Compass Group Diversified Holdings LLC (Form: 10-Q, Received: 11/08/2010 10:49:25)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMPASS DIVERSIFIED HOLDINGS

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		0-51937 (Commission file number)		57-6218917 (I.R.S. employer identification number)

COMPASS GROUP DIVERSIFIED HOLDINGS LLC

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		0-51938 (Commission file number)		20-3812051 (I.R.S. employer identification number)

Sixty One Wilton Road
Second Floor
Westport, CT 06880
(203) 221-1703
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act


Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

As of November 1, 2010, there were 41,875,000 shares of
Compass Diversified Holdings outstanding.

COMPASS DIVERSIFIED HOLDINGS

QUARTERLY REPORT ON FORM 10-Q
For the period ended September 30, 2010

TABLE OF CONTENTS


	Page
	Number
Forward-looking Statements		4
Part I Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009		5
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2010 and 2009 (unaudited)		6
Condensed Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2010 (unaudited)		7
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009 (unaudited)		8
Notes to Condensed Consolidated Financial Statements (unaudited)		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3. Quantitative and Qualitative Disclosures About Market Risk		48
Item 4. Controls and Procedures		48

Part II Other Information
Item 1. Legal Proceedings		49
Item 1A. Risk Factors		49
Item 6. Exhibits		50
Signatures		51
Exhibit Index		53
EX-3.1
EX-3.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

NOTE TO READER

In reading this Quarterly Report on Form 10-Q, references to:

	•		the “Trust” and “Holdings” refer to Compass Diversified Holdings;

	•		“businesses”, “operating segments”, “subsidiaries” and “reporting units” refer to, collectively, the businesses controlled by the Company;

	•		the “Company” refer to Compass Group Diversified Holdings LLC;

	•		the “Manager” refer to Compass Group Management LLC (“CGM”);

	•		the “initial businesses” refer to, collectively, CBS Personnel Holdings, Inc. (doing business as Staffmark) (“Staffmark”), Crosman Acquisition Corporation, Compass AC Holdings, Inc. and Silvue Technologies Group, Inc.;

	•		“Tridien Medical” refers to Anodyne Medical Device, Inc. doing business and known as Tridien Medical.

	•		the “Trust Agreement” refer to the amended and restated Trust Agreement of the Trust dated as of December 21, 2007;

	•		the “Credit Agreement” refer to the Credit Agreement with a group of lenders led by Madison Capital, LLC which provides for a Revolving Credit Facility and a Term Loan Facility;

	•		the “Revolving Credit Facility” refer to the $340 million Revolving Credit Facility provided by the Credit Agreement that matures in December 2012;

	•		the “Term Loan Facility” refer to the $74.5 million Term Loan Facility, as of September 30, 2010, provided by the Credit Agreement that matures in December 2013;

	•		the “LLC Agreement” refer to the second amended and restated operating agreement of the Company dated as of January 9, 2007; and

	•		“we”, “us” and “our” refer to the Trust, the Company and the businesses together.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, contains both historical and forward-looking statements. We may, in some cases, use words such as “project,” “predict,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “potentially,” or “may,” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q are subject to a number of risks and uncertainties, some of which are beyond our control, including, among other things:

	•		our ability to successfully operate our businesses on a combined basis, and to effectively integrate and improve future acquisitions;

	•		our ability to remove CGM and CGM’s right to resign;

	•		our organizational structure, which may limit our ability to meet our dividend and distribution policy;

	•		our ability to service and comply with the terms of our indebtedness;

	•		our cash flow available for distribution and reinvestment and our ability to make distributions in the future to our shareholders;

	•		our ability to pay the management fee, profit allocation when due and to pay the supplemental put price if and when due;

	•		our ability to make and finance future acquisitions;

	•		our ability to implement our acquisition and management strategies;

	•		the regulatory environment in which our businesses operate;

	•		trends in the industries in which our businesses operate;

	•		changes in general economic or business conditions or economic or demographic trends in the United States and other countries in which we have a presence, including changes in interest rates and inflation;

	•		environmental risks affecting the business or operations of our businesses;

	•		our and CGM’s ability to retain or replace qualified employees of our businesses and CGM;

	•		costs and effects of legal and administrative proceedings, settlements, investigations and claims; and

	•		extraordinary or force majeure events affecting the business or operations of our businesses.

Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which we are not currently aware or which we currently deem immaterial could also cause our actual results to differ.

In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements. The forward-looking events discussed in this Quarterly Report on Form 10-Q may not occur. These forward-looking statements are made as of the date of this Quarterly Report. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances, whether as a result of new information, future events or otherwise, except as required by law.

PART I
FINANCIAL INFORMATION

ITEM 1. — FINANCIAL STATEMENTS

Compass Diversified Holdings

Condensed Consolidated Balance Sheets


	September 30,			December 31,
(in thousands )	2010			2009
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	24,468		$	31,495
Accounts receivable, less allowances of $4,781 at September 30, 2010 and $5,409 at December 31, 2009		233,010			165,550
Inventories		86,599			51,727
Prepaid expenses and other current assets		29,381			26,255

Total current assets		373,458			275,027
Property, plant and equipment, net		32,177			25,502
Goodwill		320,264			288,028
Intangible assets, net		280,219			216,365
Deferred debt issuance costs, less accumulated amortization of $6,422 at September 30, 2010 and $5,093 at December 31, 2009		4,294			5,326
Other non-current assets		17,337			20,764

Total assets	$	1,027,749		$	831,012


Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	65,950		$	45,089
Accrued expenses		95,187			54,306
Due to related party		3,763			3,300
Current portion, long-term debt		2,000			2,500
Current portion of workers’ compensation liability		20,844			22,126
Other current liabilities		1,983			2,566

Total current liabilities		189,727			129,887
Supplemental put obligation		30,712			12,082
Deferred income taxes		73,943			60,397
Long-term debt		173,800			74,000
Workers’ compensation liability		37,315			38,913
Other non-current liabilities		4,306			7,667

Total liabilities		509,803			322,946

Stockholders’ equity
Trust shares, no par value, 500,000 authorized; 41,875 shares issued and outstanding at September 30, 2010 and 36,625 shares issued and outstanding at December 31, 2009		560,767			485,790
Accumulated other comprehensive loss		(674	)		(2,001	)
Accumulated deficit		(135,044	)		(46,628	)

Total stockholders’ equity attributable to Holdings		425,049			437,161
Noncontrolling interest		92,897			70,905

Total stockholders’ equity		517,946			508,066

Total liabilities and stockholders’ equity	$	1,027,749		$	831,012

See notes to condensed consolidated financial statements.

Compass Diversified Holdings

Condensed Consolidated Statements of Operations
(unaudited)


	Three months ended September 30,						Nine months ended September 30,
(in thousands, except per share data)	2010			2009			2010			2009
Net sales	$	189,433		$	130,955		$	478,620		$	361,045
Service revenues		271,334			193,284			740,088			525,636

Total revenues		460,767			324,239			1,218,708			886,681
Cost of sales		131,178			89,544			328,701			248,617
Cost of services		230,058			163,631			633,758			445,225

Gross profit		99,531			71,064			256,249			192,839

Operating expenses:
Staffing expense		21,089			17,665			60,996			56,144
Selling, general and administrative expense		44,101			36,099			129,037			108,093
Supplemental put expense (reversal)		1,639			(101	)		18,630			(8,518	)
Management fees		4,010			3,331			11,383			9,825
Amortization expense		7,469			6,168			21,069			18,614
Impairment expense		42,435			—			42,435			59,800

Operating income (loss)		(21,212	)		7,902			(27,301	)		(51,119	)

Other income (expense):
Interest income		1			34			18			111
Interest expense		(2,926	)		(2,681	)		(8,487	)		(8,918	)
Amortization of debt issuance costs		(493	)		(433	)		(1,329	)		(1,343	)
Loss on debt extinguishment		—			—			—			(3,652	)
Other income (expense), net		361			96			752			(594	)

Income (loss) before income taxes		(24,269	)		4,918			(36,347	)		(65,515	)
Provision (benefit) for income taxes		5,148			2,130			9,100			(25,920	)

Net income (loss)		(29,417	)		2,788			(45,447	)		(39,595	)
Net income (loss) attributable to noncontrolling interest		642			687			2,041			(15,005	)

Net income (loss) attributable to Holdings	$	(30,059	)	$	2,101		$	(47,488	)	$	(24,590	)


Basic and fully diluted income (loss) per share attributable to Holdings	$	(0.72	)	$	0.06		$	(1.19	)	$	(0.73	)


Weighted average number of shares of trust stock outstanding – basic and fully diluted		41,875			36,625			39,852			33,655


Cash distributions declared per share	$	0.34		$	0.34		$	1.02		$	1.02

See notes to condensed consolidated financial statements.

Compass Diversified Holdings

Condensed Consolidated Statement of Stockholders’ Equity
(unaudited)


											Total
								Accumulated			Stockholders’
								Other			Equity			Non-		Total
	Number of				Accumulated			Comprehensive			Attributable			Controlling		Stockholders’
(in thousands)	Shares		Amount		Deficit			Loss			to Holdings			Interest		Equity
Balance — December 31, 2009		36,625	$	485,790	$	(46,628	)	$	(2,001	)	$	437,161		$	70,905	$	508,066
Net loss		—		—		(47,488	)		—			(47,488	)		2,041		(45,447	)
Other comprehensive income – cash flow hedge gain		—		—		—			1,327			1,327			—		1,327

Comprehensive loss		—		—		(47,488	)		1,327			(46,161	)		2,041		(44,120	)
Issuance of Trust shares, net of offering costs		5,250		74,977		—			—			74,977			—		74,977
Contributions from noncontrolling interest holders		—		—		—			—			—			9,485		9,485
Option activity attributable to noncontrolling interest holders		—		—		—			—			—			5,772		5,772
Noncontrolling interest impact of ACI loan forgiveness (see Note N)		—		—		—			—			—			4,694		4,694
Distributions paid		—		—		(40,928	)		—			(40,928	)		—		(40,928	)

Balance — September 30, 2010		41,875	$	560,767	$	(135,044	)	$	(674	)	$	425,049		$	92,897	$	517,946

See notes to condensed consolidated financial statements.

Compass Diversified Holdings

Condensed Consolidated Statements of Cash Flows
(unaudited)


	Nine months ended September 30,
(in thousands)	2010			2009
Cash flows from operating activities:
Net loss	$	(45,447	)	$	(39,595	)

Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation expense		6,328			6,375
Amortization expense		21,656			18,614
Impairment expense		42,435			59,800
Amortization of debt issuance costs		1,329			1,343
Loss on debt extinguishment		—			3,652
Supplemental put expense (reversal)		18,630			(8,518	)
Noncontrolling stockholder charges and other		8,209			1,378
Deferred taxes		(5,115	)		(28,107	)
Other		245			(254	)
Changes in operating assets and liabilities, net of acquisition:
Decrease (increase) in accounts receivable		(44,692	)		6,054
Increase in inventories		(18,983	)		(2,413	)
Increase in prepaid expenses and other current assets		(3,793	)		(2,757	)
Increase in accounts payable and accrued expenses		48,025			5,862

Net cash provided by operating activities		28,827			21,434


Cash flows from investing activities:
Acquisition of businesses, net of cash acquired		(173,689	)		(1,435	)
Purchases of property and equipment		(4,703	)		(2,365	)
Other investing activities		7			185

Net cash used in investing activities		(178,385	)		(3,615	)


Cash flows from financing activities:
Proceeds from the issuance of Trust shares, net		74,977			42,085
Borrowings under Credit Agreement		187,300			2,000
Repayments under Credit Agreement		(88,000	)		(78,000	)
Distributions paid		(40,928	)		(33,889	)
Swap termination fee		—			(2,517	)
Net proceeds provided by noncontrolling interest		9,485			2,450
Debt issuance costs		(259	)		—
Other		(44	)		(424	)

Net cash provided by (used in) financing activities		142,531			(68,295	)

Net decrease in cash and cash equivalents		(7,027	)		(50,476	)
Cash and cash equivalents — beginning of period		31,495			97,473

Cash and cash equivalents — end of period	$	24,468		$	46,997

See notes to condensed consolidated financial statements.

Compass Diversified Holdings

Notes to Condensed Consolidated Financial Statements (unaudited)
September 30, 2010

Note A — Organization and business operations

Compass Diversified Holdings, a Delaware statutory trust (“Holdings”), was organized in Delaware on November 18, 2005. Compass Group Diversified Holdings, LLC, a Delaware limited liability company (the “Company”), was also formed on November 18, 2005. Compass Group Management LLC, a Delaware limited liability company (“CGM” or the “Manager”), was the sole owner of 100% of the Interests of the Company as defined in the Company’s operating agreement, dated as of November 18, 2005, which were subsequently reclassified as the “Allocation Interests” pursuant to the Company’s amended and restated operating agreement, dated as of April 25, 2006 (as amended and restated, the “LLC Agreement”).

Note B — Presentation and principles of consolidation

The condensed consolidated financial statements for the three-month and nine-month periods ended September 30, 2010 and September 30, 2009, are unaudited, and in the opinion of management, contain all adjustments necessary for a fair presentation of the condensed consolidated financial statements. Such adjustments consist solely of normal recurring items. Interim results are not necessarily indicative of results for a full year or any subsequent interim period. The condensed consolidated financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. G.A.A.P.”) and presented as permitted by Form 10-Q and do not contain certain information included in the annual consolidated financial statements and accompanying notes of the Company. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

Seasonality

Earnings of certain of the Company’s operating segments are seasonal. Earnings from AFM Holdings Corporation (“AFM” or “American Furniture”) are typically highest in the months of January through April of each year, coinciding with homeowners’ tax refunds. Earnings from CBS Personnel Holdings, Inc. (“Staffmark”) are typically lower in the first quarter of each year than in other quarters due to reduced seasonal demand for temporary staffing services and to lower gross margins during that period associated with the front-end loading of certain payroll taxes and other payments associated with payroll paid to our employees. Earnings from HALO Lee Wayne LLC (“HALO”) are typically highest in the months of September through December of each year primarily as the result of calendar sales and holiday promotions. HALO generates over two-thirds of its operating income in the months of September through December.

Consolidation

The condensed consolidated financial statements include the accounts of Holdings and all majority owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Note C —Recent accounting pronouncements

In March 2010, the Emerging Issues Task Force (“EITF”) reached a consensus related to guidance when applying the milestone method of revenue recognition. The consensus was issued by the Financial Accounting Standards Board (“FASB”) as an update to authoritative guidance for revenue recognition and will be effective beginning on January 1, 2011. The amended guidance provides criteria for identifying those deliverables in an arrangement that meet the definition of a milestone. In addition, the amended guidance includes enhanced quantitative and qualitative disclosure about the arrangements when an entity recognizes revenue using the milestone method. The Company does not expect the adoption of this guidance will have a significant impact on the condensed consolidated financial statements.

In February 2010, the FASB issued amended guidance for subsequent events, which was effective for the Company in February 2010. In accordance with the revised guidance, an SEC filer no longer will be required to disclose the date through which subsequent events have been evaluated in issued and revised financial statements. The adoption of the revised guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In January 2010, the FASB issued amended guidance to enhance disclosure requirements related to fair value measurements. The amended guidance for Level 1 and Level 2 fair value measurements was effective for the Company on January 1, 2010. The amended guidance for Level 3 fair value measurements will be effective for the Company January 1, 2011. The guidance requires disclosures of amounts and reasons for transfers in and out of Level 1 and Level 2 recurring fair value measurements

as well as additional information related to activities in the reconciliation of Level 3 fair value measurements. The guidance expanded the disclosures related to the level of disaggregation of assets and liabilities and information about inputs and valuation techniques. The adoption of the guidance for Level 1 and Level 2 fair value measurements did not have a material impact on the Company’s condensed consolidated financial statements. The Company does not expect the adoption of the guidance related to Level 3 fair value measurements will have a significant impact on the condensed consolidated financial statements.

In January 2010, the FASB issued amended authoritative guidance related to consolidations when there is a decrease in ownership. The guidance was effective for the Company on January 1, 2010. Specifically, the amendment clarifies the scope of the existing guidance and increases the disclosure requirements when a subsidiary is deconsolidated or when a group of assets is de-recognized. The adoption of the amended guidance did not have a significant impact on the Company’s condensed consolidated financial statements.

Note D — Acquisition of businesses

Acquisition of The ERGO Baby Carrier, Inc

On September 16, 2010, ERGO Baby Intermediate Holding Corporation (“ERGO Holding”), a subsidiary of the Company, entered into a stock purchase agreement with The ERGO Baby Carrier, Inc. (“ERGObaby”), and certain management stockholders pursuant to which ERGO Holding acquired all of the issued and outstanding capital stock of ERGObaby. Based in Pukalani, Hawaii (Maui) and founded in 2003, ERGObaby is a premier designer, marketer and distributor of babywearing products and accessories. ERGObaby’s reputation for product innovation, reliability and safety has led to numerous awards and accolades from consumer surveys and publications. ERGObaby offers a broad range of wearable baby carriers and related products that are sold through more than 800 retailers and web shops in the United States and internationally in approximately 20 countries.

The Company made loans to and purchased a controlling interest in ERGObaby for approximately $85.2 million (excluding acquisition-related costs), representing approximately 84% of the outstanding common stock of ERGObaby on a primary and fully diluted basis. ERGObaby’s management and certain other investors invested in the transaction alongside the Company collectively representing approximately 16% initial noncontrolling interest on a primary and fully diluted basis. In the event ERGObaby’s net sales, as determined on a consolidated basis in accordance with United States generally accepted accounting principles, for the fiscal year ending 2011 are equal to or greater than a contractually agreed upon fixed amount, the sellers would be entitled to an additional cash payment of $2.0 million. If the sellers do not reach this sales goal for 2011, the sellers would not be entitled to any payment. The fair value of this contingent consideration was $0.2 million as of the acquisition date and was valued assuming a 10% probability of achieving the agreed upon sales goal, discounted to present value utilizing a discounted cash flow model. Acquisition-related costs were approximately $2.0 million and were recorded in selling, general and administrative expense on the accompanying condensed consolidated statement of operations. CGM acted as an advisor to the Company in the transaction and received fees and expense payments totaling approximately $0.9 million.

The results of operations of ERGObaby have been included in the consolidated results of operations since the date of acquisition. ERGObaby’s results of operations are reported as a separate operating segment.

The table below includes the provisional recording of assets and liabilities assumed as of the acquisition date. The amounts recorded for inventory, intangible assets and goodwill are preliminary pending finalization of valuation efforts.


	Amounts
	Recognized as
ERGO	of Acquisition
(in thousands)	Date
*Assets:*
Cash	$	1,828
Accounts receivable, net (1)		1,489
Inventory (2)		8,250
Other current assets		829
Property, plant and equipment		181
Intangible assets		49,055
Goodwill (3)		33,312
Other assets		1,888

Total assets	$	96,832

*Liabilities:*
Current liabilities	$	4,517
Other liabilities		48,360
Noncontrolling interest		7,400

Total liabilities and noncontrolling interest	$	60,277

Costs of net assets acquired	$	36,555
Loans to businesses		48,683

	$	85,238


(1)		Includes $1.6 million of gross contractual accounts receivable, of which $0.2 million was not expected to be collected. The fair value of accounts receivable approximated book value acquired.

(2)		Includes $4.3 million of inventory fair value step up.

(3)		The portion of goodwill deductible for tax purposes is approximately $32.5 million.

The intangible assets preliminarily recorded in connection with the ERGObaby acquisition are as follows ( in thousands ):


			Estimated
Intangible assets	Amount		Useful Life
Trade name	$	26,155	Indefinite
Customer relationships		21,310		15
Non-compete agreements		1,360		5
Technology		230		10

	$	49,055

Acquisition of Liberty Safe and Security Products, Inc

On March 31, 2010, Liberty Safe Holding Corporation (“Liberty Holding”), a subsidiary of the Company, entered into a stock purchase agreement with Liberty Safe and Security Products, LLC (“Liberty Safe” or “Liberty”) and certain management stockholders pursuant to which Liberty Holding acquired all of the issued and outstanding capital stock of Liberty Safe. Based in Payson, Utah and founded in 1988, Liberty Safe is the premier designer, manufacturer and marketer of home and gun safes in North America. From its 200,000 square foot manufacturing facility, Liberty produces a wide range of home and gun safe models in a broad assortment of sizes, features and styles. Products are marketed under the Liberty brand, as well as a portfolio of licensed and private label brands, including Remington, Cabela’s and John Deere.

The Company made loans to and purchased a controlling interest in Liberty for approximately $70.2 million (excluding acquisition-related costs), representing approximately 96% of the outstanding common stock of Liberty on a primary basis and approximately 88% on a fully diluted basis. Liberty’s management and certain other investors invested in the transaction alongside the Company collectively representing approximately 4% initial noncontrolling interest on a primary basis and approximately 12% on a fully diluted basis. In addition, the Company issued put options to certain noncontrolling shareholders providing them an option to sell their ownership in the future at the then fair value (see Note I for further discussion). Acquisition-related costs were approximately $1.5 million and were recorded in selling, general and

administrative expense on the accompanying condensed consolidated statement of operations. CGM acted as an advisor to the Company in the transaction and received fees and expense payments totaling approximately $0.7 million.

The results of operations of Liberty have been included in the consolidated results of operations since the date of acquisition. Liberty’s results of operations are reported as a separate operating segment.

The table below includes the provisional recording of assets and liabilities assumed as of the acquisition date. The amounts recorded for inventory, property, plant and equipment, intangible assets and goodwill are preliminary pending finalization of valuation efforts.


	Amounts
	Recognized as
Liberty	of Acquisition
(in thousands)	Date
*Assets:*
Cash	$	2,438
Accounts receivable, net (1)		10,109
Inventory		7,435
Other current assets		1,552
Property, plant and equipment		5,991
Intangible assets		27,756
Goodwill (2)		33,075
Other assets		1,935

Total assets	$	90,291

*Liabilities:*
Current liabilities	$	7,125
Other liabilities		55,884
Noncontrolling interest		1,085

Total liabilities and noncontrolling interest	$	64,094

Costs of net assets acquired	$	26,197
Loans to businesses		44,059

	$	70,256


(1)		Includes $10.5 million of gross contractual accounts receivable, of which $0.4 million was not expected to be collected. The fair value of accounts receivable approximated book value acquired.

(2)		Goodwill is not deductible for tax purposes.

The intangible assets preliminarily recorded in connection with the Liberty acquisition are as follows ( in thousands ):


			Estimated
Intangible assets	Amount		Useful Life
Customer relationships	$	13,590		5
Technology		6,690		7
License agreements		3,300		3
Trade name		3,020	Indefinite
Non-compete agreements		640		5
Training documents		516		2

	$	27,756

Acquisition of Circuit Express, Inc

On March 11, 2010, the Company’s subsidiary, Compass AC Holdings, Inc. (“ACI” or “Advanced Circuits”), completed the acquisition of Circuit Express, Inc. (“Circuit Express”), a manufacturer of rigid printed circuit boards, primarily for aerospace and defense related customers, for approximately $16.1 million. The acquisition included three manufacturing facilities, totaling 35,000 square feet of production space, in Tempe, Arizona. Goodwill of $6.9 million was recorded in connection with this acquisition and is not tax deductible. In addition to goodwill, ACI recorded $7.6 million related to customer relationships with an estimated useful life of 9 years, $0.8 million related to a trade name with an estimated useful life of 10 years and $0.3 million related to a non-compete agreement with an estimated useful life of 5 years. Further, ACI recorded approximately $2.4 million in property, plant and equipment, approximately $1.7 million in gross accounts receivable and approximately $0.2 million in other working capital items.

This acquisition expands ACI’s capabilities and provides immediate access to manufacturing capabilities of more advanced higher tech PCBs, as well as the ability to provide manufacturing services to the U.S. military and defense related accounts.

Other acquisition

On February 25, 2010, the Company’s subsidiary HALO completed an acquisition of Relay Gear, Inc. for approximately $0.5 million. In connection with this acquisition, goodwill and intangible assets were recorded. The intangible assets primarily relate to customer relationships with an estimated useful life of 15 years. This acquisition was not material to the Company’s balance sheet, results of operations or cash flows.

Unaudited pro forma information

The following unaudited pro forma data for the nine months ended September 30, 2010 and 2009 gives effect to the acquisitions of ERGObaby, Liberty and Circuit Express, as described above, as if the acquisitions had been completed as of January 1, 2009. The pro forma data gives effect to historical operating results with adjustments to interest expense, amortization and depreciation expense, management fees and related tax effects. The information is provided for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred if the transactions had been consummated on the date indicated, nor is it necessarily indicative of future operating results of the consolidated companies, and should not be construed as representing results for any future period.


	Nine months ended September 30,
(in thousands)	2010			2009
Net sales	$	1,259,799		$	971,719
Operating loss		(19,270	)		(42,937	)
Net loss		(42,835	)		(37,467	)

Note E – Operating segment data

At September 30, 2010, the Company had eight reportable operating segments. Each operating segment represents an acquisition. The Company’s operating segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies. A description of each of the reportable segments and the types of products and services from which each segment derives its revenues is as follows:

	•		ACI, an electronic components manufacturing company, is a provider of prototype, quick-turn and production rigid printed circuit boards. ACI manufactures and delivers custom printed circuit boards to customers mainly in North America. ACI is headquartered in Aurora, Colorado.

	•		AFM is a leading domestic manufacturer of upholstered furniture for the promotional segment of the marketplace. AFM offers a broad product line of stationary and motion furniture, including sofas, loveseats, sectionals, recliners and complementary products, sold primarily at retail price points ranging between $199 and $699. AFM is a low-cost manufacturer and is able to ship any product in its line within 48 hours of receiving an order. AFM is headquartered in Ecru, Mississippi and its products are sold in the United States.

	•		ERGObaby is a premier designer, marketer and distributor of babywearing products and accessories. ERGObaby’s reputation for product innovation, reliability and safety has led to numerous awards and accolades from consumer surveys and publications. ERGObaby offers a broad range of wearable baby carriers and related products that are sold through more than 800 retailers and web shops in the United States and internationally. ERGObaby is headquartered in Pukalani, Hawaii (Maui).

	•		Fox Factory, Inc. (“Fox”) is a designer, manufacturer and marketer of high end suspension products for mountain bikes, all-terrain vehicles, snowmobiles and other off-road vehicles. Fox acts as both a tier one supplier to leading action sport original equipment manufacturers and provides after-market products to retailers and distributors. Fox is headquartered in Watsonville, California and its products are sold worldwide.

	•		HALO serves as a one-stop shop for over 35,000 customers providing design, sourcing, and management and fulfillment services across all categories of its customer promotional product needs. HALO has established itself as a leader in the promotional products and marketing industry through its focus on service through its approximately 700 account executives. HALO is headquartered in Sterling, Illinois.

	•		Liberty Safe is a designer, manufacturer and marketer of premium home and gun safes in North America. From it’s over 200,000 square foot manufacturing facility, Liberty produces a wide range of home and gun safe models in a broad assortment of sizes, features and styles. Liberty is headquartered in Payson, Utah.

	•		Staffmark, a human resources outsourcing firm, is a provider of temporary staffing services in the United States. Staffmark serves approximately 6,400 corporate and small business clients. Staffmark also offers employee leasing services, permanent staffing and temporary-to-permanent placement services. Staffmark is headquartered in Cincinnati, Ohio.

	•		Tridien Medical (“Tridien”) is a leading designer and manufacturer of powered and non-powered medical therapeutic support surfaces and patient positioning devices serving the acute care, long-term care and home health care markets. Tridien is headquartered in Coral Springs, Florida and its products are sold primarily in North America.

The tabular information that follows shows data of each of the operating segments reconciled to amounts reflected in the condensed consolidated financial statements. The operations of each of the operating segments are included in consolidated operating results as of their date of acquisition. Revenues from geographic locations outside the United States were not material for any operating segment, except Fox, in each of the years presented below. Fox recorded net sales to locations outside the United States, principally Asia, of $42.4 million and $26.0 million for the three months ended September 30, 2010 and 2009, respectively, and $84.8 million and $60.3 million for the nine months ended September 30, 2010 and 2009, respectively. There were no significant inter-segment transactions.

Segment profit is determined based on internal performance measures used by the Chief Executive Officer to assess the performance of each business. Segment profit excludes acquisition related charges not pushed down to the segments which are reflected in Corporate and other.

A disaggregation of the Company’s consolidated revenue and other financial data for the three and nine months ended September 30, 2010 and 2009, respectively, is presented below (in thousands) :


	Three Months Ended September 30,				Nine Months Ended September 30,
*Net sales of operating segments*	2010		2009		2010		2009
ACI	$	20,173	$	11,593	$	54,039	$	34,356
American Furniture		32,104		33,039		109,392		108,623
ERGO		1,469		—		1,469		—
Fox		61,357		36,910		128,747		86,870
Halo		41,128		35,545		106,109		91,717
Liberty		18,475		—		32,054		—
Staffmark		271,333		193,284		740,089		525,636
Tridien		14,728		13,868		46,809		39,479

Total		460,767		324,239		1,218,708		886,681
Reconciliation of segment revenues to consolidated revenues:
Corporate and other		—		—		—		—

Total consolidated revenues	$	460,767	$	324,239	$	1,218,708	$	886,681

Profit of operating segments ⁽¹⁾


	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
ACI	$	6,498		$	3,576		$	13,700		$	11,600
American Furniture (2)		(42,696	)		1,220			(38,798	)		5,379
ERGO (3)		(2,007	)		—			(2,007	)		—
Fox		10,424			4,731			16,300			5,907
Halo		1,335			722			798			(1,395	)
Liberty (4)		375			—			(1,244	)		—
Staffmark(5)		10,630			1,001			16,041			(58,929	)
Tridien		2,150			2,108			7,786			4,979

Total		(13,291	)		13,358			12,576			(32,459	)

Reconciliation of segment profit to consolidated Income (loss) before income taxes:

Interest expense, net		(2,925	)		(2,647	)		(8,469	)		(8,807	)
Other income (expense)		361			96			752			(594	)
Corporate and other (6)		(8,414	)		(5,889	)		(41,206	)		(23,655	)

Total consolidated income (loss) before income taxes	$	(24,269	)	$	4,918		$	(36,347	)	$	(65,515	)


(1)		Segment profit (loss) represents operating income (loss).

(2)		Includes $42.4 million of goodwill and intangible asset impairment charges during the three and nine months ended September 30, 2010. See Note G.

(3)		The three and nine months ended September 30, 2010 results include $2.0 million of acquisition-related costs incurred in connection with the acquisition of ERGObaby.

(4)		The nine months ended September 30, 2010 results include $1.5 million of acquisition-related costs incurred in connection with the acquisition of Liberty.

(5)		Includes $50.0 million of goodwill impairment charges during the nine months ended September 30, 2009.

(6)		Includes fair value adjustments related to the supplemental put liability and the call option of a noncontrolling shareholder. See Note I.


	Accounts			Accounts
	Receivable			Receivable
*Accounts receivable*	September 30, 2010			December 31, 2009
ACI	$	5,701		$	2,762
American Furniture		15,516			12,032
ERGO		1,859			—
Fox		31,061			15,590
Halo		27,038			25,103
Liberty		13,067			—
Staffmark		137,154			106,394
Tridien		6,395			9,078

Total		237,791			170,959
Reconciliation of segment to consolidated totals:

Corporate and other		—			—

Total		237,791			170,959

Allowance for doubtful accounts		(4,781	)		(5,409	)

Total consolidated net accounts receivable	$	233,010		$	165,550


									Depreciation and				Depreciation and
									Amortization Expense				Amortization Expense
					Identifiable		Identifiable		for the Three Months				for the Nine Months
	Goodwill		Goodwill		Assets		Assets		Ended Sept. 30,				Ended Sept. 30,
	Sept. 30, 2010		Dec. 31, 2009		Sept. 30, 2010 ⁽¹⁾		Dec. 31, 2009 ⁽¹⁾		2010		2009		2010		2009
*Goodwill and identifiable assets of operating segments*
ACI	$	57,655	$	50,716	$	30,430	$	19,252	$	1,119	$	958	$	3,170	$	2,848
American Furniture (3)		—		41,435		64,845		63,123		780		913		2,344		2,873
ERGO		33,312		—		61,881		—		659		—		659		—
Fox		31,372		31,372		84,132		73,714		1,540		1,627		4,600		4,876
Halo		39,252		39,060		47,138		43,647		798		845		2,425		2,539
Liberty		33,228		—		42,053		—		1,592		—		3,197		—
Staffmark		89,715		89,715		73,312		85,230		1,855		1,940		5,621		5,960
Tridien		19,555		19,555		19,823		20,584		616		654		1,844		2,011

Total		304,089		271,853		423,614		305,550		8,959		6,937		23,860		21,107

Reconciliation of segment to consolidated total:

Corporate and other identifiable assets		—		—		50,861		71,884		1,295		1,293		4,124		3,882
Amortization of debt issuance costs		—		—		—		—		493		433		1,329		1,343
Goodwill carried at Corporate level ⁽²⁾		16,175		16,175		—		—		—		—		—		—

Total	$	320,264	$	288,028	$	474,475	$	377,434	$	10,747	$	8,663	$	29,313	$	26,332


(1)		Does not include accounts receivable balances per schedule above.

(2)		Represents goodwill resulting from purchase accounting adjustments not “pushed down” to the segments. This amount is allocated back to the respective segments for purposes of goodwill impairment testing.

(3)		Refer to Note G for discussion regarding American Furniture’s goodwill impairment recorded during the three and nine months ended September 30, 2010.

Note F — Property, plant and equipment and inventory

Property, plant and equipment is comprised of the following at September 30, 2010 and December 31, 2009 (in thousands) :


	September 30,			December 31,
	2010			2009
Machinery, equipment and software	$	30,654		$	23,842
Office furniture and equipment		13,110			8,837
Leasehold improvements		7,647			6,182

		51,411			38,861
Less: accumulated depreciation		(19,234	)		(13,359	)

Total	$	32,177		$	25,502

Depreciation expense was $2.2 million and $6.3 million for the three and nine months ended September 30, 2010, respectively, and $2.1 million and $6.4 million for the three and nine months ended September 30, 2009, respectively.

Inventory is comprised of the following at September 30, 2010 and December 31, 2009 (in thousands) :


	September 30,			December 31,
	2010			2009
Raw materials and supplies	$	52,147		$	34,764
Finished goods		36,149			18,003
Less: obsolescence reserve		(1,697	)		(1,040	)

Total	$	86,599		$	51,727

Note G — Goodwill and other intangible assets

The Company completed its analysis of the 2010 annual goodwill impairment testing in accordance with guidelines issued by the FASB as of March 31, 2010. For each reporting unit, the analysis indicated that the fair value of the reporting unit exceeded its carrying value and as a result the carrying value of goodwill was not impaired as of March 31, 2010.

The Company determined fair values for each of its reporting units using both the income and market approach. For purposes of the income approach, fair value was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The Company used its internal forecasts to estimate future cash flows and included an estimate of long-term future growth rates based on its most recent views of the long-term outlook for each business. Discount rates were derived by applying market derived inputs and analyzing published rates for industries comparable to the Company’s reporting units. The Company used discount rates that are commensurate with the risks and uncertainty inherent in the financial markets generally and in the internally developed forecasts. Discount rates used in these reporting unit valuations ranged from approximately 15% to 16%. Valuations using the market approach reflect prices and other relevant observable information generated by market transactions involving businesses comparable to the Company’s reporting units. The Company assesses the valuation methodology under the market approach based upon the relevance and availability of data at the time of performing the valuation and weighs the methodologies appropriately.

Interim goodwill impairment

The Company tests goodwill at interim dates if events or circumstances indicate that goodwill might be impaired at any of the reporting units. As a result, the Company conducted an interim test for impairment at American Furniture based on results of operations which had deteriorated significantly during the second and third quarter of 2010. The domestic economy has undergone a significant period of economic uncertainty which has resulted in limited access to credit markets and lower consumer spending. The retail furniture market has been, and continues to be, severely impacted by these conditions, particularly as it relates to the housing market. Retail furniture sales rely heavily on consumer spending for new furniture when they move into a new home. The uptick in sales and results of operations that the Company anticipated at the beginning of this year, which it believed would coincide with the overall modest economic rebound has not occurred in the furniture industry and the Company does not at this time believe it will occur in the near future. Accordingly, the Company adjusted its forecast for American Furniture to reflect a revised outlook assuming continued pressure on sales and gross margins in the furniture industry. The revised forecast, which is used to populate a discounted cash flow analysis, led to the conclusion that it was more likely than not that the fair value of American Furniture is below its carrying amount. Based on the preliminary results of the second step of the impairment test, the Company estimated that the carrying value of American Furniture’s goodwill exceeded its fair value by approximately $41.4 million. As a result of this shortfall, we recorded a $41.4 million goodwill impairment charge as of September 30, 2010. Further, the preliminary results of this analysis indicated that the carrying value of American Furniture’s trade name exceeded its fair value by approximately $1.0 million. The fair value of the American Furniture trade name was determined by applying the relief from royalty technique to forecasted revenues at the American Furniture reporting unit.

Estimating the fair value of a reporting unit involves the use of estimates and significant judgments that are based on a number of factors including actual operating results, future business plans, economic projections and market data. Actual results may differ from forecasted results. No indicators of impairment existed at the other reporting units at September 30, 2010.

The goodwill impairment charge related to the Company’s AFM reporting unit reflects the preliminary indication from the impairment analysis performed to date and is subject to finalization of certain fair value estimates being performed with the assistance of an outside independent valuation specialist, and may be adjusted when all aspects of the analysis are completed. The Company currently expects to finalize its goodwill impairment analysis during the fourth quarter of fiscal 2010. Any adjustments to the Company’s preliminary estimate of impairment as a result of completion of this evaluation are currently expected to be recorded in the Company’s consolidated financial statements for the fourth quarter of fiscal 2010.

A reconciliation of the change in the carrying value of goodwill for the nine months ended September 30, 2010 and the year ended December 31, 2009, is as follows (in thousands) :


	Nine months			Year ended
	ended September 30,			December 31,
	2010			2009
Beginning balance:
Goodwill	$	338,028		$	339,095
Accumulated impairment losses		(50,000	)		—

		288,028			339,095

Impairment losses		(41,435	)		(50,000	)
Acquisition of businesses (1)		73,492			1,009
Adjustment to purchase accounting		179			(2,076	)

Total adjustments		32,236			(51,067	)


Ending balance:
Goodwill		411,699			338,028
Accumulated impairment losses		(91,435	)		(50,000	)

	$	320,264		$	288,028


⁽¹⁾		Relates to the purchase of ERGObaby, Liberty Safe, Circuit Express and Relay Gear. Refer to Note D.

Other intangible assets

Other intangible assets are comprised of the following at September 30, 2010 and December 31, 2009 (in thousands) :


							Weighted
	September 30,			December 31,			Average
	2010			2009			Useful Lives
Customer relationships	$	231,783		$	188,773			12
Technology		44,879			37,959			8
Trade names, subject to amortization		26,080			25,300			12
Licensing and non-compete agreements		10,048			4,451			4
Distributor relations and other		1,896			1,380			4


		314,686			257,863

Accumulated amortization customer relationships		(62,940	)		(48,677	)
Accumulated amortization technology		(15,335	)		(11,360	)
Accumulated amortization trade names, subject to amortization		(4,463	)		(3,383	)
Accumulated amortization licensing and non-compete agreements		(5,113	)		(3,613	)
Accumulated amortization distributor relations and other		(1,051	)		(797	)

Total accumulated amortization		(88,902	)		(67,830	)
Trade names, not subject to amortization		54,435			26,332

Total intangibles, net	$	280,219		$	216,365

Amortization expense related to intangible assets was $7.5 million and $21.1 million for the three and nine months ended September 30, 2010, respectively, and $6.2 million and $18.6 million for the three and nine months ended September 30, 2009, respectively.

Note H — Debt

The Credit Agreement at September 30, 2010 provides for a Revolving Credit Facility totaling $340 million, subject to borrowing base restrictions, which matures in December 2012, and a Term Loan Facility with a balance of $74.5 million at September 30, 2010, which matures in December 2013. The Term Loan Facility requires quarterly payments of $0.5 million with a final payment of the outstanding principal balance due on December 7, 2013. The fair value of the Term Loan Facility

as of September 30, 2010 was approximately $71.2 million, and was calculated based on interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities.

The Company had $101.3 million in outstanding borrowings under its Revolving Credit Facility at September 30, 2010. The Company had approximately $172.7 million in borrowing base availability under its Revolving Credit Facility at September 30, 2010. Letters of credit outstanding at September 30, 2010 totaled approximately $68.3 million. At September 30, 2010, the Company was in compliance with all covenants.

The following table provides the Company’s debt holdings at September 30, 2010 and December 31, 2009 (in thousands):


	September 30,			December 31,
	2010			2009
Revolving credit facility borrowings	$	101,300		$	500
Term loan facility		74,500			76,000

Total debt		175,800			76,500
Less: Current portion, term loan facility		(2,000	)		(2,000	)
Less: Current portion, revolving credit facility		—			(500	)

Long term debt	$	173,800		$	74,000

Note I — Fair value measurement

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of September 30, 2010 and December 31, 2009 ( in thousands ):


	Fair Value Measurements at September 30, 2010
	Carrying
	Value		Level 1		Level 2		Level 3
Liabilities:
Derivative liability — interest rate swap	$	674	$	—	$	674	$	—
Supplemental put obligation		30,712		—		—		30,712
Call option of noncontrolling shareholder ⁽¹⁾		2,550		—		—		2,550
Put option of noncontrolling shareholders ⁽²⁾		50		—		—		50


⁽¹⁾		Represents a noncontrolling shareholder’s call option to purchase additional common stock in Tridien.

⁽²⁾		Represents put options issued to noncontrolling shareholders in connection with the Liberty acquisition.


	Fair Value Measurements at December 31, 2009
	Carrying
	Value		Level 1		Level 2		Level 3
Liabilities:
Derivative liability — interest rate swap	$	2,001	$	—	$	2,001	$	—
Supplemental put obligation		12,082		—		—		12,082
Call option of noncontrolling shareholder		200		—		—		200

A reconciliation of the change in the carrying value of our level 3 supplemental put liability from January 1, 2010 through September 30, 2010 and from January 1, 2009 through September 30, 2009 is as follows ( in thousands ):


	2010		2009
Balance at January 1	$	12,082	$	13,411
Supplemental put expense (reversal)		14,426		(8,159	)

Balance at March 31		26,508		5,252
Supplemental put expense (reversal)		2,565		(258	)

Balance at June 30		29,073		4,994
Supplemental put expense (reversal)		1,639		(101	)

Balance at September 30	$	30,712	$	4,893

A reconciliation of the change in the carrying value of our level 3 call option of a noncontrolling shareholder from January 1, 2010 through September 30, 2010 is as follows ( in thousands ):


	2010
Balance at January 1	$	200
Fair Value adjustment to Call option		2,350

Balance at September 30	$	2,550


⁽¹⁾		Represents a fair value adjustment to the call option of a noncontrolling shareholder of Tridien associated with an increase in the fair value of Tridien.

Valuation techniques

The Company’s derivative instrument consists of an over-the-counter (OTC) interest rate swap contract which is not traded on a public exchange. The fair value of the Company’s interest rate swap contract was determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. As such, the Company categorized its interest rate swap contract as Level 2.

The call option of the noncontrolling shareholder was determined based on inputs that were not readily available in public markets or able to be derived from information available in publicly quoted markets. As such, the Company categorized the call option of the noncontrolling shareholder as Level 3.

The put options of noncontrolling shareholders were determined based on inputs that were not readily available in public markets or able to be derived from information available in publicly quoted markets. As such, the Company categorized the put options of the noncontrolling shareholders as Level 3.

CGM is the owner of 100% of the Allocation Interests in the Company. Concurrent with our initial public offering in 2006 (“IPO”), CGM and the Company entered into a Supplemental Put Agreement, which requires the Company to acquire these Allocation Interests upon termination of the Management Services Agreement. Essentially, the put rights granted to CGM require us to acquire CGM’s Allocation Interests in the Company at a price based on a percentage of the increase in fair value in the Company’s businesses over its original basis in those businesses. Each fiscal quarter the Company estimates the fair value of its businesses for the purpose of determining the potential liability associated with the Supplemental Put Agreement. The Company uses the following key assumptions in measuring the fair value of the supplemental put: (i) financial and market data of publicly traded companies deemed to be comparable to each of the Company’s businesses and (ii) financial and market data of comparable merged, sold or acquired companies. Any change in the potential liability is accrued currently as an adjustment to earnings.

The following table provides the assets and liabilities carried at fair value measured on a non-recurring basis as of September 30, 2010 ( in thousands ):


									Gains/(losses)
	Fair Value Measurements at Sept. 30, 2010								Three and nine months ended
	Carrying								Sept. 30,
	Value		Level 1		Level 2		Level 3		2010			2009
Assets:
Goodwill ⁽¹⁾	$	—	$	—	$	—	$	—	$	(41,435	)	$	—
Trade name ⁽¹⁾		5,300		—		—		5,300	$	(1,000	)	$	—


⁽¹⁾		Represents the fair value of goodwill at the AFM business segment subsequent to the goodwill impairment charge recognized during the third quarter of 2010. See Note G for further discussion regarding impairment and valuation techniques applied.

⁽²⁾		Represents the fair value of AFM’s trade name at the AFM business segment subsequent to the impairment charge recognized during the third quarter of 2010.

Note J — Derivative instruments and hedging activities

On January 22, 2008, the Company entered into a three-year interest rate swap (“Swap”) agreement with a bank, fixing the rate of its Term Loan Facility borrowings at 7.35%. The Swap is designated as a cash flow hedge and is anticipated to be highly effective.

The Company’s objective for entering into the Swap is to manage the interest rate exposure on a portion of its Term Loan Facility by fixing its interest rate at 7.35% and avoiding the potential variability of interest rate fluctuations. The Swap is designated as a cash flow hedge with changes in the fair value of the Swap recorded in stockholders’ equity as a component of accumulated other comprehensive loss as the Swap is deemed completely effective. For the three and nine months ended September 30, 2010, the Company recorded a $0.4 million gain and $1.3 million gain, respectively, to accumulated other comprehensive loss, which reflects that portion of comprehensive income (loss) reclassified to net income (loss) during the three and nine months ended September 30, 2010. For the three and nine months ended September 30, 2009, the Company recorded a $0.1 million loss and a $0.4 million gain to accumulated other comprehensive loss, respectively.

The following table provides the fair value of the Company’s cash flow hedge, as well as its location on the balance sheet as of September 30, 2010 and December 31, 2009 (in thousands) :


	September 30,		December 31,		Balance Sheet
	2010		2009		Location
Liability
Cash flow hedge current	$	674	$	1,620	Other current liabilities
Cash flow hedge non-current		—		381	Other non-current liabilities

Total	$	674	$	2,001

Note K — Comprehensive income (loss)

The following table sets forth the computation of comprehensive income (loss) for the three and nine months ended September 30, 2010 and 2009 (in thousands) :


	Three months ended						Nine months ended
	September 30,						September 30,
	2010			2009			2010			2009
Net income (loss) attributable to Holdings	$	(30,059	)	$	2,101		$	(47,488	)	$	(24,590	)
Other comprehensive income (loss):
Unrealized gain (loss) on cash flow hedge		430			(19	)		1,327			376
Reclassification adjustment for cash flow hedge losses realized in net loss		—			—			—			2,517

Total other comprehensive income (loss)		430			(19	)		1,327			2,893

Total comprehensive income (loss)	$	(29,629	)	$	2,082		$	(46,161	)	$	(21,697	)

Note L — Stockholder’s equity

The Trust is authorized to issue 500,000,000 Trust shares and the Company is authorized to issue a corresponding number of LLC interests. The Company will at all times have the identical number of LLC interests outstanding as Trust shares. Each Trust share represents an undivided beneficial interest in the Trust, and each Trust share is entitled to one vote per share on any matter with respect to which members of the Company are entitled to vote.

Common stock offering

On April 13, 2010, the Company completed an offering of 5,250,000 Trust shares (including the underwriter’s over-allotment completed April 23, 2010) at an offering price of $15.10 per share. The net proceeds to the Company, after deducting underwriter’s discount and offering costs totaled approximately $75.0 million. The Company used $70 million of the net proceeds to pay down its Revolving Credit Facility.

Distributions:

	•		On January 28, 2010, the Company paid a distribution of $0.34 per share to holders of record as of January 22, 2010.

	•		On April 30, 2010, the Company paid a distribution of $0.34 per share to holders of record as of April 23, 2010.

	•		On July 30, 2010, the Company paid a distribution of $0.34 per share to holders of record as of July 23, 2010.

