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,
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:
If to OPLI: Oregon Power Lending Institution
000 Xxxxxx Xxxxxx, Xxxxx 0
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
With a copy to: Xxxxxx X. Xxxxxxxxxx, Professional Corporation
000 Xxxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx
Attention: Xxxxx Xxxxxx
If to Company: Digital Video Systems, Inc.
000 Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
With a copy to: Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxxxxx
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/ Xxxxxx X. Xxxxxx, Xx.
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OREGON POWER LENDING INSTITUTION
By /s/ Xxxxxx Xxxxx
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