THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Compass Diversified Trust (CODI)

5/11/2006 424B1 Information

CGI

CGI, through its wholly owned subsidiaries, is the sole limited partner in each of the entities from which the company will acquire a controlling interest in the initial businesses, as well as the sole limited partner in CGI Diversified Holdings, LP. CGI is also an affiliate of Navco Management, Inc., the general partner of CGI Diversified Holdings, LP and the entities from which the company will acquire controlling interests in the initial businesses.

We will use a portion of the net proceeds of this offering, the separate private placement transactions and our initial borrowing from our third party credit facility to acquire controlling interests in our initial businesses from CGI and its subsidiaries. Such controlling interests were acquired or otherwise obtained by CGI and its subsidiaries pursuant to equity investments totaling approximately $71.9 million, which controlling interests we will acquire from CGI and its subsidiaries for approximately $147.7 million in cash.

CGI is the sole owner of The Compass Group. The members of our management team, while working for The Compass Group, advised CGI on the acquisition and management of the initial businesses. See the section entitled “The Acquisitions of and Loans to Our Initial Businesses” for more information about our acquisition of our initial businesses. In addition to advising on the acquisition and management of our initial businesses, the relationship between our management team and CGI has also related to the acquisition of controlling interests in six other businesses including a recent acquisition for approximately $32.0 million. Excluding the most recent acquisition, CGI and its subsidiaries acquired or otherwise obtained the controlling equity interest in five of those businesses for approximately $94.9 million in cash and have, as a result of those companies’ cash flows, sales or mergers of those companies, received cash proceeds relating to those businesses of approximately $158.0 million to date, while continuing to maintain significant, though not necessarily controlling, equity interests in four of those businesses. On average, all of the capital invested in the equity of those five businesses was received by CGI and its subsidiaries in approximately 2.5 years. The company will not have any interest in, nor be affiliated with, any of those six businesses upon the closing of this offering.

CGI Diversified Holdings, LP has agreed to purchase, in conjunction with the closing of this offering in a separate private placement transaction, that number of shares, at a per share price equal to the initial public offering price, having an aggregate purchase price of approximately $86 million. In addition, CGI has indicated it intends to purchase in this offering shares having an aggregate purchase price of $10 million. As indicated above, these amounts will be used in part to pay the purchase price to CGI and its subsidiaries for the acquisition of our initial businesses by the company. See the section entitled “The Acquisitions of and Loans to Our Initial Businesses” for more information on our acquisition of our initial businesses. CGI Diversified Holdings, LP will have certain registration rights in connection with the shares it acquires in the separate private placement transaction. See the section entitled “Shares Eligible for Future Sale — Registration Rights” for more information about these registration rights. CGI Diversified Holdings, LP will also become a non-managing member of our manager following this offering, and as a result will be entitled to receive 10% of any profit allocation paid by the company to our manager. CGI Diversified Holdings, LP did not pay any consideration for its non-management member interests in our manager.

Neither our Chief Executive Officer nor any of the employees of the manager have been or are officers, directors, employees or owners of CGI, CGI Diversified Holdings, LP or Navco Management, Inc. Except as disclosed in this prospectus, none of CGI, CGI Diversified Holdings, Inc. or Navco Management, Inc. has engaged in any transaction with the company or our manager.

Our Manager

Our manager is a newly created entity that will be owned by our management team and CGI and controlled by its sole and managing member, Mr. Massoud. Following this offering, CGI Diversified Holdings, LP, and Sostratus LLC, an entity wholly owned by our management team, will become non-managing members of our manager. Prior to this offering, the company and the trust were controlled by our manager.

Our relationship with our manager will be governed principally by the following three agreements:

• the management services agreement relating to the management services our manager will perform for us and the businesses we own and the management fee to be paid to our manager in respect thereof;

• the company’s LLC agreement setting forth our manager’s rights with respect to the allocation interests it owns, including the right to receive profit allocations from the company; and

• the supplemental put agreement relating to our manager’s right to cause the company to purchase the allocation interests it owns.

