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I. PRELIMINARY STATEMENT 1

II. FACTUAL BACKGROUND AND HISTORY OF THE LITIGATION 4

III. SUMMARY OF THE SETTLEMENT 4

IV. THE STANDARD FOR JUDICIAL APPROVAL OF CLASS ACTION SETTLEMENTS 5

V. THE SETTLEMENT IS FAIR, REASONABLE AND ADEQUATE 8

A. The Settlement Appropriately Balances The Risks Of Litigation And The Benefits To The Settlement Class Of A Certain Recovery 8

1. Continued Litigation Poses Substantial Risk In Establishing Liability And Damages 8

2. Balancing The Certainty Of An Immediate And Substantial Recovery Against The Expense And Likely Duration Of Trial Favors Settlement 15

B. The Parties Have Engaged In Sufficient Pretrial Proceedings And Discovery, And The Settlement Herein Was Negotiated With Full Knowledge Of The Strengths And Weaknesses Of The Case 17

C. The Settlement Which Represents Approximately Forty Percent Of The Possible Maximum Recovery After Trial Is Fair, Reasonable And Adequate 18

D. The Recommendations Of Experienced Counsel Strongly Militate In Favor Of Approval Of The Settlement 20

E. Reaction Of The Settlement Class Supports Approval Of The Settlement 21

VI. CONCLUSION 24

TO: ALL PARTIES AND THEIR ATTORNEYS OF RECORD

PLEASE TAKE NOTICE that, pursuant to an Order of the Court dated February 28, 1997, on May 2, 1997 at 9:30 a.m., or as soon thereafter as counsel may be heard, at the United States Courthouse, 450 Golden Gate Avenue, San Francisco, California, before the Honorable Charles A. Legge, United States District Judge, Representative Plaintiffs will and hereby do move for a judgment finally approving the settlement of the Litigation and dismissing the Litigation with prejudice. Plaintiffs' motion is based upon this Notice of Motion, Representative Plaintiffs' Memorandum in Support of Final Approval of Settlement, the Declarations of counsel for the Representative Plaintiffs submitted in support thereof, the Stipulation of Settlement dated as of January 6, 1997, all other pleadings and matters of record, and such additional evidence or argument as may be presented in Representative Plaintiffs' application or at the hearing.

I. PRELIMINARY STATEMENT

Representative Plaintiffs⁽¹⁾ respectfully submit this memorandum of law in support of their motion for final approval of the settlement (the "Settlement") of this Litigation⁽²⁾ for $11 million in cash. The Settlement appropriately reflects the relative strengths of the Parties' respective claims and defenses and the risks inherent in the Litigation. It is the result of vigorous prosecution of the Litigation and arm's-length negotiations between counsel experienced in class action securities litigation under the auspices of Retired United States District Court Judge J. Lawrence Irving who served as settlement mediator. Representative Plaintiffs' counsel believe that the Settlement is an excellent result in that it represents approximately forty percent of the maximum damages recoverable by the Settlement Class if the case had gone to trial and the Class had prevailed on every liability and damage issue. It more than satisfies the requirements for approval and Representative Plaintiffs' counsel recommend that it be approved.

As detailed in the Joint Declaration of Alan Schulman and Jeffrey A. Klafter in Support of Approval of Proposed Settlement of Class Action and Joint Application for Award of Attorneys' Fees and Reimbursement of Expenses ("Joint Declaration"), Representative Plaintiffs' counsel have investigated the facts giving rise to the claims in the Litigation and analyzed the applicable law. The Settlement was reached only after plaintiffs' counsel: (i) researched and filed detailed, comprehensive complaints and amended complaints in both the Federal and the State Actions; (ii) reviewed and analyzed all documents produced in the State Action by non-parties as well as defendants⁽³⁾; (iii) reviewed NCD's public filings, annual reports and other public statements; (iv) reviewed related public filings and statements by industry representatives; (v) researched the applicable law with respect to the claims asserted in both the Federal and State Action complaints and the potential defenses thereto; (vi) assessed the likelihood of prevailing at trial; (vii) analyzed the damages likely to be proven at trial and the maximum recovery obtainable under the terms of the PSLRA; (viii) consulted with damage and forensic accounting experts; and (ix) assessed the detailed presentation made by defendants' counsel relating to the claims asserted by plaintiffs.

Pursuant to an Order of this Court dated February 28, 1997, copies of the Notice of Pendency and Settlement of Class Action and Settlement Hearing (the "Notice") were mailed to more than 8,200 prospective members of the Settlement Class. In addition, a summary notice was published in Investor's Business Daily on March 20, 1997.⁽⁴⁾ The last day to file objections to the Settlement or request exclusion from the Settlement Class was April 18, 1997. No objections have been received. Moreover, less than half a dozen class members who purchased an aggregate of approximately 900 shares of NCD common stock during the Settlement Class Period have requested exclusion. The Settlement therefore enjoys the overwhelming support of members of the Settlement Class.

