0001104659-04-024705.txt : 20040816 0001104659-04-024705.hdr.sgml : 20040816 20040816165403 ACCESSION NUMBER: 0001104659-04-024705 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20040702 FILED AS OF DATE: 20040816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVANS & SUTHERLAND COMPUTER CORP CENTRAL INDEX KEY: 0000276283 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 870278175 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14677 FILM NUMBER: 04979494 BUSINESS ADDRESS: STREET 1: 600 KOMAS DR CITY: SALT LAKE CITY STATE: UT ZIP: 84108 BUSINESS PHONE: 8015881815 MAIL ADDRESS: STREET 1: 600 KOMAS DR CITY: SALT LAKE CITY STATE: UT ZIP: 84108 10-Q 1 a04-9302_110q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

ý Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,

For the quarterly period ended July 2, 2004

o 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 Incorporation or Organization)		(I.R.S. Employer 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

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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

The number of shares of the registrant’s Common Stock (par value $0.20 per share) outstanding at July 30, 2004, was 10,499,577.

FORM 10-Q

Evans & Sutherland Computer Corporation

Quarter Ended July 2, 2004

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of July 2, 2004, and December 31, 2003

	Condensed Consolidated Statements of Operations for the three and six months ended July 2, 2004, and June 27, 2003 (as restated)

	Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended July 2, 2004, and June 27, 2003 (as restated)

	Condensed Consolidated Statements of Cash Flows for the six months ended July 2, 2004, and June 27, 2003 (as restated)

	Notes to Condensed Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings

Item 4.	Submission of Matters to a Vote of Security Holders

Item 6.	Exhibits and Reports on Form 8-K

SIGNATURES

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share amounts)

	July 2, 2004			December 31, 2003

ASSETS
Current assets:
Cash	$	9,965		$	9,714
Restricted cash	2,405			765
Accounts receivable, less allowances for doubtful receivables of $337 at July 2, 2004, and $351 at December 31, 2003	13,846			22,298
Inventories, net	13,921			15,973
Costs and estimated earnings in excess of billings on uncompleted contracts	7,925			10,922
Prepaid expenses and deposits	4,760			4,731
Assets held for sale	—			2,463
Total current assets	52,822			66,866
Property, plant and equipment, net	22,814			24,115
Investments	1,558			2,011
Other assets	1,175			390
Total assets	$	78,369		$	93,382
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit agreements	$	884		$	7,685
Accounts payable	5,975			8,446
Accrued liabilities	12,309			12,526
Customer deposits	2,802			3,928
Billings in excess of costs and estimated earnings on uncompleted contracts	12,056			11,499
Total current liabilities	34,026			44,084
Long-term debt, net of current portion	18,015			18,015
Pension and retirement obligations	16,030			15,717
Total liabilities	68,071			77,816
Commitments and contingencies

Stockholders’ equity:
Preferred stock, no par value; authorized 10,000,000 shares; no issued and no outstanding shares	—			—
Common stock, $0.20 par value; authorized 30,000,000 shares; issued 10,850,971 shares at July 2, 2004, and 10,836,072 shares at December 31, 2003	2,170			2,167
Additional paid-in-capital	49,639			49,575
Common stock in treasury, at cost; 352,500 shares	(4,709		)	(4,709		)
Accumulated deficit	(34,486		)	(29,148		)
Accumulated other comprehensive loss	(2,316		)	(2,319		)
Total stockholders’ equity	10,298			15,566
Total liabilities and stockholders’ equity	$	78,369		$	93,382

See accompanying notes to condensed consolidated financial statements.

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended
	July 2,			June 27,
	2004			2003
				(As restated)
Sales	$	16,816		$	16,010
Cost of sales	10,955			9,924
Gross profit	5,861			6,086
Expenses:
Selling, general and administrative	6,052			6,906
Research and development	5,203			5,093
Operating expenses	11,255			11,999
Gain on sale of assets held for sale	3,488			1,406
Operating loss	(1,906		)	(4,507		)
Other income (expense), net	(334		)	(498		)
Loss before income taxes	(2,240		)	(5,005		)
Income tax expense	58			119
Net loss	$	(2,298	)	$	(5,124	)

Net loss per common share:
Basic and diluted	$	(0.22	)	$	(0.49	)
Weighted average common shares outstanding:
Basic and diluted	10,495			10,469

See accompanying notes to condensed consolidated financial statements.

	Six Months Ended
	July 2,			June 27,
	2004			2003
				(As restated)
Sales	$	34,606		$	38,587
Cost of sales	21,863			24,922
Inventory impairment	—			14,566
Gross profit (loss)	12,743			(901		)
Expenses:
Selling, general and administrative	12,138			14,163
Research and development	9,157			12,123
Restructuring charge (recovery)	(491		)	1,279
Impairment loss	—			1,151
Operating expenses	20,804			28,716
Gain on sale of asset held for sale	3,488			1,406
Gain on sale of assets	155			—
Operating loss	(4,418		)	(28,211		)
Other income (expense), net	(824		)	(1,338		)
Loss before income taxes	(5,242		)	(29,549		)
Income tax expense (benefit)	96			(149		)
Net loss	$	(5,338	)	$	(29,400	)

Net loss per common share:
Basic and diluted	$	(0.51	)	$	(2.81	)
Weighted average common shares outstanding:
Basic and diluted	10,491			10,464

See accompanying notes to condensed consolidated financial statements.

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands)

	Three Months Ended
	July 2,			June 27,
	2004			2003
				(As restated)
Net loss	$	(2,298	)	$	(5,124	)
Unrealized gain on securities, net of taxes	3			65
Comprehensive loss	$	(2,295	)	$	(5,059	)

	Six Months Ended
	July 2,			June 27,
	2004			2003
				(As restated)
Net loss	$	(5,338	)	$	(29,400	)
Unrealized gain (loss) on securities, net of taxes	(48		)	92
Comprehensive loss	$	(5,386	)	$	(29,308	)

See accompanying notes to condensed consolidated financial statements.

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Six Months Ended
	July 2,			June 27,
	2004			2003
				(As restated)
Cash flows from operating activities:
Net loss	$	(5,338	)	$	(29,400	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	2,657			3,689
Restructuring charge (recovery)	(491		)	1,279
Gain on assets held for sale	(3,488		)	(1,406		)
Gain on sale of assets	(155		)	—
Gain on sale of investment securities	(133		)	—
Inventory impairment	—			14,566
Impairment loss	—			1,151
Loss on disposal of property, plant and equipment	17			16
Loss on write-down of investment	—			500
Provisions for losses on accounts receivable	31			16
Provision for excess and obsolete inventory	896			623
Provision for warranty expense	745			1,488
Other	45			39
Change in assets and liabilities:
Accounts receivable	8,421			2,079
Inventories	1,156			(1,186		)
Costs and estimated earnings in excess of billings on uncompleted contracts, net	3,554			10,779
Prepaid expenses and deposits	(40		)	252
Other assets	(871		)	—
Accounts payable	(2,471		)	(1,741		)
Accrued liabilities	(2,332		)	(3,252		)
Customer deposits	(1,126		)	(245		)
Net cash provided by (used in) operations	1,077			(753		)

Cash flows from investing activities:
Proceeds from sale of assets held for sale	8,288			4,760
Proceeds from sale of investment securities	633			—
Purchases of property, plant and equipment	(1,373		)	(1,760		)
Net cash provided by investing activities	7,548			3,000

Cash flows from financing activities:
Net borrowings (payments) on line of credit agreements	(6,801		)	(2,203		)
Net decrease (increase) in restricted cash	(1,640		)	2,191
Proceeds from issuance of common stock	67			99
Net cash provided by (used in) financing activities	(8,374		)	87

Net change in cash	251			2,334
Cash at beginning of the period	9,714			7,375

Cash at end of the period	$	9,965		$	9,709

Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	604		$	427
Income taxes	96			180

See accompanying notes to condensed consolidated financial statements.

EVANS & SUTHERLAND COMPUTER CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Evans & Sutherland Computer Corporation have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a complete presentation of the results of operations, the financial position, and cash flows, in conformity with accounting principles generally accepted in the United States of America. This report on Form 10-Q for the three and six months ended July 2, 2004, should be read in conjunction with our annual report on Form 10-K for the year ended December 31, 2003.

The accompanying unaudited condensed consolidated balance sheets, statements of operations, comprehensive loss, and cash flows reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows. The results of operations for the three and six month periods ended July 2, 2004, are not necessarily indicative of the results to be expected for the full year ending December 31, 2004.

Certain amounts in the 2003 condensed consolidated financial statements and notes have been reclassified to conform to the 2004 presentation.

Our previously issued unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of operations, comprehensive loss, and cash flows for the first three quarters of 2003 were restated in our Annual Report on Form 10-K for the year ended December 31, 2003, in order to correct certain accounting errors. During our 2003 year-end close process and review of the financial statements of our wholly-owned subsidiary, Evans & Sutherland Computer Limited (“E&S Ltd.”), we identified certain errors in E&S Ltd’s 2003 quarterly financial statements due to the incorrect application of certain accounting principles during the first three quarters of 2003.

The effect of the restatement on amounts reported for the second quarter of 2003 decreased sales $6.2 million, decreased cost of sales $3.6 million, increased net loss $2.6 million and increased the loss per share by $0.24. The effect of the restatement on amounts reported for the first six months of 2003 decreased sales $6.3 million, decreased cost of sales $2.5 million, increased net loss $3.8 million and increased the loss per share $0.36.

Adjustments as a result of the restatement have been divided into the following three categories:

1. Early Recognition of Costs. During 2003, hardware costs were charged to certain long-term projects before the underlying costs were actually incurred. Because these long-term projects are accounted for under the percentage of completion method, these charges resulted in the recognition of both sales and costs of sales in periods earlier than appropriate. These overstatements of sales and costs of sales occurred during 2003 and were included in the Company’s previously issued 10-Q filings for the first three quarters of 2003.

2. Overstatement of Program Margins. During 2003, gross margins on certain long-term projects were recorded in excess of the actual gross margins expected to be realized based upon the percentage of completion revenue recognition method. This resulted in an overstatement of sales and gross profit during 2003 and was included in the Company’s previously issued 10-Q filings for the first three quarters of 2003.

3. Recognition of Sales and Margin in Excess of Contract Value. During 2003, hardware costs were charged to certain long-term projects which exceeded the aggregate total estimated costs for completion of each of these projects. Sales for these projects were recognized using the original ratio of contract value to estimated total costs at project completion. As a result, underlying project sales were recognized in excess of total contract value. These overstatements of sales and gross margin were included in the Company’s previously issued 10-Q filings for the first three quarters of 2003.

2. INVENTORIES

Inventories consist of the following (in thousands):

	July 2, 2004		December 31, 2003

Raw materials	$	7,040	$	6,950
Work-in-process	1,736		3,301
Finished goods	5,145		5,722
	$	13,921	$	15,973

3. DEBT

Long-term debt consists of 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 our common stock at a conversion price of $42.10 or 428,000 shares of our common stock subject to adjustment. The 6% Debentures are redeemable at our option, in whole or in part, at par.

We have a secured credit facility (the “Foothill Facility”) with Wells Fargo Foothill (“Foothill”) that provides for borrowings and the issuance of letters of credit up to $25.0 million. The Foothill Facility, among other things, (i) requires us to maintain certain financial ratios and covenants, including a minimum combined cash and borrowing availability financial covenant that adjusts each quarter and a limitation of $12.0 million of aggregate capital expenditures in any fiscal year; (ii) restricts our ability to incur debt or liens; sell, assign, pledge, or lease assets; or merge with another company; and (iii) restricts the payment of dividends and repurchase of any of our outstanding shares without the prior consent of Foothill. As of July 2, 2004, we were in compliance with all financial covenants and ratios. The Foothill Facility expires in December 2004.

Borrowings under the Foothill Facility bear interest at the Wells Fargo Bank, N.A. prevailing prime rate plus 3.0% to 4.5%, depending on the amount outstanding, and at no time will borrowings under the Foothill Facility bear interest at a rate less than 10.25%. In addition, the Foothill Facility has an unused line fee equal to 0.375% per annum times the difference between $25.0 million and the sum of the average undrawn portion of the borrowings, payable each quarter. The Foothill Facility provides Foothill with a first priority perfected security interest in substantially all of our assets, including, but not limited to, all of our intellectual property. Pursuant to the terms of the Foothill Facility, all of our cash receipts must be deposited into a Foothill controlled account.

Effective June 23, 2004, we amended the Foothill Facility. This amendment changed the terms of the Foothill Facility such that if we exceed the amount available for letter of credit guarantees, we are required to deposit 105% of the excess with Foothill. In addition, we deposited $0.8 million with Foothill for the remaining term of the Foothill Facility.

As of July 2, 2004, we had no outstanding borrowings and $2.9 million in outstanding financial letters of credit under the Foothill Facility on certain customer contracts. Our customers can draw against these letters of credit if we fail to meet the performance requirements included in the terms of each letter of credit. As of July 2, 2004, no amounts had been accrued for any estimated losses under the obligations, as we believe we will perform as required under our contracts. In addition, as of July 2, 2004, we had $1.6 million deposited in a restricted cash collateral account at Foothill related to letter of credit guarantees, projected amortized reductions in the real-estate based collateral over the remainder of the term of the Foothill Facility, and reserves required by Foothill.

December 31, 2004. Borrowings under the Overdraft Facility bear interest at Lloyds’ short-term offered rate plus 1.75% per annum. As of July 2, 2004, there were $0.9 million in outstanding borrowings under the Overdraft Facility. The Overdraft Facility is subject to reduction or demand repayment for any reason at any time at Lloyds’ discretion. E&S Ltd. 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 E&S Ltd. and require maintenance of certain financial covenants. In addition, at July 2, 2004, E&S Ltd. had $0.8 million deposited in a restricted cash collateral account at Lloyds related to the Overdraft Facility to support certain obligations that the bank guarantees.

4. 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 and the 6% Debentures are considered to be common stock equivalents.

Basic net income (loss) per common share is the amount of net income (loss) for the period attributable 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 attributable 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, net loss per common share was the same for both the basic and diluted calculations for all periods presented because to include common stock equivalents would have been anti-dilutive.

For the three and six months ended July 2, 2004, outstanding options to purchase 2,542,901 shares of common stock and 428,000 shares of common stock issuable upon conversion of the 6% Debentures were excluded from the computation of the diluted net loss per common share because to include them would have been anti-dilutive.

For the three and six months ended June 27, 2003, outstanding options to purchase 2,541,972 shares of common stock and 428,000 shares of common stock issuable upon conversion of the 6% Debentures were excluded from the computation of the diluted net loss per common share because to include them would have been anti-dilutive.

5. GEOGRAPHIC INFORMATION

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

	Three Months Ended				Six Months Ended
	July 2, 2004		June 27, 2003		July 2, 2004		June 27 , 2003
			(As restated)				(As restated)
United States	$	6,920	$	9,974	$	13,951	$	22,122
United Kingdom	3,343		2,451		6,565		5,982
Europe (excluding United Kingdom)	4,141		1,257		8,636		5,878
Pacific Rim	2,179		1,063		4,598		2,332
Other	233		1,265		856		2,273
	$	16,816	$	16,010	$	34,606	$	38,587

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

	July 2, 2004		December 31, 2003
United States	$	22,351	$	23,332
Europe	463		783
	$	22,814	$	24,115

6. LEGAL PROCEEDINGS

In May 2003, a claim was made against the Company by RealVision, Inc. relative to matters arising from the sale of a business unit to RealVision, Inc. in 2001. The parties entered mediation in the fourth quarter of 2003, and continued discussions into 2004. In March 2004, an agreement was reached under which RealVision will receive a settlement in the amount of $2.4 million of which we paid approximately $0.9 million, with the remainder of the settlement amount being paid by our insurance carrier.

As of July 2, 2004, we were aware of no legal claims against the Company.

7. RESTRUCTURING CHARGES

During the first quarter of 2004, we recorded a recovery due to the reversal of previously recorded restructuring charges in the amount of $0.5 million related to favorable cost management in comparison to initial restructuring estimates. In addition, we paid $1.0 million in severance benefits related to all restructurings occurring over fiscal years 2003, 2002, and 2001. The majority of the remaining severance benefits are expected to be paid out over the remainder of this fiscal year.

The following table represents restructuring provision activity in the first six months of 2004 (in thousands):

	Balance at December 31, 2003		Restructuring charges (recoveries)			Severance benefits paid		Balance at July 2, 2004

Remaining 2001 accrual	$	40	$	(18	)	$	10	$	12
Remaining 2002 accrual	329		(264		)	54		11
Remaining 2003 accrual	1,242		(209		)	932		101
	$	1,611	$	(491	)	$	996	$	124

8. ASSETS HELD FOR SALE

In June 2004, we sold an office building previously classified as an asset held for sale with a book value of $2.5 million for $8.6 million in cash. As part of the sale, we entered into a three-year rental guarantee with the buyer, obligating us to make certain monthly payments through June 2007 based on space available for lease in the building we sold. The maximum amount we may be required to pay over the term of the rental guarantee is $2.6 million consisting of $0.6 million during the remainder of 2004, $1.0 million in 2005, $0.7 million in 2006, and $0.3 million in 2007. The maximum guarantee is classified as an accrued liability at July 2, 2004. The maximum rental guarantee may decrease as available space is leased by the buyer, based on terms of the rental guarantee. To the extent the maximum rental guarantee is reduced, additional gain will be realized. As of July 2, 2004, 100% of the leaseable space was available. As a result of the sale, we have initially recognized a gain of $3.5 million.

9. WARRANTY RESERVES

We provide a warranty reserve for estimated future costs of servicing products under warranty agreements usually extending for periods from 90 days to several years. Anticipated costs for product warranties are based upon estimates derived from experience factors and are recorded as cost of sale at the time of sale or over the contract period for long-term contracts. As of July 2, 2004, and December 31, 2003, we had reserved approximately $1.5 million and $1.3 million, respectively, for estimated warranty claims. Warranty expense for the three and six months ended July 2, 2004, were $0.3 million and $0.7 million, respectively. Warranty expense for the three and six months ended June 27, 2003, were $0.8 million and $1.5 million, respectively.

The following table provides the changes in our warranty reserves for the first six months of 2004 (in thousands):

	Balance at December 31, 2003		Provision for warranty expense		Warranty charges against the reserve		Balance at July 2, 2004

Warranty reserves	$	1,290	$	745	$	548	$	1,487

10. QUEST FLIGHT TRAINING

We have a 50% interest in Quest Flight Training, Ltd. (“Quest”), a joint venture with Quadrant Group Ltd. (“Quadrant”), providing aircrew training services for the United Kingdom Ministry of Defence (“U.K. MoD”) under a 30-year contract. In connection with the services of Quest to the U.K. MoD, we guarantee various obligations of Quest. As of July 2, 2004, we had four guarantees outstanding related to Quest. Pursuant to the first guarantee, we have guaranteed, jointly and severally with Quadrant, the performance of Quest in relation to its contract with the U.K. MoD. If Quest fails to meet its obligations under the contract, then we (and Quadrant) are required to perform under the terms of the contract. Due to the length of the contract and the uncertainty of performance for which we would be liable if Quest fails to perform, we cannot estimate the maximum amount of possible future payments. This guarantee is in place until 2030. Pursuant to the second guarantee, we have guaranteed, jointly and severally with Quadrant, up to a maximum amount of £1.0 million ($1.8 million as of July 2, 2004), the performance of Quest, where not subcontracted, and the performance of Quest where subcontracted, and the subcontractor is not liable to meet its obligation due to any limitation of liability in the sub-contract agreement, thus preventing Quest from meeting its obligation under its contract with the U.K. MoD. This guarantee is in place until 2020. Pursuant to the third guarantee, we have pledged our equity shares in Quest to guarantee payment by Quest of a loan agreement executed by Quest. The loan agreement terminates in 2020. The pledge of our equity shares in Quest will expire at such time as Quest’s obligations under the loan agreement are satisfied or the date on which the loan agreement is otherwise terminated. In the event of default on this loan agreement, the lending institution can request that the trustee holding such equity shares surrender them to the lending institution in order to satisfy all amounts then outstanding under the loan agreement. As of July 2, 2004, the outstanding loan balance was £5.0 million ($9.0 million as of July 2, 2004). Pursuant to the fourth guarantee, we have guaranteed payment, up to a maximum of £0.13 million ($0.2 million as of July 2, 2004), in the event that Quest has a default event, as defined by its loan agreement. This guarantee is in place until 2020. As of July 2, 2004, no amounts have been accrued for any estimated losses under these guarantees because we believe that Quest will meet all of its performance and financial obligations in relation to its contract with the U.K. MoD. However, if we are required to perform under any or all of the four guarantees, it could have a material adverse impact on our operating results and liquidity.

11. STOCK-BASED COMPENSATION

On May 18, 2004, shareholders approved the adoption of the 2004 Stock Incentive Plan of Evans & Sutherland Computer Corporation (“2004 Plan”), which expires May 18, 2014. The 2004 Plan is a stock incentive plan that provides for the grant of options and restricted stock awards to employees and for the grant of options to non-employee directors. In addition, with the adoption of this plan no additional options can be issued under any of the prior stock-based plans as of May 18, 2004. The 2004 Plan establishes a minimum exercise price for options of 110% of fair market value on the date of grant. Restricted stock awards may be qualified as a performance-based

award that conditions a participant’s award upon achievement by the Company or its subsidiaries of performance goals established by our Board of Directors’ Compensation Committee. Prior to May 18, 2004, we had stock incentive plans that provided for the grant of options to employees, officers, consultants, and independent contractors. We account for these plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income as all options granted under these plans have an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net loss and loss per share if we had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

(in thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	July 2, 2004			June 27, 2003			July 2, 2004			June 27, 2003
				(As restated)						(As restated)
Net loss, as reported	$	(2,298	)	$	(5,124	)	$	(5,338	)	$	(29,400	)

Deduct: Total stock-based employee compensation expense determined under fair value method for all awards	(99		)	(171		)	(216		)	(298		)
Pro forma net loss	$	(2,397	)	$	(5,295	)	$	(5,554	)	$	(29,698	)

Loss per share:
Basic and diluted – as reported	$	(0.22	)	$	(0.49	)	$	(0.51	)	$	(2.81	)
Basic and diluted – pro forma	$	(0.23	)	$	(0.51	)	$	(0.53	)	$	(2.84	)

12. EMPLOYEE RETIREMENT BENEFIT PLANS

Components of Net Periodic Benefit Cost

For the three months ended (in thousands):

	Pension Plan						SERP
	July 2, 2004			June 27, 2003			July 2, 2004			June 27, 2003

Service cost	$	—		$	—		$	130		$	113
Interest cost	417			422			127			120
Expected return on assets	(394		)	(469		)	—			—
Amortization of actuarial loss	11			—			—			—
Amortization of prior year service cost	—			—			(15		)	(15		)
Net periodic benefit cost	$	34		$	(47	)	$	242		$	218

For the six months ended (in thousands):

	Pension Plan						SERP
	July 2, 2004			June 27, 2003			July 2, 2004			June 27, 2003

Service cost	$	—		$	—		$	260		$	226
Interest cost	1,249			1,267			254			240
Expected return on assets	(1,181		)	(1,407		)	—			—
Amortization of actuarial loss	33			—			—			—
Amortization of prior year service cost	—			—			(30		)	(30		)
Net periodic benefit cost	$	101		$	(140	)	$	484		$	436

Employer Contributions

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2003, we did not expect to contribute to either the Pension Plan or the Supplemental Executive Retirement Plan (“SERP”) in 2004. In the first six months of 2004, we made no contributions to the Pension Plan. We anticipate that we will make no contributions to the Pension Plan in the remainder of this fiscal year unless required to do so by statutory funding requirements. In the first six months of 2004, we contributed $0.2 million to the SERP in order to pay $0.2 million in benefits. We are not required to fund the SERP and we do not fund it. All benefit payments are made by us directly to those who receive benefits from the SERP. As such, these payments are treated as both contributions and benefits paid for reporting purposes. We anticipate that we will make $0.2 million in contributions to the SERP in the remainder of this fiscal year in order to pay benefits of $0.2 million.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes included in Item 1 of Part I of this Form 10-Q. Except for the historical information contained herein, this quarterly report on Form 10-Q includes certain “forward-looking statements” within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934, including, among others, those statements preceded by, followed by, or including the words “estimates,” “believes,” “expects,” “anticipates,” “plans,” “projects,” or similar expressions.

These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties. These forward-looking statements include, but are not limited to:

• Our belief that orders will increase in the third quarter.

• Our belief that we will be profitable in the second half of 2004.

• Our belief that the guarantees we issued in connection with the Quest Flight Training Ltd. project will not be called upon for payment or performance.

• Our belief that sales will increase in future quarters as a result of strong second quarter orders as well as orders growth in the second half of 2004.

• Our belief that planetarium sales will continue to be strong.

• Our belief that operating expenses will continue to decrease as development expenditures are reduced and we continue ongoing cost reduction actions.

• Our belief that cash from operations will be approximately at breakeven for the remainder of 2004.

• Our belief that the letters of credit under the Foothill Facility will not be drawn against as we believe we will perform as required under the related contracts.

• Our belief that existing cash, restricted cash, borrowings available under our various borrowing facilities, the sale of a building in June 2004, and expected cash from future operations will be sufficient to meet our anticipated working capital needs, routine capital expenditures and current debt service obligations for the next twelve months.

• Our belief that the early orders for our laser projector product will be delivered in 2005 and 2006.

These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties. Our actual results could differ materially from these forward-looking statements. Recent trends are not necessarily reliable indicators of future stock prices or financial performance and there can be no assurance that the events contemplated by the forward-looking statements contained in this quarterly report will, in fact, occur. For further information, refer to the business description and additional risk factors sections included in our Form 10-K for the year ended December 31, 2003, as filed with the Securities and Exchange Commission.

OVERVIEW

Orders were stronger in the second quarter of 2004, increasing 33% from the first quarter of 2004 and contributing to an increase in backlog. However, a substantial portion of the orders came late in the second quarter and, consequently, did not contribute to second quarter sales or gross profit. Nevertheless, our net loss for the second quarter of 2004 narrowed from the first quarter of 2004.

We completed the sale of a building which we no longer needed for operations, and the gain on that sale was included in the second quarter results. Most of this gain was offset by expenses incurred during the quarter to begin pre-production of our laser projector. Early orders for the laser projector have recently been announced for delivery in 2005 and 2006.

Cash on hand increased during the second quarter of 2004 compared to the first quarter of 2004, enabling us to eliminate all short term debt just after the end of the period.

We expect orders to increase in the third quarter, leading to profitability in the second half of 2004.

BUSINESS OVERVIEW

We produce high-quality visual systems used to display images of the real world rapidly and accurately. We are widely regarded as both a pioneer and a leader in providing the world’s most realistic visual systems. We design, manufacture, market and support visual systems for simulation with solutions that meet the training requirements for a wide range of military and commercial applications. We also provide this leading-edge visual system technology and experience to planetariums, science centers, and entertainment venues. We develop and deliver a complete line of image generators, displays, databases, services and support products that match technology to customer requirements. Our products and solutions range from the desktop PC to what we believe are the most advanced visual simulation systems in the world.

We operate as one business; providing visual simulation solutions to an international customer base. Our simulation solutions can be categorized into five customer markets: military simulation, commercial simulation, strategic visualization, digital theater, and service & support.

Military Simulation

We offer a complete range of visual simulation solutions for all types of military vehicle training. We provide high-performance image generators (IGs), display systems, and visual databases for ground-based warfare, helicopter, fixed-wing aircraft, and ship bridge simulators. In addition, we are developing complete training systems for military tactics and command training.

Commercial Simulation

In civil aviation, we provide visual systems to almost every major airline and aircraft manufacturer in the world. We offer a full range of FAA (and international equivalent JAA) approved solutions for Level D, Level C, Level A/B, and desktop training, as well as upgrades for existing systems.

Strategic Visualization

We apply breakthrough technologies and capabilities originally developed for training simulation to provide rapidly generated visualization databases and services to the world’s military operations, intelligence, and training communities for mission planning, preview, rehearsal, damage assessment, or other highly time-sensitive purposes.

Digital Theater

We develop systems that transform our simulation technology into 360-degree domed and large format theater experiences. This technology allows audiences to enter full-color, computer-generated worlds and interact with them. In addition to providing theater systems for planetariums, science centers, themed attraction venues, and premium large-format theaters, we develop, market, and license a variety of show content.

Service & Support

We provide a full range of pre- and post-sales support for our products, including customized long-term support programs; on-site installation, maintenance, and repair; and maintenance training for customers. Distribution centers and support staff are strategically located in the U.S. and U.K. to ensure timely, responsive service.

CRITICAL ACCOUNTING POLICIES

The policies discussed below are considered by management to be critical to an understanding of our financial statements. Their application places significant demands on management’s judgment, with financial reporting results relying on estimates about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. A summary of significant accounting policies can be found in Note 1 to the consolidated financial statements on our Form 10-K for the year ended December 31, 2003. For all of these policies, management cautions that future results rarely develop exactly as forecast, and the best estimates routinely require adjustment.

Revenue Recognition

Revenue from long-term contracts requiring significant production, modification and customization is recorded using the percentage-of-completion method. This method uses the ratio of costs incurred to management’s estimate of total anticipated costs. Our estimates of total costs include assumptions, such as man-hours to complete, estimated materials cost, and estimates of other direct and indirect costs. Actual results may vary significantly from our estimates. If the actual costs are higher than management’s anticipated total costs, then an adjustment is required to reduce the previously recognized revenue as the ratio of costs incurred to management’s estimate was overstated. If actual costs are lower than management’s anticipated total costs, then an adjustment is required to increase the previously recognized revenue as the ratio of costs incurred to management’s estimate is understated.

Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts and Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts

Billings on uncompleted long-term contracts may be greater than or less than incurred costs and estimated earnings. As a result, these differences are recorded as an asset or liability on the balance sheets. Since revenue recognized on these long-term contracts includes estimates of management’s anticipated total costs, the amounts in costs and estimated earnings in excess of billings on uncompleted contracts and billings in excess of costs and estimated earnings on uncompleted contracts also include these estimates.

Inventories

Inventory includes materials at standard costs, which approximates average costs, as well as inventoried costs on programs (including material, labor, subcontracting costs, as well as an allocation of indirect costs). We periodically review inventories for excess supply, obsolescence, and valuations above estimated realizable amounts, and then provide a reserve we consider sufficient to cover these items. Reserve adequacy is based on estimates of future sales, product pricing, and requirements to complete projects. Revisions of these estimates would result in adjustments to our operating results.

Accrued Liabilities

Accrued liabilities include amounts for liquidated damages and late delivery penalties. While current contracts could include additional liquidated damages and late delivery penalties, we have included all amounts we believe the Company is liable for as of July 2, 2004. These liquidated damages are based primarily on estimates of project completion dates. To the extent completion dates are not consistent with our estimates, these damage and penalty accruals may require additional adjustments.

Allowance for Doubtful Accounts

We specifically analyze accounts receivables and consider historic experience, customer creditworthiness, facts and circumstances specific to outstanding balances, current economic trends, and payment term changes when evaluating adequacy of the allowance for doubtful accounts. Changes in these factors could result in material adjustments to the expense recognized for bad debts.

Income Taxes

As part of the process of preparing our condensed consolidated financial statements we are required to estimate our actual income taxes in each of the jurisdictions in which we operate. This involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatments of items, such as accrued liabilities, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our condensed consolidated balance sheets. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase or decrease this allowance in a period, we must include a corresponding adjustment within the tax provision in the statement of

operations. Significant management judgment is required to determine our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets.