•

On October 29, 2010, the Company paid a distribution of $0.34 per share to holders of record as of October 22, 2010.

Note M — Warranties

The Company’s ERGO, Fox, Liberty and Tridien operating segments estimate their exposure to warranty claims based on both current and historical product sales data and warranty costs incurred. The Company assesses the adequacy of its recorded warranty liability quarterly and adjusts the amount as necessary.

A reconciliation of the change in the carrying value of the Company’s warranty liability for the nine months ended September 30, 2010 and the year ended December 31, 2009 is as follows ( in thousands ):


	September 30,			December 31,
	2010			2009
Beginning balance	$	1,529		$	1,577
Accrual		1,669			1,451
Warranty payments		(1,214	)		(1,499	)
Other (1)		549			—

Ending balance	$	2,533		$	1,529


⁽¹⁾		Represents warranty liabilities acquired related to Liberty Safe and ERGObaby.

Note N — Noncontrolling interest

Advanced Circuits

On January 12, 2010, in connection with a 2009 loan forgiveness arrangement, a portion of the outstanding loan between the Company and certain members of Advanced Circuits management was repaid with Class A common stock of Advanced Circuits valued at $47.50 per share ($4.75 million). The effect of this transaction decreased the noncontrolling interest ownership percentage of Advanced Circuits from approximately 30% to 25%.

During the first quarter of 2010, these same members of Advanced Circuits management were granted 0.1 million stock options in Advanced Circuits common stock. These options were fully vested on grant date and as a result Advanced Circuits recorded a $3.8 million non-cash expense during the nine months ended September 30, 2010 to selling, general and administrative expense on the condensed consolidated statement of operations.

Note O — Income tax

Each fiscal quarter the Company estimates its annual effective tax rate and applies that rate to its interim earnings. In this regard the Company reflects the tax impact of certain unusual or infrequently occurring items, the effects of changes in tax laws or rates, in the interim period in which they occur.

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, the projected operating income for the year, projections of the proportion of income earned and taxed in other jurisdictions, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, as additional information is obtained or as the tax environment changes.

Our effective income tax rate (benefit) for the three and nine months ended September 30, 2010 was 21.2% and 25.0%, respectively, compared with 43.3% and (39.6%) for the comparable three and nine months ended September 30, 2009. The effective income tax rate for the three and nine months ended September 30, 2010 includes impairment expense together with a significant loss at the Company’s parent, which is taxed as a partnership, and is due largely to interest expense and to the expense associated with the supplemental put (see Note I).

The reconciliation between the Federal Statutory Rate and the effective income tax rate for the three and nine months ended September 30, 2010 and September 30, 2009 are as follows:


	Three months ended Sept. 30,						Nine months ended Sept. 30,
	2010			2009			2010			2009
United States Federal Statutory Rate		(35.0	%)		35.0	%		(35.0	%)		(35.0	%)
State income taxes (net of Federal benefits)		3.4			6.3			3.8			—
Expenses of Compass Group Diversified Holdings, LLC representing a pass through to shareholders		3.9			8.5			24.4			(1.3	)
Credit utilization		(5.7	)		(7.1	)		(7.3	)		(1.6	)
Non-deductible acquisition costs		—			—			1.4			—
Impairment expense		61.2			—			40.9			—
Other		(6.6	)		0.6			(3.2	)		(1.7	)

Effective income tax rate		21.2	%		43.3	%		25.0	%		(39.6	%)

Note P — Subsequent events

On October 14, 2010 the Company provided written notice to The NASDAQ Stock Market LLC of its intention to transfer the listing of its shares to the New York Stock Exchange (the “NYSE”) and to voluntarily delist its shares from the NASDAQ Global Select Market in connection with the transfer. The Company’s shares commenced trading on the NYSE under the stock symbol “CODI” on November 1, 2010.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

This item 2 contains forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q are subject to a number of risks and uncertainties, some of which are beyond our control. Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which we are not currently aware or which we currently deem immaterial could also cause our actual results to differ, including those discussed in the sections entitled “Forward-Looking Statements” and “Risk Factors” included elsewhere in this Quarterly Report as well as those risk factors discussed in the section entitled “Risk Factors” in our Annual Report on Form 10-K.

Overview

Compass Diversified Holdings, a Delaware statutory trust, was incorporated in Delaware on November 18, 2005. Compass Group Diversified Holdings, LLC, a Delaware limited liability Company, was also formed on November 18, 2005. In accordance with the Trust Agreement, the Trust is sole owner of 100% of the Trust Interests (as defined in the LLC Agreement) of the Company and, pursuant to the LLC Agreement, the Company has outstanding, the identical number of Trust Interests as the number of outstanding shares of the Trust. The Manager is the sole owner of the Allocation Interests of the Company. The Company is the operating entity with a board of directors and other corporate governance responsibilities, similar to that of a Delaware corporation.

The Trust and the Company were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. We characterize small to middle market businesses as those that generate annual cash flows of up to $60 million. We focus on companies of this size because of our belief that these companies are often more able to achieve growth rates above those of their relevant industries and are also frequently more susceptible to efforts to improve earnings and cash flow.

In pursuing new acquisitions, we seek businesses with the following characteristics:

•		North American base of operations;

•		stable and growing earnings and cash flow;

•		maintains a significant market share in defensible industry niche (i.e., has a “reason to exist”);

•		solid and proven management team with meaningful incentives;

•		low technological and/or product obsolescence risk; and

•		a diversified customer and supplier base.

Our management team’s strategy for our subsidiaries involves:

•		utilizing structured incentive compensation programs tailored to each business to attract, recruit and retain talented managers to operate our businesses;

•		regularly monitoring financial and operational performance, instilling consistent financial discipline, and supporting management in the development and implementation of information systems to effectively achieve these goals;

•		assisting management in their analysis and pursuit of prudent organic cash flow growth strategies (both revenue and cost related);

•		identifying and working with management to execute attractive external growth and acquisition opportunities; and

•		forming strong subsidiary level boards of directors to supplement management in their development and implementation of strategic goals and objectives.

Based on the experience of our management team and its ability to identify and negotiate acquisitions, we believe we are positioned to acquire additional attractive businesses. Our management team has a large network of approximately 2,000 deal intermediaries to whom it actively markets and who we expect to expose us to potential acquisitions. Through this

network, as well as our management team’s active proprietary transaction sourcing efforts, we typically have a substantial pipeline of potential acquisition targets. In consummating transactions, our management team has, in the past, been able to successfully navigate complex situations surrounding acquisitions, including corporate spin-offs, transitions of family-owned businesses, management buy-outs and reorganizations. We believe the flexibility, creativity, experience and expertise of our management team in structuring transactions provides us with a strategic advantage by allowing us to consider non-traditional and complex transactions tailored to fit a specific acquisition target.

In addition, because we intend to fund acquisitions through the utilization of our Revolving Credit Facility, we do not expect to be subject to delays in or conditions by closing acquisitions that would be typically associated with transaction specific financing, as is typically the case in such acquisitions. We believe this advantage is a powerful one, especially in the current stagnant credit environment, and is highly unusual in the marketplace for acquisitions in which we operate.

2010 Highlights

Acquisitions

On September 16, 2010, we purchased a controlling interest in ERGO Baby Carrier, Inc. (“ERGObaby”) with headquarters in Pukalani, Hawaii. ERGObaby is a premier designer, marketer and distributor of baby wearing products and accessories. ERGObaby offers a broad range of wearable baby carriers and related products that are sold through more than 800 retailers and web shops in the United States and internationally in approximately 20 countries. We made loans to and purchased a controlling interest in ERGObaby for approximately $85.2 million, representing approximately 84% of the equity in Liberty on a fully diluted basis. We incurred approximately $2.0 million in transaction costs.

On March 31, 2010, we purchased a controlling interest in Liberty Safe and Security Products, Inc. (“Liberty” or “Liberty Safe”), with headquarters in Payson, Utah. Liberty is a premier designer, manufacturer and marketer of home and gun safes in North America. Liberty manufactures and sells a wide range of home and gun safes in a broad assortment of sizes, features and styles which are sold in various sporting goods, farm and fleet and home improvement retailers. We made loans to and purchased a controlling interest in Liberty for approximately $70.2 million, representing approximately 88% of the equity in Liberty on a fully diluted basis. We incurred approximately $1.5 million in transaction costs.

On March 11, 2010, our majority owned subsidiary Advanced Circuits acquired Circuit Express, Inc. (“Circuit Express”), based in Tempe, Arizona for approximately $16.1 million. Circuit Express focuses on quick-turn manufacturing of prototype and low-volume quantities of rigid PCBs primarily for aerospace and defense related customers. We incurred approximately $0.3 million in transaction costs in addition to the purchase price.

Common stock offering

On April 13, 2010, we completed a public offering of 5,250,000 Trust shares (including the underwriter’s over-allotment completed April 23, 2010) at an offering price of $15.10 per share. The net proceeds to us, after deducting underwriter’s discount and offering costs, totaled approximately $75.0 million. We used $70.0 million of the net proceeds to pay down our Revolving Credit Facility.

Impairment expense

We test goodwill at interim dates if events or circumstances indicate that goodwill might be impaired at any of our reporting units. As a result, we conducted an interim test for impairment at American Furniture based on results of operations which had deteriorated significantly during the second and third quarter of 2010. The domestic economy has undergone a significant period of economic uncertainty which has resulted in limited access to credit markets and lower consumer spending. The retail furniture market has been, and continues to be, severely impacted by these conditions, particularly as it relates to the housing market. Retail furniture sales rely heavily on consumer spending for new furniture when they move into a new home. The uptick in sales and results of operations that we anticipated at the beginning of this year, which we believed would coincide with the overall modest economic rebound has not occurred in the furniture industry and we do not at this time believe it will occur in the near future. Accordingly, we adjusted our forecast for American Furniture to reflect a revised outlook assuming continued pressure on sales and gross margins in the furniture industry. The revised forecast, which is used to populate a discounted cash flow analysis, led to the conclusion that it was more likely than not that the fair value of American Furniture is below its carrying amount.

Based on the preliminary results of our interim impairment test which is a two step process, we estimated that the carrying value of American Furniture’s goodwill exceeded its fair value by approximately $41.4 million. In addition, based on the preliminary results of the second step of the analysis we determined that the amount carried on our balance sheet reflecting the carrying value of American Furniture’s Trade name exceeded its fair value by approximately $1.0 million. As a result of these shortfalls, we recorded a $42.4 million impairment charge, which is reflected in our consolidated results of operations in both the three and nine month periods ended September 30, 2010.

Outlook

Sales and operating income during the first three quarters of 2010 increased meaningfully at each of our businesses, with the exception of Liberty Safe and American Furniture, when compared to the first nine months of 2009. Liberty Safe’s 2010 results are being compared to abnormally high 2009 sales and operating results while American Furniture, although showing slightly higher sales in its nine-month operating results, has experienced significantly lower margins and operating results. (See Results of Operations — Our Businesses for a more detailed discussion). We are optimistic and believe that we will experience continued growth in sales and operating income despite the results of operations of Liberty Safe and American Furniture, through the remainder of 2010.

We are dependent on the earnings of, and cash receipts from, the businesses that we own to meet our corporate overhead and management fee expenses and to pay distributions. These earnings and distributions, net of any minority interests in these businesses, will be available:

	•		First, to meet capital expenditure requirements, management fees and corporate overhead expenses;

	•		Second, to fund distributions from the businesses to the Company; and

	•		Third, to be distributed by the Trust to shareholders.

Results of Operations

We were formed on November 18, 2005 and acquired our existing businesses (segments) as follows:


May 16, 2006	August 1, 2006	February 28, 2007	August 31, 2007	January 4, 2008	March 31, 2010
Advanced Circuits	Tridien	HALO	American Furniture	Fox	Liberty Safe

Staffmark

September 16, 2010

ERGObaby

Consolidated Pro-forma Results of Operations — Compass Diversified Holdings and Compass Group Diversified Holdings LLC


	Three months			Three months			Nine months			Nine months
	ended			ended			ended			ended
	Sept. 30, 2010			Sept. 30, 2009			Sept. 30, 2010			Sept. 30, 2009
(in thousands)	Pro-forma ⁽¹⁾			Pro-forma ⁽¹⁾			Pro-forma ⁽¹⁾			Pro-forma ⁽¹⁾
Net sales	$	467,220		$	351,647		$	1,256,885		$	959,598
Cost of sales		363,090			270,307			980,148			743,944

Gross profit		104,130			81,340			276,737			215,654
Staffing, selling, general and administrative expense		66,085			57,974			196,033			175,935
Fees to manager		4,685			4,131			13,533			12,225
Supplemental put expense (reversal)		1,639			(101	)		18,630			(8,518	)
Amortization of intangibles		7,826			7,900			23,579			23,784
Impairment expense		42,435			—			42,435			59,800

Income (loss) from operations	$	(18,540	)	$	11,436		$	(17,473	)	$	(47,572	)


(1)		Pro-forma results of operations include the results of operations as if we had acquired Liberty Safe and ERGObaby on January 1, 2009 together with pro-forma adjustments to fees to manager, transaction costs and intangible amortization in connection with our acquisitions of Liberty Safe on March 31, 2010 and ERGObaby on September 16, 2010. See Results of Operations — Our Businesses for a more detailed discussion of these adjustments .

Net sales

On a consolidated basis, pro-forma net sales increased $115.5 million and $297.3 million in the three and nine month periods ended September 30, 2010, respectively, compared to the same pro-forma periods in 2009. These increases for both the three and nine month periods are due principally to increased revenues at Staffmark, Advanced Circuits, Tridien, Fox, Halo And ERGObaby segments offset in part by decreased net sales at Liberty Safe. Revenues at Staffmark increased $78.0 million and $214.5 million during the three and nine month periods ended September 30, 2010 compared to the same periods in 2009. Refer to Results of Operations — Our Businesses for a more detailed analysis of net sales.

We do not generate any revenues apart from those generated by the businesses we own. We may generate interest income on the investment of available funds, but expect such earnings to be minimal. Our investment in our businesses is typically in the form of loans from the Company to such businesses, as well as equity interests in those companies. Cash flows coming to the Trust and the Company are the result of interest payments on those loans, amortization of those loans and, in some cases, dividends on our equity ownership. However, on a consolidated basis these items will be eliminated.

Cost of sales

On a consolidated basis, pro-forma cost of sales increased approximately $92.8 million and $236.2 million in the three and nine month periods ended September 30, 2010, respectively, compared to the same periods in 2009. These increases are due almost entirely to the corresponding increase in net sales. Gross profit as a percentage of sales decreased slightly in both the three and nine month periods ended September 30, 2010 due to the proportionately larger increase in revenues at Staffmark, which carries a lower gross margin percentage than any of our other subsidiaries. Refer to Results of Operations — Our Businesses for a more detailed analysis of cost of sales.

Staffing, selling, general and administrative expense

On a consolidated basis, pro forma staffing, selling, general and administrative expense increased approximately $8.1 million and $20.1 million in the three and nine month periods ended September 30, 2010, respectively, compared to the same periods in 2009. These increases are due principally to (i) increases in costs directly tied to sales, such as commissions, particularly at Halo, and direct customer support services; and (ii) non-cash stock compensation expense at Advanced Circuits totaling approximately $3.8 million. Refer to Results of Operations — Our Businesses for a more detailed analysis of staffing, selling, general and administrative expense by segment. At the corporate level, selling, general and administrative expense increased approximately $2.1 million during the nine months ended September 30, 2010 compared to the same periods in 2009. This increase is principally due to a non-cash charge of approximately $2.3 million related to the increase in fair value of the call option granted by the Company in 2008 to the former CEO of Tridien. Corporate expenses were flat in the three months ended September 30, 2010 compared to 2009.

Fees to manager

Pursuant to the Management Services Agreement, we pay CGM a quarterly management fee equal to 0.5% (2.0% annually) of our consolidated adjusted net assets. We accrue for the management fee on a quarterly basis. For the proforma three-months ended September 30, 2010 and September 30, 2009, we incurred approximately $4.7 million and $4.1 million, respectively, in expense for these fees. For the pro-forma nine-months ended September 30, 2010 and 2009 we incurred approximately $13.5 million and $12.2 million, respectively, in expense for these fees. The increase in management fees for the pro forma three and nine months ended September 30, 2010 is due principally to the increase in consolidated adjusted net assets as of September 30, 2010 resulting from our 2010 acquisitions as well as the increased sales and operating income from our existing businesses in 2010, offset in part by the impairment write-off at American Furniture.

Supplemental put expense

Concurrent with the IPO, we entered into a Supplemental Put Agreement with our Manager pursuant to which our Manager has the right to cause us to purchase the allocation interests then owned by them upon termination of the Management Services Agreement. We accrue for the supplemental put expense on a quarterly basis. For the three and nine-months ended September 30, 2010 we incurred approximately $1.6 million and $18.6 million, respectively, in expense compared to a reversal of these charges of $0.1 million and $8.5 million for the corresponding periods in 2009. The increase in the supplemental put charge in both the three and nine months ended September 30, 2010 compared to the same periods in 2009 is attributable to the increase in the fair value of our businesses, particularly Advanced Circuits and Fox offset in part by a reduction in the value of the allocation interests totaling approximately $6.0 million in the third quarter of 2010 due to the significant decline in fair value of American Furniture during 2010.

Impairment expense

We incurred an impairment charge at American Furniture in the third quarter of 2010 totaling $42.4 million. We conducted an interim test for impairment at American Furniture which was triggered based on results of operations which had deteriorated significantly during the second and third quarter of 2010. The portion of the impairment charge that was attributable to impaired goodwill at American Furniture was $41.4 million. The remaining $1.0 million reflected a write off of the unamortized American Furniture Trade name. We incurred an impairment charge at Staffmark in the first quarter of 2009 totaling $59.8 million in connection with our annual impairment analysis. The portion of the impairment charge that was attributable to impaired goodwill at Staffmark was $50.0 million. The remaining $9.8 million reflected a write off of the unamortized CBS Personnel trade name as a result of rebranding the business to Staffmark.

Results of Operations — Our Businesses

The following discussion reflects a comparison of the historical, and where appropriate, pro-forma results of operations for each of our businesses for the three- and nine-month periods ending September 30, 2010 and September 30, 2009, which we believe is the most meaningful comparison in explaining the comparative financial performance of each of our businesses. The following results of operations are not necessarily indicative of the results to be expected for the full year going forward.

Advanced Circuits

Overview

Advanced Circuits is a provider of prototype, quick-turn and volume production printed circuit boards (“PCBs”) to customers throughout the United States. Collectively, prototype and quick-turn PCBs represent approximately two-thirds of Advanced Circuits’ gross revenues. Prototype and quick-turn PCBs typically command higher margins than volume production PCB’s given that customers require high levels of responsiveness, technical support and timely delivery with respect to prototype and quick-turn PCBs and are willing to pay a premium for them. Advanced Circuits is able to meet its customers’ demands by manufacturing custom PCBs in as little as 24 hours, while maintaining over 98.0% error-free production rate and real-time customer service and product tracking 24 hours per day.

Global demand for PCBs has remained strong in recent years while domestic production of PCBs has declined over 50% since 2000. In contrast, over the last several years, Advanced Circuits’ revenues have increased steadily as its customers’ prototype and quick-turn PCB requirements, such as small quantity orders and rapid turnaround, are less able to be met by low cost volume manufacturers in Asia and elsewhere. Advanced Circuits’ management anticipates that demand for its prototype and quick-turn printed circuit boards will remain strong.

On March 11, 2010, Advanced Circuits acquired Circuit Express, an Arizona based provider of high technology, quick-turn PCBs for approximately $16.1 million. This acquisition expands Advanced Circuits capabilities and provides immediate access to manufacturing capabilities of more advanced higher tech PCBs as well as the ability to provide manufacturing services to the U.S. military and defense related accounts. Circuit Express operating results for the period from March 11, 2010 to September 30, 2010 only, are included in the following table.

Results of Operations

The table below summarizes the income from operations data for Advanced Circuits for the three- and nine-month periods ended September 30, 2010 and September 30, 2009.


	Three-months ended				Nine-months ended
	September 30,		September 30,		September 30,		September 30,
(in thousands)	2010		2009		2010		2009
Net sales	$	20,173	$	11,593	$	54,039	$	34,356
Cost of sales		9,210		5,007		24,244		14,661

Gross profit		10,963		6,586		29,795		19,695
Selling, general and administrative expense		3,584		2,210		13,613		5,711
Fees to manager		125		125		375		375
Amortization of intangibles		756		675		2,107		2,009

Income from operations	$	6,498	$	3,576	$	13,700	$	11,600

Three months ended September 30, 2010 compared to the three months ended September 30, 2009.

Net sales

Net sales for the three months ended September 30, 2010 were approximately $20.2 million compared to approximately $11.6 million for the same period in 2009, an increase of approximately $8.6 million or 74.0%. Increased sales from long-lead time PCBs ($2.9 million), quick-turn production ($2.4 million) and prototype PCBs ($2.4 million) are primarily responsible for this increase. Assembly sales increased approximately $0.8 million during the three months ended September 30, 2010. Sales from quick-turn and prototype PCBs represented approximately 61.5% of gross sales in the three months ended September 30, 2010 compared to 64.4% in the same period of 2009. Quick turn and prototype sales as a percentage of total sales were higher than normal in 2009 due to the significant reduction in long-lead and sub-contract PCBs in 2009. The 2010 results are more in line with previous periods. Net sales attributable to Circuit Express during the quarter were approximately $5.2 million.

Cost of sales

Cost of sales for the three months ended September 30, 2010 increased approximately $4.2 million. This increase is principally due to the corresponding increase in sales. Gross profit as a percentage of sales was 54.3% during the three months ended September 30, 2010 compared to 56.8% in 2009. The decrease in gross profit as a percentage of sales in 2010 is largely the result of lower margins earned on the Circuit Express sales during the quarter.

Selling, general and administrative expense

Selling, general and administrative expense increased $1.4 million during the three months ended September 30, 2010 compared to the same period in 2009. This increase is due to the costs associated with operating Circuit Express in 2010, which totaled approximately $1.2 million during the quarter and increased salaries and bonus accrual resulting from the significant increase in sales.

Income from operations

Income from operations for the three months ended September 30, 2010 was approximately $6.5 million, an increase of $2.9 million over the same period in 2009, primarily as a result of those factors described above.

Nine months ended September 30, 2010 compared to the nine months ended September 30, 2009.

Net sales

Net sales for the nine months ended September 30, 2010 were approximately $54.0 million compared to approximately $34.4 million for the same period in 2009, an increase of approximately $19.7 million or 57.3%. Increased sales from long-lead time PCBs ($7.5 million), quick-turn production ($5.5 million) and prototype PCBs ($4.9 million) are principally responsible for the increase. Assembly sales increased $1.5 million in 2010. Sales from quick-turn and prototype PCBs represented approximately 62.7% of net sales in the nine months ended September 30, 2010 compared to 67.1% in the same period of 2009. The 2009 percentage of sales for quick turn and prototype sales was higher than normal because those sales were impacted less by the then slumping economy. Net sales attributable to Circuit Express were approximately $11.4 million during 2010.

Cost of sales

Cost of sales for the nine months ended September 30, 2010 was approximately $24.2 million compared to approximately $14.7 million for the same period in 2009, an increase of approximately $9.6 million or 65.4%. The increase in cost of sales is almost entirely due to the increase in sales. Gross profit as a percentage of sales was 55.1% in 2010 compared to 57.3% during the nine months ended September 30, 2009. The decrease in gross profit as a percentage of sales in 2010 is largely the result of lower margins earned on the Circuit Express sales during 2010.

Selling, general and administrative expense

Selling, general and administrative expense increased approximately $7.9 million in the nine months ended September 30, 2010 compared to same period in 2009 due primarily to a combination of the following; (i) the reversal of loan forgiveness charges in 2009 ($0.2 million); (ii) non-cash stock compensation costs resulting from options issued to management in 2010 ($3.8 million); (iii) increased salaries and bonus accrual resulting from the significant increase in sales. and (iv) overhead costs directly associated with Circuit Express ($2.7 million).

Income from operations

Income from operations was approximately $13.7 million for the nine months ended September 30, 2010 compared to $11.6 million for the same period in 2009, an increase of $2.1 million based principally on the factors described above.

American Furniture

Overview

Founded in 1998 and headquartered in Ecru, Mississippi, American Furniture is a leading U.S. manufacturer of upholstered furniture, focused exclusively on the promotional segment of the furniture industry. American Furniture offers a broad product line of stationary and motion furniture, including sofas, loveseats, sectionals, recliners and complementary products, sold primarily at retail price points ranging between $199 and $699. American Furniture is a low-cost manufacturer and is able to ship any product in its line within 48 hours of receiving an order.

American Furniture’s products are adapted from established designs in the following categories: (i) motion and recliner; (ii) stationary; (iii) occasional chair; and (iv) accent tables. American Furniture’s products are manufactured from common components and offer proven select fabric options, providing manufacturing efficiency and resulting in limited design risk or inventory obsolescence.

Results of Operations

The table below summarizes the income from operations data for American Furniture for the three and nine-month periods ended September 30, 2010 and September 30, 2009.


	Three-months ended					Nine-months ended
	September 30,			September 30,		September 30,			September 30,
(in thousands)	2010			2009		2010			2009
Net sales	$	32,104		$	33,039	$	109,392		$	108,623
Cost of sales		27,653			26,761		90,472			87,072

Gross profit		4,451			6,278		18,920			21,551
Selling, general and administrative expense		4,041			4,262		13,271			13,659
Fees to manager		125			125		375			375
Amortization of intangibles		546			671		1,637			2,138
Impairment expense		42,435			—		42,435			—

Income from operations	$	(42,696	)	$	1,220	$	(38,798	)	$	5,379

Three months ended September 30, 2010 compared to the three months ended September 30, 2009.

Net sales

Net sales for the three months ended September 30, 2010 decreased approximately $0.9 million over the corresponding three months ended September 30, 2009. Motion product sales decreased approximately $1.1 million offset in part by increases in sales in stationary and recliner products. The decrease in motion product sales is the result of the softer retail environment in the more expensive product categories such as our motion products and the increasing presence of Asian import product which often offers a better overall value proposition to customers.

Cost of sales

Cost of sales increased in the three months ended September 30, 2010 compared to the same period of 2009 despite the decrease in sales. Gross profit as a percent of sales was 13.9% in the three months ended September 30, 2010 compared to 19.0% in the corresponding period in 2009. During the third quarter of 2010 we reversed approximately $1.1 million in overhead absorption previously capitalized to finished goods inventory, in error, during the first two quarters of 2010. Had we not made this adjustment our gross profit as a percentage of sales would have been 17.3%, a decrease of approximately 170 basis points when compared to the same period in 2009 which is primarily attributable to $0.3 million in business

interruption proceeds reflected as a credit to cost of sales in 2009 and to a lesser extent downward market pricing pressure from some of our larger customers.

Selling, general and administrative expense

Selling, general and administrative expense for the three months ended September 30, 2010, decreased approximately $0.2 million compared to the same period of 2009. This decrease is primarily due to lower insurance costs due to the favorable renewal of our health care plan.

Amortization of intangibles

Intangible amortization decreased approximately $0.1 million in the quarter ended September 30, 2010 compared to the same period in 2009 due to the expiration of non-compete agreements that were being amortized in 2009.

Impairment expense

We incurred an impairment charge at American Furniture in the third quarter of 2010 totaling $42.4 million. We conducted an interim test for impairment at American Furniture which was triggered based on results of operations which had deteriorated significantly during the second and third quarter of 2010. The portion of the impairment charge that was attributable to impaired goodwill at American Furniture was $41.4 million. The remaining $1.0 million reflected a write off of the unamortized American Furniture trade name. The impairment charges recorded during the three months ended September 30, 2010 are preliminary pending finalization of our valuation efforts. We expect any adjustment to the fair value of AFM will be recorded in the fourth quarter of fiscal 2010.

Income from operations

Income from operations decreased approximately $43.9 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009, principally due to the impairment expense and to a lesser extent other factors described above.

Nine months ended September 30, 2010 compared to the nine months ended September 30, 2009.

Net sales

Net sales for the nine months ended September 30, 2010 increased approximately $0.8 million over the corresponding nine months ended September 30, 2009. Stationary product net sales increased approximately $3.6 million and recliner product sales increased $0.7 million, offset in part by a decrease in motion product sales totaling approximately $3.7 million. The increase in stationary product sales is due primarily to an improved retail environment, particularly in the lower cost categories, particularly during the first quarter of 2010. The decrease in motion product sales is the result of the softer retail environment in the more expensive product categories such as our motion products and the increasing presence of Asian import product which often offers a better overall value proposition to customers.

Cost of sales

Cost of sales increased by approximately $3.4 million in the nine months ended September 30, 2010 compared to the same period of 2009 and is due in part to the corresponding increase in sales. Gross profit as a percentage of sales was 17.3% in the nine months ended September 30, 2010 compared to 19.8% in the corresponding period in 2009. The decrease in gross profit as a percentage of sales of approximately 250 basis points in 2010 is principally attributable to business interruption insurance proceeds recorded in 2009 which accounts for half of the year over year increase in cost of sales. Excluding the insurance proceeds in 2009 gross profit decreased approximately 116 basis points in 2010. The remainder of this decrease in margin is downward market pricing pressure from some of our larger customers.

Selling, general and administrative expense

Selling, general and administrative expense for the nine months ended September 30, 2010, decreased approximately $0.4 million compared to the same period of 2009. This decrease period over period is primarily due to lower health insurance expense for 2010 ($0.5 million) and lower commission expense ($0.2 million), offset in part by an increase in bad debt expense ($0.3 million).

Amortization of intangibles

Intangible amortization decreased approximately $0.5 million in the nine months ended September 30, 2010 compared to the same period in 2009 due to the expiration of non-compete agreements that were being amortized in 2009.

Impairment expense

attributable to impaired goodwill at American Furniture was $41.4 million. The remaining $1.0 million reflected a write off of the unamortized American Furniture trade name. The impairment charges recorded during the nine months ended September 30, 2010 are preliminary pending finalization of our valuation efforts. We expect any adjustment to the fair value of AFM will be recorded in the fourth quarter of fiscal 2010.

Income from operations

Income from operations decreased approximately $44.2 million in the nine-months ended September 30, 2010 compared to the same period in 2009 principally due the impairment expense and other factors described above.

ERGObaby

Overview

ERGObaby, with headquarters in Pukalani, Hawaii, is a premier designer, marketer and distributor of baby wearing products and accessories. ERGObaby offers a broad range of wearable baby carriers and related products that are sold through more than 800 retailers and web shops in the United States and internationally in approximately 20 countries.

On September 16, 2010 we made loans to and purchased a controlling interest in ERGObaby for approximately $85.2 million, representing approximately 84% of the equity in ERGObaby. ERGObaby’s reputation for product innovation, reliability and safety has lead to numerous awards and accolades from consumer surveys and publications, including Parenting Magazine, Pregnancy magazine and Wired magazine.

Pro-forma Results of Operations

The table below summarizes the pro-forma results of operations for ERGObaby for the nine-months ended September 30, 2010 and the nine-months ended September 30, 2009. We acquired ERGObaby on September 16, 2010. The following operating results are reported as if we acquired ERGObaby on January 1, 2009.


	Nine-months ended
	September. 30,		September 30,
	2010		2009
(in thousands)	(Pro-forma)		(Pro-forma)
Net sales	$	23,714	$	16,307
Cost of sales (a)		7,012		4,245

Gross profit		16,702		12,062
Selling, general and administrative expense (b)		8,516		5,439
Fees to manager (c)		375		375
Amortization of intangibles (d)		1,287		1,287

Income from operations	$	6,524	$	4,961

Pro-forma results of operations of ERGObaby for the nine-month periods ended September 30, 2010 and 2009 include the following pro-forma adjustments : (comparative three-month results were not available)


(a)		Cost of sales for the nine months ended September 30, 2010 does not include $0.6 million of amortization expense associated with the inventory fair value step-up recorded during the last two weeks of September, our period of ownership.

(b)		Selling, general and administrative costs were reduced by approximately $10.0 million in the nine-months ended September 30, 2010, representing an adjustment for one-time transaction costs incurred as a result of our purchase.

(c)		Represents management fees that would have been payable to the Manager.

(d)		An increase in amortization of intangible assets totaling $1.3 million in both the nine-month period ended September 30, 2010 and nine-month period ended September 30, 2009. This adjustment is a result of and was derived from the purchase price allocation in connection with our acquisition of ERGObaby.

Pro forma nine months ended September 30, 2010 compared to the pro forma nine months ended September 30, 2009.

Net sales

Pro forma net sales for the nine months ended September 30, 2010 increased approximately $7.4 million over the corresponding nine months ended September 30, 2009. Domestic sales were approximately $11.3 million in the nine months ended September 30, 2010 compared to approximately $8.0 million in the same period 2009 as the number of domestic retail outlets for the ERGObaby’s

products increased from 648 outlets in 2009 to approximately 850 outlets in the 2010 period. International sales increased to $12.4 million in the nine months ended September 30, 2010 compared to $8.3 million in the same period in 2009. The increase was mostly attributable to increased sales to new and existing distributors in Asia.

Cost of sales

Pro forma cost of sales for the nine months ended September 30, 2010 increased to $7.0 million from $4.2 million in the same period in 2009. The increase is due principally to the increase in sales in the same period. Gross profit as a percentage of sales decreased from 74.0% in the nine months ended 2009 to 70.4% in the same period in 2010. The decrease is attributable to an increase in the sales of organic baby carriers in 2010 which generate approximately 65% gross profit margin versus a 76% gross profit margin generated by non-organic baby carriers. Organic baby carriers represented a greater proportion of total sales in 2010 than for the same period in 2009.

Selling, general and administrative expense

Pro forma selling, general and administrative expense for the nine months ended September 30, 2010 increased to approximately $8.5 million or 35.9% of sales versus $5.4 million or 33.4% of sales in the same period in 2009. The increase is due principally to increases in sales commissions, marketing expenses and personnel costs directly related to the significant increase in sales.

Income from operations

Pro forma income from operations for the nine months ended September 30, 2010 increased approximately $1.6 million compared to the corresponding period in 2009 based principally on the significant increase in net sales and other factors described above.

Fox Factory

Overview

Fox Factory (“Fox”) headquartered in Watsonville, California, is a branded action sports company that designs, manufactures and markets high-performance suspension products and components for mountain bikes and powered vehicles, which include; snowmobiles, watercraft, motorcycles, all-terrain vehicles (“ATVs”), and other off-road vehicles.

Fox’s products are recognized by manufacturers and consumers as being among the most technically advanced suspension products currently available in the marketplace. Fox’s technical success is demonstrated by its dominance of award winning performances by professional athletes utilizing its suspension products. As a result, Fox’s suspension components are incorporated by original equipment manufacturers (“OEM”) customers on their high-performance models at the top of their product lines. OEMs leverage the strength of Fox’s brand to maintain and expand their own sales and margins. In the Aftermarket segment, customers seeking higher performance select Fox’s suspension components to enhance their existing equipment.

Fox sells to over 200 OEM and over 7,600 Aftermarket customers across its market.

Results of Operations

The table below summarizes the income from operations data for Fox Factory for the three- and nine-month periods ended September 30, 2010 and September 30, 2009.


	Three-months ended				Nine-months ended
	September 30,		September 30,		September 30,		September 30,
(in thousands)	2010		2009		2010		2009
Net sales	$	61,357	$	36,910	$	128,747	$	86,870
Cost of sales		43,290		26,264		91,324		62,523

Gross profit		18,067		10,646		37,423		24,347
Selling, general and administrative expense		6,214		4,486		16,835		14,152
Fees to manager		125		125		375		375
Amortization of intangibles		1,304		1,304		3,913		3,913

Income from operations	$	10,424	$	4,731	$	16,300	$	5,907

Three months ended September 30, 2010 compared to the three months ended September 30, 2009 .

Net sales

Net sales for the three months ended September 30, 2010 increased $24.4 million or 66.2% compared to the corresponding three month period ended September 30, 2009. The increase in net sales is largely attributable to increases in sales in both the mountain biking and powered vehicles sectors. Sales increases in the powered vehicles sector are due to strong sales of suspension products to Ford Motor Company for use in its F-150 Raptor off-road pickup and sales to ATV OEMs. Sales increases in the mountain biking sector are principally due to increased sales to Bike OEMs as our new model year bikes were well received.

Cost of sales

Cost of sales for the three months ended September 30, 2010 increased approximately $17.0 million compared to the corresponding period in 2009. The increase in cost of sales is primarily attributable to the increase in net sales for the same period. Gross profit as a percentage of sales was up slightly during the three months ended September 30, 2010 (29.4% at September 30, 2010 vs. 28.8% at September 30, 2009) as efficiencies associated with the increase in volume were realized during the quarter which were offset in part by increases in transportation costs and unfavorable sales channel mix.

Selling, general and administrative expense

Selling, general and administrative expense for the three months ended September 30, 2010 increased approximately $1.7 million over the corresponding three month period in 2009. This increase is the result of increases in engineering, administrative, sales and marketing costs incurred during the quarter to support the sales growth.

Income from operations

Income from operations for the three months ended September 30, 2010 increased approximately $5.7 million compared to the corresponding period in 2009 based principally on the increase in net sales and other factors described above.

Nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 .

Net sales

Net sales for the nine months ended September 30, 2010 increased $41.9 million or 48.2% compared to the corresponding nine month period ended September 30, 2009. The increase in net sales is attributable to increases in sales in the mountain biking sector as well as increases in sales in the powered vehicles sector. Sales increases in the mountain biking sector were due to strong sales of new model year bikes. Additionally, prior model year bikes performed well compared to seasonally weak sales in 2009. Sales increases in the powered vehicles sector were largely due to increases in sales of suspension products to Ford Motor Company for use in its F-150 Raptor off-road pickup, and sales to ATV OEMs.

Cost of sales

Cost of sales for the nine months ended September 30, 2010 increased approximately $28.8 million compared to the corresponding period in 2009. The increase in cost of sales is primarily attributable to the increase in net sales for the same period. Gross profit as a percentage of sales increased during the nine months ended September 30, 2010 (29.1% at September 30, 2010 vs. 28.0% at September 30, 2009) due to efficiencies achieved associated with the increase in volume. This was offset in part by (i) an unfavorable channel mix in 2010 as a larger proportion of total net sales were in the OEM category which typically carries lower margins than Aftermarket sales and (ii) increases in transportation costs.

Selling, general and administrative expense

Selling, general and administrative expense for the nine months ended September 30, 2010 increased $2.7 million over the corresponding nine month period in 2009. This increase is the result of increases in engineering, administrative, sales and marketing costs to support the sales growth.

Income from operations

Income from operations for the nine months ended September 30, 2010 increased approximately $10.4 million compared to the corresponding period in 2009 based principally on the significant increase in net sales and other factors described above.

HALO

Overview

Operating under the brand names of HALO and Lee Wayne, headquartered in Sterling, IL, HALO is an independent provider of customized drop-ship promotional products in the U.S. Through an extensive group of dedicated sales professionals, HALO serves as a one-stop shop for over 40,000 customers throughout the U.S. HALO is involved in the design, sourcing, management and fulfillment of promotional products across several product categories, including apparel, calendars, writing instruments, drink ware and office accessories. HALO’s sales professionals work with customers and vendors to develop the most effective means of communicating a logo or marketing message to a target audience. Over 90% of products sold by HALO are drop shipped, resulting in minimal inventory risk. HALO has established itself as a leader in the promotional products and marketing industry through its focus on service through its approximately 700 account executives.

HALO acquired the promotional products distributor Relay Gear in February 2010.

Distribution of promotional products is seasonal. Typically, HALO expects to realize approximately 45% of its sales and over 70% of its operating income in the months of September through December, due principally to calendar sales and corporate holiday promotions.

Results of Operations

The table below summarizes the income from operations data for HALO for the three-month and nine-month periods ended September 30, 2010 and September 30, 2009:


	Three-months ended				Nine-months ended
	September 30,		September 30,		September 30,		September 30,
(in thousands)	2010		2009		2010		2009
Net sales	$	41,128	$	35,545	$	106,109	$	91,717
Cost of sales		25,373		21,859		64,947		56,537

Gross profit		15,755		13,686		41,162		35,180
Selling, general and administrative expense		13,695		12,202		38,170		34,291
Fees to manager		125		125		375		375
Amortization of intangibles		600		637		1,819		1,909

Income (loss) from operations	$	1,335	$	722	$	798	$	(1,395	)

Three-months ended September 30, 2010 compared to the three-months ended September 30, 2009.

Net sales

Net sales for the three months ended September 30, 2010 increased approximately $5.6 million or 15.7% over the corresponding three months ended September 30, 2009. Net sales attributable to acquisitions made since September 30, 2009 accounted for approximately $1.8 million in net sales during the three months ended September 30, 2010 while sales to existing accounts increased approximately $3.8 million during the three months ended September 30, 2010 compared to the same period in 2009. The increase in sales is due to increased promotional spending in 2010 compared to 2009 resulting from more favorable overall economic conditions in the promotions market in 2010.

Cost of sales

Cost of sales for the three months ended September 30, 2010 increased approximately $3.5 million compared to the same period in 2009. The increase in cost of sales is primarily attributable to the increase in net sales for the same period. Gross profit as a percentage of net sales totaled approximately 38.3% and 38.5% of net sales for the three-month periods ended September 30, 2010 and September 30, 2009, respectively. The slight decrease in gross profit as a percentage of sales in 2010 is due to an unfavorable sales channel mix compared to the third quarter of 2009.

Selling, general and administrative expense

Selling, general and administrative expense for the three months ended September 30, 2010 increased approximately $1.5 million compared to the same period in 2009. This increase is largely the result of increased direct commission expense as a result of the increase in net sales ($1.0 million) and increases in group insurance expense ($0.1 million). The remaining increases are due to increased overhead costs resulting from the increases in net sales.

Amortization of intangibles

Amortization expense decreased slightly (less than $0.1 million) in the three months ended September 30, 2010 compared to the same period in 2009. This decrease is the result of intangible assets from certain prior year acquisitions that have become fully amortized.

Income from operations

Income from operations increased $0.6 million in the three months ended September 30, 2010 compared to the three months ended September 30, 2009 based on the factors described above, particularly the increase in net sales.

Nine-months ended September 30, 2010 compared to the nine-months ended September 30, 2009.

Net sales

Net sales for the nine months ended September 30, 2010 increased approximately $14.4 million or 15.7% over the corresponding period in 2009. Net sales attributable to acquisitions made since September 30, 2009 accounted for approximately $3.2 million of the increase in net sales during the nine months ended September 30, 2010 while sales to existing accounts increased approximately $11.2 million during the same period. The increase in sales is due to increased promotional spending in 2010 compared to 2009 resulting from more favorable overall economic conditions in the promotions market in 2010.

Cost of sales

Cost of sales for the nine months ended September 30, 2010 increased approximately $8.4 million compared to the same period in 2009. The increase in cost of sales is primarily attributable to the increase in net sales for the same period. Gross profit as a percentage of net sales totaled approximately 38.8% and 38.4% of net sales for the nine month periods ended September 30, 2010 and September 30, 2009, respectively. The slight increase in gross profit as a percentage of sales in 2010 is due to a favorable sales channel mix.

Selling, general and administrative expense

Selling, general and administrative expense for the nine months ended September 30, 2010 increased approximately $3.9 million. This increase is largely the result of increased direct commission expense in 2010 as a result of the increase in net sales ($2.6 million), increased group insurance expense ($0.5 million) and increased sales and use taxes incurred ($0.2 million). The remaining increases are due to increased overhead costs resulting from the increases in net sales.

Amortization of intangibles

Amortization expense decreased approximately $0.1 million in the nine months ended September 30, 2010 compared to the same period in 2009. This decrease is the result of intangible assets from certain prior year acquisitions that have become fully amortized.

Income (loss) from operations

Income from operations was approximately $0.8 million for the nine months ended September 30, 2010 compared to a loss from operations of approximately $1.4 million during the nine months ended September 30, 2009. The increased income from operations was based principally on those factors described above.

Liberty Safe

Overview

Based in Payson, Utah and founded in 1988, Liberty Safe is the premier designer, manufacturer and marketer of home and gun safes in North America. From its over 200,000 square foot manufacturing facility, Liberty Safe produces a wide range of home and gun safe models in a broad assortment of sizes, features and styles ranging from an entry level product to good, better and best products. Products are marketed under the Liberty brand, as well as a portfolio of licensed and private label brands, including Remington, Cabela’s and John Deere. Liberty Safe’s products are the market share leader and are sold through an independent dealer network (“Dealer sales”) in addition to various sporting goods and home improvement retail outlets (“Non-Dealer sales”). Liberty has the largest independent dealer network in the industry.

Historically, approximately 60% of Liberty Safe’s net sales are Non-Dealer sales (“Non-dealer”) and 40% are Dealer (“Dealer”) sales.

Pro-forma Results of Operations

The table below summarizes the results of operations for Liberty Safe for the three-months ended September 30, 2010 and the pro-forma results of operations data for the three-months ended September 30, 2009 and the pro-forma results of operations for the nine-month periods ended September 30, 2010 and 2009. We acquired Liberty Safe on March 31, 2010. The following operating results are reported as if we acquired Liberty Safe on January 1, 2009.


	Three-months ended				Nine-months ended
	September 30,		September 30,		September 30,		September 30,
(in thousands)	2010		2009		2010		2009
			(Pro-forma)		(Pro-forma)		(Pro-forma)
Net sales	$	18,475	$	21,008	$	47,987	$	56,610
Cost of sales		14,435		15,364		35,746		41,577

Gross profit		4,040		5,644		12,241		15,033
Selling, general and administrative expense (a)		2,241		2,143		6,111		6,259
Fees to manager (b)		125		125		375		375
Amortization of intangibles (c)		1,299		1,290		3,883		3,883

Income from operations	$	375	$	2,086	$	1,872	$	4,516

Pro-forma results of operations of Liberty Safe for the three months ended September 30, 2009 and the nine-month periods ended September 30, 2010 and 2009 include the following pro-forma adjustments :


a)		Selling, general and administrative costs were reduced by $4.9 million in the nine-months ended September 30, 2010, representing an adjustment for one-time transaction costs incurred as a result of our purchase.

b)		Represents management fees that would have been payable to the Manager.

c)		An increase in amortization of intangible assets totaling $0.6 million in both the three-month period ended September 30, 2009 and nine-month period ended September 30, 2010 and $1.8 million in the nine-month period ended September 30, 2009. This adjustment is a result of and was derived from the purchase price allocation in connection with our acquisition of Liberty Safe.

Three-months ended September 30, 2010 compared to the pro-forma three-months ended September 30, 2009.

Net sales

Net sales for the three months ended September 30, 2010 decreased approximately $2.5 million over the corresponding three months ended September 30, 2009. Non-Dealer sales were approximately $12.8 million in the three months ended September 30, 2010 compared to $13.0 million in the same period in 2009 representing a decrease of $0.2 million or 1.5%. This decrease is the result of several Non-Dealer accounts trailing last year. Dealer sales totaled approximately $5.7 million in the three months ended September 30, 2010 compared to $8.0 million in the same period in 2009 representing a decrease of $2.3 million or 28.8%. The decrease in Non-Dealer sales and the significant decrease in Dealer sales in 2010 principally results from a comparison of a very strong quarter in 2009 resulting from customers’ anticipation of stricter gun laws being enacted by the new Federal administration to a more normalized quarter in 2010 for the Dealer channel.

Cost of sales

Cost of sales for the three months ended September 30, 2010 decreased approximately $0.9 million. The decrease in cost of sales is primarily attributable to the decrease in net sales for the same period. Gross profit as a percentage of net sales totaled approximately 21.9% and 26.9% of net sales for the three-month periods ended September 30, 2010 and September 30, 2009, respectively. The decrease in gross profit as a percentage of sales for the three months ended September 30, 2010 compared to 2009 is attributable to; (i) a decline in Dealer sales which traditionally has higher margin sales; (ii) unfavorable manufacturing absorption rates in 2010 due to the decline in production volume; (iii) increases in freight costs due to higher fuel prices; and (iv) a higher mix of sales coming from a large customer taking direct shipments from China with lower margins.

Selling, general and administrative expense

Selling, general and administrative expense for the three months ended September 30, 2010, increased approximately $0.1 million compared to the same period in 2009. This increase is largely the result of decreased commission expenses resulting from the net sales decline offset by the cost of a national ad campaign that was launched in the third quarter of 2010 and severance cost.

Income from operations

Income from operations decreased $1.7 million in the three months ended September 30, 2010 to $0.4 million compared to the three months ended September 30, 2009 based on the factors described above, particularly the decline in net sales.

