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Exhibit 10.42  

         

  

 
 

BUSINESS LOAN AGREEMENT    
    

        This Business Loan Agreement (this "Agreement") is entered into by and between Comerica Bank, a Michigan banking corporation ("Bank") and Digital Theater
Systems, Inc., a Delaware corporation ("Borrower"), as of the 30th day of June 2004, at Bank's headquarters office at 333 West Santa Clara Street, San Jose, California
95113. 

        In
consideration of the mutual covenants contained herein, Bank and Borrower hereby agree as follows: 

        1.    Loans To Borrower.    Any loans which Bank in its sole discretion has made or may now or hereafter make to
Borrower (sometimes hereinafter collectively referred to as the "Loan") shall be subject to the terms and conditions of this Agreement unless otherwise agreed to in writing by Bank and Borrower. If
there are contradictions between the provisions of this Agreement and any other written agreement with the Bank, then the provisions of this Agreement shall prevail. The Loan shall be subject to the
terms and conditions of this Agreement, promissory note(s) executed in connection herewith and/or previously or subsequently executed, and all amendments, renewals and extensions thereof (singularly
or collectively, the "Note"), and all those certain security agreements and/or such other security or other documents as Bank has required or may now or hereafter require in connection with the Loan
(collectively, the "Loan Documents"). 

        2.    Legal Effect.    This Agreement supplements the terms and conditions of the Loan Documents. Except as otherwise
specified herein, all terms used in this Agreement shall have the same meaning as given in
the Note and/or Loan Documents which are incorporated herein by this reference. Any and all terms used in this Agreement, the Note and/or the Loan Documents shall be construed and defined in
accordance with the meaning and definition of such term under and pursuant to the California Uniform Commercial Code, as amended. Except as specifically modified hereby, all of the terms and
conditions of the Note and/or the Loan Documents shall remain in full force and effect. 

        3.    Interest Rate; Payment Terms; Loan Fees.    The principal and interest on the Loan shall be payable on the terms
set forth in the Note and/or the Loan Documents. A loan fee in the sum of ten thousand Dollars ($10,000) shall be paid concurrently with the execution of this Agreement and the note evidencing Bank's
$10,000,000 revolving loan to Borrower. 

        4.    Security.    Bank's $10,000,000 revolving loan to Borrower is unsecured. Bank shall release any liens that it
currently has on the Borrower's personal property that would otherwise secure repayment of that loan. Without limiting the generality of the foregoing, the Bank shall file termination statements and,
at Borrower's expense, take such other actions to evidence that release as may be reasonably requested by Borrower. 

        5.    Representations and Warranties of Borrower.    Borrower represents and warrants to Bank that as of the date of
acceptance of this Agreement, the Note and/or the Loan Documents, as of the date of borrowing hereunder and at all times the Loan or any other Indebtedness are outstanding hereunder: 

        (a)   Borrower
is duly organized, validly existing and in good standing under the laws of the state of its incorporation; 

        (b)   Borrower
has the legal power and authority, to own its properties and assets and to carry out its business as now being conducted; it is qualified to do business in
every jurisdiction wherein such qualification is necessary; it has the legal power and authority to execute and perform this Agreement, the Note and/or the Loan Documents to borrow money in accordance
with its terms, to execute and deliver this Agreement, the Note and the Loan Documents, and to do any and all 

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other
things required of it hereunder; and this Agreement, the Note and all the Loan Documents, when executed on behalf of Borrower by its duly authorized officers, shall be its valid and binding
obligations legally enforceable in accordance with their terms; 

        (c)   The
execution, delivery, and performance of this Agreement, the Note and/or the Loan Documents and the borrowings hereunder and thereunder (i) have been duly
authorized by all requisite corporate, partnership or company action; (ii) do not require governmental approval; (iii) will not result (with or without notice and/or the passage of time)
in any conflict with or breach or violation of or default
under, any provision of law, the articles of incorporation of Borrower, any provision of any indenture, agreement or other instrument to which Borrower is a party, or by which it or any of its
properties or assets are bound; and (iv) will not result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of
Borrower; 

        (d)   The
balance sheet of Borrower as provided to Bank in connection herewith and the related statement of income of Borrower provided to Bank for the period ended
September 30, 2003, fairly present the financial condition of Borrower in accordance with generally accepted accounting principles ("GAAP") consistently applied; and from the date thereof to
the date hereof, there has been no material adverse change in such condition or operations; and 

        (e)   There
is not pending nor, to the best of Borrower's knowledge, threatened, any litigation, proceeding or governmental investigation which could materially and adversely
affect its business or its ability to perform its obligations, pay the Indebtedness and/or comply with the covenants set forth herein and/or in the Note and/or the other Loan Documents. 

        6.    Affirmative Covenants.    Until the Indebtedness is paid in full, Borrower covenants and agrees to do the
following: 

        (a)   Furnish
to Bank within sixty (60) days after the end of each quarter, an unaudited balance sheet and statement of income covering Borrower's operations. Within
one hundred twenty (120) days of the end of each of Borrower's fiscal years, furnish to Bank statements of the financial condition of Borrower for each such fiscal year, including but not
limited to, a balance sheet, profit and loss statement, and statement of cash flow. Said annual statements shall be prepared by an independent certified public accountant selected by Borrower and
reasonably acceptable to Bank; 

        (b)   Promptly
inform Bank of the occurrence of any Default or Event of Default as defined in the Note and/or the Loan Documents (hereinafter referred to as a "Default") or of
any event which could have a Material Adverse Effect on Borrower; 

        (c)   Furnish
such other information as Bank may reasonably request; 

        (d)   Keep
in full force and effect its own corporate existence in good standing; continue to conduct and operate its business substantially as presently conducted and
operated and maintain and protect all franchises and trade names and preserve all the remainder of its property used or useful in the conduct of its business and keep the same in good repair and
condition; 

        (e)   Comply
with the financial covenants set forth in Addendum A, attached hereto and made a part hereof; 

        (f)    Maintain
a standard and modern system of accounting in accordance with GAAP consistently applied; 

        (g)   Maintain
Borrower's same place of business or chief executive office or residence as indicated below, and not relocate said address without giving Bank 30 days
prior written notice; 

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        (h)   Maintain
insurance with such insurers in such amounts and of a type and covering such risks as are usually carried by companies engaged in similar businesses and owning
similar property in the same general area as the area in which such property is located; 

        (i)    On
a continuing basis from the date of this Agreement until the Indebtedness is paid in full and Borrower has performed all of its other obligations hereunder, Borrower
represents and agrees that: 

        (1)   There
are not and will not be Hazardous Materials (as later defined) on, in or under any real or personal property ("Property") now or at any time owned, occupied or
operated by the Borrower which in any manner violate any Environmental Law (as later defined). 

        (2)   Borrower
shall promptly conduct all investigations, testing and other actions necessary to clean up and remove all Hazardous Materials on or affecting the Property in
accordance with every Environmental Law. 

        (3)   Borrower
shall defend, indemnify and hold harmless Bank, its employees, agents, officers, shareholders and directors from and against any and all claims, damages, fines,
expenses, liabilities or causes of action of whatever kind, including without limit consultant fees, legal expenses and reasonable attorneys' fees, suffered by any of them as a direct or indirect
result of any actual or asserted violation of any Environmental Law. 

        (4)   Upon
ten days notice to Borrower (except in an emergency), Bank may (but is not obligated to) enter on the Property or take such other actions as it deems appropriate to
inspect, test for, clean up, remove or minimize the impact of any Hazardous Materials upon Bank's receipt of any notice from any
source asserting the existence of any Hazardous Materials in violation of any Environmental Law. All costs and expenses so incurred by Bank, including without limit consultant fees, legal expenses and
reasonable attorneys' fees, shall be payable by Borrower upon demand. 

        (5)   The
provisions of this section shall survive the repayment of the Indebtedness and the satisfaction of all other obligations of Borrower to the Bank. 

        (6)   "Hazardous
Materials" mean all of the following: any asbestos, petroleum, petroleum by-products, flammable explosives, or radioactive materials or any
hazardous or toxic materials as defined in the Comprehensive Environmental Response. Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601 et seq.) or in any other Environmental
Law. 

        (7)   "Environmental
Law" means any federal, state, local or other law, ordinance, statute, directive, rule, order or regulation on object of which is to regulate or improve
health, safety or the environment. 

        7.    Negative Covenants.    Borrower shall not, without Bank's prior written consent, do any of the following: 

        (a)   Grant
a security interest in or permit a lien, claim or encumbrance upon any of its personal property to any person, association, firm, corporation, entity, governmental
agency or instrumentality, except for: 

        (1)   Liens
for taxes not yet payable or statutory Liens for taxes in an amount not to exceed $l,000,000, provided that the
payment of such taxes which are due and payable is being contested in good faith and by proper proceedings diligently pursued, and that reserves or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor and that a stay of enforcement of any such Lien is in effect; 

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        (2)   Liens
upon equipment granted in connection with the acquisition of such equipment by Borrower provided each such lien
attaches only to the equipment acquired with the Debt secured thereby; 

        (3)   Deposits
under worker's compensation, unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other
than for the repayment of borrowed money) or to secure indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory
obligations or surety or appeal bonds, or to secure indemnity, performance or other similar bonds in the ordinary course of business; 

        (4)   Liens
which arise by operation of law under Article 2 of the Uniform Commercial Code in favor of unpaid sellers of goods or prepaying buyers of goods, or liens in
items of any accompanying documents or proceeds of either arising by operation of law under Article 4 of the Uniform Commercial Code in favor of a collecting bank; and 

        (5)   Liens,
not material in amount, securing the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like. 

        (b)   Permit
any levy, attachment or restraint to be made affecting any material portion of Borrower's assets this is not released, discharged, or bonded against within ten
(10) business days after such levy, attachment or restraint; 

        (c)   Permit
any judicial officer or assignee to be appointed or to take possession of any material portion or all of Borrower's assets; 

        (d)   Sell,
lease or otherwise dispose of, move, or transfer, whether by sale or otherwise, a material portion of Borrower's assets; 

        (e)   Change
its business structure, corporate identity or structure; liquidate, merge or consolidate with or into any other business organization if any such action has a
Material Adverse Effect on Borrower; 

        (f)    Acquire
any other business organization if that acquisition hag a Material Adverse Effect on Borrower; 

        (g)   Make
any change in Borrower's financial structure or in any of its business operations which would have a Material Adverse Effect on Borrower; 

        (h)   Incur
any material debt outside the ordinary course of Borrower's business; 

        (i)    Make
any advance or loan that has a Material Adverse Effect on Borrower; or 

        (j)    Guaranty
or otherwise, directly or indirectly, in any way be or become responsible for obligations of any other person any which would have a Material Adverse Effect on
Borrower, whether by agreement to purchase the indebtedness of any other person, agreement for the furnishing of funds to any other person through the furnishing of goods, supplies or services, by way
of stock purchase, capital contribution, advance or loan, for the purpose of paying and discharging (or causing the payment or discharge of) the indebtedness of any other person, or otherwise, 

        8.    Default.    The terms "Default" or "Event of Default," as used herein, shall have the meaning given in the Note
and/or the Loan Documents. In addition, any one or more of the following events shall constitute a default by Borrower under this Agreement, the Note and/or the Loan Documents: 

        (a)   If
Borrower materially fails or neglects to perform, keep or observe any term, provision, condition, covenant, agreement, warranty or representation contained in this
Agreement, the Note, the Loan Documents or any other present or future agreement between Borrower and Bank; 

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        (b)   If
any material representation, statement, report or certificate made or delivered by Borrower, or any of its officers, employees or agents to Bank is not true and
correct; 

        (c)   If
Borrower fails to pay when due and payable or declared due and payable in accordance with the terms hereof, all or any portion of the Indebtedness (whether or
principal, interest, taxes, reimbursement of Bank expenses, or otherwise); 

        (d)   If
there is a material impairment of the prospect of repayment of all or any material portion of Borrower's obligations, including without limitation the Indebtedness; 