As set forth below, based on their investigation and analysis of the Litigation, the course of settlement negotiations, past experience in similar actions and the fact that the Settlement is supported by the Members of the Settlement Class, Representative Plaintiffs' counsel believe that the Settlement is fair, reasonable, and adequate and should be approved by this Court.

II. FACTUAL BACKGROUND AND HISTORY OF THE LITIGATION

A review of the procedural history and background of the Litigation is set forth in the accompanying Joint Declaration, to which, for the sake of brevity, the Court is respectfully referred.

III. SUMMARY OF THE SETTLEMENT

As explained in the Joint Declaration, the Settlement consists of Eleven Million Dollars ($11 million) in cash which has been accruing interest for the benefit of the Settlement Class since preliminary approval of the Settlement on February 28, 1997. Pursuant to the Settlement, after deduction of the costs and expenses of notice to the Settlement Class, settlement and claims administration, and taxes due on the fund, as well as the award by the Court of attorneys' fees and reimbursement of expenses, the Net Settlement Fund will be distributed in accordance with the terms of the proposed Plan of Allocation⁽⁵⁾ to those Settlement Class Members who submit timely valid claims. Once the Settlement becomes final, no funds will revert to defendants or their insurers.

IV. THE STANDARD FOR JUDICIAL APPROVAL OF CLASS ACTION SETTLEMENTS

It is established that "there is an overriding public interest in settling and quieting litigation," and this is "particularly true in class action suits." Van Bronkhorst v. Safeco Corp., 529 F.2d 943, 950 (9th Cir. 1976) (footnote omitted).⁽⁶⁾ In deciding whether to approve a proposed settlement of a stockholder's class action under Fed. R. Civ. P. 23(e), this Court must find that the proposed settlement is "fair, adequate and reasonable."⁽⁷⁾ As one court noted:

Although Rule 23(e) is silent respecting the standard by which a proposed settlement is to be evaluated, the universally applied standard is whether the settlement is fundamentally fair, adequate and reasonable. The district court's ultimate determination will necessarily involve a balancing of several factors which may include, among others, some or all of the following: the strength of plaintiffs' case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class action status throughout the trial; the amount offered in settlement; the extent of discovery completed, and the stage of the proceedings; the experience and views of counsel; the presence of a governmental participant; and the reaction of the class members to the proposed settlement.

Officers for Justice, 688 F.2d at 625 (citations omitted). Accord Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1375 (9th Cir. 1993); Church v. Consolidated Freightways, Inc., [1993 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶97,743 (N.D. Cal. May 3, 1993); In re Washington Pub. Power Supply Sys. Sec. Litig., 720 F. Supp. 1379, 1387 (D. Ariz. 1989) ("WPPSS"), aff'd sub nom. Class Plaintiffs v. Seattle, 955 F.2d 1268 (9th Cir. 1992).

The district court must exercise "sound discretion" in approving a settlement. Torrisi, 8 F.3d at 1375; Ellis v. Naval Air Rework Facility, 87 F.R.D. 15, 18 (N.D. Cal. 1980), aff'd, 661 F.2d 939 (9th Cir. 1981). However, "[w]here, as here, a proposed class settlement has been reached after meaningful discovery, after arm's length negotiation, conducted by capable counsel, it is presumptively fair." M. Berenson Co. v. Faneuil Hall Marketplace, Inc., 671 F. Supp. 819, 822 (D. Mass. 1987) (footnote omitted). Therefore, in exercising its discretion, "the court's intrusion upon what is otherwise a private consensual agreement negotiated between the parties to a lawsuit must be limited to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable, and adequate to all concerned." Officers for Justice, 688 F.2d at 625. The Ninth Circuit defined the limits of the inquiry to be made by the Court in the following manner:

[T]he settlement or fairness hearing is not to be turned into a trial or rehearsal for trial on the merits. Neither the trial court nor this court is to reach any ultimate conclusions on the contested issues of fact and law which underlie the merits of the dispute, for it is the very uncertainty of outcome in litigation and avoidance of wasteful and expensive litigation that induce consensual settlements. The proposed settlement is not to be judged against a hypothetical or speculative measure of what might have been achieved by the negotiators.

Id. (citations omitted, emphasis in original).

As explained herein and in the Joint Declaration, applying these criteria demonstrates that Court approval of the Settlement is warranted. "The recommendations of plaintiffs' counsel should be given a presumption of reasonableness." Boyd v. Bechtel Corp., 485 F. Supp. 610, 622 (N.D. Cal. 1979). The presumption of reasonableness is fully supported in this Litigation because the Settlement is the product of substantial arm's-length negotiations conducted by capable counsel who are well-experienced in securities law litigation. M. Berenson Co., 671 F. Supp. at 822; Ellis, 87 F.R.D. at 18 ("the fact that experienced counsel involved in the case approved the settlement after hard-fought negotiations is entitled to considerable weight") (citation omitted); Manual for Complex Litigation, Third §30.42 (1995).⁽⁸⁾ Here, it is the considered judgement of experienced counsel -- after careful assessment of the merits of plaintiffs' claims, the risks attendant in a trial of those claims, and protracted settlement discussions -- that this Settlement for $11 million cash, is fair, reasonable and adequate and warrants the Court's approval.

