SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________

Commission file number 0-8771

EVANS & SUTHERLAND
COMPUTER CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

                  Utah                                 87-0278175
     (State or Other Jurisdiction of                (I.R.S. Employer
      Incorporation or Organization)               Identification No.)

  600 Komas Drive, Salt Lake City, Utah                  84108
(Address of Principal Executive Offices)               (Zip Code)

Registrant's telephone number, including area code: (801) 588-1000

Securities registered pursuant to Section 12(b) of the Act:

"None"

Securities registered pursuant to Section 12(g) of the Act:

Title of Class

Common Stock, $.20 par value
6% Convertible Debentures Due 2012
Preferred Stock Purchase Rights

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ______

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

The aggregate market value of the voting and non-voting Common Stock held by non-affiliates of the registrant as of March 2, 2001 was approximately $23,640,000, based on the closing market price of the Common Stock on such date, as reported by The Nasdaq Stock Market.

The number of shares of the registrant's Common Stock outstanding at March 2, 2001 was 9,434,537.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2001 Annual Meeting of Shareholders to be held on May 24, 2001 are incorporated by reference into Part III hereof.


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EVANS & SUTHERLAND COMPUTER CORPORATION
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2000

PART I
     Item 1.     Business...............................................................................5
     Item 2.     Properties............................................................................13
     Item 3.     Legal Proceedings.....................................................................13
     Item 4.     Submission of Matters to a Vote of Security Holders...................................14

PART II
     Item 5.     Market For Registrant's Common Equity and
                  Related Stockholder Matters..........................................................16
     Item 6.     Selected Consolidated Financial Data..................................................17
     Item 7.     Management's Discussion and Analysis of Financial Condition and
                  Results of Operations................................................................19
     Item 7A.    Quantitative and Qualitative Disclosures About Market Risk............................34
     Item 8.     Financial Statements and Supplementary Data...........................................35
                   Report of Management................................................................36
                   Report of Independent Accountants...................................................36
                   Consolidated Balance Sheets.........................................................37
                   Consolidated Statements of Operations...............................................38
                   Consolidated Statements of Comprehensive Loss.......................................39
                   Consolidated Statements of Stockholders' Equity.....................................40
                   Consolidated Statements of Cash Flows...............................................41
                   Notes to Consolidated Financial Statements..........................................42
     Item 9.     Changes in and Disagreements with Accountants
                  on Accounting and Financial Disclosure...............................................65

PART III
      Item 10.    Directors and Executive Officers of the Registrant...................................65
      Item 11.    Executive Compensation...............................................................65
      Item 12.    Security Ownership of Certain Beneficial Owners and Management.......................65
      Item 13.    Certain Relationships and Related Transactions.......................................65

PART IV
      Item 14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....................66

      Signatures  .....................................................................................73

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FORM 10-K

PART I

ITEM 1. BUSINESS

GENERAL

Evans & Sutherland Computer Corporation ("Evans & Sutherland," "E&S(R)," or the "Company") was incorporated in the State of Utah on May 10, 1968. The Company is an established high-technology company with outstanding computer graphics technology and a worldwide presence in high-performance 3D visual simulation. In addition, E&S applies its core technology into higher-growth personal computer (PC) products for both simulation and workstations. During 2000, the Company's core computer graphics technology was shared among three business groups:

(1) Simulation Group, which produces a full range of image generators, software, databases, and display systems for simulation markets;

(2) REALimage(R) Solutions Group, which provided graphics acceleration products to the professional digital content creation (DCC) market and now focuses on integrating video processing with graphics processing in products that will support content creation for broadcasting and netcasting graphic applications; and

(3) Applications Group, which applies the Company's core technologies to other growth markets.

Unless the context otherwise requires, as used herein, the term "Company" refers to Evans & Sutherland Computer Corporation and its subsidiaries. The Company's headquarters are located at 600 Komas Drive, Salt Lake City, Utah 84108, and its telephone number is (801) 588-1000. The Company's web page on the worldwide web is http://www.es.com.

RECENT DEVELOPMENTS

On July 22, 1998, Intel Corporation ("Intel") purchased 901,408 shares of the Company's preferred stock plus a warrant to purchase an additional 378,462 shares of the preferred stock at an exercise price of $33.28125 per share for approximately $24.0 million. In March 2001, Intel converted the 901,408 shares of the Company's preferred stock into 901,408 shares of the Company's common stock. In March 2001, Intel and the Company amended the preferred stock and warrant purchase agreement to terminate certain contractual rights of Intel, including registration rights, board and committee observation rights, right of first refusal, right of participation, right of maintenance, standstill agreement, and right to require the Company to repurchase the preferred stock in the event of any transaction qualifying as a specific corporate event.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

This annual report, including all documents incorporated herein by reference, includes certain "forward-looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, including, among others, those statements preceded by, followed by or including the words "estimates," "believes," "expects," "anticipates," "plans," "projects," and similar expressions.

These forward-looking statements include projections of growth in the military and commercial airline training simulator market; pilot training utilizing Harmony will commence at four additional training sites during 2001; the use of digital video to create, edit, and distribute rich visual content is a market ready for growth; sales and net income and issues that may affect sales or net income; projections of capital expenditures; plans for future operations; financing needs or plans; plans relating to the Company's products and services; and assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from

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those set forth in, contemplated by, or underlying the forward-looking information. Our actual results could differ materially from these forward-looking statements. In addition to the other risks described in the "Factors That May Affect Future Results" discussion under Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II of this annual report, important factors to consider in evaluating such forward-looking statements include risk of product demand, market acceptance, economic conditions, competitive products and pricing, difficulties in product development, product delays and failure to meet certain milestones or delivery requirements. In light of these risks and uncertainties, there can be no assurance that the events contemplated by the forward-looking statements contained in this annual report will, in fact, occur.

REPORTABLE SEGMENTS

The Company's business units have been aggregated into the following three reportable segments: the Simulation Group, the REALimage Solutions Group, and the Applications Group. The three groups benefit from shared core graphics technology, and each group's new products are based on open Intel and Microsoft hardware and software standards. Each reportable segment markets its products to a worldwide customer base. Financial information by reportable segment for each of the three years ended December 31, 2000 is included in note 19 of the Notes to Consolidated Financial Statements included in Part II of this annual report.

Simulation Group

E&S is an industry leader in providing visual systems to both government and commercial simulation customers for military and commercial airline training simulators worldwide. The Company anticipates growth in these marketplaces as simulation training is used in place of other training methods, and as simulation training technology and cost-effectiveness improve.

Throughout 2000, the Company continued development of its Integrator(R) software product, which provides the real-time control and modeling tools for the Symphony(TM) family of hardware platforms. Performance optimizations and new functionality have continuously been added with each new software release to meet existing contract requirements and to increase the product performance. The Company plans further improvements to Integrator in 2001, which will expand its functionality and help secure the Company's favorable position in its main target markets, both commercial and military. In addition to continued development of Integrator software, during 2000 the Company made enhancements of its most advanced image generator product, Harmony(R).

During the fourth quarter of 2000, the first Harmony system began training pilots at the United Kingdom's Defence Helicopter Flying School at RAF Shawbury. The Company expects that pilot training utilizing Harmony will commence at four additional training sites during 2001.

Products & Markets

The Simulation Group provides a broad line of visual systems for flight and ground training and related services to the United States and international armed forces, NASA, and aerospace companies. E&S remains an industry leader in visual systems sales to various U.S. government agencies and more than 20 foreign governments for training military vehicle operators. The Simulation Group is also a leading independent supplier of visual systems for commercial airline flight simulators.

The group's visual systems create dynamic, high-quality, out-the-window scenes that simulate the view vehicle operators see when performing tasks under actual operating conditions. The visual systems are an integral part of full mission simulators, which incorporate a number of other components, including cockpits or vehicle cabs and large hydraulic motion systems.

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Generally, the Simulation Group's visual systems products consist of the following six major components. These components are available as subsystems, but are typically sold together as a complete visual-system solution delivered to an end user or prime contractor.

(1) Image generators (IGs) create computer-generated real-time images and send these images to display devices, such as projectors or computer monitors. The group's primary IG offerings include the Symphony family of products from Harmony on the high end to OpenGL(R), PC-based simFUSION at the low end and its legacy ESIG(R)products, which continue to experience strong sales. E&S offers a complete, high-to-low family of IGs that can use the same software and databases. Harmony is the Company's flagship for highest performance, Ensemble(TM)is the first PC-based true image generator offering deterministic performance and simulation-specific functionality, and simFUSION(TM)is the first OpenGL PC-based image generation system targeted at low-cost applications. E&S is the only visual system provider offering a complete line of compatible and scalable products for real-time simulation and visualization.

(2) Display systems consist of projectors, display screens, computer monitors, and specialized optics. These display systems are offered in a broad range of configurations, from onboard instrument displays to domes offering a 360-degree field of view, depending on the applications.

(3) Databases of synthetic environments are offered as options or as custom creations. The group provides database development as well as database development tools such as Integrator and EaSIEST(R). Databases developed using Integrator are a key element of the Symphony product family. These can be run on a full range of image generators from the PC-based simFUSION to the high-end Harmony systems.

(4) Simulation of sensor imagery such as radar, infrared, and night vision goggles (NVG) is often provided with the visual systems for high-performance fixed and rotary wing aircraft. E&S develops and manufactures a variety of hardware and software products to achieve realistic sensor simulation, including the Vanguard(TM) radar image generator, infrared post processors, and customized systems for either simulated or stimulated NVG solutions.

(5) System integration and installation services are offered in support of the total simulator system. The Company has the capability to act as the main prime contractor for large commercial and military contracts requiring total systems integration.

(6) A full range of customer support services is offered to prime contractors, system integrators, and military or commercial end users. The Company's Encore program is an innovative new approach to customer service and support. Encore combines the latest advancements in manufacturing and interactive communications technology to offer E&S customers a comprehensive, flexible, and cost-effective customer service and support program. Encore combines web-based technology with new physical distribution locations to deliver timely support as efficiently as possible. Encore customers have immediate access to service information through customized, secure, private web sites providing product news and announcements, documentation, and online spares and repairs tracking. In addition, each customer has a single-point E&S contact who can be reached through the web site to ensure continuity throughout the procurement, installation, operation, and maintenance processes.

The Simulation Group's products are marketed worldwide by the Company and qualified distributors. Products and services are sold directly to end users by E&S as a prime contractor, through simulator prime contractors with E&S acting as a subcontractor, and through system OEMs. E&S continues to form both domestic and international alliances with aerospace and simulation companies that dominate their respective market segments. Such strategic alliances have proved to be an effective method for accessing specific markets. In addition, the Company has OEM and value added reseller agreements with a number of major distributors in Europe and Asia.

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Competitive Conditions

Primary competitive factors for the Simulation Group's products are performance, price, service, and product availability. Because competitors are constantly striving to improve their products, the group must ensure that it continues to offer products with superior performance at a competitive price. Prime contractors, including Lockheed Martin, Flight Safety International (FSI), and CAE Electronics, Ltd. (CAE), offer competing visual systems in the simulation market. The Company believes it is able to compete effectively in this environment and will continue to be able to do so in the foreseeable future. In 2000, the group was awarded several highly competitive orders against FSI and CAE, the principal competitors in the commercial simulation market. In the military simulation market, the group competes primarily with Silicon Graphics, Inc. and CAE. In the low-cost, PC-based market, the Company's simFUSION product competes against companies producing graphics accelerator cards, such as Quantum 3D.

Backlog

The Simulation Group's backlog was $134.6 million on December 31, 2000 compared with $149.1 million on December 31, 1999. It is anticipated that most of the 2000 backlog will be converted to sales in 2001 and replaced with new orders.

Business Subject to Government Contract Renegotiation

A significant portion of the Simulation Group's business is dependent on contracts and subcontracts associated with government business. In the normal course of this business, the government may renegotiate profits or terminate contracts or subcontracts. Management does not believe that such renegotiations or terminations are likely. However, if such renegotiations or terminations of the Company's contracts were to occur, such events would have a material adverse effect on the Company's consolidated financial condition, liquidity, or results of operations.

REALimage Solutions Group

The goal of the REALimage Solutions Group is to integrate real-time graphics and video in a unique and effective way to support all aspects of visual content creation for broadcasting and netcasting applications. The Company believes that the use of digital video to create, edit, and distribute rich visual content is a market ready for growth. The film industry's adoption of high-definition (HD), the FCC's recent reinforcement of its mandated implementation of HD broadcasting standards by 2006, and the emerging streaming video phenomena over networks, all cause the Company to anticipate that the demand for professional video production equipment will grow in the future. Similarly, the rate of spending on network infrastructure to distribute video-centric services over wired and wireless networks is also expected to grow.

The new REALimage chipset will be focused on providing lower-cost microelectronics-based content creation, editing, and delivery systems. The Company intends for REALimage to become a leading supplier of advanced video processors used to enable a new wave of markets and applications that depend on the creation and delivery of high-quality video content.

The Company is currently evaluating various business arrangements of its REALimage Solutions Group in order to enhance the value of this business segment, including, but not limited to, transferring the assets of the REALimage Solutions Group to a wholly-owned subsidiary and seeking outside investment to assist with the development of the REALimage Solutions Group's products.

Products & Markets

The REALimage Solutions Group develops and sells graphics chips and graphics subsystems for professional PC workstations. Early in 2000, the group's strategic focus changed from development and manufacture of graphics accelerator cards for professional digital content creation customers to development of the next generation REALimage chip, the REALimage 5000. This product, referred to as "studio-on-a-chip", brings together both graphics and video processing technology on a single chip for digital video content creation and post-production. This product represents the first of a new class of innovative semiconductor processors and software that will enable a completely new generation of advanced video processing systems.

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Development work on the REALimage 5000 products is in progress but further engineering and design is required. The Company has established agreements with several OEMs for REALimage 5000 "design-ins" for their next product releases.

REALimage Solutions Group markets directly to OEM customers, working to ensure that "studio-on-a- chip" products are an integral part of key products developed for professional video creation, editing, and media server applications. Typical sales cycles can require from 7 to 15 months to obtain a design-in, secure an initial order, and begin revenue-producing shipments. However, once designed into an OEM's system, multi-year follow-on orders are likely. The first target market is vertical video system OEMs.

The REALimage Solutions Group also benefits from the advanced technology developed in the Company's Simulation Group, and then flows this technology back to the simulation business for use in PC-based visual systems, such as Ensemble and simFUSION.

The group also began to establish a new application and market for REALimage technology in 2000 when REALimage chips were selected by Honeywell for use in cockpit navigation systems for military aircraft and business jets. The Company is pursuing additional opportunities for REALimage in cockpit displays.

Competitive Conditions

The group's future success will depend on completion of the REALimage 5000 chipset and achieving design-ins and partnerships with board manufacturers. The computer industry is highly competitive and is known for rapid technological advances. These advances result in frequent new product introductions, short product life cycles and increased new product capabilities, typically representing significant price/performance improvements. The principal competitive factors are product features, price, performance, product quality and reliability, customer support and product availability. The principal competitors for the new REALimage chipset are expected to be Pinnacle Systems and Matrox Graphics.

Backlog

The REALimage Solutions Group's backlog was $0.7 million on December 31, 2000 compared with $0.2 million on December 31, 1999. The group expects that the 2000 backlog will be converted to sales in 2001.

Applications Group

The Applications Group is composed of synergistic businesses that use E&S core technology in growth markets. The group's products are applications that leverage the technology of the Company's Simulation and REALimage Solutions groups and apply them to other growth markets.

Products & Markets

The Applications Group's digital theater products include hardware, software, and content for both the entertainment and educational marketplaces. Digital theater focuses on immersive all-dome theater applications combining colorful, digitally produced imagery, full-spectrum audio, and audience-participation capability. The group provides turnkey solutions incorporating visual systems and sub-systems from the Simulation and REALimage Solutions groups. E&S integrates these systems with projection equipment, audio components, and audience-participation systems from other suppliers. Products include Digistar(R), a calligraphic star projection system designed to compete with analog star projectors in planetariums, and StarRider(R), a full-color, domed theater experience available in interactive or video playback formats. The group is a leading supplier of digital display systems in the planetarium marketplace. In addition to projection and theater systems, the group develops and markets show content for planetariums and domed theaters.

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In 2000, the Applications Group continued to expand the market for E&S RAPIDsite(TM). E&S RAPIDsite is a photo-realistic visualization tool designed for use by real-estate developers, consulting engineers, architects, and municipal planners involved with all types of land development projects. RAPIDsite features fast 3D-model construction, accelerated graphics rendering performance and easy-to-use interactive exploration of a proposed development on a Windows NT computer with an Open GL graphics accelerator. During 2000, the RAPIDsite product line was expanded to allow customers to purchase a variety of software-only packages, bundled hardware and software, or complete solutions that include the visualization, computer hardware and software, multimedia presentation to be used by customers for marketing, and tailored web pages. The Company is currently evaluating various business arrangements of its E&S RAPIDsite business in order to enhance the value of this business, including, but not limited to, transferring the assets of this business to a wholly-owned subsidiary and seeking outside investment to assist with the development of the E&S RAPIDsite products.

The Applications Group sells its products directly to end-users using E&S salespeople, OEM representatives and distributors.

Competitive Conditions

Primary competitive factors for the Applications Group's products are functionality, performance, price, and access to customers and distribution channels. The Company's digital theater products compete with traditional optical-mechanical products and digital display systems offered by Minolta Planetarium Co. Ltd., GoTo Optical Mfg. Co., Carl Zeiss Inc., Spitz, Inc. and Trimension, Inc. The competitors for E&S RAPIDsite are MultiGen-Paradigm, a division of Computer Associates and Discreet, a division of Autodesk, Inc.

Backlog

The Applications Group's backlog was $7.4 million on December 31, 2000, compared with $7.2 million on December 31, 1999. It is anticipated that most of the 2000 backlog will be converted to sales in 2001.

SIGNIFICANT CUSTOMERS

Worldwide customers using E&S products include U.S. and international armed forces, NASA, aerospace companies, most major airlines, PC manufacturers, film and video studios, laboratories, museums, planetariums, and science centers.

Sales to the U.S. government, either directly or indirectly through sales to prime contractors or subcontractors, accounted for $66.7 million or 40% of total sales, $84.5 million or 42% of total sales, and $70.8 million or 37% of total sales in 2000, 1999 and 1998, respectively. Sales to the United Kingdom Ministry of Defence ("UK MOD"), either directly or indirectly through sales to prime contractors or subcontractors, accounted for $22.3 million or 13% of total sales, $33.8 million or 17% of total sales and $32.1 million or 17% of total sales in 2000, 1999 and 1998, respectively.

In 2000, sales to Lockheed Martin Corporation ("Lockheed") were $22.5 million or 14% of total sales, of which 100% related to U.S. government and UK MOD contracts and sales to Thales Training & Simulation Ltd. were $19.6 million or 12% of total sales, of which 58% related to UK MOD contracts. In 1999, sales to Lockheed were $35.8 million or 18% of total sales, of which 100% related to U.S. government and UK MOD contracts and sales to The Boeing Company ("Boeing") were $25.4 million or 13% of total sales, of which 100% related to U.S. government and UK MOD contracts. In 1998, sales to Boeing were approximately $28.1 million or 15% of total sales, of which approximately 98% related to U.S. government and UK MOD contracts and sales to Lockheed were approximately $22.0 million or 11% of total sales, of which approximately 91% related to U.S. government contracts.

All of the Company's sales to significant customers are within the Simulation Group.

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DEPENDENCE ON SUPPLIERS

Most of the Company's parts and assemblies are readily available through multiple sources in the open market; however, a limited number are available only from a single source. In these cases, the Company stocks a substantial inventory, or obtains the agreement of the vendor to maintain adequate stock for future demands, and/or attempts to develop alternative components or sources where appropriate.

On June 3, 1999, the Company entered into an electronic manufacturing services agreement with Sanmina Corporation. The agreement commits the Company to purchase a minimum of $22.0 million of electronic products and assemblies from Sanmina Corporation each year until June 3, 2002. If the Company fails to meet these minimum purchase levels, subject to adjustment, the Company may be required to pay 25 percent of the difference between the $22.0 million and the amount purchased. Management expects that the Company will satisfy this minimum purchase commitment.

SEASONALITY

E&S believes there is no inherent seasonal pattern to any of its business segments. Sales volume fluctuates quarter-to-quarter due to relatively large and nonrecurring individual sales and customer-established shipping dates.

INTELLECTUAL PROPERTY

E&S owns a number of patents and trademarks and is a licensee under several others. In the U.S., the Company holds active patents that cover many aspects of the Company's graphics technology. Several patent applications are presently pending in the U.S., Japan, and several European countries. E&S copyrights chip masks designed by the Company and has instituted copyright procedures for these masks in Japan. E&S does not rely on, and is not dependent on, patent and/or trademarks ownership to maintain its competitive position. In the event any or all patents are held to be invalid, management believes the Company would not suffer significant long-term damage. However, E&S actively pursues patents on its new technology.

RESEARCH & DEVELOPMENT

E&S considers the timely development and introduction of new products to be essential to maintaining its competitive position and capitalizing on market opportunities. The Company's research and development expenses were $44.3 million, $44.4 million and $31.8 million in 2000, 1999 and 1998, respectively. As a percentage of sales, research and development expenses were 27%, 22% and 17% in 2000, 1999 and 1998, respectively. The Company continues to fund substantially all research and development efforts internally. It is anticipated that high levels of research and development will be needed to continue to ensure that the Company maintains technical excellence, leadership, and market competitiveness. However, the Company believes that research and development expenses as a percentage of sales will decline in 2001.

INTERNATIONAL SALES

Sales of products known to be ultimately installed outside the United States are considered international sales by the Company and were $60.9 million, $86.7 million and $84.9 million in 2000, 1999 and 1998, respectively. International sales represented 36%, 43% and 44% of total sales in 2000, 1999 and 1998, respectively. For additional information, see note 20 of Notes to Consolidated Financial Statements included in Part II of this annual report.

EMPLOYEES

As of March 2, 2001, Evans & Sutherland and its subsidiaries employed a total of 847 persons. The Company believes its relations with its employees are good. None of the Company's employees are subject to collective bargaining agreements.

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ENVIRONMENTAL STANDARDS

The Company believes its facilities and operations are within standards fully acceptable to the Environmental Protection Agency and that all facilities and procedures are in accordance with environmental rules and regulations, and international, federal, state, and local laws.

STRATEGIC RELATIONSHIP

On July 22, 1998, Intel purchased 901,408 shares of the Company's preferred stock plus a warrant to purchase an additional 378,462 shares of the preferred stock at an exercise price of $33.28125 per share for approximately $24.0 million. In March 2001, Intel converted the 901,408 shares of the Company's preferred stock into 901,408 shares of the Company's common stock. In March 2001, Intel and the Company amended the preferred stock and warrant purchase agreement to terminate certain contractual rights of Intel, including registration rights, board and committee observation rights, right of first refusal, right of participation, right of maintenance, standstill agreement, and right to require the Company to repurchase the preferred stock in the event of any transaction qualifying as a specific corporate event. The Company also entered into an agreement to accelerate development of high-end graphics and video subsystems for Intel-based workstations in July 1998.

ACQUISITIONS AND DISPOSITIONS

In December 2000, the Company completed the divestiture of its German subsidiary via a management-led buyout and recorded a loss of $0.3 million. The former subsidiary, which was called Evans & Sutherland Computer GmbH, now operates under a new name. The divested company has no remaining connection with E&S. The Company will continue to operate in Germany and throughout Europe under its own name, providing marketing, sales, and support for the Company's growing visual systems business and traditional customer base.

On March 28, 2000, the Company sold certain assets of its Applications Group relating to digital video products to RT-SET Real Time Synthesized Entertainment Technology Ltd. and its subsidiary, RT-SET America Inc., for $1.4 million in cash, common stock of RT-SET Real Time Synthesized Entertainment Technology Ltd. valued at approximately $1.0 million, and the assumption of certain liabilities. On June 15, 2000, the Company received additional common stock of RT-SET Real Time Synthesized entertainment Technology Ltd. valued at $1.5 million related to the successful development of a product included in the purchased assets.

On June 3, 1999, the Company sold certain of its manufacturing capital assets and inventory for $6.0 million to Sanmina Corporation as part of the Company's efforts to outsource the production of certain electronic products and assemblies. In addition, the Company entered into an electronic manufacturing services agreement with Sanmina Corporation. The electronic manufacturing services agreement commits the Company to purchase a minimum of $22.0 million of electronic products and assemblies from Sanmina Corporation each year until June 3, 2002. If the Company fails to meet these minimum purchase levels, subject to adjustment, the Company may be required to pay 25% of the difference between the $22.0 million and the amount purchased.

On June 26, 1998, the Company, through its wholly-owned subsidiary, Evans & Sutherland Graphics Corporation ("ESGC"), acquired all of the outstanding stock of AccelGraphics, Inc. ("AGI") to expand the Company's workstation graphics development, integration and distribution within the workstation graphics marketplace. To acquire AGI the Company paid approximately $23.7 million in cash and 1,109,303 shares of the Company's common stock, which was valued at $25.7 million. In addition, the Company converted all outstanding AGI options into options to purchase approximately 351,000 shares of common stock of the Company with a fair value of $3.4 million and incurred transaction costs of approximately $1.1 million.

To further expand the Company's presence within the workstation graphics marketplace, on June 26, 1998, the Company acquired the assets and assumed certain liabilities of Silicon Reality, Inc. ("SRI"), a designer and developer of 3D graphics hardware and software products for the PC workstation marketplace. The Company paid approximately $1.2 million and incurred transaction costs of approximately $250,000.

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ITEM 2. PROPERTIES

Evans & Sutherland's principal executive, engineering, manufacturing and operations facilities for each of its business segments are located in the University of Utah Research Park, in Salt Lake City, Utah, where it owns seven buildings totaling approximately 450,000 square feet. E&S occupies five buildings and leases the remaining two buildings to other businesses, which are located on land leased from the University of Utah on 40-year land leases that expire in 2026 (the "U of U Property"). Two buildings located on the U of U Property have options to renew the land leases for an additional 40 years, and five have options to renew the land leases for 10 years. All of the Company's interests in the U of U Property are subject to a lien by Foothill Capital Corporation to secure repayment of the borrowing facility as set forth in the Liquidity and Capital Resources section of the Management's Discussion and Analysis of Financial Condition and Results of Operations. The Company and its subsidiaries hold leases on several sales, operations, service and production facilities located throughout the United States, Europe and Asia, none of which is material to the Company's manufacturing, engineering or operating facilities. E&S believes that these properties are suitable for its immediate needs and it does not currently plan to expand its facilities or relocate.

ITEM 3. LEGAL PROCEEDINGS

On May 23, 2000, Lockheed Martin Corporation (the "Plaintiff") served the Company with a civil complaint filed in the Circuit Court of the Ninth Judicial Circuit in and for Orange County, Florida. The Plaintiff alleged in the complaint that the Company breached a contract to provide certain visual systems for the Combined Arms Tactical Trainer program for the United Kingdom Ministry of Defence. The contract has an original value of $33.9 million. In the complaint, the Plaintiff seeks compensatory damages of $8.5 million plus interest as well as consequential damages and attorneys' fees. The $8.5 million being sought from the Company by the Plaintiff was paid to the Company from May 1999 to March 2000 and was recognized as revenue by the Company during 1999. On June 12, 2000, the Company filed its answer and counterclaim. In the counterclaim, the Company alleges as grounds for recovery against the Plaintiff
(1) breach of contract, (2) breach of implied covenant of good faith and fair dealing, (3) unjust enrichment, (4) unfair competition, (5) misappropriation of trade secrets, (6) intentional interference with advantageous business relationship, (7) replevin, and (8) promissory estoppel. In its counterclaim, the Company seeks compensatory damages of not less than $10.0 million and not more than $25.4 million. On June 14, 2000, the case was removed to the Orlando Division of the United States District Court for the District of Florida where it currently remains. On July 7, 2000, the Plaintiff answered the Company's counterclaim but also filed a motion for dismissal of the Company's counterclaims for unjust enrichment, unfair competition, promissory estoppel, and incidental damages. On July 24, 2000, the Company filed its opposition to the Plaintiff's motion to dismiss these certain counterclaims of the Company. On October 20, 2000 the court denied the Plaintiff's motion to dismiss in its entirety, without prejudice. On January 16, 2001, the Company filed a motion for partial summary judgement, asking the court to dismiss all of the Plaintiff's breach of contract claims. The court has indicated that it will take the motion under advisement. A trial date is currently set for September 2002. Management disputes the Plaintiff's allegations in the complaint, is vigorously defending the action, and is vigorously prosecuting its counterclaims. Although management believes the Company will ultimately prevail in the litigation, an unfavorable outcome of these matters would have a material adverse impact on the Company's financial condition and operations.

In the normal course of business, the Company has various other legal claims and other contingent matters, including items raised by government contracting officers and auditors. Although the final outcome of such matters cannot be predicted, the Company believes the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial condition, liquidity or results of operations.

13

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2000.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following sets forth certain information regarding the executive officers of the Company as of March 30, 2001:

      Name             Age              Position
-------------------  -------    ------------------------------------------------

Stewart Carrell         67      Chairman of the Board of Directors

James R. Oyler          55      President and Chief Executive Officer

Robert H. Ard           47      Vice President - Applications Group

David B. Figgins        52      Vice President - Simulation Group

Nicholas J. Iuanow      41      Vice President, Corporate Development
                                  and Treasurer

George K. Saul          50      Vice President - REALimage Solutions Group

William M. Thomas       47      Vice President, Chief Financial Officer
                                  and Corporate Secretary

-------------------

Mr. Carrell was elected Chairman of the Board of Directors of the Company in March 1991. He has been a member of the Board for 17 years. He also serves as the Chairman of Seattle Silicon Corporation, and he is a director of Tripos, Inc. From mid-1984 until October 1993, Mr. Carrell was Chairman and Chief Executive Officer of Diasonics, Inc., a medical imaging company. From November 1983 until early 1987, Mr. Carrell was also a General Partner in Hambrecht & Quist LLC, an investment banking and venture capital firm.

Mr. Oyler was appointed President and Chief Executive Officer of the Company and a member of the Board of Directors in December 1994. He is also a director of Ikos Systems, Inc. Previously, Mr. Oyler served as President of AMG, Inc. from mid-1990 through December 1994 and as Senior Vice President of Harris Corporation from 1976 through mid-1990. He has six years of service with the Company.

Mr. Ard was appointed Vice President of the Applications Group in May 1999. He joined the Company in June 1998 as Vice President and General Manager. Previously, he was President of Model Technology, Inc. where he was employed from July 1996 to May 1998. From June 1989 to July 1996, Mr. Ard was employed by Mentor Graphics Corporation as Vice President and General Manager of various divisions. He has two years of service with the Company.

Mr. Figgins was appointed Vice President of the Simulation Group in January 1999. He joined the Company in April 1998 as Vice President of PC Simulation in the Simulation Group. Previously, he was Vice President of Business Development and Marketing for Raytheon Training where he was employed from May 1986 to April 1998. He has two years of service with the Company.

Mr. Iuanow joined the Company in August 2000 as Vice President, Corporate Development and Treasurer. Prior to joining the Company, he was Vice President and Treasurer at Cordant Technologies Inc. where he was employed from September 1989 to June 2000. Previously, he held various financial management positions at Morton Thiokol. He has less than one year of service with the Company.

14

Mr. Saul was appointed Vice President of the REALimage Solutions Group in December 1999. He joined the Company in June 1998 and was appointed Vice President of Administration in October 1998. From January 1997 to June 1998, he was President and Chief Executive Officer of Silicon Reality, Inc., a graphics technology start-up company E&S acquired in June 1998. Previously, Mr. Saul was Vice President of Hitachi Semiconductor America where he was employed from January 1991 to January 1997. He also held various management positions at Fairchild Semiconductor Corporation and National Semiconductor Corporation. He has two years of service with the Company.

Mr. Thomas was appointed Vice President and Chief Financial Officer in December 2000 and Corporate Secretary in March 2001. He joined the Company in August 2000 as Vice President, Finance of the Simulation Group. Prior to joining the Company, he was Executive Vice President and Chief Financial Officer for Edge Technologies, Inc. from May 1998 to August 2000. From February 1995 to May 1998, Mr. Thomas was Chief Financial Officer for Stanley Aviation Corporation. Previously he was Director of Finance for Hughes Aircraft Company where he was employed from March 1982 to February 1995. He has less than one year of service with the Company.

15

FORM 10-K

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED

STOCKHOLDER MATTERS

PRICE RANGE OF COMMON STOCK

The Company's common stock trades on The Nasdaq Stock Market under the symbol "ESCC." The following table sets forth the range of the high and low sales prices per share of the Company's common stock for the fiscal quarters indicated, as reported by The Nasdaq Stock Market. Quotations represent actual transactions in Nasdaq's quotation system but do not include retail markup, markdown or commission.

                             HIGH                     LOW
                      --------------------    --------------------
2000
----
First Quarter            $    13 1/2             $  10 1/16
Second Quarter           $    11 3/8             $  6 1/4
Third Quarter            $    7 1/4              $  5 3/8
Fourth Quarter           $    7 3/4              $  5 1/8

1999
----
First Quarter            $    18 3/16            $  12
Second Quarter           $    19                 $  12 3/8
Third Quarter            $    15                 $  12 1/16
Fourth Quarter           $    14 1/8             $  10 7/16

APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS

On March 2, 2001, there were 701 shareholders of record of the Company's common stock. Because brokers and other institutions hold many of the Company's shares on behalf of shareholders, the Company is unable to estimate the total number of shareholders represented by these record holders.

DIVIDENDS

Evans & Sutherland has never paid a cash dividend on its common stock, retaining its earnings for the operation and expansion of its business. The Company intends for the foreseeable future to continue the policy of retaining its earnings to finance the development and growth of its business. The payment of dividends is restricted under the terms of the Company's credit facilities. See "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources."

16

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial data for the five fiscal years ended December 31, 2000 are derived from the Company's Consolidated Financial Statements. The selected financial data should be read in conjunction with the Company's Consolidated Financial Statements and related notes included elsewhere in this annual report. See also "Management's Discussion and Analysis of Financial Condition and Results of Operations."

                                                   (In thousands, except per share amounts)
                                           2000        1999(1)      1998(2)       1997        1996
                                         ---------    ---------    ---------    ---------   ---------
FOR THE YEAR

Sales ...............................   $ 166,980    $ 200,885    $ 191,766    $ 159,353   $ 130,564

Net income (loss) before accretion of
preferred stock .....................     (69,570)     (23,454)     (15,983)       5,080      10,352

Net income (loss) per common share:
      Basic .........................       (7.45)       (2.49)       (1.70)        0.56        1.16
      Diluted .......................       (7.45)       (2.49)       (1.70)        0.53        1.12

Average weighted number of common
shares outstanding
      Basic .........................       9,372        9,501        9,461        9,060       8,944
      Diluted .......................       9,372        9,501        9,461        9,502       9,222

AT END OF YEAR

Total assets ........................   $ 216,078    $ 258,464    $ 275,668    $ 234,390   $ 210,891
Long-term debt, less current portion       25,563       18,015       18,062       18,015      18,015
Redeemable preferred stock ..........      24,000       23,772       23,544           --          --
Stockholders' equity ................      67,634      137,194      165,083      165,634     160,472


(1) During 1999, the Company incurred a write-off of inventories of $13.2 million, an impairment loss of $9.7 million and a restructuring charge of $1.5 million. See notes 1, 4 and 22 of the Notes to Consolidated Financial Statements included in Part II of this annual report.

(2) During 1998, the Company incurred a $20.8 million charge to expense acquired in-process technology in connection with the acquisitions of AccelGraphics, Inc. and Silicon Reality, Inc. See note 2 of the Notes to Consolidated Financial Statements included in Part II of this annual report.

17

QUARTERLY FINANCIAL DATA (Unaudited)

(In thousands, except per share amounts)

                                                               Quarter Ended
                                               -------------------------------------------
                                               March 31     June 30    Sept. 29    Dec. 31
                                               --------     -------    --------    -------
2000

Sales ......................................   $ 45,955    $ 25,589    $ 48,092   $ 47,344

Gross profit ...............................     16,113     (12,303)     14,804     10,834

Net income (loss) before income taxes ......     (4,827)    (31,598)        448    (14,570)

Net income (loss) applicable to common stock     (3,229)    (52,253)        244    (14,560)

Net income (loss) per common share(2):
   Basic ...................................      (0.35)      (5.58)       0.03      (1.55)
   Diluted .................................      (0.35)      (5.58)       0.03      (1.55)


                                                               Quarter Ended
                                               -------------------------------------------
                                                April 2     July 2     Oct. 1(1)   Dec. 31
                                                -------     ------     ---------   -------
1999

Sales ......................................   $ 49,746   $ 44,023    $ 48,704    $ 58,412

Gross profit ...............................     22,378     17,603       7,477      12,641

Net income (loss) before income taxes ......        379     (4,980)    (28,020)     (6,246)

Net income (loss) applicable to common stock        204     (3,493)    (18,033)     (2,360)

Net income (loss) per common share(2):
   Basic ...................................       0.02      (0.36)      (1.91)      (0.25)
   Diluted .................................       0.02      (0.36)      (1.91)      (0.25)


(1) During the third quarter of 1999, the Company incurred a write-off of inventories of $13.2 million, an impairment loss of $9.7 million and a restructuring charge of $1.5 million. See notes 1, 4 and 22 of the Notes to Consolidated Financial Statements included in Part II of this annual report.

(2) Earnings per share are computed independently for each of the quarters presented and therefore may not sum to the total for the year.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussions should be read in conjunction with the Company's Consolidated Financial Statements contained herein under Item 8 of this annual report.

                                                                    Year ended December 31,
                                                               2000           1999           1998
                                                            ----------     ----------     ----------
Sales ...................................................        100.0%         100.0%         100.0%
Cost of sales ...........................................         82.4           63.5           57.5
Write-off of inventories ................................            -            6.6              -
                                                            ----------     ----------     ----------
     Gross profit .......................................         17.6           29.9           42.5
                                                            ----------     ----------     ----------
Operating expenses:
     Selling, general and administrative ................         20.5           21.4           20.9
     Research and development ...........................         26.5           22.1           16.6
     Amortization of goodwill and other intangible assets          0.1            0.8            2.5
     Impairment loss ....................................            -            4.8              -
     Restructuring charge ...............................         (0.5)           0.7              -
     Write-off of acquired in-process technology ........            -              -           10.8
                                                            ----------     ----------     ----------
     Operating expenses .................................         46.6           49.8           50.8
                                                            ----------     ----------     ----------
                                                                 (29.0)         (19.9)          (8.3)
Gain on sale of business unit ...........................          1.1              -              -
                                                            ----------     ----------     ----------
     Operating loss .....................................        (27.9)         (19.9)          (8.3)
Other income (expense) ..................................         (2.4)           0.6            1.1
                                                            ----------     ----------     ----------
     Pretax loss ........................................        (30.3)         (19.3)          (7.2)
Income tax expense (benefit) ............................         11.4           (7.6)           1.1
                                                            ----------     ----------     ----------
     Net loss ...........................................        (41.7)         (11.7)          (8.3)
Accretion of preferred stock ............................          0.1            0.1            0.1
                                                            ----------     ----------     ----------
Net loss applicable to common stock .....................        (41.8)%        (11.8)%         (8.4)%
                                                            ==========     ==========     ==========

RESULTS OF OPERATIONS

2000 vs. 1999

Sales

In 2000, the Company's total sales decreased $33.9 million, or 17% ($167.0 million in 2000 compared to $200.9 million in 1999). Sales in the Simulation Group decreased $20.7 million, or 12% ($149.9 million in 2000 compared to $170.6 million in 1999). Sales in REALimage Solutions Group decreased $16.3 million, or 74% ($5.7 million in 2000 compared to $22.0 million in 1999). Sales in the Applications Group increased $3.0 million, or 36% ($11.3 million in 2000 compared to $8.3 million in 1999). The decrease in sales in the Simulation Group is due to the cancellation of the contract with Lockheed Martin Corporation ("Lockheed") for the delivery of visual systems to the United Kingdom Ministry of Defence ("UK MOD") for the Combined Arms Tactical Trainer program ("UK CATT") and an adjustment to revenue on percent complete contracts where a review of the estimated costs to complete the contracts resulted in a negative adjustment to revenue of $10.9 million in the second quarter of 2000. The decrease was partially offset by increased sales volume of visual systems to commercial airline customers, increased sales volume of the Company's simFUSION workstation-based product and increased sales related to customer service and support contracts. The decrease in sales in the REALimage Solutions Group is due to a decrease in the number of units sold and decreased selling prices of existing products due to increased competition and delays in the introduction of new products. The increase in sales in the Applications Group is due to an

19

increase in sales volume of large-format entertainment products and planetarium systems which is partially offset by decreased sales of the Company's digital video products due to the sale of this business to RT-SET Real Time Synthesized Entertainment Technology Ltd. and its subsidiary RT-SET America Inc. (together "RT-SET") in the first quarter of 2000.

Gross Profit

Gross profit decreased $30.7 million, or 51% ($29.4 million in 2000 compared to $60.1 million in 1999). As a percent of sales, gross profit decreased to 17.6% in 2000 from 29.9% in 1999. Gross profit in the Simulation Group in 2000 was negatively impacted by (i) the cancellation of the UK CATT contract due to the loss of revenue and the write-off of obsolete and excess inventory specific to the UK CATT contract, (ii) adjustment for estimated actual costs at completion of contract on percent-complete contracts of $16.7 million ($10.9 million as a reduction in sales as discussed previously, and $5.8 million as an increase in cost of sales relating to contracts with total estimated actual costs that exceed the contract value) and (iii) higher costs on several contracts to government customers which include the Harmony image generator. Gross profit in the REALimage Solutions Group decreased due to lower revenue attributed to a decrease in the number of units sold and decreased selling prices of existing products due to increased competition and delays in the introduction of new products. Gross profit in the Applications Group increased due to increased revenue from sales of large-format entertainment products and planetarium systems which was partially offset by decreased sales of the Company's digital video products.

Selling, General and Administrative

Selling, general and administrative expenses decreased $8.8 million, or 20% ($34.2 million in 2000 compared to $43.0 million in 1999). As a percent of sales, selling, general and administrative expenses were 20.5% in 2000 compared to 21.4% in 1999. The decrease in these expenses in the Simulation Group is due primarily to lower marketing headcount, lower marketing consulting expenses and lower marketing travel expenses. The decrease in these expenses in the REALimage Solution Group is due to decreased sales volume resulting in decreased commissions and other selling-related costs and decreased labor and associated costs due to lower headcount as a result of the restructuring which took place at the end of the third quarter of 1999. The decrease in these expenses in the Applications Group is due to the reduction of employees and related expenses as a result of the sale of certain assets of the Company's digital video products business to RT-SET.

Research and Development

Research and development expenses decreased $0.1 million ($44.3 million in 2000 compared to $44.4 million in 1999). As a percent of sales, research and development expenses were 26.5% in 2000 compared to 22.1% in 1999. Research and development expenses in the Simulation Group increased due to increased efforts of the continued development of the Company's simFUSION workstation-based product and other value-priced simulation products. Research and development expenses relating to the REALimage Solutions Group decreased due to decreased headcount as a result of the group's restructuring at the end of the third quarter of 1999.

Amortization of Goodwill and Other Intangible Assets

Amortization of goodwill and other intangible assets decreased $1.3 million, or 87% ($0.2 million in 2000 compared to $1.5 million in 1999). The decrease in this expense was due to the write-off of $9.3 million of goodwill and other intangible assets during the third quarter of 1999 in the REALimage Solutions Group.

Impairment Loss

The Company recognized an impairment loss of $9.7 million in 1999 and there was no such charge in 2000. The impairment loss was determined in accordance with Statement of Financial Accounting Standards No. 121 ("SFAS 121"), Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, and related to the write-down to fair value of goodwill, intangibles and other long-lived assets acquired in the Company's acquisitions of AccelGraphic, Inc. and Silicon Reality, Inc. in the second quarter of 1998. The impairment consisted of the write-off of $4.9 million of goodwill, $4.4 million of intangible assets and $0.4 million of property, plant and equipment.

20

Restructuring Charge

The Company recognized a restructuring charge of $1.5 million in 1999 and reversed $0.8 million of that charge in 2000. The charge in 1999 was based on the expected costs related to the termination of 28 employees. The reversal of a portion of these charges in 2000 was the result of certain of these employees being transferred within the Company rather than being terminated and, therefore, these termination costs were not incurred. In addition, estimated severance and related charges were lower than expected for the terminated employees.

Gain on Sale of Business Unit

During 2000, the Company sold certain assets of its Applications Group relating to its digital video business and recognized $1.9 million of gain on the transaction. See "Item 1 - Business - Acquisitions and Dispositions." There was no such event in 1999.

Other Income (Expense), Net

Other income (expense), net was a net expense of $4.0 million in 2000 compared to a net income of $1.1 million in 1999. Interest income declined $1.1 million, or 61% ($0.7 million in 2000 compared to $1.8 million in 1999). The decline in interest income is due to lower average balances of cash, cash equivalents and short-term investments in 2000 compared to 1999 and due to interest income received in 1999 on delayed income tax refunds. Interest expense increased $0.9 million or 69% ($2.2 million in 2000 compared to $1.3 million in 1999). The increase was due to higher average borrowing balances and a higher average rate of interest paid on those borrowings in 2000 compared to 1999. Loss on write-down of investment securities increased $7.4 million, or 1,850% ($7.8 million in 2000 compared to $0.4 million in 1999). The losses in both years are the result of other-than-temporary declines in the values of certain marketable investment securities of the Company. In 2000 the Company recognized $6.5 million gain on the sale of investment securities. This gain was primarily due to the sale of the Company's investment in Silicon Light Machines, Inc. to Cypress Semiconductor, Inc. ("Cypress") in which the Company received Cypress stock. There was no such event in 1999.

Income Taxes

Income tax expense (benefit) increased $34.4 million (expense of $19.0 million in 2000 compared to a benefit of $15.4 million in 1999). During the second quarter of 2000, the Company increased its deferred tax asset valuation allowance by $20.6 million. As a result of the net operating loss in the second quarter of 2000, the cumulative net operating losses for 2000, 1999 and 1998, and the cancellation of a significant contract and the related civil complaint filed by Lockheed as discussed in Note 15 to the consolidated financial statements, the Company fully reserved its net deferred tax assets which previously existed at the end of the first quarter of 2000 and those deferred tax assets recognized during the second quarter of 2000. These net deferred tax assets relate to temporary differences, tax credit carry forwards and net operating loss carry forwards. The valuation allowance was recorded in accordance with SFAS 109, which requires that a valuation allowance be established when there is significant uncertainty as to the realizability of the deferred tax assets. The Company evaluates the realizability of its deferred tax assets on a quarterly basis. If the deferred tax assets are realized in the future, or if a portion or all of the valuation allowance is no longer deemed to be necessary, the related tax benefits will reduce future income tax provisions.

1999 vs. 1998

Sales

In 1999, the Company's total sales increased $9.1 million, or 5% ($200.9 million in 1999 compared to $191.8 million in 1998). Sales in the Simulation Group increased $3.6 million, or 2% ($170.6 million in 1999 compared to $167.0 million in 1998). The increase in sales in the Simulation Group is primarily due to increased sales volumes due to stronger demand by U.S. and European government customers that offset a decline in sales to commercial airline customers. Sales in the REALimage Solutions Group increased $4.5 million, or 26% ($22.0 million in 1999 compared to $17.5 million in 1998). The increase in sales in the REALimage Solutions Group is primarily due to the

21

effect of having a full year of sales in 1999 relating to the acquisition of AccelGraphics, Inc. which was purchased at the end of the second quarter of 1998. See "Item 1 Business - Acquisitions and Dispositions." Sales in the Applications Group increased $1.0 million, or 14% ($8.3 million in 1999 compared to $7.3 million in 1998). The increase in sales in the Applications Group is primarily due to increased sales volumes of planetarium systems and large-format entertainment products.

Write-off of Inventories

During the third quarter of 1999, the Company performed significant testing of the software relating to its Harmony image generator product that had been delayed. As a result of the testing, the Company determined that certain of the inventories previously purchased for the Harmony image generator had become technologically obsolete and did not properly function with the updated software. In connection with this assessment, the Company recorded a charge of $12.1 million to write-off obsolete, excess and overvalued inventories. In addition, during the third quarter of 1999, the Company wrote-off $1.1 million of REALimage Solutions Group inventories related to end-of-life or abandoned product lines.

Gross Profit

Gross profit decreased $21.3 million, or 26% ($60.1 million in 1999 compared to $81.4 million in 1998). As a percent of sales, gross margin decreased to 29.9% in 1999 from 42.5% in 1998. The decrease in gross profit was impacted by the write-off of $13.2 million of obsolete, excess and overvalued inventories. Gross profit was also affected by technical issues causing product delays, which caused some contract milestones to be missed in the Company's international simulation business. The Company accrued $8.2 million against cost of sales in 1999 for liquidated damages and late delivery penalties as a result of these product delays. Excluding the impact of these two charges, gross margins were 40.6% in 1999, as compared to 42.5% in 1998. The decrease in gross margin was due to higher than expected costs on certain contracts to government customers which include the Harmony and Ensemble image generators. In addition, gross margin in the REALimage Solutions Group decreased in 1999 as it has changed its business model from one based on royalty income to one based on sales of graphic subsystems which has product costs consistent with a manufacturing operation. Gross profit in the REALimage Solutions Group also decreased due to a decrease in the number of units sold and decreased selling prices of existing products and the delay in introduction of new products.

Selling, General and Administrative

Selling, general and administrative expenses increased $2.9 million, or 7% ($43.0 million in 1999 compared to $40.1 million in 1998) and increased as a percent of sales to 21.4% in 1999 from 20.9% in 1998. The increase in these expenses was due to the impact of having a full year of costs associated with ESGC (formerly AccelGraphics, Inc.) in 1999 compared to a half year in 1998, and higher costs due to increased headcount related to the Company's recruiting efforts, new business development and launch of E&S RAPIDsite.

Research and Development

Research and development expenses increased $12.6 million, or 40% ($44.4 million in 1999 compared to $31.8 million in 1998) and increased as a percent of sales to 22.1% in 1999 from 16.6% in 1998. The increase in these costs was due to increased development efforts of the Company's Integrator software. This software provides the real-time control and modeling tools for the Symphony product family, which includes Harmony, Ensemble and simFUSION. In addition, the increase in these expenses was due to the impact of having a full year of ESGC costs in 1999 compared to a half year in 1998.

Amortization of Goodwill and Other Intangible Assets

Amortization of goodwill and other intangible assets declined $3.3 million, or 68% ($1.5 million in 1999 compared to $4.8 million in 1998). The decrease in these expenses was due to the write-off of $9.3 million of goodwill and other intangible assets during the third quarter of 1999. The goodwill is being amortized using the straight-line method over an estimated useful life of seven years. The other intangible assets are being amortized using the straight-line method over estimated useful lives ranging from six months to seven years.

22

Impairment Loss

In the third quarter of 1999, the Company recorded an impairment loss of $9.7 million, as determined in accordance with SFAS 121, relating to the write-down to fair value of goodwill, intangibles and other long-lived assets acquired in the acquisitions of AGI and SRI. The impairment loss consisted of the write-off of $4.9 million of goodwill, $4.4 million of intangible assets and $0.4 million of property, plant and equipment. No such loss was incurred in 1998.

In addition to continued losses at AGI, the impairment loss was the result of the following additional circumstances: (i) delays in product introductions for the AccelGALAXY(TM), E&S Lightning 1200(TM) and the multiple-controller graphics subsystems product line; (ii) the developer of the chip used on the AccelGMX(TM) acquired a board company and entered the graphics accelerator market in direct competition with the AccelGMX; and (iii) introduction of lower-end products by competitors which can perform many of the functions of the higher-end 3D graphics cards. Furthermore, the Company determined that a manufacturer of a chip to be used in various new board products was unable to manufacture a designed chip with agreed upon specifications.

Restructuring Charge

In the third quarter of 1999, the Company initiated a restructuring plan focused on reducing the operating cost structure of its REALimage Solutions Group. As part of the plan, the Company recorded a charge of $1.5 million relating to 28 employee terminations. No such charge was incurred in 1998.

Acquired In-Process Technology

In the second quarter of 1998, the Company recognized $20.8 million of expense to write-off acquired in-process technology related to the acquisitions of AGI and SRI. No such expense was recognized in 1999.

Other Income (Expense), Net

Other income (expense), net decreased $1.0 million, or 48% ($1.1 million in 1999 compared to $2.1 million in 1998). Interest income was $1.9 million and $2.7 million in 1999 and 1998, respectively. The decrease in interest income is primarily due to the decrease in the average cash and cash equivalents and short-term investment balances in 1999 as compared to 1998. During 1998, the Company recognized a gain of $2.5 million as a result of the sale of its investment in Sense8 Corporation. The Company recognized a loss due to the write-down of its investment securities of $0.4 million and $1.1 million in 1999 and 1998, respectively. The write-downs were necessary as management believed that the decline in market value of these investments below cost were other than temporary. Other was $0.9 million income in 1999 and $0.6 million expense in 1998. Increase in other income is due to foreign currency transaction gains and other miscellaneous items in 1999 compared to foreign currency transaction losses in 1998 and other miscellaneous items.

Income Taxes

The effective tax rate was 39.7% of pre-tax loss in 1999 and was 30.7% of pre-tax income excluding the write-off of acquired in-process technology in 1998. The change in the effective tax rate is due to the Company incurring a pre-tax loss in 1999 and the benefit of research and other tax credits. The Company expects the effective income tax rate in 2000 to approximate the rate in 1998.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2000, the Company had working capital of $61.8 million, including cash, cash equivalents and short-term investments of $13.9 million, compared to working capital of $116.9 million at December 31, 1999 including cash, cash equivalents and short-term investments of $22.9 million. During 2000, the Company used $2.2 million of cash in its operating activities, used $10.2 million of cash in its investing activities and generated $2.7 million of cash in its financing activities.

23

Cash from operating activities of the Company was provided by a $27.3 million decrease in net costs and estimated earnings in excess of billings on uncompleted contracts and a $6.9 million increase in accounts payable. The decrease in net costs and estimated earnings in excess of billings on uncompleted contracts was due to the achievement of billing milestones during the year and the adjustment to revenue on percent complete contracts due to the change in estimated actual costs to complete the contracts. Cash used in the Company's operating activities included a net loss adjusted for non-cash expenses and income for the year of $20.3 million, a $10.0 million increase in accounts receivable and a $6.0 million increase in inventory.

The Company's investing activities included purchases of property, plant and equipment of $13.9 million, proceeds from sales of property, plant and equipment of $1.4 million, proceeds from the sale of certain assets of its digital video business of $1.4 million and proceeds from sale of investment securities of $1.4 million.

The Company's financing activities during the year included net borrowings of $5.4 million, proceeds from issuances of common stock of $0.6 million, increase in restricted cash of $2.0 million and payments of debt issuance costs of $1.3 million.

On March 31, 2000, the Company entered into a secured credit facility (the "Zions Facility") with Zions First National Bank. The Zions Facility provided for borrowings of up to $15.0 million, which included a $7.0 million sublimit for the issuance of letters of credit. In December 2000, the Company entered into a secured credit facility (the "Foothill Facility") with Foothill Capital Corporation ("Foothill"). In connection with the Foothill Facility, additional borrowings under the Zions Facility were terminated in December 2000 and outstanding letters of credit were secured through the issuance of a letter of credit from Wells Fargo Bank, National Association, the parent of Foothill. The Foothill Facility provides for borrowings and the issuance of letters of credit up to $30.0 million. The Foothill Facility expires in December 2002. Borrowings under the Foothill Facility bear interest at the Wells Fargo Bank National Association prevailing prime rate plus 1.5% to 3.0%, depending on the amount outstanding. The Foothill Facility provides Foothill with a first priority perfected security interest in substantially all of the Company's assets, including, but not limited to, all of the Company's intellectual property. Pursuant to the terms of the Foothill Facility, all cash receipts of the Company must be deposited into a Foothill controlled account. The Foothill Facility, among other things, (i) requires the Company to maintain certain financial ratios and covenants, including a minimum tangible net worth that adjusts each quarter and a limitation of $12.0 million of aggregate capital expenditures in any fiscal year; (ii) restricts the Company's ability to incur debt or liens; sell, assign, pledge or lease assets; merge with another company; and (iii) restricts the payment of dividends and repurchase of any of the Company's outstanding shares without the prior consent of the lender. The Company is currently in compliance with its financial covenants and ratios, although a continuation of recent negative trends could impact future compliance with such covenants. Should the need arise, the Company will negotiate with Foothill to modify and expand various financial ratios and covenants, however no assurance can be given that such negotiations will result in modifications that will allow the Company to continue to be in compliance or otherwise be acceptable to the Company. As of December 31, 2000, the Company has $7.3 million in outstanding borrowings and $15.2 million in outstanding letters of credit under the Foothill Facility.

Evans & Sutherland Computer Limited, a wholly-owned subsidiary of Evans & Sutherland Computer Corporation, has a $5.0 million overdraft facility (the "Overdraft Facility") with Lloyds TSB Bank plc ("Lloyds"). Borrowings under the Overdraft Facility bear interest at Lloyds' short-term offered rate plus 1.75% per annum. As of December 31, 2000, there were no borrowings under the Overdraft Facility. The Overdraft Facility is subject to reduction or demand repayment for any reason at any time at Lloyds' discretion and expires on November 30, 2001. Evans & Sutherland Computer Limited executed a letter of negative pledge in favor of Lloyds whereby it agreed not to sell or encumber its assets, except in the ordinary course of business. Covenants contained in the Overdraft Facility restrict dividend payments from Evans & Sutherland Computer Limited and require maintenance of certain financial covenants. In addition, at December 31, 2000, the Company has $1.5 million of cash on deposit with Lloyds in a restricted cash collateral account to support certain obligations that the bank guarantees.

At December 31, 2000, the Company has unsecured letters of credit totaling approximately $1.1 million outstanding with U.S. Bank, N.A. that expire between March 2001 and June 2001.

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As of December 31, 2000, the Company had approximately $18.0 million of 6% Convertible Subordinated Debentures due in 2012 (the "6% Debentures"). The 6% Debentures are unsecured and are convertible at each bondholder's option into shares of the Company's common stock at a conversion price of $42.10 or 428,000 shares of the Company's common stock, subject to adjustment. The 6% Debentures are redeemable at the Company's option, in whole or in part, at par.

On February 18, 1998, the Company's Board of Directors authorized the repurchase of up to 600,000 shares of the Company's common stock, including the 327,000 shares still available from the repurchase authorization approved by the Board of Directors on November 11, 1996. On September 8, 1998, the Company's Board of Directors authorized the repurchase of an additional 1,000,000 shares of the Company's common stock. Subsequent to February 18, 1998 through December 1999, the Company repurchased 1,136,500 shares of its common stock, leaving 463,500 shares available for repurchase as of March 2, 2001. The Company did not repurchase any shares of the Company's common stock in 2000. Stock may be acquired in the open market or through negotiated transactions. Under the program, repurchases may be made from time to time, depending on market conditions, share price, and other factors.

The Company also maintains trade credit arrangements with certain of its suppliers. The unavailability of a significant portion of, or the loss of, the various borrowing facilities of the Company or trade credit from suppliers would have a material adverse effect on the Company's financial condition and operations.

In the event the Company's various borrowing facilities were to become unavailable, the Company were unable to timely deliver products pursuant to the terms of various agreements with third parties, or certain of the Company's contracts were adversely impacted for failure to meet delivery requirements, the Company may be unable to meet its anticipated working capital needs, routine capital expenditures, and current debt service obligations on a short-term and long-term basis.

Management believes that existing cash, cash equivalents, borrowings available under its various borrowing facilities, other asset-related cash sources and expected cash from future operations will be sufficient to meet the Company's anticipated working capital needs, routine capital expenditures and current debt service obligations for the next twelve months. The Foothill Facility expires in December 2002 and the Overdraft Facility expires on November 30, 2001. There can be no assurances that the Company will be successful in renegotiating its existing borrowing facilities or obtaining additional debt or equity financing. The Company's cash and cash equivalents, subject to various restrictions previously set forth, are available for working capital needs, capital expenditures, strategic investments, mergers and acquisitions, stock repurchases and other potential cash needs as they may arise.

ACQUIRED IN-PROCESS TECHNOLOGY

In connection with the acquisitions of AGI and SRI, the Company made allocations of the purchase price to various acquired in-process technology projects. These amounts were expensed as non-recurring charges in the quarter ended June 26, 1998 because the acquired in-process technology had not yet reached technological feasibility and had no future alternative uses.

Failure to complete the development of these projects in their entirety, or in a timely manner, has had a material adverse impact on the Company's results of operations. During the third quarter of 1999, the Company recorded an impairment loss of $9.7 million consisting of a write-off of $4.9 million of goodwill, $4.4 million of intangible assets and $0.4 million of property, plant and equipment. Actual sales, operating profits and cash flows attributable to acquired in-process technology have been significantly lower than the original projections used to value such technology in connection with each of the respective acquisitions. On-going operations and financial results for the acquired technology and the Company as a whole are subject to a variety of factors which may not have been known or estimable at the date of such acquisitions, and the estimates discussed below should not be considered the Company's current projections for operating results for the acquired businesses or the Company as a whole. Following is a description of the acquired in-process technology and the estimates made by the Company for each of the technologies.

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Mid-range Professional Graphics Subsystem (2100). This technology is a graphics subsystem with built in VGA core and integral DMA engines. This technology provides superior graphics performance over previous technologies, and includes features such as stereo and dual monitor support and various texture memory configurations. The technology is used in the AccelGALAXY product, which was completed and began shipping to customers in late third quarter of 1998. The cost to complete this project subsequent to the acquisition of AGI was $0.3 million, $0.1 million over the budgeted amount and was funded by working capital. The project was also completed a month later than scheduled. The assigned value for this acquired in-process technology was $6.1 million.

CAD-focused Professional Graphics Subsystem (1200). This technology is a graphics subsystem with lower costs compared to the mid-range technology, resulting in a more cost-effective graphics solution for the end-user. It provides the cost sensitive user with adequate graphics performance, with few features and a single texture configuration option. The technology is used in the E&S Lightning 1200 product, which was completed in March 1999 and began shipping to customers in April 1999. The cost to complete this project subsequent to the acquisition of AGI was $0.5 million, $0.2 million over the budgeted amount and was funded by working capital. This project was completed five months later than originally projected. The assigned value for this acquired in-process technology was $6.2 million.

Multiple-Controller Graphics Subsystems (2200). This technology is a high-end graphics subsystem involving the parallel use of two or four controllers. This technology is aimed at super users in the graphics area who need significant increases in performance and features to accomplish their tasks and are willing to pay the increased price necessary to support those requirements. During the third quarter of 1999, the Company determined the technology and graphics subsystem, as originally designed, would not be a viable product in the workstation marketplace. The cost to complete this project subsequent to the acquisition of AGI was $1.7 million. The project was completed in the fourth quarter of 1999, approximately 9 months later than planned. This project was funded by working capital. The assigned value for this acquired in-process technology was $2.7 million.

On-board Geometry Engine Graphics Subsystem (AccelGMX). This technology is a mid-range graphics subsystem with a geometry engine on board. This technology is aimed at the performance intensive graphics end-user. It has fewer features than the mid-range professional technology, but faster geometry performance compared to the mid-range professional technology on Pentium II processors. This technology was completed in the third quarter of 1998 and the AccelGMX product that uses this technology began shipping to customers at that time. The cost to complete this project subsequent to the acquisition of AGI was $0.1 million and was funded by working capital. The assigned value for this acquired in-process technology was $5.3 million.

The AccelGALAXY performed below sales estimates due to the delay in product introduction by the Company and a delayed design win at one major OEM. These delays, in addition to increased competition, caused an erosion of approximately 50% of the projected average selling price for the AccelGALAXY and a loss of projected unit sales. Subsequent to the Company's acquisition of AGI, the developer of the chip used on the AccelGMX also acquired a board company and entered the graphics accelerator market in direct competition with the AccelGMX. Due to the advantage of producing the chip, the competitor can produce a comparable product at a lower cost; thus, the AccelGMX has performed below sales estimates and the Company no longer expects to generate significant sales from this product. The E&S Lightning 1200 performed below sales estimates due to the delay in product introduction by the Company. As a result of the delay in product introduction, most OEMs selected a competing product. The expected sales volume and average selling price of the E&S Lightning 1200 have been significantly reduced.

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The Company periodically reviews the value assigned to the separate components of goodwill, intangibles and other long-lived assets through comparison to anticipated, undiscounted cash flows from the underlying assets to assess recoverability. The assets are considered to be impaired when the expected future undiscounted cash flows from these assets do not exceed the carrying balances of the related assets. Based on the events described above and in accordance with SFAS 121 during the third quarter of 1999 the Company recorded an impairment loss of $9.7 million related to the acquisition of AGI and SRI. The impairment loss consisted of the write-off of $4.9 million of goodwill, $4.4 million of intangible assets and $0.4 million of property, plant and equipment.

EFFECTS OF INFLATION

The effects of inflation were not considered material during fiscal years 2000, 1999 and 1998, and are not expected to be material for fiscal year 2001.

OUTLOOK

Looking forward, the Company expects sales to increase in 2001. The increase in expected sales is due primarily to higher anticipated sales in the Simulation and Application Groups offset by lower anticipated sales in the REALimage Solutions Group. Sales in the Simulation Group are expected to increase in 2001 as compared to 2000 as orders and backlog continue to grow in those businesses. As of December 31, 2000 the Company's orders backlog was $142.7 million.

We believe the Company's main challenge is the completion of the Company's significant contracts. The Company is in the process of completing certain contracts, which include the Harmony image generator. Certain of these contracts were to be completed and integrated during 1999 and 2000. Consequently, as of December 31, 2000, in accordance with original contractual provisions, the Company incurred liquidated damages and late delivery penalties totaling $9.1 million. The Company paid $6.0 million of this amount in 2000. The Company is investing considerable resources in capital equipment, human resources and other research and development expenses to develop Harmony-related products. The near-term success of the Company is dependent in large part on the successful execution of these programs.

The Company is currently evaluating various business arrangements of its REALimage Solutions Group and its E&S RAPIDsite business in order to enhance the value of these businesses, including, but not limited to, transferring the assets of each of these businesses to wholly-owned subsidiaries and seeking outside investment to assist with the development of the products of these businesses.

The foregoing contains "forward-looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, including, among others, those statements preceded by, followed by or including the words "estimates," "believes," "expects," "anticipates," "plans," "projects," and similar expressions.

These forward-looking statements include projections of sales and net income and issues that may affect sales or net income; projections of capital expenditures; plans for future operations; financing needs or plans; plans relating to the Company's products and services; plans to enter into various arrangements to enhance the value of REALimage Solutions Group and the E&S RAPIDsite business and assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking information. In addition to the other risks described below in the "Factors That May Affect Future Results," important factors to consider in evaluating such forward-looking statements include risk of product demand, market acceptance, economic conditions, competitive products and pricing, difficulties in product development, product delays, commercialization and technology. In light of these risks and uncertainties, there can be no assurance that the events contemplated by the forward-looking statements contained in this annual report will, in fact, occur.

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FACTORS THAT MAY AFFECT FUTURE RESULTS

Evans & Sutherland's domestic and international businesses operate in highly competitive markets that involve a number of risks, some of which are beyond our control. While we are optimistic about our long-term prospects, the following discussion highlights some risks and uncertainties that should be considered in evaluating our growth outlook.

E&S's Business May Suffer if Our Competitive Strategy is Not Successful

Our continued success depends on our ability to compete in an industry that is highly competitive, with rapid technological advances and constantly improving products in both price and performance. As most market areas in which we operate continue to grow, we are experiencing increased competition, and we expect this trend to continue. In recent years, we have been forced to adapt to domestic and worldwide political, economic, and technological developments that have strongly affected our markets. Under our current competitive strategy, we endeavor to remain competitive by growing existing businesses, developing new businesses internally, selectively acquiring businesses, increasing efficiency, improving access to new markets, and reducing costs. Although our executive management team and Board of Directors continue to review and monitor our strategic plans, we have no assurance that we will be able to continue to follow our current strategy or that this strategy will be successful.

E&S's Stock Price May be Adversely Impacted if Our Sales or Earnings Fail to Meet Expectations

Our stock price is subject to significant volatility and will likely be adversely affected if sales or earnings in any quarter fail to meet the investment community's expectations. Our sales and earnings may fail to meet expectations because they fluctuate and are difficult to predict. Our earnings during 1999 and 2000 fluctuated significantly from quarter to quarter. One of the reasons we experience such fluctuations is that the largest share of our sales and earnings is from our Simulation Group, which typically has long delivery cycles and contract lengths. The timing of customer acceptance of certain large-scale commercial or government contracts may affect the timing and amount of sales that can be recognized; thus, causing our periodic operating results to fluctuate. Our results may further fluctuate if United States and international governments delay or even cancel production on large-scale contracts due to lack of available funding.

Our earnings may not meet either investor or internal expectations because our budgeted operating expenses are relatively fixed in the short term and even a small sales shortfall may cause a period's results to be below expectations. Such a sales shortfall could arise from any number of factors, including:

o delays in the availability of products,
o delays from chip suppliers,
o discontinuance of key components from suppliers,
o other supply constraints,
o transit interruptions,
o overall economic conditions, and
o customer demand.

Another reason our earnings may not meet expectations is that our gross margins are heavily influenced by mix considerations. These mix considerations include the mix of lower-margin prime contracts versus sub-contracts, the mix of new products and markets versus established products and markets, the mix of high-end products versus low-end products, as well as the mix of configurations within these product categories. Future margins may not duplicate historical margins or growth rates.

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Our Significant Debt Could Adversely Affect Our Financial Resources and Prevent Us from Satisfying Our Debt Service Obligations

We have a significant amount of indebtedness and may also incur additional indebtedness in the future. We may not generate sufficient cash flow from operations, or have future borrowings available to us, sufficient to pay our debt. At December 31, 2000, total indebtedness was $25.9 million and our total stockholders' equity was $67.6 million.

Our ability to make debt payments or refinance our indebtedness depends on future performance, which, to a certain extent, is subject to general economic, financial, competitive and other factors, some of which are beyond our control. Based upon our current level of operations and anticipated growth, management believes that available cash flow, together with available credit, will be adequate to meet our financial needs. There can be no assurance, however, that our business will generate sufficient cash flow from operations or that future borrowings will be available in an amount sufficient to enable us to pay our debts or to make necessary capital expenditures, or that any refinancing of debt would be available on commercially reasonable terms or at all.

Our substantial indebtedness could have important consequences including, but not limited to, the following: (i) the ability to obtain additional financing for working capital, capital expenditures, acquisitions, or other purposes may be impaired or unavailable; (ii) a portion of cash flow will be used to pay interest expense, which will reduce the funds that would otherwise be available for operations and future business opportunities; (iii) a substantial decrease in net operating cash flows or an increase in expenses could make it difficult for us to meet our debt service requirements and force us to modify operations; (iv) we may be more highly leveraged than our competitors, which may place us at a competitive disadvantage; (v) our substantial indebtedness may make us more vulnerable to a downturn in our business or in the economy generally; and (vi) some of our existing debt contains financial and restrictive covenants that limit our ability to, among other things, borrow additional funds, acquire and dispose of assets, and pay cash dividends.

A portion of our outstanding indebtedness bears interest at variable rates. Any increase in interest rates will reduce funds available to us for our operations and future business opportunities and will exacerbate the consequences of our leveraged capital structure.

Covenants and Restrictions in Our Credit Documents Limit Our Ability to Take Certain Actions

Our credit documents contain significant financial and operating covenants that limit the discretion of management with respect to certain business matters. These covenants include, among others, restrictions on our ability to:

o declare dividends or redeem or repurchase capital stock;
o incur certain additional debt;
o grant liens;
o make certain payments and investments;
o sell or otherwise dispose of assets; and
o consolidate with other entities.

We must also meet certain financial ratios and tests, including a minimum tangible net worth that adjusts each quarter and a limitation of $12.0 million of aggregate capital expenditures in any fiscal year. Failure to comply with the obligations contained in the credit documents could result in an event of default, and possibly the acceleration of the related debt and the acceleration of debt under other instruments evidencing debt that may contain cross-acceleration or cross-default provisions. We are currently in compliance with our financial covenants, although a continuation of recent negative operating trends could impact our future compliance with such covenants. Should the need arise, we will negotiate with our lenders to modify and expand various financial covenants, however, no assurance can be given that such negotiations will result in modifications that will allow us to continue to be in compliance or otherwise be acceptable to us.

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Delays in the Timely Delivery of Our Products May Prevent Us From Invoicing Our Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts.

In accordance with accounting for long-term contracts, we record an asset for our costs and estimated earnings that exceed the amount we are able to bill our customers on uncompleted contracts. At December 31, 2000, $46.0 million of our costs and estimated earnings that exceeded our billings on uncompleted contracts related to five contracts with five different customers. We are not able to bill these amounts unless we meet certain contractual milestones related to the delivery and integration of our Harmony image generators. Our failure to achieve these contractual milestones by timely delivering and integrating our Harmony image generators may significantly impact our ability to recover our costs and estimated earnings that exceeded our billings on uncompleted contracts, which could severely impact our cash flow.

Failure to Protect Our Intellectual Property Could Harm Our Name Recognition Efforts and Ability to Compete Effectively

Currently, we rely on a combination of patents, trademarks, copyrights and common law safeguards including trade secret protection. To protect our intellectual property rights in the future, we intend to continue to rely on a combination of patents, trademarks, copyrights and common law safeguards, including trade secret protection. We also rely on restrictions on use, confidentiality and nondisclosure agreements and other contractual arrangements with our employees, affiliates, customers, alliance partners and others. The protective steps we have taken may be inadequate to deter misappropriation of our intellectual property and proprietary information. A third party could obtain our proprietary information or develop products or technology competitive with ours. We may be unable to detect the unauthorized use of, or take appropriate steps to enforce our intellectual property rights. Effective patent, trademark, copyright and trade secret protection may not be available in every country in which we offer or intend to offer our products and services to the same extent as in the United States. Failure to adequately protect our intellectual property could harm or even destroy our brands and impair our ability to compete effectively. Further, enforcing our intellectual property rights could result in the expenditure of significant financial and managerial resources and may not prove successful.

We Could Incur Substantial Costs Defending Our Intellectual Property from Claims of Infringement

The industry is characterized by frequent litigation regarding copyright, patent and other intellectual property rights. We may be subject to future litigation based on claims that our products infringe the intellectual property rights of others or that our own intellectual property rights are invalid. Claims of infringement could require us to reengineer or rename our products or seek to obtain licenses from third parties in order to continue offering our products. Licensing or royalty agreements, if required, may not be available on terms acceptable to us or at all. Even if successfully defended, claims of infringement could also result in significant expense to us and the diversion of our management and technical resources.

E&S's Significant Investment in Research and Development May Not be Realized

We have no assurance that our significant investment in research and development will generate future sales or benefits. We currently make and plan to continue to make a significant investment in research and development. Total spending for research and development was $44.3 million or 27% of sales in 2000 as compared to $44.4 million or 22% of sales in 1999. This investment is necessary for us to be able to compete in the graphics simulation industry. Developing new products and software is expensive and often involves a long payback cycle. While we have every reason to believe these investments will be rewarded with sales-generating products, customer acceptance ultimately dictates the success of development and marketing efforts.

E&S May Not Continue to be Successful if We Are Unable to Develop, Produce and Transition Our Products

Our continued success depends on our ability to develop, produce and transition technologically complex and innovative products that meet customer needs. We have no assurance that we will be able to successfully continue such development, production and transition.

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The development of new technologies and products is increasingly complex and expensive, which among other risks, increases the risk of product introduction delays. The introduction of a new product requires close collaboration and continued technological advancement involving multiple hardware and software design and manufacturing teams within E&S as well as teams at outside suppliers of key components. The failure of any one of these elements could cause our new products to fail to meet specifications or to miss the aggressive timetables that we establish and the market demands.

As the variety and complexity of our product families increase, the process of planning and managing production, inventory levels, and delivery schedules also becomes increasingly complex. There is no assurance that acceptance of and demand for our new products will not be affected by delays in this process. Additionally, if we are unable to meet our delivery schedules, we may be subject to the penalties, including liquidated damages that are included in some of our customer contracts, and termination of our contracts.

Product transitions are a recurring part of our business. Our short product life cycles require our ability to successfully manage the timely transition from current products to new products. In fact, it is not unusual for us to announce a new product while its predecessor is still in the final stages of its development. Our transition results could be adversely affected by such factors as:

o development delays,
o late release of products to manufacturing,
o quality or yield problems experienced by production or suppliers,
o variations in product costs,
o excess inventories of older products and components, and
o delays in customer purchases of existing products in anticipation of the introduction of new products.

In the Event E&S Suffers Further Product Delays, E&S May Be Required to Pay Certain Customers Substantial Liquidated Damages

The variety and complexity of our high technology product lines require us to deal with suppliers and subcontractors supplying highly specialized parts, operating highly sophisticated and narrow tolerance equipment in performing highly technical calculations. The processes of planning and managing production, inventory levels and delivery schedules are also highly complex and specialized. Many of our products must be custom designed and manufactured, which is not only complicated and expensive, but can also require a number of months to accomplish. Slight errors in design, planning and managing production, inventory levels, delivery schedules, or manufacturing can result in unsatisfactory products that may not be correctable. If we are unable to meet our delivery schedules, we may be subject to penalties, including liquidated damages that are included in some of our customer contracts. During the fourth quarter of 1999, we accrued $8.2 million for payments of liquidated damages and penalties due to product delays. As of December 31, 2000, we have paid $6.0 million in connection with liquidated damages. During 2000, we accrued an additional $0.9 million for late delivery penalties that is expected to be settled in 2001. There is no assurance that we may not incur substantial liquidated damages in the future in connection with further product delays.

E&S May Not Maintain a Significant Portion of Our Sales if We Fail to Maintain Our United States Government Contracts

In 2000, 40% of our sales were to agencies of the United States government, either directly or through prime contractors or subcontractors, for which there is intense competition. Accordingly, we have no assurance that we will be able to maintain a significant portion of our sales. These sales are subject to the inherent risks related to government contracts, including uncertainty of economic conditions, changes in government policies and requirements that may reflect rapidly changing military and political developments, and unavailability of funds. These risks also include technological uncertainties and obsolescence, and dependence on annual Congressional appropriation and allotment of funds. In the past, some of our programs have been delayed, curtailed, or terminated. Although we cannot predict such uncertainties, in our opinion there are no spending reductions or funding limitations pending that would impact our contracts.

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Other characteristics of the government contract market that may affect our operating results include the complexity of designs, the difficulty of forecasting costs and schedules when bidding on developmental and highly sophisticated technical work, and the speed with which product lines become obsolete due to technological advances and other factors characteristic of the market. Our earnings may vary materially on some contracts depending upon the types of government long-term contracts undertaken, the costs incurred in their performance, and the achievement of other performance objectives. Furthermore, due to the intense competition for available United States government business, maintaining or expanding government business increasingly requires us to commit additional working capital for long-term programs and additional investments in company-funded research and development.

Our dependence on government contracts may lead to other perils as well because as a United States government contractor or sub-contractor, our contracts and operations are subject to government oversight. The government may investigate and make inquiries of our business practices and conduct audits of our contract performance and cost accounting. These investigations may lead to claims against E&S. Under United States government procurement regulations and practices, an indictment of a government contractor could result in that contractor being fined and/or suspended for a period of time from eligibility for bidding on, or for award of, new government contracts; a conviction could result in debarment for a specified period of time.

E&S's Sales May Suffer if We Lose Certain Significant Customers

We currently derive a significant portion of our sales from a limited number of non-U.S. government customers. The loss of any one or more of these customers could have a material adverse effect on our business, financial condition and results of operations. We were dependent on four of our non-U.S. government customers for approximately 23% of our consolidated sales and three of our non-U.S. government customers for approximately 24% of our consolidated sales in 2000 and 1999, respectively. We expect that sales to a limited number of customers will continue to account for a substantial portion of our sales in the foreseeable future. We have no assurance that sales from this limited number of customers will continue to reach or exceed historical levels in the future. We do not have supply contracts with any of our significant customers.

E&S's Sales Will Decrease if We Fail to Maintain Our International Business

Any reduction of our international business could significantly affect our sales. Our international business accounted for 36% of our 2000 sales. We expect that international sales will continue to be a significant portion of our overall business in the foreseeable future.

Our international business experiences many of the same risks our domestic business encounters as well as additional risks such as exposure to currency fluctuations and changes in foreign economic and political environments. Despite our exposure to currency fluctuations, we are not engaged in any material hedging activities to offset the risk of exchange rate fluctuations. The ongoing economic crisis affecting the Asian markets is an example of a change in a foreign economic environment that could affect our international business. Any similar economic downturns may also decrease the number of orders we receive and our receivable collections.

Our international transactions frequently involve increased financial and legal risks arising from stringent contractual terms and conditions and widely differing legal systems, customs, and standards in foreign countries. In addition, our international sales often include sales to various foreign government armed forces, with many of the same inherent risks associated with United States government sales identified previously.

