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Shareholders’ Equity

Intangible and Other Assets

S-1/A 1 w15027a3sv1za.htm COMPASS DIVERSIFIED TRUST AMENDMENT 3 TO FORM S-1 sv1za

As filed with the Securities and Exchange Commission on April 13, 2006

Securities Act File No. 333-130326

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 3

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

COMPASS DIVERSIFIED TRUST

(Exact name of Registrant as specified in charter)


Delaware	7363	57-6218917
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

COMPASS GROUP DIVERSIFIED HOLDINGS LLC

(Exact name of Registrant as specified in its charter)


Delaware	7363	20-3812051
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

Sixty One Wilton Road

Second Floor

Westport, CT 06880

(203) 221-1703

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

I. Joseph Massoud

Chief Executive Officer

Compass Group Diversified Holdings LLC

Sixty One Wilton Road

Second Floor

Westport, CT 06880

(203) 221-1703

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:


Steven B. Boehm Cynthia M. Krus Sutherland Asbill & Brennan LLP 1275 Pennsylvania Avenue, N.W. Washington, DC 20004 (202) 383-0100 (202) 637-3593 — Facsimile		Ralph F. MacDonald, III Michael P. Reed Alston & Bird LLP One Atlantic Center 1201 West Peachtree Street Atlanta, GA 30309 (404) 881-7000 (404) 253-8272 — Facsimile

Approximate date of commencement of proposed sale to the public:

As soon as practicable after the effective date of this registration statement

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated April 13, 2006

PRELIMINARY PROSPECTUS

14,000,000 Shares

Each Share Represents One Beneficial Interest in the Trust

We are making an initial public offering of 14,000,000 shares of Compass Diversified Trust, which we refer to as the trust. Each share of the trust represents one undivided beneficial interest in the trust property. The purpose of the trust is to hold 100% of the trust interests of Compass Group Diversified Holdings LLC, which we refer to as the company. Each beneficial interest in the trust corresponds to one trust interest of the company. Compass Group Management LLC, which we have engaged as our manager, owns 100% of the allocation interests of the company.

Compass Group Investments, Inc., through its wholly owned subsidiary, and Pharos I LLC, an affiliate of our manager, have each agreed to purchase, in separate private placement transactions to close in conjunction with the closing of this offering, a number of shares in the trust having an aggregate purchase price of approximately $86 million and $4 million, respectively, at a per share price equal to the initial public offering price (which will be approximately 5,733,333 shares and 266,667 shares, respectively, assuming the initial public offering price per share is $15.00, the mid-point of the expected public offering price range set forth below).

The underwriters will reserve up to 100,000 shares for sale pursuant to a directed share program.

We expect the initial public offering price to be between $14.00 and $16.00 per share. Currently, no public market exists for the shares. We have applied to have the shares quoted on the Nasdaq National Market under the symbol “CODI”.

Investing in the shares involves risks. See the section entitled “Risk Factors” beginning on page 15 of this prospectus for a discussion of the risks and other information that you should consider before making an investment in our securities.


	Per Share	Total

Public offering price	$	$
Underwriting discount and commissions*	$	$
Proceeds, before expenses, to us	$	$


*	Includes the financial advisory fee payable solely to Ferris, Baker Watts, Incorporated of $0.0375 per share for a total fee of approximately $525,000 assuming the initial public offering price per share is $15.00.

The underwriters may also purchase up to an additional 2,100,000 shares from us at the public offering price, less the underwriting discount and commissions, including the financial advisory fee, within 30 days from the date of this prospectus to cover overallotments.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

We expect to deliver the shares to the underwriters for delivery to investors on or about May , 2006.

Book Runner

Ferris, Baker Watts

Incorporated


BB&T Capital Markets a division of Scott & Stringfellow, Inc.		J.J.B. Hilliard, W.L. Lyons, Inc.
Oppenheimer & Co.		Sanders Morris Harris

Ladenburg Thalmann & Co. Inc.		Maxim Group LLC

The date of this prospectus is , 2006

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with different information. We, and the underwriters, are not making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front cover of this prospectus.

In this prospectus, we rely on and refer to information and statistics regarding market data and the industries of the businesses we will own that are obtained from internal surveys, market research, independent industry publications and other publicly available information, including publicly available information regarding public companies. The information and statistics are based on industry surveys and our manager’s and its affiliates’ experience in the industry.

This prospectus contains forward-looking statements that involve substantial risks and uncertainties as they are not based on historical facts, but rather are based on current expectations, estimates, projections, beliefs and assumptions about our businesses and the industries in which they operate. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. You should not place undue reliance on any forward-looking statements, which apply only as of the date of this prospectus.

NOTICE TO RESIDENTS OF THE UNITED KINGDOM

WE HAVE NOT PREPARED OR FILED, AND WILL NOT PREPARE OR FILE, IN THE UNITED KINGDOM AN APPROVED PROSPECTUS (WITHIN THE MEANING OF SECTION 85 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000, AS AMENDED (“FSMA”)) REGARDING THE SHARES OF THE TRUST. ACCORDINGLY, THE SHARES OF THE TRUST ARE NOT BEING OFFERED AND MAY NOT BE OFFERED OR RESOLD TO PERSONS IN THE UNITED KINGDOM EXCEPT (I) TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING, OR DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR BUSINESSES OR (II) IN CIRCUMSTANCES THAT WILL NOT CONSTITUTE OR RESULT IN AN OFFER OF TRANSFERABLE SECURITIES TO THE PUBLIC IN THE UNITED KINGDOM WITHIN THE MEANING OF SECTION 102B FSMA. THE DISTRIBUTION (WHICH TERM SHALL INCLUDE ANY FORM OF COMMUNICATION) OF THIS DOCUMENT IS RESTRICTED PURSUANT TO SECTION 21 (RESTRICTIONS ON FINANCIAL PROMOTION) OF FSMA. IN RELATION TO THE UNITED KINGDOM, THIS DOCUMENT IS ONLY DIRECTED AT, AND MAY ONLY BE DISTRIBUTED TO (I) PERSONS WHO ARE “INVESTMENT PROFESSIONALS” WITHIN THE MEANING OF ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE “FINANCIAL PROMOTION ORDER”), (II) RECIPIENTS CLASSED AS A HIGH NET WORTH COMPANY, UNINCORPORATED ASSOCIATION, ETC., IN ACCORDANCE WITH ARTICLE 49 OF THE FINANCIAL PROMOTION ORDER, AND (III) PERSONS WHO MAY OTHERWISE LAWFULLY RECEIVE IT AS EXEMPT RECIPIENTS UNDER THE FINANCIAL PROMOTION ORDER. THIS DOCUMENT MUST NOT BE ISSUED OR PASSED TO ANY OTHER PERSON IN THE UNITED KINGDOM.

PROSPECTUS SUMMARY

This summary highlights selected information appearing elsewhere in this prospectus. For a more complete understanding of this offering, you should read this entire prospectus carefully, including the “Risk Factors” section and the pro forma condensed combined financial statements, the financial statements of our initial businesses and the notes relating thereto and the related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Unless we tell you otherwise, the information set forth in this prospectus assumes that the underwriters have not exercised their overallotment option. Further, unless the context otherwise indicates, numbers in this prospectus have been rounded and are, therefore, approximate.

Compass Diversified Trust, which we refer to as the trust, will acquire and own its businesses through a Delaware limited liability company, Compass Group Diversified Holdings LLC, which we refer to as the company. Except as otherwise specified, references to “Compass Diversified,” “we,” “us” and “our” refer to the trust and the company and the initial businesses together. An illustration of our proposed structure is set forth in the diagram on page 7 of this prospectus. See the section entitled “Description of Shares” for more information about certain terms of the shares, trust interests and allocation interests.

Overview

We have been formed to acquire and manage a group of small to middle market businesses with stable and growing cash flows that are headquartered in the United States. Through our structure, we offer investors an opportunity to participate in the ownership and growth of businesses that traditionally have been owned and managed by private equity firms, private individuals or families, financial institutions or large conglomerates. Through the acquisition of a diversified group of businesses with these characteristics, we also offer investors an opportunity to diversify their own portfolio risk while participating in the ongoing cash flows of those businesses through the receipt of distributions.

We will seek to acquire controlling interests in businesses that we believe operate in industries with long-term macroeconomic growth opportunities, and that have positive and stable earnings and cash flows, face minimal threats of technological or competitive obsolescence and have strong management teams largely in place. We believe that private company operators and corporate parents looking to sell their businesses will consider us an attractive purchaser of their businesses.

Approximately $312 million of the net proceeds of this offering, the separate private placement transactions and the initial borrowings of the company under our proposed third party credit facility will be used to acquire controlling interests in and provide debt financing to the following businesses, which we refer to as the initial businesses, from certain subsidiaries of Compass Group Investments, Inc., which we refer to as CGI, its subsidiaries and certain minority owners of each initial business:


	•	CBS Personnel Holdings, Inc. and its consolidated subsidiaries, which we refer to as CBS Personnel, a human resources outsourcing firm;

	•	Crosman Acquisition Corporation and its consolidated subsidiaries, which we refer to as Crosman, a recreational products company;

	•	Compass AC Holdings, Inc. and its consolidated subsidiary, which we refer to as Advanced Circuits, an electronic components manufacturing company; and

	•	Silvue Technologies Group, Inc. and its consolidated subsidiaries, which we refer to as Silvue, a global hardcoatings company.

We believe that our initial businesses operate in strong markets and have defensible market shares and long-standing customer relationships. Importantly, we also believe that our initial businesses will produce positive and stable earnings and cash flows, enabling us to make regular quarterly distributions to our shareholders, regardless of potential future acquisitions.

As a result of this transaction, CGI will receive proceeds of approximately $147.7 million. Through a subsidiary, CGI Diversified Holdings, LP, CGI has agreed to invest $86 million in the shares pursuant to a private placement transaction to close in conjunction with the closing of the offering. These shares will be purchased at the initial public offering price. As a result of this investment, immediately following the offering, CGI will own approximately 28.7% of our shares. CGI has indirectly held a controlling interest in each of the initial businesses for varying periods of time as described herein, and the total gain to CGI on the sale of these businesses to us will be approximately $75.8 million. Following this acquisition, CGI will continue to hold interests in various unrelated businesses. CGI is indirectly owned by The Kattegat Trust, whose sole beneficiary is a philanthropic foundation mandated by the late J. Torben Karlshoej, the founder of Teekay Shipping Corporation. Teekay Shipping Corporation is the world’s largest crude oil and petroleum product marine transportation company with 16 worldwide offices and in excess of $2.5 billion in market capitalization.

We have applied to have the shares quoted on the Nasdaq National Market under the symbol “CODI.”

Our Manager

The company’s board of directors will engage Compass Group Management LLC, who we refer to as our manager, to manage the day-to-day operations and affairs of the company, oversee the management and operations of our businesses and to perform certain other services for us. We believe our affiliation with our manager will be a critical factor in our ability to execute our strategy and meet our goals of growing shareholder distributions and increasing shareholder value.

Our manager is controlled by Mr. I. Joseph Massoud, our Chief Executive Officer. Our manager will initially consist of at least eight experienced professionals, which we refer to as our management team. See section entitled “Our Manager — Key Personnel of Our Manager” for a description of our manager’s key employees. Our management team has worked together since 1998 and has overseen, on behalf of CGI, the acquisition, building and management of ten separate platform businesses, including our initial businesses, during that period. Under the guidance of our management team, these businesses have collectively experienced significant growth in revenues and cash flows. Collectively, our management team has approximately 74 years of experience in acquiring and managing small and middle market businesses and has overseen the acquisition of over 100 businesses during that time.

We believe our manager is unique in the marketplace in terms of the success and experience of its employees in acquiring and managing diverse businesses of the size and general nature of our initial businesses. We believe this experience will provide us with a significant advantage in executing our overall strategy. CGI Diversified Holdings, LP and Sostratus LLC, an entity owned by our management team and controlled by Mr. Massoud, will each own non-managing interests in our manager. Mr. Massoud also controls Pharos I LLC, which we refer to as Pharos, an entity that is owned by our management team. Pharos has agreed to invest approximately $4 million in shares, representing approximately 1.3% of the shares outstanding after the offering, pursuant to a private placement transaction to close in conjunction with the closing of this offering. These shares will be purchased at the initial public offering price. See the section entitled “Certain Relationships and Related Party Transactions” for more information about this purchase.

The company and our manager will enter into a management services agreement pursuant to which we will pay our manager, for services performed by our manager, a quarterly management fee equal to

0.5% (2.0% annualized) of the company’s adjusted net assets. The management fee will be subject to offset pursuant to fees paid to our manager by our businesses under management services agreements that our manager intends to enter into with, or be assigned with respect to, our businesses, which we refer to as offsetting management services agreements. See the sections entitled “Management Services Agreement” and “Our Manager — Our Relationship With Our Manager — Our Manager as a Service Provider — Management Fee” for more information about the terms of our management services agreement and the calculation of the management fee, respectively. The company’s board of directors will have the ability to terminate its relationship with our manager only under certain limited circumstances.

The company’s Chief Executive Officer and Chief Financial Officer will be employees of our manager and will be seconded to the company, which means that these employees will be assigned by our manager to work for the company during the term of the management services agreement. Neither the trust nor the company will initially have any other employees. Although our Chief Executive Officer and Chief Financial Officer will be employees of our manager, they will report directly to the company’s board of directors.

The management fee paid to our manager will cover all overhead expenses related to the services performed by our manager pursuant to the management services agreement, including the compensation of our Chief Executive Officer and other seconded personnel providing services to us. In addition, the management fee will cover all expenses incurred by our manager, which can be significant, in the identification, evaluation, management, performance of due diligence on, negotiation and oversight of potential acquisitions with respect to which the company (or our manager on behalf of the company) fails to submit an indication of interest or letter of intent to pursue such acquisition. These expenses may also include expenses related to travel, marketing and attendance at industry events and the retention of outside service providers. In addition, the company will not be obligated or responsible for reimbursing our manager for costs and expenses incurred by our manager in connection with the identification, evaluation, management, performance of due diligence on, negotiating and oversight of an acquisition by the company if such acquisition is actually consummated and the business so acquired entered into a transaction services agreement with our manager providing for the reimbursement of such costs and expenses by such business. However, the company will reimburse our manager for the compensation and other costs and expenses of our Chief Financial Officer and his staff, as approved by our compensation committee, and any other out-of-pocket expenses incurred by our manager in connection with performing services under the management services agreement. See the sections entitled “Management” and “Management Services Agreement” for more information about the secondment of our Chief Executive Officer and Chief Financial Officer and “Our Manager — Our Relationship With Our Manager — Our Manager as a Service Provider — Reimbursement of Expenses” for more information about the reimbursement of expenses to our manager.

Our manager owns 100% of the allocation interests of the company, which generally will entitle our manager to receive a 20% profit allocation as a form of equity incentive, subject to the company’s profits with respect to a business exceeding an annualized hurdle rate of 7%, which hurdle is tied to such business’ growth relative to our consolidated net equity. See the section entitled “Our Manager — Our Relationship With Our Manager — Our Manager as an Equity Holder — Manager’s Profit Allocation” for more information about the calculation of the profit allocation to be paid to our manager. In addition, we intend to enter into a supplemental put agreement with our manager pursuant to which our manager shall have the right, subject to certain conditions, to cause the company to purchase the allocation interests then owned by our manager upon termination of the management services agreement for a price to be determined in accordance with the supplemental put agreement, which we refer to as the put price. See the section entitled “Our Manager — Supplemental Put Agreement” for more information about the supplemental put agreement. The management fee, profit allocation and put price will be obligations of the company and, as a result, will be paid, along with other company obligations, prior to the payment of distributions to shareholders.

Our Strategy

We will seek to acquire and manage small to middle market businesses, which we characterize as those that generate annual cash flow of up to $40 million. We believe that the merger and acquisition market for small to middle market businesses is highly fragmented and provides opportunities to purchase businesses at attractive prices. We also believe, and our management team has historically found, that significant opportunities exist to improve the performance and augment the management teams of these businesses upon their acquisition.

Our goal is to grow distributions to our shareholders steadily over time and to increase shareholder value. In attempting to accomplish this, we will first, focus on growing the earnings and cash flow from the initial businesses that we manage. We believe that the scale and scope of our initial businesses give us a diverse base of cash flow from which to further build the company. Importantly, we believe that our initial businesses alone will allow us to generate distributions to our shareholders, independent of whether we acquire any additional businesses in the future. Second, we intend to identify, perform due diligence on, negotiate and consummate additional platform acquisitions of small to middle market businesses in attractive industry sectors.


	*Management Strategy*

Our management strategy involves the financial and operational management of the businesses that we own in a manner that seeks to grow earnings and cash flow and, in turn, to grow distributions to our shareholders and to increase shareholder value. In general, our manager will oversee and support the management teams of each of our businesses by, among other things:


	•	recruiting and retaining talented managers to operate our businesses by using structured incentive compensation programs, including minority equity ownership, tailored to each business;

	•	regularly monitoring financial and operational performance, instilling consistent financial discipline, and supporting management in the development and implementation of information systems to effectively achieve these goals;

	•	assisting management in their analysis and pursuit of prudent organic growth strategies;

	•	identifying and working with management to execute on attractive external growth and acquisition opportunities; and

	•	forming strong subsidiary level boards of directors to supplement management in their development and implementation of strategic goals and objectives.


	*Acquisition Strategy*

Our acquisition strategy involves the acquisition of businesses in various industries that we expect will produce positive and stable earnings and cash flow, as well as achieve attractive returns on our investment. In so doing, we expect to benefit from our manager’s ability to identify diverse acquisition opportunities in a variety of industries, perform diligence on and value such target businesses, and negotiate the ultimate acquisition of those businesses. We believe our management team has a successful track record of acquiring and managing small to middle market businesses, including our initial businesses. We also believe that in compiling this track record, our management team has been able both to access a wide network of sources of potential acquisition opportunities and to successfully navigate a variety of complex situations surrounding acquisitions, including corporate spin-offs, transitions of family-owned businesses, management buy-outs and reorganizations.

In addition to acquiring businesses, we expect to also sell businesses that we own from time to time when attractive opportunities arise. Our decision to sell a business will be based on our belief that the

return on the investment to our shareholders that would be realized by means of such a sale is more favorable than the returns that may be realized through continued ownership. Our acquisition and disposition of businesses will be consistent with the guidelines to be established by the company’s board of directors from time to time.

Summary of Our Initial Businesses

We will use the net proceeds from this offering, the separate private placement transactions and our initial borrowing under our third party credit facility to acquire controlling interests in and make loans to our initial businesses. A summary of our initial businesses is as follows:


	*Human Resources Outsourcing Firm*

CBS Personnel, headquartered in Cincinnati, Ohio, is a provider of temporary staffing services in the United States. In order to provide its 3,500 clients with tailored staffing services to fulfill their human resources needs, CBS Personnel also offers employee leasing services, permanent staffing and temporary-to-permanent placement services. Currently, CBS Personnel operates 132 branch locations in various cities in 16 states. CBS Personnel and its subsidiaries have been associated with quality service in their markets for more than 30 years.


	*Recreational Products Company*

Crosman, headquartered in East Bloomfield, New York, was one of the first manufacturers of airguns and is a manufacturer and distributor of recreational airgun products and related products and accessories. The Crosman^® brand is one of the pre-eminent names in the recreational airgun market and is widely recognized in the broader outdoor sporting goods industry. Crosman’s products are sold in over 6,000 retail locations worldwide through approximately 500 retailers, which include mass market and sporting goods retailers.


	*Electronic Components Manufacturing Company*

Advanced Circuits, headquartered in Aurora, Colorado, is a provider of prototype and quick-turn printed circuit boards, or PCBs, throughout the United States. PCBs are a vital component to all electronic equipment supply chains as PCBs serve as the foundation for virtually all electronic products. The prototype and quick-turn portions of the PCB industry are characterized by customers requiring high levels of responsiveness, technical support and timely delivery. Advanced Circuits meets this market need by manufacturing and delivering custom PCBs in as little as 24 hours, providing its over 4,000 customers with approximately 98.0% error-free production and real-time customer service and product tracking 24 hours per day.


	*Global Hardcoatings Company*

Silvue, headquartered in Anaheim, California, is a developer and producer of proprietary, high performance liquid coating systems used in the high-end eyewear, aerospace, automotive and industrial markets. Silvue’s patented coating systems can be applied to a wide variety of materials, including plastics, such as polycarbonate and acrylic, glass, metals and other surfaces. These coating systems impart properties, such as abrasion resistance, improved durability, chemical resistance, ultraviolet or UV protection, anti-fog and impact resistance, to the materials to which they are applied. Silvue has sales and distribution operations in the United States, Europe and Asia, as well as manufacturing operations in the United States and Asia.

Corporate Structure

The trust is a recently formed Delaware statutory trust that we expect to be treated as a grantor trust for U.S. federal income tax purposes. Your rights as a holder of shares, and the fiduciary duties of the company’s board of directors and executive officers, and any limitations relating thereto are set forth in the

documents governing the trust and the company, and may differ from those applying to a Delaware corporation. However, the documents governing the company specify that the duties of its directors and officers will be generally consistent with the duties of a director of a Delaware corporation. In addition, investors in this offering will be treated as beneficial owners of trust interests in the company and, as such, will be subject to tax under partnership income tax provisions.

We are selling 14,000,000 shares of the trust in connection with this public offering and an additional 6,000,000 shares in the separate private placement transactions. Each share of the trust represents one undivided beneficial interest in the trust property. The purpose of the trust is to hold the trust interests of the company, which is one of two classes of equity interests in the company that will be outstanding following this offering – the trust interests, of which 100% will be held by the trust, and allocation interests, of which 100% are and will be held by our manager. The trust has the authority to issue shares in one or more series. See the section entitled “Description of Shares” for more information about the shares, trust interests and allocation interests.

The company’s board of directors will oversee the management of the company and our businesses and the performance by our manager. Initially, the company’s board of directors will be comprised of seven directors, all of whom will be appointed by our manager, as holder of the allocation interests, and at least four of whom will be the company’s independent directors. Following this initial appointment, six of the directors will be elected by our shareholders.

As holder of the allocation interests, our manager will have the right to appoint one director to the company’s board of directors, subject to adjustment. An appointed director will not be required to stand for election by our shareholders. See the section entitled “Description of Shares — Voting and Consent Rights — Board of Directors Appointee” for more information about our manager’s right to appoint a director.

An illustration of our proposed structure is set forth on the following page.

Corporate Information

Our principal executive offices are located at Sixty One Wilton Road, Second Floor, Westport, Connecticut 06880, and our telephone number is 203-221-1703. Our website is at www.CompassDiversifiedTrust.com. The information on our website is not incorporated by reference and is not part of this prospectus.

Our Proposed Organizational Structure¹



⁽¹⁾	All percentages are approximates and assume that we sell all of the shares offered in this offering and the separate private placement transactions and that the underwriters do not exercise their overallotment option.



⁽²⁾	Mr. Massoud is not a director, officer or member.



⁽³⁾	Owned by members of our management team, including Mr. Massoud as managing member.



⁽⁴⁾	Mr. Massoud is the managing member.



⁽⁵⁾	The allocation interests, which carry the right to receive a profit allocation, will represent less than a 0.1% equity interest in the company, assuming we sell all the shares offered in this offering and the separate private placement transactions.

The Offering



Shares offered by us in this offering		14,000,000 shares (represents 70% of shares and voting power to be outstanding following this offering)



Shares outstanding after this offering and separate private placement transactions		20,000,000 shares



Use of proceeds		We estimate that our net proceeds from the sale of 14,000,000 shares in this offering will be approximately $194.8 million (or approximately $224.0 million if the underwriters’ overallotment option is exercised in full), based on the initial public offering price of $15.00 per share (which is the mid-point of the estimated initial public offering price range set forth on the cover page on this prospectus) and after deducting underwriting discounts and commissions (including the financial advisory fee payable to Ferris, Baker Watts, Incorporated) of approximately $15.2 million (or approximately $17.5 million if the underwriter overallotment is exercised), but without giving effect to the payment of public offering costs of approximately $6.0 million. We intend to use the net proceeds from this offering, the $90 million of net proceeds from the separate private placement transactions and the $43.9 million of net proceeds from the initial borrowing under our third party credit facility, each of which are to close in conjunction with this offering, to:



		• pay the purchase price and related costs of the acquisition of our initial businesses of approximately $140.8 million;



		• make loans to each of the initial businesses to repay outstanding debt and provide additional capitalization in an aggregate principal amount of approximately $170.8 million;



		• pay the public offering costs of approximately $6.0 million; and



		• provide funds for general corporate purposes of approximately $11.1 million.


		See the section entitled “Use of Proceeds” for more information about the use of the proceeds of this offering.


Nasdaq National Market symbol		CODI



Dividend and distribution policy		We intend to declare and pay regular quarterly cash distributions on all outstanding shares, based on distributions received by the trust on the trust interests in the company. The company’s board of directors intends to declare and pay an initial quarterly distribution for the quarter ending September 30, 2006 of $0.2625 per share. The company’s board of directors also intends to declare an initial distribution equal to the amount of the initial quarterly distribution for the quarter ended September 30, 2006, but pro rated for the period from the completion of this offering to June 30, 2006, which will be paid at the same time as such initial quarterly distribution. The declaration and payment of our initial distribution, initial quarterly distribution and, if



		declared, the amount of any future distribution will be subject to the approval of the company’s board of directors, which will include a majority of independent directors, and will be based on the results of operations of our initial businesses and the desire to provide sustainable levels of distributions to our shareholders. Any cash distribution paid by the company to the trust will, in turn, be paid by the trust to its shareholders.