V. THE SETTLEMENT IS FAIR, REASONABLE AND ADEQUATE

A. The Settlement Appropriately Balances The Risks Of Litigation And The Benefits To The Settlement Class Of A Certain Recovery

To determine whether the proposed Settlement is fair, reasonable and adequate, the Court must balance the continuing risks of litigation against the benefits afforded to members of the Class and the immediacy and certainty of a substantial recovery. Girsh v. Jepson, 521 F.2d 153, 157 (3d Cir. 1975); Boyd, 485 F. Supp. at 616-17; In re Warner Communications Sec. Litig., 618 F. Supp. 735, 741 (S.D.N.Y. 1985). In the context of approving class action settlements, courts attempting to balance these factors have recognized "that stockholder litigation is notably difficult and notoriously uncertain." Lewis v. Newman, 59 F.R.D. 525, 528 (S.D.N.Y. 1973) (footnote omitted); see also Republic Nat'l Life Ins. Co. v. Beasley, 73 F.R.D. 658 (S.D.N.Y. 1977). This Litigation was no exception, particularly in light of the risk presented by the uncertain state of the law with respect to the pleading requirements for scienter, an element of plaintiffs' claim, under the recently enacted PSLRA. Consideration of these factors in this case supports approval of the Settlement.

1. Continued Litigation Poses Substantial Risk In Establishing Liability And Damages

To prevail on their §10(b) claims Representative Plaintiffs have the burden of establishing certain elements of liability. To establish liability, plaintiffs would have to prove, among other things, that the alleged misstatements were material, TSC Indus. v. Northway, Inc., 426 U.S. 438 (1976), and were made with scienter (actual knowledge or reckless disregard for the truth), Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976). Significantly, plaintiffs would have had to establish their case almost exclusively through the testimony of hostile witnesses. Plaintiffs would have had the burden of proving, inter alia, (i) that defendants participated in the public dissemination of misleading information; (ii) that they possessed the information which indicated that the disclosures made were misleading; (iii) that the information omitted or misrepresented was material to an investor in determining whether to invest in NCD; (iv) that the information omitted or misrepresented would have materially affected the market price of NCD common stock; (v) that the defendants withheld information from the investing public either with an actual intent to deceive or in reckless disregard of facts known to defendants; and (vi) that the Class suffered damages as a result of the artificial inflation in the price of NCD common stock that resulted from these misrepresentations and omissions.

Although Representative Plaintiffs believe that their claims are provable and that they would prevail at trial, further litigation to establish liability when defendants have denied any wrongdoing poses significant risks. These risks have been significantly heightened with the enactment of the PSLRA.

At the time the agreement to settle the Litigation was reached, defendants' motion to dismiss the complaint was pending. In moving to dismiss the complaint, defendants argued that the alleged misstatements were not actionable because they were accurate statements of historical fact, vague statements of optimism, and/or surrounded by cautionary language. With respect to the statements of analysts complained of, defendants asserted that NCD and the individual defendants could not be held liable because plaintiffs had failed to adequately allege entanglement between defendants and the analysts with sufficient particularity, the complaint failed to demonstrate that defendants lacked a reasonable basis for the statements allegedly attributable to them when made, or that the analysts' statements were materially misleading.

Defendants also asserted that the complaint failed to satisfy the PSLRA's standard for pleading scienter. Prior to enactment of the PSLRA, under controlling Ninth Circuit law plaintiffs were able to satisfy pleading requirements by averring scienter generally. In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547 (9th Cir. 1994). The PSLRA has imposed a stricter pleading standard, i.e., a complaint under §10(b) must state with particularity facts giving rise to a strong inference of scienter. The law is not yet settled as to what is required in order to satisfy this standard. There have been several decisions holding that in enacting the PSLRA Congress effectively codified the Second Circuit pleading standard. See, e.g., Marksman Partners, L.P. v. Chantal Pharm. Corp., 927 F. Supp. 1297, 1310-12 (C.D. Cal. 1996); Zeid v. Kimberley, 930 F. Supp. 431, 434 (N.D. Cal. 1996); Fugman v. Aprogenex, Inc., Case No. 96 C 5817, 1997 U.S. Dist. LEXIS 3299 (N.D. Ill. Mar. 17, 1997). In their motion to dismiss, defendants argued that the pleading standard for scienter under the PSLRA is even more stringent than the Second Circuit standard citing to the decision of Judge Fern Smith in In re Silicon Graphics Sec. Litig., [1996-1997 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶99,325, at 95,957 (N.D. Cal. Sept. 25, 1996). A similar interpretation was recently adopted by the District Court of Massachusetts in Friedberg v. Discreet Logic, Civil Action No. 96-11232-EFH, 1997 U.S. Dist. LEXIS 2893 (D. Mass. Mar. 7, 1997). The risk of failing to satisfy the pleading standard for scienter is thus far greater under the PSLRA than under prior Ninth Circuit law even if this Court were to follow the decisions holding that the PSLRA codified the Second Circuit standard. If this Court were to accept defendants' assertion that the standard is even more stringent than the Second Circuit standard (a position plaintiffs' counsel submit is contrary to the language and intent of the PSLRA), plaintiffs would be facing the very real additional substantial risk that the complaint would not survive the motion to dismiss. Although the complaint is replete with specific allegations regarding the improper accounting treatment afforded the transactions that became the subject of the restatement and there are allegations of insider trading, defendants argued that alleging restatement of financial results does not plead fraud absent the pleading of facts with particularity that support a strong inference that defendants knew the figures reported were false when issued, and that the insider trading present here does not support a strong inference of scienter because neither the volume nor the pattern and timing of sales, indicia which can support the inference, were sufficient to do so. Defendants' motion to dismiss created the specter of possible dismissal at the pleadings stage far greater than plaintiffs' faced prior to enactment of the law.⁽⁹⁾ In short, there was no guarantee that the Litigation would progress beyond the pleadings stage.

