Document:

exv4w1

 

Exhibit 4.1

THIRD AMENDMENT

     THIS THIRD AMENDMENT (“Third Amendment”) dated as of December 21, 2007, to be effective as of
January 1, 2007, to the Amended and Restated Trust Agreement, as
amended (“Agreement”), of Compass
Diversified Holdings, a Delaware statutory trust (the “Trust”), 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 Third 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:	 	 	 	 
	 

	 	Name:

Its:
	 	 

I. Joseph Massoud

Chief Executive Officer
	 	 

REGULAR TRUSTEES:

	 	 	 	 	 
	 
	 

	 	 

James J. Bottiglieri
	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Alan B. Offenberg	 	 

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EXHIBIT A

AMENDED AND RESTATED TRUST AGREEMENT

OF

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 December 21, 2007,

to be Effective as of January 1, 2007

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TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	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	 

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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
	 	 	22	 
	DERIVATIVE ACTION
	 	 	 	 
	 
	 	 	 	 
	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 December 21, 2007, to be effective as of January
1, 2007, 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, 2007 and that Second Amendment which was effective as
of September 14, 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.

     “462(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.

-2-

 

     “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.

-3-

 

     “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 Nasdaq Global Market;
	 
	 	(B)	 	if such Shares are not so reported by the Nasdaq Global Market,
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

-4-

 

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.

     “Nasdaq Global Market” means the Nasdaq Global Market or any successor thereto.

     “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.

     “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:

-5-

 

     (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.

-6-

 

     “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.

-7-

 

     (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 “462(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 Nasdaq Global Market 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 Nasdaq Global
Market 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.

     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 Shareholders and

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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.

     (c) General

     (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

-31-

 

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 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.]

-35-

 

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

-1-

 

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

 

 

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.

 

 

     “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.

 

 

     “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

 

 

     (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

 

 

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).

 

 

     (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.

 

 

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.

 

 

     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.

 

 

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 hereunto duly authorized.

	 	 	 	 	 
	Date: December 21, 2007  	COMPASS DIVERSIFIED HOLDINGS

 	 
	 	By:  	/s/ James J. Bottiglieri
 	 
	 	 	 	 
	 	 	James J. Bottiglieri

Regular Trustee 	 
	 

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 hereunto duly authorized.

	 	 	 	 	 
	Date: December 21, 2007  	COMPASS GROUP DIVERSIFIED HOLDINGS LLC

 	 
	 	By:  	/s/ James J. Bottiglieri
 	 
	 	 	 	 
	 	 	James J. Bottiglieri

Chief Financial Officerexv10w8

 

Exhibit 10.8

OPTION ROLLOVER AGREEMENT

     This OPTION ROLLOVER AGREEMENT dated May 1, 2006 (this “Agreement”), is made by and
between Lone Star Holding Corp. (“Lone Star”), Activant Solutions Holdings Inc. (the
“Company”) and Pervez Qureshi (the “Investor”). Unless expressly provided
otherwise in this Agreement, capitalized terms defined in the Merger Agreement (as defined below)
when used in this Agreement shall have the same meanings provided to such terms in the Merger
Agreement.

     WHEREAS, the Company entered into an Agreement and Plan of Merger dated as of March 12, 2006
(the “Merger Agreement”) with Lone Star Merger Corp. (“Merger Sub”) and Lone Star,
pursuant to which and subject to the terms and conditions thereof, Merger Sub shall merge with and
into the Company, with the Company as the surviving entity (the “Front-End Merger”);

     WHEREAS, immediately following the Front-End Merger, the surviving entity of the Front-End
Merger shall be merged with and into Activant Solutions Inc. (“Activant”), with Activant as
the surviving corporation (the “Back-End Merger”; and, together with the Front-End Merger,
the “Mergers”), such that Activant shall thereafter be a wholly owned subsidiary of Lone
Star;

     WHEREAS, in connection with the consummation of the Mergers and the transactions contemplated
by this Agreement, the Investor shall become a party to a stockholders agreement in the form
attached hereto as Exhibit A (the “Stockholders Agreement”); and

     WHEREAS, the parties hereto desire to make certain agreements, representations, warranties and
covenants in connection with the Mergers, the Merger Agreement and the Stockholders Agreement and
the transactions contemplated hereby and thereby (collectively, the “Transactions”).

