<PAGE>
                                                                   EXHIBIT 10.21
 
                   SETTLEMENT AGREEMENT AND GENERAL RELEASES
                   -----------------------------------------


I.   PARTIES
     -------

     This Settlement Agreement and General Release (the "Settlement Agreement"
or the "Agreement") is entered into between the following parties (the
"Parties")

     A.   Janis P. Gemignani ("Gemignani") and her Related Entities;/1/ and

     B.   Digital Video Systems, Inc. ("DVS") and its Related Entities.
          

II.  RECITALS
     --------

     This Settlement Agreement is made with reference to the following facts:

     A.   Gemignani served as Chief Financial Officer, Vice President and
Secretary of DVS from August 1995 until October 1996. From October 1996 to the
date of this Settlement Agreement, Gemignani has been employed by DVS, reporting
to DVS' president for special assignments. Gemignani's employment as an employee
of DVS shall terminate at the close of business on February 3, 1997.

     B.   Certain disputes have arisen between Gemignani, on the one hand, and
DVS, on the other hand, regarding, among other things, the circumstances under
which Gemignani was and is employed, and the circumstances under which
Gemignani's employment as Chief Financial Officer, Vice President and Secretary
of DVS ended. The Parties' opposing views on these and related issues that are
in dispute are referred to as the "Dispute."

______________
/1/ For purposes of this Settlement Agreement, a Party's "Related Entities"
shall be defined as her or its past, present and future partners and partners of
those partners, successors, predecessors, assignees, beneficiaries, heirs,
legatees, devisees, executors, administrators, legal representatives, children,
joint venturers, principals, agents, trustees, attorneys, insurers, officers,
directors, employees, shareholders, affiliates and associates; its parent and
subsidiary corporations, divisions, affiliated companies and the officers;
directors, partnerships, representatives, employees, shareholders and affiliates
of each of them; and any other representative of the Party, including, without
limitation, in the case of DVS, Troy & Gould professional Corporation and its
officers, directors, shareholders and employees.

                                       1
<PAGE>
 
     C.   As a result of the Dispute, Gemignani filed, in October of 1996, a
charge alleging discrimination with the California Department of Fair Employment
and Housing (the "DFEH"), DFEH #E9697-G-0335-C1rsc. Gemignani's DFEH claim
alleges that since April 1996, DVS, Edmund Sun, Robert Pfannkuch, Joseph Troy,
and Troy & Gould have made continuous efforts to fire, demote, harass and
retaliate against Ms. Gemignani because she is female. On November 6, 1996, the
DFEH issued a Notice of Case Closure/Right to Sue, closing the case pending
before the DFEH as of October 28, 1996.
 
     D.   DVS denies that Gemignani suffered any alleged injury within the 
course and scope of employment or as a result of the circumstances under which
her employment as Chief Financial Officer, Vice President and Secretary of DVS
ended. DVS further denies that it acted wrongly in any manner toward Gemignani,
that it abridged her rights in any way or that it has caused her any injury of
any amount or nature.
 
     E.   Gemignani and DVS each acknowledge that the Dispute consists of
disputed claims and that the Parties have disagreements as to both the facts and
the law relating to the Dispute. The Parties further acknowledge that this
Settlement Agreement does not constitute an admission by the Parties as to the
merits of any claim that any Party may have, may have had or may come to have.
Each of the Parties has concluded, however, that litigation of this matter
through arbitration, trial or otherwise would be expensive and protracted and
that it would be much more desirable that the Dispute be settled fully and
finally in the manner and upon the terms and conditions set forth within this
Settlement Agreement, solely to avoid the expense of litigation or other dispute
resolution. This Settlement Agreement is intended to settle fully and finally
the Dispute and any other matters that in any way are related to or arise out of
Gemignani's employment with DVS, the termination of that employment, or any
written, oral or implied contract of any kind whatsoever concerning that
employment in any way. The Parties acknowledge and agree that, after the Parties
have executed the Settlement Agreement and have properly completed any and all
performance required by its terms, neither party shall have any further
obligations or duties of any kind whatsoever to the other as a result of
Gemignani's previous employment with DVS or otherwise. (This paragraph, however,
along with all other provisions of this Agreement, is subject to the
understanding that this Agreement is subject to and conditioned upon, the
agreement between Gemignani and Edmund Sun, described in Paragraph IX-A.)

