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                                                                   Exhibit 10.12

                    MUTUAL RELEASE AND SETTLEMENT AGREEMENT
                    ---------------------------------------

     This Mutual Release and Settlement Agreement (the "Agreement") is being
entered into as of March 9, 1999 by The Manufacturers Life Insurance Company
(U.S.A.), a Michigan corporation ("ManuLife") and Datametrics Corporation, a
Delaware corporation  ("Datametrics").

     WHEREAS, ManuLife has brought civil action BC 190 120 (the "Action") in Los
Angeles Superior Court, Los Angeles, California (the "Court") against
Datametrics;

     WHEREAS, the Court has granted summary judgment (the "Judgment") to
ManuLife in such Action;

     WHEREAS, ManuLife and Datametrics wish to avoid the time and expense of
appealing the Judgment and otherwise litigating issues between them and wish to
settle and compromise all issues related to the Action and all other disputes
between them;

     NOW, THEREFORE, in consideration of the promises and conditions set forth
herein, the sufficiency of which is hereby expressly acknowledged, ManuLife and
Datametrics intending to be legally bound, hereby agree as follows:

I.  Definitions
    -----------

     For purposes of this Agreement, the following terms shall have the
following meanings:

     1.  "ManuLife" shall mean The Manufacturers Life Insurance Company (U.S.A.)
and its predecessors, successors, current and former subsidiaries, affiliates,
officers, directors, partners, representative agents, employees and any other
legal representatives.

     2.   "Datametrics" shall mean Datametrics Corporation and its predecessors,
successors, current and former parents, subsidiaries, affiliates, trustees,
officers, directors, representatives, agents, employees and any other legal
representatives.

     3.  "Parties" means ManuLife and Datametrics.

II.  Settlement Payment
     ------------------

     1. Cash.  Datametrics shall pay the sum of eight-hundred fifty thousand
        ----                                                                
     dollars ($850,000) in cash to ManuLife.  Such payment shall be made by
     federal funds 

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     wire transfer payable as set forth in a notice in writing from ManuLife to
     Datametrics and shall be made not later than the close of business on the
     forty-fifth (45th) day following the execution hereof.

     2.   Common Stock.  Datametrics shall issue to ManuLife 150,000 shares of
          ------------                                                        
the Common Stock of Datametrics (the "Shares"), such Shares to be issued not
later than the close of business on the forty-fifth (45th) day following the
execution hereof.

     3.   Conditional, Limited Extension.  The due dates set forth in Sections
          ------------------------------                                      
II.1 and II.2 above may be extended by Datametrics upon written notice to
ManuLife for one fifteen (15) day period, so long as such notice is accompanied
by the payment of an additional $50,000.

III. Provisions Regarding the Shares
     -------------------------------

     1.   Securities Representation.  ManuLife hereby represents and warrants
          -------------------------                                          
that it is an "accredited investor," as such term is defined in Rule 501 of
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Act") and has the knowledge and experience in business and financial matters to
evaluate the risks and merits of acquiring the Shares and any Additional Shares
(as defined below) and that it is acquiring Shares and any Additional Shares
for investment and not for resale or for the purpose of effecting a distribution
thereof. ManuLife acknowledges and agrees that the Shares and any Additional
Shares have not been registered under the Act and may not be sold or offered for
sale except pursuant to a registration statement under the Act or an exemption
from the registration requirements thereof.

     2.   Registration Rights.  Datametrics shall use its best efforts to
          -------------------                                            
register the Shares under the Act within forty-five (45) days after the date
such Shares are issued. If Datametrics shall fail to so register the Shares,
then ManuLife shall have the right to register the Shares, with Datametrics full
cooperation and at Datametrics' cost.

     3.   Price Guarantee.  If, upon the expiration of eighteen (18) months from
          ---------------                                                       
the date of issue of the Shares to ManuLife (the "Assessment Date"), the average
of the highest closing bid prices of Datametrics Common Stock on any three (3)
trading days in the first six months of such eighteen (18) month period, plus
six (6) trading days in the second six (6) months, plus six (6) trading days in
the final six (6) months has not equaled or exceeded $2.50 per share, then
Datametrics shall be obligated to pay to 