Future Losses Could Impair Our Ability to Raise Capital or Borrow Money and Consequently Affect Our Stock Price

Although we recorded net sales of $167.0 million for the twelve months ended December 31, 2000, we incurred a net loss of $69.6 million in 2000. We have incurred net losses totaling $109.0 million over the past three years. We cannot assure you that we will be profitable in future periods. Losses in future periods could impair our ability to raise additional capital or borrow money as needed, could decrease our stock price and could cause a violation of certain covenants in our credit facility.

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If E&S's Commercial Simulation Business Fails, E&S's Sales will Decrease

We have no assurance that our commercial simulation (airline) business will continue to succeed. Our commercial simulation business currently accounts for approximately 15% to 20% of our sales. This business is subject to many of the risks related to the commercial simulation market that may adversely affect our business. The following risks are characteristic of the commercial simulation market:

o uncertainty of economic conditions,
o dependence upon the strength of the commercial airline industry,
o air pilot training requirements,
o competition,
o changes in technology, and
o timely performance by subcontractors on contracts in which E&S is the prime contractor.

We May Make Acquisitions that are Unsuccessful or Strain or Divert Our Resources from More Profitable Operations

We intend to consider acquisitions, alliances, and transactions involving other companies that could complement our existing business. However, we may not be able to identify suitable acquisition parties, joint venture candidates, or transaction counterparties. Also, even if we can identify suitable parties, we may not be able to obtain the financing necessary to complete any such transaction or consummate these transactions on terms that we find favorable.

We may not be able to successfully integrate any businesses that we acquire into our existing operations. If we cannot successfully integrate acquisitions, our operating expenses may increase. This increase would affect our net earnings, which could adversely affect the value of our outstanding securities. Moreover, these types of transactions may result in potentially dilutive issuances of equity securities, the incurrence of additional debt, and amortization of expenses related to goodwill and intangible assets, all of which could adversely affect our profitability. These transactions involve numerous other risks as well, including the diversion of management attention from other business concerns, entry into markets in which we have had no or only limited experience, and the potential loss of key employees of acquired companies. Occurrence of any of these risks could have a material adverse effect on us.

Our Contemplated Business Arrangements to Enhance the Value of our REALimage Solutions Group and RAPIDsite Business May not be Successful.

We are considering various business arrangements relating to our REALimage Solutions Group and our RAPIDsite business in order to enhance the value of these businesses, including, but not limited to, transferring the assets of each of these two businesses to wholly-owned subsidiaries and seeking outside investment to assist with the development of the products of these businesses. However, we may not be able to identify suitable parties, joint venture candidates, or transaction counterparties. Also, even if we can identify suitable parties, we may not be able to obtain the financing necessary to complete any such transaction or consummate these transactions on terms that we find favorable. These transactions involve numerous other risks as well, including the diversion of management attention from other business concerns and entry into markets in which we have had only limited experience. Occurrence of any of these risks could have a material adverse effect on us.

E&S's Shareholders May Not Realize Certain Opportunities Because of the Anti-Takeover Effect of State Law

We may be subject to the Utah Control Shares Acquisition Act which provides that any person who acquires 20% or more of the outstanding voting shares of a publicly held Utah corporation will not have voting rights with respect to the acquired shares unless a majority of the disinterested shareholders of the corporation votes to grant such rights. This could deprive shareholders of opportunities to realize takeover premiums for their shares or other advantages that large accumulations of stock would provide because anyone interested in acquiring E&S could only do so with the cooperation of our board of directors.

33

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The principal market risks to which the Company is exposed are changes in foreign currency exchange rates and changes in interest rates. The Company's international sales, which accounted for 36% of the Company's total sales in 2000 are concentrated in the United Kingdom, continental Europe and Asia. Foreign currency purchase and sale contracts are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The Company does not enter into contracts for trading purposes and does not use leveraged contracts. As of December 31, 2000, the Company had no material sales or purchase contracts in currencies other than U.S. dollars and had no foreign currency sales or purchase contracts.

The Company reduces its exposure to changes in interest rates by maintaining a high proportion of its debt in fixed-rate instruments. As of December 31, 2000, 71% of the Company's total debt was in fixed-rate instruments. Had the Company fully drawn on its $30 million revolving line of credit with Foothill Capital Corporation and its foreign line of credit, 48% of the Company's total debt would be in fixed-rate instruments. In addition, the Company maintains an average maturity of its short-term investment portfolio under three months to avoid large changes in its market value. As of December 31, 2000, all investments had maturities within 90 days.

The information below summarizes the Company's market risks associated with debt obligations as of December 31, 2000. Fair values have been determined by quoted market prices. For debt obligations, the table below presents the principal cash flows and related interest rates at year end by fiscal year of maturity. Bank borrowings bear variable rates of interest and the 6% Debentures bear a fixed rate of interest. The information below should be read in conjunction with note 11of Notes to the Consolidated Financial Statements in Part II of this annual report.

                                                                                         There-               Fair
                              Rate      2001      2002      2003      2004      2005     after      Total     Value
                            --------   -------   -------   -------   -------   -------   -------   -------   -------
Debt
Notes payable ...........    Various   $   344        --        --        --        --        --   $   344   $   344
                                       =======   =======   =======   =======   =======   =======   =======   =======

6% Debentures ...........      6.0%         --        --        --        --        --   $18,015   $18,015   $ 7,927

Bank borrowings .........     12.5%         --   $ 7,344   $   204        --        --        --     7,548     7,548
                                       -------   -------   -------   -------   -------   -------   -------   -------

Total long-term debt ....                   --   $ 7,344   $   204        --        --   $18,015   $25,563   $15,475
                                       =======   =======   =======   =======   =======   =======   =======   =======

34

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following constitutes a list of Financial Statements included in Part II of this report:

o Report of Management

o Report of Independent Accountants

o Consolidated Balance Sheets as of December 31, 2000 and 1999

o Consolidated Statements of Operations for each of the years in the three-year period ended December 31, 2000

o Consolidated Statements of Comprehensive Loss for each of the years in the three-year period ended December 31, 2000

o Consolidated Statements of Stockholders' Equity for each of the years in the three-year period ended December 31, 2000

o Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2000

o Notes to Consolidated Financial Statements for each of the years in the three-year period ended December 31, 2000

The following consists of a list of Financial Statement Schedules included in Part IV of this report:

o Schedule II - Valuation and Qualifying Accounts for each of the years in the three-year period ended December 31, 2000

Schedules other than those listed above are omitted because of the absence of conditions under which they are required or because the required information is presented in the Financial Statements or notes thereto.

35

REPORT OF MANAGEMENT

Responsibility for the integrity and objectivity of the financial information presented in this report rests with the management of Evans & Sutherland. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis and, where necessary, include estimates based on management judgment. Management also prepared other information in this report and is responsible for its accuracy and consistency with the financial statements.

Evans & Sutherland has established and maintains an effective system of internal accounting controls. The Company believes this system provides reasonable assurance that transactions are executed in accordance with management authorization in order to permit the financial statements to be prepared with integrity and reliability and to safeguard, verify, and maintain accountability of assets. In addition, Evans & Sutherland's business ethics policy requires employees to maintain the highest level of ethical standards in the conduct of the Company's business.

Evans & Sutherland's financial statements have been audited by KPMG LLP, independent public accountants. Management has made available all the Company's financial records and related data to allow KPMG LLP to express an informed professional opinion in their accompanying report.

The Audit Committee of the Board of Directors is composed of three independent directors and meets regularly with the independent accountants, as well as with Evans & Sutherland management, to review accounting, auditing, internal accounting control and financial reporting matters.

James R. Oyler                    William M. Thomas
President and                     Vice President and
Chief Executive Officer           Chief Financial Officer

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders
Evans & Sutherland Computer Corporation:

We have audited the consolidated financial statements of Evans & Sutherland Computer Corporation and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Evans & Sutherland Computer Corporation and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

KPMG LLP

Salt Lake City, Utah
February 15, 2001

36

            EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share amounts)


                                                                                   December 31,
                                                                          ------------------------------
                                                                              2000              1999
                                                                          ------------      ------------
Assets:
   Cash and cash equivalents ....................................        $     11,898      $     22,110
   Restricted cash ..............................................               2,024                --
   Short-term investments .......................................                  --               748
   Accounts receivable, less allowances for doubtful
      receivables of $4,411 in 2000 and $1,322 in 1999 ..........              34,572            28,743
   Inventories ..................................................              38,383            40,588
   Costs and estimated earnings in excess of billings
      on uncompleted contracts ..................................              68,464            80,457
   Deferred income taxes ........................................                  --            15,923
   Prepaid expenses and deposits ................................               5,326             7,844
                                                                         ------------      ------------
            Total current assets ................................             160,667           196,413

Property, plant and equipment, net ..............................              48,665            52,184
Investment securities ...........................................               5,429             4,467
Deferred income taxes ...........................................                  --             4,418
Goodwill and other intangible assets, net .......................                 374               552
Other assets ....................................................                 943               430
                                                                         ------------      ------------
            Total assets ........................................        $    216,078      $    258,464
                                                                         ============      ============

Liabilities and stockholders' equity:
   Current portion of long-term debt ............................        $        344      $         --
   Line of credit agreements ....................................                  --             2,657
   Accounts payable .............................................              27,087            19,575
   Accrued expenses .............................................              39,832            40,119
   Customer deposits ............................................               3,908             4,720
   Billings in excess of costs and estimated earnings on
      uncompleted contracts .....................................              27,710            12,412
                                                                         ------------      ------------
            Total current liabilities ...........................              98,881            79,483
                                                                         ------------      ------------
Long-term debt ..................................................              25,563            18,015
                                                                         ------------      ------------
Commitments and contingencies (notes 7, 10 and 14)

Redeemable preferred stock, class B-1, no par value; authorized
   1,500,000 shares; issued and outstanding 901,408 shares ......              24,000            23,772
                                                                         ------------      ------------
Stockholders' equity:
   Preferred stock, no par value; authorized 8,500,000 shares;
      no shares issued and outstanding ..........................                  --                --
   Common stock, $.20 par value; authorized 30,000,000 shares;
     issued 9,772,118 shares in 2000 and 9,678,938 shares in 1999               1,954             1,936
   Additional paid-in capital ...................................              24,752            24,086
   Common stock in treasury, at cost; 352,500 shares ............              (4,709)           (4,709)
   Retained earnings ............................................              46,018           115,816
   Accumulated other comprehensive income .......................                (381)               65
                                                                         ------------      ------------
            Total stockholders' equity ..........................              67,634           137,194
                                                                         ------------      ------------
            Total liabilities and stockholders' equity ..........        $    216,078      $    258,464
                                                                         ============      ============

See accompanying notes to consolidated financial statements

37

            EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)


                                                                                 Year ended December 31,
                                                                        2000              1999              1998
                                                                    ------------      ------------      ------------
Sales ......................................................        $    166,980      $    200,885      $    191,766
Cost of sales ..............................................             137,532           127,556           110,320
Write-off of inventories ...................................                  --            13,230                --
                                                                    ------------      ------------      ------------
            Gross profit ...................................              29,448            60,099            81,446
                                                                    ------------      ------------      ------------
Expenses:
   Selling, general and administrative .....................              34,229            43,039            40,088
   Research and development ................................              44,264            44,358            31,797
   Amortization of goodwill and other intangible assets ....                 177             1,515             4,767
   Impairment loss .........................................                  --             9,693                --
   Restructuring charge ....................................                (761)            1,460                --
   Write-off of acquired in-process technology .............                  --                --            20,780
                                                                    ------------      ------------      ------------
               Operating expenses ..........................              77,909           100,065            97,432
                                                                    ------------      ------------      ------------
                                                                         (48,461)          (39,966)          (15,986)
Gain on sale of business unit ..............................               1,918                --                --
                                                                    ------------      ------------      ------------
               Operating loss ..............................             (46,543)          (39,966)          (15,986)

Other income (expense):
   Interest income .........................................                 659             1,849             2,659
   Interest expense ........................................              (2,195)           (1,333)           (1,335)
   Loss on write down of investment securities .............              (7,786)             (350)           (1,075)
   Gain on sale of investment securities ...................               6,472                --             2,493
   Other ...................................................              (1,154)              933              (613)
                                                                    ------------      ------------      ------------
                                                                          (4,004)            1,099             2,129
                                                                    ------------      ------------      ------------
Loss before income taxes ...................................             (50,547)          (38,867)          (13,857)

Income tax expense (benefit) ...............................              19,023           (15,413)            2,126
                                                                    ------------      ------------      ------------
             Net loss ......................................             (69,570)          (23,454)          (15,983)

Accretion of redeemable preferred stock ....................                 228               228                95
                                                                    ------------      ------------      ------------
Net loss applicable to common stock ........................        $    (69,798)     $    (23,682)     $    (16,078)
                                                                    ============      ============      ============
Net loss per common share:
   Basic and Diluted .......................................        $      (7.45)     $      (2.49)     $      (1.70)
                                                                    ============      ============      ============

Basic and diluted weighted average common shares outstanding               9,372             9,501             9,461
                                                                    ============      ============      ============

See accompanying notes to consolidated financial statements

38

            EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                                 (In thousands)


                                                                          Year ended December 31,
                                                                  2000             1999             1998
                                                              ------------     ------------     ------------

Net loss .............................................        $    (69,570)    $    (23,454)    $    (15,983)

Other comprehensive income (loss):
   Foreign currency translation adjustments ..........                (419)            (337)             126
   Unrealized losses on securities ...................                 (27)             (48)             (89)
   Reclassification adjustment for losses included
       in net loss ...................................                  --              275               --
                                                              ------------     ------------     ------------
Other comprehensive income (loss) before income taxes                 (446)            (110)              37

Income tax expense related
   to items of other comprehensive income (loss) .....                  --               70               12
                                                              ------------     ------------     ------------
Other comprehensive income (loss), net of income taxes                (446)            (180)              25
                                                              ------------     ------------     ------------
Comprehensive loss ...................................        $    (70,016)    $    (23,634)    $    (15,958)
                                                              ============     ============     ============

See accompanying notes to consolidated financial statements

39

            EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                      (In thousands, except share amounts)


                                                                                                    Accumulated
                                         Common Stock         Additional                               Other
                                    ----------------------     Paid-In     Treasury     Retained   Comprehensive
                                     Shares       Amount       Capital       Stock      Earnings       Income       Total
                                    ---------    ---------    ---------    ---------    ---------    ---------    ---------
Balance at December 31, 1997 ....       9,067    $   1,813    $   8,025    $      --    $ 155,576    $     220    $ 165,634

Issuance of common stock for cash         156           32        1,990           --           --           --        2,022
Common stock issued in
   connection with acquisitions .       1,109          222       28,373           --           --           --       28,595
Common stock repurchased
   and retired ..................        (734)        (147)     (15,538)          --           --           --      (15,685)
Compensation expense on
   employee stock purchase plan .          --           --          186           --           --           --          186
Tax benefit from issuance of
   common stock to employees ....          --           --          384           --           --           --          384
Other comprehensive income ......          --           --           --           --           --           25           25
Net loss ........................          --           --           --           --      (15,983)          --      (15,983)
Accretion of redeemable
   preferred stock ..............          --           --           --           --          (95)          --          (95)
                                    ---------    ---------    ---------    ---------    ---------    ---------    ---------
Balance at December 31, 1998 ....       9,598        1,920       23,420           --      139,498          245      165,083

Issuance of common stock for cash         142           28        1,361           --           --           --        1,389
Repurchase of 413,500 common
   shares .......................         (61)         (12)        (911)      (4,709)          --           --       (5,632)
Compensation expense on
   employee stock purchase plan .          --           --          117           --           --           --          117
Tax benefit from issuance of
   common stock to employees ....          --           --           99           --           --           --           99
Other comprehensive loss ........          --           --           --           --           --         (180)        (180)
Net loss ........................          --           --           --           --      (23,454)          --      (23,454)
Accretion of redeemable
    preferred stock .............          --           --           --           --         (228)          --         (228)
                                    ---------    ---------    ---------    ---------    ---------    ---------    ---------
Balance at December 31, 1999 ....       9,679        1,936       24,086       (4,709)     115,816           65      137,194

Issuance of common stock for cash          93           18          562           --           --           --          580
Compensation expense on
   employee stock purchase plan .          --           --          104           --           --           --          104
Other comprehensive loss ........          --           --           --           --           --         (446)        (446)
Net loss ........................          --           --           --           --      (69,570)          --      (69,570)
Accretion of redeemable
    preferred stock .............          --           --           --           --         (228)          --         (228)
                                    ---------    ---------    ---------    ---------    ---------    ---------    ---------
Balance at December 31, 2000 ....       9,772    $   1,954    $  24,752    $  (4,709)   $  46,018    $    (381)   $  67,634
                                    =========    =========    =========    =========    =========    =========    =========

See accompanying notes to consolidated financial statements

40

            EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

                                                                                                  Year ended December 31,
                                                                                             2000          1999          1998
                                                                                          ----------    ----------    ----------
Cash flows from operating activities:
   Net loss ...........................................................................   $  (69,570)   $  (23,454)   $  (15,983)
   Adjustments to reconcile net loss to net cash
      provided by (used in) operating activities:
         Write-off of inventories .....................................................           --        13,230            --
         Impairment loss ..............................................................           --         9,693            --
         Depreciation and amortization ................................................       14,264        15,499        15,934
         Gain on sale of a business unit ..............................................       (1,918)           --            --
         Loss on disposal of property, plant and equipment ............................        2,794            --            --
         Provision for losses on accounts receivable ..................................        3,829           558           496
         Provision for obsolete and excess inventories ................................        6,613           910         1,987
         Provision for warranty expense ...............................................        1,189           958           872
         Deferred income taxes ........................................................       20,341        (8,475)       (2,919)
         Loss on write-down of investment securities ..................................        7,786           350         1,075
         Gain on sale of investment securities ........................................       (6,472)           --        (2,493)
         Write-off of acquired in-process technology ..................................           --            --        20,780
         Other, net ...................................................................          852           732           868
         Changes in assets and liabilities, net of effect of purchase/sale of business:
            Accounts receivable .......................................................       (9,977)       17,474        (3,613)
            Inventories ...............................................................       (5,992)       (6,104)      (28,867)
            Costs and estimated earnings in excess of billings on
                uncompleted contracts, net ............................................       27,296       (16,446)       (6,110)
            Prepaid expenses and deposits .............................................        2,407          (565)       (3,533)
            Accounts payable ..........................................................        6,932        (5,041)        5,699
            Accrued expenses ..........................................................       (1,720)        9,695        (1,739)
            Customer deposits .........................................................         (812)        1,381        (3,235)
                                                                                          ----------    ----------    ----------
                  Net cash provided by (used in) operating activities .................       (2,158)       10,395       (20,781)
                                                                                          ----------    ----------    ----------
Cash flows from investing activities:
   Purchases of short-term investments ................................................       (1,875)      (14,700)      (22,217)
   Proceeds from sale of short-term investments .......................................        2,627        39,767        47,691
   Purchase of investment securities ..................................................         (500)         (636)         (541)
   Proceeds from sale of investment securities ........................................        1,428            --         3,304
   Proceeds from sale of business unit ................................................        1,400            --            --
   Investment in joint venture ........................................................         (754)           --            --
   Purchases of property, plant and equipment .........................................      (13,868)      (14,530)      (18,516)
   Proceeds from sale of property, plant and equipment ................................        1,382            --            --
   Proceeds from sale of certain manufacturing assets .................................           --         6,010            --
   Payments for business acquisitions, net of cash acquired ...........................           --            --        (7,603)
                                                                                          ----------    ----------    ----------
                  Net cash provided by (used in) investing activities .................      (10,160)       15,911         2,118
                                                                                          ----------    ----------    ----------
Cash flows from financing activities:
   Borrowings under line of credit agreements and other long-term debt ................       22,365           716         3,915
   Payments under line of credit agreements and other long-term debt ..................      (16,919)       (1,869)       (1,575)
   Payments of debt issuance costs ....................................................       (1,296)           --            --
   Increase in restricted cash ........................................................       (2,024)           --            --
   Proceeds from issuance of common stock .............................................          580         1,389         2,022
   Proceeds from issuance of preferred stock ..........................................           --            --        23,544
   Payments for repurchases of common stock ...........................................           --        (5,478)      (15,685)
                                                                                          ----------    ----------    ----------
                  Net cash provided by (used in) financing activities .................        2,706        (5,242)       12,221
                                                                                          ----------    ----------    ----------
Effect of foreign exchange rates on cash and cash equivalents .........................         (600)         (788)          100
                                                                                          ----------    ----------    ----------
Net change in cash and cash equivalents ...............................................      (10,212)       20,276        (6,342)
Cash and cash equivalents at beginning of year ........................................       22,110         1,834         8,176
                                                                                          ----------    ----------    ----------
Cash and cash equivalents at end of year ..............................................   $   11,898    $   22,110    $    1,834
                                                                                          ==========    ==========    ==========

Supplemental  Disclosures of Cash Flow Information
Cash paid (received) during the year for:
   Interest ...........................................................................   $    1,539    $    1,321    $    1,309
   Income taxes .......................................................................       (5,887)       (5,846)        7,130
Accretion of redeemable preferred stock ...............................................          228           228            95

See accompanying notes to consolidated financial statements

41

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2000, December 31, 1999 and December 31, 1998

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Evans & Sutherland Computer Corporation ("E&S" or the "Company") is an established high-technology company with outstanding computer graphics technology and a worldwide presence in high-performance 3D visual simulation. In addition, E&S is now applying this core technology into higher-growth personal computer ("PC") products for both simulation and workstations. The Company's core computer graphics technology is used to produce high performance image generators for simulation including PC-based visual system products, to provide graphics acceleration technology to the professional digital content creation market, and to apply the Company's core technologies to the expanding market of PC-based applications and products.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made in the 1999 and 1998 consolidated financial statements and notes to conform to the 2000 presentation.

Liquidity

Management believes that existing cash, cash equivalents, borrowings available under its various borrowing facilities, other asset-related cash sources and expected cash from future operations will be sufficient to meet the Company's anticipated working capital needs, routine capital expenditures and current debt service obligations for the next twelve months. The Foothill Facility expires in December 2002 and the Overdraft Facility expires on November 30, 2001 (see note 11). There can be no assurances that the Company will be successful in renegotiating its existing borrowing facilities or obtaining additional debt or equity financing. The Company's cash and cash equivalents, subject to various restrictions, are available for working capital needs, capital expenditures, strategic investments, mergers and acquisitions, stock repurchases and other potential cash needs as they may arise.

In the event the Company's various borrowing facilities were to become unavailable, the Company were unable to timely deliver products pursuant to the terms of various agreements with third parties, or certain of the Company's contracts were adversely impacted for failure to meet delivery requirements, the Company may be unable to meet its anticipated working capital needs, routine capital expenditures, and current debt service obligations on a short-term and long-term basis.

Revenue Recognition

Sales includes revenue from system and software products, software license rights and service contracts.

The Company has adopted the American Institute of Certified Public Accountants ("AICPA") Statement of Position ("SOP") 97-2, Software Revenue Recognition, as modified by SOP 98-9. SOP 97-2 generally requires revenue earned on software arrangements involving multiple elements such as software products, enhancements, post-contract customer support, installation and training to be allocated to each element based on the relative fair values of the elements. The fair value of an element must be based on evidence that is specific to the vendor. The revenue allocated to software products is generally recognized upon delivery of the products. The revenue allocated to post-contract customer support is generally recognized over the support period.

42

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recognizes revenues from product sales that do not require significant production, modification, or customization when the following criteria are met: the Company has signed a noncancelable agreement; the Company has delivered the product; there are no uncertainties surrounding product acceptance; the fees are fixed and determinable; and collection is considered probable.

Revenue from long-term contracts which require significant production, modification or customization is recorded using the percentage-of-completion method, determined by the units-delivered method, or when there is significant nonrecurring engineering, the ratio of costs incurred to management's estimate of total anticipated costs. If estimated total costs on any contract indicate a loss, the Company provides currently for the total anticipated loss on the contract. Billings on uncompleted long-term contracts may be greater than or less than incurred costs and estimated earnings and are recorded as an asset or liability in the accompanying consolidated balance sheets.

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments purchased with an original maturity to the Company of 90 days or less to be cash equivalents. Cash equivalents consist of debt securities and money market funds of $3.8 million and $15.5 million as of December 31, 2000 and 1999, respectively.

Restricted Cash

The Company has restricted deposits pledged as collateral on overdraft protection, letters of credit and certain other obligations all of which mature or expire within one year.

Inventories

Inventoried costs on programs and long-term contracts include direct engineering and production costs and applicable overhead, not in excess of estimated realizable value. In accordance with industry practice, inventoried costs include amounts relating to programs and contracts with long production cycles, a portion of which is not expected to be realized within one year. Inventories are stated at standard cost, which approximates average cost. Spare parts and general stock materials are stated at cost not in excess of realizable value. The Company periodically reviews inventories for excess and obsolete amounts and provides a reserve that it considers sufficient to cover any excess and obsolete inventories.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method based on the estimated useful lives of the related assets.

Accounting for Impairment of Long-Lived Assets

The Company periodically reviews the value assigned to the separate components of goodwill, intangibles and other long-lived assets through comparison to anticipated, undiscounted cash flows from the underlying assets to assess recoverability. The assets are considered to be impaired when the expected future undiscounted cash flows from these assets do not exceed the carrying balances of the related assets. The impairment loss of $9.7 million for the year ended December 31, 1999, as determined in accordance with Statement of Financial Accounting Standards No. 121 ("SFAS 121"), Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, relates to the write-down to fair value of goodwill, intangibles and other long-lived assets acquired in the acquisition of AccelGraphics, Inc. ("AGI") and Silicon Reality, Inc. ("SRI"). Fair value was determined utilizing discounted cash flow analyses and the replacement cost approach. The impairment loss consisted of the write-off of $4.9 million of goodwill, $4.4 million of intangible assets and $0.4 million of property, plant and equipment.

43

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In addition to continued losses at AGI, the impairment loss was the result of the following additional circumstances: (i) delays in production introductions for the AccelGALAXY, E&S Lightning 1200 and the multiple-controller graphics subsystems product line; (ii) the developer of the chip used on the AccelGMX acquired a board company and entered the graphics accelerator market in direct competition with the AccelGMX; and (iii) introduction of lower-end products by competitors which can perform many of the functions of the higher-end 3D graphics cards. Furthermore, the Company determined that a manufacturer of a chip to be used in various new board products was unable to manufacture a designed chip with agreed upon specifications.

Goodwill and Other Intangible Assets

Goodwill and other intangible assets consist primarily of goodwill and other intangible assets recorded in connection with the acquisitions of AccelGraphics, Inc. and Silicon Reality, Inc. on June 26, 1998. The other intangible assets are being amortized using the straight-line method over six months to seven years. As of December 31, 2000 and 1999, accumulated amortization of goodwill and other intangible assets was $15.9 million and $15.7 million, respectively.

Software Development Costs

Software development costs, if material, are capitalized from the date technological feasibility is achieved until the product is available for general release to customers. Such deferrable costs have not been material during the periods presented.

Investments

The Company classifies its marketable debt and equity securities as available-for-sale. Available-for-sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a component of accumulated other comprehensive income until realized. Dividend income is recognized when earned. Realized gains and losses from the sale of securities are included in results of operations and are determined on the specific-identification basis. A decline in the market value below cost that is deemed other than temporary is charged to results of operations resulting in the establishment of a new cost basis for both marketable and nonmarketable investment securities.

Nonmarketable investment securities are recorded at the lower of cost or fair value. Some of the factors that are considered in determining the fair value of these securities include analyses of each investee's financial condition and operations, the status of its technology and strategies in place to achieve its objectives. The Company's 50% investment in a joint venture is stated at cost, adjusted for equity in undistributed earnings since acquisition.

Warranty Reserve

The Company provides a warranty reserve for estimated future costs of servicing products under warranty agreements extending for periods from 90 days to one year. Anticipated costs for product warranty are based upon estimates derived from experience factors and are recorded at the time of sale or over the contract period for long-term contracts.

44

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

The Company has adopted the footnote disclosure provisions of Statement of Financial Accounting Standards No. 123 ("SFAS 123"), Accounting for Stock Based Compensation. SFAS 123 encourages entities to adopt a fair value based method of accounting for stock options or similar equity instruments. However, it also allows an entity to continue measuring compensation cost for stock based compensation using the intrinsic-value method of accounting prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting for Stock Issued to Employees. The Company has elected to continue to apply the provisions of APB 25 and provide pro forma footnote disclosures required by SFAS 123.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Foreign Currency Translation

The local foreign currency is the functional currency for the Company's German subsidiaries. The United Kingdom subsidiary uses the U.S. dollar as its functional currency. Assets and liabilities of German operations are translated to U.S. dollars at the current exchange rates as of the applicable balance sheet date. Sales and expenses are translated at the average exchange rates prevailing during the period. Adjustments resulting from translation are reported as a separate component of stockholders' equity. Certain transactions of the German subsidiaries are denominated in currencies other than the functional currency, including transactions with the parent company. Transaction gains and losses are included in other income (expense) for the period in which the transaction occurs.

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash, cash equivalents, short-term investments and accounts receivable. The Company's short-term investment portfolio consists of investment-grade securities diversified among security types, industries and issuers. The Company's investments are managed by recognized financial institutions that follow the Company's investment policy. The Company's policy limits the amount of credit exposure in any one issue, and the Company believes no significant concentration of credit risk exists with respect to these investments.

In the normal course of business, the Company provides unsecured credit terms to its customers. Accordingly, the Company performs ongoing credit evaluations of its customers and maintains allowances for possible losses which, when realized, have been within the range of management's expectations.

45

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In accordance with accounting for long-term contracts, the Company records an asset for costs and estimated earnings in excess of billings on uncompleted contracts. At December 31, 2000, $46.0 million of the costs and estimated earnings in excess of billings on uncompleted contracts pertain to five contracts with five different customers. The billing of these amounts is contingent upon the successful completion of contractual milestones related to the delivery and integration of Harmony image generators. The Company expects to achieve these billing milestones during 2001. The Company's inability to achieve these contractual milestones may significantly impact the realization of such amounts.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative Instruments and Hedging Activities. SFAS 133, as amended by SFAS 137 and SFAS 138, is effective for all fiscal years beginning after June 15, 2000. SFAS 133 establishes new accounting and reporting standards for companies to report information about derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. For a derivative not designated as a hedging instrument, changes in the fair value of the derivative are recognized in earnings in the period of change. The Company adopted SFAS 133 as of January 1, 2001. The impact of adopting SFAS 133 is not anticipated to be material to the financial statements.

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides guidance on the recognition, presentation and disclosure of revenue in financial statements. The Company's adoption of SAB 101 in the fourth quarter of 2000 did not have a material impact on its financial statements.

(2) BUSINESS ACQUISITIONS AND DISPOSITIONS

In December 2000, the Company completed the divestiture of its German subsidiary via a management-led buyout and recorded a loss of $0.3 million. The former subsidiary, which was called Evans & Sutherland Computer GmbH, now operates under a new name. The divested company has no remaining connection with E&S. The Company will continue to operate in Germany and throughout Europe under its own name, providing marketing, sales, and support for the Company's growing visual systems business and traditional customer base.

On March 28, 2000, the Company sold certain assets of its Applications Group relating to digital video products to RT-SET Real Time Synthesized Entertainment Technology Ltd. and its subsidiary, RT-SET America Inc., for $1.4 million in cash, common stock of RT-SET Real Time Synthesized Entertainment Technology Ltd. valued at approximately $1.0 million, and the assumption of certain liabilities. On June 15, 2000, the Company received additional common stock of RT-SET Real Time Synthesized Entertainment Technology Ltd. valued at $1.5 million as consideration for the successful development of a product included in the purchased assets. The Company recognized a gain of $1.9 million on the sale of these assets.

On June 26, 1998, the Company acquired all of the outstanding stock of AccelGraphics, Inc. for approximately $23.7 million in cash and 1,109,303 shares of the Company's common stock, which was valued at $25.7 million. In addition, the Company converted all outstanding AGI options into options to purchase approximately 351,000 shares of common stock of the Company with a fair value of $3.4 million and incurred transaction costs of approximately $1.1 million. AGI was based in Milpitas, California, and was a provider of high-performance, cost-effective, three-dimensional graphics subsystem products for the professional Windows NT and Windows 95 markets. The acquisition was accounted for by the purchase method and, accordingly, the results of operations of AGI have been included in the Company's consolidated financial statements from June 26, 1998 forward.

46

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Also on June 26, 1998, the Company acquired the assets and assumed certain liabilities of Silicon Reality, Inc. for a purchase price of approximately $1.2 million, including transaction costs of approximately $250,000. SRI is based in Federal Way, Washington, and designs and produces three-dimensional graphics hardware and software products for the personal computer marketplace. This acquisition was accounted for by the purchase method and, accordingly, the results of operations of SRI have been included in the Company's consolidated financial statements from June 26, 1998 forward.

A modified income approach was used to allocate a portion of the purchase price to the acquired in-process technology. Under this method, the fair value for the in-process technology in each acquisition was based on analysis of the markets, projected cash flows and risks associated with achieving such projected cash flows. In developing these cash flow projections, sales were forecasted based on relevant factors, including aggregate sales growth rates for the business as a whole, individual product sales, characteristics of the potential market for the products, the anticipated life of the technology under development and the stage of completion of each project. Operating expenses and resulting profit margins were forecasted based on the characteristics and cash flow generating potential of the acquired in-process technology, and included assumptions that certain expenses would decline over time as operating efficiencies were obtained or support requirements decreased. Appropriate adjustments were made to operating income to derive net cash flow, and the estimated net cash flows of the in-process technologies in each acquisition were then discounted to present value using rates of return that the Company believes reflect the specific risk/return characteristics of these research and development projects.

The projected sales used in the income approach are based upon the sales likely to be generated upon completion of the projects and the beginning of commercial sales, as estimated by management. The projections assume that the product will be successful and that the product's development and commercialization meet management's current time schedule.

In determining the operating cash flows related exclusively to in-process technology, management has considered the contribution of both prior technologies (as demonstrated by prior products) and core technology or know-how that is generic among most or all products. Where appropriate, the operating income estimates for each project have been apportioned between in-process technology and the appropriate intangible asset (i.e. various core technologies). The operating income apportionment factor was determined on the basis of an analysis of the specific contribution of each element of core technology to the subject in-process technology, the estimated effect of this contribution on the profitability of the subject in-process project, and the relative importance of the core technology to the product's ultimate customer.

The discount rate applicable to in-process technology projects reflects the risks inherent in each project. This rate is higher than the rate applied to AGI's current products, as the current products have already demonstrated their technological feasibility product and market acceptance.

The discount rate for in-process technology considers the following risk elements (in addition to the baseline business and market risks considered as part of the current product discount rate); risk of successfully completing the in-process technology project, risk that market demand will exist in the future for the in-process technology product, risk that the forecasted cost structure will be possible, and the risk that as yet unknown competitive products will emerge. An after-tax rate of 20 to 30 percent was applied to the in-process technology projects.

The sales earned by the in-process technology products represent the return on all of the assets acquired under the agreement. The cash flows generated by the new products must provide a return on each asset purchased that is consistent with the value and the relative risk of that asset. To separately value in-process technology, the value and required rate of return for other identifiable assets must be determined. The required return on these other assets is charged to (deducted from) the cash flows generated by the projects shown in the in-process technology model to determine the incremental cash flows specifically attributable to the in-process technology project.

47

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As part of the analysis, management determined individual rates of return applicable to each asset identified in the allocation table and estimated the effective capital charge to be applied to the valuation of in-process technology. Capital charges have been made for returns related to current assets, fixed assets, workforce and tradename.

The total purchase price and final allocation among the tangible and intangible assets and liabilities acquired (including acquired in-process technology) is summarized as follows (dollars in thousands):

Total Purchase Price:

   Total cash consideration            $  24,688
   Total stock consideration              25,695
   Value of options assumed                3,400
   Transaction costs                       1,350
                                       ---------
                                       $  55,133
                                       =========

                                                       Amortization
                                                          Period
                                                         (Months)
                                                       ------------
Purchase Price Allocation:

Net tangible assets                    $  17,329
Intangible assets:
   Workforce-in-place                      1,019            60
   Customer list                             250            60
   AccelGraphics name                        699            36
   Current products                        5,640          6 - 24
   Core technology                         1,754            84
   Goodwill                                7,662            84
In-process technology                     20,780         Expensed
                                       ---------
                                       $  55,133
                                       =========

At the time of the acquisition, the estimated costs to complete the projects related to in-process technology were $1.2 million. As of December 31, 1999 and 1998, costs incurred on these projects were $2.6 million and $0.9 million, respectively. All projects were complete as of December 31, 1999 and no further costs are expected to be incurred.

The following unaudited pro forma financial information (in thousands, except per share amounts) presents the combined results of operations of the Company, AGI and SRI for 1998 as if the acquisitions had occurred as of the beginning of 1998, after giving effect to certain adjustments, including, but not limited to, amortization of goodwill and other intangible assets, decreased interest income and entries to conform to the Company's accounting policies. The $20.8 million charge for acquired in-process technology has been excluded from the pro forma results as it is a material non-recurring charge.

Net sales                              $   208,503
Net loss                                    (4,836)
Loss per share:
   Basic                                     (0.46)
   Diluted                                   (0.46)

48

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) SHORT-TERM INVESTMENTS

At December 31, 1999, the Company had short-term available-for-sale marketable investments of $0.8 million stated at cost, which approximates market. Short-term investments consisted of state and municipal securities maturing in one year or less.

(4) INVENTORIES

Inventories consist of the following (in thousands):

                                        December 31,
                                     2000           1999
                                 ------------   ------------

Raw materials                    $     26,701   $     26,803
Work-in-process                         9,219         11,479
Finished goods                          2,463          2,306
                                 ------------   ------------
                                 $     38,383   $     40,588
                                 ============   ============

During the third quarter of 1999, the Company performed significant testing of the software relating to its Harmony image generator product that had been delayed. As a result of the testing, the Company determined that certain of the inventories previously purchased for the Harmony image generator had become technologically obsolete and did not properly function with the updated software. In connection with this assessment, the Company recorded a charge of $12.1 million to write-off obsolete, excess and overvalued inventories. In addition, during the third quarter of 1999, the Company wrote-off $1.1 million of inventories related to end-of-life or abandoned product lines in the REALimage Solutions Group.

(5) COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Comparative information with respect to uncompleted contracts is summarized as follows (in thousands):

                                                           December 31,
                                                       2000           1999
                                                   ------------   ------------
Accumulated costs and estimated
   earnings on uncompleted contracts               $    252,012   $    350,193
Less total billings on uncompleted contracts           (211,258)      (282,148)
                                                   ------------   ------------
                                                   $     40,754   $     68,045
                                                   ============   ============
Costs and estimated earnings in excess of
   billings on uncompleted contracts               $     68,464   $     80,457
Billings in excess of costs and estimated
   earnings on uncompleted contracts                    (27,710)       (12,412)
                                                   ------------   ------------
                                                   $     40,754   $     68,045
                                                   ============   ============

49

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) PROPERTY, PLANT AND EQUIPMENT

The cost and estimated useful lives of property, plant and equipment are summarized as follows (dollars in thousands):

                                                 Estimated             December 31,
                                                useful lives       2000            1999
                                                ------------   ------------    ------------
Land                                                 --        $         --    $      1,436
Buildings and improvements                        40 years           41,343          39,983
Manufacturing machinery and equipment           3 to 8 years         80,212          86,433
Office furniture and equipment                    8 years             6,308           9,265
Construction-in-process                              --               2,779           3,559
                                                               ------------    ------------
                                                                    130,642         140,676
Less accumulated depreciation and amortization                      (81,977)        (88,492)
                                                               ------------    ------------
                                                               $     48,665    $     52,184
                                                               ============    ============

All buildings and improvements owned by the Company are constructed on land leased from an unrelated third party. Such leases extend for a term of 40 years from 1986, with options to extend two of the leases for an additional 40 years and the remaining five leases for an additional ten years. At the end of the lease term, including any extension, the buildings and improvements revert to the lessor.

(7) LEASES

The Company leases certain of its buildings and related improvements to third parties under noncancelable operating leases. Cost and accumulated depreciation of the leased buildings and improvements at December 31, 2000 were $8.9 million and $3.5 million, respectively. Rental income for all operating leases for 2000, 1999 and 1998 was $1.8 million, $1.6 million and $1.5 million, respectively.

The Company occupies real property and uses certain equipment under lease arrangements that are accounted for as operating leases. Rental expenses for all operating leases for 2000, 1999 and 1998 were $1.6 million, $2.1 million and $2.3 million, respectively.

At December 31, 2000, the future minimum rental income and lease payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year are as follows (in thousands):

                                     Rental         Rental
                                     Income       Commitment
                                  ------------   ------------
Year ending December 31,
  2001                            $      2,202   $      1,816
  2002                                   2,120          1,478
  2003                                   2,097          1,339
  2004                                   1,218            878
  2005                                   1,050            608
  Thereafter                             1,050          9,155
                                  ------------   ------------
                                  $      9,737   $     15,274
                                  ============   ============

50

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(8) INVESTMENTS

The Company had the following investments in marketable equity securities, adjusted for unrealized holding gains and losses and other-than-temporary declines in fair value, nonmarketable equity securities, adjusted for other-than-temporary declines in fair value and a joint venture (in thousands):

                                                          December 31,
                                                      2000           1999
                                                  ------------   ------------
Marketable securities:
  Cypress Semiconductor,  Inc. (Cypress)          $      3,276   $         --
  vi[z]rt (formerly RT-SET Real Time
     Synthesized Entertainment Technology Ltd.)            358             --
  Iwerks Entertainment, Inc. (Iwerks)                        9            150
  C3-D Digital Inc. (C3-D)                                  16            525
                                                  ------------   ------------
                                                         3,659            675
                                                  ------------   ------------
Nonmarketable securities:
  Silicon Light Machines, Inc.  (SLM)                       --          3,276
  Quantum Vision, Inc. (Quantum)                           500             --
  Total Graphics Solutions N.V. (TGS)                      500            500
  Other                                                     16             16
                                                  ------------   ------------
                                                         1,016          3,792
                                                  ------------   ------------
Investment in joint venture:
  Quest Flight Training Ltd.                               754             --
                                                  ------------   ------------
Total investment securities                       $      5,429   $      4,467
                                                  ============   ============

Cypress is a global supplier of high-performance integrated circuits. vi[z]rt develops and markets fully integrated broadcast graphics solutions using real-time visualization systems. Iwerks designs, engineers, manufactures, markets and services high-tech entertainment attractions which employ a variety of projection, show control, ride simulation and software technologies. C3-D develops and manufacturers three-dimensional imagery and virtual reality entertainment for television and the Internet. Quantum is a start-up company that owns patented technology to improve cathode raytube (CRT) performance used in large projection systems. TGS develops and markets portable graphics software tools, which provide hardware independence for application developers. Each investment in nonmarketable investment securities was made either to enhance a current technology of the Company or to complement the Company's strategic direction.

The Company owns, including total shares purchased or available to purchase under warrants, less than 15% of the outstanding common stock and common stock equivalents of Quantum and TGS. The Company has one of six seats on TGS's board of directors. There are no intercompany transactions, technological dependencies, related guarantees, obligations, contingencies, interchange of personnel, nor ability to exercise significant influence on any of the companies in which the Company has investments. Accordingly, the Company accounts for Quantum and TGS utilizing the cost method.

51

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has a 50% interest in Quest Flight Training Ltd. (Quest), a joint venture providing aircrew training services for the United Kingdom Ministry of Defence under a 30 year contract. The investment is accounted for under the equity method. Equity in earnings of Quest of $43,000 in 2000 is recorded in other income (expense). The Company guarantees a portion of the joint venture's third-party borrowings. At December 31, 2000, Quest had outstanding debt of $2.1 million. Management believes, based on current facts and circumstances and the joint venture's financial position, that the likelihood of a payment pursuant to such guarantee is remote.

During 2000, the Company recognized a $6.7 million gain on the sale of the Company's investment in SLM to Cypress in which the Company received shares of Cypress stock which was offset by a $0.2 million loss on the subsequent sale of certain Cypress shares. During 1998, the Company sold all of its holdings in Sense8 Corporation for net proceeds of $3.3 million, recognizing a $2.5 million gain. During 2000, 1999 and 1998, the Company wrote down its investments in marketable securities by $7.8 million, $0.4 million and $1.5 million, respectively, due to other-than-temporary declines in market value. These amounts are recorded in other income (expense), net in the Company's consolidated statements of operations.

(9) ACCRUED EXPENSES

Accrued expenses consist of the following (in thousands):
                                                               December 31,
                                                          2000             1999
                                                      ------------     ------------
Pension plan obligation (note 10)                     $     13,305     $     12,124
Compensation and benefits                                   11,277           13,021
Liquidated damages and late delivery penalties               3,091            8,200
Other                                                       12,159            6,774
                                                      ------------     ------------
                                                      $     39,832     $     40,119
                                                      ============     ============

On October 16, 1997, the Company and CAE Electronics Ltd. ("CAE") entered into a Sub-Contract (the "Sub-Contract") for the Company to design, develop and deliver the visual system components and visual databases required for certain dynamic mission simulators and tactical control centers, to be integrated with the Company's Harmony image generation equipment (the "Harmony VSC"). As of December 31, 1999, the Harmony VSC had not been integrated with the dynamic mission simulators or tactical control centers. Pursuant to the terms of the Sub-Contract, the integration was to be completed during 1999. Consequently, as of December 31, 1999, in accordance with the liquidated damages provision of the Sub-Contract, the Company incurred liquidated damages on this Sub-Contract totaling $6.0 million. The Company and CAE agreed to an interim solution, which provides for the installation of the Company's ESIG 4530 image generators to integrate with the dynamic mission simulators and tactical control centers until the Company's Harmony VSC are able to support the dynamic mission simulators and tactical control centers. As of December 31, 2000, integration of a Harmony VSC with a dynamic mission simulator has been tested. A Harmony VSC is currently being installed and integrated with a dynamic mission simulator at the training site. Upon successful completion of the integration, the ESIG 4530 image generators currently installed at the training site will be replaced with Harmony VSCs. The Company has agreed to pay CAE (i) $0.5 million for reimbursement of certain expenses and costs incurred by CAE relating to the integration and retrofit of the ESIG 4530 to the dynamic mission simulators and tactical control centers and (ii) $5.5 million as liquidated damages resulting from certain delays of the Harmony VSC. As of December 31, 2000, the Company has paid $6.0 million to CAE. If further delays in the integration of the Harmony VSC occur, the Company may be obligated to pay CAE additional liquidated damages. The Company will also be obligated to pay certain costs associated with the anticipated switch-over from the ESIG 4530 to the Harmony VSC. In addition, the Company incurred late delivery penalties related to two other sub-contracts of $0.9 million and $2.2 million in 2000 and 1999, respectively.

52

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(10) EMPLOYEE BENEFIT PLANS

Pension Plan (the "Plan") - The Company has a defined benefit pension plan covering substantially all employees who have attained age 21 with service in excess of one year. Benefits at normal retirement age (65) are based upon the employee's years of service and the employee's highest compensation for any consecutive five of the last ten years of employment. The Company's funding policy is to contribute amounts sufficient to satisfy regulatory funding standards, based upon independent actuarial valuations.

Supplemental Executive Retirement Plan ("SERP") - The Company has a non-qualified SERP. The SERP, which is unfunded, provides eligible executives defined pension benefits, outside the Company's pension plan, based on average earnings, years of service and age at retirement.

The following provides a reconciliation of benefit obligations, plan assets, and funded assets of the Plan and SERP (in thousands):

                                                       Pension Plan                      SERP
                                                ---------------------------   ---------------------------
                                                    2000           1999           2000           1999
                                                ------------   ------------   ------------   ------------
Change in benefit obligation:
   Beginning of year                            $     36,904   $     42,637   $      5,749   $      5,431
   Service cost                                        2,460          3,252            815            739
   Interest cost                                       2,759          2,892            410            418
   Actuarial (gain) loss                               3,722         (8,780)          (521)           216
   Benefits paid                                      (1,889)        (3,097)          (184)           (92)
   Curtailment                                            --             --             --           (963)
                                                ------------   ------------   ------------   ------------

   End of year                                  $     43,956   $     36,904   $      6,269   $      5,749
                                                ============   ============   ============   ============


Change in plan assets:
   Fair value at beginning of year              $     43,721   $     40,221
   Actual return on plan assets                        2,086          6,597
   Employer contributions                                648             --
   Benefits paid                                      (1,889)        (3,097)
                                                ------------   ------------

   Fair value at end of year                    $     44,566   $     43,721
                                                ============   ============



Reconciliation of funded status:
   Funded status                                $        610   $      6,817   $     (6,269)  $     (5,749)
   Unrecognized actuarial (gain) loss                 (9,018)       (15,254)            68            590
   Unrecognized prior service cost                       730            771            495            543
   Unrecognized transition obligation                     79            158             --             --
                                                ------------   ------------   ------------   ------------

Accrued benefit liability                       $     (7,599)  $     (7,508)  $     (5,706)  $     (4,616)
                                                ============   ============   ============   ============


Assumptions (weighted average):
   Discount rate                                        7.8%           6.8%           7.3%           7.8%
   Expected return on plan assets                       9.0%           9.0%           N/A            N/A

53

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net periodic pension and other postretirement benefit costs include the following components (in thousands):

                                                    Pension Plan                        SERP
                                            -----------------------------    ---------------------------
                                             2000       1999       1998       2000      1999      1998
                                            -------    -------    -------    -------   -------   -------
Components of net periodic benefit cost:
  Service cost                              $ 2,460    $ 3,252    $ 2,601    $   815   $   739   $   828
  Interest cost                               2,759      2,892      2,501        410       418       355
  Expected return on assets                  (3,907)    (3,575)    (3,264)        --        --        --
  Amortization of actuarial (gain) loss        (692)        --        (15)         1        53       143
  Amortization of prior year service cost        41         37          4         48        73        73
  Amortization of transition                     79         79         79         --        --        --
                                            -------    -------    -------    -------   -------   -------
  Net periodic benefit cost                 $   740    $ 2,685    $ 1,906    $ 1,274   $ 1,283   $ 1,399
                                            =======    =======    =======    =======   =======   =======

Deferred Savings Plan - The Company has a deferred savings plan that qualifies under Section 401(k) of the Internal Revenue Code. The plan covers all employees of the Company who have at least one year of service and who are age 18 or older. The Company makes matching contributions of 50 percent of each employee's contribution not to exceed six percent of the employee's compensation. The Company's contributions to this plan for 2000, 1999 and 1998 were $1.0 million, $1.1 million and $1.0 million respectively.

Life Insurance - The Company purchases company-owned life insurance policies insuring the lives of certain employees. The policies accumulate asset values to meet future liabilities including the payment of employee benefits such as supplemental retirement benefits. At December 31, 2000 and 1999, the investment in the policies was $3.2 million and $3.1 million, respectively, and net life insurance expense was $0.1 million, $0.2 million and $0.5 million for 2000, 1999 and 1998, respectively.

(11) LONG-TERM DEBT

Included in long-term debt is approximately $18.0 million of 6% Convertible Subordinated Debentures due in 2012 (the "6% Debentures"). The 6% Debentures are unsecured and are convertible at each bondholder's option into shares of the Company's common stock at a conversion price of $42.10 or 428,000 shares of the Company's common stock subject to adjustment. The 6% Debentures are redeemable at the Company's option, in whole or in part, at par.

The following is a summary of lines of credit (dollars in thousands):

                                                          2000         1999
                                                       ----------   ----------
Balance at end of year                                 $    7,345   $    2,657
Weighted average interest rate at end of year                12.5%         6.0%
Maximum balance outstanding during the year            $    7,345   $    4,298
Average balance outstanding during the year            $    1,612   $    3,320
Weighted average interest rate during the year                9.6%         6.4%

The average balance outstanding and weighted average interest rate are computed based on the outstanding balances and interest rates at month-end during each year.

54

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On March 31, 2000, the Company entered into a secured credit facility (the "Zions Facility") with Zions First National Bank. The Zions Facility provided for borrowings of up to $15.0 million, which included a $7.0 million sublimit for the issuance of letters of credit. In December 2000, the Company entered into a secured credit facility (the "Foothill Facility") with Foothill Capital Corporation ("Foothill"). In connection with the Foothill Facility, additional borrowings under the Zions Facility were terminated in December 2000 and outstanding letters of credit were secured through the issuance of a letter of credit from Wells Fargo Bank, National Association, the parent of Foothill. The Foothill Facility provides for borrowings and the issuance of letters of credit up to $30.0 million. The Foothill Facility expires in December 2002. Borrowings under the Foothill Facility bear interest at the Wells Fargo Bank National Association prevailing prime rate plus 1.5% to 3.0%, depending on the amount outstanding. The Foothill Facility provides Foothill with a first priority perfected security interest in substantially all of the Company's assets, including, but not limited to, all of the Company's intellectual property. Pursuant to the terms of the Foothill Facility, all cash receipts of the Company must be deposited into a Foothill controlled account. The Foothill Facility, among other things, (i) requires the Company to maintain certain financial ratios and covenants, including a minimum tangible net worth that adjusts each quarter and a limitation of $12.0 million of aggregate capital expenditures in any fiscal year; (ii) restricts the Company's ability to incur debt or liens; sell, assign, pledge or lease assets; merge with another company; and
(iii) restricts the payment of dividends and repurchase of any of the Company's outstanding shares without the prior consent of the lender. The Company is currently in compliance with its financial covenants and ratios, although a continuation of recent negative trends could impact future compliance with such covenants. Should the need arise, the Company will negotiate with Foothill to modify and expand various financial ratios and covenants, however no assurance can be given that such negotiations will result in modifications that will allow the Company to continue to be in compliance or otherwise be acceptable to the Company. As of December 31, 2000, the Company has $7.3 million in outstanding borrowings and $15.2 million in outstanding letters of credit under the Foothill Facility.

Evans & Sutherland Computer Limited, a wholly-owned subsidiary of Evans & Sutherland Computer Corporation, has a $5.0 million overdraft facility (the "Overdraft Facility") with Lloyds TSB Bank plc ("Lloyds"). Borrowings under the Overdraft Facility bear interest at Lloyds' short-term offered rate plus 1.75% per annum. As of December 31, 2000, there were no borrowings under the Overdraft Facility. The Overdraft Facility is subject to reduction or demand repayment for any reason at any time at Lloyds' discretion and expires on November 30, 2001. Evans & Sutherland Computer Limited executed a letter of negative pledge in favor of Lloyds whereby it agreed not to sell or encumber its assets, except in the ordinary course of business. Covenants contained in the Overdraft Facility restrict dividend payments from Evans & Sutherland Computer Limited and require maintenance of certain financial covenants. In addition, at December 31, 2000, the Company has $1.5 million of cash on deposit with Lloyds in a restricted cash collateral account to support certain obligations that the bank guarantees.

At December 31, 2000, the Company has unsecured letters of credit totaling approximately $1.1 million outstanding with U.S. Bank, N.A. that expire between March 2001 and June 2001.

55

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(12) INCOME TAXES

Components of income tax expense (benefit) attributable to earnings before income taxes (in thousands):

                                                                  Share
                                                                   and
                                                                  stock
                                                                  option
                                 Current         Deferred         benefit         Total
                               ------------    ------------    ------------    ------------
Year ended December 31, 2000:
  Federal                      $     (1,598)   $     17,750    $         --    $     16,152
  State                                (230)          2,591              --           2,361
  Foreign                               510              --              --             510
                               ------------    ------------    ------------    ------------
                               $     (1,318)   $     20,341    $         --    $     19,023
                               ============    ============    ============    ============
Year ended December 31, 1999:
  Federal                      $     (6,734)   $     (6,816)   $         85    $    (13,465)
  State                                (150)         (2,056)             14          (2,192)
  Foreign                               244              --              --             244
                               ------------    ------------    ------------    ------------
                               $     (6,640)   $     (8,872)   $         99    $    (15,413)
                               ============    ============    ============    ============
Year ended December 31, 1998:
  Federal                      $      3,520    $     (2,336)   $        330    $      1,514
  State                                 761            (385)             54             430
  Foreign                               182              --              --             182
                               ------------    ------------    ------------    ------------
                               $      4,463    $     (2,721)   $        384    $      2,126
                               ============    ============    ============    ============

The actual tax expense differs from the expected tax expense (benefit) as computed by applying the U.S. federal statutory tax rate of 35 percent as a result of the following (in thousands):

                                                       2000            1999            1998
                                                   ------------    ------------    ------------
Tax (benefit) at U.S. federal statutory rate       $    (17,692)   $    (13,603)   $     (4,850)
In-process research and development                          --              --           7,245
Losses (gains) of foreign subsidiaries                       --              --            (101)
Earnings of foreign sales corporation                        --            (232)           (305)
State taxes (net of federal income tax benefit)           1,521          (1,425)            280
Research and development and foreign tax credits           (437)           (925)           (604)
Foreign taxes                                               510             244             182
Change in federal valuation allowance                    35,607              --              --
Other, net                                                 (486)            528             279
                                                   ------------    ------------    ------------
                                                   $     19,023    $    (15,413)   $      2,126
                                                   ============    ============    ============

56

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2000 and 1999, are presented below (in thousands):

                                                               2000            1999
                                                           ------------    ------------
Deferred tax assets:
  Warranty, vacation, and other accruals                   $      4,481    $      3,357
  Inventory reserves and other inventory-related
    temporary basis differences                                   4,407           4,106
  Pension accrual                                                 5,204           4,469
  Long-term contract related temporary differences                  612           1,000
  Net operating loss carryforwards                               19,803           2,529
  Unrealized loss on marketable equity securities                    --              17
  Write-down of investment securities                             2,350           1,341
  Liquidated damages and late delivery penalties                    134           3,198
  Credit carryforwards                                            4,987           2,012
  Other                                                             332             343
                                                           ------------    ------------
        Total gross deferred tax assets                          42,310          22,372
        Less valuation allowance                                 40,866             117
                                                           ------------    ------------
        Total deferred tax assets                                 1,444          22,255
                                                           ------------    ------------
Deferred tax liabilities:
  Intangible assets                                                (111)           (155)
  Plant and equipment, principally due to
    differences in depreciation                                  (1,108)         (1,707)
  Other                                                            (225)            (52)
                                                           ------------    ------------
        Total gross deferred tax liabilities                     (1,444)         (1,914)
                                                           ------------    ------------
        Net deferred tax asset                             $         --    $     20,341
                                                           ============    ============

        Net current deferred tax asset                     $         --    $     15,923
        Net non-current deferred tax asset                           --           4,418
                                                           ------------    ------------
        Net deferred tax asset                             $         --    $     20,341
                                                           ============    ============

Worldwide income before income taxes for the years ended December 31, 2000, 1999 and 1998, consisted of the following (in thousands):

                      2000           1999           1998
                  ------------   ------------   ------------
United States     $    (51,395)  $    (40,113)  $    (15,054)
Foreign                    848          1,246          1,197
                  ------------   ------------   ------------
                  $    (50,547)  $    (38,867)  $    (13,857)
                  ============   ============   ============

The Company has federal net operating loss carryovers of $51.8 million, of which $44.6 million expire in 2020 and the remainder expire between 2006 and 2019, and various tax credit carryovers of $4.0 million that expire between 2003 and 2020. The Company also has state net operating loss carryovers that expire depending on the rules of the various states to which the loss is allocated.

During the year ended December 31, 2000, the Company increased the valuation allowance approximately $40.7 million. The increase relates primarily to the general valuation allowance established under the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, which requires that a valuation allowance be established when it is more likely than not that the net deferred tax assets will not be realized.

57

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(13) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash and cash equivalents, receivables, line of credit agreements, accounts payable, and accrued expenses approximates fair value because of their short maturity. The fair value of the Company's 6% Debentures ($7.9 million and $13.1 million as of December 31, 2000 and 1999, respectively) is based on quoted market prices.

(14) COMMITMENTS AND CONTINGENCIES

On November 27, 2000, the Company entered into a three year agreement with a third party to provide the Company with certain copy service, mail service, software and equipment through November 30, 2003. Minimum commitments under this agreement totaled $1.0 million at December 31, 2000.

On September 26, 2000, the Company entered into a purchase agreement with a third party that commits the Company to purchase a minimum $4.5 million of licensed products and support for design development software. The agreement is effective for a period of three years with an option to renew the agreement for an additional two-year term.

On June 3, 1999, the Company sold certain manufacturing capital assets and inventory for $6.0 million to Sanmina Corporation as part of the Company's efforts to outsource the production of certain electronic products and assemblies. In addition, the Company entered into an electronic manufacturing services agreement with Sanmina Corporation. The electronic manufacturing services agreement commits the Company to purchase a minimum of $22.0 million of electronic products and assemblies from Sanmina Corporation each year until June 3, 2002. If the Company fails to meet these minimum purchase levels, subject to adjustment, the Company may be required to pay 25 percent of the difference between the $22.0 million and the amount purchased. Management expects that the Company will satisfy this minimum purchase commitment.

Certain of the Company's contracts to deliver Harmony image generators contain liquidated damage provisions for delays in delivery. The Company incurred $0.9 million and $8.2 million for such damages in 2000 and 1999, respectively. If further delays in the delivery of the Harmony image generator occur, the Company may incur additional liquidated damages.

(15) LEGAL PROCEEDINGS

On May 23, 2000, Lockheed Martin Corporation (the "Plaintiff") served the Company with a civil complaint filed in the Circuit Court of the Ninth Judicial Circuit in and for Orange County, Florida. The Plaintiff alleged in the complaint that the Company breached a contract to provide certain visual systems for the Combined Arms Tactical Trainer program for the United Kingdom Ministry of Defence. The contract has an original value of $33.9 million. In the complaint, the Plaintiff seeks compensatory damages of $8.5 million plus interest as well as consequential damages and attorneys' fees. The $8.5 million being sought from the Company by the Plaintiff was paid to the Company from May 1999 to March 2000 and was recognized as revenue by the Company during 1999. On June 12, 2000, the Company filed its answer and counterclaim. In the counterclaim, the Company alleges as grounds for recovery against the Plaintiff (1) breach of contract, (2) breach of implied covenant of good faith and fair dealing, (3) unjust enrichment, (4) unfair competition, (5) misappropriation of trade secrets, (6) intentional interference with advantageous business relationship, (7) replevin, and (8) promissory estoppel. In its counterclaim, the Company seeks compensatory damages of not less than $10.0 million and not more than $25.4 million. On June 14, 2000, the case was removed to the Orlando Division of the United States District Court for the District of Florida where it currently remains. On July 7, 2000, the Plaintiff answered the Company's counterclaim but also filed a motion for dismissal of the Company's counterclaims for unjust enrichment, unfair competition, promissory estoppel, and incidental damages. On July 24, 2000, the Company filed its opposition to the Plaintiff's motion to dismiss these certain counterclaims of the Company. On

58

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

October 20, 2000 the court denied the Plaintiff's motion to dismiss in its entirety, without prejudice. On January 16, 2001, the Company filed a motion for partial summary judgement, asking the court to dismiss all of the Plaintiff's breach of contract claims. The court has indicated that it will take the motion under advisement. A trial date is currently set for September 2002. Management disputes the Plaintiff's allegations in the complaint, is vigorously defending the action, and is vigorously prosecuting its counterclaims. Although management believes the Company will ultimately prevail in litigation, an unfavorable outcome of these matters would have a material adverse impact on the Company's financial condition and operations.

In the normal course of business, the Company has various other legal claims and other contingent matters, including items raised by government contracting officers and auditors. Although the final outcome of such matters cannot be predicted, the Company believes the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial condition, liquidity or results of operations.

(16) STOCK OPTION AND STOCK PURCHASE PLANS

Stock Option Plans - The Company has stock incentive plans that provide for the grant of options to officers and employees to acquire shares of the Company's common stock at a purchase price generally equal to the fair market value on the date of grant. Options generally vest ratably over three years and expire ten years from date of grant. The Company grants options to its directors under its Director Plan. Option grants are limited to 10,000 shares per director in each fiscal year. Options generally vest ratably over four years and expire ten years from the date of grant. A summary of activity follows (shares in thousands):

                                            2000                     1999                     1998
                                   ----------------------   ----------------------   ----------------------
                                                Weighted-                Weighted-                Weighted-
                                                 average                  average                  average
                                   Number of    exercise    Number of    exercise    Number of    exercise
                                    shares        price      shares        price      shares        price
                                   ---------    ---------   ---------    ---------   ---------    ---------
Outstanding at beginning of year       2,087    $   14.05       2,084    $   13.80       1,640    $   20.38
Granted                                  865         9.18         472        14.25       2,105        16.80
Assumed in acquisitions                   --           --          --           --         351         9.69
Exercised                                 (9)        1.03         (84)        7.72        (116)       10.70
Canceled                                (286)       13.30        (385)       14.32      (1,896)       22.15
                                   ---------                ---------                ---------
Outstanding at end of year             2,657        12.63       2,087        14.05       2,084        13.80
                                   =========                =========                =========
Exercisable at end of year             1,480        14.12       1,219        14.16         532        13.74
                                   =========                =========                =========

Weighted-average fair value of
  options granted during the year                    5.91                     5.32                     5.82

Shareholders authorized an additional 400,000, 450,000 and 400,000 shares to be granted under the plans during 2000, 1999 and 1998, respectively. As of December 31, 2000, options to purchase 509,000 shares of common stock were authorized and reserved for future grant.

On September 29, 1998, the Board of Directors approved a stock option repricing program whereby each eligible stock option could be amended to have an exercise price equal to $13.56 (the closing price of the Company stock on September 29, 1998) if the optionee agreed to reduce the amount of options repriced by 20% and to accept an amended vesting period. The vesting period for the repriced options was amended to vest in one year for all options that were vested as of September 29, 1998 and to vest ratably over three years for all options that were not yet vested as of September 29, 1998. As a result, approximately 1,698,000 options were surrendered by employees for approximately 1,354,000 repriced options and are included in the table above. The repriced options expire ten years from the date of the repriced grant.

59

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information about fixed stock options outstanding as of December 31, 2000 (options in thousands):

                                 Options outstanding                Options exercisable
                        -------------------------------------    -------------------------
                                       Weighted-
                          Number        average     Weighted-       Number       Weighted-
       Range of         outstanding    remaining     average     exercisable      average
       exercise           as of       contractual    exercise       as of         exercise
        prices           12/31/00        life         price        12/31/00        price
---------------------   ----------    -----------   ---------    -----------     ---------
$   0.73  -  $  10.69          558        9.4       $    8.19              2     $    1.08
   10.75  -     12.25          484        6.6           11.82            262         12.19
   12.36  -     13.25          186        8.0           12.92            114         13.13
   13.31  -     13.56          945        7.7           13.56            781         13.56
   13.56  -     20.88          464        7.0           16.33            302         17.12
   21.25  -     32.87           20        5.6           23.47             19         23.43
                        ----------                               -----------
    0.73  -     32.87        2,657        7.7           12.63          1,480         14.12
                        ==========                               ===========

The Company accounts for these plans under APB 25, under which no compensation cost has been recognized. Had compensation cost for these plans been determined consistent with SFAS 123, the Company's net loss and loss per common share would have been changed to the following pro forma amounts (in thousands, except per share data):

                                               2000          1999          1998
                                            ----------    ----------    ----------
Net loss                      Pro forma     $  (71,923)   $  (26,995)   $  (21,093)

Basic and diluted loss
   per common share           Pro forma          (7.67)        (2.84)        (2.22)

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants during 2000, 1999 and 1998:

                               2000       1999       1998
                             --------   --------   --------
Expected life (in years)       4.5        2.6        2.3
Risk-free interest rate        6.1%       6.3%       4.6%
Expected volatility             79%        52%        49%
Dividend yield                  --         --         --

Stock Purchase Plan - The Company has an employee stock purchase plan whereby qualified employees are allowed to have up to 10% of their annual earnings withheld to purchase the company's common stock at 85% of the market value of the stock at the time of the sale. A total of 500,000 shares are authorized under the plan. Shares totaling 84,000, 58,000 and 43,000 were purchased under this plan in fiscal 2000, 1999 and 1998, and as of December 31, 2000, 113,000 shares were available for future issuance under this plan.

60

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(17) PREFERRED STOCK

Preferred Stock - Class A

The Company has 5,000,000 authorized shares of Class A Preferred Stock. Prior to 1998, the Company had reserved 300,000 shares of Class A Preferred Stock as Series A Junior Preferred Stock under a shareholder rights plan which expired in November 1998. In November 1998, the Board of Directors declared a dividend of one preferred stock purchase right ("Right") for each outstanding share of common stock, par value $0.20 per share of the Company for shareholders of record on November 19, 1998, and for all future issuances of common stock. The Rights are not currently exercisable or transferable apart from the common stock and have voting rights or rights to receive dividends. Each Right entitles the registered holder to purchase from the Company one thousandth of a share of Preferred Stock at a price per share of $60.00, subject to adjustment. The Rights will be exercisable ten business days following a public announcement of a person or group of affiliated persons acquiring beneficial ownership of 15% or more of the Company's outstanding common shares or following the announcement of a tender offer or exchange offer upon the consummation of which would result in the beneficial ownership by a person or group of affiliated persons of 15% or more of the outstanding Company's stock. The Rights may be redeemed by the Company at a price of $0.01 per Right before November 30, 2008.

In the event that the Company is acquired in a merger or other business combination transaction, provision shall be made so that each holder of a Right, excluding the Rights beneficially owned by the acquiring persons, will have the right to receive, upon exercise thereof at the then current exercise price, that number of shares of common shares of the surviving company which at the time of such transaction will have a market value of two times the exercise price of the Right. In the event that a person or group of affiliated persons acquires beneficial ownership of 15% or more of the Company's outstanding common shares, provision shall be made so that each holder of a Right, excluding the Rights beneficially owned by the acquiring persons, shall have the right to receive, upon exercise thereof, a share of common stock at a purchase price equal to 50% of the then current exercise price.

On June 7, 2000, the Company and American Stock Transfer & Trust Company amended the Rights to allow the State of Wisconsin Investment Board to acquire beneficial ownership up to 19.9% of the Company's outstanding common shares without triggering the exercisability of the Rights.

Preferred Stock - Class B

The Company has 5,000,000 authorized shares of Class B Preferred Stock. On July 22, 1998, Intel Corporation ("Intel") purchased 901,408 shares of the Company's preferred stock plus a warrant to purchase an additional 378,462 shares of the preferred stock at an exercise price of $33.28125 per share for approximately $24.0 million. In March 2001, Intel converted the 901,408 shares of the Company's preferred stock into 901,408 shares of the Company's common stock. In March 2001, Intel and the Company amended the preferred stock and warrant purchase agreement to terminate certain contractual rights of Intel, including registration rights, board and committee observation rights, right of first refusal, right of participation, right of maintenance, standstill agreement, and right to require the Company to repurchase the preferred stock in the event of any transaction qualifying as a specific corporate event.

(18) NET INCOME (LOSS) PER COMMON SHARE

Net income (loss) per common share is computed based on the weighted-average number of common shares and, as appropriate, dilutive common stock equivalents outstanding during the period. Stock options, warrants, Class B-1 Preferred Stock and the 6% Debentures are considered to be common stock equivalents.

61

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Basic net income (loss) per common share is the amount of net income
(loss) for the period available to each share of common stock outstanding during the reporting period. Diluted net income (loss) per share is the amount of net income (loss) for the period available to each share of common stock outstanding during the reporting period and to each share that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the period.

In calculating net loss per common share, the net loss was the same for both the basic and diluted calculation. The diluted weighted average number of common shares outstanding during 2000, 1999 and 1998 excludes common stock issuable pursuant to outstanding stock options, the 6% Debentures and the Class B-1 Preferred Stock because to do so would have had an anti-dilutive effect on earnings per common share.

(19) SEGMENT AND RELATED INFORMATION

The Company's business units have been aggregated into three reportable segments: simulation, REALimage Solutions and applications. These reportable segments offer different products and services and are managed and evaluated separately because each segment uses different technologies and requires different marketing strategies. The simulation segment provides a broad line of visual systems for flight and ground simulators for training purposes to government, aerospace and commercial airline customers. The REALimage Solutions segment provides graphics acceleration technology to the professional digital content creation market. The applications segment provides digital video applications for entertainment, educational and multimedia industries.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies (Note
1). The Company evaluates segment performance based on income (loss) from operations before income taxes, interest income and expense, other income and expense and foreign exchange gains and losses. The Company's assets are not identifiable by segment.

                                                      REALimage
                                      Simulation      Solutions      Applications       Total
                                     ------------    ------------    ------------    ------------
Year ended December 31, 2000:
   Sales                             $    149,909    $      5,736    $     11,335    $    166,980
   Operating loss                         (43,106)        ( 3,132)           (305)        (46,543)

Year ended December 31, 1999:
   Sales                             $    170,578    $     21,961    $      8,346    $    200,885
   Operating loss                          (8,686)        (26,685)         (4,595)        (39,966)

Year ended December 31, 1998:
   Sales                             $    167,014    $     17,453    $      7,299    $    191,766
   Operating income (loss)                 22,094         (30,663)         (7,417)        (15,986)

The operating loss in 1999 for the simulation segment includes a write-off of inventories of $12.1 million. The operating loss in 1999 for the REALimage Solutions segment includes an impairment loss of $9.7 million, a restructuring charge of $1.5 million and a write-off of inventories of $1.1 million. The operating loss in 1998 for the REALimage Solutions segment includes a write-off of acquired in-process technology of approximately $20.8 million.

62

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(20) GEOGRAPHIC INFORMATION

The following table presents sales by geographic location based on the location of the use of the product or services. Sales within individual countries greater than 10% of consolidated sales are shown separately (in thousands):

                                        2000         1999         1998
                                     ----------   ----------   ----------
United States                        $  106,045   $  114,190   $  106,858
United Kingdom                           26,584       50,100       41,029
Europe (excluding United Kingdom)        21,723       27,777       25,039
Pacific Rim                               8,162        8,324       18,257
Other                                     4,466          494          583
                                     ----------   ----------   ----------
                                     $  166,980   $  200,885   $  191,766
                                     ==========   ==========   ==========

The following table presents property, plant and equipment by geographic location based on the location of the assets (in thousands):

                                                             2000        1999
                                                          ---------   ---------
            United States                                 $  47,777   $  51,715
            Europe                                              888         469
                                                          ---------   ---------
              Total property, plant and equipment, net    $  48,665   $  52,184
                                                          =========   =========


(21)        SIGNIFICANT CUSTOMERS

Sales to the U.S. government, either directly or indirectly through sales to prime contractors or subcontractors, accounted for $66.7 million or 40% of total sales, $84.5 million or 42% of total sales, and $70.8 million or 37% of total sales in 2000, 1999 and 1998, respectively. Sales to the United Kingdom Ministry of Defence ("UK MOD"), either directly or indirectly through sales to prime contractors or subcontractors, accounted for $22.3 million or 13% of total sales, $33.8 million or 17% of total sales and $32.1 million or 17% of total sales in 2000, 1999 and 1998, respectively.

In 2000, sales to Lockheed Martin Corporation ("Lockheed") were $22.5 million or 14% of total sales, of which 100% related to U.S. government and UK MOD contracts and sales to Thales Training & Simulation Ltd. were $19.6 million or 12% of total sales, of which 58% related to UK MOD contracts. In 1999, sales to Lockheed were $35.8 million or 18% of total sales, of which 100% related to U.S. government and UK MOD contracts, and sales to The Boeing Company ("Boeing") were $25.4 million or 13% of total sales, of which 100% related to U.S. government and UK MOD contracts. In 1998, sales to Boeing were approximately $28.1 million or 15% of total sales, of which approximately 98% related to U.S. government and UK MOD contracts, and sales to Lockheed were approximately $22.0 million or 11% of total sales, of which approximately 91% related to U.S. government contracts. All sales to significant customers are within the simulation segment.

63

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Aggregated accounts receivable from agencies of the United States government, either directly or indirectly through prime or subcontractors, was $9.3 million or 24% of gross accounts receivable at December 31, 2000 and $7.2 million or 24% of gross accounts receivable at December 31, 1999. Aggregated accounts receivable from the UK MOD, either directly or indirectly through prime or subcontractors, was $2.1 million or 5% of gross accounts receivable at December 31, 2000 and $5.6 million or 19% of gross accounts receivable at December 31, 1999. Aggregated accounts receivable from the Federal Department of Defense of the Federal Republic of Germany, either directly or indirectly through prime or subcontractors, was $10.6 million or 27% of gross accounts receivable at December 31, 2000 and $3.2 million or 11% of gross accounts receivable at December 31, 1999.

The amount of costs and estimated earnings in excess of billings on uncompleted contracts from agencies of the United States government and the UK MOD, either directly or indirectly through prime or subcontractors was $16.8 million and $20.5 million, or 25% and 30% of total costs and estimated earnings in excess of billings on uncompleted contracts, respectively at December 31, 2000. The amount of costs and estimated earnings in excess of billings on uncompleted contracts from agencies of the United States government and the UK MOD, either directly or indirectly through prime or subcontractors, was $11.1 million and $41.3 million, or 14% and 51% of total costs and estimated earnings in excess of billings on uncompleted contracts, respectively, at December 31, 1999.

(22) RESTRUCTURING CHARGE

In the third quarter of 1999, the Company initiated a restructuring plan focused on reducing the operating cost structure of its REALimage Solutions Group. As part of the plan, the Company recorded a charge of $1.5 million relating to 28 employee terminations, including 17 employees in San Jose and 11 employees in Salt Lake City. The charge was recorded in accordance with Emerging Issues Task Force Issue 94-03, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit (Including Certain Costs Incurred in a Restructuring).

During 2000, after all employee severance costs were incurred, the Company reversed $0.8 million of the restructuring charge as a result of certain employees being transferred within the Company rather than being terminated and estimated severance and related charges being lower than expected for the terminated employees.

(23) RELATED PARTY TRANSACTIONS

The Company had purchases of $0.4 million and $1.4 million during 1999 and 1998, respectively, from a supplier for which the Company's Chief Executive Officer serves as a director.

64

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

"None"

FORM 10-K

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding directors of the Company is incorporated by reference from "Election of Directors" in the Proxy Statement to be delivered to shareholders in connection with the 2001 Annual Meeting of Shareholders to be held on May 24, 2001.

Information required by Item 405 of Regulation S-K is incorporated by reference from "Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the Proxy Statement to be delivered to shareholders in connection with the 2001 Annual Meeting of Shareholders to be held on May 24, 2001.

Information concerning current executive officers of the Company is incorporated by reference to the section in Part I hereof found under the caption "Executive Officers of the Registrant."

ITEM 11. EXECUTIVE COMPENSATION

Information regarding this item is incorporated by reference from "Executive Compensation" in the Proxy Statement to be delivered to shareholders in connection with the 2001 Annual Meeting of Shareholders to be held on May 24, 2001.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information regarding this item is incorporated by reference from "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement to be delivered to shareholders in connection with the 2001 Annual Meeting of Shareholders to be held on May 24, 2001.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding this item is incorporated by reference from "Executive Compensation - Summary Compensation Table," "Report of the Compensation and Stock Options Committee of the Board of Directors," and "Termination of Employment and Change of Control Arrangements," in the Proxy Statement to be delivered to shareholders in connection with the 2001 Annual Meeting of Shareholders to be held on May 24, 2001.

65

FORM 10-K

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

The following constitutes a list of Financial Statements, Financial Statement Schedules, and Exhibits required to be used in this report:

1. Financial Statements - Included in Part II, Item 8 of this report:

Report of Management

Report of Independent Accountants

Consolidated Balance Sheets as of December 31, 2000 and 1999

Consolidated Statements of Operations for each of the years in the three-year period ended December 31, 2000

Consolidated Statements of Comprehensive Loss for each of the years in the three-year period ended December 31, 2000

Consolidated Statements of Stockholders' Equity for each of the years in the three-year period ended December 31, 2000

Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2000

Notes to Consolidated Financial Statements for each of the years in the three-year period ended December 31, 2000

2. Financial Statement Schedules - included in Part IV of this report:

Schedule II - Valuation and Qualifying Accounts

Schedules other than those listed above are omitted because of the absence of conditions under which they are required or because the required information is presented in the financial statements or notes thereto.

3. Exhibits

2.1 Agreement and Plan of Merger, dated April 22, 1998, among the Company, E&S Merger Corp., and AccelGraphics, Inc., filed as Annex I to the Company's Registration Statement on Form S-4, SEC File No. 333-51041, and incorporated herein by this reference.

3.1 Articles of Incorporation, as amended, filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K, SEC File No. 000-08771, for the fiscal year ended December 25, 1987, and incorporated herein by this reference.

3.1.1 Amendments to Articles of Incorporation filed as Exhibit 3.1.1 to the Company's Annual Report on Form 10-K, SEC File No. 000-08771, for the fiscal year ended December 30, 1988, and incorporated herein by this reference.

66

3.1.2 Certificate of Designation, Preferences and Other Rights of the Class B-1 Preferred Stock of the Company, filed as Exhibit 3.1 to the Company's Form 10-Q for the quarter ended September 25, 1998, and incorporated herein by this reference.