        (e)   If
all or any material portion of Borrower's assets become subject to a writ or distress warrant, or are levied upon, or come into the possession of any judicial officer
or assignee and the same are not released, discharged or bonded against within ten (10) days thereafter; 

        (f)    If
any insolvency proceeding is filed or commenced by or against Borrower without being dismissed within ten (10) days thereafter; 

        (g)   If
any bankruptcy or other proceeding is filed or commenced by or against Borrower for its reorganization, dissolution or liquidation without being dismissed within ten
(10) days of its commencement; 

        (h)   If
Borrower is enjoined, restrained or in any way prevented by court order from continuing to conduct all or any material part of its business affairs if that injunction
or restraint has a Material Adverse Effect on Borrower; 

        (i)    If
a notice of lien, levy or assessment is filed of record with respect to any material portion or all of Borrower's assets by the United States Government, or any
department, agency or instrumentality thereof, or by any state, county, municipal or other government agency, or if any taxes or debts owing at any time hereafter to any one or more of such entities
becomes a lien, whether inchoate or otherwise, upon any or all of Borrower's assets and the same is not paid on the payment date thereof if that lien, levy, assessment or lien has a Material Adverse
Effect on Borrower; 

        (j)    If
a judgment or other claim becomes a lien or encumbrance upon any material portion or all of Borrower's assets and the same is not satisfied, dismissed or bonded
against within ten (10) days thereafter if that lien or encumbrance has a Material Adverse Effect on Borrower; 

        (k)   If
Borrower permits a default in any material agreement to which Borrower is a party with third parties so as to result in an acceleration of the maturity of Borrower's
indebtedness to others, whether under any indenture, agreement or otherwise if that default has a Material Adverse Effect on Borrower; 

        (l)    If
Borrower makes any payment on account of indebtedness which has been subordinated to Borrower's obligations to Bank, including without limitation the Indebtedness if
that payment has a Material Adverse Effect on Borrower; 

        (m)  If
any material misrepresentation exists now or thereafter in any warranty or representation made to Bank by any officer or director of Borrower, or if any such warranty
or representation is withdrawn by any officer or director; or 

        (n)   If
any party subordinating its claims to that of Bank's or any guarantor of Borrower's obligations terminates its subordination or guaranty, becomes insolvent or an
insolvency proceeding is commenced by or against any such subordinating party or guarantor if that claim or insolvency or insolvency proceeding has a Material Adverse Effect on Borrower. 

        Bank
shall not be obligated to make advances to Borrower during any cure period provided for in Sections 8(e), 8(f), 8(g), and 8(j) above. 

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        "Material Adverse Effect" means, wherever used herein, an event or condition that has a material adverse effect on (a) the ability
of Borrower, to perform its obligations under the Loan Documents or of Bank to enforce the Obligations, or (b) the validity or enforceability of this Agreement, the other Loan Documents, or the
rights and remedies of Bank hereunder or thereunder. 

        9.    Rights and Remedies.    Bank shall have the following rights and remedies upon Default or Event of Default: 

        (a)   Bank
shall have all rights and remedies available hereunder and under the Note and the Loan Documents and under applicable law; 

        (b)   Bank
may at its option without notice, accelerate the Indebtedness and declare all Indebtedness to be due, owing and payable in full; 

        (c)   Bank
may at its option without notice, cease advancing money or extending credit to or for the benefit of Borrower under this Agreement or any other agreement between
Borrower and Bank. 

        (d)   No
Default (as defined in this Agreement, the Note and/or the Loan Documents) shall be waived by Bank except in writing and a waiver of any Default shall not be a waiver
of any other default or of the same default on a future occasion; 

        (e)   No
single or partial exercise of any right, power or privilege hereunder, or any delay in the exercise hereof, shall preclude other or further exercise of the rights of
the parties under this Agreement, the Note and/or the Loan Documents; and 

        (f)    No
forbearance on the part of Bank in enforcing any of its rights under this Agreement, the Note and/or the Loan Documents nor any renewal, extension or rearrangement of
any payment or covenant to be made or performed by Borrower hereunder shall constitute a waiver of any of the terms of this Agreement, the Note, and/or the Loan Documents, or of any such right. 

        10.    Cross-Default.    A Default under this Agreement shall also be a Default under the Note and the Loan Documents,
and vice versa. A Default under this Agreement, the Note and/or the Loan Documents shall also be a Default under every other note and other agreement between Bank and Borrower, and vice versa. 

        11.    Survival of Covenants, Agreements, Representations and Warranties.    All covenants, agreements,
representations and warranties (a) previously made (except as specifically subsequently modified); (b) made in connection herewith or with the Note and/or the Loan Documents and/or any
document contemplated hereby; or (c) executed hereafter (unless such document expressly states that this Agreement does not apply thereto) shall survive the borrowing hereunder and thereunder
and the repayment in full of the Note and/or the Loan Documents and any amendments, renewals or extensions thereof and shall be deemed to have been relied upon by Bank. All statements contained in any
certificate or other document delivered to Bank at any time by or on behalf of Borrower shall constitute representations and warranties by Borrower. 

        12.    Miscellaneous.    

        (a)   This
Agreement, the Note and the Loan Documents shall be governed by California law, without regard for the effect of conflict of laws; 

        (b)   Borrower
will pay all reasonable out of pocket costs of Bank and expenses (including, without limitation, Bank's outside attorneys' fees and costs and/or fees, transfer
charges) in connection with the preparation of this Agreement, the Note, and/or the Loan Documents and/or the documents contemplated hereby and the closing of the Loan; 

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        (c)   This
Agreement, the Note and/or the Loan Documents shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors and
assigns; provided, however, that Borrower shall not assign or transfer its right or obligations under this Agreement, the Note and/or the Loan Documents without the prior written consent of Bank; 

        (d)   Bank
may provide information regarding Borrower and the Loan to Bank's parent, subsidiaries, and affiliates and service providers, and 

        (e)   This
Agreement is an integrated agreement and supersedes all prior negotiations and agreements regarding the subject matter hereof. Any amendments hereto shall be in
writing and be signed by all parties hereto. 

        14.    JURY WAIVER.    THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY,
AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS. 

        15.    Reference Provision.    If and only if the jury trial waiver set forth in Section  14 of this Agreement is invalidated for
any reason by a court of law, statute or otherwise, the reference provisions set forth below shall be
substituted in place of the jury trial waiver. So long as the jury trial waiver remains valid, the reference provisions set forth in this Section shall be inapplicable. 

        a.     Each
controversy, dispute or claim (each, a "Claim") between the parties arising out of or relating to this Agreement, any security agreement executed by Borrower in
favor of Bank, any note executed by Borrower in favor of Bank or any other document, instrument or agreement executed by Borrower with or in favor of Bank (collectively in this Section, the "Loan
Documents"), other than (i) all matters in connection with nonjudicial foreclosure of security interests in real or personal property; or (ii) the appointment of a receiver or the
exercise of other provisional remedies (any of which may be initiated pursuant to applicable law) that are not settled in writing within fifteen (15) days after the date on which a party
subject to the Loan Documents gives written notice to all other parties that a Claim exists (the "Claim Date") shall be resolved by a reference proceeding in California in accordance with the
provisions of Section 638 et seq. of the California Code of Civil Procedure, or their successor sections ("CCP"), which shall constitute the exclusive remedy for the resolution of any Claim
concerning the Loan Documents, including whether such Claim is subject to the reference proceeding. Except as set forth in this section, the parties waive the right to initiate legal proceedings
against each other concerning each such Claim. Venue for these proceedings shall be in the Superior Court in the County where the real property, if any, is located or in a County where venue is
otherwise appropriate under state law (the "Court"). By mutual agreement, the parties shall select a retired Judge of the Court to serve as referee, and if they cannot so agree within fifteen
(15) days after the Claim Date, the Presiding Judge of the Court (or his or her representative) shall promptly select the referee. A request for appointment of a referee may be heard on an ex
parte or expedited basis. The referee shall be appointed to sit as a temporary judge, with all the powers for a temporary judge, as authorized by law, and upon selection should take and subscribe to
the oath of office as provided for in Rule 244 of the California Rules of Court (or any subsequently enacted Rule). Each party shall have one peremptory challenge pursuant to CCP
§170.6. Upon being selected, the referee shall (a) be requested to set the matter for a status and trial-setting conference within fifteen (15) days after the date of
selection and (b) if practicable, try any and all issues of law or fact and report a statement of decision upon them within ninety (90) days of the date of selection. The referee will
have power to expand or limit the amount of discovery a party may employ. Any decision rendered 

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by
the referee will be final, binding and conclusive, and judgment shall be entered pursuant to CCP §644 in any court in the Stats of California having jurisdiction. The parties shall
complete all discovery no later than fifteen (15) days before the first trial date established by the referee. The referee may extend such period in the event of a party's refusal to provide
requested discovery for any reason whatsoever, including, without limitation, legal objections raised to such discovery or unavailability of a witness due to absence or illness. No party shall be
entitled to "priority" in conducting discovery. Either party may take depositions upon seven (7) days written notice, and shall respond to requests for production or inspection of documents
within ten (10) days after service. All disputes relating to discovery which cannot be resolved by the parties shall be submitted to the referee whose decision shall be final and binding upon
the parties. Pending appointment of the referee as provided herein, the Superior Court is empowered to issue temporary and/or provisional remedies, as appropriate. 

        b.     Except
as expressly set forth herein, the referee shall determine the manner in which the reference proceeding is conducted including the time and place of all hearings,
the order of presentation of evidence, and all other questions that arise with respect to the course of the reference proceeding. Except for trial, all proceedings and hearings conducted before the
referee shall be conducted without a court reporter unless a party requests a court reporter. The party making such a request shall have the obligation to arrange for and pay for the court reporter.
Subject to the referee's power to award
costs to the prevailing party, the parties shall equally bear the costs of the court reporter at the trial and the referee's expenses. 

        c.     The
referee shall determine all issues in accordance with existing California case and statutory law. California rules of evidence applicable to proceedings at law will
apply to the reference proceeding. The referee shall be empowered to enter equitable as well as legal relief, to provide all temporary and/or provisional remedies and to enter equitable orders that
shall be binding upon the parties. At the close of the reference proceeding, the referee shall issue a single judgment at disposing of all the claims of the parties that are the subject of the
reference. The parties reserve the right (i) to contest or appeal from the final judgment or any appealable order or appealable judgment entered by the referee and (ii) to obtain
findings of fact, conclusions of laws, a written statement of decision, and (iii) to move for a new trial or a different judgment, which new trial, if granted, shall be a reference proceeding
under this provision. 

        d.     If
the enabling legislation which provides for appointment of a referee is repealed (and no successor statute is enacted), any dispute between the parties that would
otherwise be determined by the reference procedure herein described will be resolved and determined by arbitration conducted by a retired judge of the Court, in accordance with the California
Arbitration Act §1280 through §1294.2 of the CCP as amended from time to time. The limitations with respect to discovery as set forth in this Section shall apply to any such
arbitration proceeding. 

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        IN
WITNESS WHEREOF, the parties have executed this Business Loan Agreement as of the date first set forth above. 

	Address of Borrower:

5171 Clareton Drive

Agoura Hills, California 91301	 	"BORROWER"
	 	 	Digital Theater Systems, Inc.
	

 	
 	

By:	

/s/  JON KIRCHNER      

	

 	
 	

Title:	

President & Chief Executive Officer

	

 	
 	

By:	

/s/  MEL FLANIGAN      

	 	 	Title:	Chief Financial Officer

	

 	
 	

"BANK"

COMERICA BANK
	

 	
 	

By:	

/s/  JONATHAN HEINE      

	 	 	Title:	Jonathan Heine

Corporate Banking Officer

 
 

ADDENDUM A TO BUSINESS LOAN AGREEMENT
  (FINANCIAL COVENANTS)    
    

        1.    Definitions Relating to Finanacial Covenants.    Debt shall
mean, as of any applicable date of determination, all items of indebtedness, obligation or liability of a person, whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute
or contingent, joint or several, that should be classified as liabilities in accordance with GAAP excepting such liabilities as shall be Subordinated Debt (as defined below). 

