**AMENDED AND RESTATED**

CONVERTIBLEPROMISSORY NOTE

 

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THESECURITIES ACT OF 1933 (THE “ACT”) OR ANY STATE SECURITIES LAWS. IT MAY NOT BESOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENTAS TO THIS NOTE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THEAVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND ANY APPLICABLESTATE SECURITIES LAWS.

 
| **AMOUNT: $3,300,000** |   | **DATE: August 31, 2001** |
|------------------------|--------|---------------------------|

 

**This AMENDED ANDRESTATED CONVERTIBLE PROMISSORY NOTE** (the“Note”) is made and entered into as of the 31st day of August, 2001,by and among **NETWORK COMPUTING DEVICES, INC.,** a Delaware corporation (the"Company" or the “Maker”) and **SCI TECHNOLOGY, INC.**, an Alabamacorporation (“SCI” or “Holder”).

 

**WHEREAS,** SCI is theholder of a certain Convertible Promissory Note made by the Company datedAugust 31, 2000 in the principal sum of Three Million Three Hundred Thousand USDollars ($3,300,000), with interest computed at an annual rate of six andone-half percent (6.5%) and payable on September 30, 2001. The parties desireto extend the Note for an additional period of one year with interest computedat an annual rate of eight percent (8%).

 

**NOW, FOR VALUE RECEIVED,** the undersigned, **NETWORKCOMPUTING DEVICES, INC**., a Delaware corporation (hereinafterreferred to as the “Company” or the “Maker”) unconditionally promises to pay tothe order of **SCI TECHNOLOGY, INC**., an Alabama corporation (“Holder”), atsuch place as may be designated by Holder, the **PRINCIPAL SUM** of ThreeMillion Three Hundred Thousand US Dollars ($3,300,000), or so much of such sumas may be due and owing at the time of maturity, together with interest fromAugust 31, 2000 to September 30, 2001 on the unpaid balance hereunder, computedat an annual rate of six and one-half percent (6.5%) and from October 1, 2001on the unpaid balance hereunder, computed at an annual rate of  eight percent (8%). Interest shall be duebased on a 360 day year and the actual number of days elapsed (subject toadjustment pursuant to Section 2). The indebtedness evidenced hereby shall bedue and payable as provided for in the terms and conditions set forth below:

 

1.             Maker. Theterm “Maker” as used in this Note shall include the Maker and the respectivesuccessors and assigns thereto or thereof; provided, however, that neither thisNote nor the obligations of Maker hereunder can be assigned without the priorwritten consent of Holder, such consent to be given or withheld in Holder’ssole discretion.

 

2.             Interest. During the existence of any Event ofDefault (as defined in Section 13) under this Note, the unpaid principal ofthis Note shall bear interest on each day until paid at a per annum rate of theWSJ Prime Rate plus 2%, but only to the extent that payment of suchinterest on such principal or interest is enforceable under applicable law. The“WSJ Prime Rate” is the highest “Prime Rate” as published daily in The WallStreet Journal under the heading “Money Rates.” The WSJ Prime Rate ineffect at any time will change each time and as of the date that a new PrimeRate is published. In the event the WSJ Prime Rate is discontinued, Holdershall substitute an index determined by the Holder to be comparable, in itsreasonable discretion.

 

3.             Payment;Maturity Date. Unless converted as provided herein, the principal andaccrued interest under this Note shall be due and payable in full on September29, 2002 (the “**Maturity Date**”). Principal and interest shall be payable toHolder when due in lawful money of the United States of America in immediatelyavailable funds at such place as Holder may from time to time notify the Makerin writing. The Maker may not prepay this Note, in whole or in part, at anytime without the prior written consent of the Holder, such consent to be givenor withheld in its sole discretion.

 

4.             Use of Proceeds. This Note evidences the accountspayable of Maker, due and owing to Holder at the date hereof as set forth on Exhibit“A” attached hereto.

 

5.             Application of Payments. All payments receivedhereunder may be applied, at Holder’s option, first to the payment of anyexpenses or charges payable hereunder and accrued interest, with the balancebeing applied to principal, or in such other order as Holder shall determine.

