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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ____)*
Digital Video Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock
- --------------------------------------------------------------------------------
(Title of Class of Securities)
25387R100
- --------------------------------------------------------------------------------
(CUSIP Number)
Don Baker, Treasurer
Oregon Power Lending Institution
c/o Gordon Cary, Esq.
888 S.W. Fifth Avenue, Suite 890
Portland, OR 97204
(503) 222-1415
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
November 5, 1998
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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>
CUSIP No. 25387R100
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
OREGON POWER LENDING INSTITUTION
- --------------------------------------------------------------------------------
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
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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 6,255,319
SHARES --------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 0
EACH --------------------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 6,255,319
WITH --------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,255,319
- --------------------------------------------------------------------------------
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
N/A
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT
19.8%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This Schedule 13D relates to the common stock, par value $0.0001 per
share ("Shares"), of Digital Video Systems, Inc., a Delaware corporation (the
"Issuer"). 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
888 S.W. Fifth Avenue, Suite 890, Portland, Oregon 97204. 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
(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
<PAGE>
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.
The aggregate purchase price for securities which, upon conversion and
exercise, become Shares, as described in Item 5 below, is $3,500,000. The
$1,500,000 payable for exercise of the OPLI option for 2,000,000 shares has not
yet been paid but OPLI has a current right to acquire those shares by exercising
the option. The source of funding for the purchase of the Shares was (and, with
respect to the exercise of the option, will be) OPLI's general working capital.
Pending receipt of shareholder approval by the shareholders of the Issuer,
which has not yet been obtained, OPLI shall have the right, with respect to an
additional $8,000,000 investment, to purchase additional shares of Series C
Convertible Preferred Stock. If such shares are purchased in the future, of
which there is no assurance, the source of funds will be OPLI's working capital.
ITEM 4. PURPOSE OF TRANSACTION.
The securities were acquired for investment purposes. In addition, in
connection with this investment, the Issuer has granted OPLI the right to
designate two members of the Board of Directors. Two directors will not be
sufficient to control the Board and control of the Board is not intended.
Except with respect to placing two designees on the Issuer's 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.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) and (b) Based on the number of Shares outstanding as reflected in the
letter of intent regarding the subject transaction attached hereto as an
exhibit, OPLI may be deemed to own beneficially 6,255,319 shares representing
approximately 19.8% of the Issuer's outstanding Shares, assuming that the
Conversion Price is $0.47. OPLI has the sole power to vote and direct the
disposition of such securities.
(c) Pursuant to a private placement (the "Placement"), on November 5,
1998, OPLI purchased from the Issuer 2,000 shares of Series C Convertible
Preferred Stock (the "Preferred Shares") at $1,000 per share. Each Preferred
Share is convertible into 2,127.6595 shares of the Issuer's Common Stock, at an
initial conversion price of $0.47 per Common Share, subject to adjustment in the
event of stock splits, reverse stock splits and other similar events of
recapitalization.
<PAGE>
In connection with this investment, which totaled $2,000,000, OPLI was also
issued an option to purchase an additional 2,000,000 shares of Common Stock at
$0.75 per share (the "OPLI Option"). The OPLI Option is exercisable at any time
or from time to time for the three year period beginning November 5, 1998.
The information in this Schedule 13D regarding OPLI's ownership of Common
Stock of the Issuer assumes conversion of its outstanding Preferred Shares and
exercise of its outstanding OPLI Option.
In addition, pending receipt of shareholder approval by the shareholders of
the Issuer, of which there is no assurance, OPLI shall have the right, with
respect to an additional $8,000,000 investment, to purchase up to an additional
8,000 Preferred Shares, at a purchase price of $1,000 per Preferred Share.
Assuming OPLI makes the total investment, including purchase of all of the
available Preferred Shares and exercise of the OPLI Option, of which there is no
assurance, OPLI would beneficially own 23,276,595 shares of Common Stock of the
Issuer which, without taking into account any additional issuances of securities
other than the issuances to OPLI, will represent approximately 48% of the
outstanding shares.