Assuming that some or all of plaintiffs' claims survived defendants' motion to dismiss and defendants' anticipated motion for summary judgment after discovery was had, at trial defendants' would likely present evidence supporting their contention that there were no material misstatements, and that they had a reasonable good faith basis for believing that their statements were true and accurate when made.

The risks of establishing liability posed by the possibility of conflicting testimony and evidence would be exacerbated by the following risks inherent in all shareholder litigation under §10(b):

(a) The unpredictability of a lengthy and complex jury trial -- witnesses could suddenly become unavailable or jurors could react to the evidence in unforeseen ways;

(b) The risk that the jury would find that some or all of the misrepresentations and omissions were not material during part or all of the Class Period; and

(c) The risk that the jury would find that defendants reasonably believed in the appropriateness of their actions in issuing statements regarding the Company's business and future prospects and in the accounting treatment afforded to the transactions that later became the subject of the restatement of NCD financial statements, and that plaintiffs had failed to prove that defendants acted with scienter.

In addition to these risks, although plaintiffs believe that they would be able to establish that they suffered substantial damages as a result of defendants' conduct, competing expert reports and the expert declarations submitted by the Parties in support of their positions could pose a real risk for plaintiffs in establishing damages.

The general measure of damages in §10(b) cases is the "out of pocket" measure. Randall v. Loftsgaarden, 478 U.S. 647, 662 (1986) (citing Blackie v. Barrack, 524 F.2d 891, 909 (9th Cir. 1975)); see also Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1436 (9th Cir. 1987). Under this measure, a defrauded buyer recovers the difference between the price paid for the security and the "fair value" of the security (i.e., the value absent the fraud) as of the date of purchase. See Green v. Occidental Petroleum Corp., 541 F.2d 1335, 1344 (9th Cir. 1976), cited with approval in In re Clearly Canadian Sec. Litig., 875 F. Supp. 1410, 1415 (N.D. Cal. 1995) and In re Seagate Tech. II Sec. Litig., 843 F. Supp. 1341, 1347 (N.D. Cal. 1994); Sirota v. Solitron Devices, Inc., 673 F.2d 566, 577-78 (2d Cir. 1982); see generally, Arnold S. Jacobs, The Measure of Damages in Rule 10b-5 Cases, 65 Geo. L.J. 1093 (1977).

Because "fair value" presumably will differ from the market price of the security (the latter being inflated by the alleged fraud), expert testimony is necessary in order to fix the amount -- and indeed the existence -- of actual damages. See, e.g., Sirota 673 F.2d at 576-78. Such an evaluation often is based not only on stock price history but on other, more elusive factors as well, including corporate asset value, cash flow, income and growth prospects for the future, industry and economic trends, the quality of management, the nature and amount of liabilities and many other variables. While defendants concede that the damage amount calculated by plaintiffs' expert is correct under the methodology employed, at trial, defendants would present their own expert who would use a different methodology which would likely yield lower or no damages. Thus, even if plaintiffs prevailed in establishing liability, additional risks would remain in establishing both loss causation and the existence of damages.