3.2 Amended and Restated Bylaws of Evans & Sutherland Computer Corporation, filed herein.

3.3 Amendment No. 1 to the Amended and Restated Bylaws of Evans & Sutherland Computer Corporation, filed herein.

4.1 Form of Rights Agreement, dated as of November 19, 1998, between Evans & Sutherland Computer Corporation and American Stock Transfer Trust Company which includes as Exhibit A, the form of Certificate of Designation for the Rights, as Exhibit B, the form of Rights Certificate and as Exhibit C, a Summary of Rights, filed as Exhibit 1 to the Company's Registration Statement on Form 8-A filed December 8, 1998, and incorporated herein by this reference.

4.2 First Amendment to Rights Agreement dated as of June 7, 2000 between Evans & Sutherland Computer Corporation and American Stock Transfer & Trust Company, filed as Exhibit 10.14 to the Company's Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by this reference.

*10.1 1985 Stock Option Plan, filed as Exhibit 1 to the Company's Post-Effective Amendment No. 1 to Registration Statement on Form S-8, SEC File No. 2-76027, and incorporated herein by this reference.

*10.2 1989 Stock Option Plan for Non-employee Directors, filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K, SEC File No. 000-08771, for the fiscal year ended December 29, 1989, and incorporated herein by this reference.

*10.3 The Company's 1991 Employee Stock Purchase Plan, filed as Exhibit 4.1 to the Company's Registration Statement on Form S-8, SEC File No. 33-39632, and incorporated herein by this reference.

*10.4 1998 Stock Option Plan, filed as Appendix A to the Company's Definitive Proxy Statement filed April 20, 1998, incorporated herein by this reference.

*10.5 The Company's 1995 Long-Term Incentive Equity Plan, filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K, SEC File No. 000-08771, for the fiscal year ended December 29, 1995, and incorporated herein by this reference.

*10.6 The Company's Executive Savings Plan, filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K, SEC File No. 000-08771, for the fiscal year ended December 29, 1995, and incorporated herein by this reference.

*10.7 The Company's Supplemental Executive Retirement Plan (SERP), filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K, SEC File No. 000-08771, for the fiscal year ended December 29, 1995, and incorporated herein by this reference.

10.8 Business Loan Agreement by and between U.S. Bank National Association and Evans & Sutherland Computer Corporation as of November 13, 1998, filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, and incorporated herein by this reference.

10.9 Addendum to Business Loan Agreement by and between U.S.
Bank National Association and Evans & Sutherland Computer Corporation ("Borrower") as of February 5, 1999, filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, and incorporated herein by reference.

67

*10.10 Severance Agreement dated December 11, 1998, by and between Evans & Sutherland Computer Corporation and Mark
C. McBride, filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, and incorporated herein by this reference.

10.11 Series B Preferred Stock and Warrant Purchase Agreement dated as of July 20, 1998, between the Company and Intel Corporation, filed as Exhibit 4.2 to the Company's Form 10-Q for the quarter ended September 25, 1998, and incorporated herein by this reference.

10.12 Warrant to Purchase Series B Preferred Stock dated as of July 22, 1998, between the Company and Intel Corporation, filed as Exhibit 4.3 to the Company's Form 10-Q for the quarter ended September 25, 1998, and incorporated herein by this reference.

10.13 Master Agreement for Electronic Manufacturing Services, dated as of June 3, 1999, between Evans & Sutherland Computer Corporation and Sanmina Corporation, filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended July 2, 1999, and incorporated herein by this reference.

10.14 Loan Agreement by and between Zions First National Bank,

        a national banking  association,  and Evans & Sutherland
        Computer  Corporation,  dated March 31,  2000,  filed as
        Exhibit 10.1 to the Company's  Form 10-Q for the quarter
        ended  March 31,  2000 and  incorporated  herein by this
        reference.

10.15   $15,000,000  Promissory  Note in favor  of  Zions  First
        National  Bank, a national  banking  association,  dated
        March 31, 2000,  filed as Exhibit 10.2 to the  Company's
        Form 10-Q for the  quarter  ended  March 31,  2000,  and
        incorporated herein by this reference.

10.16 Trust Deed, Assignment of Rents, Security Agreement and Fixture Filing executed by Evans & Sutherland Computer Corporation to Zions First National Bank, a national banking association, in favor of Zions First National Bank, a national banking association, dated March 31, 2000, filed as Exhibit 10.3 to the Company's Form 10-Q for the quarter ended March 31, 2000, and incorporated herein by this reference.

10.17 Assignment of tenant's Interest in Ground Lease for Security executed by Evans & Sutherland Computer Corporation and Zions First National Bank, a national banking association, dated March 31, 2000, filed as Exhibit 10.4 to the Company's Form 10-Q for the quarter ended March 31, 2000, and incorporated herein by this reference.

10.18 Assignment of Lease by Evans & Sutherland Computer Corporation and Zions First National Bank, a national banking association, dated March 31, 2000, filed as Exhibit 10.5 to the Company's Form 10-Q for the quarter ended March 31, 2000, and incorporated herein by this reference.

10.19 Commercial Credit and Security Agreement, dated March 2, 1998, between Evans & Sutherland Computer Corporation and First Security Bank, N.A., filed as Exhibit 10.6 to the Company's Form 10-Q for the quarter ended March 31, 2000, and incorporated herein by this reference.

10.20 Modification Agreement dated February 22, 2000, between Evans & Sutherland Computer Corporation and First Security Bank, N.A., filed as Exhibit 10.7 to the Company's Form 10-Q for the quarter ended March 31, 2000, and incorporated herein by this reference.

10.21 Letter of Credit and Reimbursement Agreement between Evans & Sutherland Computer Corporation and Zions First National Bank, dated April 24, 2000, filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by this reference.

68

10.22 Supplemental Letter of Credit and Reimbursement Agreement between Evans & Sutherland Computer Corporation and Zions First National Bank, dated May 31, 2000, filed as Exhibit 10.2 to the Company's Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by this reference.

10.23 Managed Agency Account Assignment Agreement between Evans & Sutherland Computer Corporation and Zions First National Bank, dated May 31, 2000, filed as Exhibit 10.3 to the Company's Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by this reference.

10.24 Second Loan Modification Agreement made and entered into

        effective  June 30, 2000 by and among Evans & Sutherland
        Computer Corporation,  Evans & Sutherland Computer GmbH,
        Evans & Sutherland Computer Limited,  Evans & Sutherland
        Graphics  Corporation  and Zions First  National Bank, a
        national banking  association,  filed as Exhibit 10.4 to
        the  Company's  Form 10-Q for the quarter ended June 30,
        2000, and incorporated herein by this reference.

10.25   $15,000,000  Renewal and Substitute  promissory  Note in
        favor of Zions First National  Bank, a national  banking
        association,  dated June 30, 2000, filed as Exhibit 10.5
        to the  Company's  Form 10-Q for the quarter  ended June
        30, 2000, and incorporated herein by this reference.

*10.26 Employment agreement between Evans & Sutherland Computer Corporation and James R. Oyler, dated May 16, 2000, filed as Exhibit 10.6 to the Company's Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by this reference.

*10.27 Employment agreement between Evans & Sutherland Computer Corporation and Richard J. Gaynor, dated May 16, 2000, filed as Exhibit 10.7 to the Company's Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by this reference.

*10.28 Employment agreement between Evans & Sutherland Computer Corporation and David B. Figgins, dated May 16, 2000, filed as Exhibit 10.8 to the Company's Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by this reference.

*10.29 Employment agreement between Evans & Sutherland Computer Corporation and George K. Saul, dated May 16, 2000, filed as Exhibit 10.9 to the Company's Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by this reference.

*10.30 Employment agreement between Evans & Sutherland Computer Corporation and Robert H. Ard, dated May 16, 2000, filed as Exhibit 10.10 to the Company's Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by this reference.

*10.31 Employment agreement between Evans & Sutherland Computer Corporation and Thomas Atchison, dated July 25, 2000, filed as Exhibit 10.11 to the Company's Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by this reference.

10.32 Overdraft Facility dated June 15, 2000 between Evans & Sutherland Computer Limited and Lloyds TSB Bank plc, filed as Exhibit 10.12 to the Company's Form 10-Q for the quarter ended June 30, 2000, and incorporation herein by this reference.

*10.33 Amendment to employment agreement between Evans & Sutherland Computer Corporation and James R. Oyler, dated September 22, 2000, filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended September 29, 2000, and incorporated herein by this reference.

*10.34 Amendment to employment agreement between Evans & Sutherland Computer Corporation and Richard J. Gaynor, dated September 22, 2000, filed as Exhibit 10.2 to the Company's Form 10-Q for the quarter ended September 29, 2000, and incorporated herein by this reference.

69

*10.35 Amendment to employment agreement between Evans & Sutherland Computer Corporation and David B. Figgins, dated September 22, 2000, filed as Exhibit 10.3 to the Company's Form 10-Q for the quarter ended September 29, 2000, and incorporated herein by this reference.

*10.36 Amendment to employment agreement between Evans & Sutherland Computer Corporation and George K. Saul, dated September 22, 2000, filed as Exhibit 10.4 to the Company's Form 10-Q for the quarter ended September 29, 2000, and incorporated herein by this reference.

*10.37 Amendment to employment agreement between Evans & Sutherland Computer Corporation and Robert H. Ard, dated September 22, 2000, filed as Exhibit 10.5 to the Company's Form 10-Q for the quarter ended September 29, 2000, and incorporated herein by this reference.

*10.38 Amendment to employment agreement between Evans & Sutherland Computer Corporation and Thomas Atchison, dated September 22, 2000, filed as Exhibit 10.6 to the Company's Form 10-Q for the quarter ended September 29, 2000, and incorporated herein by this reference.

*10.39 Employment agreement between Evans & Sutherland Computer Corporation and Nicholas J. Iuanow, dated September 22, 2000, filed as Exhibit 10.7 to the Company's Form 10-Q for the quarter ended September 29, 2000, and incorporated herein by this reference.

*10.40 Employment agreement between Evans & Sutherland Computer Corporation and William M. Thomas, dated December 22, 2000, filed herein.

10.41 Loan and Security Agreement by and between Evans & Sutherland Computer Corporation and Foothill Capital Corporation, dated December 14, 2000, filed herein.

10.42 Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture filing between Evans & Sutherland Computer Corporation, Chicago Title Company, Foothill Capital Corporation, dated December 14, 2001, filed herein.

10.43 Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture filing between Evans & Sutherland Computer Corporation, Chicago Title Company, Foothill Capital Corporation, dated December 14, 2001, filed herein.

10.44 Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture filing between Evans & Sutherland Computer Corporation, Chicago Title Company, Foothill Capital Corporation, dated December 14, 2001, filed herein.

10.45 Absolute Assignment of Sub-Leases and Rent by Evans & Sutherland Computer Corporation, dated December 14, 2001, filed herein.

10.46 Absolute Assignment of Sub-Leases and Rent by Evans & Sutherland Computer Corporation, dated December 14, 2001, filed herein.

10.47 Absolute Assignment of Sub-Leases and Rent by Evans & Sutherland Computer Corporation, dated December 14, 2001, filed herein.

10.48 Pledge and Security Agreement between Evans & Sutherland Computer Corporation and Foothill Capital Corporation, dated December 14, 2001, filed herein.

10.49 Intellectual Property Security Agreement between Evans & Sutherland Computer Corporation and Foothill Capital Corporation, dated December 14, 2001, filed herein.

10.50 Amendment No. 1 to Series B Preferred Stock and Warrant Purchase Agreement between Evans & Sutherland Computer Corporation and Intel Corporation, dated effective as of March 1, 2001, filed herein.

70

21.1 Subsidiaries of Registrant, filed herein.

23.1 Consent of Independent Accountants, filed herein.

24.1 Powers of Attorney for Messrs. Stewart Carrell, James R.
Oyler, William M. Thomas, Gerald S. Casilli, Peter O. Crisp and Ivan E. Sutherland, filed herein.

* Management contract for Compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.

4. Reports on Form 8-K: The Company did not file any reports on Form 8-K during the last quarter of 2000.

TRADEMARKS USED IN THIS FORM 10-K

AccelGALAXY, AccelGMX, Digistar, E&S, E&S Lightning 1200, EaSIEST, Ensemble, ESIG, Harmony, Integrator, RAPIDsite, REALimage, simFUSION, StarRider, Symphony and Vanguard are trademarks or registered trademarks of Evans & Sutherland Computer Corporation. All other product, service, or trade names or marks are the properties of their respective owners.

71

Schedule II

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

Years ended December 31, 2000, 1999 and 1998
(in thousands)

                                                              Additions             Deductions
                                                     ---------------------------     Charged
                                       Balance at     Charged to      Through      (recovered)       Balance
                                      beginning of     cost and       business       against        at end of
                                          year         expenses     acquisitions    allowance         year
                                      ------------   ------------   ------------   ------------   ------------
Allowance for doubtful receivables

December 31, 2000                     $      1,322   $      3,829   $         --   $        740   $      4,411

December 31, 1999                            1,616            558             --            852          1,322

December 31, 1998                              851            496          1,013            744          1,616

Inventory Reserves

December 31, 2000                     $      6,047   $      6,613   $         --   $      2,766   $      9,894

December 31, 1999                            6,963            910             --          1,826          6,047

December 31, 1998                            7,635          1,987          1,350          4,009          6,963

Warranty Reserves

December 31, 2000                     $      1,376   $      1,189   $         --   $      1,118   $      1,447

December 31, 1999                            1,436            958             --          1,018          1,376

December 31, 1998                              880            872            494            810          1,436

72

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EVANS & SUTHERLAND COMPUTER CORPORATION

March 30, 2001       By:      /S/  James R. Oyler
                        ----------------------------------
                            JAMES R. OYLER, PRESIDENT

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

          *                   Chairman of the                     March 30, 2001
-------------------------
STEWART CARRELL               Board of Directors


   /S/  James R. Oyler        Director, Chief Executive           March 30, 2001
-------------------------
JAMES R. OYLER                Officer and President
                              (Principal Executive Officer)


   /S/ William M. Thomas      Vice President, Chief Financial     March 30, 2001
-------------------------
WILLIAM M. THOMAS             Officer and Corporate Secretary
                              (Principal Financial and
                                Accounting Officer)


          *                    Director                           March 30, 2001
-------------------------
GERALD S. CASILLI


          *                    Director                           March 30, 2001
-------------------------
PETER O. CRISP


          *                    Director                           March 30, 2001
-------------------------
IVAN E. SUTHERLAND



By:      /S/  William M. Thomas                                   March 30, 2001
   ----------------------------------
             WILLIAM M. THOMAS
             *Attorney-in-Fact

73

AMENDED AND RESTATED BYLAWS

OF

EVANS & SUTHERLAND COMPUTER CORPORATION

A Utah Corporation


INDEX TO AMENDED AND RESTATED BYLAWS

OF
EVANS & SUTHERLAND COMPUTER CORPORATION

                                                                           Page
ARTICLE I Offices.............................................................1
    Section 1.01 Business Offices.............................................1
    Section 1.02 Principal Office.............................................1
    Section 1.03 Registered Office............................................1

ARTICLE II Shareholders.......................................................1
    Section 2.01 Annual Meeting...............................................1
    Section 2.02 Special Meetings.............................................2
    Section 2.03 Place of Meetings............................................2
    Section 2.04 Notice of Meetings...........................................2
    Section 2.05 Fixing of Record Date........................................3
    Section 2.06 Shareholder List for Meetings................................4
    Section 2.07 Shareholder Quorum and Voting Requirements...................4
    Section 2.08 Increasing Quorum or Voting Requirements.....................5
    Section 2.09 Proxies......................................................5
    Section 2.10 Voting of Shares.............................................5
    Section 2.11 Corporation's Acceptance of Votes............................5
    Section 2.12 Action Without a Meeting.....................................6
    Section 2.13 Meetings by Telecommunication................................7
    Section 2.14 Voting Trusts and Agreements.................................7
    Section 2.15 Voting for Directors.........................................7
    Section 2.16 Maintenance of Records and Shareholder Inspection Rights.....7
    Section 2.17 Financial Statements and Share Information...................9
    Section 2.18 Dissenters' Rights...........................................9
    Section 2.19 Shares Held by Nominees......................................9

ARTICLE III Board of Directors................................................9
    Section 3.01 General Powers...............................................9
    Section 3.02 Number, Tenure and Qualifications............................9
    Section 3.03 Resignation.................................................10
    Section 3.04 Removal.....................................................10
    Section 3.05 Vacancies...................................................10
    Section 3.06 Regular Meetings............................................10
    Section 3.07 Special Meetings............................................11
    Section 3.08 Place of Meetings -- Meetings by Telephone..................11
    Section 3.09 Notice of Meetings..........................................11
    Section 3.10 Waiver of Notice............................................11
    Section 3.11 Quorum and Manner of Acting.................................11
    Section 3.12 Action Without a Meeting....................................12
    Section 3.14 Compensation................................................12


                                       i

    Section 3.14 Committees..................................................12
    Section 3.15 Standards of Conduct........................................13
    Section 3.16 Liability for Unlawful Distributions........................13
    Section 3.17 Conflicting Interest Transactions...........................13

ARTICLE IV Officers..........................................................13
    Section 4.01 Number and Qualifications...................................13
    Section 4.02 Appointment and Term of Office..............................14
    Section 4.03 Removal and Resignation of Officers.........................14
    Section 4.04 Authority and Duties........................................14
    Section 4.05 Surety Bonds................................................16
    Section 4.06 Compensation................................................16

ARTICLE V Standards of Conduct for Officers and Directors....................16
    Section 5.01 Standards of Conduct........................................16
    Section 5.02 Reliance on Information and Reports.........................16
    Section 5.03 Limitation on Liability.....................................17

ARTICLE VI  Indemnification..................................................17
    Section 6.01 Indemnification of Directors................................17
    Section 6.02 Advance Expenses for Directors..............................18
    Section 6.03 Indemnification of Officers, Employees,
                 Fiduciaries, and Agents.....................................19
    Section 6.04 Insurance...................................................19
    Section 6.05 Scope of Indemnification....................................19
    Section 6.06 Other Rights and Remedies...................................20
    Section 6.07 Severability................................................20

ARTICLE VII  Stock...........................................................20
    Section 7.01 Issuance of Shares..........................................20
    Section 7.02 Certificates for Shares; Shares Without Certificates........20
    Section 7.03 Restrictions on Transfer of Shares Permitted................22
    Section 7.04 Acquisition of Shares by the Corporation....................22

ARTICLE VIII Amendments to Bylaws............................................22
    Section 8.01 Authority to Amend..........................................22

ARTICLE IX  Miscellaneous....................................................23
    Section 9.01 Corporate Seal..............................................23
    Section 9.02 Fiscal Year.................................................23

ii

AMENDED AND RESTATED BYLAWS

OF

EVANS & SUTHERLAND COMPUTER CORPORATION

Approved by Resolution of the Board of Directors dated August 30, 2000.

ARTICLE I

Offices

Section 1.01 Business Offices. The corporation may have such offices as the Board of Directors may from time to time determine or as the business of the corporation may from time to time require.

Section 1.02 Principal Office. The principal office of the corporation shall be located at any place either within or outside Utah as may be designated in the most recent document on file with the Utah Department of Commerce, Division of Corporations and Commercial Code (the "Division") providing information regarding the principal office of the corporation. The corporation shall maintain at its principal office a copy of such corporate records as may be required by the Utah Revised Business Corporation Act (the "Act") and Section 2.16 of these bylaws.

Section 1.03 Registered Office. The registered office of the corporation required by the Act to be maintained in Utah shall be the registered office as designated as the corporation's registered office in the most recent document on file with the Division providing such information. The corporation shall maintain a registered agent at the registered office, as required by the Act. The registered office and registered agent may be changed from time to time as provided by the Act.

ARTICLE II

Shareholders

Section 2.01 Annual Meeting. The annual meeting of shareholders shall be held each year on a date and at a time designated by the Board of Directors. In the absence of such designation, the annual meeting of shareholders shall be held on the third Wednesday of May in each year at 11:00 a. m. However, if the day fixed for the annual meeting is a legal holiday in Utah, then the meeting shall be held at the same time and place on the next succeeding business day. At the meeting, directors shall be elected and any other proper business may be transacted. If the election of directors shall not be held on the day designated herein for any annual meeting of the shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a meeting of the shareholders as soon thereafter as may be convenient. Failure to hold an annual meeting as required by these bylaws shall not affect the validity of any corporate action or work a forfeiture or dissolution of the corporation.


Section 2.02 Special Meetings. Special meetings of the shareholders may be called at any time by the Board of Directors, by such officers or persons as may be authorized by the bylaws to call a special meeting, or by the holders of shares representing at least ten percent (10%) of all the votes entitled to be cast on any issue proposed to be considered at the meeting, all in accordance with the Act.

Section 2.03 Place of Meetings. Each annual or special meeting of the shareholders shall be held at such place, either within or outside Utah, as may be designated by the Board of Directors. In the absence of any such designation, meetings shall be held at the principal office of the corporation.

Section 2.04 Notice of Meetings.

(a) Required Notice. The corporation shall give notice to shareholders of the date, time, and place of each annual and special meeting of shareholders no fewer than ten (10) nor more than sixty (60) days before the meeting date, in accordance with the requirements of the Act. Unless otherwise required by law or the articles of incorporation, the corporation is required to give the notice only to shareholders entitled to vote at the meeting. The notice requirement will be excused under certain circumstances with respect to shareholders whose whereabouts are unknown, as provided in the Act.

If the proposed corporate action creates dissenters' rights, the notice must be sent to all shareholders of the corporation as of the applicable record date, whether or not they are entitled to vote at the meeting.

(b) Contents of Notice. The notice of each special meeting must include a description of the purpose or purposes for which the meeting is called. Except as provided in this Section 2.04(b), or as otherwise required by the Act, other applicable law, or the articles of incorporation, notice of an annual meeting need not include a description of the purpose or purposes for which the meeting is called.

If a purpose of any shareholder meeting is to consider: (1) a proposed amendment to the articles of incorporation; (2) a plan of merger or share exchange; (3) the sale, lease, exchange or other disposition of all, or substantially all, of the corporation's property; (4) the dissolution of the corporation; or (5) the removal of a director, the notice must so state and be accompanied by a copy or summary of the transaction documents, as set forth in the above-referenced sections of the Act.

If the proposed corporate action creates dissenters' rights, the notice must state that shareholders are, or may be, entitled to assert dissenters' rights, and must be accompanied by a copy of Part 13 of the Act.

(c) Adjourned Meeting. If any annual or special meeting of shareholders is adjourned to a different date, time or place, then subject to the requirements of the following sentence notice need not be given of the new date, time and place if the new date, time and place are announced at the meeting before adjournment. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date for the adjourned meeting is or must be fixed under the Act and Section 2.05 of these bylaws, notice of the adjourned meeting must be given pursuant to the requirements of paragraph 2.04(a) of these bylaws to shareholders of record entitled to vote at the meeting, as provided in the Act.

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(d) Waiver of Notice. A shareholder may waive notice of any meeting (or any other notice required by the Act, the articles of incorporation or these bylaws) by a writing signed by the shareholder entitled to the notice, which is delivered to the corporation (either before or after the date and time stated in the notice as the date and time when any action will occur), for inclusion in the minutes or filing with the corporation records. A shareholder's attendance at a meeting: (a) waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting because of lack of notice or defective notice; and (b) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.

Section 2.05 Fixing of Record Date. For the purpose of determining shareholders of any voting group entitled to: (i) notice of or to vote at any meeting of shareholders or any adjournment thereof; (ii) take action without a meeting; (iii) demand a special meeting; (iv) receive payment of any distribution or share dividend; or (v) take any other action, the board of directors may fix in advance a date as the record date for one or more voting groups. As provided in the Act, a record date fixed pursuant to such section may not be more than 70 days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If no record date is otherwise fixed by the board as provided herein, then the record date for the purposes set forth below shall be the close of business on the dates indicated:

(a) With respect to a determination of shareholders entitled to notice of and to vote at an annual or special meeting of shareholders, the day before the first notice is mailed to shareholders;

(b) With respect to a determination of shareholders entitled to demand a special meeting of shareholders, the later of (i) the earliest date of any of the demands pursuant to which the meeting is called, and (ii) the date that is sixty days prior to the date the first of the written demands pursuant to which the meeting is called is received by the corporation;

(c) With respect to a determination of shareholders entitled to a share dividend, the date the board authorizes the share dividend;

(d) With respect to a determination of shareholders entitled to take action without a meeting (pursuant to Section 2.12 of these bylaws and the Act) or entitled to be given notice of an action so taken, the date the first shareholder delivers to the corporation a writing upon which the action is taken; and

(e) With respect to a determination of shareholders entitled to a distribution (other than one involving a purchase or reacquisition of shares for which no record date is necessary), the date the board of directors authorizes the distribution.

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A determination of shareholders entitled to notice of or to vote at any meeting of shareholders is effective for any adjournment of the meeting unless the board of directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.

Section 2.06 Shareholder List for Meetings. The officer or agent having charge of the stock transfer books for shares of the corporation shall prepare a list of the names of all shareholders entitled to be given notice of, and to vote at, each meeting of shareholders, in compliance with the requirements of the Act. The list must be arranged by voting group and within each voting group by class or series of shares. The list must be in alphabetical order within each class or series of shares and must show the address of, and the number of shares held by, each shareholder. The shareholder list must be available for inspection by any shareholder, beginning on the earlier of (i) ten days before the meeting for which the list was prepared, or (ii) two business days after notice of the meeting is given, and continuing through the meeting and any adjournments thereof. The list must be available at the corporation's principal office or at a place identified in the meeting notice in the city where the meeting is to be held. A shareholder or a shareholder's agent or attorney is entitled on written demand to the corporation, and subject to the provisions of the Act, to inspect and copy the list during regular business hours, during the period it is available for inspection. The list is to be available at the meeting for which it was prepared, and any shareholder or any shareholder's agent or attorney is entitled to inspect the list at any time during the meeting for any purpose germane to the meeting. The shareholder list is to be maintained in written form or in another form capable of conversion into written form within a reasonable time.

Section 2.07 Shareholder Quorum and Voting Requirements. If the articles of incorporation or the Act provides for voting by a single voting group on a matter, action on that matter is taken when voted upon by that voting group.

Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of such shares exists with respect to that matter. Unless the articles of incorporation or the Act provide otherwise, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that group for action on that matter.

If the articles of incorporation or the Act provides for voting by two or more voting groups on a matter, action on that matter is taken only when voted upon by each of those voting groups counted separately. One voting group may vote on a matter even though another voting group entitled to vote on the matter has not voted.

Once a share is represented for any purpose at a meeting, including the purpose of determining that a quorum exists, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of the meeting, unless a new record date is or must be set for the adjourned meeting.

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If a quorum exists, action on a matter (other than the election of directors) by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast within the voting group opposing the action, unless the articles of incorporation or the Act requires a greater number of affirmative votes. Those matters as to which the Act provides for a special voting requirement, typically requiring the vote of a majority of all votes entitled to be cast, or a majority of all voting shares within each voting group which is entitled to vote separately, include certain amendments to the articles of incorporation, mergers, sales of substantially all corporate assets, and dissolution of the corporation.

Section 2.08 Increasing Quorum or Voting Requirements. The articles of incorporation may provide for a greater quorum or voting requirement for shareholders, or voting groups of shareholders, than is provided for by the Act. An amendment to the articles of incorporation that changes or deletes a greater quorum or voting requirement must meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect.

Section 2.09 Proxies. At all meetings of shareholders, a shareholder may vote in person or by proxy. A shareholder may appoint a proxy by signing an appointment form, either personally or by the shareholder's attorney-in-fact, or by any of the other means set forth in the Act. A proxy appointment is valid for eleven months unless a longer period is expressly provided in the appointment form. The effectiveness and revocability of proxy appointments are governed by the Act.

Section 2.10 Voting of Shares. Unless otherwise provided in the articles of incorporation or applicable law, each outstanding share, regardless of class, is entitled to one vote, and each fractional share is entitled to a corresponding fractional vote, on each matter voted on at a shareholders' meeting. Only shares are entitled to vote.

Except as otherwise provided by specific court order, shares of this corporation are not entitled to be voted or to be counted in determining the total number of outstanding shares eligible to be voted if they are owned, directly or indirectly, by a second corporation, domestic or foreign, and this corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the second corporation. The prior sentence shall not limit the power of the corporation to vote any shares, including its own shares, held by it in a fiduciary capacity. Redeemable shares are not entitled to be voted after notice of redemption is mailed to the holders and a sum sufficient to redeem the shares has been deposited with a bank, trust company, or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the shares.

Section 2.11 Corporation's Acceptance of Votes. If the name signed on a vote, consent, waiver, proxy appointment, or proxy appointment revocation corresponds to the name of a shareholder, the corporation, if acting in good faith, is entitled to accept the vote, consent, waiver, proxy appointment, or proxy appointment revocation and give it effect as the act of the shareholder.

If the name signed on a vote, consent, waiver, proxy appointment, or proxy appointment revocation does not correspond to the name of a shareholder, the corporation, if acting in good faith, is nevertheless entitled to accept the vote, consent, waiver, proxy appointment, or proxy appointment revocation and give it effect as the act of the shareholder if:

(a) the shareholder is an entity and the name signed purports to be that of an officer or agent of the entity;

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(b) the name signed purports to be that of an administrator, executor, guardian, or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver, proxy appointment, or proxy appointment revocation;

(c) the name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver, proxy appointment, or proxy appointment revocation;

(d) the name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, proxy appointment, or proxy appointment revocation;

(e) two or more persons are the shareholder as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-tenants or fiduciaries and the person signing appears to be acting on behalf of all co-tenants or fiduciaries; or

(f) the acceptance of the vote, consent, waiver, proxy appointment, or proxy appointment revocation is otherwise proper under rules established by the corporation that are not inconsistent with the provisions of the Act.

If shares are registered in the names of two or more persons, whether fiduciaries, members of a partnership, co-tenants, husband and wife as community property, voting trustees, persons entitled to vote under a shareholder voting agreement or otherwise, or if two or more persons, including proxyholders, have the same fiduciary relationship respecting the same shares, then unless the secretary of the corporation or other officer or agent entitled to tabulate votes is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the effects set forth in Section 724(3) of the Act.

The corporation is entitled to reject a vote, consent, waiver, proxy appointment, or proxy appointment revocation if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder.

The corporation and its officer or agent who accepts or rejects a vote, consent, waiver, proxy appointment, or proxy appointment revocation in good faith and in accordance with the standards of Section 724 of the Act are not liable in damages to the shareholder for the consequences of the acceptance or rejection.

Corporate action based on the acceptance or rejection of a vote, consent, waiver, proxy appointment, or proxy appointment revocation under this section and Section 724 of the Act is valid unless a court of competent jurisdiction determines otherwise.

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Section 2.12 Action Without a Meeting. Unless otherwise provided in the articles of incorporation, and subject to the provisions of the Act, any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting and without prior notice, if one or more consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having no less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote thereon were present and voted. Unless the written consents of all shareholders entitled to vote have been obtained, notice of any shareholder approval without a meeting shall be given at least ten days before the consummation of the action authorized by the approval. Such notice shall meet the requirements of, and be delivered to all shareholders identified in, the Act.

Any shareholder giving a written consent, or the shareholder's proxyholder, personal representative or transferee may revoke a consent by a signed writing describing the action and stating that the shareholder's prior consent is revoked, if the writing is received by the corporation prior to the effectiveness of the action.

An action taken by written consent of the shareholders as provided herein is not effective unless all written consents on which the corporation relies for the taking of the action are received by the corporation within a sixty day period. An action so taken is effective as of the date the last written consent necessary to effect the action is received by the corporation, unless all of the written consents necessary to effect the action specify a later date as the effective date of the action, in which case the later date shall be the effective date of the action.

Written consents may be received by the corporation by electronically transmitted facsimile or other form of communication providing the corporation with a complete copy thereof, including a copy of the signature thereto.

Notwithstanding the other provisions of this bylaw, directors may not be elected by written consent except by unanimous written consent of all shares entitled to vote for the election of directors.

An action taken by written consent of the shareholders as provided herein has the same effect as action taken at a meeting of shareholders, and may be so described in any document.

Section 2.13 Meetings by Telecommunication. Any or all of the shareholders may participate in an annual or special meeting of shareholders by, or the meeting may be conducted through the use of, any means of communication by which all persons participating in the meeting can hear each other during the meeting. A shareholder participating in a meeting by this means is considered to be present in person at the meeting.

Section 2.14 Voting Trusts and Agreements. Voting trusts and agreements may be entered into among the shareholders in compliance with the requirements of the Act.

Section 2.15 Voting for Directors. Unless otherwise provided in the articles of incorporation or the Act, directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present, in accordance with the requirements and procedures set forth in the Act.

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Section 2.16 Maintenance of Records and Shareholder Inspection Rights.

(a) Corporate Records. The corporation shall keep as permanent records minutes of all meetings of its shareholders and board of directors, a record of all actions taken by the shareholders or board of directors without a meeting, a record of all actions taken on behalf of the corporation by a committee of the board of directors in place of the board of directors, and a record of all waivers of notices of meetings of shareholders, meetings of the board of directors, or any meetings of committees of the board of directors. The corporation shall also maintain appropriate accounting and shareholder records as required by the statute. The corporation shall keep at its principal office those corporate records and documents listed in the following paragraph.

(b) Inspection Rights of Records Required at Principal Office. A shareholder or director of the corporation (or such person's agent or attorney) who gives the corporation written notice of the demand at least five business days before the proposed inspection date, has the right to inspect and copy, during regular business hours, any of the following records, all of which the corporation is required to keep at its principal office:

(i) its articles of incorporation as then in effect;

(ii) its bylaws as then in effect;

(iii) the minutes of all shareholders' meetings, and records of all actions taken by shareholders without a meeting, for the past three years;

(iv) all written communications within the past three years to shareholders as a group or to the holders of any class or series of shares as a group;

(v) a list of the names and addresses of its current officers and directors;

(vi) its most recent annual report delivered to the Division; and

(vii) all financial statements prepared for periods ending during the last three years that a shareholder could request under the Act.

(c) Conditional Inspection Rights. In addition to the inspection rights set forth in paragraph (b) above, a shareholder or director of the corporation (or such person's agent or attorney) who gives the corporation a written demand in good faith and for a proper purpose at least five business days before the requested inspection date, and describes in the demand with reasonable particularity the records proposed to be inspected and the purpose of the inspection, is entitled to inspect and copy, during regular business hours at a reasonable location specified by the corporation, any of the following records of the corporation:

(i) excerpts from minutes of meetings of, and from actions taken by, the shareholders, the board of directors, or any committees of the board of directors, to the extent not subject to inspection under paragraph (b) of this Section 2.16;

(ii) accounting records of the corporation; and

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(iii) the record of shareholders (compiled no earlier than the date of the demand for inspection).

For the purposes of paragraph (c), a proper purpose means a purpose reasonably related to the demanding party's interest as a shareholder or director. A party may not use any information obtained through the inspection or copying of records permitted by this paragraph (c) for any purposes other than those set forth in a proper demand as described above, and the officers of the corporation are authorized to take appropriate steps to ensure compliance with this limitation.

Section 2.17 Financial Statements and Share Information. Upon the written request of any shareholder, the corporation shall mail to the requesting shareholder:

(i) its most recent annual or quarterly financial statements showing in reasonable detail its assets and liabilities and the results of its operations, as required by the Act; and

(ii) the information specified by Section 625(3) of the Act, regarding the designations, preferences, limitations, and relative rights applicable to each class and series of shares of the corporation, and the authority of the board of directors to determine variations for any existing or future class or series.

Section 2.18 Dissenters' Rights. Each shareholder of the corporation shall have the right to dissent from, and obtain payment of the fair value of shares held by such shareholder in the event of, any of the corporate actions identified in Section 1302 of the Act or otherwise designated in the articles of incorporation or in a resolution of the board of directors.

Section 2.19 Shares Held by Nominees. The Board of Directors is authorized to establish for the corporation from time to time such procedures as the directors may determine to be appropriate, by which the beneficial owner of shares that are registered in a nominee is recognized by the corporation as a shareholder.

ARTICLE III

Board of Directors

Section 3.01 General Powers. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of board of directors, subject to any limitation set forth in the articles of incorporation or in a shareholder agreement permitted by the Act.

Section 3.02 Number, Tenure and Qualifications. Unless otherwise specifically provided in the articles of incorporation, and subject to the provisions of the Act, the number of directors of the corporation shall be not less than 3 nor more than 11. The exact number of directors shall be 5, until changed, within the limits specified above, by a bylaw amending this Section 3.2 duly adopted by the board of directors or the shareholders.

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As provided in the articles of incorporation, the board of directors shall be divided into three classes, designated Class I, Class II and Class III. Each class of directors shall serve for a staggered three-year term. However, a director whose term expires shall continue to serve until such director's successor shall have been elected and qualified or until there is a decrease in the authorized number of directors. No decrease in the authorized number of directors shall have the effect of shortening the term of any incumbent director.

If the articles of incorporation authorize dividing the shares into classes or series, the articles of incorporation may also authorize the election of all or a specified number or portion of directors by the holders of one or more authorized classes or series of shares, as provided in Section 804 of the Act. A class or series of shares entitled to elect one or more directors is a separate voting group for purposes of the election of directors.

Section 3.03 Resignation. Any director may resign at any time by giving a written notice of resignation to the corporation. A director's resignation is effective when the notice is received by the corporation, or on such later date as may be specified in the notice of resignation. (Section 807 of the Act).

Section 3.04 Removal. The shareholders may remove one or more directors at a meeting called for that purpose, as contemplated by Section 808 of the Act, if the meeting notice states that a purpose of the meeting is such removal. The removal may be with or without cause unless the articles of incorporation provide that directors may be removed only for cause. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove the director. If the articles of incorporation provide for cumulative voting for the election of directors, a director may not be removed if a number of votes sufficient to elect the director under such cumulative voting is voted against removal. If cumulative voting is not in effect, a director may be removed only if the number of votes cast to remove the director exceeds the number of votes cast against removal.

Section 3.05 Vacancies. Unless the articles of incorporation provide otherwise, if a vacancy occurs on the board of directors, including a vacancy resulting from an increase in the number of directors, the vacancy may be filled by the shareholders or the board of directors. If the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office.

If the vacant office was held or is to be held by a director elected by a voting group of shareholders, only the holders of the shares of that voting group are entitled to vote to fill the vacancy if it is filled by the shareholders. If such vacancy is to be filled by the directors and one or more of the other directors elected by the same voting group are serving, only they are entitled to vote to fill the vacancy.

A vacancy that will occur at a specific later date (by reason of a resignation effective at a later date or otherwise) may be filled before the vacancy occurs, but the new director may not take office until the vacancy occurs.

The terms of directors elected to fill vacancies shall expire at the end of the term of the director whom they were elected to succeed.

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Section 3.06 Regular Meetings. Regular meetings of the board of directors may be held without notice of the date, time, place or purposes of the meetings, if the times of such meetings are fixed by resolution of the board of directors.

Section 3.07 Special Meetings. Special meetings of the board of directors may be called by or at the request of the president or any one director. The person or persons authorized to call special meetings of the board of directors may fix the time and place of the meetings so called.

Section 3.08 Place of Meetings -- Meetings by Telephone. The board of directors may hold regular or special meetings in or out of the State of Utah. Unless the articles of incorporation or bylaws provide otherwise, the board of directors may permit any or all directors to participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may hear each other during the meeting.

Section 3.09 Notice of Meetings. Unless the articles of incorporation or the Act provide otherwise, regular meetings of the board may be held without notice of the date, time, place, or purposes of the meeting. Unless the articles of incorporation provide for a longer or shorter period, special meetings of the board of directors must be preceded by at least two days' notice of the date, time, and place of the meeting. The notice need not describe the purpose of the special meeting unless required by the articles of incorporation or the Act.

The giving of notice of any meeting, shall be governed by the rules set forth in the Act.

Section 3.10 Waiver of Notice. Any director may waive notice of any meeting before or after the date of the meeting, as provided in the Act. Except as provided in the next sentence, the waiver must be in writing, signed by the director entitled to the notice, and delivered to the corporation for filing with the corporate records (but delivery and filing are not conditions to its effectiveness). A director's attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director at the beginning of the meeting, or promptly upon the director's arrival, objects to holding the meeting or transacting business at the meeting because of lack of notice or defective notice, and does not thereafter vote for or assent to action taken at the meeting.

Section 3.11 Quorum and Manner of Acting. Unless the articles of incorporation establish a different quorum requirement, a quorum of the board of directors consists of a majority of the number of directors fixed or prescribed in accordance with these bylaws.

The affirmative vote of a majority of directors present at a meeting at which a quorum is present when the vote is taken shall be the act of the board of directors, unless the articles of incorporation or the Act require the vote of a greater vote of directors. Any action to change the percentage of directors needed to take action is subject to the provisions of the Act.

A director who is present at a meeting of the board of directors when corporate action is taken is considered to have assented to the action taken at the meeting unless:

(i) the director objects at the beginning of the meeting (or promptly upon arrival) to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to any action taken at the meeting;

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(ii) the director contemporaneously requests that such director's dissent or abstention as to any specific action be entered into the minutes of the meeting; or

(iii) the director causes written notice of a dissent or abstention as to any specific action to be received by the presiding officer of the meeting before adjournment of the meeting or by the corporation promptly after adjournment of the meeting. The right of dissent or abstention as to a specific action is not available to a director who votes in favor of the action taken.

Section 3.12 Action Without a Meeting. Unless the articles of incorporation, these bylaws or the Act provide otherwise, any action required or permitted to be taken by the board of directors at a meeting may be taken without a meeting if all the directors consent in writing to the action as permitted by the Act. Action is considered to have been taken by such written consents when the last director signs a writing describing the action taken, unless prior to that time any director has revoked a consent by a writing signed by the director and received by an authorized officer of the corporation. An action so taken is effective at the time it is taken, unless the board of directors establishes a different effective date. An action taken by written consent of the directors as described in this section has the same effect as action taken at a meeting of directors and may be described as such in any document.

Section 3.13 Compensation. Unless otherwise provided in the articles of incorporation, the board of directors may fix the compensation of directors as permitted by the Act. The corporation shall provide for directors to be paid their expenses, if any, of attendance at each meeting of the board of directors, and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the board of directors or both. No such payment shall preclude any director from serving the corporation in any capacity and receiving compensation therefor.

Section 3.14 Committees.

(a) Creation of Committees. Unless the articles of incorporation provide otherwise, a board of directors may create one or more committees and appoint members of the board of directors to serve on them. Each committee must have two or more members, who serve at the pleasure of the board of directors.

(b) Selection of Committee Members. The creation of a committee and appointment of members to it must be approved by the greater of:

(i) a majority of all the directors in office when the action is taken; or

(ii) the number of directors required by the articles of incorporation to take action under the Act and Section 3.11 of these bylaws.

(c) Required Procedures. Sections 820 and 824 of the Act, and Sections 3.06 through 3.11 of these bylaws, which govern meetings, action without meeting, notice, waiver of notice, and quorum and voting requirements of the board of directors, apply to committees and their members as well.

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(d) Authority. Unless limited by the articles of incorporation, each committee may exercise those aspects of the authority of the board of directors (as set forth in the Act and Section 3.01 of these bylaws) which the board of directors confers upon such committee in the resolution creating the committee.

(e) Impact on Duty of Directors. The creation of, delegation of authority to, or action by a committee does not alone constitute compliance by a director with the standards of conduct described in the Act and referenced in Section 3.15 of these bylaws.

Section 3.15 Standards of Conduct. Each director is to discharge such director's duties as a director, including duties as a member of a committee, in compliance with the standards of conduct set forth in the Act and described in Article V of these bylaws.

Section 3.16 Liability for Unlawful Distributions. A director who votes for or assents to a distribution made in violation of the requirements of Section 640 of the Act or the articles of incorporation, and who does not discharge such duties in compliance with the standards of conduct set forth in the Act and referenced in Sections 3.15 and 5.01 of these bylaws, is personally liable to the corporation for the amount by which the distribution exceeds the amount that could have been properly distributed, as provided in the Act.

Section 3.17 Conflicting Interest Transactions. Transactions in which a director has a conflicting interest will be handled in accordance with Sections 850 to 853 of the Act. In accordance with such sections, each "director's conflicting interest transaction" as defined therein, which has not otherwise been established to be fair to the corporation, is to be presented to the shareholders for approval in accordance with Section 853 of the Act, or approved by the directors in compliance with the requirements of Section 822 of the Act.

Directors may take action with respect to a director's conflicting interest transaction by the affirmative vote of a majority of those "qualified directors" (defined in Section 850 of the Act as essentially those directors without conflicting interests with respect to the transaction) on the board of directors or on a duly empowered and constituted committee of the board who voted on the transaction after receipt of the "required disclosure" (as defined in Sections 850 and 852(2) of the Act). For purposes of such action, a majority of the qualified directors on the board or on the committee, as the case may be, constitutes a quorum. Such action is not affected by the presence or vote of a director who is not a qualified director.

ARTICLE IV

Officers

Section 4.01 Number and Qualifications. The officers of the corporation shall be such officers as may be appointed by the board of directors, and may include one or more of: a president, chief executive officer, chief operating officer, chief technical officer, chief financial officer, treasurer, controller, and secretary. The corporation may also have such other officers and assistant officers as the board of directors in its discretion may determine, by resolution, to be appropriate, including a chairman of the board, one or more vice-presidents, assistant secretaries and assistant treasurers. All such officers shall be appointed by the board of directors, except that if specifically authorized by the board of directors, an officer may appoint one or more officers or assistant officers, pursuant to Section 830(2) of the Act. The same individual may simultaneously hold more than one office in the corporation.

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Section 4.02 Appointment and Term of Office. The officers of the corporation shall be appointed by the board of directors (or, to the extent permitted by Section 4.01 above, by an officer specifically authorized by the board to make such appointments), for such terms as may be determined by the board of directors. Neither the appointment of an officer nor the designation of a specified term creates or grants to the officer any contract rights, and the board can remove the officer at any time prior to the termination of any term for which the officer may have been appointed, with or without cause, except to the extent an express, written agreement between the officer and the corporation provides otherwise. If no other term is specified, officers shall hold office until they resign, die, or until they are removed or replaced in the manner provided in Section 4.03 below.

Section 4.03 Removal and Resignation of Officers. Any officer or agent of the corporation may be removed or replaced by the board of directors at any time with or without cause, as permitted by Section 832 of the Act. The election of a replacement officer shall constitute the removal of the person previously holding such office. An officer may resign at any time by giving written notice of the resignation to the corporation. Resignations shall become effective as provided in Section 832 of the Act. An officer's resignation or removal does not affect the contract rights of the parties, if any.

Section 4.04 Authority and Duties. Except as otherwise established by the board of directors, the officers of the corporation shall have the authority and perform the duties specified below and as may be additionally specified by the president or chief executive officer, the board of directors, or these bylaws (and in all cases where the duties of any officer are not prescribed by the bylaws or by the board of directors, such officer shall follow the orders and instructions of the president or chief executive officer), except that in any event each officer shall exercise such powers and perform such duties as may be required by law:

(a) President; Chief Executive Officer. The chief executive officer and/or president shall, subject to the direction and supervision of the board of directors: (i) have general and active control of its affairs and business and general supervision of its officers, agents and employees; (ii) unless there is a chairman of the board, preside at all meetings of the shareholders and the board of directors; (iii) see that all orders and resolutions of the board of directors are carried into effect; and (iv) perform all other duties incident to such office and as from time to time may be assigned to such officer by the board of directors. The president and/or chief executive officer may sign, with the secretary or any other proper officer of the corporation authorized to take such action, certificates for shares of the corporation, the issuance of which have been authorized by resolution of the board of directors. The president and/or chief executive officer may also sign (or appoint other officers of the corporation to sign), subject to such restrictions and limitations as may be imposed from time to time by the board of directors, deeds, mortgages, bonds, contracts or other instruments which have been duly approved for execution. If both a president and chief executive officer are elected and serving, then as between the two of such officers, their relative authority shall be as determined by the board of directors or as otherwise agreed upon between such officers.

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(b) Chief Financial Officer. The chief financial officer, while one is serving, shall: (i) be the principal financial officer of the corporation and have responsibility for the care and custody of all its funds, securities, evidences of indebtedness and other personal property and deposit and handle the same in accordance with instructions of the board of directors; (ii) receive and give receipts and acquittances for moneys paid in on account of the corporation, and pay out of funds on hand all bills, payrolls and other just debts of the corporation of whatever nature upon maturity; (iii) be the principal accounting officer of the corporation and as such prescribe and maintain the methods and systems of accounting to be followed, keep complete books and records of account, prepare and file all local, state and federal tax returns, prescribe and maintain an adequate system of internal audit and prepare and furnish to the president and the board of directors statements of account showing the financial position of the corporation and the results of its operations; (iv) upon request of the board, make such reports to it as may be required at any time; and (v) perform all other duties incident to the office of the chief financial officer and such other duties as from time to time may be assigned by the board of directors. president or chief executive officer.

(c) Vice-Presidents. The vice-president, if any (or if there is more than one then each vice-president), shall assist the president and/or chief executive officer and shall perform such duties as may be assigned by the president, chief executive officer or board of directors. The vice-president, if there is one (or if there is more than one then the vice-president designated by the board of directors, or if there be no such designation then the vice-presidents in order of their election), shall, at the request of the president or chief executive officer, or in the event of the absence or inability or refusal to act of president and/or chief executive officer, perform the duties of such offices and when so acting shall have all the powers of and be subject to all the restrictions upon such offices. Any vice-president may sign, with the secretary or an assistant secretary, certificates for shares of the corporation the issuance of which have been authorized by resolution of the board of directors. Vice-presidents shall perform such other duties as from time to time may be assigned to them by the president or chief executive officer or by the board of directors. Assistant vice-presidents, if any, shall have such powers and perform such duties as may be assigned to them by the president, chief executive officer or board of directors.

(d) Treasurer. A treasurer, if one is appointed, shall assist the chief financial officer and perform such financial, accounting and money management functions and other duties as the board of directors or chief financial officer may from time to time direct, subject to the supervision of the chief financial officer. In the absence of a chief financial officer, the treasurer shall perform the duties of the chief financial officer and when so acting shall have the powers of, and be subject to the restrictions applicable to, the chief financial officer. The treasurer will perform all other duties incident to the office of treasurer and such other duties as from time to time may be assigned by the board of directors, president or chief executive officer.

(e) Corporate Secretary. The corporate secretary shall: (i) have responsibility for the preparation and maintenance of minutes of the proceedings of the shareholders and of the board of directors; (ii) have responsibility for the preparation and maintenance of the other records and information required to be kept by the corporation under Section 1601 of the Act; (iii) see that all

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notices are duly given in accordance with the provisions of these bylaws or as required by the Act or other applicable law; (iv) be custodian of the corporate records and of any seal of the corporation; (v) when requested or required, authenticate any records of the corporation; (vi) keep a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder; (vii) sign with the president, chief executive officer or a vice-president, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the board of directors; (viii) have general charge of the stock transfer books of the corporation, unless the corporation has a transfer agent; and (ix) in general perform all duties incident to the office of secretary, including those identified in the Act, and such other duties as from time to time may be assigned to the corporate secretary by the president, chief executive officer or board of directors. Assistant secretaries, if any, shall have the same duties and powers, subject to supervision by the corporate secretary.

Section 4.05 Surety Bonds. The board of directors may require any officer or agent of the corporation to provide to the corporation a bond, in such sums and with such sureties as may be satisfactory to the board, conditioned upon the faithful performance of such individual's duties and for the restoration to the corporation of all books, papers, vouchers, money, securities and other property of whatever kind in such officer's possession or under such officer's control belonging to the corporation.

Section 4.06 Compensation. Officers shall receive such compensation for their services as may be authorized or ratified by the board of directors and no officer shall be prevented from receiving compensation by reason of the fact that such officer is also a director of the corporation. Appointment as an officer shall not of itself create a contract or other right to compensation for services performed as such officer.

ARTICLE V

Standards of Conduct for Officers and Directors

Section 5.01 Standards of Conduct. As provided in Section 840 of the Act, each director is required to discharge his or her duties as a director, including duties as a member of a committee, and each officer with discretionary authority is required to discharge his or her duties under that authority, in a manner consistent with the following standards of conduct:

(i) in good faith;

(ii) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and

(iii) in a manner the director or officer reasonably believes is in the best interests of the corporation.

Section 5.02 Reliance on Information and Reports. In discharging his or her duties, a director or officer is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:

(i) one or more officers or employees of the corporation whom the director or officer reasonably believes to be reliable and competent in the matters presented;

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(ii) legal counsel, public accountants, or other persons as to matters the director or officer reasonably believes are within the person's professional or expert competence; or

(iii) in the case of a director, a committee of the board of directors of which such director is not a member, if the director reasonably believes the committee merits confidence.

A director or officer is not acting in good faith in relying on any such information, opinions, reports or statements if such director or officer has knowledge concerning the matter in question that makes reliance otherwise permitted as set forth above unwarranted.

Section 5.03 Limitation on Liability. A director or officer is not liable to the corporation, its shareholders, or any conservator or receiver, or any assignee or successor-in-interest thereof, for any action taken, or any failure to take any action as an officer or director, as the case may be, unless (i) the director or officer has breached or failed to perform the duties of the office in compliance with the provisions of this Article 5, and Section 840 of the Act, and (ii) the performance constitutes gross negligence, willful misconduct, or intentional infliction of harm on the corporation or the shareholders.

ARTICLE VI

Indemnification

Section 6.01 Indemnification of Directors.

(a) Permitted Indemnification. Pursuant to Section 902 of the Act, unless otherwise provided in the articles of incorporation as permitted by
Section 909 of the Act, the corporation may indemnify any individual made a party to a proceeding because such individual is or was a director of the corporation, against liability incurred in the proceeding if the corporation has authorized the payment in accordance with Section 906 of the Act and a determination has been made in accordance with the procedures set forth in Section 906(2) of the Act that the director has met the applicable standards of conduct as set forth below and in Section 902 of the Act:

(i) the individual's conduct was in good faith; and

(ii) the individual reasonably believed that his or her conduct was in, or not opposed to, the corporation's best interests; and

(iii) in the case of any criminal proceeding, the individual had no reasonable cause to believe his or her conduct was unlawful.

(b) Limitation on Permitted Indemnification. As provided in Section 902(4) of the Act, the corporation shall not indemnify a director under
Section 6.01(a) above:

(i) in connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or

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(ii) in connection with any other proceeding charging that the director derived an improper personal benefit, whether or not involving action in the director's official capacity, in which proceeding the director was adjudged liable on the basis that the director derived an improper personal benefit.

(c) Indemnification in Derivative Actions Limited. Indemnification permitted under Section 6.01(a) and Section 902 of the Act in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding.

(d) Mandatory Indemnification. As set forth in Section 903 of the Act, unless limited by its articles of incorporation, the corporation shall indemnify a director who was successful, on the merits or otherwise, in the defense of any proceeding, or in the defense of any claim, issue, or matter in the proceeding, to which the director was a party because the director is or was a director of the corporation, against reasonable expenses incurred by the director in connection with the proceeding or claim with respect to which the director has been successful.

(e) Authorized/Required Indemnification of Directors. The corporation is authorized to, and shall, indemnify its directors to the fullest extent permitted by applicable law, including without limitation the provisions of Part 9 of the Act. Without limiting the foregoing, the corporation shall indemnify its directors in all cases in which a corporation may indemnify a director under Section 902 of the Act. This provision constitutes authorization of indemnification as contemplated in Section 906 of the Act, so that the corporation can indemnify directors once a determination has been made in the specific case that indemnification is permissible in the circumstances because the director has met the applicable standard of conduct set forth in Section 902 of the Act, as referenced above. The corporation shall consider and act as expeditiously as possible on any and all requests by a director for indemnification.

Section 6.02 Advance Expenses for Directors.

(a) Requirements for Reimbursements. Pursuant to the provisions of
Section 904 of the Act, if a determination is made, following the procedures of Section 906(b) of the Act, that a director has met the following requirements; and if an authorization of payment is made, following the procedures and standards set forth in Section 906 of the Act, then unless otherwise provided in the articles of incorporation, the corporation may pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding in advance of final disposition of the proceeding, if:

(i) the director furnishes the corporation a written affirmation of the director's good faith belief that the director has met the applicable standard of conduct described in Section 5.01 of these bylaws and Section 902 of the Act;

(ii) the director furnishes to the corporation a written undertaking, executed personally or on such director's behalf, to repay the advance if it is ultimately determined that the director did not meet the standard of conduct; and

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(iii) a determination is made that the facts then known to those making the determination would not preclude indemnification under Sections 901 through 909 of the Act.

(b) Authorization for Reimbursement. The corporation is to authorize the advancement of expenses to directors, and to advance such expenses, once the written affirmation and undertaking required by Subsections 904(1)(a) and (b) of the Act (as referenced in Subsections 6.02(a)(i) and
(ii) of these bylaws) are received and the determination required by Subsection 904(1)(c) of the Act (as referenced in Subsection 6.02(a)(iii) of these bylaws) has been made. The corporation is to consider and act as expeditiously as possible upon any and all requests for advancements of expenses, promptly make the requisite determination in each instance as to eligibility for advancement of expenses and, in the event of a determination that the advancement of expenses is permissible, promptly authorize such advancement.

Section 6.03 Indemnification of Officers, Employees, Fiduciaries, and Agents. Unless otherwise provided in the articles of incorporation, and pursuant to Section 907 of the Act:

(i) an officer of the corporation is entitled to mandatory indemnification under Section 903 of the Act, and is entitled to apply for court-ordered indemnification under Section 905 of the Act, in each case to the same extent as a director;

(ii) the corporation shall indemnify and advance expenses to an officer, employee, fiduciary, or agent of the corporation to the same extent as to a director; and

(iii) the corporation shall also indemnify and advance expenses to an officer, employee, fiduciary, or agent who is not a director to a greater extent, if not inconsistent with public policy, and if provided for by its articles of incorporation, action of the board of directors, or contract.

Section 6.04 Insurance. As provided in Section 908 of the Act, the corporation may purchase and maintain liability insurance on behalf of a person who is or was a director, officer, employee, fiduciary, or agent of the corporation, or who, while serving as a director, officer, employee, fiduciary, or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, fiduciary, or agent of another foreign or domestic corporation or other person, or of an employee benefit plan, against liability asserted against or incurred by such person in that capacity or arising from such person's status as a director, officer, employee, fiduciary, or agent, whether or not the corporation would have power to indemnify such person against the same liability under Article VI of these bylaws or Sections 902, 903 or 907 of the Act. Insurance may be procured from any insurance company designated by the board of directors, president, or chief executive officer, whether the insurance company is formed under the laws of this state or any other jurisdiction, including any insurance company in which the corporation has an equity or any other interest through stock ownership or otherwise.

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Section 6.05 Scope of Indemnification. The indemnification and advancement of expenses authorized by this Article VI is intended to permit the corporation to indemnify to the fullest extent permitted by the laws of the State of Utah (and to require such indemnification under specified circumstances as described above) any and all persons whom it shall have power to indemnify under such laws from and against any and all of the expenses, disabilities, or other matters referred to in or covered by such laws. Any indemnification or advancement of expenses hereunder, unless otherwise provided when the indemnification or advancement of expenses is authorized or ratified, is intended to be applicable to acts or omissions that occurred prior to the adoption of this Article, shall continue as to any party during the period such party serves in any one or more of the capacities covered by this Article, shall continue thereafter so long as the party may be subject to any possible proceeding by reason of the fact that such party served in any one or more of the capacities covered by this Article, and shall inure to the benefit of the estate and personal representatives of such person. Any repeal or modification of this Article or of any Section or provision hereof shall not affect any right or obligations then existing. All rights to indemnification under this Article shall be deemed to be provided by a contract between the corporation and each party covered hereby.

Section 6.06 Other Rights and Remedies. The rights to indemnification and advancement of expenses provided in this Article VI shall be in addition to any other rights which a party may have or hereafter acquire under any applicable law, contract, order, or otherwise.

Section 6.07 Severability. If any provision of this Article shall be held to be invalid, illegal or unenforceable for any reason, the remaining provisions of this Article shall not be affected or impaired thereby, but shall, to the fullest extent possible, be construed so as to give effect to the intent of this Article that each party covered hereby is entitled to the fullest protection permitted by law.

ARTICLE VII

Stock

Section 7.01 Issuance of Shares. Except to the extent any such powers may be reserved to the shareholders by the articles of incorporation, the board of directors may authorize the issuance of shares for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts or arrangements for services to be performed, or other securities of the corporation. The terms and conditions of any tangible or intangible property or benefit to be provided in the future to the corporation, including contracts or arrangements for services to be performed, are to be set forth in writing.

Before the corporation issues shares, the board of directors must determine that the consideration received or to be received for the shares to be issued is adequate.

The board of directors may authorize a committee of the board of directors, or an officer of the corporation, to authorize or approve the issuance or sale, or contract for sale of shares, within limits specifically prescribed by the board of directors.

Section 7.02 Certificates for Shares; Shares Without Certificates.

(a) Use of Certificates. Shares of the corporation may, but need not be, represented by certificates. Unless the Act or another applicable statute expressly provides otherwise, the rights and obligations of shareholders are not affected by whether or not their shares are represented by certificates.

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(b) Content of Certificates. Certificates representing shares of the corporation must, at a minimum, state on their face:

(i) the name of the corporation, and that it is organized under the laws of Utah;

(ii) the name of the person to whom the certificate is issued; and

(iii) the number and class of shares and the designation of the series, if any, the certificate represents.

If the corporation is authorized to issue different classes of shares or different series within a class, the designations, preferences, limitations, and relative rights applicable to each class, the variations in preferences, limitations, and relative rights determined for each series, and the authority of the board of directors to determine variations for any existing or future class or series, must be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish the shareholder such information on request in writing and without charge.

Each share certificate must be signed (either manually or by facsimile) by the president or chief executive officer or a vice-president and by the secretary or an assistant secretary, or by any two other officers as may be designated in these bylaws or by the board of directors. Each certificate for shares is to be consecutively numbered or otherwise identified.

(c) Shares Without Certificates. As provided in Section 626 of the Act, unless the articles of incorporation provide otherwise, the board of directors may authorize the issuance of some or all of the shares of any or all of its classes or series without certificates. Such an authorization will not affect shares already represented by certificates until they are surrendered to the corporation.

Within a reasonable time after the issuance or transfer of shares without certificates, the corporation shall send the shareholder a written statement of the information required on certificates by Subsections 625(2) and (3) of the Act, as summarized in Section 7.02(b) above.

(d) Shareholder List. The corporation shall maintain a record of the names and addresses of the persons to whom shares are issued, in a form meeting the requirements of Section 1601(3) of the Act.

(e) Transferring Certificated Shares. All certificates surrendered to the corporation for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed, or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the corporation as the board of directors may prescribe.

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(f) Registration of the Transfer of Shares. Registration of the transfer of shares of the corporation shall be made only on the stock transfer books of the corporation or by transfer agents designated to transfer shares of the corporation. In order to register a transfer, the record owner shall surrender the shares to the corporation for cancellation, properly endorsed by the appropriate person or persons with reasonable assurances that the endorsements are genuine and effective. Unless the corporation has established a procedure by which a beneficial owner of shares held by a nominee is to be recognized by the corporation as the owner, the person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes.

(g) Transfer Agents and Registrars. The president or chief executive officer may appoint one or more transfer agents and one or more registrars with respect to the certificates representing shares of stock of the corporation, and may require all such certificates to bear the signature of either or both. The president or chief executive officer may from time to time define the respective duties of such transfer agents and registrars.

Section 7.03 Restrictions on Transfer of Shares Permitted. As contemplated by Section 627 of the Act, the articles of incorporation, an agreement among shareholders, or an agreement between one or more shareholders and the corporation may impose restrictions on the transfer or registration of transfer of shares of the corporation. A restriction does not affect shares issued before the restriction was adopted unless the holders of the shares are parties to the restriction agreement or voted in favor of the restriction or otherwise consented to the restriction.

A restriction on the transfer or registration of transfer of shares may be authorized for any of the purposes set forth in Section 627(3) of the Act. A restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder if the restriction is authorized by this section and its existence is noted conspicuously on the front or back of the certificate, or is contained in the information statement required by Section 7.02(c) of these bylaws with regard to shares issued without certificates. Unless so noted, a restriction is not enforceable against a person without knowledge of the restriction.

Section 7.04 Acquisition of Shares by the Corporation. Subject to the limitations on distributions set forth in Section 640 of the Act and any other restrictions imposed by applicable law, the corporation may acquire its own shares, as authorized by Section 631 of the Act, and shares so acquired constitute authorized but unissued shares.

ARTICLE VIII

Amendments to Bylaws

Section 8.01 Authority to Amend. The corporation's board of directors may amend these bylaws at any time, except to the extent that the articles of incorporation, these bylaws, or the Act reserve such power exclusively to the shareholders, in whole or part. The corporation's shareholders may amend these bylaws at any time.

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ARTICLE IX

Miscellaneous

Section 9.01 Corporate Seal. The board of directors may provide for a corporate seal, to be in such a form as the directors may determine to be appropriate, and any officer of the corporation may, when and as required or as determined to be appropriate, affix or impress the seal, or a facsimile thereof, to or on any instrument or document of the corporation.

Section 9.02 Fiscal Year. The fiscal year of the corporation shall be as established by the board of directors.

(END)

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AMENDMENT NO. 1

TO THE

THE AMENDED AND RESTATED BYLAWS

OF

EVANS & SUTHERLAND COMPUTER CORPORATION

Section 3.02 of the Amended and Restated Bylaws of Evans & Sutherland Computer Corporation is hereby replaced in its entirety with the following:

"Section 3.02 Number, Tenure and Qualifications. Unless otherwise specifically provided in the articles of incorporation, and subject to the provisions of the Act, the number of directors of the corporation shall be not less than 3 nor more than 11. The exact number of directors shall be determined by a resolution duly adopted by the board of directors or the shareholders.

As provided in the articles of incorporation, the board of directors shall be divided into three classes, designated Class I, Class II and Class III. Each class of directors shall serve for a staggered three-year term. However, a director whose term expires shall continue to serve until such director's successor shall have been elected and qualified or until there is a decrease in the authorized number of directors. No decrease in the authorized number of directors shall have the effect of shortening the term of any incumbent director.

If the articles of incorporation authorize dividing the shares into classes or series, the articles of incorporation may also authorize the election of all or a specified number or portion of directors by the holders of one or more authorized classes or series of shares, as provided in Section 804 of the Act. A class or series of shares entitled to elect one or more directors is a separate voting group for purposes of the election of directors."

Effective this ___ day of February, 2001.


EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into effective as of the 22nd day of December, 2000, by and between EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation (the "Company") and WILLIAM M. THOMAS (the "Executive").

W I T N E S S E T H:

WHEREAS, the Executive has been providing services to the Company in an executive capacity and desires to continue to provide such services;

WHEREAS, the Company desires to have the benefit of the Executive's efforts and services; and

WHEREAS, the Company has determined that it is appropriate and in the best interests of the Company to provide to the Executive protection in the event of certain terminations of the Executive's employment relationship with the Company in accordance with the terms and conditions contained herein and the Executive desires to have such protection.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the Company and the Executive hereby mutually covenant and agree as follows:

1. DEFINITIONS.

Whenever used in this Agreement, the following terms shall have the meanings set forth below:

(a) "Accrued Benefits" shall mean the amount payable not later than ten (10) days following an applicable Termination Date and which shall be equal to the sum of the following amounts:

(i) All salary earned or accrued through the Termination Date;

(ii) Reimbursement for any and all monies advanced in connection with the Executive's employment for reasonable and necessary expenses incurred by the Executive through the Termination Date;

(iii) Any and all other cash benefits previously earned through the Termination Date and deferred at the election of the Executive or pursuant to any deferred compensation plans then in effect;

(iv) The full amount of any stated bonus payable to the Executive in accordance with Sections 6(b)-(c) herein with respect to the year in which termination occurs; and


(v) All other payments and benefits to which the Executive may be entitled under the terms of any benefit plan of the Company.

(b) "Act" shall mean the Securities Exchange Act of 1934;

(c) "Affiliate" shall have the same meaning as given to that term in Rule 12b-2 of Regulation 12B promulgated under the Act;

(d) "Base Period Income" shall be an amount equal to the Executive's "annualized includable compensation" for the "base period" as defined in Sections 280G(d)(1) and (2) of the Code and the regulations adopted thereunder;

(e) "Beneficial Owner" shall have the same meaning as given to that term in Rule 13d-3 of the General Rules and Regulations of the Act, provided that any pledgee of Company voting securities shall not be deemed to be the Beneficial Owner thereof prior to its disposition of, or acquisition of voting rights with respect to, such securities;

(f) "Board" shall mean the Board of Directors of the Company;

(g) "Cause" shall mean any of the following:

(i) The engaging by the Executive in fraudulent conduct, as evidenced by a determination in a binding and final judgment, order or decree of a court or administrative agency of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal, in an action, suit or proceeding, whether civil, criminal, administrative or investigative, which the Board determines, in its sole discretion, has a significant adverse impact on the Company in the conduct of the Company's business;

(ii) Conviction of a felony, as evidenced by a binding and final judgment, order or decree of a court of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal, which the Board determines, in its sole discretion, has a significant adverse impact on the Company in the conduct of the Company's business;

(iii) Neglect or refusal by the Executive to perform the Executive's duties or responsibilities (unless significantly changed without the Executive's consent); or

(iv) A significant violation by the Executive of the Company's established policies and procedures;

Notwithstanding the foregoing, Cause shall not exist under Sections 1(g)(iii) and (iv) herein unless the Company furnishes written notice to the Executive of the specific offending conduct and the Executive fails to correct such offending conduct within the thirty (30) day period commencing on the receipt of such notice.

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(h) "Change of Control" shall mean a change in ownership or managerial control of the stock, assets or business of the Company resulting from one or more of the following circumstances:

(i) A change of control of the Company, of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act, or any successor regulation of similar import, regardless of whether the Company is subject to such reporting requirement;

(ii) A change in ownership of the Company through a transaction or series of transactions, such that any Person or Persons (other than any current officer of the Company or member of the Board) is (are) or become(s), in the aggregate, the Beneficial Owner(s), directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the Company's then outstanding securities;

(iii) Any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the common stock of the Company would be converted into cash (other than cash attributable to dissenters' rights), securities or other property provided by a Person or Persons other than the Company, other than a consolidation or merger of the Company in which the holders of the common stock of the Company immediately prior to the consolidation or merger have approximately the same proportionate ownership of common stock of the surviving corporation immediately after the consolidation or merger;

(iv) The shareholders of the Company approve a sale, transfer, liquidation or other disposition of all or substantially all of the assets of the Company to a Person or Persons;

(v) During any period of two (2) consecutive years, individuals who, at the beginning of such period, constituted the Board of Directors of the Company cease, for any reason, to constitute at least a majority thereof, unless the election or nomination for election of each new director was approved by the vote of at least two-thirds (2/3) of the directors then still in office who were directors at the beginning of the period;

(vi) The filing of a proceeding under Chapter 7 of the Federal Bankruptcy Code (or any successor or other statute of similar import) for liquidation with respect to the Company; or

(vii) The filing of a proceeding under Chapter 11 of the Federal Bankruptcy Code (or any successor or other statute of similar import) for reorganization with respect to the Company if in connection with any such proceeding, this Agreement is rejected, or a plan of reorganization is approved an element of which plan entails the liquidation of all or substantially all the assets of the Company.

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A "Change of Control" shall be deemed to occur on the actual date on which any of the foregoing circumstances shall occur; provided, however, that in connection with a "Change of Control" specified in Section 1(h)(vii), a "Change of Control" shall be deemed to occur on the date of the filing of the relevant proceeding under Chapter 11 of the Federal Bankruptcy Code (or any successor or other statute of similar import).

(i) "Change of Control Period" shall mean the period commencing on the date a Change of Control occurs and ending on the second anniversary of such Change of Control;

(j) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time;

(k) "Disability" shall mean a physical or mental condition whereby the Executive is unable to perform on a full-time basis the customary duties of the Executive under this Agreement;

(l) "Federal Short Term-Rate" shall mean the rate defined in Section 1274(d)(1)(C)(i) of the Code;

(m) "Good Reason" shall mean:

(i) The required relocation of the Executive, without the Executive's consent, to an employment location which is more than seventy-five (75) miles from the Executive's employment location on the day preceding the date of this Agreement;

(ii) The removal of the Executive from or any failure to reelect the Executive to any of the positions held by the Executive as of the date of this Agreement or any other positions to which the Executive shall thereafter be elected or assigned except in the event that such removal or failure to reelect relates to the termination by the Company of the Executive's employment for Cause or by reason of death, Disability or voluntary retirement;

(iii) A significant adverse change, without the Executive's written consent, in the nature or scope of the Executive's authority, powers, functions, duties or responsibilities, or a material reduction in the level of support services, staff, secretarial and other assistance, office space and accoutrements available to a level below that which was provided to the Executive on the day preceding the date of this Agreement and that which is necessary to perform any additional duties assigned to the Executive following the date of this Agreement, which change or reduction is not generally effective for all executives employed by the Company (or its successor) in the Executive's class or category; or

(iv) Breach or violation of any material provision of this Agreement by the Company;

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(n) "Gross Income" shall mean the Executive's current calendar year targeted compensation (base salary plus cash bonus), plus any other compensation payable to the Executive by the Company for the same period, whether taxable or non-taxable;

(o) "Notice of Termination" shall mean the notice described in Section 14 herein;

(p) "Person" shall mean any individual, partnership, joint venture, association, trust, corporation or other entity, other than an employee benefit plan of the Company or an entity organized, appointed or established pursuant to the terms of any such benefit plan;

(q) "Termination Date" shall mean, except as otherwise provided in
Section 14 herein,

(i) The Executive's date of death;

(ii) Thirty (30) days after the delivery of the Notice of Termination terminating the Executive's employment on account of Disability pursuant to Section 9 herein, unless the Executive returns on a full-time basis to the performance of his or her duties prior to the expiration of such period;

(iii) Thirty (30) days after the delivery of the Notice of Termination if the Executive's employment is terminated by the Executive voluntarily; or

(iv) Thirty (30) days after the delivery of the Notice of Termination if the Executive's employment is terminated by the Company for any reason other than death or Disability;

(r) "Termination Payment" shall mean the payment described in Section 13 herein;

(s) "Total Payments" shall mean the sum of the Termination Payment and any other "payments in the nature of compensation" (as defined in Section 280G of the Code and the regulations adopted thereunder) to or for the benefit of the Executive, the receipt of which is contingent on a Change of Control and to which Section 280G of the Code applies.

2. EMPLOYMENT.

The Company hereby agrees to employ the Executive and the Executive hereby agrees to serve the Company, on the terms and conditions set forth herein.

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3. TERM.

The employment of the Executive by the Company pursuant to the provisions of this Agreement shall commence on the date hereof and end on December 31, 2001, unless further extended or sooner terminated as hereinafter provided. On December 31, 2001, and on the last day of December each year thereafter, the term of the Executive's employment shall, unless sooner terminated as hereinafter provided, be automatically extended for an additional one year period from the date thereof unless, at least six (6) months before such December 31, the Company shall have delivered to the Executive or the Executive shall have delivered to the Company written notice that the term of the Executive's employment hereunder will not be extended beyond its existing duration.

4. POSITIONS AND DUTIES.

The Executive shall serve as Chief Financial Officer of the Company and in such additional capacities as set forth in Section 7 herein. In connection with the foregoing positions, the Executive shall have such duties, responsibilities and authority as may from time to time be assigned to the Executive by the Board. The Executive shall devote substantially all the Executive's working time and efforts to the business and affairs of the Company.

5. PLACE OF PERFORMANCE.

In connection with the Executive's employment by the Company, the Executive shall be based at the principal executive offices of the Company in Salt Lake City, Utah except for required travel on Company business.

6. COMPENSATION AND RELATED MATTERS.

(a) Salary. The Company shall pay to the Executive his annualized base salary (as in effect on the effective date of this Agreement and subject to adjustment as provided herein) in equal installments (as nearly as practicable), in accordance with the Company's standard payroll policy (as in effect from time to time), which currently provides for payments to be made every two weeks, in arrears. Such annualized base salary may be increased from time to time in accordance with normal business practices of the Company. The annualized base salary of the Executive shall not be decreased below its then existing amount during the term of this Agreement.

(b) ESIP. The Executive shall be entitled to participate in the Evans & Sutherland Incentive Program.

(c) SERP. The Executive shall be entitled to participate in the Company's Supplemental Executive Retirement Plan.

(d) Expenses. The Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in performing services hereunder, including all expenses for travel and living expenses while away from home on business or at the request of and in the service of the Company, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established from time to time by the Company.

(e) Other Benefits. The Company shall provide Executive with all other benefits normally provided to an employee of the Company similarly situated to Executive, including being added as a named officer on the Company's existing directors' and officers' liability insurance policy.

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(f) Vacations. The Executive shall be entitled to the number of vacation days in each calendar year, and to compensation in respect of earned but unused vacation days, determined in accordance with the Company's vacation plan, but in no event less than fifteen (15) days. The Executive shall also be entitled to all paid holidays given by the Company to its executives.

(g) Services Furnished. The Company shall furnish the Executive with office space, and such other facilities and services as shall be suitable to the Executive's position and adequate for the performance of the Executive's duties as set forth in Section 4 hereof.

7. OFFICES.

The Executive agrees to serve without additional compensation, if elected or appointed thereto, in one or more executive offices of the Company, or any affiliate or subsidiary of the Company, or as a member of the board of directors of any subsidiary or affiliate of the Company; provided, however, that the Executive is indemnified for serving in any and all such capacities on a basis no less favorable than is currently provided in the Company's bylaws, or otherwise.

8. TERMINATION AS A RESULT OF DEATH.

If the Executive shall die during the term of this Agreement, the Executive's employment shall terminate on the Executive's date of death and the Executive's surviving spouse, or the Executive's estate if the Executive dies without a surviving spouse, shall be entitled to the Executive's Accrued Benefits as of the Termination Date and any applicable Termination Payment.

9. TERMINATION FOR DISABILITY.

If, as a result of the Executive's Disability, the Executive shall have been unable to perform the Executive's duties hereunder on a full-time basis for four (4) consecutive months and within thirty (30) days after the Company provides the Executive with a Termination Notice, the Executive shall not have returned to the performance of the Executive's duties on a full-time basis, the Company may terminate the Executive's employment, subject to Section 14 herein. During the term of the Executive's Disability prior to termination, the Executive shall continue to receive all salary and benefits payable under
Section 6 herein, including participation in all employee benefit plans, programs and arrangements in which the Executive was entitled to participate immediately prior to the Disability; provided, however, that the Executive's continued participation is permitted under the terms and provisions of such plans, programs and arrangements. In the event that the Executive's participation in any such plan, program or arrangement is barred as the result of such Disability, the Executive shall be entitled to receive an amount equal to the contributions, payments, credits or allocations which would have been paid by the Company to the Executive, to the Executive's account or on the Executive's behalf under such plans, programs and arrangements. In the event the Executive's employment is terminated on account of the Executive's Disability in accordance with this Section 9, the Executive shall receive the Executive's Accrued Benefits as of the Termination Date and shall remain eligible for all benefits provided by any long-term disability programs of the Company in effect at the time of such termination. The Executive shall also be entitled to the Termination Payment described in Section 13(a).

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10. TERMINATION FOR CAUSE.

If the Executive's employment with the Company is terminated by the Company for Cause, subject to the procedures set forth in Section 14 herein, the Executive shall be entitled to receive the Executive's Accrued Benefits as of the Termination Date. The Executive shall not be entitled to receipt of any Termination Payment.

11. OTHER TERMINATION BY COMPANY.

If the Executive's employment with the Company is terminated by the Company other than by reason of death, Disability or Cause, or as described in paragraph 13(g) below, subject to the procedures set forth in Section 14 herein, the Executive (or in the event of the Executive's death following the Termination Date, the Executive's surviving spouse or the Executive's estate if the Executive dies without a surviving spouse) shall receive the applicable Termination Payment. The Executive shall not, in connection with any consideration receivable in accordance with this Section 11, be required to mitigate the amount of such consideration by securing other employment or otherwise and such consideration shall not be reduced by reason of the Executive securing other employment or for any other reason.

12. VOLUNTARY TERMINATION BY EXECUTIVE.

Provided that the Executive furnishes thirty (30) days prior written notice to the Company, the Executive shall have the right to voluntarily terminate this Agreement at any time. If the Executive's voluntary termination is without Good Reason, the Executive shall receive the Executive's Accrued Benefits as of the Termination Date and shall not be entitled to any Termination Payment. If the Executive's voluntary termination (other than a termination described in paragraph 13(g) below) is for Good Reason, the Executive (or in the event of the Executive's death following the Termination Date, the Executive's surviving spouse or the Executive's estate if the Executive dies without a surviving spouse) shall receive the applicable Termination Payment. The Executive shall not, in connection with any consideration receivable in accordance with this
Section 12, be required to mitigate the amount of such consideration by securing other employment or otherwise and such consideration shall not be reduced by reason of the Executive securing other employment or for any other reason.