		See the sections entitled “Dividend and Distribution Policy” for a discussion of our intended distribution rate and “Material U.S. Federal Income Tax Considerations” for more information about the tax treatment of distributions by the trust.


Management fee		The company will pay our manager a quarterly management fee equal to 0.5% (2.0% annualized) of adjusted net assets, as defined in the management services agreement, subject to certain adjustments. Based on the pro forma condensed combined financial statements set forth in this prospectus at or for the year ended December 31, 2005, the total management fee that would have been payable on a quarterly basis for the year ended December 31, 2005, would have been approximately $6.9 million on a pro forma basis (before taking into account offsetting management fees of approximately $2.4 million), representing approximately 43.9% of the pro forma net income of the company before the management fee. The company’s compensation committee, which is comprised solely of independent directors, will review the calculation of the management fee on an annual basis.



		See the section entitled “Our Manager — Our Relationship With Our Manager — Our Manager as a Service Provider — Management Fee” for more information about the calculation and payment of the management fee and the specific definitions of the terms used in such calculation, as well as an example of the quarterly calculation of the management fee.



Profit allocation		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 company’s profits with respect to a business exceeds an annualized hurdle rate of 7%, which hurdle is tied to such business’ growth relative to our consolidated net equity. The calculation of profit allocation with respect to a particular business will be based on:



		• such business’ contribution-based profit, which generally will be equal to such business’ aggregate contribution to the company’s profit during the period such business is owned by the company; and


		• the company’s 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 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%.



		Assuming we do not sell a material amount of the capital stock, assets or a subsidiary of one of our businesses, the earliest a profit allocation may be paid to our manager, if the amount of profit allocation exceeds an annualized hurdle rate, is five years from the date we acquire controlling interests in our initial businesses, which date will be concurrent with the closing of this offering. A profit allocation may be paid earlier if we sell a material amount of the capital stock, assets or a subsidiary of one of our businesses, subject to the annualized hurdle rate discussed above and certain conditions.



		The amount of profit allocation that will be payable in the future cannot be estimated with any certainty or reliability as of the date of this prospectus, and such profit allocation, if and when paid, may be greater than the management fee paid to our manager pursuant to the management services agreement.



		See the section entitled “Our Manager — Our Relationship with Our Manager — Our Manager as an Equity Holder — Manager’s Profit Allocation” for more information about calculation and payment of profit allocation and the specific definitions of the terms used in such calculation.



Shares of the trust		Each share of the trust represents an undivided beneficial interest in the trust property, and each share of the trust corresponds to one underlying trust interest of the company owned by the trust. 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 the trust. Each outstanding share of the trust is entitled to one vote on any matter with respect to which the trust, as a holder of trust interests in the company, is entitled to vote. The company, as the sponsor of the trust, will provide to our shareholders proxy materials to enable our shareholders to exercise, in proportion to their percentage ownership of outstanding shares, the voting rights of the trust, and the trust will vote its trust interests in the same proportion as the vote of holders of shares. The allocation interests do not grant to our manager voting rights with respect to the company except in certain limited circumstances.


		See the section entitled “Description of Shares” for information about the material terms of the shares, the trust interests and allocation interests.


Anti-takeover provisions		Certain provisions of the management services agreement, the trust agreement and the LLC agreement, which we will enter into upon the closing of this offering, may make it more difficult for third parties to acquire control of the trust and the company by various means. These provisions could deprive the shareholders of the trust of opportunities to realize a premium on the shares owned by them. In addition, these provisions may adversely affect the prevailing market price of the shares.


		See the section entitled “Description of Shares — Anti-Takeover Provisions” for more information about these anti-takeover provisions.


U.S. federal income tax considerations		Subject to the discussion in “Material U.S. Federal Income Tax Considerations,” the trust will be classified as a grantor trust for U.S. federal income tax purposes. As a result, for U.S. federal income tax purposes, each holder of shares generally will be treated as the beneficial owner of a pro rata portion of the trust interests of the company held by the trust. Subject to the discussion in “Material U.S. Federal Income Tax Considerations,” the company will be classified as a partnership for U.S. federal income tax purposes. Accordingly, neither the company nor the trust will incur U.S. federal income tax liability; rather, each holder of shares will be required to take into account his or her allocable share of company income, gain, loss, deduction, and other items.

		See the section entitled “Material U.S. Federal Income Tax Considerations” for information about the potential U.S. federal income tax consequences of the purchase, ownership and disposition of shares.

Risk factors		Investing in our shares involves risks. See the section entitled “Risk Factors” and read this prospectus carefully before making an investment decision with the respect to the shares or the company.

The number of shares outstanding after this offering assumes that 5,733,333 shares and 266,667 shares, representing approximately 28.7% and 1.3% of the total shares and voting power, respectively, will be purchased in the separate private placement transactions and will be outstanding after this offering, and assumes that the underwriters’ overallotment option is not exercised. If the overallotment option is exercised in full, we will issue and sell an additional 2,100,000 shares.

Summary Financial Data

The company and the trust were formed on November 18, 2005 and have conducted no operations and have generated no revenues to date. We will use the net proceeds of this offering, the separate private placement transactions and the initial borrowing under our third party credit facility in substantial part, to acquire controlling interests in and make loans to our initial businesses.

The following summary financial data represent the historical financial information for CBS Personnel, Crosman, Advanced Circuits and Silvue and does not reflect the accounting for these businesses upon completion of the acquisitions and the operation of the businesses as a consolidated entity. This historical financial data does not reflect the recapitalization of each of these businesses upon acquisition by the company. As a result, this historical data may not be indicative of these businesses’ future performance following their acquisition by the company and recapitalization. You should read this information in conjunction with the section entitled “Selected Financial Data”, the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the financial statements and notes thereto, and the unaudited condensed combined pro forma financial statements and notes which do reflect the completion of the acquisitions and related transactions thereto, all included elsewhere in this prospectus.

The summary financial data for CBS Personnel, at December 31, 2005, and for the years ended December 31, 2005 and 2004, were derived from CBS Personnel’s audited consolidated financial statements included elsewhere in this prospectus.

The summary financial data for Crosman, at June 30, 2005, and for the year ended June 30, 2005, were derived from Crosman’s audited consolidated financial statements included elsewhere in this prospectus. The summary financial data for Crosman for the period July 1, 2003 to February 9, 2004 (predecessor), and February 10, 2004 to June 30, 2004 (successor), were derived from the audited financial statements of Crosman included elsewhere in this prospectus. The summary financial data of Crosman at January 1, 2006, and for the six months ended January 1, 2006 and December 26, 2004, were derived from Crosman’s unaudited consolidated condensed financial statements included elsewhere in this prospectus.

The summary financial data for Advanced Circuits, at December 31, 2005, and for the periods September 20, 2005 to December 31, 2005 (successor) and January 1, 2005 to September 19, 2005 (predecessor), and for the year ended December 31, 2004 (predecessor), were derived from Advanced Circuits’ audited consolidated and combined financial statements included elsewhere in this prospectus.

The summary financial data for Silvue, at December 31, 2005 and for the year ended December 31, 2005 was derived from Silvue’s audited consolidated financial statements included elsewhere in this prospectus. The summary financial data for Silvue for the period January 1, 2004 to September 2, 2004 (predecessor), and September 3, 2004 (inception) to December 31, 2004, were derived from the audited financial statements of Silvue included elsewhere in this prospectus.

The unaudited condensed financial data for Crosman shown below may not be indicative of the financial condition and results of operations of Crosman for any other period. The unaudited financial data, in the opinion of management, includes all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of such data.


		Year Ended
		December 31,

CBS Personnel		2004		2005

		($ in thousands)
Statement of Operations Data:
	Revenues	$	315,258	$	543,012
	Income from operations		9,450		18,453
	Net income		7,413		8,988


		At
		December 31,
		2005

		($ in thousands)
Balance Sheet Data:
	Total assets	$	141,752
	Total liabilities		88,617
	Shareholders’ equity		53,135


	Predecessor		Successor				(Unaudited)
	July 1, 2003		February 10,				Six Months Ended
	to		2004 to		Year Ended
	February 9,		June 30,		June 30,		December 26,		January 1,
Crosman	2004		2004		2005		2004		2006

	($ in thousands)
Statement of Operations Data:
Net sales	$	38,770	$	24,856	$	70,060	$	38,234	$	45,223
Operating income		6,924		3,142		8,031		6,060		7,044
Net income		3,138		810		489		2,349		2,821


			(Unaudited)
	At		At
	June 30,		January 1,
	2005		2006

	($ in thousands)
Balance Sheet Data:
Total assets	$	84,183	$	91,595
Total liabilities		61,837		66,417
Shareholders’ equity		22,346		25,178

Predecessor

Successor

Predecessor

Combined

Consolidated

Combined

January 1,

September 20,

Year Ended

2005 to

December 31,

September 19,

December 31,

Advanced Circuits

2004

2005

($ in thousands)

Statement of Operations Data:

Net sales

36,642

29,726

12,243

Income from operations

12,211

10,931

3,935

Net income

12,093

10,922

1,686


		At
		December 31,
		2005

		($ in thousands)
Balance Sheet Data:
	Total assets	$	79,970
	Total liabilities		53,342
	Stockholders’ equity		26,628

Predecessor

Successor

January 1,

September 3,

2004 to

Year Ended

September 2,

December 31,

Silvue

2004

2005

($ in thousands)

Statement of Operations Data:

Net sales

7,604

4,532

17,093

Operating income

2,056

755

4,005

Net income

1,271

112

1,531


	At
	December 31,
	2005

	($ in thousands)
Balance Sheet Data:
Total assets	$	31,245
Total liabilities and cumulative redeemable preferred stock		22,396
Stockholders’ equity		8,849

RISK FACTORS

An investment in our shares involves a high degree of risk. You should carefully read and consider all of the risks described below, together with all of the other information contained or referred to in this prospectus, before making a decision to invest in our shares. If any of the following events occur, our financial condition, business and results of operations (including cash flows), may be materially adversely affected. In that event, the market price of our shares could decline, and you could lose all or part of your investment. Throughout this section we refer to our initial businesses and the businesses we may acquire in the future collectively as “our businesses.” For purposes of this section, unless the context otherwise requires, the term Crosman means, together, Crosman and its 50%-owned joint venture Diablo Marketing LLC (d/b/a Game Face Paintball) or, GFP.

Risks Related to Our Business and Structure


	*We are a new company with no history and we may not be able to successfully manage our initial businesses on a combined basis.*

We were formed on November 18, 2005 and have conducted no operations and have generated no revenues to date. We will use the net proceeds of this offering, the separate private placement transactions and our third party credit facility, in substantial part, to acquire controlling interests in and make loans to our initial businesses. The initial businesses will be managed by our manager. Our management team has collectively 74 years of experience in acquiring and managing small and middle market businesses. However, if we do not develop effective systems and procedures, including accounting and financial reporting systems, to manage our operations as a consolidated public company, we may not be able to manage the combined enterprise on a profitable basis, which could adversely affect our ability to pay distributions to our shareholders. In addition, the pro forma condensed combined financial statements of our initial businesses cover periods during which some of our initial businesses were not under common control or management and, therefore, may not be indicative of our future financial condition, business and results of operations.


	Our audited financial statements will not include meaningful comparisons to prior years and may differ substantially from the pro forma condensed combined financial statements included in this prospectus.

Our audited financial statements will include consolidated results of operations and cash flows only for the period from the date of the acquisition of our initial businesses to year-end. Because we will purchase our initial businesses only after the closing of this offering and recapitalize each of them, we anticipate that our audited financial statements will not contain full-year consolidated results of operations and cash flows until the end of our 2007 fiscal year. Consequently, meaningful year-to-year comparisons will not be available, at the earliest, until two fiscal years following the completion of this offering.


	Our future success is dependent on the employees of our manager and the management teams of our businesses, the loss of any of whom could materially adversely affect our financial condition, business and results of operations.

Our future success depends, to a significant extent, on the continued services of the employees of our manager, most of whom have worked together for a number of years. Because certain employees of our manager were involved in the acquisitions of these initial businesses while working for a subsidiary of CGI and, since such acquisitions, have overseen the operations of these businesses, the loss of their services may adversely affect our ability to manage the operations of our initial businesses. While our manager will have employment agreements with certain of its employees, including our Chief Financial Officer, these employment agreements may not prevent our manager’s employees from leaving our manager or from competing with us in the future. Our manager will not have an employment agreement with our Chief Executive Officer.

In addition, the future success of our businesses also depends on their respective management teams because we intend to operate our businesses on a stand-alone basis, primarily relying on existing

management teams for management of their day-to-day operations. Consequently, their operational success, as well as the success of our internal growth strategy, will be dependent on the continued efforts of the management teams of the initial businesses. We will seek to provide such persons with equity incentives in their respective businesses and to have employment agreements with certain persons we have identified as key to their businesses. We may also maintain key man life insurance on certain of these individuals. However, these insurance policies would not fully offset the loss to our businesses, and our organization generally, that would result from our losing the services of these key individuals. As a result, the loss of services of one or more members of our management team or the management team at one of our businesses could materially adversely affect our financial condition, business and results of operations.


	*We face risks with respect to the evaluation and management of future acquisitions.*

A component of our strategy is to acquire additional businesses. We will focus on small to middle market businesses in various industries. Generally, because such businesses are held privately, we may experience difficulty in evaluating potential target businesses as the information concerning these businesses is not publicly available. Therefore, our estimates and assumptions used to evaluate the operations, management and market risks with respect to potential target businesses may be subject to various risks. Further, the time and costs associated with identifying and evaluating potential target businesses and their industries may cause a substantial drain on our resources and may divert our management team’s attention away from operations for significant periods of time.

In addition, we may have difficulty effectively managing future acquisitions. The management or improvement of businesses we acquire may be hindered by a number of factors including limitations in the standards, controls, procedures and policies of such acquisitions. Further, the management of an acquired business may involve a substantial reorganization of the business’s operations resulting in the loss of employees and customers or the disruption of our ongoing businesses. We may experience greater than expected costs or difficulties relating to such acquisition, in which case, we might not achieve the anticipated returns from any particular acquisition, which may have a material adverse effect on our financial condition, business and results of operations.


	*We face competition for acquisitions of businesses that fit our acquisition strategy.*

We have been formed to acquire and manage small to middle market businesses. In pursuing such acquisitions, we expect to face strong competition from a wide range of other potential purchasers. Although the pool of potential purchasers for such businesses is typically smaller than for larger businesses, those potential purchasers can be aggressive in their approach to acquiring such businesses. Furthermore, we expect that we will need to use third party financing in order to fund some or all of these potential acquisitions, thereby increasing our acquisition costs. To the extent that other potential purchasers do not need to obtain third party financing or are able to obtain such financing on more favorable terms, they may be in a position to be more aggressive with their acquisition proposals. As a result, in order to be competitive, our acquisition proposals may need to be at price levels that exceed what we originally determine to be appropriate. Alternatively, we may determine that we cannot pursue on a cost effective basis what would otherwise be attractive acquisition opportunities.


	We may not be able to successfully fund future acquisitions of new businesses due to the unavailability of debt or equity financing on acceptable terms, which could impede the implementation of our acquisition strategy and materially adversely impact our financial condition, business and results of operations.

In order to make future acquisitions, we intend to raise capital primarily through debt financing at the company level, additional equity offerings, the sale of stock or assets of our businesses, by offering equity in the trust or our businesses to the sellers of target businesses or by undertaking a combination of any of the above. Since the timing and size of acquisitions cannot be readily predicted, we may need to be able to obtain funding on short notice to benefit fully from attractive acquisition opportunities. Such funding may not be available on acceptable terms. In addition, the level of our indebtedness may impact our ability to borrow at the company level. Another source of capital for us may be the sale of additional shares, subject

to market conditions and investor demand for the shares at prices that we consider to be in the interests of our shareholders. These risks may materially adversely affect our ability to pursue our acquisition strategy successfully and materially adversely affect our financial condition, business and results of operations.


	While we intend to make regular cash distributions to our shareholders, the company’s board of directors has full authority and discretion over the distributions of the company, other than the profit allocation, and it may decide to reduce or eliminate distributions at any time, which may materially adversely affect the market price for our shares.

To date, we have not declared or paid any distributions, but we intend to declare and pay an initial quarterly distribution of $0.2625 per share for the quarter ended September 30, 2006, and a quarterly distribution that is pro rated based on the initial distribution for the period from the completion of this offering to June 30, 2006. If you purchase shares in this offering but do not hold such shares on the record date set by the board of directors with respect to these distributions, you will not receive any distributions for any period that you held the shares.

Although we intend to pursue a policy of paying regular distributions, the company’s board of directors will have full authority and discretion to determine whether or not a distribution by the company should be declared and paid to the trust and in turn to our shareholders, as well as the amount and timing of any distribution. In addition, the management fee, profit allocation and put price will be payment obligations of the company and, as a result, will be paid, along with other company obligations, prior to the payment of distributions to our shareholders. The company’s board of directors may, based on their review of our financial condition and results of operations and pending acquisitions, determine to reduce or eliminate distributions, which may have a material adverse effect on the market price of our shares.


	*We will rely entirely on distributions from our businesses to make distributions to our shareholders.*

The trust’s only business is holding trust interests in the company, which holds controlling interests in our initial businesses. Therefore, we will be dependent upon the ability of our initial businesses to generate earnings and cash flow and distribute them to us in the form of interest and principal payments on indebtedness and distributions on equity to enable us, first, to satisfy our financial obligations and, second, to make distributions to our shareholders. The ability of our businesses to make distributions to us may be subject to limitations under laws of the jurisdictions in which they are incorporated or organized. If, as a consequence of these various restrictions, we are unable to generate sufficient distributions from our businesses, we may not be able to declare, or may have to delay or cancel payment of, distributions to our shareholders.

We do not own 100% of our businesses, and our ownership will range at the time of the initial acquisition from 70.2%, in the case of Advanced Circuits, to 94.4%, in the case of CBS Personnel, of the total equity on a fully diluted basis. While the company is expected to receive cash payments from our initial businesses which will be in the form of interest payments, debt repayment and dividends and distributions, if any dividends or distributions were to be paid by our businesses, they will be shared pro rata with the minority shareholders of our businesses and the amounts of distributions made to minority shareholders would not be available to us for any purpose, including company debt service or distributions to our shareholders. Any proceeds from the sale of a business will be allocated among us and the minority shareholders of the business that is sold.


	*The company’s board of directors will have the power to change the terms of our shares in its sole discretion in ways with which you may disagree.*

As an owner of our shares, you may disagree with changes made to the terms of our shares, and you may disagree with the company’s board of directors’ decision that the changes made to the terms of the shares are not materially adverse to you as a shareholder or that they do not alter the characterization of the trust. Your recourse, if you disagree, will be limited because our trust agreement gives broad authority and discretion to our board of directors. However, the trust agreement does not relieve the company’s board of directors from any fiduciary obligation that is imposed on them pursuant to applicable law. In

addition, we may change the nature of the shares to be issued to raise additional equity and remain a fixed-investment trust for tax purposes.


	Certain provisions of the LLC agreement of the company and the trust agreement make it difficult for third parties to acquire control of the trust and the company and could deprive you of the opportunity to obtain a takeover premium for your shares.

The amended and restated LLC agreement of the company, which we refer to as the LLC agreement, and the amended and restated trust agreement of the trust, which we refer to as the trust agreement, contain a number of provisions that could make it more difficult for a third party to acquire, or may discourage a third party from acquiring, control of the trust and the company. These provisions include, among others:


	•	restrictions on the company’s ability to enter into certain transactions with our major shareholders, with the exception of our manager, modeled on the limitation contained in Section 203 of the Delaware General Corporation Law, or DGCL;


	•	allowing the chairman of the company’s board of directors to fill vacancies on the company’s board of directors until the second annual meeting of shareholders following the closing of this offering;



	•	allowing only the company’s board of directors to fill newly created directorships, for those directors who are elected by our shareholders, and allowing only our manager, as holder of the allocation interests, to fill vacancies with respect to the class of directors appointed by our manager;



	•	requiring that directors elected by our shareholders be removed, with or without cause, only by a vote of 85% of our shareholders;



	•	requiring advance notice for nominations of candidates for election to the company’s board of directors or for proposing matters that can be acted upon by our shareholders at a shareholders’ meeting;



	•	having a substantial number of additional authorized but unissued shares that may be issued without shareholder action;



	•	providing the company’s board of directors with certain authority to amend the LLC agreement and the trust agreement, subject to certain voting and consent rights of the holders of trust interests and allocation interests;



	•	providing for a staggered board of directors of the company, the effect of which could be to deter a proxy contest for control of the company’s board of directors or a hostile takeover; and



	•	limitations regarding calling special meetings and written consents of our shareholders.

These provisions, as well as other provisions in the LLC agreement and trust agreement may delay, defer or prevent a transaction or a change in control that might otherwise result in you obtaining a takeover premium for your shares. See the section entitled “Description of Shares — Anti-Takeover Provisions” for more information about voting and consent rights and the anti-takeover provisions.


	*We may have conflicts of interest with the minority shareholders of our businesses.*

The boards of directors of our respective businesses have fiduciary duties to all their shareholders, including the company and minority shareholders. As a result, they may make decisions that are in the best interests of their shareholders generally but which are not necessarily in the best interest of the company or our shareholders. In dealings with the company, the directors of our businesses may have conflicts of interest and decisions may have to be made without the participation of directors appointed by the company, and such decisions may be different from those that we would make.


	Our third party credit facility exposes us to additional risks associated with leverage and inhibits our operating flexibility and reduces cash flow available for distributions to our shareholders.

We will initially have approximately $50 million of debt outstanding and we expect to increase our level of debt in the future. The terms of our third party credit facility will contain a number of affirmative and restrictive covenants that, among other things, require us to:



	•	maintain a minimum level of cash flow;



	•	leverage new businesses we acquire to a minimum specified level at the time of acquisition;



	•	keep our total debt to cash flow at or below a ratio of three to one; and



	•	make acquisitions that satisfy certain specified minimum criteria.

If we violate any of these covenants, our lender may accelerate the maturity of any debt outstanding and we may be prohibited from making any distributions to our shareholders. Such debt will be secured by all of our assets, including the stock we own in our businesses and the rights we have under the loan agreements with our businesses. Our ability to meet our debt service obligations may be affected by events beyond our control and will depend primarily upon cash produced by our businesses. Any failure to comply with the terms of our indebtedness could materially adversely affect us.


	*Changes in interest rates could materially adversely affect us.*

Our third party credit facility bears interest at floating rates which will generally change as interest rates change. We bear the risk that the rates we are charged by our lender will increase faster than the earnings and cash flow of our businesses, which could reduce profitability, adversely affect our ability to service our debt, cause us to breach covenants contained in our third party credit facility and reduce cash flow available for distribution, any of which could materially adversely affect us.


	We may engage in a business transaction with one or more target businesses that have relationships with our officers, our directors, our manager or CGI, which may create potential conflicts of interest.

We may decide to acquire one or more businesses with which our officers, our directors, our manager or CGI have a relationship. While we might obtain a fairness opinion from an independent investment banking firm, potential conflicts of interest may still exist with respect to a particular acquisition, and, as a result, the terms of the acquisition of a target business may not be as advantageous to our shareholders as it would have been absent any conflicts of interest.


	*CGI may exercise significant influence over the company.*

Concurrently with this offering, CGI, through a wholly owned subsidiary, will purchase $86 million or approximately 28.7% of our shares in a separate private placement transaction, assuming we sell all of the shares offered in this offering. As a result of this investment, CGI may have significant influence over the election of directors in the future.


	The terms and conditions of the stock purchase agreement, the management services agreement and the loan agreements discussed in this prospectus were negotiated among entities affiliated with or related to CGI and our manager in the overall context of this offering, and these terms may be less advantageous to us than if they had been the subject of arm’s-length negotiations.

We intend to enter into a stock purchase agreement with respect to the acquisition of our initial businesses, loan agreements with our initial businesses and a management services agreement with our manager. The terms of these agreements were negotiated among entities affiliated with or related to CGI and our manager in the overall context of this offering. 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 although the stock purchase agreement and other agreements were approved by a majority of

our independent directors, the agreements were not negotiated on an arm’s-length basis among unrelated third parties. As a result, provisions of these agreements may be less favorable to us than they might have been had they been negotiated through arm’s-length transactions with unrelated third parties.


	*We will incur increased costs as a result of being a publicly traded company.*

As a publicly traded company, we will incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act, recently adopted corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, and other rules implemented relatively recently by the Securities and Exchange Commission, or the SEC, and the Nasdaq National Market. We believe that complying with these rules and regulations will increase substantially our legal and financial compliance costs and will make some activities more time-consuming and costly and may divert significant portions of our management team from operating and acquiring businesses to these and related matters. We also believe that being a publicly traded company will make it more difficult and more expensive for us to obtain directors and officers’ liability insurance.


