Item 3.03
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Material Modification to Rights of Security Holders
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On March 13, 2018, Compass
Diversified Holdings (the Trust) and Compass Group Diversified Holdings LLC (the Company and, together with the Trust, CODI) issued 4,000,000 of the Trusts 7.875% Series B Fixed-to-Floating Rate Cumulative
Preferred Shares (the Series B Preferred Shares) pursuant to a previously announced underwritten public offering. Each Series B Preferred Share corresponds to one underlying 7.875% Series B Fixed-to-Floating Rate Cumulative Trust
Preferred Interest (the Series B Trust Preferred Interest) of the Company that was issued simultaneously to the Trust.
On
March 13, 2018, in connection with the issuance of the Series B Preferred Shares and the Series B Trust Preferred Interests, CODI executed a share designation (the Share Designation) and a trust interest designation (the Trust
Interest Designation) to create and fix the rights, preferences and powers of the Series B Preferred Shares and the Series B Trust Preferred Interests, respectively. Each of the Share Designation, which constitutes part of the Second Amended
and Restated Trust Agreement of the Trust, and the Trust Interest Designation, which constitutes part of the Fifth Amended and Restated Operating Agreement of the Company, became effective on March 13, 2018.
Holders of Series B Preferred Shares will be entitled to receive cumulative cash distributions on the Series B Preferred Shares at a rate
equal to (1) 7.875% per annum of the liquidation preference per share for the initial distribution period and each subsequent quarterly distribution period from the original issue date of the Series B Preferred Shares to, but excluding,
April 30, 2028, and (2) the then applicable three-month LIBOR plus a spread of 4.985% per annum of the liquidation preference per share for each quarterly distribution period from April 30, 2028 through the redemption date of the
Series B Preferred Shares.
Unless full cumulative distributions on the Series B Preferred Shares have been or contemporaneously are
declared and paid or declared and set apart for payment on the Series B Preferred Shares for all past distribution periods, no distribution may be declared or paid or set apart for payment on the common shares or junior shares, other than
distributions paid in junior shares or options, warrants or rights to subscribe for or purchase junior shares, and CODI may not directly or indirectly repurchase, redeem or otherwise acquire for consideration common shares (or any junior shares).
These restrictions are not applicable during the initial distribution period, which is the period from the original issue date to but excluding July 30, 2018.
The Company, at its option, may cause the Trust to redeem the Series B Preferred Shares, in whole or in part, at any time on or after
April 30, 2028 at a price of $25.00 per Series B Preferred Share, plus accumulated and unpaid distributions thereon (whether or not authorized) to, but excluding, the redemption date. Holders of the Series B Preferred Shares will have no right
to require the redemption of the Series B Preferred Shares.
If a Tax Redemption Event (as defined in the Trust Interest Designation)
occurs prior to April 30, 2028, the Company, at its option, may cause the Trust to redeem the Series B Preferred Shares, in whole but not in part, upon at least 30 days notice, within 60 days of the occurrence of such Tax Redemption
Event, out of funds received by the Trust on the corresponding Series B Trust Preferred Interests and legally available therefor, at a price of $25.25 per Series B Preferred Share, plus any accumulated and unpaid distributions thereon (whether or
not authorized or declared) to, but excluding, the redemption date.
If a Fundamental Change (as defined in the Share Designation) occurs,
unless, prior to or concurrently with the time the board of directors of the Company is required to cause the Trust to make an offer to repurchase the Series B Preferred Shares, the board of directors of the Company has caused the Company to provide
a redemption notice with respect to all of the outstanding Series B Preferred Shares, the board of directors of the Company will cause the Trust to make an offer to repurchase the Series B Preferred Shares, out of funds received by the Trust on the
corresponding Series B Trust Preferred Interests, at a purchase price of $25.25 per Series B Preferred Share, plus any accumulated and unpaid distributions thereon (whether or not authorized or declared) to, but excluding, the date
of purchase. If (i) a Fundamental Change occurs and (ii) CODI does not give notice prior to the 31st day following the Fundamental Change to repurchase or redeem all the outstanding
Series B Preferred Shares, the distribution rate per annum on the Series B Preferred Shares will increase by 5.00%, beginning on the 31st day following such Fundamental Change. Following any such increase in the distribution rate per annum, CODI
will be under no further obligation to offer to repurchase or redeem any Series B Preferred Shares.
The terms of the Series B Trust
Preferred Interests are designed to mirror those of the Series B Preferred Shares.
The description of the terms of the Series B Preferred
Shares and corresponding Series B Trust Preferred Interests in this Item 3.03 is qualified in its entirety by reference to the Share Designation, the form of 7.875% Series B Fixed-to-Floating Rate Cumulative Preferred Share certificate and the
Trust Interest Designation, which are included as Exhibits 3.1, 4.1 and 3.2, respectively, to this Current Report on Form 8-K and are incorporated by reference herein.