FORM OF SHARE PURCHASE AGREEMENT by and between COMPASS GROUP DIVERSIFIED HOLDINGS LLC, COMPASS DIVERSIFIED TRUST and PHAROS I LLC Dated as of May __, 2006
Exhibit 10.7
FORM OF
by and between
COMPASS
GROUP DIVERSIFIED HOLDINGS LLC,
and
PHAROS I LLC
Dated as of May __, 2006
SUBSCRIPTION INSTRUCTIONS — PLEASE READ CAREFULLY
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND HAVE NOT BEEN QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. THE PURCHASER OF
THESE SECURITIES, BY MAKING SUCH PURCHASE, AGREES FOR THE BENEFIT OF THE ISSUER THAT THE SECURITIES
OFFERED HEREBY MAY BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A)(1) PURSUANT
TO RULE 144A UNDER THE SECURITIES ACT TO AN INSTITUTIONAL INVESTOR THAT THE PURCHASER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, WHOM THE SELLER HAS INFORMED, IN
EACH CASE, THAT THE SALE, OFFER FOR SALE OR TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2)
PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT, OR (3)
PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH RULES 903 OR 904 OF REGULATION S
UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES
OF THE UNITED STATES.
SHARE PURCHASE AGREEMENT (this “Agreement”), dated as of [ ], 2006 by and among Compass
Group Diversified Holdings LLC, a Delaware limited liability company (the “Company”), on its own
behalf and as sponsor of Compass Diversified Trust, a Delaware statutory business trust (“Issuer”),
the Issuer and Pharos I LLC, a Delaware limited liability company (“Buyer”).
WHEREAS:
A. The Company and Issuer wish to sell, and Buyer wishes to purchase, shares of the Issuer
representing an undivided beneficial interest in the Issuer (the “Shares”) upon the terms and
subject to the conditions set forth in this Agreement;
B. The Shares (such Shares, the “Restricted Shares”) will be sold pursuant to an exemption
from registration under the Securities Act of 1933, as amended (the “1933 Act”), and the
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rules and regulations promulgated thereunder by the United States Securities and Exchange
Commission (the “SEC”);
C. Simultaneous with the closing of the purchase of Shares by the Buyer, the Company and the
Issuer intend and expect to close an initial public offering (the “IPO”) of Shares to the public
(such Shares, the “Registered Shares”), as described in the Issuer’s prospectus dated May ___, 2006
(the “Prospectus”);
D. The Restricted Shares and the Registered Shares will be identical in all respects and
constitute the same class of equity of the Issuer, except as to the status of the Restricted Shares
under the 1933 Act; and
E. The Company and Issuer will, in connection with the issuance of the Restricted Shares and
pursuant to the terms of the Registration Rights Agreement substantially in the form of Exhibit A
attached hereto (the “Registration Rights Agreement”), grant to Buyer certain rights to register
the Restricted Shares for resale by Buyer under the 1933 Act and the rules and regulations
promulgated thereunder by the SEC, and applicable state securities laws.
NOW THEREFORE, in consideration of the mutual covenants, representations, warranties and
agreements contained herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. PURCHASE AND SALE OF SHARES
a. Purchase of Restricted Shares. Subject to Section 1(b) below, at the Closing
(defined below), the Company, as sponsor of the Issuer, will cause the Issuer to issue the
Restricted Shares to the Company in exchange for, and as consideration for, an equal number
of trust interests of the Company, as provided for in the Company’s Amended and Restated
Operating Agreement, dated as of April 25, 2006 (the “Operating Agreement”), and the Company
shall sell that number of Restricted Shares to the Buyer equal to the
result of (i) the Aggregate Purchase Price (as defined below)
divided by (ii) the Per Share Price (as defined
below), and the Buyer shall purchase that number of Restricted Shares from the Company. The
per share purchase price (the “Per Share Price”) for the Restricted Shares shall be the same
as the per Share purchase price of the Registered Shares to be offered in the IPO of the
Issuer, as set forth in the Prospectus. The aggregate purchase price (the “Aggregate
Purchase Price”) for the Restricted Shares shall be Four Million Dollars ($4,000,000);
provided, however, that in the event the Per Share Price would otherwise result in the
issuance of a fraction of a Share, the Company shall sell and the Buyer shall purchase one
more Restricted Share and the Aggregate Purchase Price to be paid by Buyer shall be
increased accordingly. The Restricted Shares shall be sold at the Closing as hereinafter
provided.
