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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant To Section 14(A) Of The
Securities
Exchange Act Of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Soliciting Material Pursuant to §240.14a-11(c) of § 240.14a-12 |
COMPASS DIVERSIFIED HOLDINGS
(Name of Registrant as Specified In Its Charter)
COMPASS GROUP DIVERSIFIED HOLDINGS LLC
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
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Compass Diversified Holdings
Compass Group Diversified Holdings LLC
Notice of Annual Meeting of Shareholders
April 5, 2011
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders, which will be
held on Thursday, May 19, 2011 at 9:00 a.m., Eastern Time, at the Hilton Rye Town, 699
Westchester Avenue, Rye Brook, New York 10573.
The proxy statement contains important information about the Annual Meeting, the
proposals we will consider and how you can vote your shares. The Securities and Exchange
Commission has adopted a Notice and Access rule that allows companies to deliver a Notice
of Internet Availability of Proxy Materials, which we refer to as the Notice of Internet
Availability, to shareholders in lieu of a paper copy of the proxy statement and related
materials and the Companys Annual Report to Shareholders, which we refer to as the Proxy
Materials. The Notice of Internet Availability provides instructions as to how shareholders
can access the Proxy Materials online, contains a listing of matters to be considered at the
meeting, and sets forth instructions as to how shares can be voted. Shares must be voted
either by telephone, online or by completing and returning a proxy card. Shares cannot be
voted by marking, writing on and/or returning the Notice of Internet Availability. Any
Notices of Internet Availability that are returned will not be counted as votes. Instructions
for requesting a paper copy of the Proxy Materials are set forth on the Notice of Internet
Availability.
Your vote is very important to us. We encourage you to promptly complete, sign, date
and return the enclosed proxy card, which contains instructions on how you would like your
shares to be voted. Please submit your proxy regardless of whether you will attend the
Annual Meeting. This will help us ensure that your vote is represented at the Annual
Meeting. Signing this proxy will not prevent you from voting in person should you be able to
attend the meeting, but will assure that your vote is counted, if for any reason, you are
unable to attend.
On behalf of the board of directors and the management of Compass Group Diversified
Holdings LLC, I extend our appreciation for your investment in Compass Diversified Holdings.
We look forward to seeing you at the Annual Meeting.
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Sincerely,
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C. Sean Day |
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Chairman of the Board of Directors |
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Compass Diversified Holdings
Compass Group Diversified Holdings LLC
April 5, 2011
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On Thursday, May 19, 2011
Compass Diversified Holdings 2011 Annual Meeting of Shareholders will be held on
Thursday, May 19, 2011 at 9:00 a.m., Eastern Time, at the Hilton Rye Town, 699 Westchester
Avenue, Rye Brook, New York 10573, for the following purposes:
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to elect two directors to our board of directors, each to serve for a three-year
term; |
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to conduct an advisory vote on executive compensation; |
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to conduct an advisory vote on whether the shareholder advisory vote on executive
compensation should occur every one, two or three years; |
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to vote on a proposal to ratify the selection of Grant Thornton LLP to serve as
the independent auditor for Compass Diversified Holdings and Compass Group
Diversified Holdings LLC for the fiscal year ending December 31, 2011; and |
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to transact such other business as may properly come before the meeting. |
These matters are more fully described in the enclosed proxy statement. The board of
directors recommends that you vote FOR the election of the director nominees, FOR the approval
of the executive compensation program, FOR the occurrence of the shareholder vote to approve
the executive compensation program to occur every two years, and FOR the ratification of the
independent auditor.
Shareholders of record at the close of business on March 24, 2011 will be entitled to
notice of, and to vote at, the Annual Meeting and at any subsequent adjournments or
postponements. The share register will not be closed between the record date and the date of
the Annual Meeting. A list of shareholders entitled to vote at the Annual Meeting is available
for inspection at our principal executive offices at Sixty One Wilton Road, Westport,
Connecticut 06880. The notice of annual meeting, proxy statement and proxy are first being
mailed or provided to shareholders on or about April 5, 2011.
To be sure that your shares are properly represented at the meeting, whether or not you
attend, please promptly complete, sign, date and return the enclosed proxy card in the
accompanying pre-addressed envelope or submit your vote by telephone or online. We must
receive your proxy no later than 5:00 p.m., Eastern Time, on May 18, 2011.
You will be required to bring certain documents with you to be admitted to the Annual
Meeting. Please read carefully the sections in the proxy statement on attending and voting at
the Annual Meeting to ensure that you comply with these requirements.
By order of the board of directors.
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Sincerely,
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Carrie W. Ryan |
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Secretary |
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TABLE OF CONTENTS
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PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS |
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PURPOSE OF MEETING |
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ATTENDING AND VOTING AT THE ANNUAL MEETING |
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APPOINTMENT OF PROXY |
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APPROVAL OF PROPOSALS AND SOLICITATION |
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PROPOSAL 1: ELECTION OF DIRECTORS |
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PROPOSAL 2: ADVISORY VOTE REGARDING EXECUTIVE COMPENSATION |
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PROPOSAL 3: FREQUENCY OF ADVISORY VOTE REGARDING EXECUTIVE COMPENSATION |
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PROPOSAL 4: RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR |
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BOARD OF DIRECTORS , EXECUTIVE OFFICERS AND COMMITTEES |
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DIRECTOR COMPENSATION |
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EXECUTIVE COMPENSATION |
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SHARE OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL SHAREHOLDERS |
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AUDIT COMMITTEE REPORT |
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COMPENSATION COMMITTEE REPORT |
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CORPORATE GOVERNANCE |
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS |
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE |
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SHAREHOLDER PROPOSALS FOR THE 2012 ANNUAL MEETING OF SHAREHOLDERS |
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION REPORTS |
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OTHER MATTERS |
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Compass Diversified Holdings, a Delaware statutory trust, which we refer to as the Trust,
owns its businesses and investments through Compass Group Diversified Holdings LLC, a Delaware
limited liability company, which we refer to as the Company. Except where the context indicates
otherwise, we, us, and our refer to the Company and the Trust. References to shareholders
refer to shareholders of Compass Diversified Holdings.
COMPASS DIVERSIFIED HOLDINGS
COMPASS GROUP DIVERSIFIED HOLDINGS LLC
Sixty One Wilton Road
Westport, Connecticut 06880
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
This proxy statement is furnished in connection with the solicitation of proxies by the
board of directors of Compass Group Diversified Holdings LLC, which we refer to as the Company, a
Delaware limited liability company, for the 2011 Annual Meeting of Shareholders of Compass
Diversified Holdings, which we refer to as the Trust, to be held on May 19, 2011 at 9:00 a.m.,
Eastern Time, at the Hilton Rye Town, 699 Westchester Avenue, Rye Brook, New York 10573 and for any
adjournments or postponements of the 2011 Annual Meeting of Shareholders. We refer to the 2011
Annual Meeting of Shareholders as the Annual Meeting. The notice of Annual Meeting, proxy
statement and proxy are first being mailed or provided to shareholders on or about April 5, 2011.
PURPOSE OF MEETING
As described in more detail in this proxy statement, the Annual Meeting is being held for the
following purposes:
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to elect two directors to our board of directors, each to serve for a
three-year term; |
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to conduct an advisory vote on executive compensation; |
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to hold an advisory vote on whether the shareholder advisory vote on
executive compensation should occur every one, two or three years; |
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to vote on a proposal to ratify the selection of Grant Thornton LLP to
serve as the independent auditor for the Trust and the Company for the fiscal year
ending December 31, 2011; and |
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to transact such other business as may properly come before the meeting. |
ATTENDING AND VOTING AT THE ANNUAL MEETING
Broadridge Financial Solutions, Inc., which we refer to as Broadridge, has been selected as
our inspector of election. As part of its responsibilities, Broadridge is required to
independently verify that you are a shareholder of Compass Diversified Holdings eligible to attend
the Annual Meeting, and to determine whether you may vote in person at the Annual Meeting.
Therefore, it is very important that you follow the instructions below to gain entry to the Annual
Meeting.
Notice and Access
The SEC has adopted a Notice and Access rule that allows companies to deliver a Notice of
Internet Availability of Proxy Materials, which we refer to as the Notice of Internet Availability,
to shareholders in lieu of a paper copy of the proxy statement and related materials and the
Companys Annual Report to Shareholders, which we refer to as the Proxy Materials. The Notice of
Internet Availability provides instructions as to how shareholders can access the Proxy Materials
online, contains a listing of matters to be considered at the meeting, and sets forth instructions
as to how shares can be voted. Shares must be voted either by telephone, online or by completing
and returning a proxy card. Shares cannot be voted by marking, writing on and/or returning the
Notice of Internet Availability. Any Notices of Internet Availability that are returned will not be
counted as votes. Instructions for requesting a paper copy of the Proxy Materials are set forth on
the Notice of Internet Availability.
Important Notice Regarding Availability of Proxy Materials for the Annual Meeting to be Held
on May 19, 2011:
The Proxy Materials are available at www.proxyvote.com. Enter the 12-digit control number
located on the Notice of Internet Availability or proxy card.
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Check-in Procedure for Attending the Annual Meeting
Shareholders of Record. The documents you will need to provide to be admitted to the Annual
Meeting depend on whether you are a shareholder of record or you represent a shareholder of record.
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Individuals. If you are a shareholder of record holding shares in your
own name, you must bring to the Annual Meeting a form of
government-issued photo identification (e.g., a drivers license or
passport). Trustees who are individuals and named as shareholders of
record are in this category. |
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Individuals Representing a Shareholder of Record. If you attend on
behalf of a shareholder of record, whether such shareholder is an
individual, corporation, trust or partnership: |
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you must bring to the Annual Meeting a form of
government-issued photo identification (e.g., a drivers
license or passport); AND |
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either: |
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a letter from that shareholder of record
authorizing you to attend the Annual
Meeting on their behalf; OR |
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we must have received by 5:00 p.m.,
Eastern Time, on May 18, 2011 a duly
executed proxy card from the shareholder
of record appointing you as proxy. |
Beneficial Owners. If your shares are held by a bank or broker (often referred to as holding
in street name) you should go to the Beneficial Owners check-in area at the Annual Meeting.
Because you hold in street name, your name does not appear on the share register of the Trust. The
documents you will need to provide to be admitted to the Annual Meeting depend on whether you are a
beneficial owner or you represent a beneficial owner.
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Individuals. If you are a beneficial owner, you must bring to the Annual Meeting: |
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either: |
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a form of government-issued photo identification (e.g., a drivers license or passport); AND |
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a legal proxy that you have obtained from your bank or broker; OR |
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your most recent brokerage account statement or a recent letter from your bank or broker showing
that you own shares of Compass Diversified Holdings. |
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Individuals Representing a Beneficial Owner. If you attend on behalf of a beneficial owner, you must bring to the Annual Meeting: |
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a letter from the beneficial owner authorizing you to represent its shares at the Annual Meeting; AND |
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the identification and documentation specified above for individual beneficial owners. |
Voting in Person at the Annual Meeting
Shareholders of Record. Shareholders of record may vote their shares in person at the Annual
Meeting by ballot. Each proposal has a separate ballot. You must properly complete, sign, date and
return the ballots to the inspector of election at the Annual Meeting to vote in person. To receive
ballots, you must bring with you the documents described below:
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Individuals. You will receive ballots at the check-in table when you
present your identification. If you have already returned your proxy
card to us and do not want to change your votes, you do not need to
complete the ballots. If you do complete and return the ballots to us,
your proxy card will be automatically revoked. |
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Individuals Voting on Behalf of Another Individual. If you will vote
on behalf of another individual who is a shareholder of record, we
must have received by 5:00 p.m., Eastern Time, on May 18, 2011 a duly
executed proxy card from such individual shareholder of record
appointing you as his or her proxy. If we have received the proxy
card, you will receive ballots at the check-in table when you present
your identification. |
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Individuals Voting on Behalf of a Legal Entity. If you represent a
shareholder of record that is a legal entity, you may vote that legal
entitys shares if it authorizes you to do so. The documents you must
provide to receive ballots at the check-in table depend on whether you
are representing a corporation, trust, partnership or other legal
entity. |
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If you represent a corporation, you must: |
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bring to the Annual Meeting a letter or
other document from the corporation, on the
corporations letterhead and signed by an
officer of the corporation, that authorizes
you to vote the corporations shares on
its behalf; OR |
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we must have received by 5:00 p.m., Eastern
Time, on May 18, 2011 a duly executed proxy
card from the corporation appointing you as
its proxy. |
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If you represent a trust, partnership or other legal entity, we must
have received by 5:00 p.m., Eastern Time, on May 18, 2011 a duly
executed proxy card from the legal entity appointing you as its proxy.