Pro-forma nine months ended September 30, 2010 compared to the pro-forma nine months ended September 30, 2009.

Net sales

Net sales for the nine-months ended September 30, 2010 decreased approximately $8.6 million over the corresponding nine-months ended September 30, 2009. Non-Dealer sales were approximately $29.5 million in the nine months ended September 30, 2010 compared to $35.1 million in the same period in 2009, representing a decrease of $5.6 million or 16.0%. Dealer sales totaled approximately $18.5 million in the nine months ended September 30, 2010 compared to $21.5 million in the same period in 2009 representing a decrease of $3.0 million or 14.0%. The significant decrease in Non-Dealer sales in 2010 is principally the result of one significant customer who experienced low demand for their private label product safes, which represented a new product line supplied by Liberty Safe. Historically, this customer represented approximately 25% of Liberty Safe’s Non-Dealer sales. This customer will gain some momentum going into the fourth quarter as we replace their private label product with Liberty product. In addition, other Non-Dealer sales are lower in 2010 as a result The decline in Dealer sales is due to less product demand in 2010 overall compared to 2009 due to greater than average sales in 2009 resulting from customers’ anticipation of stricter gun laws being enacted by the new Federal administration.

Cost of sales

Cost of sales for the nine months ended September 30, 2010 decreased approximately $5.8 million. The decrease in cost of sales is primarily attributable to the decrease in net sales for the same period. Gross profit as a percentage of net sales totaled approximately 25.5% and 26.6% of net sales for the nine-month periods ended September 30, 2010 and September 30, 2009, respectively. The decrease in gross profit as a percent of sales of 1.1% is attributable to a less favorable sales mix in 2010, represented by a greater proportion of Dealer sales in 2010.

Selling, general and administrative expense

Selling, general and administrative expense for the nine months ended September 30, 2010, decreased approximately $0.1 million compared to the same period in 2009. This decrease is largely the result of decreased direct commission expense and co-op advertising as a result of the decline in net sales during 2010 offset by higher advertising costs as Liberty launched a national radio campaign in the third quarter.

Income from operations

Income from operations decreased $2.6 million in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 based on the factors described above, particularly the decline in net sales.

Staffmark

Overview

Staffmark, a provider of temporary staffing services in the United States, provides a wide range of human resources services, including temporary staffing services, employee leasing services, and permanent staffing and temporary-to-permanent placement services. Staffmark serves over 6,400 corporate and small business clients and during an average week places over 40,000 employees in a broad range of industries. These industries include manufacturing, transportation, retail, distribution, warehousing, and automotive supply, as well as, construction, industrial, healthcare and financial sectors.

Staffmark’s business strategy includes maximizing production in existing offices, increasing the number of offices within a market when conditions warrant, and expanding organically into contiguous markets where it can benefit from shared management and administrative expenses. Staffmark typically enters into new markets through acquisitions. Staffmark continues to view acquisitions as an attractive means to enter new geographic markets.

Fiscal 2008 and 2009 were challenging years for the temporary staffing industry. The already-weak economic conditions and employment trends in the U.S., present during 2008, continued to worsen as the year progressed and continued through the first three quarters of fiscal 2009. Economic conditions and employment trends showed positive signs of improvement in the fourth quarter of 2009 which has continued through 2010 to date.

Results of Operations

The table below summarizes the income from operations data for Staffmark for the three and nine- month periods ended September 30, 2010 and 2009


	Three-months ended				Nine-months ended
	September 30,		September 30,		September 30,		September 30,
(in thousands)	2010		2009		2010		2009
Service revenues	$	271,333	$	193,284	$	740,089	$	525,636
Cost of services		230,057		163,631		633,757		445,224

Gross profit		41,276		29,653		106,332		80,412
Staffing, selling, general and administrative exp.		29,410		27,200		86,320		85,042
Fees to manager		10		239		293		659
Amortization of intangibles		1,226		1,213		3,678		3,640
Impairment expense		—		—		—		50,000

Income (loss) from operations	$	10,630	$	1,001	$	16,041	$	(58,929	)

Three months ended September 30, 2010 compared to the three months ended September 30, 2009.

Service revenues

Service revenues for the three months ended September 30, 2010 increased $78.0 million over the corresponding three months ended September 30, 2009. This increase in revenues reflects increased demand for temporary staffing services (primarily light industrial). We continue to witness temporary staffing job creation and signs of a strengthening domestic economy, although uncertainty remains.

Cost of services

Direct cost of services for the three months ended September 30, 2010 increased approximately $66.4 million compared to the same period a year ago. This increase is principally the direct result of the increase in service revenues. Gross profit as a percentage of service revenue was approximately 15.2% and 15.3% of revenues for the three-month periods ended September 30, 2010 and 2009, respectively. The Hiring Incentives to Restore Employment Act H.R. 2847 (HIRE) enacted March 18, 2010, provides for exemptions from the employer’s portion of social security taxes for certain eligible new hires. This exemption is short term and set to expire December 31, 2010. HIRE exemptions contributed approximately 50 basis points to Staffmark’s gross margin for the three months ended September 30, 2010. Excluding those exemptions recognized in the quarter, the gross profit as a percentage of service revenue would have been approximately 14.7% for the three-month period ended September 30, 2010. A decrease of 60 basis points compared to 2009. The primary reason for the decrease in the gross profit margin is the result of higher unemployment taxes in 2010 as a result of increased funding requirements for various states’ depleted unemployment reserves.

Staffing, selling, general and administrative expense

Staffing, selling, general and administrative expense for the three months ended September 30, 2010 increased approximately $2.2 million compared to the same period a year ago. Management reduced overhead costs, consolidated facilities and closed unprofitable branches in order to mitigate the negative impact of the weak economic environment throughout 2009. The increase is primarily driven by increased staffing expense, which is directly tied to increased service volume.

Fees to manager

Fees to manager decreased approximately $0.2 million as a result of an amendment to the Management Services Agreement that reduces the 2010 fee to approximately 25% of the Manager’s full-year fee.

Income (loss) from operations

Income from operations increased approximately $9.6 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 based principally on the factors described above.

Nine months ended September 30, 2010 compared to the nine months ended September 30, 2009.

Service revenues

Service revenues for the nine months ended September 30, 2010 increased approximately $214.5 million over the corresponding nine months ended September 30, 2009. This increase in revenues reflects increased demand for temporary staffing services (primarily light industrial). We continue to witness temporary staffing job creation and signs of a strengthening global economy, although uncertainty remains.

Cost of revenues

Direct cost of revenues for the nine months ended September 30, 2010 increased approximately $188.5 million compared to the same period a year ago. This increase is principally the direct result of the increase in service revenues. Gross profit as a percentage of service revenue was approximately 14.4% and 15.3% of revenues for the nine-month periods ended September 30, 2010 and 2009, respectively. The Hiring Incentives to Restore Employment Act H.R. 2847 (HIRE) enacted March 18, 2010, provides for exemptions from the employer’s portion of social security taxes for certain eligible new hires. This exemption is short term and set to expire December 31, 2010. Excluding those exemptions, the gross profit as a percentage of service revenue would have been approximately 14.1% for the nine-month period ended September 30, 2010. The majority of the decrease in the gross profit margin is the result of two factors: (i) unemployment taxes are higher in 2010 as a result of increased funding required for various states’ depleted unemployment reserves; and (ii) downward market pricing pressure resulting from the recent economic downturn.

Staffing, selling, general and administrative expense

Staffing, selling, general and administrative expense for the nine months ended September 30, 2010 increased approximately $1.3 million compared to the same period a year ago. Management reduced overhead costs, consolidated facilities and closed unprofitable branches in order to mitigate the negative impact of the weak economic environment throughout 2009. Management continues to control its costs; limiting its spending increases to areas such as staffing costs required to support increased service volumes and financial performance .

Impairment expense

Based on the results of our annual goodwill impairment test in March 2009 we determined that the carrying amount of Staffmark exceeded its fair value by approximately $50.0 million as of March 31, 2009. Therefore, we recorded a $50.0 million pretax goodwill impairment charge for the nine months ended September 30, 2009. We performed the annual goodwill impairment test as of March 31, 2010 and our results indicated that no impairment of goodwill was evident.

Income (loss) from operations

Income (loss) from operations increased approximately $75.0 million for the nine months ended September 30, 2010 to operating income of $16.0 million in 2010 compared to an operating loss of $58.9 million for the nine months ended September 30, 2009, based principally on the factors described above.

Tridien Medical

Overview

Tridien Medical, formerly known as Anodyne Medical Device, Inc. (“Tridien”) headquartered in Coral Springs, Florida, is a leading designer and manufacturer of powered and non-powered medical therapeutic support services and patient positioning devices serving the acute care, long-term care and home health care markets. Tridien is one of the nation’s leading designers and manufacturers of specialty therapeutic support surfaces with manufacturing operations in multiple locations to better serve a national customer base.

Tridien, together with its subsidiary companies, provides customers the opportunity to source leading surface technologies from the designer and manufacturer.

Tridien develops products both independently and in partnership with large distribution intermediaries. Medical distribution companies then sell or rent the therapeutic support surfaces, sometimes in conjunction with bed frames and accessories to one of three end markets: (i) acute care, (ii) long term care and (iii) home health care. The level of sophistication largely varies for each product, as some patients require simple foam mattress beds (“non-powered” support surfaces) while others may require electronically controlled, low air loss, lateral rotation, pulmonary therapy or alternating pressure surfaces (“powered” support surfaces). The design, engineering and manufacturing of all products are completed in-house (with the exception of PrimaTech products, which are manufactured in Taiwan) and are FDA compliant.

Results of Operations

The table below summarizes the income from operations data for Tridien for the three- and nine-month periods ended September 30, 2010 and September 30, 2009.


	Three-months ended				Nine-months ended
	September 30,		September 30,		September 30,		September 30,
(in thousands)	2010		2009		2010		2009
Net sales	$	14,728	$	13,868	$	46,809	$	39,479
Cost of sales		10,187		9,657		32,071		27,836

Gross profit		4,541		4,211		14,738		11,643
Selling, general and administrative expense		1,935		1,644		5,570		5,289
Fees to manager		88		88		263		263
Amortization of intangibles		368		371		1,119		1,112

Income from operations	$	2,150	$	2,108	$	7,786	$	4,979

Three months ended September 30, 2010 compared to the three months ended September 30, 2009.

Net sales

Net sales for the three months ended September 30, 2010 increased approximately $0.9 million over the corresponding three months ended September 30, 2009. Net sales increases were realized from powered support surfaces of $0.5 million and positioning products of $0.6 million, which were offset in part by a decline in non-powered support surfaces of $0.2 million. Sales of powered support surfaces are continuing to show signs of recovery in 2010 over 2009. Non-powered support surfaces and patient positioning products represented approximately 78.5% of sales in the third quarter of 2010 compared to 81% in 2009.

Cost of sales

Cost of sales increased approximately $0.5 million in the three months ended September 30, 2010 compared to the same period of 2009, primarily due to increases in net sales. Gross profit as a percentage of sales was 30.8% in the three months ended September 30, 2010 compared to 30.4% in the corresponding period in 2009. The increase of 0.4% of gross profit as a percentage of net sales in 2010 is principally due to favorable absorption rates on fixed manufacturing overhead offset in part by the negative impact of timing between contractual price adjustments and changes in commodity raw material costs. We expect raw material price increases in the fourth quarter of 2010 that may have a negative impact on our margins of approximately 150 basis points going forward.

Selling, general and administrative expense

Selling, general and administrative expense for the three months ended September 30, 2010 increased approximately $0.3 million compared to the same period of 2009. This increase is principally the result of a planned increased spending in engineering support and new product development.

Income from operations

Income from operations in the three months ended September 30, 2010 was essentially flat compared to the three months ended September 30, 2009, due principally to those factors described above.

Nine months ended September 30, 2010 compared to the nine months ended September 30, 2009.

Net sales

Net sales for the nine months ended September 30, 2010 increased approximately $7.3 million over the corresponding nine months ended September 30, 2009. Sales of non-powered support surfaces increased by $3.9 million while sales of powered support services and positioning products increased by $2.0 million and $1.4 million, respectively, in the first nine months of 2010. Non-powered support surfaces and patient positioning products represented approximately 76.4% of sales during the nine-months ended September 30, 2010 compared to 77.2% of sales during the same period in 2009.

Cost of sales

Cost of sales increased approximately $4.2 million in the nine months ended September 30, 2010 compared to the same period of 2009, primarily due to the increase in net sales and inflationary cost increases. Gross profit as a percentage of sales was 31.5% in the nine months ended September 30, 2010 compared to 29.5% in the corresponding period in 2009. The

increase of 2.0% of gross profit in 2010 when compared with 2009 is principally due to labor and manufacturing efficiencies realized during the period from higher volumes, an increase in higher margin powered product sales offset in part by the negative impact of timing between contractual price adjustments and inflationary cost increases. We expect raw material price increases in the fourth quarter of 2010 that may have a negative impact on our margins of approximately 150 basis points going forward.

Selling, general and administrative expense

Selling, general and administrative expense for the nine months ended September 30, 2010 increased approximately $0.3 million compared to the same period of 2009. This increase is principally the result of a planned increased spend in engineering support and new product development offset by $0.2 million in savings from the closure of the Oklahoma office and distribution center in the second quarter of 2009.

Income from operations

Income from operations for the nine months ended September 30, 2010 increased approximately $2.8 million over the corresponding period in 2009, due principally to those factors described above.

Liquidity and Capital Resources

For the nine months ended September 30, 2010, on a consolidated basis, cash flows provided by operating activities totaled approximately $28.8 million, which represents a $7.4 million increase in cash provided by operations compared to the nine-month period ended September 30, 2009. This increase is due principally to the increase in operating income, with the exception of American Furniture, at each of our businesses. Consolidated net loss, adjusted for non-cash activity, improved by approximately $33.6 million in the nine-months ended September 30, 2010 compared to the same period in 2009.

Cash flows used in investing activities totaled approximately $178.4 million, which reflects maintenance capital expenditures of approximately $4.7 million and costs associated with platform and add-on acquisitions totaling approximately $173.7 million. We anticipate increases in capital expenditures during the remainder of fiscal 2010. Total capital expenditures for fiscal 2010 are expected to aggregate approximately $8.0 million.

Cash flows provided by financing activities totaled approximately $142.5 million, principally reflecting: (i) borrowings under our Revolving Credit Facility of $100.8 million and repayments of our Term Loan Facility of $1.5 million; (ii) proceeds from our April 2010 stock offering of $75.0 million; and (iii) receipt of approximately $9.5 million from investments in our recent acquisitions by non controlling shareholders, offset in part by distributions paid to shareholders during the year totaling approximately $40.9 million.

At September 30, 2010, we had approximately $24.5 million of cash and cash equivalents on hand. The majority of our cash is invested in short-term money market accounts and is maintained in accordance with the Company’s investment policy, which identifies allowable investments and specifies credit quality standards.

We had the following outstanding loans due from each of our businesses:

•

Advanced Circuits — approximately $48.2 million;

•

American Furniture — approximately $73.9 million;

•

ERGObaby — approximately $48.7 million;

•

Fox Factory — approximately $43.0 million;

•

HALO — approximately $47.4 million;

•

Liberty — approximately $41.6 million;

•

Staffmark — approximately $71.0 million; and

•

Tridien — approximately $7.9 million.

Each loan has a scheduled maturity and each business is entitled to repay all or a portion of the principal amount of the outstanding loans, without penalty, prior to maturity.

Our primary source of cash is from the receipt of interest and principal on the outstanding loans to our businesses. Accordingly, we are dependent upon the earnings of and cash flow from these businesses, which are available for (i) operating expenses; (ii) payment of principal and interest under our Credit Agreement; (iii) payments to CGM due pursuant to the Management Services Agreement, the LLC Agreement, and the Supplemental Put Agreement; (iv) cash distributions to our shareholders; and (v) investments in future acquisitions. Payments made under (iii) above are required to be paid before distributions to shareholders and may be significant and exceed the funds held by us, which may require us to dispose of assets or incur debt to fund such expenditures.

We incurred non-cash charges to earnings of approximately $18.6 million during the nine-months ended September 30, 2010 in order to recognize an increase in our estimated liability in connection with the Supplemental Put Agreement between us and CGM. A non-current liability of approximately $30.7 million is reflected in our condensed consolidated balance sheet, which represents our estimated liability for this obligation at September 30, 2010.

Our Credit Agreement provides for a Revolving Credit Facility totaling $340 million, subject to availability, which matures in December 2012 and a Term Loan Facility totaling $74.5 million, which matures in December 2013.

The Term Loan Facility requires quarterly payments of $0.5 million which commenced March 31, 2008, with a final payment of the outstanding principal balance due on December 7, 2013. On January 22, 2008 we entered into a three-year interest rate swap agreement with a bank, fixing the rate of $70.0 million at 7.35% on a like amount of variable rate Term Loan Facility borrowings. The interest rate swap was intended to mitigate the impact of fluctuations in interest rates and effectively converts $70 million of our floating-rate Term Facility Debt to a fixed- rate basis for a period of three years. The swap expires January 24, 2011.

At September 30, 2010 we had $100.8 million in outstanding borrowings under our Revolving Credit Facility. We had approximately $172.7 million in additional borrowing base availability under this facility at September 30, 2010. Letters of Credit totaling $68.3 million were outstanding at September 30, 2010. We currently have no exposure to failed financial institutions.

The following table reflects required and actual financial ratios as of September 30, 2010 included as part of the affirmative covenants in our Credit Agreement:


Description of Required Covenant Ratio	Covenant Ratio Requirement	Actual Ratio
Fixed Charge Coverage Ratio	greater than or equal to 1.5:1.0	6.80:1.0
Interest Coverage Ratio	greater than or equal to 2.75:1.0	9.92:1.0
Leverage Ratio	less than or equal to 3.5:1.0	1.72:1.0

We intend to use the availability under our Credit Agreement and cash on hand to pursue acquisitions of additional businesses to the extent permitted under our Credit Agreement, to fund distributions and to provide for other working capital needs.

We believe that we currently have sufficient liquidity and resources to meet our existing obligations, including quarterly distributions to our shareholders, as approved by our Board of Directors, over the next twelve months. We have considered the impact of recent market instability and credit availability in assessing the adequacy of our liquidity and capital resources.

The table below details cash receipts and payments that are not reflected on our income statement in order to provide an additional measure of management’s estimate of cash flow available for distribution and reinvestment (“CAD”). CAD is a non-GAAP measure that we believe provides additional information to evaluate our ability to make anticipated quarterly distributions. It is not necessarily comparable with similar measures provided by other entities. We believe that CAD, together with future distributions and cash available from our businesses (net of reserves) will be sufficient to meet our anticipated distributions over the next twelve months. The table below reconciles CAD to net income and to cash flow provided by operating activities, which we consider to be the most directly comparable financial measure calculated and presented in accordance with GAAP.


	Nine months			Nine months
	ended			ended
(in thousands)	Sept. 30, 2010			Sept. 30, 2009
	(unaudited)			(unaudited)
Net loss	$	(45,447	)	$	(39,595	)
Adjustment to reconcile net loss to cash provided by operating activities

Depreciation and amortization		27,984			24,989
Supplemental put expense		18,630			(8,518	)
Stockholder charges		8,209			1,378
Impairment charges		42,435			59,800
Deferred taxes		(5,115	)		(28,107	)
Debt issuance costs		1,329			1,343
Loss on debt repayment		—			3,652
Other		245			(254	)
Changes in operating assets and liabilities		(19,443	)		6,746

Net cash provided by operating activities		28,827			21,434

Add (deduct):
Unused fee on revolving credit facility (1)		2,378			2,581
Successful acquisition costs		3,970			—
Staffmark integration and restructuring		—			4,022
Changes in operating assets and liabilities		19,443			(6,746	)

Less:
Maintenance capital expenditures:
Compass Group Diversified Holdings LLC		—			—
Advanced Circuits		228			159
American Furniture		173			488
Tridien		722			395
Staffmark		2,166			400
Fox		651			334
Halo		442			405
ERGObaby		62			—
Liberty		259			—


Estimated cash flow available for distribution	$	49,915		$	19,110


Distribution paid — April of 2010 and 2009	$	14,238		$	10,719
Distribution paid — July of 2010 and 2009		14,238			12,452
Distribution paid — October of 2010 and 2009		14,238			12,452

	$	42,714		$	35,623


(1)		Represents the commitment fee on the unused portion of the Revolving Credit Facility.

(2)		Represents transaction cost for successful acquisitions that were expensed during the period.

Cash flows of certain of our businesses are seasonal in nature. Cash flows from American Furniture are typically highest in the months of January through April coinciding with income tax refunds. Cash flows from Staffmark are typically lower in the first quarter of each year than in other quarters due to: (i) reduced seasonal demand for temporary staffing services and (ii) lower gross margins earned during that period due to the front-end loading of certain payroll taxes and other costs associated with payroll paid to our employees. Cash flows from HALO are typically highest in the months of September

through December of each year primarily as the result of calendar sales and holiday promotions. HALO generates approximately two-thirds of its operating income in the months of September through December.

Contractual Obligations and Off-Balance Sheet Arrangements

We have no special purpose entities or off-balance sheet arrangements, other than operating leases entered into in the ordinary course of business.

Long-term contractual obligations, except for our long-term debt obligations, are generally not recognized in our consolidated balance sheet. Non-cancelable purchase obligations are obligations we incur during the normal course of business, based on projected needs.

The table below summarizes the payment schedule of our contractual obligations at September 30, 2010:


									More than
	Total		Less than 1 Year		1-3 Years		3-5 Years		5 Years
Long-term debt obligations (a)	$	201,040	$	12,143	$	119,627	$	69,270	$	—
Capital lease obligations		859		253		412		194		—
Operating lease obligations (b)		64,479		12,556		19,817		11,600		20,506
Purchase obligations (c)		168,999		105,486		33,438		30,075		—
Supplemental put obligation (d)		30,712		—		—		—		—

	$	466,089	$	130,438	$	173,294	$	111,139	$	20,506


(a)		Reflects commitment fees and letter of credit fees under our Revolving Credit Facility and amounts due, together with interest on our Term Loan Facility.

(b)		Reflects various operating leases for office space, manufacturing facilities, and equipment from third parties with various lease terms running from one to fourteen years.

(c)		Reflects non-cancelable commitments as of September 30, 2010, including: (i) shareholder distributions of $57 million, (ii) management fees of approximately $15 million per year over the next five years, (iii) commitment fees under our Revolving Credit Facility, and (iv) other obligations, including amounts due under employment agreements.

(d)		The supplemental put obligation represents the long-term portion of an estimated liability accrued as if our management services agreement with CGM had been terminated. This agreement has not been terminated and there is no basis upon which to determine a date in the future, if any, that this amount will be paid.

The table does not include the long-term portion of the actuarially developed reserve for workers compensation, included as a component of long-term liabilities, which does not provide for annual estimated payments beyond one year.

Critical Accounting Estimates

The preparation of our financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates under different assumptions and judgments and uncertainties, and potentially could result in materially different results under different conditions. These critical accounting estimates are reviewed periodically by our independent auditors and the Audit Committee of our Board of Directors.

With the exception of the interim goodwill impairment test performed at American Furniture as of September 30, 2010, estimates employed and judgment used in determining critical accounting estimates have not changed from those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, for the year ended December 31, 2009 as filed with the SEC with the exception.

Interim impairment testing — American Furniture

year, which we believed would coincide with the overall modest economic rebound, has not occurred in the furniture industry and we do not at this time believe it will occur in the near future. Accordingly, we adjusted our forecast for American Furniture to reflect a revised outlook assuming continued pressure on sales and gross margins in the furniture industry. The revised forecast, which is used to populate a discounted cash flow analysis, led to the conclusion that it was more likely than not that the fair value of American Furniture was below its carrying amount.

The goodwill impairment test is a two-step process, which requires management to make judgments in determining certain assumptions used in the calculation. The first step of the process consists of estimating the fair value of each of our reporting units based on a discounted cash flow model using revenue and profit forecasts and comparing those estimated fair values with the carrying values, which include allocated goodwill. If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill. The determination of a reporting unit’s “implied fair value” of goodwill requires the allocation of the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any unallocated fair value represents the “implied fair value” of goodwill, which is then compared to its corresponding carrying value. We cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill and/or intangible assets. Such events include, but are not limited to, strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our customer base, and material adverse effects in relationships with significant customers.

The “implied fair value” of reporting units is determined by management and is based upon (i) future cash flow projections for the reporting unit, discounted to present value and (ii) market comparison to comparable peer companies. We weigh the results from the two methodologies based on the relative strength of each and arrive at a blended indication of fair value at each of our reporting units. We use outside valuation experts to assist us in determining and evaluating the fair value of our reporting units.

The carrying amount of American Furniture exceeded its fair value at September 30, 2010 due primarily to the significant decrease in revenue and operating profit together with management’s revised outlook on near term operating results. As a result, we performed the second step of the goodwill impairment test in order to determine the amount of impairment loss. The second step of the goodwill impairment test involved comparing the implied fair value of American Furniture’s goodwill with the carrying value of that goodwill. This comparison resulted in a preliminary goodwill impairment charge of $41.4 million, which was recorded in impairment expense on the consolidated statement of operations. Further, the preliminary results of this analysis indicated that the carrying value of American Furniture’s trade name exceeded its fair value by approximately $1.0 million. The fair value of the American Furniture trade name was determined by applying the relief from royalty technique to forecasted revenues at the American Furniture reporting unit.

The impairment charge related to the Company’s American Furniture reporting unit reflects the preliminary indication from the impairment analysis performed to date and is subject to finalization of certain fair value estimates being performed with the assistance of an outside independent valuation specialist, and may be adjusted when all aspects of the analysis are completed. The Company currently expects to finalize its goodwill impairment analysis during the fourth quarter of fiscal 2010. Any adjustments to the Company’s preliminary estimate of impairment as a result of completion of this evaluation are currently expected to be recorded in the Company’s consolidated financial statements for the fourth quarter of fiscal 2010.

Recent Accounting Pronouncements

Refer to footnote C to our condensed consolidated financial statements.

ITEM 3. — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The quantitative and qualitative disclosures about market risk required by this item have not changed materially from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009 as filed with the SEC on March 9, 2010.

ITEM 4. — CONTROLS AND PROCEDURES

As required by Exchange Act Rule 13a-15(b), Holding’s Regular Trustees and the Company’s management, including the Chief Executive Officer and Chief Financial Officer of the Company, conducted an evaluation of the effectiveness of Holdings’ and the Company’s disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of September 30, 2010. Based on that evaluation, the Regular Trustees of Holdings’ and the Chief Executive Officer and Chief Financial Officer of the Company concluded that Holdings’ and the Company’s disclosure controls and procedures were effective as of September 30, 2010.

In connection with the evaluation required by Exchange Act Rule 13a-15(d), Holding’s Regular Trustees and the Company’s management, including the Chief Executive Officer and Chief Financial Officer of the Company, concluded that no changes in Holdings’ or the Company’s internal control over financial reporting occurred during the third quarter of 2010 that have materially affected, or are reasonably likely to materially affect, Holdings’ and the Company’s internal control over financial reporting.

PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Legal proceedings associated with the Company’s and Holdings’ business together with legal proceedings for the businesses have not changed materially from those disclosed in Part I, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2009 as filed with the SEC on March 9, 2010.

ITEM 1A. RISK FACTORS

Risk factors and uncertainties associated with the Company’s and Holdings’ business have not changed materially from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009 as filed with the SEC on March 9, 2010.

ITEM 6. Exhibits


Exhibit Number		Description
3.1		Fourth Amendment dated as of November 1, 2010 to the Amended and Restated Trust Agreement, as amended effective January 1, 2007, of Compass Diversified Holdings, originally effective as of April 25, 2006, by and among Compass Group Diversified Holdings LLC, as Sponsor, The Bank of New York (Delaware), as Delaware Trustee, and the Regular Trustees named therein

3.2		Third Amended and Restated Operating Agreement of Compass Group Diversified Holdings LLC dated November 1, 2010

31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Registrant

31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Registrant

32.1		Section 1350 Certification of Chief Executive Officer of Registrant

32.2		Section 1350 Certification of Chief Financial Officer of Registrant

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	COMPASS DIVERSIFIED HOLDINGS
	By:	/s/ James J. Bottiglieri
		James J. Bottiglieri
		Regular Trustee

Date: November 8, 2010

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	COMPASS GROUP DIVERSIFIED HOLDINGS LLC
	By:	/s/ James J. Bottiglieri
		James J. Bottiglieri
		Chief Financial Officer (Principal Financial and Accounting Officer)

Date: November 8, 2010

EXHIBIT INDEX


Exhibit
No .		Description
3.1		Fourth Amendment dated as of November 1, 2010 to the Amended and Restated Trust Agreement, as amended effective January 1, 2007, of Compass Diversified Holdings, originally effective as of April 25, 2006, by and among Compass Group Diversified Holdings LLC, as Sponsor, The Bank of New York (Delaware), as Delaware Trustee, and the Regular Trustees named therein

3.2		Third Amended and Restated Operating Agreement of Compass Group Diversified Holdings LLC dated November 1, 2010

31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Registrant

31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Registrant

32.1		Section 1350 Certification of Chief Executive Officer of Registrant

32.2		Section 1350 Certification of Chief Financial Officer of Registrant

Exhibit 3.1

FOURTH AMENDMENT

THIS FOURTH AMENDMENT (“ Third Amendment ”) dated as of November 1, 2010 to the Amended and Restated Trust Agreement, as amended effective January 1, 2007 (“ Agreement ”), of Compass Diversified Holdings, a Delaware statutory trust (the “ Trust ”), originally effective as of April 25, 2006, the effective date of the Agreement, by and among COMPASS GROUP DIVERSIFIED HOLDINGS LLC, a Delaware limited liability company (the “ Sponsor ” ), THE BANK OF NEW YORK (DELAWARE), a Delaware banking corporation, as Delaware trustee (in such capacity, the “ Delaware Trustee ” ) , and MR. ALAN B. OFFENBERG and MR. JAMES J. BOTTIGLIERI, as the regular trustees (each a “ Regular Trustee ” , together “ Regular Trustees ” and, collectively with the Delaware Trustee, the “ Trustees ”).

The Sponsor and the Trustees hereby agree as follows:

1. The Agreement is hereby amended to reflect all of the terms and conditions set forth in the updated Agreement that is attached hereto as Exhibit A .

2. The Sponsor and the Trustees otherwise ratify and confirm the Agreement.

[signatures on following page]

IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to be duly executed by their respective officers hereunto duly authorized, as of the day and year first above written.


SPONSOR: Compass Group Diversified Holdings LLC, a Delaware limited liability company
By:	/s/ I. Joseph Massoud
	Name:	I. Joseph Massoud
	Its: Chief Executive Officer

REGULAR TRUSTEES:
/s/ James J. Bottiglieri
James J. Bottiglieri

/s/ Alan B. Offenberg
Alan B. Offenberg

- ii -

EXHIBIT A

AMENDED AND RESTATED TRUST AGREEMENT

COMPASS DIVERSIFIED HOLDINGS

AMONG

COMPASS GROUP DIVERSIFIED HOLDINGS LLC

as Sponsor,

THE BANK OF NEW YORK (DELAWARE)

as Delaware Trustee,

AND

THE REGULAR TRUSTEES NAMED HEREIN,

Dated as of November 1, 2010

- iii -

TABLE OF CONTENTS


ARTICLE I DEFINED TERMS			2
Section 1.1 Definitions			2
ARTICLE II ESTABLISHMENT OF THE TRUST			7
Section 2.1 Name			7
Section 2.2 Office of the Delaware Trustee; Principal Place of Business			7
Section 2.3 Trust to Be Sole Owner of Sponsor Interests			7
Section 2.4 Authorized Shares			8
Section 2.5 Shareholders to be Bound			8
Section 2.6 Issuance of Additional Shares			8
Section 2.7 Repurchase of Outstanding Shares at Direction of the Sponsor			8
Section 2.8 Agreement of Trust			9
Section 2.9 Authorization to Enter into Certain Transactions			9
Section 2.10 Title to Trust Property			11
Section 2.11 Certain Covenants of the Sponsor			11
ARTICLE III DISTRIBUTIONS			11
Section 3.1 Distributions			11
Section 3.2 Payment Procedures			11
Section 3.3 Tax Returns and Reports			11
Section 3.4 Allocation of Profits and Losses.			12
ARTICLE IV SHARE CERTIFICATES			12
Section 4.1 Share Certificates			12
Section 4.2 Share Register			12
Section 4.3 Transfer of Shares			12
Section 4.4 Mutilated, Lost, Destroyed or Stolen Share Certificates			13
Section 4.5 Rights of Shareholders			13
ARTICLE V MEETINGS; VOTING			13
Section 5.1 Annual Meetings of Shareholders			13
Section 5.2 Special Meetings of Shareholders			14
Section 5.3 Place of Meeting			14
Section 5.4 Notice of Meeting			14
Section 5.5 Quorum and Adjournment			15
Section 5.6 Voting			16

-i-

TABLE OF CONTENTS
(continued)


	Page
Section 5.7 Proxies		16
Section 5.8 Notice of Shareholder Business and Nominations		16
Section 5.9 Procedure for Election of Directors; Voting		19
Section 5.10 Inspectors of Elections; Opening and Closing the Polls		20
Section 5.11 Confidential Shareholder Voting		20
Section 5.12 Waiver of Notice		20
Section 5.13 Remote Communication		21
Section 5.14 Action by Written Consent		21
Section 5.15 Inspection of Records		21
ARTICLE VI RIGHT OF SHAREHOLDERS TO ENFORCE PROVISIONS OF SPONSOR AGREEMENTS AND BRING DERIVATIVE ACTION		22
Section 6.1 Right to Institute Legal Proceeding		22
Section 6.2 Ten Percent (10%) or More Shareholder		22
ARTICLE VII SHAREHOLDER VOTE REQUIRED IN CONNECTION WITH CERTAIN BUSINESS COMBINATIONS OR TRANSACTIONS		23
Section 7.1 Vote Generally Required		23
Section 7.2 Vote for Business Combinations		23
Section 7.3 Power of Continuing Directors		23
Section 7.4 No Effect on Fiduciary Obligations		24
ARTICLE VIII THE TRUSTEES		24
Section 8.1 Certain Duties and Responsibilities		24
Section 8.2 Not Responsible for Recitals or Issuance of Shares		26
Section 8.3 May Hold Shares		26
Section 8.4 Compensation; Indemnity; Fees		26
Section 8.5 Delaware Trustee Required; Eligibility of Trustees		26
Section 8.6 Resignation and Removal; Appointment of Successor		27
Section 8.7 Acceptance of Appointment by Successor		28
Section 8.8 Merger, Conversion, Consolidation or Succession to Business		28
Section 8.9 Number of Trustees		28
Section 8.10 Delegation of Power		28
Section 8.11 Resignation and Appointment of Regular Trustees		29

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TABLE OF CONTENTS
(continued)


	Page
ARTICLE IX TERMINATION AND DISSOLUTION		29
Section 9.1 Termination or Dissolution		29
Section 9.2 Circumstances Under Which Shares Shall Be Voluntarily Exchanged for Sponsor Interests		29
Section 9.3 Circumstances Under Which Shares Shall Be Mandatorily Exchanged for Sponsor Interests		30
Section 9.4 Early Termination		30
Section 9.5 Termination of Obligations		30
ARTICLE X MISCELLANEOUS PROVISIONS		31
Section 10.1 Limitation of Rights of Shareholders		31
Section 10.2 Amendment		31
Section 10.3 Separability		32
Section 10.4 Specific Performance		32
Section 10.5 Governing Law		32
Section 10.6 Successors		33
Section 10.7 Headings		33
Section 10.8 Communications, Notices and Demands		33
Section 10.9 Counterpart Execution		34

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AMENDED AND RESTATED TRUST AGREEMENT (as amended, revised, supplemented or otherwise modified from time to time, this “ Agreement ”) , dated as of November 1, 2010, is entered into by and among COMPASS GROUP DIVERSIFIED HOLDINGS LLC, a Delaware limited liability company (the “ Sponsor ” ), THE BANK OF NEW YORK (DELAWARE), a Delaware banking corporation, as Delaware trustee (in such capacity, the “ Delaware Trustee ” ), and MR. ALAN B. OFFENBERG and MR. JAMES J. BOTTIGLIERI, as the regular trustees (each a “ Regular Trustee ” , together “ Regular Trustees ” and, collectively with the Delaware Trustee, the “ Trustees ”) .

The Sponsor and the Trustees hereby agree as follows:

WHEREAS, the Sponsor and the Trustees heretofore duly declared and established Compass Diversified Holdings (the “ Trust ” ), a statutory trust under the Delaware Statutory Trust Act, by entering into a trust agreement, dated as of November 18, 2005 (the “ Original Agreement ”) , and by executing and filing of a Certificate of Trust with the Secretary of State of the State of Delaware on November 18, 2005, for the purpose of owning the Sponsor Interests (as defined herein) and issuing Shares (as defined herein) of the Trust, in one or more series, each Share representing an undivided beneficial interest in the Trust Property;

WHEREAS, the Original Agreement was amended and restated by that certain Amended and Restated Trust Agreement dated April 25, 2006, and was amended by that First Amendment dated May 25, 2007, which amendment was effective as of April 25, 2006, that Second Amendment which was effective as of September 14, 2007 and that Third Amendment which was effective January 1, 2007 (together, the “ Current Agreement ”);

WHEREAS, the Sponsor and the Trustees desire to amend the Current Agreement in its entirety as set forth herein to provide for, among other things, the operation of the Trust, the tax treatment of the Trust and other matters;

WHEREAS, the Sponsor and the Trustees intend that the Trust function as a pass-through entity structured to give the Shareholders (as defined herein) similar rights and obligations, to the extent provided herein, as if they held Sponsor Interests (as defined herein) directly and the Sponsor and the Trustees further intend that this Agreement, including the grant of rights to the Sponsor, the Board of Directors (as defined herein) and certain other Persons, be interpreted consistent with such intention;

WHEREAS, the Board of Directors of the Sponsor have determined that this Agreement should be amended as provide herein pursuant to Section 9.6 of the Current Agreement;

NOW , THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, each party, for the benefit of the other party, hereby amends and restates the Current Agreement in its entirety and agrees as follows:

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ARTICLE I

DEFINED TERMS

Section 1.1 Definitions

For all purposes of this Agreement (as defined herein), except as otherwise expressly provided or unless the context otherwise requires:

(i) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;

(ii) unless the context otherwise requires, any reference to an “Article,” “Section” or an “Exhibit” refers to an Article, Section or an Exhibit, as the case may be, of this Agreement;

(iii) the words “herein,” “hereof’ and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; and

(iv) additional definitions are on Exhibit B.

“1933 Act Registration Statement ” has the meaning set forth in Section 2.9 hereof.

“ 1934 Act Registration Statement ” has the meaning set forth in Section 2.9 hereof.

“ 1940 Act ” means the Investment Company Act of 1940, as amended.

“ 4 62(b) Registration Statement ” has the meaning set forth in Section 2.9 hereof.

“ Acquirer ” has the meaning set forth in Section 9.3 hereof.

“ Acquisition Exchange ” has the meaning set forth in Section 9.3 hereof.

“ Affiliate ” means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any officer, director, general member, member or trustee of such Person. For purposes of this definition, the terms “ controlling ,” “ controlled by ” or “ under common control with ” shall mean, with respect to any Persons, the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, or the power to elect at least fifty percent (50%) of the directors, managers, general members or Persons exercising similar authority with respect to such Person.

“ Agreement ” has the meaning set forth in the preamble of this Agreement.

“ Allocation Interests ” has the meaning set forth in the Sponsor Agreement.

“ Associate ” has the meaning ascribed to such term in Rule 12b-2 of the Rules and Regulations promulgated under the Exchange Act.

“ Beneficial Owner ” has the meaning ascribed to such term in Rule 13d-3 of the Rules and Regulations promulgated under the Exchange Act.

“ Board of Directors ” means the Board of Directors of the Sponsor or any committee thereof that has been duly authorized by the Board of Directors to make a decision on the matter in question or bind the Sponsor as to the matter in question.

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“ Business Combination ” means:

(i) any merger or consolidation of the Trust with (A) an Interested Shareholder, or (B) any other Person (whether or not itself an Interested Shareholder) that is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Shareholder; or

(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with, or proposed by or on behalf of, an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder of any property or assets of the Trust having an aggregate Fair Market Value as of the date of consummation of the transaction giving rise to the Business Combination of not less than ten percent (10%) of the Net Investment Value as of such date;

(iii) the issuance or transfer by the Trust, the Sponsor or any Subsidiary thereof (in one transaction or a series of transactions) of any securities of the Trust to, or proposed by or on behalf of, an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value as of the date of consummation of the transaction giving rise to the Business Combination of not less than ten percent (10%) of the Net Investment Value as of such date; or

(iv) any spin-off or split-up of any kind of the Trust thereof proposed by or on behalf of an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder; or

(v) any reclassification of the Shares (including any reverse split of Shares) or recapitalization of the Trust or any merger or consolidation of the Trust with the Sponsor or any Subsidiary thereof, or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder), that has the effect, directly or indirectly, of increasing the proportionate share of Outstanding Shares which is beneficially owned by an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder; or

(vi) any agreement, contract or other arrangement providing for any one or more of the actions specified in clauses (i) through (iv) above.

“ Business Day ” means any day other than a Saturday, a Sunday or a day on which banks in The City of New York are required, permitted or authorized, by applicable law or executive order, to be closed for regular banking business.

“ Chairman ” has the meaning set forth in the Sponsor Agreement.

“ Commission ” means the U.S. Securities and Exchange Commission.

“ Continuing Director ” means (i) any director of the Sponsor who (A) is neither the Interested Shareholder involved in the Business Combination as to which a determination of Continuing Directors is provided hereunder, nor an Affiliate, Associate, employee, agent or nominee of such Interested Shareholder, or a relative of any of the foregoing, and (B) was a director of the Board of Directors prior to the time that such Interested Shareholder became an Interested Shareholder, or (ii) any successor of a Continuing Director described in clause (i) above who is recommended or elected to succeed a Continuing Director by the affirmative vote of a majority of Continuing Directors then on the Board of Directors.

“Delaware Statutory Trust Act” means chapter 38 of title 12 of the Delaware Code, 12 Del. C. Section 3801 et seq., as it may be amended from time to time.

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“Delaware Trustee” means the Person identified as the “Delaware Trustee” in the preamble to this Agreement solely in its capacity as Delaware Trustee of the Trust and not in its individual capacity, or its successor in interest in such capacity, or any successor Delaware Trustee appointed as herein provided.

“Depositary Agreement” has the meaning set forth in Section 2.9 hereof.

“Distributions” means amounts payable in respect of the Shares as provided in Section 3.1 hereof.

“Early Termination Event” has the meaning set forth in Section 9.4 hereof.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Fair Market Value ” means, as of any date:

(i) in the case of Shares, the average of the closing sale prices for such Shares during the ten (10) Business Days immediately preceding such date:

(A)

as reported for composite transactions by the New York Stock Exchange;

	(B)		if such Shares are not so reported by the New York Stock Exchange, the price of Shares as reported, quoted or listed on any other principal U.S. national or regional securities exchange;

	(C)		if such equity securities are not so reported, quoted or listed, the last quoted bid price for Shares in the over-the-counter market as reported by the National Quotation Bureau or a similar organization; or

(ii) if Shares are not so reported, quoted or listed, or in the case of any other Property, the fair market value of such Shares or such Property on the date in question as determined by a majority of the Board of Directors in good faith; provided, that if the Manager shall dispute any such determination of fair market value by the Board of Directors, fair market value shall be determined by the investment banking or professional valuation firm selected by the Board of Directors from among no fewer than three qualified candidates provided by the Manager.

“ Fiscal Quarter ” means the Sponsor’s fiscal quarter for purposes of its reporting obligations under the Exchange Act.

“ Future Investments ” means contractual commitments to invest represented by definitive agreements.

“ Indemnified Persons ” has the meaning set forth in Section 8.4 hereof.

“ Interested Shareholder ” means, as of any date, any Person (other than the Manager and its Affiliates, the Trust, the Sponsor or any Subsidiary of the Sponsor, any employee benefit plan maintained by the Sponsor or any Subsidiary thereof or any trustee or fiduciary with respect to any such plan when acting in such capacity) that:

(i) is, or was at any time within the three-year period immediately prior to such date, the Beneficial Owner of fifteen percent (15%) or more of the then Outstanding Shares and who did not become the Beneficial Owner of such amount of Shares pursuant to a transaction that was approved by the affirmative vote of a majority of the Board of Directors; or

(ii) is an assignee of, or has otherwise succeeded to, any Outstanding Shares of which an Interested Shareholder was the Beneficial Owner at any time within the three-year period

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immediately prior to such date, if such assignment or succession occurred in the course of a transaction, or series of transactions, not involving a public offering within the meaning of the Securities Act.

For the purpose of determining whether a Person is an Interested Shareholder, the Shares that may be issuable or exchangeable by the Trust to the Interested Shareholder pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, warrants or options, or otherwise, shall be included, but not any other Shares that may be issuable or exchangeable by the Trust pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, warrants or options, or otherwise, to any Person who is not the Interested Shareholder.

“ Managed Subsidiary ” has the meaning set forth in the Management Services Agreement.

“ Management Services Agreement ” means the Management Services Agreement, entered into by and among the Manager, the Sponsor and other parties thereto, dated as of the date hereof, as amended or otherwise modified from time to time.

“ Manager ” means Compass Diversified Management LLC, and any successor thereto, in its capacity as manager under the Management Services Agreement or in its capacity as holder of the Allocation Interests in the Sponsor, as the case may be.

“ Market Value ” means, as of any date, the product of (i) the average number of Outstanding Shares, other than treasury Shares, during the last fifteen (15) Business Days of the most recently completed Fiscal Quarter as of such date, multiplied by (ii) the volume weighted average trading price per Share, as determined by reference to the relevant securities exchange identified in clause (i) of the definition of Fair Market Value, over such fifteen (15) Business Days.

“ Net Investment Value ” means, as of any date, the sum of :

(i) the Market Value as of such date; plus

(ii) the amount of any borrowings (other than intercompany borrowings) of the Sponsor and its Managed Subsidiaries (but not including borrowings on behalf of any Subsidiary of the Managed Subsidiaries) as of such date; plus

(iii) the value of Future Investments of the Sponsor and/or any of its Subsidiaries other than cash or cash equivalents, as calculated by the Manager and approved by a majority of the Continuing Directors, as of such date; provided, that such Future Investments have not been outstanding for more than two consecutive full Fiscal Quarters as of such date; less

(iv) the aggregate amount held by the Sponsor and its Managed Subsidiaries in cash or cash equivalents (but not including cash or cash equivalents held specifically for the benefit of any Subsidiary of a Managed Subsidiary) as of such date.

“ New York Stock Exchange ” means the New York Stock Exchange or any successor thereto.

“ Original Agreement ” has the meaning set forth in the recitals to this Agreement.

“ Outstanding Shares ” means, as of any date, all Shares theretofore executed and delivered, including in electronic form, under this Agreement, except:

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(i) Shares theretofore canceled or delivered for cancellation; and

(ii) Shares in exchange for or in lieu of which other Shares have been executed and delivered pursuant to Section 4.5.

“ Person ” means any individual, partnership (whether general or limited), limited liability company, corporation, trust, estate, association, nominee or other entity as well as any syndicate or group deemed to be a person under Section l4(d)(2) of the Exchange Act.

“ Property ” means all real and personal property acquired by the Trust, including cash, and any improvements thereto, and shall include both tangible and intangible property.

“ Registration Statements ” has the meaning set forth in Section 2.9 hereof.

“ Regular Trustee ” means the Persons identified as the “Regular Trustee” in the preamble to this Agreement, each solely in his own capacity as Regular Trustee of the Trust and not in his own individual capacity, or such Regular Trustee’s successor in interest in such capacity, or any successor in interest in such capacity, or any successor Regular Trustee appointed as herein provided.

“ Relevant Trustee ” has the meaning set forth in Section 8.6 hereof.

“ Rules and Regulations ” means the rules and regulations promulgated under the Exchange Act or the Securities Act.

“ Secretary ” has the meaning set forth in the Sponsor Agreement.

“ Securities Act ” means the Securities Act of 1933, as amended.

“Share” means the shares of the Trust, each representing one undivided beneficial interest issued by the Trust corresponding to one underlying Sponsor Interest held by the Trust.

“ Share Certificate ” means a certificate evidencing ownership of Shares, substantially in the form attached hereto as Exhibit A.

“ Share Register ” has the meaning set forth in Section 4.2.