See the sections entitled “Our Manager”, “Management Services Agreement” and “Description of Shares” for more information about these agreements.

We also expect that our manager will enter into offsetting management services agreements, transaction services agreements and other agreements, in each case, with some or all of our businesses. In this respect, we expect that The Compass Group will cause its affiliates to assign any outstanding agreements with our initial businesses to our manager in connection with the closing of this offering. See the sections entitled “Our Manager — Our Relationship With Our Manager — Our Manager as a Service Provider — Offsetting Management Services Agreements” for information about these agreements.

In conjunction with the closing of this offering, all the employees of The Compass Group will become employees of our manager. While our manager will provide management services to the company, our manager will also be permitted to provide services, including services similar to management services, 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, which may be related to or affiliated with CGI, which will continue to own several businesses that were managed by our management team prior to this offering, or its affiliates as well as other parties. Our Chief Executive Officer and the officers and employees of our manager and its affiliates who provide services to us currently anticipate devoting a substantial majority of their time to the affairs of the company. Mr. James Bottiglieri, our Chief Financial Officer, will devote 100% of his time to our affairs.

The company has agreed to reimburse our manager and its affiliates, within five business days after the closing of this offering, for certain costs and expenses incurred or to be incurred prior to and in connection with the closing of this offering in the aggregate amount of approximately $6.0 million.

Mr. Massoud, as managing member of the 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 the manager, satisfy its contractual obligations and otherwise distribute such proceeds to the members of the manager in accordance with the manager’s organizational documents. Mr. C. Sean Day

Mr. Day, the chairman of the company’s board of directors, is chairman of The Compass Group, a wholly owned subsidiary of CGI. Mr. Day is not an employee, director, officer or owner of our manager.

Pharos

Pharos has agreed to purchase, in conjunction with the closing of this offering in a separate private placement transaction, that number of shares, at a per share price equal to the initial public offering price, having an aggregate purchase price of $4 million. As indicated above, this amount will be used in part to pay the purchase price to CGI and its subsidiaries for the acquisition of our initial businesses by the company. See the section entitled “The Acquisitions of and Loans to Our Initial Businesses” for more information on our acquisition of our initial business. Pharos will have certain registration rights in connection with the shares it acquires in the separate private placement transaction. See the section entitled “Shares Eligible for Future Sale — Registration Rights” for more information about these registration rights. In addition, Pharos is owned by certain employees of our manager, including Mr. Massoud, our Chief Executive Officer. Mr. Massoud, as managing member, controls Pharos.

Directed Share Program

Members of our management team have indicated their intention to purchase shares, at a per share price equal to the initial public offering price, pursuant to our directed share program. See the section entitled “Underwriting — Directed Share Program” for more information about our directed share program.

Ownership Interest In the Initial Businesses

Prior to this offering, certain employees of our manager held equity interests in certain of our initial businesses. In connection with this offering, all employees of our manager who own shares in any of our initial businesses have agreed to sell such shares to the company at the same price per share as CGI will receive pursuant to the stock purchase agreement. In addition, certain employees of our manager will receive profit payments, which will be paid through a partnership in which they are partners. Such employees intend to reinvest approximately $4.0 million, which constitutes a substantial majority of their anticipated proceeds on an after-tax basis, from such sales and profit payments in the purchase of shares, by means of the private placement transaction with Pharos. In addition, following this offering, Mr. Day, Chairman of the company’s board of directors, will continue to hold interests in certain of our initial businesses. See the section entitled “Principal Shareholders/ Security Ownership of Directors and Executive Officers” for more information about Mr. Day’s ownership interest in our initial businesses. As reflected below, the current holdings of these individuals did not and will not exceed 5% of any of such initial businesses’ outstanding shares.