        GAAP shall mean, as of any applicable period, generally accepted accounting principals in effect during such period. 

        Persons or person shall mean and includes any individual, corporation, partnership, joint venture, firm, association, trust, incorporated
association, joint stock company, government, municipality, political subdivision or agency or other entity. 

        Subordinated Debt shall mean indebtedness of the Borrower (or third parties which has been subordinated to the Indebtedness pursuant to a
subordination agreement in form and content satisfactory to Bank. 

        Tangible Effective Net Worth shall mean, with respect to any Person and as of any applicable date of determination, Tangible Net Worth
plus Subordinated Debt. 

        Tangible Net Worth as used in this Agreement means, as of any applicable date of determination, the excess of: 

        (a)   the
net book value of all assets of Borrower and its subsidiaries (excluding affiliate receivables, patents, patent rights, trademarks, trade names, franchises,
copyrights, licenses, goodwill, and other intangible assets of such Persons) after all appropriate deductions in accordance with GAAP (including, without limitation, reserves for doubtful receivables,
obsolescence, depreciation, and amortization), minus 

        (b)   all
Debt of such Person at such time. 

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        2.    Financial Covenants.    Borrower shall maintain the following financial ratios and covenants on a consolidated
and non-consolidated basis, which shall be monitored on a quarterly basis, except as noted below. 

        (a)   Tangible
Effective Net Worth in an amount not less than $60,000,000, increasing by 50% of net income on an annual basis; and 

        (b)   Maintain
a minimum of $2,000,000 in cash or securities to be held by/at Bank. 

        All
financial covenants shall be computed in accordance with GAAP consistently applied except as otherwise specifically set forth in this Agreement. All money due from affiliates
(including officers, directors and shareholders) shall be excluded from Borrower's assets for all purposes hereunder. 

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MASTER REVOLVING NOTE    
    

Variable
Rate-Maturity Date-Obligatory Advances (Business and Commercial Loans Only) 

	AMOUNT
 
	 	NOTE DATE
	 	MATURITY DATE
	 	TAX IDENTIFICATION #

	$	10,000,000.00	 	May 31, 2004	 	June 30, 2005	 	77-0467665

        On
the Maturity Date, as stated above, for value received, the undersigned promise(s) to pay to the order of Comerica Bank ("Bank"), at any office of the Bank in the State of California,
Ten Million and no/100 Dollars (U.S.) (or that portion of it advanced by the Bank and not repaid as later provided) with interest until maturity, whether by acceleration or otherwise, or an Event of
Default, as later defined, at a per annum rate equal to the Bank's base rate from time to time in effect plus 0.000% per annum and after that at a rate equal to the rate of interest otherwise
prevailing under this Note plus 3% per annum (but in no event in excess of the maximum rate permitted by law). The Bank's "base rate" is that annual rate of interest so designated by the Bank and
which is changed by the Bank from time to time. Interest rate changes will be effective for interest computation purposes as and when the Bank's base rate changes. Interest shall be calculated on the
basis of a 360-day year for the actual number of days the principal is outstanding. Accrued Interest on this Note shall be payable on the 30th day of each MONTH commencing June 30,
2004, until the Maturity Date when all amounts outstanding under this Note shall be due and payable in full. If the frequency of interest payments is not otherwise specified, accrued interest on this
Note shall be payable monthly on the first day of each month. If any payment of principal or Interest under this Note shall be payable on a day other than a day on which the Bank is open for business,
this payment shall be extended to the next succeeding
business day and interest shall be payable at the rate specified in this Note during this extension. A late payment charge equal to 5% of each late payment may be charged on any payment not received
by the Bank within 10 calendar days after the payment due date, but acceptance of payment of this charge shall not waive any Default under this Note. 

        The
principal amount payable under this Note shall be the sum of all advances made by the Bank to or at the request of the undersigned, less principal payments actually received in cash
by the Bank. The books and records of the Bank shall be the best evidence of the principal amount and the unpaid interest amount owing at any time under this Note and shall be conclusive absent
manifest error. No interest shall accrue under this Note until the date of the first advance made by the Bank; after that interest on all advances shall accrue and be computed on the principal balance
outstanding from time to time under this Note until the same is paid in full. 

        This
Note and any other indebtedness and liabilities of any kind of the undersigned (or any of them) to the Bank, and any and all modifications, renewals or extensions of it, whether
joint or several, contingent or absolute, now existing or later arising, and however evidenced (collectively "Indebtedness") are secured by and the Bank is granted a security interest in all items
deposited in any account of any of the undersigned with the Bank and by all proceeds of these items (cash or otherwise), all account balances of any of the undersigned from time to time with the Bank,
by all property of any of the undersigned from time to time in the possession of the Bank and by any other collateral, rights and properties described in each and every deed of trust, mortgage,
security agreement, pledge, assignment and other security or collateral agreement which has been, or will at any time(s) later be, executed by any (or all) of the undersigned to or for the benefit of
the Bank (collectively "Collateral"). Notwithstanding the above, (i) to the extent that any portion of the indebtedness is a consumer loan, that portion shall not be secured by any deed of
trust or mortgage on or other security interest in any of the undersigned's principal dwelling or any of the undersigned's real property which is not a purchase money security interest as to that
portion, unless expressly provided to the contrary in another place, or (ii) if the undersigned (or any of them) has (have) given or give(s) Bank a deed of trust or mortgage covering real
property, that deed of trust or mortgage shall not secure this Note or any other indebtedness of the undersigned (or any of them), unless expressly provided to the contrary in another place. 

        If
the undersigned (or any of them) or any guarantor under a guaranty of all or part of the Indebtedness ("guarantor") (i) fail(s) to pay any of the Indebtedness when due, by
maturity, acceleration or otherwise, or fail(s) to pay any indebtedness owing on a demand basis upon demand; or (ii) fail(s) to comply with any of the terms or provisions of any agreement
between the undersigned (or any of them) or any such guarantor and the Bank; or (iii) become(s) insolvent or the subject of a voluntary or involuntary proceeding in bankruptcy, or a
reorganization, arrangement or creditor composition proceeding, (if a business entity) cease(s) doing business as a going concern, (if a natural person) die(s) or become(s) incompetent, (if a
partnership) dissolve(s) or any general partner of it dies, becomes incompetent or becomes the subject of a bankruptcy proceeding or (if a corporation of a limited liability company) is the subject of
a dissolution, merger of consolidation; or (a) If any warranty or representation made by any of the undersigned or any guarantor in connection with this Note or any
of the Indebtedness shall be discovered to be untrue or incomplete; or (b) If there is any termination, notice of termination, or breach of any guaranty, pledge, collateral assignment or
subordination agreement relating to all or any part of the Indebtedness; or (c) If there is any failure by any of the undersigned or any guarantor to pay when due any of its Indebtedness (other
than to the Bank) or in the observance or performance of any term, covenant or condition in any document evidencing, securing or relating to such Indebtedness; or (d) If the Bank deems itself
insecure believing that the prospect of payment of this Note or any of the Indebtedness is impaired or shall fear deterioration, removal or waste of any of the Collateral; or (e) If there is
filed or issued a levy or writ of attachment or garnishment or other like judicial process upon the undersigned (or any of them) or any guarantor or any of the Collateral, including without limit, any
accounts of the undersigned (or any of them) or any guarantor with the Bank, then the Bank, upon the occurrence of any of these events (each a "Default"), may at its option and without prior notice to
the undersigned (or any of them), declare any or all of the Indebtedness to be immediately due and payable (notwithstanding any provisions contained in the evidence of it to the contrary), cease
advancing money or extending credit to or for the benefit of the undersigned under this Note or any other agreement between the undersigned and Bank, terminate this Note as to any future liability or
obligation of Bank, but without affecting Bank's rights and security interests in any collateral and the Indebtedness of the undersigned to Bank, sell or liquidate all or any portion of the
Collateral, set off against the Indebtedness any amounts owing by the Bank to the undersigned (or any of them), charge interest at the default rate provided in the document evidencing the relevant
Indebtedness and exercise any one or more of the rights and remedies granted to the Bank by any agreement with the undersigned (or any of them) or given to it under applicable law. In addition, if
this Note is secured by a deed of trust or mortgage covering real property, then the trustor or mortgagor shall not mortgage or pledge the mortgaged premises as security for any other indebtedness or
obligations. This Note, together with all other Indebtedness secured by said deed of trust or mortgage, shall become due and payable immediately, without notice, at the option of the Bank,
(a) If said trustor or mortgagor shall mortgage or pledge the mortgaged premises for any other Indebtedness or obligations or shall convey, assign or transfer the mortgaged premises by deed,
installment sale contract instrument, or (b) If the title to the mortgaged premises shall become vested in any other person or party in any manner whatsoever, or (c) If there is any
disposition (through one or more transactions) of legal or beneficial title to a controlling interest of said trustor or mortgagor. All payments under this Note shall be in immediately available
United States funds, without setoff or counterclaim. 

        If
this Note is signed by two or more parties (whether by all as makers or by one or more as an accommodation party or otherwise), the obligations and undertakings under this Note shall
be that of all and any two or more jointly and also of each severally. This Note shall bind the undersigned, and the undersigned's respective heirs, personal representatives, successors and assigns. 

        The
undersigned waive(s) presentment, demand, protest, notice of dishonor, notice or demand or intent to demand, notice of acceleration or intent to accelerate, and all other notices and
agree(s) that no extension or indulgence to the undersigned (or any of them) or release, substitution or nonenforcement of any security, or release or substitution of any of the undersigned, any
guarantor or any other party, whether with or without notice, shall affect the obligations of any of the undersigned. The undersigned waive(s) all defenses or right to discharge available under
Section 3.605 of the 

California
Uniform Commercial Code and waive(s) all other suretyship defenses or right to discharge. The undersigned agree(s) that the Bank has the right to sell, assign, or grant participations, or
any interest, in any or all of the Indebtedness, and that, in connection with this right, but without limiting its ability to make other disclosures to the full extent allowable, the Bank may disclose
all documents and information which the Bank now or later has relating to the undersigned or the Indebtedness. The undersigned agree(s) that the Bank may provide information relating to the Note or to
the undersigned to the Bank's parent, affiliates, subsidiaries and service providers. 

        The
undersigned agree(s) to reimburse the holder or owner of this Note for any and all costs and expenses (including without limit, court costs, legal expenses and reasonable attorney
fees, whether inside or outside counsel is used, whether or not suit is instituted and, if suit is instituted, whether at the trial court level, appellate level, in a bankruptcy, probate or
administrative proceeding or otherwise) incurred in collecting or attempting to collect this Note or incurred in any other matter or proceeding relating to this Note. 

        The
undersigned acknowledge(s) and agree(s) that there are no contrary agreements, oral or written, establishing a term of this Note and agree(s) that the terms and conditions of this
Note may not be amended, waived or modified except in a writing signed by an officer of the court expressly stating that the writing constitutes an amendment, waiver or modification of the terms of
this Note. As used in this Note, the "undersigned" means, individually and collectively, each maker, accommodation party, endorser and other party signing this Note in a similar capacity. If any
provision of this Note is unenforceable in whole or part for any reason, the remaining provisions shall continue to be effective. THIS NOTE IS MADE IN THE STATE OF CALIFORNIA AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. 

        The
maximum interest rate shall not exceed the highest applicable usury ceiling. 

        THE
UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY
TO CONSULT) WITH COUNSEL OF THEIR CHOICE. KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT
OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS. 

        Libor
Addendum attached hereto and made a part of this Note. 

	INITIAL HERE	 	/s/ JK/MF
	 	 

	Digital Theater Systems, Inc.	 	 	 
	

/s/  JON KIRCHNER      
	
 	

Its:	

PRESIDENT & CHIEF EXECUTIVE OFFICER

	SIGNATURE OF JON KIRCHNER	 	 	TITLE
	

/s/  MEL FLANIGAN      
	
 	

Its:	

CHIEF FINANCIAL OFFICER

	SIGNATURE OF MEL FLANIGAN	 	 	TITLE

	

Clareton Drive	
 	

Agoura Hills	
 	

California	
 	

USA	
 	

91301
	

	STREET ADDRESS	 	CITY	 	STATE	 	(COUNTRY)	 	ZIP CODE

	

 	
 	
For Bank Use Only	
 	

CCAR #	
 	

 	
 	
 	

 
	
Officer Initial	
 	

Loan Group Name	
 	

Obligor(s) Name	
 	

 	
 	
 	

 
	RH	 	Entertainment Group	 	Digital Theater Systems, Inc.	 	 	 	 	 
	