13. TERMINATION PAYMENT.

(a) If the Executive's employment is terminated as a result of death or disability, the lump sum Termination Payment payable to the Executive shall be equal to the Executive's Gross Income. The Company will pay the full medical, dental and vision premiums for continuation coverage under COBRA for the Executive and dependents who qualify for continuation coverage under COBRA for one year following the Termination Date.

8

(b) If the Executive's employment is terminated by the Executive for Good Reason or by the Company for any reason other than death, disability or Cause, the Termination Payment payable to the Executive by the Company or an affiliate of the Company shall be equal to the Executive's Gross Income. The Company will pay the full medical, dental and vision premiums for continuation coverage under COBRA for the Executive and dependents who qualify for continuation coverage under COBRA for one year following the Termination Date.

(c) If, during a Change of Control Period, the Executive's employment is terminated by the Executive for Good Reason or by the Company for any reason other than death, Disability, or Cause, the Termination Payment payable to the Executive by the Company or an affiliate of the Company shall be two (2.0) times the Executive's Gross Income. The Company will pay the full medical, dental and vision premiums for continuation coverage under COBRA and, after expiration of the COBRA continuation period, for conversion coverage for the Executive and dependents who qualify for continuation coverage under COBRA for two (2) years following the Termination Date.

(d) It is the intention of the Company and the Executive that no portion of the Termination Payment and any other "payments in the nature of compensation" (as defined in Section 280G of the Code and the regulations adopted thereunder) to or for the benefit of the Executive under this Agreement, or under any other agreement, plan or arrangement, be deemed to be an "excess parachute payment" as defined in Section 280G of the Code. It is agreed that the present value of the Total Payments shall not exceed an amount equal to two and ninety-nine hundredths (2.99) times the Executive's Base Period Income, which is the maximum amount which the Executive may receive without becoming subject to the tax imposed by Section 4999 of the Code or which the Company may pay without loss of deduction under Section 280G(a) of the Code. Present value for purposes of this Agreement shall be calculated in accordance with the regulations issued under Section 280G of the Code. Within sixty (60) days following delivery of the Notice of Termination or notice by the Company to the Executive of its belief that there is a payment or benefit due the Executive which will result in an excess parachute payment as defined in Section 280G of the Code, the Executive and the Company shall, at the Company's expense, obtain such opinions as more fully described hereafter, which need not be unqualified, of legal counsel and certified public accountants or a firm of recognized executive compensation consultants. The Executive shall select said legal counsel, certified public accountants and executive compensation consultants; provided, however, that if the Company does not accept one (1) or more of the parties selected by the Executive, the Company shall provide the Executive with the names of such legal counsel, certified public accountants and/or executive compensation consultants as the Company may select; provided, further, however, that if the Executive does not accept the party or parties selected by the Company, the legal counsel, certified public accountants and/or executive compensation consultants selected by the Executive and the Company, respectively, shall select the legal counsel, certified public accountants and/or executive compensation consultants, whichever is applicable, who shall provide the opinions required by this Section 13(d). The opinions required hereunder shall set forth (a) the amount of the Base Period Income of the Executive, (b) the present value of Total Payments and (c) the amount and present value of any excess parachute payments. In the event that such opinions determine that

9

there would be an excess parachute payment, the Termination Payment or any other payment determined by such counsel to be includable in Total Payments shall be reduced or eliminated as specified by the Executive in writing delivered to the Company within thirty (30) days of his or her receipt of such opinions or, if the Executive fails to so notify the Company, then as the Company shall reasonably determine, so that under the bases of calculation set forth in such opinions there will be no excess parachute payment. The provisions of this Section 13(d), including the calculations, notices and opinions provided for herein shall be based upon the conclusive presumption that the compensation and other benefits, including but not limited to the Accrued Benefits, earned on or after the date of Change of Control by the Executive pursuant to the Company's compensation programs if such payments would have been made in the future in any event, even though the timing of such payment is triggered by the Change of Control, are reasonable compensation for services rendered prior to the Change of Control; provided, however, that in the event legal counsel so requests in connection with the opinion required by this Section 13(d), a firm of recognized executive compensation consultants, selected by the Executive and the Company pursuant to the procedures set forth above, shall provide an opinion, upon which such legal counsel may rely, as to the reasonableness of any item of compensation as reasonable compensation for services rendered prior to the Change of Control by the Executive. In the event that the provisions of Sections 280G and 4999 of the Code are repealed without succession, this Section 13(d) shall be of no further force or effect.

(e) The Termination Payment shall be payable in a lump sum not later than ten (10) days following the Executive's Termination Date. Such lump sum payment shall not be reduced by any present value or similar factor. Further, the Executive shall not be required to mitigate the amount of such payment by securing other employment or otherwise and such payment shall not be reduced by reason of the Executive securing other employment or for any other reason.

(f) Notwithstanding anything to the contrary herein, in no event will a termination of Executive's employment with the Company be deemed to trigger a right to receive a Termination Payment if the termination is effected by the mutual agreement of the Company and Executive to accommodate a reassignment of Executive to an entity created or acquired by the Company, or to which the Company has contributed rights to technology, assets or business plans, if at the time of such termination the Company owns or is acquiring a minimum of a 19% equity interest in such entity. In the event of any such termination, the Executive shall only be entitled to receive the Executive's Accrued Benefits as of the Termination Date.

14. TERMINATION NOTICE AND PROCEDURE.

Any termination by the Company or the Executive of the Executive's employment during the Employment Period shall be communicated by written Notice of Termination to the Executive, if such Notice of Termination is delivered by the Company, and to the Company, if such Notice of Termination is delivered by the Executive, all in accordance with the following procedures:

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(a) The Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances alleged to provide a basis for termination;

(b) Any Notice of Termination by the Company shall be approved by a resolution duly adopted by a majority of the directors of the Company then in office;

(c) If the Executive shall in good faith furnish a Notice of Termination for Good Reason and the Company notifies the Executive that a dispute exists concerning the termination, within the fifteen (15) day period following the Company's receipt of such notice, the Executive shall continue the Executive's employment during such dispute. If it is thereafter determined that (i) Good Reason did exist, the Executive's Termination Date shall be the earlier of (A) the date on which the dispute is finally determined, either by mutual written agreement of the parties or pursuant to Section 19, (B) the date of the Executive's death or (C) one day prior to the second (2nd) anniversary of a Change of Control, and the Executive's Termination Payment, if applicable, shall reflect events occurring after the Executive delivered the Executive's Notice of Termination; or (ii) Good Reason did not exist, the employment of the Executive shall continue after such determination as if the Executive had not delivered the Notice of Termination asserting Good Reason; and

(d) If the Executive gives notice to terminate his or her employment for Good Reason and a dispute arises as to the validity of such dispute, and the Executive does not continue his employment during such dispute, and it is finally determined that the reason for termination set forth in such Notice of Termination did not exist, if such notice was delivered by the Executive, the Executive shall be deemed to have voluntarily terminated the Executive's employment other than for Good Reason.

15. NONDISCLOSURE OF PROPRIETARY INFORMATION.

Recognizing that the Company is presently engaged, and may hereafter continue to be engaged, in the research and development of processes, the manufacturing of products or performance of services, which involve experimental and inventive work and that the success of its business depends upon the protection of the processes, products and services by patent, copyright or by secrecy and that the Executive has had, or during the course of his engagement may have, access to Proprietary Information, as hereinafter defined, of the Company or other information and data of a secret or proprietary nature of the Company which the Company wishes to keep confidential and the Executive has furnished, or during the course of his engagement may furnish, such information to the Company, the Executive agrees that:

(a) "Proprietary Information" shall mean any and all methods, inventions, improvements or discoveries, whether or not patentable or copyrightable, and any other information of a similar nature related to the business of the Company disclosed to the Executive or otherwise made known to him as a consequence of or through his engagement by the Company (including information originated by the Executive) in any technological area previously developed by the Company or developed, engaged in, or researched, by the Company during the term of the Executive's engagement, including, but not limited to, trade secrets, processes, products, formulae, apparatus, techniques, know-how, marketing plans, data, improvements, strategies, forecasts, customer lists, and technical requirements of customers, unless such information is in the public domain to such an extent as to be readily available to competitors;

11

(b) The Executive acknowledges that the Company has exclusive property rights to all Proprietary Information and the Executive hereby assigns all rights he might otherwise possess in any Proprietary Information to the Company. Except as required in the performance of his duties to the Company, the Executive will not at any time during or after the term of his engagement, which term shall include any time in which the Executive may be retained by the Company as a consultant, directly or indirectly use, communicate, disclose or disseminate any Proprietary Information or any other information of a secret, proprietary, confidential or generally undisclosed nature relating to the Company, its products, customers, processes and services, including information relating to testing, research, development, manufacturing, marketing and selling;

(c) All documents, records, notebooks, notes, memoranda and similar repositories of, or containing, Proprietary Information or any other information of a secret, proprietary, confidential or generally undisclosed nature relating to the Company or its operations and activities made or compiled by the Executive at any time or made available to him or her prior to or during the term of his engagement by the Company, including any and all copies thereof, shall be the property of the Company, shall be held by him or her in trust solely for the benefit of the Company, and shall be delivered to the Company by him or her on the termination of his or her engagement or at any other time on the request of the Company; and

(d) The Executive will not assert any rights under any inventions, copyrights, discoveries, concepts or ideas, or improvements thereof, or know-how related thereto, as having been made or acquired by him or her prior to his or her being engaged by the Company or during the term of his engagement if based on or otherwise related to Proprietary Information.

16. ASSIGNMENT OF INVENTIONS.

(a) For purposes of this Section 16, the term "Inventions" shall mean discoveries, concepts, and ideas, whether patentable or copyrightable or not, including but not limited to improvements, know-how, data, processes, methods, formulae, and techniques, as well as improvements thereof or know-how related thereto, concerning any past, present or prospective activities of the Company which the Executive makes, discovers or conceives (whether or not during the hours of his engagement or with the use of the Company's facilities, materials or personnel), either solely or jointly with others during his or her engagement by the Company or any affiliate and, if based on or related to Proprietary Information, at any time after termination of such engagement. All Inventions shall be the sole property of the Company, and Executive agrees to perform the provisions of this
Section 16 with respect thereto without the payment by the Company of any royalty or any consideration therefor other than the regular compensation paid to the Executive in the capacity of an employee or consultant.

12

(b) The Executive shall maintain written notebooks in which he or she shall set forth, on a current basis, information as to all Inventions, describing in detail the procedures employed and the results achieved as well as information as to any studies or research projects undertaken on the Company's behalf. The written notebooks shall at all times be the property of the Company and shall be surrendered to the Company upon termination of his or her engagement or, upon request of the Company, at any time prior thereto.

(c) The Executive shall apply, at the Company's request and expense, for United States and foreign letters patent or copyrights either in the Executive's name or otherwise as the Company shall desire.

(d) The Executive hereby assigns to the Company all of his or her rights to such Inventions, and to applications for United States and/or foreign letters patent or copyrights and to United States and/or foreign letters patent or copyrights granted upon such Inventions.

(e) The Executive shall acknowledge and deliver promptly to the Company, without charge to the Company, but at its expense, such written instruments (including applications and assignments) and do such other acts, such as giving testimony in support of the Executive's inventorship, as may be necessary in the opinion of the Company to obtain, maintain, extend, reissue and enforce United States and/or foreign letters patent and copyrights relating to the Inventions and to vest the entire right and title thereto in the Company or its nominee. The Executive acknowledges and agrees that any copyright developed or conceived of by the Executive during the term of Executive's employment which is related to the business of the Company shall be a "work for hire" under the copyright law of the United States and other applicable jurisdictions.

(f) The Executive represents that his or her performance of all the terms of this Agreement and as an employee of or consultant to the Company does not and will not breach any trust prior to his or her employment by the Company. The Executive agrees not to enter into any agreement either written or oral in conflict herewith and represents and agrees that he or she has not brought and will not bring with him to the Company or use in the performance of his or her responsibilities at the Company any materials or documents of a former employer which are not generally available to the public, unless he or she has obtained written authorization from the former employer for their possession and use, a copy of which has been provided to the Company.

(g) No provisions of this Section shall be deemed to limit the restrictions applicable to the Executive under Section 15.

(h) No provisions of this Section shall be deemed or construed to require the Executive to assign to the Company any rights or intellectual property with respect to any invention which (i) is created by the Executive entirely on his own time, (ii) does not constitute an "employment invention" as defined in the Utah Employment Inventions Act, and (iii) is not exempted from the application f the Utah Employment Inventions Act.

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17. SHOP RIGHTS.

The Company shall also have the royalty-free right to use in its business, and to make, use and sell products, processes and/or services derived from any inventions, discoveries, concepts and ideas, whether or not patentable, including but not limited to processes, methods, formulas and techniques, as well as improvements thereof or know-how related thereto, which are not within the scope of Inventions as defined in Section 16 but which are conceived or made by the Executive during the period he or she is engaged by the Company or with the use or assistance of the Company's facilities, materials or personnel.

18. NON-COMPETE.

The Executive hereby agrees that during the term of this Agreement and for the period of one year from the termination hereof, that the Executive will not:

(a) Within any jurisdiction or marketing area in the United States in which the Company or any subsidiary thereof is doing business, own, manage, operate or control any business of the type and character engaged in and competitive with the Company or any subsidiary thereof. For purposes of this Section, ownership of securities of not in excess of five percent (5%) of any class of securities of a public company shall not be considered to be competition with the Company or any subsidiary thereof; or

(b) Within any jurisdiction or marketing area in the United States in which the Company or any subsidiary thereof is doing business, act as, or become employed as, an officer, director, employee, consultant or agent of any business of the type and character engaged in and competitive with the Company or any of its subsidiaries; or

(c) Solicit any similar business to that of the Company's for, or sell any products that are in competition with the Company's products to, any company in the United States, which is, as of the date hereof, a customer or client of the Company or any of its subsidiaries, or was such a customer or client thereof within two years prior to the date of this Agreement; or

(d) Solicit the employment of any full time employee employed by the Company or its subsidiaries as of the date of termination of this Agreement.

19. REMEDIES AND JURISDICTION.

(a) The Executive hereby acknowledges and agrees that a breach of the agreements contained in this Agreement will cause irreparable harm and damage to the Company, that the remedy at law for the breach or threatened breach of the agreements set forth in this Agreement will be inadequate, and that, in addition to all other remedies available to the Company for such breach or threatened breach (including, without limitation, the right to recover damages), the Company shall be entitled to injunctive relief for any breach or threatened breach of the agreements contained in this Agreement.

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(b) All claims, disputes and other matters in question between the parties arising under this Agreement, shall, unless otherwise provided herein, be decided by arbitration in Salt Lake City, Utah, in accordance with the Model Employment Arbitration Procedures of the American Arbitration Association (including such procedures governing selection of the specific arbitrator or arbitrators), unless the parties mutually agree otherwise. The Company shall pay the costs of any such arbitration. The award by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any state or Federal court having jurisdiction thereof.

20. ATTORNEYS' FEES.

In the event that either party hereunder institutes any legal proceedings in connection with its rights or obligations under this Agreement, the prevailing party in such proceeding shall be entitled to recover from the other party, all costs incurred in connection with such proceeding, including reasonable attorneys' fees, together with interest thereon from the date of demand at the rate of twelve percent (12%) per annum.

21. SUCCESSORS.

This Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, estates, executors, administrators, heirs and beneficiaries. In the event of the Executive's death, all amounts payable to the Executive under this Agreement shall be paid to the Executive's surviving spouse, or the Executive's estate if the Executive dies without a surviving spouse. This Agreement shall inure to the benefit of, be binding upon and be enforceable by, any successor, surviving or resulting corporation or other entity to which all or substantially all of the business and assets of the Company shall be transferred whether by merger, consolidation, transfer or sale.

22. ENFORCEMENT.

The provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part hereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof and the applicability thereof shall not be affected thereby.

23. AMENDMENT OR TERMINATION.

This Agreement may not be amended or terminated during its term, except by written instrument executed by the Company and the Executive.

24. SURVIVABILITY.

     The  provisions  of  Sections  15, 16,  17,  18,  19, and 20 shall  survive
termination of this Agreement.

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25. ENTIRE AGREEMENT.

This Agreement sets forth the entire agreement between the Executive and the Company with respect to the subject matter hereof, and supersedes all prior oral or written agreements, negotiations, commitments and understandings with respect thereto.

26. VENUE; GOVERNING LAW.

This Agreement and the Executive's and Company's respective rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Utah without giving effect to the provisions, principles, or policies thereof relating to choice or conflicts of laws.

27. NOTICE.

Notices given pursuant to this Agreement shall be in writing and shall be deemed given when received, and if mailed, shall be mailed by United States registered or certified mail, return receipt requested, addressee only, postage prepaid, if to the Company, to:

Company:       Evans & Sutherland Computer Corporation
               600 Komas Drive
               Salt Lake City, Utah 84108
               Attn:  Human Resources
               Fax:  (801) 588-4500


Executive:     William M. Thomas
               600 Komas Drive
               Salt Lake City, Utah 84108
               Fax:  (801) 588-4500

or to such other address as the Company shall have given to the Executive or, if to the Executive, to such address as the Executive shall have given to the Company.

28. NO WAIVER.

No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or any prior or subsequent time.

29. HEADINGS.

The headings herein contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement.

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30. COUNTERPARTS.

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Executive has executed this Agreement, on the date and year first above written.

"COMPANY"

EVANS & SUTHERLAND COMPUTER
CORPORATION, a Utah corporation

By:___________________________________
James R. Oyler, President and CEO

"EXECUTIVE"


William M. Thomas

17

LOAN AND SECURITY AGREEMENT

by and between

EVANS & SUTHERLAND COMPUTER CORPORATION

and

FOOTHILL CAPITAL CORPORATION

Dated as of December 14, 2000


TABLE OF CONTENTS

Page

1. DEFINITIONS AND CONSTRUCTION.............................................1

1.1    Definitions.......................................................1
1.2    Accounting Terms.................................................18
1.3    Code.............................................................18
1.4    Construction.....................................................18
1.5    Schedules and Exhibits...........................................19

2. LOAN AND TERMS OF PAYMENT...............................................19

     2.1    Revolving Receivables Advances...................................19
     2.2    Revolving Real Estate Advances...................................20
     2.3    Letters of Credit................................................21
     2.4    Overadvances.....................................................23
     2.5    Interest and Letter of Credit Fees:
            Rates, Payments, and Calculations................................23
     2.6    Collection of Accounts...........................................26
     2.7    Crediting Payments; Float Charge; Application of
            Collections......................................................26
     2.8    Designated Account...............................................27
     2.9    Maintenance of Loan Account; Statements of Obligations...........27
     2.10   Fees.............................................................27

3.   CONDITIONS; TERM OF AGREEMENT...........................................28

     3.1    Conditions Precedent to the Initial Advance and
            the Initial Letter of Credit.....................................28
     3.2    Conditions Precedent to all Advances and all
            Letters of Credit................................................30
     3.3    Condition Subsequent.............................................31
     3.4    Term.............................................................31
     3.5    Effect of Termination............................................31
     3.6    Early Termination or Paydown by Borrower.........................32
     3.7    Termination Upon Event of Default................................32

4. CREATION OF SECURITY INTEREST...........................................32

4.1    Grant of Security Interest.......................................32
4.2    Negotiable Collateral............................................33
4.3    Collection of Accounts, General Intangibles, and
       Negotiable Collateral............................................33
4.4    Delivery of Additional Documentation Required....................33
4.5    Power of Attorney................................................33
4.6    Right to Inspect.................................................34
4.7    Control Agreements...............................................34

5. REPRESENTATIONS AND WARRANTIES..........................................34

     5.1    No Encumbrances..................................................35
     5.2    Eligible Accounts................................................35
     5.3    Location of Chief Executive Office; FEIN.........................35
     5.4    Due Organization and Qualification; Subsidiaries.................35
     5.5    Due Authorization; No Conflict...................................36

     5.6    Litigation.......................................................37
     5.7    No Material Adverse Change.......................................37
     5.8    Solvency.........................................................37
     5.9    Employee Benefits................................................37
     5.10   Environmental Condition..........................................38
     5.11   Compliance With The ADA..........................................38
     5.12   Compliance with Laws.............................................38
     5.13   Registration of Copyrights.......................................38

6.   AFFIRMATIVE COVENANTS...................................................39

     6.1    Accounting System................................................39
     6.2    Collateral Reporting.............................................39
     6.3    Financial Statements, Reports, Certificates......................39
     6.4    Tax Returns......................................................41
     6.5    Returns..........................................................41
     6.6    Maintenance of Equipment.........................................41
     6.7    Taxes............................................................42
     6.8    Insurance........................................................42
     6.9    No Setoffs or Counterclaims......................................44
     6.10   Compliance with Laws.............................................44
     6.11   Leases...........................................................44
     6.12   Environmental Condition..........................................44
     6.13   Compliance With The ADA..........................................46
     6.14   Location of Inventory and Equipment..............................46
     6.15   Disclosure Updates...............................................46
     6.16   Title to Equipment...............................................46
     6.17   Registration of Copyrights.......................................47

7.   NEGATIVE COVENANTS......................................................47

     7.1    Indebtedness.....................................................47
     7.2    Liens............................................................48
     7.3    Restrictions on Fundamental Changes..............................48
     7.4    Disposal of Assets...............................................48
     7.5    Change Name......................................................48
     7.6    Nature of Business...............................................48
     7.7    Prepayments and Amendments.......................................49
     7.8    Change of Control................................................49
     7.9    Distributions....................................................49
     7.10   Accounting Methods...............................................49
     7.11   Investments......................................................49
     7.12   Transactions with Affiliates.....................................50
     7.13   Suspension.......................................................50
     7.14   Compensation.....................................................50
     7.15   Use of Proceeds..................................................50
     7.16   Change in Location of Chief Executive Office;
            Inventory and Equipment with Bailees.............................50
     7.17   Financial Covenants..............................................50
     7.18   Capital Expenditures.............................................51
     7.19   Securities Accounts..............................................51

8.   EVENTS OF DEFAULT.......................................................51

9.   FOOTHILL'S RIGHTS AND REMEDIES..........................................53

9.1 Rights and Remedies.............................................53


     9.2     Remedies Cumulative.............................................55
     9.3     Foreclosure Not A Discharge.....................................55

10.  TAXES AND EXPENSES REGARDING THE COLLATERAL............................ 56

11.  WAIVERS; INDEMNIFICATION............................................... 56

     11.1   Demand; Protest; etc.............................................56
     11.2   Foothill's Liability for Collateral..............................56
     11.3   Indemnification..................................................57

12.  NOTICES.................................................................57

13.  CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER..............................58

14.  DESTRUCTION OF BORROWER'S DOCUMENTS.....................................59

15.  GENERAL PROVISIONS......................................................59

     15.1   Effectiveness....................................................59
     15.2   Successors and Assigns...........................................59
     15.3   Section Headings.................................................59
     15.4   Interpretation...................................................60
     15.5   Severability of Provisions.......................................60
     15.6   Amendments in Writing............................................60
     15.7   Counterparts; Telefacsimile Execution............................60
     15.8   Revival and Reinstatement of Obligations.........................60
     15.9   Lending Relationship.............................................61
     15.10  Integration......................................................61

SCHEDULES

Schedule P-1      Permitted Liens
Schedule R-1      Real Property
Schedule 5.4      Subsidiaries
Schedule 5.6      Litigation
Schedule 5.9      ERISA Plans
Schedule 6.14     Location of Inventory and Equipment
Exhibit C-1       Form of Compliance Certificate
Exhibit C-2       Form of Compliance Certificate


LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as of December 14, 2000, between FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of business located at 2450 Colorado Avenue, Suite 3000 West, Santa Monica, California 90404 and EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Borrower"), with its chief executive office located at 600 Komas Drive, Salt Lake City, Utah 84108.

The parties agree as follows:

1. DEFINITIONS AND CONSTRUCTION.

1.1 Definitions. As used in this Agreement, the following terms shall have the following definitions:

"Account Debtor" means any Person who is or who may become obligated under, with respect to, or on account of, an Account.

"Accounts" means all currently existing and hereafter arising accounts, contract rights, and all other forms of obligations owing to Borrower arising out of the sale or lease of goods or the rendition of services by Borrower, irrespective of whether earned by performance, and any and all credit insurance, guaranties, or security therefor.

"Act" means all present and future laws, regulations, statutes, common law, rules, ordinances, zoning requirements, codes, licenses, permits, orders, approvals, plans, authorizations, concessions, franchises, and similar items of any federal, state, or local government, instrumentality, or body, as the same may be amended, modified, or supplemented from time to time, or any applicable treaty entered into with foreign governments, as the same may be amended, modified, or supplemented from time to time.

"ADA" means the Americans with Disabilities Act, 42 U.S.C.ss.ss.12101, et. seq., and all applicable rules and regulations promulgated thereunder.

"Advances" means Receivables Advances and Real Estate Advances.

"Affiliate" means, as applied to any Person, any other Person who directly or indirectly controls, is controlled by, is under common control with or is a director or officer of such Person. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to vote 5% or more of the securities having ordinary voting power for the election of directors or the direct or indirect power to direct the management and policies of a Person.


"Agreement" has the meaning set forth in the preamble hereto.

"Amortizing Base Amount" means the sum of Twenty-Two Million Dollars ($22,000,000) minus: (i) for the first full seventeen calendar months of this Agreement, the sum of Two hundred Twenty-Nine Thousand, One Hundred Sixty-Six Dollars and Sixty-Seven Cents ($229,166.67) for each and every partial or full month; and (ii) for each and every month thereafter during the term of this Agreement, the previous month's amount is reduced by the sum of Three Hundred Sixty-Six Thousand Six Hundred Sixty-Six Dollars and Sixty-Seven Cents ($366,666.67); and (iii) reduced further by each RP Release Price, upon receipt by Foothill of each such amount.

"Assignment of Claims" means those certain assignment of claims forms to be filed with various government entities, the quantity, form and substance of which shall be acceptable to Foothill in the exercise of its Permitted Discretion.

"Assignment of Sub-Leases" means an Absolute Assignment of Sub-Leases and Rents executed by Borrower in favor of Foothill, the form and substance of which shall be satisfactory to Foothill in its sole and absolute discretion, with respect to the Real Property Collateral, which assigns the leases and rents derived therefrom, and the related improvements thereto.

"Authorized Person" means any officer or other employee of Borrower.

"Average Undrawn Portion of Letters of Credit" means, as of any date of determination, the average undrawn Daily Balance of all Letters of Credit that were outstanding during the immediately preceding month, except that with respect to such definition when used in the context of the unused line fee set forth in Section 2.10(b), the computation shall be computed on all Letters of Credit that were outstanding during the immediately preceding fiscal quarter.

"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C. S 101 et seq.), as amended, and any successor statute.

"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any ERISA Affiliate has been an "employer" (as defined in
Section 3(5) of ERISA) within the past six years.

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"Borrower" has the meaning set forth in the preamble to this Agreement.

"Borrower's Books" means all of Borrower's books and records including: ledgers; records indicating, summarizing, or evidencing Borrower's properties or assets (including the Collateral) or liabilities; all information relating to Borrower's business operations or financial condition; and all computer programs, disk or tape files, printouts, runs, or other computer prepared information relating or pertaining thereto.

"Business Day" means any day that is not a Saturday, Sunday, or a day on which banks in Los Angeles, California, are required or permitted to be closed.

"Change of Control" shall be deemed to have occurred at such time as a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of more than thirty-three percent (33%) of the total voting power of all classes of stock then outstanding of Borrower entitled to vote in the election of directors.

"Closing Date" means the date of the first to occur of the making of the initial Advance or the issuance of the initial Letter of Credit.

"Code" means the California Uniform Commercial Code.

"Collateral" means each of the following:

(a) the Accounts,

(b) Borrower's Books,

(c) the Equipment,

(d) the General Intangibles,

(e) the Inventory,

(f) the Investment Property,

(g) the Negotiable Collateral,

(h) the Real Property Collateral,

(i) any money, or other assets of Borrower that now or hereafter come into the possession, custody, or control of Foothill, and

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(j) the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the Collateral, and any and all Accounts, Borrower's Books, Equipment, General Intangibles, Inventory, Investment Property, Negotiable Collateral, Real Property, money, deposit accounts, or other tangible or intangible property resulting from the sale, exchange, collection, or other disposition of any of the foregoing, or any portion thereof or interest therein, and the proceeds thereof.

"Collections" means all cash, checks, notes, instruments, and other items of payment (including, insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds).

"Compliance Certificate" means a certificate substantially in the form of Exhibits C-1 or C-2, as applicable, delivered by the chief financial officer or Vice President/Treasurer of Borrower to Foothill.

"Consent to Hypothecation of Lease" means a consent executed by the lessor of the Real Property Collateral (i) consenting to the granting and recordation of the Mortgages, and (ii) waiving Lien rights or interests in, if any, the Equipment or Inventory, in form and substance satisfactory to Foothill.

"Control Agreements" means one or more control agreements, if established pursuant to Section 4.7, in form and substance satisfactory to Lender, executed and delivered by Borrower, Lender, and the applicable securities intermediary with respect to a Securities Account or bank with respect to a deposit account.

"Daily Balance" means with respect to each day during the term of this Agreement the amount of the relevant Obligation owed at the end of such day.

"Default" means an event, condition, or default that, with the giving of notice, the passage of time, or both, would be an Event of Default.

"Designated Account" means account number 02-12295-0 of Borrower maintained with Borrower's Designated Account Bank, or such other deposit account of Borrower (located within the United States) which has been designated, in writing and from time to time, by Borrower to Foothill.

"Designated Account Bank" means Zions First National Bank, N.A., whose office is located at 1 South Main Street, Salt Lake City, Utah 84111, and whose ABA number is 124000054.

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"Dilution" means, as of any date of determination, a percentage, based upon the experience of the immediately prior ninety (90) days, that is the result of dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising allowances, credits, or other dilutive items with respect to the Accounts during such period, by (b) Borrower's Collections with respect to Accounts during such period (excluding extraordinary items) plus the Dollar amount of clause (a).

"Dilution Reserve" means, as of any date of determination, an amount sufficient to reduce the advance rate against Eligible Accounts by one percentage point for each percentage point by which Dilution is in excess of fifteen percent (15%).

"Disbursement Letter" means an instructional letter executed and delivered by Borrower to Foothill regarding the extensions of credit to be made on the Closing Date, the form and substance of which shall be satisfactory to Foothill.

"Dollars or $" means United States dollars.

"Eligible Accounts" means those Accounts created by Borrower in the ordinary course of its business, that arise out of Borrower's sale of goods or rendition of services, that comply in all material respects with each of the representations and warranties respecting Eligible Accounts made by Borrower in the Loan Documents, and that are not excluded as ineligible by virtue of one or more of the criteria set forth below; provided, however, that such criteria may be fixed and revised from time to time by Foothill in Foothill's Permitted Discretion to address the results of any audit of Borrower's Accounts performed by Foothill from time to time after the Closing Date. In determining the amount to be included, Eligible Accounts shall be calculated net of customer deposits and unapplied cash remitted to Borrower. Eligible Accounts shall not include the following:

(a) Accounts that the Account Debtor has failed to pay within sixty (60) days of due date or Accounts with selling terms of more than sixty (60) days,

(b) Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of all Accounts owed by that Account Debtor (or its Affiliates) are deemed ineligible under clause (a) above,

(c) Accounts with respect to which the Account Debtor is an employee, Affiliate, or agent of Borrower,

(d) Accounts arising in a transaction wherein goods are placed on consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and hold, or any other terms by reason of which the payment by the Account Debtor may be conditional,

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(e) Accounts that are not payable in Dollars,

(f) Accounts, other than Eligible Foreign Accounts, with respect to which the Account Debtor either (i) does not maintain its chief executive office in the United States, or (ii) is not organized under the laws of the United States or any state thereof, or (iii) is the government of any foreign country or sovereign state, or of any state, province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof, unless (y) the Account is supported by an irrevocable letter of credit satisfactory to Foothill (as to form, substance, and issuer or domestic confirming bank) that has been delivered to Foothill and is directly drawable by Foothill, or (z) the Account is covered by credit insurance in form, substance, and amount, and by an insurer, satisfactory to Foothill,

(g) Accounts in excess of Two Hundred Fifty Thousand Dollars ($250,000) with respect to which the Account Debtor is either (i) the United States or any department, agency, or instrumentality of the United States (exclusive, however, of Accounts with respect to which Borrower has complied, to the reasonable satisfaction of Foothill, with the Assignment of Claims Act, 31 USC ss. 3727), or (ii) any state of the United States (exclusive, however, of (y) Accounts owed by any state that does not have a statutory counterpart to the Assignment of Claims Act, or (z) Accounts owed by any state that does have a statutory counterpart to the Assignment of Claims Act as to which Borrower has complied to Foothill's satisfaction),

(h) Accounts with respect to which the Account Debtor is a creditor of Borrower, has or has asserted a right of setoff, has disputed its liability, or has made any claim with respect to its obligation to pay the Account, to the extent of such claim, right of setoff, or dispute,

(i) Accounts with respect to an Account Debtor whose total obligations owing to Borrower exceed either the dollar or percentage limitations of all Eligible Accounts set forth below, to the extent of the obligations owing by such Account Debtor in excess of such dollar limitation or percentage:

(q) The Boeing Company, thirty-three percent (33%),

(r) J. F. Taylor, Inc., fifteen percent (15%),

(s) United States Air Force-DOD, twenty-five percent (25%),

(t) United States Navy-DOD, twenty-five percent (25%),

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(u) Lockheed Martin, twenty-five percent (25%),

(v) CAE Electronics, Ltd., twenty-five percent (25%),

(w) Thomson Training & Simulation, twenty-five percent (25%),

(x) STN Atlas Elektronik, GMBH, thirty-three percent (33%),

(y) Eligible Foreign Accounts, in the aggregate, in excess of three million dollars ($3,000,000), and

(z) all other Account Debtors not listed immediately above in subsections(i)(q-y), ten percent (10%):

provided, however, that at no time can the Eligible Accounts of the largest three account debtors listed in subsections
(i)(q-y) above in the aggregate exceed forty percent (40%) of all Eligible Accounts, and

provided, further, that Foothill can lower the percentages set forth in subsection (i)(q-x) above if in the exercise of its Permitted Discretion it believes there has been a change in the creditworthiness of such Account Debtor(s),

(j) Accounts with respect to which the Account Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone out of business, or as to which Borrower has received notice of an imminent Insolvency Proceeding or a material impairment of the financial condition of such Account Debtor,

(k) Accounts with respect to which the Account Debtor is located in the states of New Jersey, Minnesota, or West Virginia (or any other state that requires a creditor to file a business activity report or similar document in order to bring suit or otherwise enforce its remedies against such Account Debtor in the courts or through any judicial process of such state), unless Borrower has qualified to do business in New Jersey, Minnesota, West Virginia, or such other states, or has filed a business activities report with the applicable division of taxation, the department of revenue, or with such other state offices, as appropriate, for the then-current year, or is exempt from such filing requirement,

(l) Accounts, the collection of which, Foothill, in its Permitted Discretion, believes to be doubtful by reason of the Account Debtor's financial condition,

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(m) Accounts that are not subject to a valid and perfected first priority Foothill Lien, or

(n) accounts generated from key software components or other key copyrightable works for which there is no copyright registration pending or obtained, or once obtained, in which Foothill has not perfected its security interest.

"Eligible Foreign Accounts" means those Accounts created by Borrower in the ordinary course of its business, that: (i) arise out of Borrower's sale of goods or rendition of services to each and any of CAE Electronics, Ltd., STN Atlas Elektronik, GMBH, and/or Thomson Training & Simulation, (ii) that comply in all material respects with each of the representations and warranties respecting Eligible Accounts made by Borrower in the Loan Documents, (iii) with respect to STN Atlas Elektronik, GMBH, the Borrower has qualified to do business and is in good standing in Germany, (iv) with respect to Thomson Training & Simulation, the Borrower has qualified to do business and is in good standing in France, (v) with respect to CAE Electronics, Ltd. if legally required in order to take legal action against such Account Debtor, that Borrower remains qualified to do business and remains in good standing in Canada, and (vi)that are not excluded as ineligible by virtue of one or more of the criteria set forth in the definition of Eligible Accounts; provided, however, that such criteria may be fixed and revised from time to time by Foothill in Foothill's Permitted Discretion to address the results of any audit of Borrower's Accounts performed by Foothill from time to time after the Closing Date, or upon Foothill's review of the credit worthiness of each such foreign Account Debtor. In determining the amount to be included, Eligible Accounts shall be calculated net of customer deposits and unapplied cash remitted to Borrower. At no time can Eligible Foreign Accounts exceed Three Million Dollars ($3,000,000).

"Equipment" means all of Borrower's present and hereafter acquired machinery, machine tools, motors, equipment, furniture, furnishings, fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods (other than consumer goods, farm products, or Inventory), wherever located, including, (a) any interest of Borrower in any of the foregoing, and (b) all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto.

"ERISA Affiliate" means (a) any Person subject to ERISA whose employees are treated as employed by the same employer as the employees of Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA whose employees are treated as employed by

8

the same employer as the employees of Borrower under IRC Section
414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any organization subject to ERISA that is a member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and
Section 412 of the IRC, any Person subject to ERISA that is a party to an arrangement with Borrower and whose employees are aggregated with the employees of Borrower under IRC Section 414(o).

"ERISA Event" means (a) a Reportable Event with respect to any Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of its Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which it was a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA), (c) the providing of notice of intent to terminate a Benefit Plan in a distress termination (as described in
Section 4041(c) of ERISA), (d) the institution by the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e) any event or condition (i) that provides a basis under Section 4042(a)(1),
(2), or (3) of ERISA for the termination of, or the appointment of a trustee to administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA, (f) the partial or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of Borrower, any of its Subsidiaries or ERISA Affiliates from a Multiemployer Plan, or (g) providing any security to any Plan under Section 401(a)(29) of the IRC by Borrower or its Subsidiaries or any of their ERISA Affiliates.

"Event of Default" has the meaning set forth in Section 8.

"Existing Lenders" mean Wells Fargo and Zions First National Bank, N.A.

"FEIN" means Federal Employer Identification Number.

"Foothill" has the meaning set forth in the preamble to this Agreement.

"Foothill Expenses" means all: costs or expenses (including taxes, and insurance premiums) required to be paid by Borrower under any of the Loan Documents that are paid or incurred by Foothill; actual fees or charges paid or incurred by Foothill in connection with Foothill's transactions with Borrower, including, fees or charges for photocopying, notarization, couriers and messengers, telecommunication, public record searches (including tax lien, litigation, and UCC searches and including searches with the patent and trademark office, the copyright office, or the department of motor vehicles), actual filing, recording, publication, appraisal (including

9

periodic Personal Property Collateral or Real Property Collateral appraisals), real estate surveys, real estate title policies and endorsements, and environmental audits; costs and expenses incurred by Foothill in the disbursement of funds to Borrower (by wire transfer or otherwise); charges paid or incurred by Foothill resulting from the dishonor of Borrower's checks; actual costs and expenses paid or incurred by Foothill to correct any default or enforce any provision of the Loan Documents, or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Personal Property Collateral or the Real Property Collateral, or any portion thereof, irrespective of whether a sale is consummated; actual costs and expenses paid or incurred by Foothill in examining Borrower's Books; costs and expenses of third party claims or any other suit paid or incurred by Foothill in enforcing or defending the Loan Documents or in connection with the transactions contemplated by the Loan Documents or Foothill's relationship with Borrower or any guarantor, if any; and Foothill's reasonable attorneys fees and expenses incurred in advising, structuring, drafting, reviewing, administering, amending, terminating, enforcing, defending, or concerning the Loan Documents (including attorneys fees and expenses incurred in connection with a "workout," a "restructuring," or an Insolvency Proceeding concerning Borrower or any guarantor, if any, of the Obligations), irrespective of whether suit is brought.

"GAAP" means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

"General Intangibles" means all of Borrower's present and future general intangibles and other personal property (including contract rights, rights arising under common law, statutes, or regulations, choses or things in action, goodwill, trade names, trademarks, servicemarks, patents, copyrights, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements, infringement claims, computer programs, information contained on computer disks or tapes, literature, reports, catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax refund claims), and including all IP Collateral, other than goods, Accounts, and Negotiable Collateral.

"Governing Documents" means the certificate or articles of incorporation, by-laws, or other organizational or governing documents of any Person.

"Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, economic, regulatory or administrative functions of or pertaining to government.

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"Hazardous Materials" means:

(i) those substances as defined as "hazardous substances," "hazardous materials," "toxic substances," or "solid waste" in the Comprehensive Environmental Response, Compensation and Liability Act, Resource Conservation and Recovery Act, 42 U.S.C. ss.ss.6901 et seq. ("RCRA"), or the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.;

(ii) those substances designated as a "hazardous substance" under or pursuant to the Federal Water Pollution Control Act, 33 U.S.C.ss.ss.1257 et seq., or defined as a "hazardous waste" under or pursuant to RCRA;

(iii) those substances listed in the United States Department of Transportation Table (40 CFR 172.101 and amendments thereto) or by the Environmental Protection Agency (or any successor agency) as hazardous substances (40 CFR Part 302 and amendments thereto); and

(iv) such other substances, materials and wastes which are regulated under any Act, or which are classified as hazardous or toxic under any applicable Act.

All of the statutes, acts, codes, sections and tables listed above shall include all amendments, modifications and supplements thereto, together with all regulations promulgated pursuant to such statutes, acts, codes, sections and tables.

"Indebtedness" means: (a) all obligations of Borrower for borrowed money, (b) all obligations of Borrower evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations of Borrower in respect of letters of credit, bankers acceptances, interest rate swaps, or other financial products,
(c) all obligations of Borrower under capital leases, (d) all obligations or liabilities of others secured by a Lien on any property or asset of Borrower, irrespective of whether such obligation or liability is assumed, and (e) any obligation of Borrower guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or sold with recourse to Borrower) any indebtedness, lease, dividend, letter of credit, or other obligation of any other Person.

"Indemnified Liabilities" has the meaning set forth in Section 11.3.

"Indemnified Persons" means Foothill and its parents, subsidiaries and affiliates, attorneys, and each of their officers, directors, agents, employees, trustees, receivers, executors, and administrators, and the heirs, successors, and assigns of all of the foregoing.

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"Insolvency Proceeding" means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

"Intangible Assets" means, with respect to any Person, that portion of the book value of all of such Person's assets that would be treated as intangibles under GAAP.

"Intellectual Property Security Agreement" means that certain Intellectual Property Security Agreement of even date herewith.

"Inventory" means all present and future inventory in which Borrower has any interest, including goods held for sale or lease or to be furnished under a contract of service and all of Borrower's present and future raw materials, work in process, finished goods, and packing and shipping materials, wherever located.

"Investment Property" has the meaning set forth in Section 9115 of the Code.

"IP Collateral" means the items defined as "Collateral" in
Section 1.1 of the Intellectual Property Security Agreement.

"IRC" means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

"L/C" has the meaning set forth in Section 2.3(a).

"L/C Guaranty" has the meaning set forth in Section 2.3(a).

"Letter of Credit" means an L/C or an L/C Guaranty, as the context requires.

"Lien" means any interest in property securing an obligation owed to, or a claim by, any Person other than the owner of the property, whether such interest shall be based on the common law, statute, or contract, whether such interest shall be recorded or perfected, and whether such interest shall be contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances, including the lien or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, adverse claim or charge, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes and also including reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting Real Property.

"Loan Account" has the meaning set forth in Section 2.9.

"Loan Documents" means this Agreement, the Assignment of Claims, Assignment of Sub-Leases, the Consent to Hypothecation of Lease, the Disbursement Letter, the Intellectual Property Security Agreement, the Lockbox Agreements, the Mortgages, the Stock Pledge Agreement, the Tenancy Statements, any note or notes executed by Borrower and payable

12

to Foothill, and any other agreement entered into, now or in the future, in connection with this Agreement.

"Lockbox Account" shall mean a depositary account established pursuant to one of the Lockbox Agreements.

"Lockbox Agreements" means those certain Lockbox Operating Procedural Agreements and those certain Depository Account Agreements, in form and substance satisfactory to Foothill, each of which is among Borrower, Foothill, and one of the Lockbox Banks.

"Lockbox Banks" means Wells Fargo Bank, N.A., or such other banks as may be agreed to by Foothill and Borrower from time to time.

"Lockboxes" has the meaning set forth in Section 2.6.

"Losses" shall mean any and all losses, liabilities, contingent liabilities, damages, obligations, claims, contingent claims, actions, suits, proceedings, disbursements, penalties, costs, and expenses (including, without limitation, actual attorneys' fees and costs of counsel retained by Foothill to monitor the proceedings and actions of Borrower in satisfying its obligations hereunder, and to advise and represent Foothill with respect to matters related hereto, including, without limitation, fees incurred pursuant to 11 U.S.C.) and all other professional or consultants' fees and expenses), whether or not an action or proceeding is commenced or threatened.

"Material Adverse Change" means (a) a material adverse change in the business, prospects, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Borrower, (b) the material impairment of Borrower's ability to perform its obligations under the Loan Documents to which it is a party or of Foothill to enforce the Obligations or realize upon the Collateral, (c) a material adverse effect on the value of the Collateral or the amount that Foothill would be likely to receive (after giving consideration to delays in payment and costs of enforcement) in the liquidation of such

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Collateral, or (d) a material impairment of the priority of Foothill's Liens with respect to the Collateral.

"Maximum Amount" means, as of any date of determination, Thirty Million Dollars ($30,000,000).

"Maximum Letters of Credit Amount" means Thirty Million Dollars ($30,000,000).

"Maximum Revolving Amount" means Twelve Million Dollars ($12,000,000).

"Mortgages" means three or more Leasehold Deeds of Trust, Assignments of Rents, Security Agreements and Fixture Filings executed by Borrower in favor of the trustee named therein for the benefit of Foothill, the form and substance of which shall be satisfactory to Foothill, that encumbers the Real Property Collateral and the related improvements thereto.

"Mortgage Policy" has the meaning set forth in Section 3.1(l).

"Multiemployer Plan" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or any ERISA Affiliate has contributed, or was obligated to contribute, within the past six years.

"Negotiable Collateral" means all of Borrower's present and future letters of credit, notes, drafts, instruments, Investment Property, securities, the UK Stock, documents, personal property leases (wherein Borrower is the lessor), and chattel paper.

"Obligations" means all loans, Advances, debts, principal, interest (including any interest that, but for the provisions of the Bankruptcy Code, would have accrued), contingent reimbursement obligations under any outstanding Letters of Credit, premiums, liabilities (including all amounts charged to Borrower's Loan Account pursuant hereto), obligations, fees, charges, costs, or Foothill Expenses (including any fees or expenses that, but for the provisions of the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants, and duties owing by Borrower to Foothill of any kind and description (whether pursuant to or evidenced by the Loan Documents or pursuant to any other agreement between Foothill and Borrower, and irrespective of whether for the payment of money), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including any debt, liability, or obligation owing from Borrower to others that Foothill may have obtained by assignment or otherwise, and further including all interest not paid when due and all Foothill Expenses that Borrower is required to pay or reimburse by the Loan Documents, by law, or otherwise.

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"Overadvance" has the meaning set forth in Section 2.4.

"Participant" means any Person to which Foothill has sold a participation interest in its rights under the Loan Documents.

"Pay-Off Letter" means a letter, in form and substance reasonably satisfactory to Foothill, from Existing Lenders respecting the amount necessary to repay in full all of the obligations of Borrower owing to Existing Lenders and obtain a termination or release of all of the Liens existing in favor of Existing Lenders in and to the properties or assets of Borrower.

"PBGC" means the Pension Benefit Guaranty Corporation as defined in Title IV of ERISA, or any successor thereto.

"Permitted Discretion" means a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment.

"Permitted Liens" means (a) Liens held by Foothill, (b) Liens for unpaid taxes that either (i) are not yet due and payable or (ii) are the subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the interests of lessors under operating leases and purchase money security interests and Liens of lessors under capital leases, so long as the Lien only attaches to the asset purchased or acquired and only secures the purchase price of the asset, (e) Liens arising from deposits made in connection with obtaining worker's compensation or other unemployment insurance, (f) Liens or deposits to secure performance of bids, tenders, or leases (to the extent permitted under this Agreement), incurred in the ordinary course of business of Borrower and not in connection with the borrowing of money, (g) Liens arising by reason of security for surety or appeal bonds in the ordinary course of business of Borrower, (h) Liens of or resulting from any judgment or award that would not cause a Material Adverse Change and as to which the time for the appeal or petition for rehearing of which has not yet expired, or in respect of which Borrower is in good faith prosecuting an appeal or proceeding for a review, and in respect of which a stay of execution pending such appeal or proceeding for review has been secured, (i) Liens with respect to the Real Property Collateral that are exceptions to the commitments for title insurance issued in connection with the Mortgages, as accepted by Foothill, and (j) with respect to any Real Property that is not part of the Real Property Collateral, if any, easements, rights of way, zoning and similar covenants and restrictions, items of record, and similar encumbrances that customarily exist on properties of Persons engaged in similar activities and similarly situated and that in any event do not materially interfere with or impair the use or operation of the

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Collateral by Borrower or the value of Foothill's Lien thereon or therein, or materially interfere with the ordinary conduct of the business of Borrower.

"Permitted Protest" means the right of Borrower to protest any Lien (other than any such Lien that secures the Obligations), tax (other than payroll taxes or taxes that are the subject of a United States federal tax lien), or rental payment, provided that (a) a reserve with respect to such obligation is established on the books of Borrower in an amount that is reasonably satisfactory to Foothill, (b) any such protest is instituted and diligently prosecuted by Borrower in good faith, and (c) Foothill is satisfied in the exercise of its Permitted Discretion that, while any such protest is pending, there will be no impairment of the enforceability, validity, or priority of any of the Liens of Foothill in and to the Collateral.

"Person" means and includes natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.

"Personal Property Collateral" means all Collateral other than the Real Property Collateral.

"Plans" means any employee benefit plan, program, or arrangement maintained or contributed to by Borrower or with respect to which it may incur liability.

"Real Estate Advances" has the meaning set forth in Section 2.2(a).

"Real Estate Borrowing Base" has the meaning set forth in Section 2.2(a).

"Real Property" means any estates or interests in real property now owned or hereafter acquired by Borrower.

"Real Property Collateral" means all of Borrower's right, title and interest in and to the parcel or parcels of real property and the related improvements thereto identified on Schedule R-1, and any Real Property hereafter acquired by Borrower.

"Receivables Advances" has the meaning set forth in Section 2.1(a).

"Receivables Advances Borrowing Base" has the meaning set forth in Section 2.1(a).

"Reference Rate" means the rate of interest announced within Wells Fargo at its principal office in San Francisco as its "prime rate", with the understanding that the "prime rate" is one of Wells Fargo's base rates (not necessarily the lowest of such rates) and

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serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publication or publications as Wells Fargo may designate, and any successor rate established by Wells Fargo as an equivalent rate.

"Remediate" and "Remediation" shall include, but not be limited to, the investigation of the environmental condition of the Real Property, the preparation of any feasibility studies, reports or remedial plans, and the performance of any cleanup, abatement, removal, remediation, containment, operation, maintenance, monitoring or restoration work, whether on or off of the Real Property.

"Reportable Event" means any of the events described in Section 4043(c) of ERISA or the regulations thereunder other than a Reportable Event as to which the provision of 30 days notice to the PBGC is waived under applicable regulations.

"RP Release Price" has the meaning set forth in Section 7.4.

"Securities Account" means a "securities account" as that term is defined in the Code.

"Solvent" means, with respect to any Person on a particular date, that on such date (a) at fair valuations, all of the properties and assets of such Person are greater than the sum of the debts of such Person, (b) the present fair salable value of the properties and assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its properties and assets and pay its debts, other liabilities, and other commitments as they mature in the normal course of business,
(d) such Person does not intend to, and does not believe that it will, incur debts beyond such Person's ability to pay as such debts mature, and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's properties and assets would constitute unreasonably small capital after giving due consideration to the prevailing practices in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that reasonably can be expected to become an actual or matured liability.

"Stock Pledge Agreement" means that certain Pledge and Security Agreement dated of even date herewith whereby Borrower pledges

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Sixty-Six and Two-Thirds percent (66 2/3%) of the issued and outstanding shares of the UK Stock.

"Subsidiary" of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the shares of stock or other ownership interests having ordinary voting power to elect a majority of the board of directors (or appoint other comparable managers) of such corporation, partnership, limited liability company, or other entity.

"Tangible Net Worth" means, as of any date of determination, the difference of (a) Borrower's total stockholder's equity, minus (b) the sum of: (i) all Intangible Assets of Borrower, (ii) all of Borrower's prepaid expenses, and (iii) all amounts due to Borrower from Affiliates.

"Tenancy Statements" means those certain Tenancy Statements executed by each of Borrower's sub-lessees of a portion or portions of the Real Property Collateral, the form and substance of which is acceptable to Foothill in its sole and absolute discretion.

"UK Stock" means the stock of Evans & Sutherland Computer LTD., a United Kingdom corporation.

"Voidable Transfer" has the meaning set forth in Section 15.8.

"Wells Fargo" means Wells Fargo Bank, National Association, a national banking association, and any successor thereto.

1.2 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. When used herein, the term "financial statements" shall include the notes and schedules thereto. Whenever the term "Borrower" is used in respect of a financial covenant or a related definition, it shall be understood to mean Borrower on a consolidated basis unless the context clearly requires otherwise.

1.3 Code. Any terms used in this Agreement that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein.

1.4 Construction. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this

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Agreement. Section, subsection, clause, schedule, and exhibit references are to this Agreement unless otherwise specified. Any reference in this Agreement or in the Loan Documents to this Agreement or any of the Loan Documents shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, and supplements, thereto and thereof, as applicable.

1.5 Schedules and Exhibits. All of the schedules and exhibits attached to this Agreement shall be deemed incorporated herein by reference.

2. LOAN AND TERMS OF PAYMENT.

2.1 Revolving Receivables Advances.

(a) Subject to the terms and conditions of this Agreement, Foothill agrees to make advances ("Receivables Advances") to Borrower in an amount outstanding not to exceed at any one time the lesser of
(i) the Receivables Borrowing Base; (ii) the Maximum Revolving Amount minus the Average Undrawn Portion of Letters of Credit not otherwise subtracted pursuant to Section 2.2 (a)(y), or (iii) the Maximum Amount minus the sum of the Average Undrawn Portion of Letters of Credit Amount and the outstanding Real Estate Advances.

(b) For purposes of this Agreement, "Receivables Advances Borrowing Base", as of any date of determination, shall mean the result of:

(x) the lesser of (i) seventy-five percent (75%) of the value of Eligible Accounts, less the amount, if any, of the Dilution Reserve, and (ii) an amount equal to twenty-five percent (25%) of Borrower's Collections with respect to Accounts for the immediately preceding ninety (90) day period, minus

(y) the Average Undrawn Portion of Letters of Credit (without duplication of such amounts if subtracted pursuant to
Section 2.2(a), minus

(z) the aggregate amount of reserves, if any, established by Foothill under Sections 2.1(b), 6.11 and 10.

(c) Anything to the contrary in Section 2.1(a) above notwithstanding, Foothill may create reserves against the Receivables Advance availability in such amounts as Foothill in its Permitted Discretion shall deem necessary or appropriate, without declaring an Event of Default, including reserves on account of (i) sums that Borrower is required to pay (such as taxes, assessments, insurance premiums, or, in the case of leased assets, rents or other amounts

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payable under such leases) and has failed to pay under any section of this Agreement or any other Loan Document and (ii) without duplication of the foregoing, amounts owing by Borrower to any Person to the extent secured by a Lien on, or trust over, any of the Collateral, which Lien or trust, in the determination of Foothill in the exercise of its Permitted Discretion would be likely to have a priority superior to the Liens of Foothill (such as landlord liens, ad valorem taxes, or sales taxes where given priority under applicable law) in and to such item of the Collateral, other than a Permitted Lien.

(d) Foothill shall have no obligation to make Advances hereunder to the extent they would cause the outstanding Obligations to exceed the Maximum Amount.

(e) Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement.

2.2 Revolving Real Estate Advances.

(a) Subject to the terms and conditions of this Agreement, Foothill agrees to make advances ("Real Estate Advances") to Borrower in an amount outstanding not to exceed at any one time the Real Estate Borrowing Base. For purposes of this Agreement, "Real Estate Borrowing Base", as of any date of determination, shall mean the result of:

(x) the Amortizing Base Amount, minus

(y) the Average Undrawn Portion of Letters of Credit (without duplication of such amounts if subtracted pursuant to
Section 2.1(a), minus

(z) the aggregate amount of reserves, if any, established by Foothill under Sections 2.2(b), 6.11 and 10.

(b) Anything to the contrary in Section 2.1(a) above notwithstanding, Foothill may create reserves against the Real Estate Advance availability (but without duplication of the reserves established pursuant to Section 2.1(b)) in such amounts as Foothill in its Permitted Discretion shall deem necessary or appropriate, without declaring an Event of Default, including reserves on account of (i) sums that Borrower is required to pay (such as taxes, assessments, insurance premiums, or, in the case of leased assets, rents or other amounts payable under such leases) and has failed to pay under any section of this Agreement or any other Loan Document and (ii) without duplication of the foregoing, amounts owing by Borrower to any Person to the extent secured by a Lien on, or trust over, any of the Collateral, which Lien or trust, in the determination of Foothill in the exercise of its Permitted Discretion would be likely to have a

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priority superior to the Liens of Foothill (such as landlord liens, ad valorem taxes, or sales taxes where given priority under applicable law) in and to such item of the Collateral.

(c) Foothill shall have no obligation to make Advances hereunder to the extent they would cause the outstanding Obligations to exceed the Maximum Amount.

(d) Amounts borrowed pursuant to this Section 2.2 may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement.

2.3 Letters of Credit.

(a) Subject to the terms and conditions of this Agreement, Foothill agrees to issue letters of credit for the account of Borrower (each, an "L/C") or to issue guarantees or confirmations of payment (each such guaranty or confirmation, an "L/C Guaranty") with respect to letters of credit issued by an issuing bank for the account of Borrower. Foothill shall have no obligation to issue a Letter of Credit if the aggregate amount of all undrawn or unreimbursed Letters of Credit would exceed either the Maximum Amount or the Maximum Letters of Credit Amount.

Borrower expressly understands and agrees that Foothill shall have no obligation to arrange for the issuance by issuing banks of the letters of credit that are to be the subject of L/C Guarantees. Borrower and Foothill acknowledge and agree that certain of the letters of credit that are to be the subject of L/C Guarantees may be outstanding on the Closing Date. All such Letters of Credit shall be in form and substance acceptable to Foothill in its sole discretion. If Foothill is obligated to advance funds under a Letter of Credit, Borrower immediately shall reimburse such amount to Foothill and, in the absence of such reimbursement, the amount so advanced immediately and automatically shall be deemed to be an Advance hereunder and, thereafter, shall bear interest at the rate then applicable to Advances under Section 2.4.

(b) Borrower hereby agrees to indemnify, save, defend, and hold Foothill harmless from any loss, cost, expense, or liability, including payments made by Foothill, expenses, and reasonable attorneys fees incurred by Foothill arising out of or in connection with any Letter of Credit, unless the same shall have been occasioned by the gross negligence or willful misconduct of Foothill. Borrower agrees to be bound by the issuing bank's regulations and interpretations of any letters of credit guarantied or confirmed by Foothill and opened to or for Borrower's account or by Foothill's interpretations of any Letter of Credit issued by Foothill to or for Borrower's account, even though this interpretation may be different from Borrower's own, and Borrower understands and agrees that Foothill shall not be liable for any error, negligence, or mistake, whether of

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omission or commission, in following Borrower's instructions or those contained in the Letter of Credit or any modifications, amendments, or supplements thereto, unless the same shall have been occasioned by the gross negligence or willful misconduct of Foothill. Borrower understands that the L/C Guarantees may require Foothill to indemnify the issuing bank for certain costs or liabilities arising out of claims by Borrower against such issuing bank. Borrower hereby agrees to indemnify, save, defend, and hold Foothill harmless with respect to any loss, cost, expense (including reasonable attorneys' fees), or liability incurred by Foothill under any L/C Guaranty as a result of Foothill's indemnification of any such issuing bank.

(c) Borrower hereby authorizes and directs any bank that issues a letter of credit guaranteed by Foothill to deliver to Foothill all instruments, documents, and other writings and property received by the issuing bank pursuant to such letter of credit, and to accept and rely upon Foothill's instructions and agreements with respect to all matters arising in connection with such letter of credit and the related application. Borrower may or may not be the "applicant" or "account party" with respect to such letter of credit.

(d) Any and all charges, commissions, fees, and costs incurred by Foothill relating to the letters of credit guaranteed by Foothill, including, but not limited to bank issuance charges as the same may be charged from time to time, currently being charged at the rate of point seven percent (.7%) of the stated amount of such Letter of Credit, shall be considered Foothill Expenses for purposes of this Agreement and immediately shall be reimbursable by Borrower to Foothill.

(e) Immediately upon the termination of this Agreement, Borrower agrees to either (i) provide cash collateral to be held by Foothill in an amount equal to 105% of the undrawn amount of such outstanding Letters of Credit, (ii) cause to be delivered to Foothill releases of all of Foothill's obligations under outstanding Letters of Credit, or
(iii) cause to be delivered in favor of Foothill letters of credit, in form and substance satisfactory to Foothill and issued by financial institutions, the identity of which is acceptable to Foothill, sufficient in an amount equal to 105% of the maximum amount of Foothill's obligations under outstanding Letters of Credit. At Foothill's discretion, any proceeds of Collateral received by Foothill after the occurrence and during the continuation of an Event of Default may be held as the cash collateral required by this Section 2.2(e).

(f) If by reason of (i) any change in any applicable Act or any change in the interpretation or application by any Governmental Authority of any such Act, or (ii) compliance by the issuing bank or Foothill with any direction, request, or requirement (irrespective of

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whether having the force of law) of any Governmental Authority, including, without limitation, Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect (and any successor thereto):

(A) any reserve, deposit, or similar requirement is or shall be imposed or modified in respect of any Letters of Credit issued hereunder, or

(B) there shall be imposed on the issuing bank or Foothill any other condition regarding any letter of credit, or Letter of Credit, as applicable, issued pursuant hereto;

and the result of the foregoing is to increase, directly or indirectly, the cost to the issuing bank or Foothill of issuing, making, guaranteeing, or maintaining any letter of credit, or Letter of Credit, as applicable, or to reduce the amount receivable in respect thereof by such issuing bank or Foothill, then, and in any such case, Foothill may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify Borrower, and Borrower shall pay on demand such amounts as the issuing bank or Foothill may specify to be necessary to compensate the issuing bank or Foothill for such additional cost or reduced receipt, together with interest on such amount from the date of such demand until payment in full thereof at the rate set forth in Section 2.5(a) or (c), as applicable. The determination by the issuing bank or Foothill, as the case may be, of any amount due pursuant to this
Section 2.3(f), as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable error, be final and conclusive and binding on all of the parties hereto.

2.4 Overadvances. If, at any time or for any reason, the amount of Obligations owed by Borrower to Foothill pursuant to Sections 2.1 and 2.2 is greater than either the Dollar or percentage limitations set forth in Sections 2.1 or 2.2 (an "Overadvance"), Borrower immediately shall pay to Foothill, in cash, the amount of such excess to be used by Foothill first, to repay Advances outstanding under Section 2.1 and, thereafter during such period of Overadvance, to be held by Foothill as cash collateral to secure Borrower's obligation to repay Foothill for all amounts paid pursuant to Letters of Credit, and thereafter deposited into the Designated Account when such period of Overadvance ends.

2.5 Interest and Letter of Credit Fees: Rates, Payments, and Calculations.

(a) Interest Rate. Except as provided in clause (c) below, all Obligations as reflected in the Loan Account (except for undrawn Letters of Credit) shall bear interest at the per annum rate set forth below:

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(i) if the sum of outstanding Advances, outstanding Letters of Credit and L/C Guarantees, is less than Fifteen Million Dollars ($15,000,000), one and one-half (1 1/2) percentage points above the Reference Rate;

(ii) if the sum of outstanding Advances, outstanding Letters of Credit, and L/C Guarantees, is greater than or equal to Fifteen Million Dollars ($15,000,000), and equal to or less than Twenty-Two Million Dollars ($22,000,000), two (2) percentage points above the Reference Rate;

(iii) if the sum of outstanding Advances, outstanding Letters of Credit, and L/C Guarantees, exceeds Twenty-Two Million Dollars ($22,000,000), three (3) percentage points above the Reference Rate.

(b) Letter of Credit Fee. Borrower shall pay Foothill a fee, payable monthly, (in addition to the charges, commissions, fees, and costs set forth in Section 2.2(d)) equal to the amount set forth below:

(i) if the sum of outstanding Advances, outstanding Letters of Credit, and L/C Guarantees, is less than Fifteen Million Dollars ($15,000,000), two (2) percent per annum times the daily balance of outstanding Letters of Credit;

(ii) if the sum of outstanding Advances, outstanding Letters of Credit, and L/C Guarantees, is between Fifteen Million Dollars ($15,000,000) and Twenty-Two Million Dollars ($22,000,000), two and one-quarter (2 1/4) percent per annum times the daily balance of outstanding Letters of Credit;

(iii) if the sum of outstanding Advances, outstanding Letters of Credit, and L/C Guarantees, exceeds Twenty-Two Million Dollars ($22,000,000), three and one-half (3 1/2) percent per annum times the daily balance of outstanding Letters of Credit.

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Such Letter of Credit fees shall continue to be owing and paid so long as any Letters of Credit remain outstanding (even after the termination or expiration of this Agreement), and even if Borrower cannot request the issuance of any additional Letters of Credit.

(c) Default Rate. Upon the occurrence and during the continuation of an Event of Default, (i) all Obligations (except for undrawn Letters of Credit) shall bear interest on the Daily Balance at a per annum rate equal to three (3)percentage points above the otherwise applicable rate, and (ii) the Letter of Credit fee provided in Section 2.4(b) shall be increased by three (3) percentage points above the fee otherwise payable.

(d) Minimum Interest. In no event shall the rate of interest chargeable hereunder for any day be less than eight and three-quarters percent (8 3/4%) per annum. To the extent that interest accrued hereunder at the rate set forth herein would be less than the foregoing minimum daily rate, the interest rate chargeable hereunder for such day automatically shall be deemed increased to the minimum rate.

(e) Payments. Interest and Letter of Credit fees payable hereunder shall be due and payable, in arrears, on the first day of each month during the term hereof. Borrower hereby authorizes Foothill, at its option, without prior notice to Borrower, to charge such interest and Letter of Credit fees, all Foothill Expenses (as and when incurred), the charges, commissions, fees, and costs provided for in Section 2.3(d) (as and when accrued or incurred), the fees and charges provided for in Section 2.10 (as and when accrued or incurred), and all installments or other payments due under any Loan Document to Borrower's Loan Account, which amounts thereafter shall accrue interest at the rate then applicable to Advances hereunder. Any interest not paid when due shall be compounded and shall thereafter accrue interest at the rate then applicable to Advances hereunder.

(f) Computation. The Reference Rate as of the date of this Agreement is nine and one half percent (9 1/2%) per annum. In the event the Reference Rate is changed from time to time hereafter, the applicable rate of interest hereunder automatically and immediately shall be increased or decreased by an amount equal to such change in the Reference Rate. All interest and fees chargeable under the Loan Documents shall be computed on the basis of a 360 day year for the actual number of days elapsed.

(g) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the interest rate or rates payable under this Agreement, plus any other amounts paid in connection herewith, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable. Borrower and Foothill, in executing and delivering this Agreement, intend legally

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to agree upon the rate or rates of interest and manner of payment stated within it; provided, however, that, anything contained herein to the contrary notwithstanding, if said rate or rates of interest or manner of payment exceeds the maximum allowable under applicable law, then, ipso facto as of the date of this Agreement, Borrower is and shall be liable only for the payment of such maximum as allowed by law, and payment received from Borrower in excess of such legal maximum, whenever received, shall be applied to reduce the principal balance of the Obligations to the extent of such excess.

2.6 Collection of Accounts. Borrower shall at all times maintain lockboxes (the "Lockboxes") and, immediately after the Closing Date, shall instruct all Account Debtors with respect to the Accounts, General Intangibles, and Negotiable Collateral of Borrower to remit all Collections in respect thereof to such Lockboxes. Borrower, Foothill, and the Lockbox Banks shall enter into the Lockbox Agreements, which among other things shall provide for the opening of a Lockbox Account for the deposit of Collections at a Lockbox Bank. Borrower agrees that all Collections and other amounts received by Borrower from any Account Debtor or any other source immediately upon receipt shall be deposited into a Lockbox Account. No Lockbox Agreement or arrangement contemplated thereby shall be modified by Borrower without the prior written consent of Foothill. Upon the terms and subject to the conditions set forth in the Lockbox Agreements, all amounts received in each Lockbox Account shall be wired each Business Day into an account (the "Foothill Account") maintained by Foothill at a depositary selected by Foothill. If there are no outstanding Receivables Advances, and the Collections received in the Lockbox Account were from sources other than RP Release Price(s), such amounts shall thereafter forthwith be deposited in the Designated Account.

2.7 Crediting Payments; Float Charge; Application of Collections. The receipt of any Collections by Foothill (whether from transfers to Foothill by the Lockbox Banks pursuant to the Lockbox Agreements or otherwise) immediately shall be applied provisionally to reduce the Obligations outstanding under Section 2.1, but shall not be considered a payment on account unless such Collection item is a wire transfer of immediately available federal funds and is made to the Foothill Account or unless and until such Collection item is honored when presented for payment. From and after the Closing Date, Foothill shall be entitled to charge Borrower for one (1) Business Day of `clearance' or `float' at the rate set forth in
Section 2.4(a) or (c), as applicable, on all Collections that are received by Foothill (regardless of whether forwarded by the Lockbox Banks to Foothill, whether provisionally applied to reduce the Obligations under
Section 2, or otherwise). This across-the-board one (1) Business Day clearance or float charge on all Collections is acknowledged by the parties to constitute an integral aspect of the pricing of Foothill's financing of

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Borrower, and shall apply irrespective of the characterization of whether receipts are owned by Borrower or Foothill, and whether or not there are any outstanding Advances, the effect of such clearance or float charge being the equivalent of charging one (1) Business Day of interest on such Collections. Should any Collection item not be honored when presented for payment, then Borrower shall be deemed not to have made such payment, and interest shall be recalculated accordingly. Anything to the contrary contained herein notwithstanding, any Collection item shall be deemed received by Foothill only if it is received into the Foothill Account on a Business Day on or before 11:00 a.m. California time. If any Collection item is received into the Foothill Account on a non-Business Day or after 11:00 a.m. California time on a Business Day, it shall be deemed to have been received by Foothill as of the opening of business on the immediately following Business Day.

2.8 Designated Account. Foothill is authorized to make the Advances and the Letters of Credit under this Agreement based upon telephonic or other instructions received from anyone purporting to be an Authorized Person, or without instructions if pursuant to Section 2.4(e). Borrower agrees to establish and maintain the Designated Account with the Designated Account Bank for the purpose of receiving the proceeds of the Advances requested by Borrower and made by Foothill hereunder. Unless otherwise agreed by Foothill and Borrower, any Advance requested by Borrower and made by Foothill hereunder shall be made to the Designated Account.

2.9 Maintenance of Loan Account; Statements of Obligations. Foothill shall maintain an account on its books in the name of Borrower (the "Loan Account") on which Borrower will be charged with all Advances made by Foothill to Borrower or for Borrower's account, including, accrued interest, Foothill Expenses, and any other payment Obligations of Borrower. In accordance with Section 2.6, the Loan Account will be credited with all payments received by Foothill from Borrower or for Borrower's account. Foothill shall render statements regarding the Loan Account to Borrower, including principal, interest, fees, and including an itemization of all charges and expenses constituting Foothill Expenses or any other charges owing, and such statements shall be conclusively presumed to be correct and accurate and constitute an account stated between Borrower and Foothill unless, within 30 days after receipt thereof by Borrower, Borrower shall deliver to Foothill written objection thereto describing the error or errors contained in any such statements.

2.10 Fees. Borrower shall pay to Foothill the following fees:

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(a) Closing Fee. On the Closing Date, a closing fee of Three Hundred Thousand Dollars ($300,000);

(b) Unused Line Fee. On the first day of each calendar quarter during the term of this Agreement, an unused line fee, payable in arrears, in an amount equal to three-eights of one percent (.375%) per annum times the Maximum Amount minus (i) the Average Undrawn Portion of the Letters of Credit; and (ii) the average Daily Balance of all outstanding Advances.

(c) Audit Appraisal and Valuation Charges. Audit appraisal, and valuation fees and charges as follows (i) a fee of $750 per day, per auditor, plus actual out-of-pocket expenses for each financial audit of Borrower performed by personnel employed by Foothill, (ii) an initial charge of $3,000 plus actual out-of-pocket expenses for expenses for the establishment of electronic collateral reporting systems, (iii) a monthly servicing fee of $3,000 (provided, however, such monthly servicing fee shall be increased to $5,000 per month if Borrower has not established a electronic reporting system in form and substance reasonably satisfactory to Foothill within six months of the Closing Date), and (iv) the actual charges paid or incurred by Foothill if it elects to employ the services of one or more third Persons to perform financial audits of Borrower, to appraise the Collateral, or any portion thereof, or to assess Borrower's business valuation.

3. CONDITIONS; TERM OF AGREEMENT.

3.1 Conditions Precedent to the Initial Advance and the Initial Letter of Credit. The obligation of Foothill to make the initial Advance or to issue the initial Letter of Credit is subject to the fulfillment, to the satisfaction of Foothill and its counsel, of each of the following conditions on or before the Closing Date:

(a) the Closing Date shall occur on or before December 15, 2000;

(b) Foothill shall have received a conformed copy of its filed financing statement;

(c) Foothill shall have received each of the following documents, duly executed, and each such document shall be in full force and effect:

(i) the Assignment of Claims;

(ii) the Assignment of Sub-Leases;

(iii) the Consent to Hypothecation of Lease;

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(iv) the Disbursement Letter;

(v) the Intellectual Property Security Agreement;

(vi) the Lockbox Agreements;

(vii) the Mortgages;

(viii) the Pay-Off Letter, together with UCC termination statements and other documentation evidencing the termination by Existing Lenders of their Liens in and to the properties and assets of Borrower; and

(ix) the Stock Pledge Agreement.

(d) Foothill shall have received a certificate from the Secretary of Borrower attesting to the resolutions of Borrower's Board of Directors authorizing its execution, delivery, and performance of this Agreement and the other Loan Documents to which Borrower is a party and authorizing specific officers of Borrower to execute the same;

(e) Foothill shall have received copies of Borrower's Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by the Secretary of Borrower;

(f) Foothill shall have received a certificate of status with respect to Borrower, dated within 10 days of the Closing Date, such certificate to be issued by the appropriate officer of the jurisdiction of organization of Borrower, which certificate shall indicate that Borrower is in good standing in such jurisdiction;

(g) Foothill shall have received certificates of status with respect to Borrower, each dated within 15 days of the Closing Date, such certificates to be issued by the appropriate officer of the jurisdictions in which its failure to be duly qualified or licensed would constitute a Material Adverse Change, which certificates shall indicate that Borrower is in good standing in such jurisdictions;

(h) Foothill shall have received a certificate of insurance, together with the endorsements thereto, as are required by Section 6.8, the form and substance of which shall be satisfactory to Foothill and its counsel;

(i) Foothill shall have received duly executed certificates of title with respect to that portion of the Collateral that is subject to certificates of title;

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(j) Foothill shall have received an opinion of Borrower's counsel in form and substance satisfactory to Foothill in its sole discretion;

(k) Foothill shall have received mortgagee title insurance policies (or marked commitments to issue the same) for the Real Property Collateral issued by a title insurance company satisfactory to Foothill ("Mortgage Policy") in amounts satisfactory to Foothill assuring Foothill that the Mortgages on the Real Property Collateral are valid and enforceable first priority mortgage Liens on the Real Property Collateral free and clear of all defects and encumbrances except Permitted Liens, and the Mortgage Policy shall otherwise be in form and substance reasonably satisfactory to Foothill;

(l) Foothill shall have received a Phase I report concerning the Real Property Collateral reasonably satisfactory to Foothill;

(m) intentionally deleted;

(n) Foothill shall have received satisfactory evidence that the outstanding convertible debentures of Borrower are subordinate in payment and priority to the Obligations;

(o) Foothill shall have completed its review of the litigation between Borrower and Lockheed Martin Corporation, and shall have approved of the same;

(p) Foothill shall have completed its review of the Sanmina manufacturing agreement, and shall have approved of the same;

(q) Foothill shall have received Borrower's fiscal 2001 projections, including availability projections, and shall have approved of the same;

(r) Foothill shall have received and reviewed key provisions of outstanding letters of credit, and shall have approved of the same; and

(s) all other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered, executed, or recorded and shall be in form and substance satisfactory to Foothill and its counsel.

3.2 Conditions Precedent to all Advances and all Letters of Credit. The following shall be conditions precedent to all Advances and all Letters of Credit hereunder:

(a) the representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the date of such extension of

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credit, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date);

(b) no Default or Event of Default shall have occurred and be continuing on the date of such extension of credit, nor shall either result from the making thereof;

(c) no injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the extending of such credit shall have been issued and remain in force by any governmental authority against Borrower, Foothill, or any of their Affiliates; and

(d) there shall not have occurred a Material Adverse Change.

3.3 Condition Subsequent. As a condition subsequent to initial closing hereunder, Borrower shall perform or cause to be performed the following (the failure by Borrower to so perform or cause to be performed constituting an Event of Default):

(a) within 30 days of the Closing Date, deliver to Foothill the certified copies of the policies of insurance, together with the endorsements thereto, as are required by Section 6.8, the form and substance of which shall be satisfactory to Foothill and its counsel;

(b) Intentionally Deleted;

(c) within thirty (30) days of the Closing Date, deliver to Foothill, in form and substance satisfactory to Foothill, Tenancy Statements executed by each of the sub-tenants of the Real Property Collateral; and

(d) within forty-five (45) days of the Closing Date, Foothill shall have received searches reflecting the filing of its financing statements.

3.4 Term. This Agreement shall become effective upon the execution and delivery hereof by Borrower and Foothill and shall continue in full force and effect for a term ending on the date that is two (2) years from the Closing Date. The foregoing notwithstanding, Foothill shall have the right to terminate its obligations under this Agreement immediately and without notice upon the occurrence and during the continuation of an Event of Default.

3.5 Effect of Termination. On the date of termination of this Agreement, all Obligations (including contingent reimbursement obligations of Borrower with respect to any outstanding Letters of Credit) immediately shall become due and payable without notice or demand. No termination of

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this Agreement, however, shall relieve or discharge Borrower of Borrower's duties, Obligations, or covenants hereunder, and Foothill's continuing security interests in the Collateral shall remain in effect until all Obligations have been fully and finally discharged and Foothill's obligation to provide additional credit hereunder is terminated.

3.6 Early Termination or Paydown by Borrower.

(a) Borrower has the option, at any time upon 90 days prior written notice to Foothill, to terminate this Agreement by paying to Foothill, in cash, the Obligations (including an amount equal to 105% of the undrawn amount of the Letters of Credit), together with a premium (the "Early Paydown Premium") equal to one percent (1%) of the Maximum Amount for each full year and portion of a full year remaining in the original term hereof. The foregoing notwithstanding: (i) should Borrower elect to terminate this Agreement with replacement financing from Wells Fargo, and (ii) such replacement financing occurs after the first annual anniversary of the Closing Date; then no Early Paydown Premium shall be owing.

(b) The Early Paydown Premium shall be due and owing should Borrower reduce the Obligations reflected on the Loan Account with any borrowed money or money generated in whole or in part from additional capitalization, other than with money borrowed from Wells Fargo, as noted immediately above.

3.7 Termination Upon Event of Default. If Borrower shall default in the payment of any sums due pursuant to this Agreement, or in the performance of any of the terms and conditions contained herein, such default shall be, and be deemed to be, an attempt by Borrower to avoid the Early Paydown Premium, and consequently, upon such default Foothill shall be entitled to collect such Early Paydown Premium from Borrower with the same effect as if Borrower had voluntarily elected to prepay the Obligations. Borrower and Foothill agree that in view of the impracticability and extreme difficulty of ascertaining actual damages, the Early Paydown Premium is a reasonable calculation of Foothill's lost profits as a result thereof. The Early Paydown Premium shall be presumed to be the amount of damages sustained by Foothill as the result of the early termination and Borrower agrees that it is reasonable under the circumstances currently existing. The Early Paydown Premium provided for in this Section 3.7 shall be deemed included in the Obligations.