Crosman

Mr. Massoud, our Chief Executive Officer, holds 2,077 shares of Crosman, representing approximately 0.4% of Crosman’s outstanding shares. In addition, certain employees of the manager, a former director of Crosman and a former employee of The Compass Group hold 4,748 shares of Crosman in the aggregate representing 0.8% of Crosman’s outstanding shares. In connection with our acquisition of the Crosman shares from CGI’s subsidiary, we will acquire from Mr. Massoud and such employees and former director all of their shares in Crosman at the same price per share as CGI will receive pursuant to the stock purchase agreement. Mr. Massoud and all employees of the manager and the former director of Crosman who hold Crosman shares intend to reinvest approximately 100% of the after-tax proceeds of such sales in the purchase of shares either by means of the private placement transaction with Pharos, discussed above, or pursuant to the directed share program.

Prior to this offering, Mr. Day, our Chairman of the board of directors, held 5,193 shares of Crosman, representing approximately 0.9% of Crosman’s outstanding shares. Mr. Day will continue to hold these shares following this offering and our acquisition of Crosman. See the section entitled “Principal Shareholders/ Security Ownership of Directors and Executive Officers” for more information about Mr. Day’s ownership interest in our initial businesses.

Advanced Circuits

ACI Coinvestment Partners, LLC, of which Mr. Massoud holds a 42.1% interest, holds 11,880 shares of Advanced Circuits, representing approximately 1.0% of Advanced Circuits’ outstanding shares. Certain employees of the manager hold the remaining 57.9% interest in ACI Coinvestment Partners, LLC. In connection with our acquisition of the Advanced Circuits’ shares from CGI’s subsidiary, we will acquire from ACI Coinvestment Partners, LLC all of its shares in Advanced Circuits at the same price per share as CGI will receive pursuant to the stock purchase agreement. Mr. Massoud and all employees of the manager who hold interests in ACI Coinvestment Partners, LLC intend to reinvest approximately 100% of the after-tax proceeds of such sales in the purchase of shares either by means of the private placement transactions to Pharos, discussed above, or pursuant to the directed share program.

Prior to this offering, Mr. Day, our Chairman of the board of directors, held 10,000 shares of Advanced Circuits, representing approximately 0.8% of Advanced Circuits’ outstanding shares. Mr. Day will continue to hold these shares following this offering and our acquisition of Advanced Circuits. See the section entitled “Principal Shareholders/ Security Ownership of Directors and Executive Officers” for more information about Mr. Day’s ownership interest in our initial businesses.

Silvue

Silvue Coinvestment Partners, LLC, of which Mr. Massoud and Mr. Day hold 26.1% and 36.2% interests, respectively, currently holds 532 shares of Silvue (on an as converted basis), representing approximately 1.2% of Silvue’s outstanding shares. Certain employees of the manager and The Compass Group hold the remaining 37.7% interest in Silvue Coinvestment Partners, LLC. In connection with our acquisition of the Silvue shares from CGI’s subsidiary, we will acquire from Silvue Coinvestment Partners, LLC, all of its shares in Silvue at the same price per share as CGI will receive pursuant to the stock purchase agreement. Mr. Massoud and all employees of the manager who hold interests in Silvue Coinvestment Partners, LLC intend to reinvest approximately 100% of the after-tax proceeds of such sales in the purchase of shares either by means of the private placement transaction with Pharos, or pursuant to the directed share program.

Contractual Arrangements with Related Parties

The following discussion sets forth the agreements that we intend to enter into with related parties in connection with this offering. The statements relating to each agreement set forth in this section and elsewhere in this prospectus are subject to and are qualified in their entirety by reference to all of the provisions of such agreements, forms of which have been filed as exhibits to the registration statement of which this prospectus is a part.

The terms and conditions, including those relating to pricing, of these agreements to which the company, CGI, our manager and certain other related parties are a party were negotiated in the overall context of this offering and not on an arm’s-length basis.