	*If in the future we cease to control and operate our businesses, we may be deemed to be an investment company under the Investment Company Act of 1940, as amended.*

Under the terms of the LLC agreement, we have the latitude to make investments in businesses that we will not operate or control. If we make significant investments in businesses that we do not operate or control or cease to operate and control our businesses, we may be deemed to be an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. If we were deemed to be an investment company, we would either have to register as an investment company under the Investment Company Act, obtain exemptive relief from the SEC or modify our investments or organizational structure or our contract rights to fall outside the definition of an investment company. Registering as an investment company could, among other things, materially adversely affect our financial condition, business and results of operations, materially limit our ability to borrow funds or engage in other transactions involving leverage and require us to add directors who are independent of us or our manager and otherwise will subject us to additional regulation that will be costly and time-consuming.


	Risks Relating to Our Manager


	Our Chief Executive Officer, directors, manager and management team may allocate some of their time to other businesses, thereby causing conflicts of interest in their determination as to how much time to devote to our affairs, which may materially adversely affect our operations.

While the members of our management team anticipate devoting a substantial amount of their time to the affairs of the company, only Mr. James Bottiglieri, our Chief Financial Officer, will devote 100% of his time to our affairs. As such, our Chief Executive Officer, directors, manager and members of our management team may engage in other business activities. This may result in a conflict of interest in allocating their time between our operations and our management and operations of other businesses. Their other business endeavors may be related to CGI, which will continue to own several businesses that were managed by our management team prior to this offering, or affiliates of CGI as well as other parties. Conflicts of interest that arise over the allocation of time may not always be resolved in our favor and may materially adversely affect our operations. See the section entitled “Certain Relationships and Related Party Transactions” for the potential conflicts of interest of which you should be aware.


	*Our manager and its affiliates, including members of our management team, may engage in activities that compete with us or our businesses.*

While our management team intends to devote a substantial majority of their time to the affairs of the company, and while our manager and its affiliates currently do not manage any other businesses that are in similar lines of business as our initial businesses, and while our manager must present all opportunities that meet the company’s acquisition and disposition criteria to the company’s board of

directors, neither our management team nor our manager, is expressly prohibited from investing in or managing other entities, including those that are in the same or similar line of business as our initial businesses or those related to or affiliated with CGI. In this regard, the management services agreement and the obligation to provide management services will not create a mutually exclusive relationship between our manager and its affiliates, on the one hand, and the company, on the other. See the sections entitled “Our Manager” and “Management Services Agreement” for more information about our relationship with our manager and our management team.


	Our manager need not present an acquisition or disposition opportunity to us if our manager determines on its own that such acquisition or disposition opportunity does not meet the company’s acquisition or disposition criteria.

Our manager will review any acquisition or disposition opportunity presented to the manager to determine if it satisfies the company’s acquisition or disposition criteria, as established by the company’s board of directors from time to time. If our manager determines, in its sole discretion, that an opportunity fits our criteria, our manager will refer the opportunity to the company’s board of directors for its authorization and approval prior to the consummation thereof; opportunities that our manager determines do not fit our criteria do not need to be presented to the company’s board of directors for consideration. If such an opportunity is ultimately profitable, we will have not participated in such opportunity. Upon a determination by the company’s board of directors not to promptly pursue an opportunity presented to it by our manager in whole or in part, our manager will be unrestricted in its ability to pursue such opportunity, or any part that we do not promptly pursue, on its own or refer such opportunity to other entities, including its affiliates.


	*We cannot remove our manager solely for poor performance, which could limit our ability to improve our performance and could materially adversely affect the market price of our shares.*

Under the terms of the management services agreement, our manager cannot be removed as a result of underperformance. Instead, the company’s board of directors can only remove our manager in certain limited circumstances or upon a vote by the majority of the company’s board of directors and the majority of our shareholders to terminate the management services agreement, as discussed in detail in the section entitled “Management Services Agreement — Termination of Management Services Agreement”.


	*We may have difficulty severing ties with our Chief Executive Officer, Mr. Massoud.*

Under the management services agreement, the company’s board of directors may, after due consultation with our manager, at any time request that our manager replace any individual seconded to the company and our manager will, as promptly as practicable, replace any such individual. However, because Mr. Massoud is the managing member of our manager with a significant ownership interest therein, we may have difficulty completely severing ties with Mr. Massoud absent terminating the management services agreement and our relationship with our manager. See the sections entitled “Our Manager” and “Management Services Agreement” for more information about our relationship with our manager.


	*If we terminate the management services agreement, we will need to change our name, which may adversely affect our financial condition, business and results of operations.*

Our manager will own the rights to the name of the company and the trust. The trust and the company will agree, and the company will agree to cause its businesses, to cease using the term “Compass”, including any trademark based on the name of the company and trust owned by our manager, entirely in their businesses and operations within 180 days of our termination of the management services agreement. This agreement would require the trust, the company and its businesses to change their names to remove any reference to the term “Compass” or any reference to trademarks owned by our manager. This also would require the trust, the company and our businesses to create and market a new name and expend funds to protect that name, which may adversely affect our financial condition, business and results of operations.


	If the management services agreement is terminated, our manager, as holder of the allocation interests in the company, has the right to cause the company to purchase such allocation interests, which may materially adversely affect our liquidity and ability to grow.

If the management services agreement is terminated at any time other than as a result of our manager’s resignation or if our manager resigns on any date that is at least three years after the closing of this offering, our manager will have the right, but not the obligation, for one year from the date of termination or resignation, as the case may be, to cause the company to purchase the allocation interests for the put price. If our manager elects to cause the company to purchase its allocation interests, we are obligated to do so and, until we have done so, our ability to conduct our business, including incurring debt, would be restricted and, accordingly, our liquidity and ability to grow may be adversely affected. See the section entitled “Our Manager — Supplemental Put Agreement” for more information about our manager’s put right and our obligations relating thereto.


	Our manager can resign on 90 days’ notice and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could materially adversely affect our financial condition, business and results of operations as well as the market price of our shares.

Our manager has the right, under the management services agreement, to resign at any time on 90 days’ written notice, whether we have found a replacement or not. If our manager resigns, we may not be able to contract with a new manager or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 90 days, or at all, in which case our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management, acquisition activities and supervision of our businesses is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our manager and its affiliates. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our businesses may result in additional costs and time delays that could materially adversely affect our financial condition, business and results of operations.


	The liability associated with the supplemental put agreement is difficult to estimate and may be subject to substantial period-to-period changes, thereby significantly impacting our future results of operations.

The company will record the supplemental put agreement at its fair value at each balance sheet date by recording any change in fair value through its income statement. The fair value of the supplemental put agreement is largely related to the value of the profit allocation that our manager, as holder of allocation interests, will receive. The valuation of the supplemental put agreement requires the use of complex financial models, which require sensitive assumptions and estimates. If our assumptions and estimates result in an over-estimation or under-estimation of the fair value of the supplemental put agreement, the resulting fluctuation in related liabilities could cause a material adverse effect on the company’s results of operations.

See the sections entitled “Our Manager — Our Relationship With Our Manager — Our Manager as Equity Holder — Manager’s Profit Allocation” and “Our Manager — Supplemental Put Agreement” for more information about the terms and calculation of the profit allocation and any payments under the supplemental put agreement and “Management’s Discussion and Analysis” for more information about our accounting policy with respect to the profit allocation and supplemental put agreement.


	*We must pay our manager the management fee regardless of our performance.*

Our manager is entitled to receive a management fee that is based on our adjusted net assets, as defined in the management services agreement, regardless of the performance of our businesses. The calculation of the management fee is unrelated to the company’s net income. As a result, the management fee may incentivize our manager to increase the amount of our assets, through, for example, the acquisition of additional assets or the incurrence of third party debt rather than increase the performance of our businesses.


	*We cannot determine the amount of the management fee that will be paid over time with any certainty.*

We estimate the management fee for the year ended December 31, 2005, on a pro forma basis, would have been approximately $6.9 million (before taking into account offsetting management fees of approximately $2.4 million), representing approximately 43.9% of the pro forma net income of the company before the management fee. The management fee will be calculated by reference to the company’s adjusted net assets, which will be impacted by the acquisition or disposition of businesses, which can be significantly influenced by our manager, as well as the performance of our initial businesses and other businesses we may acquire in the future. Changes in adjusted net assets and in the resulting management fee could be significant, resulting in a material adverse effect on the company’s results of operations. In addition, if the performance of the company declines, assuming adjusted net assets remains the same, management fees will increase as a percentage of the company’s net income. See the sections entitled “Pro Forma Condensed Combined Financial Statements” for more information about the pro forma management fee based on the acquisition of the initial businesses, and “Our Manager — Our Relationship With Our Manager — Our Manager as Service Provider — Management Fee” for more information about the terms and calculation of the management fee.


	*We cannot determine the amount of profit allocation that will be paid over time with any certainty.*

We cannot determine the amount of profit allocation that will be paid over time with any certainty. Such determination would be dependent on the potential sale proceeds received for those businesses and the performance of the company and its businesses over a multi-year period of time, among other factors that cannot be predicted with certainty at this time. Such factors may have a significant impact on the amount of any profit allocation to be paid. Likewise, such determination would be dependent on whether certain hurdles were surpassed giving rise to a payment of profit allocation. See the section entitled “Our Manager — Our Relationship With Our Manager — Our Manager as an Equity Holder — Manager’s Profit Allocation” for more information about the calculation and payment of profit allocation. Any amounts paid in respect of the profit allocation are unrelated to the management fee earned for performance of services under the management services agreement.


	The fees to be paid to our manager pursuant to the management services agreement, the offsetting management services agreements and transaction services agreements and the profit allocation to be paid to our manager, as holder of the allocation interests, pursuant to the LLC agreement may significantly reduce the amount of cash available for distribution to our shareholders.

Under the management services agreement, the company will be obligated to pay a management fee to and, subject to certain conditions, reimburse the costs and out-of-pocket expenses of our manager incurred on behalf of the company in connection with the provision of services to the company. Similarly, our businesses will be obligated to pay fees to and reimburse the costs and expenses of our manager pursuant to any offsetting management services agreements entered into between our manager and one of our businesses, or any transaction services agreements to which such businesses are a party. In addition, our manager, as holder of the allocation interests, will be entitled to receive profit allocations and may be entitled to receive the put price. While it is difficult to quantify with any certainty the actual amount of any such payments in the future, we do expect that such amounts could be substantial. See the section entitled “Our Manager” for more information about these payment obligations of the company. The management fee, profit allocation and put price will be payment obligations of the company and, as a result, will be paid, along with other company obligations, prior to the payment of distributions to shareholders. As a result, the payment of these amounts may significantly reduce the amount of cash flow available for distribution to our shareholders.


	Our manager’s influence on conducting our operations, including on our conducting of transactions, gives it the ability to increase its fees and compensation to our Chief Executive Officer, which may reduce the amount of cash flow available for distribution to our shareholders.

Under the terms of the management services agreement, our manager is paid a management fee calculated as a percentage of the company’s adjusted net assets for certain items and is unrelated to net

income or any other performance base or measure. See the section entitled “Our Manager — Our Relationship With Our Manager — Our Manager as a Service Provider — Management Fee” for more information about the calculation of the management fee. Our manager, which Mr. Massoud, our Chief Executive Officer, controls, may advise us to consummate transactions, incur third party debt or conduct our operations in a manner that, in our manager’s reasonable discretion, are necessary to the future growth of our businesses and are in the best interests of our shareholders. These transactions, however, may increase the amount of fees paid to our manager. In addition, Mr. Massoud’s compensation is paid by our manager from the management fee it receives from the company. Our manager’s ability to increase its fees, through the influence it has over our operations, may increase the compensation paid by our manager to Mr. Massoud. Our manager’s ability to influence the management fee paid to it by us could reduce the amount of cash flow available for distribution to our shareholders.


	Fees paid by the company and our businesses pursuant to transaction services agreements do not offset fees payable under the management services agreement and will be in addition to the management fee payable by the company under the management services agreement.

The management services agreement provides that our businesses may enter into transaction services agreements with our manager pursuant to which our businesses will pay fees to our manager. See the section entitled “Our Manager — Our Relationship With Our Manager — Our Manager as a Service Provider” for more information about these agreements. Unlike fees paid under the offsetting management services agreements, fees that are paid pursuant to such transaction services agreements will not reduce the management fee payable by the company. Therefore, such fees will be in excess of the management fee payable by the company.

The fees to be paid to our manager pursuant to these transaction service agreements will be paid prior to any principal, interest or dividend payments to be paid to the company by our businesses, which will reduce the amount of cash flow available for distributions to shareholders.


	*Our manager’s profit allocation may induce it to make suboptimal decisions regarding our operations.*

Our manager, as holder of 100% of the allocation interests in the company, will receive a profit allocation based on ongoing cash flows and capital gains in excess of a hurdle rate. In this respect, a calculation and payment of profit allocation may be triggered upon the sale of one of our businesses. As a result, our manager may be incentivized to recommend the sale of one or more of our businesses to the company’s board of directors at a time that is not optimal for our shareholders.

The obligations to pay the management fee and profit allocation, including the put price, may cause the company to liquidate assets or incur debt.

If we do not have sufficient liquid assets to pay the management fee and profit allocation, including the put price, when such payments are due, we may be required to liquidate assets or incur debt in order to make such payments. This circumstance could materially adversely affect our liquidity and ability to make distributions to our shareholders. See the section entitled “Our Manager” for more information about these payment obligations of the company.

Risks Related to Taxation


	*Our shareholders will be subject to taxation on their share of the company’s taxable income, whether or not they receive cash distributions from the trust.*

Our shareholders will be subject to U.S. federal income taxation and, possibly, state, local and foreign income taxation on their share of the company’s taxable income, whether or not they receive cash distributions from the trust. There is, accordingly, a risk that our shareholders may not receive cash distributions equal to their portion of our taxable income or sufficient in amount even to satisfy the tax liability that results from that income. This risk is attributable to a number of variables such as results of operations, unknown liabilities, government regulation, financial covenants of the debt of the company, funds needed for acquisitions and to satisfy short-and long-term working capital needs of our businesses, and discretion and authority of the company’s board of directors to pay or modify our distribution policy.

Additionally, payment of the profit allocation to our manager could result in allocations of taxable income (with no corresponding cash distributions) to our shareholders, thus giving rise to “phantom” income or could result in cash distributions (without an accompanying allocation of profits) to our shareholders. Such distributions may reduce your tax basis in our shares, and you may realize greater gain (or smaller loss) on the disposition of your shares than you may otherwise expect. You may have a tax gain even if the price you receive is less than your original cost.


	All of the company’s income could be subject to an entity-level tax in the United States, which could result in a material reduction in cash flow available for distribution to holders of shares of the trust and thus could result in a substantial reduction in the value of the shares.

Our shareholders generally will be treated as beneficial owners of the trust interests in the company held by the trust. Accordingly, the company may be regarded as a publicly-traded partnership, which, under the federal tax laws, would be treated as a corporation for U.S. federal income tax purposes. A publicly traded partnership will not, however, be characterized as a corporation so long as 90% or more of its gross income for each taxable year constitutes “qualifying income” within the meaning of section 7704(d) of the Code. The company expects to realize sufficient passive-type, or “qualifying,” income to qualify for the qualifying income exception.

Under current law and assuming full compliance with the terms of the LLC agreement (and other relevant documents) and based upon factual representations made by the manager on behalf of the company, Sutherland Asbill & Brennan LLP will deliver an opinion that the company will be classified as a partnership for U.S. federal income tax purposes. The factual representations made by us upon which Sutherland Asbill & Brennan LLP has relied are: (a) the company has not elected and will not elect to be treated as a corporation for U.S. federal income tax purposes; and (b) for each taxable year, more than 90% of the company’s gross income will be income that Sutherland Asbill & Brennan LLP has opined or will opine is qualifying income within the meaning of section 7704(d) of the Code. If the company fails to satisfy this “qualifying income” exception, the company will be treated as a corporation for U.S. federal (and certain state and local) income tax purposes, and shareholders of the trust would be treated as shareholders in a corporation. The company would be required to pay income tax at regular corporate rates on its income. In addition, the company would likely be liable for state and local income and/or franchise taxes on its income. Distributions to the shareholders of the trust would constitute ordinary dividend income, taxable to such holders to the extent of the company’s earnings and profits. Taxation of the company as a corporation could result in a material reduction in distributions to our shareholders and after-tax return and, thus, would likely result in a substantial reduction in the value of, or materially adversely affect the market price of, the shares of the trust.


	If the trust were determined not to be a grantor trust, the trust may itself be regarded as a partnership for U.S. federal income tax purposes, and the trust’s items of income, gain, loss, and deduction would be reportable to the shareholders of the trust on IRS Schedules K-1.

A fixed-investment trust is a type of grantor trust, and the beneficial owners of grantor trust interests are treated as the owners of undivided interests in the trust assets. Based upon the discussion in the “Material U.S. Federal Income Tax Considerations” section, in the opinion of Sutherland Asbill & Brennan LLP, which states that the opinion is not free from doubt, the trust will be treated as a grantor trust in which the trustees have no power to vary the trust’s investments. If the trust were not so treated, it likely would be regarded as a partnership for U.S. federal income tax purposes, which would affect the manner in which the trust reports tax information to the holders of shares of the trust.


	If the trust makes one or more new equity offerings, the investors participating in those subsequent offerings will be allocated a portion of any built-in gains (or losses) that exist at the time of the additional offerings.

The terms of the LLC agreement generally provide that all members share equally in any capital gains (or losses) after payment of any profit allocation to our manager. As a result, if one of the businesses owned by the company had appreciated in value and was sold after an additional equity offering in the trust, the

resulting taxable gain from the sale of the business (after any profit allocation to our manager) would be allocated to all members, and in turn, to all shareholders, including both shareholders that purchase shares in this offering (and who continue to hold their shares) and those shareholders that purchase shares in the later offering. This is similar to the concept of purchasing a dividend in a mutual fund.


	A shareholder may recognize a greater taxable gain (or a smaller tax loss) on a disposition of shares than expected because of the treatment of debt under the partnership tax accounting rules.

We may incur debt for a variety of reasons, including for acquisitions as well as other purposes. Under partnership tax accounting principles (which apply to the company), debt of the company generally will be allocable to our shareholders, who will realize the benefit of including their allocable share of the debt in the tax basis of their investment in shares. As discussed in the section entitled “Material U.S. Federal Income Tax Considerations,” the tax basis in shares will be adjusted for, among other things, distributions of cash and shares of company losses, if any. At the time a shareholder later sells shares, the selling shareholder’s amount realized on the sale will include not only the sales price of the shares but also will include the shareholder’s portion of the company’s debt allocable to his shares (which is treated as proceeds from the sale of those shares). Depending on the nature of the company’s activities after having incurred the debt, and the utilization of the borrowed funds, a later sale of shares could result in a larger taxable gain (or a smaller tax loss) than anticipated.

Risks Relating Generally to Our Businesses


	*Our results of operations may vary from quarter to quarter, which could adversely impact the market price of our shares.*

Our results of operations may experience significant quarterly fluctuations because of various factors, which include, among others:


	•	the general economic conditions including employment levels, of the industry and regions in which each of our businesses operate;

	•	seasonal shifts in demand for the products and services offered by certain of our businesses;

	•	the general economic conditions of the customers and clients of our businesses;

	•	the timing and market acceptance of new products and services introduced by our businesses; and

	•	the timing of our acquisitions of other businesses.

Based on the foregoing, quarter-to-quarter comparisons of our consolidated results of operations and the results of operations of each of our businesses may adversely impact the market price of our shares. In addition, historical results of operations may not be a reliable indication of future performance for our businesses.


	*Our businesses are or may be vulnerable to economic fluctuations as demand for their products and services tends to decrease as economic activity slows.*

Demand for the products and services provided by our businesses is, and businesses we acquire in the future may be, sensitive to changes in the level of economic activity in the regions and industries in which they do business. For example, as economic activity slows down, companies often reduce their use of temporary employees and their research and development spending. In addition, consumer spending on recreational activities also decreases in an economic slow down. Regardless of the industry, pressure to reduce prices of goods and services in competitive industries increases during periods of economic downturns, which may cause compression on our businesses’ financial margins. A significant economic downturn could have a material adverse effect on the business, results of operations and financial condition of each of our businesses and therefore on our financial condition, business and results of operations.


	Our businesses are or may be dependent upon the financial and operating conditions of their customers and clients. If the demand for their customers’ and clients’ products and services declines, demand for their products and services will be similarly affected and could have a material adverse effect on their financial condition, business and results of operations.

The success of our businesses’ customers’ and clients’ products and services in the market and the strength of the markets in which these customers and clients operate affect our businesses. Our businesses’ customers and clients are subject to their own business cycles, thus posing risks to these businesses that are beyond our control. These cycles are unpredictable in commencement, severity and duration. Due to the uncertainty in the markets served by most of our businesses’ customers and clients, our businesses cannot accurately predict the continued demand for their customers’ and clients’ products and services and the demands of their customers and clients for their products and services. As a result of this uncertainty, past operating results, earnings and cash flows may not be indicative of our future operating results, earnings and cash flows. If the demand for their customers’ and clients’ products and services declines, demand for their products and services will be similarly affected and could have a material adverse effect on their financial condition, business and results of operations.


	*The industries in which our businesses compete or may compete are highly competitive and they may not be able to compete effectively with competitors.*

Our businesses face substantial competition from a number of providers of similar services and products. Some industries in which our businesses compete are highly fragmented and characterized by intense competition and low margins. They compete with independent businesses and service providers. Many of their competitors have substantially greater financial, manufacturing, marketing and technical resources, have greater name recognition and customer allegiance, operate in a wider geographic area and offer a greater variety of products and services. Increased competition from existing or potential competitors could result in price reductions, reduced margins, loss of market share or reduced results of operations and cash flows.

In addition, current and prospective customers and clients continually evaluate the merits of internally providing products or services currently provided by our businesses and their decision to do so would materially adversely effect the financial condition, business and results of operations of our businesses.

Our businesses rely and may rely on their intellectual property and licenses to use others’ intellectual property, for competitive advantage. If our businesses are unable to protect their intellectual property, are unable to obtain or retain licenses to use other’s intellectual property, or if they infringe upon or are alleged to have infringed upon others’ intellectual property, it could have a material adverse affect on their financial condition, business and results of operations.

Each businesses’ success depends in part on their, or licenses to use others’, brand names, proprietary technology and manufacturing techniques. These businesses rely on a combination of patents, trademarks, copyrights, trade secrets, confidentiality procedures and contractual provisions to protect their intellectual property rights. The steps they have taken to protect their intellectual property rights may not prevent third parties from using their intellectual property and other proprietary information without their authorization or independently developing intellectual property and other proprietary information that is similar. In addition, the laws of foreign countries may not protect our businesses’ intellectual property rights effectively or to the same extent as the laws of the United States. Stopping unauthorized use of their proprietary information and intellectual property, and defending claims that they have made unauthorized use of others’ proprietary information or intellectual property, may be difficult, time-consuming and costly. The use of their intellectual property and other proprietary information by others, and the use by others of their intellectual property and proprietary information, could reduce or eliminate any competitive advantage they have developed, cause them to lose sales or otherwise harm their business.

Confidentiality agreements entered into by our businesses with their employees and third parties could be breached and may not provide meaningful protection for their unpatented proprietary manufacturing expertise, continuing technological innovation and other trade secrets. Adequate remedies may not be

available in the event of an unauthorized use or disclosure of their trade secrets and manufacturing expertise. Violations by others of their confidentiality agreements and the loss of employees who have specialized knowledge and expertise could harm our businesses’ competitive position and cause sales and operating results to decline.

Our businesses may become involved in legal proceedings and claims in the future either to protect their intellectual property or to defend allegations that they have infringed upon others’ intellectual property rights. These claims and any resulting litigation could subject them to significant liability for damages and invalidate their property rights. In addition, these lawsuits, regardless of their merits, could be time consuming and expensive to resolve and could divert management’s time and attention. Any potential intellectual property litigation alleging infringement of a third party’s intellectual property also could force them or their customers and clients to:


	•	temporarily or permanently stop producing products that use the intellectual property in question;

	•	obtain an intellectual property license to sell the relevant technology at an additional cost, which license may not be available on reasonable terms, or at all; and

	•	redesign those products or services that use the technology or other intellectual property in question.

The costs associated with any of these actions could be substantial and could have a material adverse affect on their financial condition, business and results of operations.


	The operations and research and development of some of our businesses’ services and technology depend on the collective experience of their technical employees. If these employees were to leave our businesses and take this knowledge, our businesses’ operations and their ability to compete effectively could be materially adversely impacted.

The future success of some of our businesses depends upon the continued service of their technical personnel who have developed and continue to develop their technology and products. If any of these employees leave our businesses, the loss of their technical knowledge and experience may materially adversely affect the operations and research and development of current and future services. We may also be unable to attract technical individuals with comparable experience because competition for such technical personnel is intense. If our businesses are not able to replace their technical personnel with new employees or attract additional technical individuals, their operations may suffer as they may be unable to keep up with innovations in their respective industries. As a result, their ability to continue to compete effectively and their operations may be materially adversely affected.


	If our businesses are unable to continue the technological innovation and successful commercial introduction of new products and services, their financial condition, business and results of operations could be materially adversely affected.

