| Entry into a Material Definitive Agreement |
On March 20, 2024, Compass Diversified Holdings (the “Trust”) and Compass Group Diversified Holdings LLC (the “Company” and, together with the Trust, “CODI”), together with Compass Group Management LLC, entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (“B. Riley”), pursuant to which CODI may sell from time to time, through B. Riley acting as sales agent and/or principal (the “Sales Agent”) up to $100 million of the Trust’s 7.250% Series A Preferred Shares (the “Series A Preferred Shares”), 7.875% Series B Preferred Shares (the “Series B Preferred Shares”), and 7.875% Series C Preferred Shares (the “Series C Preferred Shares” and together with the Series A Preferred Shares, the Series B Preferred Shares, and the Series C Preferred Shares, the “Preferred Shares”), each representing beneficial interests in the Trust.
Pursuant to the Sales Agreement, the Preferred Shares may be offered and sold through the Sales Agent in transactions that are deemed to be “at the market” offerings as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The Preferred Shares may be sold by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act. Under the Sales Agreement, the Sales Agent will be entitled to compensation equal to 2.00% of the gross proceeds of the Preferred Shares it sells from time to time under the Sales Agreement. The Sales Agent will be deemed to be an underwriter within the meaning of the Securities Act. Subject to the terms and conditions of the Sales Agreement, the Sales Agent will use its commercially reasonable efforts to sell on CODI’s behalf any Preferred Shares to be offered by CODI under the Sales Agreement. CODI has no obligation to sell any of the Preferred Shares under the Sales Agreement, and CODI or the Sales Agent may at any time suspend sales of Preferred Shares under the Sales Agreement. CODI has also agreed to provide indemnification and contribution to the Sales Agent with respect to certain liabilities, including under the Securities Act.
The Preferred Shares will be issued pursuant to CODI’s Registration Statement on Form
S-3
ASR (File
No. 333-259374)
(the “Registration Statement”). CODI has filed a prospectus supplement, dated March 20, 2024, to the prospectus, dated September 7, 2021, with the Securities and Exchange Commission in connection with the offer and sale of the Shares.
The foregoing description of the Sales Agreement is not complete and is qualified in its entirety by reference to the Sales Agreement, a copy of which is attached hereto as Exhibit 1.1 and incorporated herein by reference.
In connection with the filing of the Sales Agreement, CODI is filing as Exhibit 5.1 and Exhibit 5.2 to this Current Report on Form
8-K
the opinions of Richards, Layton & Finger, P.A., its Delaware counsel, and as Exhibit 8.1 to this Current Report on Form
8-K
the opinion of Squire Patton Boggs (US) LLP with respect to certain tax matters.
| Material Modifications to Rights of Security Holders |
First Amendments to Preferred Share Designations
In connection with the Sales Agreement, on March 20, 2024 the Trust entered into amendments (collectively the “Share Designation Amendments”) to the respective Amended and Restated Share Designations of the Trust (collectively, the “Preferred Share Designations”) establishing the terms of the Preferred Shares. Each Share Designation Amendment increased the number of authorized Preferred Shares available for issuance, (i) with respect to the Series A Preferred Shares, by 500,000 shares, (ii) with respect to the Series B Preferred Shares, by 1,750,000 shares, and (iii) with respect to the Series C Shares, by 1,750,000 shares. Except as expressly modified pursuant to the Share Designation Amendments, the provisions of the Preferred Share Designations are and shall continue to be in full force and effect.