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b. Closing. The closing (the “Closing”) of the issuance and sale of the Restricted
Shares shall occur contemporaneously with, and shall be conditioned upon, the closing of the
IPO with respect to the sale and delivery of any firm securities
thereat. The date of the occurrence of the Closing shall be referred to herein as the “Closing
Date.” For the avoidance of doubt, if for whatever reason the IPO is not completed, Issuer
will not be obligated to issue the Restricted Shares, the Company shall not be obligated to
sell the Restricted Shares and Buyer shall not be required to purchase the Restricted Shares
and this Agreement may be terminated in accordance with Section 5(k) below.
c. Form of Payment. At the Closing, the Buyer shall pay the Aggregate Purchase Price
by net settlement process in accordance with the Escrow Agreement
entered into by and among the Buyer, the Company and other parties
named therein, to be dated as of the Closing Date.
d. Form of Delivery. At the Closing, the Company shall deliver to the Buyer a Trust
Interest Certificate (as defined in the Operating Agreement), duly executed by the Issuer
and authenticated by the Transfer Agent (as defined in the Operating Agreement) representing
that number of Restricted Shares purchased by the Buyer in accordance with Section 1(a)
above and including appropriate legends for the Restricted Shares.
e. Registration Rights Agreement. At the Closing, the parties hereto shall execute and
deliver the Registration Rights Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE BUYER
Buyer hereby represents and warrants to the Company and Issuer as of the date hereof and as of
the date of the Closing that:
a. Organization and Qualification. Buyer is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation, has the requisite
corporate power to own its properties and to carry on its business as now being conducted.
b. Authorization; Enforceability. (i) Buyer has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and the
Registration Rights Agreement; (ii) the execution and delivery of this Agreement and the
Registration Rights Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby and thereby have been duly authorized and no further consent or
corporate authorization is required therefor; (iii) this Agreement has been, and at Closing
the Registration Rights Agreement will be, duly executed and delivered by Buyer; and (iv)
assuming due execution and delivery by the Company and Issuer, this Agreement constitutes,
and the Registration Rights Agreement will constitute, the valid and binding obligations of
Buyer enforceable against it in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
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moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors’ rights and remedies or by other equitable principles of general
application or by the public policy provisions of federal securities laws.
c. Knowledge and Experience. Buyer: (i) has such knowledge and experience in financial
and business matters so as to be capable of evaluating the merits and risks of an investment
in the Issuer and the Company; (ii) is prepared to bear the economic risk of such an
investment; and (iii) has consulted with its own legal, financial, tax and other advisors to
the extent it has deemed appropriate in connection with any investment in the Issuer and the
Company, as well as the purchase of the Restricted Shares and the status thereof.
d. Prospectus. Buyer has received and read the Prospectus relating to the IPO and has
requested and reviewed such other information concerning the Issuer and the Company as it
deems necessary or advisable in the circumstances.
e. Accredited Investor. Buyer is: (i) familiar with or has otherwise been advised by
counsel regarding the rules and regulations of the 1933 Act, that are and would be
applicable to it in connection with the acquisition of the Restricted Shares; (ii) familiar
with the term “accredited investor,” as defined in Rule 501(a) under the 1933 Act; and (iii)
an institutional accredited investor within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the 1933 Act.
f. No Registration. Buyer acknowledges that: (i) the Restricted Shares are not a part
of the IPO; (ii) the Restricted Shares are being offered in a transaction not involving any
public offering within the United States within the meaning of the 1933 Act; (iii) neither
the Issuer nor the Company has filed nor will file a registration statement in connection
with, or otherwise register, the offer and sale of the Restricted Shares under the 1933 Act
or the securities laws of any state except in accordance with the Registration Rights
Agreement; and (iv) the solicitation of bids and any offer or sale of the Restricted Shares
are being made in reliance on an exemption from the registration requirements of the 1933
Act.
g. Investment Purpose; No Distribution. Buyer is seeking to acquire the Restricted
Shares for its own account or an account or accounts with respect to which its exercises
sole investment discretion and each such account, if any, is an institutional accredited
investor and each such account, if any, is aware that the solicitation of bids and any offer
or sale of the Restricted Shares are being made in reliance on an exemption from the
registration requirements of the 1933 Act. Buyer is seeking to acquire the Restricted
Shares for investment purposes only, and not with a view to the distribution thereof, in
whole or in part.
h. Transfer Restrictions. Buyer acknowledges that any subsequent transfer of the
Restricted Shares may be restricted under the 1933 Act or the securities laws of any state,
and that any securities so acquired will bear legends to such effect.
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i. Condition to Closing. Buyer acknowledges and agrees that the Closing is contingent
upon the closing of the IPO, and that if, for whatever reason, the IPO is not completed,
Issuer will not be obligated to issue the Restricted Shares, the Company shall not be
obligated to sell the Restricted Shares and Buyer shall not be required to purchase the
Restricted Shares and this Agreement may be terminated in accordance with Section 5(k)
below.
j. Manner of Issuance. Buyer acknowledges and agrees that the issuance of the
Restricted Shares shall be effected in accordance with Section 1 above.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND ISSUER
The Company and Issuer hereby represent and warrant to Buyer as of the date hereof and as of
the Closing that:
a. Organization and Qualification. Each of the Company and Issuer is duly organized,
validly existing and, where applicable, in good standing under the laws of the jurisdiction
of its formation, has the requisite power and authority to own its properties and to carry
on its business as now being conducted and presently proposed to be conducted, as
applicable.