The industries in which our businesses operate, or may operate, experience periodic technological changes and ongoing product improvements. Their results of operations depend significantly on the development of commercially viable new products, product grades and applications, as well as production technologies and their ability to integrate new technologies. Our future growth will depend on their ability to gauge the direction of the commercial and technological progress in all key end-use markets and upon their ability to successfully develop, manufacture and market products in such changing end-use markets. In this regard, they must make ongoing capital investments.

In addition, their customers may introduce new generations of their own products, which may require new or increased technological and performance specifications, requiring our businesses to develop customized products. Our businesses may not be successful in developing new products and technology that satisfy their customers’ demand and their customers may not accept any of their new products. If our businesses fail to keep pace with evolving technological innovations or fail to modify their products in response to their customers’ needs in a timely manner, then their financial condition, business and results of operations could be materially adversely affected as a result of reduced sales of their products and sunk

developmental costs. These developments may require our personnel staffing business to seek better educated and trained workers, who may not be available in sufficient numbers.

Some of our businesses rely and may rely on suppliers for the timely delivery of materials used in manufacturing their products. Shortages or price fluctuations in component parts specified by their customers could limit their ability to manufacture certain products, delay product shipments, cause them to breach supply contracts and materially adversely affect our financial condition, business and results of operations.

Our results of operations could be materially adversely affected if our businesses are unable to obtain adequate supplies of raw materials in a timely manner. Strikes, fuel shortages and delays of providers of logistics and transportation services could disrupt our businesses and reduce sales and increase costs. Many of the products our businesses manufacture require one or more components that are supplied by third parties. Our businesses generally do not have any long-term supply agreements. At various times, there are shortages of some of the components that they use, as a result of strong demand for those components or problems experienced by suppliers. Suppliers of these raw materials may from time to time delay delivery, limit supplies or increase prices due to capacity constraints or other factors, which could materially adversely affect our businesses ability to deliver products on a timely basis. In addition, supply shortages for a particular component can delay production of all products using that component or cause cost increases in the services they provide. Our businesses inability to obtain these needed materials may require them to redesign or reconfigure products to accommodate substitute components, which would slow production or assembly, delay shipments to customers, increase costs and reduce operating income. In certain circumstances, our businesses may bear the risk of periodic component price increases, which could increase costs and reduce operating income.

In addition, our businesses may purchase components in advance of their requirements for those components as a result of a threatened or anticipated shortage. In this event, they will incur additional inventory carrying costs, for which they may not be compensated, and have a heightened risk of exposure to inventory obsolescence. If they fail to manage their inventory effectively, our businesses may bear the risk of fluctuations in materials costs, scrap and excess inventory, all of which may materially adversely affect their financial condition, business and results of operations.


	Our businesses could experience fluctuations in the costs of raw materials as a result of inflation and other economic conditions, which fluctuations could have a material adverse effect on their financial condition, business and results of operations.

Changes in inflation could materially adversely affect the costs and availability of raw materials used in our manufacturing businesses, and changes in fuel costs likely will affect the costs of transporting materials from our suppliers and shipping goods to our customers, as well as the effective areas from which we can recruit temporary staffing personnel. For example, for Advanced Circuits, the principal raw materials consist of copper and glass and represent approximately 33.3% of its total raw material purchases volume and approximately 10.2% of its total cost of goods sold in 2005. Prices for these key raw materials may fluctuate during periods of high demand. The ability by these businesses to offset the effect of increases in raw material prices by increasing their prices is uncertain. If these businesses are unable to cover price increases of these raw materials, their financial condition, business and results of operations could be materially adversely affected.


	Our businesses do not have and may not have long-term contracts with their customers and clients and the loss of customers and clients could materially adversely affect their financial condition, business and results of operations.

Our businesses are and may be, based primarily upon individual orders and sales with their customers and clients. Our businesses historically have not entered into long-term supply contracts with their customers and clients. As such, their customers and clients could cease using their services or buying their products from them at any time and for any reason. The fact that they do not enter into long-term contracts with their customers and clients means that they have no recourse in the event a customer or

client no longer wants to use their services or purchase products from them. If a significant number of their customers or clients elect not to use their services or purchase their products, it could materially adversely affect their financial condition, business and results of operations.


	Damage to our businesses’ or their customers’ and suppliers’ offices and facilities could increase costs of doing business and materially adversely affect their ability to deliver their services and products on a timely basis as well as decrease demand for their services and products, which could materially adversely affect their financial condition, business and results of operations.

Our businesses have offices and facilities located throughout the United States, as well as in Europe and Asia. The destruction or closure of these offices and facilities or transportation services, or the offices or facilities of our customers or suppliers for a significant period of time as a result of: fire; explosion; act of war or terrorism; labor strikes; trade embargoes or increased tariffs; floods; tornados; hurricanes; earthquakes; tsunamis; or other natural disasters, could increase our businesses’ costs of doing business and harm their ability to deliver their products and services on a timely basis and demand for their products and services and, consequently, materially adversely affect their financial condition, business and results of operations.


	Our businesses are and may be subject to federal, state and foreign environmental laws and regulations that expose them to potential financial liability. Complying with applicable environmental laws requires significant resources, and if our businesses fail to comply, they could be subject to substantial liability.

Some of the facilities and operations of our businesses are and may be subject to a variety of federal, state and foreign environmental laws and regulations including laws and regulations pertaining to the handling, storage and transportation of raw materials, products and wastes, which require and will continue to require significant expenditures to remain in compliance with such laws and regulations currently in place and in the future. Compliance with current and future environmental laws is a major consideration for our businesses as any material violations of these laws can lead to substantial liability, revocations of discharge permits, fines or penalties. Because some of our businesses use hazardous materials and generate hazardous wastes in their operations, they may be subject to potential financial liability for costs associated with the investigation and remediation of their own sites, or sites at which they have arranged for the disposal of hazardous wastes, if such sites become contaminated. Even if they fully comply with applicable environmental laws and are not directly at fault for the contamination, our businesses may still be liable.

Although our businesses estimate their potential liability with respect to violations or alleged violations and reserve funds and obtain insurance for such liability, such accruals may not be sufficient to cover the actual costs incurred as a result of these violations or alleged violations, which may include payment of large insurance deductibles. Additionally, if certain violations occur, premiums and deductibles for certain insurance policies may increase substantially and, in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage.

The identification of presently unidentified environmental conditions, more vigorous enforcement by regulatory agencies, enactment of more stringent laws and regulations, or other unanticipated events may arise in the future and give rise to material environmental liabilities, higher than anticipated levels of operating expenses and capital investment or, depending on the severity of the impact of the foregoing factors, costly plant relocation, all of which could have a material adverse effect on our financial condition, business and results of operations.

See the section entitled “— Risks Related to Crosman — Crosman may be required to pay remediation costs pursuant to DEC consent orders if the third party indemnitor is unable or unwilling to pay such costs” for a discussion of consent orders with the New York State Department of Environmental Conservation (“DEC”) signed by Crosman concerning the investigation and remediation of soil and groundwater contamination at its facility in East Bloomfield, New York.

Our businesses are and may be subject to a variety of federal, state and foreign laws and regulations concerning employment, health, safety and products liability. Failure to comply with governmental laws and regulations could subject them to, among other things, potential financial liability, penalties and legal expenses which could have a material adverse effect on our financial condition, business and results of operations.

Our businesses are and may be subject to various federal, state and foreign government employment, health, safety and products liability regulations. Compliance with these laws and regulations, which may be more stringent in some jurisdictions, is a major consideration for our businesses. Government regulators generally have considerable discretion to change or increase regulation of our operations, or implement additional laws or regulations that could materially adversely affect our businesses. Noncompliance with applicable regulations and requirements could subject our businesses to investigations, sanctions, product recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions. Suffering any of these consequences could materially adversely affect our financial condition, business and results of operations. In addition, responding to any action will likely result in a diversion of our manager’s and our management teams’ attention and resources from our operations.


	Some of our businesses are and may be operated pursuant to government permits, licenses, leases, concessions or contracts that are generally complex and may result in disputes over interpretation or enforceability. Our failure to comply with regulations or concessions could subject us to monetary penalties or result in a revocation of our rights to operate the affected business.

Our businesses, to varying degrees, rely and may, in the future, rely on government permits, licenses, concessions, leases or contracts. These arrangements are generally complex and require significant expenditures and attention by management to ensure compliance. These arrangements may result in disputes, including arbitration or litigation, over interpretation or enforceability. If our businesses fail to comply with these regulations or contractual obligations, our businesses could be subject to monetary penalties or lose their rights to operate their respective businesses, or both. Further, our businesses’ ability to grow may often require the consent of government regulators. These consents may be costly to obtain and we may not be able to obtain them in a timely fashion, if at all. Failure of our businesses to obtain any required consents could limit our ability to achieve our growth strategy.


	*Our businesses are subject to certain risks associated with their foreign operations or business they conduct in foreign jurisdictions.*

Some of our businesses have and may have operations or conduct business in Europe and Asia. Certain risks are inherent in operating or conducting business in foreign jurisdictions, including:


	•	exposure to local economic conditions;

	•	difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;

	•	longer payment cycles for foreign customers;

	•	adverse currency exchange controls;

	•	exposure to risks associated with changes in foreign exchange rates;

	•	potential adverse changes in the political environment of the foreign jurisdictions or diplomatic relations of foreign countries with the United States;

	•	withholding taxes and restrictions on the withdrawal of foreign investments and earnings;

	•	export and import restrictions;

	•	labor relations in the foreign jurisdictions;

	•	difficulties in enforcing intellectual property rights; and

	•	required compliance with a variety of foreign laws and regulations.


	*Employees of our businesses may join unions, which may increase our businesses’ costs.*

The majority of the employees of our businesses are not subject to collective bargaining agreements. However, employees who are not currently subject to collective bargaining agreements may form or join a union. The unionization of our businesses’ workforce could result in increased labor costs. Any work stoppages or other labor disturbances by our businesses’ employees could increase labor costs and disrupt production and the occurrence of either of these events could have a material adverse effect on the its business, financial condition, results of operations and cash flow available for distributions.


	*Our initial businesses have recorded a significant amount of goodwill and other identifiable intangible assets, which may never be fully realized.*

Our initial businesses collectively have, as of December 31, 2005, $308.0 million of goodwill and intangible and other assets on a pro forma basis. On a consolidated basis, this is 67.2% of our total assets on a pro forma basis. In accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets, we are required to evaluate goodwill and other intangibles for impairment at least annually. Impairment may result from, among other things, deterioration in the performance of these businesses, adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the products and services sold by these businesses, and a variety of other factors. Depending on future circumstances, it is possible that we may never realize the full value of these intangible assets. The amount of any quantified impairment must be expensed immediately as a charge to results of operations. Any future determination of impairment of a material portion of goodwill or other identifiable intangible assets could have a material adverse effect on these businesses’ financial condition and operating results, and could result in a default under our debt covenants.


	The operational objectives and business plans of our businesses may conflict with our operational and business objectives or with the plans and objective of another business we own and operate.

Our businesses operate in different industries and face different risks and opportunities depending on market and economic conditions in their respective industries and regions. A business’ operational objectives and business plans may not be similar to our objectives and plans or the objectives and plans of another business that we own and operate. This could create competing demands for resources, such as management attention and funding needed for operations or acquisitions, in the future.


	The internal controls of our initial businesses have not yet been integrated and we have only recently begun to examine the internal controls that are in place for each business. As a result, we may fail to comply with Section 404 of the Sarbanes-Oxley Act or our auditors may report a material weakness in the effectiveness of our internal control over financial reporting.

We are required under applicable law and regulations to integrate the various systems of internal control over financial reporting of our initial businesses. Beginning with our Annual Report for the year ending December 31, 2007, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), we will be required to include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. Additionally, our independent registered public accounting firm will be required to issue a report on management’s assessment of our internal control over financial reporting and a report on their evaluation of the operating effectiveness of our internal control over financial reporting.

We are evaluating our initial businesses’ existing internal controls in light of the requirements of Section 404. During the course of our ongoing evaluation and integration of the internal controls of our initial businesses, we may identify areas requiring improvement, and may have to design enhanced processes and controls to address issues identified through this review. Since our initial businesses were not subject to the requirements of Section 404 before this offering, the evaluation of existing controls and the implementation of any additional procedures, processes or controls may be costly. Our initial compliance

with Section 404 could result in significant delays and costs and require us to divert substantial resources, including management time, from other activities and hire additional accounting staff to address Section 404 requirements. In addition, under Section 404, we are required to report all significant deficiencies to our audit committee and independent auditors and all material weaknesses to our audit committee and auditors and in our periodic reports. We may not be able to successfully complete the procedures, certification and attestation requirements of Section 404 and we or our auditors may have to report material weaknesses in connection with the presentation of our financial statements for the fiscal year ending December 31, 2007.

If we fail to comply with the requirements of Section 404 or if our auditors report such a significant deficiency or material weakness, the accuracy and timeliness of the filing of our annual report may be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have a material adverse effect on the market price of the shares.

Risks Related to CBS Personnel


	*CBS Personnel’s business depends on its ability to attract and retain qualified staffing personnel that possess the skills demanded by its clients.*

As a provider of temporary staffing services, the success of CBS Personnel’s business depends on its ability to attract and retain qualified staffing personnel who possess the skills and experience necessary to meet the requirements of its clients or to successfully bid for new client projects. CBS Personnel must continually evaluate and upgrade its base of available qualified personnel through recruiting and training programs to keep pace with changing client needs and emerging technologies. CBS Personnel’s ability to attract and retain qualified staffing personnel could be impaired by rapid improvement in economic conditions resulting in lower unemployment, increases in compensation or increased competition. During periods of economic growth, CBS Personnel faces increasing competition for retaining and recruiting qualified staffing personnel, which in turn leads to greater advertising and recruiting costs and increased salary expenses. If CBS Personnel cannot attract and retain qualified staffing personnel, the quality of its services may deteriorate and its financial condition, business and results of operations may be materially adversely affected.


	*Any significant economic downturn could result in clients of CBS Personnel using fewer temporary employees, which would materially adversely affect the business of CBS Personnel.*

Because demand for temporary staffing services is sensitive to changes in the level of economic activity, CBS Personnel’s business may suffer during economic downturns. As economic activity begins to slow, companies tend to reduce their use of temporary employees before undertaking any other restructuring efforts, which may include reduced hiring and changed pay and working hours of their regular employees, resulting in decreased demand for temporary personnel. Significant declines in demand, and thus in revenues, can result in lower profit levels.


	*Customer relocation of positions filled by CBS Personnel may materially adversely affect CBS Personnel’s financial condition, business and results of operations.*

Many companies have built offshore operations, moved their operations to offshore sites that have lower employment costs or outsourced certain functions. If CBS Personnel’s customers relocate positions filled by CBS Personnel, this would have a material adverse effect on the financial condition, business and results of operations of CBS Personnel.


	*CBS Personnel assumes the obligation to make wage, tax and regulatory payments for its employees, and as a result, it is exposed to client credit risks.*

CBS Personnel generally assumes responsibility for and manages the risks associated with its employees’ payroll obligations, including liability for payment of salaries and wages (including payroll taxes), as well as group health and retirement benefits. These obligations are fixed, whether or not its

clients make payments required by services agreements, which exposes CBS Personnel to credit risks of its clients, primarily relating to uncollateralized accounts receivables. If CBS Personnel fails to successfully manage its credit risk, its financial condition, business and results of operations may be materially adversely affected.


	CBS Personnel is exposed to employment-related claims and costs and periodic litigation that could materially adversely affect its financial condition, business and results of operations.

The temporary services business entails employing individuals and placing such individuals in clients’ workplaces. CBS Personnel’s ability to control the workplace environment of its clients is limited. As the employer of record of its temporary employees, it incurs a risk of liability to its temporary employees and clients for various workplace events, including:


	•	claims of misconduct or negligence on the part of its employees, discrimination or harassment claims against its employees, or claims by its employees of discrimination or harassment by its clients;

	•	immigration-related claims;

	•	claims relating to violations of wage, hour and other workplace regulations;

	•	claims relating to employee benefits, entitlements to employee benefits, or errors in the calculation or administration of such benefits; and

	•	possible claims relating to misuse of customer confidential information, misappropriation of assets or other similar claims.

CBS Personnel may incur fines and other losses and negative publicity with respect to any of the situations listed above. Some the claims may result in litigation, which is expensive and distracts management’s attention from the operations of CBS Personnel’s business.

CBS Personnel maintains insurance with respect to many of these claims. CBS Personnel, however, may not be able to continue to obtain insurance at a cost that does not have a material adverse effect upon it. As a result, such claims (whether by reason of it not having insurance or by reason of such claims being outside the scope of its insurance) may have a material adverse effect on CBS Personnel’s financial condition, business and results of operations.


	*CBS Personnel’s workers’ compensation loss reserves may be inadequate to cover its ultimate liability for workers’ compensation costs.*

CBS Personnel self-insures its workers’ compensation exposure for certain employees. The calculation of the workers’ compensation reserves involves the use of certain actuarial assumptions and estimates. Accordingly, reserves do not represent an exact calculation of liability. Reserves can be affected by both internal and external events, such as adverse developments on existing claims or changes in medical costs, claims handling procedures, administrative costs, inflation, and legal trends and legislative changes. As a result, reserves may not be adequate.

If reserves are insufficient to cover the actual losses, CBS Personnel would have to increase its reserves and incur charges to its earnings that could be material.

Risks Related to Crosman


	*Crosman is dependent on key retailers, the loss of which would materially adversely affect its financial conditions, businesses and results of operations.*

Crosman’s 10 largest retailers accounted for approximately 71.3% of its gross sales, excluding GFP, for the fiscal year ended June 30, 2005 and its largest retailer, Wal-Mart, accounted for approximately 37.2% of its gross sales, excluding GFP, in such period. Crosman may be unable to retain listings of its products at certain existing retailers, or may only be able to retain or increase product listings at lower

prices, reducing profitability at these key retailers. Specifically, the decision to list products with specific retailers is not made solely by Crosman and may be based upon factors beyond its control. Accordingly, its listings with its current retailers may not extend into the future, or if extended, the product prices or other terms may not be acceptable to it. Moreover, the retail customers who purchase its products may not continue to do so. Any negative change involving any of its largest retailers, including but not limited to a retailer’s financial condition, desire to carry the their products or desire to carry the overall airgun, paintball or larger encompassing category (e.g., sporting goods) would likely have a material adverse effect on Crosman’s financial condition, business and results of operations.


	*Crosman may be required to pay remediation costs pursuant to DEC consent orders if the third party indemnitor is unable or unwilling to pay such costs.*

Crosman has signed consent orders with the DEC to investigate and remediate soil and groundwater contamination at its facility in East Bloomfield, New York. Pursuant to a contractual indemnity and related agreements, the costs of investigation and remediation have been paid by a third party successor to the prior owner and operator of the facility, which also has signed the consent orders with the DEC. In 2002, the DEC indicated that additional remediation of groundwater may be required. Crosman and the third party have engaged in discussions with the DEC regarding the need for additional remediation. To date, the DEC has not required any additional remediation. The third party may not have the financial ability to pay or may discontinue defraying future site remediation costs, which could have a material adverse effect on Crosman if the DEC requires additional groundwater remediation.


	*Crosman’s products are subject to governmental regulations in the United States and foreign jurisdictions.*

In the United States, recreational airgun and paintball products are within the jurisdiction of the Consumer Products and Safety Commission (“CPSC”). Under federal statutory law and CPSC regulations, a manufacturer of consumer goods is obligated to notify the CPSC if, among other things, the manufacturer becomes aware that one of its products has a defect that could create a substantial risk of injury. If the manufacturer has not already undertaken to do so, the CPSC may require a manufacturer to recall a product, which may involve product repair, replacement or refund. Crosman’s products may also be subject to recall pursuant to regulations in other jurisdictions where its products are sold. Any recall of its products may expose them to product liability claims and have a material adverse effect on its reputation, brand, and image and on its financial condition, business and results of operations. On a state level, Crosman is subject to state laws relating to the retail sale and use of certain of its products.

The American Society of Testing Materials (“ASTM”), a non-governmental self-regulating association, has been active in developing and periodically reviewing, voluntary standards regarding airguns, airgun ammunition, paintball fields, paintball face protection, paintball markers and recreational airguns. Any failure to comply with any current or pending ASTM standards may have a material adverse effect on its financial condition, business and results of operations.

Adverse publicity relating to shooting sports or paintball, or publicity associated with actions by the CPSC or others expressing concern about the safety or function of its products or its competitor’s products (whether or not such publicity is associated with a claim against it or results in any action by it or the CPSC), could have a material adverse effect on their reputation, brand image, or markets, any of which could have a material adverse effect on Crosman, its financial condition, business and results of operations.

Certain jurisdictions outside of the U.S. have legislation that prohibit retailers from selling, or places restrictions on the sale of, certain product categories that are or may be sufficiently broad enough to include recreational airguns or paintball markers. Although Crosman is not aware of any state or federal initiatives to enact comparable legislation, aside from those state laws relating to retail sale and use of certain of its products, such legislation may be enacted in the future.

Many jurisdictions outside of the United States, including Canada, have legislation limiting the power, distribution and/or use of Crosman’s products. Crosman works with its distributors in each jurisdiction to ensure that it is in compliance with the applicable rules and regulations. Any change in the laws and

regulations in any of the jurisdictions where its products are sold that restricts the distribution, sale or use of its products could have a material adverse effect on them, their financial condition and results of operations.


	*The airgun and paintball industries are seasonal, which could materially adversely affect Crosman’s financial condition, business and results of operations.*

The airgun and paintball industries are subject to seasonal variations in sales. Specifically, approximately 25% of its products are sold during October and November as part of the holiday retail season. The success of sales in the holiday retail season is dependent upon a number of factors including, but not limited to, the ability to continue to obtain promotional listings and the overall retail and consumer spending macro-economic environment.

The months following the holiday season are the winter months in North America, which typically result in lower sales of certain outdoor products. As a result, many outdoor consumer products companies, other than those focused on outdoor winter products, historically experience a significant decline in operating income from January to March. The second fiscal quarter operating results are typically above Crosman’s annual average and the third fiscal quarter operating results are typically lower than its annual average. The seasonal nature of sales requires disproportionately higher working capital investments from September through January. In addition, borrowing capacity under its revolving credit facility is impacted by the seasonal change in receivables and inventory. Consequently, interim results are not necessarily indicative of the full fiscal year and quarterly results may vary substantially, both within a fiscal year and between comparable fiscal years. The effects of seasonality could have a material adverse impact on its financial condition, business and results of operations.


	*Crosman’s products are subject to product safety and liability lawsuits, which could materially adversely affect its financial condition, business and results of operations.*

As a manufacturer of recreational airguns, Crosman, other than GFP, is involved in various litigation matters that occur in the ordinary course of business. Since the beginning of 1994, Crosman has been named as a defendant in 56 lawsuits and has been the subject of 92 other claims made by persons alleging to have been injured by its products. To date, 96 of these cases have been terminated without payment and 26 of these cases have been settled at an aggregate settlement cost of approximately $1,725,000. As of the date of this prospectus, Crosman is involved in 4 product liability cases and 22 claims brought against Crosman by persons alleging to have been injured by its products.

In addition, GFP has been the subject of three claims made by persons alleging to be injured by its products. Two of these claims have been resolved without payment and, as of the date of this prospectus, the third has not been resolved and remains active.

Crosman’s management believes that, in most cases, these injuries have been sustained as a result of the misuse of the product, or the failure to follow the safety instructions that accompanied the product or the failure to follow well-recognized common sense rules for recreational airgun safety. In the last two years, expenses incurred in connection with the defense of product liability claims have averaged less than $500,000.

If any unresolved lawsuits or claims are determined adversely, they could have a material adverse effect on Crosman, its financial condition, business and results of operations. As more of Crosman’s products are sold to and used by consumers, the likelihood of product liability claims being made against it increases.

Although Crosman provides information regarding safety procedures and warnings with all of its product packaging materials, not all users of its products will observe all proper safety practices. Failure to observe proper safety practices may result in injuries that give rise to product liability and personal injury claims and lawsuits, as well as claims for breach of contract, loss of profits and consequential damages against both companies.

In addition, the running of statutes of limitations in the United States for personal injuries to minor children typically is suspended during the children’s legal minority. Therefore, it is possible that accidents resulting in injuries to minors may not give rise to lawsuits until a number of years later.

While Crosman maintains product liability insurance to insure against potential claims, there is a risk such insurance may not be sufficient to cover all liabilities incurred in connection with such claims and the financial consequences of these claims and lawsuits will have a material adverse effect on its business, financial condition, liquidity and results of operations.


	Crosman relies on a limited number of suppliers and as a result, if suppliers are unable to provide materials on a timely basis, Crosman’s financial condition, business and results of operations may be materially adversely affected.

Crosman is aware of only five manufacturers of the gelatin-encapsulated paintballs necessary for paintball play. Crosman believes that the cost of equipment and the knowledge required for the encapsulation process have historically been significant barriers to the entry of additional paintball suppliers. Accordingly, additional paintball suppliers may not exist in the future. Because Crosman does not manufacture its own paintballs, it has entered into a joint venture with a major paintball producer. Despite the existence of contractual arrangements, it is possible that the current supplier will not be able to supply sufficient quantities of its products in order to meet Crosman’s current needs or to support any growth in Crosman’s sales in the future.