 

6.             Conversion.

 

(a)           Optional Conversion. Subject to and in compliancewith the provisions of this **Section 6,** the entire outstanding principalamount of this Note, may, at the option of Holder, by notice given to the Maker(a “**ConversionNotice**”) at any time commencing on the date hereof and ending sixtydays after the Maturity Date (the “**Conversion Period**”), be converted into thenumber of validly issued, fully-paid and nonassessable shares of common stock,par value $.001 per share, of the Company (the “**Stock**”) equal to (i) theoutstanding principal amount of the Note divided by (ii) $.62 (the “**ConversionPrice**”). Shares of Stock issued upon conversion of this Note or ofany note issued in exchange for or upon the transfer of this Note are referredto herein as “**Conversion Shares**.”

 

(b)           Mechanics of Conversion. If the Holder exercisesits right to convert this Note, the entire principal balance shallautomatically convert into Conversion Shares at the date of the ConversionNotice (“**ConversionDate**”). As promptly as practicable after the Conversion Date, but inno event later than within 5 days after the Company’s receipt of the ConversionNotice, the Maker shall issue and shall cause its transfer agent to issue anddeliver to the Holder a certificate or certificates for the number of wholeshares of Stock issuable upon the conversion of this Note in the name of theHolder hereof. The conversion shall be deemed to have been effected immediatelyprior to the close of business on the Conversion Date, and at such time therights of the Holder as holder of this Note as to the principal balance soconverted shall cease, and the Holder shall be deemed to have become the holderof record of the shares of Stock so issued.

 

(c)           Adjustment for Reorganization. Consolidation. Merger.etc. In case at any time or from time to time, the Maker shall effect areorganization, consolidate with or merge into any other person, or transfer all or substantially all of its propertiesor assets to any other person under any plan or arrangement contemplating thedissolution of the Maker, then, in each such case, Holder, on the conversionhereof as provided in this Section 6 at any time after the consummation of suchreorganization, consolidation or merger or the effective date of suchdissolution, as the case may be, shall receive, in lieu of the Stock issuableon such exercise prior to such consummation or such effective date, the stockand other securities and property (including cash) to which Holder would havebeen entitled upon such consummation or in connection with such dissolution, asthe case may be, if Holder had so converted this Note, immediately priorthereto.

 

(i)            Dissolution.In the event of any dissolution of the Maker following the transfer of all orsubstantially all of its properties or assets, the Maker, if this Note has notbeen paid in full prior to such dissolution and if this Note is thereafterconverted, shall at its expense deliver or cause to be delivered the stock andother securities and property (including cash) receivable by the holder of thisNote after the effective date of such dissolution.

 

 (ii)  Continuation ofTerms. Upon any reorganization, consolidation, merger or transfer (and anydissolution following any transfer) referred to in this Section 6, this Noteshall continue in full force and effect and the terms hereof shall beapplicable to the shares of stock and other securities and property receivableon the conversion of this Note after the consummation of such reorganization,consolidation or merger or the effective date of dissolution following any suchtransfer, as the case may be, and shall be binding upon the issuer of any suchstock or other securities, including, in the case of any such transfer, theperson acquiring all or substantially all of the properties or assets of theMaker, whether or not such person shall have expressly assumed the terms ofthis Note.

 

(d)           NoFractional Shares. No fractional shares of Stock or scrip representingfractional shares shall be issued upon the conversion of this Note. Instead ofany fractional shares of Stock which would otherwise be issuable uponconversion of this Note, the Maker shall pay to the holder of this Note anappropriate cash adjustment in respect of any fractional shares.

 

(e)           Reservationof Stock. The Maker shall at all times reserve and keep available out ofits authorized but unissued shares of Stock, solely for the purpose ofeffecting the conversion of this Note, such number of its shares of Stock asshall from time to time be sufficient to effect the conversion of this Note,and if at any time the number of authorized but unissued shares of Stock shallnot be sufficient to effect the conversion of this Note, the Maker shall takesuch corporate action as may be necessary to increase its authorized butunissued shares of Stock to such number of shares as shall be sufficient forsuch purpose.