In summary, although plaintiffs believe that their case is meritorious and that they would ultimately prevail in establishing liability and damages, their counsel's experience has taught them how the above-mentioned factors can make the outcome of a trial extremely uncertain. Moreover, even if plaintiffs were to prevail at trial, risks to the Class remain. For example, in In re Apple Computer Sec. Litig., [1991 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶96,252 (N.D. Cal. Sept. 6, 1991), the jury rendered a verdict for plaintiffs after an extended trial. Based upon the jury's findings, recoverable damages could have exceeded $100 million. However, weeks later, the court overturned the verdict, entering judgment n.o.v. for the individual defendants and ordered a new trial with respect to the corporate defendant. In another case, the class won a jury verdict and a motion for judgment n.o.v. was denied, but on appeal the judgment was reversed and the case dismissed. Backman v. Polaroid Corp., 910 F.2d 10 (1st Cir. 1990). See also West Virginia v. Chas. Pfizer & Co., 314 F. Supp. 710, 743-44 (S.D.N.Y. 1970) ("It is known from past experience that no matter how confident one may be of the outcome of litigation, such confidence is often misplaced."), aff'd, 440 F.2d 1079 (2d Cir. 1971); Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir. 1979) (reversing $87 million judgment after trial); Trans World Airlines, Inc. v. Hughes, 312 F. Supp. 478 (S.D.N.Y. 1970), modified, 449 F.2d 51 (2d Cir. 1971), rev'd, 409 U.S. 363 (1973) (overturning $145 million judgment after years of appeals); In re ICN/Viratek Sec. Litig., 87 Civ. 4296 (KMW) (S.D.N.Y.) (after a five week trial during the summer of 1996, there was a hung jury). Therefore, careful consideration of the above risks further supports approval of the Settlement as fair, reasonable, and adequate.

2. Balancing The Certainty Of An Immediate And Substantial Recovery Against The Expense And Likely Duration Of Trial Favors Settlement

The immediacy and certainty of a substantial recovery is a factor for the Court to balance in determining whether the proposed Settlement is fair, reasonable and adequate. E.g., Girsh, 521 F.2d at 157. Courts consistently have held that "[t]he expense and possible duration of the litigation are major factors to be considered in evaluating the reasonableness of [a] settlement." Milstein, 600 F. Supp. at 267 (citation omitted); Officers for Justice, 688 F.2d at 626; Boyd, 485 F. Supp. at 616-17; Bullock v. Administrator of Estate of Kircher, 84 F.R.D. 1, 10 (D.N.J. 1979). Therefore, the present Settlement must also be balanced against the expense of achieving a more favorable result at trial. Young v. Katz, 447 F.2d 431, 433 (5th Cir. 1971).

This case is obviously a complex one. If not for this Settlement, the case would have continued to be fiercely contested by all parties. Defendants have demonstrated a commitment to defend the case through and beyond trial, if necessary, and are represented by well-respected and capable counsel. Such a trial would occupy several attorneys on both sides for many weeks, and would require substantial expert testimony on both sides. While plaintiffs' counsel are confident that plaintiffs would ultimately prevail on the merits, the additional and very substantial expense that would be incurred, and attorney time, due to a trial would deplete any eventual recovery. Moreover, a judgment favorable to plaintiffs would, in light of the highly contested nature of virtually every aspect of the case, unquestionably be the subject of post-trial motions and appeal, which could prolong the case for several years. See, e.g., Warner Communications, 618 F. Supp. at 745 (delay from appeals is a factor to be considered). Therefore, delay, not just at the trial stage but through post-trial motions and the appellate process as well, could force members of the class to wait years for any recovery, further reducing its value. Accordingly, where the relative strengths of the Parties' claims and defenses have been recognized, settlement of this Litigation before significant additional resources have been expended at trial will benefit the Class.

Moreover, as the Ninth Circuit has made clear, the very essence of a settlement agreement is compromise, "a yielding of absolutes and an abandoning of highest hopes." Officers for Justice, 688 F.2d at 624 (citations omitted).

Naturally, the agreement reached normally embodies a compromise; in exchange for the saving of cost and elimination of risk, the parties each give up something they might have won had they proceeded with litigation . . . .

Id. (citation omitted); Ellis, 87 F.R.D. at 19 (as a quid pro quo for not having to undergo the uncertainties and expenses of litigation, the plaintiffs must be willing to moderate the measure of their demands). Accordingly, the fact that the class potentially could have achieved a greater recovery at trial is not dispositive and does not preclude the Court from finding that the Settlement is within a "range of reasonableness" that is appropriate for approval. E.g., Warner Communications, 618 F. Supp. at 745.

B. The Parties Have Engaged In Sufficient Pretrial Proceedings And Discovery, And The Settlement Herein Was Negotiated With Full Knowledge Of The Strengths And Weaknesses Of The Case

"'[T]he stage of the proceedings and the amount of discovery completed'" is a factor which the courts consider in determining the fairness, reasonableness and adequacy of a settlement. Warner Communications, 618 F. Supp. at 741 (citation omitted); Girsh, 521 F.2d at 157; see also Weinberger v. Kendrick, 698 F.2d 61, 74 (2d Cir. 1982); Ellis, 87 F.R.D. at 18; Boyd, 485 F. Supp. at 616-17.

As demonstrated in the Joint Declaration, even though formal discovery was stayed in the Federal Action pursuant to the PSLRA and the local rules of this Court, plaintiffs' counsel have conducted a thorough factual investigation into the matters alleged. Documents which were produced in the State Action by non-parties were thoroughly reviewed. Experts were consulted to assist plaintiffs' counsel in their analysis of these documents, the facts uncovered and the resulting damages to the Settlement Class.