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ManuLife the "Price Guarantee Amount" (as described below) not later than on the
tenth (10th) day after such Assessment Date, and in the form permitted
hereunder. Except as provided in the last sentence of this paragraph 3, the
"Price Guarantee Amount" shall mean (x) the amount by which the Market Price of
Shares on the Assessment Date is less than $2.50 per share, multiplied by (y)
                                                            -------------
150,000, less (z) any sales proceeds in excess of $2.50 received by ManuLife
         ----
from the sale (including any short sale or indirect sale) of any share of the
Common Stock of Datametrics during the period from the execution hereof through
the Assessment Date. The Price Guarantee Amount shall be payable at Datametrics'
option either by the payment of cash, or by the issuance of additional shares of
Common Stock of Datametrics ("Additional Shares") with an aggregate value
(determined as of the Assessment Date) equal to the Price Guarantee Amount. For
purposes hereof, "Market Price" shall mean the average closing bid and asked
price for Datametrics Common Stock on the five (5) trading days immediately
preceding (but not including) the Assessment Date (or, in the case of paragraphs
4 and 5 below, the date of the ManuLife Notice or the Repurchase Notice, as the
case may be). Unless otherwise consented to by Datametrics, if prior to the
Assessment Date, ManuLife shall sell more than the greater of (x) 9,000 shares
                                                   ----------
of Datametrics Common Stock in one calendar month, or (y) 27,000 shares in any
period of ninety (90) consecutive days, then the number "150,000" referred to
above shall be reduced by the excess number of shares so sold.

     4.   Right of First Refusal.  If ManuLife desires to sell any of the Shares
          ----------------------                                                
at any time prior to the Assessment Date, it shall provide notice (the "ManuLife
Notice") in writing to Datametrics of its desire to sell.  Datametrics (or its
designee) shall then have an option to repurchase any or all of such Shares at
the Market Price, determined as of the date of the ManuLife Notice, by notice in
writing to ManuLife sent within two (2) business days after Datametrics' receipt
of the ManuLife Notice.  The closing of such repurchase shall occur within ten
(10) days after the date of the ManuLife Notice, and the purchase price for the
Shares shall be payable in cash against delivery of the certificates for the
Shares to be repurchased duly endorsed for transfer or accompanied by duly
endorsed stock powers.  If Datametrics (or its designee) does not elect to
repurchase such Shares pursuant to this paragraph 4, ManuLife shall be free to
sell such Shares.

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     5.   Repurchase Option.  At any time on or before the Assessment Date,
          -----------------                                                
Datametrics (or its designee) shall have the option, exercisable by notice in
writing to ManuLife (the "Repurchase Notice"), to repurchase any or all Shares
then held by ManuLife for a purchase price equal to ten percent (10%) in excess
of the Market Price of the Shares to be repurchased (but not less than $2.50 per
Share), determined as of the date of the Repurchase Notice.  The closing of such
repurchase shall occur within ten (10) days after the date of the Repurchase
Notice.  At such closing, Datametrics (or its designee) shall pay the purchase
price for the Shares to be purchased in cash against delivery of the
certificates for the Shares to be repurchased duly endorsed for transfer or
accompanied by duly endorsed stock powers.

     6.   The provisions of this Section III shall expire upon any transfer of
the Shares by ManuLife not inconsistent with the provisions of this Agreement.

IV.  Conduct of Litigation.
     --------------------- 

     1.   ManuLife hereby agrees not to file, serve or cause to be served a
Notice of Entry of Judgment or to take any action to commence the time to appeal
the Judgment to run or the time to file a Motion to vacate the Judgment to run.

     2.   ManuLife hereby agrees that, as between ManuLife and Datametrics, all
relevant time periods in regard to the filing of motions, requests for relief,
notices of appeal, writs and other executory, procedural or appellate relief
with respect to the Judgment shall be stayed or tolled during the periods set
forth in Section II and/or during the term hereof, provided that the parties may
make the filings set forth on Schedule A attached hereto and which shall be
                              ----------                                   
necessary for each party to preserve its rights pending the completion of the
settlement herein provided for.

     3.   contemporaneously with receipt of the payments referred to in Section
II above, ManuLife shall file with the clerk of the Court a notice or other
evidence of the satisfaction of the Judgment and such other motions or documents
as will fully and effectively terminate any and all claims ManuLife may have in
the Judgment, or on account of the matters with respect to which the Judgment
arose.

V.   Standstill and Mutual Release by the Parties
     --------------------------------------------

     1.   ManuLife hereby agrees not to execute on the Judgment or otherwise
seek to enforce the Judgment or any rights granted thereby or to pursue any
remedies against 

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Datametrics or any of its assets unless and until this Agreement has been
terminated by ManuLife pursuant to Section VII below.

     2.   The Parties hereby fully and forever release, acquit and discharge
each other from any and all claims, demands, damages, actions, rights of action
and liabilities of whatever kind or nature, in law or equity, which any of them
have, ever had, or might have had, whether known or unknown, from the beginning
of time to the date of this Agreement.

     3.   The Parties acknowledge that this Mutual Release does not constitute
an admission of liability by either Party.

     4.   Notwithstanding the provisions of this Mutual Release, it is expressly
understood that the Parties are not releasing each other from any obligation
they have agreed to undertake pursuant to this Agreement.