(d) N/A
(e) N/A
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDING OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
As described in response to Item 5, OPLI and the Issuer have signed a
letter of intent that provides for a possible additional investment or series of
investments by OPLI, pending receipt of shareholder approval, which is required
pursuant to the corporate governance rules of The Nasdaq Stock Market, Inc. OPLI
may invest up to $10,000,000 total (including the $2,000,000 invested as of
November 5, 1998, as to which this Schedule 13D relates) for the purchase of
Preferred Shares and an additional $1,500,000 pursuant to the exercise of the
OPLI Option.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Letter of Intent dated October 15, 1998
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
November 16, 1998
Date
OREGON POWER LENDING INSTITUTION
By: /s/ Don Baker
-------------------------------
Don Baker
Secretary, Treasurer and Director
<PAGE>
[Digital Video Systems, Inc. Logo]
October 15, 1998
Mr. Donald Baker
Secretary & Treasurer
Oregon Power Lending Institution
357 Castro Street
Suite 2
Mountain View, CA 94041
Dear Don,
RE: OREGON POWER LENDING INSTITUTION AND DIGITAL VIDEO SYSTEMS, INC. INVESTMENT
AGREEMENT
We are pleased to advise that Digital Video Systems, Inc.'s ("DVS") Board of
Directors has approved the following Investment Structure, which is based upon
your prior conversations and correspondence with us. It is contemplated that in
this transaction Oregon Power Lending Institution ("OPLI") will have the right
to acquire a total of approximately 24,275,000 shares of DVS common stock. DVS
currently has outstanding approximately 25,337,000 shares of common stock, and
upon completion of this transaction (excluding exercise of the OPLI option or
any future issuances by DVS), the total outstanding shares of DVS will be
approximately 49,612,000 (the "Final Outstanding Common Stock").
Because DVS is subject to Nasdaq rules, we are required to obtain shareholder
approval before we can sell 20% or more of our ownership (or voting power) at a
discount to the market price. Thus, we are required to split the transaction
into separate tranches, with the tranches that follow the First Tranche being
subject to shareholder approval.
1) FIRST TRANCHE. OPLI will make an initial investment of $1.5 million in
cash by October 23rd and $500 thousand in cash on or before November 5th
(the "First Tranche"). In consideration of and upon funding of the First
Tranche, DVS will issue $2.0 million of convertible preferred shares
("Preferred Stock") to OPLI. The shares of Preferred Stock issued in the
First Tranche will convert into 4,255,319 shares of DVS' common stock
("Common Stock"). This represents a conversion price of approximately
$0.47 per share of Common Stock.
[Digital Video Systems, Inc. Letterhead]
<PAGE>
LETTER TO: MR. DONALD BAKER
OCTOBER 15, 1998
PAGE 2 OF 5
2) SECOND TRANCHE. OPLI will make an investment of $1.0 to $2.0 million in
cash during November 1998 (the "Second Tranche"). In consideration of and
upon funding of the Second Tranche, DVS will issue a minimum of $1.0 to a
maximum of $2.0 million in convertible preferred shares ("Preferred Stock")
to OPLI. The shares of Preferred Stock issued in the Second Tranche will
convert into a minimum of 2,127,660 to a maximum of 4,255,319 shares of
DVS' common stock ("Common Stock"). This represents a conversion price of
approximately $0.47 per share of Common Stock. The Second Tranche is
subject to and conditioned upon DVS obtaining the approval of its
shareholders to the Second Tranche, as well as subsequent Tranches. DVS
anticipates that it will obtain foregoing shareholder approval within
approximately 30 to 60 days from the date hereof.
3) THIRD TRANCHE. OPLI will have an option to make a third investment of a
maximum of $2.0 million in cash during December 1998 (the "Third Tranche").
In consideration of and upon funding of the Third Tranche, DVS will issue
up to a maximum of $2.0 million of convertible preferred shares ("Preferred
Stock") to OPLI. The shares of Preferred Stock issued in the Third Tranche
will convert into a maximum of 4,255,319 shares of DVS' common stock
("Common Stock"). This represents a conversion price of approximately
$0.47 per share of Common Stock. Upon the full investment of $6.0 million
and the conversion of the $6.0 million into common shares issued in
association with the First, Second and Third Tranches, OPLI will own
approximately 33% of the Final Outstanding Common Stock (including the
shares of the common stock underlying the Preferred Stock issued to OPLI in
the First Tranche and Second Tranche). The Third Tranche is subject to and
conditioned upon DVS obtaining the approval of its shareholders to the
Second Tranche, as well as subsequent Tranches.
4) SUBSEQUENT TRANCHE(S). OPLI will have the opportunity to invest on or
before April 30, 1999, an additional $4.0 million in DVS (the "Subsequent
Tranche(s)") for a total potential investment (excluding exercise of OPLI's
option) of $10.0 million. The subsequent Tranche(s) will be in increments
of $2.0 million. In consideration of and upon funding of the Subsequent
Tranche(s), DVS will issue up to an additional $4.0 million of Preferred
Stock to OPLI. The maximum number of preferred shares of DVS issued in the
Subsequent
<PAGE>
LETTER TO: MR. DONALD BAKER
OCTOBER 15, 1998
PAGE 3 OF 5
Tranche(s) will be convertible into 8,510,638 shares of DVS common stock.