A letter or other document will not be sufficient for you to vote on
behalf of a trust, partnership or other legal entity other than a
corporation. |
Beneficial Owners. If you hold your shares in street name, these proxy materials are being
forwarded to you by your bank, broker or their appointed agent. Because your name does not appear
on the share register of the Trust, you will not be able to vote in person at the Annual Meeting
unless you request a legal proxy from your bank or broker and bring it with you to the Annual
Meeting.
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Individuals. As an individual, the legal proxy will have your name on it. You must present the legal
proxy at check-in to the inspector of election at the Annual Meeting to receive your ballots. |
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Individuals Voting on Behalf of a Beneficial Owner. Because the legal proxy will not have your name on
it, to receive your ballots you must: |
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present the legal proxy at check-in to the inspector of election at the Annual Meeting; AND |
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bring to the Annual Meeting a letter from the person or entity named on the legal proxy
that authorizes you to vote its shares at the Annual Meeting. |
APPOINTMENT OF PROXY
Shareholders of Record. We encourage you to appoint a proxy to vote on your behalf by promptly
submitting the enclosed proxy card, which is solicited by our Board and which, when properly
completed, signed, dated and returned to us, will ensure that your shares are voted as you direct.
We strongly encourage you to return your completed proxy to us regardless of whether you will
attend the Annual Meeting to ensure that your vote is represented at the Annual Meeting.
PLEASE RETURN YOUR PROXY CARD TO US IN THE ACCOMPANYING ENVELOPE, OR SUBMIT YOUR VOTE BY
TELEPHONE OR ONLINE, NO LATER THAN 5:00 P.M., EASTERN TIME, ON MAY 18, 2011. IF WE DO NOT RECEIVE
YOUR PROXY CARD BY THAT TIME, YOUR PROXY WILL NOT BE VALID. IN THIS CASE, UNLESS YOU ATTEND THE
ANNUAL MEETING, YOUR VOTE WILL NOT BE REPRESENTED.
The persons named in the proxy card have been designated as proxies by our Board. The
designated proxies are officers of the Company. They will vote as directed by the completed proxy
card.
Shareholders of record may appoint another person to attend the Annual Meeting and vote on
their behalf by crossing out the Board-designated proxies, inserting such other persons name on
the proxy card and returning the duly executed proxy card to us. When the person you appoint as
proxy arrives at the Annual Meeting, the inspector of election will verify such persons
authorization to vote on your behalf by reference to your proxy card. If you would like to appoint
a person as proxy other than those designated by our Board, you must do so by using the proxy card,
as described above.
If you wish to change your vote, you may do so by revoking your proxy before the Annual
Meeting. Please see APPOINTMENT OF PROXY Revocation of Proxy below for more information.
Beneficial Owners. If you hold your shares in street name, these proxy materials are being
forwarded to you by your bank, broker or their appointed agent. You should also have received a
voter instruction card instead of a proxy card. Your bank or broker will vote your shares as you
instruct on the voter instruction card. We strongly encourage you to promptly complete and return
your voter instruction card to your bank or broker in accordance with their instructions so that
your shares are voted. As described above, you may also request a legal proxy from your bank or
broker to vote in person at the Annual Meeting.
Voting by the Designated Proxies
The persons who are the designated proxies will vote as you direct in your proxy card or voter
instruction card. Please note that proxy cards returned without voting directions, and without
specifying a proxy to attend the Annual Meeting and vote on your behalf, will be voted by the
proxies designated by our Board in accordance with the recommendations of our Board. Our Board
recommends:
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a vote FOR each of the two nominees for director, each to serve for a three-year term (Proposal 1); |
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a vote FOR the approval of the compensation of our executive officers as disclosed in the proxy
statement (Proposal 2); |
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A vote FOR the approval of the proposal that the shareholder advisory vote on executive
compensation occur every two years (Proposal 3); and |
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a vote FOR the proposal to ratify the selection of Grant Thornton LLP as the Trusts and the
Companys independent auditor for the fiscal year ending December 31, 2011 (Proposal 4). |
If any other matter properly comes before the Annual Meeting, your proxies will vote on that
matter in their discretion.
Revocation of Proxy
You may revoke or change your proxy before the Annual Meeting by:
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sending us a duly executed written notice of revocation prior to the Annual Meeting; |
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attending the Annual Meeting and voting in person; OR |
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ensuring that we receive from you, prior to 5:00 p.m., Eastern Time, on May 18,
2011 a new proxy card with a later date, including receipt of a new proxy card
submitted online. |
Any written notice of revocation must be sent to the attention of Carrie W. Ryan, Secretary,
Compass Group Diversified Holdings LLC, Sixty One Wilton Road, Westport, Connecticut 06880 or by
facsimile to (203) 221-8253.
APPROVAL OF PROPOSALS AND SOLICITATION
Each shareholder who owned shares of Trust stock on March 24, 2011, the record date for the
determination of shareholders entitled to vote at the Annual Meeting, is entitled to one vote for
each share of Trust stock. On March 24, 2011, we had 46,725,000 shares of Trust stock issued and
outstanding that were held by more than 20,000 beneficial holders.
Quorum
Under the Amended and Restated Trust Agreement of the Trust, dated April 25, 2006, as amended,
which we refer to as the Trust Agreement, the shareholders present in person or by proxy holding a
majority of the outstanding shares of Trust stock entitled to vote shall constitute a quorum at a
meeting of shareholders of Compass Diversified Holdings. Holders of shares of Trust stock are the
only shareholders entitled to vote at the Annual Meeting. Shares represented by proxies that are
marked abstain will be counted as shares present for purposes of determining the presence of a
quorum. Shares of Trust stock that are represented by broker non-votes will be counted as shares
present for purposes of determining the presence of a quorum. A broker non-vote occurs when the
broker holding shares for a beneficial owner does not vote on a particular proposal because the
broker does not have discretionary voting power to vote on that proposal without specific voting
instructions from the beneficial owner. Proposals 1, 2 and 3 described in this proxy are
non-discretionary items and Proposal 4 described in this proxy is a discretionary item.
If the persons present or represented by proxies at the Annual Meeting do not constitute a
majority of the holders of outstanding Trust stock entitled to vote as of the record date, we will
postpone the Annual Meeting to a later date.
Approval of Proposals
For the election of directors (Proposal 1) and for the advisory vote on the frequency of the
shareholder advisory vote on executive compensation (Proposal 3), the affirmative vote of at least
a plurality of the votes cast on each such proposal is required. The advisory vote on executive
compensation (Proposal 2) requires the affirmative vote of at least a majority of the outstanding
shares present in person or represented by proxy at the annual meeting. Because your votes on
Proposal 2 and Proposal 3 are advisory, they will not be binding on the Board or the Company.
However, the Board will review the voting results and take them into consideration when making
future decisions regarding executive compensation and determining the frequency of conducting an
advisory vote on executive compensation. For the approval of the proposal to ratify the selection
of Grant Thornton LLP as the independent auditor for the Trust and the Company (Proposal 4), the
affirmative vote of at least a majority of the outstanding shares present in person or represented
by proxy at the Annual Meeting is required. An abstention will not be counted as a vote cast.
With the exception of certain business combinations, as such term is defined in the Trust
Agreement, any other proposal that properly comes before the Annual Meeting must be approved by the
affirmative vote of at least a majority of the outstanding shares present in person or represented
by proxy at the annual meeting. A broker non-vote would also not be counted as a vote cast.
Proposal 4 is a discretionary item. New York Stock Exchange (NYSE) member brokers that do
not receive instructions from beneficial owners may vote your shares in their discretion.
Proposals 1, 2 and 3 are non-discretionary items and member brokers may not vote on the proposal
without specific voting instructions from beneficial owners, resulting in a broker non-vote.
Under the terms of the Third Amended and Restated Operating Agreement of Compass Group
Diversified Holdings LLC, dated as of November 1, 2010, which we refer to as the LLC Agreement, and
the Trust Agreement, with respect to those matters subject to vote by the members of the Company,
the Company will act at the direction of the Trust. The Trust Agreement requires Compass
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Diversified Holdings to vote 100% of the limited liability interests of the Company, or the
LLC interests, of which it is the sole holder, in the same proportion as the vote of holders of the
Trust stock. In this way the voting rights of members of the Company will effectively be exercised
by the shareholders of the Trust by proxy. The LLC Agreement provides that the members are
entitled, at the annual meeting of members of the Company, to vote for the election of all of the
directors other than the director appointed by our manager, Compass Group Management LLC, which we
refer to as our Manager. At this meeting, Class II directors will be elected in accordance with
the LLC Agreement. See PROPOSAL 1: ELECTION OF DIRECTORS Board Composition for a description
of Class II directors. The Trust will vote its LLC interests as directed at the Companys annual
members meeting promptly following the tabulation of votes cast at this Annual Meeting.
All votes will be tabulated by Broadridge, the proxy tabulator and inspector of election
appointed for the Annual Meeting. Broadridge will separately tabulate affirmative and negative
votes, abstentions and broker non-votes.
Solicitation of Proxies
We will bear the cost of the solicitation of proxies, including the preparation, printing and
mailing of this proxy statement and the proxy card. We have also retained Broadridge to distribute
copies of these proxy materials to banks, brokers, fiduciaries and custodians, or their agents
holding shares in their names on behalf of beneficial owners so that they may forward these proxy
materials to our beneficial owners.
We may supplement the original solicitation of proxies by mail with solicitation by telephone,
telegram and other means by directors, officers and/or employees of our Manager. We will not pay
any additional compensation to these individuals for any such services.
5
PROPOSAL 1:
ELECTION OF DIRECTORS
Board Composition
Our board of directors, which we sometimes refer to as our Board, consists of seven directors,
six of whom were initially appointed by our Manager at the time of our initial public offering, and
five of whom are the Companys independent directors. Our Board has the ability to decrease or
increase the size of the board of directors to no less than five or up to thirteen directors,
respectively. Six of our directors are elected by our shareholders and one director is appointed
by our Manager. The Board is divided into three classes serving staggered three year terms. The
terms of office of Classes I, II and III expire at different times in annual succession, with one
class being elected at each annual meeting of shareholders. Messrs. Bottiglieri and Burns are
Class II members and are up for re-election at this years Annual Meeting. Messrs. Day and Ewing
are Class III members and will serve until the 2012 Annual Meeting. Messrs. Edwards and Lazarus
are Class I members and will serve until the 2013 Annual Meeting.
Pursuant to the LLC Agreement, as holder of the allocation interests, our Manager has the
right to appoint one director to the Companys board of directors. Mr. Offenberg, our chief
executive officer, has been appointed as the Managers appointed director and is currently serving
as the director appointed by our Manager. Any appointed director will not be required to stand for
election by the shareholders.