 

(f)            TransferRestriction: Legend. Each share certificate evidencing the shares of Stockissued as Conversion Shares may bear the following legend (and any additionallegend required by (i) any applicable state securities laws and (ii) anysecurities exchange upon which such shares may, at the time of such exercise,be listed) on the face thereof unless at the time of exercise such shares shallbe registered under the Securities Act (as defined in Section 9):

 

“The shares representedby this certificate have not been registered under the Securities Act of 1933,as amended, or any state securities laws, and may not be sold or transferred inthe absence of such registration or any exemption therefrom under said Act andstate securities laws.”

 

Any certificate issued at any time in exchange or substitution for anycertificate bearing such legend (except a new certificate issued under aregistration statement of the securities represented thereby) shall also bearsuch legend unless the Company receives an opinion of counsel for the holderthereof to the effect that the securities represented thereby are not, at suchtime, required by law to bear such legend.

 

(g)           AdjustmentUpon Changes In Stock. The Conversion Price and the number of shares ofStock issuable hereunder are subject to adjustment from time to time asfollows:

 

(i)            StockIssuance. Stock Dividend. Stock Split or Subdivision of Shares. If thenumber of shares of Stock outstanding at any time after the date hereof isincreased by the issuance of Stock, or securities convertible into stock, for aconsideration per share of Stock of less than $.62 per share (other than (A)shares of the Company’s Series B Preferred Stock outstanding on the datehereof, (B) up to 530,000 shares of the Company’s Series C Preferred Stock, (C)up to 1,200,000 shares of Stock issuable upon exercise of warrants issued tothe purchasers of Series C Preferred Stock, or (E) shares of Stock issuable uponconversion or exercise of any convertible securities, options or warrants thatare outstanding on the date hereof), or as a result of a stock dividend payablein shares of Stock, or by a subdivision or split-up of shares of Stock, then,upon issuance of such Stock or other securities convertible into Stock orfollowing the record date fixed for the determination of holders of Stockentitled to receive such stock dividend, subdivision or split-up, as the casemay be, the Conversion Price shall be appropriately decreased and the number ofshares of Stock issuable upon conversion of this Note shall be appropriatelyincreased in proportion to such increase in outstanding shares. No adjustmentshall be made as a result of the issuance of shares of Stock pursuant toexisting stock plans of the Company in an amount up to the maximum number ofshares of Stock approved for issuance under such plans at the date hereof.

 

(ii)           Combinationof Shares. If, at any time after the date hereof, the number of shares ofStock outstanding is decreased by a combination of the outstanding shares ofStock, then, following the record date for such combination, the ConversionPrice shall be appropriately increased and the number of shares of Stockissuable upon conversion of this Note shall be appropriately decreased inproportion to such decrease in outstanding shares.

 

7.             The Company's Representations.The Company represents and warrants to the Holder that:

 

(a)           theCompany is a corporation duly organized, validly existing and in good standingunder the laws of the State of Delaware and is duly qualified to do businessand is in good standing in each other jurisdiction where the conduct of itsbusiness or the ownership of its properties require such qualification and where failure to be soqualified would have a material adverse effect on the Company. The Company hasfull corporate power and authority and is entitled to own or lease itsproperties and carry on its business as and in all places where such businessis conducted and such properties are owned or leased;

 

(b)           asof the date hereof and before giving effect to this Note, the Company's totalauthorized Stock and total issued and outstanding shares of Stock are as setforth in Exhibit B. Except as set forth in Exhibit B, there areno options, warrants or rights to acquire shares or other securities of theCompany authorized, issued or outstanding, nor is the Company obligated in anyother manner to issue shares or other securities. All shares and othersecurities of the Company presently issued and outstanding are duly authorized,validly issued, fully paid and nonassessable and were authorized, offered,issued and sold without violating the terms of any applicable preemptive orsimilar statutory or contractual rights to which the Company is a party or thatis otherwise binding upon the Company. Neither the execution and delivery ofthis Note nor conversion and issuance of the Conversion Shares, if and whenissued, does or will violate the terms of any applicable preemptive or similarstatutory or contractual rights to which the Company is party or that isotherwise binding upon the Company. Except as set forth in the  Company's certificate of incorporation, asamended, and bylaws, as amended, there are no restrictions on the transfer ofshares of stock or other securities of the Company other than those imposed byrelevant federal and state securities laws or Nasdaq stock market rules;