Restatement of Quarterly 2003 Financial Statements

The financial data in this Form 10-Q for the three and six month periods ended June 27, 2003 have been restated from the amounts previously reported on our Form 10-Q filed with the Securities and Exchange Commission on August 11, 2003, for the correction of certain accounting errors. This restatement was originally reported in our Annual Report filed on Form 10-K for the fiscal year ending December 31, 2003. All information presented in this Management’s Discussion and Analysis of Financial Condition and Results of Operations reflects the restatement.

Background on the Restatement. During our 2003 year-end close process and review, we discovered certain errors that affected our previously issued quarterly unaudited condensed consolidated financial statements of the first three quarters of 2003. Accordingly, our 2003 quarterly unaudited, condensed consolidated financial statements have been restated.

The adjustments reflected in the restatement resulted from the incorrect application of certain accounting principles at our wholly-owned subsidiary, Evans & Sutherland Computer Limited, that we determined were in error as a result of our in depth review of all aspects of the matter.

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2003, including an in-depth review into several accounting issues that arose in connection with the restatement, as more specifically described in Note 1 of the Notes to Consolidated Financial Statements included in this Form 10-Q. Following our in depth review, we concluded that there were material weaknesses in our control environment. Part I, Item 4 of this Form 10-Q provides a description of actions we have taken in the first six months of 2004 to improve our internal controls and procedures.

RESULTS OF OPERATIONS

The following table presents the percentage of total sales represented by certain items for the periods presented:

	For the Three Months Ended										For the Six Months Ended
	July 2, 2004					June 27, 2003					July 2, 2004					June 27, 2003
						(As restated)										(As restated)
Sales	$	16,816		100.0	%	$	16,010		100.0	%	$	34,606		100.0	%	$	38,587		100.0	%
Cost of sales	10,955			65.1		9,924			62.0		21,863			63.2		24,922			64.6
Inventory impairment	—			—		—			—		—			—		14,566			37.7
Gross profit (loss)	5,861			34.9		6,086			38.0		12,743			36.8		(901		)	(2.3	)
Expenses:
Selling, general and administrative	6,052			36.0		6,906			43.1		12,138			35.1		14,163			36.7
Research and development	5,203			30.9		5,093			31.8		9,157			26.5		12,123			31.4
Restructuring charge (recovery)	—			—		—			—		(491		)	(1.4	)	1,279			3.3
Impairment loss	—			—		—			—		—			—		1,151			3.0
Operating expenses	11,255			66.9		11,999			74.9		20,804			60.1		28,716			74.4
Gain on sale of assets held for sale	3,488			20.7		1,406			8.8		3,488			10.1		1,406			3.6
Gain on sale of assets	—			—		—			—		155			0.4		—			—

Operating loss	(1,906		)	(11.3	)	(4,507		)	(28.2	)	(4,418		)	(12.8	)	(28,211		)	(73.1	)
Other income (expense), net	(334		)	(2.0	)	(498		)	(3.1	)	(824		)	(2.4	)	(1,338		)	(3.5	)
Loss before income taxes	(2,240		)	(13.3	)	(5,005		)	(31.3	)	(5,242		)	(15.1	)	(29,549		)	(76.6	)
Income tax expenses (benefit)	58			(0.3	)	119			(0.7	)	96			(0.3	)	(149		)	(0.4	)
Net loss	$	(2,298	)	(13.7	)	$	(5,124	)	(32.0	)	$	(5,338	)	(15.4	)	$	(29,400	)	(76.2	)

Results of Operations Summary

Our second quarter 2004 results of operations were mixed as expected. Sales were down compared to the prior quarter but showed an increase over the second quarter of 2003. We saw significant growth in our commercial market and our planetarium sales remained at robust levels. While we also saw gross margin improvement from reduced warranty and product support expenditures, our overall gross profit percentage decreased as a result of large, low-margin, pass-through deliveries made in the second quarter of 2004. Our operating expenses have decreased due to restructuring actions taken last year and continuing cost reductions in 2004; however, much of the expense reduction was offset by development expenditures related to our laser projector. We also sold a building during the second quarter of 2004. We expect sales to increase in future quarters as a result of second quarter orders as well as orders growth in the second half of 2004.

Second Quarter 2004 compared to Second Quarter 2003

Consolidated Sales and Gross Margin

Our total sales were $16.8 million in the second quarter of 2004, compared with $16.0 million in the second quarter of 2003. This increase was primarily the result of greater sales in our commercial market driven by increases in both demand and deliveries of our EP product. This increase was partially offset by some shrinkage in the military market. Sales of our planetarium systems decreased slightly but remained robust as a result of strong demand for our new Digistar 3 product. We expect this strong sales trend of our planetarium systems to continue. Our service and support sales increased slightly in the second quarter of 2004 as a result of a large delivery.

Our gross margin decreased to 34.9% in the second quarter of 2004, compared with 38.0% in the second quarter of 2003. This decrease in gross margin was primarily driven by a change in product mix in our military market. During the second quarter of 2004 significant deliveries were made on large military contracts with a high proportion of subcontract pass-through sales resulting in lower gross margins. In addition, our planetarium products also experienced a gross margin decrease as a result of a unique, high-margin delivery during the second quarter of 2003. The gross margin decreases were partially offset by a slight increase in our commercial and service and support gross margins and significant reductions in both our product support and warranty costs.

Operating Expenses, Other and Taxes

Our operating expenses were $11.3 million in the second quarter of 2004, compared with $12.0 million during the second quarter of 2003. Selling, general, and administrative (“SG&A”) expenses decreased $0.9 million primarily as a result of lower labor costs. Research and development (“R&D”) expenses increased $0.1 million as a result of increased development expenditures on our new laser projector product. We expect operating expenses to continue to decrease as development expenditures are reduced and we continue ongoing cost reduction actions.

During the second quarter of 2004, we recognized a gain on assets held for sale of $3.5 million on the sale of a building. During the second quarter of 2003, we recognized a gain on assets held for sale of $1.4 million on the sale of a building.

Our other income (expense) was $0.3 million of net expense in the second quarter of 2004, down from $0.5 million of net expense in the second quarter of 2003. This decrease was primarily a result of lower interest on lower debt levels and a gain from the sale of investment securities.

Our income tax expense was $0.1 million during both the second quarter of 2004 and second quarter of 2003.

First Two Quarters of 2004 compared to First Two Quarters of 2003

Consolidated Sales and Gross Margin

Our total sales were $34.6 million in the first two quarters of 2004, compared with $38.6 million in the first two quarters of 2003. This decrease was primarily the result of a continued shrinkage in the military market. The first two quarters of 2003 also contained significant deliveries on a large military program. Sales of our planetarium systems decreased slightly but remained robust as a result of strong demand for our new products. We expect this strong sales trend of our planetarium systems to continue. Our service and support sales also decreased slightly in the first two quarters of 2004. These sales decreases were significantly offset by greater sales in our commercial markets driven by increases in both demand and deliveries of our EP product.

Our gross profit percentage increased to 36.8% in the first two quarters of 2004, compared with (2.3%) in the first two quarters of 2003. This increase in gross profit percentage was primarily driven by a $14.6 million dollar inventory impairment loss taken in the first two quarters of 2003, related primarily to our Harmony 1 product. Our gross margin related to products sold to military customers was negatively impacted due to a change in product mix in 2004. Significant deliveries were made on large military contracts with a high proportion of pass-through sales, resulting in lower gross margins. Our gross margin related to our planetarium products has also experienced a slight decrease as result of two unique, high-margin deliveries during the first two quarters of 2003. Our overall gross margin related to products sold to commercial customers has increased as a result of favorable program cost performance and program cost closeouts. In addition, we have experienced significant reductions in warranty costs due to warranty coverage of many of our Harmony 1 products ending in or before 2004 and due to various non-related warranty incurred charges during 2003.

Operating Expenses, Other and Taxes

Our operating expenses were $20.8 million in the first two quarters of 2004, compared with $28.7 million during the first two quarters of 2003. SG&A expenses decreased by $2.0 million primarily as a result of lower labor costs. R&D expenses decreased $3.0 million due to lower labor costs related to Harmony and EP product development efforts. These reductions were partially offset by higher development expenditures related to our laser projector product as we prepare to set up for manufacturing, and additional expenditures related to the development of our EP/EPX products. We expect operating expenses to continue to decrease as development expenditures are reduced and we continue our ongoing cost reduction actions.

During the first two quarters of 2004, we recorded a gain on our previous restructuring charges in the amount of $0.5 million related to favorable cost management in comparison to initial restructuring estimates. During the first two quarters of 2003, we recorded a restructuring charge of $1.3 million related to a reduction in force of approximately 45 employees to reduce operating costs.

During the first two quarters of 2003, we recognized an impairment loss of $1.2 million on development and demonstration assets related to our Harmony 1 product.

During the first two quarters of 2004, we recognized a gain on assets held for sale of $3.5 million on the sale of a building. During the first two quarters of 2003, we recognized a gain on assets held for sale of $1.4 million on the sale of a building.

During the first two quarters of 2004 we recognized a gain on the sale of assets in the amount of $0.2 million as a result of favorable cost management in comparison to initial cost estimates.

Our other income (expense) was $0.8 million of net expense in the first two quarters of 2004, compared to $1.3 million of net expense in the first two quarters of 2003. This $0.5 million expense reduction is attributable to lower interest expense as a result of lower debt levels as well as the gain on the sale of investment securities.

Our income tax expense was $0.1 million during the first two quarters of 2004, compared to an income tax benefit of $0.1 million during the first two quarters of 2003. The income tax benefit during the first two quarters of 2003

was the result of a change in the tax law which allowed us to use additional net operating losses to offset taxable income. We expect the income tax expense for the remainder of 2004 to be approximately $0.1 million.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Capital Resources Summary

Summary information about our financial position as of July 2, 2004 and December 31, 2003, is presented in the following table (in thousands):

	July 2, 2004			December 31, 2003
Cash	$	9,965		$	9,714
Restricted cash	2,405			765
Line of credit agreements	(884		)	(7,685		)
Net short term cash	11,486			2,794
Long-term debt	(18,015		)	(18,015		)
Net indebtedness	$	(6,529	)	$	(15,221	)

Stockholders’ equity	$	10,298		$	15,566

(See the Condensed Consolidated Balance Sheet in Part I Financial Information of this Form 10-Q)

In the first six months of 2004, our net cash flow was positive. Our operations provided cash that was used to pay down our accounts payable. This was accomplished despite a $5.3 million loss for this period. The sale of one of our buildings in the second quarter of 2004 enabled us to further pay down our borrowings on our lines of credit. We continue to expect cash from operations to be approximately at breakeven for the remainder of the year.

Cash Flow

	Six Months Ended
(In thousands)	July 2, 2004			June 27, 2003
Net cash provided by (used in) operating activities	$	1,077		$	(753	)
Net cash provided by investing activities	7,548			3,000
Net cash provided by (used in) financing activities	(8,374		)	87
Increase in cash	$	251		$	2,334

(See the Condensed Consolidated Statement of Cash Flow in Part I Financial Information of this Form 10-Q)

In the first six months of 2004, cash provided by our operating activities was mainly attributable to an $8.4 million reduction in accounts receivable, $3.6 million reduction in net costs and estimated earnings in excess of billings on uncompleted contracts, $1.2 million reduction in inventory, and $2.7 million in depreciation and amortization. These were offset by a $5.3 million net loss and non cash charges primarily consisting of a $3.8 million in gains and $0.5 million in recovery of prior restructure charges, a $2.5 million decrease in accounts payable, a $2.3 million decrease in accrued liabilities, a $1.1 million decrease in customer deposits and a $0.9 million increase in other assets. Accounts receivable decreased due to significant collections on several large contracts, decreasing overall sales, and a decrease of $1.2 million in our United Kingdom value added tax receivable. Net costs and estimated earnings in excess of billings on uncompleted contracts decreased primarily as a result of converting costs and estimated earnings in excess of billings on uncompleted contracts into invoicing. Inventory decreased mainly due to a reduction in the work-in-process inventory as contracts have been completed and delivered. Accounts payable decreased as we further reduced our outstanding trade payables. Accrued liabilities decreased mainly due to $0.9 million in payments related to prior year restructuring charges, $0.6 million reduction in our United Kingdom value added tax payable, and $1.1 million reduction in our accrual related to a settlement agreement with one of our customers as we met the a majority of the terms of the settlement agreement. These decreases were offset by an

increase of $1.0 million for payroll accruals at the end of the quarter. Customer deposits decreased as orders were turned into sales and new customer deposits did not offset this reduction. Other assets increased as a result of a security deposit required in relation to the rent guarantee agreement we entered into.

In the first six months of 2003, cash used in our operating activities was mainly attributable to $29.4 million net loss, decreases in accrued liabilities of $3.3 million, accounts payable of $1.7 million, and an increase in inventory of $1.2 million after adjusting for impairments. This was offset by non-cash charges primarily consisting of $16.2 million related to asset impairments, $3.7 million related to depreciation and amortization, and $1.3 million related to restructuring charges. Also, offsetting cash used were decreases in net costs and estimated earnings in excess of billings on completed projects of $10.8 million and in accounts receivable of $2.1 million. Accrued liabilities decreased due to restructure payments and warranty claims. Accounts payable decreased due to efforts to reduce our trade payables. Inventory increased due to required raw materials and an increase in work-in-process related to program costs. Net costs and estimated earnings in excess of billings on completed projects decreased as a result of converting costs and estimated earnings in excess of billings on completed contracts into invoicing and due to increasing billings (invoicing) in excess of costs and estimated earnings on uncompleted contracts. Accounts receivable decreased as a result of additional collections on two of the six large, fixed-price defense contracts that used our Harmony 1 image generator that have in previous years had longer than average agings.

In the first six months of 2004, cash provided by our investing activities was primarily due to $8.3 million in proceeds from the sale of a building classified as an asset held for sale. This was offset partially by $1.4 million primarily used for the purchase of property, plant, and equipment. In the first six months of 2003, cash provided by our investing activities was primarily due to $4.8 million in proceeds from the sale of a building classified as an asset held for sale. This was offset partially by $1.8 million for the purchase of property, plant and equipment.

In the first six months of 2004, cash used by our financing activities was primarily due to our efforts to reduce our outstanding borrowings on our lines of credit and an increase in restricted cash used to support future issuances of new letters of credit. In the first six months of 2003, cash provided by our financing activities was due to $2.2 million in restricted cash becoming unrestricted, offset by efforts to reduce our outstanding borrowings on our lines of credit.

Credit Facilities

We have in place two lines of credit that allow us to bridge the gap, if any, between our daily cash requirements and the cash we have on hand, as well as to provide the ability to issue letters of credit. The ability to issue letters of credit has become more important to our business as sales in other countries other than North America and Western Europe have grown and become a larger percentage of our gross sales. Letters of credit in many of these countries are required as part of any final contract.

We have a secured credit facility (the “Foothill Facility”) with Wells Fargo Foothill (“Foothill”) that provides for borrowings and the issuance of letters of credit up to an aggregate of $25.0 million. The original secured credit facility agreement was put into place in December 2000 and has been amended in subsequent periods. The Foothill Facility, among other things, (i) requires us to maintain certain financial ratios and covenants, including a minimum combined cash and borrowing availability amount and a limitation of $12.0 million of aggregate capital expenditures in any fiscal year; (ii) restricts our ability to incur debt or liens; sell, assign, pledge, or lease assets; or merge with another company; and (iii) restricts the payment of dividends and repurchase of any of our outstanding shares without the prior consent of Foothill. As of July 2, 2004, we were in compliance with all financial covenants and ratios. The Foothill Facility expires in December 2004.

As of July 2, 2004 we had no outstanding borrowings under the Foothill Facility and $3.7 million in outstanding borrowings as of December 31, 2003 under the Foothill Facility. As of July 2, 2004 and December 31, 2003, we had $2.9 million and $3.6 million, respectively, in outstanding financial letters of credit under the Foothill Facility on certain customer contracts. Our customers can draw against these letters of credit if we fail to meet the performance requirements included in the terms of each letter of credit. As of July 2, 2004, no amounts had been accrued for any estimated losses under the obligations, as we believe we will perform as required under our contracts. In addition, as of July 2, 2004, we had $1.6 million deposited in a restricted cash collateral account at Foothill related to letter of credit guarantees, projected amortized reductions in the real estate based collateral over the remainder of the term of the Foothill Facility, and reserves required by Foothill. As of July 30, 2004, there were no outstanding borrowings, and outstanding letters of credit were $3.7 million.

In March 2004, Evans & Sutherland Computer Limited (“E&S Ltd.”), our wholly-owned subsidiary, renewed an overdraft facility (the “Overdraft Facility”) with Lloyds TSB Bank plc (“Lloyds”) for borrowings up to $2.5 million. However, solely at Lloyd’s discretion, E&S Ltd. may be allowed to exceed the $2.5 million limit for a very limited amount of time, as defined by Lloyds at that time. In addition, borrowings over the $2.5 million limit will bear an interest rate of equal to Lloyds’ unauthorized currency borrowing rate, which was 12.0% per annum above Lloyds’ short term offered rate as of the signing of the renewed Overdraft Facility. The Overdraft Facility expires December 31, 2004. Borrowings under the Overdraft Facility bear interest at Lloyds’ short-term offered rate plus 1.75% per annum. As of July 2, 2004 and December 31, 2003, there were $0.9 million in outstanding borrowings. The Overdraft Facility is subject to reduction or demand repayment for any reason at any time at Lloyds’ discretion. E&S Ltd. 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 E&S Ltd. and require maintenance of certain financial covenants. In addition, at July 2, 2004, E&S Ltd. had $0.8 million deposited in a restricted cash collateral account at Lloyds related to the Overdraft Facility to support certain obligations that the bank guarantees. As of July 30, 2004, there were $0.2 million in outstanding borrowings.

Other Information

As of July 2, 2004, we had $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 our common stock at a conversion price of $42.10 or 428,000 shares of our common stock, subject to adjustment. The 6% Debentures are redeemable at our option, in whole or in part, at par.

As of July 2, 2004, we had a rental guarantee obligation committing us to payments over a period of three years for a maximum amount of $2.6 million. However, terms of the rental guarantee provide conditions that can reduce this obligation over the term of the agreement. Assuming we are obligated for the maximum amount of $2.6 million, we would expect to make payments of $0.6 million over the remainder of 2004, $1.0 million in 2005, $0.7 million in 2006, and $0.3 million in 2007.

In the second quarter of 2004, we settled a claim against the Company by RealVision, Inc. by making a payment of approximately $0.9 million to RealVision, Inc. and our insurance carrier making a payment of approximately $1.5 million to RealVision, Inc., a total settlement of $2.4 million. This settlement was related to matters arising from the sale of a business unit to RealVision, Inc. in 2001.

On February 18, 1998, our Board of Directors authorized the repurchase of up to 600,000 shares of our 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, our Board of Directors authorized the repurchase of an additional 1,000,000 shares of our common stock. On July 30, 2004, 463,500 shares remained available for repurchase. No shares were repurchased during 2003 or during the first six months of 2004. Stock may be acquired on 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 Foothill Facility requires that we obtain prior consent from Foothill before we repurchase any shares.

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

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

We believe that the principal sources of liquidity for 2004 will result from positive cash flow related to the restructurings that have taken place in prior years, other cost cutting measures, and the sale of a building in June 2004, designated as asset held for sale. Circumstances that could materially affect liquidity in 2004 include, but are not limited to, the following: (i) our ability to successfully develop and produce new technologies and products, (ii) our ability to meet our forecasted sales levels during 2004, (iii) our ability to reduce costs and expenses, and (iv) our ability to maintain our commercial simulation business in light of current economic conditions.

We believe that existing cash, restricted cash, borrowings available under our various borrowing facilities, the sale of a certain building sold in June 2004, and expected cash from future operations will be sufficient to meet our anticipated working capital needs, routine capital expenditures and current debt service obligations for the next twelve months. As of July 2, 2004, our total indebtedness was $18.9 million. The Foothill Facility expires in December 2004 and the Overdraft Facility expires on December 31, 2004. If these credit facilities continue to be needed beyond their respective expiration dates, we will attempt to replace them; however, there can be no assurances that we will be successful in renegotiating our existing borrowing facilities or obtaining additional debt or equity financing. Our cash and restricted cash, 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.

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we normally do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPEs”), which can be established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

However, we have a 50% interest in Quest Flight Training, Ltd., a joint venture with Quadrant Group Ltd., providing aircrew training services for the United Kingdom Ministry of Defence under a 30-year contract. We account for this investment using the equity method. In connection with the services of Quest to the U.K. MoD, we guarantee various obligations of Quest. As of July 2, 2004, we had four guarantees outstanding related to Quest. Pursuant to the first guarantee, we have guaranteed, jointly and severally with Quadrant, the performance of Quest in relation to its contract with the U.K. MoD. If Quest fails to meet its obligations under the contract, then we (and Quadrant) are required to perform under the terms of the contract. Due to the length of the contract and the uncertainty of performance for which we would be liable if Quest fails to perform, we cannot estimate the maximum amount of possible future payments. This guarantee is in place until 2030. Pursuant to the second guarantee, we have guaranteed, jointly and severally with Quadrant, up to a maximum amount of £1.0 million ($1.8 million as of July 2, 2004), the performance of Quest, where not subcontracted, and the performance of Quest where subcontracted, and the subcontractor is not liable to meet its obligation due to any limitation of liability in the sub-contract agreement, thus preventing Quest from meeting its obligation under its contract with the U.K. MoD. This guarantee is in place until 2020. Pursuant to the third guarantee, we have pledged our equity shares in Quest to guarantee payment by Quest of a loan agreement executed by Quest. The loan agreement terminates in 2020. The pledge of our equity shares in Quest will expire at such time as Quest’s obligations under the loan agreement are satisfied or the date on which the loan agreement is otherwise terminated. In the event of default on this loan agreement, the lending institution can request that the trustee holding such equity shares surrender them to the lending institution in order to satisfy all amounts then outstanding under the loan agreement. As of July 2, 2004, the

outstanding loan balance was £5.0 million ($9.0 million). Pursuant to the fourth guarantee, we have guaranteed payment, up to a maximum of £0.13 million ($0.2 million), in the event that Quest has a default event, as defined by its loan agreement. This guarantee is in place until 2020. As of July 2, 2004, no amounts have been accrued for any estimated losses under these guarantees because we believe that Quest will meet all of its performance and financial obligations in relation to its contract with the U.K. MoD. However, if we are required to perform under any or all of the four guarantees, it could have a material adverse impact on our operating results and liquidity.

CONTRACTUAL OBLIGATIONS

In the first six months of 2004 we experienced a material change in our contractual obligations due to a contract we entered into guaranteeing rents on the building we sold in June 2004. This contract obligates us to pay a maximum amount of $2.6 million over three years. The amount we are obligated to pay may be reduced over the three year contract based on the reduction of space available for rent. As a result, our contractual obligations increased compared to what we reported in our 2003 Annual Report on Form 10-K. The maximum we are obligated to pay pursuant to the rent guarantee contract in the remainder of 2004 is approximately $0.6 million. The maximum we are obligated to pay pursuant to the rent guarantee contract in the period covering 2005 to 2007 is approximately $2.0 million.

TRADEMARKS USED IN THIS FORM 10-Q

E&S, EP, EPX, Melody, Integrator, and Harmony are trademarks or registered trademarks of Evans & Sutherland Computer Corporation. All other products, services, or trade names or marks are the properties of their respective owners.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The principal market risks to which we are exposed are changes in foreign currency exchange rates and changes in interest rates. Our international sales, which accounted for 60% of our total sales in the six months ended July 2, 2004, 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. We do not enter into contracts for trading purposes and do not use leveraged contracts. As of July 2, 2004, we had eight material sales contracts in Euros with approximately $2.0 million remaining to invoice and collect, one material sales contract in GBP with approximately $0.1 million remaining to invoice and collect, and no foreign currency derivative contracts.

We reduce our exposure to changes in interest rates by maintaining a high proportion of our debt in fixed-rate instruments. As of July 2, 2004, 95% of our total debt was in fixed-rate instruments. Had we fully drawn on our $25 million revolving line of credit with Wells Fargo Foothill and our foreign line of credit, 40% of our total debt would be in fixed-rate instruments.

The information below summarizes our market risks associated with debt obligations as of July 2, 2004. Fair values have been determined by quoted market prices. For debt obligations, the table below presents the principal cash flows and related interest rates 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 3 of Notes to the Condensed Consolidated Financial Statements in Part I of this quarterly report.

	Rate		2004		2005		2006		2007		2008		There- after		Total		Fair Value
Debt

Bank Borrowings	3.3	%	$	884	$	—	$	—	$	—	$	—	$	—	$	884	$	884

6% Debentures	6.0	%	—		—		—		—		—		18,015		18,015		13,241

Total debt			$	884	$	—	$	—	$	—	$	—	$	18,015	$	18,899	$	14,125

Item 4. CONTROLS AND PROCEDURES

We carried out an evaluation, under the supervision of and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2003. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports filed with the SEC is accumulated and communicated to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

Evaluation of our internal controls and procedures related to the restatement. Our evaluation of our internal controls and procedures as of December 31, 2003 included an in-depth review of all aspects of the matter of certain material weaknesses we identified in the internal controls and procedures of our wholly-owned subsidiary, Evans & Sutherland Computer Limited (“E&S Ltd.”) as more fully disclosed in Note 3 of the Notes to Consolidated Financial Statements included as part of our annual report on Form 10-K for the period ending December 31, 2003, and an in depth review of all aspects of the matter by the Audit Committee. Based on all information gathered during our in depth review of all aspects of the matter, we concluded that our accounting, financial reporting and internal control functions needed improvement, including our system of documenting transactions.

Actions taken in response to our evaluation. As a result of our findings described above, during the first quarter of 2004, we implemented the following improvements to our internal control procedures and our disclosure controls

and procedures to address the issues we identified in our evaluation of these controls and procedures and those of our subsidiary, E&S Ltd.:

• We altered our reporting structure so that the finance director of E&S Ltd. reports directly to our chief financial officer.

• We appointed a Director of Internal Control whose primary responsibilities are to oversee the establishment of formalized policies and procedures throughout our organization and to document and assess our system of internal controls.

• We instituted new procedures around our quarterly reporting processes whereby significant accounting issues are discussed and documented, reviewed with our external auditors and the Audit Committee, formally approved by our management, and given timely effect in our books and records.

In addition, during the second quarter of 2004, we implemented and continue to implement the following improvements to our internal control procedures and our disclosure controls and procedures to address the issues we identified in our evaluation of these controls and procedures and those of our subsidiary, E&S Ltd.:

• We continue to establish new internal control processes to remedy the problems identified.

• We continue to examine our procedures for quarter-end analysis of balance sheet and income statement accounts, period-end reconciliations of subsidiary ledgers, and the correction of reconciling items in a timely manner. In those areas where we identify weaknesses we address with specific action items designed to eliminate the weaknesses. We also continue to enhance our accounting documentation policies.

• We are implementing the financial controls and procedures employed by E&S at our subsidiary, E&S Ltd., whereby monthly sales audit schedules are reconciled to the general ledger

• We have begun reconciling, on a monthly basis, operational assessments of the status of completion of each contract program and the financial accounting and reporting of such status.

We believe that our internal controls and procedures and our disclosure controls and procedures have now been improved due to the scrutiny of such controls and procedures by management and the Audit Committee. We believe our internal controls and procedures and our disclosure controls and procedures will continue to improve as we complete the implementation of the actions described above. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

As of the end of the quarter ended July 2, 2004, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC reports.

Other than as described above, during the quarter ended July 2, 2004, there have been no significant changes to our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

In the normal course of business, we have various other legal claims and other contingent matters. Although the final outcome of such matters cannot be predicted, we believe the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial condition, liquidity, or results of operations.

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

We held our Annual Meeting of Shareholders on May 18, 2004. We solicited proxies for the meeting pursuant to Regulation 14A. At the meeting, our shareholders voted on the following:

1) To re-elect two directors to our Board of Directors, Mr. David J. Coghlan, and Mr. James R. Oyler, to fill positions having a term expiring in 2007,

2) To approve the adoption of the 2004 Stock Incentive Plan of Evans & Sutherland Computer Corporation (“2004 Plan”), and

3) To ratify KPMG LLP as independent auditors of the Company for the fiscal year ending December 31, 2004.

The results were as follows:

	For	Against	Abstentions	Broker non-vote

Mr. Coghlan	9,817,525	530,034	—	—
Mr. Oyler	9,817,400	530,159	—	—
2004 Plan	5,305,981	2,823,652	810	2,217,116
KPMG LLP	8,133,874	2,212,553	1,132	—

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.1 Purchase and Sale Agreement between Evans & Sutherland Computer Corporation and Woodbury Corporation, dated April 5, 2004, filed herein.

10.2 First Amendment to Agreement of Purchase and Sale between Evans & Sutherland Computer Corporation and Woodbury Corporation, dated May 8, 2004, filed herein.

10.3 Consent and Subordination to Amended and Restated Declaration by Wells Fargo Foothill, Inc., f/k/a Foothill Capital Corporation, dated June 24, 2004, filed herein.

10.4 Consent to Lease Agreement by Wells Fargo Foothill, Inc., f/k/a Foothill Capital Corporation, dated June 24, 2004, filed herein.

10.5 Lease Agreement between Komas L.L.C. and Evans & Sutherland Computer Corporation, dated June 25, 2004, filed herein.

10.6 Amendment Number Seven to Loan and Security Agreement and Waiver by and between Wells Fargo Foothill and Evans & Sutherland Computer Corporation, dated June 23, 2004, filed herein.

31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended, filed herein.

31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended, filed herein.

32.1 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herein.

(b) Reports on Form 8-K

• On April 22, 2004, the Company furnished to the SEC a Current Report pursuant to Item 9 of Form 8-K, “Regulation FD Disclosure.” In the Report, the Company disclosed its announcement by press release on the same date of the Company’s financial results for the three months ended April 2, 2004. The Company included in the Report unaudited Summary Statements of Consolidated Operations for the three months ended April 2, 2004, and March 28, 2003, Condensed Consolidated Balance Sheets dated April 2, 2004, and December 31, 2003, the Company’s backlog as of April 2, 2004, and December 31, 2003.

SIGNATURE

Pursuant to the requirements 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


Date August 16, 2004	By:	/s/ E. Thomas Atchison
		E. Thomas Atchison, Vice President,
		Chief Financial Officer, and Corporate Secretary
		(Authorized Officer)
		(Principal Financial Officer)

EX-10.1 2 a04-9302_1ex10d1.htm EX-10.1

Exhibit 10.1

AGREEMENT OF PURCHASE AND SALE

(650 Komas Drive)

THIS AGREEMENT OF PURCHASE AND SALE (“Agreement”) is made and entered into as of the 5th day of April, 2004, by and between EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation (“Seller”), and WOODBURY CORPORATION, a Utah corporation (“Buyer”), collectively, the “Parties” and individually, a “Party.”