Crosman does not currently have long-term contracts with any of its suppliers, nor does it currently have multiple suppliers for all parts, components, tooling, supplies and services critical to its manufacturing process. Its success will depend, in part, on its and Crosman’s ability to maintain relationships with its current suppliers and on the ability of these and other suppliers to satisfy its product requirements. Failure of a key supplier to meet its product needs on a timely basis or loss of a key supplier could have a material adverse effect on its financial condition, business and results of operations.


	Crosman cannot control certain of its operating expenses and as a result, if it is unable to pass on its cost increases, its financial condition, business and results of operations may be materially adversely affected.

Certain costs including, but not limited to, steel, plastics, labor and insurance may escalate. Although Crosman has the ability to pass on some price increases to customers, significant increases in these costs could significantly decrease the affordability of its products. The cost of maintaining property, casualty, products liability and workers’ compensation insurance, for example, is significant. As a producer of recreational airguns and paintball products, Crosman is exposed to claims for personal injury or death as a result of accidents and misuse or abuse of its products. Generally, its insurance policies must be renewed annually. Its ability to continue to obtain insurance at affordable premiums also depends upon its ability to continue to operate with an acceptable safety record. Crosman could experience higher insurance premiums as a result of adverse claims experience or because of general increases in premiums by insurance carriers for reasons unrelated to its own claims experience. A significant increase in the number of claims against it, the assertion of one or more claims in excess of policy limits or the inability to obtain adequate insurance coverage at acceptable rates, or at all, could have a material adverse effect on its financial condition, business and results of operations.


	*The members agreement governing GFP has certain covenants that may have important consequences to Crosman.*

Under the terms of the members agreement governing GFP, Crosman is subject to certain non-competition and non-solicitation covenants restricting its participation in the paintball industry for a period

of three years from the date it terminates its interests in GFP. These covenants restrict its ability, among other things, to:


	•	engage in, have any equity or profit interest in, make any loan to or for the benefit of, or render services to any business that engages in providing goods or services provided by GFP in the relevant territory;

	•	employ any person who was employed by GFP and has not ceased to be employed for a period of at least one year;

	•	solicit any current or previous customer of GFP; and

	•	directly or indirectly engage in the manufacture of paintballs.

Crosman is restricted in their ability to engage in certain activities within a defined geographic scope for a period of three years following termination of its interest in GFP, and such restrictions could have a material adverse effect on its financial condition, business and results of operations.

Risks Related to Advanced Circuits


	Defects in the products that Advanced Circuits produces for their customers could result in financial or other damages to those customers, which could result in reduced demand for Advanced Circuits’ services and liability claims against Advanced Circuits.

Some of the products Advanced Circuits produces could potentially result in product liability suits against Advanced Circuits. While Advanced Circuits does not engage in design services for its customers, it does manufacture products to their customers’ specifications that are highly complex and may at times contain design or manufacturing defects, errors or failures, despite its quality control and quality assurance efforts. Defects in the products it manufactures, whether caused by a design, manufacturing or materials failure or error, may result in delayed shipments, customer dissatisfaction, or a reduction in or cancellation of purchase orders or liability claims against Advanced Circuits. If these defects occur either in large quantities or frequently, its business reputation may be impaired. Defects in its products could result in financial or other damages to its customers.

If a person were to bring a product liability suit against Advanced Circuits’ customers, such person may attempt to seek contribution from Advanced Circuits. Product liability claims made against any of these businesses, even if unsuccessful, would be time consuming and costly to defend. A customer may also bring a product liability claim directly against Advanced Circuits. A successful product liability claim or series of claims against Advanced Circuits in excess of its insurance coverage, and for which it is not otherwise indemnified, could have a material adverse effect on its financial condition, business or results of operations. Although Advanced Circuits maintains a warranty reserve, this reserve may not be sufficient to cover its warranty or other expenses that could arise as a result of defects in its products.


	Unless Advanced Circuits is able to respond to technological change at least as quickly as its competitors, its services could be rendered obsolete, which could materially adversely affect its financial condition, business and results of operations.

The market for Advanced Circuits’ services is characterized by rapidly changing technology and continuing process development. The future success of its business will depend in large part upon its ability to maintain and enhance its technological capabilities, retain qualified engineering and technical personnel, develop and market services that meet evolving customer needs and successfully anticipate and respond to technological changes on a cost-effective and timely basis. Advanced Circuits’ core manufacturing capabilities are for 2 to 12 layer printed circuit boards. Trends towards miniaturization and increased performance of electronic products are dictating the use of printed circuit boards with increased layer counts. If this trend continues Advanced Circuits may not be able to effectively respond to the technological requirements of the changing market. If it determines that new technologies and equipment are required to remain competitive, the development, acquisition and implementation of these technologies

may require significant capital investments. It may be unable to obtain capital for these purposes in the future, and investments in new technologies may not result in commercially viable technological processes. Any failure to anticipate and adapt to its customers’ changing technological needs and requirements or retain qualified engineering and technical personnel could materially adversely affect its financial condition, business and results of operations.


	Advanced Circuits’ customers operate in industries that experience rapid technological change resulting in short product life cycles and as a result, if the product life cycles of its customers slow materially, and research and development expenditures are reduced, its financial condition, business and results of operations will be materially adversely affected.

Advanced Circuits’ customers compete in markets that are characterized by rapidly changing technology, evolving industry standards and continuous improvement in products and services. These conditions frequently result in short product life cycles. As professionals operating in research and development departments represent the majority of Advanced Circuits’ net sales, the rapid development of electronic products is a key driver of Advanced Circuits’ sales and operating performance. Any decline in the development and introduction of new electronic products could slow the demand for Advanced Circuits’ services and could have a material adverse effect on its financial condition, business and results of operations.


	The continued trend of technology companies moving their operations offshore may materially adversely affect Advanced Circuits’ financial conditions, business and results of operations.

There is increasing pressure on technology companies to lower their cost of production. Many have responded to this pressure by relocating their operations to countries that have lower production costs. Despite Advanced Circuits’ focus on quick-turn and prototype manufacturing, its operations, which are located in Colorado as well as the electronics manufacturing industry as a whole, may be materially adversely affected by U.S. customers moving their operations offshore.


	Electronics manufacturing services corporations are increasingly acting as intermediaries, positioning themselves between PCB manufacturers and OEMS, which could reduce operating margins.

Advanced Circuits’ OEM customers are increasingly outsourcing the assembly of equipment to third party manufacturers. These third party manufacturers typically assemble products for multiple customers and often purchase circuit boards from Advanced Circuits in larger quantities than OEM manufacturers. The ability of Advanced Circuits to sell products to these customers at margins comparable to historical averages is uncertain. Any material erosion in margins could have a material adverse effect on Advanced Circuits’ financial condition, business and results of operations.

Risks Related to Silvue


	Silvue derives a significant portion of its revenue from the eyewear industry. Any economic downturn in this market or increased regulations by the Food and Drug Administration, would materially adversely affect its operating results and financial condition.

Silvue’s customers are concentrated in the eyewear industry, so the economic factors impacting this industry also impact its operations and revenues. Silvue’s management estimates that in 2005 approximately 75% of its net sales were from the premium eyewear industry. Silvue’s management estimates that it had approximately 17% share of this market in 2005. Any economic downturn in this market or increased regulations by the Food and Drug Administration, would materially adversely affect its operating results and financial condition.

Further, Silvue’s coating technology is utilized primarily on mid and high value lenses. A decline in the ophthalmic and sunglass lens industry in general, or a change in consumers’ preferences from mid and high value lenses to low value lenses within the industry, may have a material adverse effect on its financial condition, business and results of operations.


	Silvue’s technology is compatible with certain substrates and processes and competes with a number of products currently sold on the market. A change in the substrate, process or competitive landscape could have a material adverse affect on its financial condition, business and results of operations.

Silvue provides material for the coating of polycarbonate, acrylic, glass, metals and other surfaces. Its business is dependent upon the continued use of these substrates and the need for its products to be applied to these substrates. In addition, Silvue’s products are compatible with certain application techniques. New application techniques designed to improve performance and decrease costs are being developed that may be incompatible with Silvue’s coating technologies. Further, Silvue competes with a number of large and small companies in the research, development, and production of coating systems. A competitor may develop a coating system that is technologically superior and render Silvue’s products less competitive. Any of these conditions may have a material adverse effect on its financial condition, business and results of operations.


	*Silvue has international operations and is exposed to general economic, political and regulatory conditions and risks in the countries in which they have operations.*

Silvue has facilities located in United Kingdom and Japan. Conditions such as the uncertainties associated with war, terrorist activities, social, political and general economic environments in any of the countries in which Silvue or its customers operate could cause delays or losses in the supply or delivery of raw materials and products as well as increased security costs, insurance premiums and other expenses. Moreover, changes in laws or regulations, such as unexpected changes in regulatory requirements (including trade barriers, tariffs, import or export licensing requirements), or changes in the reporting requirements of United States, European and Asian governmental agencies, could increase the cost of doing business in these regions. Furthermore, in foreign jurisdictions where laws differ from those in the United States, it may experience difficulty in enforcing agreements. Any of these conditions may have a material adverse effect on its financial condition, business and results of operations.


	*Changes in foreign currency exchange rates could materially adversely affect Silvue’s financial condition, business and results of operations.*

Approximately half of Silvue’s net sales are in foreign currencies. Changes in the relative strength of these currencies can materially adversely affect Silvue’s financial condition, business and results of operations.


	Silvue relies upon valuable intellectual property rights that could be subject to infringement or attack. Infringement of these intellectual property rights by others could have a material adverse affect on its financial condition, business and results of operations.

As a developer of proprietary high performance coating systems, Silvue relies upon the protection of its intellectual property rights. In particular, Silvue derives a majority of its revenues from products incorporating patented technology. Infringement of these intellectual property rights by others, whether in the United States or abroad (where protection of intellectual property rights can vary widely from jurisdiction to jurisdiction), could have a material adverse effect on Silvue’s financial condition, business and results of operations. In addition, in the highly competitive hard coatings market, there can be no guarantee that Silvue’s competitors would not seek to invalidate or modify Silvue’s proprietary rights, including its nine patents related to its coating systems. While any such effort would be met with vigorous defense, the defense of any such matters could be costly and distracting and no assurance can be given that Silvue would prevail.

Risks Related to this Offering


	There is no public market for our shares. You cannot be certain that an active trading market or a specific share price will be established, and you may not be able to resell your shares at or above the initial offering price.

We have filed an application to quote our shares on the Nasdaq National Market. However, there currently is no public trading market for our shares, and an active trading market may not develop upon completion of this offering or continue to exist if it does develop. The market price of our shares may also decline below the initial public offering price. The initial public offering price per share will be determined by agreement among us and the representatives of the underwriters, and may not be indicative of the market price of our shares after our initial public offering.


	*Future sales of shares may affect the market price of our shares.*

We cannot predict what effect, if any, future sales of our shares, or the availability of shares for future sale, will have on the market price of our shares. Sales of substantial amounts of our shares in the public market following our initial public offering, or the perception that such sales could occur, could materially adversely affect the market price of our shares and may make it more difficult for you to sell your shares at a time and price which you deem appropriate. A decline below the initial public offering price, in the future, is possible. See the section entitled “Shares Eligible for Future Sale” for more information about the circumstances under which additional shares may be sold.

We, CGI, Pharos, the employees of our manager and our officers and directors have agreed that, with limited exceptions, we and they will not directly or indirectly, without the prior written consent of Ferris, Baker Watts, Incorporated, on behalf of the underwriters, offer to sell, sell or otherwise dispose of any shares they acquired in connection with this offering for a period of 180 days after the date of this prospectus.


	We may issue additional debt and equity securities which are senior to our shares as to distributions and in liquidation, which could materially adversely affect the market price of our shares.

In the future, we may attempt to increase our capital resources by entering into additional debt or debt-like financing that is secured by all or up to all of our assets, or issuing debt or equity securities, which could include issuances of commercial paper, medium-term notes, senior notes, subordinated notes or shares. In the event of our liquidation, our lenders and holders of our debt securities would receive a distribution of our available assets before distributions to our shareholders. Any preferred securities, if issued by the company, may have a preference with respect to distributions and upon liquidation, which could further limit our ability to make distributions to our shareholders. Because our decision to incur debt and issue securities in our future offerings will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings and debt financing. Further, market conditions could require us to accept less favorable terms for the issuance of our securities in the future. Thus, you will bear the risk of our future offerings reducing the value of your shares and diluting your interest in us. In addition, we can change our leverage strategy from time to time without shareholder approval, which could materially adversely affect the market share price of our shares.


	*Our earnings and cash distributions may affect the market price of our shares.*

Generally, the market price of our shares may be based, in part, on the market’s perception of our growth potential and our current and potential future cash distributions, whether from operations, sales, acquisitions or refinancings, and on the value of our businesses. For that reason, our shares may trade at prices that are higher or lower than our net asset value per share. Should we retain operating cash flow for investment purposes or working capital reserves instead of distributing the cash flows to our shareholders, the retained funds, while increasing the value of our underlying assets, may materially adversely affect the market price of our shares. Our failure to meet market expectations with respect to earnings and cash distributions could materially adversely affect the market price of our shares.

If the market price of our shares declines, you may be unable to resell your shares at or above the initial public offering price. We cannot assure you that the market price of our shares will not fluctuate or decline significantly, including a decline below the initial public offering price, in the future.


	The market price, trading volume and marketability of our shares may, from time to time, be significantly affected by numerous factors beyond our control, which may materially adversely affect the market price of your shares and our ability to raise capital through future equity financings.

The market price and trading volume of our shares may fluctuate significantly. Many factors that are beyond our control may significantly affect the market price and marketability of our shares and may materially adversely affect our ability to raise capital through equity financings. These factors include the following:


	•	price and volume fluctuations in the stock markets generally which create highly variable and unpredictable pricing of equity securities;

	•	significant volatility in the market price and trading volume of securities of companies in the sectors in which our businesses operate, which may not be related to the operating performance of these companies and which may not reflect the performance of our businesses;

	•	changes and variations in our earnings and cash flows;

	•	any shortfall in revenue or net income or any increase in losses from levels expected by securities analysts;

	•	changes in regulation or tax law;

	•	operating performance of companies comparable to us;

	•	general economic trends and other external factors including inflation, interest rates, and costs and availability of raw materials, fuel and transportation; and

	•	loss of a major funding source.

All of our shares sold in this offering will be freely transferable by persons other than our affiliates and those persons subject to lock-up agreements, without restriction or further registration under the Securities Act of 1933, as amended, or the Securities Act.

FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “The Acquisitions of and Loans to Our Initial Businesses,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” and elsewhere in this prospectus contains forward-looking statements. We may, in some cases, use words such as “project,” “predict,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “potentially,” or “may” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this prospectus are subject to a number of risks and uncertainties, some of which are beyond our control, including, among other things:


	•	our ability to successfully operate our initial businesses on a combined basis, and to effectively integrate and improve any future acquisitions;

	•	our ability to remove our manager and our manager’s right to resign;

	•	our trust and organizational structure, which may limit our ability to meet our dividend and distribution policy;

	•	our ability to service and comply with the terms of our indebtedness;


	•	our cash flow available for distribution after the closing of this offering and our ability to make distributions in the future to our shareholders;


	•	our ability to pay the management fee, profit allocation and put price when due;

	•	the acquisition price of each initial business and the loan amounts to each initial business;


	•	decisions made by persons who control our initial businesses, including decisions regarding dividend and distribution policies;


	•	our ability to make and finance future acquisitions, including, but not limited to, the acquisitions described in this prospectus;

	•	our ability to implement our acquisition and management strategies;

	•	the regulatory environment in which our initial businesses operate;

	•	trends in the industries in which our initial businesses operate;

	•	changes in general economic or business conditions or economic or demographic trends in the United States and other countries in which we have a presence, including changes in interest rates and inflation;


	•	environmental risks affecting the business or operations of our initial businesses;



	•	our and our manager’s ability to retain or replace qualified employees of our initial businesses and our manager;


	•	costs and effects of legal and administrative proceedings, settlements, investigations and claims; and


	•	extraordinary or force majeure events affecting the business or operations of our initial businesses.

Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. A description of some of the risks that could cause our actual results to differ appears under the section “Risk Factors” and elsewhere in this prospectus. Additional risks of which we are not currently aware or which we currently deem immaterial could also cause our actual results to differ.

In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements. The forward-looking events discussed in this prospectus may not occur. These forward-looking statements are made as of the date of this prospectus. We undertake no obligation to publicly update or revise any forward-looking statements after the completion of this offering, whether as a result of new information, future events or otherwise, except as required by law.

USE OF PROCEEDS

We estimate that our net proceeds from the sale of 14,000,000 shares in this offering will be approximately $194.8 million (or approximately $224.0 million if the underwriters’ overallotment option is exercised in full), based on the initial public offering price of $15.00 per share (which is the mid-point of the estimated initial public offering price range set forth on the cover page on this prospectus) and after deducting underwriting discounts and commissions (including the financial advisory fee payable to Ferris, Baker Watts, Incorporated) of approximately $15.2 million (or approximately $17.5 million if the underwriters’ overallotment option is exercised in full), but without giving effect to the payment of public offering costs of approximately $6.0 million. In addition, CGI and Pharos have each agreed to purchase in separate private placement transactions to close in conjunction with the closing of this offering a number of shares in the trust having an aggregate purchase price of approximately $86 million and $4 million, respectively, at a per share price equal to the initial public offering price.

We intend to use the net proceeds from this offering, from the separate private placement transactions and from the initial borrowing under our third party credit facility to:



	•	pay the purchase price and related costs of the acquisition of our initial business of approximately $140.8 million;



	•	make loans to each of our initial businesses to repay outstanding debt and to provide capitalization in an aggregate principal amount of $170.8 million;



	•	pay the public offering costs of approximately $6.0 million; and



	•	provide funds for general corporate purposes of approximately of $11.1 million.

The table below summarizes the expected sources and uses of the net proceeds from this offering, the separate private placement transactions and the initial borrowings under our third party credit facility:


		Sources of Funds

		($ in millions)
Net proceeds from initial public offering		$	194.8
Investment of Pharos			4.0
Investment of CGI			86.0
Net proceeds from initial borrowing under third party credit facility			43.9

	Total Sources	$	328.7


			Uses of Funds

			($ in millions)
Purchase of Equity:
	CBS Personnel		$	54.6
	Crosman			26.9
	Advanced Circuits			35.3
	Silvue			24.0
Loans to initial businesses:⁽¹⁾
	CBS Personnel			66.4	⁽²⁾
	Crosman			43.2
	Advanced Circuits			47.4
	Silvue			13.8
Public offering costs⁽³⁾				6.0
General corporate purposes				11.1

		Total Uses	$	328.7



⁽¹⁾	See the liquidity and capital resources discussion for each initial business in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information about the outstanding debt of each initial business that will be repaid in connection with this offering. See the section entitled “The Acquisitions of and Loans to Our Initial Businesses” for more information about the loans to each of our initial businesses.



⁽²⁾	The $66.4 million will be comprised of approximately $50.0 million in term loans, approximately $17.2 million of which will be used to pay down third party debt and approximately $32.8 million of which represents a capitalization loan and approximately $16.4 million of a $37.5 million revolving loan commitment which will be made to CBS Personnel in conjunction with the closing of this offering. CBS Personnel will use a portion of the loans to redeem shares of its Class B and Class C common stock from certain holders thereof and to make payments to certain of its option holders as consideration for the termination of a portion of their options to acquire Class C common stock. See the section entitled “The Acquisitions of and Loans to Our Initial Businesses” for more information about the loans to CBS Personnel.


⁽³⁾	This amount will be reimbursed by the company to the manager in conjunction with the closing of this offering. See the section entitled “Management Services Agreement—Reimbursement of Offering Expenses” and “Certain Relationships and Related Party Transactions” for more information about the reimbursement of offering expenses.

See the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information about the terms of existing loans for each business. See the sections entitled “The Acquisitions of and Loans to Our Initial Businesses” and “Certain Relationships and Related Party Transactions” for information about the acquisition of our initial businesses.

DIVIDEND AND DISTRIBUTION POLICY

The company’s board of directors intends to declare and pay regular quarterly cash distributions on all outstanding shares. The company’s board of directors intends to declare and pay an initial quarterly distribution for the first full fiscal quarter ending September 30, 2006 of approximately $0.2625 per share and an initial distribution equal to the amount of the initial quarterly distribution, but pro rated for the period from the completion of this offering to June 30, 2006. The distributions will be paid to holders of record, as determined by the company’s board of directors, together at the time that the initial quarterly distribution is paid. The company’s board of directors intends to set this initial distribution on the basis of the current results of operations of our initial businesses and other resources available to the company, including the third party credit facility, and the desire to provide sustainable levels of distributions to our shareholders.

Our distribution policy is based on the predictable and stable cash flows of our initial businesses and our intention to provide sustainable levels of distributions to our shareholders while reinvesting a portion of our cash flows in our businesses or in the acquisition of new businesses. If our strategy is successful, we expect to maintain and increase the level of our distributions to shareholders in the future.

The declaration and payment of our initial distribution, our initial quarterly distribution and any future distribution will be subject to the approval of the company’s board of directors, which will include a majority of independent directors. The company’s board of directors will take into account such matters as general business conditions, our financial condition, results of operations, capital requirements and any contractual, legal and regulatory restrictions on the payment of distributions by us to our shareholders or by our subsidiaries to us, and any other factors that the board of directors deems relevant. However, even in the event that the company’s board of directors were to decide to declare and pay distributions, our ability to pay such distributions may be adversely impacted due to unknown liabilities, government regulations, financial covenants of the debt of the company, funds needed for acquisitions and to satisfy short- and long-term working capital needs of our businesses, or if our initial businesses do not generate sufficient earnings and cash flow to support the payment of such distributions. In particular, we may incur debt in the future to acquire new businesses, which debt will have substantial debt commitments, which must be satisfied before we can make distributions. These factors could affect our ability to continue to make distributions.

We may use cash flow from our initial businesses, the capital resources of the company, including borrowings under the company’s third party credit facility, or a reduction in equity to pay a distribution. See the section entitled “Material U.S. Federal Income Tax Considerations” for more information about the tax treatment of distributions to our shareholders.

Estimated Pro Forma Cash Flow Available for Distribution for the Year Ended December 31, 2005

We believe that if we had completed this offering on January 1, 2005, our estimated pro forma cash flow available for distribution for the year ended December 31, 2005, based on our pro forma condensed combined financial statements for the year ended December 31, 2005, would have been approximately $27.0 million.

The estimated pro forma cash flow available for distribution for the year ended December 31, 2005 is based on pro forma condensed combined financial statements, which include certain assumptions and considerations. These statements do not reflect any internal growth in the cash flows of our businesses from the period covered until the date of this offering. In addition, the pro forma financial statements do not purport to present our results of operations had the transactions contemplated in this prospectus actually been completed as of the dates indicated. Furthermore, cash flow available for distribution is a cash accounting concept, while our pro forma financial statements have been prepared on an accrual basis. As a result, you should only view the amount of pro forma estimated cash flow available for distribution as a general indication of the amount of cash we believe would have been available for distribution that we might have generated had we owned our initial businesses during these periods. No assurance can be given that the estimated pro forma cash flow available for distribution presented in the prospectus will actually

be produced or, to the extent it is produced, will be sufficient to make the initial distribution and the initial quarterly distribution or distributions in subsequent quarters.

Our estimated pro forma cash flow available for distribution also includes certain other adjustments, assumptions and considerations and reflects the amount of cash that we believe would have been available for distribution to our shareholders subject to the assumptions described in the table below. The pro forma cash flow available for distribution includes management fee expense of approximately $4.5 million, after taking into account the offsetting management fees, to be paid to our manager pursuant to the management services agreement. See the section entitled “Our Manager — Our Relationship With Our Manager — Our Manager as a Service Provider — Management Fee” for more information about the management fee to be paid to our manager. The estimated management fee expense is reflected in our pro forma financial statements for the year ended December 31, 2005.

The following table sets forth our calculation of the estimated pro forma cash flow available for distribution for the year ended December 31, 2005.


				Year Ended
				December 31,
Cash Flow Available for Distribution				2005

				($ in thousands)
Net income per pro forma				$	8,783
	Adjustment to reconcile pro forma net income to pro forma net cash provided by operating activities:
		Pro forma depreciation			5,398
		Pro forma amortization			10,433
		Pro forma amortization of debt issuance cost			1,220
		Pro forma adjustment to add back in-process R&D expensed at acquisition date			1,240
		Pro forma minority interest			3,265
		Pro forma deferred taxes			367
		Pro forma foregone offering costs⁽¹⁾			3,022
		Pro forma deferred interest			1,287
		Pro forma loss from equity investment and other			98
		Pro forma changes in operating assets and liabilities			5,893

Pro forma net cash provided by operating activities					41,006
	Add:
		Pro forma unused fee on delayed term loan⁽²⁾			2,300
	Less:
		Pro forma changes in operating assets and liabilities			5,893
		Pro forma deferred interest			1,287
		Estimated incremental general and administrative expense ⁽³⁾			5,000
		Capital expenditures for the year ended December 31, 2005⁽⁴⁾
			CBS Personnel		1,018
			Crosman		1,747
			Advanced Circuits		1,184
			Silvue		178

Estimated pro forma cash flow available for distribution				$	26,999



⁽¹⁾	Relates to Crosman’s foregone offering costs associated with its intended public offering in the Canadian Income Trust market that was ultimately not consummated.