 

(c)           theCompany has the full corporate power and authority to execute, deliver andperform this Note (and to borrow hereunder), and that certain Amended andRestated Registration Rights Agreement (the "**Registration Rights Agreement**")dated August 29, 2001. The Company has taken all necessary and appropriatecorporate action to authorize the execution, delivery and performance of thisNote and the Registration Rights Agreement, each of which has been duly andvalidly executed and delivered by the Company and constitute the valid andlegally binding obligations of the Company, enforceable in accordance withtheir respective terms, except as the same may be limited by bankruptcy,insolvency, reorganization or similar laws affecting the rights of creditorsgenerally and by general equitable principles;

 

(d)           theexecution, delivery and performance by the Company of this Note and theRegistration Rights Agreement do not and will not violate any provision of anyapplicable law, rule, regulation, order, writ, judgment, injunction, decree,determination or award presently in effect and known to the Company, or resultin a breach of or constitute a default under any indenture or loan or creditagreement or any other material agreement, lease or instrument to which theCompany is a party or by which its properties may be bound or affected (eachsuch indenture, agreement, lease or instrument, a "**Material Agreement**");

 

(e)           thereis no fact peculiar to the Company which materially adversely affects (or isreasonably likely to materially adversely affect) the business, property orassets, or financial condition of the Company which has not been disclosed toHolder in writing by or on behalf of the Company prior to the date hereof inconnection with the transactions contemplated hereby or by the RegistrationRights Agreement;

 

(f)            there are no legal proceedings pendingor to the Company's knowledge threatened, against, by or affecting the Companybefore any court or administrative agency which, if adversely determined, couldmaterially adversely affect (or is reasonably likely to materially adverselyaffect) the business, assets, liabilities, financial condition or results ofoperations of the Company, the rights or remedies of Holder under, or thelegality, validity or enforceability of, this Note and the Registration RightsAgreement;

 

(g)           theCompany has taken all necessary action, if any, in order to render inapplicableany control share acquisition, business combination or other similaranti-takeover provision under the certificate of incorporation or bylaws of theCompany which is or could become applicable to the Holder or the issuance ofthis Note or the Conversion Shares. None of the transactions contemplated bythis Note or the Registration Rights Agreement, including the conversion of theNote into shares of Stock, will trigger any poison pill provisions of any ofthe Company's stockholders' rights or similar agreements;

 

(h)           theCompany has delivered to the Holder copies of its audited financial statementsas of December 31, 2000 and its unaudited financial statements as of June 30,2001 included in its most current Form 10-K and Form 10-Q, respectively. (the"Financial Statements"). The Financial Statements are true, completeand correct and have been prepared in accordance with generally acceptedaccounting principles, consistently applied; and

 

(i)            theCompany is not engaged principally, or as one of its important activities, inthe business of purchasing or carrying any "margin stock", as thatterm is defined in Section 221.2(h) of Regulation U of the Board of Governorsof the Federal Reserve System, and no part of the indebtedness evidenced bythis Note will be or has been used to purchase or carry any such margin stockor to extend credit to others for the purpose of purchasing or carrying anysuch margin stock, or be used for any purpose which violates, or which isinconsistent with, the provisions of Regulation X of said Board of Governors.

 

8.             Covenants.For so long as any present or future debts, liabilities and obligations of theCompany owing to the Holder (including its successors and assigns) arisingunder or in connection with this Note (collectively, "Obligations")remain outstanding, which Obligations are binding on all of the Company'ssuccessors and assigns, the Company covenants and agrees that:

 

(a)           theCompany shall not (i) liquidate, wind-up or dissolve itself (or suffer anyliquidation or dissolution); or (ii) convey, sell, transfer or otherwiseencumber or dispose of in one transaction or a series of transactions, all orsubstantially all of its business or assets;

 