“ Shareholder ” means a Person in whose name a Share Certificate representing a Share is registered or a Person in whose name a book-entry position is maintained, such Person being a beneficial owner of such Share within the meaning of the Delaware Statutory Trust Act.

“ Sponsor ” has the meaning set forth in the preamble to this Agreement.

“ Sponsor Agreement ” means the Second Amended and Restated Operating Agreement of the Sponsor, as amended, revised, supplemented or otherwise modified from time to time, dated as of the date hereof, entered into by and between the Trust and the Manager.

“ Sponsor Interest ” means the Trust Interests.

“ Subsidiary ” means, with respect to any Person, any corporation, company, joint venture, limited liability company, association or other Person in which such Person owns, directly or indirectly, more than fifty percent (50%) of the outstanding equity securities or interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such Person.

“ Transfer Agent ” means, with respect to the Shares and the Sponsor Interests, The Bank of New York, Inc. or any successor(s) thereto.

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“ Trust ” has the meaning set forth in the recitals hereof and which is continued hereby and identified on the cover page of this Agreement.

“ Trust Interest ” has the meaning set forth in the Sponsor Agreement.

“ Trust Property ” means the Sponsor Interests owned by the Trust including any distribution thereon, or any other property or assets relating thereto.

“ Trust’s Notice ” has the meaning set forth in Section 5.4 hereof.

“ Trustees ” has the meaning set forth in the preamble to this Agreement.

“ Voluntary Exchange ” has the meaning set forth in section 9.2 hereof.

ARTICLE II

ESTABLISHMENT OF THE TRUST

Section 2.1 Name

(a) The name of the Trust shall continue to be Compass Diversified Holdings and all business of the Trust shall be conducted in such name. The Sponsor, acting through the Board of Directors, may change the name of the Trust upon ten (10) Business Days’ written notice to the Shareholders and the Trustees, which name change shall be effective upon the filing by the Regular Trustees of a certificate of amendment or a restated certificate pursuant to Section 3810 of the Delaware Statutory Trust Act.

(b) The Regular Trustees shall take all action and do all things necessary to give effect to the requirements of Section 9.5 of the Management Services Agreement.

Section 2.2 Office of the Delaware Trustee; Principal Place of Business

The address of the Delaware Trustee in the State of Delaware is 502 White Clay Center, Route 273 P.O. Box 6973, Newark, Delaware 19711, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Shareholders and the Sponsor. The principal executive offices of the Trust are Sixty One Wilton Road, Second Floor, Westport, Connecticut 06880. The Sponsor, acting through the Board of Directors, may change the principal executive offices of the Trust to any other place within or without the State of Delaware upon written notice to the Trustees.

Section 2.3 Trust to Be Sole Owner of Sponsor Interests

(a) The Sponsor shall issue Sponsor Interests to the Trust and simultaneously therewith the Trust shall issue Shares in accordance with the requirements of Section 2.3(b). Subject to Sections 9.2 and 9.3, it is intended that the Trust shall be the sole holder and owner of one hundred percent (100%) of the Sponsor Interests, and the Sponsor shall not issue, sell, or otherwise transfer any of its Sponsor Interests to any Person other than the Trust. Subject to Sections 9.2 and 9.3, the Trust shall not sell, lease, exchange, mortgage, pledge or otherwise transfer any of its Sponsor Interests to any other Person.

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(b) At all times, the Trust shall have outstanding the identical number of Shares as the number of Sponsor Interests that have been issued and are outstanding. At all times, the Trust shall be the sole owner of the Trust Property and shall only own the Trust Property.

Section 2.4 Authorized Shares

The Trust shall be authorized to issue one class of Shares (in one or more series) in an aggregate amount of up to five hundred million (500,000,000) of such Shares; any Shares of more than one such series shall constitute one and the same class of security. The Trust is prohibited from issuing any other class of equity securities, any debt securities or any derivative securities. The aggregate number of Shares that are authorized may be increased from time to time by an amendment of this Agreement upon the adoption of a resolution by the affirmative vote of at least a majority of the Board of Directors declaring such amendment to be advisable and the approval of such amendment by the affirmative vote of the holders of a majority of the then Outstanding Shares present in person or represented by proxy at a meeting of the Shareholders.

Section 2.5 Shareholders to be Bound

Every Shareholder, by holding and receiving a Share, agrees with the Trust to be bound by the terms of this Agreement.

Section 2.6 Issuance of Additional Shares

The Sponsor shall have authority to authorize the issuance, from time to time, of authorized but unissued Shares and cause the Trust to issue such additional Shares in exchange for and upon receipt of an equal number of Sponsor Interests. Upon the issuance of such additional Shares, one of the Regular Trustees shall execute in accordance with Section 4.2 one or more Share Certificates in certificated, fully registered form and shall deliver such Share Certificates to the Transfer Agent. The Trust may issue the Shares, in one or more series, in any manner, subject to applicable law, that the Sponsor, acting through its Board of Directors, in its sole discretion, deems appropriate and advisable.

Section 2.7 Repurchase of Outstanding Shares at Direction of the Sponsor

(a) From time to time and at the direction of the Sponsor, acting through the Board of Directors, the Trust shall conduct a capital reduction, including the repurchase of any number of Outstanding Shares, on similar terms to the capital reduction simultaneously conducted by the Sponsor with respect to the Sponsor Interests and shall ensure that an identical number of Sponsor Interests and Shares are issued and outstanding at any one time.

(b) Any Shares tendered and repurchased by the Trust in accordance with this Section 2.7 shall not be deemed canceled pursuant to Section 3818 of the Delaware Statutory Trust Act but instead, shall be deemed to be authorized and issued, but not outstanding, and may subsequently be sold or transferred for due consideration.

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Section 2.8 Agreement of Trust

The purposes of the Trust are to (i) issue Shares of beneficial interest in Trust Property, each Share corresponding to one Sponsor Interest held by the Trust, (ii) own the Sponsor Interests and (iii) engage in such other activities as are necessary, convenient or incidental hereto. Each Shareholder registered on the books of the Trust shall be a “beneficial owner” within the meaning of the Delaware Statutory Trust Act. It is intended that the Trust shall qualify as a partnership for U.S. federal income tax purposes. Subject to Article IX, the Trustees are not authorized to sell, exchange, convey, pledge, encumber, or otherwise transfer, assign or dispose of the Sponsor Interests held by the Trust nor invest or reinvest the assets of the Trust. There shall be no implied duties or obligations of the Trustees hereunder. Any action by the Trustees in accordance with their respective powers shall constitute the act of and serve to bind the Trust. The Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Sponsor, Manager, the Board of Directors or the Regular Trustees set forth herein. The Delaware Trustee shall be one of the Trustees of the Trust for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Delaware Statutory Trust Act and for taking such actions as are required to be taken by a Delaware trustee under the Delaware Statutory Trust Act. The duties (including fiduciary duties), liabilities and obligations of the Delaware Trustee shall be limited to (a) accepting legal process served on the Trust in the State of Delaware and (b) the execution of any certificates required to be filed with the Secretary of State of the State of Delaware that the Delaware Trustee is required to execute under Section 3811 of the Delaware Statutory Trust Act and there shall be no other duties (including fiduciary duties) or obligations, express or implied, at law or in equity, of the Delaware Trustee. Notwithstanding anything herein to the contrary, the Delaware Trustee shall not be liable for the acts or omissions of the Trust, the Sponsor, the Regular Trustees, the Manager or the Board of Directors.

Section 2.9 Authorization to Enter into Certain Transactions

(a) The Sponsor is hereby authorized and directed, as an agent on behalf of the Trust, to engage in the following activities:

(i) to prepare and file with the Commission and execute, in each case on behalf of the Trust, (a) any registration statement from time to time on Form S-1 or any applicable form at such time, as applicable (a “1933 Act Registration Statement”), including any pre-effective or post-effective amendments thereto, including any preliminary prospectus, prospectus, prospectus supplement, free writing prospectus or pricing supplement relating thereto, relating to the registration of any Shares under the Securities Act, (b) any registration statement filed, from time to time, pursuant to Rule 462(b) under the Securities Act (the “4 62(b) Registration Statement” and, together with the 1933 Act Registration Statement, the “Registration Statements”), including any amendments thereto, relating to the registration of any Shares under the Securities Act and (c) as applicable, a registration statement on Form 8-A (a “1934 Act Registration Statement ”) , including any pre-effective or post-effective amendments thereto, relating to the registration of any Shares under Section 12(b) or (g) of the Exchange Act;

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(ii) to prepare and file with the New York Stock Exchange and/or any other securities exchange and execute, in each case on behalf of the Trust, a listing application and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Shares to be listed or quoted on the New York Stock Exchange and/or any other securities exchange;

(iii) to prepare and file and execute, in each case on behalf of the Trust, such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers, applications, filings and other documents as shall be necessary or desirable to register the Shares under the securities or “blue sky” laws of such jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or desirable;

(iv) to select underwriters or other purchasing or placement agents relating to the public offering or any issuance of any Shares pursuant to any Registration Statements;

(v) to negotiate the terms and conditions of, and execute on behalf of the Trust, any underwriting agreements or other purchase or placement agreements or other agreements relating to the public or private offering of any Shares in exchange for Sponsor Interests, including, without limitation, agreements relating to the registration of such Shares;

(vi) to execute and deliver, in each case on behalf of the Trust, such certifications or reports required by the Sarbanes-Oxley Act of 2002 from time to time as may be necessary or proper to the conduct of the business of the Trust;

(vii) to pay any filing, application or other fees associated with any of the foregoing actions, including those to the Commission, the National Association of Securities Dealers, any securities exchange, any agents or any other Person;

(viii) to select a transfer agent, including the Transfer Agent, and negotiate the terms and conditions of, and execute on behalf of the Trust, a transfer agent agreement; and

(ix) to select a custodian as holder of any Trust Property and negotiate the terms and conditions of, and execute on behalf of the Trust, a custodian agreement;

(x) to negotiate the terms and conditions of, and execute on behalf of the Trust, a depositary share agreement with a nationally recognized bank with combined capital and surplus of $50 million or more for the purpose of establishing a depositary share program for the Shares of the Trust (the “Depositary Agreement”) and to engage such nationally recognized bank as agent with respect thereto;

(xi) to negotiate the terms and conditions of, and execute on behalf of the Trust, such agreements, documents and certificates, and to do such other acts and things as the Sponsor may deem to be necessary or advisable in order to (w) give effect to any of the foregoing, (x) in connection with the public offering or any future issuance of the Shares, (y) carry out the purpose and intent of the Trust or (z) to comply or give effect to any terms or provisions of this Agreement.

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(b) It is hereby acknowledged and agreed that in connection with any execution, filing or document referred to in clauses (i) — (ix) above, (A) any Regular Trustee or the Sponsor singly be, and hereby is, authorized on behalf of the Trust to file and execute such document on behalf of the Trust and (B) the Delaware Trustee shall not be required or be deemed necessary to join in any such filing or action or execute on behalf of the Trust any such document or to take any such action.

Section 2.10 Title to Trust Property

Legal title to all Trust Property shall be vested at all times in the Trust and shall be held and administered by the Regular Trustees for the benefit of the Trust and the Shareholders in accordance with this Agreement. No Shareholder shall have legal title to any part of the Trust Property, but shall have an undivided beneficial interest in the Trust Property.

Section 2.11 Certain Covenants of the Sponsor

The Sponsor shall use its best efforts, consistent with the terms and provisions of this Agreement, to cause the Trust to remain classified as a “partnership” for U.S. federal income tax purposes.

ARTICLE III

DISTRIBUTIONS

Section 3.1 Distributions

The Regular Trustees shall pay Distributions, or cause the payment of Distributions, to the Shareholders of all distributions received by the Trust with respect to the Sponsor Interests from the Sponsor within five (5) Business Days of receipt thereof. Such Distributions shall be paid to Shareholders appearing on the Share Register for the Outstanding Shares who are Shareholders as of the record date established by the Sponsor for the payment of distributions on the Sponsor Interests. Any such Distributions shall be allocated to Shareholders in the same proportions as any such distributions were made per Sponsor Interest by the Sponsor.

Section 3.2 Payment Procedures

Payments of Distributions in respect of the Shares shall be made by (i) check mailed to the address of the Person entitled thereto as such address shall appear on the Share Register, or (ii) wire transfer of immediately available funds to an account maintained by the Person entitled thereto as specified in the Share Register.

Section 3.3 Tax Returns and Reports

The Regular Trustees shall prepare (or cause to be prepared), at the Trust’s expense, and file or provide (or cause to be filed or provided) all U.S. federal, state and local tax and information returns and reports required to be filed or provided to Shareholders by or in respect

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of the Trust. The Regular Trustees shall comply in all material respects with U.S. federal, state and local withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Shareholders upon the Shares. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to Distributions or allocations to any Shareholder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Shareholder. In the event of any claimed over-withholding, Shareholders shall be limited to an action against the applicable taxing jurisdiction.

Section 3.4 Allocation of Profits and Losses.

All Profits and Losses of the Trust (and related items of taxable income, loss, deduction and credit) shall be allocated to the Shareholders in accordance with their Percentage Interests. The provisions of Exhibit B shall apply with respect to the Trust.

ARTICLE IV

SHARE CERTIFICATES

Section 4.1 Share Certificates

The Shares shall be issued in electronic book-entry form or shall be otherwise evidenced by the Share Certificates that are issued substantially in the form of Exhibit A hereto. Each Share Certificate shall bear a serial number, shall exhibit the Shareholder’s name and the number of Shares evidenced thereby and shall be executed on behalf of the Trust by manual or facsimile signature of one of the Regular Trustees. Share Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefit of this Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Share Certificates or did not hold such offices at the date of delivery of such Share Certificates. A transferee of a Share Certificate shall become a Shareholder, and shall be entitled to the rights and subject to the obligations of a Shareholder hereunder, upon due registration of such Share Certificate in such transferee’s name pursuant to Section 4.4.

Section 4.2 Share Register

The Sponsor shall retain the Transfer Agent to keep a register or registers (herein referred to as the “Share Register”) in which shall be recorded the name and address of each Person owning the Outstanding Shares as maintained by the Transfer Agent electronically with respect to any Shares issued in book-entry form or as otherwise evidenced by each Share Certificate evidencing Shares issued by the Trust, the number of Shares evidenced by each such Share Certificate, the date of issuance thereof and, in the case of cancellation, the date of cancellation. Except as otherwise expressly required by law, the Person or entity in whose name Shares stand on the Share Register of the Trust shall be deemed the Beneficial Owner and Shareholder of record thereof for all purposes.

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Section 4.3 Transfer of Shares

Registration of transfers of Shares shall be made only in the Share Register of the Trust upon request of the registered Shareholder of such Shares, or of his attorney thereunto authorized by power of attorney duly executed and filed with the Transfer Agent, and upon the surrender of the Share Certificate or Share Certificates or the corresponding book-entry position evidencing such Shares properly endorsed or accompanied by a stock power duly executed, together with such proof of authenticity of signatures as the Transfer Agent may reasonably require, or as properly presented for transfer by a depositary or clearing agent with respect to any book-entry position of Shares. All Share Certificates surrendered for transfer shall be canceled before new Share Certificates for the transferred Shares shall be issued. Upon surrender for registration of transfer, and cancellation, of any Share Certificate, one of the Regular Trustees shall execute in the name of the designated transferee or transferees, one or more new Share Certificates.

Section 4.4 Mutilated, Lost, Destroyed or Stolen Share Certificates

Each Shareholder of record of Shares shall promptly notify the Trust of any mutilation, loss or destruction of any Share Certificate of which such Shareholder is the recordholder. The Sponsor may, in its discretion, cause the Transfer Agent to issue a new Share Certificate in place of any Share Certificate theretofore issued by it and alleged to have been mutilated, lost, stolen or destroyed, upon surrender of the mutilated Share Certificate or, in the case of loss, theft or destruction of the Share Certificate, upon satisfactory proof of such loss, theft or destruction, and the Sponsor may, in its discretion, require the Shareholder of record of the Shares evidenced by the lost, stolen or destroyed Share Certificate, or his legal representative, to give the Transfer Agent a bond sufficient to indemnify the Transfer Agent against any claim made against it on account of the alleged loss, theft or destruction of any such Share Certificate or the issuance of such new Share Certificate.

Section 4.5 Rights of Shareholders

The legal title to the Trust Property is vested exclusively in the Trust in accordance with Section 2.10, and the Shareholders shall not have any right or title therein other than the undivided beneficial interest in the Trust Property conferred by their Shares and they shall have no right to call for any partition or division of Property, profits or rights of the Trust except as described below. The Shares shall be personal property giving only the rights specifically set forth therein and in this Agreement. The Shares shall have no preemptive or similar rights and, when issued and delivered to Shareholders against payment of the purchase price therefor and otherwise in accordance with this Agreement, shall be deemed validly issued, fully paid and nonassessable undivided beneficial interests in Trust Property. Shareholders, in their capacities as such, shall be entitled to the benefits provided in this Agreement and to the same limitation of personal liability extended to shareholders of private corporations for profit organized under the General Corporation Law of the State of Delaware.

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ARTICLE V

MEETINGS; VOTING

Section 5.1 Annual Meetings of Shareholders

The annual meeting of Shareholders to direct the voting of the Trust, as a member of the Sponsor, shall be called by the Sponsor, pursuant to the Sponsor Agreement, and held at such date, at such time and at such place (if any) within or without the State of Delaware as may be designated by resolution adopted by a majority of the Board of Directors. Any other business may be transacted at the annual meeting; provided, that it is properly brought before the meeting.

Section 5.2 Special Meetings of Shareholders

Special meetings of Shareholders shall be held on such date, at such time and at such place (if any) within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Special meetings of Shareholders may be called at any time only by the Chairman of the Board of Directors or by the Board of Directors pursuant to a resolution adopted by a majority of the Board of Directors. Business transacted at any special meeting of Shareholders shall be limited to the purpose stated in the notice relating thereto.

Section 5.3 Place of Meeting

The Board of Directors may designate the place (if any) of meeting for any meeting of Shareholders. If no designation is made by the Board of Directors, the place of meeting shall be the principal executive office of the Sponsor. In lieu of holding any meeting of Shareholders at a designated place, the Board of Directors may, in its sole discretion, determine that any meeting of Shareholders may be held solely by means of remote communication.

Section 5.4 Notice of Meeting

(a) A notice of meeting, stating the place (if any), day and hour of the meeting, and the means of remote communication, if any, by which Shareholders and proxy holders may be deemed to be present in person and vote at such meeting (the “Trust’s Notice”), shall be prepared and delivered by the Sponsor not less than twenty (20) days and not more than sixty (60) days before the date of the meeting, either personally, by mail or, to the extent and in the manner permitted by applicable law, electronically, to each Shareholder of record. In the case of special meetings, the notice shall state the purpose or purposes for which such special meeting is called. Such further notice shall be given as may be required by applicable law. Any previously scheduled meeting of the Shareholders may be postponed, and (unless this Agreement otherwise provides) any special meeting of the Shareholders may be canceled, by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of Shareholders.

(b) The Trust’s Notice to Shareholders shall be given personally, by mail or, to the extent and in the manner permitted by applicable law, electronically to each Shareholder of

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record. If mailed, such notice shall be delivered by postage prepaid envelope directed to each holder at such Shareholder’s address as it appears in the records of the Trust and shall be deemed given when deposited in the United States mail.

Any Trust’s Notice to Shareholders given by the Trust pursuant to this Section 5.4 shall be effective if given by a form of electronic transmission consented to by the Shareholder to whom the notice is given. Any such consent shall be revocable by the Shareholder by written notice to the Trust and shall also be deemed revoked if (1) the Trust is unable to deliver by electronic transmission two consecutive notices given by the Trust in accordance with such consent, and (2) such inability becomes known to the Secretary of the Sponsor, the Transfer Agent or other person responsible for the giving of notice; provided, that, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

Notice given by electronic transmission pursuant to this subsection shall be deemed given: (1) if by facsimile telecommunication, when directed to a facsimile telecommunication number at which the Shareholder has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the Shareholder has consented to receive notice; (3) if by posting on an electronic network together with separate notice to the Shareholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (4) if by any other form of electronic transmission, when directed to the Shareholder. An affidavit of the Secretary or an assistant Secretary or of the Transfer Agent or other agent of the Sponsor that the notice has been given by personal delivery, mail or a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

(c) In order that the Trust may determine the Shareholders entitled to notice of or to vote at any meeting of Shareholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) or fewer than twenty (20) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining Shareholders entitled to notice of or to vote at any meeting of Shareholders or any adjournment thereof shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

Section 5.5 Quorum and Adjournment

Except as otherwise provided by applicable law or by this Agreement, the Shareholders present in person or by proxy holding a majority of the then Outstanding Shares entitled to vote, shall constitute a quorum at a meeting of Shareholders. The Chairman or the holders of a majority of the then Outstanding Shares entitled to vote so represented may adjourn the meeting from time to time, whether or not there is such a quorum. The Shareholders present at a duly organized meeting at which a quorum is present in person or by proxy may continue to transact business until adjournment, notwithstanding the withdrawal of enough Shareholders to leave less than a quorum.

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proxyholders may be deemed to be present in person and vote at such reconvened meeting are announced at the meeting at which the adjournment is taken. If the time, date and place of the reconvened meeting are not announced at the meeting at which the adjournment is taken, then the Secretary of the Sponsor shall give written notice of the time, date and place of the reconvened meeting not less than twenty (20) days prior to the date of the reconvened meeting.

At the reconvened meeting, the Shareholders may transact any business that might have been transacted at the original meeting. A determination of Shareholders of record entitled to notice of or to vote at a meeting of Shareholders shall apply to any adjournment of such meeting; provided, however, that the Board of Directors may fix a new record date for the reconvened meeting. If an adjournment is for more than thirty (30) days or if, after an adjournment, a new record date is fixed for the reconvened meeting, a notice of the reconvened meeting shall be given to each Shareholder entitled to vote at the meeting.

Section 5.6 Voting

(a) Subject to the provisions of this Section 5.6 and Section 5.7, the Shareholders shall have the exclusive and absolute right to direct the Regular Trustees with respect to the voting of the Trust on all matters that it, as holder of the Sponsor Interests, is entitled to vote upon under the terms of the Sponsor Agreement or applicable law and the Regular Trustees shall cause the Trust to vote its Sponsor Interests as so directed by the Shareholders.

(b) When the Trust is required or permitted to vote with respect to the Sponsor Interests, the Sponsor shall prepare and deliver to the Regular Trustees the form of proxy materials to enable the Regular Trustees to solicit from the Shareholders the manner in which the Shareholders desire the Regular Trustees to vote their Shares.

Shareholders shall be entitled to one vote for each Share in respect of any matter as to which the Trust as a member of the Sponsor is entitled to vote as provided in the Sponsor Agreement.

(c) All Shares shall, to the extent practicable under the circumstances, be voted in the same proportion as the Shares are directed to be voted by the Shareholders, including for purposes of determining a quorum, in favor of, in opposition to or abstaining from the matter voted upon. If such calculation of votes would require a fractional vote, the Regular Trustees shall vote the next lower number of whole Shares.

Section 5.7 Proxies

At all meetings of Shareholders, a Shareholder may vote by proxy as may be permitted by applicable law; provided, that, no proxy shall be voted after three (3) years from its date, unless the proxy provides for a longer period in accordance with this Agreement. Any proxy to be used at a meeting of Shareholders must be filed with the Secretary of the Sponsor or his or her representative at or before the time of the meeting. A Shareholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary a revocation of the proxy or a new proxy bearing a later date.

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Section 5.8 Notice of Shareholder Business and Nominations

(a) Annual Meetings of Shareholders

(i) Nominations of individuals for election by the Trust to the Board of Directors, other than the Manager’s appointed directors for so long as the Manager is entitled to appoint directors to the Board of Directors pursuant to the terms of the Sponsor Agreement, and the proposal of business to be considered by Shareholders, may be made at an annual meeting of Shareholders (A) pursuant to the Trust’s Notice of meeting delivered pursuant to Section 5.4 hereof, (B) by or at the direction of the Board of Directors or (C) by any Shareholder who is entitled to vote at the meeting, who complies with the notice procedures set forth in clauses (ii) and (iii) of this Section 5.8(a).

In addition to any other applicable requirements, for a nomination for election of a director of the Sponsor to be made by a Shareholder (other than the Manager’s appointed directors) or for business to be properly brought before an annual meeting by a Shareholder, such Shareholder must (A) be a Shareholder of record on both (1) the date of the delivery of such nomination or the date of the giving of the notice provided for in this Section 5.8(a) and (2) the record date for the determination of Shareholders entitled to vote at such annual meeting, and (B) have given timely notice thereof in proper written form in accordance with the requirements of this Section 5.8 (a) to the Secretary.

(ii) For nominations or other business to be properly brought before an annual meeting by a Shareholder pursuant to this Section 5.8(a)(i)(C), a Shareholder must have given timely notice thereof in writing to the Secretary and, in the case of business other than nominations, such other business must otherwise be a proper matter for Shareholder action. Except to the extent otherwise required by applicable law, to be timely, a Shareholder’s notice shall be delivered to the Secretary at the principal executive offices of the Sponsor not less than one hundred and twenty (120) days nor more than one hundred and fifty (150) days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that, in the event that the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by a Shareholder must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Trust. In the case of the first annual meeting of Shareholders, a Shareholder’s notice shall be timely if it is delivered to the Secretary at the principal executive offices of the Sponsor not earlier than the one hundred and twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement or an adjournment or postponement of an annual meeting commence a new time period for the giving of a Shareholder’s notice as described in this Section 5.8(a).

Subject to Section 5.8(a)(i), such Shareholder’s notice shall set forth: (A) as to each individual whom the Shareholder proposes to nominate for election or reelection as a director of the Sponsor, all information relating to such individual that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is

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otherwise required, pursuant to Regulation 14A under the Exchange Act, including such individual’s written consent to being named in the proxy statement as a nominee and to serving as a director of the Sponsor if elected; (B) as to any other business that the Shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration), the reasons for conducting such business at the meeting and any material interest in such business of such Shareholder and the Beneficial Owner or holder of Shares, if any, on whose behalf the proposal is made; and (C) as to the Shareholder giving the notice and the Beneficial Owner, if any, on whose behalf the nomination or proposal is made, (1) the name and address of such Shareholder as they appear on the Trust’s books and of such Beneficial Owner, (2) the number of, and evidence of such number of, Shares which are owned beneficially and of record by such Shareholder and such Beneficial Owner, (3) a representation that the Shareholder or Beneficial Owner, if any, intends to appear in person or by proxy at the meeting to propose such business or nomination, and (4) a representation whether the Shareholder or the Beneficial Owner, if any, intends or is part of a group which intends (i) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Trust’s Outstanding Shares required to approve or adopt the proposal or elect the nominee and/or (ii) otherwise to solicit proxies from Shareholders in support of such proposal or nomination. The foregoing notice requirements shall be deemed satisfied by a Shareholder if the Shareholder has notified the Trust of his or her intention to present a proposal at an annual meeting in compliance with Rule 14a-8 (or any successor thereof) promulgated under the Exchange Act and such Shareholder’s proposal has been included in a proxy statement that has been prepared by the Trust to solicit proxies for such annual meeting. The Trust may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Sponsor or on any committee of the Board of Directors.

(iii) Notwithstanding anything in the second sentence of clause (ii) of this Section 5.8(a) to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Sponsor, on behalf of the Trust at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a Shareholder’s notice required by this Section 5.8 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Sponsor not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Sponsor, on behalf of the Trust.

(b) Special Meeting of Shareholders

Only such business shall be conducted at a special meeting of Shareholders as shall have been brought before the meeting pursuant to the Trust’s Notice of meeting pursuant to Section 5.4 of this Agreement. Nominations of individuals for election to the Board of Directors by the Trust, other than the Manager’s appointed directors, for so long as the Manager is entitled to appoint directors of the Board of Directors pursuant to the terms of the Sponsor Agreement, may be made at a special meeting of Shareholders at which the Shareholders are to direct the Regular

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Trustees with respect to the Trust’s election of directors pursuant to the Trust’s Notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any Shareholder who is entitled to vote at the meeting who complies with the notice procedures set forth in this Section 5.8.

In addition to any other applicable requirements, for a nomination for election by the Trust of a director to be made by a Shareholder, such Shareholder must (A) be a Shareholder of record on both (1) the date of the delivery of such nomination and (2) the record date for the determination of Shareholders entitled to vote at such special meeting, and (B) have given timely notice thereof in proper written form in accordance with the requirements of this Section 5.8(b) to the Secretary.

In the event the Sponsor, on behalf of the Trust calls a special meeting of Shareholders for the purpose of their voting to direct the Trust with respect to its electing one or more directors to the Board of Directors, any such Shareholder may nominate such number of individuals for election by the Trust to such position(s) as are specified in the Trust’s Notice of Meeting, if the Shareholder’s notice as required by clause (ii) of Section 5.8(a) of this Agreement shall be delivered to the Secretary at the principal executive offices of the Sponsor not earlier than the one hundred and twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period for the giving of a Shareholder’s notice as described above.

(i) Only individuals who are nominated in accordance with the procedures set forth in this Section 5.8 shall be eligible to be considered for election by the Trust as directors of the Sponsor at a meeting of Shareholders and only such business shall be conducted at a meeting of Shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 5.8. Except as otherwise provided by applicable law or this Section 5.8, the Chairman shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 5.8 and, if any proposed nomination or business is not in compliance with this Section 5.8, to declare that such defective proposal or nomination shall be disregarded.

(ii) For purposes of this Section 5.8, “Public Announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Trust with the Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

(iii) Notwithstanding the foregoing provisions of this Section 5.8, a Shareholder shall also comply with all applicable requirements of the Exchange Act and the Rules and Regulations thereunder with respect to the matters set forth in this Section 5.8. Nothing in this Section 5.8 shall be deemed to affect any rights of Shareholders to request inclusion of proposals in the Trust’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

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Section 5.9 Procedure for Election of Directors; Voting

The election of directors by the Trust submitted to Shareholders at any meeting shall be decided by a plurality of the votes cast thereon. The Regular Trustees shall cause the Trust to vote the Sponsor Interests in accordance with section 5.6. Except as otherwise provided by applicable law or this Agreement, all matters other than the election of directors by the Trust submitted to Shareholders at any meeting shall be decided by the affirmative vote of a majority of the then Outstanding Shares present in person or represented by proxy at the meeting of Shareholders.

The vote on any matter at a meeting, including the election of directors by the Trust, shall be by written ballot. Each ballot shall be signed by shareholder voting, or by such Shareholder’s proxy, and shall state the number of Shares voted.

Section 5.10 Inspectors of Elections; Opening and Closing the Polls

(a) The Board of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors shall not be directors, officers or employees of the Sponsor, to act at the meeting and make a written report thereof. One or more individuals may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been so appointed to act, or if all inspectors or alternates who have been appointed are unable to act, at a meeting of Shareholders, the Chairman shall appoint one or more inspectors to act at the meeting. Each such inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by the General Corporation Law of the State of Delaware as if the Trust were a Delaware corporation.

(b) The Chairman shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the Shareholders will vote at the meeting.

Section 5.11 Confidential Shareholder Voting

All proxies, ballots and votes, in each case to the extent they disclose the specific vote of an identified Shareholder, shall be tabulated and certified by an independent tabulator, inspector of elections and/or other independent parties and shall not be disclosed to any director, officer or employee of the Sponsor or Trustee; provided, however, that, notwithstanding the foregoing, any and all proxies, ballots and voting tabulations may be disclosed: (a) as necessary to meet legal requirements or to assist in the pursuit or defense of legal action; (b) if the Sponsor concludes in good faith that a bona fide dispute exists as to the authenticity of one or more proxies, ballots or votes, or as to the accuracy of any tabulation of such proxies, ballots or votes; (c) in the event of a proxy, consent or other solicitation in opposition to the voting recommendation of the Board of Directors; and (d) if a Shareholder requests or consents to disclosure of such Shareholder’s vote or writes comments on such Shareholder’s proxy card or ballot.

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Section 5.12 Waiver of Notice

Whenever any notice is required to be given to any Shareholder by the terms of this Agreement, a waiver thereof in a writing, signed by the Shareholder or Shareholders entitled to notice, whether such waiver is given before or after the time stated therein, shall be deemed equivalent to the giving of such notice. If such a waiver is given by electronic transmission, the electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the Shareholder. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of Shareholders need be specified in any written waiver of notice or any waiver by electronic transmission of such meeting. Notice of any meeting of Shareholders need not be given to any Shareholder if waived by such Shareholder either in a writing signed by such Shareholder or by electronic transmission, whether such waiver is given before or after such meeting is held.

Section 5.13 Remote Communication

For the purposes of this Agreement, if authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the Board of Directors may adopt, Shareholders and proxyholders may, by means of remote communication:

(a) participate in a meeting of Shareholders; and

(b) to the fullest extent permitted by applicable law, be deemed present in person and vote at a meeting of Shareholders, whether such meeting is to be held at a designated place or solely by means of remote communication;

provided, however, that (i) the Sponsor, on behalf of the Trust, shall implement reasonable measures to verify that each Person deemed present and permitted to vote at the meeting by means of remote communication is a Shareholder or proxyholder, (ii) the Sponsor, on behalf of the Trust, shall implement reasonable measures to provide such Shareholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to Shareholders, including an opportunity to read or hear the proceedings of the meeting substantially and concurrently with such proceedings, and (iii) if any Shareholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Sponsor, on behalf of the Trust.

Section 5.14 Action by Written Consent

For so long as the Trust remains the sole holder of Sponsor Interests, the Trust shall take any action required or permitted to be taken at any meeting of the members of the Sponsor, by executing a written consent that shall reflect the vote of the Shareholders as required by the terms of this Agreement, without such meeting, without prior notice, and without a vote. Proxy materials completed by the Shareholders evidencing the result of a vote taken at a meeting of the Shareholders with at least the minimum number of votes required to constitute an affirmative vote of the Shareholders under this Agreement shall be delivered to the Sponsor indicating the vote or action being approved or disapproved by such Shareholders with respect to those matters reserved to the Shareholders by this Agreement.

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Section 5.15 Inspection of Records

(a) The Sponsor, on behalf of the Trust, shall keep or cause to be kept at its principal executive office appropriate books and records with respect to the Trust, including, without limitation, all books and records necessary to provide to the Shareholders any information, lists and copies of documents required to be provided pursuant to applicable law. Any books and records maintained by or on behalf of the Trust in the regular course of its business, including, without limitation, the record of the Shareholders, books of account and records of Trust proceedings, may be kept in electronic or any other form; provided, that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time.

(b) The Secretary shall make, at least ten (10) days before every meeting of Shareholders, a complete list of the Shareholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each Shareholder and the number of Shares registered in the name of each Shareholder. Such list shall be open to the examination of any Shareholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network; provided, that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Trust. In the event that the Sponsor determines to make the list available on an electronic network, the Sponsor may take reasonable steps to ensure that such information is available only to Shareholders. The list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any Shareholder who is present.

Any Shareholder or Beneficial Owner, in person or by attorney or other agent, shall, upon written demand stating the purpose thereof, have the right during the usual business hours to inspect for any proper purpose, and to make copies and extracts from: (1) the Trust’s Share Register, a list of the Shareholders, and its other books and records or (2) the Sponsor’s books and records; provided, that as of the date of the making of the demand, inspection of such books and records would not constitute a breach of any confidentiality agreement. In every instance where a person purports to be a Beneficial Owner of Shares but who is not the holder of record as identified on the Share Register, the demand shall state such Person’s status as a Beneficial Owner of Shares, be accompanied by documentary evidence of beneficial ownership of Shares, and state that such documentary evidence is a true and correct copy of what it purports to be. A proper purpose shall mean a purpose reasonably related to such Person’s interest as a Shareholder or Beneficial Owner of Shares.

ARTICLE VI

RIGHT OF SHAREHOLDERS TO ENFORCE PROVISIONS OF SPONSOR
AGREEMENTS AND BRING DERIVATIVE ACTION

Section 6.1 Right to Institute Legal Proceeding

Pursuant to Section 2.5 of the Sponsor Agreement, Shareholders have certain rights to institute legal proceedings against the Sponsor to enforce the provisions of the Sponsor Agreement.

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Section 6.2 Ten Percent (10%) or More Shareholder

Subject to the requirements of Section 3816 of the Delaware Statutory Trust Act and other applicable law, for so long as the Trust remains the sole owner of Sponsor Interests, Shareholders holding at least ten percent (10%) or more of the Outstanding Shares shall have the right to cause the Trust to institute any legal proceeding for any remedy available to the Trust, as a holder of Sponsor Interests, and, to the extent permitted by applicable law, such Shareholders may direct the time, method and place of conducting any such legal proceeding brought by the Trust.

Except as expressly provided in this Agreement, nothing in this Agreement shall be deemed to give to any Person any benefit or any legal or equitable right, remedy or claim under this Agreement.

ARTICLE VII

SHAREHOLDER VOTE REQUIRED IN CONNECTION WITH CERTAIN
BUSINESS COMBINATIONS OR TRANSACTIONS

Section 7.1 Vote Generally Required

Except as provided in Sections 9.2 and 9.3 and subject to the provisions of Section 7.2 hereof, the Trust shall not (a) merge or consolidate with or into any limited liability company, corporation, statutory trust, business trust or association, real estate investment trust, common-law trust, or any other unincorporated business, including a partnership, or (b) sell, lease or exchange all or substantially all of the Trust Property, unless the Sponsor, acting through the Board of Directors, adopts a resolution, by the affirmative vote of at least a majority of the Sponsor’s Board of Directors, approving such action and unless such action shall be approved by the affirmative vote of the holders of a majority of the then Outstanding Shares outstanding and entitled to vote thereon. The notice of the meeting at which such resolution is to be considered shall so state.

Section 7.2 Vote for Business Combinations

The affirmative vote of the holders of record of Outstanding Shares representing at least sixty-six and two-thirds percent (66 2/3%) of the then Outstanding Shares (excluding Shares held by an Interested Shareholder or any Affiliate or Associate of an Interested Shareholder) shall be required to approve any Business Combination. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by applicable law or in any agreement with any securities exchange or otherwise.

Section 7.3 Power of Continuing Directors

The Continuing Directors shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance

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with this Article VII, including, without limitation, (a) whether a Person is an Interested Shareholder, (b) the number of Shares beneficially owned by any Person, (c) whether a Person is an Affiliate or Associate of another and (d) the Fair Market Value of the Shares, the Sponsor Interests or any equity securities of any Subsidiary thereof; and the good faith determination of the Continuing Directors on such matters shall be conclusive and binding for all the purposes of this Article VII.

Section 7.4 No Effect on Fiduciary Obligations

Nothing contained in this Article VII shall be construed to relieve the directors of the Board of Directors or an Interested Shareholder from any fiduciary obligation imposed by applicable law.

ARTICLE VIII

THE TRUSTEES

Section 8.1 Certain Duties and Responsibilities

(a) In addition to the duties and responsibilities provided for herein, the Regular Trustees shall have the following exclusive duties:

(i) negotiate, execute and deliver the Sponsor Agreement or any amendment thereto on behalf of the Trust (which may be executed by any one Regular Trustee);

(ii) to maintain bank accounts, brokerage accounts and other custody accounts that receive Trust income and receipts from which Trust expenditures and distributions are disbursed;

(iii) to maintain the Trust Property;

(iv) to maintain Trust records;

(v) to maintain an office for Trust business;

(vi) to originate, facilitate and review Trust reports and other Trust communications;

(vii) to execute documents and authorize Trust account transactions;

(viii) to retain accountants, attorneys, agents and other advisors in connection with its duties under this Agreement;

(ix) to file reports and returns on behalf of the Trust with government agencies to the extent required by applicable law and as specifically directed in writing by the Sponsor _; and

(x) to perform such other actions as are necessary to effect any of the foregoing duties.

(b) The duties and responsibilities of the Trustees shall be as provided by this Agreement. Except as provided in Section 2.8 or other express provisions hereof, the Sponsor

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and the Trustees hereby acknowledge and agree that the Trustees are authorized, directed and instructed to act as specifically authorized in writing by the Sponsor.

Any written instructions, notwithstanding any error in the transmission thereof or that such instructions may not be genuine, shall, as against the Sponsor and in favor of the Trustees, be conclusively deemed to be valid instructions from the Sponsor to the Trustees for the purposes of this Agreement, if believed in good faith by the Trustees to be genuine and if not otherwise insufficient on the face of such written instructions; provided, however, that a Trustee in its discretion may decline to act upon any instructions where they are not received by such Trustee in sufficient time for such Trustee to act upon or in accordance with such instructions, where such Trustee has reasonable grounds for concluding that the same have not been accurately transmitted or are not genuine or where such Trustee believes in good faith that complying with such instructions is contrary to applicable law or might subject such Trustee to any liability. If a Trustee declines to act upon any instructions for any reason set out in the preceding sentence, it shall notify (and provide reasonable detail to) the Sponsor and the other Trustees in writing forthwith after it so declines. In addition, the Delaware Trustee shall not be required to take or refrain from taking any action if the Trustee shall have determined, or shall have been advised by counsel, that such performance is likely to involve the Delaware Trustee in personal liability or is contrary to the terms of this Agreement, any other document to which the Trust is a party or otherwise contrary to law.

(c) The Trustees shall not be liable for any act or omission in the course of or connected with their performance hereunder, except only that each Trustee shall be subject to liability and assume the entire responsibility for direct damages suffered by the Sponsor or any other Person occasioned by such Trustee’s own gross negligence or willful misconduct or the gross negligence or willful misconduct of any of such Trustee’s directors, officers or employees in the rendering of its performance hereunder, as determined by a court of competent jurisdiction.

(d) The Trustees shall incur no liability to anyone in acting upon any document, including any certified items referenced herein, reasonably believed by them to be genuine (which is not insufficient on its face) and to have been signed by the proper Person or Persons, including (i) written instructions from the Sponsor, and (ii) a certified copy of a resolution of the Board of Directors or other governing body of any corporate party, which shall be conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the manner of ascertainment of which is not specifically prescribed herein, the Trustees may for all purposes hereof rely on a certificate, signed by the Sponsor, as to such fact or matter, and such certificate, if relied upon by the Trustees in good faith, shall constitute full protection to the Trustees for any action taken or omitted to be taken by them in good faith in reliance thereon.

In no event shall the Trustees be liable to any Persons for (A) acting in accordance with instructions from the Sponsor, (B) any damages in the nature of special, indirect or consequential damages, however styled, including, without limitation, lost profits, or for any losses due to forces beyond the control of such Trustee, including, without limitation, strikes, work stoppages, acts of war or terrorism, insurrection, revolution, nuclear or natural catastrophes or acts of God and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services provided to the Trustees by third parties or (C) the acts or omissions of their nominees, correspondents, designees, agents or subagents appointed by them in good faith.

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(e) In the event that the Trustees are unsure of the course of action to be taken by them hereunder, the Trustees may request instructions from the Sponsor as to such course of action to be taken. In the event that no instructions are provided within the time requested by the Trustees, they shall have no duty or liability for their failure to take any action or for any action they take in good faith and in accordance with the terms hereof.

Section 8.2 Not Responsible for Recitals or Issuance of Shares

The recitals contained herein and in the Share Certificates shall not be taken as the statements of the Trustees, and the Trustees do not assume any responsibility for their correctness.

Section 8.3 May Hold Shares

Any Trustee or any other agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Shares and may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such other agent.

Section 8.4 Compensation; Indemnity; Fees

The Sponsor agrees:

(i) to pay the Delaware Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree from time to time in writing (which compensation shall not be limited by any provision of applicable law in regard to the compensation of a trustee of an express trust);

(ii) except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance with any provision of this Agreement (including the reasonable compensation and the expenses and disbursements of its agents, counsel and experts), except any such expense, disbursement or advance determined by a court of competent jurisdiction to have been caused by its own gross negligence or willful misconduct; and

(iii) to the fullest extent permitted by applicable law, to indemnify and hold harmless (i) the Trustees, (ii) any officer, director, shareholder, employee, representative or agent of the Trustees, (iii) any employee or agent of the Trust, and (iv) the Tax Matters Member (collectively, the “ Indemnified Person ”) from and against any loss, damage, liability, tax, penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person by reason of the creation, operation or termination of the Trust or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage, liability, tax, penalty, expense or claim of any kind or nature incurred by such Indemnified Person by reason of gross negligence or willful misconduct with respect to such acts or omissions.

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Section 8.5 Delaware Trustee Required; Eligibility of Trustees

(a) There shall at all times be a Delaware Trustee hereunder with respect to the Shares. The Delaware Trustee shall be either (i) a natural person who is at least 21 years of age and a resident of the State of Delaware or (ii) a legal entity with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law that shall act through one or more persons authorized to bind such entity. If at any time the Delaware Trustee with respect to the Shares shall cease to be eligible in accordance with the provisions of this Section 8.5, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VIII.

(b) There shall at all times be at least one Regular Trustee hereunder with respect to the Shares. The Regular Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind that entity.

Section 8.6 Resignation and Removal; Appointment of Successor

(a) Subject to Sections 8.6(b) and 8.6(c), any Trustee (the “ Relevant Trustee ” ) may be appointed or removed without cause upon thirty (30) days prior notice to such Trustee by the Sponsor.

(b) The Trustee that acts as Delaware Trustee shall not be removed in accordance with Section 8.6(a) until a successor possessing the qualifications to act as Delaware Trustee under Section 8.5 (a “ Successor Delaware Trustee ”) has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the removed Delaware Trustee.

(c) A Trustee appointed to office shall hold office until his, her or its successor shall have been appointed or until his, her or its death, removal, resignation, dissolution or liquidation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing with thirty (30) days notice signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such later date as is specified therein; provided, however, that no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee.

(d) If no Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 8.6 within sixty (60) days after delivery pursuant to this Section 8.6 of an instrument of resignation or removal, the Delaware Trustee resigning or being removed, as applicable, may petition, at the expense of the Sponsor, any court of competent jurisdiction for appointment of a Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Delaware Trustee.

(e) No Delaware Trustee shall be liable for the acts or omissions to act of any Successor Delaware Trustee, as the case may be.

(f) Notwithstanding the foregoing or any other provision of this Agreement, in the event a Regular Trustee or a Delaware Trustee who is a natural person dies or becomes, solely in the opinion of the Sponsor, incompetent or incapacitated, the vacancy created by such death,

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incompetence or incapacity may be filled by the Sponsor (with the successor in each case being a Person who satisfies the eligibility requirement for the Regular Trustee or the Delaware Trustee, as the case may be, set forth in Section 8.5).

(g) The indemnity provided to a Trustee under Section 8.4 shall survive any Trustee’s resignation or removal and the termination of this Agreement.

Section 8.7 Acceptance of Appointment by Successor

(a) In case of the appointment hereunder of a Successor Trustee, such Successor Trustee so appointed shall execute, acknowledge and deliver to the Trust and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such Successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers and duties of the retiring Trustee; provided, that on the request of the Sponsor or the Successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such Successor Trustee all the rights and powers of the retiring Trustee.

(b) No Successor Trustee shall accept its appointment unless at the time of such acceptance such Successor Trustee shall be qualified and eligible under this Article VIII.

Section 8.8 Merger, Conversion, Consolidation or Succession to Business

Any Person into which the Delaware Trustee or the Regular Trustee that is not a natural person may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Relevant Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder; provided, such Person shall be otherwise qualified and eligible under this Article VIII, without the execution or filing of any paper or any further act on the part of any of the parties hereto.

Section 8.9 Number of Trustees

(a) The number of Trustees shall be three; provided, that the Sponsor may increase or decrease the number of Regular Trustees, subject to Section 8.5.

(b) If a Trustee ceases to hold office for any reason and the number of Regular Trustees is not reduced pursuant to Section 8.9(a), or if the number of Trustees is increased pursuant to Section 8.9(a), a vacancy shall occur. The vacancy shall be filled by a Successor Trustee appointed in accordance with Section 8.6.

(c) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust.

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Section 8.10 Delegation of Power

(a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 2.9.

(b) The Regular Trustees shall have power to delegate from time to time to such of their number or to the Sponsor the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein.

Section 8.11 Resignation and Appointment of Regular Trustees

(a) The Regular Trustees shall be Alan B. Offenberg and James J. Bottiglieri, each an individual and his successor shall be appointed by the Sponsor. Upon the resignation or removal of either individual, the Sponsor shall appoint a successor Regular Trustee.

(b) Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with this Section 8.11 or Section 8.6, the Regular Trustee(s) in office, if any, regardless of their number (and not withstanding any other provision of this Agreement), shall have all the powers granted to the Regular Trustee and shall discharge all the duties imposed upon the Regular Trustee by this Agreement.