Officer I.D. No.	
 	

Loan Group No.	
 	

Obligor #	
 	

Note #	
 	
 	

Amount
	48135	 	97110	 	2258830922	 	 	 	$	10,000,000.00

  

 
 

LIBOR
  Addendum To Master Revolving Note    
    

        This Addendum to Master Revolving Note (this "Addendum") is entered into as of June 1, 2004, by and between Comerica Bank ("Bank") and Digital Theater
Systems, Inc. ("Borrower"). This Addendum supplements the terms of the Master Revolving Note of even date herewith. 

1.    Definitions.    

        a.    Advance.    As used herein, "Advance" means a borrowing requested by Borrower and made by Bank under the Note,
including a LIBOR Option Advance and/or a Base Rate Option Advance. 

        b.    Business Day.    As used herein, "Business Day" means any day except a Saturday, Sunday or any other day
designated as a holiday under Federal or California statute or regulation. 

        c.    LIBOR.    As used herein, "LIBOR" means the rate per annum (rounded upward if necessary, to the nearest whole
1/8 of 1%) and determined pursuant to the following formula: 

	LIBOR =	 	Base LIBOR
 100% - LIBOR Reserve Percentage	 	 

	(1)
	"Base
LIBOR" means the rate per annum determined by Bank at which deposits for the relevant LIBOR Period would be offered to Bank in the approximate amount of the relevant LIBOR
Option Advance in the inter-bank LIBOR market selected by Bank, upon request of Bank at 10:00 a.m. California time, on the day that is the first day of such LIBOR Period.

	(2)
	"LIBOR
Reserve Percentage" means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for "Eurocurrency Liabilities" (as
defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for expected changes in such reserve percentage during the applicable LIBOR Period. 

        d.     LIBOR
Business Day. As used herein, "LIBOR Business Day" means a Business day on which dealings in Dollar deposits may be carried out in the interbank LIBOR market. 

        e.     LIBOR
Period. As used herein, "LIBOR Period" means, with respect to a LIBOR Option Advance: 

	(1)
	initially,
the period commencing on, as the case may be, the date the Advance is made or the date on which the Advance is converted to a LIBOR Option Advance, and continuing for, in
every case, a thirty (30), sixty (60), or ninety (90), thereafter so long as the LIBOR Option is quoted for such period in the applicable interbank LIBOR market, as such period is selected by Borrower
in the notice of Advance as provided in the Note or in the notice of conversion as provided in this Addendum; and

	(2)
	thereafter,
each period commencing on the last day of the next preceding LIBOR Period applicable to such LIBOR Option Advance and continuing for, in every case, a thirty (30), sixty
(60), or ninety (90), thereafter so long as the LIBOR Option is quoted for such period in the applicable interbank LIBOR market, as such period is selected by Borrower in the notice of continuation as
provided in this Addendum. 

        f.    Note.    As used herein, "Note" means the Master Revolving Note of even date herewith. 

        g.    Regulation D.    As used herein, "Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System as amended or supplemented from time to time. 

1

 

        h.    Regulatory Development.    As used herein, "Regulatory Development" means any or all of the following:
(i) any change in any law, regulation or interpretation thereof by any public authority (whether or not having the force of law); (ii) the application of any existing law, regulation or
the interpretation thereof by any public authority (whether or not having the force of law); and (iii) compliance by Bank with any request or directive (whether or not having the force of law)
of any public authority. 

2.    Interest Rate Options.    Borrower shall have the following options regarding the interest rate to be paid by Borrower on
Advances under the Note: 

        a.     A
rate equal to two percent (2.00%) above Bank's LIBOR, (the "LIBOR Option"), which LIBOR Option shall be in effect during
the relevant LIBOR Period; or 

        b.     A
rate calculated with reference to the Base Rate (the "Base Rate Option") (as referenced in the Note) equal to: (a) the Base Rate as quoted from time to time by
Bank, as such rate may change from time to time, minus one-half percent for all unpaid Advances with respect to which Borrower has elected
to have interest calculated with reference to the Base Rate ("Base Rate Advances"), not exceeding at any time the amount of cash then on deposit at the Bank; and (b) the Base Rate as quoted
from time to time by Bank, as such rate may change from time to time, for all unpaid Base Rate Advances exceeding the amount of cash then on deposit at the Bank. 

3.    LIBOR Option Advance.    The minimum LIBOR Option Advance will not be less than two hundred fifty thousand and 00/100 Dollars
($250,000) for any LIBOR Option Advance. Additionally, no more than four (4) LIBOR Advances shall be outstanding at any given time. 

4.    Payment of Interest on LIBOR Option Advances.    Interest on each LIBOR Option Advance shall be payable pursuant to the terms
of the Note. Interest on such LIBOR Option Advance shall be computed on the basis of a 360-day year and shall be assessed for the actual number of days elapsed from the first day of the
LIBOR Period applicable thereto but not including the last day thereof. 

5.    Bank's Records Re: LIBOR Option Advances.    With respect to each LIBOR Option Advance, Bank is hereby authorized to note the
date, principal amount, interest rate and LIBOR Period applicable thereto and any payments made thereon on Bank's books and records (either manually or by electronic entry) and/or on any schedule
attached to the Note, which notations shall be prima facie evidence of the accuracy of the information noted. 

6.    Selection/Conversion of Interest Rate Options.    At the time any Advance is requested under the Note and/or Borrower wishes
to select the LIBOR Option for all or a portion of the outstanding principal balance of the Note, and at the end of each LIBOR Period, Borrower shall give Bank notice specifying (a) the
interest rate option selected by Borrower; (b) the principal amount subject thereto; and (c) if the LIBOR Option is selected, the length of the applicable LIBOR Period. Any such notice
may be given by telephone so long as, with respect to each LIBOR Option selected by Borrower, (i) Bank receives written confirmation from Borrower not later than three (3) LIBOR Business
Days after such telephone notice is given; and (ii) such notice is given to Bank prior to 10:00 a.m., California time, on the first day of the LIBOR Period. For each LIBOR Option
requested hereunder, Bank will quote the applicable fixed LIBOR Rate to Borrower at approximately 10:00 a.m., California time, on the first day of the LIBOR Period. If Borrower does not
immediately accept the rate quoted by Bank, any subsequent acceptance by Borrower shall be subject to a redetermination of the rate by Bank; provided, however, that if Borrower fails to accept any
such quotation given, then the quoted rate shall expire and Bank shall have no obligation to permit a LIBOR Option to be selected on such day. If no specific designation of interest is made at the
time any Advance is requested under the Note or at the end of any LIBOR Period, Borrower shall be deemed to have selected the Base Rate Option for such Advance or the principal amount to which such
LIBOR Period applied. At any time the LIBOR Option is in effect, Borrower may, at the end of the applicable LIBOR Period, convert to the Base 

2

 

Rate
Option. At any time the Base Rate Option is in effect, Borrower may convert to the LIBOR OPTION, and shall designate a LIBOR Period. 

7.    Default Interest Rate.    From and after the maturity date of the Note, or such earlier date as all principal owing hereunder
becomes due and payable by acceleration or otherwise, the outstanding principal balance of the Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a
360-day year, actual days elapsed) equal to three percent (3.00%) above the rate of interest from time to time applicable to the Note. 

8.    Prepayment.    In the event that the LIBOR Option is the applicable interest rate for all or any part of the outstanding
principal balance of the Note, and any payment or prepayment of any such outstanding principal balance of the Note shall occur on any day other than the last day of the applicable LIBOR Period
(whether voluntarily, by acceleration, required payment, or otherwise), or if Borrower elects the LIBOR Option as the applicable interest rate for all or any part of the outstanding principal balance
of the Note in accordance with the terms and conditions hereof, and, subsequent to such election, but prior to the commencement of the applicable LIBOR Period, Borrower revokes such election for any
reason whatsoever, or if the applicable interest rate in respect of any outstanding principal balance of the Note hereunder shall be changed, for any reason whatsoever, from the LIBOR Option to the
Base Rate Option prior to the last day of the applicable LIBOR Period, or if Borrower shall fail to make any payment of principal or interest hereunder at any time that the LIBOR Option is the
applicable interest rate hereunder in respect of such outstanding principal balance of the Note, Borrower shall reimburse Bank, on demand, for any resulting loss, cost or expense incurred by Bank as a
result thereof, including, without limitation, any such loss, cost or expense incurred in obtaining, liquidating, employing or redeploying deposits from third parties. Such amount payable by Borrower
to Bank may include, without limitation, an amount equal to the excess, if any, of (a) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, refunded or
converted, for the period from the date of such prepayment or of such failure to borrow, refund or convert, through the last day of the relevant LIBOR Period, at the applicable rate of interest for
such outstanding principal balance of the Note, as provided under this Note, over (b) the amount of interest (as reasonably determined by Bank) which would have accrued to Bank on such amount
by placing such amount on deposit for a comparable period with leading banks in the interbank LIBOR market. Calculation of any amounts payable to Bank under this paragraph shall be made as though Bank
shall have actually funded or committed to fund the relevant outstanding principal balance of the Note hereunder through the purchase of an underlying deposit in an amount equal to the amount of such
outstanding principal balance of the Note and having a maturity comparable to the relevant LIBOR Period; provided, however, that Bank may fund the outstanding principal balance of the Note hereunder
in any manner it deems fit and the foregoing assumptions shall be utilized only for the purpose of the calculation of amounts payable under this paragraph. Upon the written request of Borrower, Bank
shall deliver to Borrower a certificate setting forth the basis for determining such losses, costs and expenses, which certificate shall be conclusively presumed correct, absent manifest error. Any
prepayment hereunder shall also be accompanied by the payment of all accrued and unpaid interest on the amount so prepaid. Any outstanding principal balance of the Note which is bearing interest at
such time at the Base Rate Option may be prepaid without penalty or premium. Partial prepayments hereunder shall be applied to the installments hereunder in the inverse order of their maturities. 

        BY
INITIALING BELOW, BORROWER ACKNOWLEDGE(S) AND AGREE(S) THAT: (A) THERE IS NO RIGHT TO PREPAY ANY LIBOR OPTION ADVANCE, IN WHOLE OR IN PART, WITHOUT PAYING THE PREPAYMENT AMOUNT
SET FORTH HEREIN ("PREPAYMENT AMOUNT"). EXCEPT AS OTHERWISE REQUIRED UNDER APPLICABLE LAW; (B) BORROWER SHALL BE LIABLE FOR PAYMENT OF THE PREPAYMENT AMOUNT IF BANK EXERCISES ITS RIGHT TO
ACCELERATE PAYMENT OF ANY LIBOR OPTION 

3

 

ADVANCE
AS PART OR ALL OF THE OBLIGATIONS OWING UNDER THE NOTE, INCLUDING WITHOUT LIMITATION, ACCELERATION UNDER A DUE-ON-SALE PROVISION; (C) BORROWER WAIVES ANY RIGHTS
UNDER SECTION 2954.10 OF THE CALIFORNIA CIVIL CODE OR ANY SUCCESSOR STATUTE; AND (D) BANK HAS MADE EACH LIBOR OPTION ADVANCE PURSUANT TO THE NOTE IN RELIANCE ON THESE AGREEMENTS. 

	/s/  JK/MF      
 BORROWER'S INITIALS	 	 	 

9.    Hold Harmless and Indemnification.    Borrower agrees to indemnify Bank and to hold Bank harmless from, and to reimburse Bank
on demand for, all losses and expenses which Bank sustains or incurs as a result of (i) any payment of a LIBOR Option Advance prior to the last day of the applicable LIBOR Period for any
reason, including, without limitation, termination of the Note, whether pursuant to this Addendum or the occurrence of an Event of Default; (ii) any termination of a LIBOR Period prior to the
date it would otherwise and in accordance with this Addendum; or (iii) any failure by Borrower, for any reason, to borrow any portion of a LIBOR Option Advance. 