Director Independence
Pursuant to our governing documents, our Board will consist of at least a majority of
independent directors at all times. Our Board has reviewed the materiality of any relationship
that each of our directors has with the Trust or the Company, either directly or indirectly. Based
on this review, the Board has determined that the following directors are independent directors
as defined by the New York Stock Exchange: Messrs. Burns, Day, Edwards, Ewing and Lazarus.
Election of Directors
The Class II directors will be elected at the Annual Meeting and will serve a term that
expires at our 2014 Annual Meeting. Messrs. Bottiglieri and Burns have been nominated for
re-election as Class II directors. Each of Mr. Bottiglieri and Mr. Burns was nominated by the
board of directors upon the recommendation of the nominating and corporate governance committee.
The following paragraphs describe the business experience and education of Messrs. Bottiglieri
and Burns.
James J. Bottiglieri has served as a director of the Company since December 2005, as well as
its chief financial officer since its inception on November 18, 2005. Mr. Bottiglieri has also
been an executive vice president of our Manager since 2005. Previously, Mr. Bottiglieri was the
senior vice president/controller of WebMD Corporation. Prior to that, Mr. Bottiglieri was with
Star Gas Corporation and a predecessor firm to KPMG LLP. Mr. Bottiglieri serves as a director for
all of our subsidiary companies, except Staffmark Holdings, Inc. and Liberty Safe and Security
Products, Inc. Mr. Bottiglieri also serves on the board of directors, audit committee and
nominating and corporate governance committee of Horizon Technology Finance Corporation, a NASDAQ
listed company. Mr. Bottiglieri is a graduate of Pace University.
As the chief financial officer of the Company, as well as a director for several of our
subsidiary companies, Mr. Bottiglieri brings to our Board an intimate understanding of our business
and operations and the business and operations of our subsidiaries. Mr. Bottiglieri provides the
Board with Company-specific experience and expertise, in addition to his substantial expertise in
accounting, tax and other financial matters.
Gordon M. Burns has served as a director of the Company since May 2008. Mr. Burns has been a
private investor since 1998. Previously, he was responsible for investment banking at UBS
Securities and before that was a managing director at Salomon Brothers Inc. Mr. Burns is a
graduate of Yale University and the Harvard Business School. Mr. Burns served on the board of
directors and audit committee of Aztar Corporation, a NYSE listed company, from 1998 through 2007.
Mr. Burns brings to our Board extensive knowledge of investment and financing activities,
having significant experience in such fields. He has also been involved with several public and
private companies as they have gone through important transitions, including mergers and
acquisitions, divestitures, and management succession. Our Board benefits from the insights
gleaned from these experiences.
The following paragraphs describe the business experience and education of our Class I and III
directors and the Managers appointed director (not standing for re-election).
Harold S. Edwards has served as a director of the Company since April 2006. Mr. Edwards has
been the president and chief executive officer of Limoneira Company, a NASDAQ listed company, since
November 2004. Previously, Mr. Edwards was the president of Puritan Medical Products, a division
of Airgas Inc. Prior to that, Mr. Edwards held management positions with Fisher
6
Scientific International, Inc., Cargill, Inc., Agribrands International and the Ralston Purina
Company. Mr. Edwards is currently a member of the boards of directors of Limoneira Company and
Calavo Growers, Inc., which is also a NASDAQ listed company. Mr. Edwards is a graduate of Lewis
and Clark College and The Thunderbird School of Global Management.
Mr. Edwards experience as a chief executive officer and senior executive across a variety of
industries allows him to bring a hands on management perspective to our board of directors,
particularly in the areas of operations, executive compensation, succession planning and issues
confronting a diversified array of companies.
Mark H. Lazarus has served as a director of the Company since April 2006. Mr. Lazarus has
been the president and chief executive officer of NBCUniversal Sports Cable Group since January
2011. Previously, Mr. Lazarus was a senior sports adviser for Comcast Corporation, a NASDAQ listed
company, since December 2010, the president, media and marketing, of CSE, a sports and
entertainment company from 2008 through 2010, and the president of Turner Entertainment Group from
2003 through 2008. Prior to that, Mr. Lazarus served in a variety of other roles for Turner
Broadcasting and also worked for Backer, Spielvogel, Bates, Inc. and NBC Cable. Mr. Lazarus is
a graduate of Vanderbilt University. Mr. Lazarus served on the board of directors of Cincinnati
Bell, a NYSE listed company, from 2009 through 2011.
Mr. Lazarus extensive experience in the media industry provides the Board with an important
perspective in the areas of marketing and use of media by our Company and its subsidiaries. Mr.
Lazarus management and leadership experience provides the Board with guidance on the skills
necessary to lead and properly manage our subsidiaries.
C. Sean Day has served as chairman of the board of directors of the Company since April 2006.
Mr. Day has been the president of Seagin International, and he was the chairman of our Managers
predecessor from 1999 to 2006. Previously, Mr. Day was with Navios Corporation and Citicorp
Venture Capital. Mr. Day is currently the chairman of the boards of directors of Teekay
Corporation; Teekay Offshore GP LLC, the general partner of Teekay Offshore Partners LP; Teekay GP
L.L.C., the general partner of Teekay LNG Partners LP; Teekay Tankers Limited and a member of the
board of directors of Kirby Corporation, all NYSE listed companies. Mr. Day is a graduate of the
University of Capetown and Oxford University.
Mr. Days experiences as both an operating executive and investor are invaluable to our Board,
and enable him to effectively serve as our chairman. Furthermore, Mr. Days substantial experience
as a director of other companies, both public and private, adds an important dimension to our Board
and provides valuable insight on governance practices and risk management. In addition, his
leadership experience and knowledge of global investment decisions and related risks provides the
Board with an important global perspective.
D. Eugene Ewing has served as a director of the Company since April 2006. Mr. Ewing has been
the managing member of Deeper Water Consulting, LLC, a private wealth and business consulting
company since March, 2004. Previously, Mr. Ewing was with the Fifth Third Bank. Prior to that,
Mr. Ewing was a partner in Arthur Andersen LLP. Mr. Ewing is on advisory boards for the business
schools at Northern Kentucky University and the University of Kentucky. Mr. Ewing is also the
chairman of the board of directors of Staffmark Holdings, Inc. and a director of a private trust
company located in Wyoming and a private consulting company located in California. Mr. Ewing is a
graduate of the University of Kentucky.
As a former partner with a respected independent registered public accounting firm, Mr. Ewing
brings to our Board and his role as chairman of our audit committee substantial experience with
complex accounting and reporting issues, SEC filings and corporate transactions. Mr. Ewings
experience in these areas has allowed him to become, as the chairman of our audit committee, a
strong financial leader.
Alan B. Offenberg has served as a director and chief executive officer of the Company since
February 2011. Mr. Offenberg has also been a partner of our Manager and its predecessor since
1998. Previously, Mr. Offenberg was with Trigen Energy, Creditanstalt-Bankverein and GE Capital.
Mr. Offenberg currently serves as a director and the chairman of American Furniture Manufacturing,
Inc. and Liberty Safe and Security Products, Inc. Mr. Offenberg is a graduate of Tulane University
and the Northeastern University Graduate School of Business.
Mr. Offenberg brings extensive experience in management, private equity and operating finance
to our board of directors. Mr. Offenbergs knowledge and experience of the Company, as well as the
Companys subsidiaries, provides the Board with an intricate understanding of the Companys
business, history and organization that is critical to the overall functioning of the Board.
Recommendation of the Board
Our board of directors recommends that you vote FOR the election of Messrs. Bottiglieri and
Burns to our Board as Class II directors for a term ending at our 2014 Annual Meeting.
7
PROPOSAL 2 ADVISORY VOTE REGARDING EXECUTIVE COMPENSATION
The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the
Dodd-Frank Act, enables our shareholders to vote to approve, on an advisory (nonbinding) basis, the
compensation of our named executive officers as disclosed in this proxy statement in accordance
with applicable SEC rules.
Our compensation policy is designed to enable us to attract, motivate, reward and retain the
management talent required to achieve our objectives, and thereby increase shareholder value.
Please see the section titled Compensation Discussion and Analysis and the related compensation
tables below for additional details about our executive compensation policy, including information
about the fiscal year 2010 compensation of our named executive officers.
We are asking our shareholders to indicate their support for our named executive officer
compensation as described in this proxy statement. This proposal, commonly known as a say-on-pay
proposal, gives our shareholders the opportunity to express their views on our named executive
officers compensation. This vote is not intended to address any specific item of compensation,
but rather the overall compensation of our named executive officer and the philosophy, policies and
practices described in this proxy statement. We believe our overall compensation policy
accomplishes our compensation goals of attracting and retaining a qualified and talented chief
financial officer. Accordingly, we will ask our shareholders to vote FOR the following
resolution at the Annual Meeting:
RESOLVED, that the Companys shareholders approve, on an advisory basis, the compensation of
the named executive officer, as disclosed in the Companys Proxy Statement for the 2011 Annual
Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and
Exchange Commission.
The say-on-pay vote is advisory, and therefore not binding on the Company, the compensation
committee or our board of directors. Our board of directors and our compensation committee value
the opinions of our shareholders and to the extent there is any significant vote against the named
executive officer compensation as disclosed in this proxy statement, we will consider the results
of the vote in future compensation deliberations and evaluate whether any actions are necessary to
address shareholder concerns.
Recommendation of the Board
Our board of directors recommends that you vote FOR the resolution approving the compensation
of our executive officer as disclosed in this proxy statement.
8
PROPOSAL 3 FREQUENCY OF ADVISORY VOTE REGARDING EXECUTIVE COMPENSATION
The Dodd-Frank Act also enables our shareholders to indicate how frequently we should seek an
advisory vote on the compensation of our named executive officer, as disclosed pursuant to the
SECs compensation disclosure rules. By voting on this Proposal 3, shareholders may indicate
whether they would prefer an advisory vote on named executive officer compensation once every one,
two, or three years. After careful consideration of this Proposal, our board of directors has
determined that an advisory vote on executive compensation that occurs every two years is the most
appropriate alternative for our Company.
Our Board has determined that an advisory vote on executive compensation that occurs every two
years is the most appropriate alternative for our Company, and therefore our Board recommends that
you vote for a two-year interval for the advisory vote on executive compensation. The board
believes that an advisory vote on say on pay every other year represents an appropriate balance
between receiving shareholder input and the need for stability and continuity with respect to
corporate policies. By holding the vote every other year, we can achieve our goal of attracting
and retaining a qualified and talented chief financial officer while receiving frequent shareholder
input into our compensation policy and objectives.
You may cast your vote on your preferred voting frequency by choosing the option of one year,
two years, three years or abstain from voting when you vote in response to the resolution set forth
below.
RESOLVED, that the option of once every one year, two years, or three years that receives the
highest number of votes cast for this resolution will be determined to be the preferred frequency
with which the Company is to hold a shareholder vote to approve the compensation of the named
executive officer, as disclosed pursuant to the compensation disclosure rules of the Securities and
Exchange Commission.
While this vote is advisory and non-binding in nature, it is the intention of the Board to
adopt a policy to seek an advisory vote on the compensation of our named executive officers with
the frequency desired by our shareholders as expressed by their vote on this proposal.
Shareholders should be aware that they are not voting for or against the boards recommendation
to hold an advisory vote on executive compensation every two years. Rather, shareholders will be
casting votes to recommend an advisory vote on executive compensation every year, once every two
years or once every three years, or they may abstain entirely from voting.
Recommendation of the Board
Our board of directors recommends that you vote FOR future advisory votes on the compensation
of our executive officer to occur every two years.