(b)           theCompany shall not permit to exist or enter into any transaction (including thepurchase, sale, lease or exchange of any property or the rendering of anyservice) with any affiliate of the Company or with any director, officer oremployee of the Company, (i) except for salaries and other remuneration paid toemployees in the ordinary course of business at levels consistent with pastpractices (subject to annual increases in compensation consistent with pastpractices); (ii) reimbursement of reasonable bona fide business expensesincurred in the conduct of the Company's business in the ordinary courseconsistent with its past practices; or (iii) as approved by the Board ofDirectors of the Company by vote of disinterested directors;

 

(c)           as long as Holder holds this Note orowns the Conversion Shares, the Company will cause the Stock to continue at alltimes to be registered under Section 12 of the Securities and Exchange Act of1934 ("Exchange Act") or subject to Section 15(d) of the ExchangeAct, will timely file (or obtain extensions in respect thereof and file withinthe applicable grace period) all reports required to be filed by the Companyafter the date hereof pursuant to Section 13, 14 or 15(d) of the Exchange Actand will not take any action or file any document (whether or not permitted bythe Exchange Act or the rules thereunder) to terminate or suspend suchreporting and filing obligations. As long as Holder holds this Note or owns theConversion Shares, if the Company is not required to file reports pursuant to Section13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Holderand make publicly available in accordance with Rule 144(c) promulgated underthe Securities Act annual and quarterly financial statements, together with adiscussion and analysis of such financial statements in form and substancesubstantially similar to those that would otherwise be required to be includedin reports required by Section 13(a) or 15(d) of the Exchange Act, as well asany other information required thereby, in the time period that such filingswould have been required to have been made under the Exchange Act. The Companyfurther covenants that it will take such further action as the Holder mayreasonably request, all to the extent required from time to time to enable theHolder to sell the Conversion Shares without registration under the SecuritiesAct within the limitation of the exemptions provided by Rule 144 promulgatedunder the Securities Act. Upon the request of Holder, the Company shall deliverto Holder a written certification of a duly authorized officer as to whether ithas complied with such requirements.

 

(d)           the Company shall not sell, offer forsale or solicit offers to buy or otherwise negotiate in respect of any security(as defined in Section 2 of the Securities Act) that would be integrated withthe issuance of this Note or the Conversion Shares in a manner that wouldrequire the registration under the Securities Act of the issuance of this Noteto Holder or the sale of the Conversion Shares to Holder, or to issuesecurities in such circumstances that is likely to result in such offeringbeing integrated with the issuance of this Note to Holder or the sale of theConversion Shares in such manner that stockholder approval would be requiredpursuant to any stockholder approval provision applicable to the Company or itssecurities.

 

(e)           (1)           the Company shall (i) not later thantwenty (20) business days after the date hereof, prepare and file with Nasdaq(as well as any other national securities exchange or market on which the Stockis then listed) additional shares listing applications or letters acceptable toNasdaq covering and listing a number of shares of Stock which is at least equalto 100% the maximum number of Conversion Shares then issuable, assuming thatthe payment of all future dividends on such shares then outstanding were madein shares of Stock, (ii) take all steps necessary to cause the ConversionShares to be approved for listing on Nasdaq (as well as on any other nationalsecurities exchange or market on which the Stock is then listed) as soon aspossible thereafter, (iii) maintain, so long as any other shares of Stock shallbe so listed, such listing of all Conversion Shares, and (iv) provide to Holderevidence of such listing. The Company shall promptly provide to Holder copiesof any notices it receives from Nasdaq regarding the continued eligibility ofthe Stock for listing on such automated quotation system. The Company shall payall fees and expenses in connection with satisfying its obligations under thissubsection (e)(l).

 

(2)           the Company at all times shallreserve a sufficient number of shares of its authorized but unissued Stock toprovide for the full conversion of this Note into  Stock. If at any time the number of shares of Stock authorizedand reserved for issuance is insufficient to cover 100% of the number ofConversion Shares issuable upon conversion of this Note (based on theConversion Price in effect from time to time) without regard to any limitationon conversions or exercises, the Company will promptly take all corporateaction necessary to authorize and reserve 100% of such required shares ofStock, including, without limitation, calling a special meeting of stockholdersto authorize additional shares to meet the Company's obligations under thissubsection (e)(2), in the case of an insufficient number of authorized shares,and using best efforts to obtain stockholder approval of an increase in suchauthorized number of shares.