R E C I T A L S:

This Agreement is entered into upon the basis of the following facts, understandings and intentions of the Parties:

A. The University of Utah, a body politic and corporate of the State of Utah (referred to herein as the “Master Landlord” or the “University”), as landlord, and Seller’s predecessor-in-interest, Black Hawk Investment Company, a general partnership, entered into a Lease Agreement, dated September 5, 1980, as amended by each of (i) that First Amendment to Lease Agreement, dated June 7, 1982, (ii) that Second Amendment to Lease Agreement, dated September 28, 1982, (iii) that Third Addendum to Lease Agreement, dated April 9, 1987, and (iv) that Fourth Addendum to Lease Agreement, dated December 31, 1990 (collectively, the “Ground Lease”), relating to the real property which is depicted on the site plan attached hereto as Exhibit A and more particularly described in Exhibit B attached hereto and incorporated herein by this reference (the “Property”). The tenant’s interest in and to the Ground Lease being now held by Seller.

B. Seller is the owner of certain improvements described in Exhibit C attached hereto (the “Improvements”) currently located on the Property. Buyer desires to purchase from Seller and Seller desires to sell to Buyer all of Seller’s right, title and interest in the Improvements, subject to the terms and conditions of the Ground Lease.

C. Seller is the owner of certain personal property currently located in the Improvements as described on Exhibit D attached hereto (the “Personal Property”).

D. Buyer and Seller acknowledge that there are currently no subtenants located at the Property or who have any interest in the Property or Improvements located thereon.

E. Seller desires to sell the Improvements and the Personal Property to Buyer and assign all of Seller’s right, title, interest and obligations in and under the Ground Lease to Buyer, and Buyer desires to purchase the Improvements and the Personal Property from Seller and accept and assume from Seller the right, title, interest and obligations of Seller in and under the Ground Lease on the terms and conditions set forth herein.

F. Buyer desires that Seller lease the Property and Improvements from Buyer, and Seller has agreed to lease the Property and Improvement from Buyer, during the period commencing on the Date of Closing (defined later) and terminating on the earlier to occur of (a) the date which is three (3) years after the Date of Closing; and (b) the date on which the Property and Improvements have been fully leased to third parties (the “Seller Leaseback Period”), pursuant to the terms and conditions of a lease agreement to be negotiated between the Parties in accordance with Section 4.5 of this Agreement as set forth in this Agreement (the “Building Lease”).

March 31, 2004

650 Komas Drive
University of Utah, Research Park
Salt Lake City, Utah

AGREEMENT:

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and promises of the Parties set forth herein, the Parties agree as follows:

1. AGREEMENT OF PURCHASE AND SALE; ASSIGNMENT OF GROUND LEASE. Subject to all of the provisions of this Agreement, Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller the Improvements and the Personal Property. Subject to all of the provisions of this Agreement, Seller agrees to assign to Buyer, and Buyer agrees to assume all of Seller’s right, title, interest and obligations in and under the Ground Lease.

2. PURCHASE PRICE.

2.1 The Purchase Price. The total consideration to be paid by Buyer to Seller for the Improvements and the Personal Property and the Seller’s right, title, interest and obligations in and under the Ground Lease shall be Eight Million Six Hundred Thousand Dollars ($8,600,000.00) (the “Purchase Price”). The Purchase Price, less the Earnest Money [defined later] deposited in escrow pursuant to Section 2.2 below and plus or minus prorations as hereinafter provided, shall be paid in cash at Closing [defined later].

2.2 Earnest Money.

2.2.1 Buyer shall, within twenty four (24) hours of receipt of one (1) fully-executed original of this Agreement, deposit the sum of Fifty Thousand Dollars ($50,000.00) with Escrow Holder [defined later] as earnest money to be applied against the Purchase Price at Closing. This sum, plus sums referred to in Section 2.2.2, are referred to in this Agreement as the “Earnest Money”. Wherever this Agreement refers to the “Earnest Money”, such reference shall be deemed to refer to the actual amount of Earnest Money deposited (or to be deposited) as the context requires.

2.2.2 Additional Earnest Money. Upon the expiration of the Inspection Contingency Period [defined later] (the “Additional Deposit Date”), Buyer shall deposit an additional One Hundred Thousand Dollars ($100,000.00) (the “Additional Deposit”) with Escrow Agent, such that the total Earnest Money deposited with Escrow Agent at that point shall be equal to One Fifty Hundred Thousand One Dollars ($150,000.00). Upon the Additional Deposit Date, the entire Earnest Money Deposit and Additional Deposit shall become absolutely non-refundable to Buyer and shall be deemed fully earned by Seller (the “Non-refundable Deposit”).

2.2.3 The Earnest Money is absolutely non-refundable except to the limited extent provided in Sections 3.1.3 (dealing with Buyer’s determination whether all conditions are satisfactory to Buyer), 3.2.6 (dealing with title), 3.4 (dealing with the estoppel certificate), 3.5 (dealing with mutual conditions precedent), 3.6 (dealing with the financing contingency), 6.4 (dealing with environmental investigations), 8 (dealing with condemnation and casualty) and in Section 10.1 of this Agreement (dealing with certain defaults of Seller).

2.2.4 The Earnest Money shall be in the form of a check made payable to the account of the Escrow Holder in the amount of the required payment. Escrow Holder is hereby instructed to deposit all Earnest Money in a federally-insured money market or

other similar interest-bearing account, subject to immediate withdrawal, at a banking institution located in Utah or in such other financial institution as the Parties may mutually designate. If this transaction closes, the Earnest Money, plus any interest earned thereon, shall be credited against the total Purchase Price. If the Earnest Money is forfeited to Seller as provided by this Agreement, the Earnest Money, with any interest earned thereon, shall be paid immediately to Seller. Wherever in this Agreement Buyer is entitled at any time to a return of the Earnest Money, the Earnest Money and any interest earned on the Earnest Money shall be immediately paid to Buyer.

2.3 Disbursement at Closing. Upon the Closing, all amounts to be paid at Closing according to this Section 2, less any closing costs payable by Seller, shall be disbursed to Seller in accordance with the Seller Closing Settlement Statement [defined later].

3. BUYER’S CONDITIONS PRECEDENT. Buyer’s obligations to purchase the Improvements and the Personal Property and to assume Seller’s right, title, interest and obligations in and under the Ground Lease are conditioned upon satisfaction of the following conditions, which may be waived in writing at any time by Buyer:

3.1 General Conditions and Inspections.

3.1.1 Seller shall provide, within ten (10) business days after execution of this Agreement by both Parties, the following (collectively, the “Seller’s Disclosures”): (a) copies of the Ground Lease and any amendments, assignments, modifications and letter agreements thereto, currently in effect with respect to the Property; (b) a copy of the ALTA Survey for the Property, dated January 18, 2001, revised February 14, 2001 and stamped by the engineer on February 27, 2001, prepared by Bush & Gudgell, in Seller’s possession; (c) copies of any architectural, structural, electrical and mechanical plans and/or drawings for the Improvements which are in Seller’s possession; (d) legible copies of all service contracts relative to the Property which Seller has engaged in and which are in Seller’s possession; (e) legible copies of applicable tax bills in Seller’s possession with respect to the Property; provided, however, because the Personal Property is not separated on a single tax bill, Seller shall provide property tax information regarding the Personal Property as calculated by Seller from applicable tax bills for such items; (f) an inventory list of all the Personal Property available for conveyance pursuant to the terms of this Agreement; (g) copies of any environmental reports, soils studies or related reports with respect to the Property which are in Seller’s possession; (h) copies of any warranties for the Improvements or the Personal Property which are in Seller’s possession; (i) copies of all licenses and permits, including any governmental approvals, with respect to the Property which are in Seller’s possession; and (j) copies of building operating expense statements for the last twenty-four (24) months during which Seller occupied more than seventy five percent (75%) of the building; (k) records of any building maintenance and/or installation of equipment and/or capital improvements records in Seller’s possession which may have occurred during the past three (3) years to the extent such can be separated from Seller’s general maintenance records; and (l) a statement from Seller specifying what improvements, fixtures, equipment and other personal property located on or at the Property, other than the real property interest of Master Landlord and the reversionary interest of Master Landlord under the Ground Lease, are owned by Master Landlord or any third parties. Any items or information delivered by Seller to Buyer pursuant to this Section 3.1.1 are delivered without any representation or warranty as to accuracy or completeness thereof. As used in this Agreement, the term “in Seller’s

possession” shall mean in the files for the Property of the Seller’s Facility Manager, Bruce Lyman, as of the date of this Agreement, which files are currently located at 600 Komas Drive, Salt Lake City, Utah.

3.1.2 During the period commencing on the date of this Agreement and terminating on the date which is thirty (30) days thereafter (the “Inspection Contingency Period”), Buyer and its agents shall (subject to obtaining Master Landlord’s approval with respect to the Property) have the right, at Buyer’s sole cost and expense, to (a) inspect the Seller’s Disclosures; (b) make such inquiries and investigations regarding the zoning and permitted uses of the Property with applicable governmental authorities, (c) make, upon not less than three (3) days’ prior notice to Seller, a physical inspection of and such other tests and inspections regarding the Improvements, Personal Property and, subject to the terms of Section 6, the Property as Buyer deems necessary and appropriate; (d) determine the suitability of the parking on the Property; (e) to update or otherwise obtain a revised survey if the survey delivered by Seller is inadequate in Buyer’s determination; (f) determine the feasibility of obtaining necessary financing within the time limits and subject to the limitations set forth in this Agreement; and (g) make such other inquiries and determinations as Buyer, in its sole discretion deemed necessary in order to be willing to acquire the Property, Personal Property and Improvements. Buyer’s access to, and inspection of, the Property, the Improvements and Personal Property, or any of them, shall be at Buyer’s sole risk and expense and Seller shall have no responsibility therefor and such activities shall be conducted in such a manner as not to damage the Property, the Improvements or the Personal Property, or any of them, or to endanger, or otherwise constitute a nuisance to, persons or property in the vicinity of the Property, the Improvements or the Personal Property. Buyer shall immediately repair any loss or damage to the Property, the Improvements or the Personal Property, or any of them, caused by the acts or omissions of Buyer or Buyer’s agents, contractors or employees in connection with its inspection hereunder and shall indemnify, defend and hold Seller harmless from and against any and all liability, loss, damage, cost or expense (including court costs and reasonable attorney’s fees), of whatever nature and by whomever asserted, arising out of, resulting from or in any way connected with the acts or omissions of Buyer, its contractors, employees or agents in connection with Buyer’s access to, and inspection of the Property, the Improvements and/or the Personal Property hereunder other than as may relate to the discovery of any hazardous substances or other environmental liability items not caused by the acts of Buyer or its agents, employees or contractors.

3.1.3 If Buyer determines that either the Property or Improvements are not satisfactory to Buyer, or if Buyer determines that any of the items inspected or results of inquiries made by Buyer pursuant to this Section 3.1 are unsatisfactory to Buyer, then Buyer shall so notify Seller in writing with such reasons on or before the last day of the Inspection Contingency Period. Upon receiving such notice, Seller shall have the right, but not the obligation, to elect to cure or otherwise correct those items to which Buyer has objected pursuant to this Section 3.1. If Seller elects to cure or otherwise correct such items, Seller shall provide Buyer with written notice of such election and a detailed plan for curing or otherwise correcting such items and specifying the time frame in which such plan shall be completed, which plan must be approved by Buyer in writing. If Buyer approves such plan, Seller shall have the right, but not the obligation, to proceed to cure or otherwise correct such item in accordance with the plan approved by Buyer; provided, however, that Seller may deliver written notice to Buyer at any time that Seller

cannot or is not willing to cure or otherwise correct those items to which Buyer has objected. If Seller does not complete such cure or correction as and when required by the Buyer-approved plan, then this Agreement shall terminate, the Earnest Money shall be returned to Buyer, less the amount of all escrow cancellation fees, if any, payable by Buyer pursuant to Section 5.8, and the Parties shall have no further rights, obligations or liability hereunder, except as may be otherwise expressly provided herein. If Buyer fails to deliver such notice on or before expiration of the Inspection Contingency Period, Buyer shall be conclusively deemed to have waived all conditions set forth in this Section 3.1 and its right to terminate this Agreement pursuant to this Section 3.1.3. If this Agreement is terminated for any reason following the Inspection Contingency Period, the Earnest Money shall be absolutely non-refundable except to the limited extent provided in Section 3.2.6 (dealing with title), Section 3.4 (dealing with the estoppel certificate), Section 3.5 (dealing with mutual conditions precedent), Section 3.6 (dealing with the financing contingency), Section 6.4 (dealing with environmental investigations), Section 8 of this Agreement (dealing with condemnation or casualty) and in Section 10.1 of this Agreement (dealing with certain defaults of Seller).

3.2 Title Commitment.

3.2.1 Within ten (10) days following the execution of this Agreement by Buyer and Seller, Seller shall cause Landmark Title Company (“Title Insurer”) to deliver a current commitment for title insurance on the Property and the Improvements (the “Title Commitment”) to Buyer and Seller. The Title Commitment shall show the status of title to the Property and the Improvements as of the date of such Title Commitment and shall be accompanied by legible copies of all documents referred to in such Title Commitment (the “Underlying Documents”).

3.2.2 Buyer shall review the Title Commitment and notify Seller in writing of Buyer’s approval or disapproval of any Schedule B exception(s) shown on such Title Commitment within ten (10) days following the date on which Buyer received the Title Commitment and legible copies of all of the Underlying Documents, but in any event before the expiration of the Inspection Contingency Period. Any exceptions to which Buyer has objected (other than the Permitted Exceptions [defined later]) shall be referred to herein as the “Disapproved Exceptions”. Buyer’s failure to notify Seller in writing of its disapproval of any exception within such time period shall be deemed approval of such exception.

3.2.3 If on or before Closing, Title Insurer amends the Title Commitment to add any Schedule B exception (other than the Permitted Exceptions listed in subsections (i) through (vii) and in subsections (ix) through (x) of Section 3.3 below) in addition to the Schedule B exceptions shown in such Title Commitment, as the same may have been amended by prior amendments, (an “Additional Exception”), Title Insurer shall give both Buyer and Seller written notice thereof, and Buyer shall notify Seller in writing within ten (10) days of Buyer’s receipt of such amended Title Commitment of Buyer’s approval or disapproval of any Additional Exception. Any Additional Exception which has not been approved by Buyer as provided in this Section 3.2 shall be deemed disapproved and shall be a Disapproved Exception. Buyer’s failure to notify Seller of its approval of any Additional Exception within such time period shall be deemed a disapproval of such Additional Exception. Notwithstanding anything set forth herein to the contrary, if the amended Title Commitment is delivered to Buyer less than ten (10)

days before the Date of Closing, then Buyer shall be presumed to have objected to any Additional Exception unless Buyer approves in writing of such Additional Exception prior to closing and if such Additional Exception is not so approved by Buyer in writing and cannot be removed from the Title Commitment or the Title Insurer will not agree to insure against loss or damage that may be occasioned by such Additional Exception prior to closing, this Agreement shall be terminated, the Earnest Money shall be returned to Buyer, less the amount of all escrow cancellation fees, if any, payable by Buyer pursuant to Section 5.8, and the Parties shall have no further rights, obligations or liability hereunder, except as may be otherwise expressly provided herein. Any Additional Exception which has been disapproved by Buyer pursuant to the preceding sentence shall be considered a Disapproved Exception.

3.2.4 Within five (5) days after (a) the date Seller receives notice of any Disapproved Exception; or (b) the addition of any Additional Exception, if such addition occurs less than ten (10) days prior to the Date of Closing, Seller shall notify Buyer in writing whether Seller intends to cause such Disapproved Exception or Additional Exception to be removed from the Title Commitment or cause the Title Insurer to commit to insure against loss or damage that may be occasioned by such Disapproved Exceptions. Seller shall have ten (10) days (but in no event later than seven [7] days prior to the Date of Closing) from the date of receipt of any notice of disapproval to cause such Disapproved Exceptions or any Additional Exceptions to be removed from the Title Commitment or cause the Title Insurer to commit to insure against loss or damage that may be occasioned by such Disapproved Exceptions. However, Seller shall have no obligation to cause such Disapproved Exceptions to be removed from the Title Commitment or cause the Title Insurer to commit to insure against loss or damage that may be occasioned by such Disapproved Exceptions; provided, however, if Seller does not cause such Disapproved Exception or Additional Exception to be removed from the Title Commitment or cause the Title Insurer to commit to insure against loss or damage that may be occasioned by such Disapproved Exceptions within seven (7) days prior to the Date of Closing, then Buyer may terminate this Agreement, and upon such termination the Earnest Money shall be returned to Buyer, less the amount of all escrow cancellation fees, if any, payable by Buyer pursuant to Section 5.8, and the Parties shall have no further rights, obligations or liability hereunder, except as may be otherwise expressly provided herein.

3.2.5 Unless Seller notifies Buyer within the time period provided in Section 3.2.4 above that Seller has caused such Disapproved Exceptions to be removed from the Title Commitment or caused the Title Insurer to commit to insure against loss or damage that may be occasioned by such Disapproved Exceptions, Seller will conclusively be deemed to have elected not to cause such Disapproved Exceptions to be removed from such Title Commitment or to cause the Title Insurer to commit to insure against loss or damage that may be occasioned by such Disapproved Exceptions. In such event, unless Buyer shall notify Seller by the earlier to occur of (a) 12:00 p.m. on the Date of Closing or (b) within five (5) days after the earlier to occur of (i) expiration of the 10-day cure period provided in Section 3.2.4 above; or (ii) the date on which Seller notifies Buyer in writing that Seller shall not cause such Disapproved Exceptions to be removed from the Title Commitment or cause the Title Insurer to commit to insure against loss or damage that may be occasioned by such Disapproved Exceptions, that Buyer has elected to waive the Disapproved Exceptions and complete the acquisition of the Property in accordance with this Agreement, then this Agreement shall terminate, the Earnest Money shall be

returned to Buyer, less the amount of all escrow cancellation fees, if any, payable by Buyer pursuant to Section 5.8, and the Parties shall have no further rights, obligations or liability hereunder, except as may be otherwise expressly provided herein.

3.2.6 If this Agreement is terminated as provided in this Section 3.2, then the Earnest Money with any interest earned thereon pursuant to Section 2.2.2, shall be returned to Buyer, less the amount of all title and escrow cancellation fees, if any, payable by Buyer pursuant to Section 5.8, and the Parties shall have no further rights, obligations or liability hereunder, except as may be otherwise expressly provided herein.

3.3 Title Policy. Title Insurer shall be unconditionally prepared to issue to Buyer, as of the Closing, a standard policy of title insurance for the Property and Improvements in the aggregate amount of the Purchase Price insuring the tenant leasehold interest in the Property and the fee interest in the Improvements to be vested in Buyer, subject to the Permitted Exceptions [defined later]. Buyer shall have the option to deposit with Escrow Holder (a) an ALTA survey or surveys sufficient to cause Title Insurer to issue an ALTA extended coverage policy of title insurance for the Property and Improvements and such endorsements as Buyer shall deem necessary (collectively “Buyer’s Endorsements”), and (b) all such other and further items required by Title Insurer in order to issue such ALTA extended coverage policy and Buyer’s Endorsements; provided, however, that all such items shall be at Buyer’s sole cost and expense and shall not delay the Closing; provided further, that Buyer’s inability to obtain such items shall not be a contingency to Closing, unless (i) Buyer has stated prior to the end of the Inspection Contingency Period that the surveys received from Seller are inadequate; (ii) that Buyer’s inability results from a Disapproved Exception which has not been removed from the Title Commitment or for which the Title Insurer has not insured against loss or damage resulting from such Disapproved Exception as described in Section 3.2; or (iii) that Buyer’s inability results from an objection by Buyer’s lender pursuant to which Buyer’s lender will not grant the required financing. At Closing, Seller shall assign its right, title, interest and obligations under the Ground Lease to Buyer and convey title to the Improvements to Buyer as described in Section 5, subject to the following matters, as applicable, being hereinafter collectively referred to as the “Permitted Exceptions”: (i) private, public and utility easements approved by Buyer in accordance with Section 3.2; (ii) roads and highways, if any; (iii) real estate taxes and special taxes or assessments not due and payable on or before Closing or any installments of any special taxes or assessments not due and payable on or before Closing; (iv) rights of way approved by Buyer in accordance with Section 3.2; (v) drainage ditches, feeders, laterals, drain tile, pipes or other conduit; (vi) zoning and building laws and ordinances; (vii) all matters approved or waived by Buyer pursuant to Section 3.2 of this Agreement; (viii) all matters of record shown in the title commitment and approved or waived by Buyer pursuant to Section 3.2 herein; (ix) the terms and conditions of the Ground Lease; and (x) all matters which would be disclosed by an accurate survey or inspection of the Property and/or the Improvements. Notwithstanding anything to the contrary above, the items referred to in subsections (i), (ii), (iv), (v) and (vii) above shall be Permitted Exceptions only if such are shown on the survey to be provided by Seller pursuant to Section 3.1.1 or indicated in the Title Commitment to be provided pursuant to Section 3.2.1 and approved or waived by Buyer pursuant to Section 3.2 or are described in the Declaration.

3.4 Estoppel Certificate. Seller shall have obtained and delivered to Buyer on or before the expiration of the Inspection Contingency Period, an estoppel certificate in substantially the form attached hereto as Exhibit E (the “Estoppel Certificate”) from the Master Landlord with respect to the Ground Lease (but in no event shall such estoppel certificate be required to contain information which is not otherwise required to be provided by the Master Landlord under

the Ground Lease). If Seller has not delivered the Estoppel Certificate on or before the expiration of the Inspection Contingency Period, then this Agreement shall be deemed terminated as of the expiration of the Inspection Contingency Period in accordance with this Section 3.4; provided, however, that Seller shall have the right, on or before the expiration of the Inspection Contingency Period, at Seller’s option and in Seller’s sole discretion, to represent and warrant to Buyer the matters set forth in the Estoppel Certificate, in which event this Agreement shall remain in full force and effect and subject to the terms and conditions of this Agreement the Parties shall proceed to close the transaction contemplated by this Agreement on the Date of Closing. Seller agrees to indemnify Buyer from and against any liability, claims, damages, expenses (including reasonable attorneys’ fees), judgments, proceedings and causes of action to the extent arising from a misrepresentation by Seller concerning the matters set forth in Seller’s representations and warranties pursuant to this Section 3.4. Notwithstanding the foregoing, Seller’s representation and warranty described above (including any indemnification obligation of Seller in connection therewith) shall only be in effect until such time as Seller delivers to Buyer the Estoppel Certificate setting forth the matters represented and warranted by Seller. At the Date of Closing, Seller shall represent and warrant the following to Buyer: (a) all rent and other payments accrued and owing under the Ground Lease are current, except for those amounts which have been agreed to between the Parties in connection with the prorations under this Agreement; (b) to Seller’s actual knowledge, there has been no material change in the facts set forth in the Estoppel Certificate during the period between the date such Estoppel Certificate was signed and the Date of Closing.

3.5 Mutual Conditions Precedent. Each of the conditions set forth in Sections 4.1, 4.2, 4.3, 4.4 and 4.5 shall be conditions precedent to the Buyer’s obligations under this Agreement, and the Buyer shall have the right to terminate this Agreement if any of those conditions are not satisfied within the time limits set forth in such sections. If Buyer terminates this Agreement pursuant to this Section 3.5, the Earnest Money, with any interest earned thereon pursuant to Section 2.2.2, shall be returned to Buyer, less the amount of all title and escrow cancellation fees, if any, payable by Buyer pursuant to Section 5.8, and the Parties shall have no further rights, obligations or liability hereunder, except as may be otherwise expressly provided herein.

3.6 Financing Contingency. During the period commencing on the date of this Agreement and expiring thirty (30) days after execution of the Building Lease (the “Financing Contingency Period”), Buyer shall use commercially reasonable efforts and good faith to obtain from a lender a commitment to loan Buyer funds on terms acceptable to Buyer, in Buyer’s sole discretion, and sufficient to consummate the transactions contemplated by this Agreement (“Financing”). In no event shall Buyer seek Financing for more than seventy five percent (75%) of the sum of the following: (i) the Purchase Price; plus (ii) any reasonable fees incurred by Buyer in obtaining the Financing. Notwithstanding the foregoing, Buyer agrees to accept (70%) and notify Seller promptly if Buyer receives notice from a lender that such lender is not willing to commit to loan Buyer the funds necessary to consummate this transaction on terms acceptable to Buyer. Buyer shall notify Seller when Buyer receives an acceptable financing commitment; however, if Buyer has not notified Seller on or before the expiration of the Financing Contingency Period that acceptable financing has been obtained, then this Agreement shall terminate on the expiration of the Financing Contingency Period unless Buyer waives in writing said Financing contingency. If this Agreement is terminated pursuant to this Section 3.6, then the Earnest Money shall be returned to Buyer, less the amount of all escrow cancellation fees, if any, payable by Buyer pursuant to Section 5.8, and the Parties shall have no further rights, obligations or liability hereunder, except as may be otherwise expressly provided herein.

3.7 Failure of a Condition. Except as set forth herein, the Parties do not guaranty, warrant or represent that any of the conditions set forth in this Section 3 shall be or can be satisfied and neither Party shall incur liability or expense in connection with the other Party’s ability or inability to satisfy any of such conditions, nor shall either Party be obligated to take any action. Each Party agrees that any expenditure, commitment or other action taken by it pursuant to this Agreement, or otherwise in contemplation of the Closing, is taken at such Party’s own risk, and that no such expenditure, commitment or action shall obligate such Party to incur any liability to the other Party or any third party, against which liability such Party expressly indemnifies the other Party.

4. SELLER’S CONDITIONS PRECEDENT. Seller’s obligations to sell the Improvements and Personal Property to Buyer and to assign the Seller’s right, title, interest and obligations under the Ground Lease to Buyer are conditioned upon satisfaction of the following conditions, which may be waived in writing at any time by Seller:

4.1 Consents. Subject to the terms of this Section 4.1, on or before the date which is thirty (30) days prior to the Date of Closing (the “Consent Date”) (provided Buyer and Seller have elected to proceed toward Closing), Seller shall have obtained all consents required to consummate this transaction from (a) the Master Landlord under the Ground Lease, and (b) Seller’s lenders holding liens on the Improvements and Personal Property and/or on the Seller’s leasehold interest under the Ground Lease, including, without limitation, required consents from Foothill Capital Corporation (“Foothill”), including, without limitation, (i) consents to any agreements between Seller and Buyer to which Foothill would become subject upon any foreclosure of Seller’s interest in adjacent properties within the University of Utah Research Park; (ii) subordination of Foothill’s liens to any agreements that will be recorded between Buyer and Seller in connection with this transaction; and (iii) all appropriate documentation and agreements necessary to release all Foothill liens on the Property, Improvements and Personal Property and on Seller’s leasehold interest under the Ground Lease. Seller agrees to use commercially reasonable efforts and act in good faith in obtaining such Consents. Notwithstanding the foregoing, Buyer and Seller agree that if Buyer, Seller and any necessary third parties have not agreed to final forms of all documents and/or agreements to which Seller’s lenders would be required to consent, or for which Seller will require Seller’s lenders’ consent, then the Consent Date shall be extended to the date which is fifteen (15) days following the date on which (x) final forms of all such documents and agreements have been agreed to by Buyer, Seller and any necessary third parties; and (y) Seller’s lenders have received copies of the final forms of all such documents and agreements. Buyer and Seller agree to negotiate in good faith to agree to the final form of any such documents and/or agreements in a timely manner. Buyer and Seller acknowledge and agree that any extension of the Consent Date pursuant to this Section 4.1 shall not be deemed a Seller delay under Section 5.1.

4.2 Utility Agreement Regarding Electricity. On or before the Date of Closing, Buyer and Seller, and to the extent the Parties deem necessary Utah Power, shall have agreed, in writing, to a pass-through by Seller to Buyer of costs for electricity supplied by Seller to the Improvements and, upon termination of the Building Lease, a separation, including separate metering, by Utah Power of any electrical facilities servicing the Property from the electrical facilities servicing other property owned and/or controlled by Seller in the vicinity of the Property. Buyer and Seller agree to negotiate in good faith to complete this agreement in a timely manner.

4.3 Nonsegregable Water Agreement. On or before the Date of Closing, Buyer and Seller shall have agreed in writing to a mutually acceptable cost sharing arrangement for nonsegregable items, if any, on the Property, including, without limitation, the landscape water usage and an agreement regarding separation of such nonsegregated items at such time as the Parties deem necessary. Buyer and Seller agree to negotiate in good faith to complete this agreement in a timely manner.

4.4 Amendment to Declaration. On or before the Date of Closing, the Seller shall have obtained an amendment to that certain Declaration of Easements, dated December 27, 2002, and recorded December 27, 2002 as Entry No. 8474712, in the official records of the Salt Lake County Recorder’s office, as amended (“Declaration”), in recordable form, approved and executed by Seller, KP Arapeen, LC, a Utah limited liability company (“KP”), Master Landlord and Buyer, in a form reasonably acceptable to Buyer and Seller, allowing Buyer the right to use common areas on the property currently being leased to Seller and KP by Master Landlord and located adjacent to the Property, including, without limitation, driveways, sidewalks and parking areas, for purposes of pedestrian and vehicular ingress and egress to and from the Property, and for servicing the Improvements and any other improvement related to the Property, including utility conduits and related improvements and allowing Seller the right to use common areas on the Property, including, without limitation, driveways, sidewalks and parking areas, for purposes of pedestrian and vehicular ingress and egress to and from the Seller’s improvements located adjacent to the Property, for servicing Seller’s other improvements, including utility conduits and related improvements.

4.5 Building Lease. On or before the expiration of the Inspection Contingency Period, Buyer and Seller shall have mutually agreed, and Seller’s lenders and any other necessary third parties shall have consented to, the Building Lease, which shall be in form and substance reasonably acceptable to Buyer and Seller.

4.6 Buyer Fulfilling Obligations. Buyer shall have fulfilled, on or before the Date of Closing, all of its obligations under this Agreement, including, without limitation, the payment of the Purchase Price.

If any of the foregoing conditions are not satisfied, as determined by Seller in its sole and absolute discretion, Seller shall have the right to terminate this Agreement. If Seller terminates this Agreement under Sections 4.1, 4.2, 4.3, 4.4 or 4.5, the Earnest Money shall be returned to Buyer and neither of the Parties shall have further obligations to the other, except as otherwise set forth in this Agreement. If Buyer has not terminated this Agreement pursuant to Section 3 and Seller terminates this Agreement pursuant to Section 4.6, Seller shall be entitled to receive the Earnest Money as liquidated damages pursuant to the terms of Section 10 of this Agreement.

5. CLOSING.

5.1 Date of Closing. Notwithstanding anything contained in this Agreement to the contrary, the Closing of the transaction contemplated by this Agreement (the “Closing”) shall take place at the office of the Escrow Holder on or before the earlier to occur of the following: (a) the date which is thirty (30) days following expiration of the Inspection Contingency Period; (b) upon such other date prior thereto as the Parties agree; or (c) June 25, 2004; provided, however, if the Closing is delayed solely as a result the actions of Seller (other than Seller’s election not to Close this transaction for reasons allowed under this Agreement), the Date of Closing shall be extended one (1) day for each day of such delay caused solely by Seller; provided, however, that

if the Date of Closing is delayed solely by Seller for more than thirty (30) days beyond the date set forth in subsection (a) above, then Buyer shall have the right to terminate this Agreement. The date on which this transaction is scheduled to close pursuant to this Section 5.1 is sometimes referred to in this Agreement as the “Date of Closing”.

