<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
Digital Video Systems, Inc.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
25387R100
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(CUSIP Number)
Donald Baker, Treasurer
Oregon Power Lending Institution
357 Castro Street, Suite 2
Mountain View, CA 94041
(650) 962-8991
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
May 5, 1999
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of (S)(S)240.13d.1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box [_].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See (S)240.13d-7 for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Potential persons who are to respond to the collection of information contained
in this form are not required to respond unless the form displays a currently
valid OMB control number.
<PAGE>
INTRODUCTION
On November 16, 1998, Oregon Power Lending Institution ("OPLI") filed
the original Schedule 13D pertaining to its investment and possible future
investments in Digital Video Systems, Inc. ("DVS") pursuant to a letter of
intent, dated October 15, 1998 and as subsequently amended, between OPLI and DVS
("Investment Agreement"). The initial investment of $2,000,000 resulted in the
issuance of 2,000 shares of DVS Series C Convertible Preferred Stock (the
"Preferred Stock"), which were convertible into 4,255,320 shares of DVS Common
Stock, and an option entitling the holder to purchase up to 2,000,000 shares of
DVS Common Stock at $0.75 per share.
Since the date of the initial investment in DVS by OPLI as previously
reported, between November 12, 1998 and March 23, 1999, OPLI invested a total of
$4,475,326.40 in additional funds and was issued Convertible Promissory Notes to
memorialize the investment. In addition, pursuant to the Investment Agreement,
OPLI was issued a second option for 1,000,000 additional shares, exercisable at
$0.75. See Item 5 for details of OPLI's subsequent investments in DVS.
OPLI elected to convert the Preferred Stock to Common Stock on April
19, 1999. On May 5, 1999, pursuant to a Conversion Agreement between OPLI and
DVS dated March 23, 1999, OPLI converted its outstanding Convertible Notes
and interest on those Notes to 4,598 shares of Preferred Stock, which then
was immediately converted to Common Stock. These securities converted into a
total of 14,038,301 shares of Common Stock. OPLI subsequently transferred
3,212,767 shares of its DVS Common Stock, leaving it with actual ownership of
10,825,534 shares of Common Stock. See Item 5.
If the options currently owned by OPLI were exercised, as OPLI has a
current right to do, OPLI would own 13,825,534 shares of DVS Common Stock. In
addition, OPLI has the right to invest an additional $3,500,000 in Preferred
Stock, which would convert into 7,446,808 additional shares of DVS Common Stock.
Because OPLI has a current right to make the $3,500,000 additional investment
and to exercise its outstanding options, this Schedule 13D assumes such actions,
in accordance with Rule 13d-3(d)(1).
This Amendment No. 1 pursuant to Rule 13d-2 under the Act amends and
supplements the cover page and statements under all items of the Original
Schedule 13D, other than Item 1. Capitalized terms used in this Amendment No. 1
not otherwise defined shall have the meaning ascribed to such terms in the
Original Schedule 13D.
2
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CUSIP No. 25387R100
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1. NAME OF REPORTING PERSON
OREGON POWER LENDING INSTITUTION
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
WC and OO
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e)
N/A
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Oregon
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7. SOLE VOTING POWER
NUMBER OF 21,272,342
SHARES -----------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 0
EACH -----------------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 21,272,342
WITH -----------------------------------------------------------
10. SHARED DISPOSITIVE POWER
0
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
21,272,342
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12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
N/A
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT
42.8%
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14. TYPE OF REPORTING PERSON
CO
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3
<PAGE>
Item 1. Security and Issuer.
- -----------------------------
This Schedule 13D, as amended, relates to the common stock, par value
$0.0001 per share ("Shares"), of Digital Video Systems, Inc., a Delaware
corporation (the "Issuer" or "DVS"). The address of the principal executive
offices of the Issuer is 160 Knowles Drive, Los Gatos, California 95032.
Item 2. Identity and Background.
- ---------------------------------
The person filing this statement is Oregon Power Lending Institution,
an Oregon corporation ("OPLI"). Its principal executive offices are located at
357 Castro Street, Suite 2 Mountain View, CA 94041. OPLI is principally involved
in the business of power generation facility financing and development.
OPLI has not, during the last five years, (a) been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors), or
(b) been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting,
or mandating activities subject to, Federal or State securities laws or a
finding of any violation with respect to such laws.