Although we received an opinion from Duff & Phelps, LLC, an independent financial advisory and investment banking firm, regarding the fairness, from a financial point of view only, of the acquisition prices of the four initial businesses (on an individual basis only), and notwithstanding that the acquisitions of the initial businesses and all of the agreements identified above were approved by a majority of our independent directors, the agreements were not negotiated on an arm’s-length basis with unrelated third parties. As a result, the terms and conditions of these agreements may be less favorable to us than they might have been had they been negotiated on an arm’s-length basis.

Stock Purchase Agreement with Sellers, including CGI and its Subsidiaries

CGI and its subsidiaries, together with the other sellers, intend to enter into a stock purchase agreement with the company pursuant to which the company will acquire controlling interests in our initial businesses. In addition, upon consummation of the transactions contemplated by the stock purchase agreement, the company will succeed to the rights and interests of the applicable selling CGI subsidiaries under certain stockholders’ agreements and registration rights agreements currently in place at our businesses. See the section entitled “The Acquisitions of and Loans to Our Initial Businesses” for more information about the stock purchase agreement.

Loan Agreements with each Initial Business

The company intends to enter into loan agreements with each of our initial businesses pursuant to which the company will make loans and financing commitments to each initial business. See the section entitled “The Acquisitions of and Loans to Our Initial Businesses” for more information about the loan agreements.

Management Services Agreement

The company intends to enter into a management services agreement pursuant to which our manager will provide management services. See the section entitled “Management Services Agreement” for more information about the management services agreement.

Offsetting Management Services Agreements

Our manager may, at any time, 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 during any fiscal quarter will 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.

In addition, in conjunction with the closing of this offering, The Compass Group will cause its affiliates to assign to our manager each existing agreement pursuant to which its affiliates provide management services to our initial businesses. Each such agreement shall be deemed an offsetting management services agreement. See the section entitled “Our Manager — Our Relationship With Our Manager — Our Manager as a Service Provider — Offsetting Management Services Agreements” for more information about offsetting management services agreements and offsetting management fees.

LLC Agreement

The trust and our manager will each be parties to the LLC agreement relating to their respective interests in the company. See the section entitled “Description of Shares” for more information about the LLC agreement.

Supplemental Put Agreement

In consideration of our manager’s acquisition of the allocation interests, we intend to enter 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. See the section entitled “Our Manager — Supplemental Put Agreement” for more information about the supplemental put agreement.

Private Placement Agreements

CGI and Pharos have each agreed to purchase, in conjunction with the closing of this offering in separate private placement transactions, that number of shares, at a per share price equal to the initial public offering price, having an aggregate purchase price of $86 and $4 million, respectively.

Registration Rights Agreements

In connection with CGI’s and Pharos’ purchase of shares pursuant to the separate private placement transactions described above, we intend to enter into registration rights agreements with CGI Diversified Holdings, LP and Pharos for the registration of such shares under the Securities Act. See the section entitled “Shares Eligible for Future Sale — Registration Rights” for more information about the registration rights agreement.

Code of Ethics

Prior to the completion of this offering, the company’s board of directors will adopt a code of ethics and conduct establishing the standards of ethical conduct applicable to all directors, officers and employees, as applicable, of the company, our manager, members of our management team and other employees of our manager and any other person who is performing services for or on behalf of the company. We anticipate that our initial businesses will adopt codes of ethics and conduct substantially similar to that of the company.

The code of ethics and conduct will address, among other things, conflicts of interest and related party transactions generally and will require the approval of all related party transactions by the company’s nominating and corporate governance committee. The code of ethics and conduct specifically will require nominating and corporate governance committee approval for transactions between us and any affiliate of CGI or our manager relating to the provision of any services to us or our businesses. We will disclose promptly any waivers of the code of ethics and conduct by our nominating and corporate governance committee with respect to directors and executive officers of the company. In addition, our nominating and corporate governance committee will review any conflicts of interest that may arise between the company and our manager.