9
PROPOSAL 4 -RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
General
Our Board has recommended and asks that you ratify the selection of Grant Thornton LLP as
independent auditor for the Company and the Trust for the fiscal year ending December 31, 2011.
You would be so acting based on the recommendation of our audit committee.
Grant Thornton LLP was appointed by our audit committee to audit the annual financial
statements of the Company and the Trust for the fiscal years ended December 31, 2010 and December
31, 2009. Based on its past performance during these audits, the audit committee of the Board has
selected Grant Thornton LLP as the independent auditor to perform the audit of our financial
statements and internal control over financial reporting for 2011. Grant Thornton LLP is a
registered public accounting firm. Information regarding Grant Thornton LLP can be found at:
www.grantthornton.com.
The affirmative vote of a majority of the outstanding shares present in person or represented
by proxy at the Annual Meeting is required to ratify the appointment of Grant Thornton LLP. If you
do not ratify the selection of Grant Thornton LLP, our Board will reconsider its selection of Grant
Thornton LLP and may, in its sole discretion, make a new proposal for independent auditor.
Representatives of Grant Thornton LLP are expected to be present at the Annual Meeting, will
have the opportunity to make a statement if they desire to do so and will be available to respond
to questions.
Fees
The chart below sets forth the total amount billed to us by Grant Thornton LLP for services
performed for fiscal years 2010 and 2009, respectively, and breaks down these amounts by category
of service:
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
Audit Fees (1) |
|
$ |
3,094,019 |
|
|
$ |
2,491,421 |
|
Audit-Related Fees (2) |
|
|
|
|
|
|
|
|
Tax Fees (3) |
|
|
|
|
|
|
|
|
All Other Fees (4) |
|
|
142,376 |
|
|
|
51,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,236,395 |
|
|
$ |
2,543,061 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit Fees are fees billed by Grant Thornton LLP for professional
services for the audit of our consolidated financial statements
included in our annual reports on Form 10-K and for the review of
financial statements included in our quarterly reports on Form 10-Q,
or for services that are normally provided by the auditors in
connection with statutory and regulatory filings or engagements. |
|
(2) |
|
Audit-Related Fees are fees billed by Grant Thornton LLP for
assurance and related services that are reasonably related to the
performance of the audit or review of our financial statements. There
were no audit related fees in 2010 or 2009. |
|
(3) |
|
Tax fees are fees billed by Grant Thornton LLP for professional
services rendered in connection with tax compliance, advice and
planning. There were no tax fees billed in 2010 or 2009. |
|
(4) |
|
Other Fees are fees billed by Grant Thornton LLP for the performance
of due diligence services. The 2010 fees were rendered for diligence
efforts associated with our acquisition of Liberty Safe and Security
Products, Inc. completed in March of 2010. The 2009 fees were rendered
for diligence efforts associated with an unsuccessful acquisition. |
Pre-Approval Policies and Procedures
The audit committee has established policies and procedures for its appraisal and approval of
audit and non-audit services. The audit committee has also delegated to the chairman of the
committee the authority to approve additional audit and non-audit services and, subject to
compliance with all applicable independence requirements, to approve the engagement of additional
accounting firms to provide such services. The audit committee or its chairman has pre-approved
all of the services provided by Grant Thornton LLP since its engagement. All other audit-related,
tax and other fees may be approved by the audit committee prospectively.
In making its recommendation to ratify the selection of Grant Thornton LLP as independent
auditor for the fiscal year ending December 31, 2011, the audit committee has considered whether
the services provided by Grant Thornton LLP are compatible with maintaining the independence of
Grant Thornton LLP and has determined that such services do not interfere with Grant Thornton LLPs
independence.
Recommendation of the Board
Our board of directors recommends that, based on the recommendation of the audit
committee, you vote FOR the ratification of the selection of Grant Thornton LLP to serve as
independent auditor for the Company and the Trust for the fiscal year ending December 31, 2011.
10
BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND COMMITTEES
Certain Information Regarding our Directors and Executive Officers
The name and age of each director, nominee and executive officer and the positions held by
each of them as of March 31, 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Serving as Officer |
|
|
Director |
|
Age |
|
or Director Since |
|
Position |
C. Sean Day
|
|
|
61 |
|
|
|
2006 |
|
|
Chairman/Director |
Gordon M. Burns
|
|
|
59 |
|
|
|
2008 |
|
|
Director |
Harold S. Edwards
|
|
|
45 |
|
|
|
2006 |
|
|
Director |
D. Eugene Ewing
|
|
|
62 |
|
|
|
2006 |
|
|
Director |
Mark H. Lazarus
|
|
|
47 |
|
|
|
2006 |
|
|
Director |
Alan B. Offenberg
|
|
|
43 |
|
|
|
2011 |
|
|
Director, Chief Executive Officer |
James J. Bottiglieri
|
|
|
55 |
|
|
|
2005 |
|
|
Director, Chief Financial Officer |
Board Leadership Structure and Role of Risk Oversight
Generally. The LLC Agreement provides that the chairman is elected by a majority of the
Board and must be a member of the board of directors. The chairman is not required to be an
employee of the Company. Likewise, the LLC Agreement provides that the chief executive officer is
elected by the board of directors. Although there is no requirement that the chief executive
officer and the chairman be separate positions, the Board has currently chosen to separate the
chief executive officer and chairman of the Board positions. The Board believes the current
separation of these roles helps to ensure good Board governance and fosters independent oversight
to protect the long term interests of the Companys private and institutional shareholders. In
addition, the Board believes this separation is presently appropriate as it allows our chief
executive officer to focus primarily on leading the Companys day-to-day business and affairs while
the chairman can focus on leading the Board in its consideration of strategic issues and monitoring
corporate governance and shareholder matters.
Risk Oversight. The board of directors performs a majority of its role in risk oversight
through the audit committee. The audit committee charter provides that the audit committee shall
assist the Board in fulfilling its oversight responsibility relating to the evaluation of
enterprise risk issues. In addition, the audit committee, pursuant to its charter, discusses with
management, the vice president of internal audit and internal audit service providers, as the case
may be, and the independent accountant, the Companys major risk exposures (whether financial,
operational or both) and the steps management has taken to monitor and control such exposures,
including the Companys risk assessment and risk management policies. The Companys internal audit
department supervises the day-to-day risk management responsibilities of the Company and reports
directly to the audit committee, which is comprised solely of independent directors. In addition,
during each quarterly meeting of the audit committee, the members of the audit committee meet with
the Companys vice president of internal audit and independent accountant, in each case, without
management present, to discuss the specific areas of risk identified during the quarter, if any.
The audit committee is authorized to utilize outside lawyers, internal staff, independent experts,
and other consultants to assist and advise the committee in connection with its responsibilities,
including the evaluation of the Companys major risk exposures. The Companys management team
regularly evaluates the risks inherent to the businesses of the Companys subsidiaries and
periodically reports the results of such evaluations to the full Board for consideration. The
Board believes that the foregoing processes for overseeing risk ensures that independent directors
are aware of the Companys major risk exposures.
Board Meetings and Committees
Our Board met nine times during 2010. All independent directors attended at least 75% of the
combined Board and committee meetings on which they served in 2010.
The LLC Agreement gives our Board the authority to delegate its powers to committees appointed
by the Board. All of our standing committees are composed solely of independent directors. Our
committees are required to conduct meetings and take action in accordance with the directions of
the Board, the provisions of our LLC Agreement and the terms of the respective committee charters.
We have three standing committees: the audit committee, the compensation committee and the
nominating and corporate governance committee. Each of the audit committee, compensation committee
and nominating and corporate governance committee may not delegate any of its authority to
subcommittees, unless otherwise authorized by the Board. Copies of all committee charters are
available on our website at www.compassdiversifiedholdings.com, and in print from us
without charge upon request by writing to Investor Relations at our principal executive offices at
Sixty One Wilton Road, Westport, Connecticut 06880. The information on our
11
website is not, and shall not be deemed to be, incorporated by reference into this proxy
statement or incorporated into any other filings that the Company or the Trust makes with the
Securities Exchange Commission, which we refer to as the SEC.
Audit Committee. The audit committee is comprised entirely of independent directors who meet
the independence requirements of the NYSE and Rule 10A-3 of the Exchange Act of 1934, as amended,
which we refer to as the Exchange Act, and includes at least one audit committee financial
expert, as required by applicable SEC regulations. The audit committee is responsible for, among
other things:
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|
|
retaining and overseeing our independent accountants; |
|
|
|
|
assisting the Companys board of directors in its oversight of the integrity of our financial
statements, the qualifications, independence and performance of our independent auditors and our
compliance with legal and regulatory requirements; |
|
|
|
|
reviewing and approving the plan and scope of the internal and external audit; |
|
|
|
|
pre-approving any audit and non-audit services provided by our independent auditors; |
|
|
|
|
approving the fees to be paid to our independent auditors; |
|
|
|
|
reviewing with our chief executive officer and chief financial officer and independent auditors
the adequacy and effectiveness of our internal controls; |
|
|
|
|
preparing the audit committee report to be filed with the SEC; and |
|
|
|
|
reviewing and assessing annually the audit committees performance and the adequacy of its charter. |
Messrs. Edwards, Ewing and Burns serve on our audit committee, and the Board has determined
that Mr. Ewing qualifies as an audit committee financial expert, as defined by the SEC. The audit
committee met six times during 2010.
Compensation Committee. The compensation committee is comprised entirely of independent
directors who meet the independence requirements of the NYSE. In accordance with the compensation
committee charter, the members are outside directors as defined in Section 162(m) of the Internal
Revenue Code of 1986, as amended, and non-employee directors within the meaning of Section 16 of
the Exchange Act. The responsibilities of the compensation committee include:
|
|
|
reviewing our Managers performance of its obligations under the Management Services Agreement; |
|
|
|
|
reviewing the remuneration of our Manager and approving the remuneration paid to our Manager as reimbursement
for the compensation paid by our Manager to our chief financial officer and the chief financial officers staff; |
|
|
|
|
determining the compensation of our independent directors; |
|
|
|
|
granting rights to indemnification and reimbursement of expenses to the Manager and any seconded individuals; and |
|
|
|
|
making recommendations to the Board regarding equity-based and incentive compensation plans, policies and
programs. |
Neither the compensation committee nor management has engaged compensation consultants to
provide advice with respect to the form or amount of director compensation. During early 2011, the
compensation committee conducted a survey of the director compensation practices of other companies
that it considered roughly comparable to the Company and also considered the time commitment and
related burdens of Board service over the Companys history. Based upon the compensation
committees review, the compensation committee recommended to the full Board that the annual cash
retainer payable to directors be increased by thirteen percent. The compensation committee also
recommended that the annual equity compensation payable to directors and the Companys chairman be
increased by thirty-five percent and thirty-three percent, respectively. The foregoing increases
represent an aggregate increase in compensation for each of the Companys directors and its
chairman of twenty percent. The full Board ratified the compensation committees recommendation on
March 3, 2011. The increases in compensation became effective as of January 1, 2011.
Messrs. Edwards, Ewing and Lazarus serve on our compensation committee. The compensation
committee met one time during 2010.