Certain information with respect to the directors, officers and
controlling persons of OPLI is as follows:
1. (a) Don Baker (Director, Secretary and Treasurer of OPLI)
(b) 2858 Stevens Creek Boulevard, #101, San Jose, CA 95128
(c) Mr. Baker is a real estate mortgage broker with First
Financial Co., 2858 Stevens Creek Boulevard, #101, San Jose, CA 95128
(d)and (e) Mr. Baker has not, during the last five years, (a)
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), or (b) been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting, or mandating activities subject to, Federal or
State securities laws or a finding of any violation with respect to such laws.
(f) Mr. Baker is a citizen of the United States.
(g) Mr. Baker beneficially owns no securities of the Issuer
and has not engaged in any transactions in the Issuer's stock in the previous 60
days. Mr. Baker does share voting and investment control, in his capacity as a
director and executive officer of OPLI, of the 6,255,319 Shares deemed
beneficially owned by OPLI, as reported in this Schedule 13D.
2. (a) Oran Chang (Director and President of OPLI)
(b) 487 Gianni Street, Santa Clara, CA 95054
4
<PAGE>
(c) Mr. Chang is a general contractor with Great Earth
Construction Co., 487 Gianni Street, Santa Clara, CA 95054.
(d)and (e) Mr. has not, during the last five years, (a) been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), or (b) been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting, or mandating activities subject to, Federal or
State securities laws or a finding of any violation with respect to such laws.
(f) Mr. Chang is a citizen of the United States.
(g) Mr. Chang beneficially owns no securities of the Issuer
and has engaged in no transactions in the securities of the Issuer in the
previous 60 days. Mr. Chang does share voting and investment control, in his
capacity as a director and executive officer of OPLI, of the 6,255,319 Shares
deemed beneficially owned by OPLI, as reported in this Schedule 13D.
Item 3. Source and Amount of Funds or Other Consideration.
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The aggregate purchase price for the securities, including securities
which, upon conversion and exercise, become Shares, as described in Item 5
below, is $12,250,000. Of this amount, $5,750,000 has not yet been paid to DVS.
However, under the terms of the Investment Agreement between OPLI and DVS, as
amended, OPLI has the right to invest an additional $3,500,000 through the
purchase of up to 3,500 additional shares of Series C Convertible Preferred
Stock and an additional $2,250,000 through the exercise of options to purchase
3,000,000 shares of Common Stock. As of the date of this Amendment No. 1, OPLI
has the absolute right to acquire those securities if it elects to do so. The
source of funding for the purchase of the Shares was both OPLI's general working
capital and loans.
OPLI obtained a total of $1,000,000 in loans which it used to purchase
a portion of the DVS securities. The loans were made in November 1998, bear
interest at 8% per annum and are due one year from the date of the notes. The
principal and interest could be paid back in cash or in shares of DVS stock, at
OPLI's option. OPLI has repaid certain of these loans by the transfer of DVS
shares. See Item 5. The details of those loans are as follows:
<TABLE>
<S> <C>
John Gaddy $50,000
Anthony W. Chung & Angela L. Chung
as Trustees for the Chung 1998 Family Trust 250,000
Chien-Liang Chen and Hsiang-Fang Wu Chen
Trustees of the Chien-Liang Chen and
Hsiang-Fang Wu Chen Family Trust under
declaration of trust dated August 4, 1997 100,000
Su-Chin Liao 50,000
Hung Tao Liu 50,000
Wen-Ching Dennis Chen 300,000
Wang Chen Hsiu Wen 200,000
</TABLE>
5
<PAGE>
Additional funds of were loaned to OPLI by two persons. These funds
were not specifically loaned to OPLI for purposes of its investment in DVS and
were for working capital.
It is anticipated that any future investments pursuant to the
Investment Agreement will be funded with OPLI's working capital.
Item 4. Purpose of Transaction.
- --------------------------------
The securities were acquired for investment purposes. In addition, in
connection with this investment, DVS granted OPLI the right to designate two
members of the Board of Directors. Pursuant to that right, OPLI has designated
two members of the DVS Board, including Ma-Li Kuo, who has been appointed
Co-Chairman of the Board and Chief Executive Officer. Except with respect to
placing two designees on the DVS' Board, there are no plans or proposals with
regard to any of the matters referred to in Items 4(a)-4(j) of Schedule 13D.