4. CREATION OF SECURITY INTEREST.

4.1 Grant of Security Interest. Borrower hereby grants to Foothill a continuing security interest in all of Borrower's interest in all currently existing and hereafter acquired or arising Personal Property Collateral in order to secure prompt repayment of any and all Obligations and in order to

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secure prompt performance by Borrower of each of its covenants and duties under the Loan Documents. Foothill's security interests in the Personal Property Collateral shall attach to all Personal Property Collateral without further act on the part of Foothill or Borrower. Anything contained in this Agreement or any other Loan Document to the contrary notwithstanding, except for the sale of Inventory to buyers in the ordinary course of business, Borrower shall not dispose of any item or portion of the Personal Property Collateral or the Real Property Collateral.

4.2 Negotiable Collateral. In the event that any Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral, Borrower, immediately upon the request of Foothill, shall endorse and deliver physical possession of such Negotiable Collateral to Foothill.

4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral. At any time after the occurrence of an Event of Default, Foothill or Foothill's designee may (a) notify customers or Account Debtors of Borrower that the Accounts, General Intangibles, or Negotiable Collateral have been assigned to Foothill or that Foothill has a security interest therein, and (b) collect the Accounts, General Intangibles, and Negotiable Collateral directly and charge the collection costs and expenses to the Loan Account. Borrower agrees that it will hold in trust for Foothill, as Foothill's trustee, any Collections that it receives and immediately will deliver said Collections to Foothill in their original form as received by Borrower.

4.4 Delivery of Additional Documentation Required. At any time upon the request of Foothill, Borrower shall execute and deliver to Foothill all financing statements, continuation financing statements, fixture filings, security agreements, pledges, assignments, control agreements, endorsements of certificates of title, applications for title, affidavits, reports, notices, schedules of accounts, letters of authority, and all other documents that Foothill reasonably may request, in form reasonably satisfactory to Foothill, to perfect and continue perfected Foothill's security interests in the Collateral, and in order to fully consummate all of the transactions contemplated hereby and under the other the Loan Documents.

4.5 Power of Attorney. Borrower hereby irrevocably makes, constitutes, and appoints Foothill (and any of Foothill's officers, employees, or agents designated by Foothill) as Borrower's true and lawful attorney, with power to (a) if Borrower refuses to, or fails timely to execute and deliver any of the documents described in Section 4.4, sign the name of Borrower on any of the documents described in Section 4.4, (b) at any time that an Event of Default has occurred and is continuing, sign Borrower's name on any invoice or bill of lading relating to any Account, drafts against Account Debtors,

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schedules and assignments of Accounts, verifications of Accounts, and notices to Account Debtors, (c) send requests for verification of Accounts,
(d) endorse Borrower's name on any Collection item that may come into Foothill's possession, (e) at any time that an Event of Default has occurred and is continuing, notify the post office authorities to change the address for delivery of Borrower's mail to an address designated by Foothill, to receive and open all mail addressed to Borrower, and to retain all mail relating to the Collateral and forward all other mail to Borrower,
(f) at any time that an Event of Default has occurred and is continuing, make, settle, and adjust all claims under Borrower's policies of insurance and make all determinations and decisions with respect to such policies of insurance, and (g) at any time that an Event of Default has occurred and is continuing, settle and adjust disputes and claims respecting the Accounts directly with Account Debtors, for amounts and upon terms that Foothill determines to be reasonable, and Foothill may cause to be executed and delivered any documents and releases that Foothill determines to be necessary. The appointment of Foothill as Borrower's attorney, and each and every one of Foothill's rights and powers, being coupled with an interest, is irrevocable until all of the Obligations have been fully and finally repaid and performed and Foothill's obligation to extend credit hereunder is terminated.

4.6 Right to Inspect. Foothill (through any of its officers, employees, or agents) shall have the right, from time to time hereafter during normal business hours to inspect Borrower's Books and to check, test, and appraise the Collateral, in accordance with the requirements of Governmental Authorities, if any, in order to verify Borrower's financial condition or the amount, quality, value, condition of, or any other matter relating to, the Collateral.

4.7 Control Agreements. Upon the request of Foothill, Borrower agrees that it will enter into one or more Control Agreements. Borrower further agrees that it will not thereafter transfer assets out of any Securities Accounts other than as permitted under Section 7.19 and, if to another securities intermediary, unless each of Borrower, Lender, and the substitute securities intermediary have entered into a Control Agreement. No arrangement contemplated hereby or by any Control Agreement in respect of any Securities Accounts or other Investment Property shall be modified by Borrower without the prior written consent of Lender. Upon the occurrence and during the continuance of an Event of Default, Lender may notify any securities intermediary to liquidate the applicable Securities Account or any related Investment Property maintained or held thereby and remit the proceeds thereof to the Lender's Account.

5. REPRESENTATIONS AND WARRANTIES.

In order to induce Foothill to enter into this Agreement, Borrower makes the following representations and warranties which shall be true, correct, and

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complete in all material respects as of the date hereof, and shall be true, correct, and complete in all material respects as of the Closing Date, and at and as of the date of the making of each Advance and Letter of Credit made thereafter, as though made on and as of the date of such Advance or Letter of Credit (except to the extent that such representations and warranties relate solely to an earlier date) and such representations and warranties shall survive the execution and delivery of this Agreement:

5.1 No Encumbrances. Borrower has good and indefeasible title to the Collateral (excluding the IP Collateral, which is the subject of the representations set forth in the Intellectual Property Security Agreement), free and clear of Liens except for Permitted Liens.

5.2 Eligible Accounts. The Eligible Accounts are bona fide existing payment obligations of Account Debtors created by the sale and delivery of Inventory or the rendition of services to such Account Debtors in the ordinary course of Borrower's business, owed to Borrower without defenses, disputes, offsets, counterclaims, or rights of return or cancellation. As to each Eligible Account, such Account conforms to the requirements set forth in the definition of Eligible Accounts.

5.3 Location of Chief Executive Office; FEIN. The chief executive office of Borrower is located at the address indicated in the preamble to this Agreement and Borrower's FEIN is 87-0278175.

5.4 Due Organization and Qualification; Subsidiaries.

(a) Except as otherwise set forth on Schedule 5.4, Borrower is duly organized and existing and in good standing under the laws of the jurisdiction of its incorporation and qualified and licensed to do business in, and in good standing in, any state where the failure to be so licensed or qualified reasonably could be expected to cause a Material Adverse Change.

(b) Set forth on Schedule 5.4, is a complete and accurate list of Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of their incorporation; (ii) the number of shares of each class of common and preferred stock authorized for each of such Subsidiaries; and (iii) the number and the percentage of the outstanding shares of each such class owned directly or indirectly by Borrower. All of the outstanding capital stock of each such Subsidiary has been validly issued and is fully paid and non-assessable.

(c) Except as set forth on Schedule 5.4, no capital stock (or any securities, instruments, warrants, options, purchase rights, conversion or exchange rights, calls, commitments or claims of any character convertible into or exercisable for capital stock) of any

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direct or indirect Subsidiary of Borrower is subject to the issuance of any security, instrument, warrant, option, purchase right, conversion or exchange right, call, commitment or claim of any right, title, or interest therein or thereto.

5.5 Due Authorization; No Conflict.

(a) The execution, delivery, and performance by Borrower of this Agreement and the Loan Documents to which it is a party have been duly authorized by all necessary corporate action.

(b) The execution, delivery, and performance by Borrower of this Agreement and the Loan Documents to which it is a party do not and will not (i) violate any provision of federal, state, or local law or regulation (including Regulations G, T, U, and X of the Federal Reserve Board) applicable to Borrower, the Governing Documents of Borrower, or any order, judgment, or decree of any court or other Governmental Authority binding on Borrower, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation or material lease of Borrower, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of Borrower, other than Permitted Liens, or (iv) require any approval of stockholders or any approval or consent of any Person under any material contractual obligation of Borrower.

(c) Other than the filing of appropriate financing statements, fixture filings, and the Intellectual Property Security Agreement, the recording of the Mortgages, obtaining the Consent to Hypothecation of Lease and the Tenancy Statements, the execution of the control agreement in the Stock Pledge Agreement, and Borrower's 10-Q and 10-K filing with the Securities and Exchange Commission, the execution, delivery, and performance by Borrower of this Agreement and the Loan Documents to which Borrower is a party do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any federal, state, foreign, or other Governmental Authority or other Person, excluding any foreign filings that may be required to perfect security interests in Collateral outside the United States.

(d) This Agreement and the Loan Documents to which Borrower is a party, and all other documents contemplated hereby and thereby, when executed and delivered by Borrower will be the legally valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors' rights generally.

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(e) The Liens granted by Borrower to Foothill in and to its properties and assets pursuant to this Agreement and the other Loan Documents are validly created, perfected, and first priority Liens, subject only to Permitted Liens, on Collateral located in the United States.

5.6 Litigation. There are no actions or proceedings pending by or against Borrower before any court or administrative agency and Borrower does not have knowledge or belief of any pending, threatened, or imminent litigation, governmental investigations, or claims, complaints, actions, or prosecutions involving Borrower or any guarantor of the Obligations, except for: (a) ongoing collection matters in which Borrower is the plaintiff; (b) matters disclosed on Schedule 5.6; and (c) matters arising after the date hereof that, if decided adversely to Borrower, would not cause a Material Adverse Change.

5.7 No Material Adverse Change. All financial statements relating to Borrower or any guarantor of the Obligations that have been delivered by Borrower to Foothill have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and fairly present Borrower's (or such guarantor's, as applicable) financial condition as of the date thereof and Borrower's results of operations for the period then ended. There has not been a Material Adverse Change with respect to Borrower (or such guarantor, as applicable) since the date of the latest financial statements submitted to Foothill on or before the Closing Date.

5.8 Solvency. Borrower is Solvent. No transfer of property is being made by Borrower and no obligation is being incurred by Borrower in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of Borrower.

5.9 Employee Benefits. None of Borrower, any of its Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any Benefit Plan, other than those listed on Schedule 5.13. Borrower, each of its Subsidiaries and each ERISA Affiliate have satisfied the minimum funding standards of ERISA and the IRC with respect to each Benefit Plan to which it is obligated to contribute. To the best of Borrower's knowledge, no ERISA Event has occurred nor has any other event occurred that may result in an ERISA Event that reasonably could be expected to result in a Material Adverse Change. To the best of Borrower's knowledge, none of Borrower or its Subsidiaries, any ERISA Affiliate, or any fiduciary of any Plan is subject to any direct or indirect liability with respect to any Plan under any applicable law, treaty, rule, regulation, or agreement. None of

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Borrower or its Subsidiaries or any ERISA Affiliate is required to provide security to any Plan under Section 401(a)(29) of the IRC.

5.10 Environmental Condition.

(a) Borrower has not used Hazardous Materials at or affecting the Real Property in any manner which violates any Act governing the use, storage, treatment, transportation, manufacturing, refinement, handling, production, or disposal of Hazardous Materials, or that may make the owner of the Premises liable in tort under a common law public or private nuisance action.

(b) To the best of Borrower's knowledge, no prior or current owner, occupant or operator of the Real Property has used Hazardous Materials at or affecting the Real Property in any manner which violates any Act governing the use, storage, treatment, transportation, manufacturing, refinement, handling, production, or disposal of Hazardous Materials, or that may make the owner of the Premises liable in tort under a common law public or private nuisance action, other than as set forth in that certain "De Minimus" Letter dated August 16, 2000 from the State of Utah Department of Environment Quality, Division of Air Quality, to Borrower.

5.11 Compliance With The ADA.

(a) All of the Real Property is presently used as an administrative, office, manufacturing, or distribution facility and for other commercial purposes, and no portions of the Real Property are used as or for a "public accommodation," within the meaning of the ADA.

(b) To the best of Borrower's knowledge, Borrower has made all modifications or provided all accommodations which may be required to be made or provided by Borrower to the Real Property pursuant to the ADA in order to accommodate the needs and requirements of any disabled persons.

(c) Borrower has received no notice or complaint regarding any noncompliance with the ADA of any of the Real Property, and, to the best of Borrower's knowledge, there has been no threatened litigation alleging any such noncompliance by Borrower or the Real Property.

5.12 Compliance with Laws. Borrower has complied with the requirements of all Acts including the Fair Labor Standards Act and the ADA.

5.13 Registration of Copyrights. Borrower has registered all copyrights, or has such copyright applications pending, for all key software components and other key copyrightable works from which Eligible Accounts are generated.

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6. AFFIRMATIVE COVENANTS.

Borrower covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Borrower shall do all of the following:

6.1 Accounting System. Maintain a standard and modern system of accounting that enables Borrower to produce financial statements in accordance with GAAP, and maintain records pertaining to the Collateral that contain information as from time to time may be requested by Foothill. Borrower also shall keep a modern inventory reporting system that shows all additions, sales, claims, returns, and allowances with respect to the Inventory.

6.2 Collateral Reporting. Provide Foothill with the following documents at the following times in form satisfactory to Foothill: (a)on each Business Day, a sales journal, collection journal, and credit register since the last such schedule and a calculation of the Borrowing Base as of such date, (b) on a monthly basis and, in any event, by no later than the 10th day of each month during the term of this Agreement, (1) a detailed calculation of the Borrowing Base, and (2) a detailed aging, by total, of the Accounts, together with a reconciliation to the detailed calculation of the Borrowing Base previously provided to Foothill, (c) on a monthly basis and, in any event, by no later than the 10th day of each month during the term of this Agreement, (1) a summary aging, by vendor, of Borrower's accounts payable and any book overdraft, and (2) a report listing the status of all new or pending copyright registrations, (d) on each Business Day, notice of all returns, disputes, or claims, (e) upon request, copies of invoices in connection with the Accounts, customer statements, credit memos, remittance advices and reports, deposit slips, shipping and delivery documents in connection with the Accounts and for Inventory and Equipment acquired by Borrower, purchase orders and invoices, (f) on a quarterly basis, a detailed list of Borrower's customers, (g) on a monthly basis, a calculation of the Dilution for the prior month; (h) upon request, Borrower's electronic data, and (i) such other reports as to the Collateral or the financial condition of Borrower as Foothill may reasonably request from time to time.

6.3 Financial Statements, Reports, Certificates. Deliver to Foothill:
(a) as soon as available, but in any event within 45 days after the end of each month during each of Borrower's fiscal years, a company prepared balance sheet and income statement covering Borrower's operations during such period; (b) as soon as available, but in any event within 45 days after the end of each fiscal quarter during each of Borrower's fiscal years, a company prepared statement of cash flow covering Borrower's operations during such period; and (c) as soon as available, but in any event within 90 days after the end of each of Borrower's fiscal years,

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financial statements of Borrower for each such fiscal year, audited by nationally recognized independent certified public accountants and certified, without any qualifications, by such accountants to have been prepared in accordance with GAAP, together with a certificate of such accountants addressed to Foothill stating that such accountants do not have knowledge of the existence of any violation of the financial covenants set forth in Section 7.17 herein. Such audited financial statements shall include a balance sheet, profit and loss statement, and statement of cash flow and, if prepared, such accountants' letter to management. If Borrower is a parent company of one or more Subsidiaries or Affiliates, or is a Subsidiary or Affiliate of another company, then, in addition to the financial statements referred to above, Borrower agrees to deliver unaudited financial statements prepared on a consolidating basis so as to present Borrower and each such related entity separately, and on a consolidated basis.

Together with the above, Borrower also shall deliver to Foothill Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K Current Reports, and any other filings made by Borrower with the Securities and Exchange Commission, if any, as soon as the same are filed, or any other information that is provided by Borrower to its shareholders, and any other report reasonably requested by Foothill relating to the financial condition of Borrower.

Each month, together with the financial statements provided pursuant to Section 6.3(a), Borrower shall deliver to Foothill a Compliance Certificate in the form set forth on Exhibit C-1 signed by its chief financial officer or Vice President/Treasurer to the effect that: (i) all financial statements delivered or caused to be delivered to Foothill hereunder have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and fairly present the financial condition of Borrower, (ii) the representations and warranties of Borrower contained in this Agreement and the other Loan Documents are true and correct in all material respects on and as of the date of such certificate, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date), and
(iii)on the date of delivery of such certificate to Foothill there does not exist any condition or event that constitutes a Default or Event of Default (or, in the case of clauses (i), (ii), or (iii), to the extent of any non-compliance, describing such non-compliance as to which he or she may have knowledge and what action Borrower has taken, is taking, or proposes to take with respect thereto).

Each month, together with the financial statements provided pursuant to Section 6.3(a), that also is the date on which a financial covenant in
Section 7.17 is to be tested, Borrower shall deliver to Foothill a Compliance Certificate in the form set forth in Exhibit C-2 signed by its

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chief financial officer or Vice President/Treasurer to the effect that: (i) all financial statements delivered or caused to be delivered to Foothill hereunder have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and fairly present the financial condition of Borrower, (ii) the representations and warranties of Borrower contained in this Agreement and the other Loan Documents are true and correct in all material respects on and as of the date of such certificate, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date), (iii) Borrower is in compliance with the financial covenant in Section 7.17, and demonstrating in reasonable detail compliance at the end of such period with such financial covenant, and (iv) on the date of delivery of such certificate to Foothill there does not exist any condition or event that constitutes a Default or Event of Default (or, in the case of clauses (i),
(ii), or (iii), to the extent of any non-compliance, describing such non-compliance as to which he or she may have knowledge and what action Borrower has taken, is taking, or proposes to take with respect thereto).

6.4 Tax Returns. Deliver to Foothill copies of each of Borrower's future federal income tax returns, and any amendments thereto, within 30 days of the filing thereof with the Internal Revenue Service.

6.5 Returns. Cause returns and allowances, if any, as between Borrower and its Account Debtors to be on the same basis and in accordance with the usual customary practices of Borrower. If, at a time when no Event of Default has occurred and is continuing, any Account Debtor returns any Inventory to Borrower, Borrower promptly shall determine the reason for such return and, if Borrower accepts such return, issue a credit memorandum in the appropriate amount to such Account Debtor. If, at a time when an Event of Default has occurred and is continuing, any Account Debtor returns any Inventory to Borrower, Borrower promptly shall determine the reason for such return and, if Foothill consents (which consent shall not be unreasonably withheld and shall not be withheld if such credit memo is required by written agreement between Borrower and its Account Debtor), issue a credit memorandum in the appropriate amount to such Account Debtor.

6.6 Maintenance of Equipment. Maintain the Equipment in good operating condition and repair (ordinary wear and tear excepted), and make all necessary replacements thereto so that the value and operating efficiency thereof shall at all times be maintained and preserved. Other than those items of Equipment that constitute fixtures on the Closing Date, Borrower shall not permit any item of Equipment to become a fixture to real estate or an accession to other property, and such Equipment shall at all times remain personal property.

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6.7 Taxes. Cause all assessments and taxes, whether real, personal, or otherwise, due or payable by, or imposed, levied, or assessed against Borrower or any of its property to be paid in full, before delinquency or before the expiration of any extension period, except to the extent that the validity of such assessment or tax shall be the subject of a Permitted Protest. Borrower shall make due and timely payment or deposit of all such federal, state, and local taxes, assessments, or contributions required of it by law, and will execute and deliver to Foothill, on demand, appropriate certificates attesting to the payment thereof or deposit with respect thereto. Borrower will make timely payment or deposit of all tax payments and withholding taxes required of it by applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon request, furnish Foothill with proof reasonably satisfactory to Foothill indicating that Borrower has made such payments or deposits.

6.8 Insurance.

(a) At its expense, keep the Personal Property Collateral insured against loss or damage by fire, theft, explosion, sprinklers, and all other hazards and risks, and in such amounts, as are ordinarily insured against by other owners in similar businesses. Borrower also shall maintain business interruption, public liability, product liability, and property damage insurance relating to Borrower's ownership and use of the Personal Property Collateral, as well as insurance against larceny, embezzlement, and criminal misappropriation.

(b) At its expense, obtain and maintain (i) insurance of the type necessary to insure the Improvements and Chattels (as such terms is defined in the Mortgages), for the full replacement cost thereof, against any loss by fire, lightning, windstorm, hail, explosion, aircraft, smoke damage, vehicle damage, earthquakes, elevator collision, and other risks from time to time included under "extended coverage" policies, in such amounts as Foothill may require, but in any event in amounts sufficient to prevent Borrower from becoming a co-insurer under such polices, (ii) combined single limit bodily injury and property damages insurance against any loss, liability, or damages on, about, or relating to each parcel of Real Property, in an amount of not less than Two Million Dollars ($2,000,000); and (iii) such other risk as Foothill may require. Replacement costs, at Foothill's option, may be redetermined by an insurance appraiser, satisfactory to Foothill, not more frequently than once every twelve
(12) months at Borrower's cost.

(c) All insurance required herein shall be written by companies with a rating of Best's B+, VII, or better, which are authorized to do insurance business in the State of Utah. Such insurance shall be in form satisfactory to Foothill, shall with respect to hazard insurance and such other insurance as Foothill shall specify, name as the loss

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payee thereunder Borrower and Foothill, as their interests may appear, and shall contain a California Form 438BFU (NS) mortgagee endorsement, or its local equivalent. Every policy of insurance referred to in this
Section shall contain an agreement by the insurer that it will not cancel such policy except after thirty (30) days' prior written notice to Foothill and that any loss payable thereunder shall be payable notwithstanding any act or negligence of Borrower or Foothill which might, absent such agreement, result in a forfeiture of all or a part of such insurance payment and notwithstanding (i) occupancy or use of the Real Property for purposes more hazardous than permitted by the terms of such policy, (ii) any foreclosure or other action or proceeding taken by Foothill pursuant to the Mortgages upon the happening of an Event of Default, or (iii) any change in title or ownership of the Real Property.

(d) Original policies or certificates thereof satisfactory to Foothill evidencing such insurance shall be delivered to Foothill at least thirty (30) days prior to the expiration of the existing or preceding policies. Borrower shall give Foothill prompt notice of any loss covered by such insurance and Foothill shall have the right: (i) to adjust any loss following an Event of Default, or (ii) to adjust any loss in excess of One Hundred Thousand Dollars ($100,000). To the extent set forth in the immediately preceding sentence, Foothill shall have the exclusive right to adjust such losses payable under any such insurance policies without any liability to Borrower whatsoever in respect of such adjustments. Any monies received as payment for any loss under any insurance policy including, but not limited to, the insurance policies mentioned above, shall be paid over to Foothill to be applied at the option of Foothill either to the prepayment of the Obligations without premium, in such order or manner as Foothill may elect, or shall be disbursed to Borrower under stage payment terms satisfactory to Foothill for application to the cost of repairs, replacements or restorations. All restorations shall be effected with reasonable promptness and shall be of a value at least equal to the value of the items or property to destroyed prior to such damage or destruction. Upon the occurrence of an Event of Default, all prepaid premiums shall be the sole and absolute property of Foothill to be applied by Foothill to the payment of the Obligations in such order or form as Foothill shall determine.

(e) Borrower shall not take out separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 6.8, unless Foothill is included thereon as named insured with the loss payable to Foothill under a standard California 438BFU (NS) mortgagee endorsement, or its local equivalent. Borrower shall immediately notify Foothill whenever such separate insurance is taken out, specifying the insurer thereunder and full particulars as to the policies evidencing the same, and originals of such policies shall immediately thereafter be provided to Foothill.

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6.9 No Setoffs or Counterclaims. Make payments hereunder and under the other Loan Documents without setoff or counterclaim and free and clear of, and without deduction or withholding for or on account of, any federal, state, or local taxes.

6.10 Compliance with Laws. Comply with the requirements of all applicable Acts, including the Fair Labor Standards Act and the ADA, other than laws, rules, regulations, and orders the non-compliance with which, individually or in the aggregate, would not have and could not reasonably be expected to cause a Material Adverse Change.

6.11 Leases. Pay when due all rents and other amounts payable under any leases to which Borrower is a party or by which Borrower's properties and assets are bound, unless such payments are the subject of a Permitted Protest. To the extent that Borrower fails timely to make payment of such rents and other amounts payable when due under its leases, Foothill shall be entitled, in its Permitted Discretion, to reserve an amount equal to such unpaid amounts against the Borrowing Base.

6.12 Environmental Condition.

(a) Borrower shall keep or cause the Real Property to be kept free of Hazardous Materials, except those Hazardous Materials used in compliance with all applicable Acts and not cause or permit the Real Property to be used to generate, manufacture, refine, transport, treat, store, handle, dispose, produce, or process Hazardous Materials except in compliance with all applicable Acts.

(b) Borrower shall exercise all reasonable efforts to ensure compliance by all operators, and occupants of the Real Property with all applicable Acts and will ensure that all such operators and occupants obtain and comply with any and all required approvals, registrations, or permits.

(c) Upon the reasonable request of Foothill, Borrower shall conduct and complete all investigations, studies, samplings, and testings relative to Hazardous Materials at or affecting the Real Property, unless it is prohibited from doing so by reason of its written subleases with Borrower's sublessees. Upon the written request of Foothill from time to time, Borrower shall provide Foothill at Borrower's sole cost and expense and without any liability to Foothill, with an environmental site assessment or an environmental audit report, or an update of such assessment or report, by an environmental engineering firm reasonably acceptable to Foothill, all in scope, form, and content reasonably satisfactory to Foothill, to assess with a reasonable degree of certainty the presence or absence of Hazardous Materials and the potential cost in connection with the Remediation of any Hazardous Materials at or related to the Real

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Property. Upon demand of Foothill, and at Borrower's sole cost and expense, Borrower shall promptly take all actions to Remediate the Real Property which are required by any Governmental Authority, or which are reasonably necessary to mitigate a spill or a violation of any applicable Act. All such work shall be performed by one or more contractors selected by Borrower and approved in advance and in writing by Foothill, which such consent shall not be unreasonably withheld or delayed. Borrower shall proceed continuously and diligently with such investigatory and remedial actions, provided that in all cases, such actions shall be in accordance with all applicable requirements of all Acts. Any such actions shall be performed in a good, safe, and workmanlike manner and shall minimize any impact on the business or occupation at or near the Real Property. Borrower shall pay all costs in connection with such investigatory and remedial activities, including but not limited to, all power and utility costs, any and all taxes or fees that may be applicable to such activities. Borrower shall promptly provide to Foothill copies of testing results and reports that are generated in compliance with the above activities. Promptly upon completion of such investigation and Remediation, Borrower shall permanently seal or cap all monitoring wells and test holes to industrial standards and compliance with all applicable Acts, remove all associated equipment, and restore the Real Property to the condition existing prior to the commencement of Remediation, which shall include, without limitation, the repair of any surface damage, including paving caused by such investigation or Remediation hereunder. Within ten (10) days of demand therefor, Borrower shall provide Foothill with a bond, letter of credit, or similar financial insurance evidencing that the necessary funds are available for the obligations established by this subparagraph.

(d) The obligations of Borrower and the rights of Foothill with respect to Hazardous Materials are in addition to and not in substitution of the obligations of Borrower and the rights of Foothill under all applicable Acts. The obligations of Borrower and the rights of Foothill, notwithstanding anything contained herein or in any other document or agreement which may be construed to the contrary, (i) shall not be subject to any antideficiency laws or protections, if any, (ii) shall survive (y) a non-judicial sale, judicial sale or deed or other transaction in lieu of such sale hereunder, and (z) the repayment of the Obligations. In the event Borrower does not timely perform any of its obligations with respect to Hazardous Materials, Foothill may perform such obligations, but is not obligated to, at the expense of Borrower and such expense shall be added to the obligations and shall not cure Borrower's breach under this Agreement.

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6.13 Compliance With The ADA.

(a) Borrower shall promptly provide Foothill with copies of all notices or claims which may be received by Borrower and involving claims made by any individual, entity or governmental agency as to any alleged noncompliance of the Real Property with the requirements of the ADA.

(b) Borrower shall observe and comply in all material respects with all obligations and requirements of the ADA as it applies to the Real Property, which shall include, without limitation, installing or constructing all improvements or alterations which may be necessary to cause the Real Property to be accessible to all persons if the use of any of the Real Property or any part thereof becomes a "public accommodation," as defined in the ADA, or in the event additional building improvements are added or incorporated into the existing improvements, and making any reasonable accommodations which may be necessary to accommodate the needs or requirements of any existing or future employee of Borrower.

6.14 Location of Inventory and Equipment. Keep the Inventory and Equipment only at the locations identified on Schedule 6.14; provided, however, that Borrower may amend Schedule 6.14 so long as such amendment occurs by written notice to Foothill not less than 30 days prior to the date on which the Inventory or Equipment is moved to such new location, so long as such new location is within the continental United States, and so long as, at the time of such written notification, Borrower provides any financing statements or fixture filings necessary to perfect and continue perfected Foothill's security interests in such assets and also provides to Foothill a Collateral Access Agreement; the foregoing notwithstanding, Borrower may move Inventory and Equipment to locations outside the United States, provided that the fair market value of such Inventory and Equipment shall, in the aggregate, never exceed Ten Million Dollars ($10,000,000).

6.15 Disclosure Updates. Promptly and in no event later than 5 Business Days after obtaining knowledge thereof, (a) notify Foothill if any written information, exhibit, or report furnished to Foothill contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements contained therein not misleading in light of the circumstances in which made, and (b) correct any defect or error that may be discovered therein or in any Loan Document or in the execution, acknowledgment, filing, or recordation thereof.

6.16 Title to Equipment. Upon Foothill's reasonable request, Borrower immediately shall deliver to Foothill, properly endorsed, any and all evidences of ownership of, certificates of title, or applications for title to any items of Equipment.

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6.17 Registration of Copyrights. Borrower will continue processing copyright registrations for all key software components and other key copyrightable works from which Eligible Accounts are generated, and will cooperate with Foothill in obtaining perfected security interests in such items when the copyright registration is completed.

7. NEGATIVE COVENANTS.

Borrower covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Borrower will not do any of the following:

7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness, except:

(a) Indebtedness evidenced by this Agreement, together with Indebtedness to issuers of letters of credit that are the subject of L/C Guarantees;

(b) Indebtedness set forth in the latest financial statements of Borrower submitted to Foothill on or prior to the Closing Date;

(c) Indebtedness secured by Permitted Liens;

(d) refinancings, renewals, or extensions of Indebtedness permitted under clauses (b) and (c) of this Section 7.1 (and continuance or renewal of any Permitted Liens associated therewith) so long as: (i) the terms and conditions of such refinancings, renewals, or extensions do not materially impair the prospects of repayment of the Obligations by Borrower, (ii) the net cash proceeds of such refinancings, renewals, or extensions do not result in an increase in the aggregate principal amount of the Indebtedness so refinanced, renewed, or extended, (iii) such refinancings, renewals, refundings, or extensions do not result in a shortening of the average weighted maturity of the Indebtedness so refinanced, renewed, or extended, and
(iv) to the extent that Indebtedness that is refinanced was subordinated in right of payment to the Obligations, then the subordination terms and conditions of the refinancing Indebtedness must be at least as favorable to Foothill as those applicable to the refinanced Indebtedness;

(e) unsecured indebtedness which, in the aggregate, does not exceed Ten Million Dollars ($10,000,000); and

(f) capitalized leases as set forth on the financial statements delivered by Borrower to Foothill which, in the aggregate, do not exceed Two Million Two Hundred Thousand Dollars ($2,200,000).

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7.2 Liens. Create, incur, assume, or permit to exist, directly or indirectly, any Lien on or with respect to any of its property or assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for Permitted Liens (including Liens that are replacements of Permitted Liens to the extent that the original Indebtedness is refinanced under Section 7.1(d) and so long as the replacement Liens only encumber those assets or property that secured the original Indebtedness).

7.3 Restrictions on Fundamental Changes. Unless expressly permitted under Section 7.4, enter into any merger, consolidation, reorganization, or recapitalization, or reclassify its capital stock, or liquidate, wind up, or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of, in one transaction or a series of transactions, all or any substantial part of its property or assets.

7.4 Disposal of Assets.

(a) Sell, lease, assign, transfer, or otherwise dispose of any of Borrower's properties or assets: (i) other than the sale, lease, disposition, transfer, mortgage, hypothecation, or contribution of REALimage or Rapid Site; or (ii) other than sales of obsolete Inventory to buyers in the ordinary course of Borrower's business as currently conducted in an amount in excess of Five Million Dollars ($5,000,000) in any fiscal year; or (iii) sell Borrower's interest in that portion of the Real Property Collateral commonly known as 540 Arappen Drive for less than Two Million One Hundred Fifty Thousand Dollars ($2,150,000: such amount, a "RP Release Price"); or (iv) sell Borrower's interest in that portion of the Real Property Collateral commonly known as 580 Arappen Drive for less than Three Million Three Hundred Sixty-Eight Dollars ($3,368,000: such amount, a "RP Release Price"). The proceeds of all such sales shall constitute Collections.

(b) The foregoing provisions of Section 7.4(a) notwithstanding, Borrower may continue to grant non-exclusive licenses of the IP Collateral to third parties in the ordinary course of Borrower's business, as historically conducted, and can abandon or otherwise discontinue registrations on portions of the IP Collateral which Borrower, acting in good faith and in the exercise of its business judgment, believes prudent.

7.5 Change Name. Change Borrower's name, FEIN, corporate structure (within the meaning of Section 9402(7) of the Code), or identity, or add any new fictitious name.

7.6 Nature of Business. Unless expressly permitted under Section 7.4, make any material change in the principal nature of Borrower's business.

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7.7 Prepayments and Amendments.

(a) Except in connection with a refinancing permitted by Section 7.1(d), prepay, redeem, retire, defease, purchase, or otherwise acquire any Indebtedness owing to any third Person, other than the Obligations in accordance with this Agreement, and

(b) Directly or indirectly, materially amend, modify, alter, increase, or change any of the terms or conditions of any agreement, instrument, document, indenture, or other writing evidencing or concerning Indebtedness permitted under Sections 7.1(b), (c), or (d).

7.8 Change of Control. Cause, permit, or suffer, directly or indirectly, any Change of Control.

7.9 Distributions. Make any distribution, except as expressly permitted in Section 7.11, or declare or pay any dividends (in cash or other property, other than capital stock) on, or purchase, acquire, redeem, or retire any of Borrower's capital stock, of any class, whether now or hereafter outstanding. The foregoing notwithstanding, Borrower may make distributions or equity investments in Affiliates or joint ventures to which Borrower is a party, in an aggregate amount not to exceed Seven Million Dollars ($7,000,000) so long as Borrower has at least Five Million Dollars ($5,000,000) of availability pursuant to Section 2.2 at the time of such distribution or equity investment after giving effect to the distribution or equity investment.

7.10 Accounting Methods. Materially modify or change its method of accounting or enter into, modify, or terminate any material agreement currently existing, or at any time hereafter entered into with any third party accounting firm or service bureau for the preparation or storage of Borrower's accounting records without said accounting firm or service bureau agreeing to provide Foothill information regarding the Collateral or Borrower's financial condition.

7.11 Investments. Directly or indirectly make, acquire, or incur any liabilities (including contingent obligations) for or in connection with
(a) the acquisition of the securities (whether debt or equity) of, or other interests in, a Person, (b) loans, advances, capital contributions, or transfers of property to any Person that is not an Affiliate; provided, however, that Borrower may loan, or have outstanding at any time, Five Million Dollars ($5,000,000) to any Person that is not an Affiliate so long as Borrower has at least Five Million Dollars ($5,000,000) of availability pursuant to Section 2 at the time of such loan, advance, capital

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contribution or transfer of property after giving effect to the loan, advance, contribution or transfer, or (c) the acquisition of all or substantially all of the properties or assets of a Person.

7.12 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except for transactions that are in the ordinary course of Borrower's business, upon fair and reasonable terms, that are fully disclosed to Foothill, and that are no less favorable to Borrower than would be obtained in an arm's length transaction with a non-Affiliate.

7.13 Suspension. Suspend or go out of a substantial portion of its business.

7.14 Compensation. Intentionally Deleted.

7.15 Use of Proceeds. Use the proceeds of the Advances made hereunder for any purpose other than (a) on the Closing Date, (i) to repay in full the outstanding principal, accrued interest, and accrued fees and expenses owing to Existing Lenders, and (ii) to pay transactional costs and expenses incurred in connection with this Agreement, and (b) thereafter, consistent with the terms and conditions hereof, for its lawful and permitted corporate purposes.

7.16 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees. Relocate its chief executive office to a new location without providing 30 days prior written notification thereof to Foothill and so long as, at the time of such written notification, Borrower provides any financing statements or fixture filings necessary to perfect and continue perfected Foothill's security interests. The Inventory and Equipment shall not at any time now or hereafter be stored with a bailee, warehouseman, or similar party without Foothill's prior written consent.

7.17 Financial Covenants. Maintain Tangible Net Worth of at least the required amount set forth in the following table as of the applicable date set forth opposite thereto:

------------------------------- ----------------------------------------
      Applicable Amount                   Applicable Date
------------------------------- ----------------------------------------
         $80,000,000                         12/31/00
------------------------------- ----------------------------------------
         $74,000,000                          3/31/01
------------------------------- ----------------------------------------
         $71,500,000                          6/30/01
------------------------------- ----------------------------------------
         $74,000,000                          9/30/01
------------------------------- ----------------------------------------
         $80,000,000               12/31/01, and the last day of each
                                       fiscal quarter thereafter
------------------------------- ----------------------------------------

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7.18 Capital Expenditures. Make capital expenditures in any fiscal year in excess of Twelve Million Dollars ($12,000,000).

7.19 Securities Accounts. If one or more Control Agreements are required pursuant to Section 4.7, establish or maintain any Securities Account unless Lender shall have received a Control Agreement in respect of such Securities Account. Borrower shall not transfer assets out of any Securities Account; provided, however, that, so long as no Event of Default has occurred and is continuing or would result therefrom, Borrower may use such assets (and the proceeds thereof) to the extent not prohibited by this Agreement.

8. EVENTS OF DEFAULT.

Any one or more of the following events shall constitute an event of default (each, an "Event of Default") under this Agreement:

8.1 If Borrower fails to pay when due and payable or when declared due and payable, any portion of the Obligations (whether of principal, interest (including any interest which, but for the provisions of the Bankruptcy Code, would have accrued on such amounts), fees and charges due Foothill, reimbursement of Foothill Expenses, or other amounts constituting Obligations); provided, however, that if the fees, charges, or Foothill Expenses are not charged to Borrower's Loan Account because the posting of the same would cause the Obligations to exceed the Maximum Amount, it shall be an Event of Default if Borrower does not pay the same within five (5) days;

8.2 If Borrower fails or neglects to perform, keep, or observe any term, provision, condition, covenant, or agreement contained in this Agreement(unless expressly not a default under a Loan Document), in any of the Loan Documents, or in any other present or future agreement between Borrower and Foothill; provided, however, (i) that Borrower's failure or neglect to comply with Section 6.2 (Collateral Reporting) shall not constitute an Event of Default hereunder unless such failure or neglect continues for five (5) days or more, (ii) that Borrower's failure or neglect to comply with Section 6.3 (Financial Statements), Section 6.7 (Taxes), and Section 6.14 (Location of Inventory and Equipment) shall not constitute an Event of Default hereunder unless such failure or neglect continues for fifteen (15) days or more, and (iii) that Borrower's failure or neglect to comply with Section 6.1 (Accounting System), Section 6.4 (Tax Returns), Section 6.6 (Maintenance of Equipment) Section 6.11 (Leases),
Section 6.12 (Environmental Compliance), and Section 6.13 (ADA) shall not constitute an Event of Default hereunder unless such failure or neglect continues for thirty (30) days or more;

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8.3 If Borrower fails or neglects to perform, keep, or observe any term, provision, condition, or agreement contained in the Mortgages;

8.4 Intentionally Deleted;

8.5 If: (i) any portion of Borrower's properties or assets which constitutes Real Property Collateral is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any third Person, or (ii) any portion of Borrower's properties or assets which does not constitute Real Property Collateral is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any third Person the value of which exceeds Five Hundred Thousand Dollars ($500,000);

8.6 If an Insolvency Proceeding is commenced by Borrower;

8.7 If an Insolvency Proceeding is commenced against Borrower and any of the following events occur: (a) Borrower consents to the institution of the Insolvency Proceeding against it; (b) the petition commencing the Insolvency Proceeding is not timely controverted; (c) the petition commencing the Insolvency Proceeding is not dismissed within 60 calendar days of the date of the filing thereof; provided, however, that, during the pendency of such period, Foothill shall be relieved of its obligation to extend credit hereunder; (d) an interim trustee is appointed to take possession of all or a substantial portion of the properties or assets of, or to operate all or any substantial portion of the business of, Borrower; or (e) an order for relief shall have been issued or entered therein;

8.8 If Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs;

8.9 If a notice of Lien, levy, or assessment is filed of record with respect to any material portion of Borrower's properties or assets, or against any Collateral, by any Governmental Authority, or if any taxes or debts owing at any time hereafter to any one or more of such entities becomes a Lien, whether choate or otherwise, upon any of Borrower's properties or assets, and the same is not paid on the payment date thereof or bonded around, the form and substance of which is satisfactory to Foothill;

8.10 If: (i) a judgment or other claim becomes a Lien or encumbrance upon any of the Real Property Collateral, or (ii) a judgment or other claim in excess of Five Hundred Thousand Dollars ($500,000) becomes a Lien or encumbrance upon any material portion of Borrower's properties or assets, other than Real Property Collateral;

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8.11 If Borrower makes any payment on account of Indebtedness that has been contractually subordinated in right of payment to the payment of the Obligations, except to the extent such payment is permitted by the terms of the subordination provisions applicable to such Indebtedness; or

8.12 If any material misstatement or misrepresentation exists now or hereafter in any warranty, representation, statement, or report made to Foothill by Borrower or any officer, employee, agent, or director of Borrower, or if any such warranty or representation is withdrawn.

9. FOOTHILL'S RIGHTS AND REMEDIES.

9.1 Rights and Remedies. Upon the occurrence, and during the continuation, of an Event of Default Foothill may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by Borrower:

(a) Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable;

(b) Cease advancing money or extending credit to or for the benefit of Borrower under this Agreement, under any of the Loan Documents, or under any other agreement between Borrower and Foothill;

(c) Terminate this Agreement and any of the other Loan Documents as to any future liability or obligation of Foothill, but without affecting Foothill's rights and security interests in the Personal Property Collateral or the Real Property Collateral and without affecting the Obligations;

(d) Settle or adjust disputes and claims directly with Account Debtors for amounts and upon terms which are commercially reasonable under the circumstances, and in such cases, Foothill will credit Borrower's Loan Account with only the net amounts received by Foothill in payment of such disputed Accounts after deducting all Foothill Expenses actually incurred or expended in connection therewith;

(e) Without notice to or demand upon Borrower or any guarantor, make such payments and do such acts as Foothill considers necessary or reasonable to protect its security interests in the Collateral. Borrower agrees to assemble the Tangible Personal Property Collateral if Foothill so requires, and to make the Personal Property Collateral available to Foothill as Foothill may designate. Borrower authorizes Foothill to enter the premises where the Personal Property Collateral is located, to take and maintain possession of the Personal Property Collateral, or any part of it, and to pay, purchase, contest, or

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compromise any encumbrance, charge, or Lien that in Foothill's determination appears to conflict with its security interests and to pay all expenses incurred in connection therewith. With respect to any of Borrower's owned or leased premises, Borrower hereby grants Foothill a license (subject to superior rights of sublessees, if any) to enter into possession of such premises and to occupy the same, without charge, for up to 120 days in order to exercise any of Foothill's rights or remedies provided herein, at law, in equity, or otherwise;

(f) Without notice to Borrower (such notice being expressly waived), and without constituting a retention of any collateral in satisfaction of an obligation (within the meaning of Section 9505 of the Code), set off and apply to the Obligations any and all (i) balances and deposits of Borrower held by Foothill, or (ii) indebtedness at any time owing to or for the credit or the account of Borrower held by Foothill;

(g) Hold, as cash collateral, any and all balances and deposits of Borrower held by Foothill, and any amounts received in the Lockbox Accounts, to secure the full and final repayment of all of the Obligations;

(h) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Personal Property Collateral. Foothill is hereby granted a license or other right to use, without charge, Borrower's labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Personal Property Collateral, in completing production of, advertising for sale, and selling any Personal Property Collateral and Borrower's rights under all licenses and all franchise agreements shall inure to Foothill's benefit;

(i) Sell the Personal Property Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Borrower's premises) as Foothill determines is commercially reasonable. It is not necessary that the Personal Property Collateral be present at any such sale;

(j) Foothill shall give notice of the disposition of the Personal Property Collateral as follows:

(1) Foothill shall give Borrower and each holder of a security interest in the Personal Property Collateral who has filed with Foothill a written request for notice, a notice in writing of the time and place of public sale, or, if the sale is a private sale or some other disposition other than a public sale is to be made of the Personal Property Collateral, then the time on or after which the private sale or other disposition is to be made;

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(2) The notice shall be personally delivered or mailed, postage prepaid, to Borrower as provided in Section 12, at least 5 days before the date fixed for the sale, or at least 5 days before the date on or after which the private sale or other disposition is to be made; no notice needs to be given prior to the disposition of any portion of the Personal Property Collateral that is perishable or threatens to decline speedily in value or that is of a type customarily sold on a recognized market. Provided that it is disposed of in such a market. Notice to Persons other than Borrower claiming an interest in the Personal Property Collateral shall be sent to such addresses as they have furnished to Foothill;

(3) If the sale is to be a public sale, Foothill also shall give notice of the time and place by publishing a notice one time at least 5 days before the date of the sale in a newspaper of general circulation in the county in which the sale is to be held;

(k) Foothill may credit bid and purchase at any public sale; and

(l) Any deficiency that exists after disposition of the Personal Property Collateral as provided above will be paid immediately by Borrower. Any excess will be returned, without interest and subject to the rights of third Persons, by Foothill to Borrower.

(m) Exercise any rights and remedies with respect to the Real Property Collateral set forth in the Mortgages.

In the event that Foothill or its successor, whether by foreclosure, transfer in lieu of foreclosure, purchase at foreclosure or otherwise, acquires ownership rights in the IP Collateral, Foothill or such successor shall affirm, and not seek to repudiate or otherwise cancel or modify the rights of any licensee of the IP Collateral, other than as expressly provided in the document, agreement or instrument evidencing or governing such license.

9.2 Remedies Cumulative. Foothill's rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative. Foothill shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Foothill of one right or remedy shall be deemed an election, and no waiver by Foothill of any Event of Default shall be deemed a continuing waiver. No delay by Foothill shall constitute a waiver, election, or acquiescence by it.

9.3 Foreclosure Not A Discharge. Foreclosure shall not operate as a discharge to Borrower's Obligations to Foothill as to Hazardous Materials and the indemnity provisions in Section 11; and in the event Borrower

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tenders a deed in lieu of foreclosure for all or part of the Real Property, Borrower shall deliver such property to Foothill (or its designee) free of any and all Hazardous Materials which do not comply with applicable Acts. The indemnity provisions in Section 11 shall not be discharged or affected in any way by foreclosure or by Foothill's acceptance of a deed in lieu thereof.

10. TAXES AND EXPENSES REGARDING THE COLLATERAL.

If Borrower fails to pay any monies (whether taxes, assessments, insurance premiums, or, in the case of leased properties or assets, rents or other amounts payable under such leases) due to third Persons, or fails to make any deposits or furnish any required proof of payment or deposit, all as required under the terms of this Agreement, then, in its discretion and without prior notice to Borrower, Foothill may do any or all of the following: (a) make payment of the same or any part thereof; (b) set up such reserves in Borrower's Loan Account as Foothill deems necessary to protect Foothill from the exposure created by such failure; or (c) obtain and maintain insurance policies of the type described in
Section 6.8, and take any action with respect to such policies as Foothill deems prudent. Any such amounts paid by Foothill shall constitute Foothill Expenses. Any such payments made by Foothill shall not constitute an agreement by Foothill to make similar payments in the future or a waiver by Foothill of any Event of Default under this Agreement. Foothill need not inquire as to, or contest the validity of, any such expense, tax, or Lien and the receipt of the usual official notice for the payment thereof shall be conclusive evidence that the same was validly due and owing.

11. WAIVERS; INDEMNIFICATION.

11.1 Demand; Protest; etc. Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees at any time held by Foothill on which Borrower may in any way be liable.

11.2 Foothill's Liability for Collateral. So long as Foothill complies with its obligations, if any, under Section 9207 of the Code, Foothill shall not in any way or manner be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring or arising in any manner or fashion from any cause; (c) any diminution in the value thereof; or (d) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other Person. All risk of loss, damage, or destruction of the Collateral shall be borne by Borrower.

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11.3 Indemnification. Borrower shall pay, indemnify, defend, and hold Foothill, each Participant, and each of their respective officers, directors, employees, counsel, agents, and attorneys-in-fact (each, an "Indemnified Person") harmless (to the fullest extent permitted by law) from and against any and all: (a) obligations, demands, claims, and liabilities claimed or asserted by any other Person arising out of or relating to the transactions contemplated by this Agreement or any other Loan Document including, but not limited to, those claimed by any broker or finder, and (b) Losses, and (c) Losses (including attorneys' fees) suffered or incurred by any Indemnified Person, regardless of negligence, whether as a holder of security interests in Real Property, as mortgagee in possession, or as successor in interest to Borrower as owner of the Real Property by virtue of foreclosure or acceptance of a deed or other transaction in lieu of foreclosure, or after partial or total reconveyance of the mortgage, arising from, in respect of, as a consequence of (whether foreseeable or unforeseeable) or in connection with the use, storage, disposal, generation, transportation, spill, or treatment of any Hazardous Materials at or related to the Real Property whether or not originating or emanating from the Real Property (all of the foregoing, collectively, the "Indemnified Liabilities"). Borrower shall have no obligation to any Indemnified Person under this Section 11.3 with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of such Indemnified Person. This provision shall survive the termination of this Agreement.

12. NOTICES.

Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other Loan Document shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested), overnight courier, or telefacsimile to Borrower or to Foothill, as the case may be, at its address set forth below:

If to Borrower:         EVANS & SUTHERLAND COMPUTER CORPORATION
                        600 Komas Drive
                        Salt Lake City, Utah  84108
                        Attn:  Vice President/Treasurer
                        Fax No.  801.588.4510

with copies to:         SNELL & WILMER
                        15 West South Temple, Suite 1200
                        Salt Lake City, Utah  84101
                        Attn:  Brian Cunningham, Esq.
                        Fax No. 801.257.1800

                                  57

If to Foothill:         FOOTHILL CAPITAL CORPORATION
                        2450 Colorado Avenue
                        Suite 3000 West
                        Santa Monica, California 90404
                        Attn: Business Finance Division
                              Manager
                        Fax No. 310.453.7413

with copies to:         BUCHALTER, NEMER, FIELDS & YOUNGER
                        601 South Figueroa Street, Ste 2400
                        Los Angeles, California  90017
                        Attn:  Kevin M. Brandt, Esq.
                               Re:  F6415-0097
                        Fax No. 213.896.0400

The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other. All notices or demands sent in accordance with this Section 12, other than notices by Foothill in connection with Sections 9504 or 9505 of the Code, shall be deemed received on the earlier of the date of actual receipt or 3 days after the deposit thereof in the mail. Borrower acknowledges and agrees that notices sent by Foothill in connection with Sections 9504 or 9505 of the Code shall be deemed sent when deposited in the mail or personally delivered, or, where permitted by law, transmitted telefacsimile or other similar method set forth above.

13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13. BORROWER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT

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CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF BORROWER AND FOOTHILL REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

14. DESTRUCTION OF BORROWER'S DOCUMENTS.

All documents (excluding certificates of title or original invoices for which Borrower does not have a copy), schedules, invoices, agings, or other papers delivered to Foothill may be destroyed or otherwise disposed of by Foothill four months after they are delivered to or received by Foothill, unless Borrower requests, in writing, the return of said documents, schedules, or other papers and makes arrangements, at Borrower's expense, for their return.

15. GENERAL PROVISIONS.

15.1 Effectiveness. This Agreement shall be binding and deemed effective when executed by Borrower and Foothill.

15.2 Successors and Assigns. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, however, that Borrower may not assign this Agreement or any rights or duties hereunder without Foothill's prior written consent and any prohibited assignment shall be absolutely void. No consent to an assignment by Foothill shall release Borrower from its Obligations. Foothill may assign this Agreement and its rights and duties hereunder to another Person, with the prior consent of Borrower, which such consent shall not be unreasonably withheld or delayed. The foregoing notwithstanding, Foothill may assign this Agreement and its rights and duties hereunder as part of a bulk assignment along with other loans in Foothill's portfolio, and no consent or approval by Borrower is required in connection with any such assignment. Foothill reserves the right to sell, assign, transfer, negotiate, or grant participations in all or any part of, or any interest in Foothill's rights and benefits hereunder. In connection with any such assignment or participation, Foothill may disclose all documents and information which Foothill now or hereafter may have relating to Borrower or Borrower's business, provided such assignee or participant signs a non-disclosure agreement substantially in the form signed by Foothill. To the extent that Foothill assigns its rights and obligations hereunder to a third Person, Foothill thereafter shall be released from such assigned obligations to Borrower and such assignment shall effect a novation between Borrower and such third Person.

15.3 Section Headings. Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context,

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everything contained in each section applies equally to this entire Agreement.

15.4 Interpretation. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Foothill or Borrower, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto.

15.5 Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

15.6 Amendments in Writing. This Agreement can only be amended by a writing signed by both Foothill and Borrower.

15.7 Counterparts; Telefacsimile Execution. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed counterpart of this Agreement by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement.

15.8 Revival and Reinstatement of Obligations. If the incurrence or payment of the Obligations by Borrower or any guarantor of the Obligations or the transfer by either or both of such parties to Foothill of any property of either or both of such parties should for any reason subsequently be declared to be void or voidable under any state or federal law relating to creditors' rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, and other voidable or recoverable payments of money or transfers of property (collectively, a "Voidable Transfer"), and if Foothill is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that Foothill is required or elects to repay or restore, and as to all reasonable costs, expenses, and attorneys fees of Foothill related thereto, the liability of Borrower or such guarantor automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made.

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15.9 Lending Relationship. Nothing contained in the this Agreement or any of the other Loan Documents shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint venture, or any association between Borrower and Foothill, it being expressly understood and agreed that nothing contained in this Agreement or the other Loan Documents shall be deemed to create any relationship between Borrower and Foothill other than the relationship of borrower and lender.

15.10 Integration. This Agreement, together with the other Loan Documents, reflect the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in Los Angeles, California.

FOOTHILL CAPITAL CORPORATION,
a California corporation

By          /s/ Rhonda Foreman
   ----------------------------------------------
            Rhonda Foreman,
            Senior Vice President

EVANS & SUTHERLAND COMPUTER
CORPORATION, a Utah corporation

By          /s/ R. Gaynor
   ----------------------------------------------
            Richard J. Gaynor
            Vice President and
            Chief Financial Officer

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RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:

FOOTHILL CAPITAL CORPORATION
2450 Colorado Avenue
Suite 3000
Santa Monica, California 90404
Attn: Business Finance
Division Manager

THIS INSTRUMENT IS ALSO TO BE INCLUDED IN THE INDEX OF
FINANCING STATEMENTS AS A FIXTURE FILING IN ACCORDANCE
WITH THE UNIFORM COMMERCIAL CODE AND CROSS-INDEXED IN THE
REAL ESTATE MORTGAGE RECORDS

THIS DOCUMENT SECURES OBLIGATIONS WHICH CONTAIN
PROVISIONS FOR A VARIABLE RATE OF INTEREST

STATE OF UTAH               )
                            ) ss.
COUNTY OF SALT LAKE         )

LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT and FIXTURE FILING made as of this 14th day of December, 2000, between EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Grantor"), with its chief executive office located at 600 Komas Drive, Salt Lake City, Utah 84108, as grantor, and CHICAGO TITLE INSURANCE COMPANY, as trustee ("Trustee") and FOOTHILL CAPITAL CORPORATION, a California corporation, having an office at 2450 Colorado Avenue, Suite 3000 West, Santa Monica, California 90404, Attn: Business Finance Division Manager.

WITNESSETH

THIS LEASEHOLD DEED OF TRUST CONSTITUTES A FIXTURE FILING UNDER SECTIONS 9-313 AND 9-402 OF THE UNIFORM COMMERCIAL CODE OF THE STATE OF UTAH. TO THE EXTENT THE GOODS ARE FIXTURES UNDER THE LAWS OF THE STATE OF UTAH, THE FIXTURES ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY LOCATED IN THE COUNTY OF SALT LAKE, STATE OF UTAH, MORE PARTICULARLY DESCRIBED ON EXHIBIT A ATTACHED HERETO, COMMONLY KNOWN BY THE STREET ADDRESSES: 560 ARAPPEN DRIVE, 650 KOMAS DRIVE, 600 KOMAS DRIVE, 770 KOMAS DRIVE, AND 630 KOMAS DRIVE, SALT LAKE CITY. THE NAME OF THE RECORD OWNER OF THE REAL PROPERTY IS UNIVERSITY OF UTAH.

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FOR THE PURPOSE OF SECURING (a) the performance of all obligations and the payment of all indebtedness to be paid in accordance with the terms and with interest as set forth in that certain Loan and Security Agreement (hereinafter referred to as the "Loan Agreement"), of even date herewith, entered into between Grantor and Foothill Capital Corporation (Foothill Capital Corporation and any subsequent lender pursuant to the Loan Agreement being hereinafter referred to as "Beneficiary") and all modifications, extensions, renewals, or amendments and restatements thereof: should Foothill Capital Corporation and others enter into an amended and restated loan and security agreement, then the agent thereunder shall be the Beneficiary hereunder, (b) the payment and performance of all indebtedness and obligations of Grantor arising under this Deed of Trust and other documents executed by Grantor in connection herewith, and (c) payment of any money advanced by Beneficiary (and other lenders, if any) to Grantor, or its successors, with interest thereon, evidenced by a note or notes (indicating that they are so secured), executed by Grantor or its successors, Grantor has granted, mortgaged, bargained, sold, alienated, enfeoffed, released, conveyed and confirmed, and by these presents does grant, mortgage, bargain, sell, alienate, enfeoff, release, convey and confirm unto the Trustee, in trust, WITH POWER OF SALE, all its estate, right, title and interest in, to and under any and all of the property located in the City of Salt Lake City, County of Salt Lake, State of Utah, and more particularly described in Exhibit A attached hereto and made a part hereof, including all easements, rights, privileges, tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and all of the estate, right, title, interest, claim, demand, reversion or remainder whatsoever of Grantor therein or thereto, either at law or in equity, in possession or expectancy, now or hereafter acquired, including, without limitation, all and singular the ways, waters, water courses, water rights and powers, liberties, privileges, sewers, pipes, conduits, wires and other facilities furnishing utility or other services to the property (collectively, the "Land");

TOGETHER with all of the right, title and interest of Grantor in and to all buildings, structures and improvements now or hereafter erected on the Land including all plant equipment, apparatus, machinery and fixtures of every kind and nature whatsoever now or hereafter located on or forming part of said buildings, structures and improvements (collectively, the "Improvements"; the Land and Improvements being hereinafter collectively referred to as the "Premises");

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TOGETHER with all of the right, title and interest of Grantor in and to the land lying in the bed of any street, road, highway or avenue in front of or adjoining the Premises;

TOGETHER with any and all award and awards heretofore made or hereafter to be made by any governmental authorities to the present and all subsequent owners of the Premises which may be made with respect to the Premises as a result of the return of excess taxes paid on the Mortgaged Property, the exercise of the right of eminent domain, the alteration of the grade of any street or any other injury to or decrease of value of the Premises, which said award or awards are hereby assigned to Beneficiary and Beneficiary, at its option, is hereby authorized, directed and empowered to collect and receive the proceeds of any such award or awards from the authorities making the same and to give proper receipts and acquittances therefor, and to apply the same as hereinafter provided; and Grantor hereby covenants and agrees to and with Beneficiary, upon request by Beneficiary, to make, execute and deliver, at Grantor's expense, any and all assignments and other instruments sufficient for the purpose of assigning the aforesaid award or awards to Beneficiary free, clear and discharged of any and all encumbrances of any kind or nature whatsoever;

TOGETHER with all goods, equipment, machinery, furni ture, furnishings, fixtures, appliances, inventory, building materials, chattels and articles of personal property (other than personal property which is or at any time has become Hazardous Substances, as defined in the Loan Agreement), including any interest therein, now or at any time hereafter affixed to, attached to, or used in any way in connection with or to be incorporated at any time into the Premises, or placed on any part thereof but not attached or incorporated thereto, together with any and all replacements thereof, appertaining and adapted to the complete and compatible use, enjoyment, occupancy, operation or improvement of the Premises (collectively, the "Chattels");

TOGETHER with leases of the Premises or the Chattels or any part thereof now or hereafter entered into and all right, title and interest of Grantor thereunder, including, without limitation, cash or securities deposited thereunder to secure performance by the lessees of their obligations thereunder (whether such cash or securities are to be held until the expiration of the terms of such leases or applied to one or more of the installments of rent coming due immediately prior to the expiration of such terms) and all rights to all insurance proceeds and unearned premiums arising from or relating to the Premises and all other rights and easements of Grantor now or hereafter existing pertaining to the use and enjoyment of the Premises and all right, title and interest of Grantor in and to

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all declarations of covenants, conditions and restrictions as may affect or otherwise relate to the Premises and all of Grantor's right, title and interest in and to the lease and any and all options to purchase, rights of first offer and rights of first refusal, whether contained in the lease or elsewhere (the "Lease") more particularly described in Exhibit A attached hereto including, without limitation, the right to surrender, terminate, cancel, waive, change, supplement, grant subleases of, alter or amend the Lease;

TOGETHER with all sales agreements, deposit receipts, escrow agreements and other ancillary documents and agreements entered into with respect to the sale to any purchasers of any part of the Premises, and all deposits and other proceeds thereof;

TOGETHER with all permits, plans, licenses, specifica tions, subdivision rights, tentative tract maps, final tract maps, security interests, contracts, contract rights or other rights as may affect or otherwise relate to the Premises;

TOGETHER with all rights of Grantor in or to any fund, program or trust monies and any reimbursement therefrom directly or indirectly established, maintained or administered by any governmental authority or any other individual or entity which is designed to or has the effect of providing funds (whether directly or indirectly or as reimbursement) for the repair or replacement of storage tanks (whether above or below ground) located on the Premises or the remediation or cleanup of any spill, leakage or contamination from any such tank or resulting from the ownership, use or maintenance of any such tank or to compensate third parties for any personal injury or property damage;

TOGETHER with all rents, issues, profits, revenues, income and other benefits to which Grantor may now or hereafter be entitled from the Premises or the Chattels (which Premises, titles, interests, awards, Chattels, easements, rents, income, benefits, ways, waters, rights, powers, liberties, privileges, utilities, tenements, hereditaments, appurtenances, reversions, remainders, rents, issues, profits, estate, property, possession, claims and demands, are hereinafter collectively referred to as the "Mortgaged Property");

TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee, its successors and assigns forever.

THE OBLIGATIONS SECURED HEREBY SHALL NOT EXCEED AN AGGREGATE PRINCIPAL AMOUNT, AT ANY ONE TIME OUTSTANDING OF SIXTY MILLION AND NO/100 DOLLARS ($60,000,000), PROVIDED, THAT THE

4

FOREGOING LIMITATION SHALL APPLY ONLY TO THE LIEN UPON THE REAL PROPERTY CREATED BY THIS DEED OF TRUST, AND IT SHALL NOT IN ANY MANNER LIMIT, AFFECT OR IMPAIR ANY GRANT OF A SECURITY INTEREST OR OTHER RIGHT IN FAVOR OF THE BENEFICIARY UNDER THE PROVISIONS OF THE LOAN AGREEMENT OR UNDER ANY OTHER SECURITY AGREEMENT AT ANY TIME EXECUTED BY GRANTOR.

ARTICLE I

And Grantor further covenants with the Trustee and Beneficiary as follows:

SECTION 1.01 . Grantor has good and marketable title to an indefeasible leasehold estate in the Premises subject to no lien, charge, or encumbrance except such as are approved by Beneficiary; that it owns the Chattels free and clear of liens and claims, except for Permitted Liens; that this Deed of Trust is and will remain a valid and enforceable first and prior lien on the Mortgaged Property subject only to the exceptions referred to above. Grantor will forever preserve, warrant and defend the same unto the Trustee and Beneficiary, and will forever preserve, warrant and defend the validity and priority of the lien hereof against the claims of all persons and parties whomsoever. Grantor has not, and will not, surrender, terminate, cancel, waive, accept waiver, change, supplement, grant subleases of, alter, surrender or amend, and will comply with all of the terms, covenants and conditions contained in, the Lease.

SECTION 1.02 . Intentionally Deleted.

SECTION 1.03 . Intentionally Deleted.

SECTION 1.04 . Intentionally Deleted.

SECTION 1.05 . All right, title and interest of Grantor in and to all extensions, improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the Mortgaged Property, hereafter acquired

5

by, or released to, or constructed, assembled or placed by Grantor on the Premises, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further grant, conveyance, assignment or other act by Grantor, shall become subject to the first and prior lien and security interest of this Deed of Trust as fully and completely, and with the same effect, as though now owned by Grantor and specifically described in the granting clause hereof.

SECTION 1.06 . Grantor, from time to time when the same shall become due, will pay and discharge, or cause to be paid and discharged, all payments required under the Lease. Grantor will, upon the request of Beneficiary, deliver to Beneficiary receipts evidencing the payment, before any penalties accrued thereon, of all such lease payments.

(a) Grantor will pay from time to time when the same shall become due, all lawful claims and demands of mechanics, materialmen, laborers, and others which, if unpaid, might result in, or permit the creation of, a lien on the Mortgaged Property or any part thereof, or on the revenues, rents, issues, income and profits arising therefrom and in general will do or cause to be done everything necessary so that the lien and security interest hereof shall be fully preserved, at the cost of Grantor, without expense to Beneficiary.

SECTION 1.07 . In the event of the passage, after the date of this Deed of Trust, of any law of the State of Utah deducting from the value of the Mortgaged Property for the purpose of taxing the amount of any lien thereon, or changing in any way the laws now in force for the taxation of deeds of trust, or debts secured thereby, for state or local purposes, or the manner of operation of any such

6

taxes so as to adversely affect the interest of Beneficiary, then and in such event, Grantor shall bear and pay the full amount of such taxes, provided that if for any reason payment by Grantor of any such new or additional taxes would be unlawful or if the payment thereof would constitute usury or render the Loan Agreement or the indebtedness secured hereby wholly or partially usurious under any of the terms or provisions of the Loan Agreement, or this Deed of Trust, or otherwise, Beneficiary may, at its option, upon thirty (30) days' written notice to Grantor, (i) declare the whole indebtedness secured by this Deed of Trust, with interest thereon, to be immediately due and payable, or (ii) pay that amount or portion of such taxes as renders the Loan Agreement, or the indebtedness secured hereby unlawful or usurious, in which event Grantor shall concurrently therewith pay the remaining lawful non-usurious portion or balance of said taxes.

SECTION 1.08 . In addition to restrictions contained in the Loan Agreement, Grantor will not further encumber, sell, convey or transfer any interest in, or any part of, the Mortgaged Property. Any such encumbrance, sale, conveyance or transfer made without Beneficiary's prior written consent shall be an Event of Default hereunder.

SECTION 1.09 . Intentionally Deleted.

SECTION 1.10 . Intentionally Deleted.

SECTION 1.11 . If Grantor shall fail to perform any of the covenants contained herein or in the Lease on its part to be performed, Beneficiary may, but shall not be required to, make advances to perform the same, or cause the same to be performed, on Grantor's behalf, and all sums so advanced shall bear interest, from and after the date advanced until

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repaid, at the lower of (i) the maximum rate permitted by law or (ii) the default rate set forth in the Loan Agreement, shall be a lien upon the Mortgaged Property and shall, at Beneficiary's option, be added to the indebtedness secured hereby. Grantor will repay on demand all sums so advanced on its behalf with interest at the rate herein set forth. This Section 1.11 shall not be construed as preventing any default by Grantor in the observance of any covenant contained in this Deed of Trust from constituting an Event of Default hereunder.

SECTION 1.12 . Grantor will not commit any waste at or with respect to the Mortgaged Property nor will Grantor do or fail to do anything which will in any way increase the risk of fire or other hazard to the Premises, Improvements or Chattels or to any part thereof.

SECTION 1.13 . Grantor will immediately notify Beneficiary of the institution of any proceeding for the condemnation or taking by eminent domain of the Mortgaged Property, or any portion thereof. The Trustee and Beneficiary may participate in any such proceeding and Grantor from time to time will deliver to Beneficiary all instruments requested by it to permit such participation. In the event of such condemnation proceedings, or a conveyance in lieu of such taking, the award or compensation payable is hereby assigned to and shall be paid to Beneficiary. Beneficiary shall be under no obligation to question the amount of any such award or compensation and may accept the same in the amount in which the same shall be paid, but shall have no right to bind Grantor or to make settlement of its claim, except to the extent of the interest of the Trustee and Beneficiary. In any such condemnation proceedings the Trustee and Beneficiary may be represented by

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counsel selected by Beneficiary. The proceeds of any award or compensation so received after reimbursement of any expenses incurred by Beneficiary in connection with such proceedings, shall, at the option of Beneficiary, be applied, without premium, to the repayment of the sums due under the Loan Agreement in such order as Beneficiary may in its sole discretion elect (regardless of interest payable on the award by the condemning authority), or to the cost of restoration of the Improvement or Chattel so taken and other terms as shall be satisfactory to Beneficiary.

SECTION 1.14 . The assignment of rents, income and other benefits (collectively, "rents") contained in the granting clause of this Deed of Trust shall be fully operative without any further action on the part of Grantor or Beneficiary and specifically Beneficiary shall be entitled, at its option, to all rents from the Mortgaged Property whether or not Beneficiary takes possession of the Mortgaged Property. Grantor hereby further grants to Beneficiary the right (i) to enter upon and take possession of the Mortgaged Property for the purpose of collecting the rents, (ii) to dispossess by the usual summary proceedings any tenant defaulting in the payment thereof to Beneficiary, (iii) to let the Mortgaged Property or any part thereof, and (iv) to apply the rents, after payment of all necessary charges and expenses, on account of the indebtedness and other sums secured hereby. Such assignment and grant shall continue in effect until the indebtedness and other sums secured hereby are paid, the execution of this Deed of Trust constituting and evidencing the irrevocable consent of Grantor to the entry upon and taking possession of the Mortgaged Property by Beneficiary pursuant to such grant, whether or not sale or foreclosure has

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been instituted. Neither the exercise of any rights under this Section by Beneficiary nor the application of the rents to the indebtedness and other sums secured hereby, shall cure or waive any Event of Default, or notice of default hereunder or invalidate any act done pursuant hereto, but shall be cumulative of all other rights and remedies.

The foregoing provisions hereof shall constitute an absolute and present assignment of the rents from the Mortgaged Property, subject, however, to the conditional permission given to Grantor to collect and use the rents until the occurrence of an Event of Default at which time such conditional permission shall automatically terminate; and the existence or exercise of such right of Grantor shall not operate to subordinate this assignment, in whole or in part, to any subsequent assignment by Grantor permitted under the provisions of this Deed of Trust, and any such subsequent assignment by Grantor shall be subject to the rights of the Trustee and Beneficiary hereunder.

SECTION 1.15 . Grantor will not (i) execute an assignment of the rents or any part thereof from the Mortgaged Property unless such assignment shall provide that it is subject and subordinate to the assignment contained in this Deed of Trust, and any additional or subsequent assignment executed pursuant hereto, or (ii) except where the lessee is in default thereunder, terminate or consent to the cancellation or surrender of any lease of the Mortgaged Property or of any part thereof, now existing or hereafter to be made or (iii) modify any such lease or give consent to any assignment or subletting without Beneficiary's prior written consent, or (iv) accept prepayments of any installments of rent or additional rent to become due under such leases, except prepayments in the nature of security for the performance of the lessee's obligations thereunder, or (v) in any other manner impair the value of the Mortgaged Property or the security of the Trustee or Beneficiary for the payment of the indebtedness secured hereby, or (vi) enter into any lease

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prohibited under the provisions of the Loan Agreement.

(a) Grantor will not execute any lease of all or a substantial portion of the Mortgaged Property except for actual occupancy by the lessee thereunder, and will at all times promptly and faithfully perform, or cause to be performed, all of the covenants, conditions and agreements contained in all leases of the Mortgaged Property now or hereafter existing, on the part of the lessor thereunder to be kept and performed. If any such lease provides for the giving by the lessee of certificates with respect to the status of such leases, Grantor shall exercise its right to request such certificates within five (5) days of any demand therefor by Beneficiary.

(b) Grantor shall furnish to Beneficiary, within fifteen (15) days after a request by Beneficiary to do so, a written statement containing the names of all lessees for the Mortgaged Property, the terms of their respective leases, the spaces occupied, the rentals paid and any security therefor.

(c) Grantor shall, from time to time upon request of Beneficiary, specifically assign to Beneficiary as additional security hereunder, by an instrument in writing in such form as may be approved by Beneficiary, all right, title and interest of Grantor in and to any and all leases now or hereafter on or affecting the Mortgaged Property, together with all security therefor and all monies payable thereunder, subject to the conditional permission hereinabove given to Grantor to collect the rentals under any such lease. Grantor shall also execute and deliver to Beneficiary any notification, financing statement or other document reasonably required by Beneficiary to perfect the foregoing assignment as to any such lease.

SECTION 1.16 . Each lease of the Mortgaged Property or of any part thereof entered into after the date hereof shall provide that, in the event of the enforcement by the Trustee or Beneficiary of the remedies provided for by law or by this Deed of Trust, any person succeeding to

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the interest of Grantor as a result of such enforcement shall not be bound by any payment of rent or additional rent for more than one (1) month in advance, provided, however, that nothing herein set forth shall affect or impair the rights of Beneficiary to terminate any one or more of such leases in connection with the exercise of its or the Trustee's remedies hereunder.

SECTION 1.17 . (a) With respect to the Lease, Grantor hereby warrants and represents as follows: (i) the Lease is in full force and effect, unmodified by any writing or otherwise, except as specifically set forth in Exhibit A; (ii) all rent, additional rent and other charges reserved herein have been paid to the extent they are payable to the date hereof; (iii) Grantor enjoys the quiet and peaceful possession of the property demised thereby; (vi) Grantor is not in default under any of the terms thereof and, to the best of its knowledge, there are no circumstances which, with the passage of time or the giving of notice or both, would constitute a default thereunder; and (v) to the best of Grantor's knowledge the landlord under the Lease is not in default under any of the terms or provisions thereof on the part of the landlord to be observed or performed;

(b) Further, with respect to the Lease, Grantor covenants and agrees as follows: (i) to promptly and faithfully observe, perform and comply with all the terms, covenants and provisions thereof on Grantor's part to be observed, performed and complied with, at the times set forth therein, without any allowance for grace period, if any; (ii) not to do, permit, suffer or refrain from doing anything, as a result of which, there could be a default under or breach of any of the terms thereof; (iii) not to cancel, surrender, modify, amend or in any way alter or permit the alternation of any of the terms thereof; (iv) to give Beneficiary immediate notice of any default by anyone thereunder and to promptly deliver to Beneficiary copies of each notice of default and all other notices, communications, plans, specifications and other similar instruments received or delivered by Grantor in connection therewith; (v) to furnish to

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Beneficiary such information and evidence as Beneficiary may reasonably require concerning Grantor's due observance, performance and compliance with the terms, covenants and provisions thereof; and (vi) that any default of the tenant thereunder shall constitute an Event of Default under this Deed of Trust;

(c) In the event of any default by Grantor in the performance of any of its obligations under the Lease, including, without limitation, any default in the payment of rent and other charges and impositions made payable by the tenant thereunder, then, in each and every case, Beneficiary may, at its option and without notice, cause the default or defaults to be remedied and otherwise exercise any and all of the rights of Grantor thereunder in the name of, and on behalf of, Grantor. Grantor shall, on demand, reimburse Beneficiary for all advances made and expenses incurred by Beneficiary incurring any such default (including, without limitation, reasonable attorneys' fees), together with interest thereon computed at the rate provided for in Section 1.12 hereof from the date that an advance is made or expense is incurred, to and including the date the same is paid;

(d) Grantor shall give Beneficiary notice of its intention to exercise each and every option to extend the term of the Lease, at least twenty (20) but not more than sixty (60) days prior to the expiration of the time to exercise such option under the terms thereof. If Grantor intends to extend the term of the Lease, it shall deliver to Beneficiary with the notice of such decision, a copy of the notice extension delivered to the landlord thereunder. If Grantor does not intend to extend the term of the Lease, Beneficiary may, at its option, exercise the option to extend in the name and on behalf of Grantor. In any event, Grantor hereby appoints Beneficiary its attorney-in-fact to execute and deliver, for and in the name of Grantor, all instruments and agreements necessary under the Lease or otherwise to cause any extension of the term thereof. This power, being coupled with an interest, shall be irrevocable as long as any amounts secured hereby remain unpaid;

(e) It is hereby agreed that the fee title, the leasehold estate and the subleasehold estates in the property demised by the Lease shall not merge but shall always be kept separate and distinct, notwithstanding the union of said estates in either the landlord thereunder, Grantor or a third party, whether by purchase or otherwise. Not less than sixty (60) nor more than ninety (90) days prior to the date of the exercise of any option or other right to purchase the Premises, or any part thereof, Grantor shall notify Beneficiary of the existence of such option or right. At least twenty (20) but not more than sixty (60) days prior to the expiration of the time to exercise

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such option or right, Grantor shall give Beneficiary notice of its intention to exercise such option or right. If Grantor intends to purchase, it shall deliver to Beneficiary with the notice of such decision, a copy of the notice of purchase delivered to the appropriate party. If Grantor does not intend to purchase, then Grantor will be deemed to have assigned the option to Beneficiary, who may purchase the Premises in Beneficiary's name, subject to the Lease, which will remain in full force and effect subject to its terms. If Grantor acquires the fee title or any other estate, title or interest in the property demised by the Lease, or any part thereof, the lien of this Deed of Trust shall attach to, cover and be a lien upon such acquired estate, title or interest and same shall thereupon be and become a part of the Mortgaged Property with the same force and effect as if specifically encumbered herein. Grantor agrees to execute all instruments and documents which Beneficiary may reasonably require to ratify, confirm and further evidence Beneficiary's lien on the acquired estate, title or interest. Furthermore, Grantor hereby appoints Beneficiary its true and lawful attorney-in-fact to execute and deliver all such instruments and documents in the name and on behalf of Grantor. This power, being coupled with an interest, shall be irrevocable as long as any amounts secured hereby remain unpaid.

(f) If the Lease is cancelled or terminated, and if Beneficiary or its nominee shall acquire an interest in any new lease of the property demised thereby, Grantor shall have no right, title or interest in or to the new lease or the leasehold estate created by such new lease;

(g) Grantor shall use its best efforts to obtain and deliver to Beneficiary within twenty (20) days after written demand by Beneficiary, an estoppel certificate from the landlord under the Lease setting forth (i) the name of the tenant thereunder, (ii) that the Lease has not been modified or, if it has been modified, the date of each modification (together with copies of each such modifications), (iii) the basic rent payable under the Lease,
(iv) the date to which all rental charges have been paid by the tenant under the Lease, and (v) whether there are any alleged defaults of the tenant under the Lease and, if there are, setting forth the nature thereof in reasonable detail.

(h) Grantor covenants and agrees that neither Grantor nor its trustee in bankruptcy shall exercise any right to terminate the Lease as afforded to it by ss.365(h)(i) of the Bankruptcy Code of the United States, as amended, without the prior written consent of Beneficiary.

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ARTICLE II

EVENTS OF DEFAULT AND REMEDIES

SECTION 2.01 . The occurrence of any one or more of the following events shall constitute an event of default ("Event of Default") hereunder:

(a) If there shall be an Event of default under the Loan Agreement; or

(b) If Grantor shall breach, or be in default of, any of the covenants or provisions contained in this Deed of Trust, or of any chattel mortgage, other deed of trust, security agreement or other document issued thereunder or in connection therewith or herewith; or

(c) If there shall be a default under the Lease.

Upon the occurrence of an Event of Default, and in every such case:

(i) During the continuance of any Event of Default, Beneficiary personally, or by its agents or attorneys may enter into and upon all or any part of the Mortgaged Property, and each and every part thereof, and may exclude the party owning the beneficial interest in same, its agents and servants wholly therefrom; and having and holding the same, may use, operate, manage and control the Mortgaged Property for any lawful purpose and conduct the business thereof, either personally or by its superintendents, managers, agents, servants, attorneys or receivers; and upon every such entry, Beneficiary, at the expense of Grantor, from time to time, either by purchase, repairs or construction, may maintain and restore the Mortgaged Property, whereof it shall become possessed as aforesaid, may complete the construction of the Improvements and in the course of such completion may make such changes in the contemplated Improvements as it may deem desirable; may insure or reinsure the same as provided in the Loan Agreement, and likewise, from time to time, at the expense of Grantor, Beneficiary may make all

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necessary or proper repairs, renewals, replacements, alterations, additions, betterments and improvements to the Mortgaged Property or any part thereof and thereon as it may deem advisable; and in every such case Beneficiary shall have the right to manage and operate the Mortgaged Property, possessed as aforesaid, and to carry on the business thereof and exercise all rights and powers of the party owning such property with respect thereto either in the name of such party or otherwise as it shall deem best; and Beneficiary shall be entitled to collect and receive all earnings, revenues, rents, issues, profits and income of the Mortgaged Property and every part thereof; and after deducting payments due under the Lease, the expenses of conducting the business thereof and of all maintenance, repairs, replacements, alterations, additions, betterments and improvements and all payments which may be made for taxes, assessments, insurance, in payment of any prior deed of trust and prior or other proper charges upon the Mortgaged Property or any part thereof, as well as just and reasonable compensation of Beneficiary for the services of Beneficiary and for all attorneys, counsel, agents, clerks, servants and other employees by it properly engaged and employed, Beneficiary shall apply the moneys arising as aforesaid, first, to the payment of any sums, other than interest and principal due pursuant to the Loan Agreement required to be paid by Grantor under this Deed of Trust, second, to the payment of interest due pursuant to the Loan Agreement, third, to the payment of the principal due pursuant to the terms of the Loan Agreement when and as the same shall become payable, whether by acceleration or otherwise.