Plaintiffs' Settlement Counsel also met with counsel for defendants at which time a detailed presentation was made by defendants' counsel relating to the claims asserted by plaintiffs including the accounting treatment afforded the transactions which were the subject of the revisions to NCD's previously reported financial results for 1995. During this meeting, Plaintiffs' Settlement Counsel and their forensic accountant reviewed Company documents made available by defendants' counsel directly relating to those transactions and questioned defendants' counsel regarding these documents, plaintiffs' allegations and defendants' defenses. The Litigation has therefore reached the stage where "the parties certainly have a clear view of the strengths and weaknesses of their cases." Warner Communications, 618 F. Supp. at 745; Ellis, 87 F.R.D. at 18; Boyd, 485 F. Supp. at 616-17. In this case, sufficient information has been made available to the Parties and their counsel to make a careful appraisal of the adequacy of the Settlement in the context of the circumstances of the case.

C. The Settlement Which Represents Approximately Forty Percent Of The Possible Maximum Recovery After Trial Is Fair, Reasonable And Adequate

The courts agree that determination of a "reasonable" settlement is not susceptible to a single mathematical equation yielding a particularized sum. Rather, as Judge Friendly has explained, "in any case there is a range of reasonableness with respect to a settlement . . . ." Newman, 464 F.2d at 693; Fickinger v. C.I. Planning Corp., 646 F. Supp. 622, 630 (E.D. Pa. 1986). Accord Zerkle v. Cleveland-Cliffs Iron Co., 52 F.R.D. 151, 159 (S.D.N.Y. 1971). The Second Circuit has observed:

The fact that a proposed settlement may only amount to a fraction of the potential recovery does not, in and of itself, mean that the proposed settlement is grossly inadequate and should be disapproved.

In fact there is no reason, at least in theory, why a satisfactory settlement could not amount to a hundredth or even a thousandth part of a single percent of the potential recovery.

Detroit v. Grinnell Corp., 495 F.2d 448, 455 & n.2 (2d Cir. 1974) (emphasis added).

In order to calculate the "best possible" recovery, one must assume complete success on both liability and damages as to all class members over the entire class period. And, as Judge Wyatt observed in West Virginia, 314 F. Supp. at 743-44: "It is known from past experience that no matter how confident one may be of the outcome of litigation, such confidence is often misplaced."

Plaintiffs' damage expert estimated that the maximum recoverable damages would be approximately $29.2 million. This amount assumes not only complete acceptance of plaintiffs' liability and damage evidence by the jury, but also is based on assumptions concerning the number of shares that actually traded during the Class Period, and the percentage of those shares that were held at various points during the Class Period, and at the end of the Class Period, as opposed to sold earlier. It also does not account for any trading profits in NCD common stock made by Settlement Class Members, which pursuant to the Plan of Allocation will be netted against any losses.

The Settlement, which represents a certain and immediate recovery of approximately forty percent of the maximum amount recoverable, clearly satisfies the standard for judicial approval. D. The Recommendations Of Experienced Counsel Strongly Militate In Favor Of Approval Of The Settlement

Experienced and informed counsel, negotiating at arm's-length, have weighed these factors and endorse the Settlement. As courts have stated, the view of the attorneys actively conducting the litigation, while not conclusive, "is entitled to significant weight." Fisher Bros. v. Cambridge-Lee Indus., Inc., 630 F. Supp. 482, 488 (E.D. Pa. 1985); Ellis, 87 F.R.D. at 18 (the "fact that experienced counsel involved in the case approved the settlement after hard-fought negotiations is entitled to considerable weight"). In approving a settlement, courts often focus on the "negotiating process by which the settlement was reached." Weinberger, 698 F.2d at 74, cited in Warner Communications, 618 F. Supp. at 741.

This Litigation has been litigated by experienced and competent counsel on both sides of the case. Even the Settlement negotiations were hard fought. The law firms representing plaintiffs are well known for their experience and success in class action securities litigation. Defense counsel are also from law firms with vast experience in this type of litigation. That such qualified and well-informed counsel, operating at arm's-length, all endorse the Settlement as being fair, reasonable and adequate to the Settlement Class strongly militates in favor of this Court's approval of the Settlement.

Moreover, this Settlement was achieved only after the Parties engaged in three mediation sessions under the auspices of Retired United States District Court Judge J. Lawrence Irving. The good-faith vigorous negotiations conducted by counsel on behalf of their respective clients is beyond question.