Specifically, OPLI has no plans to (i) acquire additional shares of DVS stock
beyond the securities purchases contemplated by the Investment Agreement; (ii)
formulate and implement any extraordinary corporate transaction; (iii) effect a
sale or transfer of a material amount of assets of DVS; (iv) make any material
change in DVS' present capitalization or dividend policy; (iv) effect any other
material change in DVS' business or corporate structure, except to the extent
OPLI's designees, acting in that capacity, act with other members of the DVS
board to implement changes determined to be in the best interests of DVS and its
stockholders (although there are no specific plans in this regard at this time);
(v) cause DVS' Common Stock to be delisted from Nasdaq; or (vi) cause DVS'
Common Stock to be eligible for termination of registration under Section
12(g)(4) of the Securities Exchange Act.
Item 5. Interest in Securities of the Issuer.
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(a), (b) and (c) As of May 31, 1999, pursuant to Rule 13d-3(d)(1), OPLI
is deemed to be the beneficial owner of an aggregate of 21,272,340 shares of DVS
Common Stock. Other than the $2,000,000 investment in October and November 1998,
listed first on the following table, all of the investments in DVS were made
initially as Convertible Notes. All of those Notes have been converted to
Preferred Stock and immediately converted to Common Stock as of May 5, 1999.
6
<PAGE>
<TABLE>
<CAPTION>
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Preferred Stock
Notes Convert into Converted into
Shares of Shares of Common
Date Amount Invested Preferred Stock Stock(1)
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<S> <C> <C> <C>
October-November 1998(2) $2,000,000.00 2,000 4,255,319
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November 12, 1998 1,000,000.00 1,000 2,127,660
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December 31, 1998 500,000.00 500 1,063,830
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January 21, 1999 200,000.00 200 425,532
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February 2, 1999 100,000.00 100 212,766
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February 3, 1999 186,000.00 186 395,745
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February 5, 1999 100,000.00 100 212,766
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February 8, 1999 100,000.00 100 212,766
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February 11, 1999 433,236.40 433 921,780
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February 25, 1999 920,000.00 20 1,957,447
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March 5, 1999 136,000.00 36 289,362
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March 18, 1999 150,000.00 50 319,149
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March 23, 1999 650,000.00 50 1,382,979
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March 23, 1999 122,946.72(3) 23 261,589
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Total 6,598 14,038,301
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Transfers by OPLI(4) (1,510) (3,212,767)
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Balance Owned by OPLI 5,088 10,825,534
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Currently Exercisable Options 2,250,000.00 3,000,000
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Current Investment
Right under
Investment
Agreement(5) 3,500,000.00 3,500 7,446,808
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TOTAL BENEFICIALLY OWNED PURSUANT
TO RULE 13D-3(d)(1) 21,272,342
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</TABLE>
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(1) Certain totals are rounded to conform to the amounts actually issued upon
conversion.
(2) Previously reported on Schedule 13D.
(3) Represents accrued interest on the Convertible Notes.
(4) See table that follows for details of the transfer of 1,510 shares of
Preferred Stock.
(5) Represents a future investment opportunity pursuant to a current right to
invest as provided in the Investment Agreement.
OPLI's beneficial ownership interest in 21,272,342 shares of DVS Common
Stock represents 42.8% of the outstanding shares, calculated in accordance with
Rule 13d-3(d)(1), based on actual DVS Common Shares outstanding of 39,245,301.
If OPLI were to elect to make no further investment in DVS, OPLI's actual share
ownership in DVS would represent 27.6% of the outstanding
7
<PAGE>
DVS Common Stock. This calculation is provided solely for information
purposes and should not be interpreted as a statement of OPLI's future
investment intentions.