10.    Funding Losses.    The indemnification and hold harmless provisions set forth in this Addendum shall include, without
limitation, all losses and expenses arising from interest and fees that Bank pays to lenders of funds it obtains in order to fund the loans to Borrower on the basis of the LIBOR Option(s) and all
losses incurred in liquidating or re-deploying deposits from which such funds were obtained and loss of profit for the period after termination. A written statement by Bank to Borrower of
such losses and expenses shall be conclusive and binding, absent manifest error, for all purposes. This obligation shall survive the termination of this Addendum and the payment of the Note. 

11.    Regulatory Developments Or Other Circumstances Relating To Illegality or Impracticality of LIBOR.    If any Regulatory
Development or other circumstances relating to the interbank Euro-dollar markets shall, at any time, in Bank's reasonable determination, make it unlawful or impractical for Bank to fund or
maintain, during any LIBOR Period, to determine or charge interest rates based upon LIBOR, Bank shall give notice of such circumstances to Borrower and; 

          (i)  In
the case of a LIBOR Period in progress, Borrower shall, if requested by Bank, promptly pay any interest which had accrued prior to such request and the date of such
request shall be deemed to be the last day of the term of the LIBOR Period; and 

         (ii)  No
LIBOR Period may be designated thereafter until Bank determines that such would be practical. 

12.    Additional Costs.    Borrower shall pay to Bank from time to time, upon Bank's request, such amounts as Bank determines are
needed to compensate Bank for any costs it incurred which are attributable to Bank having made or maintained a LIBOR Option Advance or to Bank's obligation to make a LIBOR Option Advance, or any
reduction in any amount receivable by Bank hereunder with respect to any LIBOR Option or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional
Costs"), resulting from any Regulatory Developments, which (i) change the basis of taxation of any amounts payable to Bank hereunder with respect to taxation of any amounts payable to Bank
hereunder with respect to any LIBOR Option Advance (other than taxes imposed on the overall net income of Bank for any LIBOR Option Advance by the jurisdiction where Bank is headquartered or the
jurisdiction where Bank extends the LIBOR Option Advance; (ii) impose or modify any reserve, special deposit, or similar requirements relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of, Bank (including any LIBOR Option Advance or any deposits referred to in the definition of LIBOR); or (iii) impose any other condition affecting this
Addendum (or any of such extension of credit or liabilities). Bank shall notify Borrower of any event occurring after the date hereof which entitles Bank to compensation pursuant to this paragraph 

4

 

as
promptly as practicable after it obtains knowledge thereof and determines to request such compensation. Determinations by Bank for purposes of this paragraph, shall be conclusive, provided that
such determinations are made on a reasonable basis. 

13.    Legal Effect.    Except as specifically modified hereby, all of the terms and conditions of the Note remain in full force and
effect. 

        IN
WITNESS WHEREOF, the parties have agreed to the foregoing as of the date first set forth above. 

	 	 	DIGITAL THEATER SYSTEMS, INC.
	

By:	
 	

/s/  JON KIRCHNER      
	
 	

By:	
 	

/s/  JONATHAN HEINE      

	Title:	 	PRESIDENT & CHIEF EXECUTIVE OFFICER
	 	Title:	 	Jonathan Heine
 Corporate Banking Officer
	

By:	
 	

/s/  MEL FLANIGAN      
	
 	

 	
 	

 
	Title:	 	CHIEF FINANCIAL OFFICER	 	 	 	 

5

 
 
 

ADDENDUM TO MASTER REVOLVING NOTE    
    

        This is an Addendum to a Master Revolving Note (the "Note"), dated as of May 31, 2004, in the original principal
amount of $10,000,000, issued by Digital Theater Systems, Inc. ("DTS") as promisor, and Comerica Bank, as promisee. Capitalized terms used, but not defined in this addendum, have the meaning assigned
to those terms in the Note. 

        The
Note is an unsecured obligation of DTS. Accordingly, all provisions of the third and fourth paragraphs of the Note that reflect that the Indebtedness is secured by Collateral or
state that DTS has granted to the Bank a security interest in any of DTS's property are hereby deleted from the Note and are of no further force or effect. Otherwise, all provisions of the Note are
and shall remain in full force and effect. 

        This
Addendum is part of Note and is effective as of May 31, 2004. 

        IN
WITNESS WHEREOF, DTS and the Bank have entered into this Addendum as of May 31, 2004. 

	"DTS"

Digital Theater Systems, INC.	 	"BANK"

COMERICA BANK
	

By:	
 	

/s/  JON KIRCHNER      
 Jon Kirchner,

Chief Executive Officer and President	
 	

By:	
 	

/s/  JONATHAN HEINE      
 Jonathan Heine

Assistant Vice President
	

By:	
 	

/s/  MEL FLANIGAN      
 Mel Flanigan

Chief Financial Officer	
 	

 	
 	

 

1

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Exhibit 10.21  

 
 
$200,000,000 91/2% Senior Notes due 2009

$260,000,000 11% Senior Notes due 2012

LABRANCHE & CO INC.

PURCHASE AGREEMENT  

May 4, 2004 

Credit
Suisse First Boston LLC,

Eleven Madison Avenue,

New York, N.Y. 10010-3629 

Dear
Sirs: 

        1.    Introductory.    LaBranche & Co Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to Credit Suisse First Boston LLC (the
"Initial Purchaser") (i) $200,000,000 principal amount of its 91/2% Senior Notes due 2009 (the "2009
Notes") and (ii) $260,000,000 principal amount of its 11% Senior Notes due 2012 (the "2012 Notes" and, together with the
2009 Notes, the "Offered Securities") to be issued under an indenture dated as of May 18, 2004 (the
"Indenture"), between the Company and U.S. Bank National Association, as trustee (the "Trustee"), on a
private placement basis pursuant to an exemption under Section 4(2) of the United
States Securities Act of 1933 (the "Securities Act"), and hereby agrees with the Initial Purchaser as follows. 

        The
holders of the Offered Securities will be entitled to the benefits of a Registration Rights Agreement of even date herewith between the Company and the Initial Purchaser (the
"Registration Rights Agreement"), pursuant to which the Company agrees to file (i) a registration statement ("Exchange
Offer Registration Statement") with the Securities and Exchange Commission (the "Commission") with respect to a proposed offer
(the "Registered Exchange Offer") to the holders of the Offered Securities, to issue and deliver to such holders, in exchange for the Offered
Securities, a like aggregate principal amount of debt securities (the "Exchange Securities") of the Company issued under the Indenture and identical in
all material respects to the Offered Securities (except for the transfer restrictions relating to the Offered Securities and certain other provisions discussed in Section 6 of the Registration
Rights Agreement) that would be registered under the Securities Act, and (ii) a shelf registration statement pursuant to Rule 415 under the Securities Act under certain circumstances
specified in the Registration Rights Agreement. 

        2.    Representations and Warranties of the Company.    The Company represents and warrants to, and agrees with, the
Initial Purchaser that: 

        (a)    A
preliminary offering circular and an offering circular relating to the Offered Securities have been prepared by the Company. Such preliminary offering circular (the
"Preliminary Offering Circular") and offering circular (the "Offering Circular"), as supplemented as of
the date of this Agreement, together with any other document approved by the Company for use in connection with the contemplated resale of the Offered Securities, are hereinafter collectively referred
to as the "Offering Document". The Preliminary Offering Circular as of its date did not, and the Offering Circular on the date of this Agreement does
not, include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Offering Document based upon written information furnished to the
Company by the Initial Purchaser specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 7(b) hereof. Except as
disclosed in the Offering Document, on the 

 

date
of this Agreement, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (the "2003
Form 10-K") filed with the SEC, and all subsequent reports to the 2003 Form 10-K (collectively, the "Exchange Act
Reports") which have been filed by the Company with the Commission or sent to stockholders pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act") do not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. Such documents, when they were filed with the Commission, conformed in all material respects to the requirements of the
Exchange Act and the rules and regulations of the Commission thereunder. No stop order or decree preventing the use of the Offering Document, or any amendment or supplement thereto, or any order
asserting that any of the transactions contemplated by this Agreement are subject to the registration requirements of the Securities Act, has been issued and no proceeding for any such purpose has
been commenced or is pending or, to the knowledge of the Company, is threatened. 

        (b)    The
Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has full corporate
power and authority to carry on its business as described in the Offering Document and to own, lease and operate its properties, and is duly qualified and is in good standing as a foreign corporation
authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified or
in good standing in a foreign jurisdiction would not have a material adverse effect on the business, condition (financial or other), properties, or results of operations of the Company and its
subsidiaries set forth on Exhibit A hereto (each, a "Subsidiary" and collectively, the
"Subsidiaries"), taken as a whole, or draw into question the validity of this Agreement or the Indenture or the Registration Rights Agreement (a
"Material Adverse Effect"). As of the date hereof, the Subsidiaries constitute all of the Company's subsidiaries. 

        (c)    Each
Subsidiary has been duly incorporated or organized, as the case may be, and is an existing corporation or limited liability company, as the case may be, in good
standing under the laws of the jurisdiction of its incorporation or organization, as the case may be, with power and authority (corporate and other) to own, lease and operate its properties and
conduct its business as described in the Offering Document; and each Subsidiary is duly qualified to do business as a foreign corporation and is in good standing in all other jurisdictions in which
its ownership or leasing of property or the conduct of its business requires such qualification, except to the extent that a failure to be so qualified or in good standing in a foreign jurisdiction
would not have a Material Adverse Effect. All of the issued and outstanding capital stock or membership interests, as the case may be, of each Subsidiary have been duly authorized and validly issued
and are fully paid and nonassessable, and are owned by the Company, directly or through the Subsidiaries, free and clear of any security interest, claim, lien, encumbrance or adverse interest of any
nature (each, a "Lien"). 

        (d)    At
December 31, 2003, the Company had an authorized capitalization as set forth in the Offering Document, and all currently outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid, nonassessable and not subject to any preemptive or similar rights. 

        (e)    The
Indenture has been duly authorized by the Company; the Offered Securities have been duly authorized by the Company; and when the Offered Securities are delivered and
paid for pursuant to this Agreement on the Closing Date (as defined below), the Indenture will have been duly executed and delivered by the Company, and such Offered Securities will have been duly
executed, authenticated, issued and delivered by the Company, will conform to the description thereof contained in the Offering Document and be entitled to the benefits of the Indenture. The Indenture
and such Offered Securities will constitute valid and legally binding obligations of the 

2

 

Company,
enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles. On the Closing Date, the Indenture will conform in all material respects to the description thereof in the Offering Document and to the
requirements of the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the rules and regulations of the Commission applicable to
an indenture which is qualified thereunder. 

        (f)    The
Registration Rights Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. On the Closing Date, the Registration Rights Agreement will conform in all material respects to the description thereof in the Offering Document. 

        (g)    On
the Closing Date, the Exchange Securities will have been duly authorized by the Company and when the Exchange Securities are issued, executed and authenticated in
accordance with the terms of the Exchange Offer and the Indenture, the Exchange Securities will be entitled to the benefits of the Indenture and will be valid and legally binding obligations of the
Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles. 

        (h)    This
Agreement has been duly authorized, executed and delivered by the Company. 

        (i)    Neither
the Company nor any of the Subsidiaries is (i) in violation of its charter, by-laws or other organizational documents or (ii) in
default in the performance of any obligation, agreement, covenant or condition contained in any indenture, loan agreement, mortgage, lease or other agreement or instrument to which the Company or any
of the Subsidiaries is a party or by which the Company or any of the Subsidiaries or their respective property is bound, except, in the case of clause (ii), for any such violation or default
that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. 

