A MATERIAL ADVERSE EFFECT ON THE
COMPANY'S BUSINESS OR FINANCIAL CONDITION.
THE COMPANY AND ITS SUBSIDIARIES
HAVE THE CORPORATE POWER AND AUTHORITY TO OWN AND HOLD ITS PROPERTIES AND TO
CARRY ON ITS BUSINESS AS NOW CONDUCTED AND AS PROPOSED TO BE CONDUCTED, TO
EXECUTE, DELIVER AND PERFORM THIS AGREEMENT AND THE SECURITY AND PLEDGE
AGREEMENT, AND TO ISSUE, SELL AND DELIVER THE NOTE.
(B)
THE COMPANY HAS NO SUBSIDIARIES, OTHER THAN
AS SET FORTH ON SCHEDULE II.
THE COMPANY DOES NOT (I) OWN OF RECORD OR
BENEFICIALLY, DIRECTLY OR INDIRECTLY, (A) ANY SHARES OF CAPITAL STOCK OR
SECURITIES CONVERTIBLE INTO CAPITAL STOCK OF ANY OTHER CORPORATION OR (B) ANY
PARTICIPATING INTEREST IN ANY PARTNERSHIP, JOINT VENTURE OR OTHER NON-CORPORATE
BUSINESS ENTERPRISE OR (II) CONTROL, DIRECTLY OR INDIRECTLY, ANY OTHER ENTITY,
OTHER THAN AS SET FORTH ON SCHEDULE II.
SECTION 2.02.
AUTHORIZATION OF AGREEMENTS, ETC.
(A)
EXCEPT AS SET FORTH ON SCHEDULE II, THE
EXECUTION AND DELIVERY BY THE COMPANY OF THIS AGREEMENT AND THE SECURITY AND
PLEDGE AGREEMENT, THE PERFORMANCE BY THE COMPANY OF ITS OBLIGATIONS HEREUNDER
AND THEREUNDER, THE ISSUANCE, SALE AND DELIVERY OF THE NOTE HAVE BEEN DULY
AUTHORIZED BY ALL REQUISITE CORPORATE ACTION AND WILL NOT (I) VIOLATE ANY
PROVISION OF LAW, ANY ORDER OF ANY COURT OR OTHER AGENCY OF GOVERNMENT,
(II) VIOLATE THE CERTIFICATE OF INCORPORATION OR THE BY-LAWS OF THE COMPANY,
EACH AS AMENDED, (III) VIOLATE ANY PROVISION OF ANY INDENTURE, AGREEMENT OR
OTHER INSTRUMENT TO WHICH THE COMPANY OR ANY OF ITS PROPERTIES OR ASSETS IS
BOUND, (IV) CONFLICT WITH, RESULT IN A BREACH OF OR CONSTITUTE (WITH DUE NOTICE
OR LAPSE OF TIME OR BOTH) A DEFAULT UNDER ANY SUCH INDENTURE, AGREEMENT OR OTHER
INSTRUMENT, OR (V) RESULT IN THE CREATION OR IMPOSITION OF ANY LIEN, CHARGE,
RESTRICTION, CLAIM OR ENCUMBRANCE OF ANY NATURE WHATSOEVER UPON ANY OF THE
PROPERTIES OR ASSETS OF THE COMPANY (EXCEPT PURSUANT TO THE TERMS OF THE
SECURITY AND PLEDGE AGREEMENT).
(B)
THE NOTE HAS BEEN DULY AUTHORIZED AND, WHEN
ISSUED IN ACCORDANCE WITH THIS AGREEMENT, WILL BE FREE AND CLEAR OF ALL LIENS,
CHARGES, RESTRICTIONS, CLAIMS AND ENCUMBRANCES IMPOSED BY OR THROUGH THE
COMPANY.
THE ISSUANCE, SALE AND DELIVERY OF THE NOTE ARE NOT SUBJECT TO ANY
PREEMPTIVE RIGHT OF STOCKHOLDERS OF THE COMPANY OR TO ANY RIGHT OF FIRST REFUSAL
OR OTHER RIGHT IN FAVOR OF ANY PERSON.
SECTION 2.03.
VALIDITY.
EACH OF THIS AGREEMENT, THE SECURITY AND
PLEDGE AGREEMENT AND THE NOTE HAS BEEN DULY EXECUTED AND DELIVERED BY THE
COMPANY AND DSI AND CONSTITUTE THE LEGAL, VALID AND BINDING OBLIGATIONS OF THE
COMPANY AND DSI, ENFORCEABLE IN ACCORDANCE WITH THEIR TERMS.
SECTION 2.04.
AUTHORIZED CAPITAL STOCK.
THE AUTHORIZED CAPITAL STOCK
OF THE COMPANY CONSISTS OF 450,000,000 SHARES OF COMMON STOCK, $.0001 PAR VALUE
PER SHARE, AND 10,000,000 SHARES OF PREFERRED STOCK, $0.0001 PAR VALUE PER SHARE
("PREFERRED STOCK").
AS OF THE DATE OF THIS AGREEMENT, 58,234,989 SHARES OF
COMMON STOCK AND NO SHARES OF PREFERRED STOCK WERE VALIDLY ISSUED AND
OUTSTANDING, FULLY