On May 5, 1999, OPLI converted its outstanding Preferred Stock and
transferred a total of 3,212,767 shares of DVS Common Stock to seven lenders of
OPLI. The transfers were made to the following persons, all of whom agreed to
take DVS stock in lieu of cash repayment of the amounts owed to them. See Item 3
for details regarding certain of the loans. The transfers on May 5, 1999 were as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Number of Number of Shares of Common
Shares of Stock Issuable upon
Preferred Stock Conversion of the
Transferee Transferred Preferred Stock
- ----------------------------------------------------------------------------------------------------------------
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<S> <C> <C>
John Gaddy 50 106,383
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Chao-Fu Incorporated 500 1,063,830
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Gold Mountain Electric Power Company 500 1,063,830
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Eminent Holdings Company, Ltd. 160 340,426
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Anthony W. Chung & Angela L. Chung as Trustees for the 100 212,766
Chung 1998 Family Trust
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Primo Industrial, Inc. 120 255,319
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Chien-Liang Chen and Hsiang-Fang Wu Chen Trustees of the 80 170,213
Chien-Liang Chen and Hsiang-Fang Wu Chen Family Trust under declaration of trust
dated August 4, 1997
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- ----------------------------------------------------------------------------------------------------------------
TOTAL TRANSFERRED 1,510 3,212,767
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</TABLE>
OPLI's ownership interest in DVS, as reflected in the first table of
this Item 5, takes into account the transfers of Preferred Stock reflected in
the second table immediately above.
None of the lenders to whom OPLI distributed shares of DVS Preferred
Stock are officers or directors or stockholders of OPLI. There are no agreements
among these persons with respect to voting or disposition of the DVS securities
owned by them and they do not constitute a "group" within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934.
(d) N/A
(e) N/A
8
<PAGE>
Item 6. Contracts, Arrangements, Understanding or Relationships with Respect to
Securities of the Issuer.
- -------------------------------------------------------------------------------
As described in response to Item 5, OPLI and DVS are parties to an
Investment Agreement that provides for a possible additional investment or
series of investments by OPLI. OPLI may invest up to an additional $3,500,000
for the purchase of additional Preferred Shares and an additional $2,250,000
pursuant to the exercise of options to purchase up to 3,000,000 shares of Common
Stock.
Item 7. Material to be Filed as Exhibits.
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<TABLE>
<S> <C>
Exhibit 1(1) Letter of Intent dated October 15, 1998
Exhibit 2(2) First Amendment to Oregon Power Lending Institution and Digital
Video Systems, Inc. Investment Agreement, dated as of
October 15, 1998
Exhibit 3(2) Form of Stock Option Agreement
</TABLE>
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(1) Previously filed with the original filing of Schedule 13D, filed November
16, 1998.
(2) Filed herewith.
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this amended statement is true,
complete and correct.
June 8, 1999
Date
OREGON POWER LENDING INSTITUTION
By: /s/ Don Baker
----------------------------
Don Baker
Secretary, Treasurer and Director
9
<PAGE>
FIRST AMENDMENT TO
OREGON POWER LENDING INSTITUTION AND
DIGITAL VIDEO SYSTEMS, INC. INVESTMENT AGREEMENT
THIS FIRST AMENDMEND, dated as of October 15,1998 (this "First Amendment"),
is entered into by and between Digital Video Systems, Inc., a Delaware
corporation ("DVS") and Oregon Power Lending Institution, an Oregon corporation
("OPLI").
WITNESSETH:
WHEREAS, DVS and OPLI are parties to a certain Letter Agreement dated as of
October 15, 1998 (the "Investment Agreement");
WHEREAS, the Corporate Governance Rules of Nasdaq require shareholder
approval for the issuance of common stock (or securities exercisable or
convertible into common stock) having voting power equal to or greater than
twenty percent (20%) of the outstanding common stock at a price per share below
the greater of the market or book value of such stock ("Nasdaq 20% Limit");
WHEREAS, in light of the Nasdaq 20% Limit, the Investment Agreement
requires shareholder approval as a condition precedent to certain investments
described in Paragraph 2, Paragraph 3 and Paragraph 4 of the Investment
Agreement (the "Second Tranche," the "Third Tranche," and the "Subsequent
Tranche(s)" respectively, and collectively "All Subsequent Investments");
WHEREAS, the Investment Agreement provides that the Second Tranche will
occur in November 1998, the Third Tranche will occur in December 1998 and the
Subsequent Tranche(s) will occur on or before April 30, 1999 (the "Investment
Timetable");
WHEREAS, such Investment Timetable was based on the expectation that
shareholder approval would be obtained by mid-November 1998;
WHEREAS, shareholder approval of All Subsequent Investments is expected to.