ARTICLE IX

TERMINATION AND DISSOLUTION

Section 9.1 Termination or Dissolution

Unless terminated as provided herein, the Trust shall continue without limitation of time. If an Early Termination Event specified in Section 9.4 occurs, the Trust shall be dissolved, and one Sponsor Interest shall be distributed to each Shareholder in exchange for each Outstanding Share.

Section 9.2 Circumstances Under Which Shares Shall Be Voluntarily Exchanged for Sponsor Interests

In the event that the Sponsor, acting through the Board of Directors determines that the Trust or the Sponsor, or both, is, or is reasonably likely to be, treated as a corporation for U.S. federal income tax purposes, or (B) the existence of the Trust otherwise results, or is reasonably likely to result, in a material tax detriment to the Trust, Shareholders, the Sponsor or any member of the Sponsor, the Sponsor, acting through the Board of Directors (a) shall declare a record date and deliver a mandatory instruction to the Regular Trustees, together with any opinions of counsel or officers’ certificates of the Sponsor as the Regular Trustees may reasonably request, directing the Regular Trustees to, subject to Section 3808(e) of the Delaware Statutory Trust Act, (i) deliver one Sponsor Interest to each Shareholder in exchange for each Outstanding Share (the

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“Voluntary Exchange”) and (ii) dissolve the Trust and (b) shall deliver to the Transfer Agent notice of such Voluntary Exchange and shall cause the Transfer Agent to mail a copy of such notice to the Shareholders at least thirty (30) days prior to the Voluntary Exchange. Simultaneously with the completion of such Voluntary Exchange, each Shareholder immediately prior to the completion of the Voluntary Exchange shall be admitted to the Sponsor as a member in respect of a number of Sponsor Interests previously held by the Trust equal in number to the Outstanding Shares previously held by such Shareholder and each such member shall be issued a certificate evidencing the same, in accordance with the provisions of the Sponsor Agreement. Immediately thereafter, the Trust shall be deemed withdrawn from the Sponsor as a member in respect of such Sponsor Interest(s), and the Trust shall tender its certificates evidencing Sponsor Interests to the Transfer Agent or Sponsor for cancellation.

Section 9.3 Circumstances Under Which Shares Shall Be Mandatorily Exchanged for Sponsor Interests

If at any time one Person is the Beneficial Owner of more than ninety percent (90%) of the then Outstanding Shares (the “ Acquirer ” ), such Acquirer shall then have the right to direct the Sponsor, acting through the Board of Directors, to (i) declare a record date and deliver a mandatory instruction to the Regular Trustees, together with any opinions of counsel or officers’ certificates of the Sponsor as the Regular Trustees may reasonably request, directing the Regular Trustees to (A) deliver one Sponsor Interest to each Shareholder, including the Acquirer, in exchange for each Outstanding Share (the “ Acquisition Exchange ”) and (B) dissolve the Trust and (ii) deliver to the Transfer Agent notice of such Acquisition Exchange and cause the Transfer Agent to mail a copy of such notice to Shareholders at least thirty (30) days prior to the Acquisition Exchange. Simultaneously with the completion of such Acquisition Exchange, each Shareholder immediately prior to the completion of the Acquisition Exchange shall, pursuant to the terms of the Sponsor Agreement, be admitted to the Sponsor as a member in respect of a number of Sponsor Interests previously held by the Trust equal in number to the Outstanding Shares previously held by such Shareholder and each such member shall be issued a certificate evidencing the same, in accordance with the provisions of the Sponsor Agreement. Immediately thereafter, the Trust shall be deemed withdrawn from the Sponsor as a member in respect of such Sponsor Interest(s), and the Trust shall tender its certificates evidencing Sponsor Interests to the Transfer Agent or Sponsor for cancellation.

Section 9.4 Early Termination

The Trust shall dissolve upon the first to occur of any of the following events (each an “ Early Termination Event ”):

(i) the occurrence of a Voluntary Exchange pursuant to Section 9.2 or an Acquisition Exchange pursuant to Section 9.3;

(ii) the filing of a Certificate of Cancellation or its equivalent with respect to the Sponsor or the failure of the Sponsor to revive its charter within ten (10) days following the revocation of the Sponsor’s charter;

(iii) the entry of a decree of judicial dissolution by a court of competent jurisdiction of the Sponsor or the Trust; or

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(iv) the written election of the Sponsor.

As soon as is practicable after the occurrence of any event referred to above, the Regular Trustees shall notify the Delaware Trustee and then shall wind-up the Trust pursuant to Section 3808(e) of the Delaware Statutory Trust Act and any one of the Regular Trustee shall execute and file a Certificate of Cancellation with the Secretary of State of the State of Delaware.

Section 9.5 Termination of Obligations

The respective obligations and responsibilities of the Trustees and the Trust continued hereby shall terminate upon the latest to occur of the following:

(i) the payment of all expenses owed by the Trust pursuant to Section 3808 of the Delaware Statutory Trust Act;

(ii) the discharge of all administrative duties of the Regular Trustees; and

(iii) the filing of a Certificate of Cancellation canceling the Trust’s Certificate of Trust with the Secretary of State of the State of Delaware by one of the Regular Trustees.

ARTICLE X

MISCELLANEOUS PROVISIONS

Section 10.1 Limitation of Rights of Shareholders

The death or incapacity of any person having an interest, beneficial or otherwise, in Shares shall not operate to terminate this Agreement, nor entitle the legal representatives or heirs of such person or any Shareholder for such person to claim an accounting, take any action or bring any proceeding in any court for a partition or winding-up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them.

Section 10.2 Amendment

This Agreement may be amended from time to time by the Sponsor, acting through the Board of Directors, and by the Regular Trustees at the direction of the Sponsor, acting through the Board of Directors; provided, however, that no such amendment shall alter the rights, powers or immunities of the Delaware Trustee without its written consent; provided, further, that the Sponsor shall not, and no Trustee shall, without the affirmative vote of a majority of the then Outstanding Shares present in person or represented by proxy at a meeting of the Shareholders (i) enter into or consent to any amendment to this Agreement which would cause the Trust to fail or cease to qualify for the exemption from the status of an “investment company” under the 1940 Act, (ii) cause the Trust to issue a class of equity securities other than the Shares (it being understood that separate series of the Shares shall not constitute a different class of equity security from the Shares) or issue any debt securities or any derivative securities or amend the provision of Section 2.4 of this Agreement prohibiting such issuance, (iii) enter into or consent to any amendment to this Agreement that would affect the exclusive and absolute right of the

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Shareholders to direct the voting of the Trust, as a member of the Sponsor, pursuant to Section 5.6 of this Agreement, with respect to all matters reserved for the vote of members of the Sponsor pursuant to the provisions of the Sponsor Agreement or (iv) effect the merger or consolidation of the Trust, effect the sale, lease or exchange of all or substantially all of the Trust Property and certain other Business Combinations or transactions; provided, further, that Section 2.4, Section 3.1 and this Section 10.2 of this Agreement may not be amended without the affirmative vote of a majority of the then Outstanding Shares present in person or represented by proxy at a meeting of Shareholders.

Section 10.3 Separability

In case any provision in this Agreement or in the Share Certificates or the application of such provision to any person or circumstance, shall be held invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Trust Agreement or in the Shares Certificates or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not in any way be affected or impaired thereby.

Section 10.4 Specific Performance

The Sponsor and the Trustees agree that each party to this Agreement would be irreparably damaged if any of the provisions of this Agreement were not performed in accordance with their specific terms and that monetary damages would not provide an adequate remedy in such event. Accordingly, it is agreed that, in addition to any other remedy to which the nonbreaching party may be entitled, at law or in equity, each nonbreaching party shall be entitled to injunctive relief to prevent breaches of the provisions of this Agreement and specifically to enforce the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction thereof.

Section 10.5 Governing Law

This Agreement and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to the principles of conflict of laws; PROVIDED, HOWEVER, THAT THERE SHALL NOT BE APPLICABLE TO THE PARTIES HEREUNDER OR THIS TRUST AGREEMENT ANY PROVISION OF THE LAWS (COMMON OR STATUTORY) OF THE STATE OF DELAWARE PERTAINING TO TRUSTS (OTHER THAN THE DELAWARE STATUTORY TRUST ACT) THAT RELATE TO OR REGULATE, IN A MANNER INCONSISTENT WITH THE TERMS HEREOF, (A) THE FILING WITH ANY COURT OR GOVERNMENTAL BODY OR AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF TRUSTEE FEES AND CHARGES, (B) AFFIRMATIVE REQUIREMENTS TO POST BONDS FOR TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (C) THE NECESSITY FOR OBTAINING COURT OR OTHER GOVERNMENTAL APPROVAL CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF REAL OR PERSONAL PROPERTY, (D) FEES OR OTHER SUMS PAYABLE TO TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (E) THE ALLOCATION OF

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RECEIPTS AND EXPENDITURES TO INCOME OR PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE PERMISSIBLE NATURE, AMOUNT OR CONCENTRATION OF TRUST INVESTMENTS OR REQUIREMENTS RELATING TO THE TITLING, STORAGE OR OTHER MANNER OF HOLDING OR INVESTING TRUST ASSETS OR (G) THE ESTABLISHMENT OF FIDUCIARY OR OTHER STANDARDS OF RESPONSIBILITY OR LIMITATIONS ON THE ACTS OR POWERS OF TRUSTEES THAT ARE INCONSISTENT WITH THE LIMITATIONS OR AUTHORITIES AND POWERS OF THE TRUSTEES HEREUNDER AS SET FORTH OR REFERENCED IN THIS AGREEMENT. SECTION 3540 OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY TO THE TRUST.

Section 10.6 Successors

This Agreement shall be binding upon and shall inure to the benefit of any successor to the Sponsor, the Trust or the Relevant Trustee, including any successor by operation of law.

Section 10.7 Headings

The Section and other headings contained in this Agreement are for reference purposes only and are not intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof.

Section 10.8 Communications, Notices and Demands

(a) Subject to Sections 5.4 and 5.8, any communications, notices or payment demands which are required or permitted to be given or served to or upon any Shareholder or the Sponsor by any provision of this Agreement shall be in writing and delivered personally, or, when the same is actually received, if sent either by registered or certified mail, postage and charges prepaid, or by facsimile, if such facsimile is followed by a hard copy of the facsimile communication sent promptly thereafter by registered or certified mail, postage and charges prepaid, addressed as follows, or to such other address as such Person may from time to time specify by notice to the Shareholders:

If to the Shareholder, to such Shareholder as such Shareholder’s name and address may appear in the Share Register.

If to the Sponsor, to:
Compass Group Diversified Holdings LLC
Sixty One Wilton Road, Second Floor
Westport, CT 06880
Attention: Alan B. Offenberg
Facsimile No.: 203-221-8253

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With a copy to:
Squire, Sanders & Dempsey L.L.P.
221 East Fourth Street, Suite 2900
Cincinnati, Ohio 45202
Attention: Stephen C. Mahon
Facsimile No. 513-361-1201

And a copy to:
Richards, Layton & Finger, P.A.
One Rodney Square
920 North King Street
Wilmington, Delaware 19801
Attention: Eric A. Mazie
Facsimile No.: (302) 651-7701

or to such other address as such Person may from time to time specify by notice to the other parties hereto. Such communication, notice or demand to or upon a Shareholder shall be deemed to have been sufficiently given, or made, for all purposes, upon hand delivery, mailing or transmission.

(b) Any notice, demand or other communication which by any provision of this Agreement is required or permitted to be given or served to or upon the Trust, the Delaware Trustee or the Regular Trustees shall be given in writing (which may be by facsimile transmission) addressed (until another address is published by the Trust) as follows: (a) with respect to the Delaware Trustee, to The Bank of New York (Delaware), 502 White Clay Center, Route 273 P.O. Box 6973, Newark, Delaware 19711, and (b) with respect to each of the Regular Trustees, to him at the address for notices to the Sponsor, marked “Attention: Alan B. Offenberg” or “Attention: James J. Bottiglieri.” Such notice, demand or other communication to or upon the Trust shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Trust.

Section 10.9 Counterpart Execution

This Agreement may be executed in any number of counterparts with the same effect as if all of the Parties had signed the same document. All counterparts shall be construed together and shall constitute one agreement.

[signatures on following page]

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IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Trust Agreement to be duly executed by their respective officers hereunto duly authorized, as of the day and year first above written.

[Signature blocks intentionally omitted.]

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EXHIBIT A — FORM OF SHARE CERTIFICATE

SPECIMEN


Number Series		_______ Shares

CREATED UNDER THE LAWS
OF
THE STATE OF DELAWARE

COMPASS DIVERSIFIED HOLDINGS

This Certifies that ______ is the owner of Shares of _______ the Trust with such rights and privileges as are set forth in the Amended and Restated Trust Agreement of the Trust dated •, 2006 (the “Trust Agreement”), as it may be amended from time to time.

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE (THE “STATE ACTS”) OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, BY ANY STATE SECURITIES COMMISSION OR BY ANY OTHER REGULATORY AUTHORITY OF ANY OTHER JURISDICTION. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

NEITHER THE SHARES NOR ANY PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OR FOR WHICH SUCH REGISTRATION IS OTHERWISE NOT REQUIRED AND (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER ANY APPLICABLE STATE ACTS OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER SUCH STATE ACTS OR FOR WHICH SUCH REGISTRATION OTHERWISE IS NOT REQUIRED.

THE SHARES REPRESENTED BY THIS CERTIFICATE EVIDENCE THE PROPORTIONATE PORTION OF SUCH HOLDER’S SHARES IN THE TRUST. A STATEMENT OF THE RELATIVE RIGHTS AND PREFERENCES OF THE TRUST’S SHARES WILL BE FURNISHED BY THE TRUST TO THE HOLDER HEREOF UPON REQUEST WITHOUT CHARGE.

IN WITNESS WHEREOF, said Trust has caused this Certificate to be signed by its Regular Trustee this _____ day of _________, A.D. 2006.


COMPASS DIVERSIFIED HOLDINGS
By:
	Name:
	Title:	Regular Trustee

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EXHIBIT B – ALLOCATIONS OF PROFITS AND LOSSES

ARTICLE B.I

DEFINITIONS

The following additional definitions apply for purposes of this Exhibt B and the Agreement:

“Adjusted Capital Account Deficit” means, with respect to any Shareholder, the deficit balance, if any, in such Shareholder’s Capital Account as of the end of the relevant Allocation Year, after giving effect to the following adjustments:

(i) credit to such Capital Account any amounts which such Shareholder is deemed to be obligated to restore pursuant to the penultimate sentence in each of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and

(ii) debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Regulations.

The foregoing definition of “Adjusted Capital Account Deficit” is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith.

“Allocation Year” means (i) the period ending on December 31, 2007, (ii) any subsequent twelve (12)-month period commencing on January 1 and ending on December 31, or (iii) any portion of the period described in clause (i) or (ii) above for which the Trust is required to allocate Profits, Losses and other items of Trust income, gain, loss or deduction pursuant to Section 3.4 and Article B.II.

“Capital Account” means, with respect to any Shareholder, the Capital Account established and maintained for such Shareholder by the Trust in accordance with the following provisions:

(i) to each Shareholder’s Capital Account there shall be credited (A) such Shareholder’s Capital Contributions (net of any liabilities relating to such Property), and (B) such Shareholder’s distributive share of Profits and any items in the nature of income or gain which are specially allocated pursuant to Sections B.1 or B.2;

(ii) to each Shareholder’s Capital Account there shall be debited (A) the amount of money and the Gross Asset Value of any Property distributed to such Shareholder pursuant to any provision of this Agreement (net of any liabilities relating to such Property), and (B) such Shareholder’s distributive share of Losses and any items in

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the nature of expenses or losses which are specially allocated pursuant to Sections B.1 or B.2;

(iii) in the event Shares are Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the Transferred Shares; and

(iv) in determining the amount of any liability for purposes of subparagraphs (i) and (ii) above, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and the Regulations.

The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Regulations. In the event the Board of Directors of the Sponsor shall determine that it is prudent to modify the manner in which the Capital Accounts or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Trust or any Shareholders) are computed in order to comply with such Regulations, the Board of Directors may make such modification; provided , that it is not likely to have a material effect on the amounts distributed to any Person upon the dissolution of the Trust. The Board of Directors also shall (i) make any adjustments that are necessary or appropriate to maintain equality among the Capital Accounts of the Shareholders and the amount of capital reflected on the Trust’s balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).

“Capital Contributions” means, with respect to any Shareholder, the amount of money and the initial Gross Asset Value of any Property (other than money) net of any liabilities relating to such Property contributed to the Trust with respect to the Shares of the Trust held or subscribed for by such Shareholder.

“Code” means the United States Internal Revenue Code of 1986, as amended and in effect from time to time. Any reference herein to a specific section of the Code shall be deemed to include a reference to any corresponding provision of law in effect in the future.

“Depreciation” means, for each Allocation Year or part thereof, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable for federal income tax purposes with respect to an asset for such Allocation Year or part thereof, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Allocation Year, the depreciation, amortization, or other cost recovery deduction for such Allocation Year or part thereof shall be an amount which bears the same ratio to such Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Allocation Year or part thereof bears to such adjusted tax basis, provided however, that if the adjusted basis for federal income tax purposes is zero, Depreciation shall be determined with reference to the Gross Asset Value using any reasonable method determined by the Board of Directors of the Sponsor.

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“Dissolution Event” shall be any event that leads to the dissolution of the Trust pursuant to Article IX.

“Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for U.S. federal income tax purposes, except as follows:

(i) the initial Gross Asset Value of any asset contributed by a Shareholder to the Trust shall be the gross fair market value of such asset, as determined by the Board of Directors;

(ii) the Gross Asset Values of all Trust assets shall be adjusted by the Tax Matters Member to equal their respective gross fair market values (taking Code Section 7701(g) into account), as determined by the Tax Matters Member as of the following times: (A) the acquisition of an additional interest in the Trust by any new or existing Shareholder in exchange for more than a de minimis Capital Contribution; (B) the distribution by the Trust to a Shareholder of more than a de minimis amount of Trust Property as consideration for an interest in the Trust; (C) in connection with the grant of an interest in the Trust (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Trust by an existing Shareholder acting in a partner capacity or by a new Shareholder acting in a partner capacity or in anticipation of being a Shareholder; or (D) the liquidation of the Trust within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided, that an adjustment described in clauses (A) and (B) of this subparagraph (ii) shall be made only if the Tax Matters Member reasonably determines that such adjustment is necessary to reflect the relative economic interests of the Shareholders in the Trust;

(iii) the Gross Asset Value of any item of Trust assets distributed to any Shareholder shall be adjusted to equal the gross fair market value (taking Code Section 7701(g) into account) of such asset on the date of distribution, as determined by the Tax Matters Member; and

(iv) the Gross Asset Values of Trust assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the definition of “Profits” and “Losses”; provided, however, that Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv) to the extent that an adjustment pursuant to subparagraph (ii) is required in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (iv).

If the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraph (ii) or (iv), such Gross Asset Value shall thereafter be adjusted by Depreciation.

“Losses” has the meaning set forth in the definition of “ Profits ” and “ Losses ” below.

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“Nonrecourse Deductions” has the meaning set forth in Section 1.704-2(b)(1) of the Regulations.

“Nonrecourse Liability” has the meaning set forth in Section 1.704-2(b)(3) of the Regulations.

“Percentage Interest” means, with respect to any Shareholder as of any date, the ratio (expressed as a percentage) of the number of Shares held by such Shareholder on such date relative to the aggregate number of Shares then outstanding as of such date.

“Profits” and “Losses” mean, for each Allocation Year, an amount equal to the Trust’s taxable income or loss for such Allocation Year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments (without duplication):

(i) any income of the Trust that is exempt from U.S. federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition of “Profits” and “Losses” shall be added to such taxable income or loss;

(ii) any expenditures of the Trust described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Profits or Losses pursuant to this definition of “Profits” and “Losses” shall be subtracted from such taxable income or loss;

(iii) in the event the Gross Asset Value of any Trust asset is adjusted pursuant to subparagraph (ii) or (iii) of the definition of Gross Asset Value, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Gross Asset Value of the asset) or an item of loss (if the adjustment decreases the Gross Asset Value of the asset) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses;

(iv) gain or loss resulting from any disposition of Property with respect to which gain or loss is recognized for U.S. federal income tax purposes shall be computed by reference to the Gross Asset Value of the Property disposed of, notwithstanding that the adjusted tax basis of such Property differs from its Gross Asset Value;

(v) to the extent an adjustment to the adjusted tax basis of any Trust asset pursuant to Code Section 734(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Shareholder’s interest in the Trust, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses; and

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(vi) notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Sections B.1 or B.2 shall not be taken into account in computing Profits or Losses.

The amounts of the items of Trust income, gain, loss or deduction available to be specially allocated pursuant to Section B.1 or B.2 shall be determined by applying rules analogous to those set forth in subparagraphs (i) through (v) above.

“Regulations” means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations are amended from time to time.

“Regulatory Allocations” has the meaning set forth in Section B.2.

“Shareholder Nonrecourse Debt” has the same meaning as the term “partner nonrecourse debt” in Section 1.704-2(b)(4) of the Regulations.

“Shareholder Nonrecourse Debt Minimum Gain” means an amount, with respect to each Shareholder Nonrecourse Debt, equal to the Trust Minimum Gain that would result if such Shareholder Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of the Regulations.

“Shareholder Nonrecourse Deductions” has the same meaning as the term “partner nonrecourse deductions” in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.

“Tax Matters Member” has the meaning set forth in Section B.6

“Trust Minimum Gain” has the same meaning as the term “partnership minimum gain” in Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.

ARTICLE B.II

ALLOCATIONS

Section B.1 Special Allocations

The following special allocations shall be made in the following order:

(a) Minimum Gain Chargeback . Except as otherwise provided in Section 1.704-2(f) of the Regulations, notwithstanding any other provision of Section 3.4 and this Article B.II, if there is a net decrease in Trust Minimum Gain during any Allocation Year, each Shareholder shall be specially allocated items of Trust income and gain for such Allocation Year (and, if necessary, subsequent Allocation Years) in an amount equal to such Shareholder’s share of the net decrease in Trust Minimum Gain, determined in accordance with Regulations Section 1.704-2(g) and (h). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be

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allocated to each Shareholder pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section B.1(a) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Regulations and shall be interpreted consistently therewith.

(b) Shareholder Minimum Gain Chargeback . Except as otherwise provided in Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of Section 3.4 and this Article B.II, if there is a net decrease in Shareholder Nonrecourse Debt Minimum Gain attributable to a Shareholder Nonrecourse Debt during any Allocation Year, each Shareholder who has a share of the Shareholder Nonrecourse Debt Minimum Gain attributable to such Shareholder Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items of Trust income and gain for such Allocation Year (and, if necessary, subsequent Allocation Years) in an amount equal to such Shareholder’s share of the net decrease in Shareholder Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Shareholder pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section B.1(b) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently therewith.

(c) Qualified Income Offset . In the event any Shareholder unexpectedly receives any adjustments, allocations or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Trust income and gain shall be specially allocated to such Shareholder in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of the Shareholder as quickly as possible; provided, that an allocation pursuant to this Section B.1(c) shall be made only if and to the extent that the Shareholder would have an Adjusted Capital Account Deficit after all other allocations provided for in Section 3.4 and this Article B.II have been tentatively made as if this Section B.1(c) were not in this Agreement.

(d) Nonrecourse Deductions . Nonrecourse Deductions for any Allocation Year shall be specially allocated to the Shareholders in the manner elected by the Tax Matters Member in conformity with the provisions of Regulations 1.704-2, and in the absence of such an election, to the Shareholders in proportion to their respective Percentage Interests.

(e) Shareholder Nonrecourse Deductions . Any Shareholder Nonrecourse Deductions for any Allocation Year shall be specially allocated to the Shareholder who bears the economic risk of loss with respect to the Shareholder Nonrecourse Debt to which such Shareholder Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-2(i)(1).

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(f) Section 754 Adjustments . To the extent an adjustment to the adjusted tax basis of any Trust asset, pursuant to Code Section 734(b) or Code Section 743(b), is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Shareholder in complete liquidation of such Shareholder’s interest in the Trust, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Shareholders in accordance with their interests in the Trust in the event Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies or to the Shareholder to whom such distribution was made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

(g) Allocations Relating to Taxable Issuance of Trust Shares . Any income, gain, loss or deduction realized as a direct or indirect result of the issuance of Shares by the Trust to a Shareholder (the “ Issuance Items ”) shall be allocated among the Shareholders so that, to the extent possible, the net amount of such Issuance Items, together with all other allocations made under this Agreement to each Shareholder, shall be equal to the net amount that would have been allocated to each such Shareholder if the Issuance Items had not been realized.

Section B.2 Curative Allocations

The allocations set forth in Sections B.1(a), B.1(b), B.1(c), B.1(d), B.1(e), B.1(f), B.1(g) and B.3 (the “Regulatory Allocations” ) are intended to comply with certain requirements of the Regulations. It is the intent of the Shareholders that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Trust income, gain, loss or deduction pursuant to this Section B.2. Therefore, notwithstanding any other provision of Section 3.4 or this Article B.II (other than the Regulatory Allocations), the Board of Directors shall make such offsetting special allocations of Trust income, gain, loss or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Shareholder’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Shareholder would have had if the Regulatory Allocations were not part of this Agreement and all Trust items were allocated pursuant to Section 3.4.

Section B.3 Loss Limitation

Losses allocated pursuant to Section 3.4 shall not exceed the maximum amount of Losses that can be allocated without causing any Shareholder to have an Adjusted Capital Account Deficit at the end of any Allocation Year. In the event some but not all of the Shareholders would have Adjusted Capital Account Deficits as a consequence of an allocation of Losses pursuant to Section 3.4, the limitation set forth in this Section B.3 shall be applied on a Shareholder-by-Shareholder basis, and Losses not allocable to any Shareholder as a result of such limitation shall be allocated to the other Shareholders in accordance with the positive balances in such Shareholders’ Capital Accounts so as to allocate the maximum permissible Losses to each Shareholder under Section 1.704-1(b)(2)(ii)(d) of the Regulations.

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Section B.4 Other Allocation Rules

(a) For purposes of determining the Profits and Losses or any other items allocable to any period, Profits, Losses, and any other such items shall be determined on a monthly or other basis, as determined by the Trust using any method permissible under Code Section 706 and the Regulations thereunder.

(b) The Shareholders are aware of the income tax consequences of the allocations made by Section 3.4 and this Article B.II and hereby agree to be bound by the provisions of Section 3.4 and this Article B.II in reporting their shares of Trust income and loss for income tax purposes.

(c) Solely for purposes of determining a Shareholder’s proportionate share of the “excess nonrecourse liabilities” of the Trust within the meaning of Regulations Section 1.752-3(a)(3), the Shareholder’s interests in Trust profits are in proportion to their Percentage Interests.

(d) To the extent permitted by Section 1.704-2(h)(3) of the Regulations, the Trustees shall endeavor to treat distributions as having been made from the proceeds of a Nonrecourse Liability or a Shareholder Nonrecourse Debt only to the extent that such distributions would cause or increase an Adjusted Capital Account Deficit for any Shareholder.

(e) To the extent the Tax Matters Member determines, in consultation with the Trust’s tax advisors, that any distribution pursuant to Article III to a Shareholder hereunder (or portion of such distribution) would more properly be characterized as a payment described in Code Section 707(a) or 707(c), such payment may be so characterized in the Trust’s tax filings, and in such event, shall be taken into account for federal income tax purposes as an expense of the Trust, and not as an allocation of income to a Shareholder affecting such Shareholder’s Capital Account.

Section B.5 Tax Allocations; Code Section 704(c)

In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss and deduction with respect to any Property contributed to the capital of the Trust shall, solely for tax purposes, be allocated among the Shareholders so as to take account of any variation between the adjusted basis of such Property to the Trust for U.S. federal income tax purposes and its initial Gross Asset Value (computed in accordance with the definition of Gross Asset Value) using a method, selected in the discretion of the Board of Directors of the Sponsor in accordance with Section 1.704-3 of the Regulations.

In the event the Gross Asset Value of any Trust asset is adjusted pursuant to subparagraph (ii) of the definition of Gross Asset Value, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for U.S. federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder.

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Any elections or other decisions relating to such allocations shall be made by the Board of Directors in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section B.5 are solely for purposes of U.S. federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Shareholder’s Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement.

Section B.6 Tax Elections

(a) The Trustees shall, without any further consent of the Shareholders being required (except as specifically required herein), make (i) the election to adjust the basis of Property pursuant to Code Sections 754, 734(b) and 743(b), or comparable provisions of state, local or foreign law, in connection with Transfers of Shares and Trust distributions; and (ii) any and all other elections for U.S. federal, state, local and foreign tax purposes, including, without limitation, any election, if permitted by applicable law: (x) to extend the statute of limitations for assessment of tax deficiencies against the Shareholders with respect to adjustments to the Trust’s U.S. federal, state, local or foreign tax returns; and (y) to the extent provided in Code Sections 6221 through 6231 and similar provisions of U.S. federal, state, local or foreign law, to represent the Trust and the Shareholders before taxing authorities or courts of competent jurisdiction in tax matters affecting the Trust or the Shareholders in their capacities as Shareholders, and to file any tax returns and execute any agreements or other documents relating to or affecting such tax matters, including agreements or other documents that bind the Shareholders with respect to such tax matters or otherwise affect the rights of the Trust and the Shareholders. James J. Bottiglieri is specifically authorized to act as the “Tax Matters Member” under the Code and in any similar capacity under state or local law.

(b) The Board of Directors of the Sponsor may, by the affirmative vote of at least a majority of the entire Board of Directors, and without any further consent of the Shareholders being required, cause the Trust to elect to be treated as a corporation for U.S. federal income tax purposes; provided, however, that such action shall be taken only if the Board of Directors first obtains an opinion from a nationally recognized financial advisor to the effect that it expects the market valuation of the Trust to be significantly lower as a result of the Trust continuing to be treated as a partnership for U.S. federal income tax purposes than if the Trust instead elected to be treated as a corporation for U.S. federal income tax purposes.

Section B.7 Distributions on Liquidation; Compliance with Certain Requirements of Regulations; Deficit Capital Accounts .

In the event the Trust is “liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), notwithstanding Section 3.1, distributions shall be made to the Shareholders who have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any Shareholder has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all Allocation Years, including the Allocation Year during which such liquidation occurs), such Shareholder shall have no obligation to make any contribution to the capital of the Trust with respect to such deficit, and such deficit shall not be considered a debt owed to the Trust or to any other Person for any purpose whatsoever.

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Exhibit 3.2

THIRD AMENDED AND RESTATED

OPERATING AGREEMENT

COMPASS GROUP DIVERSIFIED HOLDINGS LLC

Dated as of November 1, 2010

TABLE OF CONTENTS


	Page
ARTICLE 1 THE COMPANY		1

Section 1.1 Formation		1
Section 1.2 Name		1
Section 1.3 Purpose; Powers; Company Not to Be an Investment Company; Prior Authorization of Actions Valid		2
Section 1.4 Principal Place of Business; Registered Office; Registered Agent		3
Section 1.5 Term		3
Section 1.6 Filings		3
Section 1.7 Title to Property		3
Section 1.8 Payments of Individual Obligations		4
Section 1.9 Definitions		4

ARTICLE 2 THE TRUST		23

Section 2.1 Trust to Be Sole Holder of Trust Interests		23
Section 2.2 Trust Shares to Represent Trust Interests		23
Section 2.3 Voluntary Exchange of Trust Shares for Trust Interests		23
Section 2.4 Acquisition Exchange of Trust Shares for Trust Interests		23
Section 2.5 Right of Holders of Trust Shares and Members to Enforce Provisions of this Agreement and Bring Derivative Action		24
Section 2.6 Reimbursement of Regular Trustees		24

ARTICLE 3 CLASSES AND ISSUANCE OF LLC INTERESTS; TRANSFER		24

Section 3.1 LLC Interests		24
Section 3.2 Issuance of Additional Trust Interests		26
Section 3.3 Trust Interest Certificates; Admission of Additional Members		26
Section 3.4 Repurchase of Trust Interests by the Company		26
Section 3.5 Mutilated, Lost, Destroyed or Stolen Certificates		27

ARTICLE 4 ALLOCATIONS		27

Section 4.1 General Application		27
Section 4.2 Allocations of Profits and Losses		27
Section 4.3 Special Allocations		28
Section 4.4 Curative Allocations		30
Section 4.5 Loss Limitation		30
Section 4.6 Other Allocation Rules		30


	Page
Section 4.7 Tax Allocations: Code Section 704(c)		31

ARTICLE 5 DISTRIBUTIONS		31

Section 5.1 Distributions to Members		31
Section 5.2 Distributions to the Allocation Member		31
Section 5.3 Amounts Withheld		37
Section 5.4 Limitations on Dividends and Distributions		37

ARTICLE 6 BOARD OF DIRECTORS		37

Section 6.1 Initial Board		37
Section 6.2 General Powers		37
Section 6.3 Duties of Directors		38
Section 6.4 Number, Tenure and Qualifications		38
Section 6.5 Election of Directors		39
Section 6.6 Removal		39
Section 6.7 Resignations		39
Section 6.8 Vacancies and Newly Created Directorships		39
Section 6.9 Appointment of or Nomination and Election of Chairman		40
Section 6.10 Chairman of the Board		40
Section 6.11 Regular Meetings		40
Section 6.12 Special Meetings		40
Section 6.13 Notice for Special Meetings		41
Section 6.14 Waiver of Notice		41
Section 6.15 Action Without Meeting		41
Section 6.16 Conference Telephone Meetings		41
Section 6.17 Quorum		42
Section 6.18 Committees		42
Section 6.19 Committee Members		43
Section 6.20 Committee Secretary		44
Section 6.21 Compensation		44
Section 6.22 Indemnification, Advances and Insurance		44
Section 6.23 Reliance; Limitations in Liability		46

ARTICLE 7 OFFICERS		47

Section 7.1 General		47
Section 7.2 Duties of Officers		48
Section 7.3 Election and Term of Office		48
Section 7.4 Chief Executive Officer		48
Section 7.5 Chief Financial Officer		49
Section 7.6 Reserved		49
Section 7.7 Secretary		49
Section 7.8 Resignations		49


	Page
Section 7.9 Vacancies		49

ARTICLE 8 MANAGEMENT		49

Section 8.1 Duties of the Manager		49
Section 8.2 Secondment of the Chief Executive Officer and Chief Financial Officer		49
Section 8.3 Secondment of Additional Officers		50
Section 8.4 Status of Seconded Officers and Employees		50
Section 8.5 Removal of Seconded Officers		50
Section 8.6 Replacement Manager		50

ARTICLE 9 THE MEMBERS		50

Section 9.1 Rights or Powers		50
Section 9.2 Annual Meetings of Members		51
Section 9.3 Special Meetings of Members		51
Section 9.4 Place of Meeting		51
Section 9.5 Notice of Meeting		51
Section 9.6 Quorum and Adjournment		52
Section 9.7 Proxies		53
Section 9.8 Notice of Member Business and Nominations		53
Section 9.9 Procedure for Election of Directors; Voting		56
Section 9.10 Inspectors of Elections; Opening and Closing the Polls		56
Section 9.11 Confidential Member Voting		57
Section 9.12 Waiver of Notice		57
Section 9.13 Remote Communication		57
Section 9.14 Member Action Without a Meeting		58
Section 9.15 Return on Capital Contribution		58
Section 9.16 Member Compensation		58
Section 9.17 Member Liability		58

ARTICLE 10 MEMBER VOTE REQUIRED IN CONNECTION WITH CERTAIN BUSINESS COMBINATIONS OR TRANSACTIONS		58

Section 10.1 Vote Generally Required		58
Section 10.2 Vote for Business Combinations		59
Section 10.3 Power of Continuing Directors		59
Section 10.4 No Effect on Fiduciary Obligations		59

ARTICLE 11 BOOKS AND RECORDS		59

Section 11.1 Books and Records; Inspection by Members		59
Section 11.2 Reports		60
Section 11.3 Preparation of Tax Returns		61
Section 11.4 Tax Elections		61

iii


	Page
Section 11.5 Tax Information		62

ARTICLE 12 AMENDMENTS		62

ARTICLE 13 TRANSFERS; MONTHLY ALLOCATIONS		62

ARTICLE 14 DISSOLUTION AND WINDING UP		63

Section 14.1 Dissolution Events		63
Section 14.2 Winding Up		63
Section 14.3 Compliance with Certain Requirements of Regulations; Deficit Capital Accounts		64
Section 14.4 Deemed Distribution and Recontribution		65
Section 14.5 Rights of Members		65
Section 14.6 Notice of Dissolution/Termination		65
Section 14.7 Allocations During Period of Liquidation		65
Section 14.8 Character of Liquidating Distributions		65
Section 14.9 The Liquidator		65
Section 14.10 Form of Liquidating Distributions		66

ARTICLE 15 MISCELLANEOUS		66

Section 15.1 Notices		66
Section 15.2 Binding Effect		67
Section 15.3 Construction		67
Section 15.4 Time		67
Section 15.5 Headings		67
Section 15.6 Severability		67
Section 15.7 Incorporation by Reference		67
Section 15.8 Variation of Terms		67
Section 15.9 Governing Law and Consent to Jurisdiction/Service of Process		67
Section 15.10 Waiver of Jury Trial		68
Section 15.11 Counterpart Execution		68
Section 15.12 Specific Performance		68

Exhibit A — Specimen Trust Interest Certificate		A-1

This THIRD AMENDED AND RESTATED OPERATING AGREEMENT (the “ Agreement ”) shall be effective as of November 1, 2010 and is entered into by Compass Diversified Holdings and Compass Group Management LLC, as Members hereunder and pursuant to the provisions of the Act as in effect on the date hereof. Such Members hereby agree to the amendment and restatement of the Second Amended and Restated Operating Agreement, effective as of January 9, 2007 which amended and restated the Amended and Restated Operating Agreement, dated as of April 25, 2006, which amended and restated the Operating Agreement, dated as of November 18, 2005 (the “ Original Agreement ”), as set forth herein. Capitalized terms used in this Agreement without definition shall have the respective meanings specified in Section 1.9 and, unless otherwise specified, article and section references used herein refer to Articles and Sections of this Agreement.

ARTICLE 1

THE COMPANY

Section 1.1 Formation. Pursuant to the terms of the Original Agreement, the Manager formed the Company as a limited liability company under and pursuant to the provisions of the Act and upon the terms and conditions set forth in the Original Agreement. The fact that the Certificate is on file in the office of the Secretary of State of the State of Delaware shall constitute notice that the Company is a limited liability company. Simultaneously with the execution of Original Agreement and the formation of the Company, the Manager was admitted as a Member of the Company. Each member of the Board of Directors was designated as an “authorized person” within the meaning of the Act under the Original Agreement, and I. Joseph Massoud has executed, delivered and filed the Certificate with the Secretary of State of the State of Delaware, such execution, delivery and filing being hereby ratified in all respects. Upon the effectiveness of this Agreement, the powers of each member of the Board of Directors as an authorized person shall cease, and the Manager shall become the designated “authorized person” within the meaning of the Act and shall continue as the designated “authorized person” within the meaning of the Act. The Manager shall execute, deliver and file any other certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in Connecticut and in any other jurisdiction in which the Company may wish to conduct business. The rights and liabilities of the Members shall be as provided under the Act, the Certificate and this Agreement.

Section 1.2 Name.

(a) Subject to Section 1.2(b), the name of the Company shall continue to be Compass Group Diversified Holdings LLC and all business of the Company shall be conducted in such name. The Board of Directors may change the name of the Company upon ten (10)

Business Days’ written notice to the Members, which name change shall be effective upon the filing of a certificate of amendment of the Certificate with the Secretary of State of the State of Delaware, and an amendment of this Agreement (which amendment shall not require the consent of any Member or other Person notwithstanding any other provision of this Agreement).

(b) The Board of Directors shall take all action and do all things necessary to give effect to Section 9.5 of the Management Services Agreement.

Section 1.3 Purpose; Powers; Company Not to Be an Investment Company; Prior Authorization of Actions Valid.

(a) The purposes of the Company are (i) to conduct or promote any lawful business, purpose or activity permitted for a limited liability company of the State of Delaware under the Act, (ii) to make such additional investments and engage in such additional activities as the Board of Directors may approve, and (iii) to engage in any and all activities related or incidental to the purposes set forth in clauses (i) and (ii); provided , however , that the Company is not permitted to engage in any activities that would cause it to become an “investment company” as defined in Section 3(a)(1) of the Investment Company Act of 1940, as amended and as may be amended from time to time, or any successor provision thereto.

(b) The Company has the power to do any and all acts necessary, appropriate, proper, advisable, incidental or convenient to or in furtherance of the purposes of the Company set forth in this Section 1.3 and has, without limitation, any and all powers that may be exercised on behalf of the Company by the Board of Directors pursuant to Article 6 hereof.

(c) Notwithstanding anything in this Agreement to the contrary, any actions and things (including the entering into and performance of any agreements or other documents) properly authorized, in the name and on behalf of the Company, by the Board of Directors as constituted at the time of any such authorization, whether prior to the date of this Agreement (including under the Original Agreement) or under and in accordance with this Agreement (or the Original Agreement), were, are and shall continue to be valid and duly authorized, and the Company shall continue to have the power and authority to take and do all such actions and things (including to enter into and perform all such agreements or other documents), whether or not such actions or things have already been taken or done (or such agreements or other documents entered into and/or performed), and regardless of whether the composition of the Board of Directors has changed, whether the Original Agreement or this Agreement has been amended, whether the Initial Public Offering has closed or otherwise prior to the actual taking or doing of any such actions or things (including the entering into or performance of any such documents) by the Company.

(d) The Company, and the Company on behalf of the Trust, is hereby authorized to execute, deliver and perform, and the Manager or any member of the Board of Directors or the Chief Executive Officer or the Chief Financial Officer, or any Person authorized by the Board of Directors on behalf of the Company, are hereby authorized to execute and deliver, the Transaction Documents and all documents, agreements, certificates, or financing statements contemplated thereby or related thereto, all without any further act, vote or approval of any other Person notwithstanding any other provision of this Agreement. The foregoing

authorizations shall not be deemed a restriction on the powers of the Manager or the Board of Directors to enter into (or for the Board of Directors to delegate to other Persons the power to enter into) other agreements on behalf of the Company.

Section 1.4 Principal Place of Business; Registered Office; Registered Agent. The principal executive offices of the Company are at 61 Wilton Road, Westport, CT 06880. The Board of Directors may change the principal executive offices of the Company to any other place within or without the State of Delaware upon written notice to the Members. The address of the Company’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent for service of process in the State of Delaware at such address is The Corporation Trust Company or any successor registered agent for service of process as shall be appointed by the Board of Directors in accordance with the Act. The Company may have such offices, either within or without the State of Delaware, as the Board of Directors may designate or as the business of the Company may from time to time require.

Section 1.5 Term. The term of the Company commenced on the date the Certificate was first filed in the Office of the Secretary of State of the State of Delaware in accordance with the Act and shall continue until the winding up of the Company is completed following a Dissolution Event, as provided in Article 14 and the Certificate is cancelled as provided in the Act.

Section 1.6 Filings.

(a) The Board of Directors shall take any and all other actions, as may be reasonably necessary, to perfect and maintain the status of the Company as a limited liability company or similar type of limited liability entity under the laws of the State of Delaware and under the laws of any other jurisdictions in which the Company engages in business, including causing the Company to prepare, execute and file such amendments to the Certificate and such other assumed name certificates, documents, instruments and publications as may be required by law, including, without limitation, action to reflect:

(i) a change in the Company name; or

(ii) a correction of false or erroneous statements in the Certificate to accurately represent the information contained therein.

(b) Upon the dissolution and completion of the winding up of the Company in accordance with Article 14, the Board of Directors shall cause the Company to promptly execute and file a Certificate of Cancellation in accordance with the Act and the laws of any other jurisdiction in which the Board of Directors deems such filing necessary or advisable.

Section 1.7 Title to Property. All Property owned by the Company shall be owned by the Company as an entity and no Member shall have any ownership interest in such Property in its individual name, and each Member’s interest in the Company shall be personal property for all purposes. At all times after the Effective Date, the Company shall hold title to all of its Property in the name of the Company and not in the name of any Member.

Section 1.8 Payments of Individual Obligations. The Company’s credit and assets shall be used solely for the benefit of the Company, and no asset of the Company shall be Transferred or encumbered for, or in payment of, any individual obligation of any Member.

Section 1.9 Definitions. For all purposes of this Agreement (as defined herein), except as otherwise expressly provided or unless the context otherwise requires:

(i) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;

(ii) unless the context otherwise requires, any reference to an “Article,” “Section” or an “Exhibit” refers to an Article, Section or an Exhibit, as the case may be, of this Agreement; and

(iii) the words “herein,” “hereinafter,” “hereof,” “hereto” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision:

“Acquirer” has the meaning set forth in the Trust Agreement.

“Acquisition Exchange” has the meaning set forth in the Trust Agreement.

“Act” means the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101 et seq. , as amended from time to time (or any corresponding provisions of succeeding law) and, for the avoidance of doubt, includes all applicable jurisprudence.

“Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Allocation Year, after giving effect to the following adjustments:

(i) credit to such Capital Account any amounts which such Member is deemed to be obligated to restore pursuant to the penultimate sentence in each of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and

(ii) debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Regulations.

“Adjusted Net Assets” shall be equal to, with respect to any Person as of any date, the sum of (i) such Person’s consolidated total assets (as determined in accordance with GAAP) as of such date, plus (ii) the absolute amount of consolidated accumulated amortization of intangibles of such Person (as determined in accordance with GAAP) as of such date, minus (iii) the absolute amount of Adjusted Total Liabilities of such Person as of such date.

“Adjusted Profit Distribution Amount” has the meaning set forth in Section 5.2(b).

“Adjusted Total Liabilities” shall be equal to, with respect to any Person as of any date, such Person’s consolidated total liabilities (as determined in accordance with GAAP) as of such date, after excluding the effect of any outstanding indebtedness of such Person.

“Administrator” means, as of any Calculation Date, (i) the Manager as of such Calculation Date, and (ii) if there is no Manager, the Chief Financial Officer in all other cases.

“Affiliate” means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person or (ii) any officer, director, general member, member or trustee of such Person. For purposes of this definition, the terms “controlling,” “controlled by” or “under common control with” shall mean, with respect to any Persons, the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, or the power to elect at least fifty percent (50%) of the directors, managers, general members or Persons exercising similar authority with respect to such Person.

“Agreement” has the meaning set forth in the introductory paragraph hereof.

“Allocated Share of Company Overhead” means, with respect to any Profit Distribution Subsidiary during any Measurement Period as of any Calculation Date, the aggregate amount of such Profit Distribution Subsidiary’s Quarterly Share of the Company’s Overhead for each Fiscal Quarter ending during such Measurement Period.

“Allocation Interests” means the limited liability company interests in the Company designated under the Original Agreement as the “Class B Interests” and redesignated herein as “Allocation Interests”, as authorized pursuant to Section 3.1(b), and having the rights provided herein.

“ Allocation Interest Certificate ” means a certificate representing Allocation Interests substantially in the form attached hereto as Exhibit A.

“Allocation Member” means the Manager, in its capacity as a Member.

“Allocation Year” means (i) the period commencing on the Effective Date and ending on December 31, 2005, (ii) any subsequent twelve (12)-month period commencing on January 1 and ending on December 31, or (iii) any portion of the period described in clause (i) or (ii) above for which the Company is required to allocate Profits, Losses and other items of Company income, gain, loss or deduction pursuant to Article 4.

“Applicable Listing Rules” means the applicable rules, if any, of the principal U.S. securities exchange or the New York Stock Exchange, as the case may be, on which the Trust Shares or Trust Interests, as applicable, are listed or quoted, as the case may be.

“Appointed Director” has the meaning set forth in Section 6.4.

“Approved Profit Distribution” has the meaning set forth in Section 5.2(c).

“Approved Profit Distribution Payment Date” means, with respect to any Calculation Date, ten (10) Business Days after the date upon which the Approved Profit Distribution as of such Calculation Date is deemed approved in accordance with Sections 5.2(c) or 5.2(d).

“Associate” has the meaning ascribed to such term in Rule 12b-2 of the rules promulgated under the Exchange Act.

“Audit Committee” means the Audit Committee of the Board of Directors established pursuant to Section 6.18(a)(ii).

“Average Allocated Share of Consolidated Equity” shall be equal to, with respect to any Profit Distribution Subsidiary during any Measurement Period as of any Calculation Date, the average ( i.e. the arithmetic mean) of the Profit Distribution Subsidiary’s Quarterly Allocated Share of Consolidated Equity for each Fiscal Quarter ending during such Measurement Period.