           III  RELEASES
                --------
  
     A..  Gemignani's Release of DVS. In consideration of the terms and 
          --------------------------
provisions of this Settlement Agreement and in consideration of DVS's payments
to Gemignani and DVS's

                                       2
<PAGE>
 
agreements and acknowledgments as set forth in section VII, below, Gemignani, on
behalf of herself and on behalf of her Related Entities, hereby, generally and
unconditionally, relieves, releases, remises, acquits and forever discharges DVS
and its Related Entities, including, but not limited to, Edmund Sun, Robert
Pfannkuch, Joseph Troy and Tray & Gould, of and from any and all claims,
demands, rights, actions, causes of action, suits, contracts, debts,
controversies, expenses, liabilities, obligations, damages, losses, expenses
(including, without limitation, attorneys' fees, except as expressly set forth
within this Agreement), penalties, costs and allegations of any kind and
character whatsoever, whether legal, contractual, statutory, administrative or
equitable in nature or otherwise, whether known or unknown, suspected or
unsuspected, direct or indirect, absolute, fixed or contingent, that Gemignani
now owns, holds, has or claims to have, or owned at any time, held, had or
claimed to have had or may come to own, hold, have or claim to have against DVS
and its Related Entities arising out of or in connection with the Dispute or
Gemignani's employment with DVS. This includes, without limitation, all claims,
demands, causes of action, facts, transactions, occurrences, circumstances, acts
or omissions, or allegations of any kind and character whatsoever asserted by
the Parties or which could have been asserted by the Parties in connection with
the Dispute or Gemignani 5 employment with DVS, including any and all facts in
any manner arising out of, related or pertaining to or connected with those
claims or with the terms of or value of any consideration paid to Gemignani in
connection with Gemignani's employment with, or termination of employment from,
DVS, or any of its Related Entities, including, without limitation, any claims
based on, related to or arising from federal, state or local laws (including,
but not limited to, the Age Discrimination in Employment Act, the California
Labor Code, Title VII of the Civil Rights Act of 1964, as amended, and the Fair
Labor Standards Act) that prohibit employment discrimination on the basis of
race, national origin, religion, age, gender, marital status, pregnancy,
handicap, perceived handicap, ancestry, sexual orientation, family or personal
leave or of any other form of discrimination, or from laws such as workers'
compensation laws, which provide rights and remedies for injuries sustained in
the workplace or from any common law claims of any kind, including, without
limitation, contract, tort or property rights including, but not limited to,
breach of express or implied contract, breach of the implied covenant of good
faith and fair dealing, tortious interference with contract or current or
prospective economic advantage, fraud, deceit, breach of privacy,
misrepresentation, defamation, wrongful termination, 9 tortious infliction of
emotional distress, loss of consortium, breach of fiduciary duty, violation of
public policy and any other common law claim of any kind whatsoever, any claims
for severance pay, sick leave, family leave,

                                       3
<PAGE>
 
vacation, life insurance, bonuses, health insurance, disability or medical
insurance or any other fringe benefit or compensation, or any claims relating to
or arising out of any purported right to stock or stock options in DVS, and all
rights or claims arising under the Employment Retirement Income Security Act of
1974 ("ERISA") or pertaining to ERISA regulated benefits (all collectively
defined as the "Released Claims"). Notwithstanding any provision hereof to the
contrary, Gemignani's release of claims against DVS' Related Parties shall not
extend to any Related Party who claims not to be bound by the following
Paragraph B.