be obtained in February 1999;
WHEREAS, the Investment Agreement sets forth in Paragraph 5 a certain
"Option Grant" that requires DVS to grant OPLI a stock option to purchase two
million (2,000,000) shares of Common Stock of DVS ("Common Stock') in connection
with OPLI's initial two million dollar ($2,000,000) investment (the "First
Tranche") and a stock option to purchase one million (1,000,000) shares of
Common Stock in connection with the Second Tranche;
<PAGE>
WHEREAS, the Investment Agreement states that this Option Grant is
exercisable at any time prior to its expiration and does not clearly state in
Paragraph 5 that this Option Grant is conditioned upon shareholder approval due
to the Nasdaq 20% Limit;
WHEREAS, the Investment Agreement sets forth in Paragraph 7 that DVS grants
OPLI a Right of First Refusal to make additional investments in DVS and such
terms of the Right of First Refusal as described in Paragraph 7 may be unclear
or ambiguous; and
WHEREAS, by this Amendment, DVS and OPLI desire to extend the Investment
Timetable, clarify the condition upon which options pursuant to the Option Grant
become exercisable and clarify the terms of OPLI's Right of First Refusal;
NOW, THEREFORE, in consideration of the terms, conditions and premises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, DVS and OPLI hereby agree as
follows:
1. INCORPORATION OF THE INVESTMENT AGREEMENT. This First Amendment is in
'tended to modify and become part of the Investment Agreement. Capitalized terms
not otherwise defined herein shall have the same meanings set forth in the
Investment Agreement.
2. EXTENSION OF INVESTMENT TIMETABLE. The Investment Timetable is
extended and as such Paragraph 2, Paragraph 3 and Paragraph 4 of the Investment
Agreement are modified as follows:
The time period during which OPLI may invest in the Second
Tranche shall be the 30-day period immediately following the
date DVS obtains shareholder approval of All Subsequent
Investments.
The time period during which OPLI may invest in the Third
Tranche shall be the 60-day period immediately following the
date DVS obtains shareholder approval of All Subsequent
Investments.
The time period during which OPLI may invest in the
Subsequent Tranche(s) shall be the I 80-day period
immediately following the date DVS obtains. shareholder
approval of All Subsequent Investments.
2
<PAGE>
3. OPTION.
(a) Paragraph 5 of the Investment Agreement is hereby amended by adding
the following sentence after the first sentence thereof:
"Such option shall not become exercisable until such
time, if ever, as the shareholders of DVS approve the
exercisability of such option."
(b) Paragraph 5 of the Investment Agreement is further amended by
adding the following sentence after the sentence which is
currently the second sentence thereof-
"Such option shall not be issued until such time as DVS
obtains the approval of its shareholders with respect
to the Second Tranche."
4. RIGHT OF FIRST REFUSAL. The third sentence of Paragraph 7 of the
Investment Agreement is hereby amended to read as follows:
"Because any such issuance could result in OPLI converting
the Preferred Stock from the First Tranche, Second Tranche
and Third Tranche into less than 33% of the total
outstanding Common Stock after the conversion, DVS hereby
grants OPLI a right of first refusal to purchase the
securities which would otherwise be issued to a third-party
investor on the same terms as have been offered to DVS by
such third-party investor (the "Right of First Refusal")
pursuant to a written offer binding on such third-party
investor."
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this First
Amendment on the day and year first above written.
DIGITAL VIDEO SYSTEMS, INC.
By /s/ Edward W. Miller
------------------------------------
Edward W. Miller, Jr.
President and Chief Executive Officer
OREGON POWER LENDING INSTITUTION
By /s/ Donald Baker
-----------------------------------
Donald Baker
Secretary and Treasurer
<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") is dated as of November 12, 1998,
and is by and between Digital Video Systems, Inc., a Delaware corporation
("Company"), and Oregon Power Lending Institution, an Oregon corporation
("OPLI").
WITNESSETH:
WHEREAS, Company and OPLI have entered into that certain Letter Agreement
(the "Investment Agreement"), dated as of October 15, 1998, which provides that
Company will provide OPLI with the option to purchase certain shares of common
stock of Company upon certain terms and subject to certain conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. GRANT OF OPTION. Effective November 12, 1998 (the "Grant Date") and upon
the terms and subject to the conditions hereinafter set forth, Company hereby
grants to OPLI the option (the "Option") to purchase 2,000,000 authorized but
unissued shares of Company common stock (the "Shares") for the Exercise Price
(as defined in Section 2 hereof).