Nominating and Corporate Governance Committee. The nominating and corporate governance
committee is comprised entirely of independent directors who meet the independence requirements of
the NYSE. The nominating and corporate governance committee is responsible for, among other
things:
|
|
|
recommending the number of directors to comprise the board of directors; |
|
|
|
|
identifying and evaluating individuals qualified to become members of the board of directors,
other than our Managers appointed director and his or her alternate, and soliciting
recommendations for director nominees from the chairman and chief executive officer of the
Company; |
|
|
|
|
recommending to the Board the director nominees for each annual shareholders meeting, other
than our Managers appointed director; |
|
|
|
|
recommending to the board of directors the candidates for filling vacancies that may occur
between annual shareholders meetings, other than our Managers appointed director; |
12
|
|
|
reviewing independent director compensation and Board processes, self-evaluations and policies; |
|
|
|
|
overseeing compliance with our code of ethics and conduct by our officers and directors; and |
|
|
|
|
monitoring developments in the law and practice of corporate governance. |
Messrs. Burns, Edwards, and Lazarus serve on our nominating and corporate governance
committee. The nominating and corporate governance committee met one time during 2010.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee are, or have been, an officer or employee of
the Company. During 2010, no member of our compensation committee had any relationship with the
Company requiring disclosure under Item 404 of Regulation S-K. None of our executive officers
serves on a board of directors or compensation committee of a company that has an executive officer
serving on our Board or compensation committee.
Executive Sessions of our Board
Our corporate governance guidelines provide that the non-management directors will meet
without management directors at regularly scheduled executive sessions at least quarterly and at
such other times as they deem appropriate. The non-management directors meet in regularly
scheduled executive sessions. The independent directors meet in executive session at least once
annually. In accordance with our corporate governance guidelines, the chairman of the Board, audit
committee, nominating and corporate governance committee or compensation committee will preside at
these executive sessions of the non-management directors as determined by the non-executive
directors based upon the subject matter to be discussed. Mr. Day presided, and continues to
preside, over sessions of the non-management directors. Our non-management directors met at least
four times during 2010.
Nominations of Directors
As provided in its charter, the nominating and corporate governance committee will identify
and recommend to the Board nominees for election or re-election to the Board. In addition, the
committee may review candidates for the Board recommended by executive search firms, the Companys
management and other members of the Board who are not members of the committee, as well as
candidates recommended by shareholders, in accordance with the following criteria and as discussed
in BOARD OF DIRECTORS AND EXECUTIVE OFFICERS Shareholder Nominations of Directors below.
The nominating and corporate governance committee, in making its recommendations regarding
Board nominees, may consider some or all of the following factors, among others:
|
|
|
the candidates judgment, skill, and experience with other organizations of comparable purpose,
complexity and size, and subject to similar legal restrictions and oversight; |
|
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|
the relationship of the candidates experience to the experience of other Board members; |
|
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|
|
the extent to which the candidate would be a valuable addition to the Board and any committees thereof; |
|
|
|
|
whether or not the person has any relationships that might impair his or her independence, including
any business, financial or family relationships with the Manager or the Companys management; and |
|
|
|
|
the candidates ability to contribute to the effective management of the Company, taking into account
the needs of the Company and such factors as the individuals experience, perspective, skills, and
knowledge of the industries in which the Company operates. |
In recommending candidates for election as directors, the nominating and corporate governance
committee will also take into consideration the need for the board of directors to have a majority
of directors that are independent under the requirements of the NYSE and other applicable laws, and
at least three directors that are independent under these requirements and are not appointed by the
Manager pursuant to the terms of the Management Services Agreement or otherwise affiliated with our
Manager.
In addition, the nominating and corporate governance committee will recommend candidates for
election as directors based on the following criteria and qualifications:
|
|
|
Financial Literacy. Such person should be financially literate as such
qualification is interpreted by the board of directors in its business
judgment. |
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|
|
|
Leadership Experience. Such person should possess significant leadership
experience, such as experience in business, finance/accounting, law,
education or government, and shall possess qualities reflecting a proven
record of accomplishment and ability to work with others. |
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Commitment to our Companys Values. Such person shall be committed to
promoting our financial success and preserving and enhancing our reputation
and shall be in agreement with our values as embodied in our code of
ethics. |
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Absence of Conflicting Commitments. Such person should not have commitments
that would conflict with the time commitments of a director of our Company. |
13
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Complementary Attributes. Such person shall have skills and talents which
would be a valuable addition to the Board and any committees thereof and
that shall complement the skills and talents of our existing directors. |
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Reputation and Integrity. Such person shall be of high repute and integrity. |
Neither the nominating and corporate governance committee nor the board of directors has a
formal policy with regard to the consideration of diversity in identifying director nominees;
however, diversity is one of the criteria evaluated by the nominating and corporate governance
committee when selecting Board nominees and re-electing Board members. The nominating and
corporate governance committee seeks and recommends candidates for election or re-election with
differences of viewpoint, professional experience, education, skill, and other individual
qualities. The nominating and corporate governance committee charter provides that the committee
endeavor to solicit as director candidates individuals possessing skills and talents which would
complement the skills and talents of the Companys existing directors. In addition, before
recommending that the Board nominate each new director candidate or re-nominate each incumbent
director, the nominating and corporate governance committee assesses to what extent such
individuals contributions will enhance the effectiveness of the Board and its committees given its
overall current composition. Each year, the Board assesses the effectiveness of its diversity
efforts, among other items, during its annual self-evaluation process. The nominating and
corporate governance committee assesses annually the composition of the Board and each long
standing committee. Under the Companys corporate governance guidelines, directors must inform the
chairman of the Board and the chairman of the nominating and corporate governance committee in
advance of accepting an invitation to serve on another public company board or any committee
thereof.
Shareholder Nominations of Directors
To make a director nomination, a shareholder must give written notice to our Secretary at our
principal executive office at Sixty One Wilton Road, Westport, Connecticut 06880, Attention:
Investor Relations. To be considered for inclusion in our proxy statement for the 2012 Annual
Meeting of Shareholders, shareholder nominations must be received by the Company no later than
January 19, 2012. In order for a notice to be timely, it must be delivered to our Secretary at the
principal executive office described in the preceding sentence not less than 120 days or more than
150 days prior to the first anniversary of the preceding years annual meeting. In the event that
the date of the annual meeting is more than 30 days before or more than 70 days after such
anniversary date, notice by a shareholder must be so delivered not earlier than the close of
business on the 120th day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the Trust.
When directors other than the Managers appointed director are to be elected at a special
meeting, such notice must be given not earlier than the 120th day prior to such special meeting and
not later than the close of business on the later of the 90th day prior to such special meeting or
the 10th day following the day on which a public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board to be elected at such meeting.
In addition to any other requirements, for a shareholder to properly bring a nomination for
director before either an annual or special meeting, the shareholder must be a shareholder of
record on both the date of the shareholders notice of nomination and the record date relating to
the meeting.
The shareholder submitting the recommendation must submit:
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the shareholders name and address as they appear on the share
register of the Trust, as well as the name and address of the
beneficial owner, if any, on whose behalf the nomination is made; |
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the number of shares of Trust stock which are owned beneficially and
of record by such shareholder and such beneficial owner, if any; and |
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a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons pursuant
to which the recommendation is being made by the shareholder. |
In addition, any such notice from a shareholder recommending a director nominee must include
the following information:
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the candidates name, age, business address and residence address; |
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the candidates principal occupation or employment; |
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the number of shares of Trust stock that are beneficially owned by the candidate; |
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a copy of the candidates resume; |
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a written consent from the candidate to being named in the proxy statement as a
nominee and to serving as director, if elected; and |
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any other information relating to such candidate that would be required to be
disclosed in solicitations of proxies for election of directors under the
federal securities laws, including Regulation 14A of the Exchange Act. |
14
We may require any proposed nominee to furnish any additional information that we reasonably
require to enable our nominating and corporate governance committee to determine the eligibility of
the proposed nominee to serve as a director. Candidates are evaluated based on the standards,
guidelines and criteria discussed above as well as other factors contained in the nominating and
corporate governance committees charter, our corporate governance guidelines, other of our
policies and guidelines, and the current needs of the Board.
15
DIRECTOR COMPENSATION
For fiscal 2010, our non-management directors each received annual cash retainers of $40,000,
or $60,000 if serving as the chairman of the Board, payable in equal quarterly installments, as
well as cash compensation for attendance at committee meetings and an annual retainer for service
as committee chairman, both as described below. The annual cash retainer amounts were increased
for fiscal 2011 to $45,000, or $68,000 if serving as the chairman of the Board. Directors
(including the chairman) are reimbursed for reasonable out-of-pocket expenses incurred in attending
meetings of the board of directors or committees and for any expenses reasonably incurred in their
capacity as directors. The Company also reimburses directors for all reasonable and authorized
business expenses related to service to the Company by the directors in accordance with the
policies of the Company as in effect from time to time.
Messrs. Day, Edwards, Ewing and Lazarus have been independent directors since the closing of
our initial public offering in May 2006. Mr. Burns has been an independent director since his
election as a director at the 2008 Annual Meeting.
Each member of the Companys various standing committees also receives the following
compensation related to service on these committees:
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for attending a committee meeting in person (if any): $2,000 for each
meeting of the audit committee; $2,000 for each meeting of the
nominating and corporate governance committee; and $2,000 for each
meeting of the compensation committee; and |
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for attending a telephonic committee meeting (if any): $1,000 for each
meeting of the audit committee; $1,000 for each meeting of the
nominating and corporate governance committee; and $1,000 for each
meeting of the compensation committee. |
The chairperson of the audit committee, nominating and corporate governance committee and
compensation committee also receives an annual cash retainer of $20,000, $5,000 and $5,000,
respectively, payable in equal quarterly installments.
Our non-management directors also receive, on or around January 1 of each year, in respect of
their service for the prior fiscal year, $20,000, or $30,000 if serving as the Companys chairman,
of equity compensation. The non-management directors receive that number of shares of Trust stock
that can be purchased with $20,000 or $30,000, as applicable, at the market price on the date of
purchase. For fiscal year 2011 these amounts were increased to $27,000 for non-management directors
and $40,000 if serving as the Companys chairman.
The following table provides compensation paid or accrued by us to our non-management
directors in 2010:
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Change in |
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Pension Value |
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and Non- |
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Qualified |
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Fees Earned |
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Non-Equity |
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Deferred |
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or Paid in |
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Stock |
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Option |
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Incentive Plan |
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Compensation |
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All other |
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Cash |
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Awards |
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Awards |
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Compensation |
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Earnings |
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Compensation |
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Name |
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($) |
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($) |
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($) |
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($) |
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($) |
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($) |
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Total |
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C. Sean Day |
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$ |
60,000 |
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$ |
30,000 |
(1) |
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$ |
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$ |
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$ |
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$ |
|
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$ |
90,000 |
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Gordon M. Burns |
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52,000 |
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20,000 |
(1) |
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72,000 |
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Harold S. Edwards |
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60,000 |
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20,000 |
(1) |
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80,000 |
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D. Eugene Ewing |
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73,000 |
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20,000 |
(1) |
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93,000 |
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Mark H. Lazarus |
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49,000 |
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20,000 |
(1) |
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69,000 |
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Totals |
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$ |
294,000 |
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$ |
110,000 |
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$ |
|
(2) |
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$ |
|
(2) |
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$ |
|
(2) |
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$ |
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$ |
404,000 |
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(1) |
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Represents 1,713 fully vested shares for C. Sean Day and 1,142 fully vested shares for each
other director issued pursuant to the annual award described above. These shares were received by
the directors on January 4, 2011. |
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(2) |
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The Company does not have any stock option, non-equity incentive or deferred compensation
arrangements for any of its directors. |
16
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
We have entered into a management services agreement with our Manager, which we refer to as
the Management Services Agreement. The Management Services Agreement defines our Managers duties
and responsibilities and is subject to the oversight and supervision of our Board. Our Manager is
responsible for the conduct of the Companys day-to-day business and affairs and is entitled to
receive a management fee for the provision of its services. The current executive officers,
Messrs. Offenberg and Bottiglieri, are employed by our Manager and are seconded to the Company,
which means that they have been assigned by our Manager to work for the Company during the term of
the Management Services Agreement between us and our Manager. The Company does not have any other
executive officers. Our Manager determines and pays the compensation of these officers who we
refer to as the named executives, subject to the reimbursement described below.