This represents a conversion price of approximately $0.47 per share of
Common Stock. OPLI will fund the Subsequent Tranche(s) with 50% in cash
and 50% in Letter(s) of Credit issued to DVS suppliers. The Subsequent
Tranche(s) are subject to and conditioned upon DVS obtaining the approval
of its shareholders to the Second Tranche, as well as subsequent Tranches.
5) OPTION GRANT. In connection with funding the First Tranche, DVS will grant
a stock option to purchase 2.0 million shares of Common Stock at an
exercise price of $0.75 per share. In connection with the funding of the
Second Tranche, DVS will grant a stock option to purchase 1.0 million
shares of Common Stock at an exercise price of $0.75 per share. Both
options will expire twenty-four (24) months after the grant date. The
terms of the options will provide for OPLI to exercise this option, in
whole or in part, at any time prior to its expiration by making a cash
payment to DVS for the portion exercised.
6) TERMS OF PREFERRED STOCK. All of the Preferred Stock issued in the First
Tranche, Second Tranche, Third Tranche, and Subsequent Tranche(s) will have
identical terms. The Preferred Stock will have a term of three (3) years
from the date of November 1, 1998 and will be convertible by OPLI into DVS
common stock, at any time. Any shares of Preferred Stock not converted at
the end of the three-year term will, at OPLI's option, probably be
converted into shares of DVS common stock or with the mutual agreement of
both OPLI and DVS; DVS will repurchase all or a portion of such outstanding
Preferred Stock at a price equal to 125% of the original investment. DVS
will file a registration statement for all common stock contemplated in
this transaction within 60 days following the first conversion of the
Preferred Stock into common stock to register the common stock for public
resale by OPLI.
7) RIGHT OF FIRST REFUSAL. OPLI understands that DVS may need to raise
additional capital in order to operate and grow its business. In order to
do this DVS may be required to issue shares of Common Stock or other
securities that may be convertible into Common Stock. 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 make an additional
<PAGE>
LETTER TO: MR. DONALD BAKER
OCTOBER 15, 1998
PAGE 4 OF 5
investment in DVS on the same terms as have been offered to DVS by a
third-party investor (the "Right of First Refusal") upon DVS accepting such
third-party offer. The Right of First Refusal shall remain in effect up
until such time as the term of the Preferred Stock expires; provided OPLI
has converted into Common Stock at least half of all Preferred Stock issued
to OPLI from the First Tranche, Second Tranche and Third Tranche within an
eighteen (18) months from the date of issuance of the Preferred Stock
associated with the First Tranche.
8) BOARD SEATS. DVS will provide OPLI with up to two (2) seats on the DVS'
Board of Directors upon the completion of the funding associated with the
First Tranche. OPLI may designate these individuals and DVS agrees to
appoint them to DVS' Board of Directors, subject to a standard due
diligence review that will take no more than five (5) business days.
9) RESTRUCTURING OF CAPITAL STRUCTURE. DVS will commit to using its best
efforts to restructure its current capital structure, by eliminating, to
the extent reasonably possible, its Class A Warrants and Class B Warrants
(the "Warrants"). DVS proposes to swap the Warrants for Common Stock. If,
however, another less dilutive or less costly method to eliminate the
Warrants is available, DVS may use such alternative method. DVS estimates
that it will require approximately four (4) months to complete this
restructuring.
10) CONFIDENTIALITY. Each party shall safeguard the secrecy and
confidentiality of the letter and will not allow the existence of or the
contents of this letter to be published, disseminated or disclosed to any
person (other than officers, directors and employees of such party and its
accountants and lawyers, all of whom shall agree to maintain the
confidentiality of this letter) without the prior written consent of the
other party, except as is required by law or regulation applicable to the
parties.
11) BINDING AGREEMENT. The undersigned, does hereby confirm and acknowledge
that this letter is a binding expression of the terms of OPLI's investment
in DVS and that such terms are acceptable, subject to obtaining the
approval of DVS's shareholders for the Second Tranche, Third Tranche and
Subsequent Tranche(s).
<PAGE>
LETTER TO: MR. DONALD BAKER
OCTOBER 15, 1998
PAGE 5 OF 5
If you agree to the points described above, please so indicate by signing below
and returning a signed copy of this letter to me by fax at (408) 871-8222.
Should you have any questions concerning the information contained within this
letter or the Subscription Agreement, please feel free to contact me by
telephone at (408) 874-8224.
We look forward to working with you in the future.
Very truly yours,
/s/ Edward M. Miller, Jr.
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Edward M. Miller, Jr.
President and Chief Executive Officer
ACKNOWLEDGED AND AGREED TO:
OREGON POWER LENDING INSTITUTION
/s/ Don Baker
- --------------------------------------
Donald Baker
Secretary and Treasurer