⁽²⁾	Represents the 2% commitment fee on the $115 million unused delayed term loan.


⁽³⁾	Represents ongoing incremental administrative expenses, professional fees and management fees we expect to incur annually as a public company such as accounting, legal and other consultant fees, SEC and listing fees, directors’ fees and directors’ and officers’ insurance. We currently estimate these costs to be approximately $5.0 million.


⁽⁴⁾	Represents capital expenditures that were funded from operating cash flow.

This calculation is an estimate of the cash flow available for distribution to shareholders on a pro forma basis for 2005 had this offering, the separate private placement transactions and our initial borrowing under our third party credit facility been consummated on January 1, 2005. It does not include any profit allocation with respect to the allocation interests held by our manager, as no trigger event has occurred, or would have occurred on a pro forma basis, during such period.

Restrictions on Distribution Payments

We are a holding company with no operations. We will be dependent upon the ability of our initial businesses to generate earnings and cash flow and to make distributions to us in the form of interest and principal payments on indebtedness and distributions on equity to enable us to, first, satisfy our financial obligations including payments under our third party credit facility, the management fee, profit allocation and put price, and, second, make distributions to our shareholders. There is no guarantee that we will make quarterly distributions, including the distribution we project to make in the initial quantities following this offering. Our ability to make quarterly distributions may be subject to certain restrictions, including:


	•	The operating results of our initial businesses which are impacted by factors outside of our control including competition, inflation and general economic conditions;


	•	The ability of our businesses to make distributions to us, which may be subject to limitations under laws of the jurisdictions in which they are incorporated or organized;


	•	Insufficient cash to pay distributions due to increases in our general and administrative expenses, including our quarterly management fee, principal and interest payments on our outstanding debt, tax expenses or working capital requirements;

	•	The obligation to pay our manager a profit allocation upon the occurrence of a trigger event;

	•	The obligation to pay our manager the put price pursuant to the supplemental put agreement;

	•	The company’s board of directors’ election to keep a portion of the operating cash flow in the initial businesses or to use such funds for the acquisition of new businesses;


	•	Restrictions on distributions under our third party credit facility which contains financial tests and covenants that we will have to satisfy in order to make quarterly or annual distributions;


	•	Any dividends or distributions paid by our businesses pro rata to the minority shareholders of our businesses, which portion will not be available to us for any purpose, including for the purpose of making distributions to our shareholders;

	•	Possible future issuances of debt or debt-like financing arrangements that are secured by all or substantially all of our assets, or issuing debt or equity securities, which could include issuances of commercial paper, medium-term notes, senior notes, subordinated notes or shares, which obligations will have priority over our cash flow; and

	•	In the future, the company may issue preferred securities and holders of such preferred securities may have a preference with respect to distributions, which could limit our ability to make distributions to our shareholders.

If, as a consequence of these various restrictions, we are unable to generate sufficient distributions from our businesses, we may not be able to declare, or may have to delay or cancel payment of, distributions to our shareholders.

Because the company’s board of directors intends to declare and pay regular quarterly cash distributions on all outstanding shares, our growth may not be as fast as businesses that reinvest their available cash to expand ongoing operations. We expect that we will rely upon external financing sources, including issuances of debt or debt-like financing arrangements and the issuance of debt and equity securities, to fund our acquisitions and expansion of capital expenditures. As a result, to the extent we are unable to finance growth externally, our decision to declare and pay regular quarterly distributions will significantly impair our ability to grow.

Our decision to incur debt and issue securities in future offerings will depend on market conditions and other factors beyond our control. Therefore, we cannot predict or estimate the amount, timing or nature of our future offerings and debt financings. Likewise, holders of our shares may be diluted pursuant to additional equity issuances.

THE ACQUISITIONS OF AND LOANS TO OUR INITIAL BUSINESSES

The terms and conditions of the stock purchase agreement and the related documents pursuant to which the company will acquire controlling interests in the initial businesses, which agreement and documents are collectively referred to as the stock purchase agreement in this prospectus, were negotiated among representatives of CGI, on behalf of CGI, and representatives of our manager, on behalf of the company, in the overall context of this offering. The terms and conditions so negotiated relate to, among others, the acquisition prices of the initial businesses, the representations and warranties to be provided by CGI and its affiliates and the indemnity obligations of CGI and its affiliates following the acquisition of the initial businesses.

The terms and conditions of the loan agreements pursuant to which the company will make loans to the initial businesses were negotiated among representatives of the manager, on behalf of the company, and representatives of each initial business, on behalf of such initial business, in the overall context of this offering. The terms and conditions so negotiated relate to, among others, the nature of such loans, the aggregate principal amount of such loans, the interest rate terms of such loans and the repayment terms and schedules of such loans.

Background

The offering and transactions contemplated by this prospectus are the result of our management team’s consideration of various means by which they could, generally, establish their independence from CGI in managing the initial businesses and augment their ability to raise additional capital for this purpose and possible future acquisitions. Our management team determined that the structure and transactions discussed in this prospectus were the most efficient and effective means by which to achieve both of these goals. In essence, the structure represents a modified management buy-out structure — one in which our management team creates a public vehicle to allow them to access the capital markets to raise the necessary resources to conduct both the acquisition of the initial businesses and the acquisition of future businesses, while at the same time allowing them to achieve their independence from CGI, notwithstanding CGI’s investment in our shares. Significantly, certain members of our management team will invest (along the lines of such a management buy-out) approximately $4.0 million in our shares, which shares will be acquired at the initial public offering price.

Once identified by our management team, the proposed structure and related transactions were presented to CGI’s representatives. After due consideration, CGI informed the management team that it would be receptive to selling certain of the initial businesses subject to mutually agreeable terms and conditions. The initial businesses represent less than 30% of the assets and investments of CGI. After initially agreeing to the concept of selling the initial businesses and, notwithstanding the employment relationship between our management team and CGI, through The Compass Group International LLC, which we refer to as The Compass Group, the terms and conditions of this offering and the related transactions have been the subject of on-going negotiations between our management team, representing our interests, and CGI’s representatives, representing the interests of CGI. These on-going negotiations have related to issues including, among other issues, the amount of the purchase price for each of the initial businesses and the terms and conditions of the stock purchase agreement, the amount of CGI’s investment in the shares, CGI’s participation in the profit allocation via its non-management interest in our manager and our management team’s continuing ability to manage other investments on behalf of CGI.

The results of these negotiations are represented by our structure and the terms and conditions of the transactions described in this prospectus. Further, based on these negotiations in the overall context of this offering and the related transactions and the terms and conditions of the stock purchase agreement, our management team believes the purchase price of each of the initial businesses represents a fair value for each of the initial businesses. The company has entered into letters of intent in connection with the proposed acquisitions. An overview of the terms and conditions relating to the acquisitions in the context of this offering is discussed in more detail below.

Overview

The company will use a portion of the net proceeds from this offering, the separate private placement transactions and the initial borrowings under our third party credit facility to acquire controlling interests in the initial businesses from the sellers for cash, as follows:



	•	approximately 97.6% of CBS Personnel on a primary basis, without giving effect to conversion of any convertible securities, and approximately 94.4% on a fully diluted basis, after giving effect to the exercise of vested and in the money options and vested non-contingent warrants (as applicable);


	•	approximately 75.4% of Crosman on a primary and fully diluted basis;

	•	approximately 70.2% of Advanced Circuits on a primary and fully diluted basis; and

	•	approximately 73.0% of Silvue on a primary and fully diluted basis, after giving effect to the conversion of preferred stock of Silvue we acquired.

CGI, through its wholly owned subsidiaries, is a limited partner in each of the entities from which the company will acquire controlling interests in the initial businesses. Navco Management, Inc., an affiliate of CGI, is the general partner of each of the entities from which the company will acquire controlling interests in the initial businesses. The remaining equity interests in each initial business will be held by the respective senior management of each of our initial businesses, as well as other minority shareholders. See the section entitled “Certain Relationships and Related Party Transactions” for more information about the relationship with CGI and its affiliated entities.

In addition, the company will use a portion of the net proceeds of this offering, the separate private placement transactions and the initial borrowings under our third party credit facility to make loans and financing commitments to each of our initial businesses, as follows:



	•	approximately $50.0 million in term loans and approximately $37.5 million in a financing commitment pursuant to a revolving loan to CBS Personnel. The full amount of the term loans, of which approximately $32.8 million represents a capitalization loan, and approximately $16.4 million of the revolving loan commitment will be funded to CBS Personnel in conjunction with the closing of this offering. At the closing of this offering, an aggregate amount of approximately $66.4 million will be funded to CBS Personnel pursuant to these loans and financing commitments.



	•	approximately $37.7 million in term loans and approximately $18.0 million in a financing commitment pursuant to a revolving loan to Crosman. The full amount of the term loans and approximately $5.5 million of the revolving loan commitment will be funded to Crosman in conjunction with the closing of this offering. At the closing of this offering, an aggregate amount of approximately $43.2 million will be funded to Crosman pursuant to these loans and financing commitments.



	•	approximately $37.0 million in term loans and approximately $14.0 million in a financing commitment pursuant to a revolving loan to Advanced Circuits. The full amount of the term loans and approximately $10.4 million of the revolving loan commitment will be funded to Advanced Circuits in conjunction with the closing of this offering. At the closing of this offering, an aggregate amount of approximately $47.4 million will be funded to Advanced Circuits pursuant to these loans and financing commitments.



	•	approximately $11.0 million in term loans and approximately $5.0 million in a financing commitment pursuant to a revolving loan to Silvue. The full amount of the term loans and approximately $2.8 million of the revolving loan commitment will be funded to Silvue in conjunction with the closing of this offering. At the closing of this offering, an aggregate amount of approximately $13.8 million will be funded to Silvue pursuant to these loans and financing commitments.

The acquisition of and the making of the loans and financing commitments to each of our initial businesses will be conditioned upon the closing of this offering. Each of the loans and the financing

commitments are discussed in more detail below. The terms, including pricing, and conditions of the stock purchase agreement were reviewed and approved by the independent directors of the company and the directors of each of the initial businesses who are not affiliated with our management team and our board of directors. The composition of the board of directors of each of the initial businesses will remain the same following the company’s acquisition of such business. In addition, the composition of the management team of each of the initial businesses will remain the same following the company’s acquisition thereof.

The terms and conditions of the loan agreements were reviewed and approved by the independent directors of the company and the directors of each of the initial businesses who are not affiliated with either our management team or the company’s board of directors. While this process of review and approval is designed to ensure that the terms of the loans will be fair to the initial businesses, it is not necessarily designed to protect you. The company believes that the terms and conditions of the loans will be substantially similar to those that the initial businesses would be able to obtain from unaffiliated third parties. In addition, the company believes that the terms of the loans will be fair and reasonable given the leverage and risk profiles of each of the initial businesses.

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 stock purchase agreement and the loan agreements were approved by a majority of our independent directors and the directors of each of the initial businesses, neither the stock purchase agreement nor the loan agreements were negotiated on an arm’s-length basis. As a result, such terms and conditions may be less favorable to the company than they might have been had they been negotiated at arm’s-length with unaffiliated persons. See the section entitled “Certain Relationships and Related Party Transactions — Relationships with Related Parties — CGI” for more information.

CBS Personnel

In conjunction with the closing of this offering, the company will acquire approximately 97.6%, on a primary basis, and 94.4%, on a fully diluted basis, of the equity of CBS Personnel for approximately $54.6 million. This approximation is based upon an agreed upon enterprise value for CBS Personnel and assumes projected levels of debt and net working capital as of the closing of this offering. The actual purchase price will be based upon such agreed upon enterprise value and the actual levels of debt and net working capital at closing. Therefore, if the actual debt level at closing is less than such projected debt level, then the actual purchase price will be greater than such approximation. With respect to net working capital, the actual purchase price will be increased if the estimated net working capital of CBS Personnel as of the closing of the offering exceeds an agreed upon range, or decreased if such net working capital is less than such agreed upon range (with the adjustment, in either case, to be in an amount equal to the difference between such estimated net working capital and the mid-point of such agreed upon range). For a description of the formula for determining net working capital and the agreed upon range thereof, see the section below entitled “— Additional Acquisition Terms”. In addition, in connection with such acquisition and concurrently with the closing of the offering, the company will lend approximately $66.4 million to CBS Personnel. The proceeds of the company’s debt and equity investments will be used to:



	•	retire approximately $29.8 million of existing CBS Personnel debt, plus pay an early redemption premium of approximately $0.4 million;



	•	purchase, in the aggregate, approximately $54.6 million of equity from Compass CS Partners, L.P. and Compass CS II Partners, L.P., subsidiaries of CGI which we together refer to as Compass CS Partners;



	•	redeem approximately $35.9 million of equity held by Compass CS Partners, members of CBS Personnel’s management team and certain unaffiliated minority stockholders; and


	•	make option termination payments aggregating approximately $0.3 million to members of CBS Personnel’s management team.


	*Acquisition*

The company will acquire from Compass CS Partners 2,830,909 shares of CBS Personnel’s Class A common stock and 1,450,035 of shares of CBS Personnel’s Class B common stock. In addition, CBS Personnel will use a portion of the proceeds of the loan from the company to redeem 847,474 shares of Class B common stock held by Compass CS Partners, 2,197,325 shares of Class B common stock held by Robert Lee Brown, the founder of a predecessor to CBS Personnel and a member of CBS Personnel’s board since October 13, 2000 and who we refer to as Mr. Brown, and 145,800 shares of CBS Personnel’s Class C common stock held by certain members and former members of CBS Personnel’s management team and a former director of CBS Personnel. Our ownership interest may be diluted by future options, if any, granted at the discretion of the CBS Personnel board of directors.

As of April 1, 2006, the issued and outstanding capital of CBS Personnel consisted of:


	•	2,830,909 shares of Class A common stock, all of which were held by Compass CS Partners;

	•	3,548,384 shares of Class B common stock, 2,274,052 of which were held by Compass CS Partners and 1,274,332 of which were held by Mr. Brown;


	•	250,833 shares of Class C common stock, all of which were held by members of CBS Personnel’s management team and certain other investors in CBS Personnel;


	•	warrants to acquire 23,457.15 shares of Class B common stock, all of which were held by Compass CS Partners and are expected to be exercised prior to the closing of this offering;

	•	warrants to acquire 922,993.45 shares of Class B common stock, all of which were held by Mr. Brown and are expected to be exercised prior to the closing of this offering; and


	•	options to purchase 454,417 shares of Series C commons stock, all of which were held by members of CBS Personnel’s management team and certain other investors.

The rights of the holders of such Class A, Class B and Class C shares are substantially identical except that each holder of Class A common stock is entitled to 10 votes per share, whereas each holder of Class B common stock and Class C common stock is entitled to only one vote per share.

Pursuant to the stock purchase agreement, CGI and Compass CS Partners make certain representations, warranties and covenants for the company’s benefit and provide the company with certain rights to receive indemnification. See the section below entitled “— Additional Acquisition Terms” for a more detailed discussion of such terms and provisions of the stock purchase agreement. See also the section below entitled “— Stockholders’ Agreements” for a discussion of certain rights and restrictions of the stockholders of CBS Personnel.


	*Term Loans*

The company will make term loans to CBS Personnel, consisting of a senior secured term loan in the principal amount of approximately $30.0 million and a senior subordinated secured term loan in the principal amount of approximately $20.0 million, pursuant to a credit agreement by and between the company and CBS Personnel. The proceeds of the term loans will be used, in part, to prepay all of the outstanding debt obligations of CBS Personnel and, in part as a capitalization loan, to redeem shares of Class B and Class C common stock of CBS Personnel and to terminate options to purchase Class C common stock held by certain members of CBS Personnel’s management team. Interest on the senior term loan and the senior subordinated term loan will initially accrue at the per annum rates of LIBOR plus 3.25% and LIBOR plus 8.0% (or substantially equivalent rates based on the prime rate), respectively, and will be due and payable monthly in arrears on the last day of each calendar month. The senior term loan and the senior subordinated term loan will have bullet maturities at the end of the 72nd month and 84th month, respectively, subsequent to the funding thereof but, in each case, will be pre-payable, without premium or penalty, at any time at the option of CBS Personnel. The credit agreement will contain customary covenants and events of default, and will require that a substantial portion of any excess cash

flow generated by CBS Personnel be applied to repay the senior and senior subordinated term loans and then to repay any amount outstanding under the revolving credit facility. The covenants will require CBS Personnel to maintain, among other things, an agreed upon level of coverage against a number of measures, including the ratio of senior and total debt to earnings before interest, taxes, depreciation and amortization, which we refer to as EBITDA, as well as the level of EBITDA to CBS Personnel’s fixed charges. In addition, the performance of CBS Personnel as measured by the ratio of total debt to EBITDA will affect the interest rate applicable to the borrowings under the credit agreement by varying the margin over the applicable index chosen by CBS Personnel (i.e., LIBOR or prime rate based). In the event of a default by CBS Personnel, the interest rate otherwise applicable to the borrowings by CBS Personnel under the credit agreement will be increased by an additional 2% per annum.

The aggregate principal amount of the term loans will be adjusted to give effect to payments made by or other borrowings of CBS Personnel from December 31, 2005 until the closing of this offering, and may be adjusted to achieve a specific leverage with respect to CBS Personnel.

See the section below entitled “— Collateralization of Loans to Our Initial Businesses” for a description of the collateral securing the loans to our initial businesses.


	*Revolving Loan*

The company will, pursuant to a revolving credit facility by and between the company and CBS Personnel, make available to CBS Personnel a secured revolving loan commitment of approximately $37.5 million, of which approximately $16.4 million will be funded. In addition, the company will procure a letter of credit facility from a third party financial institution in an aggregate commitment amount of approximately $25.0 million, pursuant to which letters of credit in an aggregate amount of approximately $20.0 million will be outstanding at the closing of the offering. The reimbursement obligations of CBS Personnel under the letter of credit facility will be secured by a first priority lien on the accounts receivable of CBS Personnel. Interest on outstanding revolving loans will initially accrue at a rate of LIBOR plus 3.25% per annum (or a substantially equivalent rate based on the prime rate) and will be payable monthly in arrears on the last day of each calendar month. In addition, CBS Personnel will be charged a fee based upon the face amount of all letters of credit issued by such financial institution and a commitment fee (based upon the ratio of total debt to EBITDA) on the unused balance of the letter of credit commitment amount. In addition, CBS Personnel will be charged a fee equal to between 0.25% and 0.5% per annum (based on the ratio of total debt to EBITDA) on the unused balance of the revolving loan commitment amount. The revolving loan commitment will expire, and all revolving loans will mature, at the end of the 72nd month subsequent to the effective date of the commitment, but such revolving loans will be pre-payable, without premium or penalty, at any time at the option of CBS Personnel. The revolving credit facility will contain customary covenants and events of default. The revolving credit facility will replace an existing revolving credit facility provided by a third party lending group. CBS Personnel will use this revolving credit facility to finance its working capital needs and for general corporate purposes.

The revolving loan commitment will be adjusted to give effect to payments made by or other borrowings of CBS Personnel from December 31, 2005 until the closing of this offering, and may be adjusted to achieve a specific leverage with respect to CBS Personnel.

In connection with the extension of the term loans and revolving credit commitment, CBS Personnel will pay to the company an origination fee equal to 1.0% of the revolving loan commitment and senior term loan and 2.0% of the senior subordinated term loan.

See the section below entitled “— Collateralization of Loans to Our Initial Businesses” for a description of the collateral securing the loans to our initial businesses.

Crosman

In conjunction with the closing of this offering, the company will acquire, on both a primary basis and a fully diluted basis, approximately 75.4% of the equity of Crosman for approximately $26.9 million. This approximation is based upon an agreed upon enterprise value for Crosman and assumes projected levels of debt and net working capital as of the closing of this offering. The actual purchase price will be based

upon such agreed upon enterprise value and the actual levels of debt and net working capital at closing. Therefore, if the actual debt level at closing is less than such projected debt level, then the actual purchase price will be greater than such approximation. With respect to net working capital, the actual purchase price will be increased if the estimated net working capital of Crosman as of the closing of the offering exceeds an agreed upon range, or decreased if such net working capital is less than such agreed upon range (with the adjustment, in either case, to be in an amount equal to the difference between such estimated net working capital and the mid-point of such agreed upon range). For a description of the formula for determining net working capital and the agreed upon range thereof, see the section below entitled “— Additional Acquisition Terms”. In addition, in connection with such acquisition and concurrently with the closing of the offering, the company will lend approximately $43.2 million to, and will assume approximately $0.2 million of capital leases from, Crosman. The proceeds of the company’s debt and equity investments will be used to purchase approximately $26.3 million of such equity from Compass Crosman Partners, L.P., a subsidiary of CGI, which we refer to as Compass Crosman Partners, and approximately $0.4 million of equity from individuals affiliated with the manager.


	*Acquisition*

The company will acquire from Compass Crosman Partners 428,292 shares of Crosman common stock and certain contingent, unvested warrants. In addition, the company will acquire 6,825 shares of common stock owned by employees of our manager and a former director of Crosman. The company’s ownership interest in Crosman may be diluted by future options, if any, granted at the discretion of the Crosman board of directors.

As of April 1, 2006, the issued and outstanding capital stock of Crosman consisted of:



	•	577,232 shares of a single class of common stock, 428,292 of which were held by Compass Crosman Partners and the balance of which was held by members of Crosman’s management team and certain other stockholders of Crosman; and


	•	options to purchase 30,000 additional shares of Crosman’s common stock, all of which were held by a member of Crosman’s management team.

Pursuant to the stock purchase agreement, CGI and Compass Crosman Partners make certain representations, warranties and covenants for the company’s benefit and provide the company with certain rights to receive indemnification. See the section below entitled “— Additional Acquisition Terms” for a more detailed discussion of such terms and provisions of the stock purchase agreement. See also the section below entitled “— Stockholders’ Agreements” for a discussion of certain rights and restrictions of the stockholders of Crosman.


	*Term Loans*

The company will make term loans to Crosman, consisting of a senior secured term loan in the principal amount of approximately $23.7 million and a senior subordinated secured term loan in the principal amount of approximately $14.0 million, pursuant to a credit agreement by and between the company and Crosman. The proceeds of the term loans will be used to prepay all of the outstanding debt obligations of Crosman. Interest on the senior term loan and the senior subordinated term loan will initially accrue at a floating rate of LIBOR plus 3.5% per annum and a fixed rate of 15.0% per annum, respectively, and will be payable monthly in arrears the last day of each calendar month. The senior term loan and the senior subordinated term loan will have bullet maturities at the end of the 72nd month and 84th month, respectively, subsequent to the funding thereof but, in each case, will be pre-payable, without premium or penalty, at any time at the option of Crosman. The credit agreement will contain customary covenants and events of default, and will require that a substantial portion of any excess cash flow generated by Crosman be applied to repay the senior and senior subordinated term loans and then to repay any amounts outstanding under the revolving credit facility. The covenants will require Crosman to maintain, among other things, an agreed upon level of coverage against a number of measures, including the ratio of senior and total debt to EBITDA, as well as the level of EBITDA to Crosman’s fixed charges.

In addition, the performance of Crosman as measured by the ratio of total debt to EBITDA will affect the interest rate applicable to the borrowings under the credit agreement by varying the margin over the applicable index chosen by Crosman (i.e., LIBOR or prime rate based). In the event of a default by Crosman, the interest rate otherwise applicable to the borrowings by Crosman under the credit agreement will be increased by an additional 2% per annum.

The aggregate principal amount of term loans will be adjusted to give effect to payments made by or other borrowings of Crosman from January 1, 2006 until the closing of this offering.

See the section below entitled “— Collateralization of Loans to Our Initial Businesses” for a description of the collateral securing the loans to our initial businesses.


	*Revolving Loan*

The company will, pursuant to a revolving credit facility by and between the company and Crosman, make available to Crosman a secured revolving loan commitment of approximately $18.0 million, of which approximately $5.5 million will be funded. Interest on outstanding revolving loans will initially accrue at a rate of LIBOR plus 3.25% per annum (or a substantially equivalent rate based on the prime rate), and will be payable monthly in arrears on the last day of each calendar month. In addition, Crosman will be charged a commitment fee equal to between 0.25% and 0.5% per annum (based on the ratio of total debt to EBITDA) on the unused balance of the revolving loan commitment amount. The revolving loan commitment will expire, and all revolving loans will mature, at the end of the 72nd month subsequent to the effective date of the commitment, but such revolving loans will be pre-payable, without premium or penalty, at any time at the option of Crosman. The revolving credit facility will contain customary covenants and events of default. The revolving credit facility will replace an existing revolving credit facility provided by a third party lending group. Crosman will use this revolving credit facility to finance its working capital needs and for general corporate purposes.

The revolving loan commitment will be adjusted to give effect to payments made by or other borrowings of Crosman from January 1, 2006 until the closing of this offering.

See the section below entitled “— Collateralization of Loans to Our Initial Businesses” for a description of the collateral securing the loans to our initial businesses.