 

9.             Holder'sRepresentations. By its acceptance of this Note, the Holder herebyacknowledges and represents and warrants to the Maker that:

 

(a)           Holderis experienced in evaluating and investing in companies such as the Company,and is an "accredited investor" (as such term is defined in Section2(15) of the Securities Act of 1933 (the "**Securities Act**");

 

(b)           Holderis acquiring the Note for investment for Holder's own account and not with aview to, or for resale in connection with, any distribution thereof. Holderunderstands that the Note has not been registered under the Securities Act byreason of an exemption from the registration provisions of the Securities Actwhich depends upon, among other things, the bona fide nature of Holder'sinvestment intent; and

 

(c)           TheNote must be held indefinitely unless it is subsequently registered under theSecurities Act or an exemption from such registration is available.

 

10.           FinancialInformation. The Maker will from time to time deliver to the Holder suchinformation respecting the condition or operations, financial or otherwise, orproperty of the Maker and its subsidiaries as the Holder may reasonablyrequest, including, without limitation all public filings made with theSecurities and Exchange Commission.

 

11.           Expenses.Maker herewith agrees to pay, on demand, all costs and expenses of collectionof this Note or of any endorsement or guaranty hereof and/or the enforcement ofHolder's rights with respect to this Note, including, without limitation,reasonable attorneys fees actually incurred by Holder if this Note is collectedby an attorney-at-law.

 

12.           Holder.The term "Holder" as used in this Note shall include Holder'ssuccessors, endorsees and assigns.

 

13.          Events of Default.

 

(a)           Theoccurrence of any one or more of the following events will constitute a defaultby the Maker hereunder (each, an "Event of Default"): (i) the Makerfails to pay when due any amount payable under this Note and Holder does notdeliver a Conversion Notice within the Conversion Period; (ii) Maker fails toperform or breaches a covenant or agreement in this Note or in the RegistrationRights Agreement , or the Maker takes or omits to take any action that if takenor not taken by the Maker would constitute a breach of any such covenant oragreement and Maker fails to cure such breach or omission within thirty daysafter written notice from Holder; (iii) any statement, representation, orwarranty made by the Maker or on its behalf in connection with this Note or inthe Registration Rights Agreement proves to have been untrue, incorrect,misleading or incomplete in any material respect as of the date made; (iv) theMaker is in default under any other agreement with the Holder (or any of itsaffiliates) or under any other instrument executed by the Maker in favor of theHolder (or any of its affiliates); (v) the Maker shall fail to pay when due anyother indebtedness for borrowed money owed by it to any person in an amount inexcess of $1,000,000 and such default shall continue beyond any applicablegrace period and is not otherwise waived by such person; (vi) the Maker becomesinsolvent as defined in the Uniform Commercial Code or any similar law in itsjurisdiction of incorporation or makes an assignment for the benefit ofcreditors, or an action is brought by the Maker seeking its dissolution orliquidation of its assets or seeking the appointment of a trustee, interimtrustee, receiver or other custodian for any of its property, or the Makercommences a voluntary case under the U.S. Federal Bankruptcy Code or any similarlaw in any relevant jurisdiction, or a reorganization or arrangement proceedingis instituted by the Maker for the settlement, readjustment, composition orextension of any of its debts upon any terms, or an action or petition isotherwise brought by the Maker seeking similar relief or alleging that it isinsolvent or unable to pay its debts as they mature; (vii) an action is broughtagainst the Maker seeking its dissolution or liquidation of any of its assetsor seeking the appointment of a trustee, interim trustee, receiver or othercustodian for any of its property, and such action is consented to oracquiesced in by the Maker or is not dismissed within sixty (60) days of thedate upon which it was instituted, or a proceeding under the U.S. Federal BankruptcyCode or any similar law in any relevant jurisdiction is instituted against theMaker and an order for relief is entered in such proceeding or such proceedingis consented to or acquiesced in by it or is not dismissed within sixty (60)days of the date upon which it was instituted, or a reorganization orarrangement proceeding is instituted against the Maker for the settlement,readjustment, composition or extension of any of its debts upon any terms andsuch proceeding is consented to or acquiesced in by it or is not dismissedwithin sixty (60) days of the date upon which it was instituted, or an actionor petition is otherwise brought against the Maker seeking similar relief oralleging that it is insolvent, unable to pay its debts as they mature or generallynot paying its debts as they become due and such action or petition isconsented to or acquiesced in by it or is not dismissed within sixty (60) daysof the date upon which it was brought; or (viii) dissolution of or liquidationof the Maker.