(ii) Beneficiary, at its option, may declare the entire unpaid balance of the indebtedness secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale and written notice of default and of election to cause the Mortgaged Property to be sold, which notice Trustee shall cause to be duly filed

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for record. Beneficiary shall also deposit with the Trustee this Deed of Trust, and all documents evidencing the expenditures secured hereby.

(iii)After the lapse of such time as may then be required by law following the recordation of said notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Grantor, shall sell the Mortgaged Property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. If the Mortgaged Property consists of several known lots or parcels, Beneficiary may designate the order in which such parcels shall be sold or offered for sale. Any person, including Grantor, Trustee or Beneficiary, may purchase at such sale.

(iv) Trustee may postpone sale of all or any portion of the Mortgaged Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the time fixed by the preceding postponement.

(v) On and after the occurrence of an Event of Default, Grantor shall pay all rents, issues and profits thereafter received by Grantor from the Mortgaged Property to Beneficiary and to the extent not paid shall hold such amounts as trust funds for the benefit of Beneficiary and such rents, issues and profits shall be deemed "cash collateral" of Beneficiary under 11 U.S.C., as amended.

SECTION 2.02 . Trustee, after making such sale, and upon receipt of the purchase price, shall make, execute and deliver to the purchaser or purchasers its deed or deeds conveying the Mortgaged Property so sold, but without any covenant or warranty, express or implied, and

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without any representation, express or implied, as to the existence, or lack thereof, of Hazardous Substances on the Mortgaged Property, and shall apply the proceeds of sale thereof to payment, FIRSTLY, of the expenses of such sale, together with the reasonable expenses of this Trust, including Trustee's fees and cost of evidence of title in connection with sale, Torrens certificates, and revenue stamps on Trustee's deed; SECONDLY, of all moneys paid, advanced or expended by Beneficiary under the terms hereof, not then repaid, together with the interest thereon as herein provided; and THIRDLY, of the amount of the principal and interest due pursuant to the Loan Agreement then remaining unpaid.

(a) In the event of a sale of the Mortgaged Property, or any part thereof, and the execution of a deed or deeds therefor under these trusts, the recitals therein of any matters or facts shall be conclusive proof of the truthfulness thereof and of the fact that said sale was regularly and validly made in accordance with all requirements of the laws of the State of Utah and of this Deed of Trust; and any such deed or deeds, with such recitals therein, shall be effectual and conclusive against Grantor and all other persons; and the receipt for the purchase money recited or contained in any deed executed to the purchaser as aforesaid shall be sufficient discharge to such purchaser from all obligations to see to the proper application of the purchase money according to the trusts aforesaid.

SECTION 2.03 . After the happening of an Event of Default by Grantor under this Deed of Trust and immediately upon the commencement of any action, suit or other legal proceeding by Beneficiary to obtain judgment for the principal of, or interest due pursuant to the Loan Agreement and other sums required to be paid by Grantor pursuant to any provisions of this Deed of Trust, or of any other nature in aid of the enforcement of the Loan Agreement, or of

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this Deed of Trust, Grantor will waive the issuance and service of process and enter its voluntary appearance in such action, suit or proceeding. Further, Grantor hereby consents to the appointment of a receiver or receivers, without bond, of the Mortgaged Property and of all the earnings, revenues, rents, issues, profits and income thereof. The exercise of any right under this Article II shall not be deemed as election of remedies nor a "pending action" so as to preclude to exercise of any other right or remedy. After the happening of any such default and during its continuance or upon the commencement of any proceedings to foreclose this Deed of Trust or to enforce the specific performance hereof or in aid thereof or upon the commencement of any other judicial proceeding to enforce any right of the Trustee or Beneficiary hereunder, Beneficiary shall be entitled, as a matter of right, if it shall so elect, without the giving of notice to any other party and without regard to the adequacy or inadequacy of any security for the Deed of Trust indebtedness, forthwith either before or after declaring all sums due pursuant to the Loan Agreement to be due and payable, to the appointment of such a receiver or receivers.

SECTION 2.04 . During the continuance of an Event of Default, Beneficiary shall have the following rights and remedies:

I. Beneficiary or its employees, acting by themselves or through a court- appointed receiver, may enter upon, possess, manage, operate, dispose of, and contract to dispose of the Mortgaged Property or any part thereof; take custody of all accounts; negotiate with governmental authorities with respect to the Mortgaged Property's environmental compliance and remedial measures; take any action necessary to enforce

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compliance with any Act, including but not limited to spending rents to abate the problem; make, terminate, enforce or modify leases of the Mortgaged Property upon such terms and conditions as Beneficiary deems proper; contract for goods and services, hire agents, employees, and counsel, make repairs, alterations, and improvements to the Mortgaged Property necessary, in Beneficiary's judgment, to protect or enhance the security hereof; incur the risks and obligations ordinarily incurred by owners of property (without any personal obligation on the part of the receiver); and/or take any and all other actions which may be necessary or desirable to comply with Grantor's obligations hereunder and under the Loan Agreement. All sums realized by Beneficiary under this subparagraph, less all costs and expenses incurred by it under this subparagraph, including attorneys' fees, and less such sums as Beneficiary deems appropriate as a reserve to meet future expenses under the subparagraph, shall be applied on any indebtedness secured hereby in such order as Beneficiary shall determine. Neither application of said sums to said indebtedness, nor any other action taken by Beneficiary under this subparagraph shall cure or waive any Event of Default or notice of default hereunder, or nullify the effect of any such notice of default. Beneficiary, or any employee or agent of Beneficiary, or a receiver appointed by a court, may take any action or proceeding hereunder without regard to (a) the adequacy of the security for the indebtedness secured hereunder, (b) the existence of a declaration that the indebtedness secured hereby has been declared immediately due and payable, or (c) the filing of a notice of default.

II. With or without notice, and without releasing Grantor from any obligation hereunder,

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to cure any default of Grantor and, in connection therewith, Beneficiary or its agents, acting by themselves or through a court appointed receiver, may enter upon the Mortgaged Property or any part thereof and perform such acts and things as Beneficiary deems necessary or desirable to inspect, investigate, assess, and protect the security hereof, including without limitation of any of its other rights: (a) to obtain a court order to enforce Beneficiary's right to enter and inspect the Mortgaged Property, to which the decision of Beneficiary as to whether there exists a release or threatened release of a Hazardous Substances onto the Mortgaged Property shall be deemed reasonable and conclusive as between the parties hereto; and (b) to have a receiver appointed to enforce Beneficiary's right to enter and inspect the Mortgaged Property for Hazardous Substances. All costs and expenses incurred by Beneficiary with respect to the audits, tests, inspections, and examinations which Beneficiary or its agents or employees may conduct, including the fees of the engineers, laboratories, contractors, consultants, and attorneys, shall be paid by Grantor. All costs and expenses incurred by Trustee and Beneficiary pursuant to this subparagraph (including without limitation court costs, consultant fees and attorneys' fees, whether incurred in litigation or not

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and whether before or after judgment) shall bear interest at the Default Rate set forth in the Loan Agreement from the date they are incurred until said sums have been paid.

III. To seek a judgment that Grantor has breached its covenants, representations and/or warranties with respect to the environmental matters set forth in the Loan Agreement by commencing and maintaining an action or actions in any court of competent jurisdiction for breach of contract, whether commenced prior to or after foreclosure of the Mortgaged Property, and to seek the recovery of any and all costs, damages, expenses, fees, penalties, fines, judgments, indemnification payments to third parties, and other out- of-pocket costs or expenses actually incurred by Beneficiary (collectively, the "Environmental Costs") incurred or advanced by Beneficiary relating to the cleanup, remediation or other response action required by any Act or to which Beneficiary believes necessary to protect the Mortgaged Property, it being conclusively presumed between Beneficiary and Grantor that all such Environmental Costs incurred or advanced by Beneficiary relating to the cleanup, remediation, or other response action of or to the Mortgaged Property were made by Beneficiary in good faith. All Environmental Costs incurred by Beneficiary under this subparagraph (including

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without limitation court costs, consultant fees and attorneys' fees, including, without limitation, fees incurred pursuant to 11 U.S.C., whether incurred in litigation or not and whether before or after judgment) shall bear interest at the Default Rate from the date of expenditure until said sums have been paid. Beneficiary shall be entitled to bid, at the sale of the Mortgaged Property, the amount of said costs, expenses and interest in addition to the amount of the other obligations hereby secured as a credit bid, the equivalent of cash.

Grantor acknowledges and agrees that notwithstanding any term or provision contained herein or in the other Loan Documents (as defined in the Loan Agreement), the Environmental Costs shall be exceptions to any nonrecourse or exculpatory provision of the Loan Documents, and Grantor shall be fully and personally liable for the Environmental Costs hereunder, and such liability shall not be limited to the original principal amount of the obligations secured by this Deed of Trust, and Grantor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Deed of Trust. For the purposes of any action brought under this subparagraph, Grantor hereby waives the defense of laches and any applicable statute of limitations.

IV. To waive its lien against the Mortgaged Property or any portion thereof, whether fixtures or personal property, to the extent such property is found to be environmentally impaired and to exercise any and all rights and remedies of an unsecured creditor against Grantor and all of Grantor's assets and property for the recovery of any deficiency and Environmental Costs, including, but not limited to,

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seeking an attachment order. As between Beneficiary and Grantor, Grantor shall have the burden of proving that Grantor or any related party (or any affiliate or agent of Grantor or any related party) was not in any way negligent in permitting the release or threatened release of the Hazardous Substances. Grantor acknowledges and agrees that Grantor shall be fully and personally liable for all judgments and awards entered against Grantor hereunder and such liability shall not be limited to the original principal amount of the obligations secured by this Deed of Trust and Grantor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Deed of Trust. For the purposes of any action brought under this subparagraph, Grantor hereby waives the defense of laches and any applicable statute of limitations.

V. Nothing contained herein shall be construed to limit any and all rights that Beneficiary has at law or pursuant hereto.

SECTION 2.05 . No remedy herein conferred upon or reserved to the Trustee or Beneficiary is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission of the Trustee or Beneficiary to exercise any right or power occurring

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upon the Event of Default shall impair any such right or power or shall be construed to be a waiver thereof or an acquiescence therein; and every power and remedy given by this Deed of Trust to the Trustee or Beneficiary may be exercised from time to time and as often as may be deemed expedient by the Trustee or Beneficiary. Nothing in this Deed of Trust or in the Loan Agreement shall affect the obligation of Grantor to pay the principal of and interest on all sums due under the Loan Agreement in the manner and at the time and place therein respectively expressed.

SECTION 2.06 . To the extent permitted by law, Grantor will not at any time insist upon, or plead, or in any manner whatever claim or take any benefit or advantage of, any stay or extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance of this Deed of Trust; nor claim, take or insist upon any benefit or advantage of any law now or hereafter in force providing for the marshalling of the Mortgaged Property or on the valuation or appraisal of the Mortgaged Property, or any part thereof, prior or subsequent to any sale or sales thereof which may be made pursuant to any provision herein, or pursuant to the decree, judgment or order of any court of competent jurisdiction; nor, after any such final sale or sales, claim or exercise any right under any statute or otherwise, to redeem the property so sold or any part thereof; and Grantor hereby expressly waives all benefit or advantage of any such law or laws, and covenants not to hinder, delay or impede the execution of any power herein granted or delegated to the Trustee or Beneficiary, but to suffer and permit the execution of every power as though no such law or laws had been made or

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enacted. Grantor hereby waives the right to require any sale to be made in parcels, or the right to select parcels to be so sold, and there shall be no requirement for marshalling of assets. Grantor hereby further waives any rights it may have under applicable law relating to the prohibition of the obtaining of a deficiency judgment by Beneficiary against Grantor.

SECTION 2.07 . During the continuance of any Event of Default and pending the exercise by the Trustee or Beneficiary of its right to exclude Grantor from all or any part of the Premises, Grantor agrees to pay the fair and reasonable rental value for the use and occupancy of the Mortgaged Property for such period and upon default of any such payment, will vacate and surrender possession of the Premises to the Trustee or Beneficiary or to a receiver, if any, and in default thereof may be evicted by any summary action or proceeding for the recovery or possession of Premises for non-payment of rent, however designated. In the event Grantor remains in possession of the Mortgaged Property after the same is sold as provided above or after Beneficiary otherwise becomes entitled to possession of the same, Grantor shall become a tenant at will of Beneficiary or the purchaser of the Mortgaged Property.

SECTION 2.08 . Without affecting the personal liability of any person, firm, corporation or other entity, including Grantor (other than any person released pursuant hereto), for the payment of the indebtedness secured hereby, and without affecting the lien of this Deed of Trust for the full amount of the indebtedness remaining unpaid upon any property not reconveyed pursuant hereto, Beneficiary and Trustee are respectively authorized and empowered as follows: Beneficiary may, at any time and from time to time, either before or after the expiration of

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the Loan Agreement, and without notice: (a) release any person liable for the payment of any of the indebtedness, (b) make any agreement extending the time or otherwise altering the terms of payment of any of the indebtedness, (c) accept additional security therefor of any kind, (d) release any property, real or personal, securing the indebtedness. Trustee may, without liability therefor and without notice, at any time and from time to time so long as the lien or charge hereof shall subsist, but only upon the written request of Beneficiary and presentation of this Deed of Trust for endorsement:
(a) consent to the making of any map or plat of the Land, (b) join in granting any easement thereon or in creating any covenants restricting use or occupancy thereof, (c) reconvey, without warranty, any part of the Mortgaged Property, (d) join in any extension agreement or in any agreement subordinating the lien or charge hereof.

SECTION 2.09 . This Deed of Trust constitutes a Security Agreement under the laws of the State of Utah so that Beneficiary shall have and may endorse a security interest in any or all of the Mortgaged Property which may or might now or hereafter be or be deemed to be personal property, fixtures or property other than real estate (collectively, "Personal Property") and Grantor agrees to execute, as debtor, such financing statement or statements as Beneficiary may now or hereafter reasonably request in order that such security interest or interests may be perfected pursuant to such laws. This Deed of Trust further constitutes a fixture filing under Sections 9-313 and 9-402 of the Utah Uniform Commercial Code, as amended or recodified from time to time; provided, however that the execution and/or filing hereof does not imply that the items of Personal Property included in the Mortgaged Property are or are to become

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fixtures. The filing hereof as a fixture filing is intended to protect the parties from unwarranted assertions by third parties.

Notwithstanding any release of any or all of the property included in the Premises which is deemed "real property", any proceedings to foreclose this Deed of Trust, or its satisfaction of record, the terms hereof shall survive as a security agreement with respect to the security interest created hereby and referred to above until the repayment or satisfaction in full of the obligations of Grantor as are now or hereafter evidenced by the Loan Agreement.

SECTION 2.10 . During the continuance of any Event of Default, Beneficiary shall have all of the rights and remedies of a secured party under the Uniform Commercial Code (the "Code") of the State of Utah, and specifically the right to direct notice and collections of any obligation owing to Grantor by any lessee. In addition to its rights to foreclose this Deed of Trust, Beneficiary shall have the right to sell the Personal Property or any part thereof, or any further, or additional, or substituted Personal Property, at one or more times, and from time to time, at public sale or sales or at private sale or sales, on such terms as to cash or credit, or partly for cash and partly on credit, as Beneficiary may deem proper. Beneficiary shall have the right to become the purchaser at any such public sale or sales, free and clear of any and all claims, rights of equity of redemption in Grantor, all of which are hereby waived and released. Grantor shall not be credited with the amount of any part of such purchase price, unless, until and only to the extent that such payment is actually received in cash. Notice of public sale, if given, shall be sufficiently given, for all purposes, if published not less than seven days prior to any sale, in any newspaper of general circulation distributed in the city in which the property to be sold is located or as otherwise required by the Code.

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The net proceeds of any sale of the Personal Property which may remain after the deduction of all costs, fees and expenses incurred in connection therewith, including, but not limited to, all advertising expenses, broker's or brokerage commissions, documentary stamps, recording fees, foreclosure costs, stamp taxes and counsel fees, shall be credited by Beneficiary against the liabilities, obligations and indebtedness of Grantor to Beneficiary secured by this Deed of Trust and evidenced by the Loan Agreement. Any portion of the Personal Property which may remain unsold after the full payment, satisfaction and discharge of all of the liabilities, obligations and indebtedness of Grantor to Beneficiary shall be returned to the respective parties which delivered the same to Beneficiary. If at any time Grantor or any other party shall become entitled to the return of any of the Personal Property hereunder, any transfer or assignment thereof by Beneficiary shall be, and shall recite that the same is, made wholly without representation or warranty whatsoever by, or recourse whatsoever against Beneficiary.

SECTION 2.11 . All rights, remedies and powers provided by Sections 2.01-2.10 hereof may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law in the jurisdiction in which the Premises are located, and all such provisions are intended to be subject to all applicable provisions of law which may be controlling in such jurisdiction and to be limited to the extent necessary so that they will not render this Deed of Trust invalid, illegal or unenforceable under the provisions of any applicable law.

SECTION 2.12 . Grantor agrees, to the full extent permitted by law, that at all times following an Event of Default, neither

29

Grantor nor anyone claiming through or under it shall or will set up, claim or seek to take advantage of any appraisement, valuation, stay, or extension laws now or hereafter in force, in order to prevent or hinder the enforcement or foreclosure of this Deed of Trust or the absolute sale of the Mortgaged Property or the final and absolute putting into possession thereof, immediately after such sale, of the purchaser thereat; and Grantor, for itself and all who may at any time claim through or under it, hereby waives, to the full extent that it may lawfully so do, the benefit of all such laws and any and all right to have the assets comprising the Mortgaged Property marshalled upon any foreclosure of the lien hereof and agrees that Trustee or any court having jurisdiction to foreclose such lien may sell the Mortgaged Property in part or as an entirety. To the full extent permitted by law, Grantor hereby waives any and all statutory or other rights of redemption from sale under any order or decree of foreclosure of this Deed of Trust, on its own behalf and on behalf of each and every person acquiring any interest in or title to the Mortgaged Property subsequent to the date hereof.

ARTICLE III

MISCELLANEOUS

SECTION 3.01 . In the event any one or more of the provisions contained in this Deed of Trust shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Deed of Trust, but this Deed of Trust shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

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SECTION 3.02 . All notices or demands by any party relating to this Deed of Trust or any other agreement entered into in connection herewith shall be sent in the form set forth in the Loan Agreement.

The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other. All notices or demands sent in accordance with this Section 3.02 other than notices by Beneficiary in connection with Sections 9504 or 9505 of the Code, shall be deemed received on the earlier of the date of actual receipt or three (3) calendar days after the deposit thereof in the mail. Grantor acknowledges and agrees that notices sent by Beneficiary in connection with Sections 9504 or 9505 of the Code shall be deemed sent when deposited in the mail or transmitted by telefacsimile or other similar method permitted by law.

SECTION 3.03 . Whenever in this Deed of Trust the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person or persons entitled to receive such notice.

SECTION 3.04 . All of the grants, covenants, terms, obligations, provisions and conditions herein contained shall run with the land and shall apply to, bind and inure to the benefit of, the successors and assigns of Grantor and Beneficiary and to the successors of the Trustee.

SECTION 3.05 . Intentionally Deleted.

SECTION 3.06 . It shall be lawful for the Trustee, or Beneficiary, at its election, upon the occurrence of an Event of Default, to sue out forthwith a complaint in foreclosure upon this Deed of Trust and to proceed thereon to judgment and execution for the recovery of all sums payable by Grantor pursuant to the terms of this Deed of Trust without further stay, any law, usage or custom to the contrary notwithstanding.

SECTION 3.07 . Notwithstanding the appointment of any receiver, liquidator or trustee of Grantor, or of any of its property, or of the Mortgaged Property, or any part

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thereof, the Trustee shall be entitled to retain possession and control of all property now or hereafter held under this Deed of Trust.

SECTION 3.08 . Intentionally Deleted.

SECTION 3.09 . Grantor hereby waives and relin quishes unto, and in favor of Beneficiary, all benefit under all laws, now in effect or hereafter passed, to relieve Grantor in any manner from the obligations assumed and the obligation for which this Deed of Trust is security or to reduce the amount of the said obligation to any greater extent than the amount actually paid for the Mortgaged Property, in any judicial proceedings upon the said obligation, or upon this Deed of Trust.

SECTION 3.10 . Neither Grantor nor any other person now or hereafter obligated for payment for all or any part of the indebtedness secured hereby shall be relieved of such obligation by reason of the failure of Beneficiary to comply with any request of Grantor or of any other person so obligated to take action to foreclose on this Deed of Trust or otherwise enforce any provisions hereof or under the Loan Agreement or by reason of the release, regardless of consideration, of all or any part of the security held for the indebtedness secured hereby, or by reason of any agreement of stipulation between any subsequent owner of the Mortgaged Property and Beneficiary extending the time of payment or modifying the terms hereof without first having obtained the consent of Grantor or such other person; and in the latter event Grantor and all other such persons shall continue to be liable to make payment according to the terms of any such extension or modification agreement, unless expressly released and discharged in writing by Beneficiary.

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SECTION 3.11 . By accepting or approving anything required to be observed, performed or fulfilled or to be given to Beneficiary pursuant to this Deed of Trust, including (but not limited to) any certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal or insurance policy, Beneficiary shall not be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance or approval thereof shall not be or constitute any warranty or representation with respect thereto by Beneficiary.

SECTION 3.12 . Beneficiary may from time to time, without notice to Grantor or to the Trustee, and with or without cause and with or without the resignation of the Trustee substitute a successor or successors to the Trustee named herein or acting hereunder to execute this trust. Upon such appointment and without conveyance to the successor Trustee, the latter shall be vested with all title, powers and duties conferred upon the Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written document executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which when duly filed for record in the proper office, shall be conclusive proof of proper appointment of the successor Trustee. The procedure herein provided for substitution of the Trustee shall be conclusive of all other provisions for substitution, statutory or otherwise.

SECTION 3.13 . Intentionally Deleted.

SECTION 3.14 . Intentionally Deleted.

SECTION 3.15 . GRANTOR AGREES THAT THIS DEED OF TRUST, THE LOAN AGREEMENT, AND ALL OTHER

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RELATED DOCUMENTS AND THE RIGHT, DUTIES, OBLIGATIONS AND LIABILITIES THEREUNDER (INCLUDING, WITHOUT LIMITATION, THE LIABILITY OF GRANTOR FOR ANY DEFICIENCY FOLLOWING A FORECLOSURE OF ALL OR ANY PART OF THE MORTGAGED PROPERTY) ARE TO BE CONSTRUED, GOVERNED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, EXCEPT AS TO MATTERS RELATING TO THE CREATION, PERFECTION, PRIORITY AND ENFORCEMENT OF THE LIENS ON AND SECURITY INTEREST IN THE MORTGAGED PROPERTY, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH. WHEREVER POSSIBLE, EACH PROVISION OF THIS DEED OF TRUST SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS DEED OF TRUST SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISIONS OR THE REMAINING PROVISIONS OF THIS DEED OF TRUST.

SECTION 3.16 . Trustee covenants faithfully to perform the trust herein created, being liable, however, only for gross negligence or willful misconduct. Trustee accepts this Trust, when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Trustee is not obligated to notify any party hereto of any action or proceeding in which Grantor, Beneficiary or Trustee shall be a party unless brought by Trustee.

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IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed as of the day and year first above written.

"Grantor"

EVANS & SUTHERLAND COMPUTER CORPORATION,
a Utah corporation

By       /s/ R. Gaynor
  ------------------------------------------------
         Richard J. Gaynor, Vice President
         & Chief Financial Officer

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STATE OF CALIFORNIA                         )
                                            ) ss.
COUNTY OF LOS ANGELES                       )

On December 14, 2000, before me, Greta Johnson, personally appeared RICHARD J. GAYNOR, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument

WITNESS my hand and official seal.

/s/ Greta Johnson

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EXHIBIT A

EXHIBIT "A"

PARCEL 1 - 560 ARAPPEN DRIVE:

The leasehold estate and interest which arise pursuant to that certain Lease Agreement, dated September 4, 1979, by and between UNIVERSITY OF UTAH, a corporate and body politic ("Lessor"), and TRI VENTURE, A General Partnership ("Lessee"), and amended by that certain First Addendum to Lease Agreement, dated April 9, 1987, by that certain Second Addendum To Lease Agreement, dated December 31, 1990, and by a Memorandum of Ground Lease and Amendment To Ground Lease recorded June 1, 2000 as Entry No. 7650612, in Book 8365 at Page 3595, of the Official Records of the Salt Lake County Recorder (the Lessee's interest being now held by EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation) in and to the following described tracts of land:

BEGINNING at a point on the Westerly line of Arappen Drive, said point being North 2324.780 feet and West 686.110 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence South 41(degree)00'00" West 212.00 feet; thence North 49(degree)00'00" West 90.00 feet; thence South 41(degree)00'00" West 340.00 feet; thence South 49(degree)00'00" East 260.00 feet; thence North 41(degree)00'00" East 342.00 feet, thence North 49(degree)00'00" West 70.00 feet; thence North 41(degree)00'00" East 210.00 feet to the Westerly line of Arappen Drive; thence North 49(degree)00'00" West 100.00 feet along said Westerly line to the point of BEGINNING.

BEGINNING at a point on the Westerly line of Komas Drive, said point being North 1626.262 feet and West 815.400 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence North 49(degree)00'00" West 450.692 feet; thence South 41(degree)00'00" West 70.00 feet; thence North 49(degree)00'00" West 220.932 feet to a point on the arc of a 692.200 foot radius curve whose center bears South 62(degree)28'51" East; thence Southwesterly 42.964 feet along the arc of said curve to the left through a central angle of 03(degree)33'23";

37

thence South 49(degree)00'00" East 660.319 feet; thence North 41(degree)00'00" East 111.443 feet to the point of BEGINNING.

EXCEPTING FROM PARCEL 1, DESCRIBED HEREIN, ANY PORTION LYING WITHIN THE BOUNDS OF KOMAS DRIVE, THE DEDICATION PLAT OF WHICH IS FILED IN THE OFFICE OF THE SALT LAKE COUNTY RECORDER.

PARCEL 2 - 650 KOMAS DRIVE:

The leasehold estate and interest which arise pursuant to that certain Lease Agreement, dated September 5, 1980, by and between UNIVERSITY OF UTAH, a corporate and body politic ("Lessor"), and BLACK HAWK INVESTMENT COMPANY, A General Partnership ("Lessee"), and amended by that certain First Amendment To Lease Agreement, dated June 7, 1982, and by that certain Second Amendment To Lease Agreement, dated September 28, 1982, and by that certain Third Addendum To Lease Agreement, April 9, 1987, and by that certain Fourth Addendum To Lease Agreement, dated December 31, 1990 [record notice of the existence of said Lease Agreement was originally afforded by that certain Short Form Ground Lease recorded April 15, 1983 as Entry No. 3781219, in Book 5451 at Page 2306, of the Official Records of the Salt Lake County Recorder. Further record notice was afforded by a Memorandum Of Ground Lease recorded June 1, 2000 as Entry No. 7650614, in Book 8365 at Page 3602, of the Official Records of the Salt Lake County Recorder; the Lessee's interest being now held by EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation], in and to the following described tract of land:

BEGINNING at a point on the Westerly line of Komas Drive, said point being North 1626.262 feet and West 815.400 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence South 49(degree)00'00" East 551.954 feet; thence South 41(degree)00'00" West 31.741 feet; thence South 60(degree)00'00" West 601.002 feet; thence North 49(degree)00'00" West 326.287 feet; thence North 41(degree)00'00" East 488.553 feet; thence North 49(degree)00'00" West 30.000 feet; thence North 41(degree)00'00" East 111.443 feet to the point of BEGINNING.

38

PARCEL 3 - 600 KOMAS DRIVE:

The leasehold estate and interest which arise pursuant to that certain University of Utah Research Park Master Form Lease Lease Agreement, dated April 9, 1987, by and between UNIVERSITY OF UTAH, a corporation and body politic ("Lessor"), and EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Lessee"), and amended by that certain First Addendum To Lease Agreement, dated December 31, 1990, and by a Memorandum of Ground Lease and Amendment to Ground Lease recorded June 1, 2000 as Entry No. 7650615, in Book 8365 at Page 3606, of the Official Records of the Salt Lake County Recorder, in and to the following described tract of land:

BEGINNING at a point which is North 1626.262 feet and West 815.400 feet and South 40(degree)00'00" West 111.443 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monuments is located South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence North 49(degree)00'00" West 660.319 feet to a point on the arc of a 692.200 foot radius curve whose center bears South 66(degree)02'14" East; thence Northeasterly 114.196 feet along the arc of said curve to the right through a central angle of 09(degree)27'08"; thence North 49(degree)00'00" West 6.001 feet; thence South 41(degree)00'00" West 525.082 feet; thence South 12(degree)21'26" East 320.00 feet; thence North 82(degree)47'10" East 208.879 feet to a point on the arc of a 608.887 foot radius curve whose center bears North 82(degree)02'11" East; thence Southeasterly 360.905 feet along the arc of said curve to the left through a central angle of 33(degree)57'39"; thence North 41(degree)00'00" East 593.845 feet; thence North 49(degree)00'00" West 30.00 feet to the point of BEGINNING.

EXCEPTING FROM PARCEL 3, DESCRIBED ABOVE, ANY PORTION LYING WITHIN THE BOUNDS OF WAKARA WAY AND/OR KOMAS DRIVE, THE DEDICATION PLATS OF WHICH ARE FILED IN THE OFFICE OF THE SALT LAKE COUNTY RECORDER.

PARCEL 4 - 770 KOMAS DRIVE:

The leasehold estate and interest which arise pursuant to that certain University Of Utah Research Park Master Form Lease Lease Agreement, dated April 1, 1988, by and between UNIVERSITY OF UTAH, a corporate and body politic ("Lessor"), and EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Lessee"), and amended by that first Addendum To Lease Agreement, dated December 31, 1990, and by a Memorandum Of Ground Lease Agreement

39

and Amendment To Lease recorded June 1, 2000 as Entry No. 7650616, in Book 8365 at Page 3610, of the Official Records of the Salt Lake County Recorder, in and to the following described tract of land:

BEGINNING at a point which is North 22(degree)00'00" West 179.000 feet from a point on the North line of Sunnyside Avenue, said point being South 89(degree)59'50" West 761.997 feet and North 00(degree)00'10" West 58.200 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65(degree)48'24" West 3622.620 feet and East 97.000 feet and South 58.200 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence South 61(degree)09'35" West 166.781 feet; thence North 52(degree)49'31" West 103.650 feet; thence North 12(degree)49'54" West 461.520 feet; thence North 43(degree)19'53" West 315.935 feet; thence North 44(degree)00'00" East 123.669 feet along the radial line to a point on a curve; thence Southeasterly along the arc of the 212.4714 foot radius curve to the left, arc length = 274.416 feet, chord length = 255.737 feet (chord bearing = South 83(degree)00'00" East), tangent length = 160.109 feet, central angle = 74(degree)00'00"; thence along the radial line South 30(degree)00'00" East 20.500 feet to the point of tangency; thence North 60(degree)00'00" East 71.108 feet; thence South 49(degree)00'00" East 33.554 feet; thence South 60(degree)00'00" West 11.730 feet; thence South 22(degree)00'00" East 550.000 feet; thence South 23(degree)00'00" West 217.000 feet to the point of BEGINNING.

PARCEL 5 - 630 KOMAS DRIVE:

The leasehold estate and interest which arise pursuant to that certain University of Utah Research Park Master Form Lease Lease Agreement, dated December 31, 1990, by and between UNIVERSITY OF UTAH, a corporate and body politic ("Lessor"), and EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Lessee"), amended by a Memorandum Of Ground Lease and Amendment to Ground Lease recorded June 1, 2000 as Entry No. 7650617, in Book 8365 at Page 3614, of the Official Records of the Salt Lake County Recorder, in and to the following described tract of land:

BEGINNING at a point which is North 886.114 feet and West 1377.035 feet from a Salt Lake City Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument being South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence North 43(degree)19'53" West 245.767 feet; thence North 12(degree)21'26" West 312.856 feet;

40

thence North 82(degree)47'10" East 208.879 feet to a point on the arc of a 608.887 foot radius curve, the center of which bears North 82(degree)02'11" East; thence Southeasterly along said curve to the left through a central angle of 33(degree)57'39", a distance of 360.905 feet; thence North 40(degree)58' East 105.291 feet; thence South 49(degree)00' East 292.731 feet; thence South 60(degree)00' West 71.105 feet; thence North 30(degree)00' West 20.50 feet to a point on the arc of a 212.471 foot radius curve, the center of which bears North 30(degree)00' West; thence Southwesterly along said curve to the right though a central angle of 74(degree)00', a distance of 274.416 feet; thence South 44(degree)00' West 123.669 feet to the point of BEGINNING.

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RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:

FOOTHILL CAPITAL CORPORATION
2450 Colorado Avenue
Suite 3000
Santa Monica, California 90404
Attn: Business Finance
Division Manager

THIS INSTRUMENT IS ALSO TO BE INCLUDED IN THE INDEX OF
FINANCING STATEMENTS AS A FIXTURE FILING IN ACCORDANCE
WITH THE UNIFORM COMMERCIAL CODE AND CROSS-INDEXED IN THE
REAL ESTATE MORTGAGE RECORDS

THIS DOCUMENT SECURES OBLIGATIONS WHICH CONTAIN
PROVISIONS FOR A VARIABLE RATE OF INTEREST

STATE OF UTAH                               )
                                            ) ss.
COUNTY OF SALT LAKE                         )

LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT and FIXTURE FILING made as of this 14th day of December, 2000, between EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Grantor"), with its chief executive office located at 600 Komas Drive, Salt Lake City, Utah 84108, as grantor, and CHICAGO TITLE INSURANCE COMPANY, as trustee ("Trustee") and FOOTHILL CAPITAL CORPORATION, a California corporation, having an office at 2450 Colorado Avenue, Suite 3000 West, Santa Monica, California 90404, Attn: Business Finance Division Manager.

WITNESSETH

THIS LEASEHOLD DEED OF TRUST CONSTITUTES A FIXTURE FILING UNDER SECTIONS 9-313 AND 9-402 OF THE UNIFORM COMMERCIAL CODE OF THE STATE OF UTAH. TO THE EXTENT THE GOODS ARE FIXTURES UNDER THE LAWS OF THE STATE OF UTAH, THE FIXTURES ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY LOCATED IN THE COUNTY OF SALT LAKE, STATE OF UTAH, MORE PARTICULARLY DESCRIBED ON EXHIBIT A ATTACHED HERETO, COMMONLY KNOWN BY THE STREET ADDRESS: 580 ARAPPEN DRIVE, SALT LAKE CITY. THE NAME OF THE RECORD OWNER OF THE REAL PROPERTY IS UNIVERSITY OF UTAH.

1

FOR THE PURPOSE OF SECURING (a) the performance of all obligations and the payment of all indebtedness to be paid in accordance with the terms and with interest as set forth in that certain Loan and Security Agreement (hereinafter referred to as the "Loan Agreement"), of even date herewith, entered into between Grantor and Foothill Capital Corporation (Foothill Capital Corporation and any subsequent lender pursuant to the Loan Agreement being hereinafter referred to as "Beneficiary") and all modifications, extensions, renewals, or amendments and restatements thereof: should Foothill Capital Corporation and others enter into an amended and restated loan and security agreement, then the agent thereunder shall be the Beneficiary hereunder, (b) the payment and performance of all indebtedness and obligations of Grantor arising under this Deed of Trust and other documents executed by Grantor in connection herewith, and (c) payment of any money advanced by Beneficiary (and other lenders, if any) to Grantor, or its successors, with interest thereon, evidenced by a note or notes (indicating that they are so secured), executed by Grantor or its successors, Grantor has granted, mortgaged, bargained, sold, alienated, enfeoffed, released, conveyed and confirmed, and by these presents does grant, mortgage, bargain, sell, alienate, enfeoff, release, convey and confirm unto the Trustee, in trust, WITH POWER OF SALE, all its estate, right, title and interest in, to and under any and all of the property located in the City of Salt Lake City, County of Salt Lake, State of Utah, and more particularly described in Exhibit A attached hereto and made a part hereof, including all easements, rights, privileges, tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and all of the estate, right, title, interest, claim, demand, reversion or remainder whatsoever of Grantor therein or thereto, either at law or in equity, in possession or expectancy, now or hereafter acquired, including, without limitation, all and singular the ways, waters, water courses, water rights and powers, liberties, privileges, sewers, pipes, conduits, wires and other facilities furnishing utility or other services to the property (collectively, the "Land");

TOGETHER with all of the right, title and interest of Grantor in and to all buildings, structures and improvements now or hereafter erected on the Land including all plant equipment, apparatus, machinery and fixtures of every kind and nature whatsoever now or hereafter located on or forming part of said buildings, structures and improvements (collectively, the "Improvements"; the Land and Improvements being hereinafter collectively referred to as the "Premises");

TOGETHER with all of the right, title and interest of Grantor in and to the land lying in the bed of any street, road, highway or avenue in front of or adjoining the Premises;

2

TOGETHER with any and all award and awards heretofore made or hereafter to be made by any governmental authorities to the present and all subsequent owners of the Premises which may be made with respect to the Premises as a result of the return of excess taxes paid on the Mortgaged Property, the exercise of the right of eminent domain, the alteration of the grade of any street or any other injury to or decrease of value of the Premises, which said award or awards are hereby assigned to Beneficiary and Beneficiary, at its option, is hereby authorized, directed and empowered to collect and receive the proceeds of any such award or awards from the authorities making the same and to give proper receipts and acquittances therefor, and to apply the same as hereinafter provided; and Grantor hereby covenants and agrees to and with Beneficiary, upon request by Beneficiary, to make, execute and deliver, at Grantor's expense, any and all assignments and other instruments sufficient for the purpose of assigning the aforesaid award or awards to Beneficiary free, clear and discharged of any and all encumbrances of any kind or nature whatsoever;

TOGETHER with all goods, equipment, machinery, furni ture, furnishings, fixtures, appliances, inventory, building materials, chattels and articles of personal property (other than personal property which is or at any time has become Hazardous Substances, as defined in the Loan Agreement), including any interest therein, now or at any time hereafter affixed to, attached to, or used in any way in connection with or to be incorporated at any time into the Premises, or placed on any part thereof but not attached or incorporated thereto, together with any and all replacements thereof, appertaining and adapted to the complete and compatible use, enjoyment, occupancy, operation or improvement of the Premises (collectively, the "Chattels");

TOGETHER with leases of the Premises or the Chattels or any part thereof now or hereafter entered into and all right, title and interest of Grantor thereunder, including, without limitation, cash or securities deposited thereunder to secure performance by the lessees of their obligations thereunder (whether such cash or securities are to be held until the expiration of the terms of such leases or applied to one or more of the installments of rent coming due immediately prior to the expiration of such terms) and all rights to all insurance proceeds and unearned premiums arising from or relating to the Premises and all other rights and easements of Grantor now or hereafter existing pertaining to the use and enjoyment of the Premises and all right, title and interest of Grantor in and to all declarations of covenants, conditions and restrictions as may affect or otherwise relate to the Premises and all of Grantor's right, title and interest in and to the lease and any and all options to purchase, rights of first offer and rights of first

3

refusal, whether contained in the lease or elsewhere (the "Lease") more particularly described in Exhibit A attached hereto including, without limitation, the right to surrender, terminate, cancel, waive, change, supplement, grant subleases of, alter or amend the Lease;

TOGETHER with all sales agreements, deposit receipts, escrow agreements and other ancillary documents and agreements entered into with respect to the sale to any purchasers of any part of the Premises, and all deposits and other proceeds thereof;

TOGETHER with all permits, plans, licenses, specifica tions, subdivision rights, tentative tract maps, final tract maps, security interests, contracts, contract rights or other rights as may affect or otherwise relate to the Premises;

TOGETHER with all rights of Grantor in or to any fund, program or trust monies and any reimbursement therefrom directly or indirectly established, maintained or administered by any governmental authority or any other individual or entity which is designed to or has the effect of providing funds (whether directly or indirectly or as reimbursement) for the repair or replacement of storage tanks (whether above or below ground) located on the Premises or the remediation or cleanup of any spill, leakage or contamination from any such tank or resulting from the ownership, use or maintenance of any such tank or to compensate third parties for any personal injury or property damage;

TOGETHER with all rents, issues, profits, revenues, income and other benefits to which Grantor may now or hereafter be entitled from the Premises or the Chattels (which Premises, titles, interests, awards, Chattels, easements, rents, income, benefits, ways, waters, rights, powers, liberties, privileges, utilities, tenements, hereditaments, appurtenances, reversions, remainders, rents, issues, profits, estate, property, possession, claims and demands, are hereinafter collectively referred to as the "Mortgaged Property");

TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee, its successors and assigns forever.

THE OBLIGATIONS SECURED HEREBY SHALL NOT EXCEED AN AGGREGATE PRINCIPAL AMOUNT, AT ANY ONE TIME OUTSTANDING OF SIXTY MILLION AND NO/100 DOLLARS ($60,000,000), PROVIDED, THAT THE FOREGOING LIMITATION SHALL APPLY ONLY TO THE LIEN UPON THE REAL PROPERTY CREATED BY THIS DEED OF TRUST, AND IT SHALL NOT IN ANY MANNER LIMIT, AFFECT OR IMPAIR ANY GRANT OF A SECURITY INTEREST OR OTHER RIGHT IN FAVOR OF THE BENEFICIARY UNDER THE PROVISIONS

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OF THE LOAN AGREEMENT OR UNDER ANY OTHER SECURITY AGREEMENT AT ANY TIME EXECUTED BY GRANTOR.

ARTICLE I

And Grantor further covenants with the Trustee and Beneficiary as follows:

SECTION 1.01 . Grantor has good and marketable title to an indefeasible leasehold estate in the Premises subject to no lien, charge, or encumbrance except such as are approved by Beneficiary; that it owns the Chattels free and clear of liens and claims, except for Permitted Liens; that this Deed of Trust is and will remain a valid and enforceable first and prior lien on the Mortgaged Property subject only to the exceptions referred to above. Grantor will forever preserve, warrant and defend the same unto the Trustee and Beneficiary, and will forever preserve, warrant and defend the validity and priority of the lien hereof against the claims of all persons and parties whomsoever. Grantor has not, and will not, surrender, terminate, cancel, waive, accept waiver, change, supplement, grant subleases of, alter, surrender or amend, and will comply with all of the terms, covenants and conditions contained in, the Lease.

SECTION 1.02 . Intentionally Deleted.

SECTION 1.03 . Intentionally Deleted.

SECTION 1.04 . Intentionally Deleted.

SECTION 1.05 . All right, title and interest of Grantor in and to all extensions, improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the Mortgaged Property, hereafter acquired by, or released to, or constructed, assembled or placed by Grantor on the Premises, and all conversions of the security constituted thereby,

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immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further grant, conveyance, assignment or other act by Grantor, shall become subject to the first and prior lien and security interest of this Deed of Trust as fully and completely, and with the same effect, as though now owned by Grantor and specifically described in the granting clause hereof.

SECTION 1.06 . Grantor, from time to time when the same shall become due, will pay and discharge, or cause to be paid and discharged, all payments required under the Lease. Grantor will, upon the request of Beneficiary, deliver to Beneficiary receipts evidencing the payment, before any penalties accrued thereon, of all such lease payments.

(a) Grantor will pay from time to time when the same shall become due, all lawful claims and demands of mechanics, materialmen, laborers, and others which, if unpaid, might result in, or permit the creation of, a lien on the Mortgaged Property or any part thereof, or on the revenues, rents, issues, income and profits arising therefrom and in general will do or cause to be done everything necessary so that the lien and security interest hereof shall be fully preserved, at the cost of Grantor, without expense to Beneficiary.

SECTION 1.07 . In the event of the passage, after the date of this Deed of Trust, of any law of the State of Utah deducting from the value of the Mortgaged Property for the purpose of taxing the amount of any lien thereon, or changing in any way the laws now in force for the taxation of deeds of trust, or debts secured thereby, for state or local purposes, or the manner of operation of any such taxes so as to adversely affect the interest of Beneficiary, then and in such event, Grantor shall bear and pay the full amount of such taxes, provided

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that if for any reason payment by Grantor of any such new or additional taxes would be unlawful or if the payment thereof would constitute usury or render the Loan Agreement or the indebtedness secured hereby wholly or partially usurious under any of the terms or provisions of the Loan Agreement, or this Deed of Trust, or otherwise, Beneficiary may, at its option, upon thirty (30) days' written notice to Grantor, (i) declare the whole indebtedness secured by this Deed of Trust, with interest thereon, to be immediately due and payable, or
(ii) pay that amount or portion of such taxes as renders the Loan Agreement, or the indebtedness secured hereby unlawful or usurious, in which event Grantor shall concurrently therewith pay the remaining lawful non-usurious portion or balance of said taxes.

SECTION 1.08 . In addition to restrictions contained in the Loan Agreement, Grantor will not further encumber, sell, convey or transfer any interest in, or any part of, the Mortgaged Property. Any such encumbrance, sale, conveyance or transfer made without Beneficiary's prior written consent shall be an Event of Default hereunder.

SECTION 1.09 . Intentionally Deleted.

SECTION 1.10 . Intentionally Deleted.

SECTION 1.11 . If Grantor shall fail to perform any of the covenants contained herein or in the Lease on its part to be performed, Beneficiary may, but shall not be required to, make advances to perform the same, or cause the same to be performed, on Grantor's behalf, and all sums so advanced shall bear interest, from and after the date advanced until repaid, at the lower of (i) the maximum rate permitted by law or (ii) the default rate set forth in the Loan Agreement, shall be a lien upon the

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Mortgaged Property and shall, at Beneficiary's option, be added to the indebtedness secured hereby. Grantor will repay on demand all sums so advanced on its behalf with interest at the rate herein set forth. This Section 1.11 shall not be construed as preventing any default by Grantor in the observance of any covenant contained in this Deed of Trust from constituting an Event of Default hereunder.

SECTION 1.12 . Grantor will not commit any waste at or with respect to the Mortgaged Property nor will Grantor do or fail to do anything which will in any way increase the risk of fire or other hazard to the Premises, Improvements or Chattels or to any part thereof.

SECTION 1.13 . Grantor will immediately notify Beneficiary of the institution of any proceeding for the condemnation or taking by eminent domain of the Mortgaged Property, or any portion thereof. The Trustee and Beneficiary may participate in any such proceeding and Grantor from time to time will deliver to Beneficiary all instruments requested by it to permit such participation. In the event of such condemnation proceedings, or a conveyance in lieu of such taking, the award or compensation payable is hereby assigned to and shall be paid to Beneficiary. Beneficiary shall be under no obligation to question the amount of any such award or compensation and may accept the same in the amount in which the same shall be paid, but shall have no right to bind Grantor or to make settlement of its claim, except to the extent of the interest of the Trustee and Beneficiary. In any such condemnation proceedings the Trustee and Beneficiary may be represented by counsel selected by Beneficiary. The proceeds of any award or compensation so received after reimbursement of any expenses incurred by Beneficiary in

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connection with such proceedings, shall, at the option of Beneficiary, be applied, without premium, to the repayment of the sums due under the Loan Agreement in such order as Beneficiary may in its sole discretion elect (regardless of interest payable on the award by the condemning authority), or to the cost of restoration of the Improvement or Chattel so taken and other terms as shall be satisfactory to Beneficiary.

SECTION 1.14 . The assignment of rents, income and other benefits (collectively, "rents") contained in the granting clause of this Deed of Trust shall be fully operative without any further action on the part of Grantor or Beneficiary and specifically Beneficiary shall be entitled, at its option, to all rents from the Mortgaged Property whether or not Beneficiary takes possession of the Mortgaged Property. Grantor hereby further grants to Beneficiary the right (i) to enter upon and take possession of the Mortgaged Property for the purpose of collecting the rents, (ii) to dispossess by the usual summary proceedings any tenant defaulting in the payment thereof to Beneficiary, (iii) to let the Mortgaged Property or any part thereof, and (iv) to apply the rents, after payment of all necessary charges and expenses, on account of the indebtedness and other sums secured hereby. Such assignment and grant shall continue in effect until the indebtedness and other sums secured hereby are paid, the execution of this Deed of Trust constituting and evidencing the irrevocable consent of Grantor to the entry upon and taking possession of the Mortgaged Property by Beneficiary pursuant to such grant, whether or not sale or foreclosure has been instituted. Neither the exercise of any rights under this Section by Beneficiary nor the application of the rents to the indebtedness and other sums

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secured hereby, shall cure or waive any Event of Default, or notice of default hereunder or invalidate any act done pursuant hereto, but shall be cumulative of all other rights and remedies.

The foregoing provisions hereof shall constitute an absolute and present assignment of the rents from the Mortgaged Property, subject, however, to the conditional permission given to Grantor to collect and use the rents until the occurrence of an Event of Default at which time such conditional permission shall automatically terminate; and the existence or exercise of such right of Grantor shall not operate to subordinate this assignment, in whole or in part, to any subsequent assignment by Grantor permitted under the provisions of this Deed of Trust, and any such subsequent assignment by Grantor shall be subject to the rights of the Trustee and Beneficiary hereunder.

SECTION 1.15 . Grantor will not (i) execute an assignment of the rents or any part thereof from the Mortgaged Property unless such assignment shall provide that it is subject and subordinate to the assignment contained in this Deed of Trust, and any additional or subsequent assignment executed pursuant hereto, or (ii) except where the lessee is in default thereunder, terminate or consent to the cancellation or surrender of any lease of the Mortgaged Property or of any part thereof, now existing or hereafter to be made or (iii) modify any such lease or give consent to any assignment or subletting without Beneficiary's prior written consent, or (iv) accept prepayments of any installments of rent or additional rent to become due under such leases, except prepayments in the nature of security for the performance of the lessee's obligations thereunder, or (v) in any other manner impair the value of the Mortgaged Property or the security of the Trustee or Beneficiary for the payment of the indebtedness secured hereby, or (vi) enter into any lease prohibited under the provisions of the Loan Agreement.

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(a) Grantor will not execute any lease of all or a substantial portion of the Mortgaged Property except for actual occupancy by the lessee thereunder, and will at all times promptly and faithfully perform, or cause to be performed, all of the covenants, conditions and agreements contained in all leases of the Mortgaged Property now or hereafter existing, on the part of the lessor thereunder to be kept and performed. If any such lease provides for the giving by the lessee of certificates with respect to the status of such leases, Grantor shall exercise its right to request such certificates within five (5) days of any demand therefor by Beneficiary.

(b) Grantor shall furnish to Beneficiary, within fifteen (15) days after a request by Beneficiary to do so, a written statement containing the names of all lessees for the Mortgaged Property, the terms of their respective leases, the spaces occupied, the rentals paid and any security therefor.

(c) Grantor shall, from time to time upon request of Beneficiary, specifically assign to Beneficiary as additional security hereunder, by an instrument in writing in such form as may be approved by Beneficiary, all right, title and interest of Grantor in and to any and all leases now or hereafter on or affecting the Mortgaged Property, together with all security therefor and all monies payable thereunder, subject to the conditional permission hereinabove given to Grantor to collect the rentals under any such lease. Grantor shall also execute and deliver to Beneficiary any notification, financing statement or other document reasonably required by Beneficiary to perfect the foregoing assignment as to any such lease.

SECTION 1.16 . Each lease of the Mortgaged Property or of any part thereof entered into after the date hereof shall provide that, in the event of the enforcement by the Trustee or Beneficiary of the remedies provided for by law or by this Deed of Trust, any person succeeding to the interest of Grantor as a result of such enforcement shall not be bound by any payment of rent or additional rent

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for more than one (1) month in advance, provided, however, that nothing herein set forth shall affect or impair the rights of Beneficiary to terminate any one or more of such leases in connection with the exercise of its or the Trustee's remedies hereunder.

SECTION 1.17 . (a) With respect to the Lease, Grantor hereby warrants and represents as follows: (i) the Lease is in full force and effect, unmodified by any writing or otherwise, except as specifically set forth in Exhibit A; (ii) all rent, additional rent and other charges reserved herein have been paid to the extent they are payable to the date hereof; (iii) Grantor enjoys the quiet and peaceful possession of the property demised thereby; (vi) Grantor is not in default under any of the terms thereof and, to the best of its knowledge, there are no circumstances which, with the passage of time or the giving of notice or both, would constitute a default thereunder; and (v) to the best of Grantor's knowledge the landlord under the Lease is not in default under any of the terms or provisions thereof on the part of the landlord to be observed or performed;

(b) Further, with respect to the Lease, Grantor covenants and agrees as follows: (i) to promptly and faithfully observe, perform and comply with all the terms, covenants and provisions thereof on Grantor's part to be observed, performed and complied with, at the times set forth therein, without any allowance for grace period, if any; (ii) not to do, permit, suffer or refrain from doing anything, as a result of which, there could be a default under or breach of any of the terms thereof; (iii) not to cancel, surrender, modify, amend or in any way alter or permit the alternation of any of the terms thereof; (iv) to give Beneficiary immediate notice of any default by anyone thereunder and to promptly deliver to Beneficiary copies of each notice of default and all other notices, communications, plans, specifications and other similar instruments received or delivered by Grantor in connection therewith; (v) to furnish to Beneficiary such information and evidence as Beneficiary may reasonably require concerning Grantor's due observance, performance and compliance with the terms, covenants and

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provisions thereof; and (vi) that any default of the tenant thereunder shall constitute an Event of Default under this Deed of Trust;

(c) In the event of any default by Grantor in the performance of any of its obligations under the Lease, including, without limitation, any default in the payment of rent and other charges and impositions made payable by the tenant thereunder, then, in each and every case, Beneficiary may, at its option and without notice, cause the default or defaults to be remedied and otherwise exercise any and all of the rights of Grantor thereunder in the name of, and on behalf of, Grantor. Grantor shall, on demand, reimburse Beneficiary for all advances made and expenses incurred by Beneficiary incurring any such default (including, without limitation, reasonable attorneys' fees), together with interest thereon computed at the rate provided for in Section 1.12 hereof from the date that an advance is made or expense is incurred, to and including the date the same is paid;

(d) Grantor shall give Beneficiary notice of its intention to exercise each and every option to extend the term of the Lease, at least twenty (20) but not more than sixty (60) days prior to the expiration of the time to exercise such option under the terms thereof. If Grantor intends to extend the term of the Lease, it shall deliver to Beneficiary with the notice of such decision, a copy of the notice extension delivered to the landlord thereunder. If Grantor does not intend to extend the term of the Lease, Beneficiary may, at its option, exercise the option to extend in the name and on behalf of Grantor. In any event, Grantor hereby appoints Beneficiary its attorney-in-fact to execute and deliver, for and in the name of Grantor, all instruments and agreements necessary under the Lease or otherwise to cause any extension of the term thereof. This power, being coupled with an interest, shall be irrevocable as long as any amounts secured hereby remain unpaid;

(e) It is hereby agreed that the fee title, the leasehold estate and the subleasehold estates in the property demised by the Lease shall not merge but shall always be kept separate and distinct, notwithstanding the union of said estates in either the landlord thereunder, Grantor or a third party, whether by purchase or otherwise. Not less than sixty (60) nor more than ninety (90) days prior to the date of the exercise of any option or other right to purchase the Premises, or any part thereof, Grantor shall notify Beneficiary of the existence of such option or right. At least twenty (20) but not more than sixty (60) days prior to the expiration of the time to exercise such option or right, Grantor shall give Beneficiary notice of its intention to exercise such option or right. If Grantor intends to purchase, it shall deliver to Beneficiary with the

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notice of such decision, a copy of the notice of purchase delivered to the appropriate party. If Grantor does not intend to purchase, then Grantor will be deemed to have assigned the option to Beneficiary, who may purchase the Premises in Beneficiary's name, subject to the Lease, which will remain in full force and effect subject to its terms. If Grantor acquires the fee title or any other estate, title or interest in the property demised by the Lease, or any part thereof, the lien of this Deed of Trust shall attach to, cover and be a lien upon such acquired estate, title or interest and same shall thereupon be and become a part of the Mortgaged Property with the same force and effect as if specifically encumbered herein. Grantor agrees to execute all instruments and documents which Beneficiary may reasonably require to ratify, confirm and further evidence Beneficiary's lien on the acquired estate, title or interest. Furthermore, Grantor hereby appoints Beneficiary its true and lawful attorney-in-fact to execute and deliver all such instruments and documents in the name and on behalf of Grantor. This power, being coupled with an interest, shall be irrevocable as long as any amounts secured hereby remain unpaid.

(f) If the Lease is cancelled or terminated, and if Beneficiary or its nominee shall acquire an interest in any new lease of the property demised thereby, Grantor shall have no right, title or interest in or to the new lease or the leasehold estate created by such new lease;

(g) Grantor shall use its best efforts to obtain and deliver to Beneficiary within twenty (20) days after written demand by Beneficiary, an estoppel certificate from the landlord under the Lease setting forth (i) the name of the tenant thereunder, (ii) that the Lease has not been modified or, if it has been modified, the date of each modification (together with copies of each such modifications), (iii) the basic rent payable under the Lease,
(iv) the date to which all rental charges have been paid by the tenant under the Lease, and (v) whether there are any alleged defaults of the tenant under the Lease and, if there are, setting forth the nature thereof in reasonable detail.

(h) Grantor covenants and agrees that neither Grantor nor its trustee in bankruptcy shall exercise any right to terminate the Lease as afforded to it by ss.365(h)(i) of the Bankruptcy Code of the United States, as amended, without the prior written consent of Beneficiary.

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ARTICLE II

EVENTS OF DEFAULT AND REMEDIES

SECTION 2.01 . The occurrence of any one or more of the following events shall constitute an event of default ("Event of Default") hereunder:

(a) If there shall be an Event of default under the Loan Agreement; or

(b) If Grantor shall breach, or be in default of, any of the covenants or provisions contained in this Deed of Trust, or of any chattel mortgage, other deed of trust, security agreement or other document issued thereunder or in connection therewith or herewith; or

(c) If there shall be a default under the Lease.

Upon the occurrence of an Event of Default, and in every such case:

(i) During the continuance of any Event of Default, Beneficiary personally, or by its agents or attorneys may enter into and upon all or any part of the Mortgaged Property, and each and every part thereof, and may exclude the party owning the beneficial interest in same, its agents and servants wholly therefrom; and having and holding the same, may use, operate, manage and control the Mortgaged Property for any lawful purpose and conduct the business thereof, either personally or by its superintendents, managers, agents, servants, attorneys or receivers; and upon every such entry, Beneficiary, at the expense of Grantor, from time to time, either by purchase, repairs or construction, may maintain and restore the Mortgaged Property, whereof it shall become possessed as aforesaid, may complete the construction of the Improvements and in the course of such completion may make such changes in the contemplated Improvements as it may deem desirable; may insure or reinsure the same as provided in the Loan Agreement, and likewise, from time to time, at the expense of Grantor, Beneficiary may make all

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necessary or proper repairs, renewals, replacements, alterations, additions, betterments and improvements to the Mortgaged Property or any part thereof and thereon as it may deem advisable; and in every such case Beneficiary shall have the right to manage and operate the Mortgaged Property, possessed as aforesaid, and to carry on the business thereof and exercise all rights and powers of the party owning such property with respect thereto either in the name of such party or otherwise as it shall deem best; and Beneficiary shall be entitled to collect and receive all earnings, revenues, rents, issues, profits and income of the Mortgaged Property and every part thereof; and after deducting payments due under the Lease, the expenses of conducting the business thereof and of all maintenance, repairs, replacements, alterations, additions, betterments and improvements and all payments which may be made for taxes, assessments, insurance, in payment of any prior deed of trust and prior or other proper charges upon the Mortgaged Property or any part thereof, as well as just and reasonable compensation of Beneficiary for the services of Beneficiary and for all attorneys, counsel, agents, clerks, servants and other employees by it properly engaged and employed, Beneficiary shall apply the moneys arising as aforesaid, first, to the payment of any sums, other than interest and principal due pursuant to the Loan Agreement required to be paid by Grantor under this Deed of Trust, second, to the payment of interest due pursuant to the Loan Agreement, third, to the payment of the principal due pursuant to the terms of the Loan Agreement when and as the same shall become payable, whether by acceleration or otherwise.

(ii) Beneficiary, at its option, may declare the entire unpaid balance of the indebtedness secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale and written notice of default and of election to cause the Mortgaged Property to be sold, which notice Trustee shall cause to be duly filed

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for record. Beneficiary shall also deposit with the Trustee this Deed of Trust, and all documents evidencing the expenditures secured hereby.

(iii)After the lapse of such time as may then be required by law following the recordation of said notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Grantor, shall sell the Mortgaged Property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. If the Mortgaged Property consists of several known lots or parcels, Beneficiary may designate the order in which such parcels shall be sold or offered for sale. Any person, including Grantor, Trustee or Beneficiary, may purchase at such sale.

(iv) Trustee may postpone sale of all or any portion of the Mortgaged Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the time fixed by the preceding postponement.

(v) On and after the occurrence of an Event of Default, Grantor shall pay all rents, issues and profits thereafter received by Grantor from the Mortgaged Property to Beneficiary and to the extent not paid shall hold such amounts as trust funds for the benefit of Beneficiary and such rents, issues and profits shall be deemed "cash collateral" of Beneficiary under 11 U.S.C., as amended.

SECTION 2.02 . Trustee, after making such sale, and upon receipt of the purchase price, shall make, execute and deliver to the purchaser or purchasers its deed or deeds conveying the Mortgaged Property so sold, but without any covenant or warranty, express or implied, and

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without any representation, express or implied, as to the existence, or lack thereof, of Hazardous Substances on the Mortgaged Property, and shall apply the proceeds of sale thereof to payment, FIRSTLY, of the expenses of such sale, together with the reasonable expenses of this Trust, including Trustee's fees and cost of evidence of title in connection with sale, Torrens certificates, and revenue stamps on Trustee's deed; SECONDLY, of all moneys paid, advanced or expended by Beneficiary under the terms hereof, not then repaid, together with the interest thereon as herein provided; and THIRDLY, of the amount of the principal and interest due pursuant to the Loan Agreement then remaining unpaid.

(a) In the event of a sale of the Mortgaged Property, or any part thereof, and the execution of a deed or deeds therefor under these trusts, the recitals therein of any matters or facts shall be conclusive proof of the truthfulness thereof and of the fact that said sale was regularly and validly made in accordance with all requirements of the laws of the State of Utah and of this Deed of Trust; and any such deed or deeds, with such recitals therein, shall be effectual and conclusive against Grantor and all other persons; and the receipt for the purchase money recited or contained in any deed executed to the purchaser as aforesaid shall be sufficient discharge to such purchaser from all obligations to see to the proper application of the purchase money according to the trusts aforesaid.

SECTION 2.03 . After the happening of an Event of Default by Grantor under this Deed of Trust and immediately upon the commencement of any action, suit or other legal proceeding by Beneficiary to obtain judgment for the principal of, or interest due pursuant to the Loan Agreement and other sums required to be paid by Grantor pursuant to any provisions of this Deed of Trust, or of any other nature in aid of the enforcement of the Loan Agreement, or of

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this Deed of Trust, Grantor will waive the issuance and service of process and enter its voluntary appearance in such action, suit or proceeding. Further, Grantor hereby consents to the appointment of a receiver or receivers, without bond, of the Mortgaged Property and of all the earnings, revenues, rents, issues, profits and income thereof. The exercise of any right under this Article II shall not be deemed as election of remedies nor a "pending action" so as to preclude to exercise of any other right or remedy. After the happening of any such default and during its continuance or upon the commencement of any proceedings to foreclose this Deed of Trust or to enforce the specific performance hereof or in aid thereof or upon the commencement of any other judicial proceeding to enforce any right of the Trustee or Beneficiary hereunder, Beneficiary shall be entitled, as a matter of right, if it shall so elect, without the giving of notice to any other party and without regard to the adequacy or inadequacy of any security for the Deed of Trust indebtedness, forthwith either before or after declaring all sums due pursuant to the Loan Agreement to be due and payable, to the appointment of such a receiver or receivers.

SECTION 2.04 . During the continuance of an Event of Default, Beneficiary shall have the following rights and remedies:

I. Beneficiary or its employees, acting by themselves or through a court- appointed receiver, may enter upon, possess, manage, operate, dispose of, and contract to dispose of the Mortgaged Property or any part thereof; take custody of all accounts; negotiate with governmental authorities with respect to the Mortgaged Property's environmental compliance and remedial measures; take any action necessary to enforce

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compliance with any Act, including but not limited to spending rents to abate the problem; make, terminate, enforce or modify leases of the Mortgaged Property upon such terms and conditions as Beneficiary deems proper; contract for goods and services, hire agents, employees, and counsel, make repairs, alterations, and improvements to the Mortgaged Property necessary, in Beneficiary's judgment, to protect or enhance the security hereof; incur the risks and obligations ordinarily incurred by owners of property (without any personal obligation on the part of the receiver); and/or take any and all other actions which may be necessary or desirable to comply with Grantor's obligations hereunder and under the Loan Agreement. All sums realized by Beneficiary under this subparagraph, less all costs and expenses incurred by it under this subparagraph, including attorneys' fees, and less such sums as Beneficiary deems appropriate as a reserve to meet future expenses under the subparagraph, shall be applied on any indebtedness secured hereby in such order as Beneficiary shall determine. Neither application of said sums to said indebtedness, nor any other action taken by Beneficiary under this subparagraph shall cure or waive any Event of Default or notice of default hereunder, or nullify the effect of any such notice of default. Beneficiary, or any employee or agent of Beneficiary, or a receiver appointed by a court, may take any action or proceeding hereunder without regard to (a) the adequacy of the security for the indebtedness secured hereunder, (b) the existence of a declaration that the indebtedness secured hereby has been declared immediately due and payable, or (c) the filing of a notice of default.

II. With or without notice, and without releasing Grantor from any obligation hereunder,

L

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to cure any default of Grantor and, in connection therewith, Beneficiary or its agents, acting by themselves or through a court appointed receiver, may enter upon the Mortgaged Property or any part thereof and perform such acts and things as Beneficiary deems necessary or desirable to inspect, investigate, assess, and protect the security hereof, including without limitation of any of its other rights: (a) to obtain a court order to enforce Beneficiary's right to enter and inspect the Mortgaged Property, to which the decision of Beneficiary as to whether there exists a release or threatened release of a Hazardous Substances onto the Mortgaged Property shall be deemed reasonable and conclusive as between the parties hereto; and (b) to have a receiver appointed to enforce Beneficiary's right to enter and inspect the Mortgaged Property for Hazardous Substances. All costs and expenses incurred by Beneficiary with respect to the audits, tests, inspections, and examinations which Beneficiary or its agents or employees may conduct, including the fees of the engineers, laboratories, contractors, consultants, and attorneys, shall be paid by Grantor. All costs and expenses incurred by Trustee and Beneficiary pursuant to this subparagraph (including without limitation court costs, consultant fees and attorneys' fees, whether incurred in litigation or not

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and whether before or after judgment) shall bear interest at the Default Rate set forth in the Loan Agreement from the date they are incurred until said sums have been paid.

III. To seek a judgment that Grantor has breached its covenants, representations and/or warranties with respect to the environmental matters set forth in the Loan Agreement by commencing and maintaining an action or actions in any court of competent jurisdiction for breach of contract, whether commenced prior to or after foreclosure of the Mortgaged Property, and to seek the recovery of any and all costs, damages, expenses, fees, penalties, fines, judgments, indemnification payments to third parties, and other out- of-pocket costs or expenses actually incurred by Beneficiary (collectively, the "Environmental Costs") incurred or advanced by Beneficiary relating to the cleanup, remediation or other response action required by any Act or to which Beneficiary believes necessary to protect the Mortgaged Property, it being conclusively presumed between Beneficiary and Grantor that all such Environmental Costs incurred or advanced by Beneficiary relating to the cleanup, remediation, or other response action of or to the Mortgaged Property were made by Beneficiary in good faith. All Environmental Costs incurred by Beneficiary under this subparagraph (including

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without limitation court costs, consultant fees and attorneys' fees, including, without limitation, fees incurred pursuant to 11 U.S.C., whether incurred in litigation or not and whether before or after judgment) shall bear interest at the Default Rate from the date of expenditure until said sums have been paid. Beneficiary shall be entitled to bid, at the sale of the Mortgaged Property, the amount of said costs, expenses and interest in addition to the amount of the other obligations hereby secured as a credit bid, the equivalent of cash.

Grantor acknowledges and agrees that notwithstanding any term or provision contained herein or in the other Loan Documents (as defined in the Loan Agreement), the Environmental Costs shall be exceptions to any nonrecourse or exculpatory provision of the Loan Documents, and Grantor shall be fully and personally liable for the Environmental Costs hereunder, and such liability shall not be limited to the original principal amount of the obligations secured by this Deed of Trust, and Grantor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Deed of Trust. For the purposes of any action brought under this subparagraph, Grantor hereby waives the defense of laches and any applicable statute of limitations.

IV. To waive its lien against the Mortgaged Property or any portion thereof, whether fixtures or personal property, to the extent such property is found to be environmentally impaired and to exercise any and all rights and remedies of an unsecured creditor against Grantor and all of Grantor's assets and property for the recovery of any deficiency and Environmental Costs, including, but not limited to,

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seeking an attachment order. As between Beneficiary and Grantor, Grantor shall have the burden of proving that Grantor or any related party (or any affiliate or agent of Grantor or any related party) was not in any way negligent in permitting the release or threatened release of the Hazardous Substances. Grantor acknowledges and agrees that Grantor shall be fully and personally liable for all judgments and awards entered against Grantor hereunder and such liability shall not be limited to the original principal amount of the obligations secured by this Deed of Trust and Grantor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Deed of Trust. For the purposes of any action brought under this subparagraph, Grantor hereby waives the defense of laches and any applicable statute of limitations.

V. Nothing contained herein shall be construed to limit any and all rights that Beneficiary has at law or pursuant hereto.

SECTION 2.05 . No remedy herein conferred upon or reserved to the Trustee or Beneficiary is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission of the Trustee or Beneficiary to exercise any right or power occurring

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upon the Event of Default shall impair any such right or power or shall be construed to be a waiver thereof or an acquiescence therein; and every power and remedy given by this Deed of Trust to the Trustee or Beneficiary may be exercised from time to time and as often as may be deemed expedient by the Trustee or Beneficiary. Nothing in this Deed of Trust or in the Loan Agreement shall affect the obligation of Grantor to pay the principal of and interest on all sums due under the Loan Agreement in the manner and at the time and place therein respectively expressed.

SECTION 2.06 . To the extent permitted by law, Grantor will not at any time insist upon, or plead, or in any manner whatever claim or take any benefit or advantage of, any stay or extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance of this Deed of Trust; nor claim, take or insist upon any benefit or advantage of any law now or hereafter in force providing for the marshalling of the Mortgaged Property or on the valuation or appraisal of the Mortgaged Property, or any part thereof, prior or subsequent to any sale or sales thereof which may be made pursuant to any provision herein, or pursuant to the decree, judgment or order of any court of competent jurisdiction; nor, after any such final sale or sales, claim or exercise any right under any statute or otherwise, to redeem the property so sold or any part thereof; and Grantor hereby expressly waives all benefit or advantage of any such law or laws, and covenants not to hinder, delay or impede the execution of any power herein granted or delegated to the Trustee or Beneficiary, but to suffer and permit the execution of every power as though no such law or laws had been made or

25

enacted. Grantor hereby waives the right to require any sale to be made in parcels, or the right to select parcels to be so sold, and there shall be no requirement for marshalling of assets. Grantor hereby further waives any rights it may have under applicable law relating to the prohibition of the obtaining of a deficiency judgment by Beneficiary against Grantor.

SECTION 2.07 . During the continuance of any Event of Default and pending the exercise by the Trustee or Beneficiary of its right to exclude Grantor from all or any part of the Premises, Grantor agrees to pay the fair and reasonable rental value for the use and occupancy of the Mortgaged Property for such period and upon default of any such payment, will vacate and surrender possession of the Premises to the Trustee or Beneficiary or to a receiver, if any, and in default thereof may be evicted by any summary action or proceeding for the recovery or possession of Premises for non-payment of rent, however designated. In the event Grantor remains in possession of the Mortgaged Property after the same is sold as provided above or after Beneficiary otherwise becomes entitled to possession of the same, Grantor shall become a tenant at will of Beneficiary or the purchaser of the Mortgaged Property.

SECTION 2.08 . Without affecting the personal liability of any person, firm, corporation or other entity, including Grantor (other than any person released pursuant hereto), for the payment of the indebtedness secured hereby, and without affecting the lien of this Deed of Trust for the full amount of the indebtedness remaining unpaid upon any property not reconveyed pursuant hereto, Beneficiary and Trustee are respectively authorized and empowered as follows: Beneficiary may, at any time and from time to time, either before or after the expiration of

26

the Loan Agreement, and without notice: (a) release any person liable for the payment of any of the indebtedness, (b) make any agreement extending the time or otherwise altering the terms of payment of any of the indebtedness, (c) accept additional security therefor of any kind, (d) release any property, real or personal, securing the indebtedness. Trustee may, without liability therefor and without notice, at any time and from time to time so long as the lien or charge hereof shall subsist, but only upon the written request of Beneficiary and presentation of this Deed of Trust for endorsement:
(a) consent to the making of any map or plat of the Land, (b) join in granting any easement thereon or in creating any covenants restricting use or occupancy thereof, (c) reconvey, without warranty, any part of the Mortgaged Property, (d) join in any extension agreement or in any agreement subordinating the lien or charge hereof.

SECTION 2.09 . This Deed of Trust constitutes a Security Agreement under the laws of the State of Utah so that Beneficiary shall have and may endorse a security interest in any or all of the Mortgaged Property which may or might now or hereafter be or be deemed to be personal property, fixtures or property other than real estate (collectively, "Personal Property") and Grantor agrees to execute, as debtor, such financing statement or statements as Beneficiary may now or hereafter reasonably request in order that such security interest or interests may be perfected pursuant to such laws. This Deed of Trust further constitutes a fixture filing under Sections 9-313 and 9-402 of the Utah Uniform Commercial Code, as amended or recodified from time to time; provided, however that the execution and/or filing hereof does not imply that the items of Personal Property included in the Mortgaged Property are or are to become

27

fixtures. The filing hereof as a fixture filing is intended to protect the parties from unwarranted assertions by third parties.

Notwithstanding any release of any or all of the property included in the Premises which is deemed "real property", any proceedings to foreclose this Deed of Trust, or its satisfaction of record, the terms hereof shall survive as a security agreement with respect to the security interest created hereby and referred to above until the repayment or satisfaction in full of the obligations of Grantor as are now or hereafter evidenced by the Loan Agreement.

SECTION 2.10 . During the continuance of any Event of Default, Beneficiary shall have all of the rights and remedies of a secured party under the Uniform Commercial Code (the "Code") of the State of Utah, and specifically the right to direct notice and collections of any obligation owing to Grantor by any lessee. In addition to its rights to foreclose this Deed of Trust, Beneficiary shall have the right to sell the Personal Property or any part thereof, or any further, or additional, or substituted Personal Property, at one or more times, and from time to time, at public sale or sales or at private sale or sales, on such terms as to cash or credit, or partly for cash and partly on credit, as Beneficiary may deem proper. Beneficiary shall have the right to become the purchaser at any such public sale or sales, free and clear of any and all claims, rights of equity of redemption in Grantor, all of which are hereby waived and released. Grantor shall not be credited with the amount of any part of such purchase price, unless, until and only to the extent that such payment is actually received in cash. Notice of public sale, if given, shall be sufficiently given, for all purposes, if published not less than seven days prior to any sale, in any newspaper of general circulation distributed in the city in which the property to be sold is located or as otherwise required by the Code.

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The net proceeds of any sale of the Personal Property which may remain after the deduction of all costs, fees and expenses incurred in connection therewith, including, but not limited to, all advertising expenses, broker's or brokerage commissions, documentary stamps, recording fees, foreclosure costs, stamp taxes and counsel fees, shall be credited by Beneficiary against the liabilities, obligations and indebtedness of Grantor to Beneficiary secured by this Deed of Trust and evidenced by the Loan Agreement. Any portion of the Personal Property which may remain unsold after the full payment, satisfaction and discharge of all of the liabilities, obligations and indebtedness of Grantor to Beneficiary shall be returned to the respective parties which delivered the same to Beneficiary. If at any time Grantor or any other party shall become entitled to the return of any of the Personal Property hereunder, any transfer or assignment thereof by Beneficiary shall be, and shall recite that the same is, made wholly without representation or warranty whatsoever by, or recourse whatsoever against Beneficiary.

SECTION 2.11 . All rights, remedies and powers provided by Sections 2.01-2.10 hereof may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law in the jurisdiction in which the Premises are located, and all such provisions are intended to be subject to all applicable provisions of law which may be controlling in such jurisdiction and to be limited to the extent necessary so that they will not render this Deed of Trust invalid, illegal or unenforceable under the provisions of any applicable law.

SECTION 2.12 . Grantor agrees, to the full extent permitted by law, that at all times following an Event of Default, neither

29

Grantor nor anyone claiming through or under it shall or will set up, claim or seek to take advantage of any appraisement, valuation, stay, or extension laws now or hereafter in force, in order to prevent or hinder the enforcement or foreclosure of this Deed of Trust or the absolute sale of the Mortgaged Property or the final and absolute putting into possession thereof, immediately after such sale, of the purchaser thereat; and Grantor, for itself and all who may at any time claim through or under it, hereby waives, to the full extent that it may lawfully so do, the benefit of all such laws and any and all right to have the assets comprising the Mortgaged Property marshalled upon any foreclosure of the lien hereof and agrees that Trustee or any court having jurisdiction to foreclose such lien may sell the Mortgaged Property in part or as an entirety. To the full extent permitted by law, Grantor hereby waives any and all statutory or other rights of redemption from sale under any order or decree of foreclosure of this Deed of Trust, on its own behalf and on behalf of each and every person acquiring any interest in or title to the Mortgaged Property subsequent to the date hereof.

ARTICLE III

MISCELLANEOUS

SECTION 3.01 . In the event any one or more of the provisions contained in this Deed of Trust shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Deed of Trust, but this Deed of Trust shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

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SECTION 3.02 . All notices or demands by any party relating to this Deed of Trust or any other agreement entered into in connection herewith shall be sent in the form set forth in the Loan Agreement.

The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other. All notices or demands sent in accordance with this Section 3.02 other than notices by Beneficiary in connection with Sections 9504 or 9505 of the Code, shall be deemed received on the earlier of the date of actual receipt or three (3) calendar days after the deposit thereof in the mail. Grantor acknowledges and agrees that notices sent by Beneficiary in connection with Sections 9504 or 9505 of the Code shall be deemed sent when deposited in the mail or transmitted by telefacsimile or other similar method permitted by law.

SECTION 3.03 . Whenever in this Deed of Trust the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person or persons entitled to receive such notice.

SECTION 3.04 . All of the grants, covenants, terms, obligations, provisions and conditions herein contained shall run with the land and shall apply to, bind and inure to the benefit of, the successors and assigns of Grantor and Beneficiary and to the successors of the Trustee.

SECTION 3.05 . Intentionally Deleted.

SECTION 3.06 . It shall be lawful for the Trustee, or Beneficiary, at its election, upon the occurrence of an Event of Default, to sue out forthwith a complaint in foreclosure upon this Deed of Trust and to proceed thereon to judgment and execution for the recovery of all sums payable by Grantor pursuant to the terms of this Deed of Trust without further stay, any law, usage or custom to the contrary notwithstanding.

SECTION 3.07 . Notwithstanding the appointment of any receiver, liquidator or trustee of Grantor, or of any of its property, or of the Mortgaged Property, or any part

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thereof, the Trustee shall be entitled to retain possession and control of all property now or hereafter held under this Deed of Trust.

SECTION 3.08 . Intentionally Deleted.

SECTION 3.09 . Grantor hereby waives and relin quishes unto, and in favor of Beneficiary, all benefit under all laws, now in effect or hereafter passed, to relieve Grantor in any manner from the obligations assumed and the obligation for which this Deed of Trust is security or to reduce the amount of the said obligation to any greater extent than the amount actually paid for the Mortgaged Property, in any judicial proceedings upon the said obligation, or upon this Deed of Trust.

