Compass Diversified Holdings Announces Eighth Amended and Restated Management Services Agreement

Date of Report: February 23, 2026

Company: Compass Diversified Holdings (“CODI”)

SEC Filing: Form 8-K

Business Address: 301 Riverside Avenue, Westport, CT 06880

Contact: 203-221-1703

Key Points and Shareholder-Relevant Details

• Amendment of Management Services Agreement: Compass Diversified Holdings has executed the Eighth Amended and Restated Management Services Agreement (the “Amendment”) with Compass Group Management LLC. This agreement, effective as of February 23, 2026, updates and restates prior versions, with the original agreement dating back to May 16, 2006.
• Repayment of Over-Paid Management Fees: The new amendment introduces a requirement for the Manager to repay any over-paid management fees on the applicable management fee payment dates, unless otherwise agreed in writing by the Company. This could potentially improve CODI’s cost structure and increase distributable earnings.
• Manager Indemnification: The Manager is now required to indemnify the Company to substantially the same extent as the Company indemnifies the Manager. This adds an additional layer of protection for shareholders against managerial risk and misconduct.
• Management Fee Structure:
  • The management fee is calculated based on Adjusted Net Assets as of each fiscal quarter. Specific fee rates are as follows:
    • 0.5% on Adjusted Net Assets up to \$3.5 billion
    • For Adjusted Net Assets above \$3.5 billion but less than \$10 billion: a fixed \$17.5 million plus 0.3125% of the amount exceeding \$3.5 billion
    • 0.375% on Adjusted Net Assets of \$10 billion or more
  • The calculation is based on audited consolidated financial statements if available, or unaudited statements otherwise. Once calculated, the management fee is final with no recalculation permitted.
  • If the Company lacks sufficient liquidity to pay the management fee, it must liquidate assets or incur indebtedness to fulfill the payment obligation. This clause could potentially impact CODI’s leverage and liquidity profile.
• Transparency and Reporting:
  • The Manager must provide the Board of Directors with annual reports on the composition and performance of each subsidiary, annual strategic plans, and other relevant information. This provides investors with enhanced transparency regarding executive oversight and strategic direction.
  • The Company is granted inspection rights to the Manager’s books and records at reasonable times, bolstering operational transparency.
• Secondment and Remuneration of Key Executives:
  • The Manager is responsible for seconding individuals to serve as the Company’s Chief Executive Officer and Chief Financial Officer. These individuals remain employees of the Manager (or its affiliates) for payroll and benefits purposes, but their remuneration is determined and approved annually by CODI’s Compensation Committee.
  • The Company reimburses the Manager for the cost of services provided by the CFO and their staff. The Board may prohibit any such individual from providing services if deemed in the best interest of the Company.
• Director and Officer Insurance: The Company must maintain at least \$15 million in directors and officers insurance coverage for individuals seconded to CODI.
• Manager’s Exclusive Authority: The Manager retains exclusive responsibility for reviewing and making recommendations on acquisition and disposition opportunities. The Board must seek the Manager’s recommendation before any decision. For related party transactions involving affiliates of the Manager, approval by the Nominating and Corporate Governance Committee is required.
• Indemnification and Reliance:
  • The Manager can rely on legal, financial, and other expert advice in good faith, and is not liable for actions taken in such reliance.
  • The Manager is required to promptly notify the Company of any third-party claims related to Company assets and cannot settle such claims without Board approval.
• Emerging Growth Company Status: CODI is not an emerging growth company under relevant SEC definitions.
• Securities Registration: The Series C Preferred Shares representing beneficial interests in Compass Diversified Holdings trade on the New York Stock Exchange under the symbol CODI PR C.

Potentially Price-Sensitive Information

• Fee Repayment Mechanism: The new requirement for the Manager to repay over-paid management fees could enhance CODI’s profitability and distributable cash flow, possibly supporting higher future dividends or buybacks.
• Liquidity Management: The stipulation to liquidate assets or incur debt to pay management fees could impact CODI’s leverage metrics and cash flows, and may be viewed as a risk factor by investors.
• Enhanced Governance: Increased Board oversight, mandatory reporting, and annual executive remuneration review may provide investors with greater confidence in CODI’s governance and alignment with shareholder interests.
• Indemnification Provisions: The reciprocal indemnification between the Company and Manager reduces shareholder risk from management actions and could be viewed favorably by the market.

Investor Takeaways

• The Eighth Amended and Restated Management Services Agreement introduces significant changes to the management fee structure and governance, directly impacting CODI’s cost base and risk profile.
• The Company’s ongoing obligations to fund management fees—even if it requires asset sales or new debt—could influence liquidity, leverage, and potentially share value.
• Shareholders should monitor future filings for details on management fee repayments and the impact of these provisions on distributable earnings and dividend policy.
• Enhanced reporting and transparency measures may improve investor confidence and support CODI’s market valuation.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors should review the full SEC filing and consult their financial advisors before making investment decisions. The information herein is based on publicly available filings as of the date of publication and may be subject to change.

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