5.2 Escrow Closing. The Parties have established, or immediately after execution of this Agreement shall establish, an escrow with Landmark Title Company, at 675 East 2100 South, Suite 200, Salt Lake, Utah, Attn: Jeff Jensen, or at such other office of Landmark Title Company designated by Seller (“Escrow Holder”), and Escrow Holder is hereby engaged to administer the escrow. By accepting this escrow, Escrow Holder agrees to the terms of this Agreement as they relate to the duties of Escrow Holder and that there shall be no escrow or title cancellation fees payable by either Buyer or Seller if this transaction fails to close for any reason other than the default of Buyer or Seller. This Agreement constitutes escrow instructions to the Escrow Holder and a copy shall be deposited with Escrow Holder for this purpose. Should Escrow Holder require the execution of its standard form printed escrow instructions, Buyer and Seller agree to execute same; provided, however, that any such instructions shall be construed as applying only to Escrow Holder’s engagement and shall be auxiliary to this Agreement. If there are conflicts between the terms of this Agreement and the terms of the escrow instructions, the terms of this Agreement shall control.

5.3 Seller’s Obligations. At Closing, Seller shall undertake the following:

5.3.1 Deed. Execute, acknowledge, and deliver to Escrow Holder a Special Warranty Deed with respect to the Improvements in substantially the form attached hereto as Exhibit F (the “Deed”), duly signed and acknowledged by Seller, conveying the Improvements to Buyer (subject to the rights of the Master Landlord under the Ground Lease) free and clear of all encumbrances other than those items set forth in the Deed, including, without limitation, the Permitted Exceptions, or such items set forth in the Permitted Exceptions as may be applicable to the Improvements.

5.3.2 Assignment of Lease. Execute, acknowledge, and deliver to Escrow Holder an Assignment of Lease with respect to the Ground Lease, in substantially the form attached hereto as Exhibit G (the “Assignment”), duly signed and acknowledged by Seller, assigning the Seller’s right, title, interest and obligations under the Ground Lease, free and clear of all encumbrances other than those items set forth in the Assignment, including, without limitation, the Permitted Exceptions, or such items set forth in the Permitted Exceptions as may be applicable to the Ground Lease.

5.3.3 Non-Foreign Affidavit. Execute and deliver to Escrow Holder a certificate of non-foreign status in accordance with Section 1445 of the U.S. Internal Revenue Code.

5.3.4 Possession. Upon compliance by Buyer with all the terms and conditions of this Agreement to be performed by Buyer, deliver possession of the Improvements and the Personal Property to Buyer, subject to the terms and conditions of the Ground Lease and the Building Lease. During the term of this Agreement, Seller agrees to maintain the exterior landscaping and the Improvements (including equipment located therein) and Personal Property such that they all shall be delivered to Seller in as good condition as existed at the expiration of the Inspection Contingency Period, taking

into account seasonal conditions as may be related to landscaping, and subject to the terms and conditions of Section 8.

5.3.5 Bill of Sale. Execute and deliver to Escrow Holder a Bill of Sale in substantially the form attached hereto as Exhibit H, conveying the Personal Property subject to the exceptions and limitations set forth in such Bill of Sale.

5.3.6 Title Insurance. Cause Title Insurer to be unconditionally prepared to issue to Buyer a standard policy of title insurance (the “Title Policy”), dated as of the Date of Closing, on the standard form in an insured amount equal to the Purchase Price, insuring that the tenant’s leasehold interest in the Ground Lease and the title to the Improvements are vested in Buyer subject to the Permitted Exceptions.

5.3.7 Update of Estoppel Certificate. Execute and deliver to Escrow Holder a representation and warranty from Seller stating that, to Seller’s knowledge: (a) all rent and other payments accrued and owing under the Ground Lease are current, except for those amounts which have been agreed to between the Parties in connection with the prorations under this Agreement; and (b) to Seller’s actual knowledge, there has been no material change in the facts set forth in the Estoppel Certificate during the date such Estoppel Certificate was signed and the Date of Closing. As used in this Agreement, the term “to Seller’s knowledge” shall mean to the current actual knowledge of Bruce Lyman, Seller’s Facilities Manager, without any duty of further investigation or inquiry.

5.3.8 Operations Manuals and Other Documents. Deliver to Buyer all operations manuals and other documentation, including any warranties, in Seller’s possession with respect to the Improvements, the Personal Property and any equipment located within the Improvements.

5.3.9 Building Lease. Execute and deliver to Escrow Holder the Building Lease in accordance with the terms and conditions of this Agreement.

5.3.10 Additional Documents. Execute, acknowledge as appropriate, and deliver to Escrow Holder such other documents as may be necessary or appropriate to consummate this transaction in accordance with the terms of this Agreement.

5.4 Buyer’s Obligations. At Closing, Buyer shall undertake the following:

5.4.1 Payment of Purchase Price. Pay to Escrow Holder, in cash or by wire transfer of ready funds, for disbursement pursuant to Section 2.3 above, the balance of the Purchase Price.

5.4.2 Assignment. Execute, acknowledge and deliver to Escrow Holder the Assignment in substantially the form attached hereto as Exhibit G, duly signed and acknowledged by Buyer.

5.4.3 Building Lease. Execute and deliver to Escrow Holder the Building Lease in accordance with the terms and conditions of this Agreement.

5.4.4 Additional Documents. Execute, acknowledge as appropriate, and deliver to Escrow Holder such other documents as may be necessary or appropriate to consummate this transaction in accordance with the terms of this Agreement.

5.5 Prorations.

5.5.1 Prorations. General and special real estate and other ad valorem taxes and assessments (“Taxes”), and charges for utilities and related common area charges with respect to the Property, the Improvements and/or the Personal Property, if any, and any accrued but unpaid amounts due and owing under the Ground Lease (collectively, the “Charges”) shall be prorated as of the Date of Closing based upon the most recently ascertainable amounts of each such item. Buyer and Seller agree that the proration of Taxes and the Charges shall be adjusted as between Buyer and Seller within a reasonable time after the exact amount of Taxes and the Charges for proration purposes is ascertained, and this obligation to adjust the proration of Taxes and the Charges shall survive the Closing.

5.5.2 Basis of Prorations. All prorations and/or adjustments called for in this Agreement will be made on the basis of the actual days within the period being prorated unless otherwise specifically agreed in writing by Seller and Buyer.

5.5.3 Payments and Disbursements to Be Handled through the Escrow. The various charges, credits and prorations contemplated by this Agreement will be handled by Escrow Holder through the escrow by appropriate charges and credits to Buyer and Seller and will be reflected in the Seller Closing Settlement Statement [defined later] or the Buyer Closing Settlement Statement [defined later], as appropriate. All amounts payable pursuant to this Agreement will be paid to Escrow Holder for disposition through the escrow. Escrow Holder is authorized to make all disbursements to the Parties and to third parties contemplated by this Agreement from funds deposited for those purposes, as necessary or appropriate to close this transaction and as set forth in the Seller Closing Settlement Statement and the Buyer Closing Settlement Statement.

5.5.4 Closing Statements. Prior to Closing, Escrow Holder will prepare separate closing settlement statements for Seller and Buyer, reflecting the various charges, prorations and credits applicable to such Party, as provided in this Agreement, and provide Seller with a copy of Seller’s closing settlement statement and Buyer with a copy of Buyer’s closing settlement statement. Prior to Closing, Seller shall have the right to review and approve its closing settlement statement to insure that such settlement statement conforms to the terms of this Agreement, and the settlement statement for Seller, as approved by Seller, is referred to in this Agreement as the “Seller Closing Settlement Statement”. Prior to Closing, Buyer shall have the right to review and approve its closing settlement statement to insure that such settlement statement conforms to the terms of this Agreement, and the settlement statement for Buyer, as approved by Buyer, is referred to in this Agreement as the “Buyer Closing Settlement Statement”.

5.6 Seller’s Costs. Seller shall pay:

5.6.1 One-half (½) of the escrow fees and Declaration recording fees.

5.6.2 All transfer taxes or fees, sales taxes, stamp taxes, and excise taxes, if any.

5.6.3 The fees and expenses of Seller’s attorneys, accountants, engineers, consultants and designated representatives.

5.6.4 The cost for the standard title policy premium for the title policy described in Section 3 (excluding the cost of any extended coverage elected by Buyer, Buyer’s Endorsements or additional coverages elected by Buyer).

5.7 Buyer’s Costs. Buyer shall pay:

5.7.1 All recording fees for Deed and Assignment of Leases and any documents required for Buyer’s Financing.

5.7.2 One-half (½) of the escrow fees and Declaration recording fees.

5.7.3 The cost of all title insurance premiums for extended coverage, Buyer’s Endorsements or additional coverages requested by Buyer, including, the ALTA extended coverage portion of any title policy premiums, if any, and any costs associated with any new survey or updated survey.

5.7.4 The fees and expenses of Buyer’s attorneys, accountants, agents and designated representatives.

5.8 Escrow Cancellation Charges. If the escrow fails to close because of Seller’s default, or if Seller is unable to deliver the Estoppel Certificate and as a result this Agreement is terminated as provided herein, Seller shall be liable for all customary escrow and title cancellation charges. If the escrow fails to close because of Buyer’s default, Buyer shall be liable for all customary escrow and title cancellation charges. If the escrow fails to close for any other reason, Seller and Buyer shall not be liable for any escrow and title cancellation charges pursuant to the provisions of Section 5.2.

5.9 IRS Reporting at Closing. Escrow Holder agrees to be the designated “reporting person” under § 6045(e) of the U.S. Internal Revenue Code with respect to the real estate transaction described in this Agreement and to prepare, file and deliver such information, returns and statements as the U.S. Treasury Department may require by regulations or forms in connection therewith, including Form 1099-B.

6. CONDITION OF PROPERTY AND IMPROVEMENTS.

6.1 Parties in Possession. Except as otherwise set forth herein, and subject to the terms and conditions of the Ground Lease, Seller hereby represents and warrants, as of the date of this Agreement and as of the Date of Closing, there are no third parties in possession of the Improvements or any part thereof who claim or may rightfully claim by, through or under Seller any continued right to occupy or use the Improvements subsequent to the Date of Closing, and no third party has been granted any lease, license or other right relating to the use or possession of the Property after the Date of Closing, except as may specifically be provided for in agreements of record, or in this Agreement.

6.2 Representations of Seller. Seller hereby makes the following representations to Buyer regarding the Property all of which representations shall be deemed remade as of Closing. Seller’s representations set forth in this Section 6.2 shall only be as of the Closing and Buyer

shall have the right to make a claim for Seller’s breach of these representations only during the 12-month period following the Date of Closing, unless otherwise provided for herein.

6.2.1 Building code violations, zoning and structure. Except as otherwise disclosed to Buyer by Seller on or before the expiration of the Inspection Contingency Period, as of the date of this Agreement, (i) to Seller’s knowledge, Seller is not aware of and has received no building code violation notices with respect to the Property; and (ii) to Seller’s knowledge, Seller is not aware of and has received no notices of any action or governmental proceeding in eminent domain, or for zoning change, which would affect the Property; and (iii) to Seller’s knowledge no structural problems exist with respect to the Improvements.

6.2.2 Service Contracts. Except as have been disclosed to Buyer prior to the expiration of the Inspection Contingency Period there are no maintenance, advertising, management, leasing, employment, or service contracts affecting the Property that will be in effect after the Closing unless expressly assumed in writing by Buyer. Otherwise, Seller shall terminate any such employment or other contracts not expressly assumed by Buyer at or prior to Closing.

6.2.3 Seller Authority. That (i) Seller has the capacity and authority to enter into and carry out this Agreement and the transactions contemplated hereby and Seller will provide Buyer at Closing with copies of board resolutions and the appropriate lender’s consents, if required, authorizing and consenting to the sale of the Property; and (ii) to Seller’s knowledge, no third party has any right, to purchase all or any part of the Property.

6.2.4 Encumbrances. Except as expressly set forth herein, between the date of this Agreement and the Closing, Seller shall not further encumber the Property or any of the Improvements or personal property and Seller shall not voluntarily create any exception to the title to the Property other than the Declaration as provided for herein; provided, however, that (a) Seller shall have the right to allow monetary liens or any other monetary encumbrances to be recorded against the Property prior to Closing or to allow liens to be recorded against the Property as a result of work or materials furnished on the Property for or on behalf of Seller prior to Closing, provided Seller removes such liens or encumbrances at Sellers’ sole cost on or before Closing; and (b) Seller shall have the right to record or cause to be recorded such documents and to take such action as Seller or Seller’s lenders may deem necessary or appropriate in connection with the restructuring or replacement of Seller’s current credit facility with Foothill Capital Corporation.

6.2.5 Pending Actions. Except as otherwise disclosed to Buyer by Seller on or before the expiration of the Inspection Contingency Period, to Seller’s knowledge, as of the date hereof, there is no suit action, arbitration or legal or other proceeding or governmental investigation pending which materially or adversely affects the Property.

6.2.6 Hazardous Substances. Except as otherwise disclosed to Buyer by Seller on or before the expiration of the Inspection Contingency Period, to Seller’s knowledge, no Hazardous Material is or has been released, located, stored or disposed of on, under or at the Property or Improvements, except in accordance with applicable laws, rules, and ordinances.

As used in this Section 6.2, the term “Seller’s knowledge”, and similar terms, shall mean to the actual knowledge of James T. Oyler, Seller’s CEO, and Bruce Lyman, Seller’s Facilities Manager, after reasonable inquiry of Seller’s existing senior executive officers. If Buyer determines within the 12-month period described above, that Seller intentionally misrepresented any matter set forth in this Section 6.2 of which Buyer was not aware (either through Buyer’s due diligence efforts or otherwise) prior to Closing of this transaction, then Buyer shall have the right to seek Buyer’s actual damages (excluding consequential and any other unforeseeable damages) resulting from such misrepresentation; provided, however, that in no event shall Buyer be entitled to rescind or otherwise seek a rescission of this Agreement after Closing.

6.3 No Representations. Except for the express representations and warranties contained in this Agreement, Buyer hereby affirms that Seller, its agents, employees and/or attorneys have not made, nor has Buyer relied upon, any representation, warranty, or promise with respect to the Property, the Improvements, the Personal Property, the Ground Lease or any other subject matter of this Agreement except as expressly set forth in this Agreement, including, without limitation, any warranties or representations, expressed or implied, as to (a) the accuracy of any survey, soils report or other plan or report with respect to the Property or the Improvements; or (b) the physical condition of the Personal Property. Without limiting the generality of the foregoing, except as set forth in this Agreement, Buyer is purchasing the Improvements and the Personal Property, and is assuming the Ground Lease from Seller, in an “AS IS” “WHERE IS” CONDITION, SUBJECT TO “ALL FAULTS,” INCLUDING BUT NOT LIMITED TO BOTH LATENT AND PATENT DEFECTS. EXCEPT AS MAY RELATE TO ANY MISREPRESENTATIONS BY SELLER CONTAINED IN THIS AGREEMENT, BUYER HEREBY WAIVES ALL WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE CONDITION AND USE OF THE PROPERTY, THE IMPROVEMENTS OR THE PERSONAL PROPERTY, INCLUDING, BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

Seller’s Initials:

Buyer’s Initials:

Buyer acknowledges that it will inspect the Property, Improvements and Personal Property and otherwise undertake to perform investigations of the Property, Improvements, Personal Property, Ground Lease in accordance with this Agreement, and subject to the terms of this Agreement, Buyer shall purchase the Improvements and the Personal Property and to assume the Ground Lease without adjustment to or offset against the Purchase Price.

6.4 Environmental Due Diligence.

6.4.1 Buyer shall have the right, but not the obligation, to perform such environmental due diligence with respect to the Property as the Master Landlord permits during the Inspection Contingency Period. If Buyer desires to perform environmental due diligence with respect to the Property or Improvements, or either of them, or conduct any tests or cause the surface of the ground to be penetrated in any manner for any purpose (such as soils tests, etc.), it shall first inform Seller and the Master Landlord of such desire in writing. Thereafter, Buyer, Seller and the Master Landlord, shall meet to discuss how and when such inspection shall be undertaken or if such inspection is acceptable to Seller and the Master Landlord. Such environmental inspections shall be performed by an individual or firm professionally licensed to perform such inspections in the State of Utah (“Inspector”). The Inspector shall be informed that it is employed or otherwise engaged by Seller, the Master Landlord and Buyer, notwithstanding the fact

that Buyer shall be solely obligated to pay the Inspector’s fees and costs; provided, however, that Seller and/or Master Landlord may not request any information increasing the cost of Buyer’s requested report. The results of Buyer’s inspections, if any, relating to Hazardous Materials, shall be initially orally reported to Buyer, Seller and the Master Landlord by the Inspector. Either Party may terminate this Agreement as a result of such oral reports indicating the actual or probable presence of Hazardous Materials on, under or in area of the Property within five (5) days of each such report, in which case the Earnest Money will be refunded to Buyer, less the amount of all escrow cancellation fees, if any, payable by Buyer pursuant to Section 5.8. If this Agreement is not so terminated, such reports shall be reduced to writing and marked “draft.” Buyer shall deliver to Seller and the Master Landlord as soon as they are made available to Buyer, copies of all reports and analyses prepared or used in connection with Buyer’s environmental inspection of the Property. All studies, data, reports, analyses, writings and communications, including any environmental studies or reports, shall be generated by the Inspector for the use of Buyer’s, Seller’s and the Master Landlord’s attorneys and, to the fullest extent permitted by law, shall be the work product of Buyer’s, Seller’s and the Master Landlord’s respective attorneys and shall constitute confidential, attorney-client communications and each Party shall use its best efforts to ensure that such confidence and privilege is maintained.

6.4.2 For purposes of this Agreement, “Hazardous Materials” means any substance or material which is defined as or included in the definition of “hazardous substances”, “hazardous wastes”, “hazardous materials”, “extremely hazardous waste”, “acutely hazardous wastes”, “restricted hazardous waste”, “toxic substances”, or “known to cause cancer or reproductive toxicity” (or words of similar import), petroleum products (including crude oil or any fraction thereof) or any other chemical, substance or material which is prohibited, limited or regulated under any federal, state or local law, ordinance, regulation, order, permit, license, decree, common law, or treaty now or hereafter in force regulating, relating to or imposing liability or standards concerning materials or substances known or suspected to be toxic or hazardous to health or safety, the environment or natural resources.

6.5 Environmental Release. Buyer expressly assumes the risk that any Hazardous Material is or hereafter may be located on the Property or Improvements. EXCEPT TO THE EXTENT THE SAME MAY BE AS A RESULT OF THE SOLE ACT OF SELLER, BUYER HEREBY FOREVER RELEASES AND DISCHARGES SELLER AND ANY SUBSIDIARY OR AFFILIATE OF SELLER, THEIR DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES AND AGENTS, FROM AND AGAINST ANY AND ALL JUDGMENTS, CLAIMS, EXPENSES (INCLUDING ATTORNEYS’ AND OTHER CONSULTANTS’ REASONABLE FEES AND COSTS), CAUSES OF ACTION, DAMAGES, LIABILITIES, INCLUDING WITHOUT LIMITATION, (A) ALL FORESEEABLE AND ALL UNFORESEEABLE CONSEQUENTIAL DAMAGES, DIRECTLY OR INDIRECTLY ARISING OUT OF THE USE, GENERATION, STORAGE, DISPOSAL, RELEASE OR THREATENED RELEASE OF HAZARDOUS MATERIALS ON THE PROPERTY AND/OR IMPROVEMENTS AND (B) THE COST OF ANY REASONABLY NECESSARY INVESTIGATION, REPAIR, CLEANUP, REMEDIATION OR DETOXIFICATION OF THE PROPERTY AND/OR IMPROVEMENTS AND OTHER AFFECTED PROPERTY AND THE PREPARATION OF ANY CORRECTIVE ACTION, CLOSURE OR OTHER REQUIRED PLANS OR REPORTS TO THE FULL EXTENT THAT SUCH ACTIONS ARE ALLEGED TO BE

ATTRIBUTABLE, DIRECTLY OR INDIRECTLY, TO THE PRESENCE OR USE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, OR DISPOSAL OF HAZARDOUS MATERIALS BY ANY PERSON AND RELATE TO OR INVOLVE THE PROPERTY AND/OR IMPROVEMENTS.

Seller’s Initials:

Buyer’s Initials:

7. COMMISSIONS. Seller represents that it has not entered into any contracts with any brokers or finders nor has obligated itself to pay any real estate commissions or finders’ fees on account of the execution of this Agreement or the close of the transaction contemplated hereby, except for NAI Utah Commercial Real Estate, which Seller shall pay a commission pursuant to a separate agreement, which separate agreement reflects that such commission is to be paid at a rate of four percent (4%) of Seven Million Three Hundred Seventy One Thousand Dollars ($7,371,000.00). Buyer represents that it has not entered into any contracts with any brokers or finders nor has Buyer obligated itself to pay any real estate commissions or finders’ fees on account of the execution of this Agreement or the close of the transaction contemplated hereby, except Woodbury Corporation, who shall look solely to NAI Utah Commercial Real Estate for payment of any commission due to Woodbury Corporation in connection with this transaction. Based on such representations, Buyer and Seller hereby agree to indemnify, defend and hold each other harmless from any claims, damages, expenses, liabilities, liens or judgments (including costs, expenses and attorneys’ fees in defending the same) which arise on account of any claim made by any person or entity, other than as identified above, for commissions or finders’ fees with respect to the transaction contemplated hereby due to the breach of any of the representations and warranties made by the indemnifying Party in this Section 7. This indemnification shall survive the Closing or the cancellation and termination of this Agreement.

8. CONDEMNATION, DAMAGE OR DESTRUCTION.

8.1 Condemnation. If during the term of this Agreement and prior to Closing, any entity having the power of condemnation initiates proceedings to acquire by condemnation any portion of or interest in the Property or the Improvements (a “Taking”), then either Party shall have the right to terminate this Agreement by written notice (“Taking Notice”) to the other Party given prior to the earlier of (a) thirty (30) days following the date notice of such proceeding is given to Seller by either the Master Landlord or the entity initiating such proceeding or (b) the Date of Closing; and Buyer shall be entitled to the return of the Earnest Money, less the amount of all escrow cancellation fees, if any, payable by Buyer pursuant to Section 5.8. If either (i) a Taking occurs and no Taking Notice is given prior to the applicable date, or (ii) the Taking is not of a nature as to create a right in either Party to terminate this Agreement, this Agreement shall not terminate nor shall the Purchase Price be reduced, but such proceeding and any condemnation relating thereto shall constitute a Permitted Exception and Seller shall assign to Buyer at Closing any and all rights Seller may have in such proceeding and any condemnation award relating thereto.

8.2 Casualty. If, during the term of this Agreement and prior to Closing, the Property or any of the Improvements located thereon is damaged by fire or other casualty (a “Casualty Event”) which Casualty Event cannot be completely repaired or replaced by Seller prior to Closing, this Agreement shall be deemed terminated as of the date of such Casualty Event unless Buyer shall elect in writing (the “Casualty Notice”) to accept the Property subject to the damage caused by such Casualty Event, such written notice to be given prior to the earlier to occur of (a) thirty (30) days after such Casualty Event or (b) the Date of Closing; and Buyer shall be entitled to a return of the Earnest Money, less the amount of all escrow cancellation fees, if

any, payable by Buyer pursuant to Section 5.8. If the Casualty Event is not of a nature as to create a right in either Party to terminate this Agreement, this Agreement shall not terminate and the Purchase Price shall not be reduced, but Seller shall, at the Closing and at Seller’s sole and exclusive option and subject to the rights, title, interests and obligations of the Master Landlord under the Ground Lease either (x) assign to Buyer all Seller’s right, title and interest in and to any insurance proceeds with respect to such Casualty Event, or (y) pay to Buyer any proceeds actually received by Seller with respect to such Casualty Event.

Except as described above, all other risk of loss due to damage or destruction of the Improvements or the Personal Property prior to Closing shall be borne by Seller.

9. NOTICES. All notices, requests, demands, and other communications hereunder shall be in writing and shall be given by (a) established express delivery service which maintains delivery records, (b) hand delivery, or (c) certified or registered mail, postage prepaid, return receipt requested, to the Parties at the following addresses, or at such other address as the Parties may designate by written notice in the above manner:

To Seller:		With a copy to:

EVANS & SUTHERLAND 600 Komas Salt Lake City, Utah 84108 Attention: Bruce Lyman Fax No.: (801) 588-4517		SNELL & WILMER, L.L.P. 15 West South Temple Suite 1200 Salt Lake City, Utah 84101 Attention: W. Brian Hulse, Esq. Fax No.: (801) 257-1800
To Buyer:

WOODBURY CORPORATION 2733 East Parleys Way, Suite 300 Salt Lake City, Utah 84109-1662 Attn: W. Richards Woodbury Fax No.: (801) 485-0209

Communications may also be given by fax, provided the communication is concurrently given by one of the above methods. Notices are effective upon receipt, or upon attempted delivery if delivery is refused or if delivery is impossible because of the recipient’s failure to provide a reasonable means for accomplishing delivery.

10. DEFAULT.

10.1 Seller’s Default. IF SELLER SHALL DEFAULT IN THE PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT FOR ANY REASON, THEN BUYER, AS ITS SOLE AND EXCLUSIVE REMEDY AND RIGHT TO DAMAGES AS A RESULT OF SELLER’S DEFAULT, SHALL BE ENTITLED TO TERMINATE THIS AGREEMENT, RECEIVE THE IMMEDIATE REFUND OF THE EARNEST MONEY DEPOSITED BY BUYER, AND DAMAGES IN AN AMOUNT EQUAL TO THE LESSER OF: (A) BUYER’S ACTUAL OUT-OF-POCKET COST AND EXPENSE IN PERFORMING BUYER’S DUE DILIGENCE WITH RESPECT TO THE PROPERTY AND IMPROVEMENTS AND IN OBTAINING FINANCING; OR (B) $50,000.00, TO COMPENSATE BUYER FOR ITS COSTS OF PERFORMING DUE

DILIGENCE AND SELLER SHALL BE RESPONSIBLE FOR ALL COSTS OF ESCROW, IF ANY. NOTWITHSTANDING THE FOREGOING, IF SELLER INTENTIONALLY DEFAULTS UNDER THIS AGREEMENT FOR THE SOLE PURPOSE OF SELLING THE PROPERTY TO A THIRD PARTY FOR A HIGHER PURCHASE PRICE, THEN BUYER SHALL BE ENTITLED TO SEEK SPECIFIC PERFORMANCE OF THIS AGREEMENT. EXCEPT AS SET FORTH IN THE PRECEDING SENTENCE, BUYER WAIVES ALL RIGHTS AND REMEDIES BUYER OTHERWISE MAY HAVE BY LAW TO SPECIFICALLY ENFORCE THIS AGREEMENT.

Seller’s Initials:

Buyer’s Initials:

10.2 Buyer’s Default. IF BUYER SHALL DEFAULT IN THE PERFORMANCE OF ANY OF ITS OBLIGATIONS (WHICH DEFAULT SHALL INCLUDE BUYER’S FAILURE TO TIMELY CLOSE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AFTER SELLER HAS TENDERED PERFORMANCE OF ITS OBLIGATIONS HEREUNDER) UNDER THIS AGREEMENT, THEN SELLER SHALL BE ENTITLED, AS ITS SOLE AND EXCLUSIVE REMEDY TO TERMINATE THIS AGREEMENT AND RETAIN THE EARNEST MONEY AS LIQUIDATED DAMAGES.

Seller’s Initials:

Buyer’s Initials:

11. ATTORNEYS’ FEES. If a Party commences a legal proceeding to enforce any of the terms of this Agreement, the prevailing Party in such action shall have the right to recover reasonable attorneys’ fees and costs from the other Party to be fixed by the court in the same action. The term “legal proceedings” as used above shall be deemed to include appeals from a lower court judgment and it shall include proceedings in the Federal Bankruptcy Court, whether or not they are adversary proceedings or contested matters. The term “prevailing Party” as used above in reference to proceedings in the Federal Bankruptcy Court shall be deemed to mean the prevailing Party in any adversary proceeding or contested matter, or any other actions taken by the non-bankrupt party which are reasonably necessary to protect its rights in the Property, the Improvements, the Ground Leases and the terms of this Agreement. The phrase “prevailing Party” in the context of proceedings in any court other than the Federal Bankruptcy court shall mean the Party that prevails in obtaining the remedy or relief sought; so that, for example, the prevailing Party may be a Party which is ordered to pay $100.00 where the obligation to pay $80.00 was undisputed and the claiming Party alleged that it was entitled to $1,000.00.

12. SURVIVAL. The indemnity agreements contained in Sections 3, 7, and 13 of this Agreement shall survive any expiration or termination of this Agreement and shall not merge into any deed or other instruments delivered and accepted upon the Closing of the transaction herein contemplated.

13. TAX-FREE EXCHANGE. The interest in the Property and/or Improvements may be a part of a tax-free exchange to Seller or Buyer (or both). If the interest in the Property and/or the Improvements, or either of them, are to be a part of a tax-free exchange to a Party, the Party shall notify the other Party of such fact at least ten (10) days prior to Closing. If any such exchange should fail to occur for whatever reason, the sale of the interest in the Property and/or Improvements shall nonetheless be consummated. In connection therewith, the other Party agrees to execute such documents which the Party initiating the tax-free exchange deems reasonably necessary or appropriate, and to otherwise cooperate with the initiating Party to effectuate such exchange; provided, the other Party shall not be obligated to take title to any replacement property in connection with such exchange and such exchange

does not result in any cost to the other Party or any delay or postponement of the Closing, and provided further that the other Party shall assume no liability in connection therewith against which it is not indemnified by the initiating Party, and the Initiating Party hereby indemnifies and holds the other Party free and harmless from any liability (including, but not limited to the tax ramifications to the initiating Party of such exchange) arising by reason of performing acts requested by the initiating Party to effectuate such exchange.

14. MISCELLANEOUS.

14.1 Binding Terms. The terms, covenants and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors, transferees and assigns of the Parties.

14.2 No Assignment. Except as set forth below, neither Buyer nor Seller shall assign this Agreement or any rights hereunder to anyone except with the prior written consent of the other Party not to be unreasonably withheld or delayed; provided, however, that either Party may assign this Agreement or its rights hereunder to any third party for purposes of effectuating a tax-free exchange as set forth in Section 13 above. Notwithstanding the foregoing, Seller may assign this Agreement or its rights hereunder (a) to any entity which is wholly-owned or ultimately owned (i.e. through various subsidiaries) by Seller (a “Seller Affiliate”); or (b) in connection with the sale or disposal of the assets or stock of Seller or a Seller Affiliate. Notwithstanding the foregoing, and in addition to its rights with respect to a tax-free exchange, Buyer shall have a one time right to assign all or any portion of Buyer’s interest in this Agreement, provided, however, that Buyer shall give Seller at least three (3) business days prior written notice of such assignment, such assignment shall not delay the Closing and Buyer shall remain liable for all obligations to be performed by Buyer under this Agreement.

14.3 Entire Agreement. This Agreement constitutes the entire Agreement between the Parties hereto with respect to the subject matter hereof, incorporates all prior agreements, and may only be modified by a subsequent writing duly executed by the Parties.

14.4 Waivers. No waiver of any of the provisions of this Agreement shall constitute a waiver of any other provision, whether or not similar, nor shall any waiver be a continuing waiver. Except as expressly provided in this Agreement, no waiver shall be binding unless executed in writing by the Party making the waiver. Either Party may waive any provision of this Agreement intended for its benefit; provided, however, such waiver shall in no way excuse the other Party from the performance of any of its other obligations under this Agreement.