Overview of our Executive Compensation
We do not pay any compensation to our executive officers seconded to us by our Manager. Our
Manager is responsible for the payment of compensation to the executive officers seconded to us.
We do not reimburse our Manager for the compensation paid to our chief executive officer, Alan B.
Offenberg. We do, however, pay our Manager a quarterly management fee and our Manager uses the
proceeds from the management fee, in part, to pay compensation to Mr. Offenberg. The Company has
the right to require the Manager to replace Mr. Offenberg as its chief executive officer.
Pursuant to the Management Services Agreement with our Manager, we reimburse our Manager for
the compensation paid to our chief financial officer, Mr. James J. Bottiglieri. Such reimbursement
is approved by the Companys compensation committee. The terms and conditions of Mr. Bottiglieris
employment are governed by an employment agreement between Mr. Bottiglieri and our Manager. Mr.
Bottiglieris compensation is described below.
The discussion that follows relates to the compensation policies and philosophy for Mr.
Bottiglieri only, as the compensation of the Companys chief executive officer is not reimbursed by
the Company.
Elements of Our Executive Compensation and How Each Relates to Our Overall Compensation Objectives
Mr. Bottiglieris employment agreement provides that his annual compensation is to be paid
through a combination of a base salary and an annual cash bonus. Both elements are designed to be
competitive with comparable employers in our industry and intended to provide incentives and reward
Mr. Bottiglieri for his contributions to the Company.
Objectives of Our Executive Compensation and What it is Designed to Reward
The primary objective of the aforementioned elements of our executive compensation is to
attract and retain a qualified and talented individual to serve as chief financial officer.
Through payment of a competitive base salary, we recognize particularly the experience, skills,
knowledge and responsibilities required of the chief financial officer position. An annual cash
bonus is designed to reward our chief financial officers individual performance during the year
and can therefore be variable from year to year.
How We Determine the Amount of Each Element
To determine the amount of our chief financial officers compensation, we consider competitive
market practices, by reviewing publicly available information across our industry and related
industries. We do not use compensation consultants at this time. When establishing Mr.
Bottiglieris 2010 base salary, the compensation committee and management considered a number of
factors including: Mr. Bottiglieris seniority, the functional role of his position, the level of
his responsibility, the ability to replace Mr. Bottiglieri and the base salary of Mr. Bottiglieri
during the prior year. In addition, the compensation committee of our board of directors
considered whether such compensation achieves the objective of appropriately rewarding Mr.
Bottiglieri for his contributions to our growth and profitability.
Mr. Bottiglieris compensation is reviewed on an annual basis. Factors considered in
determining increases to his salary level are: the employment market for chief financial officers
of public entities comparable to the Company in size and industry, the breadth and scope of the
responsibilities of the chief financial officer within our organization, Mr. Bottiglieris
performance in prior years (as assessed by our compensation committee in accordance with the
factors as outlined below) and the retention of Mr. Bottiglieri. We expect the salary of our chief
financial officer to increase annually with adjustments largely reflecting additional
responsibilities assumed, growth of the Company and the related increase in the complexity of the
position of chief financial officer within our organization, to appropriately reward Mr.
Bottiglieri for his contributions to our growth and profitability, thereby retaining his services
and to compensate for cost of living increases.
17
The annual cash bonus element of our executive compensation policy is determined on a discretionary
basis and is largely based upon the job performance of Mr. Bottiglieri in completing his
responsibilities. In determining the amount of Mr. Bottiglieris annual cash bonus, our
compensation committee assesses Mr. Bottiglieris performance in respect of: (i) the nature and
quality of the internal and financial reporting controls; (ii) management of the Companys
financial accounting staff; (iii) the performance of the Companys financial accounting function
and its ability to perform assigned tasks on a timely basis; (iv) Mr. Bottiglieris and the
financial accounting staffs interactions with the Companys outside independent auditors on the
strength of the controls environment, the strength of the Companys finance function generally, and
the level of cooperation received by such independent auditors in the conduct of the Companys
audit; (v) Mr. Bottiglieris and the financial accounting staffs interaction with the management
of the businesses in which the Company owns a controlling interest; and (vi) Mr. Bottiglieris lead
role in capital raises and in investor relations. Mr. Bottiglieris bonus is not based upon the
performance of the Company and is unrelated to the amount of Mr. Bottiglieris base salary. The
employment agreement for Mr. Bottiglieri defines the minimum amount of this element to be paid for
any fiscal year to be $100,000, but does not limit the amount of such compensation. The amount of
the annual cash bonus paid to Mr. Bottiglieri in each of 2010, 2009 and 2008 was established by our
chief executive officer and approved by our compensation committee. Such compensation is accrued
quarterly in the Companys consolidated financial statements and is updated based on the amount
approved by the compensation committee.
Summary Compensation Table
The following Summary Compensation Table summarizes the total compensation accrued for our
named executive officers in each of 2010, 2009 and 2008 and should be read in conjunction with the
Compensation Discussion and Analysis.
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Change In |
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Pension Value |
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And Non- |
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Qualified |
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Non-Equity |
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Deferred |
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All |
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|
Stock |
|
|
Option |
|
|
Incentive Plan |
|
|
Compensation |
|
|
Other |
|
|
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|
|
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|
|
|
Salary |
|
|
Bonus |
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
|
Earnings |
|
|
Compensation |
|
|
Total |
|
Name & Principal Position |
|
Year |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
I. Joseph Massoud |
|
|
2010 |
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Chief Executive Officer (1) |
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2009 |
|
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|
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|
|
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|
|
|
|
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|
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|
|
|
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James J. Bottiglieri |
|
|
2008 |
|
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Chief Financial Officer (2) |
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2010 |
|
|
|
390,000 |
|
|
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300,000 |
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,203 |
(3) |
|
|
737,203 |
|
|
|
|
2009 |
|
|
|
385,000 |
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,779 |
(3) |
|
|
642,779 |
|
|
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2008 |
|
|
|
375,000 |
|
|
|
225,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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52,018 |
(3) |
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|
652,018 |
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(1) |
|
Mr. I. Joseph Massoud, our chief executive officer for the periods covered above, was
seconded to us by our Manager and did not receive compensation directly from us. We pay our
Manager a quarterly management fee and Mr. Massoud as managing member of our Manager, received
distributions from our Manager periodically after payment of all compensation and other
expenses to our Managers employees. Mr. Massoud did not receive a salary or other
compensation from our Manager. Accordingly, no compensation information for Mr. Massoud is
reflected in the above compensation table. |
|
(2) |
|
Mr. Bottiglieri did not participate in any stock award, stock option, non-equity
incentive or nonqualified deferred stock compensation plans. |
|
(3) |
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Includes the following payments paid on behalf of Mr. Bottiglieri: |
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Healthcare |
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Insurance |
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401-K |
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Contributions |
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Premiums |
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Contributions |
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Total |
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Year |
|
($) |
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|
($) |
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|
($) |
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|
($) |
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2010 |
|
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26,080 |
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|
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1,523 |
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|
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19,600 |
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|
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47,203 |
|
2009 |
|
|
21,956 |
|
|
|
1,523 |
|
|
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34,300 |
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|
|
57,779 |
|
2008 |
|
|
18,565 |
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|
|
1,253 |
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32,200 |
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|
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52,018 |
|
Grants of Plan Based Awards
None of our named executives participate in or have account balances in any plan based award
programs.
18
Employment Agreements
Employment Agreement with James J. Bottiglieri. During fiscal year 2008, our Manager entered
into an amended and restated employment agreement with Mr. Bottiglieri, an executive vice president
of the Manager. The Manager has seconded Mr. Bottiglieri to the Company to act as its chief
financial officer.
On March 3, 2011, the compensation committee considered and approved an increase in Mr.
Bottiglieris base salary from $390,000 to $405,000. Such increase in base salary became effective
as of January 1, 2011. The Manager has the right to increase, but not decrease, Mr. Bottiglieris
base salary during the term of his employment agreement. The employment agreement with our Manager
provides that Mr. Bottiglieri is entitled to receive an annual bonus, which must not be less than
$100,000, as determined in the sole judgment of our Manager, subject to ratification and approval
of the reimbursement of such amount by the compensation committee of our board of directors.
Pursuant to Mr. Bottiglieris employment agreement, if Mr. Bottiglieri terminates his employment
for good reason or without good reason, or if the Manager terminates his employment other than for
cause, Mr. Bottiglieri will be entitled to receive his accrued but unpaid base salary plus
$400,000. The employment agreement prohibits Mr. Bottiglieri from soliciting any of the Managers
or the Companys employees for a period of two years after the termination of his employment. The
employment agreement also requires that Mr. Bottiglieri protect the Companys confidential
information.
Outstanding Equity Awards at Fiscal Year-End; Option Exercises and Stock Vested
None of our named executives have ever held options to purchase interests in us or other
awards with values based on the value of our interests.
Pension Benefits
None of our named executives participate in or have account balances in qualified or
nonqualified defined benefit plans sponsored by us.
Nonqualified Deferred Compensation
None of our named executives participate in or have account balances in nonqualified defined
contribution plans or other deferred compensation plans maintained by us.
Potential Payments upon Termination or Change in Control
The following summarizes potential payments payable to our executive officers upon termination
of employment or a change in control.
Employment Agreement with James J. Bottiglieri. Pursuant to his employment agreement, if Mr.
Bottiglieri terminates his employment for good reason or without good reason, or if the Manager
terminates his employment without cause, Mr. Bottiglieri will be entitled to receive his accrued
but unpaid base salary plus $400,000. The Company is accruing this obligation to Mr. Bottiglieri
over a six year period and accrued approximately $31,000 for this obligation during fiscal year
2010.
Supplemental Put Agreement. Our Manager is also the owner of 100% of the allocation
interests in the Company. Mr. Offenberg, through his ownership interest in our Manager shares in a
portion of the proceeds of the allocation interests. Additionally, Mr. Bottiglieri indirectly
shares in approximately 5% of the proceeds of the allocation interests. Concurrent with our
initial public offering, we entered into a supplemental put agreement with our Manager, which we
refer to as the Supplemental Put Agreement, pursuant to which our Manager shall have the right to
cause the Company to purchase the allocation interests then owned by our Manager upon either (i)
the termination of the Management Services Agreement (other than as a result of our Managers
resignation), or (ii) the resignation of our Manager on any date that is at least three years after
the closing of our initial public offering. Essentially, the put rights granted to our Manager
require us to acquire our Managers initial allocation interests in the Company at a price based on
the increase in fair value in the Companys businesses over its basis in those businesses. If we
terminate the Management Services Agreement, the payment to the Manager will be determined at two
times the increase in fair value in the Companys businesses over the Companys initial basis in
those businesses. Each fiscal quarter the fair value of our subsidiaries is estimated for the
purpose of determining the Companys potential liability associated with the Supplemental Put
Agreement. Any change in the potential liability is accrued currently as a non-cash charge to
earnings. For the year ended December 31, 2010, the Company recorded accruals of approximately
$32.5 million for the potential liability associated with the Supplemental Put Agreement. The
Company paid approximately $14.9 million in fiscal year 2008 for the Managers share of the profit
allocation from the sales of Aeroglide Corporation and Silvue Technologies Group, Inc. No profit
allocations were paid in fiscal years 2010 and 2009. Such profit allocation payments
proportionately reduced the supplemental put liability. See the section CERTAIN RELATIONSHIPS AND
RELATED PARTY TRANSACTIONS Contractual Arrangements with Related Parties Supplemental Put
Agreement for additional information related to the Supplemental Put Agreement.