SECTION 3.10 . Neither Grantor nor any other person now or hereafter obligated for payment for all or any part of the indebtedness secured hereby shall be relieved of such obligation by reason of the failure of Beneficiary to comply with any request of Grantor or of any other person so obligated to take action to foreclose on this Deed of Trust or otherwise enforce any provisions hereof or under the Loan Agreement or by reason of the release, regardless of consideration, of all or any part of the security held for the indebtedness secured hereby, or by reason of any agreement of stipulation between any subsequent owner of the Mortgaged Property and Beneficiary extending the time of payment or modifying the terms hereof without first having obtained the consent of Grantor or such other person; and in the latter event Grantor and all other such persons shall continue to be liable to make payment according to the terms of any such extension or modification agreement, unless expressly released and discharged in writing by Beneficiary.

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SECTION 3.11 . By accepting or approving anything required to be observed, performed or fulfilled or to be given to Beneficiary pursuant to this Deed of Trust, including (but not limited to) any certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal or insurance policy, Beneficiary shall not be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance or approval thereof shall not be or constitute any warranty or representation with respect thereto by Beneficiary.

SECTION 3.12 . Beneficiary may from time to time, without notice to Grantor or to the Trustee, and with or without cause and with or without the resignation of the Trustee substitute a successor or successors to the Trustee named herein or acting hereunder to execute this trust. Upon such appointment and without conveyance to the successor Trustee, the latter shall be vested with all title, powers and duties conferred upon the Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written document executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which when duly filed for record in the proper office, shall be conclusive proof of proper appointment of the successor Trustee. The procedure herein provided for substitution of the Trustee shall be conclusive of all other provisions for substitution, statutory or otherwise.

SECTION 3.13 . Intentionally Deleted.

SECTION 3.14 . Intentionally Deleted.

SECTION 3.15 . GRANTOR AGREES THAT THIS DEED OF TRUST, THE LOAN AGREEMENT, AND ALL OTHER

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RELATED DOCUMENTS AND THE RIGHT, DUTIES, OBLIGATIONS AND LIABILITIES THEREUNDER (INCLUDING, WITHOUT LIMITATION, THE LIABILITY OF GRANTOR FOR ANY DEFICIENCY FOLLOWING A FORECLOSURE OF ALL OR ANY PART OF THE MORTGAGED PROPERTY) ARE TO BE CONSTRUED, GOVERNED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, EXCEPT AS TO MATTERS RELATING TO THE CREATION, PERFECTION, PRIORITY AND ENFORCEMENT OF THE LIENS ON AND SECURITY INTEREST IN THE MORTGAGED PROPERTY, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH. WHEREVER POSSIBLE, EACH PROVISION OF THIS DEED OF TRUST SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS DEED OF TRUST SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISIONS OR THE REMAINING PROVISIONS OF THIS DEED OF TRUST.

SECTION 3.16 . Trustee covenants faithfully to perform the trust herein created, being liable, however, only for gross negligence or willful misconduct. Trustee accepts this Trust, when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Trustee is not obligated to notify any party hereto of any action or proceeding in which Grantor, Beneficiary or Trustee shall be a party unless brought by Trustee.

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IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed as of the day and year first above written.

"Grantor"

EVANS & SUTHERLAND COMPUTER CORPORATION,
a Utah corporation

By       /s/ R. Gaynor
  --------------------------------------------------
         Richard J. Gaynor, Vice President
         & Chief Financial Officer

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STATE OF CALIFORNIA                         )
                                            ) ss.
COUNTY OF LOS ANGELES                       )

On December 14, 2000, before me, Greta Johnson, personally appeared RICHARD J. GAYNOR, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument

WITNESS my hand and official seal.

         /s/ Greta Johnson
-----------------------------------------------------

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EXHIBIT A

The leasehold estate and interest which arise pursuant to that certain Lease Agreement, dated November 21, 1973, by and between UNIVERSITY OF UTAH, a corporate and body politic ("Lessor"), and PARK ENTERPRISES, a general partnership ("Lessee"), and amended by that certain First Addendum To Lease Agreement, dated May 24, 1974, and by that certain Second Addendum To Lease Agreement, dated March 23, 1977, and by that certain Third Addendum To Lease Agreement, dated September 12, 1979, and by that certain Fourth Addendum To Lease Agreement, dated April 9, 1987 [record notice of the existence of said Lease Agreement was originally afforded by that certain Memorandum Of Lease recorded July 26, 1974 as Entry No. 2638807, in Book 3640 at Page 114, of the Official Records of the Salt Lake County Recorder. Further record notice was afforded by a Memorandum Of Ground Lease recorded June 1, 2000 as Entry No. 7650613, in Book 8365 at Page 3599, of the Official Records of Salt Lake County Recorder; the Lessee's interest being now held by EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation], in and to the following described tract of land:

BEGINNING at a point on the Westerly line of Arappen Drive, said point being North 2259.174 feet and West 610.639 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence South 41(degree)00'00" West 210.00 feet; thence South 49(degree)00'00" East 70.00 feet; thence South 41(degree)00'00" West 342.00 feet; thence South 49(degree)00'00" East 303.00 feet to a point on the arc of a 70.00 foot radius curve to the left; thence Easterly 109.956 feet along said curve (chord bears: North 86(degree)00'00" East 98.995 feet); thence North 41(degree)00'00" East 90.00 feet; thence North 49(degree)00'00" West 178 feet; thence North 49(degree)00'00" East 392.00 feet to the Westerly line of Arappen Drive; thence North 49(degree)00'00" West 265.00 feet along said Westerly line to the point of BEGINNING.

EXCEPTING ANY PORTIONS LYING WITHIN THE BOUNDS OF KOMAS DRIVE AND/OR BLACK HAWK WAY, THE DEDICATION PLATS OF WHICH ARE FILED IN THE OFFICE OF THE SALT LAKE COUNTY RECORDER.

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RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:

FOOTHILL CAPITAL CORPORATION
2450 Colorado Avenue
Suite 3000
Santa Monica, California 90404
Attn: Business Finance
Division Manager

THIS INSTRUMENT IS ALSO TO BE INCLUDED IN THE INDEX OF
FINANCING STATEMENTS AS A FIXTURE FILING IN ACCORDANCE
WITH THE UNIFORM COMMERCIAL CODE AND CROSS-INDEXED IN THE
REAL ESTATE MORTGAGE RECORDS

THIS DOCUMENT SECURES OBLIGATIONS WHICH CONTAIN
PROVISIONS FOR A VARIABLE RATE OF INTEREST

STATE OF UTAH                               )
                                            ) ss.
COUNTY OF SALT LAKE                         )

LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT and FIXTURE FILING made as of this 14th day of December, 2000, between EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Grantor"), with its chief executive office located at 600 Komas Drive, Salt Lake City, Utah 84108, as grantor, and CHICAGO TITLE INSURANCE COMPANY, as trustee ("Trustee") and FOOTHILL CAPITAL CORPORATION, a California corporation, having an office at 2450 Colorado Avenue, Suite 3000 West, Santa Monica, California 90404, Attn: Business Finance Division Manager.

WITNESSETH

THIS LEASEHOLD DEED OF TRUST CONSTITUTES A FIXTURE FILING UNDER SECTIONS 9-313 AND 9-402 OF THE UNIFORM COMMERCIAL CODE OF THE STATE OF UTAH. TO THE EXTENT THE GOODS ARE FIXTURES UNDER THE LAWS OF THE STATE OF UTAH, THE FIXTURES ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY LOCATED IN THE COUNTY OF SALT LAKE, STATE OF UTAH, MORE PARTICULARLY DESCRIBED ON EXHIBIT A ATTACHED HERETO, COMMONLY KNOWN BY THE STREET ADDRESS: 540 ARAPPEN DRIVE, SALT LAKE CITY. THE NAME OF THE RECORD OWNER OF THE REAL PROPERTY IS UNIVERSITY OF UTAH.

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FOR THE PURPOSE OF SECURING (a) the performance of all obligations and the payment of all indebtedness to be paid in accordance with the terms and with interest as set forth in that certain Loan and Security Agreement (hereinafter referred to as the "Loan Agreement"), of even date herewith, entered into between Grantor and Foothill Capital Corporation (Foothill Capital Corporation and any subsequent lender pursuant to the Loan Agreement being hereinafter referred to as "Beneficiary") and all modifications, extensions, renewals, or amendments and restatements thereof: should Foothill Capital Corporation and others enter into an amended and restated loan and security agreement, then the agent thereunder shall be the Beneficiary hereunder, (b) the payment and performance of all indebtedness and obligations of Grantor arising under this Deed of Trust and other documents executed by Grantor in connection herewith, and (c) payment of any money advanced by Beneficiary (and other lenders, if any) to Grantor, or its successors, with interest thereon, evidenced by a note or notes (indicating that they are so secured), executed by Grantor or its successors, Grantor has granted, mortgaged, bargained, sold, alienated, enfeoffed, released, conveyed and confirmed, and by these presents does grant, mortgage, bargain, sell, alienate, enfeoff, release, convey and confirm unto the Trustee, in trust, WITH POWER OF SALE, all its estate, right, title and interest in, to and under any and all of the property located in the City of Salt Lake City, County of Salt Lake, State of Utah, and more particularly described in Exhibit A attached hereto and made a part hereof, including all easements, rights, privileges, tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and all of the estate, right, title, interest, claim, demand, reversion or remainder whatsoever of Grantor therein or thereto, either at law or in equity, in possession or expectancy, now or hereafter acquired, including, without limitation, all and singular the ways, waters, water courses, water rights and powers, liberties, privileges, sewers, pipes, conduits, wires and other facilities furnishing utility or other services to the property (collectively, the "Land");

TOGETHER with all of the right, title and interest of Grantor in and to all buildings, structures and improvements now or hereafter erected on the Land including all plant equipment, apparatus, machinery and fixtures of every kind and nature whatsoever now or hereafter located on or forming part of said buildings, structures and improvements (collectively, the "Improvements"; the Land and Improvements being hereinafter collectively referred to as the "Premises");

TOGETHER with all of the right, title and interest of Grantor in and to the land lying in the bed of any street, road, highway or avenue in front of or adjoining the Premises;

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TOGETHER with any and all award and awards heretofore made or hereafter to be made by any governmental authorities to the present and all subsequent owners of the Premises which may be made with respect to the Premises as a result of the return of excess taxes paid on the Mortgaged Property, the exercise of the right of eminent domain, the alteration of the grade of any street or any other injury to or decrease of value of the Premises, which said award or awards are hereby assigned to Beneficiary and Beneficiary, at its option, is hereby authorized, directed and empowered to collect and receive the proceeds of any such award or awards from the authorities making the same and to give proper receipts and acquittances therefor, and to apply the same as hereinafter provided; and Grantor hereby covenants and agrees to and with Beneficiary, upon request by Beneficiary, to make, execute and deliver, at Grantor's expense, any and all assignments and other instruments sufficient for the purpose of assigning the aforesaid award or awards to Beneficiary free, clear and discharged of any and all encumbrances of any kind or nature whatsoever;

TOGETHER with all goods, equipment, machinery, furni ture, furnishings, fixtures, appliances, inventory, building materials, chattels and articles of personal property (other than personal property which is or at any time has become Hazardous Substances, as defined in the Loan Agreement), including any interest therein, now or at any time hereafter affixed to, attached to, or used in any way in connection with or to be incorporated at any time into the Premises, or placed on any part thereof but not attached or incorporated thereto, together with any and all replacements thereof, appertaining and adapted to the complete and compatible use, enjoyment, occupancy, operation or improvement of the Premises (collectively, the "Chattels");

TOGETHER with leases of the Premises or the Chattels or any part thereof now or hereafter entered into and all right, title and interest of Grantor thereunder, including, without limitation, cash or securities deposited thereunder to secure performance by the lessees of their obligations thereunder (whether such cash or securities are to be held until the expiration of the terms of such leases or applied to one or more of the installments of rent coming due immediately prior to the expiration of such terms) and all rights to all insurance proceeds and unearned premiums arising from or relating to the Premises and all other rights and easements of Grantor now or hereafter existing pertaining to the use and enjoyment of the Premises and all right, title and interest of Grantor in and to all declarations of covenants, conditions and restrictions as may affect or otherwise relate to the Premises and all of Grantor's right, title and interest in and to the lease and any and all options to purchase, rights of first offer and rights of first

3

refusal, whether contained in the lease or elsewhere (the "Lease") more particularly described in Exhibit A attached hereto including, without limitation, the right to surrender, terminate, cancel, waive, change, supplement, grant subleases of, alter or amend the Lease;

TOGETHER with all sales agreements, deposit receipts, escrow agreements and other ancillary documents and agreements entered into with respect to the sale to any purchasers of any part of the Premises, and all deposits and other proceeds thereof;

TOGETHER with all permits, plans, licenses, specifica tions, subdivision rights, tentative tract maps, final tract maps, security interests, contracts, contract rights or other rights as may affect or otherwise relate to the Premises;

TOGETHER with all rights of Grantor in or to any fund, program or trust monies and any reimbursement therefrom directly or indirectly established, maintained or administered by any governmental authority or any other individual or entity which is designed to or has the effect of providing funds (whether directly or indirectly or as reimbursement) for the repair or replacement of storage tanks (whether above or below ground) located on the Premises or the remediation or cleanup of any spill, leakage or contamination from any such tank or resulting from the ownership, use or maintenance of any such tank or to compensate third parties for any personal injury or property damage;

TOGETHER with all rents, issues, profits, revenues, income and other benefits to which Grantor may now or hereafter be entitled from the Premises or the Chattels (which Premises, titles, interests, awards, Chattels, easements, rents, income, benefits, ways, waters, rights, powers, liberties, privileges, utilities, tenements, hereditaments, appurtenances, reversions, remainders, rents, issues, profits, estate, property, possession, claims and demands, are hereinafter collectively referred to as the "Mortgaged Property");

TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee, its successors and assigns forever.

THE OBLIGATIONS SECURED HEREBY SHALL NOT EXCEED AN AGGREGATE PRINCIPAL AMOUNT, AT ANY ONE TIME OUTSTANDING OF SIXTY MILLION AND NO/100 DOLLARS ($60,000,000), PROVIDED, THAT THE FOREGOING LIMITATION SHALL APPLY ONLY TO THE LIEN UPON THE REAL PROPERTY CREATED BY THIS DEED OF TRUST, AND IT SHALL NOT IN ANY MANNER LIMIT, AFFECT OR IMPAIR ANY GRANT OF A SECURITY INTEREST OR OTHER RIGHT IN FAVOR OF THE BENEFICIARY UNDER THE PROVISIONS

4

OF THE LOAN AGREEMENT OR UNDER ANY OTHER SECURITY AGREEMENT AT ANY TIME EXECUTED BY GRANTOR.

ARTICLE I

And Grantor further covenants with the Trustee and Beneficiary as follows:

SECTION 1.01 . Grantor has good and marketable title to an indefeasible leasehold estate in the Premises subject to no lien, charge, or encumbrance except such as are approved by Beneficiary; that it owns the Chattels free and clear of liens and claims, except for Permitted Liens; that this Deed of Trust is and will remain a valid and enforceable first and prior lien on the Mortgaged Property subject only to the exceptions referred to above. Grantor will forever preserve, warrant and defend the same unto the Trustee and Beneficiary, and will forever preserve, warrant and defend the validity and priority of the lien hereof against the claims of all persons and parties whomsoever. Grantor has not, and will not, surrender, terminate, cancel, waive, accept waiver, change, supplement, grant subleases of, alter, surrender or amend, and will comply with all of the terms, covenants and conditions contained in, the Lease.

SECTION 1.02 . Intentionally Deleted.

SECTION 1.03 . Intentionally Deleted.

SECTION 1.04 . Intentionally Deleted.

SECTION 1.05 . All right, title and interest of Grantor in and to all extensions, improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the Mortgaged Property, hereafter acquired by, or released to, or constructed, assembled or placed by Grantor on the Premises, and all conversions of the security constituted thereby,

5

immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further grant, conveyance, assignment or other act by Grantor, shall become subject to the first and prior lien and security interest of this Deed of Trust as fully and completely, and with the same effect, as though now owned by Grantor and specifically described in the granting clause hereof.

SECTION 1.06 . Grantor, from time to time when the same shall become due, will pay and discharge, or cause to be paid and discharged, all payments required under the Lease. Grantor will, upon the request of Beneficiary, deliver to Beneficiary receipts evidencing the payment, before any penalties accrued thereon, of all such lease payments.

(a) Grantor will pay from time to time when the same shall become due, all lawful claims and demands of mechanics, materialmen, laborers, and others which, if unpaid, might result in, or permit the creation of, a lien on the Mortgaged Property or any part thereof, or on the revenues, rents, issues, income and profits arising therefrom and in general will do or cause to be done everything necessary so that the lien and security interest hereof shall be fully preserved, at the cost of Grantor, without expense to Beneficiary.

SECTION 1.07 . In the event of the passage, after the date of this Deed of Trust, of any law of the State of Utah deducting from the value of the Mortgaged Property for the purpose of taxing the amount of any lien thereon, or changing in any way the laws now in force for the taxation of deeds of trust, or debts secured thereby, for state or local purposes, or the manner of operation of any such taxes so as to adversely affect the interest of Beneficiary, then and in such event, Grantor shall bear and pay the full amount of such taxes, provided

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that if for any reason payment by Grantor of any such new or additional taxes would be unlawful or if the payment thereof would constitute usury or render the Loan Agreement or the indebtedness secured hereby wholly or partially usurious under any of the terms or provisions of the Loan Agreement, or this Deed of Trust, or otherwise, Beneficiary may, at its option, upon thirty (30) days' written notice to Grantor, (i) declare the whole indebtedness secured by this Deed of Trust, with interest thereon, to be immediately due and payable, or
(ii) pay that amount or portion of such taxes as renders the Loan Agreement, or the indebtedness secured hereby unlawful or usurious, in which event Grantor shall concurrently therewith pay the remaining lawful non-usurious portion or balance of said taxes.

SECTION 1.08 . In addition to restrictions contained in the Loan Agreement, Grantor will not further encumber, sell, convey or transfer any interest in, or any part of, the Mortgaged Property. Any such encumbrance, sale, conveyance or transfer made without Beneficiary's prior written consent shall be an Event of Default hereunder.

SECTION 1.09 . Intentionally Deleted.

SECTION 1.10 . Intentionally Deleted.

SECTION 1.11 . If Grantor shall fail to perform any of the covenants contained herein or in the Lease on its part to be performed, Beneficiary may, but shall not be required to, make advances to perform the same, or cause the same to be performed, on Grantor's behalf, and all sums so advanced shall bear interest, from and after the date advanced until repaid, at the lower of (i) the maximum rate permitted by law or (ii) the default rate set forth in the Loan Agreement, shall be a lien upon the

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Mortgaged Property and shall, at Beneficiary's option, be added to the indebtedness secured hereby. Grantor will repay on demand all sums so advanced on its behalf with interest at the rate herein set forth. This Section 1.11 shall not be construed as preventing any default by Grantor in the observance of any covenant contained in this Deed of Trust from constituting an Event of Default hereunder.

SECTION 1.12 . Grantor will not commit any waste at or with respect to the Mortgaged Property nor will Grantor do or fail to do anything which will in any way increase the risk of fire or other hazard to the Premises, Improvements or Chattels or to any part thereof.

SECTION 1.13 . Grantor will immediately notify Beneficiary of the institution of any proceeding for the condemnation or taking by eminent domain of the Mortgaged Property, or any portion thereof. The Trustee and Beneficiary may participate in any such proceeding and Grantor from time to time will deliver to Beneficiary all instruments requested by it to permit such participation. In the event of such condemnation proceedings, or a conveyance in lieu of such taking, the award or compensation payable is hereby assigned to and shall be paid to Beneficiary. Beneficiary shall be under no obligation to question the amount of any such award or compensation and may accept the same in the amount in which the same shall be paid, but shall have no right to bind Grantor or to make settlement of its claim, except to the extent of the interest of the Trustee and Beneficiary. In any such condemnation proceedings the Trustee and Beneficiary may be represented by counsel selected by Beneficiary. The proceeds of any award or compensation so received after reimbursement of any expenses incurred by Beneficiary in

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connection with such proceedings, shall, at the option of Beneficiary, be applied, without premium, to the repayment of the sums due under the Loan Agreement in such order as Beneficiary may in its sole discretion elect (regardless of interest payable on the award by the condemning authority), or to the cost of restoration of the Improvement or Chattel so taken and other terms as shall be satisfactory to Beneficiary.

SECTION 1.14 . The assignment of rents, income and other benefits (collectively, "rents") contained in the granting clause of this Deed of Trust shall be fully operative without any further action on the part of Grantor or Beneficiary and specifically Beneficiary shall be entitled, at its option, to all rents from the Mortgaged Property whether or not Beneficiary takes possession of the Mortgaged Property. Grantor hereby further grants to Beneficiary the right (i) to enter upon and take possession of the Mortgaged Property for the purpose of collecting the rents, (ii) to dispossess by the usual summary proceedings any tenant defaulting in the payment thereof to Beneficiary, (iii) to let the Mortgaged Property or any part thereof, and (iv) to apply the rents, after payment of all necessary charges and expenses, on account of the indebtedness and other sums secured hereby. Such assignment and grant shall continue in effect until the indebtedness and other sums secured hereby are paid, the execution of this Deed of Trust constituting and evidencing the irrevocable consent of Grantor to the entry upon and taking possession of the Mortgaged Property by Beneficiary pursuant to such grant, whether or not sale or foreclosure has been instituted. Neither the exercise of any rights under this Section by Beneficiary nor the application of the rents to the indebtedness and other sums

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secured hereby, shall cure or waive any Event of Default, or notice of default hereunder or invalidate any act done pursuant hereto, but shall be cumulative of all other rights and remedies.

The foregoing provisions hereof shall constitute an absolute and present assignment of the rents from the Mortgaged Property, subject, however, to the conditional permission given to Grantor to collect and use the rents until the occurrence of an Event of Default at which time such conditional permission shall automatically terminate; and the existence or exercise of such right of Grantor shall not operate to subordinate this assignment, in whole or in part, to any subsequent assignment by Grantor permitted under the provisions of this Deed of Trust, and any such subsequent assignment by Grantor shall be subject to the rights of the Trustee and Beneficiary hereunder.

SECTION 1.15 . Grantor will not (i) execute an assignment of the rents or any part thereof from the Mortgaged Property unless such assignment shall provide that it is subject and subordinate to the assignment contained in this Deed of Trust, and any additional or subsequent assignment executed pursuant hereto, or (ii) except where the lessee is in default thereunder, terminate or consent to the cancellation or surrender of any lease of the Mortgaged Property or of any part thereof, now existing or hereafter to be made or (iii) modify any such lease or give consent to any assignment or subletting without Beneficiary's prior written consent, or (iv) accept prepayments of any installments of rent or additional rent to become due under such leases, except prepayments in the nature of security for the performance of the lessee's obligations thereunder, or (v) in any other manner impair the value of the Mortgaged Property or the security of the Trustee or Beneficiary for the payment of the indebtedness secured hereby, or (vi) enter into any lease prohibited under the provisions of the Loan Agreement.

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(a) Grantor will not execute any lease of all or a substantial portion of the Mortgaged Property except for actual occupancy by the lessee thereunder, and will at all times promptly and faithfully perform, or cause to be performed, all of the covenants, conditions and agreements contained in all leases of the Mortgaged Property now or hereafter existing, on the part of the lessor thereunder to be kept and performed. If any such lease provides for the giving by the lessee of certificates with respect to the status of such leases, Grantor shall exercise its right to request such certificates within five (5) days of any demand therefor by Beneficiary.

(b) Grantor shall furnish to Beneficiary, within fifteen (15) days after a request by Beneficiary to do so, a written statement containing the names of all lessees for the Mortgaged Property, the terms of their respective leases, the spaces occupied, the rentals paid and any security therefor.

(c) Grantor shall, from time to time upon request of Beneficiary, specifically assign to Beneficiary as additional security hereunder, by an instrument in writing in such form as may be approved by Beneficiary, all right, title and interest of Grantor in and to any and all leases now or hereafter on or affecting the Mortgaged Property, together with all security therefor and all monies payable thereunder, subject to the conditional permission hereinabove given to Grantor to collect the rentals under any such lease. Grantor shall also execute and deliver to Beneficiary any notification, financing statement or other document reasonably required by Beneficiary to perfect the foregoing assignment as to any such lease.

SECTION 1.16 . Each lease of the Mortgaged Property or of any part thereof entered into after the date hereof shall provide that, in the event of the enforcement by the Trustee or Beneficiary of the remedies provided for by law or by this Deed of Trust, any person succeeding to the interest of Grantor as a result of such enforcement shall not be bound by any payment of rent or additional rent

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for more than one (1) month in advance, provided, however, that nothing herein set forth shall affect or impair the rights of Beneficiary to terminate any one or more of such leases in connection with the exercise of its or the Trustee's remedies hereunder.

SECTION 1.17 . (a) With respect to the Lease, Grantor hereby warrants and represents as follows: (i) the Lease is in full force and effect, unmodified by any writing or otherwise, except as specifically set forth in Exhibit A; (ii) all rent, additional rent and other charges reserved herein have been paid to the extent they are payable to the date hereof; (iii) Grantor enjoys the quiet and peaceful possession of the property demised thereby; (vi) Grantor is not in default under any of the terms thereof and, to the best of its knowledge, there are no circumstances which, with the passage of time or the giving of notice or both, would constitute a default thereunder; and (v) to the best of Grantor's knowledge the landlord under the Lease is not in default under any of the terms or provisions thereof on the part of the landlord to be observed or performed;

(b) Further, with respect to the Lease, Grantor covenants and agrees as follows: (i) to promptly and faithfully observe, perform and comply with all the terms, covenants and provisions thereof on Grantor's part to be observed, performed and complied with, at the times set forth therein, without any allowance for grace period, if any; (ii) not to do, permit, suffer or refrain from doing anything, as a result of which, there could be a default under or breach of any of the terms thereof; (iii) not to cancel, surrender, modify, amend or in any way alter or permit the alternation of any of the terms thereof; (iv) to give Beneficiary immediate notice of any default by anyone thereunder and to promptly deliver to Beneficiary copies of each notice of default and all other notices, communications, plans, specifications and other similar instruments received or delivered by Grantor in connection therewith; (v) to furnish to Beneficiary such information and evidence as Beneficiary may reasonably require concerning Grantor's due observance, performance and compliance with the terms, covenants and

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provisions thereof; and (vi) that any default of the tenant thereunder shall constitute an Event of Default under this Deed of Trust;

(c) In the event of any default by Grantor in the performance of any of its obligations under the Lease, including, without limitation, any default in the payment of rent and other charges and impositions made payable by the tenant thereunder, then, in each and every case, Beneficiary may, at its option and without notice, cause the default or defaults to be remedied and otherwise exercise any and all of the rights of Grantor thereunder in the name of, and on behalf of, Grantor. Grantor shall, on demand, reimburse Beneficiary for all advances made and expenses incurred by Beneficiary incurring any such default (including, without limitation, reasonable attorneys' fees), together with interest thereon computed at the rate provided for in
Section 1.12 hereof from the date that an advance is made or expense is incurred, to and including the date the same is paid;

(d) Grantor shall give Beneficiary notice of its intention to exercise each and every option to extend the term of the Lease, at least twenty (20) but not more than sixty (60) days prior to the expiration of the time to exercise such option under the terms thereof. If Grantor intends to extend the term of the Lease, it shall deliver to Beneficiary with the notice of such decision, a copy of the notice extension delivered to the landlord thereunder. If Grantor does not intend to extend the term of the Lease, Beneficiary may, at its option, exercise the option to extend in the name and on behalf of Grantor. In any event, Grantor hereby appoints Beneficiary its attorney-in-fact to execute and deliver, for and in the name of Grantor, all instruments and agreements necessary under the Lease or otherwise to cause any extension of the term thereof. This power, being coupled with an interest, shall be irrevocable as long as any amounts secured hereby remain unpaid;

(e) It is hereby agreed that the fee title, the leasehold estate and the subleasehold estates in the property demised by the Lease shall not merge but shall always be kept separate and distinct, notwithstanding the union of said estates in either the landlord thereunder, Grantor or a third party, whether by purchase or otherwise. Not less than sixty (60) nor more than ninety (90) days prior to the date of the exercise of any option or other right to purchase the Premises, or any part thereof, Grantor shall notify Beneficiary of the existence of such option or right. At least twenty (20) but not more than sixty (60) days prior to the expiration of the time to exercise such option or right, Grantor shall give Beneficiary notice of its intention to exercise such option or right. If Grantor intends to purchase, it shall deliver to Beneficiary with the

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notice of such decision, a copy of the notice of purchase delivered to the appropriate party. If Grantor does not intend to purchase, then Grantor will be deemed to have assigned the option to Beneficiary, who may purchase the Premises in Beneficiary's name, subject to the Lease, which will remain in full force and effect subject to its terms. If Grantor acquires the fee title or any other estate, title or interest in the property demised by the Lease, or any part thereof, the lien of this Deed of Trust shall attach to, cover and be a lien upon such acquired estate, title or interest and same shall thereupon be and become a part of the Mortgaged Property with the same force and effect as if specifically encumbered herein. Grantor agrees to execute all instruments and documents which Beneficiary may reasonably require to ratify, confirm and further evidence Beneficiary's lien on the acquired estate, title or interest. Furthermore, Grantor hereby appoints Beneficiary its true and lawful attorney-in-fact to execute and deliver all such instruments and documents in the name and on behalf of Grantor. This power, being coupled with an interest, shall be irrevocable as long as any amounts secured hereby remain unpaid.

(f) If the Lease is cancelled or terminated, and if Beneficiary or its nominee shall acquire an interest in any new lease of the property demised thereby, Grantor shall have no right, title or interest in or to the new lease or the leasehold estate created by such new lease;

(g) Grantor shall use its best efforts to obtain and deliver to Beneficiary within twenty (20) days after written demand by Beneficiary, an estoppel certificate from the landlord under the Lease setting forth (i) the name of the tenant thereunder, (ii) that the Lease has not been modified or, if it has been modified, the date of each modification (together with copies of each such modifications), (iii) the basic rent payable under the Lease, (iv) the date to which all rental charges have been paid by the tenant under the Lease, and (v) whether there are any alleged defaults of the tenant under the Lease and, if there are, setting forth the nature thereof in reasonable detail.

(h) Grantor covenants and agrees that neither Grantor nor its trustee in bankruptcy shall exercise any right to terminate the Lease as afforded to it by ss.365(h)(i) of the Bankruptcy Code of the United States, as amended, without the prior written consent of Beneficiary.

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ARTICLE II

EVENTS OF DEFAULT AND REMEDIES

SECTION 2.01 . The occurrence of any one or more of the following events shall constitute an event of default ("Event of Default") hereunder:

(a) If there shall be an Event of default under the Loan Agreement; or

(b) If Grantor shall breach, or be in default of, any of the covenants or provisions contained in this Deed of Trust, or of any chattel mortgage, other deed of trust, security agreement or other document issued thereunder or in connection therewith or herewith; or

(c) If there shall be a default under the Lease.

Upon the occurrence of an Event of Default, and in every such case:

(i) During the continuance of any Event of Default, Beneficiary personally, or by its agents or attorneys may enter into and upon all or any part of the Mortgaged Property, and each and every part thereof, and may exclude the party owning the beneficial interest in same, its agents and servants wholly therefrom; and having and holding the same, may use, operate, manage and control the Mortgaged Property for any lawful purpose and conduct the business thereof, either personally or by its superintendents, managers, agents, servants, attorneys or receivers; and upon every such entry, Beneficiary, at the expense of Grantor, from time to time, either by purchase, repairs or construction, may maintain and restore the Mortgaged Property, whereof it shall become possessed as aforesaid, may complete the construction of the Improvements and in the course of such completion may make such changes in the contemplated Improvements as it may deem desirable; may insure or reinsure the same as provided in the Loan Agreement, and likewise, from time to time, at the expense of Grantor, Beneficiary may make all

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necessary or proper repairs, renewals, replacements, alterations, additions, betterments and improvements to the Mortgaged Property or any part thereof and thereon as it may deem advisable; and in every such case Beneficiary shall have the right to manage and operate the Mortgaged Property, possessed as aforesaid, and to carry on the business thereof and exercise all rights and powers of the party owning such property with respect thereto either in the name of such party or otherwise as it shall deem best; and Beneficiary shall be entitled to collect and receive all earnings, revenues, rents, issues, profits and income of the Mortgaged Property and every part thereof; and after deducting payments due under the Lease, the expenses of conducting the business thereof and of all maintenance, repairs, replacements, alterations, additions, betterments and improvements and all payments which may be made for taxes, assessments, insurance, in payment of any prior deed of trust and prior or other proper charges upon the Mortgaged Property or any part thereof, as well as just and reasonable compensation of Beneficiary for the services of Beneficiary and for all attorneys, counsel, agents, clerks, servants and other employees by it properly engaged and employed, Beneficiary shall apply the moneys arising as aforesaid, first, to the payment of any sums, other than interest and principal due pursuant to the Loan Agreement required to be paid by Grantor under this Deed of Trust, second, to the payment of interest due pursuant to the Loan Agreement, third, to the payment of the principal due pursuant to the terms of the Loan Agreement when and as the same shall become payable, whether by acceleration or otherwise.

(ii) Beneficiary, at its option, may declare the entire unpaid balance of the indebtedness secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale and written notice of default and of election to cause the Mortgaged Property to be sold, which notice Trustee shall cause to be duly filed

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for record. Beneficiary shall also deposit with the Trustee this Deed of Trust, and all documents evidencing the expenditures secured hereby.

(iii) After the lapse of such time as may then be required by law following the recordation of said notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Grantor, shall sell the Mortgaged Property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. If the Mortgaged Property consists of several known lots or parcels, Beneficiary may designate the order in which such parcels shall be sold or offered for sale. Any person, including Grantor, Trustee or Beneficiary, may purchase at such sale.

(iv) Trustee may postpone sale of all or any portion of the Mortgaged Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the time fixed by the preceding postponement.

(v) On and after the occurrence of an Event of Default, Grantor shall pay all rents, issues and profits thereafter received by Grantor from the Mortgaged Property to Beneficiary and to the extent not paid shall hold such amounts as trust funds for the benefit of Beneficiary and such rents, issues and profits shall be deemed "cash collateral" of Beneficiary under 11 U.S.C., as amended.

SECTION 2.02 . Trustee, after making such sale, and upon receipt of the purchase price, shall make, execute and deliver to the purchaser or purchasers its deed or deeds conveying the Mortgaged Property so sold, but without any covenant or warranty, express or implied, and

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without any representation, express or implied, as to the existence, or lack thereof, of Hazardous Substances on the Mortgaged Property, and shall apply the proceeds of sale thereof to payment, FIRSTLY, of the expenses of such sale, together with the reasonable expenses of this Trust, including Trustee's fees and cost of evidence of title in connection with sale, Torrens certificates, and revenue stamps on Trustee's deed; SECONDLY, of all moneys paid, advanced or expended by Beneficiary under the terms hereof, not then repaid, together with the interest thereon as herein provided; and THIRDLY, of the amount of the principal and interest due pursuant to the Loan Agreement then remaining unpaid.

(a) In the event of a sale of the Mortgaged Property, or any part thereof, and the execution of a deed or deeds therefor under these trusts, the recitals therein of any matters or facts shall be conclusive proof of the truthfulness thereof and of the fact that said sale was regularly and validly made in accordance with all requirements of the laws of the State of Utah and of this Deed of Trust; and any such deed or deeds, with such recitals therein, shall be effectual and conclusive against Grantor and all other persons; and the receipt for the purchase money recited or contained in any deed executed to the purchaser as aforesaid shall be sufficient discharge to such purchaser from all obligations to see to the proper application of the purchase money according to the trusts aforesaid.

SECTION 2.03 . After the happening of an Event of Default by Grantor under this Deed of Trust and immediately upon the commencement of any action, suit or other legal proceeding by Beneficiary to obtain judgment for the principal of, or interest due pursuant to the Loan Agreement and other sums required to be paid by Grantor pursuant to any provisions of this Deed of Trust, or of any other nature in aid of the enforcement of the Loan Agreement, or of

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this Deed of Trust, Grantor will waive the issuance and service of process and enter its voluntary appearance in such action, suit or proceeding. Further, Grantor hereby consents to the appointment of a receiver or receivers, without bond, of the Mortgaged Property and of all the earnings, revenues, rents, issues, profits and income thereof. The exercise of any right under this Article II shall not be deemed as election of remedies nor a "pending action" so as to preclude to exercise of any other right or remedy. After the happening of any such default and during its continuance or upon the commencement of any proceedings to foreclose this Deed of Trust or to enforce the specific performance hereof or in aid thereof or upon the commencement of any other judicial proceeding to enforce any right of the Trustee or Beneficiary hereunder, Beneficiary shall be entitled, as a matter of right, if it shall so elect, without the giving of notice to any other party and without regard to the adequacy or inadequacy of any security for the Deed of Trust indebtedness, forthwith either before or after declaring all sums due pursuant to the Loan Agreement to be due and payable, to the appointment of such a receiver or receivers.

SECTION 2.04 . During the continuance of an Event of Default, Beneficiary shall have the following rights and remedies:

I. Beneficiary or its employees, acting by themselves or through a court- appointed receiver, may enter upon, possess, manage, operate, dispose of, and contract to dispose of the Mortgaged Property or any part thereof; take custody of all accounts; negotiate with governmental authorities with respect to the Mortgaged Property's environmental compliance and remedial measures; take any action necessary to enforce

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compliance with any Act, including but not limited to spending rents to abate the problem; make, terminate, enforce or modify leases of the Mortgaged Property upon such terms and conditions as Beneficiary deems proper; contract for goods and services, hire agents, employees, and counsel, make repairs, alterations, and improvements to the Mortgaged Property necessary, in Beneficiary's judgment, to protect or enhance the security hereof; incur the risks and obligations ordinarily incurred by owners of property (without any personal obligation on the part of the receiver); and/or take any and all other actions which may be necessary or desirable to comply with Grantor's obligations hereunder and under the Loan Agreement. All sums realized by Beneficiary under this subparagraph, less all costs and expenses incurred by it under this subparagraph, including attorneys' fees, and less such sums as Beneficiary deems appropriate as a reserve to meet future expenses under the subparagraph, shall be applied on any indebtedness secured hereby in such order as Beneficiary shall determine. Neither application of said sums to said indebtedness, nor any other action taken by Beneficiary under this subparagraph shall cure or waive any Event of Default or notice of default hereunder, or nullify the effect of any such notice of default. Beneficiary, or any employee or agent of Beneficiary, or a receiver appointed by a court, may take any action or proceeding hereunder without regard to (a) the adequacy of the security for the indebtedness secured hereunder, (b) the existence of a declaration that the indebtedness secured hereby has been declared immediately due and payable, or (c) the filing of a notice of default.

II. With or without notice, and without releasing Grantor from any obligation hereunder,

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to cure any default of Grantor and, in connection therewith, Beneficiary or its agents, acting by themselves or through a court appointed receiver, may enter upon the Mortgaged Property or any part thereof and perform such acts and things as Beneficiary deems necessary or desirable to inspect, investigate, assess, and protect the security hereof, including without limitation of any of its other rights: (a) to obtain a court order to enforce Beneficiary's right to enter and inspect the Mortgaged Property, to which the decision of Beneficiary as to whether there exists a release or threatened release of a Hazardous Substances onto the Mortgaged Property shall be deemed reasonable and conclusive as between the parties hereto; and (b) to have a receiver appointed to enforce Beneficiary's right to enter and inspect the Mortgaged Property for Hazardous Substances. All costs and expenses incurred by Beneficiary with respect to the audits, tests, inspections, and examinations which Beneficiary or its agents or employees may conduct, including the fees of the engineers, laboratories, contractors, consultants, and attorneys, shall be paid by Grantor. All costs and expenses incurred by Trustee and Beneficiary pursuant to this subparagraph (including without limitation court costs, consultant fees and attorneys' fees, whether incurred in litigation or not

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and whether before or after judgment) shall bear interest at the Default Rate set forth in the Loan Agreement from the date they are incurred until said sums have been paid.

III. To seek a judgment that Grantor has breached its covenants, representations and/or warranties with respect to the environmental matters set forth in the Loan Agreement by commencing and maintaining an action or actions in any court of competent jurisdiction for breach of contract, whether commenced prior to or after foreclosure of the Mortgaged Property, and to seek the recovery of any and all costs, damages, expenses, fees, penalties, fines, judgments, indemnification payments to third parties, and other out- of-pocket costs or expenses actually incurred by Beneficiary (collectively, the "Environmental Costs") incurred or advanced by Beneficiary relating to the cleanup, remediation or other response action required by any Act or to which Beneficiary believes necessary to protect the Mortgaged Property, it being conclusively presumed between Beneficiary and Grantor that all such Environmental Costs incurred or advanced by Beneficiary relating to the cleanup, remediation, or other response action of or to the Mortgaged Property were made by Beneficiary in good faith. All Environmental Costs incurred by Beneficiary under this subparagraph (including

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without limitation court costs, consultant fees and attorneys' fees, including, without limitation, fees incurred pursuant to 11 U.S.C., whether incurred in litigation or not and whether before or after judgment) shall bear interest at the Default Rate from the date of expenditure until said sums have been paid. Beneficiary shall be entitled to bid, at the sale of the Mortgaged Property, the amount of said costs, expenses and interest in addition to the amount of the other obligations hereby secured as a credit bid, the equivalent of cash.

Grantor acknowledges and agrees that notwithstanding any term or provision contained herein or in the other Loan Documents (as defined in the Loan Agreement), the Environmental Costs shall be exceptions to any nonrecourse or exculpatory provision of the Loan Documents, and Grantor shall be fully and personally liable for the Environmental Costs hereunder, and such liability shall not be limited to the original principal amount of the obligations secured by this Deed of Trust, and Grantor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Deed of Trust. For the purposes of any action brought under this subparagraph, Grantor hereby waives the defense of laches and any applicable statute of limitations.

IV. To waive its lien against the Mortgaged Property or any portion thereof, whether fixtures or personal property, to the extent such property is found to be environmentally impaired and to exercise any and all rights and remedies of an unsecured creditor against Grantor and all of Grantor's assets and property for the recovery of any deficiency and Environmental Costs, including, but not limited to,

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seeking an attachment order. As between Beneficiary and Grantor, Grantor shall have the burden of proving that Grantor or any related party (or any affiliate or agent of Grantor or any related party) was not in any way negligent in permitting the release or threatened release of the Hazardous Substances. Grantor acknowledges and agrees that Grantor shall be fully and personally liable for all judgments and awards entered against Grantor hereunder and such liability shall not be limited to the original principal amount of the obligations secured by this Deed of Trust and Grantor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Deed of Trust. For the purposes of any action brought under this subparagraph, Grantor hereby waives the defense of laches and any applicable statute of limitations.

V. Nothing contained herein shall be construed to limit any and all rights that Beneficiary has at law or pursuant hereto.

SECTION 2.05 . No remedy herein conferred upon or reserved to the Trustee or Beneficiary is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission of the Trustee or Beneficiary to exercise any right or power occurring

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upon the Event of Default shall impair any such right or power or shall be construed to be a waiver thereof or an acquiescence therein; and every power and remedy given by this Deed of Trust to the Trustee or Beneficiary may be exercised from time to time and as often as may be deemed expedient by the Trustee or Beneficiary. Nothing in this Deed of Trust or in the Loan Agreement shall affect the obligation of Grantor to pay the principal of and interest on all sums due under the Loan Agreement in the manner and at the time and place therein respectively expressed.

SECTION 2.06 . To the extent permitted by law, Grantor will not at any time insist upon, or plead, or in any manner whatever claim or take any benefit or advantage of, any stay or extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance of this Deed of Trust; nor claim, take or insist upon any benefit or advantage of any law now or hereafter in force providing for the marshalling of the Mortgaged Property or on the valuation or appraisal of the Mortgaged Property, or any part thereof, prior or subsequent to any sale or sales thereof which may be made pursuant to any provision herein, or pursuant to the decree, judgment or order of any court of competent jurisdiction; nor, after any such final sale or sales, claim or exercise any right under any statute or otherwise, to redeem the property so sold or any part thereof; and Grantor hereby expressly waives all benefit or advantage of any such law or laws, and covenants not to hinder, delay or impede the execution of any power herein granted or delegated to the Trustee or Beneficiary, but to suffer and permit the execution of every power as though no such law or laws had been made or

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enacted. Grantor hereby waives the right to require any sale to be made in parcels, or the right to select parcels to be so sold, and there shall be no requirement for marshalling of assets. Grantor hereby further waives any rights it may have under applicable law relating to the prohibition of the obtaining of a deficiency judgment by Beneficiary against Grantor.

SECTION 2.07 . During the continuance of any Event of Default and pending the exercise by the Trustee or Beneficiary of its right to exclude Grantor from all or any part of the Premises, Grantor agrees to pay the fair and reasonable rental value for the use and occupancy of the Mortgaged Property for such period and upon default of any such payment, will vacate and surrender possession of the Premises to the Trustee or Beneficiary or to a receiver, if any, and in default thereof may be evicted by any summary action or proceeding for the recovery or possession of Premises for non-payment of rent, however designated. In the event Grantor remains in possession of the Mortgaged Property after the same is sold as provided above or after Beneficiary otherwise becomes entitled to possession of the same, Grantor shall become a tenant at will of Beneficiary or the purchaser of the Mortgaged Property.

SECTION 2.08 . Without affecting the personal liability of any person, firm, corporation or other entity, including Grantor (other than any person released pursuant hereto), for the payment of the indebtedness secured hereby, and without affecting the lien of this Deed of Trust for the full amount of the indebtedness remaining unpaid upon any property not reconveyed pursuant hereto, Beneficiary and Trustee are respectively authorized and empowered as follows: Beneficiary may, at any time and from time to time, either before or after the expiration of

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the Loan Agreement, and without notice: (a) release any person liable for the payment of any of the indebtedness, (b) make any agreement extending the time or otherwise altering the terms of payment of any of the indebtedness, (c) accept additional security therefor of any kind, (d) release any property, real or personal, securing the indebtedness. Trustee may, without liability therefor and without notice, at any time and from time to time so long as the lien or charge hereof shall subsist, but only upon the written request of Beneficiary and presentation of this Deed of Trust for endorsement:
(a) consent to the making of any map or plat of the Land, (b) join in granting any easement thereon or in creating any covenants restricting use or occupancy thereof, (c) reconvey, without warranty, any part of the Mortgaged Property, (d) join in any extension agreement or in any agreement subordinating the lien or charge hereof.

SECTION 2.09 . This Deed of Trust constitutes a Security Agreement under the laws of the State of Utah so that Beneficiary shall have and may endorse a security interest in any or all of the Mortgaged Property which may or might now or hereafter be or be deemed to be personal property, fixtures or property other than real estate (collectively, "Personal Property") and Grantor agrees to execute, as debtor, such financing statement or statements as Beneficiary may now or hereafter reasonably request in order that such security interest or interests may be perfected pursuant to such laws. This Deed of Trust further constitutes a fixture filing under Sections 9-313 and 9-402 of the Utah Uniform Commercial Code, as amended or recodified from time to time; provided, however that the execution and/or filing hereof does not imply that the items of Personal Property included in the Mortgaged Property are or are to become

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fixtures. The filing hereof as a fixture filing is intended to protect the parties from unwarranted assertions by third parties.

Notwithstanding any release of any or all of the property included in the Premises which is deemed "real property", any proceedings to foreclose this Deed of Trust, or its satisfaction of record, the terms hereof shall survive as a security agreement with respect to the security interest created hereby and referred to above until the repayment or satisfaction in full of the obligations of Grantor as are now or hereafter evidenced by the Loan Agreement.

SECTION 2.10 . During the continuance of any Event of Default, Beneficiary shall have all of the rights and remedies of a secured party under the Uniform Commercial Code (the "Code") of the State of Utah, and specifically the right to direct notice and collections of any obligation owing to Grantor by any lessee. In addition to its rights to foreclose this Deed of Trust, Beneficiary shall have the right to sell the Personal Property or any part thereof, or any further, or additional, or substituted Personal Property, at one or more times, and from time to time, at public sale or sales or at private sale or sales, on such terms as to cash or credit, or partly for cash and partly on credit, as Beneficiary may deem proper. Beneficiary shall have the right to become the purchaser at any such public sale or sales, free and clear of any and all claims, rights of equity of redemption in Grantor, all of which are hereby waived and released. Grantor shall not be credited with the amount of any part of such purchase price, unless, until and only to the extent that such payment is actually received in cash. Notice of public sale, if given, shall be sufficiently given, for all purposes, if published not less than seven days prior to any sale, in any newspaper of general circulation distributed in the city in which the property to be sold is located or as otherwise required by the Code.

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The net proceeds of any sale of the Personal Property which may remain after the deduction of all costs, fees and expenses incurred in connection therewith, including, but not limited to, all advertising expenses, broker's or brokerage commissions, documentary stamps, recording fees, foreclosure costs, stamp taxes and counsel fees, shall be credited by Beneficiary against the liabilities, obligations and indebtedness of Grantor to Beneficiary secured by this Deed of Trust and evidenced by the Loan Agreement. Any portion of the Personal Property which may remain unsold after the full payment, satisfaction and discharge of all of the liabilities, obligations and indebtedness of Grantor to Beneficiary shall be returned to the respective parties which delivered the same to Beneficiary. If at any time Grantor or any other party shall become entitled to the return of any of the Personal Property hereunder, any transfer or assignment thereof by Beneficiary shall be, and shall recite that the same is, made wholly without representation or warranty whatsoever by, or recourse whatsoever against Beneficiary.

SECTION 2.11 . All rights, remedies and powers provided by Sections 2.01-2.10 hereof may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law in the jurisdiction in which the Premises are located, and all such provisions are intended to be subject to all applicable provisions of law which may be controlling in such jurisdiction and to be limited to the extent necessary so that they will not render this Deed of Trust invalid, illegal or unenforceable under the provisions of any applicable law.

SECTION 2.12 . Grantor agrees, to the full extent permitted by law, that at all times following an Event of Default, neither

29

Grantor nor anyone claiming through or under it shall or will set up, claim or seek to take advantage of any appraisement, valuation, stay, or extension laws now or hereafter in force, in order to prevent or hinder the enforcement or foreclosure of this Deed of Trust or the absolute sale of the Mortgaged Property or the final and absolute putting into possession thereof, immediately after such sale, of the purchaser thereat; and Grantor, for itself and all who may at any time claim through or under it, hereby waives, to the full extent that it may lawfully so do, the benefit of all such laws and any and all right to have the assets comprising the Mortgaged Property marshalled upon any foreclosure of the lien hereof and agrees that Trustee or any court having jurisdiction to foreclose such lien may sell the Mortgaged Property in part or as an entirety. To the full extent permitted by law, Grantor hereby waives any and all statutory or other rights of redemption from sale under any order or decree of foreclosure of this Deed of Trust, on its own behalf and on behalf of each and every person acquiring any interest in or title to the Mortgaged Property subsequent to the date hereof.

ARTICLE III

MISCELLANEOUS

SECTION 3.01 . In the event any one or more of the provisions contained in this Deed of Trust shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Deed of Trust, but this Deed of Trust shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

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SECTION 3.02 . All notices or demands by any party relating to this Deed of Trust or any other agreement entered into in connection herewith shall be sent in the form set forth in the Loan Agreement.

The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other. All notices or demands sent in accordance with this Section 3.02 other than notices by Beneficiary in connection with Sections 9504 or 9505 of the Code, shall be deemed received on the earlier of the date of actual receipt or three (3) calendar days after the deposit thereof in the mail. Grantor acknowledges and agrees that notices sent by Beneficiary in connection with Sections 9504 or 9505 of the Code shall be deemed sent when deposited in the mail or transmitted by telefacsimile or other similar method permitted by law.

SECTION 3.03 . Whenever in this Deed of Trust the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person or persons entitled to receive such notice.

SECTION 3.04 . All of the grants, covenants, terms, obligations, provisions and conditions herein contained shall run with the land and shall apply to, bind and inure to the benefit of, the successors and assigns of Grantor and Beneficiary and to the successors of the Trustee.

SECTION 3.05 . Intentionally Deleted.

SECTION 3.06 . It shall be lawful for the Trustee, or Beneficiary, at its election, upon the occurrence of an Event of Default, to sue out forthwith a complaint in foreclosure upon this Deed of Trust and to proceed thereon to judgment and execution for the recovery of all sums payable by Grantor pursuant to the terms of this Deed of Trust without further stay, any law, usage or custom to the contrary notwithstanding.

SECTION 3.07 . Notwithstanding the appointment of any receiver, liquidator or trustee of Grantor, or of any of its property, or of the Mortgaged Property, or any part

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thereof, the Trustee shall be entitled to retain possession and control of all property now or hereafter held under this Deed of Trust.

SECTION 3.08 . Intentionally Deleted.

SECTION 3.09 . Grantor hereby waives and relin quishes unto, and in favor of Beneficiary, all benefit under all laws, now in effect or hereafter passed, to relieve Grantor in any manner from the obligations assumed and the obligation for which this Deed of Trust is security or to reduce the amount of the said obligation to any greater extent than the amount actually paid for the Mortgaged Property, in any judicial proceedings upon the said obligation, or upon this Deed of Trust.

SECTION 3.10 . Neither Grantor nor any other person now or hereafter obligated for payment for all or any part of the indebtedness secured hereby shall be relieved of such obligation by reason of the failure of Beneficiary to comply with any request of Grantor or of any other person so obligated to take action to foreclose on this Deed of Trust or otherwise enforce any provisions hereof or under the Loan Agreement or by reason of the release, regardless of consideration, of all or any part of the security held for the indebtedness secured hereby, or by reason of any agreement of stipulation between any subsequent owner of the Mortgaged Property and Beneficiary extending the time of payment or modifying the terms hereof without first having obtained the consent of Grantor or such other person; and in the latter event Grantor and all other such persons shall continue to be liable to make payment according to the terms of any such extension or modification agreement, unless expressly released and discharged in writing by Beneficiary.

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SECTION 3.11 . By accepting or approving anything required to be observed, performed or fulfilled or to be given to Beneficiary pursuant to this Deed of Trust, including (but not limited to) any certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal or insurance policy, Beneficiary shall not be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance or approval thereof shall not be or constitute any warranty or representation with respect thereto by Beneficiary.

SECTION 3.12 . Beneficiary may from time to time, without notice to Grantor or to the Trustee, and with or without cause and with or without the resignation of the Trustee substitute a successor or successors to the Trustee named herein or acting hereunder to execute this trust. Upon such appointment and without conveyance to the successor Trustee, the latter shall be vested with all title, powers and duties conferred upon the Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written document executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which when duly filed for record in the proper office, shall be conclusive proof of proper appointment of the successor Trustee. The procedure herein provided for substitution of the Trustee shall be conclusive of all other provisions for substitution, statutory or otherwise.

SECTION 3.13 . Intentionally Deleted.

SECTION 3.14 . Intentionally Deleted.

SECTION 3.15 . GRANTOR AGREES THAT THIS DEED OF TRUST, THE LOAN AGREEMENT, AND ALL OTHER

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RELATED DOCUMENTS AND THE RIGHT, DUTIES, OBLIGATIONS AND LIABILITIES THEREUNDER (INCLUDING, WITHOUT LIMITATION, THE LIABILITY OF GRANTOR FOR ANY DEFICIENCY FOLLOWING A FORECLOSURE OF ALL OR ANY PART OF THE MORTGAGED PROPERTY) ARE TO BE CONSTRUED, GOVERNED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, EXCEPT AS TO MATTERS RELATING TO THE CREATION, PERFECTION, PRIORITY AND ENFORCEMENT OF THE LIENS ON AND SECURITY INTEREST IN THE MORTGAGED PROPERTY, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH. WHEREVER POSSIBLE, EACH PROVISION OF THIS DEED OF TRUST SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS DEED OF TRUST SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISIONS OR THE REMAINING PROVISIONS OF THIS DEED OF TRUST.

SECTION 3.16 . Trustee covenants faithfully to perform the trust herein created, being liable, however, only for gross negligence or willful misconduct. Trustee accepts this Trust, when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Trustee is not obligated to notify any party hereto of any action or proceeding in which Grantor, Beneficiary or Trustee shall be a party unless brought by Trustee.

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IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed as of the day and year first above written.

"Grantor"

EVANS & SUTHERLAND COMPUTER CORPORATION,
a Utah corporation

By       /s/ R. Gaynor
  ---------------------------------------------------
         Richard J. Gaynor, Vice President
         & Chief Financial Officer

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STATE OF CALIFORNIA             )
                                ) ss.
COUNTY OF LOS ANGELES           )

On December 14, 2000, before me, Greta Johnson, personally appeared RICHARD J. GAYNOR, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument

WITNESS my hand and official seal.

         /s/ Greta Johnson
-----------------------------------------------------

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EXHIBIT A

The leasehold estate and interest which arise pursuant to that certain Lease Agreement, dated November 21, 1972, by and between UNIVERSITY OF UTAH, a corporate and body politic ("Lessor"), and MOUNTAIN CO-VENTURE, a general partnership ("Lessee"), and amended by that certain Addendum To Lease Agreement, dated April 3, 1973, and by that Second Addendum to Lease Agreement, dated June 4, 1973, and by that certain Third Addendum To Lease Agreement, dated December 7, 1973, and by that certain Fourth Addendum To Lease Agreement, dated September 12, 1979, and by that certain Fifth Addendum to Lease Agreement, dated April 9, 1987, [record notice of the existence of said Lease Agreement was originally afforded by that certain Memorandum of Lease recorded June 21, 1973 as Entry No. 2548892, in Book 3355 at Page 354, of the Official Records of the Salt Lake County Recorder. Further record notice was afforded by a Memorandum Of Ground Lease recorded June 1, 2000 as Entry No. 7650611, in Book 8365 at Page 3592 of the Official Records of the Salt Lake County Recorder; the Lessee's interest in and to said Lease Agreement being now held by EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation], in and to the following described tracts of land:

BEGINNING at a point on the Westerly line of Arappen Drive, said point being North 2324.780 feet and West 686.110 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence South 41(degree)00'00" West 212.00 feet; thence North 49(degree)00'00" West 90.00 feet; thence South 41(degree)00'00" West 340.00 feet; thence North 49(degree)00'00" West 239.289 feet to a point on the arc of a 692.20 foot radius curve to the right; thence Northeasterly 31.381 feet along said curve (chord bears:
North 39(degree)42'06" East 31.378 feet); thence North 41(degree)00'00" East 475.63 feet to a point on the arc of a 45.00 foot radius curve to the right; thence Northeasterly and Southeasterly 70.69 feet along said curve (chord bears: North 86(degree)00'00" East 63.64 feet) to a point on the Westerly line of Arappen Drive; thence South 49(degree)00'00" East 285.00 feet along the said Westerly line to the point of BEGINNING.

BEGINNING at a point North 1921.943 feet and West 1155.542 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence South 41(degree)00'00" West 70.00 feet; thence North 49(degree)00'00" West 220.927 feet to a point on the arc of a 692.20 foot radius curve; thence

37

Northeasterly 71.229 feet along said curve to the right (chord bears:
North 30(degree)28'00" East 71.20 feet); thence south 49(degree)00'00" East 233.943 feet to the point of BEGINNING.

EXCEPTING ANY PORTION LYING WITHIN THE BOUNDS OF WAKARA WAY AND/OR KOMAS DRIVE, THE DEDICATION PLATS OF WHICH ARE FILED IN THE OFFICE OF THE SALT LAKE COUNTY RECORDER.

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Recording Requested by and
When Recorded Return to:

FOOTHILL CAPITAL CORPORATION
2450 Colorado Avenue
Suite 3000
Santa Monica, California 90404
Attention: Business Finance
Division Manager

STATE OF UTAH                               )
                                            ) ss.
COUNTY OF SALT LAKE                         )

ABSOLUTE ASSIGNMENT OF SUB-LEASES AND RENTS

THIS DOCUMENT SECURES OBLIGATIONS WHICH CONTAIN

PROVISIONS FOR A VARIABLE RATE OF INTEREST.

THIS ABSOLUTE ASSIGNMENT OF SUB-LEASES AND RENTS, made as of
this 14th day of December, 2000, by EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Assignor"), with its chief executive office located at 600 Komas Drive, Salt Lake City, Utah 84108 to FOOTHILL CAPITAL CORPORATION, a California corporation ("Assignee"), whose address is 2450 Colorado Avenue, Suite 3000 West, Santa Monica, California 90404, Attention: Business Finance Division Manager.

WITNESSETH THAT:

WHEREAS, Assignor, to evidence and secure a loan indebtedness in the aggregate amount of up to THIRTY Million Dollars ($30,000,000), and Assignee, have executed and Assignor has delivered to Assignee a Loan and Security Agreement ("Loan Agreement") of even date herewith, payable as provided in the Loan Agreement and finally maturing as provided in the Loan Agreement, with interest as therein expressed, and has executed and delivered on the aforesaid date and to secure said Loan Agreement, a Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing ("Mortgage": the Loan Agreement and Mortgage are hereinafter collectively called the "Mortgage Instruments") on Assignor's leasehold and possessory interest in that certain real estate commonly known as 540 Arappen Drive, in the City

1

of Salt Lake City, County of Salt Lake, State of Utah more particularly described in Exhibit "A" attached hereto and by reference made a part hereof, including the Assignor's interest in the improvements now or hereafter located thereon and the easements, rights and appurtenances thereunto belonging (hereinafter collectively called the "Mortgaged Premises");

WHEREAS, Assignor is or will become the lessor under written sub-leases for certain portions of the Mortgaged Premises, and Assignor may hereafter make other sub-leases of the Mortgaged Premises or parts thereof; and

WHEREAS, Assignee has required the assignment hereinafter made as a condition to making the above loan.

NOW, THEREFORE, Assignor, for good and valuable consideration, the receipt of which is hereby acknowledged, does hereby BARGAIN, SELL, TRANSFER, ASSIGN, CONVEY, SET OVER and DELIVER unto Assignee, as additional security for the payment of the above described loan indebtedness and the payment and performance of all the terms and conditions of the Mortgage Instruments, and any and all amendments, extensions and renewals thereof, the tenant sub-leases affecting the Mortgaged Premises or any part thereof as set forth in Exhibit "B" attached hereto and made a part hereof, and any sub-leases which may be executed at any time in the future during the life of this Assignment, and all amendments, extensions and renewals of said sub-leases and any of them, all of which are hereinafter called the "Sub-Leases";

TOGETHER WITH all of the income, rents, issues, profits, and proceeds of the Sub-Leases;

TOGETHER WITH all of the right, power and authority of Assignor to alter, modify or change the terms, conditions and provisions of any or all of the Sub-Leases or to surrender, cancel or terminate the same or to accept any surrender, cancellation or termination of same; and

TOGETHER WITH all of the credits, security, deposits, options, rights, powers and privileges of Assignor under any or all of the Sub-Leases, whether heretofore or hereafter existing.

1. All capitalized terms which are not defined herein shall have the definitions assigned to such terms in the Loan Agreement. To the extent that there are any conflicting provisions between the Mortgage and this Assignment, the provisions of this Assignment shall govern.

2

2. Assignor hereby authorizes Assignee or Assignee's agents to collect the aforesaid rents and revenues and hereby directs each tenant under a Sub-Lease which affects a portion of the Mortgaged Premises to pay such rents and revenues to Assignee or Assignee's agents; provided, however, that prior to written notice given by Assignee to Assignor of the occurrence of an Event of Default (as defined in the Mortgage) and the Assignee's intent to exercise its rights to such rents and revenues (the "Default Notice"), Assignor shall collect and receive all rents and revenues of the Mortgaged Premises and Assignor shall apply the rents and revenues so collected to the amounts then due and payable in connection with the Mortgage Instruments with the balance, so long as no unrescinded Default Notice has been delivered, to the account of Assignor, it being intended by Assignor and Assignee that this assignment of rents constitutes an absolute present assignment and not an assignment for additional security only.

3. Upon delivery of the Default Notice by Assignee to Assignor, and without the necessity of Assignee entering upon and taking and maintaining full control of the Mortgaged Premises in person, by agent or by a court-appointed receiver, Assignee shall immediately be entitled to receive all rents and revenues of the Mortgaged Premises as specified in this Assignment as the same become due and payable, including but not limited to rents then due and unpaid, and all such rents and revenue then held by Assignor or thereafter delivered to Assignor shall, immediately upon delivery of the Default Notice, be held by Assignor as trustee for the benefit of Assignee only. Assignor agrees that commencing upon delivery of the Default Notice each tenant of the Mortgaged Premises shall make such rents payable to and shall pay such rents directly to Assignee or Assignee's agents on Assignee's written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Assignor. All such rents collected by Assignee shall be credited against amounts due under each respective Sub-Lease. Assignor shall execute any and all writings and letters reasonably required by Assignee, to be delivered to such tenants, to effectuate the intent of this paragraph.

4. Assignor hereby represents, warrants and covenants that there are no presently effective assignments of said rents, except pursuant to the Mortgage, that Assignor has not performed, and will not perform, any acts or has not executed, and will not execute, any instrument which would prevent Assignee from exercising its rights under this Assignment, or which would give rise to any right of set-off

3

against, or reduction of, the rents payable under the Sub- Leases, and that at the time of execution of this Assignment there has been no anticipation or prepayment of any of the rents of the Mortgaged Premises for more than one month prior to the due dates of such rents. Assignor covenants that Assignor will not hereafter collect or accept payment of any rents of the Mortgaged Premises more than one month prior to the due dates of such rents. Assignor further covenants that Assignor will execute and deliver to Assignee such further assignments of rents and revenues of the Mortgaged Premises as Assignee may from time to time reasonably request.

5. Upon an Event of Default, Assignee may, in person, by agent or by a court-appointed receiver, regardless of the adequacy of Assignee's security, enter upon and take possession of and maintain full control of the Mortgaged Premises in order to perform all acts necessary and appropri ate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of Sub-Leases (but only in accordance with such Sub-Lease terms and conditions), the collection of all rents and revenues of the Mortgaged Premises, the making of repairs to the Mortgaged Premises and the execution or termination of contracts providing for the management or maintenance of the Mortgaged Premises; all on such terms as are reasonably deemed best to protect the security of this instrument. Upon such taking of possession or control of the Mortgaged Premises, Assignee or its agents shall thereafter prospectively honor the Sub- leases. In the event Assignee elects to seek the appointment of a receiver for the Mortgaged Premises upon an Event of Default, Assignor hereby expressly consents to the appointment of such receiver upon ex parte applications without notice, if permitted under applicable law. Assignee or the receiver shall be entitled to receive a reasonable fee for so managing the Mortgaged Premises. Nothing contained herein nor any collection of rents, payments or other sums by Assignee, or by a receiver, shall be construed to make Assignee a "mortgagee- in-possession" of the Mortgaged Premises so long as Assignee has not itself entered into actual possession of the Mortgaged Premises.

6. All rents and revenues collected by Assignee subsequent to delivery of the Default Notice by Assignee to Assignor shall be applied first to the reasonable costs, if any, of taking control of and managing the Mortgaged Premises and collecting the rents, including, but not limited to, reasonable attorneys' fees, receiver's fees, premiums on insurance policies, taxes, assessments and other charges on the Mortgaged Premises, and the costs of discharging any obligation or liability of Assignor as lessor or landlord of

4

the Mortgaged Premises and then to the sums secured by the Mortgage Instruments. Assignee or the receiver shall have access to the books and records used in the operation and maintenance of the Mortgaged Premises and shall be liable to account to Assignor only for those rents and revenues actually received. Assignee shall not be liable to Assignor, anyone claiming under or through Assignor or anyone having an interest in the Mortgaged Premises by reason of anything done or left undone by Assignee under this Assignment.

7. If the rents of the Mortgaged Premises are not sufficient to meet the costs, if any, of taking control of and managing the Mortgaged Premises and collecting the rents, any reasonable funds expended by Assignee for such purposes shall become obligations of Assignor to Assignee secured by the Mortgage Instruments. Unless Assignee and Assignor agree in writing to other terms of payment, such amounts shall be payable upon notice from Assignee to Assignor requesting payment thereof and shall bear interest from the date of disbursement until paid, at the Default Rate set forth in the Note.

8. Any entering upon and taking and maintaining of control of the Mortgaged Premises by Assignee or the receiver, and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy of Assignee under applicable law or provided herein.

9. Except as may be permitted by the Loan Agreement, Assignor will not (i) execute an assignment of the rents or any part thereof from the Mortgaged Premises to any party other than Assignee unless such assignment shall provide that it is subject and subordinate to this Assignment, and any additional or subsequent assignment executed pursuant hereto, or (ii) except where the tenant is in default thereunder, terminate or consent to the cancellation or surrender of any Sub-Leases of the Mortgaged Premises or of any part thereof, now existing or hereafter to be made or (iii) modify any such Sub-Leases or give consent to any assignment or subletting, which modification, assignment or subletting would materially impair the value of such Sub-Leases, without Assignee's prior written consent, or (iv) accept prepayments of any installments of rent or additional rent to become due under such Sub-Leases more than one (1) month in advance, except prepayments in the nature of security for the performance of the tenant's obligations thereunder, or (v) in any other manner materially impair the value of the Mortgaged Premises or the security of the Assignee for the payment of the indebtedness secured by the Mortgage Instruments or (vi) enter into any Sub-Leases prohibited by the Loan Agreement.

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10. Except as may be permitted by the Loan Agreement, Assignor will not execute any Sub-Leases of all or a substantial portion of the Mortgaged Premises without the prior written consent of Assignee. All tenants must take actual occupancy of the Mortgaged Premises and Assignor will at all times promptly and faithfully perform, or cause to be performed, all of the material covenants, conditions and agreements contained in all Sub-Leases of the Mortgaged Premises now or hereafter existing, on the part of the lessor thereunder to be kept and performed. If any such Sub-Leases provides for the giving by the tenant of certificates with respect to the status of such Sub-Leases, Assignor shall exercise its right to request such certificates within five (5) days of any demand therefor by Assignee.

11. Assignor shall furnish to Assignee, within fifteen (15) days after a request by Assignee to do so, a written statement containing the names of all tenants for the Mortgaged Premises, the terms of their respective Sub-Leases, the spaces occupied, and the rentals paid and any security therefor.

12. In addition to the assignment granted herein, Assignor shall, from time to time upon the reasonable request of Assignee, specifically assign to Assignor, by an instrument in writing in such form as may be approved by Assignor, all right, title and interest of Assignor in and to any and all Sub-Leases now or hereafter on or affecting the Mortgaged Premises, together with all security therefor and all monies payable thereunder, subject to the conditional permission hereinabove given to Assignor to collect the rentals under any such Sub-Leases. Assignor shall also execute and deliver to Assignee any notification, financing statement or other document reasonably required by Assignee to perfect the foregoing assignment or the assignment granted herein as to any such Sub-Leases.

13. Each Sub-Leases of the Mortgaged Premises or of any part thereof entered into after the date hereof shall provide that, in the event of the enforcement by a receiver, trustee, or Assignee of the remedies provided for by law or by this Assignment, any person succeeding to the interest of Assignor as a result of such enforcement shall not be bound by any payment of rent or additional rent for more than one (1) month in advance, provided, however, that nothing herein set forth shall affect or impair the rights of Assignee to terminate any one or more of such Sub-Leases in connection with the exercise of its remedies hereunder.

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14. Any notice hereunder by either party hereto to the other shall be given as provided for in the Loan Agreement.

15. Assignor hereby agrees to indemnify and hold the Assignee harmless against and from (a) any and all liability, loss, damage and expense, including reasonable attorneys' fees, which it may or shall incur or which may be asserted under or in connection with this assignment or any of the Sub-Leases, or by reason of any action permitted hereunder or at law taken by the Assignee (including without limitation any action which Assignee in its reasonable discretion may take to protect its interest in the Mortgaged Premises), and (b) any and all claims and demands whatsoever which may be incurred by or asserted against Assignor by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants and conditions contained in any of the Sub-Leases.

16. Should Assignee incur any such liability as described in Paragraph 15, the amount thereof, together with interest thereon at the lower of the highest rate permitted by law or the Default Rate under the Loan Agreement shall be payable by Assignor to Assignee immediately upon demand, or at the option of Assignee, Assignee may reimburse itself therefor out of any rents, issues or profits of the Mortgaged Premises collected by Assignee.

17. Nothing contained herein shall operate or be construed to obligate Assignee to perform any of the terms, covenants or conditions contained in any Sub-Lease (unless required by law), or to take any measures, legal or otherwise, to enforce collection of any of said rents or other payments.

18. Prior to actual entry into and taking possession of the Mortgaged Premises by Assignee, this assignment shall not operate to place upon Assignee any responsibility for the operation, control, care, management or repair of the Mortgaged Premises, or for performance of the terms, covenants, and conditions of any Sub-Leases, and the execution of this assignment by the Assignor shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Premises is and shall be that of Assignor prior to such actual entry and taking of possession.

19. Upon payment in full of the principal sum, interest and other indebtedness evidenced by the Mortgage Instruments, this Assignment shall be and become null and void; otherwise, it shall remain in full force and effect as

7

herein provided and, with the covenants, warranties and representations herein contained, shall bind Assignor and all subsequent ground lessees of the Mortgaged Premises and inure to the benefit of Assignee and all subsequent holders of the Mortgage Instruments. The term "Assignee," as used herein shall be construed to mean as of any time the holder for the time being of the Mortgage Instruments and all rights, options, powers, authority and remedies herein granted to Assignee may be exercised or executed at any and all times or from time to time by any holder for the time being of the Mortgage Instruments. This Assignment may not be changed or terminated orally, but only by an instrument in writing, signed by the party against whom enforcement of any waiver, change, modification, termination or discharge is sought.

IN WITNESS WHEREOF, Assignor has caused this instrument to be executed as of the date first above written.

"ASSIGNOR"

EVANS & SUTHERLAND COMPUTER
CORPORATION, a Utah corporation

By      /s/ R. Gaynor
   ----------------------------------------------
        Richard J. Gaynor,
        Vice President and
        Chief Financial Officer

8

STATE OF CALIFORNIA                         )
                                            ) ss.
COUNTY OF LOS ANGELES                       )

On December 14, 2000, before me, Greta Johnson, personally appeared RICHARD J. GAYNOR, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument

WITNESS my hand and official seal.

         /s/ Greta Johnson
----------------------------------------------

9

EXHIBIT A

The leasehold estate and interest which arise pursuant to that certain Lease Agreement, dated November 21, 1972, by and between UNIVERSITY OF UTAH, a corporate and body politic ("Lessor"), and MOUNTAIN CO-VENTURE, a general partnership ("Lessee"), and amended by that certain Addendum To Lease Agreement, dated April 3, 1973, and by that Second Addendum to Lease Agreement, dated June 4, 1973, and by that certain Third Addendum To Lease Agreement, dated December 7, 1973, and by that certain Fourth Addendum To Lease Agreement, dated September 12, 1979, and by that certain Fifth Addendum to Lease Agreement, dated April 9, 1987, [record notice of the existence of said Lease Agreement was originally afforded by that certain Memorandum of Lease recorded June 21, 1973 as Entry No. 2548892, in Book 3355 at Page 354, of the Official Records of the Salt Lake County Recorder. Further record notice was afforded by a Memorandum Of Ground Lease recorded June 1, 2000 as Entry No. 7650611, in Book 8365 at Page 3592 of the Official Records of the Salt Lake County Recorder; the Lessee's interest in and to said Lease Agreement being now held by EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation], in and to the following described tracts of land:

BEGINNING at a point on the Westerly line of Arappen Drive, said point being North 2324.780 feet and West 686.110 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence South 41(degree)00'00" West 212.00 feet; thence North 49(degree)00'00" West 90.00 feet; thence South 41(degree)00'00" West 340.00 feet; thence North 49(degree)00'00" West 239.289 feet to a point on the arc of a 692.20 foot radius curve to the right; thence Northeasterly 31.381 feet along said curve (chord bears:
North 39(degree)42'06" East 31.378 feet); thence North 41(degree)00'00" East 475.63 feet to a point on the arc of a 45.00 foot radius curve to the right; thence Northeasterly and Southeasterly 70.69 feet along said curve (chord bears: North 86(degree)00'00" East 63.64 feet) to a point on the Westerly line of Arappen Drive; thence South 49(degree)00'00" East 285.00 feet along the said Westerly line to the point of BEGINNING.

BEGINNING at a point North 1921.943 feet and West 1155.542 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1

10

East, Salt Lake Base and Meridian, and running thence South 41(degree)00'00" West 70.00 feet; thence North 49(degree)00'00" West 220.927 feet to a point on the arc of a 692.20 foot radius curve; thence Northeasterly 71.229 feet along said curve to the right (chord bears: North 30(degree)28'00" East 71.20 feet); thence south 49(degree)00'00" East 233.943 feet to the point of BEGINNING.

EXCEPTING ANY PORTION LYING WITHIN THE BOUNDS OF WAKARA WAY AND/OR KOMAS DRIVE, THE DEDICATION PLATS OF WHICH ARE FILED IN THE OFFICE OF THE SALT LAKE COUNTY RECORDER.

11

Recording Requested by and
When Recorded Return to:

FOOTHILL CAPITAL CORPORATION
2450 Colorado Avenue
Suite 3000
Santa Monica, California 90404
Attention: Business Finance
Division Manager

STATE OF UTAH                      )
                                   ) ss.
COUNTY OF SALT LAKE                )

ABSOLUTE ASSIGNMENT OF SUB-LEASES AND RENTS

THIS DOCUMENT SECURES OBLIGATIONS WHICH CONTAIN PROVISIONS FOR A VARIABLE RATE OF INTEREST.

THIS ABSOLUTE ASSIGNMENT OF SUB-LEASES AND RENTS, made as of
this 14th day of December, 2000, by EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Assignor"), with its chief executive office located at 600 Komas Drive, Salt Lake City, Utah 84108 to FOOTHILL CAPITAL CORPORATION, a California corporation ("Assignee"), whose address is 2450 Colorado Avenue, Suite 3000 West, Santa Monica, California 90404, Attention: Business Finance Division Manager.

WITNESSETH THAT:

WHEREAS, Assignor, to evidence and secure a loan indebtedness in the aggregate amount of up to THIRTY Million Dollars ($30,000,000), and Assignee, have executed and Assignor has delivered to Assignee a Loan and Security Agreement ("Loan Agreement") of even date herewith, payable as provided in the Loan Agreement and finally maturing as provided in the Loan Agreement, with interest as therein expressed, and has executed and delivered on the aforesaid date and to secure said Loan Agreement, a Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing ("Mortgage": the Loan Agreement and Mortgage are hereinafter collectively called the "Mortgage Instruments") on Assignor's leasehold and possessory interest in that certain real estate commonly known as 580 Arappen Drive, in the City

1

of Salt Lake City, County of Salt Lake, State of Utah more particularly described in Exhibit "A" attached hereto and by reference made a part hereof, including the Assignor's interest in the improvements now or hereafter located thereon and the easements, rights and appurtenances thereunto belonging (hereinafter collectively called the "Mortgaged Premises");

WHEREAS, Assignor is or will become the lessor under written sub-leases for certain portions of the Mortgaged Premises, and Assignor may hereafter make other sub-leases of the Mortgaged Premises or parts thereof; and

WHEREAS, Assignee has required the assignment hereinafter made as a condition to making the above loan.

NOW, THEREFORE, Assignor, for good and valuable consideration, the receipt of which is hereby acknowledged, does hereby BARGAIN, SELL, TRANSFER, ASSIGN, CONVEY, SET OVER and DELIVER unto Assignee, as additional security for the payment of the above described loan indebtedness and the payment and performance of all the terms and conditions of the Mortgage Instruments, and any and all amendments, extensions and renewals thereof, the tenant sub-leases affecting the Mortgaged Premises or any part thereof as set forth in Exhibit "B" attached hereto and made a part hereof, and any sub-leases which may be executed at any time in the future during the life of this Assignment, and all amendments, extensions and renewals of said sub-leases and any of them, all of which are hereinafter called the "Sub-Leases";

TOGETHER WITH all of the income, rents, issues, profits, and proceeds of the Sub-Leases;

TOGETHER WITH all of the right, power and authority of Assignor to alter, modify or change the terms, conditions and provisions of any or all of the Sub-Leases or to surrender, cancel or terminate the same or to accept any surrender, cancellation or termination of same; and

TOGETHER WITH all of the credits, security, deposits, options, rights, powers and privileges of Assignor under any or all of the Sub-Leases, whether heretofore or hereafter existing.

1. All capitalized terms which are not defined herein shall have the definitions assigned to such terms in the Loan Agreement. To the extent that there are any conflicting provisions between the Mortgage and this Assignment, the provisions of this Assignment shall govern.