14.5 Time of the Essence. Time is expressly made of the essence of each and every provision of this Agreement.

14.6 Interpretation. This Agreement shall be interpreted and construed only by the contents hereof, and there shall be no presumption or standard of construction in favor of or against either Party.

14.7 Governing Law; Jurisdiction. This Agreement shall be construed and enforced in accordance with, and governed by, the law of the state in which the Property and the Improvements are located. The Parties agree and hereby consent that any legal action with respect to this Agreement may be commenced and maintained in either the local courts in the County in which the Property and the Improvements are located or the United States District Court for the

District in which the Property and the Improvements are located and each Party hereby consent to the personal and subject matter jurisdictions of those courts. Each Party also agrees that venue is proper in either of those courts and waives any objection to venue.

14.8 Captions. The captions in this Agreement are for convenience only and do not constitute a part of the provisions hereof.

14.9 Applicability. If any term or provision of this Agreement or the application of it to any person, entity or circumstance shall to any extent be invalid and unenforceable, the remainder of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby, and each term and provision of this Agreement shall be valid and shall be enforced to the extent permitted by law.

14.10 Authority. The individuals executing this Agreement represent and warrant that they have the power and authority to do so, and to bind the entities for which they are executing this Agreement. In connection with the foregoing, Buyer represents and warrants to Seller that all necessary actions have been taken to allow Buyer to execute the documents and otherwise consummate the transactions contemplated by this Agreement.

14.11 Numbering of Days. If the last day of any time period stated herein shall fall on a Saturday, Sunday or federal legal holiday, then such time period shall be extended to the next succeeding day which is not a Saturday, Sunday or a federal legal holiday.

14.12 Allocation of Professional Fees. Except as provided in Section 11 of this Agreement, regardless of whether the transaction contemplated by this Agreement is consummated, each respective Party shall be responsible for its own legal, accounting, and other professional fees incurred in relation to this Agreement or the transaction contemplated by this Agreement.

14.13 Publicity/Disclosure of Information. All publicity or disclosure relating to this Agreement and the Property and/or the Improvements hereunder or the assignment of the Ground Lease shall be released only after prior consultation with and the consent of the other Party. The Parties agree to hold strictly confidential, and not to disclose publicly (except as required by law, including any applicable securities law or other legal disclosure obligations of such Party or any consolidated group of which it is a part) any financial information in connection with the sale of the Improvements or the assignment of the Ground Lease hereunder, or any other terms and conditions of this Agreement. The provisions of this Section 14.13 shall not survive the Closing, but shall survive any termination of this Agreement prior to the Closing of the transaction contemplated hereby.

THE SUBMISSION OF THIS AGREEMENT FOR EXAMINATION OR ITS NEGOTIATION OR THE NEGOTIATION OF THE TRANSACTION DESCRIBED HEREIN DOES NOT CONSTITUTE AN OFFER TO SELL, AND THE EXECUTION OF THIS AGREEMENT BY BUYER DOES NOT CONSTITUTE A BINDING CONTRACT UNTIL SUCH TIME AS THIS AGREEMENT HAS BEEN EXECUTED BY AUTHORIZED OFFICERS OF SELLER, AND DELIVERED TO BUYER.

This Agreement has been executed as of the date first above written.

	BUYER:

	WOODBURY CORPORATION,
	a Utah corporation

	By:	(Signed) W. Richards Woodbury

	Its:	President


	SELLER:

	EVANS & SUTHERLAND COMPUTER CORPORATION,
	a Utah corporation

	By:	(Signed) Thomas Atchison

	Its:	Chief Financial Officer

EXHIBIT A
SITE PLAN SHOWING PROPERTY

A-1

EXHIBIT B
LEGAL DESCRIPTION OF PROPERTY

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°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°00’00” East 551.954 feet; thence South 41°00’00” West 31.741 feet; thence South 60°00’00” West 601.002 feet; thence North 49°00’00” West 326.287 feet; thence North 41°00’00” East 488.553 feet; thence North 49°00’00” West 30.00 feet; thence North 41°00’00” East 111.443 feet to the point of beginning.

16:03:300:001:2014 / 6014

B-1

EXHIBIT C
IMPROVEMENTS

The building and improvements constructed on the Property by Seller pursuant to the Ground Lease. Buyer and Seller acknowledge and agree that the Improvements do not include any real property, improvements, fixtures equipment or other personal property owned by the Master Landlord or any third parties pursuant to the terms of the Ground Lease.

C-1

EXHIBIT D
PERSONAL PROPERTY LIST

BUILDING 650 FURNITURE INVENTORY AS OF SEPTEMBER 24, 2002

HERMAN MILLER AO1 SYSTEMS FURNITURE

MODEL #	ITEM	DESCRIPTION	QUANTITY	COMMENTS:
	TABLES:
ET102		36” Diameter	1
ET103		42” Diameter	8
AO453		23” X 48”	4
AO712.3048L		30” X 48”	228
AO712.3060L		30” X 60”	27
AO712.3072L		30” X 72”	6
AO660XX		36” X 72”	33

	CHAIRS:
Kevi Management		Roller	263
Kevi Sled Base		Sled	297
Kevi Secretarial		Secretary	27

	PANELS:
AO120.6212LN49044904	1 Foot Panel	12” X 62”	14
AO120.6224LN49044904	2 Foot Panel	24” X 62”	1136
AO120.6248LN49044904	4 Foot Panel	48” X 62”	1147
A1125.3924N	2 Foot Panel-Low	24” X 42”	253
A1125.3948N	4 Foot Panel-Low	48” X 42”	4	Old HM part #
	4 Foot Panel-Curved Low	Low 48” Curved	6

Note: Color 4904, Vertical Surface Blend color: orange grey

	LATERAL FILES:
AO511.1624KDBUOK	2 Foot Lateral File	24”	54
AO511.1648KDBUOK	4 Foot Lateral File	48”	512

AO483	DRAWER UNITS:		309	Old HM part #

AO420DT	PENCIL DRAWERS:		9	Old HM part #

	TACK BOARDS:
AO610.16486441	Tack Board	48” X 15”	328

HERMAN MILLER AO1 SYSTEMS FURNITURE

MODEL #	ITEM	DESCRIPTION	QUANTITY	COMMENTS:
	SHELVES:
AO523.1324BU	2 Foot Open Shelf	24” X 12 1/2”	339
AO523.1336BU	3 Foot Open Shelf	36” X 12 1/2”	1
AO523.1348BU	4 Foot Open Shelf	48” X 12 1/2”	731

	BINS:
AO560.1348KDBU6403	Flipper Bin	48”	3

	WORK SURFACES:
AO417.2472LOLBU	6 Foot Work Surface	72”	282	Oak Laminate Dark Tone Trim
AO417.2448LOLBU	4 Foot Work Surface	48”	70	Oak Laminate Dark Tone Trim
AO417.2424LOLBU	2 Foot Work Surface	24”	58	Oak Laminate Dark Tone Trim
		48” (Corner)	152	Oak Laminate Dark Tone Trim

D-1

HERMAN MILLER AO1 SYSTEMS FURNITURE

MODEL #	ITEM	DESCRIPTION	QUANTITY	COMMENTS:
	SHELVES:
AO450.1448L	Transaction Top	48”	3	Old HM part #
AO450.1424L	Transaction Top	24”	7	Old HM part #
AO867FF	Transaction Top	48” (Corner)	5	Old HM part #

	TASK LIGHTS:
G6123.48MENBU	4 Foot Under Shelf Light	48”	339
G6123.24MENBU	2 Foot Under Shelf Light	24”	10

	PANEL CONNECTORS:
AO220.62HLN	Connector	2-Way	373
AO230.62HLN	Connector	3-Way	196
AO240.62HLN	Connector	4-Way	59
AO220.42HLN	Connector	2-Way, Low	4

WEST LOBBY

MODEL #	ITEM	DESCRIPTION	QUANTITY	COMMENTS:
20/656-WW	LOW BACK CHAIR:		2	Armstrong Chair
Formica #437.58	PHONE TABLE:	24 X 24 X 20	1

WEST LOBBY DEMONSTRATION ROOM
	PANELS:
See attached order form for component part #s	Panel	36”W X 70”H	2	Ethospace
See attached order form for component part #s	Panel	42”W X 70”H	2	Ethospace
See attached order form for component part #s	Panel	30”W X 38”H	3	Ethospace

	WORK SURFACES:
E22310.2478L		24” x 78”	1	Ethospace
S8542902		24” x 84”	1	Ethospace
E22310.3078L		30” x 78”	2	Ethospace
	PEDESTALS:
F-16-1518-B	Freestanding Ped	15”W X 18”D X 26 1/4”H	1	Ethospace

WEST LOBBY CONFERENCE ROOM

ET156L	TABLE:	54” x 96” Oval	1	Ethospace
EN122PBS	ROLLER CHAIR:	Fixed Arms	3	Ethospace
EN500PBS	SIDE CHAIR:	Sled Base, Fixed Arms	5	Ethospace
F-16-1518-B	PHONE TABLE:	15”W X 18”D X 26 1/4”H	1	Ethospace

CONFERENCE ROOMS
	TABLES:	36” x 72”	16	Virco Mfg. Corp.
	CHAIRS:
		White (Without arms)	232	Superior Chaircraft Corp.
		White (With arms)	58	Superior Chaircraft Corp.

CAFETERIA
	TABLES:	36” X 36”	14	Virco Mfg. Corp.
	CHAIRS:	Stacking	21	Virco Mfg. Corp.
	REFRIGERATOR:	17 Cu. Ft.	1	Kenmore Coldspot
	ICE MAKER:		1	Ice-O-Matic

D-2

MODEL #	ITEM	DESCRIPTION	QUANTITY	COMMENTS:
GLASS OFFICES FURNITURE:
”	Misc	25” X 84” Work Surface	2	Walnut
”	Misc	36” X 36” Corner	1	”
”	Misc	36” X 36” Table	1	”

MISCELLANEOUS ITEMS
Upper East Lobby		11” X 30” Ottoman	3
Women’s Restrooms		6’ Couch	2
First Aid Room		Couch	1	Nateland Prolducts Co., Inc.
Lower East Lobby		Databank Vault	1	Schwab Safe Co., Inc.
2nd Floor Office & First Aid Room		2 Drawer Filing Cabinet	3	Anderson Hickey
2nd Floor Office		4 Drawer Filing Cabinet	1	Anderson Hickey

D-3

EXHIBIT E
ESTOPPEL CERTIFICATE

TO: WOODBURY CORPORATION, a Utah corporation

RE: The University of Utah, a body politic and corporate of the State of Utah (“Landlord”), as landlord, and the predecessor-in-interest of Evans & Sutherland Computer Corporation, a Utah corporation (“Tenant”), Black Hawk Investment Company, a general partnership, entered into a Lease Agreement, dated September 5, 1980, as amended by each of (i) that First Amendment to Lease Agreement, dated June 7, 1982, (ii) that Second Amendment to Lease Agreement, dated September 28, 1982, (iii) that Third Addendum to Lease Agreement, dated April 9, 1987, and (iv) that Fourth Addendum to Lease Agreement, dated December 31, 1990 (collectively, the “Lease”).

The undersigned does hereby certify to you as follows:

1. Landlord is the current landlord under the Lease for the premises described therein (“Premises”). The Lease constitutes the entire agreement between Landlord and Tenant. The Lease is in full force and effect.

2. To the Landlord’s actual knowledge, Tenant is not in default under the Lease.

3. The presently existing term of the Lease expires on December 31, 2030, and Tenant has one (1) option, Ten (10) years in length, to extend such term.

The rent payable by Tenant under the Lease is $ 58,513.11 per year during the current Five (5) year period and increases as follows: On date being five (5) years after the first rental is due under the Lease and on date every five (5) years thereafter, a new land rental to be paid by Tenant to Landlord shall be determined for the five (5) year period immediately following or the remaining term of this Lease, whichever is the shorter time. The new land rental shall be such an amount as shall bear the same ratio to the then current annual Consumer Price Index for All Urban Consumers as shown in the “Survey of Current Business” of the U. S. Department of Commerce as the base land rental of $36,873 bore to the Consumer Price Index for All Urban Consumers at the time first rental was due. The land rental so computed shall be payable one-twelfth (1/12) each month for the following five (5) years or the remaining term of this Lease, whichever is the shorter time. Under no circumstances shall the rent so determined be lower than the base land rent; provided, however, the base land rental above was reduced to $30,423.00 effective May 1, 1987; and further provided, that effective January 1, 2021 and throughout the extended term of the Lease, Tenant’s land rental payment shall be based on and equal to the same per acre rate as is applied to Tenant’s Land Lease entered into with Landlord dated December 31, 1990. The next scheduled rental increase is September 1, 2007.

4. Tenant has not paid in advance of its due date under the Lease any rent or other charges due under the Lease.

5. Landlord holds no security deposit.

6. This Master Landlord Estoppel Certificate is not intended to alter or add to the terms of the Lease and imposes no obligations on Landlord other than as specifically provided in the Lease. Additionally, there may be other agreements which affect the Premises such as recorded documents. Reference should

E-1

be made to the Lease and any other agreements for additional information on the specific provisions of the Lease or any other agreements.

7. The undersigned is aware that you and prospective purchasers, lenders and others will rely upon the statements made in this Master Landlord Estoppel Certificate, and the undersigned has therefore adjusted the language of this Master Landlord Estoppel Certificate as necessary to make it an accurate statement of the current facts concerning the Lease. If no such adjustments have been made, said parties may rely upon the statements in this form as printed.

8. Additional items (it will be presumed no additional items exist unless set forth herein):

DATE:	, 2004
(Fill in date of execution)

		LANDLORD

		UNIVERSITY OF UTAH,
		a body corporate and politic of the State of Utah


		By:
		Name printed:
		Title:

E-2

EXHIBIT F

WHEN RECORDED, RETURN TO:

WOODBURY CORPORATION

2733 East Parleys Way, Suite 300

Salt Lake City, Utah 84109-1662

Space Above Line for Recorder’s Use

SPECIAL WARRANTY DEED

THIS SPECIAL WARRANTY DEED (“Deed”) is made and entered into this day of , 2004, by and between EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation (“Grantor”), and WOODBURY CORPORATION, a Utah corporation (“Grantee”).

RECITALS

A. The University of Utah, a body politic and corporate of the State of Utah (“Master Landlord”), as landlord, and Grantor’s predecessor-in-interest, Black Hawk Investment Company, a general partnership, entered into a Lease Agreement, dated September 5, 1980, as amended by each of (i) that First Amendment to Lease Agreement, dated June 7, 1982, (ii) that Second Amendment to Lease Agreement, dated September 28, 1982, (iii) that Third Addendum to Lease Agreement, dated April 9, 1987, and (iv) that Fourth Addendum to Lease Agreement, dated December 31, 1990 (collectively, the “Ground Lease”), relating to the real property which is depicted on the site plan attached hereto as Exhibit A and more particularly described in Exhibit B attached hereto and incorporated herein by this reference (the “Property”).

B. Grantor now desires to convey certain improvements to Grantee and Grantee desires to accept such conveyance of improvements, upon the terms and conditions of this Deed.

C O N V E Y A N C E:

NOW, THEREFORE, in consideration of Ten Dollars and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor hereby grants and conveys to Grantee all of Grantors’ right, title and interest in the improvements described in Exhibit C attached hereto (the “Improvements”), together with all rights and appurtenances thereto in anywise belonging, subject to the Ground Lease (including any rights the Master Landlord may have upon termination of the Ground Lease) and subject to the Permitted Exceptions listed on Exhibit D attached hereto, and Grantor hereby binds itself, its successors and assigns, to warrant and defend the grant and conveyance of the Improvements unto Grantee, its successors and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof by, through, or under Grantor, but not otherwise.

IN WITNESS WHEREOF, Grantor has executed this Deed effective as of the date first written above.

F-1

	GRANTOR:

	EVANS & SUTHERLAND COMPUTER
	CORPORATION,
	a Utah corporation

	By:

	Its:

F-2

STATE OF	)
	) :ss.
COUNTY OF	)

On , 2004, before me , a Notary Public, personally appeared , the of Evans & Sutherland Computer Corporation, a Utah corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument he/she executed the instrument.

WITNESS my hand and official seal


	NOTARY PUBLIC

F-3

Exhibit A to EXHIBIT F
SITE PLAN SHOWING PROPERTY

F-4

Exhibit B to EXHIBIT F
LEGAL DESCRIPTION OF PROPERTY

16:03:300:001:2014 / 6014

F-5

Exhibit C to EXHIBIT F
DESCRIPTION OF IMPROVEMENTS

F-6

Exhibit D to EXHIBIT F
PERMITTED EXCEPTIONS

[Insert Permitted Exceptions from Title Commitment and such other items agreed to by Buyer pursuant to Agreement].

F-7

EXHIBIT G

WHEN RECORDED, RETURN TO:

WOODBURY CORPORATION

2733 East Parleys Way, Suite 300

Salt Lake City, Utah 84109-1662

Space Above Line for Recorder’s Use

ASSIGNMENT OF LEASE

THIS ASSIGNMENT OF LEASE (“Assignment”) is made and entered into this day of , 2004, by and between EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation (“E&S”), and WOODBURY CORPORATION, a Utah corporation (“Buyer”).

RECITALS

A. The University of Utah, a body politic and corporate of the State of Utah (“Master Landlord”), as landlord, and E&S’ predecessor-in-interest, Black Hawk Investment Company, a general partnership, entered into a Lease Agreement, dated September 5, 1980, as amended by each of (i) that First Amendment to Lease Agreement, dated June 7, 1982, (ii) that Second Amendment to Lease Agreement, dated September 28, 1982, (iii) that Third Addendum to Lease Agreement, dated April 9, 1987, and (iv) that Fourth Addendum to Lease Agreement, dated December 31, 1990 (collectively, the “Ground Lease”), relating to the real property which is depicted on the site plan attached hereto as Exhibit A and more particularly described in Exhibit B attached hereto and incorporated herein by this reference (the “Property”).

B. E&S now desires to assign all of E&S’ right, title, interest and obligations in and under the Ground Lease to Buyer and Buyer desires to accept such assignment and assume such right, title, interest and obligations in and under the Ground Lease, upon the terms and conditions of this Assignment.

A G R E E M E N T:

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

1. Assignment and Assumption. Subject to the Permitted Exceptions set forth on Exhibit D attached hereto, E&S hereby assigns and transfers to Buyer all of its right, title and interest in and to the Ground Lease and Buyer hereby accepts the foregoing assignment and assumes the obligations of E&S pursuant to the Ground Lease arising from and after the date hereof.

2. Buyer’s Indemnity. Buyer covenants and agrees to indemnify, defend, and hold harmless E&S, and any subsidiary or affiliate of E&S, their directors, officers, employees, stockholders, representatives and agents and their respective successors and assigns, from and against any actions, suits, proceedings, judgments, claims, causes of action, damages and liabilities, and all costs and expenses (including without limitation reasonable attorneys’ and other consultants’ fees and costs) incurred in

G-1

connection therewith, based upon or arising out of any breach or alleged breach of the Ground Lease by Buyer, its successors or assigns, or arising in connection with the Ground Lease occurring or alleged to have occurred from and after the date of this Assignment. Buyer covenants and agrees, for itself, its successors and assigns, to deliver to E&S, immediately upon receipt of same by Buyer, or any successor or assign, as the case may be, copies of any notices of default or breach under the Ground Lease. E&S shall have the right, but not the obligation, to cure any such defaults and Buyer shall reimburse E&S for any costs (including reasonable attorneys’ fees and other consultants’ costs and expenses) incurred in curing such default or breach.

3. E&S’ Representations and Indemnity. E&S hereby represents and warrants that, except for the Permitted Exceptions, E&S has performed all of the obligations of E&S accruing prior to the date of this Assignment, and as tenant under the Ground Lease. E&S covenants and agrees to indemnify, defend, and hold harmless Buyer, and any subsidiary or affiliate of Buyer, their directors, officers, employees, stockholders, representatives and agents and their respective successors and assigns, from and against any actions, suits, proceedings, judgments, claims, causes of action, damages and liabilities, and all costs and expenses (including without limitation reasonable attorneys’ and other consultants’ fees and costs) incurred in connection therewith, based upon or arising out of any breach or alleged breach of the Ground Lease by E&S, its successors or assigns, or arising in connection with the Ground Lease occurring or alleged to have occurred up to the date of this Assignment.

4. Binding Effect. This Assignment shall be binding on and inure to the benefit of the parties hereto, their heirs, executors, administrators, successors in interest and assigns.

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

	E&S:

	EVANS & SUTHERLAND COMPUTER
	CORPORATION,
	a Utah corporation

	By:

	Its:


	BUYER:

	WOODBURY CORPORATION,
	a Utah corporation

	By:

	Its:

G-2

STATE OF	)
	) :ss.
COUNTY OF	)

WITNESS my hand and official seal


	NOTARY PUBLIC

* * * * * * * * * *

STATE OF	)
	) :ss.
COUNTY OF	)

On , 2004, before me , a Notary Public, personally appeared , the of Woodbury Corporation, a Utah corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument he/she executed the instrument.

WITNESS my hand and official seal


	NOTARY PUBLIC

G-3

Exhibit A to EXHIBIT G
SITE PLAN SHOWING PROPERTY

G-4

Exhibit B to EXHIBIT G
LEGAL DESCRIPTION OF PROPERTY

16:03:300:001:2014 / 6014

G-5

Exhibit C to EXHIBIT G
DESCRIPTION OF IMPROVEMENTS

G-6

Exhibit D to EXHIBIT G
PERMITTED EXCEPTIONS

G-7

EXHIBIT H

BILL OF SALE
(Personal Property located at 650 Komas Drive)

THIS BILL OF SALE (“Bill of Sale”) is delivered by EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation (“Seller”), to WOODBURY CORPORATION, a Utah corporation (“Buyer”) in connection with the sale of the items described herein.

Seller, for and in consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby conveys to Buyer all of Seller’s right, title and interest in and to the personal property, fixtures and equipment listed on Exhibit A attached hereto (the “Property”) as of the date of this Bill of Sale.

Except as expressly set forth in the Agreement, the Property is hereby conveyed to Buyer “AS IS, WHERE IS” and “WITHOUT WARRANTY, EXPRESS OR IMPLIED”, INCLUDING WITHOUT LIMITATION, ANY WARRANTY AS TO MERCHANTABILITY OR FITNESS AS TO A PARTICULAR PURPOSE.

Seller hereby represents and warrants to Buyer that Seller is the owner of the Property. Seller further represents and warrants to Buyer that the Property is free and clear of any monetary liens or encumbrances. NOTWITHSTANDING THE FOREGOING, TO THE EXTENT SELLER’S REPRESENTATIONS OR WARRANTIES SET FORTH HEREIN ARE NOT TRUE AND CORRECT, BUYER’S SOLE AND EXCLUSIVE REMEDY SHALL BE TO OBTAIN A REFUND FROM SELLER OF THE TOTAL CONSIDERATION PAID BY BUYER TO SELLER FOR THE PERSONAL PROPERTY IN AN AMOUNT NOT TO EXCEED $5,000.00, AND BUYER HEREBY RELEASES AND WAIVES ANY OTHER CLAIMS OR CAUSES OF ACTION WHICH BUYER MAY HAVE AGAINST SELLER OR ANY OF ITS AFFILIATES OR PARENT COMPANIES AND THEIR RESPECTIVE DIRECTORS, OFFICERS, SHAREHOLDERS, MANAGERS, MEMBERS, AGENTS, ATTORNEYS OR EMPLOYEES IN CONNECTION WITH THE PROPERTY. IN ADDITION, THE FOREGOING REPRESENTATIONS AND WARRANTIES OF SELLER ARE LIMITED AND SHALL BE OF NO FURTHER FORCE OR EFFECT AFTER THE DATE WHICH IS TWO (2) YEARS FOLLOWING THE DATE OF THIS BILL OF SALE.

This Bill of Sale may, but need not be, supplemented by specific assignments of any and all the assets covered hereby, and Seller covenants and agrees that it will, within ten (10) business days after Buyer’s written request, execute and deliver to Buyer, its successors and assigns, such supplemental or specific assignments as Buyer, its successors or assigns may deem reasonably necessary and advisable to carry out the purposes of the conveyance of Seller’s right, title and interest in and to the Property, and to vest in Buyer, as of the date hereof, such title to the Property covered hereby as may be transferred hereby.

H-1

IN WITNESS WHEREOF, Seller has executed this Bill of Sale as of the day of , 2004.

	EVANS & SUTHERLAND COMPUTER CORPORATION,
	a Utah corporation


	By:
	Its:

H-2

EXHIBIT A to EXHIBIT H
PERSONAL PROPERTY LIST

BUILDING 650 FURNITURE INVENTORY AS OF SEPTEMBER 24, 2002

HERMAN MILLER AO1 SYSTEMS FURNITURE

MODEL #	ITEM	DESCRIPTION	QUANTITY	COMMENTS:
	TABLES:
ET102		36” Diameter	1
ET103		42” Diameter	8
AO453		23” X 48”	4
AO712.3048L		30” X 48”	228
AO712.3060L		30” X 60”	27
AO712.3072L		30” X 72”	6
AO660XX		36” X 72”	33

	CHAIRS:
Kevi Management		Roller	263
Kevi Sled Base		Sled	297
Kevi Secretarial		Secretary	27

	PANELS:
AO120.6212LN49044904	1 Foot Panel	12” X 62”	14
AO120.6224LN49044904	2 Foot Panel	24” X 62”	1136
AO120.6248LN49044904	4 Foot Panel	48” X 62”	1147
A1125.3924N	2 Foot Panel-Low	24” X 42”	253
A1125.3948N	4 Foot Panel-Low	48” X 42”	4	Old HM part #
	4 Foot Panel-Curved Low	Low 48” Curved	6

Note: Color 4904, Vertical Surface Blend color: orange grey

	LATERAL FILES:
AO511.1624KDBUOK	2 Foot Lateral File	24”	54
AO511.1648KDBUOK	4 Foot Lateral File	48”	512

AO483	DRAWER UNITS:		309	Old HM part #

AO420DT	PENCIL DRAWERS:		9	Old HM part #

	TACK BOARDS:
AO610.16486441	Tack Board	48” X 15”	328

HERMAN MILLER AO1 SYSTEMS FURNITURE

MODEL #	ITEM	DESCRIPTION	QUANTITY	COMMENTS:
	SHELVES:
AO523.1324BU	2 Foot Open Shelf	24” X 12 1/2”	339
AO523.1336BU	3 Foot Open Shelf	36” X 12 1/2”	1
AO523.1348BU	4 Foot Open Shelf	48” X 12 1/2”	731

	BINS:
AO560.1348KDBU6403	Flipper Bin	48”	3

	WORK SURFACES:
AO417.2472LOLBU	6 Foot Work Surface	72”	282	Oak Laminate Dark Tone Trim
AO417.2448LOLBU	4 Foot Work Surface	48”	70	Oak Laminate Dark Tone Trim
AO417.2424LOLBU	2 Foot Work Surface	24”	58	Oak Laminate Dark Tone Trim
		48” (Corner)	152	Oak Laminate Dark Tone Trim

H-3

HERMAN MILLER AO1 SYSTEMS FURNITURE

MODEL #	ITEM	DESCRIPTION	QUANTITY	COMMENTS:
	SHELVES:
AO450.1448L	Transaction Top	48”	3	Old HM part #
AO450.1424L	Transaction Top	24”	7	Old HM part #
AO867FF	Transaction Top	48” (Corner)	5	Old HM part #

	TASK LIGHTS:
G6123.48MENBU	4 Foot Under Shelf Light	48”	339
G6123.24MENBU	2 Foot Under Shelf Light	24”	10

	PANEL CONNECTORS:
AO220.62HLN	Connector	2-Way	373
AO230.62HLN	Connector	3-Way	196
AO240.62HLN	Connector	4-Way	59
AO220.42HLN	Connector	2-Way, Low	4

WEST LOBBY

MODEL #	ITEM	DESCRIPTION	QUANTITY	COMMENTS:
20/656-WW	LOW BACK CHAIR:		2	Armstrong Chair
Formica #437.58	PHONE TABLE:	24 X 24 X 20	1

WEST LOBBY DEMONSTRATION ROOM
	PANELS:
See attached order form for component part #s	Panel	36”W X 70”H	2	Ethospace
See attached order form for component part #s	Panel	42”W X 70”H	2	Ethospace
See attached order form for component part #s	Panel	30”W X 38”H	3	Ethospace

	WORK SURFACES:
E22310.2478L		24” x 78”	1	Ethospace
S8542902		24” x 84”	1	Ethospace
E22310.3078L		30” x 78”	2	Ethospace
	PEDESTALS:
F-16-1518-B	Freestanding Ped	15”W X 18”D X 26 1/4”H	1	Ethospace

WEST LOBBY CONFERENCE ROOM

ET156L	TABLE:	54” x 96” Oval	1	Ethospace
EN122PBS	ROLLER CHAIR:	Fixed Arms	3	Ethospace
EN500PBS	SIDE CHAIR:	Sled Base, Fixed Arms	5	Ethospace
F-16-1518-B	PHONE TABLE:	15”W X 18”D X 26 1/4”H	1	Ethospace

CONFERENCE ROOMS
	TABLES:	36” x 72”	16	Virco Mfg. Corp.
	CHAIRS:
		White (Without arms)	232	Superior Chaircraft Corp.
		White (With arms)	58	Superior Chaircraft Corp.

CAFETERIA
	TABLES:	36” X 36”	14	Virco Mfg. Corp.
	CHAIRS:	Stacking	21	Virco Mfg. Corp.
	REFRIGERATOR:	17 Cu. Ft.	1	Kenmore Coldspot
	ICE MAKER:		1	Ice-O-Matic

H-4

MODEL #	ITEM	DESCRIPTION	QUANTITY	COMMENTS:
GLASS OFFICES FURNITURE:
”	Misc	25” X 84” Work Surface	2	Walnut
”	Misc	36” X 36” Corner	1	”
”	Misc	36” X 36” Table	1	”

MISCELLANEOUS ITEMS
Upper East Lobby		11” X 30” Ottoman	3
Women’s Restrooms		6’ Couch	2
First Aid Room		Couch	1	Nateland Prolducts Co., Inc.
Lower East Lobby		Databank Vault	1	Schwab Safe Co., Inc.
2nd Floor Office & First Aid Room		2 Drawer Filing Cabinet	3	Anderson Hickey
2nd Floor Office		4 Drawer Filing Cabinet	1	Anderson Hickey

H-5

PURCHASE AND SALE AGREEMENT

between

EVANS & SUTHERLAND COMPUTER CORPORATION,
a Utah corporation

as Seller

and

WOODBURY CORPORATION,
a Utah corporation

as Buyer

Dated: April 7, 2004
Building located at 650 Komas Drive
University of Utah, Research Park
Salt Lake City, Utah

EX-10.2 3 a04-9302_1ex10d2.htm EX-10.2

Exhibit 10.2

FIRST AMENDMENT

TO AGREEMENT OF PURCHASE AND SALE

(650 Komas Drive)

This First Amendment to Agreement of Purchase and Sale (“the Amendment”) is effective as of May 8, 2004 between EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation (“Seller”) and WOODBURY CORPORATION, a Utah corporation (“Buyer”), collectively, the “Parties” and individually, a “Party.” Capitalized terms used in this Amendment and not defined herein shall have the meanings given them in the Agreement.