     NOW, THEREFORE, in consideration of the mutual covenants and conditions as hereinafter set
forth, the parties hereto do hereby agree as follows:

I. Assumption and Rollover

     1.1 No Option Payment. On the terms and subject to the conditions of this Agreement,
the Investor hereby agrees that effective at the Closing of the Front-End Merger, Activant
Solutions Holdings Inc. shall not cancel and terminate those outstanding Options listed in Table 1
below that were previously granted to Investor under the Company’s stock option plans (the
“Company Options”) and shall not convert any part of the Company Options into a right to
receive the Option Payment with respect to the Company Options, which Option Payment would be
$1,000,000 (such amount, the “Option Consideration”) but for the terms of this Agreement.
The Investor understands and agrees that, pursuant to the terms of this Agreement, he or she shall
have no right to receive the Option Payment with respect to the Company Options.

 

 

Table 1

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Number of	 	 	 	 
	 	 	 	 	 	 	shares subject	 	 	 	 
	 	 	 	 	 	 	to Company	 	 	 	 
	 	 	 	 	 	 	Options not	 	 	 	 
	 	 	Company	 	being cashed	 	Exercise price	 	Spread value (at
	Grant date	 	option plan	 	out	 	per share	 	$4 per share)
	   2/16/2000
	 	 	2000	 	 	 	125,000	 	 	$	1.00	 	 	$	375,000	 
	1/1/2001
	 	 	2000	 	 	 	25,000	 	 	$	1.00	 	 	$	75,000	 
	1/1/2002
	 	 	2000	 	 	 	25,000	 	 	$	1.00	 	 	$	75,000	 
	   6/30/2004
	 	 	2000	 	 	 	50,000	 	 	$	2.25	 	 	$	87,500	 
	2/1/2005
	 	 	2000	 	 	 	221,429	 	 	$	2.25	 	 	$	387,500	 
	Total number rolled:
	 	 	446,429	 	 	Total spread:	 	$	1,000,000	 

     1.2 Assumption and Granting of Rollover Options. In consideration for the Investor’s
agreement to forego payment of the Option Consideration, Lone Star hereby agrees to assume the
Company Options as of the Closing and automatically convert the Company Options into stock options
to acquire an aggregate of 333,334 shares of Lone Star common stock, par value $0.01 per share (the
“Rollover Options”), as set forth in Table 2 below. The Rollover Options will be fully
vested, non-statutory stock options, and except as otherwise set forth in this Agreement, will be
subject to the terms and conditions of the Company stock option plans under which they originally
were granted. The per share exercise price of each of the Rollover Options is equal to 25% of the
“Subscription Price” (as defined below). The number of shares of Lone Star common stock subject to
each of the Rollover Options has been determined by dividing (A) the total option spread for each
respective Company Option (i.e., the product of (i) the difference between $4.00 and the exercise
price of such Company Option and (ii) the total number of shares of Common Stock subject to such
Company Option) by (B) 75% of the Subscription Price. In making this adjustment, the adjusted
number of shares of Lone Star common stock subject to the Rollover Options has been rounded up to
the nearest whole share, to the extent necessary. For purposes of this Agreement, the term
“Subscription Price” shall mean $4, which is the per share price paid by Hellman & Friedman
Capital Partners V, L.P., a Delaware limited partnership, Hellman & Friedman Capital Partners V
(Parallel), L.P., a Delaware limited partnership, and Hellman & Friedman Capital Associates V, LLC,
a Delaware limited liability company (collectively, the “H&F Parties”), Thoma Cressey Fund
VII, L.P., a Delaware limited partnership, Thoma Cressey Fund VIII, L.P., a Delaware limited
partnership, and Thoma Cressey Friends Fund VIII, L.P., a Delaware limited partnership
(collectively, the “TCEP Parties”), and JMI Equity Fund IV, L.P., a Delaware limited
partnership, and JMI Equity Fund IV (AI), L.P., a Delaware limited partnership (collectively, the
“JMI Parties”) to subscribe for shares of Lone Star common stock on the Closing Date. You
will not be issued new option agreements for your Rollover Options.