VI.  Default
     -------

     1.   In the event of any material breach by Datametrics of Section II
hereof (which shall include any failure by Datametrics to strictly follow the
time constraints thereof), ManuLife shall be entitled to cancel this Agreement,
and the Mutual Release and all other provisions of this Settlement Agreement
shall be deemed to be null and void, including, but not limited to, permitting
ManuLife to take any and all steps necessary to pursue and enforce its Judgment.

     2.   A Party shall be in default under this Agreement if any other material
breach remains uncured for ten (10) days.

VII. Miscellaneous Provisions
     ------------------------

     1.   This Agreement supersedes any and all prior oral or written agreements
between the Parties and shall take effect as an instrument under seal.

     2.   This Agreement sets forth the entire agreement between the Parties and
may not be modified except by a writing signed by all of the Parties.

     3.   The Parties hereby acknowledge that they have each read this Agreement
carefully, that they have been afforded sufficient time to understand the terms
and effects of it, that they, in fact, fully understand all of the terms and
effects of it, that they have been advised to consult legal counsel, and in fact
have consulted legal counsel prior to 

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signing this Agreement, and that they are voluntarily entering into and
executing this Agreement.

     4.   The Parties represent and warrant as to themselves that they have the
power and authority to enter into this Agreement and that the execution,
delivery and performance of this Agreement (including, in the case of
Datametrics, the issue of the Shares and any Additional Shares) has been duly
authorized by all necessary action.

     5.   The covenants, agreements, terms, provisions and conditions contained
in this Agreement shall be binding and inure to the benefit of the Parties and
their respective successors and assigns.

     6.   This Agreement may be executed in one or more counterparts, and
together these counterparts shall be construed as one agreement.

     7.   Each of the Parties shall execute two originals of this Agreement and
provide one of the originals to the other Party.

     8.   This Agreement may be executed and transmitted by facsimile, and such
"facsimile execution" shall be treated by the Parties as an original and legally
binding for all purposes.  An original of any "facsimile execution" shall be
served upon the other Parties' counsel within seven (7) business days of the
date of execution by that party.

     9.   Any provision hereof which is invalid or unenforceable shall be
ineffective solely to the extent of such invalidity or unenforceability, without
affecting in any way the remaining provisions of this Agreement which shall be
valid and enforceable to the fullest extent permitted by law.

     10.  Datametrics hereby consents to a stipulation of the amount of actual
attorneys fees and court costs incurred by counsel for ManuLife incurred in the
prosecution of the Action to be filed with the Court in an amount not to exceed
$100,000.  Such stipulation is solely for the purpose of establishing the amount
of such fees and costs, and shall not otherwise serve to obligate Datametrics in
any way for payment of such amounts (other than as such amounts may be approved
and added to the Judgment, and such Judgment is not satisfied pursuant to the
terms hereof.)

     11.  (a) If a civil action is brought to enforce the terms of this
Agreement, the prevailing party shall be entitled, in addition to compensatory
damages, the costs, expenses, and/or fees (including, but not limited to,
reasonable attorney's fees and court 

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costs) incurred in connection with the prosecution or defense of such civil
action or otherwise to enforce the provisions hereof.

          (b) In the event that Datametrics shall fail to pay the Price
Guarantee Amount, or any portion thereof, due, and when due, under Section
III(3) hereof, them, in addition to the attorneys fees and costs provided for
above, ManuLife shall be entitled, as liquidated damages for such breach, to an
amount which shall equal the greater of (x) two times (2 x) the unpaid Price
Guarantee Amount, or (y) One Hundred Thousand Dollars ($100,000), and further
provided that Datametrics shall, and does hereby consent, to ManuLife's
decision, if so elected by ManuLife, to arbitrate any dispute relating to such
alleged breach, before the American Arbitration Association, Los Angeles,
California, the decision of which shall be final, binding and non-appealable, in
any court, and in any jurisdiction whatsoever.

     12.  This Agreement shall be governed by and construed in accordance with
the laws of the State of California, without giving effect to its conflicts of
laws provisions, and each party consents and submits to the exclusive
jurisdiction of the California state courts located in Los Angeles, California
in connection with any proceeding arising out of this Agreement.

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     IN WITNESS HEREOF, the parties hereto have executed this Mutual Release and
Settlement Agreement as a sealed instrument.

THE MANUFACTURERS LIFE INSURANCE
COMPANY (U.S.A.)                         DATAMETRICS CORPORATION



By:  __________________________     By:  ______________________
Name:                               Name:
Title:                              Title:

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                                   Schedule A
                                   ----------

1.   Datametrics Motion to Vacate Judgment and for new trial.

2.   Datametrics Motion to Appeal Judgment.

3.   Datemetrics Writ of Supersedeas.

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