R E C I T A L S:

WHEREAS, Seller and Buyer entered into that certain Agreement of Purchase and Sale, dated April 7, 2004 (the “Agreement”),

WHEREAS, Seller and Buyer desire to extend certain time periods within the Agreement (with the exception of the Close Date) in order to facilitate the transaction contemplated therein.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual promises contained herein, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer agree to amend the Agreement as follows:

1. Additional Earnest Money. In Section 2.2.2 of the Agreement (the “Additional Deposit Date”) is amended to be June 3, 2004.

2. Title Commitment. At close, Seller will cause the removal of certain Schedule B, Section 2 exceptions dealing with navigable rivers or lakes, certain water rights, the rights of tenants or lessees of Evans & Sutherland, and financial encumbrances of the Premises which are as follows;

Exception 7. Any adverse claim based upon the assertion that (a) some portion of the land forms the bed or bank of a navigable river or lake, or lies below the mean high water mark thereof; (b) the boundary of the land has been affected by a change in the course or water level of a navigable river or lake; (c) the land is subject to water rights, claims or title to water and to any law or governmental regulation pertaining to wetlands.

Exception 19. Water rights, claims or title to water, whether or not shown by the public records.

Exception 22. The rights of any tenants and/or lessees of EVANS & SUTHERLAND, a Utah Corporation, which may also be known as EVANS & SUTHERLAND COMPUTER CORPORATION, their creditors, and other parties claiming by, through, or under said

tenants/lessees, pursuant to any leases, rental agreements, occupancy agreements, and/or assignments thereof.

Exception 24. A Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixtures Filing, dated December 14, 2000, A First Amendment To Leasehold Deed Of Trust, Assignment Of Rents, Security Agreement And Fixtures Filing, dated as of May 30, 2003,

Exception number 25. Absolute Assignment Of Sub-Leases And Rents, dated December 14, 2000, A First Amendment To Absolute Assignment Of Sub-Leases And Rents, dated as of May 30, 2003, and

Exception 26. A Consent To Encumbrance of Tenant’s Interest and Landlord’s Waiver, dated as of December 13, 2000.

Seller will, at close, also cause the removal of reference to inquiry of Evans & Sutherland Computer Corporation with regards to unrecorded rights-of- way and/or easements in Exception 20, Schedule B of the Title Commitment.

All remaining Schedule B exceptions shall be deemed approved except as otherwise set forth in the Agreement.

3. Estoppel Certificate. Section 3.4 Estoppel Certificate shall be amended and restated in its entirety as follows:

“Seller shall have obtained and delivered to Buyer, within ten (10) days of the date Buyer delivers written notice to Seller of it’s assignment of this Agreement to Komas L.L.C (the “Notice of Assignment”), an estoppel certificate in substantially the form delivered to Buyer as Exhibit E of this Agreement (the “Estoppel Certificate”) from the Master Landlord with respect to the Ground Lease (but in no event shall such estoppel certificate be required to contain information which is not otherwise required to be provided by the Master Landlord under the Ground Lease). If Seller has not delivered the Estoppel Certificate on or before the later of the expiration of the Finance Contingency Period or within ten (10) days of Notice of Assignment as set forth above, then this Agreement shall be deemed terminated as of the the later of the expiration of the Finance Contingency Period or within ten (10) days of Notice of Assignment in accordance with this Section 3.4; provided, however, that Seller shall have the right, on or before the expiration of the Finance Contingency Period or such ten (10) day period as case may, at Seller’s option and in Seller’s sole discretion, to represent and warrant to Buyer the matters set forth in the Estoppel Certificate, in which event this Agreement shall remain in full force and effect and subject to the terms and conditions of this Agreement the Parties shall proceed to close the transaction contemplated by this Agreement on the Date of Closing. Seller agrees to indemnify Buyer from and against any liability, claims, damages, expenses (including reasonable attorneys’ fees), judgments, proceedings and causes of action to the extent arising from a misrepresentation by Seller concerning the matters set forth in Seller’s representations and warranties pursuant to this Section 3.4. Notwithstanding the foregoing, Seller’s representation and warranty described above (including any indemnification obligation of Seller in connection therewith) shall only be in effect until such time as Seller delivers to Buyer the Estoppel Certificate setting forth the matters represented and warranted by Seller. At the Date of Closing, Seller shall represent and warrant the following to Buyer: (a) all rent and other payments accrued and owing under the Ground

Lease are current, except for those amounts which have been agreed to between the Parties in connection with the prorations under this Agreement; (b) to Seller’s actual knowledge, there has been no material change in the facts set forth in the Estoppel Certificate during the period between the date such Estoppel Certificate was signed and the Date of Closing.”

4. Financing Contingency. As set forth in Section 3.6 of the Agreement, Buyer herby waives said Finance contingency.

5. Seller’s Conditions Precedent. Section 4.1, Consents shall be amended and restated in it entirety as follows:

“Subject to the terms of this Section 4.1, on or before the date which is ten (10) days prior to the Date of Closing (the “Consent Date”) (provided Buyer and Seller have elected to proceed toward Closing), Seller shall have obtained all consents required to consummate this transaction from (a) the Master Landlord under the Ground Lease, and (b) Seller’s lenders holding liens on the Improvements and Personal Property and/or on the Seller’s leasehold interest under the Ground Lease, including, without limitation, required consents from Foothill Capital Corporation (“Foothill”), including, without limitation, (i) consents to any agreements between Seller and Buyer to which Foothill would become subject upon any foreclosure of Seller’s interest in adjacent properties within the University of Utah Research Park; (ii) subordination of Foothill’s liens to any agreements that will be recorded between Buyer and Seller in connection with this transaction; and (iii) all appropriate documentation and agreements necessary to release all Foothill liens on the Property, Improvements and Personal Property and on Seller’s leasehold interest under the Ground Lease. Seller agrees to use commercially reasonable efforts and act in good faith in obtaining such Consents. Notwithstanding the foregoing, Buyer and Seller agree that if Buyer, Seller and any necessary third parties have not agreed to final forms of all documents and/or agreements to which Seller’s lenders would be required to consent, or for which Seller will require Seller’s lenders’ consent, then the Consent Date shall be extended to the date which is fifteen (15) days following the date on which (x) final forms of all such documents and agreements have been agreed to by Buyer, Seller and any necessary third parties; and (y) Seller’s lenders have received copies of the final forms of all such documents and agreements. Buyer and Seller agree to negotiate in good faith to agree to the final form of any such documents and/or agreements in a timely manner. Buyer and Seller acknowledge and agree that any extension of the Consent Date pursuant to this Section 4.1 shall not be deemed a Seller delay under Section 5.1 and shall no event result in an extension of the Closing Date.”

7. Building Lease. Section 4.5, Building Lease shall be amended and restated in its entirety as follows:

“On or before the Date of Closing, Buyer and Seller shall have mutually agreed, and Seller’s lenders and any other necessary third parties shall have consented to, the Building Lease, which shall be in form and substance reasonably acceptable to Buyer and Seller.”

8. Counterparts. This Amendment may be executed in any number of counterparts, all of which shall be an original, but each of which shall constitute the same instrument.

9. Agreement Amended. The Agreement is hereby amended to the extent necessary to effectuate the purposes set forth in this Amendment.

10. Amendment Controls. In the event the terms and conditions of this Amendment conflict with any terms and conditions of the Agreement, the terms and conditions of this Amendment shall control. Except as expressly set forth herein, the Agreement shall remain in full force and effect.

11. Time of the Essence. Time is expressly made of the essence of each and every provision of this Amendment.

12. Interpretation. This Amendment shall be interpreted and construed only by the contents hereof, and there shall be no presumption or standard of construction in favor of or against either Party.

13. Captions. The captions in this Amendment are for convenience only and do not constitute a part of the provisions hereof.

14. Authority. The individuals executing this Amendment represent and warrant that they have the power and authority to do so, and to bind the entities for which they are executing this Amendment.

THE SUBMISSION OF THIS AMENDMENT FOR EXAMINATION OR ITS NEGOTIATION DOES NOT CONSTITUTE A BINDING CONTRACT AND THE EXECUTION OF THIS AGREEMENT BY BUYER DOES NOT CONSTITUTE A BINDING CONTRACT UNTIL SUCH TIME AS THIS AMENDMENT HAS BEEN EXECUTED BY AUTHORIZED OFFICERS OF SELLER, AND DELIVERED TO BUYER.

This Agreement has been executed as of the date first above written.

BUYER:

WOODBURY CORPORATION, a Utah corporation

By:		(Signed) W. Richards Woodbury

Its:		President


SELLER:

EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation

By:	(Signed) Thomas Atchison

Its:			CFO

EX-10.3 4 a04-9302_1ex10d3.htm EX-10.3

Exhibit 10.3

When Recorded, Return To:

W. Brian Hulse, Esq.

SNELL & WILMER, L.L.P.

Gateway Tower West

15 West South Temple, Suite 1200

Salt Lake City, Utah 84101

CONSENT AND SUBORDINATION TO AMENDED AND RESTATED DECLARATION

A. WELLS FARGO FOOTHILL, INC., a California corporation, formerly known as FOOTHILL CAPITAL CORPORATION (“Foothill”), is the “Beneficiary” under that certain Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, executed December 14, 2000, and recorded on December 20, 2000, as Entry No. 7784142, in Book 8409, at Page 3891, of the real property records of Salt Lake County, Utah, as amended and/or modified of record (“Deed of Trust”) with respect to the real property described in Exhibit A thereto, as amended and/or modified of record (“Property”) and as more particularly described on Exhibit A attached hereto.

B. Foothill is the “Assignee” under that certain Absolute Assignment of Sub-Leases and Rents, executed December 14, 2000, and recorded December 20, 2000, as Entry No. 7784145, in Book 8409 at Page 3943, of the real property records of Salt Lake County, Utah, as amended and/or modified of record (“Assignment”) with respect to the leasehold interests described in Exhibit A thereto.

C. EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah Corporation (“E&S”), is the “Trustor” under the Deed of Trust and the “Assignor” under the Assignment.

D. Pursuant to that certain Purchase and Sale Agreement, dated April 7, 2004, between E&S and WOODBURY CORPORATION, a Utah corporation, and with the consent and approval of Foothill, E&S has sold its right, title and interest in all improvements on certain real property located at 650 Komas Drive, Salt Lake City, Utah, which property is more particularly described on Exhibit B attached hereto, and has assigned its right, title, interest and obligations in that certain Lease Agreement between THE UNIVERSITY OF UTAH, a body politic and corporate of the State of Utah (the “University”), and the predecessor-in-interest of E&S, Black Hawk Investment Company, a general partnership, entered into a Lease Agreement, dated September 5, 1980, as amended by each of (i) that First Amendment to Lease Agreement, dated June 7, 1982, (ii) that Second Amendment to Lease Agreement, dated September 28, 1982, (iii) that Third Addendum to Lease Agreement, dated April 9, 1987, and (iv) that Fourth Addendum to Lease Agreement, dated December 31, 1990 to Komas L.L.C., a Utah limited liability company. Such sale and assignment transaction is sometimes referred to herein as the “Sale Transaction”.

H. As part of the Sale Transaction, E&S will record concurrently herewith an Amended and Restated Declaration of Easements (“Amendment”), which will amend and restate in its entirety the Declaration of Easements recorded as Entry No. 8474711, in Book 8711, at Page 873 of the official records of the Salt Lake County Recorder’s office, as amended by that certain Amendment to Declaration of Easements, dated May 30, 2003, and recorded June 3, 2003 as Entry No. 8674109, in Book 8810, at Page 3983 of the official records of the Salt Lake County Recorder’s office.

Foothill does hereby consent to and approve the Amendment and agrees to subordinate the lien of the Deed of Trust and the Assignment to such Amendment. Such subordination is solely intended to ensure survival of the Amendment after any foreclosure of the Deed of Trust, or any exercise of rights under the Assignment. This Consent shall not be construed as a release of the collateral secured by the Deed of Trust or the Assignment or a subordination of the Deed of Trust or the Assignment as to any other subsequent recorded interest in the Property other than the Amendment.

Dated this 24 day of June, 2004.

	WELLS FARGO FOOTHILL, INC., f/k/a
	Foothill Capital Corporation a California corporation


	By:	(Signed) Larissa Mergerdichian
	Larissa Mergerdichian

STATE OF CALIFORNIA	)
	: ss.
COUNTY OF LOS ANGELES	)

On June 24, 2004, before me Rochelle M. Lyon, Notary Public, personally appeared Larissa Mergerdichian, personally known to me to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal

	(Signed) Rochelle M. Lyon
	Notary Public

[Seal]

EXHIBIT A

Property Legal Description

That certain real property located in Salt Lake County, Utah, and more particularly described as follows:

PROPERTY

560 Arapeen

BEGINNING at a point on the Westerly line of Arapeen 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°48’24” West 3622.62 feet and East 97.00 feet and South 58.20 feet from the Southeast corner of Section 3, Township 1South, Range 1 East, Salt Lake Base and Meridian, and running thence South 41°00’00” West 212.00 feet; thence North 49°00’00” West 90.00 feet; thence South 41°00’00” West 340.00 feet; thence South 49°00’00” East 260.00 feet; thence North 41°00’00” East 336.00 feet; thence North 49°00’00” West 17.00 feet; thence North 41°00’00” East 6.00 feet; thence North 49°00’00” West 53.00 feet; thence North 41°00’00” East 210.00 feet to the Westerly line of Arapeen Drive; thence North 49°00’00” West 100.00 feet along said Westerly line to the point of beginning.

Contains 109,642 sq. ft. or 2.5170 acres.

BEGINNING at a point on the Westerly line of Komas Drive, said point being North1626.262 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°48’24” West 3622.62 feet and East 97.00 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°00’00” West 450.692 feet; thence South 41°00’00” West 70.00 feet; thence North 49°00’00” West 220.932 feet to a point on the arc of a 692.200 foot radius curve whose center bears South 62°28’51” East; thence Southwesterly 42.964 feet along the arc of said curve to the left through a central angle of 03°33’23”; thence South 49°00’00” East 660.319 feet; thence North 41°00’00” East 111.443 feet to the point of beginning.

EXCEPTING THEREFROM 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.

Contains 59,158 sq. ft. or 1.3581 acres.

Part of 16:03:300:001:2007 / 6007 and 16-03-300-001-6007

650 Komas Drive

16:03:300:001:2014 / 6014

600 Komas Drive

BEGINNING at a point which is North 1626.262 feet and West 815.400 feet and South 41°00’00” West 111.443 feet from the Salt Lake City Survey Monument at the intersection of Sunnyside Avenue and Padley Street, said Monument is located South 65°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°00’00” West 660.319 feet to a point on the arc of a 692.200 foot radius curve whose center bears South 66°02’ 14” East; thence Northeasterly 114.196 feet along the arc of said curve to the right through a central angle of 09°27’08”; thence North 49°00’00” West 6.001 feet; thence South 41°00’00” West 525.082 feet; thence South 12°21’26” East 320.000 feet; thence North 82°47’ 10” East 208.879 feet to a point on the arc of a 608.887 foot radius curve whose center bears North 82°02’11” East; thence Southeasterly 360.905 feet along the arc of said curve to the left through a central angle of 33°57’39”; thence North 41°00’00” East 593.845 feet; thence North 49°00’00” West 30.000 feet to the point of beginning.

EXCEPTING THEREFROM 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

16:03:300:001:2023 / 6023

770 Komas Drive

BEGINNING at a point which is North 22°00’00” West 179.00 feet from a point on the North line of Sunnyside Avenue, said point being South 89°59’50” West 761.997 feet and North 00°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°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°09’35” West 166.781 feet; thence North 52°49’31” West 103.650 feet; thence North 12°49’54” West 461.520 feet; thence North 43°19’53” West 315.935 feet; thence North 44°00’00” East 123.669 feet along the radial line to a point of 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°00’00” East), tangent length = 160.109 feet, central angle = 74°00’00”; thence along the radial line South 30°00’00” East 20.500 feet to the point of tangency; thence North 60°00’00” East 71.108 feet; thence South 49°00’00” East 33.554 feet; thence South 60°00’00” West 11.730 feet; thence South 22°00’00” East 550.000 feet; thence South 23°00’00” West 217.000 feet to the point of BEGINNING.

Together with a 26 foot access easement to Komas Drive.

16:10:126:001:2001 / 6001

630 Komas Drive

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°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°19’53” West 245.767 feet; thence North 12°21’26” West 312.856 feet; thence North 82°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°02’ 11” East; thence Southeasterly along said curve to the left through a central angle of 33°57’39”, a distance of 360.905 feet; thence North 40°58’00” East 105.291 feet; thence South 49°00’00” East 292.731 feet; thence South 60°00’00” West 71.105 feet; thence North 30°00’00” West 20.50 feet to a point on the arc of a 212.471 foot radius curve, the center of which bears North 30°00’00” West; thence Southwesterly along said curve to the right through a central angle of 74°00’00”, a distance of 274.416 feet; thence South 44°00’00” West 123.669 feet to the point of beginning.

Together with a 26 foot wide access easement to Komas Drive.

16:03:300: 001

EXHIBIT B

Property Legal Description

That certain real property located in Salt Lake County, Utah, and more particularly described as follows:

16:03:300:001:2014 / 6014

EX-10.4 5 a04-9302_1ex10d4.htm EX-10.4

Exhibit 10.4

When Recorded, Return To:

W. Brian Hulse, Esq.

SNELL & WILMER, L.L.P.

Gateway Tower West

15 West South Temple, Suite 1200

Salt Lake City, Utah 84101

CONSENT TO LEASE AGREEMENT

A. WELLS FARGO FOOTHILL, INC., a California corporation, formerly known as FOOTHIL CAPITAL CORPORATION (“Foothill”), is the “Beneficiary” under that certain Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, executed December 14, 2000, and recorded on December 20, 2000, as Entry No. 7784142, in Book 8409, at Page 3891, of the real property records of Salt Lake County, Utah, as amended and/or modified of record (“Deed of Trust”) with respect to the real property described in Exhibit A thereto (“Property”) and as more particularly described on Exhibit A attached hereto.

C. EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah Corporation (“E&S”), is the “Trustor” under the Deed of Trust and the “Assignor” under the Assignment.

D. Pursuant to that certain Purchase and Sale Agreement, dated April 7, 2004, between E&S and WOODBURY CORPORATION, a Utah corporation, and with the consent and approval of Foothill, E&S has sold its right, title and interest in all improvements on certain real property located at 650 Komas Drive, Salt Lake City, Utah, which property is more particularly described on Exhibit B attached hereto, and has assigned its right, title, interest and obligations in that certain Lease Agreement between THE UNIVERSITY OF UTAH, a body politic and corporate of the State of Utah (the “University”), and the predecessor-in-interest of E&S, Black Hawk Investment Company, a general partnership, entered into a Lease Agreement, dated September 5, 1980, as amended by each of (i) that First Amendment to Lease Agreement, dated June 7, 1982, (ii) that Second Amendment to Lease Agreement, dated September 28, 1982, (iii) that Third Addendum to Lease Agreement, dated April 9, 1987, and (iv) that Fourth Addendum to Lease Agreement, dated December 31, 1990 to Komas L.L.C., a Utah limited liability company (“Buyer”). Such sale and assignment transaction is sometimes referred to herein as the “Sale Transaction”.

E. As part of the Sale Transaction, E&S has entered into a Lease Agreement, dated June 25th, 2004, between E&S and Buyer with respect to the Property (the “Lease Agreement”).

Foothill does hereby consent to and approve the terms and conditions of the Lease Agreement. This

650 Komas Drive
University of Utah, Research Park
Salt Lake City, Utah

Consent Agreement shall not be construed as a release of the collateral secured by the Deed of Trust or the Assignment or a subordination of the Deed of Trust or the Assignment as to any recorded interest in the Property..

Dated this 24^th day of June, 2004.

	WELLS FARGO FOOTHILL, INC., f/k/a
	Foothill Capital Corporation, a California corporation


	By:	(Signed) Larissa Mergerdichian
	Larissa Megerdichian V.P.

STATE OF CALIFORNIA	)
	) ss:
COUNTY OF LOS ANGELES	)

On June 24, 2004, before me Rochelle M. Lyon, Notary Public, personally appeared Larissa Megerdichian, personally known to me to be the person of WELLS FARGO FOOTHILL, INC. a California corporation, whose name is subscribed to the within instrument and acknowledged to me that she executed the same in her authorized capacity, and that by her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal

	(Signed) Rochelle M Lyon
Stamp	Notary Public

EXHIBIT A

Property Legal Description

That certain real property located in Salt Lake County, Utah, and more particularly described as follows:

PROPERTY

560 Arapeen

BEGINNING at a point on the Westerly line of Arapeen 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°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°00’00” West 212.00 feet; thence North 49°00’00” West 90.00 feet; thence South 41°00’00” West 340.00 feet; thence South 49°00’00” East 260.00 feet; thence North 41°00’00” East 336.00 feet; thence North 49°00’00” West 17.00 feet; thence North 41°00’00” East 6.00 feet; thence North 49°00’00” West 53.00 feet; thence North 41°00’00” East 210.00 feet to the Westerly line of Arapeen Drive; thence North 49°00’00” West 100.00 feet along said Westerly line to the point of beginning.

Contains 109,642 sq. ft. or 2.5170 acres.

BEGINNING at a point on the Westerly line of Komas Drive, said point being North1626.262 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°48’24” West 3622.62 feet and East 97.00 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°00’00” West 450.692 feet; thence South 41°00’00” West 70.00 feet; thence North 49°00’00” West 220.932 feet to a point on the arc of a 692.200 foot radius curve whose center bears South 62°28’51” East; thence Southwesterly 42.964 feet along the arc of said curve to the left through a central angle of 03°33’23”; thence South 49°00’00” East 660.319 feet; thence North 41°00’00” East 111.443 feet to the point of beginning.

EXCEPTING THEREFROM 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.

Contains 59,158 sq. ft. or 1.3581 acres.

Part of 16:03:300:001:2007 / 6007 and 16-03-300-001-6007

A-1

650 Komas Drive

16:03:300:001:2014 / 6014

600 Komas Drive

EXCEPTING THEREFROM 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

16:03:300:001:2023 / 6023

A-2

770 Komas Drive

Together with a 26 foot access easement to Komas Drive.

16:10:126:001:2001 / 6001

630 Komas Drive

43°19’53” West 245.767 feet; thence North 12°21’26” West 312.856 feet; thence North 82°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°02’ 11” East; thence Southeasterly along said curve to the left through a central angle of 33°57’39”, a distance of 360.905 feet; thence North 40°58’00” East 105.291 feet; thence South 49°00’00” East 292.731 feet; thence South 60°00’00” West 71.105 feet; thence North 30°00’00” West 20.50 feet to a point on the arc of a 212.471 foot radius curve, the center of which bears North 30°00’00” West; thence Southwesterly along said curve to the right through a central angle of 74°00’00”, a distance of 274.416 feet; thence South 44°00’00” West 123.669 feet to the point of beginning.

Together with a 26 foot wide access easement to Komas Drive.

16:03:300: 001

A-3

EXHIBIT B

Property Legal Description

That certain real property located in Salt Lake County, Utah, and more particularly described as follows:

16:03:300:001:2014 / 6014

B-1

EX-10.5 6 a04-9302_1ex10d5.htm EX-10.5

Exhibit 10.5

LEASE AGREEMENT

FUNDAMENTAL PROVISIONS:

DATE OF LEASE:	June 25th, 2004

LANDLORD:	Komas L.L.C.
	2738 E. Parleys Way, Ste. 300
	Salt Lake City, Utah 84109
	Attn: W. Richards Woodbury

TENANT:	Evans & Sutherland Computer Corporation
	600 Komas Drive
	Salt Lake City, Utah 84106
	Attn: Bruce Lyman, Facilities Manager

PREMISES:	That portion of the improvements owned by Landlord which consists of the existing office space located at 650 Komas Drive, Salt Lake City, Utah containing approximately 86,400 square feet of floor area together with all easements, rights-of-way, rights, privileges, benefits and appurtenances now or hereafter belonging thereto or commonly enjoyed therewith, including, without limitation, rights to ingress and egress and parking over, in and on designated areas (hereinafter referred to as the “Premises”). A legal description of the Premises is attached as Exhibit A.

TERM:	The Term shall commence upon the execution of this Lease and shall expire on the day immediately prior to the date which is three (3) years thereafter, unless terminated earlier as permitted by this Lease (the “Term”).

MONTHLY RENTAL:	Except as expressly provided to the contrary herein, the “Monthly Rental Amount” shall be an absolutely net rental amount to Landlord and shall be calculated as follows: (a) Tenant shall pay Seventy Two Thousand Six Hundred Two and 50/100 Dollars ($72,602.50) per month during the first twelve months of the Term; (b) Forty Seven Thousand One Hundred Ninety One and 67/100 ($47,191.67) per month during the next twelve months of the Term; and (c) Thirty Six Thousand Three Hundred and One 25/100 Dollars ($36,301.25) during the last twelve months of the Term. To the extent the Term of this Lease commences on a day other than the first day of a month, the rent shall be prorated based on the actual number of days in such month. The rental amounts set forth above shall be adjusted as set forth in this Lease.

SECURITY DEPOSIT:	Eight Hundred Seventy One Thousand Two Hundred Thirty and 00/100 Dollars ($871,230.00) subject to reduction as set forth in Article 4.

[Premises Address]
[City], Utah

PERMITTED USE:	The Premises may be used for office, research and development, laboratory or any other lawful use permitted by applicable covenants and restrictions currently in place with respect to the University of Utah Research Park and the Premises, or for no purpose.

PRO RATA SHARE:	As used herein, Tenant’s pro rata share shall mean the percentage obtained by dividing the actual rentable square footage being leased to Tenant under this Lease, as adjusted from time to time by leases to third parties in accordance with Section 1.5, by the total rentable square footage in the Premises.

FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which hereby acknowledged, it is agreed as follows:

ARTICLE 1

LEASE OF PREMISES

1.1 Lease of Premises to Tenant. Landlord hereby leases the Premises to Tenant, and Tenant hereby leases the Premises from Landlord, on the terms and conditions set forth in this Lease, including the Fundamental Provisions set forth above.

1.2 Acceptance of Premises.

Tenant is currently in possession of the Premises and Tenant accepts the Premises, “AS IS, WHERE IS”, including any and all defects, patent, latent or otherwise, with no representation or warranty whatsoever by Landlord as to the fitness, suitability, habitability, or usability of the Premises.

1.3 Landlord’s Access to Premises. Subject to the terms and conditions of this Lease, Landlord and its agents, at all reasonable times, shall have access to the Premises for the purpose of examining or inspecting the condition thereof. In addition, Landlord and its agents and contractors shall have access to the Premises for purposes of completing development of the Premises for Landlord’s intended uses.

1.4 Quiet Enjoyment. Conditioned upon Tenant paying the Monthly Rental Amount and such other amounts as may be required hereunder, Tenant may at all times during the Term peaceably, quietly, and exclusively have, hold, and enjoy the Premises, subject to the terms and conditions of this Lease.

1.5 Landlord’s Obligations. During the Term, Landlord agrees to act diligently and in good faith to lease all or any portion of the Premises to third parties. Tenant acknowledges that Landlord and Landlord’s affiliates own other improvements in the vicinity of the Premises (the “Other Properties”), and, as a result, Landlord may not place every potential third party tenant in the Premises; provided, however, that Landlord will make reasonable efforts to do so in accordance with this Section 1.5. Subject to the terms of this Lease, Landlord agrees to offer the Premises for lease to third parties at market rates that are reasonable for the Premises. Landlord will provide monthly reports to Tenant regarding the leasing progress with respect to the Premises, and with respect to leasing of the Other Properties. Tenant will keep all such leasing information confidential, except to the extent Tenant is required by law or court order to disclose the same, and except for disclosure to Tenant’s officers, directors, employees, agents, attorneys and consultants. Any new leases for the Premises or Other Properties entered into after the date of this Lease shall conform to the requirements of this Section 1.5. Landlord shall amortize over the term of such new lease for the Premises (but in no event shall such amortization be less than 5 years) the cost

of any tenant improvements required in connection with such new lease; provided, however, that in no event shall any such tenant improvements include any of the following: (a) demising costs; (b) costs pertaining to modifications of common areas or systems needed to create multi-tenant capabilities for the Premises, (c) costs in excess of the actual rate at which such amortization is financed (which may include a blended rate of 10% for those funds furnished directly by Landlord and the actual finance rate for the portion of funds being financed by a lender) provided, however, such blended finance rate shall not exceed nine per cent (9%); or (d) the first $5.00 per rentable square foot of tenant improvements within any leased space and Landlord shall deduct or cause to be deducted the monthly amortization cost therefore from the rental to be paid by such tenant. In no event shall the monthly rental amount to be paid by such third party tenant be less than $11.00 per rentable square foot after such amortization of tenant improvements in accordance with this Section 1.5, nor shall any such tenant’s share of Operating Expenses [defined later] in such lease be less than the actual pro rata share of Operating Expenses for such portion of the Premises. Any third party tenant’s rent, after amortization as set forth above, shall be referred to herein as “Third Party Rents”. Any third party tenant’s share of Operating Expenses and additional rent under such third party tenant’s lease, shall be referred to herein as “Third Party Additional Rents”.

ARTICLE 2

TERM

2.1 Initial Term of Lease. The initial Term of this Lease shall be as stated in the Fundamental Provisions, subject to the terms and conditions set forth in this Lease.

2.2 Surrender of Premises. Upon the termination of this Lease for any cause whatsoever, Tenant shall immediately surrender to Landlord peaceable possession of the Premises in substantially the condition said Premises was in immediately prior to the commencement of this Lease (ordinary depreciation and reasonable wear and tear and damage caused by casualty or by Landlord or its employees, agents or contractors excepted); subject, however, to the rights of removal as provided in Section 2.3 below.

2.3 Removal of Personal Property and Tenant’s Fixtures; Landlord’s Lien. So long as Tenant is not in default under this Lease, Tenant may remove from the Premises, at any time, any and all personal property of Tenant including, without limitation, Tenant’s equipment and trade fixtures. If Tenant is in default, then to secure the payment of all rent and other amounts due and to become due under this Lease, Tenant hereby grants to Landlord, in addition to any landlord’s lien provided by Utah Code Section 38-3-1, an express contract lien on all property, chattels, merchandise, fixtures and equipment which may be placed in the Premises by Tenant during the Term.

2.4 Holding Over. If Tenant should remain in possession of the Premises after the expiration of the Term without executing a new lease, then such holding over shall be construed as a tenancy from month to month, subject to all the covenants, terms, provisions and obligations of this Lease except that the Monthly Rental Amount during any holdover tenancy shall be equal to 125% of the then current Monthly Rental Amount.

2.5 Partial Termination. If a third party tenant requires as a condition of entering into it’s lease, that Tenant release and surrender it’s rights of possession to the portion of the Lease Premises being leased to the third party tenant, then Tenant agrees to execute a document releasing said portion of the Premises.

ARTICLE 3

RENT

3.1 Rent. Tenant shall pay to Landlord as rent during the Term, the Monthly Rental Amount stated in the Fundamental Provisions. The Monthly Rental Amount is payable monthly, in advance, on the first day of each calendar month during the Term.

3.2 Additional Rent. In addition to Monthly Rental Amount, Tenant’s pro rata share of Operating Expenses (as defined in Exhibit B) and all other payments to be made by Tenant under this Lease will be deemed “Additional Rent” and will be due and payable within ten (10) days of receipt by Tenant of an invoice from Landlord, if no other time for payment is specified.