 

 

Table 2

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Company	 	Number of Lone Star	 	Exercise price
	Grant date	 	option plan	 	shares	 	per share
	   2/16/2000
	 	 	2000	 	 	 	125,000	 	 	$	1.00	 
	1/1/2001
	 	 	2000	 	 	 	25,000	 	 	$	1.00	 
	1/1/2002
	 	 	2000	 	 	 	25,000	 	 	$	1.00	 
	   6/30/2004
	 	 	2000	 	 	 	29,167	 	 	$	1.00	 
	2/1/2005
	 	 	2000	 	 	 	129,167	 	 	$	1.00	 
	 
	 	Total shares:	 	 	333,334	 	 	 	 	 

     1.3 Compliance with Applicable Laws. The parties contemplate that the assumption of
the Company Options and the conversion thereof into Rollover Options will qualify as a transaction
satisfying the requirements of Section and 409A of the Internal Revenue Code of 1986, as amended,
and the regulatory guidance promulgated thereunder (the “Code”).

     1.4 Condition to the Obligations of the Investor. The obligations of the Investor to
consummate the transactions contemplated by this Agreement shall be subject to the following
conditions:

          (a) the Company shall determine that all conditions to the Company’s obligation to close under
the Merger Agreement shall have been satisfied, or waived by the Company, on or before the Closing
and the Company shall confirm to the Investor that the Mergers shall occur on the Closing Date; and

          (b) the Company, Merger Sub, the H&F Parties, the TCEP Parties and the JMI Parties shall have
executed and delivered the Stockholders Agreement.

     1.5 Termination. This Agreement shall be terminated and the transactions contemplated
herein shall be abandoned at any time prior to the Closing by any of the parties hereto if the
Merger Agreement shall have been terminated in accordance with its terms. In the event of any
termination of the Agreement as provided in this Section 1.5, this Agreement shall forthwith become
wholly void and of no further force or effect (except Article IV) and there shall be no liability
on the part of any parties hereto or their respective officers or directors, except as provided in
Article IV. Notwithstanding the foregoing, no party hereto shall be relieved from liability for
any willful breach of this Agreement.

II. Representations and Warranties

     2.1 Representations and Warranties of Lone Star and Merger Sub. Each of Lone Star and
Merger Sub represents and warrants to the Investor that it has the full power, authority and legal
right to execute, deliver and perform this Agreement and to consummate the transactions
contemplated herein. This Agreement has been duly executed and delivered by such company and
constitutes its legal, valid and binding obligation, enforceable against it in accordance with

 

 

its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’
rights generally.

     2.2 Representations and Warranties of the Investor; Acknowledgments of Investor. The
Investor represents and warrants, severally and not jointly, to each of Lone Star and Merger Sub
that:

          (a) The Investor has full legal capacity, power and authority to execute and deliver this
Agreement and to perform his or her obligations hereunder. This Agreement has been duly executed
and delivered by the Investor and is the legal, valid and binding obligation of the Investor
enforceable against it in accordance with the terms hereof, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors’ rights generally.

          (b) The Investor has been furnished and has carefully read this Agreement, the Merger
Agreement and the Stockholders Agreement and understands that the Rollover Options and any shares
of Lone Star common stock purchased upon the exercise thereof will be subject to the terms and
conditions of the applicable Company stock option plan(s) under which the Company Options were
granted and the Stockholders Agreement. In the event of any conflict between the original terms of
the Company Options and the terms of the Stockholders Agreement, the terms of the Stockholders
Agreement will govern and prevail.

          (c) To the full satisfaction of the Investor, the Investor has been furnished any materials
the Investor has requested relating to Lone Star and Merger Sub and the shares of Lone Star common
stock that may be acquired upon the exercise of the Rollover Options, and the Investor has been
afforded the opportunity to ask questions of representatives of Lone Star and Merger Sub concerning
this Agreement and to obtain any additional information necessary to verify the accuracy of any
information provided to him.

          (d) The Investor has, independently and without reliance upon Lone Star and Merger Sub, any
Affiliate of the foregoing or any agent of them, and based on such documents and information as the
Investor has deemed appropriate, made his or her own appraisal of and investigation into the
business, operations, property, financial and other condition of Lone Star and Merger Sub and made
his or her own investment decision with respect to the investment represented by the Rollover
Options and the shares of Lone Star common stock that may be purchased upon the exercise thereof.
The Investor has consulted, to the extent deemed appropriate by the Investor, with the Investor’s
own advisers as to the financial, tax, legal and related matters concerning an investment in the
Rollover Options and the shares of Lone Star common stock that may be purchased upon the exercise
thereof and on that basis understands the financial, legal, tax and related consequences of an
investment in the Rollover Options and the shares of Lone Star common stock that may be purchased
upon the exercise thereof, and believes that an investment in the Rollover Options and the shares
of Lone Star common stock that may be purchased upon the exercise thereof is suitable and
appropriate for the Investor.