“Beneficial Owner” has the meaning ascribed to such term in Rule 13d-3 of the Rules and Regulations promulgated under the Exchange Act.

“Board” or “Board of Directors” means the Board of Directors referred to in Article 6.

“Business Combination” means:

(i) any merger or consolidation of the Company or any Subsidiary thereof with (A) an Interested Shareholder, or (B) any other Person (whether or not itself an Interested Shareholder) that is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Shareholder; or

(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with, or proposed by or on behalf of, an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder of any property or assets of the Company or any Subsidiary thereof having an aggregate Fair Market Value as of the date of the consummation of the transaction giving rise to the Business Combination of not less than ten percent (10%) of the Net Investment Value as of such date; or

(iii) the issuance or transfer by the Trust, the Company or any Subsidiary thereof (in one transaction or a series of transactions) of any securities of the Trust, the Company or any Subsidiary thereof to, or proposed by or on behalf of, an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value as of the date of the consummation of the transaction giving rise to the Business Combination of not less than ten percent (10%) of the Net Investment Value as of such date; or

(iv) any spin-off or split-up of any kind of the Company or any Subsidiary thereof, proposed by or on behalf of an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder; or

(v) any reclassification of the Trust Interests or securities of a Subsidiary of the Company (including any reverse split of Trust Interests or such securities) or recapitalization of the Company or such Subsidiary, or any merger or consolidation of the Company or such Subsidiary with any other Subsidiary thereof, or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder), that has the effect, directly or indirectly, of increasing the proportionate share of (A) Outstanding LLC Interests or such securities or securities of such Subsidiary which are beneficially owned by an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder or (B) any securities of the Company or such Subsidiary that are convertible into or exchangeable for Trust Interests or such securities of such Subsidiary, that are directly or indirectly owned by an Interested Shareholder or any of its Affiliates or Associates; or

(vi) any agreement, contract or other arrangement providing for any one or more of the actions specified in clauses (i) through (v) above.

“Business Day” means any day other than a Saturday, a Sunday or a day on which banks in The City of New York are required, permitted or authorized, by applicable law or executive order, to be closed for regular banking business.

“Calculation Date” means, with respect to any Trigger Event, the last day of the Fiscal Quarter in which such Trigger Event occurs.

“Capital Account” means, with respect to any Member, the Capital Account established and maintained for such Member by the Company in accordance with the following provisions:

(i) to each Member’s Capital Account there shall be credited (A) such Member’s Capital Contributions (net of any liabilities relating to such Property), and (B) such Member’s distributive share of Profits and any items in the nature of income or gain which are specially allocated pursuant to Sections 4.3 or 4.4;

(ii) to each Member’s Capital Account there shall be debited (A) the amount of money and the Gross Asset Value of any Property distributed to such Member pursuant to any provision of this Agreement (net of any liabilities relating to such Property), and (B) such Member’s distributive share of Losses and any items in the nature of expenses or losses which are specially allocated pursuant to Sections 4.3 or 4.4;

(iii) in the event LLC Interests are Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the Transferred LLC Interests; and

The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Regulations. In the event the Board of Directors shall determine that it is prudent to modify the manner in which the Capital Accounts or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Company or any Members) are computed in order to comply with such Regulations, the Board of Directors may make such modification; provided , that it is not likely to have a material effect on the amounts distributed to any Person pursuant to Article 14 upon the dissolution of the Company. The Board of Directors also shall (i) make any adjustments that are necessary or appropriate to maintain equality among the Capital Accounts of the Members and the amount of capital reflected on the Company’s balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).

“Capital Contributions” means, with respect to any Member, the amount of money and the initial Gross Asset Value of any Property (other than money) net of any liabilities relating to such Property contributed to the Company with respect to the LLC Interests of the Company held or subscribed for by such Member.

“Capital Gains” (i) shall mean, with respect to any Person, capital gains (as determined in accordance with GAAP) that are calculated in connection with the sale of capital stock or assets of such Person and which gave rise to a Sale Event and the calculation of the Profit Distribution Amount, and (ii) shall be equal to the amount, adjusted for minority interests, by which (x) the net sales price of such capital stock or assets, as the case may be, exceeded (y) the net book value (as determined in accordance with GAAP) of such capital stock or assets, as the case may be, at the time of such sale thereof, as reflected on the Company’s consolidated balance sheet prepared in accordance with GAAP; provided , that such amount shall not be less than zero.

“Capital Losses” (i) shall mean, with respect to any Person, capital losses (as determined in accordance with GAAP) that are calculated in connection with the sale of capital stock or assets of such person and which gave rise to a Sale Event and the calculation of the Profit Distribution Amount, and (ii) shall be equal to the amount, adjusted for minority interests, by which (x) the net book value (as determined in accordance with GAAP) of such capital stock or assets, as the case may be, at the time of such sale thereof, as reflected on the Company’s consolidated balance sheet prepared in accordance with GAAP, exceeded (y) the net sales price of such capital stock or assets, as the case may be; provided , that the absolute amount shall not be less than zero.

“Cash Available for Distribution” means, for any period, the sum of (i) gross cash proceeds of the Company for such period (which includes the proceeds of borrowings by the Company) minus (ii) the portion thereof used to pay or establish reserves for Company expenses, debt payments, capital improvements, replacements and contingencies, in each case, as determined by the Board of Directors. “Cash Available for Distribution” shall not be reduced by

depreciation, amortization, cost recovery deductions or similar allowances, but shall be increased by any reductions of reserves described in clause (ii) of the prior sentence.

“Certificate” means the certificate of formation of the Company filed with the Secretary of State of the State of Delaware pursuant to the Act on November 18, 2005, as originally executed and amended, modified, supplemented or restated from time to time as the context requires.

“Certificate of Cancellation” means a certificate of cancellation of the Certificate filed in accordance with 6 Del. C. § 18-203.

“Chairman” means the director designated or nominated and elected, as the case may be, as Chairman of the Board of Directors, in accordance with Section 6.9, with such powers and duties as are set forth in Section 6.10.

“Chief Executive Officer” means the Chief Executive Officer of the Company, including any interim Chief Executive Officer of the Company, with such powers and duties as are set forth in Section 7.4.

“Chief Financial Officer” means the Chief Financial Officer of the Company, including any interim Chief Financial Officer of the Company, with such powers and duties as are set forth in Section 7.5.

“Closing Price” means, as of any date:

(i) the closing sale price (or, if no closing price is reported, the last reported sale price) of one Trust Share on the New York Stock Exchange on such date;

(ii) if the Trust Shares are not so quoted on the New York Stock Exchange on any such date, the last reported sale price as reported in the composite transactions for the principal U.S. securities exchange on which the Trust Shares are so listed on such date;

(iii) if the Trust Shares are not so reported, the last quoted bid price for the Trust Shares in the over-the-counter market as reported by the National Quotation Bureau or a similar organization on such date; or

(iv) if the Trust Shares are not so quoted, the average of the midpoint of the last bid and ask prices for the Trust Shares from at least three nationally recognized investment banking firms that the Company selects for such purpose on such date.

“Commission” means the U.S. Securities and Exchange Commission.

“Company” means the limited liability company formed pursuant to the Original Agreement and the Certificate, and continued pursuant to this Agreement.

“Company Minimum Gain” has the same meaning as the term “partnership minimum gain” in Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.

“Company Only Financial Statements” means, with respect to any accounting period, the unconsolidated financial statements of the Company prepared in accordance with GAAP.

“Compass Diversified Investments, Inc.” means Compass Diversified Investments, Inc. a Bahamian international business corporation wholly owned by Compass Group Investments, Inc.

“Compensation Committee” means the Compensation Committee of the Board of Directors established pursuant to Section 6.18(a)(iii).

“Consolidated Net Equity” shall be equal to, with respect to the Company as of any date, the sum of (i) the Company’s consolidated total assets (as determined in accordance with GAAP) as of such date, plus (ii) the aggregate amount of assets impairments (as determined in accordance with GAAP) that were taken relating to any Subsidiaries of the Company as of such date, plus (iii) the consolidated accumulated amortization of intangibles (as determined in accordance with GAAP) of the Company as of such date, minus (iv) the Company’s consolidated total liabilities (as determined in accordance with GAAP) as of such date plus (v) to the extent included in the Company’s consolidated total liabilities (as determined in accordance with GAAP) as of such date, the absolute amount of the Company’s liabilities (as determined in accordance with GAAP) in respect of its obligations under the Supplemental Put Agreement.

“Continuing Director” means (i) any director of the Company who (A) is neither the Interested Shareholder involved in the Business Combination as to which a determination of Continuing Directors is provided hereunder, nor an Affiliate, Associate, employee, agent or nominee of such Interested Shareholder, or a relative of any of the foregoing, and (B) was a member of the Board of Directors prior to the time that such Interested Shareholder became an Interested Shareholder, or (ii) any successor of a Continuing Director described in clause (i) above who is recommended or elected to succeed a Continuing Director by the affirmative vote of a majority of Continuing Directors then on the Board of Directors.

“Contribution-Based Profits” shall be equal to, with respect to any Profit Distribution Subsidiary for any Measurement Period as of any Calculation Date, the sum of (i) the aggregate amount of such Profit Distribution Subsidiary’s net income (loss) (as determined in accordance with GAAP and adjusted for minority interests) with respect to such Measurement Period (without giving effect to (x) any Capital Gains or Capital Losses realized by such Profit Distribution Subsidiary that arise with respect to the sale of capital stock or assets held by such Profit Distribution Subsidiary and which gave rise to a Sale Event and a calculation of Profit Distribution Amount or (y) any expense attributable to the accrual or payment of any amount of Profit Distribution or any amount arising under the Supplemental Put Agreement, in each case, to the extent included in the calculation of such Profit Distribution Subsidiary’s net income (loss)), plus (ii) the absolute aggregate amount of such Profit Distribution Subsidiary’s Loan Expense with respect to such Measurement Period, minus (iii) the absolute aggregate amount of such

Profit Distribution Subsidiary’s Allocated Share of the Company’s Overhead with respect to such Measurement Period.

“Control Date” means the date upon which the Acquirer becomes the Beneficial Owner of at least 90% of the Outstanding Trust Interests.

“Credit Agreement” means the Credit Agreement, dated as of the date hereof, as may be amended from time to time, entered into by and between the Company and the Borrower (as defined therein).

“Cumulative Capital Gains” shall be equal to, as of any Calculation Date, the aggregate amount of Capital Gains realized by the Company as of such calculation date, after giving effect to any Capital Gains realized by the Company on such Calculation Date, since its inception.

“Cumulative Capital Losses” shall be equal to, as of any Calculation Date, the aggregate amount of Capital Losses realized by the Company, after giving effect to any Capital Losses realized by the Company on such Calculation Date, since its inception.

“Cumulative Gains and Losses” shall be equal to, with respect to the Company as of any Calculation Date, an amount equal to the sum of (i) the amount of Cumulative Capital Gains as of such Calculation Date, minus (ii) the absolute amount of Cumulative Capital Losses as of such Calculation Date.

“Debt” means (i) any indebtedness for borrowed money or the deferred purchase price of property as evidenced by a note, bonds or other instruments, (ii) obligations as lessee under capital leases, (iii) obligations secured by any mortgage, pledge, security interest, encumbrance, lien or charge of any kind existing on any asset owned or held by the Company, whether or not the Company has assumed or become liable for the obligations secured thereby, (iv) any obligation under any interest rate swap agreement, (v) accounts payable, and (vi) obligations under direct or indirect guarantees of (including obligations, contingent or otherwise, to assure a creditor against loss in respect of) indebtedness or obligations of the kinds referred to in clauses (i), (ii), (iii), (iv) and (v) above; provided , that Debt shall not include obligations in respect of any accounts payable that are incurred in the ordinary course of the Company’s business and are not delinquent or are being contested in good faith by appropriate proceedings.

“DGCL” means the Delaware General Corporation Law, 8 Del. C. §§ 101 et seq ., as amended from time to time (or any corresponding provisions of succeeding law) and, for the avoidance of doubt, includes all applicable jurisprudence.

“Direct Company Expenses” means, with respect to any period, that portion of the Company’s operating expenses (including any management fees paid by the Company) for such period that are not incurred with respect to any Subsidiary for such period.

“Disputed Profit Distribution” has the meaning set forth in Section 5.2(c).

“Disputed Profit Distribution Date” has the meaning set forth in Section 5.2(c).

“Disputed Profit Distribution Payment Date” means, with respect to any Calculation Date, (i) if the Administrator does not disagree with the Audit Committee’s calculation of Disputed Profit Distribution in accordance with Section 5.2(e)(i)(B), ten (10) Business Days after the Disputed Profit Distribution Date as of such Calculation Date or (ii) in all other cases, twenty-one (21) Business Days after the Disputed Profit Distribution Date as of such Calculation Date.

“Distribution Entitlement” has the meaning set forth in Section 5.2(l).

“Distribution Entitlement Amount” shall be equal to, as of any date of a Distribution Entitlement Notice, the sum of (i) the aggregate amount of all Distribution Entitlements elected to be such by the Allocation Member on all Profit Distribution Payment Dates occurring prior to the date of such Distribution Entitlement Notice, minus (ii) the aggregate amount of all Distribution Entitlement Payments paid by the Company to the Manager on all Distribution Entitlement Payment Dates occurring prior to the date of such Distribution Entitlement Notice.

“Distribution Entitlement Notice” has the meaning set forth in Section 5.2(l).

“Distribution Entitlement Payment” has the meaning set forth in Section 5.2(l).

“Distribution Entitlement Payment Date” has the meaning set forth in Section 5.2(l).

“Disinterested Director” means a director of the Company who is not and was not a party to the proceeding or matter in respect of which indemnification is sought by the claimant.

“Dissolution Event” has the meaning set forth in Section 14.1.

“Effective Date” means November 18, 2005, being the date of the effectiveness of the filing of the Certificate.

“Election Period” means, with respect to any Holding Date or anniversary thereof, the 30-day period immediately following such Holding Date or anniversary thereof.

“Entire Board of Directors” has the meaning set forth in Section 6.17.

“Escrow Agreement” means the Escrow Agreement, dated as of the date hereof, as may be amended from time to time, entered into by and between the Company and The Bank of New York, Inc. or any successor(s) thereto and the other parties names therein.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Fair Market Value” means, as of any date:

(i) in the case of any equity securities, the average of the closing sale prices for such equity securities during the ten (10) Business Days immediately preceding such date:

(A) as reported in composite transactions by the New York Stock Exchange;

(B) if such equity securities are not so reported by the New York Stock Exchange, as reported in the composite transactions for the principal U.S. securities exchange on which such equity securities are so listed;

(C) if such equity securities are not so reported, the last quoted bid price for such equity securities, in the over-the-counter market as reported by the National Quotation Bureau or a similar organization; or

(ii) if such equity securities are not so reported, quoted or listed, or in the case of any other Property, the fair market value of such equity securities or such Property as of such date as determined by a majority of the Board of Directors in good faith; provided , that if the Manager shall dispute any such determination of fair market value by the Board of Directors, fair market value shall be determined instead by the investment banking or professional valuation firm selected by the Board of Directors from among no fewer than three qualified candidates provided by the Manager.

“Fiscal Quarter” means the Company’s fiscal quarter for purposes of its reporting obligations under the Exchange Act.

“Fiscal Year” means the Company’s fiscal year for purposes of its reporting obligations under the Exchange Act.

“Future Investments” means contractual commitments to invest represented by definitive agreements.

“GAAP” means generally accepted accounting principles in effect in the United States, consistently applied.

“Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for U.S. federal income tax purposes, except as follows:

(i) the initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the Board of Directors;

(ii) the Gross Asset Values of all Company assets shall be adjusted by the Tax Matters Member to equal their respective gross fair market values (taking Code Section 7701(g) into account), as determined by the Tax Matters Member as of the following times: (A) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution; (B) the distribution by the Company to a Member of more than a de minimis amount of Company Property as consideration for an interest in the Company; (C) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) or (D) upon the declaration of a Holding Event; provided , that an adjustment described in clauses (A) and (B) of this subparagraph (ii) shall be made only if the Tax Matters

Member reasonably determines that such adjustment is necessary to reflect the relative economic interests of the Members in the Company;

(iii) the Gross Asset Value of any item of Company assets distributed to any Member shall be adjusted to equal the gross fair market value (taking Code Section 7701(g) into account) of such asset on the date of distribution, as determined by the Tax Matters Member; and

(iv) the Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the definition of “Profits” and “Losses”; provided , however , that Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv) to the extent that an adjustment pursuant to subparagraph (ii) is required in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (iv).

If the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraph (ii) or (iv), such Gross Asset Value shall thereafter be adjusted by depreciation taken into account with respect to such asset for purposes of computing Profits and Losses.

“High Water Mark” means, as of any Calculation Date, the highest positive amount of the Company’s Cumulative Gains and Losses as of such Calculation Date that were calculated in connection with any Qualifying Trigger Event that occurred prior to such Calculation Date.

“High Water Mark Allocation” shall be equal to, as of any Calculation Date, the product of (i) the amount of the High Water Mark as of such Calculation Date, multiplied by (ii) 20%.

“ Holding Date ” means, with respect to any Subsidiary, the fifth anniversary of the date upon which the Company acquired a controlling interest in such Subsidiary; provided, that if the Allocation Member has previously elected that a Holding Event has occurred with respect to any Subsidiary, then Holding Date shall mean, with respect to such Subsidiary, the fifth anniversary of the Calculation Date with respect to such previously elected Holding Event.

“ Holding Event” means, with respect to any Subsidiary, (i) the election by the Allocation Member on or after the Holding Date with respect to such Subsidiary that a Holding Event has occurred; provided , that the Allocation Member must make such election during the Election Period with respect to such Holding Date, or (ii) the election by the Allocation Member on or after each anniversary of any Holding Date with respect to such Subsidiary that a Holding Event has occurred; provided , that the Allocation Member must make such election during the Election Period with respect to such anniversary of such Holding Date.

“Independent Director” means a director who (i) (a) is not an officer or employee of the Company, or an officer, director or employee of any Subsidiary of the Company, (b) was not appointed as a director pursuant to the terms of the Management Services Agreement, and (c) for so long as the Management Services Agreement is in effect, is not

affiliated with the Manager or any of its Affiliates, and (ii) who satisfies the independence requirements under the Applicable Listing Rules as determined by the Board of Directors.

“Independently Calculated Profit Distribution” has the meaning set forth in Section 5.2(d).

“Independently Calculated Profit Distribution Payment Date ” means, with respect to any Calculation Date, ten (10) Business Days after the receipt by the Administrator and the Audit Committee of the calculation of Profit Distribution Amount as of such Calculation Date by the independent accounting firm in accordance with Section 5.2(d).

“Initial Board” has the meaning set forth in Section 6.1.

“Initial Director” has the meaning set forth in Section 6.1.

“Initial Public Offering” means the initial public offering of Trust Shares by the Trust, closing on the date hereof.

“Interested Shareholder” means any Person (other than the Manager, the Members, the Company or any Subsidiary of the Company, any employee benefit plan maintained by the Company or any Subsidiary thereof or any trustee or fiduciary with respect to any such plan when acting in such capacity) that:

(i) is, or was at any time within the three-year period immediately prior to the date in question, the Beneficial Owner of fifteen percent (15%) or more of the then Outstanding Trust Interests and who did not become the Beneficial Owner of such amount of Trust Interests pursuant to a transaction that was approved by the affirmative vote of a majority of the Entire Board of Directors; or

(ii) is an assignee of, or has otherwise succeeded to, any Trust Interests of which an Interested Shareholder was the Beneficial Owner at any time within the three-year period immediately prior to the date in question, if such assignment or succession occurred in the course of a transaction, or series of transactions, not involving a public offering within the meaning of the Securities Act.

For the purpose of determining whether a Person is an Interested Shareholder, the Trust Interests that may be issuable or exchangeable by the Company to the Interested Shareholder pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, warrants or options, or otherwise, shall be included, but not any other Trust Interests that may be issuable or exchangeable by the Company pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, warrants or options, or otherwise, to any Person who is not the Interested Shareholder.

“Issuance Items” has the meaning set forth in Section 4.3(g).

“Level 1 Hurdle Amount” shall be equal to, with respect to any Profit Distribution Subsidiary as of any Calculation Date, the product of (i) (x) 1.75% multiplied by (y) the number of Fiscal Quarters ending during the Measurement Period with respect to such Profit

Distribution Subsidiary as of such Calculation Date, multiplied by (ii) such Profit Distribution Subsidiary’s Average Allocated Share of Consolidated Equity for each Fiscal Quarter ending during such Measurement Period.

“Level 2 Hurdle Amount ” shall be equal to, with respect to any Profit Distribution Subsidiary as of any Calculation Date, the product of (i) (x) 2.1875%, multiplied by (y) the number of Fiscal Quarters ending during the Measurement Period with respect to such Profit Distribution Subsidiary as of such Calculation Date, multiplied by (ii) such Profit Distribution Subsidiary’s Average Allocated Share of Consolidated Equity for each Fiscal Quarter ending during such Measurement Period.

“Liquidation Period” has the meaning set forth in Section 14.7.

“Liquidator” means a Person appointed by the Board of Directors to oversee the winding up of the Company.

“LLC Interests” means, collectively, the Trust Interests and the Allocation Interests.

“Loan Expense” means, with respect to any Profit Distribution Subsidiary for any Measurement Period as of any Calculation Date, the aggregate amount of all interest or other expenses paid by such Profit Distribution Subsidiary with respect to indebtedness of such Profit Distribution Subsidiary to either the Company or other Subsidiaries of the Company with respect to such Measurement Period.

“Losses” has the meaning set forth in the definition of “ Profits ” and “ Losses ” below.

“Management Fee” means the management fee payable by the Company pursuant to the Management Services Agreement with respect to the provision of management services to the Company.

“Management Services Agreement” means the Management Services Agreement, dated as of the date hereof, as may be amended from time to time, entered into by and between the Company and the Manager.

“Manager” means Compass Group Management LLC, and any successor thereto.

“Market Value” means, as of any date, the product of (1) the average number of, if the Trust is in existence as of such date, Trust Shares or, if the Trust is not in existence as of such date, Trust Interests, as applicable, issued and Outstanding, other than treasury shares or treasury Trust Interests, as applicable, during the last fifteen (15) Business Days of the most recently completed Fiscal Quarter as of such date multiplied by (2) the volume weighted average trading price per Trust Share or per Trust Interest, as applicable, as determined by reference to the relevant securities exchange identified in clause (i) of the definition of Fair Market Value, over such fifteen (15) Business Days.

“Measurement Period” means, with respect to any Profit Distribution Subsidiary as of any Calculation Date, the period from and including the later of: (i) the date upon which the Company acquired a controlling interest in such Profit Distribution Subsidiary and (ii) the immediately preceding Calculation Date as of which Contribution-Based Profits were calculated with respect to such Profit Distribution Subsidiary and with respect to which Profit Distributions were paid (or, at the election of the Allocation Member, deferred) by the Company, up to and including such Calculation Date.

“Member” means, as of any date, any holder of Trust Interests or Allocation Interests, as of such date.

“Member Nonrecourse Debt” has the same meaning as the term “partner nonrecourse debt” in Section 1.704-2(b)(4) of the Regulations.

“Member Nonrecourse Debt Minimum Gain” means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of the Regulations.

“Member Nonrecourse Deductions” has the same meaning as the term “partner nonrecourse deductions” in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.

“Net Investment Value” means, as of any date, the sum of:

(i) the Market Value as of such date; plus

(ii) the amount of any borrowings (other than intercompany borrowings) of the Company and its Subsidiaries (but not including borrowings on behalf of any Subsidiary of such Subsidiaries) as of such date; plus

(iii) the value of Future Investments of the Company and/or any of its Subsidiaries other than cash or cash equivalents, as calculated by the Manager and approved by a majority of the Continuing Directors as of such date; provided , that such Future Investments have not been outstanding for more than two consecutive full Fiscal Quarters as of such date; less

(iv) the aggregate amount held by the Company and its Subsidiaries in cash or cash equivalents (but not including cash or cash equivalents held specifically for the benefit of any Subsidiary of such Subsidiaries) as of such date.

“Net Long Term Capital Gain” has the meaning set forth in Code Section 1222(7).

“New York Stock Exchange” means the New York Stock Exchange or any successor thereto.

“Nominating and Governance Committee” means the Nominating and Governance Committee of the Board of Directors established pursuant to Section 6.18(a)(i).

“Nonrecourse Deductions” has the meaning set forth in Section 1.704-2(b)(1) of the Regulations.

“Nonrecourse Liability” has the meaning set forth in Section 1.704-2(b)(3) of the Regulations.

“Offer Price” means, as of any Control Date, the average Closing Price per Trust Share or Trust Interest, as applicable, on the twenty (20) Business Days immediately prior to, but not including, such Control Date.

“Original Agreement” has the meaning set forth in the introductory paragraph hereof.

“Outstanding” means, as of any date, with respect to any security theretofore issued by the Company, except:

(i) such securities as represented by certificates or electronic positions evidencing such securities that have been canceled or delivered for cancellation; and

(ii) such security as represented by certificates or electronic positions that have been exchanged for or in lieu of which other securities have been executed and delivered pursuant to Section 3.5.

“Overhead” shall be equal to, with respect to the Company for any Fiscal Quarter, the sum of (i) that portion of the Company’s operating expenses (as determined in accordance with GAAP) (without giving effect to any expense attributable to the accrual or payment of any amount of Profit Distribution or any amount arising under the Supplemental Put Agreement to the extent included in the calculation of the Company’s operating expenses), including any Management Fees actually paid by the Company to the Manager, with respect to such Fiscal Quarter that are not attributable to any Subsidiary of the Company ( i.e. , operating expenses that do not correspond to operating expenses of a Subsidiary of the Company with respect to such Fiscal Quarter), plus (ii) the Company’s accrued interest expense (as determined in accordance with GAAP) on any outstanding Third Party Indebtedness of the Company with respect to such Fiscal Quarter, minus (iii) revenue, interest income and other income reflected in the Company Only Financial Statements.

“ Over-Paid Profit Distributions ” shall be equal to, as of any Calculation Date, the amount by which (i) the aggregate amount of Profit Distributions that were actually paid by the Company with respect to all Profit Distribution Payment Dates immediately preceding such Calculation Date, exceeded (ii) the aggregate amount of Profit Distributions that were actually due and payable by the Company with respect to all such Profit Distribution Payment Dates, as determined in accordance with Section 5.2; provided , that such amount shall not be less than zero.

“Percentage Interest” means, with respect to any Member as of any date, the ratio (expressed as a percentage) of the number of LLC Interests held by such Member on such date relative to the aggregate number of LLC Interests then Outstanding as of such date.

“Person” means any individual, company (whether general or limited), limited liability company, corporation, trust, estate, association, nominee or other entity.

“Profit Distribution” means, as of any Calculation Date, any Approved Profit Distribution as of such Calculation Date, Disputed Profit Distribution as of such Calculation Date, the Independently Calculated Profit Distribution as of such Calculation Date or the Profit Distribution Amount as of such Calculation Date, originally submitted to the Audit Committee by the Administrator pursuant to Section 5.2(c), as the case may be. For the avoidance of doubt, Profit Distribution shall also mean any portion of the foregoing payable on any applicable Profit Distribution Payment Date, including any Independently Calculated Profit Distribution Payment Date or Submission Failure Payment Date, as the case may be.

“Profit Distribution Amount ” shall be equal to, with respect to any Profit Distribution Subsidiary as of any Calculation Date, the sum of (i) the amount by which Total Profit Allocation with respect to such Profit Distribution Subsidiary as of such Calculation Date exceeds such Profit Distribution Subsidiary’s Level 1 Hurdle Amount as of such Calculation Date but is less than such Profit Distribution Subsidiary’s Level 2 Hurdle Amount as of such Calculation Date, plus (ii) the product of (x) the amount by which Total Profit Allocation with respect to such Profit Distribution Subsidiary as of such Calculation Date exceeds such Profit Distribution Subsidiary’s Level 2 Hurdle Amount as of such Calculation Date, multiplied by (y) 20%, minus (iii) the High Water Mark Allocation, if any, as of such Calculation Date.

“Profit Distribution Payment Date” means any Approved Profit Distribution Payment Date, as of any Calculation Date, with respect to Approved Profit Distribution, any Disputed Profit Distribution Payment Date, as of any Calculation Date, with respect to Disputed Profit Distribution, any Submission Failure Payment Date, as of any Calculation Date, with respect to Approved Profit Distribution, or any Independently Calculated Profit Distribution Payment Date, as of any Calculation Date, with respect to the Independently Calculated Profit Distribution, as the case may be.

“Profit Distribution Subsidiary” has the meaning set forth in Section 5.2(b).

“Profits” and “Losses” mean, for each Allocation Year, an amount equal to the Company’s taxable income or loss for such Allocation Year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments (without duplication):

(i) any income of the Company that is exempt from U.S. federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition of “Profits” and “Losses” shall be added to such taxable income or loss;

(ii) any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Profits or Losses pursuant to this definition of “Profits” and “Losses” shall be subtracted from such taxable income or loss;

(iii) in the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraph (ii) or (iii) of the definition of Gross Asset Value, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Gross Asset Value of the asset) or an item of loss (if the adjustment decreases the Gross Asset Value of the asset) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses;

(v) to the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Member’s interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses; and

(vi) notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Sections 4.3 or 4.4 shall not be taken into account in computing Profits or Losses.

The amounts of the items of Company income, gain, loss or deduction available to be specially allocated pursuant to Sections 4.3 and 4.4 shall be determined by applying rules analogous to those set forth in subparagraphs (i) through (v) above.

“Property” means all real and personal property acquired by the Company, including cash, and any improvements thereto, and shall include both tangible and intangible property.

“Qualifying Trigger Event” means any Trigger Event with respect to a Profit Distribution Subsidiary (i) that gave rise to the calculation of Total Profit Allocation with respect to such Profit Distribution Subsidiary as of any Calculation Date and (ii) where the amount of Total Profit Allocation so calculated as of such Calculation Date exceeded such Profit Distribution Subsidiary’s Level 2 Hurdle Amount as of such Calculation Date.

“Quarterly Allocated Share of Consolidated Equity” shall be equal to, with respect to any Profit Distribution Subsidiary for any Fiscal Quarter, the product of (i) the Company’s Consolidated Net Equity as of the last day of such Fiscal Quarter, multiplied by (ii) a fraction, the numerator of which is such Profit Distribution Subsidiary’s Adjusted Net Assets as of the last day of such Fiscal Quarter and the denominator of which is the sum of the Adjusted Net Assets of all of the Subsidiaries owned by us as of the last day of such Fiscal Quarter.

“Quarterly Share of Company Overhead” shall be equal to, with respect to any Profit Distribution Subsidiary for any Fiscal Quarter, the product of (i) the absolute amount of the Company’s Overhead with respect to such Fiscal Quarter, multiplied by (ii) a fraction, the

numerator of which is such Profit Distribution Subsidiary’s Adjusted Net Assets as of the last day of such Fiscal Quarter and the denominator of which is the sum of the Adjusted Net Assets of all of the Subsidiaries owned by us as of the last day of such Fiscal Quarter.

“Register” has the meaning set forth in Section 3.3.

“Regular Trustees” has the meaning set forth in the Trust Agreement.

“Regulations” means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations are amended from time to time.

“Regulatory Allocations” has the meaning set forth in Section 4.4.

“Repurchase Date” has the meaning set forth in Section 3.4(b).

“Rules and Regulations” means the rules and regulations promulgated under the Exchange Act or the Securities Act.

“Sale Event” means, with respect to any Subsidiary, the sale of a material amount, as determined by the Allocation Member and consented to by a majority of the Board of Directors, such consent not to be unreasonably withheld, conditioned or delayed, of the capital stock or assets of such Subsidiary or a Subsidiary of such Subsidiary.

“Secretary” means the Secretary of the Company, with such powers and duties as set forth in Section 7.7.

“Securities Act” means the Securities Act of 1933, as amended.

“Stock Transfer Agency Agreement” means the Stock Transfer Agency Agreement, dated as of the date hereof, as may be amended from time to time, entered into by and between the Company and The Bank of New York, Inc. or any successor(s) thereto.

“Submission Date” has the meaning set forth in Section 5.2(d).

“Submission Failure Payment Date” means, with respect to any Calculation Date, ten (10) Business Date after the Submission Date with respect to such Calculation Date.

“Subsidiary” means, with respect to any Person, any corporation, company, joint venture, limited liability company, association or other Person in which such Person owns, directly or indirectly, more than 50% of the Outstanding equity securities or interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such Person.

“Supplemental Put Agreement” means the Supplemental Put Agreement, dated as of the date hereof, as may be amended from time to time, entered into by and between the Company and the Allocation Member.

“Tax Distribution” has the meaning set forth in Section 5.2(h).

“Tax Distribution Payment Date” has the meaning set forth in Section 5.2(h).

“Tax Matters Member” has the meaning set forth in Section 11.4(a).

“Third Party Indebtedness” means, with respect to any Person, indebtedness of such Person owed to any third party lenders that are not Affiliated with such Person.

“Total Profit Allocation” shall be equal to, with respect to any Profit Distribution Subsidiary as of any Calculation Date, the sum of (i) the Contribution-Based Profits of such Profit Distribution Subsidiary for the Measurement Period with respect to such Profit Distribution Subsidiary as of such Calculation Date, plus (ii) if the Trigger Event underlying the calculation of Total Profit Allocation as of such Calculation Date is a Sale Event, the Company’s Cumulative Gains and Losses as of such Calculation Date.

“Transaction Documents” means the Management Services Agreements, the Trust Agreement, the Supplemental Put Agreement, the Credit Agreement, the Underwriting Agreement, the Stock Transfer Agency Agreement, the Escrow Agreement and all documents and certificates contemplated thereby or delivered in connection therewith.

“Transfer” means, as a noun, any voluntary or involuntary transfer, sale, pledge or hypothecation or other disposition and, as a verb, voluntarily or involuntarily to transfer, sell, pledge or hypothecate or otherwise dispose of.

“Transfer Agent” means, with respect to the Trust Shares and the LLC Interests, The Bank of New York, Inc., or any successor(s) thereto.

“Trigger Event” means, with respect to any Subsidiary, the occurrence of either a Sale Event or a Holding Event with respect to such Subsidiary.

“Trust” means Compass Diversified Holdings, a Delaware statutory trust.

“Trust Agreement” means the Amended and Restated Trust Agreement, dated as of the date hereof, entered into by and among the Company and The Bank of New York (Delaware), a Delaware banking corporation, as property trustee, and the Regular Trustees.

“Trust Interests” means the limited liability company interests in the Company designated under the Original Agreement as the “Class A Interests” and redesignated herein as “Trust Interests”, as authorized pursuant to Section 3.1(a), and having the rights provided herein.

“Trust Interest Certificates” means a certificate representing Trust Interests substantially in the form attached hereto as Exhibit A.

“Trust Member” means any holder of a Trust Interest, in its capacity as a Member.

“Trust Shares” means the shares of the Trust, each representing one undivided beneficial interest in the assets of the Trust.

“Under-Paid Profit Distributions” shall be equal to, as of any Calculation Date, the amount by which (i) the aggregate amount of Profit Distributions that were actually due and payable by the Company with respect to all Profit Distribution Payment Dates immediately preceding such Calculation Date, as determined in accordance with Section 5.2 exceeded (ii) the aggregate amount of Profit Distributions that were actually paid by the Company with respect to all such Profit Distribution Payment Dates; provided , that such amount shall not be less than zero.

“Underwriting Agreement” means the Underwriting Agreement, dated as of the date hereof, entered into by and among the Company, the Trust, the Manager, Ferris, Baker Watts, Incorporated, and the other parties thereto.

“Voluntary Exchange” has the meaning set forth in the Trust Agreement.

ARTICLE 2

THE TRUST

Section 2.1 Trust to Be Sole Holder of Trust Interests. The Company shall issue Trust Interests to the Trust as the initial Trust Member, and the Trust shall be admitted to the Company as a Member of the Company in respect thereof upon its execution of a counterpart of this Agreement. For so long as the Trust remains in existence, subject to Sections 2.3 and 2.4(a), it is intended that the Trust shall be the sole Trust Member and the sole owner of one hundred percent (100%) of the Trust Interests, and, during such period, the Company shall not issue, sell or otherwise transfer any of its Trust Interests to any Person other than the Trust. Each Trust Member agrees with the Company to be bound by the terms of this Agreement.

Section 2.2 Trust Shares to Represent Trust Interests. Each Trust Share represents one undivided beneficial interest in the assets of the Trust, which assets consist of the underlying Trust Interests.

Section 2.3 Voluntary Exchange of Trust Shares for Trust Interests. The Company, acting through its Board of Directors, shall take all actions and do all things necessary to give effect to a Voluntary Exchange on the terms and conditions set forth in Section 9.2 of the Trust Agreement.

Section 2.4 Acquisition Exchange of Trust Shares for Trust Interests.

(a) Right to Acquisition Exchange . The Company, acting through its Board of Directors, shall take all actions and do all things necessary to give effect to an Acquisition Exchange on the terms and conditions set forth in Section 9.3 of the Trust Agreement.

(b) Right to Acquire Trust Interests of Remaining Holders for Cash . Following the completion of an Acquisition Exchange, the Acquirer shall have the right to purchase, solely for cash, and Members other than the Acquirer shall be required to sell, all, but not less than all, of the Outstanding Trust Interests not then held by the Acquirer, at the Offer

Price. The Acquirer may exercise its right to effect such purchase by delivering written notice to the Company and the Transfer Agent of its election to make the purchase not less than sixty (60) days prior to the Control Date. Promptly after receipt of such notice, the Board of Directors shall declare a record date. The Company will cause the Transfer Agent to mail a copy of such notice to the Trust Members at least thirty (30) days prior to such Control Date.

Section 2.5 Right of Holders of Trust Shares and Members to Enforce Provisions of this Agreement and Bring Derivative Action.

(a) The Allocation Member, individually, and any other Member or Members holding, in the aggregate, at least ten percent (10%) of the Outstanding Trust Interests, shall have the right to institute any legal proceeding against the Company to enforce the provisions of this Agreement, and to the fullest extent permitted by applicable law, no other Member or Members shall have the right to institute any legal proceeding against the Company to enforce the provisions of this Agreement.

(b) For so long as the Trust remains the sole holder of Trust Interests, holders of at least ten percent (10%) of the Outstanding Trust Shares shall have the right to cause the Trust to institute any legal proceeding for any remedy available to the Trust, as a holder of Trust Interests and, to the extent permitted by applicable law, such holders of Trust Shares may direct the time, method and place of conducting any such legal proceeding brought by the Trust. For so long as the Trust remains the sole holder of Trust Interests, holders of record of at least ten percent (10%) of the Outstanding Trust Shares shall also have the right to institute directly against the Company any legal proceeding available to the Trust against the Company to enforce the provisions of this Agreement. Solely for purposes of this Section 2.5(b) and only to the extent provided herein, the holders of the Outstanding Trust Shares shall be deemed to be third-party beneficiaries of this Agreement to the same extent as if they were signatories hereto.

(c) Except as expressly provided in this Agreement, nothing in this Agreement shall be deemed to give to any Person any benefit or any legal or equitable right, remedy or claim under this Agreement.

Section 2.6 Reimbursement of Regular Trustees . The Company shall reimburse the Regular Trustees for any expenses, out-of-pocket or otherwise, incurred on behalf of the Trust or otherwise in connection with performing any of their duties or obligations under the Trust Agreement.

ARTICLE 3

CLASSES AND ISSUANCE OF LLC INTERESTS; TRANSFER

Section 3.1 LLC Interests. The Company shall be authorized to issue two classes of limited liability company interests to the Members: Trust Interests and Allocation Interests as provided in Sections 3.1(a) and (b).

(a) Trust Interests.

(i) Generally . The Company, and the Board of Directors by resolution on behalf of the Company, shall initially be authorized to issue up to five hundred million (500,000,000) Trust Interests in one or more series and, for so long as the Trust remains the sole holder of Trust Interests, shall cause to be issued to the Trust, as of any date, the identical number of Trust Interests as the number of Trust Shares that are issued and Outstanding. The aggregate number of Trust Interests that are authorized may be increased from time to time by an amendment to this Agreement upon the adoption of a resolution by the affirmative vote of at least a majority of the Entire Board of Directors declaring such amendment to be advisable and the approval of such amendment by the affirmative vote of the holders of a majority of the Trust Interests then Outstanding present in person or represented by proxy at a meeting of the Members. Each Member holding a Trust Interest shall have all the rights, privileges and obligations set forth herein pertaining to holders of Trust Interests, and shall have one vote per Trust Interest in accordance with the terms of this Agreement. The Trust Interests shall be certificated in the form of a Trust Interest Certificate or represented by electronic book-entry position.

(ii) Restrictions on Transfer of Trust Interests . Except as otherwise provided in Article 2, the Trust to the fullest extent permitted by law shall not be permitted to transfer, and the Company shall not recognize any purported transfer of, nor in any respect treat any purported transferee as the owner of, any Trust Interests held by the Trust.

(b) Allocation Interests.

(i) Generally . The Company is authorized to issue one thousand (1,000) Allocation Interests. As of the date hereof, all one thousand (1,000) Allocation Interests have been or are hereby issued to the Allocation Member. One hundred percent (100%) of the Allocation Interests shall be issued to the Manager. Each Member holding an Allocation Interest shall have all the rights, privileges and obligations set forth herein pertaining to holders of Allocation Interests. The Allocation Interests shall be certificated in the form of an Allocation Interest Certificate. The holders of Allocation Interests shall not be entitled to vote with respect to any issue relating to the Company notwithstanding the Act or other applicable law, except as provided in Article 10 (in which case, the holders of Allocation Interests shall have one vote per Allocation Interest). For the avoidance of doubt, the parties intend that the Manager not be a “manager” within the meaning of Section 18-402 of the Act.

(ii) Restrictions on Transfer of Allocation Interests . Until such time as the Management Services Agreement is terminated, the Manager (or any Allocation Member holding Allocation Interests in accordance with this Section 3.1(b)) to the fullest extent permitted by law shall not be permitted to transfer, and the Company shall not recognize any purported transfer of, nor in any respect treat any purported transferee as the owner of, any Allocation Interests held by the Manager; provided , that any Allocation Member may transfer Allocation Interests to any Affiliate of the Manager, and any Allocation Interests so transferred shall remain subject to the restrictions of this Section 3.1(b)(i) in the hands of such permitted transferee.

Section 3.2 Issuance of Additional Trust Interests. For so long as the Trust remains the sole holder of Trust Interests, (a) the Board of Directors shall have authority to issue to the Trust, from time to time without any vote or other action by the Members, in one or more series, any or all Trust Interests of the Company at any time authorized, and (b) the Company will issue additional Trust Interests , in one or more series to the Trust in exchange for an equal number of Trust Shares which the Company may sell or distribute in any manner, subject to applicable law, that the Board of Directors in its sole discretion deems appropriate and advisable.

Section 3.3 Trust Interest Certificates; Admission of Additional Members. The Trust Interest Certificates shall be conclusive evidence of ownership of the related Trust Interests, and every holder of record of Trust Interests of the Company shall be entitled to one or more Trust Interest Certificates representing the number of Trust Interests held by such holder of record. Any Trust Interest Certificates of the Company to be issued shall be issued under the seal of the Company, or a facsimile thereof, and shall be numbered and shall be entered in the books of the Company as they are issued. If and when issued, each Trust Interest Certificate shall bear a serial number, shall exhibit the holder’s name and the number of Trust Interests evidenced thereby and shall be signed by the Chief Executive Officer or the Chief Financial Officer. Any or all of the signatures on the Trust Interest Certificates may be facsimiles. If any officer or Transfer Agent who has signed or whose facsimile signature has been placed upon a Trust Interest Certificate shall have ceased to be such officer or Transfer Agent before such Trust Interest Certificate is issued, the Trust Interest Certificate may be issued by the Company with the same effect as if such Person or entity were such officer or Transfer Agent at the date of issue. From the time of the closing of the Initial Public Offering, the Company shall retain the Transfer Agent to maintain a register of the Trust Interests (the “ Register ”), the Transfer Agent, in such capacity shall be known as the Registrar, and cause such Registrar to register thereon any transfer of Trust Interest Certificates. Transfer of Trust Interests of the Company shall be made on the Register only upon surrender to the Transfer Agent of the Trust Interest Certificates duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer; provided , however , that such succession, assignment or transfer is not prohibited by the Trust Interest Certificates, this Agreement, applicable law or contract. Thereupon, the Company shall issue a new Trust Interest Certificate (if requested) to the Person entitled thereto, cancel the old Trust Interest Certificate, and shall instruct the Registrar to record the transaction upon the Register.

Section 3.4 Repurchase of Trust Interests by the Company.

(a) The Board of Directors shall have authority to cause the Company to conduct a capital reduction, including the repurchase of any number of issued and Outstanding Trust Interests; provided , however , that the Company shall not purchase or redeem its Trust Interests for cash or other property if any such purchase or redemption would be inconsistent with the requirements of Section 18-607 or Section 18-804 of the Act; provided , further , that so long as the Trust remains the sole holder of Trust Interests, the Company, as sponsor of the Trust, acting through its Board of Directors, shall cause the Trust to conduct a capital reduction on similar terms and shall ensure that an identical number of Trust Interests and Trust Shares are issued and Outstanding at any one time.

(b) In the event the Board of Directors determines that the Company shall make an offer to repurchase any number of issued and Outstanding Trust Interests, the Board of

Directors shall deliver to the Transfer Agent notice of such offer to repurchase indicating the repurchase price and the date of repurchase (the “ Repurchase Date ”) and shall cause the Transfer Agent to mail a copy of such notice to the Members and holders of Trust Shares, as the case may be, at least thirty (30) days prior to the Repurchase Date. Any Trust Interests tendered and repurchased by the Company, in accordance with this Section 3.4, shall be deemed to be authorized and issued, but not Outstanding and, subject to Section 2.1, may subsequently be sold or Transferred for due consideration.

Section 3.5 Mutilated, Lost, Destroyed or Stolen Certificates . Each holder of record of Trust Interests and Allocation Interests shall promptly notify the Company of any mutilation, loss or destruction of any certificate of which such holder is the record holder. The Company may, in its discretion, cause the Transfer Agent to issue a new certificate in place of any certificate theretofore issued by it and alleged to have been mutilated, lost, stolen or destroyed, upon surrender of the mutilated Share certificate or, in the case of loss, theft or destruction of the certificate, upon satisfactory proof of such loss, theft or destruction, and the Board of Directors may, in its discretion, require the holder of record of the Trust Interests or Allocation Interests evidenced by the lost, stolen or destroyed certificate, or his legal representative, to give the Transfer Agent a bond sufficient to indemnify the Transfer Agent against any claim made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

ARTICLE 4

ALLOCATIONS

Section 4.1 General Application . The rules set forth below in this Article 4 shall apply for the purposes of determining each Member’s allocable share of the items of income, gain, loss and expense of the Company comprising Profits or Losses of the Company for each Allocation Year, determining special allocations of other items of income, gain, loss and expense, and adjusting the balance of each Member’s Capital Account to reflect the aforementioned general and special allocations. For each Allocation Year, the special allocations in Section 4.3 shall be made immediately prior to the general allocations of Section 4.2.

Section 4.2 Allocations of Profits and Losses.

(a) Special Allocations Following Capital Gain Transactions . If the Company has a Sale Event during the Allocation Year, any Company Net Long Term Capital Gain shall be allocated:

(i) First to the Allocation Member to the extent of any amounts payable to the Allocation Member with respect to the Allocation Year pursuant to Section 5.2, and

(ii) The balance of such Net Long Term Capital Gain shall be allocated among the Members in accordance with the general allocation of Profits or Losses for such year, as provided in Section 4.2(b) or (c).

(b) Allocation of Profit . If the Company has Profits during the Allocation Year, after excluding the amount of any Net Long Term Capital Gain allocated to the Allocation Member pursuant to Section 4.2(a), such Profits (as so reduced) shall be allocated:

(i) First to the Allocation Member to the extent of the any amounts payable to the Allocation Member with respect to the Allocation Year pursuant to Section 5.2, but without duplicating any allocations of Net Long Term Capital Gain to the Allocation Member for such Allocation Year pursuant to Section 4.2(a), and

(ii) The balance to the Members in accordance with their Percentage Interests.

(c) Allocation of Losses . If the Company has Losses during the Allocation Year, after excluding the amount of any Net Long Term Capital Gain allocated to the Allocation Member pursuant to Section 4.2(a), such Losses (as so increased) shall be allocated, subject to the limitations of Section 4.5:

(i) First to the Members in accordance with their Percentage Interests, up to, but not exceeding, the amount that would cause the Capital Account of any Member to be a negative number; and

(ii) The balance, if any, shall be allocated among the Trust Members in accordance with their Percentage Interests.

