and in good standing under the laws of the
State of California, with full corporate power and authority to own, license,
operate or lease its assets and conduct its Business.
The Company is not
required to be qualified to do business as a foreign corporation under the laws
of any other jurisdiction.
The copies of the Company's articles of
incorporation and bylaws which have been delivered to DTS are accurate, correct
and complete as of the date hereof.
4.2
Authorization; Power; Valid and Binding
Agreement; No Breach.
(A)
EACH OF THIS AGREEMENT AND THE NOTE HAS
BEEN DULY AUTHORIZED, EXECUTED AND DELIVERED BY THE COMPANY.
(B)
THE COMPANY HAS ALL REQUISITE POWER AND
AUTHORITY TO EXECUTE AND DELIVER THIS AGREEMENT AND THE NOTE AND TO PERFORM ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE NOTE AND THE TRANSACTIONS CONTEMPLATED
HEREIN AND THEREIN.
(C)
EACH OF THIS AGREEMENT AND THE NOTE
CONSTITUTES A VALID AND BINDING OBLIGATION OF THE COMPANY, ENFORCEABLE IN
ACCORDANCE WITH ITS TERMS, EXCEPT AS ENFORCEABILITY MAY BE LIMITED BY BANKRUPTCY
LAWS, OTHER SIMILAR LAWS AFFECTING CREDITORS' RIGHTS AND GENERAL PRINCIPLES OF
EQUITY AFFECTING THE AVAILABILITY OF SPECIFIC PERFORMANCE AND OTHER EQUITABLE
REMEDIES.
(D)
THE AUTHORIZATION, ISSUANCE (OR RESERVATION
FOR ISSUANCE), SALE AND DELIVERY OF THE NOTE AND ANY EQUITY SECURITIES ISSUABLE
UPON CONVERSION OF THE NOTE (THE "CONVERSION SECURITIES"), HAS BEEN AUTHORIZED
BY ALL REQUISITE ACTION OF BOTH THE BOARD AND THE STOCKHOLDERS OF THE COMPANY
(THE "STOCKHOLDERS").
THE CONVERSION SECURITIES ISSUABLE UPON CONVERSION OF THE
NOTE, WHEN ISSUED IN ACCORDANCE WITH THE NOTE, WILL BE VALIDLY ISSUED AND
OUTSTANDING, FULLY PAID AND NONASSESSABLE, FREE AND CLEAR OF ANY LIENS
WHATSOEVER AND WITH NO RESTRICTIONS ON THE VOTING RIGHTS THEREOF AND OTHER
INCIDENTS OF RECORD AND BENEFICIAL OWNERSHIP PERTAINING THERETO, EXCEPT AS SET
FORTH IN THIS AGREEMENT.
(E)
THE EXECUTION, DELIVERY AND PERFORMANCE OF
THIS AGREEMENT AND THE NOTE BY THE COMPANY AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY DO NOT CONFLICT WITH OR RESULT IN
ANY MATERIAL BREACH OF, CONSTITUTE A MATERIAL DEFAULT UNDER, RESULT IN A
MATERIAL VIOLATION OF, RESULT IN THE CREATION OF ANY MATERIAL LIEN, SECURITY
INTEREST, CHARGE OR ENCUMBRANCE UPON ANY MATERIAL ASSETS OF THE COMPANY, OR
REQUIRE ANY MATERIAL AUTHORIZATION, CONSENT, APPROVAL, EXEMPTION OR OTHER ACTION
BY OR NOTICE TO ANY COURT, OTHER GOVERNMENTAL BODY OR THIRD PARTY, UNDER THE
PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION OR BYLAWS OR ANY MATERIAL
INDENTURE, MORTGAGE, LEASE, LOAN AGREEMENT OR OTHER MATERIAL AGREEMENT OR
INSTRUMENT TO WHICH THE COMPANY IS BOUND, OR ANY LAW, STATUTE, RULE OR
REGULATION OR ORDER, JUDGMENT OR DECREE TO WHICH THE COMPANY IS SUBJECT,
INCLUDING BUT NOT LIMITED TO THE BREACH OF ANY USURY OR SIMILAR LAW OR
REGULATION RELATING TO INTEREST CHARGES (WITHOUT GIVING EFFECT TO THE
APPLICATION OF SECTION 2.8 OR 8.12).
4.3
Capitalization.
(A)
OWNERSHIP.
THE AUTHORIZED CAPITAL OF THE
COMPANY CONSISTS SOLELY OF 10,000,000 SHARES OF COMMON STOCK, WITHOUT PAR VALUE,
OF WHICH 2,526,526 SHARES ARE ISSUED AND
10
OUTSTANDING.
ALL