2. EXERCISE PRICE, ADJUSTMENTS. As used herein the term "Exercise Price"
shall mean $35 in cash for each Share subject to this Agreement. If Company
shall make, declare or effectuate any recapitalization, reclassification, stock
dividend or distribution, stock split or combination (whether effected by
merger, consolidation, exchange of shares or otherwise), with respect to Company
common stock as of a record date subsequent to the date hereof, the number of
Shares subject to the Option and/or the Exercise Price per Share, shall be
appropriately adjusted so that, upon exercise of the Option, OPLI will be
entitled to obtain the same number and kind of securities and other
consideration as OPLI would have received had it exercised the Option
immediately prior to the occurrence of such event.
3. PERIOD OF EXERCISE. The Option shall be exercisable at any time (a) after
the date (the "Effective Date") upon which the Company obtains Shareholder
Approval and (b) prior to the two year anniversary of the Grant Date (the
"Expiration Date"). As used herein, the, term "Shareholder Approval" shall mean
the approval of the transactions described in the Investment Agreement which
require shareholder approval, including the exercisability of this Option, by
shareholders of the Company holding a majority of shares present (in person or
by proxy) at Company's 1998 annual meeting of shareholders and entitled to vote
on such proposal.
4. METHOD OF EXERCISE. After the Effective Date and prior to the Expiration
Date, the Option may be exercised by OPLI in whole or in part by giving written
notice to Company specifying (i) its intention to exercise the Option, (ii) the
number of Shares it will purchase, (iii) the amount of cash to be delivered to
Company in accordance with the provisions of Section 5 hereof, and (iv) a place
and date for the closing (the "Closing") of such purchase; it being expressly
understood and agreed that unless otherwise agreed to by the parties hereto,
<PAGE>
the Closing shall occur at the principal offices of Company within three (3)
business days following the Exercise Date (as hereinafter defined). As used
herein, the term "Exercise Date" shall mean the date on which such notice is
given by OPLI in accordance with the provisions of this Section 4.
5. PAYMENT AND DELIVERY OF CERTIFICATES. At any Closing (a) OPLI shall make
payment to Company of the aggregate purchase price for the shares being
purchased upon exercise of the Option by delivery to Company by wire transfer of
immediately available funds or by a certified bank check in an amount equal to
the product of the number of Shares being purchased times the Exercise Price,
and (b) Company shall deliver to OPLI a stock certificate or certificates
representing the aggregate number of Shares being purchased by OPLI.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY. Company hereby
represents, warrants and covenants to OPLI the following.
6.1 DUE ORGANIZATION. Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power to enter into and perform this Agreement.
6.2 DUE AUTHORIZATION. Following receipt of Shareholder Approval,
this Agreement will have been duly authorized by all necessary corporate action
on the part of Company. This Agreement has been duly executed by a duly
authorized officer of Company.
6.3 COMPANY SHARES. Company has taken all necessary corporate and
other action to authorize, reserve and permit it to issue, and at all times from
the date hereof to the Expiration Date, will have reserved for issuance a
sufficient number of shares of Company common stock as shall be necessary to
fulfill Company's obligations under this Agreement; upon issuance of the Shares
pursuant hereto, all of such Shares shall be duly and validly issued, fully paid
and non-assessable and shall be delivered free and clear of all claims, liens,
encumbrances and security interests, including any preemptive right to any
shareholder of Company (except restrictions with respect to compliance with the
Securities Act of 1933, as amended (the "Securities Act") and state securities
laws).
6.4 VALIDITY, NO CONFLICT. Following receipt of Shareholder
Approval, this Agreement will constitute the legal, valid and binding obligation
of Company, enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, court decisions with
respect thereto, and general principles of equity. Neither the execution and
delivery of this Agreement by Company nor, following receipt of Shareholder
Approval, the consummation by Company of the transactions contemplated hereby,
will violate or conflict with, or result in a breach or default under, the terms
of (i) the Certificate of Incorporation or Bylaws of Company, (ii) any agreement
or instrument by which Company is bound, or (iii) any decree, judgment, order,
law or regulation now in effect of any court or other governmental body
applicable to Company.