19
SHARE OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial ownership of shares of
Trust stock by each person who is known to us to be the beneficial owner of more than five percent
of the outstanding shares of Trust stock, each of our directors and executive officers, and our
directors and executive officers as a group as of March 31, 2011, based on 46,725,000 shares issued
and outstanding. All holders of shares of Trust stock are entitled to one vote per share on all
matters submitted to a vote of holders of shares of Trust stock. The voting rights attached to
shares of Trust stock held by our directors, executive officers or major shareholders do not differ
from those that attach to shares of Trust stock held by any other holder. Under Rule 13d-3 of the
Exchange Act, beneficial ownership includes shares for which the individual, directly or
indirectly, has voting power, meaning the power to control voting decisions, or investment power,
meaning the power to cause the sale of the shares, whether or not the shares are held for the
individuals benefit. The address for each director and executive officer is Sixty One Wilton
Road, Westport, Connecticut, 06880.
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Shares of Trust Stock |
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|
|
|
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Representing Sole |
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|
Percent of |
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|
|
Voting and/or |
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|
Shares |
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Name and Address of Beneficial Owner |
|
Investment Power |
|
|
Outstanding |
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5% Beneficial Owners |
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|
|
|
|
|
CGI Magyar Holdings LLC (1) |
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6,356,000 |
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|
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13.6 |
% |
Directors, Nominees and Executive Officers: |
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C. Sean Day (2) |
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527,473 |
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1.1 |
% |
Alan B. Offenberg |
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87,375 |
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* |
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James J. Bottiglieri |
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19,017 |
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* |
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Harold S. Edwards |
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31,554 |
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|
* |
|
D. Eugene Ewing (3) |
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27,174 |
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* |
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Mark H. Lazarus |
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9,219 |
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* |
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Gordon M. Burns (4) |
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87,160 |
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* |
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All Directors, Nominees and Executive Officers as a Group |
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788,972 |
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1.7 |
% |
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|
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* |
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Less than 1%. |
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(1) |
|
The mailing address for CGI Magyar Holdings LLC is Belvedere Building, 4th Floor, 69
Pitts Bay Road, Hamilton HM 08, Bermuda. Path Spirit Limited is the ultimate controlling person of
CGI Magyar Holdings LLC. The mailing address for Path Spirit Limited is 10 Norwich Street, London,
EC4A 1BD, United Kingdom. |
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(2) |
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30,393 of these shares are beneficially owned directly by Mr. Day, 190,080 of these shares are
beneficially owned by Mr. Day through the Christopher Sean Day 2009 GRAT #4, 300,000 of these
shares are beneficially owned by Mr. Day though the Christopher Sean Day 2010 GRAT #7 and 7,000
additional shares are beneficially owned by Mr. Day through the Day Family 2007 Irrevocable Trust. |
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(3) |
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2,000 of these shares are beneficially owned by Mr. Ewing and directly owned by Mr. Ewings spouse. |
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(4) |
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5,987 of these shares are beneficially owned by Mr. Burns through the Talley Burns Executor Trust
and 5,824 of these shares are beneficially owned by Mr. Burns through the Peter Burns Executor
Trust. |
The following table sets forth certain information regarding the beneficial ownership of the
Companys two classes of equity interests.
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Number of |
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Percent of |
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Interests (1) |
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Class |
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Compass Group Management LLC |
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Allocation interests (2) |
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1,000 |
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100 |
% |
Trust interests |
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Compass Diversified Holdings (3) |
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Allocation interests |
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Trust interests |
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46,725,000 |
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100 |
% |
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(1) |
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Compass Group Diversified Holdings LLC has two classes of interests: allocation interests and trust interests. |
20
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(2) |
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Mr. Offenberg, as a member of the Manager, may be deemed to be the beneficial owner of 19% of the allocation interests
held by the Manager. Mr. Bottiglieri may be deemed to be the beneficial owner of approximately 5% of the allocation
interests in that he indirectly shares in approximately 5% of the proceeds of the allocation interests. Mr. Day may be
deemed to be the beneficial owner of 5% of the allocation interests in that he indirectly shares in 5% of the proceeds of
the allocation interests. |
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(3) |
|
Each beneficial interest in the Trust corresponds to one underlying trust interest of the Company. Unless the Trust is
dissolved, it must remain the sole holder of 100% of the trust interests and at all times the Company will have
outstanding the identical number of trust interests as the number of outstanding shares of Trust stock. As a result of
the corresponding interests between shares and trust interests, each holder of shares identified in the table above
relating to the Trust is deemed to beneficially own a correspondingly proportionate interest in the Company. |
The following table sets forth certain information as of March 31, 2011, regarding the
beneficial ownership by Mr. Day of equity interests in Advanced Circuits, Inc., one of our
businesses.
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Number of |
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Percent of |
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Owner |
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Entity |
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Shares (1) |
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Class |
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C. Sean Day |
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Compass AC
Holdings, Inc. (sole shareholder of
Advanced Circuits), Series B Common
Stock
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10,000 |
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0.7 |
% |
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(1) |
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Mr. Day is the direct owner of 6,480 shares of
Series B Common Stock and Mr. Days children
are the owners in the aggregate of 3,520 shares
of Series B Common Stock. |
Securities Authorized for Issuance under Equity Compensation Plans.
There are no securities currently authorized for issuance under an equity compensation plan.
21
AUDIT COMMITTEE REPORT
Our audit committee is composed of three independent directors, all of whom are financially
literate. In addition, the Board has determined that Mr. Ewing, an independent director and the
chairman of the audit committee, qualifies as an audit committee financial expert as defined by the
SEC. The audit committee operates under a written charter, which reflects the NYSE listing
standards and Sarbanes-Oxley Act requirements regarding audit committees. A copy of the audit
committee charter is available on the Companys website at
www.compassdiversifiedholdings.com.
The audit committees primary role is to assist the Board in fulfilling its responsibility for
oversight of (1) the quality and integrity of the consolidated financial statements and related
disclosures, (2) compliance with legal and regulatory requirements, (3) the independent auditors
qualifications, independence and performance and (4) the performance of our internal audit and
control functions.
The Companys management is responsible for the preparation of the financial statements, the
financial reporting process and the system of internal controls. The independent auditors are
responsible for performing an audit of the financial statements in accordance with auditing
standards generally accepted in the United States, and issuing an opinion as to the conformity of
those audited financial statements to U.S. generally accepted accounting principles. The audit
committee monitors and oversees these processes.
The audit committee has adopted a policy designed to ensure proper oversight of our
independent auditor. Under the policy, the audit committee is directly responsible for the
appointment, compensation, retention and oversight of the work of any registered public accounting
firm engaged for the purpose of preparing or issuing an audit report or performing any other audit
review (including resolution of disagreements among management, the Manager, and the auditor
regarding financial reporting), or attestation services. In addition, the audit committee is
responsible for pre-approving any non-audit services provided by the Companys independent
auditors. The audit committees charter also ensures that the independent auditor discusses with
the audit committee important issues such as internal controls, critical accounting policies, any
instances of fraud and the consistency and appropriateness of our accounting policies and
practices.
The audit committee has reviewed and discussed with management and Grant Thornton LLP, the
Companys independent auditor, the audited financial statements as of and for the year ended
December 31, 2010. The audit committee has also discussed with Grant Thornton LLP the matters
required to be discussed by Statement on Auditing Standards No. 61, as amended (Communication with
Audit Committees). In addition, the audit committee has received from the independent auditor its
written report required by Public Company Accounting Oversight Board Rule 3526 (Auditor
Independence) and has discussed its independence from the Company and its management. The audit
committee also considered whether the non-audit services provided by Grant Thornton LLP to us
during 2010 were compatible with its independence as auditor.
Based on these reviews and discussions, the audit committee has recommended to the Board, and
the Board has approved, the inclusion of the audited financial statements in the Companys Annual
Report on Form 10-K for the year ended December 31, 2010.
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Members of the Audit Committee |
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D. Eugene Ewing, Chairman |
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Harold S. Edwards |
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Gordon M. Burns |
The information contained in the report above shall not be deemed to be soliciting material
or to be filed with the SEC, nor shall such information be incorporated by reference into any
future filing under the Exchange Act or the Securities Act of 1933, as amended, except to the
extent that we specifically incorporate it by reference in such filing.
22
COMPENSATION COMMITTEE REPORT
We have reviewed and discussed with management the Compensation Discussion and Analysis
provisions to be included in the Companys 2011 Proxy Statement filed pursuant to Section 14(a) of
the Securities Exchange Act of 1934. Based on the reviews and discussions referred to above, we
recommend to the board of directors that the Compensation Discussion and Analysis referred to above
be included in the Companys proxy statement.
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Members of the Compensation Committee |
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Harold S. Edwards, Chairman |
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D. Eugene Ewing |
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Mark H. Lazarus |
The information contained in the report above shall not be deemed to be soliciting material
or to be filed with the SEC, nor shall such information be incorporated by reference into any
future filing under the Exchange Act or the Securities Act of 1933, as amended, except to the
extent that we specifically incorporate it by reference in such filing.
23
CORPORATE GOVERNANCE
Corporate Governance Guidelines and Code of Ethics
Our Board has adopted corporate governance guidelines that set forth our corporate governance
objectives and policies and govern the functioning of the Board. Our corporate governance
guidelines are available on our website at www.compassdiversifiedholdings.com and in print
from us without charge upon request by writing to Investor Relations at Compass Group Diversified
Holdings LLC, Sixty One Wilton Road, Westport, Connecticut 06880.
We also have a code of ethics that sets forth our commitment to ethical business practices.
Our code of ethics applies to our directors, officers and employees, including our chief executive
officer and chief financial officer, and also applies to our Manager, and the officers and
employees of our Manager involved in the oversight of the day-to-day operations of the Company and
its subsidiaries. Our code of ethics is available on our website and in print from us without
charge upon request by writing to Investor Relations at Compass Group Diversified Holdings LLC,
Sixty One Wilton Road, Westport, Connecticut 06880.
Communications with our Board
Communications to our Board, to non-management directors as a group or to any director
individually may be made by writing to the following address:
Attention: [Board of Directors] [Board Member]
c/o Carrie W. Ryan, Secretary
Sixty One Wilton Road
Westport, Connecticut 06880
Communications sent to the physical mailing address are forwarded to the relevant director, if
addressed to an individual director or to the chairman of our Board if addressed to the Board.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Policy for Approval of Related Person Transactions
Our nominating and corporate governance committee, which is composed entirely of independent
directors, is responsible for reviewing and approving, prior to our entry into any such
transaction, all transactions in which we are a participant and in which any of the following
related parties have or will have a direct or indirect material interest:
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our chief executive officer and/or chief financial officer; |
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our directors; and |
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other members of the management team involved in the oversight of the day-to-day
operations of the Company and its subsidiaries. |
Pursuant to the terms of our code of ethics, any transaction required to be disclosed pursuant
to Item 404 of Regulation S-K (related party transactions) must be brought to the attention of,
and reviewed and approved for potential conflict of interest by, our nominating and corporate
governance committee. The Company may not enter into or engage in any related party transaction
with a related party without such approval. Additionally, all related party transactions are to be
considered and conducted in a manner such that no preferential treatment is given to any such
dealing of transactions. All related party transactions involving an acquisition from or sale to
an affiliate of our Manager, including any entity managed by an affiliate of our Manager, must be
submitted to the nominating and corporate governance committee of our board of directors for
pre-approval. Details of related party transactions will be publicly disclosed as required by
applicable law.