(d) Character of Allocations . Allocations to Members of Profits or Losses pursuant to Sections 4.2(b) and 4.2(c) shall consist of a proportionate share of each Company item of income, gain, expense and loss entering into the computation of Profits or Losses for such Allocation Year (other than the portion of each Net Long Term Capital Gain that is specially allocated to the Allocation Member pursuant to Section 4.2(a)).

Section 4.3 Special Allocations. The following special allocations shall be made in the following order:

(a) Minimum Gain Chargeback . Except as otherwise provided in Section 1.704-2(f) of the Regulations, notwithstanding any other provision of this Article 4, if there is a net decrease in Company Minimum Gain during any Allocation Year, each Member shall be specially allocated items of Company income and gain for such Allocation Year (and, if necessary, subsequent Allocation Years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Regulations Section 1.704-2(g) and (h). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section 4.3(a) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Regulations and shall be interpreted consistently therewith.

(b) Member Minimum Gain Chargeback . Except as otherwise provided in Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of this Article 4, if

there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Allocation Year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items of Company income and gain for such Allocation Year (and, if necessary, subsequent Allocation Years) in an amount equal to such Member’s share of the net decrease in Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section 4.3(b) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently therewith.

(c) Qualified Income Offset . In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of the Member as quickly as possible; provided , that an allocation pursuant to this Section 4.3(c) shall be made only if and to the extent that the Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article 4 have been tentatively made as if this Section 4.3(c) were not in this Agreement.

(d) Nonrecourse Deductions . Nonrecourse Deductions for any Allocation Year shall be specially allocated to the Members in the manner elected by the Tax Matters Member in conformity with the provisions of Regulations 1.704-2, and in the absence of such an election, to the Trust Members in proportion to their respective Percentage Interests.

(e) Member Nonrecourse Deductions . Any Member Nonrecourse Deductions for any Allocation Year shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-2(i)(1).

(f) Section 754 Adjustments . To the extent an adjustment to the adjusted tax basis of any Company asset, pursuant to Code Section 734(b) or Code Section 743(b), is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of such Member’s interest in the Company, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies or to the Member to whom such distribution was made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

(g) Allocations Relating to Taxable Issuance of Company LLC Interests . Any income, gain, loss or deduction realized as a direct or indirect result of the issuance of LLC Interests by the Company to a Member (the “Issuance Items” ) shall be allocated among the

Members (the Trust Members and Allocation Members) so that, to the extent possible, the net amount of such Issuance Items, together with all other allocations made under this Agreement to each Member, shall be equal to the net amount that would have been allocated to each such Member if the Issuance Items had not been realized.

Section 4.4 Curative Allocations. The allocations set forth in Sections 4.3(a), 4.3(b), 4.3(c), 4.3(d), 4.3(e), 4.3(f), 4.3(g) and 4.5 (the “Regulatory Allocations” ) are intended to comply with certain requirements of the Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 4.4. Therefore, notwithstanding any other provision of this Article 4 (other than the Regulatory Allocations), the Board of Directors shall make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of this Agreement and all Company items were allocated pursuant to Sections 4.1, 4.2 and 4.3(h).

Section 4.5 Loss Limitation. Losses allocated pursuant to Section 4.2 shall not exceed the maximum amount of Losses that can be allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any Allocation Year. In the event some but not all of the Members would have Adjusted Capital Account Deficits as a consequence of an allocation of Losses pursuant to Section 4.2, the limitation set forth in this Section 4.5 shall be applied on a Member-by-Member basis, and Losses not allocable to any Member as a result of such limitation shall be allocated to the other Members in accordance with the positive balances in such Members’ Capital Accounts so as to allocate the maximum permissible Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of the Regulations.

Section 4.6 Other Allocation Rules.

(a) For purposes of determining the Profits and Losses or any other items allocable to any period, Profits, Losses, and any other such items shall be determined on a monthly or other basis, as determined by the Company using any method permissible under Code Section 706 and the Regulations thereunder.

(b) The Members are aware of the income tax consequences of the allocations made by this Article 4 and hereby agree to be bound by the provisions of this Article 4 in reporting their shares of Company income and loss for income tax purposes.

(c) Solely for purposes of determining a Member’s proportionate share of the “excess nonrecourse liabilities” of the Company within the meaning of Regulations Section 1.752-3(a)(3), the Member’s interests in Company profits are in proportion to their Percentage Interests.

(d) To the extent permitted by Section 1.704-2(h)(3) of the Regulations, the Manager shall endeavor to treat distributions as having been made from the proceeds of a

Nonrecourse Liability or a Member Nonrecourse Debt only to the extent that such distributions would cause or increase an Adjusted Capital Account Deficit for any Member.

(e) To the extent the Tax Matters Member determines, in consultation with the Company’s tax advisors, that any distribution pursuant to Article 5 to a Member hereunder (or portion of such distribution) would more properly be characterized as a payment described in Code Section 707(a) or 707(c), such payment may be so characterized in the Company’s tax filings, and in such event, shall be taken into account for federal income tax purposes as an expense of the Company, and not as an allocation of income to a Member affecting such Member’s Capital Account.

Section 4.7 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss and deduction with respect to any Property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such Property to the Company for U.S. federal income tax purposes and its initial Gross Asset Value (computed in accordance with the definition of Gross Asset Value) using a method, selected in the discretion of the Board of Directors in accordance with Section 1.704-3 of the Regulations.

In the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraph (ii) of the definition of Gross Asset Value, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for U.S. federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder.

Any elections or other decisions relating to such allocations shall be made by the Board of Directors in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section 4.7 are solely for purposes of U.S. federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement.

ARTICLE 5

DISTRIBUTIONS

Section 5.1 Distributions to Members. Except as otherwise provided in Section 5.3 and Article 14, the Board of Directors may, in its sole discretion and at any time, declare and pay distributions with respect to the LLC Interests to the Members, as of any record date established by the Board of Directors with respect to such distributions, from Cash Available for Distribution to all Members in proportion to their Percentage Interests.

Section 5.2 Distributions to the Allocation Member.

(a) In General . Except as otherwise provided in Section 5.3 and Article 14 and subject to the other terms and conditions set forth in this Section 5.2, for so long as the

Allocation Interests are Outstanding (i) the Administrator shall calculate (x) the Profit Distribution Amount, and the components thereof, in accordance with Section 5.2(b) and (y) Tax Distributions, and the components thereof, in accordance with Section 5.2(i) and (ii) the Company shall pay (x) Profit Distributions in accordance with Section 5.2(e) and (y) Tax Distributions in accordance with Section 5.2(h).

(b) Calculation of Profit Distribution Amount Upon Trigger Event . Subject to Section 5.2(g), upon the occurrence of a Trigger Event with respect to any Subsidiary (the “ Profit Distribution Subsidiary ”), the Administrator, as of the relevant Calculation Date with respect to such Trigger Event, shall:

(i) calculate, on or promptly following such Calculation Date, the Profit Distribution Amount with respect to such Profit Distribution Subsidiary as of such Calculation Date; and

(ii) adjust such Profit Distribution Amount (as adjusted, the “Adjusted Profit Distribution Amount” ) so calculated, on a dollar-for-dollar basis, by:

(A) reducing such Profit Distribution Amount by the aggregate amount of any Over-Paid Profit Distributions, if any, existing as of such Calculation Date;

(B) increasing such Profit Distribution Amount by the aggregate amount of any Under-Paid Profit Distributions, if any, existing as of such Calculation Date; and

(C) reducing such Profit Distribution Amount by the aggregate amount of any Tax Distributions, if any, that were previously received by the Allocation Member on any Tax Distribution Payment Date prior to such Calculation Date, to the extent such amount of Tax Distributions have not been previously applied towards a reduction of Profit Distribution Amount in accordance with this Section 5.2(b).

If more than one Trigger Event takes place during any Fiscal Quarter which would cause the calculation of the Profit Distribution Amount with respect to more than one Profit Distribution Subsidiary as of the Calculation Date with respect to such Trigger Event, then the Profit Distribution Amount shall be calculated under this Section 5.2(b) with respect to each Profit Distribution Subsidiary separately and in the order in which controlling interest in each such Profit Distribution Subsidiary was acquired or otherwise obtained by the Company, and the resulting amounts so calculated shall be aggregated to determine the total amount of the Profit Distribution Amount as of such Calculation Date for any purpose hereunder; provided , that if controlling interest in such Profit Distribution Subsidiaries was acquired or otherwise obtained at the same time, then the Profit Distribution Amount shall be further calculated under this Section 5.2(b) with respect to each Profit Distribution Subsidiary separately and in the order in which each such Profit Distribution Subsidiary was sold.

(c) Approval of Profit Distributions . The Administrator shall promptly submit in writing any calculation of the Adjusted Profit Distribution Amount to the Audit Committee, in sufficient detail to permit a prompt review and approval by the Audit Committee. Any calculation of the Adjusted Profit Distribution Amount so submitted by the Administrator shall be deemed automatically approved by the Audit Committee ten (10) Business Days after

the date submitted by the Administrator (such approved Adjusted Profit Distribution Amount, as well as any amounts deemed to be Approved Profit Distributions pursuant to Sections 5.2(c) or 5.2(d)), the “ Approved Profit Distribution ”); provided , that if the Audit Committee, by resolution, disapproves of the calculation of such Adjusted Profit Distribution Amount submitted to it by the Administrator within such ten (10) Business Days, then, within ten (10) Business Days after the date of such resolution of disapproval, the Audit Committee shall recalculate, or cause the recalculation of, such Adjusted Profit Distribution Amount as of the relevant Calculation Date in accordance with this Section 5.2 (such recalculated Adjusted Profit Distribution Amount, the “ Disputed Profit Distribution ”) and present in writing its calculation of the Disputed Profit Distribution to the Administrator in sufficient detail to permit a prompt review by the Administrator (such date of presentation, the “ Disputed Profit Distribution Date ”); provided , further , that if the Audit Committee fails to present such a calculation of Disputed Profit Distribution to the Administrator by the tenth (10 ^th ) Business Day after the date it disapproves of the calculation of Adjusted Profit Distribution Amount submitted to it by the Administrator, then the calculation of the Adjusted Profit Distribution Amount originally submitted to the Audit Committee by the Administrator shall be deemed an Approved Profit Distribution on such tenth (10 ^th ) Business Day.

(d) Independent Accounting Firm . The Administrator shall have ten (10) Business Days to review the Audit Committee’s calculation of any Disputed Profit Distribution presented to it pursuant to Section 5.2(c), and if the Administrator disagrees with such calculation, then the Administrator shall have the right, pursuant to a written notice that must be delivered during such ten (10) Business Day period, to direct the Audit Committee to engage, at the Company’s cost and expense, an independent accounting firm to calculate the Adjusted Profit Distribution Amount as of the relevant Calculation Date in accordance with this Section 5.2. Such notice from the Administrator shall state any points of disagreement with the Audit Committee’s calculation and shall designate no fewer than three independent accounting firms to calculate the Adjusted Profit Distribution Amount. The Audit Committee shall engage one of the designated independent accounting firms within ten (10) Business Days. If the Audit Committee fails to engage one of the designated independent accounting firms within ten (10) Business Days, then the calculation of the Adjusted Profit Distribution Amount originally submitted to the Audit Committee by the Administrator pursuant to Section 5.2(c) shall be deemed an Approved Profit Distribution. The Audit Committee shall direct the designated independent accounting firm to deliver its calculation of the Adjusted Profit Distribution Amount, calculated in accordance with this Section 5.2 (as calculated, the “ Independently Calculated Profit Distribution ”), within twenty (20) Business Days of its engagement (the “Submission Date ”) to both the Administrator and the Audit Committee at the same time. If the independent accounting firm so engaged fails to deliver its calculation of the Adjusted Profit Distribution Amount within the time required hereby, then the calculation of the Adjusted Profit Distribution Amount originally submitted to the Audit Committee by the Administrator pursuant to Section 5.2(c) shall be deemed an Approved Profit Distribution. In making its calculation of the Adjusted Profit Distribution Amount, the independent accounting firm shall (i) review and consider any documentation submitted by the Administrator and the Audit Committee in support of their respective calculations of the Adjusted Profit Distribution Amount, and (ii) be based on the most recently available consolidated financial statements of the Company and its Subsidiaries (audited or unaudited). The Independently Calculated Profit Distribution shall be final,

conclusive and binding on the Administrator, the Audit Committee, the Company and the Allocation Member.

(e) Payment of Profit Distributions . Subject to 5.2(l), the Company shall pay, on the applicable Profit Distribution Payment Date with respect to any Calculation Date, Profit Distribution in the following manner:

(i) First , one of the following amounts of Profit Distribution:

(A) if the calculation of the Adjusted Profit Distribution Amount as of such Calculation Date submitted by the Administrator to the Audit Committee is deemed approved in accordance with Section 5.2(c) or 5.2(d), then the Company shall pay to the Allocation Member on the Approved Profit Distribution Payment Date an amount equal to the Approved Profit Distribution as of such Calculation Date, or

(B) if (x) the calculation of the Adjusted Profit Distribution Amount as of such Calculation Date submitted by the Administrator to the Audit Committee is disapproved by the Audit Committee and recalculated by the Audit Committee and (y) the Administrator does not disagree with such calculation of Disputed Profit Distribution pursuant to Section 5.2(d), then the Company shall pay to the Allocation Member on the Disputed Profit Distribution Payment Date an amount equal to the Disputed Profit Distribution as of such Calculation Date; or

(C) if (x) the calculation of the Adjusted Profit Distribution Amount as of such Calculation Date submitted by the Administrator to the Audit Committee is disapproved by the Audit Committee and recalculated by the Audit Committee and (y) the Administrator disagrees with such calculation of Disputed Profit Distribution and directs the Audit Committee to engage an independent accounting firm pursuant to Section 5.2(d) and the Audit Committee engages such independent accounting firm, then the Company shall pay to the Allocation Member on the Disputed Profit Distribution Payment Date the lesser of an amount equal to (A) the Profit Distribution Amount, as of such Calculation Date, originally submitted to the Audit Committee by the Administrator pursuant to Section 5.2(c), and (B) the Disputed Profit Distribution as of the relevant Calculation Date; and

(ii) Second, one of the following amounts of Profit Distribution:

(A) if an independent accounting firm delivers its Independently Calculated Profit Distribution as of such Calculation Date to the Administrator and the Audit Committee in accordance with Section 5.2(d), then the Company shall pay to the Allocation Member on the Independently Calculated Profit Distribution Payment Date an amount equal to the amount by which (x) the Independently Calculated Profit Distribution as of such Calculation Date exceeds (y) the amount of Profit Distribution, as the case may be and as of such Calculation Date, paid by the Company in accordance with Section 5.2(e)(i)(C), or

(B) if (x) an independent accounting firm fails to delivers its calculation of Adjusted Profit Distribution Amount as of such Calculation Date to the Administrator and the Audit Committee in accordance with Section 5.2(d) and (y) the Profit Distribution Amount originally submitted to the Audit Committee by the Administrator pursuant

to Section 5.2(c) is greater than the Disputed Profit Distribution, then the Company shall pay to the Allocation Member on the Submission Failure Payment Date, the amount by which Approved Profit Distribution as of such Calculation Date exceeds (y) the amount of Profit Distribution, as the case may be and as of such Calculation Date, paid by the Company in accordance with Section 5.2(e)(i)(C).

Any Profit Distributions will be due and payable on the applicable Profit Distribution Payment Date by the Company, in arrears, in immediately available funds by wire transfer to an account designated by the Allocation Member from time to time.

(f) Reserved.

(g) True-Up and Review of Profit Distributions . The calculation to be made by any Person hereunder of any Profit Distribution or Adjusted Profit Distribution Amount, in each case, as of any Calculation Date, shall be based on, in the following order (i) audited consolidated financial statements to the extent available with respect to any Person underlying such calculation of Profit Distribution, (ii) if audited consolidated financial statements are not available with respect to such Person, then unaudited consolidated financial statements to the extent available with respect to such Person, and (iii) if neither audited nor unaudited consolidated financial statements are available with respect to such Person, then the books and records of such Person then available; provided , that, with respect to any calculation of the Profit Distribution based on the books and records of any Person related to such calculation of Profit Distribution, upon availability of, in the first instance, audited consolidated financial statements with respect to such Person or, in the second instance, unaudited consolidated financial statements with respect to such Person, in each case, relating to amounts previously calculated on such Calculation Date by reference to the books and records of such relevant Person, the Profit Distribution Amount, and any components thereof, as of such Calculation Date shall be recalculated to determine if any Over-Paid Profit Distributions or Under-Paid Profit Distributions were created as of such Calculation Date. In making any determination under this Section 5.2 with respect to any individual calculation of the Profit Distribution Amount or Adjusted Profit Distribution Amount, in each case, as of any Calculation Date, such determination shall be based on only one of the following, in the following order, with respect to such calculation of Profit Distribution Amount or Adjusted Profit Distribution Amount, as the case may be: (x) the Independently Calculated Profit Distribution calculated as of such Calculation Date, (y) if no Independently Calculated Profit Distribution was calculated as of such Calculation Date, the Approved Profit Distribution as of such Calculation Date, and (z) if no Approved Profit Distribution or Independently Calculated Profit Distribution, in each case, was calculated as of such Calculation Date ( i.e. , if the Profit Distribution Amount calculated by the Administrator as of such Calculation Date was not approved by the Audit Committee, automatically or otherwise, or the Administrator did not disagree with the Audit Committee’s calculated of Disputed Profit Distribution as of such Calculation Date), the Disputed Profit Distribution as calculated as of the Calculation Date.

(h) Payment of Tax Distributions . With respect to any calendar year in which the Allocation Member shall be allocated income pursuant to Article 4, but with respect to which the Allocation Member has not, prior to April 15 of the following year, received Profit Distributions from the Company pursuant to Section 5.2(e) in amounts at least equal to the

Allocation Member’s tax liability arising from allocations of income hereunder to the Allocation Member with respect to such calendar year, the Company shall make a distribution to the Allocation Member in an amount calculated in accordance with Section 5.2(i) (the “ Tax Distribution ”) by April 15 of such following year (such date of payment, the “ Tax Distribution Payment Date ”).

(i) Calculation of Tax Distributions . The amount of Tax Distributions to be paid on any Tax Distribution Payment Date pursuant to Section 5.2(h) shall be calculated as if the items of income, gain, deduction, loss and credit in respect of the Company were the only such items entering into the computation of tax liability of the Allocation Member for the calendar year and as if the Allocation Member were subject to tax at the highest marginal effective rate of Federal, state and local income tax applicable to an individual resident in New York City, taking account of any difference in rates applicable to ordinary income and long terms capital gains and any allowable deductions in respect of such state and local taxes in computing the Allocation Member’s liability for Federal income taxes.

(j) Books and Records . The Administrator shall maintain cumulative books and records with respect to the details of any calculations made pursuant to this Section 5.2, which records shall be available for inspection and reproduction at any time upon request by the Board of Directors and the Allocation Member.

(k) Sufficient Liquidity . If the Company does not have sufficient liquid assets to pay the entire amount of Profit Distributions and/or Tax Distributions, including any accrued and unpaid Profit Distributions and/or Tax Distribution to date, on any applicable Profit Distribution Date, the Company shall liquidate assets or incur indebtedness in order to pay such Profit Distribution and/or Tax Distribution, as the case may be, in full on such Profit Distribution Payment Date; provided , that the Allocation Member may elect, in its sole discretion, on such Profit Distribution Payment Date and/or Tax Distribution Payment Date, as the case may be, to allow the Company to defer the payment of all or any portion of the Profit Distribution and/or Tax Distribution, as the case may be, then accrued and unpaid until the next succeeding Profit Distribution Payment Date or Tax Distribution Payment Date, as the case may be, and, thereby, enable to the Company to avoid such liquidation or incurrence. For the avoidance of doubt, the Allocation Member may make such election to allow the Company to defer the payment of the Profit Distributions and/or Tax Distributions more than once.

(l) Distribution Entitlement . The Allocation Member shall have the right to elect, in its sole discretion, on any applicable Profit Distribution Payment Date to defer payment by the Company of all or any portion of the amount of Profit Distribution payable by the Company in accordance with Section 5.2(e) on such Profit Distribution Payment Date. Such election shall become effective upon the delivery of a written notice to the Company indicating the amount of Profit Distribution that the Allocation Member is electing to defer (such amount, the “ Distribution Entitlement ”). Once deferred, the Company shall pay, on twenty (20) Business Days prior written notice delivered by the Allocation Member and received by the Company (the “ Distribution Entitlement Notice ”), all or any portion of the Distribution Entitlement Amount as designated by the Allocation Member in the Distribution Entitlement Notice (the “ Distribution Entitlement Payment ”) on the date specified in the Distribution Entitlement Notice (the “ Distribution Entitlement Payment Date ”). Any Distribution

Entitlement Notice delivered by the Allocation Member pursuant to this Section 5.2(l) shall specify (i) the Distribution Entitlement Amount as of the date of such Distribution Entitlement Notice, (ii) the calculation of the Distribution Entitlement Amount, (iii) the portion of the Distribution Entitlement that the Allocation Member is electing to receive, and (iv) the Distribution Entitlement Payment Date with respect to the amount so elected to be received by the Allocation Member.

Section 5.3 Amounts Withheld. All amounts withheld pursuant to the Code or any provision of any state, local or foreign tax law with respect to any payment, dividend or other distribution or allocation to the Company or the Members shall be treated as amounts paid to the Members with respect to which such amounts were withheld pursuant to this Section 5.3 for all purposes under this Agreement. The Company is authorized to withhold from payments or with respect to allocations to the Members, and to pay over to any U.S. federal, state and local government or any foreign government, any amounts required to be so withheld pursuant to the Code or any provisions of any other U.S. federal, state or local law or any foreign law, and shall allocate any such amounts to the Members with respect to which such amounts were withheld. For so long as the Trust is the sole Trust Member, all amounts withheld in accordance with this Section 5.3 will be treated as amounts paid to holders of the Trust Shares and any such amounts shall be allocated to the holders of the Trust Shares in the same proportion as any such allocations were made per Trust Interest.

Section 5.4 Limitations on Dividends and Distributions.

(a) The Company shall pay no distributions to the Members except as provided in this Article 5 and Article 14.

(b) A Member may not receive, and the Company, and Board of Directors on behalf of the Company may not make, distributions from the Company to the extent such distribution is inconsistent with, or in violation of, the Act or any provision of this Agreement.

ARTICLE 6

BOARD OF DIRECTORS

Section 6.1 Initial Board. The Board of Directors is comprised of the seven following individuals: I. Joseph Massoud, C. Sean Day, James J. Bottiglieri, D. Eugene Ewing, Ted Waitman, Mark H. Lazarus and Harold S. Edwards (each, an “Initial Director” and, collectively, the “Initial Board” ). Each Initial Director shall hold office until his successor is elected or appointed and qualified, or until his or her earlier death, resignation or removal in accordance with this Article 6. The Initial Board shall have all of the powers and authorities accorded to the Board of Directors, and each Initial Director shall have all of the powers and authorities accorded the directors of the Company under the terms of this Agreement.

Section 6.2 General Powers. The business and affairs of the Company shall be managed by or under the direction of its Board of Directors. Each director of the Company, when acting in such capacity, is a “manager” within the meaning of Section 18-402 of the Act and as such is

vested with the powers and authorities necessary for the management of the Company, subject to the terms of this Agreement and the Management Services Agreement; provided , that no director is authorized to act individually on behalf of the Company and the Board of Directors shall only take action in accordance with the requirements of this Agreement. In addition to the powers and authorities expressly conferred upon it by this Agreement, the Board of Directors may exercise all such powers of the Company and do all such lawful acts and things as are not prohibited by applicable law, including the Rules and Regulations, or by this Agreement required to be exercised or done by the Members. Without limiting the generality of the foregoing, it shall be the responsibility of the Board of Directors to establish broad objectives and the general course of the business, determine basic policies, appraise the adequacy of overall results, and generally represent and further the interests of the Members.

Section 6.3 Duties of Directors. Except as provided in this Agreement or otherwise required by the Act, each director of the Company shall have the same fiduciary duties to the Company and the Members as a director of a corporation incorporated under the DGCL has to such corporation and its stockholders, as if such directors of the Company were directors of a corporation incorporated under the DGCL. Except as provided in this Agreement, the parties intend that the fiduciary duties of the directors of the Company shall be interpreted consistently with the jurisprudence regarding such fiduciary duties of directors of a corporation under the DGCL. It shall be expressly understood that, to the fullest extent permitted by law, no director of the Company has any duties (fiduciary or otherwise) with respect to any action or inaction of the Manager, and that, to the fullest extent permitted by law, any actions or inactions of the directors of the Company that cause the Company to act in compliance or in accordance with the Management Services Agreement shall be deemed consistent and compliant with the fiduciary duties of such directors and shall not constitute a breach of any duty hereunder or existing in law, in equity or otherwise.

Section 6.4 Number, Tenure and Qualifications. As provided by Section 6.1, the Initial Board shall be comprised of seven (7) Initial Directors and at all times from and after the closing of the Initial Public Offering the composition of the Board of Directors shall consist of at least a majority of Independent Directors. Subject to this Section 6.4, the number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by the Board of Directors, but shall consist of not less than five (5) nor more than thirteen (13) directors. However, no decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

Subject to the next sentence, the Board of Directors shall be divided into three classes: Class I, Class II, Class III, with the holders of Trust Interests entitled to elect or appoint the Class I, II, and III directors. In addition, the Board of Directors shall include one (1) director (or, if there are nine (9) or more directors then serving on the Board of Directors, two (2) directors), who shall not be a member of any class (each, an “ Appointed Director ”), and who shall be elected or appointed by the Allocation Member.

Classes I, II and III shall be divided as nearly equal in numbers as the then total number of directors constituting such classes permits, with the term of office of each class expiring in succeeding years, so that (except for the initial terms provided below) each such director shall be elected for a three year term. If the number of such directors is not evenly

divisible by three, the greatest number of such directors shall be in Class III and the least number in Class I. The initial Class I directors shall hold office for a term expiring at the first annual meeting of the Members following closing of the Initial Public Offering, the initial Class II directors shall hold office for a term expiring at the second succeeding annual meeting of the Members following closing of the Initial Public Offering, and the initial Class III directors shall hold office for a term expiring at the third succeeding annual meeting of the Members following closing of the Initial Public Offering. The initial Class I directors are Mark H. Lazarus and Harold S. Edwards. The initial Class II directors are James J. Bottiglieri and Ted Waitman. The initial Class III directors are C. Sean Day and D. Eugene Ewing. Any director filling any Class I, II or III vacancy pursuant to Section 6.8 shall hold office until the next election of the class for which such directors shall have been chosen and until their successors shall be elected and qualified. The term of each director in Classes I, II and III shall be the period from the effective date of such director’s election until the end of the term provided in this paragraph, or until such director’s successor is duly elected and qualified, or until such director’s earlier death, resignation or removal. Directors need not be residents of the State of Delaware or Members.

The Allocation Member has designated I. Joseph Massoud as the initial Appointed Director. The Appointed Director shall hold office until his successor is elected or appointed and qualified, or until his or her earlier death, resignation or removal in accordance with this Article 6. Any director filling a Appointed Director vacancy pursuant to Section 6.8 shall hold office until his successor is elected or appointed and qualified, or until his or her earlier death, resignation or removal in accordance with this Article 6.

Section 6.5 Election of Directors. Except as provided in Sections 6.1, 6.4 and 6.8, the Class I, II and III directors shall be elected at the annual meeting of Members. At any meeting of Members duly called and held for the election of directors at which a quorum is present, directors shall be elected by a plurality of the Trust Interests present in person or represented by proxy at the meeting of Members. Except as provided in Sections 6.1 and 6.8, the Appointed Director shall be elected or appointed at such time or times as the Allocation Member so determines, pursuant to written notice delivered to the Chairman or, if none then serving, the Board of Directors as constituted immediately prior to such election or appointment.

Section 6.6 Removal. Any director may be removed from office, with or without cause, by the affirmative vote of the Members holding at least eighty-five percent (85%) of the applicable issued and Outstanding Trust Interests that so elected or appointed such director. In the case of an Appointed Director, any such removal shall be evidenced in writing by the Allocation Member, which shall be delivered to the Chairman or, if none then serving, the Board of Directors as constituted immediately after such removal.

Section 6.7 Resignations. Any director, whether elected or appointed, may resign at any time upon notice of such resignation to the Company. An Independent Director who ceases to be independent shall promptly resign to the extent required for the Company or the Allocation Member to comply with applicable laws, rules and regulations.

Section 6.8 Vacancies and Newly Created Directorships. Until the second annual election of directors following the Initial Public Offering and other than with respect to the Appointed Director, any vacancies on the Board of Directors, including vacancies resulting from

any increase in the authorized number of directors, shall be filled by the Chairman for the applicable term relating to director position so filled. Thereafter, subject to Section 6.9 and other than with respect to an Appointed Director and except as otherwise provided herein, any vacancies on the Board of Directors, including vacancies resulting from any increase in the authorized number of directors, shall be filled by a majority vote of the directors then in office, although less than a quorum, or by a sole remaining director. Notwithstanding anything to the contrary contained in the preceding sentences of this Section 6.8, any director filling any such vacancy shall satisfy the Applicable Listing Standards and the Rules and Regulations, and any necessary or required qualifications under the Applicable Listing Standards and the Rules and Regulations for applicable committee membership. Subject to Section 6.9, any vacancies in the Appointed Director for any reason, and any newly created directorships resulting from any increase in the authorized number of Appointed Directors may be filled by the Allocation Member at such time or times as the Allocation Member so determines, pursuant to written notice delivered to the Chairman or, if none then serving, the Board of Directors as constituted immediately prior to filling such vacancy, or such election or appointment.

Section 6.9 Appointment of or Nomination and Election of Chairman. C. Sean Day shall be the initial Chairman, and shall hold office for a term expiring at the second annual meeting of the Members following the closing of the Initial Public Offering, or until such Chairman’s successor is duly elected and qualified, or until such Chairman’s earlier death, resignation or removal. As of the expiration of the term of the initial Chairman (and of any subsequent Chairman) or upon any such Chairman’s earlier death, resignation or removal, a majority of the Board of Directors shall elect a Chairman, who shall hold office for at least one (1) year, or until such Chairman’s successor is duly elected and qualified, or until such Chairman’s earlier death, resignation or removal.

Section 6.10 Chairman of the Board. The Chairman shall be a member of the Board of Directors. The Chairman is not required to be an employee of the Company. The Chairman, if present, shall preside at all meetings of the Board of Directors. If the Chairman is unavailable for any reason, the duties of the Chairman shall be performed, and the Chairman’s authority may be exercised, by a director designated for this purpose by the remaining directors of the Board of Directors. The Chairman shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or this Agreement, all in accordance with basic policies as may be established by the Company, and subject to the approval and oversight of the Board of Directors.

Section 6.11 Regular Meetings. A regular meeting of the Board of Directors shall be held without any other notice than this Agreement, immediately after, and at the same place (if any) as, each annual meeting of Members. The Board of Directors may, by resolution, provide the time and place (if any) for the holding of additional regular meetings without any other notice than such resolution. Unless otherwise determined by the Board of Directors, the Secretary of the Company shall act as Secretary at all regular meetings of the Board of Directors and in the Secretary’s absence a temporary Secretary shall be appointed by the chairman of the meeting.

Section 6.12 Special Meetings. Special meetings of the Board of Directors shall be called at the request of the Chief Executive Officer, the Chairman or of eighty-five percent (85%) of the directors of the Board of Directors. The Person or Persons authorized to call special

meetings of the Board of Directors may fix the place and time of the meetings. Unless otherwise determined by the Board of Directors, the Secretary of the Company shall act as Secretary at all special meetings of the Board of Directors and in the Secretary’s absence a temporary Secretary shall be appointed by the chairman of the meeting.

Section 6.13 Notice for Special Meetings. Notice of any special meeting of the Board of Directors shall be mailed by first class mail, postage paid, to each director at his or her business or residence or shall be sent by telegraph, express courier service (including, without limitation, Federal Express) or facsimile (directed to the facsimile number to which the director has consented to receive notice) or other electronic transmission (including, but not limited to, an e-mail address at which the director has consented to receive notice) not later than three (3) days before the day on which such meeting is to be held if called by the Chief Executive Officer or the Chairman and twenty one (21) days before the day on which such meeting is to be held in all other cases. Except in the case where the business to be transacted at such special meeting includes a proposed amendment to this Agreement, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting. A meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in accordance with Section 9.12, either before or after such meeting.

Section 6.14 Waiver of Notice. Whenever any notice is required to be given to any director of the Company under the terms of this Agreement, a waiver thereof in writing, signed by the Person or Persons entitled to such notice, or a waiver thereof by electronic transmission by the Person or Persons entitled to notice, whether before or after the time stated in such notice, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Directors or committee thereof need be specified in any written waiver of notice or any waiver by electronic transmission of notice of such meeting.

Section 6.15 Action Without Meeting. Any action required or permitted to be taken at any meeting by the Board of Directors or any committee or subcommittee thereof, as the case may be, may be taken without a meeting, without a vote and without prior notice if a consent thereto is signed or transmitted electronically, as the case may be, by the Chairman and at least eighty-five percent (85%) of the directors of the Board of Directors or of such committee or subcommittee, as the case may be, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or such committee or subcommittee; provided , however , that such electronic transmission or transmissions must either set forth or be submitted with information from which it can be determined that the electronic transmission or transmissions were authorized by the director. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Section 6.16 Conference Telephone Meetings. Directors of the Board of Directors, or any committee or subcommittee thereof, may participate in a meeting of the Board of Directors or such committee or subcommittee by means of conference telephone or other communications equipment by means of which all Persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

Section 6.17 Quorum. Except as otherwise provided in this Agreement, at all meetings of the Board of Directors, at least thirty-five percent (35%) of the then total number of directors in office (such total number of directors, the “Entire Board of Directors” ) shall constitute a quorum for the transaction of business. At all meetings of any committee of the Board of Directors, the presence of a majority of the total number of members of such committee (assuming no vacancies) shall constitute a quorum. The act of a majority of the directors or committee members present at any meeting at which there is a quorum shall be the act of the Board of Directors or such committee, as the case may be. If a quorum shall not be present at any meeting of the Board of Directors or any committee, a majority of the directors or members, as the case may be, present thereat may adjourn the meeting from time to time without further notice other than announcement at the meeting. The directors of the Board of Directors present at a duly organized meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors of the Board of Directors to leave less than a quorum.

Section 6.18 Committees.

(a) Upon the effectiveness of the Initial Public Offering, the Company shall have three standing committees: the Nominating and Governance Committee, the Audit Committee and the Compensation Committee, as set out below. Each of the Nominating and Governance Committee, the Audit Committee and the Compensation Committee shall adopt by resolution a charter to establish the rules and responsibilities of such committee in accordance with applicable law, including the Rules and Regulations and the Applicable Listing Rules.

(i) Nominating and Corporate Governance Committee . The Board of Directors, by resolution adopted by a majority of the Entire Board of Directors, has designated a Nominating and Corporate Governance Committee comprised solely of Independent Directors, which committee shall oversee the Company’s commitment to good corporate governance, develop and recommend to the Board a set of corporate governance principles and oversee the evaluation of the performance of the Board of Directors. The Nominating and Corporate Governance Committee shall have the duties and responsibilities enumerated in its charter, as amended from time to time by the Board of Directors.

Subject to Section 6.8, the Nominating and Corporate Governance Committee will solicit recommendations for director nominees (other than the Appointed Director) from the Chairman and the Chief Executive Officer. The Nominating and Corporate Governance Committee may also recommend to the Board specific policies or guidelines concerning the structure and composition of the Board of Directors or committees of the Board of Directors, and the tenure and retirement of directors (other than the Appointed Director) and matters related thereto.

(ii) Audit Committee . The Board of Directors, by resolution adopted by a majority of the Entire Board of Directors, has designated an Audit Committee comprised of not fewer than three (3) nor more than seven (7) directors, all of whom shall be Independent Directors, who shall collectively meet the financial literacy requirements of the Exchange Act, the Rules and Regulations and of the Applicable Listing Rules. At

least one member of the Audit Committee will meet the accounting or related financial management expertise required to be established by the Board of Directors. The Audit Committee shall have the duties and responsibilities enumerated in its charter, as amended from time to time by the Board of Directors.

The Company shall provide appropriate funding, as determined by the Audit Committee, in its capacity as a committee of the Board of Directors for payment of:

(A) compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company;

(B) compensation to independent counsel and other advisors engaged for any reason by the Audit Committee; and

(C) ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.

(iii) Compensation Committee . The Board of Directors, by resolution adopted by a majority of the Entire Board of Directors, has designated a Compensation Committee comprised solely of Independent Directors. The Compensation Committee shall have the duties and responsibilities enumerated in its charter, as amended from time to time by the Board of Directors.

(b) In addition, the Board of Directors may designate one or more additional committees or subcommittees, with each such committee or subcommittee consisting of such number of directors of the Company and having such powers and authority as shall be determined by resolution of the Board of Directors.

(c) All acts done by any committee or subcommittee within the scope of its powers and authority pursuant to this Agreement and the resolutions adopted by the Board of Directors in accordance with the terms hereof shall be deemed to be, and may be certified as being, done or conferred under authority of the Board of Directors. The Secretary is empowered to certify that any resolution duly adopted by any such committee is binding upon the Company and to execute and deliver such certifications from time to time as may be necessary or proper to the conduct of the business of the Company.

(d) Regular meetings of committees shall be held at such times as may be determined by resolution of the Board of Directors or the committee or subcommittee in question and no notice shall be required for any regular meeting other than such resolution. A special meeting of any committee or subcommittee shall be called by resolution of the Board of Directors or by the Secretary upon the request of the Chief Executive Officer, the Chairman or a majority of the members of any committee. Notice of special meetings shall be given to each member of the committee in the same manner as that provided for in Section 6.13.

Section 6.19 Committee Members.

(a) Each member of any committee of the Board of Directors shall hold office until such member’s successor is elected and has qualified, unless such member sooner dies, resigns or is removed.

(b) Subject to Section 6.8, the Board of Directors may designate one or more directors as alternate members of any committee to fill any vacancy on a committee and to fill a vacant chairmanship of a committee, occurring as a result of a member or chairman leaving the committee, whether through death, resignation, removal or otherwise.

Section 6.20 Committee Secretary. The Secretary of the Company shall act as Secretary of any committee or subcommittee, unless otherwise provided by the Board of Directors or the committee or subcommittee, as applicable.

Section 6.21 Compensation. The directors may be paid their expenses, if any, incurred with respect to their attendance at each meeting of the Board of Directors in their capacities as directors, any expenses reasonably incurred in their capacities as directors and, other than an Appointed Director or any executive officer serving in a director capacity who is an employee of the Manager, may be paid compensation as director or chairman of any committee or subcommittee, as the case may be, as determined by the Initial Board or, following the first annual meeting of Members, the Compensation Committee, as the case may be; provided , however , that the directors shall not receive any compensation prior to the issuance of the Trust Interests. Members of special or standing committees may be allowed like compensation and payment of expenses for attending committee meetings.

Section 6.22 Indemnification, Advances and Insurance.

(a) Each Person who was or is made a party or is threatened to be made a party to or is involved in any manner in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he, she or a Person of whom he or she is the legal representative is or was a director, officer, manager, Member of the Company or the Manager of the Company, or is or was serving at the request of the Company as a director, officer, manager, member of a Subsidiary of the Company or the Manager of the Company, if the Person acted in good faith and in a manner the Person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the Person’s conduct was unlawful, shall be indemnified against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the Person in connection with any such action, suit or proceeding, and held harmless by the Company to the fullest extent permitted from time to time as such Person would be if the Company were a corporation incorporated under the DGCL as the same exists or may hereafter be amended (but, if permitted by applicable law, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment) or any other applicable laws as presently or hereafter in effect, and such indemnification shall continue as to a Person who has ceased to be a director, officer, manager, Member (or member) or the Manager of the Company and shall inure to the benefit of his or her heirs, executors and administrators (if applicable); provided , however , that the Company shall indemnify any such Person seeking indemnification

in connection with any such action, suit or proceeding (or part thereof) initiated by such Person only if such action, suit or proceeding (or part thereof) was authorized by the Board of Directors or is an action, suit or proceeding to enforce such Person’s claim to indemnification pursuant to the rights granted by this Agreement. The Company shall pay, to the fullest extent permitted by law, the expenses (including attorneys’ fees) incurred by such Person in defending any such action, suit or proceeding in advance of its final disposition upon receipt (unless the Company upon authorization of the Board of Directors waives such requirement to the extent permitted by applicable law) of an undertaking by or on behalf of such Person to repay such amount if it shall ultimately be determined by final judicial decision from which there is no further right of appeal that such Person is not entitled to be indemnified by the Company as authorized in this Agreement or otherwise.

With respect to any Person who is a present or former director, officer, manager, Member of the Company or the Manager of the Company, the undertaking required by this Section 6.22(a) shall be an unlimited general obligation but need not be secured and shall be accepted without reference to financial ability to make repayment; provided , however , that such present or former director, officer, manager, Member of the Company or the Manager of the Company does not transfer assets with the intent of avoiding such repayment. With respect to any Person who is a present or former director, officer, manager, Member of the Company or the Manager of the Company, the provisions of Section 6.22(b) relating to a determination that indemnification is proper in the circumstances shall not be a condition to such Person’s right to receive advances pursuant to this Section 6.22(a).

(b) Any indemnification of a present or former director, officer, manager, Member or the Manager of the Company under this Section 6.22 shall be made by the Company only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, manager, Member or the Manager of the Company is proper in the circumstances because the Person has met the applicable standard of conduct set forth in Section 6.3 or the applicable section of Article 7, as the case may be, and acted in good faith and in a manner the Person reasonably believed to be in, or not opposed to, the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe that its conduct was unlawful. Such determination shall be made, with respect to a Person who is a director, officer, manager, Member or the Manager of the Company at the time of such determination, (1) by a majority vote of the directors who are not parties to any such action, suit or proceeding, even though less than a quorum, (2) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, (3) if there are no such directors, or if a majority, even though less than a quorum, of such directors so direct, by independent legal counsel in a written opinion, or (4) by the Members. The indemnification and the advancement of expenses incurred in defending a action, suit or proceeding prior to its final disposition provided by or granted pursuant to this Agreement shall not be exclusive of any other right which any Person may have or hereafter acquire under any statute, provision of the Certificate, other provision of this Agreement, vote of Members or Disinterested Directors (as defined below) or otherwise. No repeal, modification or amendment of, or adoption of any provision inconsistent with, this Section 6.22, nor, to the fullest extent permitted by applicable law, any modification of law, shall adversely affect any right or protection of any Person granted pursuant hereto existing at, or with respect to any events that occurred prior to, the time of such repeal, amendment, adoption or modification.

(c) The Company may maintain insurance, at its expense, to protect itself and any Person who is or was a director, officer, partner, the Manager (or manager), Member (or member), employee or agent of the Company or a Subsidiary of the Company or of another corporation, partnership, limited liability company, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Company would have the power to indemnify such Person against such expense, liability or loss under the DGCL (if the Company were a corporation incorporated thereunder) or the Act.

(d) The Company may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the Company the expenses incurred in defending any such action, suit or proceeding in advance of its final disposition, to any Person who is or was an employee or agent of the Company or any Subsidiary of the Company (other than those Persons indemnified pursuant to clause (a) of this Section 6.22) and to any Person who is or was serving at the request of the Company or a Subsidiary of the Company as a director, officer, partner, manager, member, employee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the Company or a Subsidiary of the Company, to the fullest extent of the provisions of this Agreement with respect to the indemnification and advancement of expenses of directors, officers, managers and Members of the Company. The payment of any amount to any Person pursuant to this clause (d) shall subrogate the Company to any right such Person may have against any other Person or entity.

(e) The indemnification provided in this Section 6.22 is intended to comply with the requirements of, and provide indemnification rights substantially similar to those available to corporations incorporated under, the DGCL as it relates to the indemnification of officers, directors, employees and agents of a Delaware corporation and, as such (except to the extent greater rights are expressly provided in this Agreement), the parties intend that they should be interpreted consistently with the provisions of, and jurisprudence regarding, the DGCL.

(f) Any notice, request or other communications required or permitted to be given to the Company under this Section 6.22 shall be in writing and either delivered in person or sent by facsimile, telex, telegram, overnight mail or courier service, or certified or registered mail, postage prepaid, return receipt requested, to the Secretary of the Company and shall be effective only upon receipt by the Secretary, as the case may be.

(g) To the fullest extent permitted by the law of the State of Delaware, each Member, manager, director, officer, employee and agent of the Company agrees that all actions for the advancement of expenses or indemnification brought under this Section 6.22 or under any vote of Members or Disinterested Directors or otherwise shall be a matter to which Section 18-111 of the Act shall apply and which shall be brought exclusively in the Court of Chancery of the State of Delaware. Each of the parties hereto agree that the Court of Chancery may summarily determine the Company’s obligations to advance expenses (including attorneys’ fees) under this Section 6.22.

Section 6.23 Reliance; Limitations in Liability.

(a) Each director of the Company shall, in the performance of such director’s duties, be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by the Manager, or employees of the Manager, or any of the officers of the Company, or committees of the Board of Directors, or by any other Person as to matters the director reasonably believes are within such other Person’s professional or expert competence, including, without limitation, information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits or losses of the Company, or the value and amount of assets or reserves or contracts, agreements or other undertakings that would be sufficient to pay claims and obligations of the Company or to make reasonable provision to pay such claims or obligations, or any other facts pertinent to the existence and amount of the assets of the Company from which distributions to Members might properly be paid.

(b) No director shall be liable to the Company or the Members for monetary damages for any breach of fiduciary duty by such director as a director; provided , however , that a director shall be liable to the same extent as if he or she were a director of a Delaware corporation pursuant to the DGCL (i) for breach of the director’s duty of loyalty to the Company or its Members, (ii) for acts or omissions not in good faith or a knowing violation of applicable law, or (iii) for any transaction for which the director derived an improper benefit. To the extent the provisions of this Agreement restrict or eliminate the duties and liabilities of a director of the Company or the Members or the Manager otherwise existing at law or in equity, the provisions of this Agreement shall replace such duties and liabilities.

(c) To the fullest extent permitted by law, a director of the Company shall not be liable to the Company, any Member, the Trust or any other Person for: (i) any action taken or not taken as required by this Agreement; (ii) any action taken or not taken as permitted by this Agreement and, with respect to which, such director acted on an informed basis, in good faith and with the honest belief that such action, taken or not taken, was in the best interests of the Company; or (iii) the Company’s compliance with an obligation incurred or the performance of any agreement entered into prior to such director having become a director of the Company.

(d) Any director shall not be liable to the Company or to any other director or Member of the Company or any such other Person for breach of fiduciary duty for the director’s good faith reliance on the provisions of this Agreement.

(e) Except as otherwise required by the Act, the debts, obligations and liabilities of the Company shall be solely the debts, obligations and liabilities of the Company and no director shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a director of the Company.

ARTICLE 7

OFFICERS

Section 7.1 General.

(a) The officers of the Company shall be elected by the Board of Directors, subject to Section 7.1(b) and Article 8. The officers of the Company shall consist of a Chief Executive Officer, a Chief Financial Officer and a Secretary and, subject to Section 7.1(b), such other officers as in the judgment of the Board of Directors may be necessary or desirable. All officers elected by the Board of Directors shall have such powers and duties as generally pertain to their respective offices for a corporation incorporated under the DGCL, subject to the specific provisions of this Article 7. Such officers shall also have powers and duties as from time to time may be conferred by the Board of Directors or any committee thereof. Any number of offices may be held by the same Person, unless otherwise prohibited by applicable law or this Agreement. The officers of the Company need not be Members or directors of the Company.

(b) For so long as the Management Services Agreement is in effect, the Manager shall second personnel to serve as the Chief Executive Officer and the Chief Financial Officer and in such other capacities as set forth in the Management Services Agreement, subject to Section 8.5. The Board of Directors shall elect nominated personnel as officers of the Company in accordance with this Article 7. Upon termination of the Management Services Agreement, if no replacement manager is retained by the Company to assume the Manager’s rights and obligations hereunder, the Nominating and Corporate Governance Committee shall nominate and the Board of Directors shall elect the officers of the Company.

