Company: CODI-PB
Filing Date: 2025-04-14
Form Type: DEF 14A
Source: 0001140361-25-013771
Chunk: 37

Company: Compass Diversified Holdings
Filing Date: 2025-04-14
Form: DEF 14A
Chunk 37
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 the Company’s LLC Agreement, the Trust owns an identical number of trust interests in the Company as exist for the number of outstanding shares of stock of the Trust. Sostratus LLC, who we refer to as the “Allocation Member”, owns 100% of the Company’s allocation interests. Pursuant to the LLC Agreement, the Allocation Member is entitled to receive, if it so elects, a payment representing the positive contribution based profit realized by the Company following the acquisition of a subsidiary, which we refer to as a “profit allocation payment”, upon the occurrence of a “Holding Event” (each five year anniversary of the acquisition of such subsidiary) or a “Sale Event” (a sale by the Company of a material amount of such subsidiary’s stock or assets), in each case, as defined in the LLC Agreement. If the Allocation Member elects to receive such payment in respect of a Holding Event or Sale Event of a subsidiary, the Company will make a profit allocation payment to the Allocation Member if the Company’s profits with respect to such subsidiary exceed an annualized hurdle rate of 7%, which hurdle is tied to such subsidiary’s adjusted net assets (as defined in the LLC Agreement) relative to the sum of all of our subsidiaries’ adjusted net assets. The calculation of profit allocation with respect to a particular subsidiary will be based on:

| • | such subsidiary’s contribution-based profit, which generally will be equal to such subsidiary’s aggregate contribution to the Company’s profit during the period such subsidiary is owned by the Company; and |

| • | the Company’s cumulative gains and losses to date. |

Generally, a profit allocation payment will be made in the event that the amount of profit allocation exceeds the

annualized hurdle rate of 7% in the following manner: (i) 100% of the amount of profit allocation in excess of the hurdle rate of 7% but that is less than the hurdle rate of 8.75%, which amount is intended to provide the Allocation Member with an overall profit allocation of 20% once the hurdle rate of 7% has been surpassed; and (ii) 20% of the amount of profit allocation in excess of the hurdle rate of 8.75%. The Audit Committee, which is comprised solely of independent directors, approves the calculation of any profit allocation payment to be made to the Allocation Member. Certain persons who are employees and/or partners of our Manager, including Mr. Sabo, the Company’s Chief Executive Officer and Messrs. Keller and Faulkingham, the Company