     B.   DVS' Release of Gemignani. In consideration of the terms and 
          -------------------------
provisions of this settlement Agreement and in consideration of Gemignani's
agreements and acknowledgments as set forth in section VII, below, DVS, on
behalf of itself and on behalf of its Related Entities, hereby, generally and
unconditionally, relieves, releases, remises, acquits and forever discharges
Gemignani and her Related Entities of and from any and all claims, demands,
rights, actions, causes of action, suits, contracts, debts, controversies,
expenses, liabilities, obligations, damages, losses, expenses (including,
without limitation, attorneys' fees except as expressly set forth within this
Agreement), penalties, costs and allegations of any kind and character
whatsoever, whether legal, contractual, statutory, administrative or equitable
in nature or otherwise, whether known or unknown, suspected or unsuspected,
direct or indirect, absolute, fixed or contingent, that DVS now owns, holds, has
or claims to have, or owned at any time, held, had or claimed to have had or may
come to own, hold, have or claim to have against Gemignani arising out of or in
connection with the Dispute or Gemignani's employment with DVS and all claims,
demands, causes of action, facts, transactions, occurrences, circumstances, acts
or omissions, or allegations of any kind and character whatsoever asserted by
the Parties or which could have been asserted by the Parties in connection with
the Dispute or Gemignani's employment with DVS (all of these claims and
Gemignani's Released Claims defined collectively as the "Released Claims")
Notwithstanding any provision hereof to the contrary, DVS' release of claims
against Gemignani's Related Parties shall not extend to any Related Party who
claims not to be bound by the preceding Paragraph A.

     C.   Unknown claims And Risks Released By The Parties. The Parties, and 
          ------------------------------------------------
each of them, hereby knowingly, voluntarily and expressly waive and relinquish
any and all rights and benefits that they may have under section 1542 of the
California Civil Code, or under any similar provision of law of any state or
territory of the United States or any other jurisdiction and under any similar,
or analogous principle of common law. The Parties, and each of them, expressly

                                       4
<PAGE>
 
understand that section 1542 of the California Civil Code provides as follows:

          "A general release does not extend to claims which the creditor does
          not know or suspect to exist in his favor at the time of executing the
          release which, if known by him, must have materially affected his
          settlement with the debtor."

     The Parties, and each of them, agree and acknowledge that they are familiar
with section 1542 of the California Civil Code. The Parties, and each of them,
further agree and acknowledge that their respective waivers of all rights or any
similar benefits under that section and under any similar statutes of any other
jurisdiction (to the full extent that the Parties lawfully may waive all such
rights and benefits with respect to the subject matter of this Settlement
Agreement) are essential terms of this Settlement Agreement, without which the
consideration given pursuant to this Settlement Agreement would not have been
given by the Parties, and each of them.

IV.  ASSUMPTION OF RISK REGARDING RELEASED CLAIMS
     --------------------------------------------

     A.   The Parties acknowledge that there is a risk that, after execution of
this Settlement Agreement, they may discover, incur or suffer claims that were
unknown or unanticipated at the time of this Settlement Agreement, including,
but not limited to, unknown or unanticipated claims that arise from, are based
upon or are related to any facts underlying the Released Claims, which had they
been known or more fully understood, may have affected the Parties' decisions to
execute the Settlement Agreement as it currently is written. Each Party
knowingly and expressly assumes the risk of these unknown and unanticipated
claims and agrees that this Settlement Agreement and the general releases set
forth within it apply to all such unknown, unanticipated or potential claims.
 
     B.   Furthermore, it is the intention of the Parties, by entering into this
Settlement Agreement, to settle and release fully, finally and forever all
Released Claims and any and all claims that now exist, or may have at any time
existed or shall come to exist in connection with the Dispute. In furtherance of
the Parties' intention, the releases given within this Settlement Agreement
(including, without limitation, the waivers set forth in paragraph III.C.,
above) shall be and remain in effect as full and complete releases and
discharges of the Released Claims .and of any related matters notwithstanding
the 9 discovery by any Party of the existence of any additional or different
claims or the facts relative to any such claims.
 

                                       5
<PAGE>
 
V.   COVENANT NOT TO SUE
     -------------------

     A.   Subject to the excepted matters set forth in Paragraph VI., each
Party to this Settlement Agreement agrees that she or it will forever refrain
and forbear from commencing, instituting or prosecuting any lawsuit, action or
other proceeding, in law, equity or otherwise, against any other Party or
against any Party's Related Entities, in any way arising out of or relating to
the Dispute and/or the Released Claims.
 