        (j)    The
execution, delivery and performance of this Agreement, the Indenture and the Registration Rights Agreement by the Company, the compliance by the Company with all
provisions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not (i) require any consent, approval, authorization or other order of, or filing, or
qualification with, any court or governmental or self regulatory body or agency (except such as may be required under federal securities laws, the securities or Blue Sky laws of the various states,
the rules and regulations of the various self-regulatory organizations or the Trust Indenture Act), (ii) conflict with or constitute a breach of any of the terms or provisions of,
or a default under, (a) the charter, bylaws or other organizational documents of the Company or any of the Subsidiaries or (b) any indenture, loan agreement, mortgage, lease or other
agreement or instrument to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries or any of its or their property is bound, except, in the case of
clause (b), any such conflict, breach or default that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect, (iii) violate or conflict with
any applicable statute, law, ordinance, administrative, governmental or self-regulatory organizational rule or regulation, or judgment, order or decree of any court or any governmental
body or agency having jurisdiction over the Company, any of the Subsidiaries or any of its or their property, except any such violation or conflict that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect, (iv) result in the imposition or creation of (or the obligation to create or impose) a material Lien under, any agreement or instrument
to which the Company or any of the 

3

 

Subsidiaries
is a party or by which the Company or any of the Subsidiaries or any of its or their property is bound, or (v) result in the termination, suspension or revocation of any
Authorization (as defined below) of the Company or any of the Subsidiaries or result in any other impairment of the rights of the holder of any such Authorization. 

        (k)    Except
as disclosed in the Offering Document, the Company and the Subsidiaries have good and marketable title to all real properties and all other properties and assets
owned by them, in each case free from Liens that would materially affect the value thereof or materially interfere with the use made or to be made thereof by them; and except as disclosed in the
Offering Document, the Company and the Subsidiaries hold any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or
to be made thereof by them. 

        (l)    The
Company and the Subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how,
patents, copyrights, confidential information and other intellectual property (collectively, "Intellectual Property Rights") necessary to conduct the
business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any Intellectual Property
Rights that, if determined adversely to the Company or any of the Subsidiaries, individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. 

        (m)    Except
as disclosed in the Offering Document or incorporated by reference into the Offering Document, there are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened to which the Company or any of the Subsidiaries is or could be a party or to
which any of its or their property is or could be subject, that individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. There are no such proceedings that
materially adversely affect the issuance of the Offered Securities or any of the transactions contemplated by this Agreement, the Indenture and the Registration Rights Agreement. Except as disclosed
in the Offering Document or incorporated by reference into the Offering Document, neither the Company nor any of the Subsidiaries is involved in any strike, job action or labor dispute with any group
of its employees that individually or in the aggregate could reasonably be expected to have a Material Adverse Effect, and, to the knowledge of the Company, no such action or dispute is threatened. 

        (n)    (i) Arthur
Andersen LLP, which has certified certain financial statements of the Company and its consolidated subsidiaries and delivered its report with respect
to certain of the audited consolidated financial statements and schedule incorporated by reference in the Offering Circular, were, at the time of delivery of such report, independent public
accountants with respect to the Company within the meaning of the Securities Act and the Exchange Act and the then-applicable published rules and regulations thereunder. 

        (ii)    KPMG
LLP, which has certified certain financial statements of the Company and its consolidated subsidiaries and delivered their report with respect to certain of the
audited consolidated financial statements incorporated by reference in the Offering Circular, are independent public accountants with respect to the Company within the meaning of the Securities Act
and the Exchange Act and the applicable published rules and regulations thereunder. 

        (o)    The
financial statements and financial statement schedule incorporated by reference in the Offering Document present fairly the financial position of the Company and its
consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with generally
accepted accounting principles in the United States applied on a consistent basis. The selected financial data 

4

 

set
forth under the captions "Summary—Summary Historical Consolidated Financial Data" and "Selected Historical Consolidated Financial Data" in the Preliminary Offering Circular and the
Offering Circular fairly present, on the basis stated in the Preliminary Offering Circular and the Offering Circular, the information included therein. 

        (p)    The
statistical and market-related data included in the Offering Document are based on or derived from sources that the Company believes to be reliable and accurate. 

        (q)    The
Company and each of the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. 

        (r)    Neither
the Company nor any of the Subsidiaries has violated any foreign, federal, state or local law or regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), any provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any provisions of the Foreign Corrupt Practices Act or the rules and regulations
promulgated thereunder, except for such violations that individually or in the aggregate could not reasonably be expected to have a Material Adverse
Effect. 

        (s)    There
are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws or any Authorization, any related constraints on operating activities and any potential liabilities to third parties)
that individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. 

        (t)    Each
of the Company and the Subsidiaries (i) has such concessions, permits, licenses, consents, exemptions, franchises, authorizations, orders, registrations,
qualifications and other approvals (each, an "Authorization") of, and has made all filings with and notices to, all federal, state and foreign
governments, governmental or regulatory authorities and self-regulatory organizations and all courts and other tribunals, including, without limitation, under any applicable Environmental
Laws and (ii) is a member in good standing of each federal, state or foreign exchange, board of trade, clearing house or association and self-regulatory or similar organization, in
each case, as are necessary to own, lease, license and operate its properties and to conduct its business, except where the failure to have any such Authorization or to make any such filing or notice
individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. Each such Authorization is valid and in full force and effect and each of the Company and the
Subsidiaries is in compliance with all the terms and conditions thereof and with the rules and regulations of the authorities and governing bodies having jurisdiction with respect thereto; and no
event has occurred (including, without limitation, the receipt of any notice from any authority or governing body) which allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after notice or lapse of time or both, would result in any other impairment of the rights of the holder of any such Authorization;
except where such revocation, suspension, termination or impairment individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. 

        (u)    Each
of the Company and the Subsidiaries and ERISA Affiliates (as defined below) has fulfilled its obligations, if any, under the minimum funding standards of
Section 302 of ERISA and Section 412 of the Internal Revenue Code of 1986, as amended (the "Code") and the regulations 

5

 

and
published interpretations thereunder with respect to each "plan" (as defined in Section 3(3) of ERISA) for which the Company or any of the Subsidiaries or ERISA Affiliates have or may have
any liability (contingent or otherwise) and each such plan is in compliance in all material respects with the applicable provisions of ERISA and such regulations and published interpretations
thereunder. Neither the Company nor any ERISA Affiliate has obtained or applied for a waiver of the minimum funding standards of Section 302 of ERISA or Section 412 of the Code with
respect to such plan. Neither the Company nor any of the Subsidiaries or ERISA Affiliates has any material unpaid liability, or reasonably expects to incur any material liability, to the Pension
Benefit Guaranty Corporation (other than for the payment of premiums in the ordinary course) or to any such plan under Title IV of ERISA. The Company and the ERISA Affiliates do not contribute to any
plans which are subject to Title IV of ERISA. To the Company's knowledge, neither the Company nor any of the Subsidiaries has engaged in any non-exempt "prohibited transactions" under
ERISA or the Code that could reasonably be expected to result in a Material Adverse Effect. The term "ERISA Affiliate" means each trade or business
(whether or not incorporated) that would be treated as a single employer with the Company under Title IV of ERISA or Section 412 of the Code. 

        (v)    The
Company is not a party in interest under ERISA or a disqualified person under the Code to any employee benefit plan subject to the fiduciary responsibility part of
ERISA or Section 4975 of the Code except for those employee benefit plans covering its employees or the employees of the Subsidiaries. 

        (w)    Each
of LaBranche & Co. LLC ("LaBCo."), LaBranche Financial Services, Inc.
("LFS"), LaBranche Structured Products, LLC ("LSP") and LaBranche Structured Products Specialists, LLC
("LSPS") is (a) registered as a broker-dealer with the Commission under the Exchange Act and (b) registered with the securities authority
of each state in which it is required to be so registered. Each of LaBCo., LFS and LSP is a member organization in good standing with the NYSE and is a member organization of the AMEX. 

        (x)    Each
of LaBCo., LFS, LSP and LSPS is a broker-dealer subject to the provisions of Regulation T (12 C.F.R. §220) of the Board of Governors of the
Federal Reserve System. Each of LaBCo., LFS, LSP and LSPS maintains procedures and internal controls reasonably designed to ensure that it does not extend or maintain credit to or for its customers
other than in accordance with the provisions of Regulation T, and management officials of the Company or the Subsidiaries regularly supervise the activities of LaBCo., LFS, LSP and LSPS and the
activities of their respective employees in a manner reasonably designed to ensure that none of LaBCo., LFS, LSP or LSPS will extend or maintain credit to or for its customers other than in accordance
with the provisions of said Regulation T. 

        (y)    There
is no franchise, contract or other document of a character that would be required to be described in a prospectus under the Securities Act, which is not described
in or incorporated by reference in the Offering Document; and the statements set forth in the Offering Document under the headings "Risk Factors—Risks Related to Our
Business—The regulatory environment in which we operate may change, making it difficult for us to maintain our levels of profitability," "—We are subject to extensive
regulation under federal and state laws that could result in fines and other penalties" and "—We are subject to securities laws liability and related civil litigation,"
"Business—Our Specialist Segment—NYSE and AMEX Rules Governing Our Specialist Activities," "Business—Regulatory Matters," "Business—Legal Proceedings,'
"Description of Senior Notes," "Description of Other Indebtedness," "Certain Federal Income Tax Consequences" and "Plan of Distribution," in the proxy statement filed April 12, 2004 under the
heading "Employment Agreements" and in the 2003 Form 10-K under the headings "Business—Our Specialist Segment—NYSE and AMEX Rules Governing Our Specialist
Activities," "Business—Regulatory Matters," "Business—Risk Factors—The regulatory environment in which we operate 

6

 

may
change, making it difficult for us to maintain our levels of profitability," and "—We are subject to securities laws liability and related civil litigation," "—Our or our
employees' failure to comply with applicable laws and regulations could result (and have resulted) in substantial fines and other penalties," and "Legal Proceedings" fairly summarize in all material
respects the matters described therein as of the date hereof and as of the date such statements were made. 

        (z)    The
Company and each of the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which they are engaged; all policies of insurance and fidelity or surety bonds insuring the Company or any of the Subsidiaries or any of its or their businesses,
assets, employees, officers and directors are in full force and effect; the Company and the Subsidiaries are in compliance with the terms of such policies and instruments in all material respects; and
there are no claims by the Company or any of the Subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights
clause; neither the Company nor any of the Subsidiaries has been refused any insurance coverage sought or applied for; and neither the Company nor any of the Subsidiaries has any reason to believe
that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at
a cost that would not have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Offering Document. 

        (aa)    Other
than the Registration Rights Agreement, there are no contracts, agreements or understandings between the Company and any person granting such person the right to
require the Company to include any securities of the Company with Offered Securities registered pursuant to any Exchange Offer Registration Statement. 

        (bb)    The
Company is subject to the reporting requirements of either Section 13 or Section 15(d) of the Exchange Act and files reports with the Commission on
the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. 

        (cc)    Neither
the Company nor any of the Subsidiaries or any agent thereof acting on its or their behalf has taken, and none of them will take, any action that might cause
this Agreement or the issuance or sale of the Offered Securities to violate Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12
C.F.R. Part 224) of the Board of Governors of the Federal Reserve System. The proceeds of the issuance of the Offered Securities will not be used for the purpose, whether immediate, incidental,
or ultimate, of buying or carrying margin stock (as such terms are used in the definition of "purpose credit" in Section 2 of Regulation U, 12 C.F.R. § 221.2). 

        (dd)    Prior
to the date hereof, neither the Company nor any of its affiliates has taken any action which is designed to or which has constituted or which might have been
expected to cause or result in stabilization or manipulation of the price of any security of the Company in connection with the offering of the Offered Securities; 

        (ee)    No
"nationally recognized statistical rating organization", as such term is defined for purposes of Rule 436(g)(2) under the Securities Act, (i) has
imposed (or has informed the Company that it is considering imposing) any condition (financial or otherwise) on the Company's retaining any rating assigned to the Company or any securities of the
Company or (ii) has indicated to the Company that it is considering (a) the downgrading, suspension, or withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (b) any change in the outlook for any rating of the Company or any securities of the Company. 