Relationships with Related Parties
Our Manager
Our relationship with our Manager is governed principally by the following three agreements:
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the Management Services Agreement relating to the management services our Manager
performs for us and the businesses we own and the management and transaction fees to be
paid to our Manager in respect thereof; |
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|
the Companys LLC Agreement setting forth our Managers rights with respect to the
allocation interests our Manager owns, including the right to receive profit allocations
from the Company; and
|
24
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|
|
the Supplemental Put Agreement relating to our Managers right to cause the Company to
purchase the allocation interests owned by our Manager. |
While our Manager provides management services to the Company, our Manager is also permitted
to provide services, including services similar to the management services provided to us, to other
entities. In this respect, the Management Services Agreement and the obligation to provide
management services will not create a mutually exclusive relationship between our Manager and the
Company or our businesses. As such, our Manager, and our management team, will be permitted to
engage in other business endeavors. Mr. James Bottiglieri, our chief financial officer, devotes a
substantial portion of his time to our affairs.
Mr. Massoud, as managing member of our Manager, will beneficially receive the management fees,
offsetting management fees, fees under any transaction services agreements and expense
reimbursements related to the foregoing, and he will use such proceeds to pay the compensation,
overhead, out-of-pocket and other expenses of our Manager, satisfy its contractual obligations and
otherwise distribute such proceeds to the members of our Manager, which includes Mr. Offenberg, our
chief executive officer, in accordance with our Managers organizational documents.
Contractual Arrangements with Related Parties
Loan Agreements with each of our Subsidiaries
The Company is a party to a loan agreement with each of our businesses pursuant to which the
Company will make loans and financing commitments to each of our businesses.
Management Services Agreement
The Company and our Manager are parties to the Management Services Agreement pursuant to which
we pay our Manager a quarterly management fee equal to 0.5% (2.0% annualized) of the Companys
adjusted net assets as of the last day of each fiscal quarter in respect of the services performed
by our Manager. The management fee paid to our Manager is required to be paid prior to the payment
of any distributions to shareholders. The management fee is offset by fees paid to our Manager by
our businesses under management services agreements that our Manager entered into with, or was
assigned with respect to, our businesses, which we refer to as offsetting management services
agreements. We incurred approximately $12.2 million of management fees under the Management
Services Agreement during fiscal year 2010.
Offsetting Management Services Agreements
Our Manager has entered into and may, at any time in the future, enter into offsetting
management services agreements directly with the businesses that we own relating to the performance
by our Manager of offsetting management services for such businesses. All fees, if any, paid by
the businesses that we own to our Manager pursuant to an offsetting management services agreement
during any fiscal quarter offset, on a dollar-for-dollar basis, the management fee otherwise due
and payable by the Company to our Manager under the Management Services Agreement for such fiscal
quarter. The Manager has entered into offsetting management services agreements with all of the
Companys subsidiaries. Offsetting management fees were approximately $3.2 million during fiscal
year 2010.
LLC Agreement
The Trust and our Manager are each equity holders of the Companys limited liability company
interests and parties to the LLC Agreement relating to their respective interests in the Company.
The LLC Agreement sets forth our Managers rights with respect to its profit allocation interest
among other things.
The Company will pay a profit allocation with respect to its businesses to our Manager, as
holder of 100% of the allocation interests, upon the occurrence of certain events, if the Companys
profits with respect to a business exceeding an annualized hurdle rate of 7%, which hurdle is tied
to such business adjusted net assets (as defined in the LLC Agreement) relative to the sum of all
of our subsidiaries adjusted net assets. The calculation of profit allocation with respect to a
particular business will be based on:
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|
such business contribution-based profit, which generally will be equal to such
business aggregate contribution to the Companys profit during the period such business is
owned by the Company; and |
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the Companys cumulative gains and losses to date. |
Generally, a profit allocation will be paid in the event that the amount of profit allocation
exceeds the annualized hurdle rate of 7% in the following manner: (i) 100% of the amount of profit
allocation in excess of the hurdle rate of 7% but that is less than the
25
hurdle rate of 8.75%, which
amount is intended to provide our Manager with an overall profit allocation of 20% once the hurdle
rate of 7% has been surpassed; and (ii) 20% of the amount of profit allocation in excess of the
hurdle rate of 8.75%. Our Manager has the right to cause the Company to purchase the allocation interests it owns, as described below
under the heading CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Supplemental Put
Agreement.
Supplemental Put Agreement
As distinct from its role as our Manager, our Manager is also the owner of 100% of the
allocation interests in the Company. Concurrent with our initial public offering, we entered into a
Supplemental Put Agreement with our Manager pursuant to which our Manager shall have the right to
cause the Company to purchase the allocation interests then owned by our Manager upon termination
of the Management Services Agreement. Essentially, the put rights granted to our Manager require
us to acquire our Managers allocation interests in the Company at a price based on the increase in
fair value in the Companys businesses over the Companys basis in those businesses. If we
terminate the Management Services Agreement, the payment to the Manager will be determined at two
times the increase in fair value in the Companys businesses over the Companys initial basis in
those businesses. At any point in time, the supplemental put liability recorded on the Companys
balance sheet is our Managers estimate of what its allocation interests are worth based upon the
increase in fair value of our businesses over our basis in those businesses. Because the
supplemental put price would be calculated based upon an assumed profit allocation for the sale of
all of our businesses, the growth of the supplemental put liability over time is indicative of our
Managers estimate of the Companys unrealized gains on its interests in our businesses. A decline
in the supplemental put liability is indicative either of the realization of gains associated with
the sale of a business and the corresponding payment of a profit allocation to our Manager, or a
decline in our Managers estimate of the Companys unrealized gains on its interests in our
businesses. We account for the change in the estimated value of the supplemental put liability on
a quarterly basis in our income statement. The expected value of the supplemental put liability
affects our results of operations but it does not affect our cash flows or our cash flow available
for distribution. See the financial statements included in our annual report accompanying this
proxy statement and footnotes B and P thereto for further information concerning the Supplemental
Put Agreement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and officers, and persons who
beneficially own more than ten percent of our Trust stock, to file initial reports of ownership and
reports of changes in ownership of our Trust stock and our other equity securities with the
Securities and Exchange Commission. As a practical matter, we assist our directors and officers by
monitoring transactions and completing and filing Section 16 reports on their behalf. Based upon
this assistance, as well as upon our review of copies of reports filed pursuant to Section 16(a) of
the Exchange Act, we believe that all filings required to be made were timely made in accordance
with the requirements of the Exchange Act in 2010, other than (1) a late Form 4 filed by Compass
Group Investments, Ltd., CGI Diversified Holdings, LP, NAVCO Management, Inc. and Path Spirit LTD,
a group filing, on April 22, 2010 relating to one transaction that took place on April 13, 2010,
and (2) a late Form 4 filed by Alan B. Offenberg on March 25, 2011 relating to one transaction that
took place on January 29, 2010.
SHAREHOLDER PROPOSALS FOR THE 2012 ANNUAL MEETING OF SHAREHOLDERS
To be considered for inclusion in our proxy statement for the 2012 Annual Meeting of
Shareholders, shareholder proposals must be received by the Company no later than January 19, 2012
and no earlier than December 20, 2011. In order to be included in Company-sponsored proxy
materials, shareholder proposals will need to comply with Rule 14a-8 promulgated under the Exchange
Act. If you do not comply with Rule 14a-8, we will not be required to include the proposal in the
proxy statement and the proxy card we will mail to shareholders. No other business (other than
matters included in our proxy statement in accordance with Rule 14a-8) may be presented for action
at the annual meeting unless a shareholder gives timely notice of the proposal in writing to the
Secretary. To be timely, a shareholders notice is required to be delivered to the Secretary not
less than 120 days and no more than 150 days prior to the first anniversary of the preceding years
annual meeting. Shareholder proposals should be sent to the Secretary at Compass Group Diversified
Holdings LLC, Sixty One Wilton Road, Westport, Connecticut 06880, Attention: Investor Relations.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION REPORTS
Copies of our Annual Report on Form 10-K for the year ended December 31, 2010, as filed with
the SEC, are available to shareholders free of charge on our website at
www.compassdiversifiedholdings.com under the caption Investor Relations SEC Filings or by
writing to us at Sixty One Wilton Road, Westport, Connecticut 06880, Attention: Investor Relations.
Alternatively, a copy of our annual report will also be available to shareholders free of charge on
a website maintained by Broadridge Financial Solutions, Inc. and may be viewed at
http://materials.proxyvote.com/20451Q.
26
OTHER MATTERS
We know of no other business that will be brought before the Annual Meeting. If
any other matter or any proposal should be properly presented and should properly come before the
meeting for action, the persons named in the accompanying proxy will, at their discretion and in
accordance with their best judgment, vote upon such proposal.
27
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COMPASS DIVERSIFIED HOLDINGS
61 WILTON ROAD, 2ND FL WESTPORT, CT 06880
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VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date.
Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until
11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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M29366-P05523 |
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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COMPASS DIVERSIFIED HOLDINGS
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For All |
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Withhold All |
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For All Except |
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To withhold authority
to vote for any individual nominee(s), mark For All
Except and write the number(s) of the nominee(s) on the line below.
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THE BOARD RECOMMENDS A VOTE FOR EACH OF THE DIRECTOR NOMINEES, A VOTE FOR
PROPOSALS 2 AND 4 AND A VOTE OF EVERY TWO YEARS FOR PROPOSAL 3.
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¨
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¨
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¨
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1. To elect as directors all nominees listed (except as marked to the contrary above):
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01) James J. Bottiglieri
02) Gordon M. Burns |
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For |
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Against |
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Abstain |
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2.
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To approve, by non-binding vote, the compensation of our executive officers as disclosed in the Proxy Statement.
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¨
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¨
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¨ |
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Every year |
Every 2 years |
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Every 3 years |
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Abstain |
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3.
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To recommend, by non-binding vote, the frequency of the shareholder advisory vote on executive compensation.
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¨
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¨
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For |
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Against |
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Abstain |
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4.
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To ratify the appointment of Grant Thornton LLP as independent
auditor.
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¨
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Sign exactly as imprinted (do not print).
If shares are held jointly, EACH holder should sign. Executors, administrators, trustees,
guardians and others signing in a representative capacity should indicate the capacity in
which they sign. An authorized officer signing on behalf of a corporation should indicate the
name of the corporation and the officers title.
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Signature
[PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to
be
Held on May 19, 2011:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
M29367-P05523
Proxy
COMPASS DIVERSIFIED HOLDINGS
Annual Meeting of Shareholders May 19, 2011 9:00 AM
This proxy is solicited by the Board of Directors
The undersigned hereby appoints Alan B. Offenberg and James J. Bottiglieri, and each of them, attorneys and proxies with full power of substitution, to
represent and to vote on behalf of the undersigned all of the shares of Trust stock of Compass Diversified Holdings that the undersigned is entitled in any
capacity to vote if personally present at the 2011 Annual Meeting of Shareholders to be held on May 19, 2011, and at any adjournments or postponements
thereof, in accordance with the instructions set forth on the reverse and with the same effect as though the undersigned were present in person and voting
such shares. The proxies are authorized in their discretion to vote for the election of a person to the board of directors if any nominee named herein
becomes unable to serve or for good cause will not serve, upon all matters incident to the conduct of the meeting, and upon such other business as may
properly come before the meeting.
PLEASE RETURN THIS PROXY CARD AFTER SIGNING AND DATING IT. THIS PROXY WILL BE VOTED AS DIRECTED. IF THIS PROXY IS RETURNED SIGNED, BUT NO DIRECTION IS
MADE, IT WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS OF COMPASS GROUP DIVERSIFIED HOLDINGS LLC.
Continued and to be signed on reverse side