2

2. Assignor hereby authorizes Assignee or Assignee's agents to collect the aforesaid rents and revenues and hereby directs each tenant under a Sub-Lease which affects a portion of the Mortgaged Premises to pay such rents and revenues to Assignee or Assignee's agents; provided, however, that prior to written notice given by Assignee to Assignor of the occurrence of an Event of Default (as defined in the Mortgage) and the Assignee's intent to exercise its rights to such rents and revenues (the "Default Notice"), Assignor shall collect and receive all rents and revenues of the Mortgaged Premises and Assignor shall apply the rents and revenues so collected to the amounts then due and payable in connection with the Mortgage Instruments with the balance, so long as no unrescinded Default Notice has been delivered, to the account of Assignor, it being intended by Assignor and Assignee that this assignment of rents constitutes an absolute present assignment and not an assignment for additional security only.

3. Upon delivery of the Default Notice by Assignee to Assignor, and without the necessity of Assignee entering upon and taking and maintaining full control of the Mortgaged Premises in person, by agent or by a court-appointed receiver, Assignee shall immediately be entitled to receive all rents and revenues of the Mortgaged Premises as specified in this Assignment as the same become due and payable, including but not limited to rents then due and unpaid, and all such rents and revenue then held by Assignor or thereafter delivered to Assignor shall, immediately upon delivery of the Default Notice, be held by Assignor as trustee for the benefit of Assignee only. Assignor agrees that commencing upon delivery of the Default Notice each tenant of the Mortgaged Premises shall make such rents payable to and shall pay such rents directly to Assignee or Assignee's agents on Assignee's written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Assignor. All such rents collected by Assignee shall be credited against amounts due under each respective Sub-Lease. Assignor shall execute any and all writings and letters reasonably required by Assignee, to be delivered to such tenants, to effectuate the intent of this paragraph.

4. Assignor hereby represents, warrants and covenants that there are no presently effective assignments of said rents, except pursuant to the Mortgage, that Assignor has not performed, and will not perform, any acts or has not executed, and will not execute, any instrument which would prevent Assignee from exercising its rights under this Assignment, or which would give rise to any right of set-off

3

against, or reduction of, the rents payable under the Sub- Leases, and that at the time of execution of this Assignment there has been no anticipation or prepayment of any of the rents of the Mortgaged Premises for more than one month prior to the due dates of such rents. Assignor covenants that Assignor will not hereafter collect or accept payment of any rents of the Mortgaged Premises more than one month prior to the due dates of such rents. Assignor further covenants that Assignor will execute and deliver to Assignee such further assignments of rents and revenues of the Mortgaged Premises as Assignee may from time to time reasonably request.

5. Upon an Event of Default, Assignee may, in person, by agent or by a court-appointed receiver, regardless of the adequacy of Assignee's security, enter upon and take possession of and maintain full control of the Mortgaged Premises in order to perform all acts necessary and appropri ate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of Sub-Leases (but only in accordance with such Sub-Lease terms and conditions), the collection of all rents and revenues of the Mortgaged Premises, the making of repairs to the Mortgaged Premises and the execution or termination of contracts providing for the management or maintenance of the Mortgaged Premises; all on such terms as are reasonably deemed best to protect the security of this instrument. Upon such taking of possession or control of the Mortgaged Premises, Assignee or its agents shall thereafter prospectively honor the Sub- leases. In the event Assignee elects to seek the appointment of a receiver for the Mortgaged Premises upon an Event of Default, Assignor hereby expressly consents to the appointment of such receiver upon ex parte applications without notice, if permitted under applicable law. Assignee or the receiver shall be entitled to receive a reasonable fee for so managing the Mortgaged Premises. Nothing contained herein nor any collection of rents, payments or other sums by Assignee, or by a receiver, shall be construed to make Assignee a "mortgagee- in-possession" of the Mortgaged Premises so long as Assignee has not itself entered into actual possession of the Mortgaged Premises.

6. All rents and revenues collected by Assignee subsequent to delivery of the Default Notice by Assignee to Assignor shall be applied first to the reasonable costs, if any, of taking control of and managing the Mortgaged Premises and collecting the rents, including, but not limited to, reasonable attorneys' fees, receiver's fees, premiums on insurance policies, taxes, assessments and other charges on the Mortgaged Premises, and the costs of discharging any obligation or liability of Assignor as lessor or landlord of

4

the Mortgaged Premises and then to the sums secured by the Mortgage Instruments. Assignee or the receiver shall have access to the books and records used in the operation and maintenance of the Mortgaged Premises and shall be liable to account to Assignor only for those rents and revenues actually received. Assignee shall not be liable to Assignor, anyone claiming under or through Assignor or anyone having an interest in the Mortgaged Premises by reason of anything done or left undone by Assignee under this Assignment.

7. If the rents of the Mortgaged Premises are not sufficient to meet the costs, if any, of taking control of and managing the Mortgaged Premises and collecting the rents, any reasonable funds expended by Assignee for such purposes shall become obligations of Assignor to Assignee secured by the Mortgage Instruments. Unless Assignee and Assignor agree in writing to other terms of payment, such amounts shall be payable upon notice from Assignee to Assignor requesting payment thereof and shall bear interest from the date of disbursement until paid, at the Default Rate set forth in the Note.

8. Any entering upon and taking and maintaining of control of the Mortgaged Premises by Assignee or the receiver, and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy of Assignee under applicable law or provided herein.

9. Except as may be permitted by the Loan Agreement, Assignor will not (i) execute an assignment of the rents or any part thereof from the Mortgaged Premises to any party other than Assignee unless such assignment shall provide that it is subject and subordinate to this Assignment, and any additional or subsequent assignment executed pursuant hereto, or (ii) except where the tenant is in default thereunder, terminate or consent to the cancellation or surrender of any Sub-Leases of the Mortgaged Premises or of any part thereof, now existing or hereafter to be made or (iii) modify any such Sub-Leases or give consent to any assignment or subletting, which modification, assignment or subletting would materially impair the value of such Sub-Leases, without Assignee's prior written consent, or (iv) accept prepayments of any installments of rent or additional rent to become due under such Sub-Leases more than one (1) month in advance, except prepayments in the nature of security for the performance of the tenant's obligations thereunder, or (v) in any other manner materially impair the value of the Mortgaged Premises or the security of the Assignee for the payment of the indebtedness secured by the Mortgage Instruments or (vi) enter into any Sub-Leases prohibited by the Loan Agreement.

5

10. Except as may be permitted by the Loan Agreement, Assignor will not execute any Sub-Leases of all or a substantial portion of the Mortgaged Premises without the prior written consent of Assignee. All tenants must take actual occupancy of the Mortgaged Premises and Assignor will at all times promptly and faithfully perform, or cause to be performed, all of the material covenants, conditions and agreements contained in all Sub-Leases of the Mortgaged Premises now or hereafter existing, on the part of the lessor thereunder to be kept and performed. If any such Sub-Leases provides for the giving by the tenant of certificates with respect to the status of such Sub-Leases, Assignor shall exercise its right to request such certificates within five (5) days of any demand therefor by Assignee.

11. Assignor shall furnish to Assignee, within fifteen (15) days after a request by Assignee to do so, a written statement containing the names of all tenants for the Mortgaged Premises, the terms of their respective Sub-Leases, the spaces occupied, and the rentals paid and any security therefor.

12. In addition to the assignment granted herein, Assignor shall, from time to time upon the reasonable request of Assignee, specifically assign to Assignor, by an instrument in writing in such form as may be approved by Assignor, all right, title and interest of Assignor in and to any and all Sub-Leases now or hereafter on or affecting the Mortgaged Premises, together with all security therefor and all monies payable thereunder, subject to the conditional permission hereinabove given to Assignor to collect the rentals under any such Sub-Leases. Assignor shall also execute and deliver to Assignee any notification, financing statement or other document reasonably required by Assignee to perfect the foregoing assignment or the assignment granted herein as to any such Sub-Leases.

13. Each Sub-Leases of the Mortgaged Premises or of any part thereof entered into after the date hereof shall provide that, in the event of the enforcement by a receiver, trustee, or Assignee of the remedies provided for by law or by this Assignment, any person succeeding to the interest of Assignor as a result of such enforcement shall not be bound by any payment of rent or additional rent for more than one (1) month in advance, provided, however, that nothing herein set forth shall affect or impair the rights of Assignee to terminate any one or more of such Sub-Leases in connection with the exercise of its remedies hereunder.

6

14. Any notice hereunder by either party hereto to the other shall be given as provided for in the Loan Agreement.

15. Assignor hereby agrees to indemnify and hold the Assignee harmless against and from (a) any and all liability, loss, damage and expense, including reasonable attorneys' fees, which it may or shall incur or which may be asserted under or in connection with this assignment or any of the Sub-Leases, or by reason of any action permitted hereunder or at law taken by the Assignee (including without limitation any action which Assignee in its reasonable discretion may take to protect its interest in the Mortgaged Premises), and (b) any and all claims and demands whatsoever which may be incurred by or asserted against Assignor by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants and conditions contained in any of the Sub-Leases.

16. Should Assignee incur any such liability as described in Paragraph 15, the amount thereof, together with interest thereon at the lower of the highest rate permitted by law or the Default Rate under the Loan Agreement shall be payable by Assignor to Assignee immediately upon demand, or at the option of Assignee, Assignee may reimburse itself therefor out of any rents, issues or profits of the Mortgaged Premises collected by Assignee.

17. Nothing contained herein shall operate or be construed to obligate Assignee to perform any of the terms, covenants or conditions contained in any Sub-Lease (unless required by law), or to take any measures, legal or otherwise, to enforce collection of any of said rents or other payments.

18. Prior to actual entry into and taking possession of the Mortgaged Premises by Assignee, this assignment shall not operate to place upon Assignee any responsibility for the operation, control, care, management or repair of the Mortgaged Premises, or for performance of the terms, covenants, and conditions of any Sub-Leases, and the execution of this assignment by the Assignor shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Premises is and shall be that of Assignor prior to such actual entry and taking of possession.

19. Upon payment in full of the principal sum, interest and other indebtedness evidenced by the Mortgage Instruments, this Assignment shall be and become null and void; otherwise, it shall remain in full force and effect as

7

herein provided and, with the covenants, warranties and representations herein contained, shall bind Assignor and all subsequent ground lessees of the Mortgaged Premises and inure to the benefit of Assignee and all subsequent holders of the Mortgage Instruments. The term "Assignee," as used herein shall be construed to mean as of any time the holder for the time being of the Mortgage Instruments and all rights, options, powers, authority and remedies herein granted to Assignee may be exercised or executed at any and all times or from time to time by any holder for the time being of the Mortgage Instruments. This Assignment may not be changed or terminated orally, but only by an instrument in writing, signed by the party against whom enforcement of any waiver, change, modification, termination or discharge is sought.

IN WITNESS WHEREOF, Assignor has caused this instrument to be executed as of the date first above written.

"ASSIGNOR"

EVANS & SUTHERLAND COMPUTER
CORPORATION, a Utah corporation

By       /s/ R. Gaynor
  --------------------------------------------------
         Richard J. Gaynor,
         Vice President and
         Chief Financial Officer

8

STATE OF CALIFORNIA                         )
                                            ) ss.
COUNTY OF LOS ANGELES                       )

On December 14, 2000, before me, Greta Johnson, personally appeared RICHARD J. GAYNOR, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument

WITNESS my hand and official seal.

        /s/ Greta Johnson
------------------------------------------------

9

EXHIBIT A

The leasehold estate and interest which arise pursuant to that certain Lease Agreement, dated November 21, 1973, by and between UNIVERSITY OF UTAH, a corporate and body politic ("Lessor"), and PARK ENTERPRISES, a general partnership ("Lessee"), and amended by that certain First Addendum To Lease Agreement, dated May 24, 1974, and by that certain Second Addendum To Lease Agreement, dated March 23, 1977, and by that certain Third Addendum To Lease Agreement, dated September 12, 1979, and by that certain Fourth Addendum To Lease Agreement, dated April 9, 1987 [record notice of the existence of said Lease Agreement was originally afforded by that certain Memorandum Of Lease recorded July 26, 1974 as Entry No. 2638807, in Book 3640 at Page 114, of the Official Records of the Salt Lake County Recorder. Further record notice was afforded by a Memorandum Of Ground Lease recorded June 1, 2000 as Entry No. 7650613, in Book 8365 at Page 3599, of the Official Records of Salt Lake County Recorder; the Lessee's interest being now held by EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation], in and to the following described tract of land:

BEGINNING at a point on the Westerly line of Arappen Drive, said point being North 2259.174 feet and West 610.639 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence South 41(degree)00'00" West 210.00 feet; thence South 49(degree)00'00" East 70.00 feet; thence South 41(degree)00'00" West 342.00 feet; thence South 49(degree)00'00" East 303.00 feet to a point on the arc of a 70.00 foot radius curve to the left; thence Easterly 109.956 feet along said curve (chord bears: North 86(degree)00'00" East 98.995 feet); thence North 41(degree)00'00" East 90.00 feet; thence North 49(degree)00'00" West 178 feet; thence North 49(degree)00'00" East 392.00 feet to the Westerly line of Arappen Drive; thence North 49(degree)00'00" West 265.00 feet along said Westerly line to the point of BEGINNING.

EXCEPTING ANY PORTIONS LYING WITHIN THE BOUNDS OF KOMAS DRIVE AND/OR BLACK HAWK WAY, THE DEDICATION PLATS OF WHICH ARE FILED IN THE OFFICE OF THE SALT LAKE COUNTY RECORDER.

10

Recording Requested by and
When Recorded Return to:

FOOTHILL CAPITAL CORPORATION
2450 Colorado Avenue
Suite 3000
Santa Monica, California 90404
Attention: Business Finance
Division Manager

STATE OF UTAH                               )
                                            ) ss.
COUNTY OF SALT LAKE                         )

ABSOLUTE ASSIGNMENT OF SUB-LEASES AND RENTS

THIS DOCUMENT SECURES OBLIGATIONS WHICH CONTAIN

PROVISIONS FOR A VARIABLE RATE OF INTEREST.

THIS ABSOLUTE ASSIGNMENT OF SUB-LEASES AND RENTS, made as of
this 14th day of December, 2000, by EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Assignor"), with its chief executive office located at 600 Komas Drive, Salt Lake City, Utah 84108 to FOOTHILL CAPITAL CORPORATION, a California corporation ("Assignee"), whose address is 2450 Colorado Avenue, Suite 3000 West, Santa Monica, California 90404, Attention: Business Finance Division Manager.

WITNESSETH THAT:

WHEREAS, Assignor, to evidence and secure a loan indebtedness in the aggregate amount of up to THIRTY Million Dollars ($30,000,000), and Assignee, have executed and Assignor has delivered to Assignee a Loan and Security Agreement ("Loan Agreement") of even date herewith, payable as provided in the Loan Agreement and finally maturing as provided in the Loan Agreement, with interest as therein expressed, and has executed and delivered on the aforesaid date and to secure said Loan Agreement, a Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing ("Mortgage": the Loan Agreement and Mortgage are hereinafter collectively called the "Mortgage Instruments") on Assignor's leasehold and possessory interest in that certain real estate commonly known as 560 ARAPPEN DRIVE, 650 KOMAS

1

DRIVE, 600 KOMAS DRIVE, 770 KOMAS DRIVE, AND 630 KOMAS DRIVE, in the City of Salt Lake City, County of Salt Lake, State of Utah more particularly described in Exhibit "A" attached hereto and by reference made a part hereof, including the Assignor's interest in the improvements now or hereafter located thereon and the easements, rights and appurtenances thereunto belonging (hereinafter collectively called the "Mortgaged Premises");

WHEREAS, Assignor is or will become the lessor under written sub-leases for certain portions of the Mortgaged Premises, and Assignor may hereafter make other sub-leases of the Mortgaged Premises or parts thereof; and

WHEREAS, Assignee has required the assignment hereinafter made as a condition to making the above loan.

NOW, THEREFORE, Assignor, for good and valuable consideration, the receipt of which is hereby acknowledged, does hereby BARGAIN, SELL, TRANSFER, ASSIGN, CONVEY, SET OVER and DELIVER unto Assignee, as additional security for the payment of the above described loan indebtedness and the payment and performance of all the terms and conditions of the Mortgage Instruments, and any and all amendments, extensions and renewals thereof, the tenant sub-leases affecting the Mortgaged Premises or any part thereof as set forth in Exhibit "B" attached hereto and made a part hereof, and any sub-leases which may be executed at any time in the future during the life of this Assignment, and all amendments, extensions and renewals of said sub-leases and any of them, all of which are hereinafter called the "Sub-Leases";

TOGETHER WITH all of the income, rents, issues, profits, and proceeds of the Sub-Leases;

TOGETHER WITH all of the right, power and authority of Assignor to alter, modify or change the terms, conditions and provisions of any or all of the Sub-Leases or to surrender, cancel or terminate the same or to accept any surrender, cancellation or termination of same; and

TOGETHER WITH all of the credits, security, deposits, options, rights, powers and privileges of Assignor under any or all of the Sub-Leases, whether heretofore or hereafter existing.

1. All capitalized terms which are not defined herein shall have the definitions assigned to such terms in the Loan Agreement. To the extent that there are any

2

conflicting provisions between the Mortgage and this Assignment, the provisions of this Assignment shall govern.

2. Assignor hereby authorizes Assignee or Assignee's agents to collect the aforesaid rents and revenues and hereby directs each tenant under a Sub-Lease which affects a portion of the Mortgaged Premises to pay such rents and revenues to Assignee or Assignee's agents; provided, however, that prior to written notice given by Assignee to Assignor of the occurrence of an Event of Default (as defined in the Mortgage) and the Assignee's intent to exercise its rights to such rents and revenues (the "Default Notice"), Assignor shall collect and receive all rents and revenues of the Mortgaged Premises and Assignor shall apply the rents and revenues so collected to the amounts then due and payable in connection with the Mortgage Instruments with the balance, so long as no unrescinded Default Notice has been delivered, to the account of Assignor, it being intended by Assignor and Assignee that this assignment of rents constitutes an absolute present assignment and not an assignment for additional security only.

3. Upon delivery of the Default Notice by Assignee to Assignor, and without the necessity of Assignee entering upon and taking and maintaining full control of the Mortgaged Premises in person, by agent or by a court-appointed receiver, Assignee shall immediately be entitled to receive all rents and revenues of the Mortgaged Premises as specified in this Assignment as the same become due and payable, including but not limited to rents then due and unpaid, and all such rents and revenue then held by Assignor or thereafter delivered to Assignor shall, immediately upon delivery of the Default Notice, be held by Assignor as trustee for the benefit of Assignee only. Assignor agrees that commencing upon delivery of the Default Notice each tenant of the Mortgaged Premises shall make such rents payable to and shall pay such rents directly to Assignee or Assignee's agents on Assignee's written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Assignor. All such rents collected by Assignee shall be credited against amounts due under each respective Sub-Lease. Assignor shall execute any and all writings and letters reasonably required by Assignee, to be delivered to such tenants, to effectuate the intent of this paragraph.

4. Assignor hereby represents, warrants and covenants that there are no presently effective assignments of said rents, except pursuant to the Mortgage, that Assignor has not performed, and will not perform, any acts or has not

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executed, and will not execute, any instrument which would prevent Assignee from exercising its rights under this Assignment, or which would give rise to any right of set-off against, or reduction of, the rents payable under the Sub- Leases, and that at the time of execution of this Assignment there has been no anticipation or prepayment of any of the rents of the Mortgaged Premises for more than one month prior to the due dates of such rents. Assignor covenants that Assignor will not hereafter collect or accept payment of any rents of the Mortgaged Premises more than one month prior to the due dates of such rents. Assignor further covenants that Assignor will execute and deliver to Assignee such further assignments of rents and revenues of the Mortgaged Premises as Assignee may from time to time reasonably request.

5. Upon an Event of Default, Assignee may, in person, by agent or by a court-appointed receiver, regardless of the adequacy of Assignee's security, enter upon and take possession of and maintain full control of the Mortgaged Premises in order to perform all acts necessary and appropri ate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of Sub-Leases (but only in accordance with such Sub-Lease terms and conditions), the collection of all rents and revenues of the Mortgaged Premises, the making of repairs to the Mortgaged Premises and the execution or termination of contracts providing for the management or maintenance of the Mortgaged Premises; all on such terms as are reasonably deemed best to protect the security of this instrument. Upon such taking of possession or control of the Mortgaged Premises, Assignee or its agents shall thereafter prospectively honor the Sub- leases. In the event Assignee elects to seek the appointment of a receiver for the Mortgaged Premises upon an Event of Default, Assignor hereby expressly consents to the appointment of such receiver upon ex parte applications without notice, if permitted under applicable law. Assignee or the receiver shall be entitled to receive a reasonable fee for so managing the Mortgaged Premises. Nothing contained herein nor any collection of rents, payments or other sums by Assignee, or by a receiver, shall be construed to make Assignee a "mortgagee- in-possession" of the Mortgaged Premises so long as Assignee has not itself entered into actual possession of the Mortgaged Premises.

6. All rents and revenues collected by Assignee subsequent to delivery of the Default Notice by Assignee to Assignor shall be applied first to the reasonable costs, if any, of taking control of and managing the Mortgaged Premises and collecting the rents, including, but not limited to, reasonable attorneys' fees, receiver's fees, premiums on

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insurance policies, taxes, assessments and other charges on the Mortgaged Premises, and the costs of discharging any obligation or liability of Assignor as lessor or landlord of the Mortgaged Premises and then to the sums secured by the Mortgage Instruments. Assignee or the receiver shall have access to the books and records used in the operation and maintenance of the Mortgaged Premises and shall be liable to account to Assignor only for those rents and revenues actually received. Assignee shall not be liable to Assignor, anyone claiming under or through Assignor or anyone having an interest in the Mortgaged Premises by reason of anything done or left undone by Assignee under this Assignment.

7. If the rents of the Mortgaged Premises are not sufficient to meet the costs, if any, of taking control of and managing the Mortgaged Premises and collecting the rents, any reasonable funds expended by Assignee for such purposes shall become obligations of Assignor to Assignee secured by the Mortgage Instruments. Unless Assignee and Assignor agree in writing to other terms of payment, such amounts shall be payable upon notice from Assignee to Assignor requesting payment thereof and shall bear interest from the date of disbursement until paid, at the Default Rate set forth in the Note.

8. Any entering upon and taking and maintaining of control of the Mortgaged Premises by Assignee or the receiver, and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy of Assignee under applicable law or provided herein.

9. Except as may be permitted by the Loan Agreement, Assignor will not (i) execute an assignment of the rents or any part thereof from the Mortgaged Premises to any party other than Assignee unless such assignment shall provide that it is subject and subordinate to this Assignment, and any additional or subsequent assignment executed pursuant hereto, or (ii) except where the tenant is in default thereunder, terminate or consent to the cancellation or surrender of any Sub-Leases of the Mortgaged Premises or of any part thereof, now existing or hereafter to be made or (iii) modify any such Sub-Leases or give consent to any assignment or subletting, which modification, assignment or subletting would materially impair the value of such Sub-Leases, without Assignee's prior written consent, or (iv) accept prepayments of any installments of rent or additional rent to become due under such Sub-Leases more than one (1) month in advance, except prepayments in the nature of security for the performance of the tenant's obligations thereunder, or (v) in any other manner materially impair the value of the Mortgaged Premises

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or the security of the Assignee for the payment of the indebtedness secured by the Mortgage Instruments or (vi) enter into any Sub-Leases prohibited by the Loan Agreement.

10. Except as may be permitted by the Loan Agreement, Assignor will not execute any Sub-Leases of all or a substantial portion of the Mortgaged Premises without the prior written consent of Assignee. All tenants must take actual occupancy of the Mortgaged Premises and Assignor will at all times promptly and faithfully perform, or cause to be performed, all of the material covenants, conditions and agreements contained in all Sub-Leases of the Mortgaged Premises now or hereafter existing, on the part of the lessor thereunder to be kept and performed. If any such Sub-Leases provides for the giving by the tenant of certificates with respect to the status of such Sub-Leases, Assignor shall exercise its right to request such certificates within five (5) days of any demand therefor by Assignee.

11. Assignor shall furnish to Assignee, within fifteen (15) days after a request by Assignee to do so, a written statement containing the names of all tenants for the Mortgaged Premises, the terms of their respective Sub-Leases, the spaces occupied, and the rentals paid and any security therefor.

12. In addition to the assignment granted herein, Assignor shall, from time to time upon the reasonable request of Assignee, specifically assign to Assignor, by an instrument in writing in such form as may be approved by Assignor, all right, title and interest of Assignor in and to any and all Sub-Leases now or hereafter on or affecting the Mortgaged Premises, together with all security therefor and all monies payable thereunder, subject to the conditional permission hereinabove given to Assignor to collect the rentals under any such Sub-Leases. Assignor shall also execute and deliver to Assignee any notification, financing statement or other document reasonably required by Assignee to perfect the foregoing assignment or the assignment granted herein as to any such Sub-Leases.

13. Each Sub-Leases of the Mortgaged Premises or of any part thereof entered into after the date hereof shall provide that, in the event of the enforcement by a receiver, trustee, or Assignee of the remedies provided for by law or by this Assignment, any person succeeding to the interest of Assignor as a result of such enforcement shall not be bound by any payment of rent or additional rent for more than one (1) month in advance, provided, however, that nothing herein set forth shall affect or impair the rights of Assignee to

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terminate any one or more of such Sub-Leases in connection with the exercise of its remedies hereunder.

14. Any notice hereunder by either party hereto to the other shall be given as provided for in the Loan Agreement.

15. Assignor hereby agrees to indemnify and hold the Assignee harmless against and from (a) any and all liability, loss, damage and expense, including reasonable attorneys' fees, which it may or shall incur or which may be asserted under or in connection with this assignment or any of the Sub-Leases, or by reason of any action permitted hereunder or at law taken by the Assignee (including without limitation any action which Assignee in its reasonable discretion may take to protect its interest in the Mortgaged Premises), and (b) any and all claims and demands whatsoever which may be incurred by or asserted against Assignor by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants and conditions contained in any of the Sub-Leases.

16. Should Assignee incur any such liability as described in Paragraph 15, the amount thereof, together with interest thereon at the lower of the highest rate permitted by law or the Default Rate under the Loan Agreement shall be payable by Assignor to Assignee immediately upon demand, or at the option of Assignee, Assignee may reimburse itself therefor out of any rents, issues or profits of the Mortgaged Premises collected by Assignee.

17. Nothing contained herein shall operate or be construed to obligate Assignee to perform any of the terms, covenants or conditions contained in any Sub-Lease (unless required by law), or to take any measures, legal or otherwise, to enforce collection of any of said rents or other payments.

18. Prior to actual entry into and taking possession of the Mortgaged Premises by Assignee, this assignment shall not operate to place upon Assignee any responsibility for the operation, control, care, management or repair of the Mortgaged Premises, or for performance of the terms, covenants, and conditions of any Sub-Leases, and the execution of this assignment by the Assignor shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Premises is and shall be that of Assignor prior to such actual entry and taking of possession.

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19. Upon payment in full of the principal sum, interest and other indebtedness evidenced by the Mortgage Instruments, this Assignment shall be and become null and void; otherwise, it shall remain in full force and effect as herein provided and, with the covenants, warranties and representations herein contained, shall bind Assignor and all subsequent ground lessees of the Mortgaged Premises and inure to the benefit of Assignee and all subsequent holders of the Mortgage Instruments. The term "Assignee," as used herein shall be construed to mean as of any time the holder for the time being of the Mortgage Instruments and all rights, options, powers, authority and remedies herein granted to Assignee may be exercised or executed at any and all times or from time to time by any holder for the time being of the Mortgage Instruments. This Assignment may not be changed or terminated orally, but only by an instrument in writing, signed by the party against whom enforcement of any waiver, change, modification, termination or discharge is sought.

IN WITNESS WHEREOF, Assignor has caused this instrument to be executed as of the date first above written.

"ASSIGNOR"

EVANS & SUTHERLAND COMPUTER
CORPORATION, a Utah corporation

By       /s/ R. Gaynor
  -----------------------------------------------
         Richard J. Gaynor,
         Vice President and
         Chief Financial Officer

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STATE OF CALIFORNIA                )
                                   ) ss.
COUNTY OF LOS ANGELES              )

On December 14, 2000, before me, Greta Johnson, personally appeared RICHARD J. GAYNOR, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument

WITNESS my hand and official seal.

         /s/ Greta Johnson
-----------------------------------------------

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EXHIBIT A

PARCEL 1 - 560 ARAPPEN DRIVE:

The leasehold estate and interest which arise pursuant to that certain Lease Agreement, dated September 4, 1979, by and between UNIVERSITY OF UTAH, a corporate and body politic ("Lessor"), and TRI VENTURE, A General Partnership ("Lessee"), and amended by that certain First Addendum to Lease Agreement, dated April 9, 1987, by that certain Second Addendum To Lease Agreement, dated December 31, 1990, and by a Memorandum of Ground Lease and Amendment To Ground Lease recorded June 1, 2000 as Entry No. 7650612, in Book 8365 at Page 3595, of the Official Records of the Salt Lake County Recorder (the Lessee's interest being now held by EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation) in and to the following described tracts of land:

BEGINNING at a point on the Westerly line of Arappen Drive, said point being North 2324.780 feet and West 686.110 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence South 41(degree)00'00" West 212.00 feet; thence North 49(degree)00'00" West 90.00 feet; thence South 41(degree)00'00" West 340.00 feet; thence South 49(degree)00'00" East 260.00 feet; thence North 41(degree)00'00" East 342.00 feet, thence North 49(degree)00'00" West 70.00 feet; thence North 41(degree)00'00" East 210.00 feet to the Westerly line of Arappen Drive; thence North 49(degree)00'00" West 100.00 feet along said Westerly line to the point of BEGINNING.

BEGINNING at a point on the Westerly line of Komas Drive, said point being North 1626.262 feet and West 815.400 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence North 49(degree)00'00" West 450.692 feet; thence South 41(degree)00'00" West 70.00 feet; thence North 49(degree)00'00" West 220.932 feet to a point on the arc of a 692.200 foot radius curve whose center bears South 62(degree)28'51" East; thence Southwesterly 42.964 feet along the arc of said curve to the left through a central angle of 03(degree)33'23"; thence South 49(degree)00'00" East 660.319 feet; thence North 41(degree)00'00" East 111.443 feet to the point of BEGINNING.

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EXCEPTING FROM PARCEL 1, DESCRIBED HEREIN, ANY PORTION LYING WITHIN THE BOUNDS OF KOMAS DRIVE, THE DEDICATION PLAT OF WHICH IS FILED IN THE OFFICE OF THE SALT LAKE COUNTY RECORDER.

PARCEL 2 - 650 KOMAS DRIVE:

The leasehold estate and interest which arise pursuant to that certain Lease Agreement, dated September 5, 1980, by and between UNIVERSITY OF UTAH, a corporate and body politic ("Lessor"), and BLACK HAWK INVESTMENT COMPANY, A General Partnership ("Lessee"), and amended by that certain First Amendment To Lease Agreement, dated June 7, 1982, and by that certain Second Amendment To Lease Agreement, dated September 28, 1982, and by that certain Third Addendum To Lease Agreement, April 9, 1987, and by that certain Fourth Addendum To Lease Agreement, dated December 31, 1990 [record notice of the existence of said Lease Agreement was originally afforded by that certain Short Form Ground Lease recorded April 15, 1983 as Entry No. 3781219, in Book 5451 at Page 2306, of the Official Records of the Salt Lake County Recorder. Further record notice was afforded by a Memorandum Of Ground Lease recorded June 1, 2000 as Entry No. 7650614, in Book 8365 at Page 3602, of the Official Records of the Salt Lake County Recorder; the Lessee's interest being now held by EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation], in and to the following described tract of land:

BEGINNING at a point on the Westerly line of Komas Drive, said point being North 1626.262 feet and West 815.400 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence South 49(degree)00'00" East 551.954 feet; thence South 41(degree)00'00" West 31.741 feet; thence South 60(degree)00'00" West 601.002 feet; thence North 49(degree)00'00" West 326.287 feet; thence North 41(degree)00'00" East 488.553 feet; thence North 49(degree)00'00" West 30.000 feet; thence North 41(degree)00'00" East 111.443 feet to the point of BEGINNING.

PARCEL 3 - 600 KOMAS DRIVE:

The leasehold estate and interest which arise pursuant to that certain University of Utah Research Park Master Form Lease Lease Agreement, dated April 9, 1987, by and between UNIVERSITY OF UTAH, a corporation and body politic ("Lessor"), and EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Lessee"), and amended by that certain First Addendum To Lease Agreement, dated December 31, 1990, and by a Memorandum of Ground Lease and Amendment to Ground Lease recorded June 1, 2000 as Entry No. 7650615, in Book 8365 at

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Page 3606, of the Official Records of the Salt Lake County Recorder, in and to the following described tract of land:

BEGINNING at a point which is North 1626.262 feet and West 815.400 feet and South 40(degree)00'00" West 111.443 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monuments is located South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence North 49(degree)00'00" West 660.319 feet to a point on the arc of a 692.200 foot radius curve whose center bears South 66(degree)02'14" East; thence Northeasterly 114.196 feet along the arc of said curve to the right through a central angle of 09(degree)27'08"; thence North 49(degree)00'00" West 6.001 feet; thence South 41(degree)00'00" West 525.082 feet; thence South 12(degree)21'26" East 320.00 feet; thence North 82(degree)47'10" East 208.879 feet to a point on the arc of a 608.887 foot radius curve whose center bears North 82(degree)02'11" East; thence Southeasterly 360.905 feet along the arc of said curve to the left through a central angle of 33(degree)57'39"; thence North 41(degree)00'00" East 593.845 feet; thence North 49(degree)00'00" West 30.00 feet to the point of BEGINNING.

EXCEPTING FROM PARCEL 3, DESCRIBED ABOVE, ANY PORTION LYING WITHIN THE BOUNDS OF WAKARA WAY AND/OR KOMAS DRIVE, THE DEDICATION PLATS OF WHICH ARE FILED IN THE OFFICE OF THE SALT LAKE COUNTY RECORDER.

PARCEL 4 - 770 KOMAS DRIVE:

The leasehold estate and interest which arise pursuant to that certain University Of Utah Research Park Master Form Lease Lease Agreement, dated April 1, 1988, by and between UNIVERSITY OF UTAH, a corporate and body politic ("Lessor"), and EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Lessee"), and amended by that first Addendum To Lease Agreement, dated December 31, 1990, and by a Memorandum Of Ground Lease Agreement and Amendment To Lease recorded June 1, 2000 as Entry No. 7650616, in Book 8365 at Page 3610, of the Official Records of the Salt Lake County Recorder, in and to the following described tract of land:

BEGINNING at a point which is North 22(degree)00'00" West 179.000 feet from a point on the North line of Sunnyside Avenue, said point being South 89(degree)59'50" West 761.997 feet and North 00(degree)00'10" West 58.200 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65(degree)48'24" West 3622.620 feet and East 97.000 feet and South 58.200 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt

12

Lake Base and Meridian, and running thence South 61(degree)09'35" West 166.781 feet; thence North 52(degree)49'31" West 103.650 feet; thence North 12(degree)49'54" West 461.520 feet; thence North 43(degree)19'53" West 315.935 feet; thence North 44(degree)00'00" East 123.669 feet along the radial line to a point on a curve; thence Southeasterly along the arc of the 212.4714 foot radius curve to the left, arc length = 274.416 feet, chord length = 255.737 feet (chord bearing = South 83(degree)00'00" East), tangent length = 160.109 feet, central angle = 74(degree)00'00"; thence along the radial line South 30(degree)00'00" East 20.500 feet to the point of tangency; thence North 60(degree)00'00" East 71.108 feet; thence South 49(degree)00'00" East 33.554 feet; thence South 60(degree)00'00" West 11.730 feet; thence South 22(degree)00'00" East 550.000 feet; thence South 23(degree)00'00" West 217.000 feet to the point of BEGINNING.

PARCEL 5 - 630 KOMAS DRIVE:

The leasehold estate and interest which arise pursuant to that certain University of Utah Research Park Master Form Lease Lease Agreement, dated December 31, 1990, by and between UNIVERSITY OF UTAH, a corporate and body politic ("Lessor"), and EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Lessee"), amended by a Memorandum Of Ground Lease and Amendment to Ground Lease recorded June 1, 2000 as Entry No. 7650617, in Book 8365 at Page 3614, of the Official Records of the Salt Lake County Recorder, in and to the following described tract of land:

BEGINNING at a point which is North 886.114 feet and West 1377.035 feet from a Salt Lake City Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument being South 65(degree)48'24" West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian, and running thence North 43(degree)19'53" West 245.767 feet; thence North 12(degree)21'26" West 312.856 feet; thence North 82(degree)47'10" East 208.879 feet to a point on the arc of a 608.887 foot radius curve, the center of which bears North 82(degree)02'11" East; thence Southeasterly along said curve to the left through a central angle of 33(degree)57'39", a distance of 360.905 feet; thence North 40(degree)58' East 105.291 feet; thence South 49(degree)00' East 292.731 feet; thence South 60(degree)00' West 71.105 feet; thence North 30(degree)00' West 20.50 feet to a point on the arc of a 212.471 foot radius curve, the center of which bears North 30(degree)00' West; thence Southwesterly along said curve to the right though a central angle of 74(degree)00', a distance of 274.416 feet; thence South 44(degree)00' West 123.669 feet to the point of BEGINNING.

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PLEDGE AND SECURITY AGREEMENT

This Pledge and Security Agreement ("Pledge Agreement") is entered into as of the 14th day of December, 2000, between EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Pledgor"), with its chief executive office located at 600 Komas Drive, Salt Lake City, Utah 84108, as pledgor ("Pledgor") and FOOTHILL CAPITAL CORPORATION, with an office at 2450 Colorado Avenue, Suite 3000 West, Santa Monica, California 90404 ("Foothill"), as pledgee, and is entered into with reference to the following facts:

RECITALS

FACT ONE: Contemporaneously herewith, Pledgor and Foothill are entering into financial agreements evidenced by that certain Loan and Security Agreement of even date herewith (the "Loan Agreement"), and other documents as set forth therein, whereby Foothill has agreed to loan money to Pledgor (all initially capitalized terms not otherwise defined herein shall have the meaning set forth in the Loan Agreement).

FACT TWO: The loan will be secured by, inter alia, pledges of One Million Two Hundred Forty-Seven Thousand Two Hundred Eighteen (1,247,218) shares of stock ("Stock") in EVANS & SUTHERLAND COMPUTER LIMITED, a company organized under the laws of the United Kingdom on September 5, 1983 ("Company").

NOW THEREFORE, pursuant to the above and pursuant to the Loan Agreement, the parties hereto agree as follows:

1. DEFINED TERMS

As used in this Pledge Agreement:

"Certificated Security, "Endorsement", "Registered Form", "Security", "Security Certificate", and "Uncertificated Security" have the meanings ascribed to such terms in Division 8 of the Code.

"Code" means the California Uniform Commercial Code, as amended and supplemented from time to time, and any successor statute, except to the extent otherwise provided in Section 8110 or 9103 thereof.

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"Collateral" has the meaning given to such term in Section 2.

"Company" has the meaning given to such term in FACT TWO.

"Event of Default" has the meaning given to such term in Section 12.

"Instrument" has the meaning ascribed to such term in Division 9 of the Code.

"Pledgor" has the meaning given to such term in the introductory paragraph.

"Secured Obligations" has the meaning given to such term in Section 3.

"Stock" has the meaning given to such term in FACT TWO.

2. PLEDGE TO FOOTHILL BY PLEDGOR

Pledgor hereby grants a continuing first priority security interest in, and pledges to Foothill, each and all of the following items of collateral (collectively the "Collateral"):

(a) All of Pledgor's right, title and interest in and to the Stock, including without limitation, the right to exercise any and all rights and privileges associated therewith, together with the right to receive dividends or stock splits therefrom (the "Stock Attributes"), all to the same degree as if Foothill was the owner thereof; provided, however, that Pledgor shall retain the Stock Attributes unless there is an "Event of Default" (as defined in Section 12 herein) in which event Foothill has the option (but not the obligation) to exercise or receive the Stock Attributes on any and all of the Stock.

(b) All proceeds of the Stock, including, but not limited to, all accounts, instruments, chattel paper, notes, general intangibles, goods, equipment, deposit accounts, money and whatever other tangible or intangible property is received by Pledgor upon the sale or other disposition of the Stock, and the proceeds thereof.

2

3. FOOTHILL OBLIGATIONS

The Collateral shall secure the repayment of all Obligations arising under the Loan Agreement and the obligations of Pledgor arising hereunder ("Secured Obligations").

4. PAYMENTS RECEIVED

Any and all cash received by Foothill related to any of the Collateral shall be accepted as payment on the Obligations, against the sums then due, in accordance with the provisions of the Loan Agreement.

5. CONTROL OF COLLATERAL

Pledgor shall promptly deliver to Foothill any and all Instruments and Certificated Securities comprising all or any portion of the Collateral for Foothill to hold pursuant to the terms hereof, and if such Certificated Securities are in Registered Form, (i) such Certificated Securities shall be endorsed in blank by an effective undated Endorsement, in form and substance satisfactory to Foothill in its sole and absolute discretion, or (ii) Pledgor shall cause Company's transfer agents to transfer such Securities into the name of Foothill and issue a replacement Security Certificate evidencing the same in the name of Foothill. In the event that all or any portion of the Collateral consists of Uncertificated Securities, Pledgor shall cause Company to enter into a control agreement with respect to such Uncertificated Securities, in the form set forth in Exhibit "A" attached hereto.

6. FURTHER ASSURANCES

Pledgor agrees that it shall cooperate with Foothill and shall execute and deliver, or cause to be executed and delivered, to Foothill all of the Collateral, originals where possible, and all proxies, assignments, financing statements, instruments, control agreements and other documents, and shall take all further action, at the expense of Pledgor, from time to time requested by Foothill, in order to maintain a continuing, first-priority, perfected security interest in the Collateral in favor of Foothill, and to enable Foothill to exercise and enforce its rights and remedies hereunder with respect to the Collateral, and Pledgor agrees that it shall execute and deliver to Foothill at Foothill's request any further applications, agreements, documents and instruments, and shall perform any and all acts deemed necessary by Foothill to

3

carry into effect the terms, conditions, and provisions of this Agreement and the transactions connected herewith. Should Pledgor fail to execute or deliver any such applications, agreements, documents, financing statements and instruments, or to perform any such acts, Pledgor acknowledges that Foothill may execute and deliver the same and perform such acts in the name of Pledgor and on its behalf as its attorney-in-fact in accordance with Section 11.

7. FOOTHILL'S DUTIES

Foothill shall not have any duties with respect to the Collateral other than the duty to use reasonable care if the Collateral is in its possession. In accordance with Section 9207 of the Code, Foothill shall be deemed to have used reasonable care if it observes substantially the same standard of care with respect to the custody or preservation of the Collateral as it observes with respect to similar assets owned by Foothill. Without limiting the generality of the foregoing, Foothill shall be under no obligation to take any steps necessary to preserve rights in the Collateral against any other parties, to sell the same if it threatens to decline in value, or to exercise any rights represented thereby (including rights with respect to calls, conversions, exchanges, maturities, or tenders); provided, however, that Foothill may, at its option, do so, and any and all expenses incurred in connection therewith shall be for the account of Pledgor.

8. REPRESENTATIONS AND WARRANTIES OF PLEDGOR

Pledgor hereby represents and warrants to Foothill that:

(i) The security interests of Foothill shall attach to the Collateral without further act on the part of Pledgor or Foothill.

(ii) That Pledgor has good and valid title to the Collateral and full power and authority to pledge the same, and that the Collateral is and shall remain, free from any other security interests, liens, encumbrances, or other rights of third parties.

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(iii) The total authorized and issued shares of stock in the Company are One Million Eight Hundred Eighty-Nine Thousand Seven Hundred and Twenty-Five (1,889,725).

9. AFFIRMATIVE COVENANTS OF PLEDGOR

Pledgor covenants and agrees that Pledgor shall do all of the following:

9.1 Furnish Foothill such information concerning the Collateral and the Company as Foothill may from time to time request.

9.2 Notify Foothill in writing prior to any change in Pledgor's chief executive office and execute such financing statements covering the security interest granted by this Agreement as Foothill may from time to time request.

9.3 Preserve and protect the Collateral.

9.4 Pay all charges of any nature against the Collateral prior to their delinquency; provided, however, that upon Pledgor's failure to do so, Foothill may pay such charges which they deem necessary (but shall have no obligation to do so) and Pledgor shall reimburse Foothill the amount paid.

9.5 Pledgor acknowledges that any costs or expenses (including attorneys' fees and legal expenses and attorneys' fees and expenses pursuant to 11 U.S.C.) incurred by Foothill: (a) in exercising any right, power, or remedy conferred by this Pledge Agreement; (b) in enforcing or attempting to enforce the payment or performance of the obligations of Foothill hereunder; (c) in connection with any redemption of the Collateral by Pledgor; or (d) otherwise in connection with this Pledge Agreement constitute "Foothill Expenses" under the Loan Agreement.

9.6 Pledgor will execute and deliver to Foothill, concurrently with Pledgor's execution of this Pledge Agreement and at any time or times hereafter at the request of Foothill, Assignment of Stock Powers, in blank, and all records respecting the Collateral including security agreements, reports, notices, endorsements, and all other documents that Foothill may reasonably request, in form satisfactory to Foothill, and do any other acts in order to perfect and maintain perfected Foothill's security interests in the Collateral and in order to fully consummate all of the transactions contemplated under this Pledge Agreement.

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10. NEGATIVE COVENANTS OF PLEDGOR

Pledgor shall not without the prior written consent of Foothill:

10.1 Approve the amendment or modification of the Company's articles of association or memorandum of association, or similar governing documents, or approve the dissolution or winding up of the Company.

10.2 Sell, assign, mortgage, pledge, assign in trust, hypothecate or otherwise create or permit to exist any lien on or security interest in the Collateral, or any Assets of the Company in favor of anyone other than Foothill.

10.3 Permit Company to issue any additional Stock.

11. SUBSTITUTE PERFORMANCE; POWER OF ATTORNEY

Pledgor authorizes Foothill to perform any and all acts which Foothill deems necessary for the protection and preservation of the Collateral or of the value of Foothill's security interest therein, including but not limited to receiving income thereon as additional security hereunder, all at Pledgor's expense, and Pledgor agrees to repay Foothill promptly upon demand any amounts expended hereunder by Foothill, together with interest thereon at the rate set forth in the Loan Agreement. Pledgor further grants to Foothill a power of attorney coupled with an interest to, during the continuance of an Event of Default, execute all agreements, forms, applications, documents and instruments and to take all actions and do all things as could be executed, taken, or done by Pledgor in connection with the protection and preservation of the Collateral, the Assigned Benefits, or this Agreement. This power of attorney is irrevocable and authorizes Foothill to act for Pledgor in connection with the matters described herein without notice to or demand upon Pledgor.

12. EVENTS OF DEFAULT BY PLEDGOR

Pledgor shall be in default hereunder if any of the following shall occur:

(a) Pledgor shall fail to perform, keep, or observe any term, provision, condition, covenant, agreement, warranty, or representation contained in this Pledge Agreement, or any other agreement, instrument, document, or writing concerning the Secured Obligations; or

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(b) There shall be a continuing Event of Default under the Loan Agreement; or

(c) There shall be a levy upon, seizure, or attachment of any portion of the Collateral.

13. REMEDIES UPON DEFAULT BY PLEDGOR

In the event of a default by Pledgor under this Pledge Agreement, Foothill may, at its election, and without notice and without demand, exercise its rights and remedies under the Loan Agreement, and do any one or more of the following, all of which are authorized by Pledgor:

(a) Without notice to or demand upon Pledgor, make such payments and do such acts as Foothill considers necessary or reasonable to protect its security interest in the Collateral;

(b) Retain the Collateral in partial satis faction of the Obligations secured thereby, or sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and such places as is commercially reasonable in Foothill's opinion. It is not necessary that the Collateral be present at any such sale;

(c) Obtain reimbursement from Pledgor, upon demand, of all costs and expenses (including attorneys' fees whether arising under matters under 11 U.S.C. or otherwise) incurred by Foothill in connection with the enforcement and/or exercise of any of its rights or remedies herein (such costs and expenses shall be reimbursed by Pledgor, upon demand, and shall constitute Obligations secured hereunder and under the Loan Agreement, whether or not suit is commenced);

(d) Exercise any and all other rights and remedies of a secured party under the California Commercial Code; and

(e) In view of the fact that securities laws may impose certain restrictions on the method by which a sale of the Collateral may be effected after an Event of Default, Pledgor agrees that upon the occurrence and during the continuance of an Event of Default, Foothill may from time

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to time attempt to sell all or any part of the Collateral by a private placement, restricting the bidders and prospective purchasers to those who will represent and agree that they are purchasing for investment only and not for distribution. In so doing, Foothill may solicit offers to buy the Collateral, or any part of it for cash, from a limited number of investors deemed by Foothill, in its reasonable judgment, to be responsible parties who might be interested in purchasing the Collateral. If Foothill shall solicit such offers from not less than four (4) such investors, then the acceptance by Foothill of the highest offer obtained therefrom shall be deemed to be a commercially reasonable method of disposition of such Collateral.

Notwithstanding the above, should Foothill determine that, prior to any public offering of any securities contained in the Collateral, such securities should be registered under the Securities Act of 1933 and/or regis tered or qualified under any other federal or state law, and that such registration and/or qualification is not practical, then Pledgor agrees that it will be commercially reasonable if a private sale is arranged so as to avoid a public offering even if offers are solicited from fewer than four (4) investors, and even though the sales price established and/or obtained may be substantially less than the price which would be obtained pursuant to a public offering.

Foothill may exercise one or more or all of the foregoing rights and remedies or any and all further rights and remedies provided for in other agreements now or hereafter existing between Pledgor and Foothill. All of such rights and remedies are specifically hereby made cumulative. No delay or failure on the part of Foothill in exercising any right, privilege, remedy or option hereunder shall operate as a waiver of such or any other right, privilege, remedy or option, and no waiver whatever shall be valid unless in writing, signed by Foothill, and then only to the extent therein set forth.

Foothill may exercise one or more or all of the foregoing rights and remedies or any and all further rights and remedies provided for in other agreements now or hereafter existing between Pledgor and Foothill. All of such rights and remedies are specifically hereby made cumulative. No delay or failure on the part of Foothill in exercising any right, privilege, remedy or option hereunder shall operate as a waiver of such or any other right, privilege, remedy or option, and no waiver whatever shall be valid unless in writing, signed by Foothill, and then only to the extent therein set forth.

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14. MISCELLANEOUS PROVISIONS

14.1 This Pledge Agreement shall be construed under, governed by, and enforced in accordance with the laws of the State of California. The parties agree that all actions or proceedings arising in connection with this Pledge Agreement shall be tried and litigated only in the state and federal courts located in the County of Los Angeles, State of California.

14.2 Unless otherwise provided in this Pledge Agreement, all notices or demands by any party relating to this Pledge Agreement or any other Loan Document shall be given in the manner required in the Loan Agreement.

14.3 If any clause, provision, or right provided for herein is unenforceable or inoperative, the remainder of this Pledge Agreement may be enforced as if such clause, provision, or right were not contained herein.

14.4 This Pledge Agreement cannot be changed or terminated orally.

14.5 All the representations, warranties, rights, privileges, remedies and options given to Foothill hereunder shall inure to the benefit of its successors and assigns and all of the terms, conditions, promises, covenants, provisions, representations and warranties contained in this Pledge Agreement shall bind the representatives, successors and assigns of each of the parties.

14.6 In the event of litigation arising under or in connection with this Pledge Agreement, the prevailing party shall be entitled to recover from the losing party any and all reasonable attorneys' fees and costs incurred, including, without limitation, fees and costs incurred pursuant to 11 U.S.C.

14.7 THE VALIDITY OF THIS PLEDGE AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS PLEDGE AGREEMENT SHALL BE TRIED AND LITIGATED ONLY

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IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. PLEDGOR AND FOOTHILL WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 14.6. PLEDGOR AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. PLEDGOR AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS PLEDGE AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

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14.8 Foothill and Pledgor acknowledge and agree that the Stock certificate delivered to Foothill this date, Certificate #4 in the amount of One Million Two Hundred Fifty-Nine Thousand Eight Hundred Seventeen (1,259,817) shares dated as of December 8, 2000, is incorrect in the number of shares listed. Foothill agrees that it will return the original certificate when it is provided with a replacement certificate in the amount of One Million Two Hundred Forty- Seven Thousand Two Hundred Eighteen (1,247,218) shares. In the event Pledgor does not deliver the replacement certificate to Foothill, then the pledge contained herein shall extend to the full shares evidenced by the delivered certificate.

IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be executed as of the date first hereinabove written.

"PLEDGOR"

EVANS & SUTHERLAND COMPUTER
CORPORATION, a Utah corporation

By:      /s/ R. Gaynor
    ----------------------------------------
  Richard J. Gaynor, Vice President
       and Chief Financial Officer

"FOOTHILL"

FOOTHILL CAPITAL CORPORATION,
a California corporation

By:      /s/ Rhonda Foreman
   -----------------------------------------
   Rhonda Foreman, Senior V.P.

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STATE OF CALIFORNIA         )
                            ) SS.
COUNTY OF LOS ANGELES       )

On December 14, 2000 before me, the undersigned, a notary public in and for said State, personally appeared RICHARD J. GAYNOR and RHONDA FOREMAN, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the persons, or the entity upon behalf of which the persons acted, executed the instrument.

WITNESS my hand and official seal.

                                     Signature       /s/ Greta Johnson
                                               ------------------------------
                                                     NOTARY PUBLIC
(SEAL)

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EXHIBIT "A"
CONTROL AGREEMENT

EVANS & SUTHERLAND COMPUTER LIMITED, a company organized under the laws of the United Kingdom on September 5, 1983 ("Company") hereby acknowledges the terms of the foregoing Stock Pledge and Security Agreement (the "Pledge Agreement"), dated as of December 12, 2000, by and between EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Pledgor"), and FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"). Company agrees that it will comply with all instructions from Foothill with respect to transfers of all or any part of the Collateral (as defined in the (Pledge Agreement), whether by sale or otherwise, without further consent from Pledgor. Company further acknowledges and agrees that it has received a copy of the Pledge Agreement and will honor the instruction of Pledgor contained below. Company acknowledges that, in entering into the Loan Agreement (as defined in the Pledge Agreement), Foothill is relying on the Pledge Agreement and on Company's agreement herein; and Company agrees that any offset or claim Company may now or hereafter have against Pledgor (or against Pledgor's interests, claims or rights) shall be subordinate to the claims, rights and interests of Foothill under the Pledge Agreement. The signatories below hereby represent and warrant to Foothill that they are duly authorized to execute and deliver this Control Agreement to Foothill and thereby bind the Company as set forth herein.

Dated: December ___, 2000.        EVANS & SUTHERLAND COMPUTER
                                  LIMITED, a United Kingdom
                                                    company

By

By

Evans and Sutherland Computer Corporation hereby instructs the Company to recognize and honor Foothill's rights under the Pledge Agreement.

Dated: December 14, 2000.         EVANS & SUTHERLAND COMPUTER
                                  Corporation, a Utah corporation

                                  By       /s/ R. Gaynor
                                     ----------------------------------------
                                    Richard J. Gaynor, VP & CFO

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INTELLECTUAL PROPERTY SECURITY AGREEMENT

This INTELLECTUAL PROPERTY SECURITY AGREEMENT ("Agreement"), is entered into as of December 14, 2000, between FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of business located at 2450 Colorado Avenue, Suite 3000 West, Santa Monica, California 90404 and EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("Borrower"), with its chief executive office located at 600 Komas Drive, Salt Lake City, Utah 84108.

A. Debtor and Foothill are, contemporaneously herewith, entering into that certain Loan and Security Agreement ("Loan Agreement") and other instruments, documents and agreements contemplated thereby or related thereto (collectively, together with the Loan Agreement, the "Loan Documents"); and

B. Debtor is the owner of certain intellectual property, identified below, in which Debtor is granting a security interest to Foothill.

NOW THEREFORE, in consideration of the mutual promises, covenants, conditions, representations, and warranties hereinafter set forth and for other good and valuable consideration, the parties hereto mutually agree as follows:

1. DEFINITIONS AND CONSTRUCTION.

1.1 Definitions. The following terms, as used in this Agreement, have the following meanings:

"Code" means the California Uniform Commercial Code, as amended and supplemented from time to time, and any successor statute.

"Collateral" means:

(i) Trademarks: Each of the trademarks and rights and interest which are capable of being protected as trademarks (including trademarks, service marks, designs, logos, indicia, trade names, corporate names, company names, business names, fictitious business names, trade dress, trade styles, and other source or business identifiers, and applications pertaining thereto), which are presently, or in the future may be, owned, created, acquired, or used (whether pursuant to a license or otherwise) by Debtor, in whole or in part, and all trademark rights with respect thereto throughout the world, including all proceeds thereof (including license royalties and proceeds of infringement suits), and rights to renew and extend such trademarks and trademark rights, and the associated goodwill;

(ii) All of Debtor's right to the trademark registrations and trademark applications listed on Schedule A, attached hereto, as the same may be updated from time to time;

(iii) All of Debtor's right, title and interest to register trademark claims under any state or federal trademark law or

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regulation of any foreign country and to apply for, renew, and extend the trademark registrations and trademark rights, the right (without obligation) to sue or bring opposition or cancellation proceedings in the name of Debtor or in the name of Foothill for past, present, and future infringements of the trademarks, registrations, or trademark rights and all rights (but not obligations) corresponding thereto in the United States and any foreign country, and the associated goodwill;

(iv) Patents: Each of the patents and patent applications which are presently, or in the future may be owned, issued, acquired, or used (whether pursuant to a license or otherwise) by Debtor, in whole or in part, and all patent rights with respect thereto throughout the world, including all proceeds thereof (including license royalties and proceeds of infringement suits), foreign filing rights, and rights to extend such patents and patent rights;

(v) All of Debtor's right, title, and interest, in and to the patents and patent applications listed on Schedule B, attached hereto, as the same may be updated hereafter from time to time;

(vi) All of Debtor's right, title, and interest in all patentable inventions, and to file applications for patent under federal patent law or regulation of any foreign country, and to request reexamination and/or reissue of the patents, the right (without obligation) to sue or bring interference proceedings in the name of Debtor or in the name of Foothill for past, present, and future infringements of the patents, and all rights (but not obligations) corresponding thereto in the United States and any foreign country;

(vii) Copyrights: Each of the common law copyrights, copyright registrations, copyright applications, and works protectable by copyright, whether published or unpublished, which are presently, or in the future may be, owned, created, authored (as a work for hire), acquired, or used (whether pursuant to a license or otherwise) by Debtor, in whole or in part, and all copyright rights with respect thereto and all registrations therefor or hereafter granted or applied for, throughout the world, including all proceeds thereof (including license royalties and proceeds of infringement suits) and rights to renew and extend such copyrights and copyright rights;

(viii) All of Debtor's right, title, and interest, in and to the copyright registrations and copyright applications listed on Schedule C, attached hereto, as the same may be updated hereafter from time to time;

(ix) All of Debtor's right, title, and interest to register all common law copyrights, copyright registrations, copyright applications, and works protectable by copyright, whether published or unpublished, and copyrights under any federal copyright law or regulation of any foreign country and to apply for, renew, and extend the copyright registrations and copyright rights, the right (without obligation) to sue in the name of Debtor or in the name of Foothill for past, present, and future infringements of the copyrights and all rights (but not obligations) corresponding thereto in the United States and any foreign country;

(x) All general intangibles relating to the foregoing; and,

(xi) All proceeds of any and all of the foregoing (including, without limitation, license royalties and proceeds of infringement

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suits) and, to the extent not otherwise included, all payments under insurance, or any indemnity, warranty, or guaranty payable by reason of loss or damage to or otherwise with respect to the Collateral.

"Obligations" means all obligations, liabilities, and indebtedness of Debtor to Foothill, whether direct, indirect, liquidated, or contingent, and whether arising under this Agreement, the Loan Agreement, any other of the Loan Documents, or otherwise, including all costs and expenses described in Section 12.8 hereof.

1.2 Construction. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, and the term "including" is not limiting. The words "hereof," "herein," "hereby," "hereunder," and other similar terms refer to this Agreement as a whole and not to any particular provision of this Agreement. Any initially capitalized terms used but not defined herein shall have the meaning set forth in the Loan Agreement. Any reference herein to any of the Loan Documents includes any and all alterations, amendments, extensions, modifications, renewals, or supplements thereto or thereof, as applicable. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Foothill or Debtor, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by Debtor, Foothill, and their respective counsel, and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of Foothill and Debtor.

2. GRANT OF SECURITY INTEREST.

Debtor hereby grants to Foothill a first-priority security interest in all of Debtor's right, title, and interest in and to the Collateral to secure the Obligations.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS.

Debtor hereby represents, warrants, and covenants that:

3.1 Trademarks; Service Marks; Patents; Copyrights.

(i) A true and complete schedule setting forth all federal, state, and foreign trademark and service mark registrations and applications with respect to the trademarks and service marks which Debtor is using, or intends to use, and does not intend to abandon, and those trademarks and service marks owned or controlled by Debtor or licensed to Debtor, together with a summary description and such information as may be reasonably requested by Foothill, with respect to the filing or issuance thereof and expiration dates is set forth on Schedule A;

(ii) A true and complete schedule setting forth all United States and foreign patents and patent applications owned or controlled by Debtor or licensed to Debtor, together with a summary description and such information as may be reasonably requested by Foothill with respect to the filing or issuance thereof and expiration dates is set forth on Schedule B;

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(iii) A true and complete schedule setting forth all United States copyright registrations and applications owned or controlled by Debtor or licensed to Debtor, together with a summary description and such information as may be reasonably requested by Foothill with respect to the filing or issuance thereof and expiration dates is set forth on Schedule C;

3.2 Validity; Enforceability. To Debtor's knowledge, each of the patents and registered service marks, trademarks, and copyrights listed on the attached Schedules A, B, and C, is valid and enforceable, and Debtor is not presently aware of any present claim by any third party that any of such patents, service marks, trademarks, or copyrights are invalid or unenforceable, or that the use of any such patents, service marks, trademarks, or copyrights violates the rights of any third person, or of any basis for any such claims;

3.3 Title. Debtor is the sole and exclusive owner of the entire and unencumbered right, title, and interest in and to each of the patents, registered service marks, trademarks, and copyrights listed on the attached Schedules A, B, and C, free and clear of any liens, charges, and encumbrances, including pledges, assignments, licenses, shop rights, and covenants by Debtor not to sue third persons;

3.4 Notice. Debtor has used and will continue to use proper statutory notice in connection with its use of each of the patents, service marks, trademarks, and copyrights;

3.5 Quality. Debtor has used and will continue to use consistent standards of high quality (which may be consistent with Debtor's past practices) in the manufacture, sale, and delivery of products and services sold or delivered under or in connection with the service marks and trademarks, including, to the extent applicable, in the operation and maintenance of its merchandising operations, and will continue to maintain the validity of the service marks and trademarks, as long as such service marks and trademarks are being used;

3.6 Perfection of Security Interest. Except for the filing of a financing statement with the Secretary of State of the State of Utah and filings with the United States Patent and Trademark Office and United States Copyright Office and filings with any foreign patent, trademark, and copyright offices necessary to perfect the security interests created hereunder, no authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either for the grant by Debtor of the security interest hereunder or for the execution, delivery, or performance of this Agreement by Debtor or for the perfection of or the exercise by Foothill of its rights hereunder to the Collateral in the United States.

4. AFTER-ACQUIRED SERVICE MARK, TRADEMARK, COPYRIGHT, OR PATENT RIGHTS.

If Debtor shall obtain rights to any new patents (including any reissues, divisions, or continuations), or registrations for service marks, trademarks, or copyrights, or file or become entitled to the benefit of any patent application (including any reissue, division, or continuation) or any application for the registration of a service mark, trademark, or copyright, the provisions of this Agreement shall automatically apply thereto. Debtor shall give prompt notice in

4

writing to Foothill with respect to any such new patents, registrations or applications, or renewals or extensions thereof. Debtor shall bear any expenses incurred in connection with future patents or patent applications, service mark applications or registrations, trademark applications or registrations, or copyright applications or registrations.

5. LITIGATION AND PROCEEDINGS.

Debtor shall commence and diligently prosecute in its own name, as the real party in interest, for its own benefit, and its own expense, such suits, administrative proceedings, or other action for infringement or other damages as are in its reasonable business judgment necessary to protect the Collateral. Debtor shall provide to Foothill any information with respect thereto requested by Foothill. Foothill shall provide at Debtor's expense all necessary cooperation in connection with any such suits, proceedings, or action, including, without limitation, joining as a necessary party. Following Debtor's becoming aware thereof, Debtor shall notify Foothill of the institution of, or any adverse determination in, any proceeding in the United States Patent and Trademark Office, or any United States, state, or foreign court regarding Debtor's claim of ownership in any of the patents, service marks, trademarks, or copyrights, its right to apply for the same, or its right to keep and maintain such patent, service mark, trademark, or copyright rights.

6. POWER OF ATTORNEY.

Debtor grants Foothill power of attorney, having the full authority, and in the place of Debtor and in the name of Debtor, from time to time following an Event of Default in Foothill's discretion, to take any action and to execute any instrument which Foothill may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, as may be subject to the provisions of this Agreement: to endorse Debtor's name on all applications, documents, papers, and instruments necessary for Foothill to use or maintain the Collateral; to ask, demand, collect, sue for, recover, impound, receive, and give acquittance and receipts for money due or to become due under or in respect of any of the Collateral; to file any claims or take any action or institute any proceedings that Foothill may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce Foothill's rights with respect to any of the Collateral and to assign, pledge, convey, or otherwise transfer title in or dispose of the Collateral to any person.

7. RIGHT TO INSPECT.

Subject to Debtor's applicable security clearance requirements, Debtor grants to Foothill and its employees and agents the right to visit Debtor's plants and facilities which manufacture, inspect, or store products sold under any of the patents, trademarks, or copyrights, and to inspect the products and quality control records relating thereto at reasonable times during regular business hours.

8. EVENTS OF DEFAULT.

Any of the following events shall be an Event of Default:

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8.1 Loan Agreement. An Event of Default shall occur as defined in the Loan Agreement;

8.2 Misrepresentation. Any representation or warranty made herein by Debtor or in any document furnished to Foothill by Debtor under this Agreement is incorrect in any material respect when made or when reaffirmed; and

8.3 Breach. Debtor fails to observe or perform any covenant, condition, or agreement to be observed or performed pursuant to the terms hereof which materially and adversely affects Foothill.

9. SPECIFIC REMEDIES.

Upon the occurrence of any Event of Default, Foothill shall have, in addition to, other rights given by law or in this Agreement, the Loan Agreement, or in any other Loan Document, all of the rights and remedies with respect to the Collateral of a secured party under the Code, including the following:

9.1 Notification. Foothill may notify licensees to make royalty payments on license agreements directly to Foothill;

9.2 Sale. Foothill may sell or assign the Collateral and associated goodwill at public or private sale for such amounts, and at such time or times as Foothill deems advisable. Any requirement of reasonable notice of any disposition of the Collateral shall be satisfied if such notice is sent to Debtor five days prior to such disposition. Debtor shall be credited with the net proceeds of such sale only when they are actually received by Foothill, and Debtor shall continue to be liable for any deficiency remaining after the Collateral is sold or collected. If the sale is to be a public sale, Foothill shall also give notice of the time and place by publishing a notice one time at least five days before the date of the sale in a newspaper of general circulation in the county in which the sale is to be held. To the maximum extent permitted by applicable law, Foothill may be the purchaser of any or all of the Collateral and associated goodwill at any public sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any public sale, to use and apply all or any part of the Obligations as a credit on account of the purchase price of any collateral payable by Foothill at such sale.

10. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER

6

COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF DEBTOR AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
10. DEBTOR AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. DEBTOR AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

11. CONFIDENTIALITY

11.1 Confidential Information. For purposes of this Agreement, the term "Confidential Information" means any pending patent applications owned or controlled by Debtor or licensed to Debtor, and any proprietary information concerning the Collateral as defined in Section 1.1 above, which is designated, marked or otherwise identified by appropriate stamp or legend by Debtor as "Confidential" at the time of disclosure, including but not limited to, pending patent applications, written or oral information, data, drawings, processes, methods, formulations, source code, manuals, and other documents.

11.2 Foothill's Obligations. Foothill agrees, (i) to maintain in confidence any and all Confidential Information obtained from Debtor; (ii) to make every reasonable effort to prevent the disclosure of the Confidential Information to others; and, (iii) to use the Confidential Information only in connection with preparing, financing, and servicing the Loan Agreement, except in the case of default of the Loan Agreement, except in the case of default of the Loan Agreement, Foothill may disclose Confidential Information to third parties in connection with a foreclosure and sale of the Collateral, but shall use reasonable efforts to preserve such confidentiality.

11.3 Exclusions. This Agreement does not make Foothill responsible for: (i) information which was in the public domain prior to Foothill's receipt of the same pursuant to this Agreement, which subsequently becomes part of the public domain by publication or otherwise, except by the wrongful act of Foothill; (ii) information which Foothill can show by written documentation was in its possession prior to its receipt of Debtor's Confidential Information pursuant to this Agreement and which was not acquired directly or indirectly from Debtor; and, (iii) information which Foothill can show by written documentation was received by Foothill from a third party who did not acquire the information directly or indirectly from Debtor and who did not require Foothill to hold the information in confidence.

7

12. GENERAL PROVISIONS.

12.1 Effectiveness. This Agreement shall be binding and deemed effective when executed by Debtor and Foothill.

12.2 Successors and Assigns. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, however, that Debtor may not assign this Agreement or any rights or duties hereunder without Foothill's prior written consent and any prohibited assignment shall be absolutely void. Foothill may assign this Agreement and its rights and duties hereunder and no consent or approval by Debtor is required in connection with any such assignment.

12.3 Section Headings. Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each section applies equally to this entire Agreement.

12.4 Interpretation. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Foothill or Debtor, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto.

12.5 Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

12.6 Amendments in Writing. This Agreement can only be amended by a writing signed by both Foothill and Debtor.

12.7 Counterparts; Telefacsimile Execution. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed counterpart of this Agreement by telefacsimile shall be equally as effective as delivery of a manually executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile also shall deliver a manually executed counterpart of this Agreement but the failure to deliver a manually executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement.

12.8 Fees and Expenses. Debtor shall pay to Foothill on demand all costs and expenses that Foothill pays or incurs in connection with the negotiation, preparation, consummation, administration, enforcement, and termination of this Agreement, including: (a) reasonable attorneys' and paralegals' fees and disbursements of counsel to Foothill; (b) costs and expenses (including reasonable attorneys' and paralegals' fees and disbursements) for any amendment, supplement, waiver, consent, or subsequent closing in connection with this Agreement and the transactions contemplated hereby; (c) costs and expenses of lien and title searches; (d) taxes, fees, and other charges for filing this Agreement at the United

8

States Patent and Trademark Office, or for filing financing statements, and continuations, and other actions to perfect, protect, and continue the security interest created hereunder; (e) sums paid or incurred to pay any amount or take any action required of Debtor under this Agreement that Debtor fails to pay or take; (f) costs and expenses of preserving and protecting the Collateral; and (g) costs and expenses (including reasonable attorneys' and paralegals' fees and disbursements) paid or incurred to enforce the security interest created hereunder, sell or otherwise realize upon the Collateral, and otherwise enforce the provisions of this Agreement, or to defend any claims made or threatened against Foothill arising out of the transactions contemplated hereby (including preparations for the consultations concerning any such matters). The foregoing shall not be construed to limit any other provisions of this Agreement or the Loan Documents regarding costs and expenses to be paid by Debtor. The parties agree that reasonable attorneys' and paralegals' fees and costs incurred in enforcing any judgment are recover-able as a separate item in addition to fees and costs incurred in obtaining the judgment and that the recovery of such attorneys' and paralegals' fees and costs is intended to survive any judgment, and is not to be deemed merged into any judgment.

12.9 Notices. Except as otherwise provided herein, all notices, demands, and requests that either party is required or elects to give to the other shall be in writing and shall be governed by the provisions of
Section 12 of the Loan Agreement.

12.10 Termination By Foothill. After termination of the Loan Agreement and when Foothill has received payment and performance, in full, of all Obligations, Foothill shall execute and deliver to Debtor a termination of all of the security interests granted by Debtor hereunder.

9

12.11 Integration. This Agreement, together with the other Loan Documents, reflect the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof.

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

FOOTHILL CAPITAL CORPORATION,
a California corporation

By:  /s/ Rhonda Foreman
     ---------------------------------------------
     Rhonda Foreman
     Senior Vice President

EVANS & SUTHERLAND COMPUTER
CORPORATION, a Utah corporation

By:  /s/ R. Gaynor
     ---------------------------------------------
     Richard J. Gaynor
     Vice President and Chief Financial Officer

STATE OF CALIFORNIA        )
                           )            ss.
COUNTY OF LOS ANGELES      )

On December 14, 2000, before me, Greta Johnson, personally appeared Rhonda Foreman and Richard Gaynor, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

/s/ Greta Johnson
---------------------------------------------
Notary Public
Greta Johnson

10

EVANS & SUTHERLAND COMPUTER CORPORATION
AMENDMENT NO. 1 TO
SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

THIS AMENDMENT NO. 1 TO SERIES B PREFERRED STOCK AND WARRANT PURCHASE
AGREEMENT (the "Amendment") is made as of March 1, 2001, by and among EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation (the "Company"), and INTEL CORPORATION, a Delaware corporation (the "Investor").

RECITALS:

WHEREAS, on July 20, 1998 the Company and the Investor executed a Series B Preferred Stock and Warrant Purchase Agreement (the "Purchase Agreement") pursuant to which, among other things, the Investor received 901,408 shares of Company Class B-1 Preferred Stock and a Warrant (the "Warrant") exercisable for 378,462 shares of Company Class B-1 Preferred Stock;

WHEREAS, on February 5, 2001, the Investor executed a sale of 903,666 shares of the Company common stock (the "Stock Sale"). In order to settle the Stock Sale, the Investor presented for transfer 2,258 shares of Company common stock not subject to any restrictions under the Securities Act of 1933, as amended, and 901,408 shares of Company common stock which are issuable upon conversion of the shares of Class B-1 Preferred Stock held by the Investor;

WHEREAS, Certain rights that were held by the Investor under the Purchase Agreement expired on December 31, 2000. The expired rights included a right of notice of certain proposed corporate events and acquisitions, a right of first refusal with respect to participating in certain corporate transactions affecting the Company, a right to participate on a pro rate basis in certain sales of Company common stock and a consent requirement for any acquisition in which the Company issued stock in excess of a specified threshold;

WHEREAS, the Investor continues to have certain other rights under the Purchase Agreement, including, but not limited to, a right to acquire additional securities to maintain its pro-rata ownership interest in the Company's common stock following certain dilutive security issuances by the Company, registration rights, and a right to be notified of and to negotiate in good faith for 15 days with respect to engaging in certain corporate transactions; and

WHEREAS, the Company and the Investor Intel desire to amend the Purchase Agreement as provided in this Amendment.

NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Company and the Investor agree as follows:


1. Covenants of the Company.

1.1 Information Rights and Registration Rights. Sections 7(a) and 7(b) of the Purchase Agreement are hereby deleted in their entirety and replaced with the following:

"(a) Information Rights. Intentionally omitted.

(b) Registration Rights. Intentionally omitted."

1.2 Board and Committee Observer; Rights in the event of a Corporate Event; Rights of Participation; Right of Maintenance; Standstill Agreement. Sections 7(d)-(h) of the Purchase Agreement are hereby deleted in their entirety and replaced with the following:

"(d) Board and Committee Observer. Intentionally omitted.

(e) Rights in the event of a Corporate Event. Intentionally omitted.

(f) Rights of Participation. Intentionally Omitted.

(g) Right of Maintenance. Intentionally Omitted.

(h) Standstill Agreement. Intentionally Omitted."

2. Company Indemnity. The last sentence of Section 8(a)(i)of the Purchase Agreement is hereby deleted in its entirety and replaced with the following:

"Indemnification or other claims with respect to the other Transaction Agreements shall be covered by the provisions of those agreements and not by this Section 8."

3. Investor Indemnity. The last sentence of Section 8(a)(ii) of the Purchase Agreement is hereby deleted in its entirety and replaced with the following:

"Indemnification or other claims with respect to the other Transaction Agreements shall be covered by the provisions of those agreements and not by this Section 8."

4. Assignment and Delegation. Section 9 of the Purchase Agreement is hereby deleted in its entirety and replaced with "ASSIGNMENT AND DELEGATION. Notwithstanding anything herein to the contrary, the obligations of the Company or the Investor under Section 7(c) may not be delegated."


5. No Other Amendment. Except as expressly amended pursuant to this Amendment, the terms of the Purchase Agreement shall remain in full force and effect.

6. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same document.

[REMAINDER OF THIS PAGE INTENTIONALLY OMITTED]


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

EVANS & SUTHERLAND COMPUTER CORPORATION

By:         /s/ James R. Oyler
Name:       James R. Oyler
            ------------------------------------------------
Title:      President & CEO
            ------------------------------------------------

Address:    Attention:  Treasurer
                        600 Komas Drive
                        Salt Lake City, Utah 84108

                        Telephone No:           (801) 588-1000
                        Facsimile No:           (801) 588-4510

With copy to:           John G. Weston, Esq.
                        Snell & Wilmer L.L.P.
                        15 West South Temple
                        Suite 1200

Salt Lake City, Utah 84101 Telephone No: (801) 257-1900 Facsimile No: (801) 257-1800

INTEL CORPORATION

By:         /s/ Noel Lazo
            ------------------------------------------------
Name:       Noel  Lazo
            ------------------------------------------------
Title:      Assistant Treasurer

Address:    Attn:       M&A Portfolio Manager
                        2200 Mission College Blvd.
                        RN6-46
                        Santa Clara, California 95052

                        Telephone No:           (408) 765-5636
                        Facsimile No:           (408) 765-6038

With copy to:           Attn:  General Counsel
                        2200 Mission College Blvd.
                        SC4-203

Santa Clara, California 95052

Telephone No: (408) 765-1125 Facsimile No: (408) 765-1859

Signature page to Evans & Sutherland Computer Corporation Amendment No. 1 to Series B Stock and Warrant Purchase Agreement


Exhibit 21.1

EVANS & SUTHERLAND COMPUTER CORPORATION

SUBSIDIARIES OF THE REGISTRANT

                                              State or Other
                                             Jurisdiction of
                                             Incorporation or              Names Under Which
              Subsidiary Name                  Organization              Each Subsidiary Does Business
------------------------------------------  ------------------     -----------------------------------------

Evans & Sutherland Graphics Corporation            Utah            Evans & Sutherland Graphics Corporation

Xionix Simulation, Inc.                           Texas            Xionix Simulation, Inc.

Evans & Sutherland, Ltd.                      United Kingdom       Evans & Sutherland, Ltd.

Evans & Sutherland SARL                           France           Evans & Sutherland SARL

E&S Foreign Sales Corporation                 Virgin Islands       E&S Foreign Sales Corporation

E&S Partners, Inc.                                 Utah            E&S Partners, Inc.

REALimage, Inc.                                  Delaware          REALimage, Inc.


Exhibit 23.1

Accountant's Consent

The Board of Directors
Evans & Sutherland Computer Corporation

We consent to incorporation by reference in the Registration Statements Nos. 33-39632, 2-76027, 333-53305, 333-58735 and 333-58733 on Forms S-8 and Registration Statements Nos. 333-09657 and 333-67189 on Forms S-3 of Evans & Sutherland Computer Corporation of our report dated February 15, 2001 relating to the consolidated balance sheets of Evans & Sutherland Computer Corporation and subsidiaries as of December 31, 2000 and December 31, 1999, and the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2000 and related schedule, which report appears in the December 31, 2000 Annual Report on Form 10-K of Evans & Sutherland Computer Corporation.

KPMG LLP

Salt Lake City, Utah
March 30, 2001


Exhibit 24.1

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each officer and/or director of Evans & Sutherland Computer Corporation whose signature appears below constitutes and appoints James R. Oyler and William M. Thomas, or any of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign in the name of or on behalf of the undersigned, as a director and/or officer of said corporation, the Annual Report on Form 10-K of Evans & Sutherland Computer Corporation for the year ended December 31, 2000, and any and all amendments to such Annual Report, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney this 28th day of March, 2001.

        Signature                         Title                                 Date

/S/  Stewart Carrell         Chairman of the Board of Directors            March 28, 2001
-------------------------
Stewart Carrell

/S/  James R. Oyler          President and Chief Executive Officer         March 28, 2001
-------------------------
James R. Oyler               (Principal Executive Officer) and Director

/S/  William M. Thomas       Vice President, Chief Financial               March 28, 2001
-------------------------
William M. Thomas            Officer and Corporate Secretary (Principal
                             Financial and Accounting Officer)

/S/  Gerald S. Casilli       Director                                      March 28, 2001
-------------------------
Gerald S. Casilli

/S/  Peter O. Crisp          Director                                      March 28, 2001
-------------------------
Peter O. Crisp

/S/  Ivan E. Sutherland      Director                                      March 28, 2001
-------------------------
Ivan E. Sutherland