7

  

        (ff)    Since
the respective dates as of which information is given in the Offering Document, other than as set forth in or contemplated by the Offering Document (exclusive of
any amendments or supplements thereto subsequent to the date of this Agreement), (i) there has not occurred any material adverse change or any development which could reasonably be expected to
result in a material adverse change in the condition, financial or otherwise, or the earnings, business, management or operations of the Company and the Subsidiaries, taken as a whole,
(ii) there has not been any material adverse change or any development which could reasonably be expected to result in a material adverse change in the capital stock or in the
long-term debt of the Company or any of the Subsidiaries and (iii) neither the Company nor any of the Subsidiaries has incurred any material liability or obligation, direct or
contingent. 

        (gg)    The
Company is not an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be
registered under Section 8 of the United States Investment Company Act of 1940 (the "Investment Company Act"); and the Company is not and, after
giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the Offering Document, will not be an "investment company" as defined in
the Investment Company Act. 

        (hh)    When
the Offered Securities are issued and delivered pursuant to this Agreement, the Offered Securities will not be of the same class (within the meaning of
Rule 144A(d)(3) under the Securities Act) as any security of the Company that is listed on any national securities exchange registered under Section 6 of the Exchange Act or that is
quoted in a U.S. automated inter-dealer quotation system. 

        (ii)    The
offer and sale of the Offered Securities by the Company to the Initial Purchaser in the manner contemplated by this Agreement will be exempt from the registration
requirements of the Securities Act by reason of Section 4(2) thereof; and it is not necessary to qualify an indenture in respect of the Offered Securities under the Trust Indenture Act. 

        (jj)    Neither
the Company nor any of its affiliates or any person acting on its or their behalf (i) has, within the six-month period prior to the date
hereof, offered or sold in the United States or to any U.S. person (as such terms are defined in Regulation S under the Securities Act) the Offered Securities or any security of the same class
or series as the Offered Securities or (ii) has offered or will offer or sell the Offered Securities (A) in the United States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act or (B) with respect to any securities sold in reliance on Rule 903 of Regulation S, by means of any
directed selling efforts within the meaning of Rule 902(c) of Regulation S. The Company has not entered and will not enter into any contractual arrangement with respect to the
distribution of the Offered Securities except for this Agreement. 

        3.    Purchase, Sale and Delivery of Offered Securities.    On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from the
Company, at a purchase price of (i) 97.25% of the principal amount of the 2009 Notes and (ii) 97.25% of the principal amount of the 2012 Notes, plus, in each case, accrued interest from
May 18, 2004 $200,000,000 principal amount of the 2009 Notes and $260,000,000 principal amount of the 2012 Notes. In addition, at the request of the Company, the Initial
Purchaser agrees to pay the Company a credit of $375,000.

        The
Company will deliver against payment of the purchase price the Offered Securities in the form of one or more permanent global Securities in definitive form (the
"Global Securities") deposited with the Trustee as custodian for The Depository Trust Company ("DTC")
and registered in the name of Cede & Co., as nominee for DTC. Interests in any permanent Global Securities will be held only in book-entry form through DTC, except in the limited
circumstances described in the Offering Document. Payment for the Offered Securities shall be made by the Initial Purchaser in Federal (same 

8

 

day)
funds by official check or checks or wire transfer to an account at a bank acceptable to the Initial Purchaser drawn to the order of the Company at the office of Cleary, Gottlieb, Steen &
Hamilton at 10:00 A.M. (New York time), on May 18, 2004, or at such other time and date not later than seven full business days thereafter as the Initial Purchaser and the Company
determine, such time and date being herein referred to as the "Closing Date", against delivery to the Trustee as custodian for DTC of the Global
Securities representing all of the Offered Securities. The Global Securities will be made available for checking at the above office at least 24 hours prior to the Closing Date. 

        4.    Representations by Initial Purchaser; Resale by Initial Purchaser.

        (a)    The
Initial Purchaser acknowledges that the Offered Securities have not been registered under the Securities Act and may not be offered or sold except pursuant to an
exemption from the registration requirements of the Securities Act or as contemplated in the Registration Rights Agreement. The Initial Purchaser represents to and agrees with the Company that it has
offered and sold the Offered Securities, and will offer and sell the Offered Securities, only in accordance with Rule 144A or Rule 903 under the Securities Act or as contemplated in the
Registration Rights Agreement. Accordingly, neither the Initial Purchaser nor its affiliates, or any person acting on its or their behalf, have engaged or will engage in any directed selling efforts
with respect to the Offered Securities, and the Initial Purchaser, its affiliates and all persons acting on its or their behalf have complied and will comply with the offering restrictions requirement
of Regulation S. The Initial Purchaser agrees that, at or prior to confirmation of sale of the Offered Securities, other than a sale pursuant to Rule 144A, the Initial Purchaser will
have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases the Offered Securities from it during the restricted period a confirmation or
notice to substantially the following effect: 

"The
Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the date of the commencement of the offering and the
closing date, except in either case in accordance with Regulation S (or Rule 144 if available) under the Securities Act. Terms used above have the meanings given to them by
Regulation S." 

Terms
used in this subsection (a) have the meanings given to them by Regulation S. 

        (b)    The
Initial Purchaser agrees that it and each of its affiliates has not entered and will not enter into any contractual arrangement with respect to the distribution of
the Offered Securities except with the prior written consent of the Company. 

        (c)    The
Initial Purchaser agrees that it and each of its affiliates will not offer or sell the Offered Securities by means of any form of general solicitation or general
advertising, within the meaning of Rule 502(c) under the Securities Act, including, but not limited to (i) any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.
The Initial Purchaser agrees, with respect to resales made in reliance on Rule 144A of any of the Offered Securities, to deliver either with the confirmation of such resale or otherwise prior
to settlement of such resale a notice to the effect that the resale of such Offered Securities has been made in reliance upon the exemption from the registration requirements of the Securities Act
provided by Rule 144A. 

        (d)    The
Initial Purchaser agrees that it has not offered or sold, and prior to the expiration of a period of six months from the Closing Date, it will not offer or sell any
Offered Securities to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for
the purposes 

9

 

of
their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995. 

        (e)    The
Initial Purchaser has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in
investment activity (within the meaning of section 21 of the Financial Services and Markets Act of 2000 (the "FSMA")) received by it in
connection with the issue or sale of any Offered Securities in circumstances in which section 21(1) of the FSMA does not apply to the Company. 

        (f)    The
Initial Purchaser has complied and will comply with all applicable provisions of the FSMA with respect to anything doe my it in relation to the Offered Securities
in, from or otherwise involving the United Kingdom. 

        5.    Certain Agreements of the Company.    The Company agrees with the Initial Purchaser that: 

        (a)    The
Company will advise the Initial Purchaser promptly of any proposal to amend or supplement the Offering Document and will not effect such amendment or supplementation
without the Initial Purchaser's consent. If, at any time prior to the completion of the resale of the Offered Securities by the Initial Purchaser, any event occurs as a result of which the Offering
Document as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary at any such time to amend or supplement the Offering Document to comply with any applicable law, the Company promptly
will notify the Initial Purchaser of such event and promptly will prepare, at its own expense, an amendment or supplement which will correct such statement or omission or effect such compliance.
Neither the Initial Purchaser's consent to, nor its delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in
Section 6. 

        (b)    The
Company will furnish to the Initial Purchaser copies of the Preliminary Offering Circular, the Offering Circular and all amendments and supplements to such
documents, in each case as soon as available and in such quantities as the Initial Purchaser requests. At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act,
the Company will promptly furnish or cause to be furnished to the Initial Purchaser and, upon request of holders and prospective purchasers of the Offered Securities, to such holders and Initial
Purchasers, copies of the information required to be delivered to holders and prospective purchasers of the Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or any
successor provision thereto) in order to permit compliance with Rule 144A in connection with resales by such holders of the Offered Securities. The Company will pay the expenses of printing and
distributing to the Initial Purchaser all such documents. 

        (c)    The
Company will arrange for the qualification of the Offered Securities for sale and the determination of their eligibility for investment under the laws of such states
in the United States as the Initial Purchaser designates and will continue such qualifications in effect so long as required for the resale of the Offered Securities by the Initial Purchaser provided
that the Company will not be required to qualify as a foreign corporation or to file a general consent to service of process in any such state. 

        (d)    During
the period of two years after the Closing Date, the Company will, upon request, furnish to the Initial Purchaser and any holder of Offered Securities a copy of
the restrictions on transfer applicable to the Offered Securities. 

        (e)    During
the period of two years after the Closing Date, the Company will not, and will not permit any of its affiliates (as defined in Rule 144 under the
Securities Act) to, resell any of the Offered Securities that have been reacquired by any of them. 

10

 

        (f)    During
the period of two years after the Closing Date, the Company will not be or become an open-end investment company, unit investment trust or
face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act. 

        (g)    The
Company will pay all expenses incidental to the performance of its obligations under this Agreement and the Indenture and the Registration Rights Agreement,
including (i) the fees and expenses of the Trustee and its professional advisers; (ii) all expenses in connection with the execution, issue, authentication, packaging and initial
delivery of the Offered Securities and, as applicable, the Exchange Securities (as defined in the Registration Rights Agreement), the preparation and printing of this Agreement, the Registration
Rights Agreement, the Offered Securities, the Indenture, the Offering Document and amendments and supplements thereto, and any other document relating to the issuance, offer, sale and delivery of the
Offered Securities; (iii) the cost of qualifying the Offered Securities for trading in The PortalSM Market ("PORTAL") of The Nasdaq
Stock Market, Inc. and any expenses incidental thereto; (iv) the cost of any advertising approved by the Company in connection with the issue of the Offered Securities; (v) any
expenses (including fees and disbursements of counsel) incurred in connection with qualification of the Offered Securities or the Exchange Securities for sale under the laws of such jurisdictions as
the Initial Purchaser designates and the printing of memoranda relating thereto; (vi) any fees charged by investment rating agencies for the rating of the Offered Securities or the Exchange
Securities; and (vii) expenses incurred in distributing the Preliminary Offering Circular and the Offering Circular (including any amendments and supplements thereto) to the Initial Purchaser. 

        (h)    In
connection with the offering, until the Initial Purchaser shall have notified the Company of the completion of the resale of the Offered Securities, neither the
Company nor any of its affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its affiliates has a beneficial interest any
Offered Securities or attempt to induce any person to purchase any Offered Securities; and neither it nor any of its affiliates will make bids or purchases for the purpose of creating actual, or
apparent, active trading in, or of raising the price of, the Offered Securities. 

        (i)    For
a period beginning on the date hereof and continuing to and including the Closing Date, the Company will not offer, sell, contract to sell, pledge, or otherwise
dispose of, directly or indirectly, any United States dollar-denominated debt securities issued or guaranteed by the Company and having a maturity of more than one year from the date of issue, without
the prior written consent of the Initial Purchaser, or publicly disclose the intention to make any such offer, sale, pledge or disposition. The Company will not at any time offer, sell, contract to
sell, pledge or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale, pledge, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act to cease to be
applicable to the offer and sale of the Offered Securities. 

        (j)    In
connection with the offering, until the Initial Purchaser shall have notified the Company of the completion of the resale of the Offered Securities, neither the
Company nor any "affiliated purchaser" (as defined in Rule 100 of Regulation M under the Exchange Act) has or will, either alone or with one or more other persons, bid for or purchase
for any account in which it or any of its affiliates has a beneficial interest any Offered Securities or any securities which would be considered "reference securities" (as defined in Rule 100
of Regulation M under the Exchange Act) or attempt to induce any person to purchase any Offered Securities or "reference securities". 

        6.    Conditions of the Obligation of the Initial Purchaser.    The obligation of the Initial Purchaser to purchase
and pay for the Offered Securities will be subject to the accuracy of the representations and warranties on the part of the Company herein, to the accuracy of the statements of officers of the 

11

 

Company
made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent: 

        (a)    All
the representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects on the Closing Date with the same
force and effect as if made on and as of the Closing Date. 