Advanced Circuits

In conjunction with the closing of this offering, the company will acquire, on both a primary basis and a fully diluted basis, approximately 70.2% of the equity of Advanced Circuits for approximately $35.3 million. This approximation is based upon an agreed upon enterprise value for Advanced Circuits and assumes projected levels of debt and net working capital as of the closing of this offering. The actual purchase price will be based upon such agreed upon enterprise value and the actual levels of debt and net working capital at closing. Therefore, if the actual debt level at closing is less than such projected debt level, then the actual purchase price will be greater than such approximation. With respect to net working capital, the actual purchase price will be increased if the estimated net working capital of Advanced Circuits as of the closing of the offering exceeds an agreed upon range, or decreased if such net working capital is less than such agreed upon range (with the adjustment, in either case, to be in an amount equal to the difference between such estimated net working capital and the mid-point of such agreed upon range). For a description of the formula for determining net working capital and the agreed upon range thereof, see the section below entitled “— Additional Acquisition Terms”.

In addition, in connection with such acquisition and concurrently with the closing of the offering, the company will lend approximately $47.4 million to Advanced Circuits. The proceeds of the company’s debt and equity investments will be used to purchase approximately $33.3 million of such equity from Compass Advanced Partners, L.P., a subsidiary of CGI which we refer to as Compass Advanced Partners, approximately $0.5 million of such equity from individuals affiliated with our manager and approximately $1.5 million of such equity from an unaffiliated minority stockholder.


	*Acquisition*

The company will acquire from Compass Advanced Partners 882,120 shares of Advanced Circuits’ Series B common stock. In addition, the company will acquire 11,880 shares of Series B common stock from an entity owned by employees of our manager and 40,000 shares of Advanced Circuits’ Series A common stock from a lender to Advanced Circuits. The company’s ownership interest may be diluted by future options, if any, granted at the discretion of the Advanced Circuits board of directors.

As of April 1, 2006, the issued and outstanding capital of Advanced Circuits consisted of:


	•	425,729 shares of Series A common stock, all of which were held by members of Advanced Circuits’ management team and certain other stockholders of Advanced Circuits; and

	•	904,000 shares of Series B common stock, 882,120 of which were held by Compass Advanced Partners, and the balance of which were held by certain other investors.

Pursuant to the stock purchase agreement, CGI and Compass Advanced Partners make certain representations, warranties and covenants for the company’s benefit and provide the company with certain rights to receive indemnification. See the section below entitled “— Additional Acquisition Terms” for a more detailed discussion of such terms and provisions of the stock purchase agreement. See also the section below entitled “— Stockholders’ Agreements” for a discussion of certain rights and restrictions of the stockholders of Advanced Circuits.


	*Term Loans*

The company will make term loans to Advanced Circuits, consisting of a senior secured term loan in the principal amount of approximately $21.5 million and a senior subordinated secured term loan in the principal amount of approximately $15.5 million, pursuant to a credit agreement by and between the company and Advanced Circuits. The proceeds of the term loans will be used to prepay all of the outstanding debt obligations of Advanced Circuits. Interest on the senior term loan and the senior subordinated term loan will accrue at the per annum rates of LIBOR plus 3.75% and LIBOR plus 7.5% (or substantially equivalent rates based on the prime rate), respectively, and will be due and payable monthly in arrears on the last day of each calendar month. The senior term loan and the senior subordinated term loan will have bullet maturities at the end of the 72nd month and 84th month, respectively, subsequent to the funding thereof but, in each case, will be pre-payable, without premium or penalty, at any time at the option of Advanced Circuits. The credit agreement will contain customary covenants and events of default, and will require that a substantial portion of any excess cash flow generated by Advanced Circuits be applied to repay the senior and senior subordinated term loans and then to repay any amounts outstanding under the revolving credit facility. The covenants will require Advanced Circuits to maintain, among other things, an agreed upon level of coverage against a number of measures, including the ratio of senior and total debt to EBITDA, as well as the level of EBITDA to Advanced Circuits’ fixed charges. In the event of a default by Advanced Circuits, the interest rate otherwise applicable to the borrowings by Advanced Circuits under the credit agreement will be increased by an additional 2% per annum.

The aggregate principal amount of term loans will be adjusted to give effect to payments made by or other borrowings of Advanced Circuits from December 31, 2005 until the closing of this offering.

See the section below entitled “— Collateralization of Loans to Our Initial Businesses” for a description of the collateral securing the loans to our initial businesses.


	*Revolving Loan*

The company will, pursuant to a revolving credit facility by and between the company and Advanced Circuits, make available to Advanced Circuits a secured revolving loan commitment of approximately $14.0 million, of which $10.4 million will be funded. Interest on outstanding revolving loans will accrue at a rate of LIBOR plus 3.75% per annum (or a substantially equivalent rate based on the prime rate), and will be payable monthly in arrears on the last day of each calendar month. In addition, Advanced Circuits will be charged a commitment fee equal to 0.5% per annum on the unused balance of the revolving loan commitment amount. The revolving loan commitment will expire, and all revolving loans will mature, at the end of the 72nd month subsequent to the effective date of the commitment, but such revolving loans will be pre-payable, without premium or penalty, at any time at the option of Advanced Circuits. The revolving credit facility will contain customary covenants and events of default. The revolving credit facility will replace an existing revolving credit facility provided by a third party lending group. Advanced Circuits will use this revolving credit facility to finance its working capital needs and for general corporate purposes.

The revolving loan commitment will be adjusted to give effect to payments made by or other borrowings of Advanced Circuits from December 31, 2005 until the closing of this offering.

See the section below entitled “— Collateralization of Loans to Our Initial Businesses” for a description of the collateral securing the loans to our initial businesses.

Silvue

In conjunction with the closing of this offering, the company will acquire common and preferred equity securities of Silvue, representing approximately 73.0% interest in Silvue’s equity capital, after giving effect to the conversion of preferred stock of Silvue to be acquired by the company, for approximately $24.0 million. This approximation is based upon an agreed upon enterprise value for Silvue and assumes projected levels of debt and net working capital as of the closing of this offering. The actual purchase price will be based upon such agreed upon enterprise value and the actual levels of debt and net working capital at closing. Therefore, if the actual debt level at closing is less than such projected debt level, then the actual purchase price will be greater than such approximation. With respect to net working capital, the actual purchase price will be increased if the estimated net working capital of Silvue as of the closing of the offering exceeds an agreed upon range, or decreased if such net working capital is less than such agreed upon range (with the adjustment, in either case, to be in an amount equal to the difference between such estimated net working capital and the mid-point of such agreed upon range). For a description of the formula for determining net working capital and the agreed upon range thereof, see the section below entitled “— Additional Acquisition Terms”. In addition, in connection with such acquisition and concurrently with the closing of the offering, the company will lend approximately $13.8 million to Silvue. The proceeds of the company’s debt and equity investments will be used to purchase approximately $22.8 million of such equity from Compass Silvue Partners, LP, a subsidiary of CGI, which we refer to as Compass Silvue Partners, approximately $0.4 million of such equity from individuals affiliated with the manager and approximately $0.8 million of such equity from unaffiliated minority investors.


	*Acquisition*

The company will acquire from Compass Silvue Partners 1,716 shares of Silvue’s Series A common stock, 4,901.4 shares of Silvue’s Series B common stock and 21,521.85 shares of Silvue’s Series A convertible preferred stock. In addition, the company will acquire 1,465.72 shares of Silvue’s Series A common stock, 98.6 shares of Silvue’s Series B common stock and 552.42 shares of Silvue’s Series A convertible preferred stock from an entity owned by employees of our manager, a retiring manager of Silvue and certain individuals affiliated with an investment banking firm. Such shares of common stock to be acquired by the company will represent, on both a primary basis and a fully diluted basis, approximately 43.0% of the then issued and outstanding shares, approximately 73.0% of the issued and outstanding shares after giving effect to the conversion of preferred stock of Silvue to be acquired by the

company, and approximately 87.0% of the voting power of all series of stock of Silvue after giving effect to the conversion of preferred stock of Silvue to be acquired by the company. The company’s ownership interest may be diluted by future options, if any, granted at the discretion of the Silvue board of directors.

As of April 1, 2006, Silvue’s issued and outstanding capital consisted of:


	•	14,036.72 shares of Series A common stock, all of which were held by members of Silvue’s management team and other stockholders of Silvue;

	•	5,000 shares of Series B common stock, 4,901.4 of which were held by Compass Silvue Partners and the remainder of which were held by certain other stockholders of Silvue;

	•	22,432.23 shares of Series A convertible preferred stock, 21,521.85 of which were held by CGI’s subsidiary and the remainder of which were held by certain stockholders of Silvue; and

	•	4,500 shares of Series B redeemable preferred stock, all of which were held by members of Silvue’s management team.

Prior to the closing of this offering, Compass Silvue Partners will acquire 1,716 shares of Silvue’s Series A common stock from a retiring Silvue manager. In addition, as of April 1, 2006, certain members of the management team, employees and directors of Silvue held options to purchase 1,581 additional shares of Series A common stock of Silvue, all of which were unvested.

The rights of all holders of common stock are substantially identical except that each holder of Series A common stock is entitled to only one vote per share, whereas each holder of Series B common stock is entitled to ten votes per share. Among other rights, each share of Series A convertible preferred stock is convertible into both (i) one share of Series A common stock and (ii) that number of shares of Series B redeemable preferred stock which equals the product of (x) the product of (A) 15.714 multiplied by (B) the number of shares of Series A convertible preferred stock, multiplied by (y) 1.13, reflecting a 13% return compounded annually, from the date of issuance of such shares to the date of conversion. In each following years, the number of shares of Series B redeemable preferred stock would equal the product of (x) prior years calculated number of Series B redeemable preferred stock, multiplied by (y) 1.13. Among other rights, each share of Series B redeemable preferred stock is entitled to a redemption preference equal to the face amount of the shares multiplied by 20 plus a 13% return, compounded annually, from the date of issuance of such share to the date of redemption.

Pursuant to the stock purchase agreement, CGI and CGl’s subsidiary make certain representations, warranties and covenants for the company’s benefit and provide the company with certain rights to receive indemnification. See the section below entitled “— Additional Acquisition Terms” for a more detailed discussion of such terms and provisions of the stock purchase agreement. See also the section below entitled “— Stockholders’ Agreements” for a discussion of certain rights and restrictions of the stockholders of Silvue.


	*Term Loans*

The company will make term loans to Silvue, consisting of a senior secured term loan in the principal amount of approximately $8.0 million and a senior subordinated secured term loan in the principal amount of approximately $3.0 million, pursuant to a credit agreement by and between the company and Silvue. The proceeds of the term loans will be used to prepay all of the outstanding debt obligations of Silvue. Interest on the senior term loan and the senior subordinated term loan will initially accrue at the per annum rates of LIBOR plus 3.5% and LIBOR plus 8.5% (or substantially equivalent rates based on the prime rate), respectively, and will be due and payable monthly in arrears on the last day of each calendar month. The senior term loan and the senior subordinated term loan will have bullet maturities at the end of the 72nd month and 84th month, respectively, subsequent to the funding thereof but, in each case, will be pre-payable, without premium or penalty, at any time at the option of Silvue. The credit agreement will contain customary covenants and events of default, and will require that a substantial portion of any excess cash flow generated by Silvue be applied to repay the senior and senior subordinated term loans and then

to repay any amounts outstanding under the revolving credit facility. The covenants will require Silvue to maintain, among other things, an agreed upon level of coverage against a number of measures, including the ratio of senior to total debt to EBITDA, as well as the level of EBITDA to Silvue’s fixed charges. In addition, the performance of Silvue as measured by the ratio of total debt to EBITDA will affect the interest rate applicable to the borrowings under the credit agreement by varying the margin over the applicable index chosen by Silvue (i.e., LIBOR or prime rate based). In the event of a default by Silvue, the interest rate otherwise applicable to the borrowings by Silvue under the credit agreement will be increased by an additional 2% per annum.

The aggregate principal amount of term loans will be adjusted to give effect to payments made by or other borrowings of Silvue from December 31, 2005 until the closing of this offering.

See the section below entitled “— Collateralization of Loans to Our Initial Businesses” for a description of the collateral securing the loans to our initial businesses.


	*Revolving Loan*

The company will, pursuant to a revolving credit facility by and between the company and Silvue, make available to Silvue a secured revolving loan commitment of approximately $5.0 million, of which $2.8 million will be funded. Interest on outstanding revolving loans will initially accrue at a rate of LIBOR plus 3.5% per annum (or a substantially equivalent rate based on the prime rate), and will be payable monthly in arrears on the last day of each calendar month. In addition, Silvue will be charged a commitment fee equal to between 0.25% and 0.5% per annum (based upon the ratio of total debt to EBITDA) on the unused balance of the revolving loan commitment amount. The revolving loan commitment will expire, and all revolving loans will mature, at the end of the 72nd month subsequent to the effective date of the commitment, but such revolving loans will be pre-payable, without premium or penalty, at any time at the option of Silvue. The revolving credit facility will contain customary covenants and events of default. The revolving credit facility will replace an existing revolving credit facility provided by a third party lending group. Silvue will use this revolving credit facility to finance its working capital needs and for general corporate purposes.

The revolving loan commitment will be adjusted to give effect to payments made by or other borrowings of Silvue from December 31, 2005 until the closing of this offering.

See the section below entitled “— Collateralization of Loans to Our Initial Businesses” for a description of the collateral securing the loans to our initial businesses.

Additional Acquisition Terms

Pursuant to the stock purchase agreement, the purchase price to be paid by the company for each of the initial businesses will be increased if the estimated net working capital of such business, agreed upon by the company and the sellers immediately prior to the acquisition thereof, exceeds an agreed upon range, or decreased if such estimated net working capital is less than such range. The amount of such increase or decrease, as the case may be, will be equal to the difference between the mid-point of the agreed upon range and such estimated net working capital. For purposes of this adjustment, net working capital for each of the initial businesses is defined as the excess at any time, calculated on a consolidated basis taking into account intercompany eliminations, of (i) all current assets (exclusive of deferred income taxes) of such business at such time, over (ii) all current liabilities (exclusive of current maturities on long-term debt and deferred income taxes) of such business at such time, including, in the case of CBS Personnel, all workers compensation liabilities, as determined in accordance with generally accepted accounting principles, whether short-term or long-term.

Further, pursuant to the stock purchase agreement, with respect to the company’s acquisition of each of the initial businesses, CGI and the applicable selling CGI subsidiary or subsidiaries, as the case may be, jointly and severally represent and warrant to the company, among other matters, as to the due organization, valid existence and good standing of such businesses, their authority to enter into the stock purchase agreement and their legal, valid, binding and enforceable obligations thereunder, the capitalization of such businesses and ownership of the shares, the accuracy of the financial statements of

such businesses, the good and marketable title of such business to their assets and properties, the good condition and sufficiency of the assets and properties of such businesses, compliance by such businesses with applicable legal requirements, the absence of any material adverse change to the assets or results of operations of such businesses, legal proceedings, insurance and intellectual property. Additionally, CGI and Compass CS Partners jointly and severally represent and warrant to the company as to labor matters, CGI and Compass Crosman Partners jointly and severally represent and warrant to the company as to labor matters, environmental matters and customer and supplier contracts, CGI and Compass Advanced Partners jointly and severally represent and warrant to the company as to labor and environmental matters and permits and compliance with laws, and CGI and Compass Silvue Partners jointly and severally represent and warrant to the company as to labor and environmental matters. In addition, the company’s acquisition of the initial businesses is subject to customary conditions precedent and regulatory approval, including expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The waiting period for our Hart-Scott-Rodino filing expired on February 21, 2006.

Except for representations and warranties with respect to due organization and valid existence of each of the initial businesses and their subsidiaries, capitalization and ownership of shares, authority to enter into the stock purchase agreement and their legal, valid, binding and enforceable obligations under the stock purchase agreement, which representations and warranties will survive for the periods of any applicable statutes of limitations, all representations and warranties and covenants of CGI and its selling subsidiaries will survive the closing of the applicable acquisition for 15 months (except for certain representations, warranties and covenants made by CGI and its selling subsidiaries under the agreements pursuant to which CGI originally acquired control of the businesses, which shall survive for the periods set forth in such agreements), and the applicable sellers and CGI agree to indemnify the company for their proportionate shares of any damages arising from a breach of any such representation, warranty or covenant by any of CGI and the selling subsidiaries, in each case in respect only of that business which the company is acquiring from them. The parties to the stock purchase agreement also indemnify each other against claims for brokerage or finder’s fees or commissions in connection with the purchase and sale of the applicable initial business. The indemnification obligations of the parties (except in respect of breaches of representations and warranties as to due organization and valid existence of each of the initial businesses and their subsidiaries, capitalization and ownership of shares, authority to enter into the stock purchase agreement and their legal, valid, binding and enforceable obligations under the stock purchase agreement) are subject to a threshold above which claims must aggregate prior to the availability of recovery and a cap on the maximum potential indemnification liability.

In addition to the indemnification provisions described above:


	•	the company will indemnify CGI and Compass Crosman Partners for any damages arising pursuant to a partial guaranty by Compass Crosman Partners of an obligation of Crosman to pay to the former owners of Crosman an earn-out under the agreement pursuant to which CGI acquired control of Crosman. Such earn-out would be triggered if Crosman meets certain financial performance benchmarks for the fiscal year ending June 30, 2006. If triggered, we do not anticipate that such earn-out would be material to our results of operations or financial condition. A similar earn-out with respect to the fiscal year ended June 30, 2005 was not triggered.


	•	CGI and Compass Advanced Partners will indemnify the company against any damages resulting from a breach of any representation, warranty, covenant or obligation of Compass Advanced Partners or Advanced Circuits under the agreement pursuant to which CGI originally acquired control of Advanced Circuits, or any failure by either of them to perform any obligation under such original purchase agreement after the date of the closing of CGI’s original acquisition and through the closing of this offering.


	•	CGI and Compass Silvue Partners will indemnify the company against any damages resulting from a breach of any representation, warranty, covenant or obligation of Compass Silvue Partners or Silvue under the agreement pursuant to which CGI originally acquired control of Silvue, or any


		failure by either of them to perform any obligation under such original purchase agreement after the date of the closing of CGI’s original acquisition and through the closing of this offering.

The representations and warranties set forth in each of the stock purchase agreement and each other agreement filed as an exhibit to the registration statement were made exclusively for the benefit of the parties to such agreement and not for the benefit of any other person, including those persons seeking to make an investment decision with respect to us or the shares. Such representations and warranties will be made solely for the purpose of consummating the transactions contemplated by the applicable agreement and allocating risk among the parties thereto, and for no other purpose. In this respect, such representations and warranties are not an indication of the actual state of facts at the time made or otherwise. Further, such representations and warranties will be made as of a specific date or dates as opposed to generally. Likewise, such representations and warranties will be subject to the limitations negotiated by the parties to the applicable agreement, including those relating to materiality, substantive limitations as to the scope and nature of such representations and warranties and limitations arising out of disclosures between the parties during the negotiation process. Standards of materiality set forth in such representations or warranties or which are used for determining satisfaction of such representations or warranties do not correspond to standards of materiality with respect to disclosures made in a registration statement or made to the public generally. As a result, you should not place any reliance on any such representations and warranties in the course of making an investment decision with respect to us or the shares.

Stockholders’ Agreements

With respect to each of our initial businesses, the respective stockholders are party to one or more stockholders’ agreements that restrict the rights of some or all of such stockholders to transfer the shares held by them, and grant to the applicable selling CGI subsidiary or subsidiaries certain rights with respect to shares held by minority stockholders. 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 such stockholders’ agreements.

In the case of CBS Personnel, there is a stockholders’ agreement among the holders of Class A common stock and Class B common stock. However, pursuant to the stock purchase agreement, the company will acquire all outstanding shares of Class A common stock and Class B common stock and, therefore, such stockholders’ agreement relating to Class A and Class B common stock will have no legal effect. In addition, each holder of Class C common stock of CBS Personnel is party to a stockholders’ agreement among such holder, CBS Personnel and Compass CS Partners. Pursuant to each such Class C stockholders’ agreement, the company will have the benefit of both the right, which we refer to as a right of first refusal, upon a proposed sale by a holder of shares to an unaffiliated person, to acquire such shares on the same terms as offered to such unaffiliated person, and the right, referred to as a drag-along right, upon a proposed sale by the company of some or all of its shares, to cause the other holders of shares to sell, on the same terms, a proportionate number of such shares held by such other holders. Such drag-along right will enable the company to cause the complete disposition of CBS Personnel. These Class C stockholders’ agreements do not restrict the company’s ability to sell, pledge or otherwise dispose of its shares.

The holders of Crosman common stock are party to a stockholders’ agreement among such holders and Crosman, pursuant to which the company will have rights of first refusal and drag-along rights, which drag-along rights will enable the company to cause the complete disposition of Crosman. Pursuant to this stockholders’ agreement, the company will be permitted to sell or otherwise dispose of its shares to unaffiliated persons subject, however, to the right, which we refer to as a drag-along right, of each other stockholder to sell, on the same terms available to the company, a proportionate number of its shares to such proposed purchaser. In addition, this stockholders’ agreement permits the company to pledge its controlling interest in Crosman as security for loans to the company.

The holders of Advanced Circuits common stock and Silvue common and preferred stock are party to stockholders’ agreements among such holders and the applicable initial business, pursuant to which the

company will have drag-along rights, which drag-along rights will enable the company to cause the complete disposition of either or both Advanced Circuits or Silvue, and the other stockholders will have tag-along rights. These stockholders’ agreements do not permit stockholders other than the company to sell shares to unaffiliated persons. In addition, these stockholders’ agreements permit the company to pledge its controlling interest in the applicable initial business as security for loans to the company.

Collateralization of Loans to Our Initial Businesses

The senior secured term loans and the revolving loans to each of our initial businesses will be secured by a first priority lien on all properties and assets of such businesses. The senior subordinated secured term loans to each of our initial businesses will be secured by a second priority lien on all properties and assets of such businesses.

OUR MANAGER

Overview of Our Manager

Our manager is a newly created entity that is owned and controlled by its sole and managing member, our Chief Executive Officer, Mr. Massoud. Following this offering, CGI, through a subsidiary, and Sostratus LLC, an entity owned by our management team, will become non-managing members of our manager. CGI will be issued its non-management interest in our manager in conjunction with the closing of this offering and will not pay any cash consideration for this interest; CGI will receive this consideration as part of the overall consideration for participating and engaging in the transactions contemplated by this offering. Sostratus LLC paid $100,000 for its non-management interest in our manager.

Key Personnel of Our Manager

Our Chief Executive Officer’s and Chief Financial Officer’s business experiences are described in the section entitled “Management”. In addition, the following personnel are key employees of our manager. Each of these individuals will be compensated entirely by our manager from the management fees it receives. Currently, these individuals are employees of The Compass Group. In conjunction with the closing of this offering, these individuals will resign from The Compass Group and become employees of our manager and comprise our management team. As employees of our manager, it is anticipated that these individuals will devote a substantial majority of their time to the affairs of our company. The titles reflected for each individual reflect that individual’s position with the manager and is not related to any role or responsibility that individual may have with the company at any time.

Alan B. Offenberg, Partner. Mr. Offenberg joined The Compass Group in 1998 as a Principal. Prior to joining The Compass Group, Mr. Offenberg worked in mergers and acquisitions for Trigen Energy Corporation. Previously, Mr. Offenberg was with Creditanstalt Bankverein and with GE Capital. Collectively, Mr. Offenberg’s background in finance includes deal origination, underwriting, portfolio management, restructuring and due diligence. Mr. Offenberg began his professional career as a research analyst with Alan Haft and Associates. Mr. Offenberg received his B.S. in Management from Tulane University and his MBA from Northeastern University, where he graduated Beta Gamma Sigma. Mr. Offenberg is currently a director of a number of private companies, including Crosman.

Elias J. Sabo, Partner. Mr. Sabo joined The Compass Group in 1998 as a Principal. Previously, Mr. Sabo was an investment banker at CIBC Oppenheimer, where he was responsible for the successful execution of numerous private and public financings, as well as the provision of merger and acquisition advisory services. Prior to joining CIBC Oppenheimer, Mr. Sabo was President and Chief Investment Officer of Boundary Partners, LLC, a hedge fund management company. Prior to that, Mr. Sabo worked at Colony Capital, Inc. Mr. Sabo graduated from Rennselaer Polytechnic Institute with a B.S. in management. Mr. Sabo is currently a director of a number of companies, including CBS Personnel, Advanced Circuits, Silvue and Comsys IT Partners, a Nasdaq listed company.

David P. Swanson, Principal. Mr. Swanson joined The Compass Group in 2001 as a Vice President. Previously, Mr. Swanson was with Goldman Sachs in the Financial Institutions and Distressed Debt practices. Mr. Swanson has also worked with Credit Suisse First Boston’s private equity investment group. Mr. Swanson is a graduate of the Harvard Business School MBA program and also holds a B.A. in Economics from the University of Chicago, where he was elected Phi Beta Kappa.

Joseph P. Milana, Executive Vice President, Finance. Mr. Milana joined The Compass Group as Controller in 1998. Prior to that, Mr. Milana managed his own consulting practice providing accounting and tax services to small businesses and high-net worth individuals. From 1984 through 1995, Mr. Milana was with KPMG LLP as a senior manager servicing mid-size, domestic and international clients. Mr. Milana received both a B.B.A. in Accounting and an M.S. in Taxation from Pace University in New York. Mr. Milana is a director of Families Network of Western Connecticut.