E. Reaction Of The Settlement Class Supports Approval Of The Settlement

Notice of the Settlement was sent to over 8,200 potential members of the Settlement Class. In conformity with the requirements of the PSLRA, the Notice provided Settlement Class Members with very specific information as to the average recovery per damaged share of NCD common stock under the Settlement, the maximum average per share recovery that could have been obtained if the action proceeded to trial and plaintiffs prevailed on all their claims and contentions and their expert's assessment of the damages were accepted by the jury, and the average per share amount that Representative Plaintiffs' counsel's application for fees and reimbursement of expenses represents. Thus, Settlement Class Members were fully and clearly informed as to the economic substance of the Settlement, how the Settlement proceeds would be distributed to Class members who file valid and timely Proofs of Claim, and the fee and expense application.

The time period for objecting to the Settlement expired on April 18, 1997. As noted above, no objection to the Settlement has been registered by anyone to date. The absence of any objections is especially significant because, according to a survey of institutional investors prepared by Vickers Stock Research Corporation, approximately 36.5% of the shares damaged by the decline in the market price of NCD common stock during the Settlement Class Period (February 2, 1995 through July 3, 1996, inclusive) were held by large institutional investors, such as financial institutions, benefit plans and investment funds. During the Settlement Class Period, approximately 53 institutions purchased over 3.4 million shares of NCD common stock.⁽¹⁰⁾ Many of these institutional Settlement Class Members have their own in-house and outside attorneys capable of evaluating the proposed Settlement and fee request and advising them as to their adequacy and fairness.

The absence of any objection by Settlement Class Members is an important factor in evaluating the fairness, reasonableness and adequacy of the Settlement and supports approval of the Settlement. Detroit, 495 F.2d at 463; Warner Communications, 618 F. Supp. at 746; Milstein, 600 F. Supp. at 267.

F. The Scope Of Release Is Appropriate

As a condition of settling this case, defendants demanded global peace and insisted that all claims pending in both the State and Federal Actions pending against them be released. The Settlement addresses defendants' desire for closure. First, in connection with the Settlement, plaintiffs filed the Second Amended Consolidated Class Action Complaint in this Court which (a) includes the state law claims that had been asserted in the State Action against the defendants herein, which arose out of essentially the same facts that formed the basis for the action in this Court; (b) asserts federal claims against Morgan Stanley and Milunovich; and, (c) extends the Class Period to include the period from March 22, 1996 through and including July 3, 1996, the date on which NCD filed its amended Form 10-K in which it issued final revisions to its financial results for 1995. Second, the Settlement provides for the release of all claims by all Settlement Class Members, including claims asserted in both the State and Federal Actions. Joint Declaration, ¶5.

It is well within this Court's authority to approve a settlement which includes the State Action and provides for the release of the state law claims.⁽¹¹⁾ See, e.g., Class Plaintiffs, 955 F.2d at 1287-91; In re Corrugated Container Antitrust Litig., 643 F.2d 195, 221-23 (5th Cir. 1981) (rejecting objections to settlement resolving state court claims); In re Baldwin-United Corp., 607 F. Supp. 1312, 1324-25 (S.D.N.Y. 1985); Sommers v. Abraham Lincoln Fed. Sav. & Loan Ass'n, 79 F.R.D. 571, 573 (E.D. Pa. 1978).

Plaintiffs' claims in the State Action arise from the same common nucleus of operative facts as the claims in the Federal Action. See Class Plaintiffs, 955 F.2d at 1288 (approving release of state court claims arising "from the same common nucleus of operative fact as those set forth in [the federal action]").

Furthermore, both the State and Federal Actions allege claims against virtually the same defendants on behalf of identical Classes. As a result, counsel in this action have authority to negotiate resolution of the Class claims being pursued in the State Action. See WPPSS, 720 F. Supp. at 1413. Finally, because the Class in the Federal Action is comprised of the same persons as the proposed class in the State Action, notice to the Class in the Federal Action would also notify the Class of the settlement of the state court claims. See WPPSS, 720 F. Supp. at 1412-13 (finding that notice containing description of state action and explanation that settlement would release state court claims provided class members with sufficient opportunity to object).

In short, it is fair and reasonable for the Settlement to provide for the release to encompass claims in both the State and Federal Actions where the claims in both actions arise from the same alleged wrongful conduct, and where the Classes and the Parties are virtually identical.

VI. CONCLUSION

The Settlement for $11 million in cash is an excellent result, given the presence of skilled counsel for all Parties, the complexity and expense if this Litigation were to continue and eventually go to trial, the risks attendant to further litigation, the significant present benefit of the Settlement to all Members of the Settlement Class and the complex arm's-length negotiations themselves. Representative Plaintiffs respectfully request that this Court approve the Settlement of this Litigation as fair, reasonable and adequate.

DATED: April 24, 1997 Respectfully submitted,

MILBERG WEISS BERSHAD

HYNES & LERACH LLP

ALAN SCHULMAN

KEITH F. PARK

RANDI D. BANDMAN

KRISTEN McCULLOCH

______________________________

600 West Broadway, Suite 1800

San Diego, CA 92101

Telephone: 619/231-1058

BERNSTEIN LITOWITZ BERGER &

GROSSMANN LLP

JEFFREY A. KLAFTER

ROCHELLE FEDER HANSEN

_____________________________

JEFFREY A. KLAFTER

1285 Avenue of the Americas

33rd Floor

New York, NY 10019

Telephone: 212/554-1400

Co-Lead Counsel for Plaintiffs

NETWORK.FED\TLC01419.BRF

I, the undersigned, declare:

1. That declarant is and was, at all times herein mentioned, a citizen of the United States and a resident of the County of San Diego, over the age of 18 years, and not a party to or interested in the within action; that declarant's business address is 600 West Broadway, Suite 1800, San Diego, California 92101.