 

(b)           Subjectto Section 6, upon the occurrence of an Event of Default, Holder, at itsoption, without demand or notice of any kind, may declare this Note immediatelydue and payable, whereupon the Maturity Date hereunder shall be the date ofsuch declaration and all outstanding principal and accrued interest shallbecome immediately due and payable; provided,

however, that upon the occurrence of any Event of Default described inclause (vi) or (vii) above, this Note, without demand, notice or declaration bythe Holder of any kind, shall automatically and immediately become due andpayable.

 

(c)           Upon the occurrence of an Event ofDefault hereunder, the Holder, without notice or demand of any kind, may holdand set off against any or all outstanding principal or interest owing underthis Note as the Holder may elect, any balance or amount to the credit of theMaker in any deposit, agency, reserve, holdback or other account of any naturewhatsoever maintained by or on behalf of the Maker with the Holder or any of itsaffiliates at any of its offices, regardless of whether such accounts aregeneral or special and regardless of whether such accounts are individual orjoint.

 

14.           Usury.In no event shall the amount or rate of interest due and payable under thisNote exceed the maximum amount or rate of interest allowed by applicable lawand, in the event any such excess payment is made by the Maker or received bythe Holder, such excess sum shall be credited as a payment of principal (or ifno principal shall remain outstanding, shall be refunded to the Maker). It isthe express intent hereof that the Maker not pay and the Holder not receive,directly or indirectly or in any manner, interest in excess of that which maybe lawfully paid under applicable law. All interest (including all charges,fees or other amounts deemed to be interest) which is paid or charged underthis Note shall, to the maximum extent permitted by applicable law, beamortized, allocated and spread on a pro rata basis throughout the actual term

of this Note.

 

15.           Timeof the Essence. Time is of the essence with respect to the obligations ofthe Maker evidenced hereby. Demand, presentment, notice, notice of demand,notice for payment, protest and notice of dishonor are hereby waived by theMaker. The Holder shall not be deemed to waive any of its rights under thisNote unless such waiver be in writing and signed by the Holder. No delay oromission by the Holder in exercising any of its rights under this Note shalloperate as a waiver of such rights and a waiver in writing on one occasionshall not be construed as a consent to or a waiver of any right or remedy onany future occasion.

 

16.           Choiceof Law. This Note shall be governed by and construed under the internallaws of the State of Alabama without giving effect to conflicts of laws.Whenever possible, each provision of this Note shall be interpreted in suchmanner as to be effective and valid under applicable law, but if any provisionof this Note shall be prohibited by or invalid under applicable law, suchprovision shall be ineffective only to the extent of such prohibition orinvalidity, without invalidating the remainder of such provision or theremaining provisions of this Note.

 

17.           Waiver of Jury Trial

 