     B.   The Parties acknowledge and agree that monetary damages alone are
inadequate to compensate any Party or any Party's Related Entities for injury
caused or threatened by a breach of this Covenant Not To Sue and that
preliminary and permanent injunctive relief restraining and prohibiting the
prosecution of any action or proceeding brought or instituted in violation of
this Covenant is a necessary and appropriate remedy in the event of such a
breach. Nothing contained in this paragraph, however, shall be interpreted or
construed to prohibit or in any way to limit the right of a nonbreaching Party
or of any of its Related Entities to obtain, in addition to injunctive relief,
an award of monetary damages against any person or entity breaching this
Covenant Not To Sue and Settlement Agreement.

VI.  EXCEPTED MATTERS
     ----------------

     Any action or proceeding brought for breach of or to interpret or enforce
the terms of this Settlement Agreement is excepted from the Covenant Not To Sue
set forth in section V., above.

VII. CONSIDERATION: AGREEMENTS BY THE PARTIES AND ACTS TO BE 
     -------------------------------------------------------
     TAKEN BY THE PARTIES         
     --------------------

     As additional consideration of settlement, the Parties, and each of them,
agree as follows:
 
     A.   Ms. Gemignani will continue to serve as a director of DVS until DVS'
next annual meeting. Ms. Gemignani will have no obligation to serve as a
director of DVS after the date of that meeting and DVS will have no obligation
to cause her election to the Board of Directors after that date. Notwithstanding
the foregoing, Gemignani reserves the right to resign, at any time, as a
director of DVS.
 
     B.   DVS will retain Ms. Gemignani as a consultant for general policy and
operations advisory work. The consultancy shall continue for a period of twelve
months commencing February 4, 1997.
 

                                       6
<PAGE>
 
          1.   Gemignani will report to Robert Pfannkuch and shall have flexible
work periods.. Gemignani shall not have to account for her time, and shall not
be required to devote more than forty hours per week of her time to the business
of DVS. This shall apply in a non-cumulative manner; e.g., if she works only
thirty hours in one week, the maximum time required in any and all subsequent
weeks shall remain forty hours per week.
 
          2.   DVS shall pay Gemignani a consulting fee of $15,000 per month.
This fee shall be paid in accordance with the usual DVS payroll practices (every
two weeks), and be paid by direct deposit to Gemignani's bank account.
 
          3.   DVS shall continue medical and dental insurance coverage for
Gemignani during the consulting term. This coverage shall be identical to what
she would receive as an employee of DVS.

          4.   The consultancy agreement may be terminated by Gemignani on 15 
days prior notice. This agreement may not be terminated by DVS for any reason,
other than Gemignani 5 incapacity, death or habitual and willful neglect of her
duties under this agreement; any such termination shall require fifteen days'
prior written notice.
 
     C.   In close cooperation with, and under the guidelines set by, the
designated Board member(s) (see Para. 1 above)Ms. Gemignani shall carry out the
following:

          1.   Ms. Gemignani shall assume responsibility for working on the
employee compensation programs, including the 401K program.

          2.   During the term of the consultancy, Gemignani agrees to work
diligently toward enhancing employee goodwill toward DVS management and further
improving morale among affected employees.
 
          3.   Gemignani will work to facilitate arrangements and programs to
enable employees to readily exercise their stock options and perform other
similar functions to enhance the circumstances of non-officer employees.
 
          4.   Gemignani will work towards completion of policies and procedures
as required by the D&O carrier.

     D.   Gemignani shall retain all rights under the Indemnity Agreement dated
April 19, 1996, between DVS and Gemignani, on the same terms as though she
remained an officer and director of DVS.

                                       7
<PAGE>
 
     E.   DVS shall provide Gemignani with a continuation of the coverage for
D&O liability. Gemignani shall be included on all renewal policies during her
service as a director. All coverage described in this paragraph shall be
provided both during and following Gemignani's service as a consultant, and DVS
shall promptly provide to Gemignani copies of all policies evidencing such
coverage. DVS shall not issue any press release relating to Gemignani without
her prior written approval of the content of any such release.