2. That on April 24, 1997, declarant caused true copies of NOTICE OF MOTION AND MOTION AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF REPRESENTATIVE PLAINTIFFS' MOTION FOR FINAL APPROVAL OF SETTLEMENT to be delivered to Federal Express for service on each of the parties listed on the attached Service List on April 25, 1997.

I declare under penalty of perjury that the foregoing is true and correct. Executed this 24th day of April, 1997, at San Diego, California.

______________________________

DANELLE L. McNERTNEY

1. All capitalized terms herein which have been defined in the Stipulation of Settlement and exhibits thereto have the same meaning set forth therein.

2. The Settlement resolves not only the consolidated class action pending in this Court (the "Federal Action"), but the action filed in California state court (the "State Action") against defendants herein, i.e., Network Computing Devices, Inc. ("NCD" or the "Company") and certain of its present and former officers and directors, as well as NCD's underwriter and market maker, Morgan Stanley & Co. Incorporated ("Morgan Stanley") and Steven Milunovich ("Milunovich").

After entry of the Judgment in this action, plaintiffs will move to conditionally dismiss the State Action. The conditional dismissal shall become a final dismissal without further action of the State Court when the Judgment herein becomes final.

The Federal and State Action are collectively referred to herein as the "Litigation."

3. Plaintiffs could not serve discovery in the Federal Action, which is being prosecuted under the recently enacted Private Securities Litigation Reform Act of 1995 ("PSLRA" or the "Reform Act"), under the provisions of the PSLRA and the local rules. However, there was no bar to the service of discovery in the State Action and plaintiffs aggressively pursued this course in an effort to advance the Litigation.

4. See Declaration of Cheryl Washington filed herewith.

5. The Plan of Allocation was set forth in the Notice.

6. The law always favors the compromise of disputed claims, Williams v. First Nat'l Bank, 216 U.S. 582, 595, (1910); MWS Wire Indus., Inc. v. California Fine Wire Co., 797 F.2d 799, 802 (9th Cir. 1986), including those asserted in stockholder class actions. Weinberger v. Kendrick, 698 F.2d 61, 73 (2d Cir. 1982).

7. In re Pacific Enters. Sec. Litig., 47 F.3d 373, 377 (9th Cir. 1995); Utility Reform Project v. Bonneville Power Admin., 869 F.2d 437, 443 (9th Cir. 1989); Officers for Justice v. Civil Serv. Comm'n, 688 F.2d 615, 625 (9th Cir. 1982); Marshall v. Holiday Magic, Inc., 550 F.2d 1173, 1178 (9th Cir. 1977).

8. In reviewing this Settlement under Rule 23 of the Federal Rules of Civil Procedure, the Court is not required to substitute its business judgment for that of counsel, In re United Energy Corp. Solar Power Modules Tax Shelter Inv. Sec. Litig., [1989 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶94,376, at 92,462 (C.D. Cal. Mar. 9, 1989); Steinberg v. Carey, 470 F. Supp. 471 (S.D.N.Y. 1979); the settlement should be approved if it is within a "range of reasonableness." Newman v. Stein, 464 F.2d 689, 693 (2d Cir. 1972). Accord Malchman v. Davis, 761 F.2d 893, 903 (2d Cir. 1985); Milstein v. Huck, 600 F. Supp. 254, 262 (E.D.N.Y. 1984).

9. Defendants also sought dismissal of the State Action on similar grounds, and further argued in support of their demurrers that §§25400/25500 of the California Corporations Code apply only to California purchasers and do not apply to securities, like NCD stock, which trade on a national exchange and that Sections 17200 and 17500 do not apply to securities transactions. Defendants' demurrers were pending when the Settlement of the Litigation was reached. In addition, defendants sought to stay the State Action in favor of the Federal Action. While the Superior Court and Appellate Division rejected defendants' arguments, the California Supreme Court remanded the case to the Appellate Court for further proceedings. This Settlement ended those proceedings as well.

10. The figures cited were obtained by averaging the figures reported by Vickers for each quarter of 1995 and the first and second quarters of 1996.

11. "The weight of authority holds that a federal court may release not only those claims alleged in the complaint, but also a claim 'based on the identical factual predicate as that underlying the claims in the settled class action . . . .'" Class Plaintiffs v. Seattle, 955 F.2d at 1287 (quoting TBK Partners, Ltd. v. Western Union Corp., 675 F.2d 456, 460 (2d Cir. 1982)).