3.3 Rental Credits. Tenant shall be entitled to credits against any Monthly Rental Amount due and against Additional Rent as follows:

(a) Credit Against Additional Rent. All Third Party Additional Rents shall be used first to reduce the total Additional Rent due under this Lease. In addition, (i) in year one of this Lease, all Third Party Rents shall be first credited toward any remaining amounts then due and owing in connection with Additional Rents under this Lease and if any Third Party Rents remain after such credit is applied, the remainder shall be applied as set forth in Section 3.3(b) below, and (ii) in year two of this Lease all monthly Third Party Rents in excess of Twenty Five Thousand Four Hundred Ten and 88/100 Dollars ($25,410.88.00) which represents thirty five percent (35%) of the Monthly Rental Amount due Landlord from Tenant in year one of this Lease shall be first credited toward any remaining amounts then due and owing in connection with Additional Rents under this Lease and if any Third Party Rents remain after such credit is applied, the remainder shall be applied as set forth in Section 3.3(b) below and, (iii) in year three of this Lease all monthly Third Party Rents in excess of Thirty Six Thousand Three Hundred One and 25/100 Dollars ($36,301.25) which represents fifty percent (50%) of the Monthly Rental Amount due Landlord from Tenant in year one of this Lease shall be first credited toward any remaining amounts then due and owing in connection with Additional Rents under this Lease and if any Third Party Rents remain after such credit is applied, the remainder shall be applied as set forth in Section 3.3(b) below. Notwithstanding the foregoing, on the date Third Party Rents exceed Seventy Two Thousand Six Hundred Two and 50/100 Dollars ($72,602.50) per month, which is equal to 100% of the Monthly Rental Amount payable by Tenant in year one of this Lease, this Lease shall be deemed terminated as of such date and Tenant shall be released from any further obligation under the Lease.

(b) Credit Against Monthly Rental Amount. The Monthly Rental Amount shall be reduced by an amount equal to any remaining amounts of Third Party Additional Rents and Third Party Rents after applying the same pursuant to Section 3.3(a) above.

(c) Controlling Operating Expenses. Tenant represents that Operating Expenses on the Premises, when vacant, are approximately Two Hundred Seventy Four Thousand and 00/100 Dollars per year or Three and 21/100 Dollars ($3.21) per rentable square foot as set forth in Exhibit C. Tenant acknowledges and agrees that Landlord will not be able to recover all increased Operating Expenses that are a result of a third party tenant and as such, that Operating Expenses to Tenant will increase; provided, however, Landlord and Tenant agree to work together in good faith to control Operating Expenses on the unoccupied portions of the Premises and Landlord agrees to a reasonable cap on Operating Expenses for the vacant portion of the Premises, such Operating Expenses will be on a sliding scale according to third party tenant occupancy of approximately Two Hundred Seventy Eight Thousand Three Hundred Seventy Three and 00/100 Dollars ($278,373.00) including management fees (which is approximately Three and 21/100 Dollars ($3.21) per rentable square foot) to Five

Hundred Twenty Eight Thousand Two Hundred Sixty Six and 50/100 Dollars ($528,266.50) including management fees (which is approximately Six and 21/100 Dollars ($6.21) per rentable square foot) multiplied by one hundred twenty five percent (125%) as set forth in Exhibits C & D and as offset by Third Party Rents and pro rata share of Operating Expenses as set forth herein; and further, provided, however, Landlord agrees that such Operating Expenses payable by Tenant to Landlord including management fees, shall not exceed Seven Hundred Twenty Six Thousand Eight Hundred Fifty Six and 00/100 Dollars ($726,856.00) in the aggregate over the three year term of this Lease. Notwithstanding the foregoing, management fees charged to Tenant by Landlord shall billed as set forth herein and are not subject to escalation.

(d) Management of the Premises. Landlord and Tenant agree that Tenant will retain management of the Premises at Tenant’s expense until the earlier of (i) 50% third party tenant occupancy, or (ii) the commencement of the second 12-month term of this Lease; provided, however, such management will be commercially reasonable and Landlord may process and pass through to Tenant any direct billing such as Utilities other than electrical.

(e) Management Fee. Landlord’s annual management fee for processing and pass through of billing to Tenant shall not exceed ½% of the aggregate Monthly Rental Amount for the first 12 months of this Lease, 2% of the aggregate Monthly Rental Amount the second year, and 3% of the aggregate Monthly Rental Amount for the third year of the Lease.

(f) Audit Rights. Landlord agrees the Tenant shall have the right to audit Landlord’s books and records, including, without limitation third party leases, to verify that Landlord is properly applying credit amounts as required by this Lease.

(g) Initial Third Party Tenant Leases. Landlord agrees that it will not lease a space in the Premises to any initial third party tenant smaller than Eight Thousand rentable square feet without the prior written approval of Tenant.

ARTICLE 4

SECURITY DEPOSIT

4.1 Security Deposit. Upon the execution of this Lease, Tenant will deposit an amount equal to the Security Deposit with Landlord, as security for the full performance by Tenant of its obligations under this Lease. If an event of default by Tenant occurs under any provision of this Lease, Landlord will be entitled, at its option, to apply or retain all or any part of the Security Deposit for the payment of any rent or other sum in default, any other amount which Landlord may spend or become obligated to spend because of Tenant’s default, or to compensate Landlord for any other loss or damage which Landlord may suffer because of Tenant’s default. If any portion of the Security Deposit is so used or applied, Tenant will, within five (5) days after written demand therefor, deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its original amount. In no event will the Security Deposit be deemed or treated as a prepayment of any rental or other amounts payable by Tenant under this Lease, including without limitation, the last monthly installment of rent. Landlord will not be required to keep the Security Deposit separate from its general funds, and Tenant will be entitled to interest on the Security Deposit at the rate of 1% below the Prime Rate of Zions First National Bank, N.A. or its successors adjusted monthly. Said interest will be paid by Landlord to Tenant

quarterly within five (5) days after the end of each calendar quarter so long as Tenant is not in default under the Lease. If Tenant will fully and faithfully perform every provision of this Lease to be performed by it, upon Tenant’s surrender of the Premises and within fifteen (15) days after the expiration of the Lease, Landlord will return the Security Deposit, or any remaining balance thereof, together with its written explanation of the application of the funds, to Tenant. In the event of termination of Landlord’s interest in this Lease, Landlord will transfer the deposit to Landlord’s successor in interest, giving notice to Tenant, and Tenant waives any claim to approve the transfer. Tenant agrees that, upon a transfer of the Security Deposit, Landlord will have no further liability to return or account for it; provided, however, that Landlord may retain the Security Deposit until such time as any amount due from Tenant in accordance with this Lease has been determined and paid in full. Landlord’s rights with respect to the Security Deposit will be in addition to and will not preclude concurrent, alternative or successive exercise of any other rights or remedies available to Landlord.

4.2 In the alternative, Tenant may elect to keep said Security Deposit in an escrow account with appropriate instructions to the escrow holder to pay to Landlord appropriately upon default of Tenant. Said escrow account may be interest bearing with any accured interest payable to Tenant so long as Tenant is not in default under the Lease.

4.3 As a further alternative, Tenant may elect to provide Landlord with an irrevocable Letter of Credit issued by an acceptable financial institution in the amount of Eight Hundred Seventy One Thousand Two Hundred Thirty and 00/100 Dollars ($871,230.00) which may be drawn against by Landlord to the extent that Tenant fails to pay as set forth in the Lease or if within fifteen (15) days prior to the expiration of any letter of credit provided, Tenant fails to obtain an acceptable replacement letter of credit. If the Landlord draws on the letter of credit it will be held and used subject Section 4.1 of this Lease.

4.4 Provided that Tenant is not in default the amount of Security Deposit or Letter of Credit shall be reduced from Eight Hundred Seventy One Thousand Two Hundred Thirty and 00/100 Dollars ($871,230) after the first full calendar year as follows:

a) Tenant may withdraw or be entitled to a refund from the Security Deposit of the amount of Monthly Rental (but not Additional Rental) paid commencing with the sixteenth (16) month as set forth in Exhibit E and;

b) To the extent that due to Third Party Rents, Tenant’s Monthly Rental obligation for months sixteen through thirty-six (16 – 36) of this Lease has been reduced from that set forth in the Monthly Rental section of the Fundamental Provisions, Tenant shall be entitled to a refund of the amount of reduced Monthly Rental obligation as reasonably agreed by Landlord and Tenant. Whenever an additional third party occupies space, Landlord and Tenant shall reasonably calculate the reduction of Tenant’s Monthly Rental obligation due to the anticipated Third Party Rents added and Tenant shall receive a refund of such reduction as set forth is Exhibit F.

c) Furthermore, if Tenant reports a Net Income (excluding any one-time benefits from disposition of assets in any two consecutive quarters commencing in the first calendar quarter of 2005, then the amount of the required Security Deposit shall be reduced by one-half (½) of the then remaining Security Deposit. This one-half (½) reduction shall apply one (1) time only.

Notwithstanding the above, if Tenant reports a Net Income as defined above for four (4) consecutive quarters commencing after January 1, 2005, the Security Deposit shall be reduced to One Hundred Thousand and 00/100 Dollars ($100,000.00).

ARTICLE 5

USE; CONSTRUCTION; MAINTENANCE AND REPAIR

5.1 Permitted Use. Tenant may use the Premises for office, research and development, laboratory or any other lawful use permitted by applicable covenants and restrictions currently in place with respect to the University of Utah Research Park and the Premises, or for no purpose.

5.2 No Waste; Compliance with Law. Tenant agrees not to commit any waste of the Premises. Tenant agrees to comply with all laws, ordinances, regulations, governmental stipulations, covenants, conditions and restrictions, public or private, affecting or relating to the Premises, and Tenant’s use thereof including, without limitation, such laws, rules and regulations as may from time to time be in effect with respect to the use of “Hazardous Materials” [as defined below] on the Premises.

5.3 Buildings and Improvements. Tenant shall not remove, demolish or impair the structural character of any existing improvement to the Premises without Landlord’s prior written consent, which may be withheld in Landlord’s sole and absolute discretion.

5.4 Maintenance and Repair Obligations. During the Term, Tenant, at Tenant’s sole cost and expense, shall keep and maintain the Premises and any improvements serving the Premises, in good, useable, safe condition; provided, however, that Tenant shall not be required to repair or restore any portion of the Premises or any improvements serving the Premises, except to the extent the same results from the active negligence of Tenant, its employees, agents or contractors and is not covered by casualty insurance. Notwithstanding the foregoing, and in order to control Operating Expenses, Tenant’s obligation to have all of the building systems in working order will be upon reasonable notice from Landlord of a third party tenant requirement; and further, provided, however, Tenant shall, (i) at the commencement of this Lease and at Tenant’s expense, seal and stripe the west parking lot for the Premises, and (ii) at Lease commencement or such date as the parties agree, disassemble and remove the dome structure located in the wide bay. Landlord acknowledges and agrees that Tenant’s removal of the dome structure does not include any other restoration or repairs to the Premises by Tenant.

5.5 Environmental Compliance. Tenant shall comply with all environmental and industrial hygiene laws, rules, and regulations relating to or affecting the Premises or any operations thereon, including laws, rules and regulations governing the storage of Hazardous Materials. For purposes of this Lease, “Hazardous Materials” means any and all substances, chemicals, wastes, sewage, materials or emissions which are now or hereafter may be regulated, controlled, prohibited or otherwise affected by any local, state or federal statute, ordinance, code, rule, regulation, order, license, common law, treaty, decree, permit or other law now or hereafter in effect, including, without limitation: (a) any substance which is defined as or included in the definition of “hazardous substances”, “hazardous wastes”, “hazardous materials”, “extremely hazardous waste”, “acutely hazardous wastes”, “restricted hazardous waste”, “toxic substances”, “air pollutant”, or “known to cause cancer or reproductive toxicity” (or words of similar import), petroleum products (including crude oil or any fraction thereof) or any other chemical, substance or material which is prohibited, limited or regulated under any federal, state or local law, ordinance, regulation, order, permit, license, decree, common law, or treaty now or hereafter in force regulating, relating to or imposing liability or standards concerning materials or substances known or suspected to be toxic or hazardous to health or safety, the environment or natural resources, including,

without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA”), 42 U.S.C. § 9601, et seq., the Hazardous Materials Transportation Act, as amended, 49 U.S.C. § 1801, et seq., the Resource Conservation and Recovery Act, as amended (“RCRA”), 42 U.S.C. § 6901, et seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C. § 1251, et seq., the Clean Air Act, as amended, 42 U.S.C. § 7401, et seq.; (b) any substance the presence of which at the Premises causes or threatens to cause a nuisance upon the Premises or to adjacent properties or poses or threatens to pose a hazard to the health or safety of human beings; and (c) any substance the presence of which at the Premises or at nearby or adjacent properties could constitute a trespass.

ARTICLE 6

LIENS AND ENCUMBRANCES

6.1 Encumbering the Premises. During the Term of this Lease, Tenant shall not cause any lien, claim, charge or encumbrance of any nature or description whatsoever to attach to or encumber the Premises or any part thereof without Landlord’s prior consent.

ARTICLE 7

GENERAL INDEMNITY; INSURANCE; CASUALTY

7.1 General Indemnity Provisions. Tenant covenants and agrees to indemnify and save Landlord harmless for, from and against each and every claim, demand, liability, loss, cost, damage and expense, including, without limitation, attorneys’ fees and court costs, arising out of any injury to or death of persons or damage to property caused by Tenant or its agents, contractors or employees. These indemnity provisions, as well as all other indemnity provisions in this Lease, shall survive the expiration of this Lease or the earlier termination thereof.

7.2 General Indemnity Provisions. Landlord covenants and agrees to indemnify and save Tenant entirely harmless for, from and against each and every claim, demand, liability, loss, cost, damage and expense, including, without limitation, attorneys’ fees and court costs, arising out of any injury to or death of persons or damage to property caused by Landlord or its agents, contractors or employees. These indemnity provisions, as well as all other indemnity provisions in this Lease, shall survive the expiration of this Lease or the earlier termination thereof.

7.3 Casualty Insurance. Landlord will, at all times during the Term, subject to reimbursement by Tenant as provided herein, obtain and maintain in effect an All Risk property and casualty insurance policy for the benefit of Landlord and Tenant insuring one hundred percent (100%) of replacement cost of the building in which the Premises are located . The original of such policy or policies shall remain in possession of Landlord; provided, however, that Tenant shall have the right to receive from Landlord, upon written demand, a duplicate policy or policies of any such insurance; and further provided, however; Landlord and Tenant will bid such insurance and Tenant may upon the reasonable approval of Landlord purchase such insurance directly. All such insurance may be carried under blanket policy covering the Premises and any other of the Tenant’s real property. Notwithstanding the foregoing, if Tenant is providing such All Risk and casualty insurance coverage directly, Tenant may require Landlord to provide such insurance coverage at the time the Premises are Leased and occupied by a third party tenant and Tenant shall reimburse Landlord for its pro rata share of such insurance.

7.4 Liability Insurance. Tenant, at the sole cost and expense of Tenant, shall at all times during the Term maintain in force an insurance policy or policies which will name Tenant as insured and Landlord together with additional parties reasonably designated by Landlord as an additional insured, insuring against all liability resulting from injury or death occurring to persons in or about the Premises and from property damage occurring in or about the Premises, the liability under such insurance to be not

less than Two Million and 00/100 Dollars ($2,000,000) (combined single limit for personal injury, including death, and property damage). The original of such policy or policies shall remain in possession of Tenant; provided, however, that Landlord shall have the right to receive from Tenant, upon written demand, a duplicate policy or policies of any such insurance. Landlord, subject to reimbursement by Tenant as provided herein, shall at all times during the Term maintain in force an insurance policy or policies which will name Landlord as insured and Tenant together with additional parties reasonably designated by Tenant as an additional insured, insuring against all liability resulting from injury or death occurring to persons in or about the remainder of the property (excluding the Premises) and from property damage occurring in or about the remainder of the property (excluding the Premises), the liability under such insurance to be not less than Two Million and 00/100 Dollars ($2,000,000) (combined single limit for personal injury, including death, and property damage). The original of such policy or policies shall remain in possession of Landlord; provided, however, that Tenant shall have the right to receive from Landlord, upon written demand, a duplicate policy or policies of any such insurance.

7.5 Insurance Policy Requirements. The insurance policies and certificates required by this Article 7 shall require the insurance company to furnish Landlord and Tenant, as the case may be, thirty (30) days prior written notice of any cancellation or lapse, or the effective date of any reduction in the amounts or scope of coverage. Except with respect to blanket insurance, as described in Section 7.8 below, all such policies shall be issued by a company or companies, rated “A” or better by Best’s Insurance Guide, responsible and authorized to do business in the State of Utah.

7.6 Mutual Waiver of Subrogation Rights. Tenant and Landlord each hereby release and relieve the other and any parent, subsidiary or affiliate of the other, and their respective directors, officers, shareholders, employees, representatives and agents (the “Related Parties”) and waive their entire right of recovery against the other and the Related Parties of the other, for loss or damage arising out of or incident to the perils insured against under this Article 7, which perils occur in, on or about the Premises, whether due to the negligence of Landlord or Tenant or their Related Parties but only to the extent of insurance proceeds actually paid. Landlord shall, upon obtaining the policies of insurance required hereunder, give notice to and obtain waiver of subrogation agreements or endorsements from the insurance carrier or carriers concerning the foregoing mutual waiver of subrogation.

7.7 Damage. If any buildings, structures or other improvements upon the Premises shall be destroyed or damaged in whole or in part by fire, or as a result directly or indirectly of war, or by act of God, or occurring by reason of any other cause whatsoever, so as to render the Premises untenantable, and such condition continues for a period longer than twelve (12) months, this Lease may be terminated at the election of Tenant, by sending written notice thereof to the Landlord, which termination shall be effective immediately upon receipt thereof. Upon any termination of this Lease pursuant to this Section 7.7, Tenant’s rental obligations shall immediately cease, and except as otherwise expressly provided herein, all of the obligations of Landlord and Tenant shall terminate. Notwithstanding the foregoing, (i) Landlord shall purchase rental income insurance, covering up to twelve (12) months of the Monthly Rental Amount due Landlord from Tenant and Tenant will reimburse Landlord for such costs not to exceed One Thousand Two Hundred Dollars ($1200.00) per year and if such casualty shall occur, Tenant shall have no obligation to pay the Monthly Rental Amount due during said twelve (12) month period, or (ii) with the reasonable written approval of Landlord, Tenant may purchase such rental income insurance directly and the cost of Tenant’s Monthly Rental Amount shall be covered by such rental income insurance for a 12-month period as set forth in this Section 7.7.

7.8 Blanket Insurance Policies. Landlord and Tenant agree that either party may satisfy its insurance obligations under this Lease by a blanket policy of insurance. Such blanket policy shall contain an endorsement that names Tenant or Landlord as the case may be as an additional insured, references the

Premises, and guarantees a minimum limit available for the Premises equal to the insurance amounts required in this Lease. Upon request, each Party shall cause certificates of insurance reasonably evidencing compliance with the requirements of this Article 7 to be delivered to the other Party.

7.9 Pro Rata Share. Tenant shall reimburse Landlord for Tenant’s pro rata share of all insurance premiums reasonably incurred by Landlord under this Lease.

ARTICLE 8

UTILITIES

8.1 Utility Charges. Tenant shall, pursuant to its obligations as set forth in Section 3.3 of this Lease, pay or cause to be paid, when due and prior to delinquency, its pro rata share of any and all charges for water, gas, electricity, telephone service, and any other utilities used in or upon the Premises by or on behalf of Tenant during the Term and agrees not to permit any charges of any kind to accumulate or become a lien against the Premises.

8.2 Separation of Utilities. Landlord and Tenant agree that, upon the expiration or earlier termination of the Term, or if required by the applicable utility company, Tenant and Landlord shall immediately (but in any event within thirty (30) days after such termination or earlier expiration of the Term or within thirty days after request therefor by such utility company) enter into such agreements as may be necessary to separate utilities serving the Premises from utilities serving other properties owned or operated by Tenant adjacent to the Premises, including, without limitation, separation of the electrical utilities from the substation currently being operated by Tenant for other properties owned and/or operated by Tenant. Landlord shall hold harmless, defend (with counsel reasonably acceptable to Tenant) and indemnify Tenant from all costs, damages, and liability whatsoever resulting from Landlord’s failure to execute such agreement as set forth herein. Land lord and Tenant agree that a separation of the electrical utility will be pursuant to an agreement in substantially the form of Exhibit G.

ARTICLE 9

TAXES AND ASSESSMENTS

9.1 Real Estate Taxes. Landlord shall pay, during the entire term of this Lease, all real estate taxes, assessments, and charges and other governmental levies and charges, general and special which are assessed or imposed upon the Premises, or any part thereof, or which become payable during the term of this Lease; provided, however that Tenant shall reimburse Landlord for Tenant’s pro rata share of such amounts within thirty (30) days prior to the date such amounts are due to the applicable governmental authority.

ARTICLE 10

SECURITY

10.1 Security. Tenant shall furnish security for the Premises at substantially the same level it provides security for its other buildings in the Research Park including monitoring and use of the existing AMAG card access system (“Card Access System”), taped monitoring of the existing CCTV system and security rounds after normal business hours. Such security shall not include parking lot enforcement or other security measures beyond Tenant’s normal observation and reporting procedures and as has been provided by Tenant to other tenant’s from time to time.

10.2 Card Access System. With respect to the card access system, Tenant will, at Tenant’s expense and not as Operating Expenses, provide, as reasonably determined by Tenant, use of the

Card Access System as follows; maintenance of the system, limited programming of access times, photos on a scheduled basis, badge activation, badge deactivation, archival of old badges, and encoding. The cost of materials will be reimbursed by Landlord to Tenant as reasonably determined by Tenant.

10.3 Modifications and Additions. Notwithstanding any language to the contrary, Landlord will pay for the costs of any modifications, additions or changes to the Card Access System, CCTV System, or additional security labor required.

10.4 Scheduling of Work. Services including, without limitation, initial programming, access code changes, badge activation, badge deactivation, and photos will be as reasonably determined by the Tenant.

10.5 Card Format. Landlord will, at Landlord’s expense, provide; (i) logo for any Landlord or third party tenant badges in a format acceptable to Tenant which is compatible with existing card key badge system and existing photo equipment and, (ii) a background color different than those currently used by Tenant.

10.6 Materials. Tenant will order and stock materials for badges as reasonably estimated by Landlord or allow Landlord to order and stock its own materials. Materials ordered or provided by Tenant will be included as Operating Expenses to Tenant unless Tenant is reimbursed directly by Landlord or Landlord’s third party tenant(s).

10.7 Temporary Badges. Landlord will provide to Tenant a copy of Landlord’s current written policy in effect from time to time, which policy must be reasonably acceptable to Tenant, regarding Landlord’s requirements for issuing temporary badges and after hours access to Landlord’s employees, contractors or agents, or third party tenants.

10.8 Reporting. Tenant will provide security rounds after normal business hours and report security or maintenance issues such as open exterior doors, roof leaks or other water leaks, or upon specific requests from Landlord, high temperatures in key areas if temperature recording equipment is provided by Landlord. All such reports will be to Landlord’s designee; provided, however, Tenant shall only be responsible to report such security or maintenance problems that are in the areas normally covered by security rounds and easily visible and times reasonably determined by Tenant.

10.9 Termination. Tenant’s agreement to provide security for the Premises shall terminate at Lease termination or may by terminated by Landlord with written notice of such termination at any time; provided, however, Landlord shall pay the costs of such security for the Premises.

10.10 Indemnification. Tenant’s agreement to provide security for the building including, card access service, CCTV taped monitoring, and security rounds is at the request of the Landlord, and Landlord agrees to indemnify and save Tenant and Tenant’s Related Parties entirely harmless for, from and against each and every claim, demand, liability, loss, cost, fine, penalty, damage and expense, including, without limitation, reasonable attorneys’ fees and court costs, arising out of such security or any accident or other occurrence causing damage or loss to property by reason of construction, maintenance or use of the Card Access System, CCTV

system, of any additions, alterations or renovations thereto, or due to the condition of the Premises, or the use or neglect thereof by Landlord or any of Landlord’s Related Parties, third party tenant’s, or any other person, or otherwise occurring upon the Premises, and unless caused by the sole gross negligence of Tenant.

ARTICLE 11

ASSIGNMENT AND SUBLETTING

11.1 Assignments. Tenant may assign all or any part of this Lease with the prior written consent of Landlord which shall not be unreasonably withheld, conditioned or delayed; provided, however, Tenant shall remain liable to Landlord for the performance of all obligations to be performed by Tenant under this Lease, including payment of the Monthly Rental Amount.

11.2 Subleases. Tenant may sublet all or any part of this Lease with the prior written consent of Landlord which shall not be unreasonably withheld, conditioned or delayed; provided, however, Tenant shall remain liable to Landlord for the performance of all obligations to be performed by Tenant under this Lease, including payment of the Monthly Rental Amount.

ARTICLE 12

SALE OF LEASEHOLD BY LANDLORD

12.1 Sale by Landlord. Landlord may sell, transfer, assign or otherwise dispose of its interest in the Premises or this Lease, or any part thereof or interest therein, without the consent of Tenant; provided, however, that Landlord shall obtain a customary nondisturbance agreement from the purchaser of Landlord’s interest and shall cause such purchaser to be bound by each and every covenant and condition to be performed by Landlord under this Lease, including, without limitation, the provisions of Section 1.5. This Lease shall not be affected by any such sale, transfer, assignment or disposal of Landlord’s interest, and Tenant agrees to attorn to Landlord’s purchaser or assignee.

ARTICLE 13

DEFAULTS AND REMEDIES

13.1 Default. Upon the non-payment of the whole or any portion of the rentals hereby reserved, or upon the non-performance by Tenant of any other covenant or condition herein set forth on the part of said Tenant to be kept and performed, Tenant shall be in default hereunder; provided, however, except as otherwise provided in this Lease, Landlord shall not be entitled to exercise its remedies for default unless, in the case of a default involving the failure to pay rent, such default continues for more than five (5) days following Tenant’s receipt of written notice from Landlord therefor, and in the case of any other default, Landlord shall have given Tenant written notice of the default and Tenant shall have failed to cure such default (or in the case of a default that cannot be cured within twenty (20) days, Tenant shall not have commenced to cure such default and be diligently prosecuting such cure) on or before twenty (20) days after Tenant receives such notice. Tenant shall also be in default under this Lease and Landlord shall be entitled to exercise its remedies under this Lease for default (without any additional cure period except as provided in subsections (a) or (b) below):

(a) Bankruptcy. If Tenant shall file a petition in bankruptcy or for reorganization or for an arrangement pursuant to any federal or state bankruptcy law or any similar federal or state

law, or shall be adjudicated a bankrupt or shall make an assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due, or if a petition or answer proposing the adjudication of Tenant as a bankrupt or its reorganization pursuant to any federal or state bankruptcy law or any similar federal or state law shall be filed in any court and Tenant shall consent to or acquiesce in the filing thereof or such petition or answer shall not be discharged or denied within sixty (60) days after the occurrence of any of the foregoing; or

(b) Other Insolvency Events. If a receiver, trustee or liquidator of Tenant or of all or substantially all of the assets of Tenant or Tenant’s leasehold interest in the Premises shall be appointed in any proceeding brought by Tenant, or if any such receiver, trustee or liquidator shall be appointed in any proceeding brought against Tenant and shall not be discharged within sixty (60) days after the occurrence thereof, or if Tenant shall consent to or acquiesce in such appointment.

13.2 Remedies. On any event of default, Landlord, at Landlord’s option, may exercise any and all rights and remedies available at law or in equity or pursuant to this Lease, in any order, successively or concurrently, including the following:

(a) Cure of Default. Landlord may take any action deemed necessary by Landlord, in Landlord’s reasonable discretion, to cure the default. Tenant shall be liable to Landlord for all of Landlord’s reasonable expenses so incurred, as additional rent, payable by Landlord to Tenant within ten (10) days of receipt by Tenant of an invoice therefor.

(b) Termination of Lease. Landlord may terminate this Lease by written notice to Tenant of Landlord’s election to do so. Upon the giving of such notice, the term of this Lease and the estate hereby granted shall expire and terminate on the date set forth in such notice as fully and completely and with the same effect as if such date were the date herein fixed for the expiration of the Term, and all rights of Tenant shall expire and terminate, but Tenant shall remain liable as hereinafter provided. Upon Landlord’s notice of termination, Landlord may recover from Tenant the Default Payment.

(c) Right to Re-enter. Landlord shall have the right pursuant to proper legal process, whether or not the term of this Lease shall have been terminated pursuant to Section 11.2(b), to re-enter and repossess the Premises by summary proceedings, ejectment, any other legal action or in any lawful manner Landlord determines to be necessary or desirable and to remove all persons and property therefrom. No such re-entry or repossession of the Premises shall be construed as an election by Landlord to terminate the term of this Lease unless a notice of such termination is given to Tenant pursuant to Section 12.2(b).

(d) Reletting of the Premises. At any time or from time to time after the re-entry or repossession of the Premises pursuant to Section 12.2(c), whether or not the term of this Lease shall have been terminated pursuant to Section 12.2(b), Landlord shall use reasonable efforts to relet the Premises for the account of Tenant at a rental which is reasonable in light of the then existing market conditions in the community, in the name of Tenant or Landlord or otherwise, without notice to Tenant, for such term or terms and on such other conditions and for such uses as Landlord, in its reasonable discretion, may determine. Landlord may collect and receive any rents payable by reason of such reletting.

13.3 Interest on Past Due Amounts. Any sum of money due to Landlord and not paid within five (5) days after such sum shall become due shall bear interest from the due date until paid at the rate of twenty one percent (21%) per annum.

13.4 Waiver of Breach. No waiver by Landlord or Tenant of the breach of any provision of this Lease shall be construed as a waiver of any preceding or succeeding breach of the same or any other provision of this Lease, nor shall the acceptance of rent by Landlord during any period of time in which Tenant is in default in any respect other than payment of rent be deemed to be a waiver of such default.

ARTICLE 14

SUBORDINATION

14.1 Subordination. Tenant agrees to execute any documents required to effectuate an attornment or subordination of this Lease to the lien of any mortgage or deed of trust, as the case may be; provided, however, that Tenant shall receive a customary nondisturbance agreement from the holder of any such mortgage or deed of trust, as the case may be.

ARTICLE 15

ESTOPPEL CERTIFICATE

15.1 Delivery of Estoppel Certificate. Each party shall at any time upon twenty (20) days’ prior written notice from the other party execute, acknowledge and deliver to the requesting party a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modifications and certifying that this Lease, as so modified, is in full force and effect) and the date to which the rent is paid; (ii) acknowledging that there are not, to such party’s knowledge, any uncured defaults on the part of either party hereunder, or specifying such defaults if any are claimed; (iii) agreeing to provide any mortgagee of the requesting party with the opportunity to cure defaults by the requesting party; and (iv) agreeing not to amend, cancel or assign the Lease without the prior consent of any such mortgagee. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises or any interest therein.

ARTICLE 16

GENERAL PROVISIONS

16.1 Notices. Notices shall be in writing and shall be given by personal delivery, by deposit in the United States mail, certified mail, return receipt requested, postage prepaid, or by express delivery service, freight prepaid. Notices shall be delivered or addressed to Landlord and Tenant at the addresses set forth on the first page of this Lease or at such other address or number as a party may designate in writing. The date notice is deemed to have been given, received and become effective shall be the date on which the notice is delivered, if notice is given by personal delivery, or the date of actual receipt, if the notice is sent through the United States mail or by express delivery service or by facsimile transmission.