     F.   DVS will pay $10,000 to Gemignani to offset a portion of expenses
incurred in her relocation from Houston. DVS will also reimburse Gemignani for
all other reasonably incurred past expenses incurred while employed by DVS. All
such payments shall be made no later than February 3, 1997. DVS also agrees to
promptly reimburse Gemignani for all company-related business expenses that she
incurs while a consultant for DVS.
 
     G.   The Parties acknowledge and agree that, as of the date of the
execution of this Agreement, Gemignani has been paid for all salary,
reimbursable expenses, accrued vacation, or for any other amounts that arise out
of or relate in any way to Gemignani 5 employment or to services rendered to DVS
by Gemignani up to and including the date of this Settlement Agreement. -Payment
for said "accrued vacation" refers to payment by DVS on or about February 3,
1997, for five weeks of vacation time.

     H.   All options to purchase DVS stock, held by Gemignani, shall continue
to vest until the later of (a) the date on which she ceases being a consultant
for DVS; or (b) the date on which she ceases being a director of DVS. DVS agrees
to support the request by Gemignani that she be released from the underwriter's
"thirteen-month lock-up" period, by submitting to the underwriter the letter
attached to this Settlement Agreement as Exhibit A.

     I.   The Parties acknowledge and agree that in the event that the
"Gemignani Options" (as defined in the Settlement-Agreement and General Release,
of even date, between Gemignani and Edmund Sun) are not delivered to Gemignani
on or before February 3, 1997, this Settlement Agreement shall be deemed
automatically rescinded, and the parties shall retain any and all rights which
they possessed prior to executing this Agreement, and the Parties shall be
considered for all purposes never to have entered into this Agreement or the
above-referenced Agreement between Gemignani and Edmund Sun.

VIII.REPRESENTATIONS AND WARRANTIES
     ------------------------------

     A.   Independent Legal Advice. Each of the Parties represents, warrants
          ------------------------   
and agrees that she or it has received 

                                       8
<PAGE>
 
independent legal advice from her or its attorneys with respect to the 
advisability of executing this Settlement Agreement.

     B.   No Other Representation. Each of the Parties represents, warrants and
           ----------------------- 
agrees that, in executing this Settlement Agreement, she or it has relied solely
on the statements expressly set forth within this Agreement. Each of the Parties
further represents, warrants and agrees that, in executing this Settlement
Agreement, she or it has placed no reliance whatsoever on any statement,
representation or promise of any other Party, or any other person or entity,
that is not expressly set forth within this Agreement, or upon 9 the failure of
any other Party, or any other person or entity, to make any statement,
representation or disclosure of anything whatsoever. The Parties have included
this clause: (1) to preclude any claim that any Party was without the advice of
counsel; and (2) to preclude the introduction of parol evidence to vary,
interpret, supplement or contradict the terms of this Agreement.

     C.   Factual Investigation. Each of the Parties represents, warrants
          ---------------------                                          
and agrees that she or it has made a sufficient investigation of the facts
pertaining to the Dispute and of all matters pertaining to the Dispute or
contained in or related to this Agreement as she or it deems necessary or
desirable.

     D.   Authority. Each of the Parties represents, warrants and agrees that
          --------- 
she or it has the full right, power and authority to execute this Settlement
Agreement and that the person executing this Agreement on her or its behalf has
the full right, power and authority to commit and to bind that Party fully to
the terms of this Agreement. The Parties expressly covenant and warrant to each
other and their Related Entities that they have the right, power, and authority
to bind each and all of their Related Entities with respect to each and every
provision of this Agreement which affects, or purports to affect, any or all of
said Related Entities. In the event that any Related Entity makes any assertion
that conflicts with the intent of the prior sentence, the Party making the
representation shall fully indemnify, hold harmless and defend the affected
Party and her or its Related Entities for the consequences of such assertion.