b. Authorization; Enforceability. (i) Each of the Company and Issuer has the requisite
power and authority to enter into and perform this Agreement and the Registration Rights
Agreement, and to issue and/or sell the Restricted Shares in accordance with the terms
hereof; (ii) the execution and delivery of this Agreement and the Registration Rights
Agreement by the Company and Issuer and the consummation by them of the transactions
contemplated hereby and thereby, including the issuance of the Restricted Shares, have been
duly authorized and no further consent or authorization is required therefor; (iii) this
Agreement has been, and at Closing the Registration Rights Agreement will be, duly executed
and delivered by the Company and Issuer; and (iv) assuming due execution and delivery by
Buyer, this Agreement constitutes, and the Registration Rights Agreement will constitute,
the valid and binding obligations of the Company and Issuer enforceable against them in
accordance with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors’ rights and remedies or by
other equitable principles of general application or by the public policy provisions of
federal securities laws.
c. Issuance of Securities. The Restricted Shares have been duly authorized and, upon issuance in
accordance with the terms hereof and thereof, shall be validly issued and fully paid, and free
from all taxes, liens and charges with respect to the issue thereof.
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4. TRANSFER AGENT INSTRUCTIONS
The Company shall cause the Issuer to instruct its transfer agent to issue
certificates, registered in the name of the Buyer or its nominee, for the Restricted Shares in such
amounts as specified from time to time by the Buyer to Issuer. All such certificates shall bear a
restrictive legend of the type referred to in Section 2(h) of this Agreement. Issuer warrants and
covenants that no instruction other than such instructions referred to in this Section 4, and stop
transfer instructions to give effect to Section 2(h) hereof or any applicable provision of the
Registration Rights Agreement, will be given by Issuer to its transfer agent and that the
Restricted Shares shall otherwise be freely transferable on the books and records of the Issuer as
and to the extent provided in this Agreement. Nothing in this Section 4 shall affect in any way
Buyer’s obligations and agreement to comply with all applicable securities laws upon the sale,
assignment or other transfer of the Shares. If Buyer provides Issuer with an opinion of counsel,
reasonably satisfactory in form, scope, substance to Issuer, that registration of the sale,
assignment or other transfer by Buyer of any of the Restricted Shares is not required under the
1933 Act, Issuer shall permit the transfer, and promptly instruct its transfer agent to issue one
or more certificates in such name and in such denominations as specified by Buyer.
5. GOVERNING LAW; MISCELLANEOUS
a. Governing Law. This Agreement shall be governed by and interpreted in accordance
with, the laws of the State of New York without regard to the principles of conflict of laws
to the extent that such principles would require or permit the application of laws of
another jurisdiction.
b. Counterparts. This Agreement may be executed in two or more identical counterparts,
including, without limitation, by facsimile transmission (with copies sent by United States
mail to the other parties), all of which counterparts shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause four (4) additional
original executed signature pages to be physically delivered to the other party within five
(5) days of the execution and delivery hereof.
c. Headings. The headings of this Agreement are for convenience of reference and shall
not form part of, or affect the interpretations of, this Agreement.
d. Severability. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement.
e. Entire Agreement; Amendments. This Agreement and the Registration Rights
Agreement contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or therein, none of
the parties hereto makes any representation, warranty, covenant or undertaking with respect
to
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such matters. No provision of this Agreement may be waived or amended other than by an
instrument in writing signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given under the terms of this
Agreement shall be sent by mail or delivered personally, by courier or by facsimile (with a
copy by U.S. mail) and shall be effective five days after being placed in the mail, if
mailed, certified or registered, return receipt requested, or upon receipt, if delivered
personally or by courier or by facsimile (with a copy by U.S. mail), in each case properly
addressed to the party to receive the same. The addresses for such communications shall be:
If to the Company or Issuer:
Compass Group Diversified Holdings LLC
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If to the Buyer:
Pharos I LLC
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With a copy to:
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
Suite 3500
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Suite 3500
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Each
party hereto shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties. Neither the Company nor Issuer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent the Buyer. Buyer may not
assign its rights hereunder without the consent of the Company and Issuer.
h. No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other person.
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i. Publicity. The parties shall have the right to approve before issuance any press
releases or any other public statements with respect to the transactions contemplated
hereby; provided, however, that Issuer shall be entitled, without the prior approval of
Buyer, to make any press release or other public disclosure with respect to such
transactions as is required by applicable law and regulations (although the Buyer shall be
consulted by Issuer in connection with any such press release or other public disclosure
prior to its release and shall be provided with a copy thereof).
j. Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purpose of this Agreement and
the consummation of the transactions contemplated hereby.
k. Termination. In the event that the IPO is terminated, this Agreement shall
automatically be terminated and be of no further force and effect.
[signature pages follow]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the day and
year first above written.
COMPASS GROUP DIVERSIFIED HOLDINGS LLC
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
By:
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| Title: Chief Financial Officer |
PHAROS I LLC
By:
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| Title: Manager |