Section 7.2 Duties of Officers. Except as provided in this Agreement (or as required by the Act), each officer of the Company shall have the same fiduciary duties applicable to officers of a corporation incorporated under the DGCL, as if such officers were officers of a corporation incorporated under the DGCL. Except as provided in this Agreement, the parties hereto intend that the fiduciary duties of the officers of the Company shall be interpreted consistently with the jurisprudence regarding such fiduciary duties of officers of a corporation under the DGCL. It shall be expressly understood that, to the fullest extent permitted by law, no officer of the Company owes any duties (fiduciary or otherwise) to the Members or the Company with respect to any action or inaction of the Manager pursuant to the terms of the Management Services Agreement.

Section 7.3 Election and Term of Office. Subject to Section 7.1(b), the elected officers of the Company shall be elected annually by the Board of Directors at the regular meeting of the Board of Directors held after each annual meeting of the Members. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as is convenient. Each officer shall hold office until his or her successor shall have been duly elected and qualified or until his or her death or resignation or removal.

Section 7.4 Chief Executive Officer. The Chief Executive Officer of the Company shall, subject to the oversight of the Board of Directors, supervise, coordinate and manage the Company’s business and operations, and supervise, coordinate and manage its activities, operating expenses and capital allocation, shall have general authority to exercise all the powers necessary for the Chief Executive Officer of the Company and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or this Agreement, all in accordance with basic policies as may be established by the Board of Directors.

Section 7.5 Chief Financial Officer. The Chief Financial Officer shall have responsibility for the financial affairs of the Company, including the preparation of financial reports, managing financial risk and overseeing accounting and internal control over financial reporting, subject to the responsibilities of the Audit Committee. The Chief Financial Officer shall also be the Company’s chief compliance officer, with responsibility for overseeing and managing compliance issues, including, without limitation, ensuring compliance with regulatory requirements, and internal controls, policies and procedures. In the absence of a Secretary, the Chief Financial Officer shall be responsible for the performance of the duties of Secretary. The Chief Financial Officer shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or this Agreement, all in accordance with basic policies as may be established by the Board of Directors and subject to the oversight of the Board of Directors and the Chief Executive Officer.

Section 7.6 Reserved.

Section 7.7 Secretary. The Secretary shall act as secretary of all meetings of Members and the Board of Directors and any meeting of any committee of the Board of Directors. The Secretary shall prepare and keep or cause to be kept in books provided for such purpose minutes of all meetings of Members and the Board of Directors and any meeting of any committee of the Board of Directors, ensure that all notices are duly given in accordance with the provisions of this Agreement and applicable laws, and perform all duties incident to the office of Secretary and as required by law and such other duties as may be assigned to him or her from time to time by the Board of Directors.

Section 7.8 Resignations. Any officer of the Company may resign at any time upon notice of such resignation to the Company.

Section 7.9 Vacancies. Subject to Section 7.1(b), a newly created office and a vacancy in any office because of death, resignation or removal may be filled by the Board of Directors for the unexpired portion of the term at any meeting of the Board of Directors.

ARTICLE 8

MANAGEMENT

Section 8.1 Duties of the Manager. For so long as the Management Services Agreement is in effect and subject at all times to the oversight of the Board of Directors, the Manager will manage the business of the Company and provide its services to the Company in accordance with the terms and conditions of the Management Services Agreement.

Section 8.2 Secondment of the Chief Executive Officer and Chief Financial Officer. Pursuant to the terms of the Management Services Agreement, the Manager will second to the Company natural Persons to serve as the Chief Executive Officer and Chief Financial Officer. The Chief Executive Officer and the Chief Financial Officer shall report directly to the Board.

Section 8.3 Secondment of Additional Officers. Pursuant to the terms of the Management Services Agreement, the Manager and the Company may agree from time to time that the Manager will second to the Company one or more additional natural Persons to serve as officers of the Company, upon such terms as the Manager and the Company may mutually agree. Any such natural Persons will have such titles and fulfill such functions as the Manager and the Company may mutually agree.

Section 8.4 Status of Seconded Officers and Employees. Any officers or employees of the Manager seconded to the Company pursuant to Section 8.3 shall not be employees of the Company; provided , that, except as provided in this Agreement (or as required by the Act), any such seconded officers and employees of the Manager shall have the same fiduciary duties with respect to the Company applicable to officers or similarly situated employees, as the case may be, of a corporation incorporated under the DGCL, as if such officers or employees, as the case may be, were officers or employees, as the case may be, of a corporation incorporated under the DGCL. Except as provided in this Agreement, the parties hereto intend that the fiduciary duties of any such seconded officers and employees of the Manager shall be interpreted consistently with the jurisprudence regarding such fiduciary duties of officers or similarly situated employees, as the case may be, of a corporation under the DGCL. It shall be expressly understood that, to the fullest extent permitted by applicable law, no seconded officer or employee of the Manager owes any duties (fiduciary or otherwise) to the Members or the Company with respect to any action or inaction of the Manager except in accordance with the terms of the Management Services Agreement.

Section 8.5 Removal of Seconded Officers. The Board of Directors shall have the right to remove any officer of the Company at any time, with or without cause; provided , however , that for so long as the Management Services Agreement is in effect, the Board of Directors may remove officers of the Company seconded by the Manager only pursuant to the terms of the Management Services Agreement.

Section 8.6 Replacement Manager. In the event that the Management Services Agreement is terminated and the Board of Directors determines that a replacement manager should be retained to provide for the management of the Company pursuant to a management or other services agreement, the affirmative vote of a majority of the holders of Trust Interests present in person or represented by proxy at the meeting of Members shall be required to retain such replacement manager.

ARTICLE 9

THE MEMBERS

Section 9.1 Rights or Powers. The Members acting as such shall not have any right or power to take part in the management or control of the Company or its business and affairs or to act for or bind the Company in any way. Notwithstanding the foregoing, the Members have all the rights and powers specifically set forth in this Agreement, including, without limitation, those

rights and powers set forth in Article 12 and, to the extent not inconsistent with this Agreement, in the Act.

Section 9.2 Annual Meetings of Members. The annual meeting of the Members of the Company shall be held at such date, at such time and at such place (if any) within or without the State of Delaware as may be fixed by resolution of the Board of Directors. Any other business may be transacted at the annual meeting; provided , that it is properly brought before the meeting.

Section 9.3 Special Meetings of Members. Special meetings of the Members of the Company shall be held on such date, at such time and at such place (if any) within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Special meetings of the Members may be called at any time only by the Chairman or by the Board of Directors pursuant to a resolution adopted by the Board of Directors. Business transacted at any special meeting of Members shall be limited to the purposes stated in such notice.

Section 9.4 Place of Meeting. The Board of Directors may designate the place (if any) of meeting for any meeting of the Members. If no designation is made by the Board of Directors, the place of meeting shall be the principal executive office of the Company. In lieu of holding any meeting of Members at a designated place, the Board of Directors may, in its sole discretion, determine that any meeting of Members may be held solely by means of remote communication.

Section 9.5 Notice of Meeting.

(a) A notice of meeting, stating the place (if any), day and hour of the meeting, and the means of remote communication, if any, by which Members and proxy holders may be deemed to be present in person and vote at such meeting, shall be prepared and delivered by the Company not less than twenty (20) days and not more than sixty (60) days before the date of the meeting, either personally, by mail or, to the extent and in the manner permitted by applicable law, electronically, to each Member of record. In the case of special meetings, the notice shall state the purpose or purposes for which such special meeting is called. Such further notice shall be given as may be required by applicable law. Any previously scheduled meeting of the Members may be postponed, and (unless this Agreement otherwise provides) any special meeting of the Members may be canceled, by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of Members. Any notice of meeting given to Members pursuant to this Section 9.5 shall be effective if given by a form of electronic transmission consented to by the Member to whom the notice is given. Any such consent shall be revocable by the Member by written notice to the Company and shall also be deemed revoked if (1) the Company is unable to deliver by electronic transmission two consecutive notices given by the Company in accordance with such consent, and (2) such inability becomes known to the Secretary of the Company, the Transfer Agent or other person responsible for the giving of notice; provided , that, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

(b) Notice to Members shall be given personally, by mail or, to the extent and in the manner permitted by applicable law, electronically to each Member of record. If mailed, such notice shall be delivered by postage prepaid envelope directed to each holder at such

Member’s address as it appears in the records of the Company and shall be deemed given when deposited in the United States mail.

(c) In order that the Company may determine the Members entitled to notice of or to vote at any meeting of Members or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) or fewer than twenty (20) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining Members entitled to notice of or to vote at any meeting of Members or any adjournment thereof shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

(d) Notice given by electronic transmission pursuant to this subsection shall be deemed given: (1) if by facsimile telecommunication, when directed to a facsimile telecommunication number at which the Member has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the Member has consented to receive notice; (3) if by posting on an electronic network together with separate notice to the Member of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (4) if by any other form of electronic transmission, when directed to the Member. An affidavit of the Secretary or an assistant Secretary or of the Transfer Agent or other agent of the Company that the notice has been given by personal delivery, mail or a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

Section 9.6 Quorum and Adjournment. Except as otherwise provided by applicable law or by the Certificate or this Agreement, the Members present in person or by proxy holding a majority of each class of the Outstanding LLC Interests entitled to vote hereunder, shall constitute a quorum at a meeting of Members. The Chairman or the holders of a majority of each class of the LLC Interests entitled to vote hereunder so represented may adjourn the meeting from time to time, whether or not there is such a quorum. The Members present at a duly organized meeting at which a quorum is present in person or by proxy may continue to transact business until adjournment, notwithstanding the withdrawal of enough Members to leave less than a quorum.

When a meeting is adjourned to another time and place, if any, unless otherwise provided by this Agreement, notice need not be given of the reconvened meeting if the date, time and place, if any, thereof and the means of remote communication, if any, by which Members and proxyholders may be deemed to be present in person and vote at such reconvened meeting are announced at the meeting at which the adjournment is taken. If the time, date and place of the reconvened meeting are not announced at the meeting at which the adjournment is taken, then the Secretary of the Company shall give written notice of the time, date and place of the reconvened meeting not less than twenty (20) days prior to the date of the reconvened meeting. At the reconvened meeting, the Members may transact any business that might have been transacted at the original meeting. A determination of Members of record entitled to notice of or to vote at a meeting of Members shall apply to any adjournment of such meeting; provided , however , that the Board of Directors may fix a new record date for the reconvened meeting. If an

adjournment is for more than thirty (30) days or if, after an adjournment, a new record date is fixed for the reconvened meeting, a notice of the reconvened meeting shall be given to each Member entitled to vote at the meeting.

Section 9.7 Proxies. For so long as the Trust is the sole holder of Trust Interests, actions by Trust Members required to be taken hereunder will be taken by the Trust pursuant to instructions given to the Trust by the holders of the Trust Shares in accordance with the Trust Agreement or otherwise pursuant to terms set forth in the Trust Agreement. In addition, for so long as the Trust is the sole holder of Trust Interests, the Company shall provide to the Trust, for transmittal to the holders of Trust Shares, the appropriate form of proxy to enable the holders of Trust Shares to direct, in proportion to their percentage ownership of the Trust Shares, the vote of the Trust Member, and the Trust Member shall vote its Trust Interests in the same proportion as the vote of holders of Trust Shares. At all meetings of Members, a Member may vote by proxy as may be permitted by law; provided , that no proxy shall be voted after three (3) years from its date unless, in the case of the Trust Member and for so long as the Trust is the sole holder of Trust Interests, the proxy provides for a longer period in accordance with the Trust Agreement. Any proxy to be used at a meeting of Members must be filed with the Secretary of the Company or his or her representative at or before the time of the meeting. A Member may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary of the Company a revocation of the proxy or a new proxy bearing a later date.

Section 9.8 Notice of Member Business and Nominations.

(a) Annual Meetings of Members .

(i) Except in the case of the Initial Board, nominations of individuals for election to the Board of Directors by a Member (other than any Appointed Director, who shall be appointed by the Manager for so long as the Manager is entitled to appoint one or more directors to the Board of Directors pursuant to the terms of this Agreement), and the proposal of business to be considered by the Members, may be made at an annual meeting of Members (A) pursuant to the Company’s notice of meeting delivered pursuant to Section 9.5, (B) by or at the direction of the Board of Directors or (C) by any Member of the Company who is entitled to vote at the meeting, who complies with the notice procedures set forth in clauses (ii) and (iii) of this Section 9.8(a).

In addition to any other applicable requirements, for a nomination for election of a director to be made by a Member (other than any Appointed Director, who shall be appointed by the Manager for so long as the Manager is entitled to appoint one or more directors to the Board of Directors pursuant to the terms of this Agreement) or for business to be properly brought before an annual meeting by a Member, such Member must (A) be a Member of record on both (1) the date of the delivery of such nomination or the date of the giving of the notice provided for in this Section 9.8(a) and (2) the record date for the determination of Members entitled to vote at such annual meeting, and (B) have given timely notice thereof in proper written form in accordance with the requirements of this Section 9.8(a) to the Secretary.

(ii) For nominations or other business to be properly brought before an annual meeting by a Member pursuant to Section 9.8(a)(i)(C), the Member must have given timely notice thereof in writing to the Secretary of the Company and, in the case of business other than nominations, such other business must otherwise be a proper matter for Member action. Except to the extent otherwise required by applicable law, to be timely, a Member’s notice shall be delivered to the Secretary at the principal executive offices of the Company not less than one hundred and twenty (120) days nor more than one hundred and fifty (150) days prior to the first anniversary of the preceding year’s annual meeting; provided , however , that, in the event that the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by a Member must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Company. In the case of the first annual meeting of Members, a Member’s notice shall be timely if it is delivered to the Secretary at the principal executive offices of the Company not earlier than the one hundred and twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement or an adjournment or postponement of an annual meeting commence a new time period for the giving of a Member’s notice as described in this Section 9.8(a).

Subject to Section 9.8(a)(i), such Member’s notice shall set forth: (A) as to each individual whom the Member proposes to nominate for election or reelection as a director, all information relating to such individual that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, pursuant to Regulation 14A under the Exchange Act, including such individual’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (B) as to any other business that the Member proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration), the reasons for conducting such business at the meeting and any material interest in such business of such Member and the Beneficial Owner or holder of Trust Shares, if any, on whose behalf the proposal is made; and (C) as to the Member giving the notice and the Beneficial Owner, if any, on whose behalf the nomination or proposal is made, (1) the name and address of such Member as they appear on the Company’s books and of such Beneficial Owner, (2) the number of, and evidence of such number of, LLC Interests which are owned beneficially and of record by such Member and such Beneficial Owner, (3) a representation that the Member intends to appear in person or by proxy at the meeting to propose such business or nomination, and (4) a representation whether the Member or the Beneficial Owner, if any, intends or is part of a group which intends (i) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the LLC Interests required to approve or adopt the proposal or elect the nominee and/or (ii) otherwise to solicit proxies from Members in support of such proposal or nomination. The foregoing notice requirements shall be deemed satisfied by a Member if the Member has notified the Company of the Member’s

intention to present a proposal at an annual meeting in compliance with Rule 14a-8 (or any successor thereof) promulgated under the Exchange Act and such Member’s proposal has been included in a proxy statement that has been prepared by the Company to solicit proxies for such annual meeting. The Company may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Company or on any committee of the Board of Directors.

(iii) Notwithstanding anything in the second sentence of clause (ii) of this Section 9.8(a) to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Company at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a Member’s notice required by this Section 9.8 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Company not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Company.

(b) Special Meeting of Members . Only such business shall be conducted at a special meeting of Members as shall have been brought before the meeting pursuant to the Company’s notice of meeting pursuant to Section 9.5. Nominations of individuals for election to the Board of Directors by a Member (other than any Appointed Director, who shall be appointed by the Manager for so long as the Manager is entitled to appoint one or more directors to the Board of Directors pursuant to the terms of this Agreement) may be made at a special meeting of Members at which directors are to be elected pursuant to the Company’s notice of meeting (i) by or at the direction of the Board of Directors, or (ii) by any Member who is entitled to vote at the meeting who complies with the notice procedures set forth in this Section 9.8.

In addition to any other applicable requirements, for a nomination for election of a director to be made by a Member, such Member must (A) be a Member of record on both (1) the date of the delivery of such nomination and (2) the record date for the determination of Members entitled to vote at such special meeting, and (B) have given timely notice thereof in proper written form in accordance with the requirements of this Section 9.8(b) to the Secretary.

In the event the Company calls a special meeting of Members for the purpose of electing one or more directors to the Board of Directors, any Member entitled to vote thereon may nominate such number of individuals for election to such position(s) as are specified in the Company’s Notice of Meeting, if such Member’s notice as required by Section 9.8(a)(ii) shall be delivered to the Secretary at the principal executive offices of the Company not earlier than the one hundred and twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period for the giving of a Member’s notice as described above.

(i) Only individuals who are nominated in accordance with the procedures set forth in this Section 9.8 shall be eligible to be considered for election as directors at a meeting of Members and only such business shall be conducted at a meeting of Members as shall have been brought before the meeting in accordance with the procedures set forth in this Section 9.8. Except as otherwise provided by applicable law or this Section 9.8, the Chairman shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 9.8 and, if any proposed nomination or business is not in compliance with this Section 9.8, to declare that such defective proposal or nomination shall be disregarded.

(ii) For purposes of this Section 9.8, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Company with the Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(iii) Notwithstanding the foregoing provisions of this Section 9.8, a Member shall also comply with all applicable requirements of the Exchange Act, the Rules and Regulations thereunder and the Listing Rules with respect to the matters set forth in this Section 9.8. Nothing in this Section 9.8 shall be deemed to affect any rights of Members to request inclusion of proposals in the Company’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 9.9 Procedure for Election of Directors; Voting. The election of directors submitted to Members at any meeting shall be decided by a plurality of the votes cast by the Members entitled to vote thereon. Except as otherwise provided by applicable law or this Agreement, all matters other than the election of directors submitted to the Members at any meeting shall be decided by the affirmative vote of the holders of a majority of the then Outstanding LLC Interests entitled to vote thereon present in person or represented by proxy at the meeting of Members. The vote on any matter at a meeting, including the election of directors, shall be by written ballot. Each ballot shall be signed by the Member voting, or by such Member’s proxy, and shall state the number of LLC Interests voted.

Section 9.10 Inspectors of Elections; Opening and Closing the Polls.

(a) The Board of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors shall not be directors, officers or employees of the Company, to act at the meeting and make a written report thereof. One or more individuals may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been so appointed to act, or if all inspectors or alternates who have been appointed are unable to act, at a meeting of Members, the Chairman shall appoint one or more inspectors to act at the meeting. Each such inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by the DGCL as if the Company were a Delaware corporation.

(b) The Chairman shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the Members will vote at the meeting.

Section 9.11 Confidential Member Voting. All proxies, ballots and votes, in each case to the extent they disclose the specific vote of an identified Member, shall be tabulated and certified by an independent tabulator, inspector of elections and/or other independent parties and shall not be disclosed to any director, officer or employee of the Company; provided , however , that, notwithstanding the foregoing, any and all proxies, ballots and voting tabulations may be disclosed: (a) as necessary to meet legal requirements or to assist in the pursuit or defense of legal action; (b) if the Company concludes in good faith that a bona fide dispute exists as to the authenticity of one or more proxies, ballots or votes, or as to the accuracy of any tabulation of such proxies, ballots or votes; (c) in the event of a proxy, consent or other solicitation in opposition to the voting recommendation of the Board of Directors; and (d) if a Member requests or consents to disclosure of such Member’s vote or writes comments on such Member’s proxy card or ballot.

Section 9.12 Waiver of Notice. Whenever any notice is required to be given to any Member by the terms of this Agreement, a waiver thereof in writing, signed by the Person or Persons entitled to such notice, or a waiver thereof by electronic transmission by the Person or Persons entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the Members need be specified in any written waiver of notice or any waiver by electronic transmission of such meeting. Notice of any meeting of Members need not be given to any Member if waived by such Member either in a writing signed by such Member or by electronic transmission, whether such waiver is given before or after such meeting is held. If any such waiver is given by electronic transmission, the electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the Member.

Section 9.13 Remote Communication. For the purposes of this Agreement, if authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the Board of Directors may adopt, Members and proxyholders may, by means of remote communication:

(a) participate in a meeting of Members; and

(b) to the fullest extent permitted by applicable law, be deemed present in person and vote at a meeting of Members, whether such meeting is to be held at a designated place or solely by means of remote communication;

provided , however , that (i) the Company shall implement reasonable measures to verify that each Person deemed present and permitted to vote at the meeting by means of remote communication is a Member or proxyholder, (ii) the Company shall implement reasonable measures to provide such Members and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the Members, including an opportunity to read or hear the proceedings of the meeting substantially and concurrently with such proceedings, and (iii) if any

Member or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Company.

Section 9.14 Member Action Without a Meeting. For so long as the Trust remains the sole holder of Trust Interests, the Trust shall take any action required or permitted to be taken at any meeting of Members, by executing a written consent that shall reflect the vote of the holders of Trust Shares as required by the terms of the Trust Agreement, without such meeting, without prior notice, and without a vote. Proxy materials completed by the holders of Trust Shares evidencing the result of a vote taken at a meeting of the holders of Trust Shares with at least the minimum number of votes required to constitute an affirmative vote of the holders of Trust Shares under the Trust Agreement shall be delivered to the Company indicating the vote or action being approved or disapproved by such holders with respect to those matters reserved to the Trust Members of the Company by this Agreement. If the Trust is not the sole owner of the Trust Interests, Members shall take any action required or permitted only at a meeting of Members duly called and noticed, and shall not be entitled to take any action by written consent.

Section 9.15 Return on Capital Contribution. Except as otherwise provided in Article 14, no Member shall demand a return on or of its Capital Contributions.

Section 9.16 Member Compensation. No Member shall receive any interest, salary or draw with respect to its Capital Contributions or its Capital Account or for services rendered on behalf of the Company, or otherwise, in its capacity as a Member, except as otherwise provided in this Agreement or in the Management Services Agreement.

Section 9.17 Member Liability. Except as required by the Act, no Member shall be liable under a judgment, decree or order of a court, or in any other manner, for the Debts or any other obligations or liabilities of the Company. A Member shall be liable only to make its Capital Contributions and shall not be required to restore a deficit balance in its Capital Account or to lend any funds to the Company or, after its Capital Contributions have been made, to make any additional contributions, assessments or payments to the Company; provided , however , that a Member may be required to repay any distribution made to it in contravention of Section 5.3 or Sections 18-607 or 18-804 of the Act. The Manager shall not have any personal liability for the repayment of any Capital Contributions of any Member.

ARTICLE 10

MEMBER VOTE REQUIRED IN CONNECTION WITH
CERTAIN BUSINESS COMBINATIONS OR TRANSACTIONS

Section 10.1 Vote Generally Required. Except as provided in Sections 2.3 and 2.4 and subject to the provisions of Section 10.2, the Company shall not (a) merge or consolidate with or into any limited liability company, corporation, statutory trust, business trust or association, real estate investment trust, common-law trust or any other unincorporated business, including a partnership, or (b) sell, lease or exchange all or substantially all of its Property and assets, unless the Board of Directors shall adopt a resolution, by the affirmative vote of at least a majority of the Entire Board of Directors, approving such action and unless such action shall be approved by

the affirmative vote of the holders of a majority of each class of LLC Interests, in each case, Outstanding and entitled to vote thereon. The notice of the meeting at which such resolution is to be considered will so state.

Section 10.2 Vote for Business Combinations. The affirmative vote of the holders of record of at least sixty-six and two-thirds percent (66 2/3%) of each class of LLC Interests then Outstanding (excluding LLC Interests Beneficially Owned by the Interested Shareholder or any Affiliate or Associate of the Interested Shareholder) shall be required to approve any Business Combination. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by applicable law or in any agreement with any securities exchange or otherwise.

Section 10.3 Power of Continuing Directors. The Continuing Directors shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article 10, including, without limitation, (a) whether a Person is an Interested Shareholder, (b) the number of Trust Interests of the Company beneficially owned by any Person, (c) whether a Person is an Affiliate or Associate of another, and (d) the Fair Market Value of the equity securities of the Company or any Subsidiary thereof, and the good faith determination of the Continuing Directors on such matters shall be conclusive and binding for all the purposes of this Article 10.

Section 10.4 No Effect on Fiduciary Obligations. Nothing contained in this Article shall be construed to relieve the directors of the Board of Directors or an Interested Shareholder from any fiduciary obligation imposed by applicable law.

ARTICLE 11

BOOKS AND RECORDS

Section 11.1 Books and Records; Inspection by Members.

(a) The Company, other than as provided in the Management Services Agreement, shall keep or cause to be kept at its principal executive office appropriate books and records with respect to the Company’s business, including, without limitation, all books and records necessary to provide to the Members any information, lists and copies of documents required to be provided pursuant to applicable law. Any books and records maintained by or on behalf of the Company in the regular course of its business, including, without limitation, the record of the Members, books of account and records of Company proceedings, may be kept in electronic or any other form; provided , that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time.

(b) The Secretary shall make, at least ten (10) days before every meeting of Trust Members, a complete list of the Trust Members entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each Trust Member and the number of Trust Interests registered in the name of each Trust Member. Such list shall be open to the examination of any Trust Member, for any purpose germane to the meeting for a period of at least ten (10)

days prior to the meeting: (i) on a reasonably accessible electronic network; provided , that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Company. In the event that the Company determines to make the list available on an electronic network, the Company may take reasonable steps to ensure that such information is available only to Members. The list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any Member who is present.

(c) Any Member or Beneficial Owner, in person or by attorney or other agent, shall, upon written demand stating the purpose thereof, have the right during the usual business hours to inspect for any proper purpose, and to make copies and extracts from the Register, a list of the Members, and its other books and records; provided , that as of the date of the making of the demand inspection of such books and records would not constitute a breach of any confidentiality agreement. In every instance where a person purports to be a Beneficial Owner of LLC Interests but who is not the holder of record as identified on the Register, the demand shall state such Person’s status as a Beneficial Owner of LLC Interests, be accompanied by documentary evidence of beneficial ownership of LLC Interests, and state that such documentary evidence is a true and correct copy of what it purports to be. A proper purpose shall mean a purpose reasonably related to such Person’s interest as a Member or Beneficial Owner of LLC Interests.

Section 11.2 Reports.

(a) In General . The Chief Financial Officer of the Company shall be responsible for causing the preparation of financial reports of the Company and the coordination of financial matters of the Company with the Company’s accountants.

(b) Periodic and Other Reports . The Company shall cause to be delivered to each Member the financial statements listed in clauses (i) and (ii) below, prepared in each case (other than with respect to Members’ Capital Accounts, which shall be prepared in accordance with this Agreement) in accordance with GAAP consistently applied (and, if required by any Member or its controlled Affiliates for purposes of reporting thereunder, Regulation S-X of the Exchange Act). The monthly and quarterly financial statements referred to in clause (ii) below may be subject to normal year-end audit adjustments.

(i) As soon as practicable following the end of each Fiscal Year (and in any event not later than the date on which the Rules and Regulations provide) and at such time as distributions are made to the Members pursuant to Article 14 following the occurrence of a Dissolution Event, a balance sheet of the Company as of the end of such Fiscal Year and the related statements of operations, Members’ Capital Accounts and changes therein, and cash flows for such Fiscal Year, together with appropriate notes to such financial statements and supporting schedules, all of which shall be audited and certified by the Company’s accountants, and in each case, to the extent the Company was in existence, setting forth in comparative form the corresponding figures for the immediately preceding Fiscal Year end (in the case of the balance sheet) and the two (2) immediately preceding Fiscal Years (in the case of the statements); and

(ii) As soon as practicable following the end of each of the first three Fiscal Quarters of each Fiscal Year (and in any event not later than the date on which the Rules and Regulations require), a balance sheet of the Company as of the end of such Fiscal Quarter and the related statements of operations and cash flows for such Fiscal Quarter and for the Fiscal Year to date, in each case, to the extent the Company was in existence, setting forth in comparative form the corresponding figures for the prior Fiscal Year’s Fiscal Quarter and the interim period corresponding to the Fiscal Quarter and the interim period just completed.

The quarterly statements described in clause (ii) above shall be accompanied by such written certifications as the Rules and Regulations require.

Section 11.3 Preparation of Tax Returns. The Company shall arrange for the preparation and timely filing of all returns of Company income, gains, deductions, losses and other items required of the Company for U.S. federal and state income tax purposes. The classification, realization and recognition of income, gains, deductions, losses and other items shall be on the accrual method of accounting for U.S. federal income tax purposes. The taxable year of the Company shall be the calendar year.

Section 11.4 Tax Elections.

(a) The Board of Directors shall, without any further consent of the Members being required (except as specifically required herein), make (i) the election to adjust the basis of Property pursuant to Code Sections 754, 734(b) and 743(b), or comparable provisions of state, local or foreign law, in connection with Transfers of LLC Interests and Company distributions; and (ii) any and all other elections for U.S. federal, state, local and foreign tax purposes, including, without limitation, any election, if permitted by applicable law: (x) to extend the statute of limitations for assessment of tax deficiencies against the Members with respect to adjustments to the Company’s U.S. federal, state, local or foreign tax returns; and (y) to the extent provided in Code Sections 6221 through 6231 and similar provisions of U.S. federal, state, local or foreign law, to represent the Company and the Members before taxing authorities or courts of competent jurisdiction in tax matters affecting the Company or the Members in their capacities as Members, and to file any tax returns and execute any agreements or other documents relating to or affecting such tax matters, including agreements or other documents that bind the Members with respect to such tax matters or otherwise affect the rights of the Company and the Members. The Manager is specifically authorized to act as the “Tax Matters Member” under the Code and in any similar capacity under state or local law.

(b) In circumstances where the Trust has been dissolved, the Board of Directors may, by the affirmative vote of at least a majority of the Entire Board of Directors, and without any further consent of the Members being required, cause the Company to elect to be treated as a corporation for U.S. federal income tax purposes; provided , however , that such action shall be taken only if (i) the Board of Directors first obtains an opinion from a nationally recognized financial advisor to the effect that it expects the market valuation of the Company to be significantly lower as a result of the Company continuing to be treated as a partnership for U.S. federal income tax purposes than if the Company instead elected to be treated as a corporation for U.S. federal income tax purposes and (ii) the effective date for such election is no

earlier than the date on which the Trust has been dissolved pursuant to clause (i) of Section 10.02 of the Trust Agreement.

Section 11.5 Tax Information. Necessary tax information shall be delivered to each Member as soon as practicable after the end of the Fiscal Year of the Company but not later than February 15.

ARTICLE 12

AMENDMENTS

The Board of Directors is authorized to amend the terms of this Agreement by resolution adopted by the affirmative vote of a majority of the Entire Board of Directors; provided , however , that Sections 1.3, 2.4, 2.5, 3.1(a), 5.1, 8.6, 14.1(i) or (ii), Article 10 and this Article 12 may not be amended without the affirmative vote of Trust Members holding a majority of the Trust Interests present in person or represented by proxy at a meeting of Trust Members; provided , further , however , that Sections 5.1, 5.2, 6.1 , 6.4 (excluding provisions relating to classification of the Board of Directors), 6.5 (solely with respect to the provision relating to an Appointed Director), 6.6 (solely with respect to the Allocation Member’s right to remove an Appointed Director), 6.8 (solely with respect to the provision relating to an Appointed Director), 6.9 (solely with respect to the provision relating to the initial Chairman), 6.12 (solely with respect to the Chief Executive Officer’s right to call special meetings of the Board of Directors), 6.17, 6.22, 6.23, Article 10 and this Article 12, and any other amendment that would adversely affect the rights of the Allocation Member may not be amended without the prior written consent of the Allocation Member. Notwithstanding anything to the contrary contained in this Agreement, the Board of Directors is authorized by resolution adopted by the affirmative vote of a majority of the Entire Board of Directors to (x) amend, modify or supplement this Agreement to correct any administrative or ministerial error or omission contained in this Agreement or to clarify, or to correct any error in, the calculation of the Profit Distribution Amount consistent with the intent of the Company and the Allocation Member, as determined by the Board of Directors and the Allocation Member in their sole discretion and (y) without limiting the generality of the foregoing provisions of this Article 12, amend, modify or supplement the provisions of Section 6.18 (relating to committees of the Board) from time to time.

ARTICLE 13

TRANSFERS; MONTHLY ALLOCATIONS

Profits, Losses, each item thereof and all other items attributable to LLC Interests for any Allocation Year shall, for U.S. federal income tax purposes, be determined on an annual basis and prorated on a monthly basis and the pro rata portion for each month shall be allocated to those Persons who are Members as of the close of the New York Stock Exchange on the last day of the preceding month. With respect to any LLC Interest that was not treated as Outstanding

as of the close of the New York Stock Exchange on the last day of the preceding month, the first Person who is treated as the Member with respect to such LLC Interest will be treated as the Member with respect to such LLC Interest for this purpose as of the close of the New York Stock Exchange on the last day of the preceding month. All distributions having a record date on or before the date of a Transfer of LLC Interests shall be made to the transferor, and all distributions having a record date thereafter shall be made to the transferee. The Board of Directors may revise, alter or otherwise modify such methods of allocation as it determines necessary, to the extent permitted or required by Code Section 706 and the Regulations or rulings promulgated thereunder.

ARTICLE 14

DISSOLUTION AND WINDING UP

Section 14.1 Dissolution Events . The Company shall dissolve and shall commence winding up upon the first to occur of any of the following (each a “Dissolution Event” ):

(i) the Board of Directors adopts a resolution, by the affirmative vote of at least a majority of the Entire Board of Directors, approving the dissolution, winding up and liquidation of the Company and such action has been approved by the affirmative vote of the holders of a majority of the Outstanding Trust Interests and entitled to vote thereon;

(ii) the unanimous vote of the Trust Members to dissolve, wind up and liquidate the Company;

(iii) the entry of a decree of judicial dissolution under Section 18-802 of the Act; or

(iv) upon the termination of the legal existence of the last remaining Member or the occurrence of any other event that terminates the continued membership of the last remaining Member unless the Company is continued without dissolution in a manner permitted by this Agreement or the Act.

The Members hereby agree that, notwithstanding any provision of the Act, the Company shall not dissolve prior to the occurrence of a Dissolution Event.

Section 14.2 Winding Up. Upon the occurrence of a Dissolution Event, the Company shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Members, and no Member shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Company’s business and affairs; provided , however , that all covenants contained in this Agreement and obligations provided for in this Agreement shall continue to be fully binding upon the Members until such time as the Property has been distributed pursuant to this Section 14.2 and the Certificate has been canceled pursuant to the Act. The Liquidator shall be responsible for overseeing the winding up of the Company, which winding up shall be completed

no later than ninety (90) days after the later of the occurrence of the Dissolution Event. The Liquidator shall take full account of the Company’s liabilities and Property and shall cause the Property or the proceeds from the sale thereof (as determined pursuant to Section 14.9), to the extent sufficient therefor, to be applied and distributed, to the maximum extent permitted by law, in the following order:

(a) First, to creditors (including the Manager and the Members who are creditors, to the extent otherwise permitted by law) in satisfaction of all of the Company’s Debts and other liabilities (whether by payment or the making of reasonable provision for payment thereof), other than liabilities for distributions to Members under Section 18-601 or 18-604 of the Act;

(b) Second, except as provided in this Agreement, to Members and former Members of the Company in satisfaction of liabilities for distributions under Section 18-601 or 18-604 of the Act; and

(c) The balance, if any, to the Members in accordance with the positive balance in their Capital Accounts, after giving effect to all contributions, distributions and allocations for all periods.

Notwithstanding Section 14.9, no Member or Manager shall receive additional compensation for any services performed pursuant to this Article 14.

Section 14.3 Compliance with Certain Requirements of Regulations; Deficit Capital Accounts . In the event the Company is “liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article 14 to the Members who have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any Member has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all Allocation Years, including the Allocation Year during which such liquidation occurs), such Member shall have no obligation to make any contribution to the capital of the Company with respect to such deficit, and such deficit shall not be considered a debt owed to the Company or to any other Person for any purpose whatsoever. In the discretion of the Liquidator, a pro rata portion of the distributions that would otherwise be made to the Members pursuant to this Article 14 may be:

(a) Distributed to a trust established for the benefit of the Members for the purposes of liquidating Company assets, collecting amounts owed to the Company, and paying any contingent, conditional or unmatured liabilities or obligations of the Company; the assets of any such trust shall be distributed to the Members from time to time, in the reasonable discretion of the Liquidator, in the same proportions as the amount distributed to such trust by the Company would otherwise have been distributed to the Members pursuant to Section 14.2; or

(b) Withheld to provide a reasonable reserve for Company liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Company; provided , however , that such withheld amounts shall be distributed to the Members as soon as practicable.

Section 14.4 Deemed Distribution and Recontribution. Notwithstanding any other provision of this Article 14, in the event the Company is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Dissolution Event has occurred, the Property shall not be liquidated, the Company’s Debts and other Liabilities shall not be paid or discharged, and the Company’s affairs shall not be wound up. Instead, solely for U.S. federal income tax purposes, the Company shall be deemed to have contributed all its Property and liabilities to a new limited liability company in exchange for interests in such new company and, immediately thereafter, the Company will be deemed to liquidate by distributing interests in the new company to the Members.

Section 14.5 Rights of Members. Except as otherwise provided in this Agreement, each Member shall look solely to the Property of the Company for the return of its Capital Contribution and has no right or power to demand or receive Property other than cash from the Company. If the assets of the Company remaining after payment or discharge of the debts or liabilities of the Company are insufficient to return such Capital Contribution, the Members shall have no recourse against the Company or any other Member or the Manager.

Section 14.6 Notice of Dissolution/Termination.

(a) In the event a Dissolution Event occurs or an event occurs that would, but for the provisions of Section 14.1, result in a dissolution of the Company, the Board of Directors shall, within thirty (30) days thereafter, provide written notice thereof to each of the Members and to all other parties with whom the Company regularly conducts business (as determined in the discretion of the Board of Directors) and shall publish notice thereof in a newspaper of general circulation in each place in which the Company regularly conducts business (as determined in the discretion of the Board of Directors).

(b) Upon completion of the distribution of the Company’s Property as provided in this Article 14, the Board of Directors shall cause the filing of the Certificate of Cancellation pursuant to Section 18-203 of the Act and shall take all such other actions as may be necessary to terminate the Company.

Section 14.7 Allocations During Period of Liquidation. During the period commencing on the first day of the Fiscal Year during which a Dissolution Event occurs and ending on the date on which all of the assets of the Company have been distributed to the Members pursuant to Section 14.2 (the “Liquidation Period” ), the Members shall continue to share Profits, Losses, gain, loss and other items of Company income, gain, loss or deduction in the manner provided in Article 4.

Section 14.8 Character of Liquidating Distributions. All payments made in liquidation of the interest of a Member in the Company shall be made in exchange for the interest of such Member in Property pursuant to Section 736(b)(1) of the Code, including the interest of such Member in Company goodwill.

Section 14.9 The Liquidator.

(a) Fees . Subject to Section 14.2, the Company is authorized to pay a reasonable fee to the Liquidator for its services performed pursuant to this Article 14 and to

reimburse the Liquidator for its reasonable costs and expenses incurred in performing those services.

(b) Indemnification . The Company shall indemnify, hold harmless and pay all judgments and claims against the Liquidator or any officers, directors, agents or employees of the Liquidator relating to any liability or damage incurred by reason of any act performed or omitted to be performed by the Liquidator or any officers, directors, agents or employees of the Liquidator in connection with the liquidation of the Company, including reasonable attorneys’ fees incurred by the Liquidator, officer, director, agent or employee in connection with the defense of any action based on any such act or omission, which attorneys’ fees may be paid as incurred, except to the extent such liability or damage is caused by the fraud or intentional misconduct of, or a knowing violation of the laws by, the Liquidator which was material to the cause of action.

Section 14.10 Form of Liquidating Distributions. For purposes of making distributions required by Section 14.2, the Liquidator may determine whether to distribute all or any portion of the Property in kind or to sell all or any portion of the Property and distribute the proceeds therefrom.

ARTICLE 15

MISCELLANEOUS

Section 15.1 Notices. Subject to Sections 6.11, 6.13, 9.5 and 9.8, any notice, payment, demand or communication required or permitted to be given by any provision of this Agreement shall be in writing and delivered personally, or, when the same is actually received, if sent either by registered or certified mail, postage and charges prepaid, or by facsimile, if such facsimile is followed by a hard copy of the facsimile communication sent promptly thereafter by registered or certified mail, postage and charges prepaid, addressed as follows, or to such other address as such Person may from time to time specify by notice to the Members and the Manager:


(a)	If to the Company:

		61 Wilton Road
		Westport CT 06880
		Attention: I. Joseph Massoud
		Facsimile No.: (212) 581-8037

(b)	If to the Allocation Members:

		61 Wilton Road
		Westport CT 06880
		Attention: I. Joseph Massoud
		Facsimile No.: (212) 581-8037


(c)	If to the Trust Members:

		61 Wilton Road
		Westport CT 06880
		Attention: I. Joseph Massoud
		Facsimile No.: (212) 581-8037

Section 15.2 Binding Effect. Except as otherwise provided in this Agreement, every covenant, term and provision of this Agreement shall be binding upon and inure to the benefit of the Members and their respective successors, transferees and assigns.

Section 15.3 Construction. It is the intent of the parties hereto that every covenant, term and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any Member.

Section 15.4 Time. In computing any period of time pursuant to this Agreement, the day of the act, event or default from which the designated period of time begins to run shall not be included, but the time shall begin to run on the next succeeding day. The last day of the period so computed shall be included, unless it is a Saturday, Sunday or any other day on which banks in The City of New York are required or authorized by law or executive order to close, in which event the period shall run until the end of the next day which is not a Saturday, Sunday or any other day on which banks in The City of New York are required or authorized by law or executive order to close.

Section 15.5 Headings. Section and other headings contained in this Agreement are for reference purposes only and are not intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof.

Section 15.6 Severability. Except as otherwise provided in the succeeding sentence, every provision of this Agreement is intended to be severable, and, if any term or provision of this Agreement is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity or legality of the remainder of this Agreement. The preceding sentence of this Section 15.6 shall be of no force or effect if the consequence of enforcing the remainder of this Agreement without such illegal or invalid term or provision would be to cause any Member to lose the material benefit of its economic bargain.

Section 15.7 Incorporation by Reference. Every exhibit, schedule and other appendix attached to this Agreement and referred to herein is not incorporated in this Agreement by reference unless this Agreement expressly otherwise provides.

Section 15.8 Variation of Terms. All terms and any variations thereof shall be deemed to refer to masculine, feminine or neuter, singular or plural, as the identity of the Person or Persons may require.

Section 15.9 Governing Law and Consent to Jurisdiction/Service of Process. The laws of the State of Delaware shall govern this Agreement, including the validity of this Agreement, the construction of its terms and the interpretation of the rights and duties arising hereunder.

Each party hereto and any Person acquiring an LLC Interest, from time to time, (i) irrevocably submits to the non-exclusive jurisdiction and venue of any Delaware state court or U.S. federal court sitting in Wilmington, Delaware in any action arising out of this Agreement and (ii) consents to the service of process by mail. Nothing herein shall affect the right of any party to serve legal process in any manner permitted by law or affect its right to bring any action in any other court.

Section 15.10 Waiver of Jury Trial. Each of the Members irrevocably waives, to the extent permitted by law, all rights to trial by jury and all rights to immunity by sovereignty or otherwise in any action, proceeding or counterclaim arising out of or relating to this Agreement.

Section 15.11 Counterpart Execution. This Agreement may be executed in any number of counterparts with the same effect as if all of the Members had signed the same document. All counterparts shall be construed together and shall constitute one agreement.

Section 15.12 Specific Performance. Each Member agrees with the other Members that the other Members would be irreparably damaged if any of the provisions of this Agreement were not performed in accordance with their specific terms and that monetary damages would not provide an adequate remedy in such event. Accordingly, it is agreed that, in addition to any other remedy to which the nonbreaching Members may be entitled, at law or in equity, the nonbreaching Members shall be entitled to injunctive relief to prevent breaches of the provisions of this Agreement and specifically to enforce the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction thereof.

— Signature page follows —

IN WITNESS WHEREOF, the Members have executed and entered into this Third Amended and Restated Operating Agreement of the Company as of the day first above set forth.


COMPASS DIVERSIFIED HOLDINGS
By:	/s/ James J. Bottiglieri
	Name:	James J. Bottiglieri
	Title:	Regular Trustee


COMPASS GROUP MANAGEMENT LLC
By:	/s/ I. Joseph Massoud
	Name:	I. Joseph Massoud
	Title:	Managing Member

EXHIBIT A

SPECIMEN LLC INTEREST CERTIFICATE

COMPASS GROUP DIVERSIFIED HOLDINGS LLC INTEREST

____________________________________________________________ * This Certifies that _____________________________________ is the owner of ______ Trust Interests or _____ Allocation Interests of Compass Group Diversified Holdings LLC, a Delaware limited liability company (the “Company”), with such rights and privileges as are set forth in the Amended and Restated Operating Agreement of the Company dated as of April 25, 2006 (the “Agreement”), as it may be amended from time to time.

THE LLC INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE (THE “STATE ACTS”) OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURIITES ACT AND SUCH LAWS. THE LLC INTERESTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISION, BY AN STATE SECURITIES COMMISSION OR BY ANY OTHER REGULATORY AUTHORITY OF ANY OTHER JURISDICTION. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

THE LLC INTERESTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TRANSFER RESTRICTIONS CONTAINED IN THE AGREEMENT. EVERY HOLDER OF THIS CERTIFICATE, BY HOLDING AND RECEIVING THE SAME, AGREES WITH THE COMPANY TO BE BOUND BY THE TERMS OF THE AGREEMENT. THE AGREEMENT WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST WITHOUT CHARGE.

____________________________________________________________ In Witness Whereof, said Company has caused this Certificate to be signed by its Chief Executive Officer this __ day of ____, A.D. _____.

______________________________,

__________________________________________________________________________________________________________

Exhibit 31.1

CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, I. Joseph Massoud, certify that:

	1.		I have reviewed this Quarterly Report on Form 10-Q of Compass Group Diversified Holdings LLC (the “registrant”);

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2010



	/s/ I. Joseph Massoud
	I. Joseph Massoud
	Chief Executive Officer of Compass Group Diversified Holdings LLC (Principal executive officer)

Exhibit 31.2

CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James J. Bottiglieri, certify that:

	1.		I have reviewed this Quarterly Report on Form 10-Q of Compass Diversified Holdings and Compass Group Diversified Holdings LLC (each, the “registrant”);

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a)		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2010



	/s/ James J. Bottiglieri
	James J. Bottiglieri
	Regular Trustee of Compass Diversified Holdings and Chief Financial Officer of Compass Group Diversified Holdings LLC (Principal financial and accounting officer )

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of COMPASS GROUP DIVERSIFIED HOLDINGS LLC on Form 10-Q for the period ended September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, I. Joseph Massoud, Chief Executive Officer of Compass Group Diversified Holdings LLC, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

	(1)		The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Compass Group Diversified Holdings LLC.



Dated: November 8, 2010	/s/ I. Joseph Massoud
	I. Joseph Massoud
	Chief Executive Officer of Compass Group Diversified Holdings LLC

The foregoing certification is being furnished to accompany Compass Group Diversified Holdings LLC’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010 (the “Report”) solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed as part of the Report or as a separate disclosure document and shall not be deemed incorporated by reference into any other filing of Compass Group Diversified Holdings LLC that incorporates the Report by reference. A signed original of this written certification required by Section 906 has been provided to Compass Group Diversified Holdings LLC and will be retained by Compass Group Diversified Holdings LLC and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of COMPASS DIVERSIFIED HOLDINGS and COMPASS GROUP DIVERSIFIED HOLDINGS LLC on Form 10-Q for the period ended September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James J. Bottiglieri, Regular Trustee of Compass Diversified Holdings and Chief Financial Officer of Compass Group Diversified Holdings LLC, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

	(1)		The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Compass Diversified Holdings and Compass Group Diversified Holdings, LLC..



Dated: November 8, 2010	/s/ James J. Bottiglieri
	James J. Bottiglieri
	Regular Trustee of Compass Diversified Holdings and Chief Financial Officer of Compass Group Diversified Holdings LLC

The foregoing certification is being furnished to accompany Compass Diversified Holdings’ and Compass Group Diversified Holdings LLC’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010 (the “Report”) solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed as part of the Report or as a separate disclosure document and shall not be deemed incorporated by reference into any other filing of Compass Diversified Holdings and Compass Group Diversified Holdings LLC that incorporates the Report by reference. A signed original of this written certification required by Section 906 has been provided to Compass Diversified Holdings and Compass Group Diversified Holdings LLC and will be retained by Compass Diversified Holdings and Compass Group Diversified Holdings LLC and furnished to the Securities and Exchange Commission or its staff upon request.