16.2 Attorneys’ Fees. If any action is brought by any party to this Lease in respect of its rights under this Lease, the prevailing party shall be entitled to reasonable attorneys’ fees and court costs as determined by the court. In the event that any person who shall not be a party to this Lease shall institute an action against Tenant in which Landlord shall be involuntarily and without cause joined as a party, Tenant shall reimburse Landlord for all attorneys’ fees incurred by Landlord in connection therewith.

16.3 Severability. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.

16.4 Recording. Neither this Lease nor any memorandum of this Lease shall be recorded or filed without Landlord’s prior written consent, which consent shall not be unreasonably withheld.

16.5 Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies hereunder or at law or in equity.

16.6 Construction. The titles which are used following the number of each Section are so used only for convenience in locating various provisions of this Lease and shall not be deemed to affect the interpretation or construction of such provisions. The parties acknowledge that each party and its counsel have reviewed and revised this Lease. This Lease shall not be construed for or against Landlord or Tenant. References in this Lease to “Articles” and “Sections” refers to the Articles and Sections of this Lease, unless otherwise noted.

16.7 Successors. This Lease and all of provisions hereof shall be binding upon and inure to the benefit of the successors and assigns of Landlord and Tenant.

16.8 Governing Law. The terms, conditions, covenants, and agreements herein contained shall be governed, construed, and controlled according to the laws of the State of Utah.

16.9 Time is of the Essence. Time is of the essence of this Lease and in the performance of all of the covenants and conditions hereof.

16.10 Entire Agreement. This Lease and the Purchase Agreement set forth all the promises, inducements, agreements, conditions, and understandings between Landlord and Tenant relative to the Premises, and there are no other promises, agreements, conditions, or understandings, either oral or written, express or implied, between them. No subsequent alteration, amendment, change, or addition to this Lease shall be binding upon Landlord or Tenant unless in writing and signed by each of them. Parol evidence shall never be admissible in any court, tribunal, arbitration or governmental agency to modify, amend or vary the terms of this Lease.

16.11 Counterparts. This Lease may be executed in one or more counterparts, each of which, when taken together, shall constitute the original. Telecopy signatures shall be adequate to indicate original signatures provided the originals are provided to the parties as soon as reasonably possible following execution.

IN WITNESS WHEREOF, this Lease has been executed and delivered by Landlord and Tenant.

	LANDLORD:

	Komas L.L.C.
	By Woodbury Corporation, Its Manager
	By (Signed) W. Richards Woodbury, President


	TENANT:

	Evans & Sutherland Corporation
	By:	(Signed) Thomas Atchison
	Chief Financial Officer

EXHIBIT A
LEGAL DESCRIPTION OF PROPERTY

16:03:300:001:2014 / 6014

EXHIBIT B

DEFINITION OF OPERATING EXPENSES

1) Notwithstanding anything in this Lease to the contrary, “Operating Expenses” as said term is used herein and in the Lease, shall consist of the direct operating expenses of the Building, and shall include all expenditures by Landlord to keep the Building in operation in subsequent years as may be reasonable, normal, and customary. All such Operating Expenses shall be determined in accordance with generally accepted accounting principles, which shall be consistently applied. The Operating Expenses shall be net and for that purpose shall be deemed reduced by the amount of any insurance reimbursement, other reimbursement, recoupment, payment, discount, credit, reduction, allowance, or the like received or receivable by Landlord in connection with such Operating Expenses. Operating Expenses, as used herein, shall mean, but not be limited to, the following direct expenses, costs and disbursements of operation of the Building:

a) Salaries and such other compensation (including payroll taxes, welfare, retirement, vacation, holiday, other paid absences and other fringe benefits) payable to all full-time employees up to and including the building manager for performing services rendered in connection with the repair, maintenance and operation of the Building (or an equitable pro rata portion of such expenses, if such employees are engaged in the management, maintenance or operations of other buildings).

b) Expenses of independent contractors or agents of Landlord performing services rendered in connection with the normal operation, repair and maintenance of the Building, such as the following:

i) Window cleaners, miscellaneous handymen, janitors, cleaning personnel and porters engaged in cleaning, repairing, and maintaining the Building, its equipment and fixtures;

ii) Watchmen, caretakers and persons engaged in patrolling and protecting;

iii) Engineers, firemen, mechanics, electricians, plumbers and persons engaged in the operation, repair and maintenance of the heating, air conditioning, ventilating, plumbing, electrical and elevator systems; and

iv) Plumbers, electricians, and other persons engaged in connection with the operation, normal repairs and normal maintenance of the Building.

c) Normal repairs to and normal physical maintenance of the Building, including mechanical equipment and appurtenances thereto and the cost of supplies, tools, materials and equipment used in connection therewith.

d) Premiums and other charges incurred by Landlord with respect to the following insurance to the extent carried by Landlord:

i) Fire and extended coverage insurance, including earthquake, windstorm, hail, and explosion coverage;

ii) Rioting attending a strike, civil commotion, aircraft, vehicle and smoke insurance;

iii) Public liability and property damage insurance;

iv) Elevator insurance;

v) Workmen’s compensation insurance for the employees specified in Section 1(a) above;

vi) Boiler and machinery insurance, sprinkler leakage, water damage, legal liability, burglary, fidelity and pilferage insurance on equipment and materials; and

vii) Such other insurance as is reasonable, necessary or advisable.

e) Costs incurred for electricity, chilled water, water for heating, gas fuel, steam, water, telephone, or other similar utilities required in connection with the operation and maintenance of the Building.

f) Costs incurred in connection with inspection, servicing and maintenance contracts necessary for proper operation, janitorial and window cleaning, rubbish removal, exterminating, water treatment, elevator, electrical, plumbing, and mechanical equipment and the cost of materials, tools, supplies, and equipment used in connection therewith.

g) Water and sewer charges.

h) Sales, use and excise taxes on goods and services purchased by Landlord to properly operate or maintain the Building and its equipment.

i) License, permits and inspection fees for the Building, but not for any tenant improvements in the Building.

j) Auditor’s fees for public accounting normally required for the operation and maintenance of the Building, but not including expenses for determining rents and operating expenses.

k) Such other reasonable expenses and costs reasonably necessary to be incurred for the purpose of operating and maintaining the Building in a normal first-class manner and condition.

l) Any such reasonable expenses and reasonable costs resulting from a substitution of work, labor, material or services in lieu of any of the above itemizations, or for any such additional work, labor services or material resulting from compliance with any governmental laws, rules, regulations or orders applicable to the Building or any parts thereof which shall, at the time of any such substitution and/or addition, be considered operating expenses in accordance with generally accepted accounting principles.

m) All taxes, assessments and governmental charges, whether federal, state, county or municipal, and whether they be by taxing districts or authorities presently taxing the Building, or by others, subsequently created or otherwise, and other taxes and assessments attributable to the Building and the Building Parcel or the Building’s operation, excluding, however, all federal, state and local taxes on income, or measured by income.

n) Reasonable costs incurred by Landlord in maintaining the Common Areas.

o) Reasonable costs incurred by Landlord for management and maintenance of energy and utility savings devices and equipment.

p) Property management fees, as set forth in Article 3, subsection (e) of this Lease.

q) Ground Rent in connection with the Ground Lease, dated September 5, 1980, as amended by each of (i) that First Amendment to Lease Agreement, dated June 7, 1982, (ii) that Second Amendment to Lease Agreement, dated September 28, 1982, (iii) that Third Addendum to Lease Agreement, dated April 9, 1987, and (iv) that Fourth Addendum to Lease Agreement, dated December 31, 1990 (collectively, the “Ground Lease”).

2) Notwithstanding anything contained in the Lease or in the foregoing list to the contrary, no expenses incurred for the following shall be included within the definition of “Operating Expenses”:

a) Repairs or other work occasioned by fire, windstorm or other casualty of an insurable nature or by the exercise of the right of eminent domain.

b) Leasing commissions, attorney’s fees, costs and disbursements and other expenses incurred in connection with negotiations, transactions, or disputes with tenants, other occupants, or prospective tenants or other occupants.

c) Costs incurred in renovating or otherwise improving or decorating, painting or redecorating space for tenants or other occupants of the Building.

d) Landlord’s costs of electricity, HVAC, and other services sold to tenants and for which Landlord is entitled or would ordinarily be entitled to be reimbursed by tenants as an additional charge or rental over and above the basic rent payable under the lease agreement with such tenant.

e) Depreciation and amortization.

f) Costs of a capital nature, as defined under generally accepted accounting principles, including, but not limited to, capital improvements, capital replacements, capital repairs, capital equipment and capital tools, expect as otherwise provided in Section 1(p) above.

g) Expenses in connection with non-standard services or other benefits of a type which are not provided Tenant but which are provided to another tenant or occupant.

h) Costs incurred as a result of legal fees, judgments, or consent decrees due to violation by Landlord or any tenant of the terms and conditions of any lease.

i) Interest on debt or amortization payments on any mortgage(s) or deed(s) of trust.

j) Landlord’s general corporate overhead and general administrative expenses.

k) Rentals and other related expenses incurred in leasing air conditioning systems, elevators, or other equipment ordinarily considered to be of a capital nature, except equipment which is used in providing janitorial services and which is not affixed to the Building.

l) All items and services for which Tenant reimburses Landlord or pays third persons.

m) Any other expense which under generally accepted accounting principles and practice would not be rendered as a normal maintenance or operating expense.

n) Any costs, fines, penalties, legal fees or costs of litigation incurred due to violations by Landlord, its employees, agents, contractors or assigns, of any governmental rule or authority or of any lease in the Building.

o) Management fees in excess of Article 3, subsection (e) of this Lease.

p) Interest or penalties due to late payments of taxes, utility bills and other costs.

q) Federal and state taxes on income, death, estate or inheritance taxes; franchise taxes and any taxes imposed or measured on or by the income of Landlord from the operation of the Building or imposed in connection with any financing or change of ownership of the Building.

Exhibit C

Description	Yearly Cost		Rentable Square Feet	Cost Per Square Foot		Monthly Cost		Usable Square Feet	Monthly Usable Cost
Janitorial	$	5,022.00	83806	$	0.005	$	418.50	64718	$	0.08
Landscape	$	6,209.24	83806	$	0.07	$	517.44	64718	$	0.10
Snow Removal	$	3,885.00	83806	$	0.05	$	323.75	64718	$	0.06
Utilites	$	27,623.00	83806	$	0.33	$	2,301.92	64718	$	0.43
Taxes	$	131,139.40	83806	$	1.56	$	10,928.28	64718	$	2.03
Land Lease	$	58,513.00	83806	$	0.70	$	4,876.08	64718	$	0.90
Insurance	$	14,170.00	83806	$	0.17	$	1,180.83	64718	$	0.22
In-HouseMaintenance	$	16,422.00	83806	$	0.20	$	1,368.50	64718	$	0.25
Substation Maintenance	$	2,027.00	83806	$	0.02	$	168.92	64718	$	0.03
Asphalt Maintenance	$	—	83806	$	—	$	—	64718	$	—
Maintenance	$	9,006.00	83806	$	0.11	$	750.50	64718	$	0.14
Emergency			83806	$	—	$	—	64718	$	—
	$	274,016.64		$	3.21	$	22,834.72		$	4.23
Management Fees	$	4,356.15	83806	$	0.05	$	363.01	64718	$	280.33
1.25% Cap	$	342,520.80
Total	$	346,876.95

Exhibit D

8K Leased Year Two

50 % Operating Expenses

Description	Yearly Cost		Rentable Square Feet		Cost Per Square Foot		Monthly Cost		Usable Square Feet	Monthly Usable Cost
Janitorial	$	50,283.60	83806		$	1.20	$	8,380.60	64718	$	0.78
Landscape	$	6,209.24	83806		$	0.07	$	517.44	64718	$	0.10
Snow Removal	$	3,885.00	83806		$	0.05	$	323.75	64718	$	0.06
Electrical	$	61,608.50	83806		$	0.74	$	5,134.04	64718	$	0.95
Gas	$	9,108.52	83806		$	0.11	$	759.04	64718	$	0.14
Water & Sewer	$	15,600.00	83806		$	0.19	$	1,300.00	64718	$	0.24
Taxes	$	131,139.40	83806		$	1.56	$	10,928.28	64718	$	2.03
Land Lease	$	58,513.00	83806		$	0.70	$	4,876.08	64718	$	0.90
Insurance	$	14,170.00	83806		$	0.17	$	1,180.83	64718	$	0.22
Maintenance	$	24,711.00	83806		$	0.29	$	2,059.25	64718	$	0.38
Substation Maintenance	$	2,027.00	83806		$	0.02	$	168.92	64718	$	0.03
Emergency Maintenance	$	15,000.00	83806		$	0.18	$	1,250.00	64718	$	0.23
	$	392,255.26			$	5.28	$	36,878.24		$	6.06
Management Fees	$	13,068.45	83806		$	0.16	$	1,089.04	64718	$	840.99
Total	$	405,323.71								$	6.26
Tenant’s Pro Rata Share @ 8K	$	74,888.20	9.5459	%						$	1.16
E&S Responsibility	$	330,435.51								$	5.11
1.25% CAP	$	413,044.39

EXHIBIT E

The Monthly Rental Amount to be refunded from the Security Deposit by Landlord to Tenant beginning the 16^th month as set forth in Section 4.4 (a) of this Lease shall be as set forth below plus any interest due Tenant at the end of the Lease term.

Month	Rental Amount		Month	Rental Amount
13			25	$	36,301.25
14			26	$	36,301.25
15			27	$	36,301.25
16	$	58,081.64	28	$	36,301.25
17	$	47,191.67	29	$	36,301.25
18	$	47,191.67	30	$	36,301.25
19	$	47,191.67	31	$	36,301.25
20	$	47,191.67	32	$	36,301.25
21	$	47,191.67	33	$	36,301.25
22	$	47,191.67	34	$	36,301.25
23	$	47,191.67	35	$	36,301.25
24	$	47,191.67	36	$	36,301.25
25	$	435,615.00		$	435,615.00

Note: The Rental Amount in the 16^th month includes $10,889.97 from the payment of the Monthly Rental Amount in the 15^th month as it is in excess of Tenant’s Security Deposit obligation.

EXHIBIT F

As set forth in Section 4.4 (b) of this Lease, the Monthly Rental Amount to be refunded from the Security Deposit by Landlord to Tenant shall be the difference between the sum of the aggregate Monthly Rental Amount as set forth below for months sixteen (16) through thirty six (36) plus the aggregate monthly Rental Amount of any applicable Third Party Rents minus Eight Hundred Seventy One Thousand Two Hundred Thirty and 00/100 Dollars ($871,230.00) and Landlord shall pay Tenant any interest due Tenant on Security Deposit at the end of the Lease term.

Month	Rental Amount		Month	Rental Amount
13			25	$	36,301.25
14			26	$	36,301.25
15			27	$	36,301.25
16	$	58,081.64	28	$	36,301.25
17	$	47,191.67	29	$	36,301.25
18	$	47,191.67	30	$	36,301.25
19	$	47,191.67	31	$	36,301.25
20	$	47,191.67	32	$	36,301.25
21	$	47,191.67	33	$	36,301.25
22	$	47,191.67	34	$	36,301.25
23	$	47,191.67	35	$	36,301.25
24	$	47,191.67	36	$	36,301.25
25	$	435,615.00		$	435,615.00

Note: The Rental Amount in the 16^th month includes $10,889.97 from the payment of the Monthly Rental Amount in the 15^th month as it is in excess of Tenant’s Security Deposit obligation.

EXHIBIT G

UTILITY AGREEMENT

THIS UTILITY AGREEMENT (“Agreement”) is entered into this day of , 2007, by and between EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation (“E&S”), KOMAS, L.L.C., a Utah limited liability company (“Komas”) and PACIFICORP, an Oregon corporation doing business as Utah Power & Light Company (“UP&L”), individually a “Party” and collectively, the “Parties”.

R E C I T A L S

A. E&S and Woodbury Corporation have entered into a Purchase and Sale Agreement, dated April 7, 2004 (the “Purchase Agreement”) with respect to the building and improvements located at 650 Komas Drive, Salt Lake City, Utah (the “Property”).

B. Komas intends to obtain from Woodbury Corporation an assignment of Woodbury Corporation’s rights and interests under the Purchase Agreement, and to take possession of the Property.

C. Currently, the Property receives electrical power from a substation (the “Substation”) owned and operated by E&S.

D. Pursuant to the Purchase Agreement, Woodbury Corporation and E&S have required, as a condition to closing the transaction contemplated by the Purchase Agreement and as further set forth in that certain Lease Agreement dated , 2004, that Komas, E&S and UP&L agree, in writing, to a separation, including separate metering, by UP&L of any electrical facilities servicing the Property from the electrical facilities servicing other property owned and/or controlled by E&S in the vicinity of the Property.

E. The Parties have agreed to enter into this Agreement at the termination of the Lease set forth above to resolve the issues regarding the billing separation of electrical services to the Property.

A G R E E M E N T

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

1. Installation of Electrical Meter. UP&L shall install, at the cost and expense of E&S and Komas, to be borne equally by E&S and Komas, a primary meter near the existing switch box to allow UP&L to meter for the electrical services provided to the Property upon separation of the electrical facilities servicing the Property from the electrical facilities servicing other property owned and/or controlled by E&S. Charges due UP&L under this Section 1 are separate from the costs due under any other section of this Agreement.

2. Charge for Electrical Service. At such time as UP&L has installed the electrical meter referenced in Section 1 above and the electrical service is separated as defined in Section 3 below, Komas shall be served and billed by UP&L, at the applicable approved rate schedule.

3. Separation of Electrical Services. As soon as is practicable, in the opinion of UP&L, in its sole and absolute discretion, UP&L will separate the electrical service for the Property from the Substation; provided, however, that such separation, including, without limitation, line design and

construction, shall be subject to the standard Public Service Commission regulations regarding line extension costs, deposits and contracts. Komas shall be responsible, at its sole cost and expense, to pay for such installation in accordance with the applicable Public Service Commission regulations regarding line extension costs, deposits and contracts. Komas shall pay for all costs to provide service beyond the existing primary switchgear, including but not limited to, any necessary trenching, conduit installation, connection, splicing or conductoring, to and from the new meter cabinet, but excluding the cost of primary metering addressed in Section 1 above. Once UP&L has installed the electrical meter as required herein, and separated the electrical service provided to the Property as described in this Section 3, UP&L will bill Komas under the applicable electric service schedule, on file with and approved by the Utah Public Service Commission, which is currently Electric Service Schedule No. 6, with voltage discount.

4. Payment. E&S and Komas shall tender payment in the total amount of and 00/100 Dollars ($ ) immediately upon executing this Agreement and UP&L’s obligation to proceed with the activities described in Section 1 and Section 3 herein shall be contingent upon receipt of such payment. UP&L may, at its sole discretion, require an additional prepayment from Komas to cover the estimated cost of work performed pursuant to Section 3 herein. Payment in full of amounts due under this Agreement is a condition precedent to UP&L’s obligation to provide electric service to the Property.

5. Execution of Additional Documents. Komas, E&S and UP&L agree to execute such further documentation, as may be necessary to fulfill the purposes of this Agreement. Komas specifically acknowledges and agrees to execute such utility provider contracts and documents (the “Utility Contracts”) as UP&L may require in connection with providing the electrical service to the Property.

6. Indemnification. In addition to any other indemnities that may be required by or contained in the Utility Contracts, Komas hereby agrees to indemnify, defend (with counsel reasonably acceptable to E&S and/or UP&L, as the case may be) and hold harmless E&S and UP&L and their respective parent companies, subsidiaries, affiliates, employees, attorneys, representatives and agents, and successors and assigns, from and against any and all judgments, claims, expenses (including attorneys’ and other consultants’ reasonable fees and costs), causes of action, damages, liabilities, including without limitation, all foreseeable and all unforeseeable consequential damages, directly or indirectly arising out of the supply of electrical services to the Property, through the Substation or otherwise. Komas acknowledges and agrees, for itself, its successors and assigns, that neither E&S nor UP&L shall be liable to Komas or any tenants or other occupants of the Property in damages or otherwise if such electrical services are interrupted or terminated because of necessary repairs, installations, improvements, or any other cause beyond the control of E&S or UP&L. Komas further acknowledges and agrees that if Komas needs uninterrupted electrical service, that Komas shall be responsible, at its sole cost and expense, for providing an electrical back-up generator or other uninterruptible power source for the Property.

7. Successors and Assigns. This Agreement shall be binding on the Parties and their respective successors and assigns.

8. Severability. Invalidation of any one of these Covenants and Restrictions by judgment or court order shall in no way affect the validity of any other provisions, which shall remain in full force and effect.

9. Number and Gender. Number and gender as used in this Agreement shall extend to and include both a singular and plural and all genders as the context and construction require.

10. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Utah.

11. Integration. Except as set forth below, this Agreement contains the entire agreement of the parties hereto, and supersedes any prior written or oral agreements between the parties concerning the subject matter contained herein. Notwithstanding the foregoing, any matters in connection with the subject matter of this Agreement not specifically set forth in this Agreement shall be subject to and governed by the Utah Public Service Commission regulations in connection with such matters.

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

	E&S:

	EVANS & SUTHERLAND COMPUTER CORPORATION,
	a Utah corporation

	By:

	Its:

	Komas:

	KOMAS, L.L.C.,
	a Utah limited liability company

	By:		Woodbury Corporation,
	a Utah corporation
	Its:		Manager

	By:
			W. Richards Woodbury, President

	By:
			O. Randall Woodbury, Secretary


			UP&L:

	PACIFICORP, an Oregon corporation doing business as Utah Power & Light Company,


	By:

	Its:

EX-10.6 7 a04-9302_1ex10d6.htm EX-10.6

Exhibit 10.6

AMENDMENT NUMBER SEVEN TO LOAN AND
SECURITY AGREEMENT AND WAIVER

This Amendment Number Seven to Loan and Security Agreement and Waiver (“Seventh Amendment”) is entered into as of June 23, 2004, by and between WELLS FARGO FOOTHILL, INC., a California corporation, f/k/a/ Foothill Capital Corporation (“Foothill”), and EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation (“Borrower”), in light of the following:

A. Borrower and Foothill have previously entered into that certain Loan and Security Agreement, dated as of December 14, 2000 (“Agreement”);

B. On or about June 19, 2001, Borrower and Foothill entered into that certain amending Letter Agreement, whereby certain terms and conditions of the Agreement were temporarily amended;

C. On or about February 22, 2002, Borrower and Foothill entered into that certain Amendment Number One to Loan and Security Agreement and Waiver whereby certain terms and conditions of the Agreement were amended;

D. On or about August , 2002, Borrower and Foothill entered into that certain Amendment Number Two to Loan and Security Agreement and Waiver whereby certain terms and conditions of the Agreement were further amended

E. On or about December 11, 2002, Borrower and Foothill entered into that certain Amendment Number Three to Loan and Security Agreement and Waiver whereby certain terms and conditions of the Agreement were further;

F. On or about January 8, 2003, Borrower and Foothill entered into that certain Amendment Number Four to Loan and Security Agreement and Waiver whereby certain terms and conditions of the Agreement were further amended;

G. On or about March 14, 2003, Borrower and Foothill entered into that certain amending Consent Letter, whereby certain terms and conditions of the Agreement were temporarily amended;

H. On or about July 16, 2003, Borrower and Foothill entered into that certain Amendment Number Five to Loan and Security Agreement and Waiver whereby certain terms and conditions of the Agreement were further amended

I. On or about July 25, 2003, Borrower and Foothill entered into that certain Amendment Number Six to Loan and Security Agreement and Waiver whereby certain terms and conditions of the Agreement were further amended (the Agreement, as amended by the letter

agreement, the first amendment, the second amendment, the third amendment, the fourth amendment, the consent letter, the fifth amendment, and the sixth Amendment, all as referenced above, is hereinafter referred to as the “Loan Agreement”); and

J. Borrower and Foothill desire to further amend the Loan Agreement as provided for and on the conditions herein.

NOW, THEREFORE, Borrower and Foothill hereby amend and supplement the Loan Agreement as follows:

1. DEFINITIONS. All initially capitalized terms used in this Seventh Amendment shall have the meanings given to them in the Agreement unless specifically defined herein.

2. AMENDMENTS.

(a) There is added the following new definitions to Section 1.1 of the Loan Agreement as follows:

““Seventh Amendment” means that certain Amendment Number Seven to Loan and Security Agreement dated as of June 23, 2004, entered into between Borrower and Foothill.”

““Substitute Cash Collateral” means cash deposited by Borrower with Foothill pursuant to Section 2.4(b).”

(b) The definition of Maximum Letters of Credit Amount is deleted in its entirety and the following substituted in its place and stead:

““Maximum Letters of Credit Amount” means the lesser of: (i) Twenty-Five Million Dollars ($25,000,000); or (ii) the sum of the Real Estate Borrowing Base and the Substitute Cash Collateral.

(d) The definition of Real Estate Borrowing Base is deleted in its entirety and the following substituted in its place and stead:

““Real Estate Borrowing Base” means, as of any date of determination, the result of subtracting: (i) the aggregate amount of reserves, if any, established by Foothill under Sections 2.2, 6.11 and 10; and further subtracting (ii) the Average Undrawn portion of Letters of Credit (without duplication of such amounts if subtracted pursuant to Section 2.1(a)); from, the Amortizing Base Amount.

(e) Section 2.1(b) of the Loan Agreement is deleted in its entirety, and the following substituted in its place and stead:

“(b) For purposes of this Agreement, “Receivables Advances Borrowing Base”, as of any date of determination, shall mean the result of:

(w) 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, plus

(x) any unused availability arising out of the formula set forth in the definition of Maximum Letters of Credit Amount, 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(c), 6.11 and 10.”

(f) Section 2.2 of the Loan Agreement is amended by altering the title thereof to read “Real Estate Reserves.” and deleting all of subsections (a), (c), & (d).

(g) Section 2.2(b) will be amended by deleting the reference to the text as “(b)”since old referenced subsection (b) will be the entire text of Section 2.2.

(h) Section 2.3 (a) will be amended by deleting the last sentence thereof in its entirety, and substituting the following in its place and stead:

“Foothill shall have no obligation to issue a Letter of Credit if the aggregate amount of all: (i) undrawn or unreimbursed Letters of Credit; plus (ii) Obligations; would exceed either the Maximum Amount or the Maximum Letters of Credit Amount.

(i) Section 2.4 of the Loan Agreement is deleted in its entirety and the following substituted in its place and stead:

“2.4(a) 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 to repay Advances outstanding under Sections 2.1 or 2.2.

(b) In addition to Foothill’s ability to require a cash paydown on the Obligations as set forth in Section 2.4(a), but not in duplication thereof, in the event of an Overadvance, Foothill shall have the right to require that Borrower deposit with Foothill Substitute Cash Collateral in the amount of One hundred and five percent (105%) of the (i) Overadvance; plus (ii) the projected reductions occasioned by the Amortizing Base Amount over the balance of the remaining term of the Agreement. The Substitute Cash Collateral shall not be deposited in a segregated account, but rather will be reflected as a ledger entry in Borrower’s Loan Account. The Substitute Cash Collateral shall earn interest, computed at the rate of the announced Wells Fargo Bank, N.A. one year certificate of deposit rate, in effect on the immediately preceding January 1, April 1, July 1, or October 1, and shall either be credited against the Obligations, or quarterly, within ten (10) days of the dates set forth immediately above, paid to Borrower.”

3. REPRESENTATIONS AND WARRANTIES. Borrower hereby affirms to Foothill that all of Borrower’s representations and warranties set forth in the Agreement are true, complete and accurate in all respects as of the date hereof.

4. NO DEFAULTS. Borrower hereby affirms to Foothill that, other than Events of Default having been expressly waived by Foothill in writing, no Event of Default has occurred and is continuing as of the date hereof.

5. CONDITION PRECEDENT. The effectiveness of this Seventh Amendment is expressly conditioned upon the receipt by Foothill of an executed copy of this Seventh Amendment.

6. COSTS AND EXPENSES. Borrower shall pay to Foothill all of Foothill’s out-of-pocket costs and expenses (including, without limitation, the fees and expenses of its counsel, which counsel may include any local counsel deemed necessary, search fees, filing and recording fees, documentation fees, appraisal fees, travel expenses, and other fees) arising in connection with the preparation, execution, and delivery of this Seventh Amendment and all related documents.

7. LIMITED EFFECT. In the event of a conflict between the terms and provisions of this Seventh Amendment and the terms and provisions of the Agreement, the terms and provisions of this Seventh Amendment shall govern. In all other respects, the Agreement, as amended and supplemented hereby, shall remain in full force and effect.

8. COUNTERPARTS; EFFECTIVENESS. This Seventh Amendment may be executed in any number of counterparts and by different parties on separate counterparts,

each of which when so executed and delivered shall be deemed to be an original. All such counterparts, taken together, shall constitute but one and the same Seventh Amendment. This Seventh Amendment shall become effective upon the execution of a counterpart of this Seventh Amendment by each of the parties hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment Number Six to Loan and Security Agreement as of the date first set forth above.

WELLS FARGO FOOTHILL, INC.,
a California corporation, f/k/a Foothill Capital Corporation


By:	/s/ Larissa Megerdichian
	Larissa Megerdichian, V.P.


EVANS & SUTHERLAND COMPUTER,
a Utah corporation


By:		/s/ E. Thomas Atchison
		Tom Atchison, CFO

EX-31.1 8 a04-9302_1ex31d1.htm EX-31.1

Exhibit 31.1

CERTIFICATION*

I, James R. Oyler, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Evans & Sutherland Computer Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) [Omitted in reliance on SEC Release No. 33-8238; 34-47986, Section III.E.]

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 16, 2004

	/s/ James R. Oyler
	James R. Oyler
	Chief Executive Officer
	(Principal Executive Officer)

* Provide a separate certification for each principal executive officer and principal financial officer of the registrant. See Rules 13a-14(a) and 15d-14(a).

EX-31.2 9 a04-9302_1ex31d2.htm EX-31.2

Exhibit 31.2

CERTIFICATION*

I, E. Thomas Atchison, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Evans & Sutherland Computer Corporation;

(b) [Omitted in reliance on SEC Release No. 33-8238; 34-47986, Section III.E.]

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 16, 2004

	/s/ E. Thomas Atchison
	E. Thomas Atchison
	Chief Financial Officer
	(Principal Financial Officer)

* Provide a separate certification for each principal executive officer and principal financial officer of the registrant. See Rules 13a-14(a) and 15d-14(a).

EX-32.1 10 a04-9302_1ex32d1.htm EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. 1350,

as Adopted Pursuant Section 906 of the

Sarbanes-Oxley Act of 2002

I, James R. Oyler, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Form 10-Q of Evans & Sutherland Computer Corporation for the quarter ended July 2, 2004, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Evans & Sutherland Computer Corporation.

August 16, 2004	By:		/s/ James R. Oyler
		James R. Oyler
		Chief Executive Officer

I, E. Thomas Atchison, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Form 10-Q of Evans & Sutherland Computer Corporation for the quarter ended July 2, 2004, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Evans & Sutherland Computer Corporation.

August 16, 2004	By:		/s/ E. Thomas Atchison
		E. Thomas Atchison
		Chief Financial Officer