       E.  No Assignment. Each of the Parties represents, warrants and
           -------------                                              
agrees that there has been no assignment or transfer, including, without
limitation, by way of subrogation or operation of law or otherwise, to any
person or entity whatsoever of claims released by that Party or of any other
claim, right, demand, action or cause of action that the Parties may have had,
have or might have arising out of the Dispute. Each Party, to the extent any
particular Party

                                       9
<PAGE>
 
breaches this representation or warranty, agrees to defend, to indemnify and to
hold harmless any nonbreaching Party to this Agreement from and against any and
all claims, allegations, demands, liabilities, losses, obligations, promises,
damages, costs, expenses (including, without limitation, attorneys' fees and
costs of investigation), lawsuits, actions (in law, equity or otherwise), causes
of action, rights and privileges actually incurred as a result of that breach.

IX.  GENERAL
     -------

     A.   Full Integration. Except as set forth hereinbelow, this Settlement
          ---------------- 
Agreement is the final written expression and the complete and exclusive
statement of all of the agreements, conditions, promises, representations and
covenants between the Parties with respect to the subject matter of this
Agreement, and replaces and supersedes all prior, former or contemporaneous
agreements, negotiations, understandings, representations, discussions or
warranties between the Parties, their respective representatives, and any other
person or entity, with respect to the subject matter of this Agreement. Any
modification, alteration or amendment of this Agreement shall be nonbinding,
ineffective or invalid unless it is in writing, specifically refers to this
Agreement and is signed by the Party to be charged with the modification,
alteration or amendment or by a duly authorized representative of that Party.
Notwithstanding the above, the Parties acknowledge and agree that a binding,
effective and valid Settlement Agreement and General Release, of even date,
exists between Gemignani and Edmund Sun, which is being executed separately by
the Parties solely for the convenience of Edmund Sun and DVS, and which for all
purposes shall be deemed to be subject to and conditioned upon this Agreement
with DVS. In no event shall Gemignani be prejudiced by her willingness to
accommodate Edmund Sun and DVS by her agreement to execute two distinct
documents.
 
     B.   No Admissions. Each of the Parties expressly acknowledges and
          -------------                                                
agrees that this Agreement represents a settlement of disputed claims and is
not, in any respect, nor for any purpose, to be deemed or construed to be an
admission or concession of any liability or wrongdoing by any Party whatsoever
or of the existence of any claim. Furthermore, this Settlement Agreement shall
not be deemed to be for the benefit of, or to confer any rights of any kind or
nature whatsoever upon, any third party (whether a person or entity) other than
the Related Entities.

     C.   Waiver And Severability. No waiver of any term, covenant or condition
          ----------------------- 
of this Settlement Agreement shall be construed as a waiver of any other term,
covenant or condition, nor shall any waiver of any default under this Settlement
Agreement be construed as a continuing waiver of

                                       10
<PAGE>
 
any term, condition or covenant or as a waiver of any other default.
Furthermore, in the event any portion of this Agreement is found, judicially or
otherwise, to be unlawful, void or, for any other reason, unenforceable, that
provision shall be deemed severable from this Agreement and the invalidity or
lack of enforceability shall not affect the validity and enforceability of the
remaining portions of this Agreement.

     D.   California Law Governs. This Settlement Agreement shall be construed
          ---------------------- 
and enforced in accordance with, and governed by, the internal, substantive laws
of the State of California. Any lawsuits filed to enforce any provision of this
Agreement by any party hereto shall be filed in the Superior Court for the State
of California, County of Santa Clara.

