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 Xxxxxxxxx 0, Xxxxxxxxx 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;
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 Xxxxxxxxx 0, Xxxxxxxxx 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.
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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."
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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/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx, Xx.
President and Chief Executive Officer
OREGON POWER LENDING INSTITUTION
By /s/ Xxxxxx Xxxxx
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Xxxxxx Xxxxx
Secretary and Treasurer