        (b)    The
Initial Purchaser shall have received a letter, dated the date of this Agreement, of KPMG LLP confirming that they are independent public accountants within the
meaning of the Securities Act and the Exchange Act and the applicable published rules and regulations thereunder adopted by the Commission and to the effect set forth in Schedule A hereto. 

        (c)    Subsequent
to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development or event involving a prospective
change, in the condition (financial or other), business, properties or results of operations of the Company and the Subsidiaries taken as one enterprise which, in the judgment of the Initial
Purchaser, is material and adverse and makes it impractical or inadvisable to proceed with completion of the offering or the sale of and payment for the Offered Securities; (ii) any downgrading
in the rating of any debt securities or preferred stock of the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the
Securities Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities or preferred stock of the Company (other than an announcement
with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating) or any announcement that the Company has been placed on negative outlook;
(iii) any change in U.S. or international financial, political or economic conditions or
currency exchange rates or exchange controls as would, in the judgment of the Initial Purchaser, be likely to prejudice materially the success of the proposed issue, sale or distribution of the
Offered Securities, whether in the primary market or in respect of dealings in the secondary market; (iv) any material suspension or material limitation of trading in securities generally on
the NYSE or any setting of minimum prices for trading on such exchange; or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter
market; (v) any banking moratorium declared by U.S. Federal or New York authorities; (vi) any major disruption of settlements of securities or clearance services in the United States; or
(vii) any attack on, outbreak or escalation of hostilities or act of terrorism involving the United States, any declaration of war by Congress or any other national or international calamity or
emergency if, in the judgment of the Initial Purchaser, the effect of any such attack, outbreak, escalation, act, declaration, calamity or emergency makes it impractical or inadvisable to proceed with
completion of the offering or sale of and payment for the Offered Securities. 

        (d)    The
Initial Purchaser shall have received an opinion, dated the Closing Date, of Fulbright & Jaworski LLP, counsel for the Company, to the effect set forth in
Schedule B hereto. 

        (e)    The
Initial Purchaser shall have received an opinion, dated the Closing Date, of outside counsel for the Company that the statements in the Preliminary Offering Circular
and the Offering Circular under the captions "Risk Factors—Risks Related to Our Business—The regulatory environment in which we operate may change, making it difficult for us
to maintain our levels of profitability," "—We are subject to extensive regulation under federal and state laws that could result in fines and other penalties" and "—We are
subject to securities laws liability and related civil litigation," "Business—Our Specialist Segment—NYSE and AMEX Rules Governing Our Specialist Activities,"
"Business—Regulatory Matters," and "Business—Legal Proceedings," in the proxy statement filed April 12, 2004 under the heading "Employment Agreements" and in the 2003
Form 10-K under the headings "Business—Our Specialist Segment—NYSE and AMEX Rules Governing Our Specialist Activities," "Business—Regulatory
Matters," "Business—Risk Factors—The regulatory environment in which we operate may change, making it difficult for us to maintain 

12

 

our
levels of profitability," "—We are subject to securities laws liability and related civil litigation," "—Our or our employees' failure to comply with applicable laws and
regulations could result (and have resulted) in substantial fines and other penalties," and "Legal Proceedings," insofar as such statements constitute a summary of the legal matters, documents or
proceedings referred to therein, fairly present in all material respects such legal matters, documents and proceedings. 

        (f)    The
Initial Purchaser shall have received from Cleary, Gottlieb, Steen & Hamilton, counsel for the Initial Purchaser, such opinion or opinions, dated the Closing
Date, as the Initial Purchaser may require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. 

        (g)    The
Initial Purchaser shall have received a certificate, dated the Closing Date, of the President or any Vice President and a principal financial or accounting officer
of the Company in which such officers, to the best of their knowledge after reasonable investigation, shall state that the representations and warranties of the Company in this Agreement are true and
correct, that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date, and that, subsequent to the
date of the most recent financial statements incorporated by reference in the Offering Document there has been no material adverse change, nor any development or event involving a prospective material
adverse change, in the condition (financial or other), business, properties or results of operations of the Company and the Subsidiaries taken as a whole, except as set forth in the Offering Document
or as described in such certificate. 

        (h)    The
Initial Purchaser shall have received a letter, dated the Closing Date, of KPMG LLP which meets the requirements of subsection (a) of this Section, except
that the specified date referred to in such subsection will be a date not more than three days prior to the Closing Date for the purposes of this subsection. 

        (i)    The
Offered Securities shall have been duly listed in PORTAL. 

        (j)    On
the Closing Date, this Agreement, the Indenture and the Registration Rights Agreement, in form and substance satisfactory to the Initial Purchaser, shall have been
duly executed and delivered by the Company and in full force and effect. 

        (k)    At
or prior to the Closing Date, the Company shall have performed or complied in all material respects with the agreements herein contained and required to be performed
or complied with the Company at or prior to the Closing Date. 

        (l)    At
the time of execution of this Agreement and on the Closing Date, no order or decree preventing the use of the Offering Document or any amendment or supplement
thereto, or any order asserting that the transactions contemplated by this Agreement are subject to the registration requirements of the Securities Act, shall have been issued and no proceedings for
those purposes shall have been commenced or shall be pending or, to the knowledge of the Company, threatened. No order suspending the sale of the Offered Securities in any jurisdiction shall have been
issued and no proceedings for that purpose shall have been commenced or shall be pending or, to the knowledge of the Company, threatened. 

The
Company will furnish the Initial Purchaser with such conformed copies of such opinions, certificates, letters and documents as the Initial Purchaser may reasonably request. The Initial Purchaser
may in its sole discretion waive compliance with any conditions to the obligations of the Initial Purchaser hereunder. 

        7.    Indemnification and Contribution.    (a) The Company will indemnify and hold harmless the Initial
Purchaser, its partners, members, directors and officers and each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the Securities Act, against any losses,
claims, damages or liabilities to which the Initial Purchaser may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in 

13

 

respect
thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in, or incorporated by reference thereto, the Offering Document, or any
amendment or supplement thereto, or in, or incorporated by reference thereto, the Preliminary Offering Circular or arise out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, including any losses,
claims, damages or liabilities arising out of or based upon the Company's failure to perform its obligations under Section 5(a) of this Agreement, and will reimburse the Initial Purchaser for
any legal or other expenses reasonably incurred by the Initial Purchaser in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred;  provided,
however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the
Company by the Initial Purchaser specifically for use therein, it being understood and agreed that the only such information consists of the information described as such in subsection
(b) below; provided further, that the foregoing indemnity agreement with respect to any Preliminary Offering Circular shall not inure to the
benefit of the Initial Purchaser to the extent the Initial Purchaser failed to deliver an Offering Circular (but excluding any documents incorporated by reference therein), as then amended or
supplemented (so long as the Offering Circular and any amendment or supplement thereto was provided by the Company to the Initial Purchaser in the requisite quantity and on a timely basis to permit
proper delivery on or prior to the Closing Date), to the person asserting any losses, claims, damages, liabilities or judgments caused by any untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Offering Circular, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements
therein not misleading, if such material misstatement or omission or alleged material misstatement or omission was cured in the Offering Circular, as so amended or supplemented 

        (b)    The
Initial Purchaser will indemnify and hold harmless the Company, its directors and officers and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, against any losses, claims, damages or liabilities to which the Company may become subject, under the Securities Act or the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in, or
incorporated by reference thereto, the Offering Document or any amendment or supplement thereto, or in, or incorporated by reference thereto, the Preliminary Offering Circular or arise out of or are
based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the Company by the Initial Purchaser specifically for use therein, and will reimburse any legal or other
expenses reasonably incurred by the Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and
agreed that the only such information furnished by the Initial Purchaser consists of (i) the following information in the Offering Document: the disclosure concerning
over-allotment, stabilizing, covering transactions and penalty bids appearing in the ninth and tenth paragraphs under the caption "Plan of Distribution"; and  provided, however, that the Initial
Purchaser shall not be liable for any losses, claims, damages or liabilities arising out of or based upon the
Company's failure to perform its obligations under Section 5(a) of this Agreement. 

14

  

        (c)   Promptly
after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof
is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying
party shall not relieve it from any liability that it may have under subsection (a) or (b) above except to the extent that it has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party
otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder
by such indemnified party unless such settlement includes (i) an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and
(ii) does not include a statement as to or an admission of fault, culpability or failure to act by or on behalf of any indemnified party. 

        (d)   If
the indemnification provided for in this Section 7 is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Initial Purchaser on the
other from the offering of the Offered Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Initial Purchaser on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one
hand and the Initial Purchaser on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the
total discounts and commissions received by the Initial Purchaser from the Company under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Initial Purchaser and the parties'
relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), the Initial Purchaser shall not be
required to contribute any amount in excess of the amount by which the total price at which the Offered Securities purchased by it were resold exceeds the 

15

 

amount
of any damages which the Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. 

        (e)   The
obligations of the Company under this Section shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls the Initial Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations of the Initial Purchaser under this Section
shall be in addition to any liability which the Initial Purchaser may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act. 

        8.     Survival of Certain Representations and Obligations.    The respective indemnities, agreements, representations,
warranties and other statements of the Company or its officers and of the Initial Purchaser set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf of the Initial Purchaser, the Company or any of their respective representatives, officers or directors or any controlling
person, and will survive delivery of and payment for the Offered Securities. If for any reason the purchase of the Offered Securities by the Initial Purchaser is not consummated, the Company shall
remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 5 and the respective obligations of the Company and the Initial Purchaser pursuant to Section 7
shall remain in effect. If the purchase of the Offered Securities by the Initial Purchaser is not consummated for any reason other than solely because of the occurrence of any event specified in
clause (iii), (iv), (v), (vii) or (vii) of Section 6(c), the Company will reimburse the Initial Purchaser for all out-of-pocket expenses (including
fees and disbursements of counsel) reasonably incurred by it in connection with the offering of the Offered Securities. 

        9.     Notices.    All communications hereunder will be in writing and, if sent to the Initial Purchaser, will be
mailed, delivered or telegraphed and confirmed to the Initial Purchaser at Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: Transactions Advisory Group, or, if sent to the
Company, will be mailed, delivered or telegraphed and confirmed to it at One Exchange Plaza New York, NY 10006-3008, Attention: Harvey S. Traison. 

        10.   Successors.    This Agreement will inure to the benefit of and be binding upon the parties hereto and their
respective successors and the controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder, except that holders of Offered Securities shall be
entitled to enforce the agreements for their benefit contained in the second and third sentences of Section 5(b) hereof against the Company as if such holders were parties hereto. 

        11.   Counterparts.    This Agreement may be executed in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the same Agreement. 

        12.   Applicable Law.    This Agreement shall be governed by, and construed in accordance with, the laws of the State
of New York without regard to principles of conflicts of laws.

        The
Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding
arising out of or relating to this Agreement or the transactions contemplated hereby. 

16

 

        If
the foregoing is in accordance with the Initial Purchaser's understanding of our agreement, kindly sign and return to the Company one of the counterparts hereof, whereupon it will
become a binding agreement between the Company and the Initial Purchaser in accordance with its terms. 

	 	 	Very truly yours,
	

 	
 	

 	
 	

 	
 	

 
	 	 	LABRANCHE & CO INC.
	

 	
 	

By:	
 	

/s/  HARVEY S. TRAISON      

	 	 	 	 	Name:

Title:	 	Harvey S. Traison

Senior Vice President and Chief Financial Officer
	The foregoing Purchase Agreement is hereby confirmed and accepted as of the date first above written.	 	 	 	 	 	 
	
CREDIT SUISSE FIRST BOSTON LLC	
 	

 	
 	

 	
 	

 

	

By:	
 	

/s/  JOSEPH A. MOLLUSO      
	
 	

 
	 	 	Name:

Title:	 	Joseph A. Molluso

Director	 	 

17

EXHIBIT A  

 
 

Subsidiaries of the Company  
  

LaBranche &
Co. LLC 

LaBranche
Financial Services, Inc. 

LaBranche
Structured Products, LLC 

LaBranche
Structured Products Specialists, LLC 

LaBranche &
Co. B.V. 

LABDR
Services, Inc. 

QuickLinks

PURCHASE AGREEMENT

Subsidiaries of the Company

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