     E.   Attorneys' Fees. Except as otherwise provided in this Agreement,
          ---------------                                                 
each side is to bear its own legal expenses and attorneys' fees. In the event
any legal or governmental action or proceeding is commenced under or pursuant to
any other terms and conditions of this Agreement, or to interpret or, enforce
the terms of or obligations arising out of this Agreement, or to recover damages
for the breach of this Agreement, the Party (or Parties) prevailing in any such
action or proceeding shall be entitled, in addition to any other relief awarded
by the Court or other tribunal, to recover from the other Party (or Parties) all
reasonable attorneys' fees, costs and expenses incurred by the prevailing Party
(or Parties). In addition, the prevailing Party (or Parties) shall be entitled
to recover from the non-prevailing Party (or Parties) post-judgment/award/order
attorneys', fees incurred by the prevailing Party (or Parties) in enforcing a
judgment, order or award against the non-prevailing Party (or Parties).
Notwithstanding anything in this Agreement to the contrary, the provisions of
the preceding sentence are intended to be severable from the balance of the
Agreement, shall survive any judgment rendered in connection with the aforesaid
legal action, and shall not be merged into any such judgment, order or award.

     F.   Confidentiality Of Agreement. The Parties acknowledge and agree that
          ---------------------------- 
this Settlement Agreement is a confidential document, that it shall be
maintained in strict confidence and that neither this document, nor any
information contained within this document, shall be disclosed to any person or
entity other than to counsel for a Party (including secretarial, clerical and
paralegal personnel regularly employed by that counsel), accountants, financial
advisors or other professionals employed by that Party to the extent absolutely
necessary for that professional to perform her or his function for the Party.
The Parties further acknowledge and agree that this section regarding
confidentiality of the

                                       11
<PAGE>
 
settlement Agreement is an essential term such that a breach of this section
shall be deemed a material breach of the Settlement Agreement. Notwithstanding
the above, the Parties further acknowledge and agree that upon the advice of its
counsel, DVS shall be permitted to disclose the entirety of this Settlement
Agreement, or any portion thereof, to the Securities and Exchange Commission, in
connection with any of DVS' SEC filings

     G.   Counterparts, Copies, Faxed Signatures. This Settlement Agreement
          --------------------------------------                           
may be executed in any number of counterparts by the Parties, and, when each
Party has signed and delivered at least one counterpart to the other Parties,
each counterpart shall be deemed an original and, taken together, shall
constitute and be deemed to be one and the same Agreement, and shall be binding
and effective as to all Parties. In addition, true and correct copies may be
used in lieu of the original Agreement for any purpose whatsoever. Finally,
faxed copies of the Agreement and faxed signature pages shall be binding and
effective as to all Parties and may be used in lieu of the original Agreement,
and, in particular, in lieu of original signatures, for any purpose whatsoever.

     H.   Headings. The headings to the paragraphs of this Agreement are
          -------- 
 inserted for convenience only and will not be deemed a part of this Agreement,
 nor will the heading affect the construction or interpretation of the
 provisions contained within this Agreement.

     I.   Survival of Warranties. All representations and warranties contained
          ----------------------  
within this Agreement shall survive its execution, effectiveness and delivery.
It is expressly understood and agreed by the Parties that none of the releases
or covenants set forth within this Agreement are intended to or do release or
affect any claims or rights specifically arising out of this Agreement or the
breach of it.

     J.   Further Instruments. The Parties shall execute and deliver further
          ------------------- 
instruments, documents or papers and shall perform all acts necessary or proper
to carry out and effectuate the terms of this Agreement as may be required by
the terms of the Agreement or as may be reasonably requested by any Party to
this Agreement.

      K.   No Presumption From Drafting. This Agreement has been negotiated at
           ---------------------------- 
arm's-length between persons knowledgeable in the matters set forth within this
Agreement. Accordingly, given that all. Parties have had the opportunity to
draft, review and/or. edit the language of this Agreement, no presumption for or
against any Party arising out of drafting all or any part of this Agreement will
be applied in any action relating to, connected with or involving this
Agreement. In particular, any rule of law, including, but not limited to,
section 1654 of the

                                       12
<PAGE>
 
California Civil Code Section, or any other statutes, legal decisions, or common
law principles of similar effect, that would require interpretation of any
ambiguities in this Agreement against the party that has drafted it, is of no
application and is hereby expressly waived. The provisions of this Agreement
shall be interpreted in a reasonable manner to effect the intentions of the
Parties.