**MAKER HEREBY WAIVES,TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT MAKER MAY HAVEUNDER ANY APPLICABLE LAW TO A TRIAL BY JURY WITH RESPECT TO ANY SUIT OR LEGALACTION WHICH MAY BE COMMENCED BY OR AGAINST HOLDER CONCERNING THEINTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS NOTEOR ANY OTHER AGREEMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH, INCLUDINGTHE REGISTRATION RIGHTS AGREEMENT. TN THE EVENT ANY SUCH SUIT OR LEGAL ACTIONIS COMMENCED BY HOLDER, MAKER HEREBY EXPRESSLY AGREES, CONSENTS AND SUBMITS TOTHE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE COUNTYIN WHICH HOLDER'S ADDRESS SHOWN BELOW IS LOCATED WITH RESPECT TO SUCH SUIT ORLEGAL ACTION, AND MAKER ALSO EXPRESSLY CONSENTS AND SUBMITS TO AND AGREES THATVENUE IN ANY SUCH SUIT OR LEGAL ACTION IS PROPER IN SAID COURTS AND COUNTY ANDMAKER HEREBY EXPRESSLY WAIVES ANY AND ALL PERSONAL RIGHTS UNDER APPLICABLE LAWOR IN EQUITY TO OBJECT TO THE JURISDICTION AND VENUE IN SAID COURTS AND COUNTY.THE JURISDICTION AND VENUE OF THE COURTS CONSENTED AND SUBMITTED TOAND AGREEDUPON IN THIS PARAGRAPH ARE NOT EXCLUSIVE BUT ARE CUMULATIVE AND IN ADDITION TOTHE JURISDICTION AND VENUE OF ANY OTHER COURT UNDER ANY APPLICABLE LAW OR INEQUITY.**

 

18.           Notices.All notices and other communications hereunder shall be in writing and shall bedelivered to Maker by overnight courier or mailed, first-class postage prepaid,addressed to Maker at the address set forth beneath Maker’s signature below.Notice shall be effective upon the earlier of (I) receipt or (ii) five daysafter mailing as provided above.

 

**IN WITNESS WHEREOF**, the parties hereto have caused thisNote to be duly executed and delivered by their respective duly authorizedcorporate officers as of the date first written above.

 

 
|             |   | NETWORK COMPUTING DEVICES, INC. |
|------------------|--------|---------------------------------|
|             |   |                            |   |
|             |   |                            |   |
| [CORPORATE SEAL] |   | By:                             |   |
|             |   |                            | Rudolph G. Morin |
|             |   |                            | President and Chief Executive Officer |
|             |   |                            |   |
|             |   | Attest:                         |
|             |   |                            |   |
|             |   |                            | By: |   |
|             |   |                            | Title: |   |
|             |   |                            |   |
|             |   | Address for notices:            |
|             |   |                            | 301 Ravendale Drive |
|             |   |                            | Mountain View, California 94043-5207 |
|             |   |                            | Attn: President |
|                  |        |                                 |  |  |  |

 

 
|   | SCI TECHNOLOGY, INC. |
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|   | By:                  |   |
|   | Title:               |   |
|   |                 |
|   | Address for Notices: |
|   |                 |   |
|   |                 |   |
|   |                 |   |
|        |                      |  |  |  |  |

 

**EXHIBIT A**

 

**LIST OF ACCOUNTS**

 

**EXHIBIT B**

 

**CAPITALIZATION**

**As of June 30, 2001 (in thousands)**

 

 
| **Shareholders'  equity:**                                                                                                                                                                                                                                                                                                                                                    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Preferred stock, $0.001 par value:  3,000,000 shares authorized; Shares  designated are:  Series A  Participating Preferred Stock, $0.001 par value: 500,000 shares authorized,  none issued or outstanding; Series B Convertible Preferred Stock, $0.001 par  value: 290,000 shares authorized;   220,000 shares issued and outstanding as of 

June 30, 2001 |   | $ | 1,500 |   |
| Common stock, $0.001 par value:   30,000,000 shares authorized; 17,613,237 shares issued and outstanding  as of  June 30, 2001                                                                                                                                                                                                                                           |   | 18 |   |
| Capital in excess of par value                                                                                                                                                                                                                                                                                                                                                |   | 62,380 |   |
| Accumulated deficit                                                                                                                                                                                                                                                                                                                                                           |   | (59,447 | ) |
| Total shareholders' equity                                                                                                                                                                                                                                                                                                                                                    |   | $ | 4,451 |   |

 

**Stock options:**

 

As of June 30, 2001, therewere 2,802,458 options outstanding under NCD's stock option plans at a weightedaverage exercise price of $3.19.

 

 

**Warrants:**

 

As of June 30, 2001, therewere warrants outstanding to purchase 1,000,000 and 600,000 shares of NCDcommon stock at exercise prices of $8.00 and $.75, respectively.