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6.5 NO CONSENT. Other than in connection with or in compliance with
the provisions of the Securities Exchange Act of 1934, as amended, and the
securities or blue sky laws of the various states, and other than the need to
obtain Shareholder Approval, no authorization, consent or approval of, or filing
with, any public body, court or authority, or any other person, is necessary on
the part of the Company in connection with the execution, delivery, and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated by this Agreement.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF OPLI. OPLI represents,
warrants and covenants to Company as follows:
7.1 ORGANIZATION. OPLI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. OPLI has
the requisite corporate power to enter into and perform this Agreement.
7.2 DUE AUTHORIZATION. This Agreement has been authorized by all
necessary corporate action on the part of OPLI and has been duly executed by a
duly authorized officer of OPLI.
7.3 VALIDITY, NO CONFLICT. This Agreement constitutes the legal,
valid and binding obligation of OPLI, enforceable in accordance with its terms,
subject to the effects of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, court
decisions with respect thereof, and general principles of equity. Neither the
execution and delivery of this Agreement by OPLI nor the consummation by OPLI of
the transactions contemplated hereby, will violate or conflict with, or result
in a breach or default under, the terms of (i) the Certificate of Incorporation
or Bylaws of OPLI , (ii) any agreement or instrument by which OPLI is bound, or
(iii) any decree, judgment, order, law or regulation now in effect of any court
or other governmental body applicable to OPLI .
7.4 INVESTMENT REPRESENTATIONS. Any Shares or other securities
acquired by OPLI upon exercise of the Option will be acquired for OPLI's own
account and not with a view to resale or distribution in violation of the
Securities Act. The officers and directors of OPLI have such knowledge and
experience in business and financial matters as to be capable of utilizing the
information which is available to them to evaluate the merits and risk of an
investment in the Shares and OPLI is able to bear the economic risks of any of
the Shares or other securities which OPLI may acquire upon exercise of the
Option. OPLI covenants and agrees that it will not sell, offer to sell or
solicit offers to buy any such securities in violation of the Securities Act or
the "blue sky" or securities laws of any state.
8. REGISTRATION COVENANTS. The Shares shall be Registrable Securities as such
term is defined in that certain Registration Rights Agreement, dated November
12, 1998 by and between, Company and OPLI and shall have all rights and
obligations associated therewith.
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9. MISCELLANEOUS.
9.1 SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
9.2 EXPENSES. Except as otherwise provided herein, Company, on the
one hand, and OPLI, on the other hand, shall each bear their respective expenses
in connection with the preparation, execution and performance of this Agreement,
including, without limitation, all fees and expenses of agents, representatives,
counsel and accountants.
9.3 BINDING EFFECT AND ASSIGN. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but except as
otherwise specifically provided, neither this Agreement nor any of the rights,
interests or obligations of the parties hereto may be assigned by any of the
parties without the prior written consent of the other.
9.4 AMENDMENTS AND MODIFICATION. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
9.5 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and sufficient if delivered in
person, by cable, telegram or telex, or sent by mail (registered or certified
mail, postage prepaid, return receipt requested) to the respective parties as
follows:
<TABLE>
<S> <C>
If to OPLI: Oregon Power Lending Institution
357 Castro Street, Suite 2
Mountain View, CA 94041
Attention: Donald Baker
With a copy to: Grover T. Wickersham, Professional Corporation
430 Cambridge Avenue
Palo Alto, California
Attention: Debra Weiner
If to Company: Digital Video Systems, Inc.
160 Knowles Drive
Los Gatos, California 95032
Attention: Edward M. Miller
With a copy to: Orrick, Herrington & Sutcliffe, LLP
777 South Figueroa Street, Suite 3200
Los Angeles, CA 90017-5832
Attention: Blase P. Dillingham
</TABLE>
or to such other address any party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall only be
effective upon receipt.
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9.6 GOVERNING LAW. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of California as applied
to contracts entered into solely between residents of, and to be performed
entirely in, such state.
9.7 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matters.
9.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
9.9 EFFECT OF HEADING. The section headings herein after for
convenience only and shall not affect the construction or interpretation of this
Agreement.
9.10 DEFINITIONS. All capitalized terms used herein shall have the
meanings defined in the Investment Agreement, unless otherwise defined herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
DIGITAL VIDEO SYSTEMS, INC.
By /s/ Edward M. Miller, Jr.
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OREGON POWER LENDING INSTITUTION
By /s/ Donald Baker
-------------------------------------
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