EXHIBIT 10.38
 
 
March 26, 1998
 
 
 
Digital Video Systems, Inc.
160 Knowles Drive
Los Gatos, California  95032
 
Arris Interactive L.L.C.
David Potts, Chief Financial Officer
3871 Lakefield Drive
Suwanee, Georgia  30174
 
        Re:     Release of Shares; Termination of Earn Out, Etc.
 
Dear Mr. Potts:
 
        We make reference to that certain Asset Purchase Agreement dated
as of July 25, 1997 by and between Digital Video Systems, Inc. ("DVS")
and Arris Interactive L.L.C. ("Arris"), as amended by Amendment No. 1
thereto dated as of August 1, 1997 (the "Asset Purchase Agreement"),
and that certain Escrow Agreement dated as of August 1, 1997 by and
between DVS and Arris (the "Escrow Agreement").  Capitalized terms used
herein and not otherwise defined shall have the meaning given to such
terms in the Asset Purchase Agreement.
 
        Subject to the covenants and representations of Arris set forth
below:
 
1. DVS shall immediately release the 300,000 shares of DVS's
common stock escrowed pursuant to the Escrow Agreement (the
"Shares") in connection with the purchase of certain assets by
DVS from Arris;
 
2. DVS agrees that the restriction on sales of the Shares by
Arris contained in subsection 1.2(a)(iii) of the Asset
Purchase Agreement in hereby terminated and without further
force and effect; and
 
3. DVS agrees that Arris is hereby released from any obligation
under Article 10 of the Asset Purchase Agreement to indemnify
DVS for breaches of the representations and warranties
contained in Section 2.7(c) of the Asset Purchase Agreement
relating to Proprietary Technology.
 
Arris Interactive L.L.C.
March 26, 1998
Page 2
 
Arris makes the following representation and agrees to set forth
below:
 
1. As of the date hereof, the earn out and funding provisions set
forth in subsections 1.2(b)(I), (ii) and (iii) of the Asset
Purchase Agreement are hereby terminated and without further
force and effect;
 
2. Arris covenants that it will make any sales of the Shares in
compliance with the applicable requirements of the Securities
Act of 1933, as amended, and any applicable state securities
laws, rules and regulations;
 
3. Arris represents and warrants to DVS that no claim, action,
suit, proceeding, inquiry, hearing, arbitration,
administrative proceeding, or investigation is pending, or, to
Arris's best knowledge threatened in connection with the
Proprietary Technology.  Arris knows of no facts that could
reasonably be expected to serve as the basis for litigation
against DVS affecting, involving, or relating to the
Proprietary Technology; and
 
4. Arris acknowledges and agrees that as of the date hereof, no
amounts are owned to Arris by DVS in connection with any of
the provisions of or transactions provided for the Asset
Purchase Agreement.
 
Please acknowledge your agreement to the above by signing below
and returning your signed letter to the attention of Thomas R.
Parkinson, President of DVS, by facsimile at (408) 871-8222 and sending
the original to the attention of Mr. Parkinson by overnight courier at
the address set forth above.
 
        Very Truly Yours,
 
        /s/ Thomas R. Parkinson
 
        Thomas R. Parkinson
        President and COO
        Digital Video Systems, Inc.
 
 
ACKNOWLEDGED AND AGREED
BY ARRIS INTERACTIVE L.L.C.
 
 
 
By:     /s/ David B. Potts
        Name: David B. Potts
        Title:Vice President of Finance