          (e) The Investor has been advised that shares of Lone Star common stock for which the Rollover
Options are exercisable have not been registered under the Securities Act of

 

 

1933, as amended (the “Securities Act”), or any state securities laws and, therefore,
cannot be resold unless they are registered under the Securities Act and applicable state
securities laws or unless an exemption from such registration requirements is available. The
Investor is aware that, except as otherwise provided in the Stockholders Agreement, Lone Star is
under no obligation to effect any such registration with respect to such shares of Lone Star common
stock or to file for or comply with any exemption from registration. The Investor has such
knowledge and experience in financial and business matters that the Investor is capable of
evaluating the merits and risks of the transactions contemplated by this Agreement and understands
that any investment in the Rollover Options and the shares of Lone Star common stock that may be
purchased upon the exercise thereof is a speculative investment that has limited liquidity and is
subject to the risk of complete loss.

          (f) The Investor has received a copy of the Confidential Preliminary Offering Memorandum of
Merger Sub dated April 14, 2006 with respect to the offering of Senior Subordinated Notes due 2016
and has read all of such Confidential Preliminary Offering Memorandum, including, without
limitation, the section titled “Risk Factors.”

III. Other Covenants

     3.1 Merger Agreement. The parties hereto acknowledge and agree that Lone Star will
have sole discretion with respect to (i) determining whether the conditions set forth in the Merger
Agreement have been satisfied and/or whether to waive any of such conditions pursuant to the terms
of the Merger Agreement, and (ii) the manner and timing of the compliance by Lone Star and Merger
Sub with the covenants applicable to each of them under the Merger Agreement.

     3.2 Agreement to Cooperate; Further Assurances. Subject to the terms and conditions
of this Agreement, each of the parties hereto shall use all reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including providing information and using reasonable best efforts
to obtain all necessary or appropriate waivers, consents and approvals, and effecting all necessary
registrations and filings.

     3.3 Execution of Stockholders Agreement. At or prior to the Closing, the Investor
agrees to execute and deliver to the other parties thereto the Stockholders Agreement.

     3.4 Transfers. The Investor agrees not to enter into any plan, agreement, arrangement
or understanding to transfer the Company Options or the shares of Common Stock subject thereto
prior to and including the Closing, other than as expressly contemplated hereby.

IV. Miscellaneous

     4.1 Notices. Any notices and other communications required or permitted in this
Agreement shall be effective if in writing and delivered as provided in the Stockholders Agreement.

 

 

     4.2 Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware applicable to contracts entered into and performed entirely
within such State.

     4.3 Assignment. This Agreement may not be assigned by the Investor without the prior
written consent of the Company. Any assignment or delegation in derogation of this provision shall
be null and void. The provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, executors and administrators of the parties hereto.

     4.4 Entire Agreement. This Agreement and the other agreements referred to herein set
forth the entire understanding among the parties with respect to the subject matter hereof.

     4.5 Amendment. This Agreement can be amended only by an instrument in writing signed
by each of the parties hereto. Any provision of this Agreement may be waived if, but only if, such
waiver is in writing and is signed by the party against whom the waiver is to be effective. No
failure or delay by any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The rights and remedies
provided herein shall be cumulative and not exclusive of any rights or remedies provided by law.

     4.6 Survival. All covenants, agreements, representations and warranties made herein
shall survive the execution and delivery hereof, the granting of the Rollover Options, and the
purchase of any shares of Lone Star common stock upon the exercise thereof.

     4.7 Counterparts. This Agreement may be executed in two or more counterparts, and by
different parties on separate counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

     4.8 No Employment Rights. None of the assumption of your Company Options, the
issuance of the Rollover Options or the entry into this Agreement is intended to constitute an
employment contract or agreement, and neither should be interpreted to prohibit you, Lone Star or
Activant from terminating your employment or services at any time, with or without cause.

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	LONE STAR HOLDING CORP.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Name:
	 	David Tunnell
	 

	 	 	 	Title:
	 	President
	 
	 	 	 	 	 	 
	 	 	ACTIVANT SOLUTIONS HOLDINGS INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Name:
	 	Richard Rew
	 

	 	 	 	Title:	 	Vice President, General Counsel & Secretary
	 
	 	 	 	 	 	 
	 	 	INVESTOR:
	 
	 	 	 	 	 	 
	 	 	 
	 	 	Pervez Qureshi

 

 

Exhibit A

Form of Stockholders’ Agreement

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