     L.   Benefits Successors. Except as limited by the terms of this Agreement,
          ------------------- 
this Settlement Agreement shall be binding upon and shall inure to the benefit
of each of the Parties to the Agreement and to their respective heirs,
executors, administrators, assigns, successors-in-interest, representatives,
trustees, beneficiaries and Related Entities

     M.   All Terms Are Contractual. Each term of this Settlement Agreement is
          ------------------------- 
contractual and not merely a recital.

     N.   Voluntary Execution of Agreement. Gemignani represents that she has
          -------------------------------- 
carefully read this entire Settlement Agreement and that she knows and
understands its contents. Gemignani has had the opportunity to receive
independent legal advice from attorneys of her choice with respect to the
preparation, review and advisability of executing this Settlement Agreement.
Gemignani further represents and acknowledges that she has freely and
voluntarily executed this Settlement Agreement after independent investigation
and without fraud, duress, or undue influence, with the full understanding of
the legal and binding effect of this Settlement Agreement and with the approval
of her legal counsel. Gemignani thereby knowingly waives the twenty-one (21) day
period under the older Workers Benefits Protection Act to review this Settlement
Agreement with her attorney prior to signing.

     O.   Right of Revocation. With respect only to claims arising under the Age
          ------------------- 
Discrimination in Employment Act Gemignani has the right to revoke this
Settlement Agreement for any reason within seven (7) days after she signs it. To
be effective, Gemignani's notice of revocation must be in writing and must be
hand delivered or mailed to Robert Pfannkuch, Digital Video Systems, Inc., 271C
Walsh Avenue, Santa Clara, California 95C51, within the seven (7) day period. If
mailed, the revocation must be postmarked within the seven-day period, properly
addressed and sent by certified mail, return receipt requested. If hand-
delivered, it must be given to Robert Pfannkuch within the seven-day period.
 

                                       13
<PAGE>
 
     IN WITNESS WHEREOF, the Parties to this Agreement have approved and
executed this Settlement Agreement on the dates set forth opposite their
respective signatures.

DATE: January, 30, 1997                JANIS P GEMIGNANI
                                      
                                       ______________________________
                                       
                                       Janis P. Gemignani
                                      
DATE: January __, 1997                 DIGITAL VIDEO SYSTEMS, INC.
                                      
                                      
                                       By: __________________________
                                        
                                       Its: _________________________



APPROVED AS TO FORM:

TROY & GOULD
Professional Corporation


By: ____________________________    
    Russ M. Fukano
Attorneys for Digital Video
Systems, Inc.


QUACKENBUSH & QUACKENBUSH


By: ____________________________
    William Quackenbush
Attorneys for Janis P Gemignani

                                       14
<PAGE>
 
                                January __, 1997



Martin A. Bell, Esq.
Vice Chairman
D.H. Blair Investment Banking Corp.
44 Wall Street
New York, New York 10005

     
     Re:  Janis Gemignani - Lock-Up
          -------------------------


Dear Mr. Bell:

     We are writing this letter in support of the request by Janis Gemignani to
have all of her Digital Video Systems, Inc. securities released from the lock-up
letters that she has signed at the request of D.H. Blair in connection with the
IPO and secondary offers of DVS underwritten by Blair.

     We believe that a release of Ms. Gemignani's securities from the lock-up is
in the best interests of DVS and its shareholders. Our request that you take
this action is being made in connection with a settlement that DVS has reached
with Ms. Gemignani with respect to certain employment related claims that she
has asserted against DVS.

     We note the following in connection with our request.

     (1)  Ms. Gemignani is no longer an officer of DVS and DVS is not required
to renominate her to the Board of Directors when her current term expires.

     (2)  Ms. Gemignani currently owns only 2,250 shares of common stock. Ms.
Gemignani holds options to purchase 238,646 shares of common stock, as to which
89,492 currently are vested and the balance vest over a 2-1/2 year period.
<PAGE>
 
Martin A. Bell,
January __, 1997
Page 2


     
     (3)  The trading volume of the securities of DVS has been sufficiently
heavy so that any sales by Ms. Gemignani would be unlikely to disrupt the
market.

     Thank you for your consideration in this matter.


                               Very truly yours,



                               Robert Pfannkuch