Patrick A. Maciariello, Vice President. Mr. Maciariello joined The Compass Group in 2005 as a Vice President. Previously, Mr. Maciariello worked as a management consultant at Bain & Company, in their London and Los Angeles offices, providing consulting services to both corporate and private equity clients. Mr. Maciariello also worked in the business services investment banking group of Deutsche Banc Alex. Brown. Mr. Maciariello received a B.B.A., cum laude, from the University of Notre Dame and an MBA from Columbia University where he graduated Beta Gamma Sigma.

Timothy K. Chiodo, Associate. Mr. Chiodo joined The Compass Group in 2004 as an Associate. Previously, Mr. Chiodo worked as a mergers and acquisitions investment banker at Lazard Frères & Co. LLC, focusing on transactions in the consumer products industry. Mr. Chiodo graduated with a B.S. degree in Mathematics from the Massachusetts Institute of Technology in 2001.

Our Relationship With Our Manager

Our relationship with our manager is based on our manager having two distinct roles: first, as a service provider to us and, second, as an equity holder of the allocation interests.

As a service provider, our manager will perform a variety of services for us, which will entitle it to receive a management fee. As holder of the company’s allocation interests, our manager has the right to a preferred distribution in the form of a profit allocation upon the occurrence of certain events. Our manager paid $100,000 for the allocation interests. In addition, our manager will have the right to cause the company to purchase the allocation interests then owned by our manager upon termination of the management services agreement.

These relationships with our manager will be governed principally by the following agreements:



	•	the management services agreements relating to the services our manager will perform for us and the businesses we own;


	•	the company’s LLC agreement relating to our manager’s rights with respect to the allocation interests it owns; and

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

We also expect that our manager will enter into offsetting management services agreements and transaction services agreements with our businesses directly. These agreements, and some of the material terms relating thereto, are discussed in more detail below. The management fee, profit allocation and put price under the supplemental put agreement will be payment obligations of the company and, as a result, will be paid, along with other company obligations, prior to the payment of distributions to shareholders.


	*Our Manager as a Service Provider*

The company’s board of directors will engage our manager to manage the day-to-day operations and affairs of the company, oversee the management and operations of our businesses and perform certain other services for us. The company will enter into a management services agreement which will set forth the services to be performed by our manager and the fees to be paid to our manager for providing such services. The company will pay our manager a quarterly management fee equal to 0.5% (2.0% annualized) of its adjusted net assets, as discussed in more detail below. See the section entitled “Management Services Agreement” for more information about the material terms of the management services agreement.

Management Fee

Subject to any adjustments discussed below, for performing management services under the management services agreement during any fiscal quarter, the company will pay our manager a management fee with respect to such fiscal quarter. The management fee to be paid with respect to any fiscal quarter will be calculated as of the last day of such fiscal quarter, which we refer to as the

calculation date. The management fee will be calculated by an administrator, which will be our manager so long as the management services agreement is in effect. The amount of any management fee payable by the company as of any calculation date with respect to any fiscal quarter will be (i) reduced by the aggregate amount of any offsetting management fees, if any, received by our manager from any of our businesses with respect to such fiscal quarter, (ii) reduced (or increased) by the amount of any over-paid (or under-paid) management fees received by (or owed to) our manager as of such calculation date, and (iii) increased by the amount of any outstanding accrued and unpaid management fees.

As an obligation of the company, the management fee will be paid prior to the payment of distributions to our shareholders. If we do not have sufficient liquid assets to pay the management fee when due, we may be required to liquidate assets or incur debt in order to pay the management fee.

Example of Calculation of Management Fee

Based on the pro forma condensed combined financial statements set forth in this prospectus at or for the quarter ended December 31, 2005, the quarterly management fee that would have been payable under the management services agreement, on a pro forma basis, would be calculated as follows:


		(In thousands)
Total Management fee:
	1. Total assets	$	458,207
	2. Accumulated amortization of intangibles		0
	3. Adjusted total liabilities		113,979

	4. Adjusted net assets (1 – 2 – 3)		344,228
	5. Quarterly management fee (0.5% * 4)		1,721
Offsetting management fees:
	6. CBS Personnel		250
	7. Crosman		145
	8. Advanced Circuits		125
	9. Silvue		88

10. Total offsetting management fees (6 + 7 + 8 + 9)			608

11. Quarterly management fee payable by the company (5 – 10)		$	1,113

Assuming the information above remained constant for the fiscal year ended December 31, 2005, the total management fee, on a pro forma basis, that would have been due for such fiscal year would have been approximately $6.9 million (4 x line 5), with total offsetting management fees of approximately $2.4 million, resulting in a management fee payable by the company of approximately $4.5 million (4 x line 11). There were no transaction services agreements during this period.

For purposes of this provision:



	•	“Adjusted net assets” will be equal to, with respect to the company as of any calculation date, the sum of (i) consolidated total assets (as determined in accordance with GAAP) of the company as of such calculation date, plus (ii) the absolute amount of consolidated accumulated amortization of intangibles (as determined in accordance with GAAP) for the company as of such calculation date, minus (iii) the absolute amount of adjusted total liabilities of the company as of such calculation date.



	•	“Adjusted total liabilities” will be equal to, with respect to the company as of any calculation date, the company’s consolidated total liabilities (as determined in accordance with GAAP) as of such calculation date after excluding the effect of any outstanding third party indebtedness of the company.



	•	“Management fee” will be equal to, as of any calculation date, the product of (i) 0.5%, multiplied by (ii) the company’s adjusted net assets as of such calculation date; provided, however, that, with

respect to the fiscal quarter in which the closing of this offering occurs, the company will pay our manager a management fee with respect to such fiscal quarter equal to the product of (i)(x) 0.5%, multiplied by (y) the company’s adjusted net assets as of such calculation date, multiplied by (ii) a fraction, the numerator of which is the number of days from and including the date of closing to and including the last day of such fiscal quarter and the denominator of which is the number of days in such fiscal quarter; provided, further, however, that, with respect to any fiscal quarter in which the management services agreement is terminated, the company will pay our manager a management fee with respect to such fiscal quarter equal to the product of (i)(x) 0.5%, multiplied by (y) the company’s adjusted net assets as of such calculation date, multiplied by (ii) a fraction, the numerator of which is the number of days from and including the first day of such fiscal quarter to but excluding the date upon which the management services agreement is terminated and the denominator of which is the number of days in such fiscal quarter.

• “Third party indebtedness” means any indebtedness of the company owed to third party lenders that are not affiliated with the company.

Reimbursement of Expenses

The company will be responsible for paying costs and expenses relating to its business and operations. The company will agree to reimburse our manager during the term of the management services agreement for:



	•	all costs and expenses of the company that are incurred by our manager or its affiliates on behalf of the company, including any out-of-pocket costs and expenses incurred in connection with the performance of services under the management services agreement, and all costs and expenses the reimbursement of which are specifically approved by the company’s board of directors; and



	•	the compensation and other costs and expenses of the Chief Financial Officer and his staff as approved by the company’s compensation committee.

The company will not be obligated or responsible for reimbursing or otherwise paying for any costs or expenses relating to our manager’s overhead or any other costs and expenses relating to our manager’s conduct of its business and operations. Also, the company will not be obligated or responsible for reimbursing our manager for costs and expenses incurred by our manager in the identification, evaluation, management, performance of due diligence on, negotiation and oversight of potential acquisitions of new businesses for which the company (or our manager on behalf of the company) fails to submit an indication of interest or letter of intent to pursue such acquisition, including costs and expenses relating to travel, marketing and attendance of industry events and retention of outside service providers relating thereto. In addition, the company will not be obligated or responsible for reimbursing our manager for costs and expenses incurred by our manager in connection with the identification, evaluation, management, performance of due diligence on, negotiating and oversight of an acquisition by the company if such acquisition is actually consummated and the business so acquired entered into a transaction services agreement with our manager providing for the reimbursement of such costs and expenses by such business. In this respect, the costs and expenses associated with the pursuit of add-on acquisitions for the company may be reimbursed by any businesses so acquired pursuant to a transaction services agreement. Further, the company will not reimburse our manager for the compensation of our Chief Executive Officer and any other personnel providing services pursuant to the management services agreement, including personnel seconded to the company.

All reimbursements will be reviewed and, in certain circumstances, approved by the compensation committee of the company’s board of directors on an annual basis in connection with the preparation of year end financial statements.

Termination Fee

We will pay our manager a termination fee upon termination of the management services agreement if such termination is based solely on a vote of the company’s board of directors and our shareholders; no other termination fee will be payable to our manager in connection with the termination of the management services agreement for any other reason. The termination fee that is payable to our manager will be equal to the product of (i) two (2) multiplied by (ii) the sum of the amount of the four management fees calculated with respect to the four fiscal quarters immediately preceding the termination date of the management services agreement. The termination fee will be payable in eight equal quarterly installments, with the first such installment being paid on or within five business days of the last day of the fiscal quarter in which the management services agreement was terminated and each subsequent installment being paid on or within five business days of the last day of each subsequent fiscal quarter, until such time as the termination fee is paid in full to our manager.

Offsetting Management Services Agreements

Pursuant to the management services agreement, we have agreed that our manager may, at any time, enter into offsetting management services agreements with our businesses pursuant to which our manager may perform services that may or may not be similar to management services. Any fees to be paid by one of our businesses pursuant to such agreements are referred to as offsetting management fees and will offset, on a dollar-for-dollar basis, the management fee otherwise due and payable by the company under the management services agreement with respect to a fiscal quarter. The management services agreement provides that the aggregate amount of offsetting management fees to be paid to our manager with respect to any fiscal quarter shall not exceed the management fee to be paid to our manager with respect to such fiscal quarter. See the section entitled “— Management Fee” for more information about the treatment of offsetting management fees.

In connection with the historical acquisition by CGI and its subsidiaries of each of our initial businesses, such businesses entered into management services agreements with an affiliate of The Compass Group. Pursuant to each such agreement, the applicable affiliate of The Compass Group continues to provide services to our initial businesses, and the applicable business is obligated to pay to such affiliate an annual management fee. In conjunction with the closing of this offering, CGI or The Compass Group will cause their respective affiliates to assign each such agreement to our manager. Each such agreement will be an offsetting management services agreement and all payments thereunder will be offsetting management fees. Each such agreement will be terminable by the relevant initial businesses upon 30 days prior written notice. A summary of each such agreement is as follows:



	•	CBS Personnel and an affiliate of The Compass Group are parties to a five year, automatically renewable management services agreement, dated October 13, 2000. Such management services agreement is currently in its renewal period. Under such management services agreement, CBS Personnel is obligated to pay an annual fee equal to 0.15% of its annual gross revenues, which is payable quarterly in arrears. In addition, CBS Personnel is obligated to provide reimbursement for certain expenses in connection with the services performed under such management services agreement. Such management services agreement may be terminated upon the occurrence of an event of default, as set forth. For the year ended December 31, 2005, CBS Personnel paid approximately $1.0 million to an affiliate of The Compass Group under such management services agreement.



	•	Crosman and an affiliate of The Compass Group are parties to a one year, automatically renewable management services agreement, dated February 10, 2004. Such management services agreement is currently in its renewal period. Under such management services agreement, Crosman is obligated to pay a fixed annual fee equal to $580,000, which is payable quarterly in advance. In addition, Crosman is obligated to provide reimbursement for certain expenses in connection with the services performed under such management services agreement. Such management services agreement may be terminated upon the occurrence of an event of default, as set forth in such agreement. For the

year ended June 30, 2005, Crosman paid approximately $580,000 to an affiliate of The Compass Group under such management services agreement.

• Advanced Circuits and an affiliate of The Compass Group are parties to a five year, automatically renewable management services agreement, dated September 20, 2005. Under such management services agreement, Advanced Circuits is obligated to pay a fixed annual fee equal to $500,000, which is payable quarterly in arrears. In addition, Advanced Circuits is obligated to provide reimbursement for certain expenses in connection with the services performed under such management services agreement. Such management services agreement may be terminated upon the occurrence of an event of default, as set forth in such agreement. For the period from September 2005 to December 31, 2005, Advanced Circuits paid approximately $139,000 to an affiliate of The Compass Group under such management services agreement.

• Silvue and an affiliate of The Compass Group are a party to a three year, automatically renewable management services agreement, dated September 2, 2004 as amended September 30, 2004. Under such management services agreement, Silvue is obligated to pay a fixed annual fee equal to $350,000, which is payable quarterly in arrears. In addition, Silvue is obligated to provide reimbursement for certain expenses in connection with the services performed under such management services agreement. Such management services agreement may be terminated upon the occurrence of an event of default, as set forth in such agreement. For the year ended December 31, 2005, Silvue paid approximately $350,000 to an affiliate of The Compass Group under such management services agreement.

The boards of directors and management teams of each of our initial businesses believe the fees charged under the offsetting management services agreements are reasonable.

Transaction Services Agreements

Pursuant to the management services agreement, we have agreed that our manager may, at any time, enter into transaction services agreements with any of our businesses relating to the performance by our manager of certain transaction-related services in connection with the acquisitions of target businesses by the company or its businesses or dispositions of the company’s or its subsidiaries’ property or assets. Our manager will contract for the performance of transaction services on market terms and conditions. Any fees received by our manager pursuant to such a transaction services agreement will be in addition to the management fee payable by the company pursuant to the management services agreement and will not offset the payment of such management fee. A transaction services agreement with any of our businesses may provide for the reimbursement of costs and expenses incurred by our manager in connection with the acquisition of such businesses. Entry into a transaction services agreement will be subject to the authorization and approval of the company’s nominating and corporate governance committee.


	*Our Manager as an Equity Holder*

Our manager will own 100% of the allocation interests of the company, which generally will entitle our manager to receive a 20% profit allocation as a form of preferred distribution, subject to the company’s profit with respect to a business exceeding on an annualized hurdle rate of 7%, which hurdle is tied to such business’ growth relative to our consolidated net equity. The calculation of the profit allocation and the rights of our manager, as the holder of the allocation interests, are governed by the LLC agreement. See the section entitled “Description of Shares” for more information about the LLC agreement.

Manager’s Profit Allocation

The profit allocation to be paid to our manager is intended to reflect our ability to generate ongoing cash flows and capital gains in excess of a hurdle rate. In general, such profit allocation is designed to pay our manager 20% of the company’s profits upon clearance of the 7% annualized hurdle rate. The company’s audit committee, which is comprised solely of independent directors, will have the opportunity to review and approve the calculation of manager’s profit allocation when it becomes due and payable. Our

manager will not receive a profit allocation on an annual basis. Instead, our manager will be paid a profit allocation only upon the occurrence of one of the following events, which we refer to collectively as the trigger events:



	•	the sale of a material amount, as determined by our manager and reasonably consented to by a majority of the company’s board of directors, of the capital stock or assets of one of our businesses or a subsidiary of one of our businesses, which event we refer to as a sale event; or



	•	at the option of our manager, for the 30-day period following the fifth anniversary of the date upon which we acquired a controlling interest in a business, which event we refer to as a holding event. If our manager elects to forego declaring a holding event with respect to such business during such period, then our manager may only declare a holding event with respect to such business during the 30–day period following each anniversary of such fifth anniversary date with respect to such business. Once declared, our manager may only declare another holding event with respect to a business following the fifth anniversary of the calculation date with respect to a previously declared holding event.

We believe this allocation timing, rather than a method that provides for annual allocations, more accurately reflects the long-term performance of each of our businesses and is consistent with our intent to hold, manage and grow our businesses over the long term. We refer generally to the obligation to make this payment to our manager as the “profit allocation” and, specifically, to the amount of any particular profit allocation as the “manager’s profit allocation”. Definitions used in, and an example of the calculation of profit allocation, are set forth in more detail below.

The amount of the manager’s profit allocation will be based on the extent to which the total profit allocation amount with respect to any business, as of the last day of any fiscal quarter in which a trigger event occurs, which date we refer to as the calculation date, exceeds the relevant hurdle amounts with respect to such business, as of such calculation date. Manager’s profit allocation will be calculated by an administrator, which will be our manager so long as the management services agreement is in effect, and such calculation will be subject to a review and approval process by the company’s audit committee. For this purpose, “total profit allocation amount” will be equal to, with respect to any business as of any calculation date, the sum of:


	•	the contribution-based profit of such business as of such calculation date, which will be calculated upon the occurrence of any trigger event with respect to such business; plus

	•	the cumulative gains and losses of the company as of such calculation date, which will only be calculated upon the occurrence of a sale event with respect to such business. We generally expect this component to be the most significant component in calculating total profit allocation amount.

Specifically, manager’s profit allocation will be calculated and paid as follows:



	•	manager’s profit allocation will not be paid with respect to a trigger event relating to any business if the total profit allocation amount, as of any calculation date, with respect to such business does not exceed such business’ level 1 hurdle amount (7% annualized), as of such calculation date; and



	•	manager’s profit allocation will be paid with respect to a trigger event relating to any business if the total profit allocation amount, as of any calculation date, with respect to such business exceeds such business’ level 1 hurdle amount (7% annualized), as of such calculation date. Manager’s profit allocation to be paid with respect to such calculation date will be equal to the sum of the following:


	•	100% of such business’ total profit allocation amount, as of such calculation date, with respect to that portion of the total profit allocation amount that exceeds such business’ level 1 hurdle amount (7% annualized) but is less than or equal to such business’ level 2 hurdle amount (8.75% annualized), in each case, as of such calculation date. We refer to this portion of the total profit allocation amount as the “catch-up.” The “catch-up” is intended to provide our manager with an overall profit allocation of 20% once the level 1 hurdle amount has been surpassed; plus


	•	20% of the total profit allocation amount, as of such calculation date, that exceeds such business’ level 2 hurdle amount (8.75% annualized) as of such calculation date; minus


	•	the high water mark allocation, if any, as of such calculation date. The effect of deducting the high water mark allocation is to take into account allocations our manager has already received in respect of past gains and losses.

The administrator will calculate manager’s profit allocation on or promptly following the relevant calculation date, subject to a “true-up” calculation upon availability of audited or unaudited consolidated financial statements, as the case may be, of the company to the extent not available on such calculation date. Any adjustment necessitated by the true-up calculation will be made in connection with the next calculation of manager’s profit allocation. Because of the length of time that may pass between trigger events, there may be a significant delay in the company’s ability to realize the benefit, if any, of a true-up of manager’s profit allocation.

Once calculated, the administrator will submit the calculation of manager’s profit allocation, as adjusted pursuant to any true-up, to the company’s audit committee, which is comprised solely of independent directors, for its review and approval. The audit committee will have ten business days to review and approve the calculation, which approval shall be automatic absent disapproval by the audit committee. Manager’s profit allocation will be paid ten business days after such approval.

If the audit committee disapproves of the administrator’s calculation of manager’s profit allocation, the calculation and payment of manager’s profit allocation will be subject to a dispute resolution process, which may result in manager’s profit allocation being determined, at the company’s cost and expense, by two independent accounting firms. Any determination by such independent accounting firms will be conclusive and binding on the company and our manager.

We will also pay a tax distribution to our manager if our manager is allocated taxable income by the company but does not realize distributions from the company at least equal to the taxes payable by our manager resulting from allocations of taxable income. Any such tax distributions will be paid in a similar manner as profit allocations are paid.

For any fiscal quarter in which a trigger event occurs with respect to more than one business, the calculation of the manager’s profit allocation, including the components thereof, will be made with respect to each business in the order in which controlling interests in such businesses were acquired or obtained by the company and the resulting amounts shall be aggregated to determine the total amount of manager’s profit allocation. If controlling interests in two or more businesses were acquired at the same time and such businesses give rise to a calculation of manager’s profit allocation during the same fiscal quarter, then manager’s profit allocation will be further calculated separately for each such business in the order in which such businesses were sold.

As obligations of the company, profit allocations and tax distributions will be paid prior to the payment of distributions to our shareholders. If we do not have sufficient liquid assets to pay the profit allocations or tax distributions when due, we may be required to liquidate assets or incur debt in order to pay such profit allocation. Our manager will have the right to elect to defer the payment of the manager’s profit allocation due on any payment date. Once deferred, our manager may demand payment thereof upon 20 business days prior written notice.

Termination of the management services agreement, by any means, will not affect our manager’s rights with respect to the allocation interests that it owns, including its right to receive profit allocations.


	Example of Calculation of Manager’s Profit Allocation

The manager will receive a profit allocation at the end of the fiscal quarter in which a trigger event occurs, as follows (all dollar amounts are in millions):


	*Assumptions*

	Year 1:

	Acquisition of Company A (“Company A”)

	Acquisition of Company B (“Company B”)

	Year 3

	Acquisition of Company C (“Company C”)

	Year 4

	Company A (or assets thereof) sold for $20 capital gain over book value of assets at time of sale, which is a qualifying trigger event

	Company A’s average allocated share of our consolidated net equity over its ownership is $40

	Company A’s holding period in quarters is 12

	Company A’s contribution-based profit since acquisition is $8.5

	Year 6:

	Company B’s contribution-based profit since acquisition is $4.5

	Company B’s average allocated share of our consolidated net equity over its ownership is $30

	Company B’s holding period in quarters is 20

	Manager elects to have holding period measured for purposes of profit allocation for Company B

	Year 7:

	Company B (or assets thereof) is sold for $5 capital loss under book value of assets at time of sale

	Company B’s average allocated share of our consolidated net equity over its ownership is $30

	Company B’s holding period in quarters is 24

	Company B’s contribution-based profit since acquisition is $8.5

	Company C (or assets thereof) is sold for $12 capital gain over book value of assets at time of sale

	Company C’s average allocated share of our consolidated net equity over its ownership is $35

	Company C’s holding period in quarters is 16

	Company C’s contribution-based profit since acquisition is $8


	With Respect to Relevant Business	Year 4		Year 6		Year 7			Year 7

		A, due to		B, due to		B, due to			C, due to
		sale		5 year hold		sale			sale
1	Contribution-based profit since acquisition for respective subsidiary	$	8.5	$	4.5	$	1		$	8
2	Gain/ Loss on sale of company		20		0		(5	)		12
3	Cumulative gains and losses		20		20		15			27
4	High water mark prior to transaction		0		20		20			20
5	Total Profit Allocation Amount (1 + 3)		28.5		24.5		16			35
6	Business’ holding period in quarters since ownership or last measurement due to holding event		12		20		4			16
7	Business’ average allocated share of consolidated net equity		40		30		30			35
8	Business’ level 1 hurdle amount (1.75% * 6 * 7)		8.4		10.5		2.1			9.8
9	Business’ excess over level 1 hurdle amount (5 - 8)		20.1		14		13.9			25.2
10	Business’ level 2 hurdle amount (125% * 8)		10.5		13.125		2.625			12.25
11	Allocated to manager as “catch-up” (10 - 8)		2.1		2.625		0.525			2.45
12	Excess over level 2 hurdle amount (9 - 11)		18		11.375		13.375			22.75
13	Allocated to manager from excess over level 2 hurdle amount (20% * 12)		3.6		2.275		2.675			4.55
14	Cumulative allocation to manager (11 +13)		5.7		4.9		3.2			7
15	High water mark allocation (20% * 4)		0		4		4			4

16	Manager’s Profit Allocation for Current Period (14 - 15,> 0)	$	5.7	$	0.9	$	0		$	3


	Definitions

For purposes of calculating profit allocation:



	•	An entity’s “adjusted net assets” will be equal to, as of any date, the sum of (i) such entity’s consolidated total assets (as determined in accordance with GAAP) as of such date, plus (ii) the absolute amount of such entity’s consolidated accumulated amortization of intangibles (as determined in accordance with GAAP) as of such date, minus (iii) the absolute amount of such entity’s adjusted total liabilities as of such date.


	•	An entity’s “adjusted total liabilities” will be equal to, as of any date, such entity’s consolidated total liabilities (as determined in accordance with GAAP) as of such date after excluding the effect of any outstanding third party indebtedness of such entity.

	•	A business’ “allocated share of the company’s overhead” will be equal to, with respect to any measurement period as of any calculation date, the aggregate amount of such business’ quarterly share of the company’s overhead for each fiscal quarter ending during such measurement period.


	•	A business’ “average allocated share of our consolidated equity” will be equal to, with respect to any measurement period as of any calculation date, the average (i.e., arithmetic mean) of a business’ quarterly allocated share of our consolidated equity for each fiscal quarter ending during such measurement period.


	•	“Capital gains” (i) means, with respect to any entity, capital gains (as determined in accordance with GAAP) that are calculated with respect to the sale of capital stock or assets of such entity and which sale gave rise to a sale event and the calculation of profit allocation and (ii) will be equal to the amount, adjusted for minority interests, by which (x) the net sales price of such capital stock or assets, as the case may be, exceeded (y) the net book value (as determined in accordance with GAAP) of such capital stock or assets, as the case may be, at the time of such sale, as reflected on the company’s consolidated balance sheet prepared in accordance with GAAP; provided, that such amount shall not be less than zero.


	•	“Capital losses” (i) means, with respect to any entity, capital losses (as determined in accordance with GAAP) that are calculated with respect to the sale of capital stock or assets of such entity and which sale gave rise to a sale event and the calculation of profit allocation and (ii) will be equal to the amount, adjusted for minority interests, by which (x) the net book value (as determined in accordance with GAAP) of such capital stock or assets, as the case may be, at the time of such sale, as reflected on the company’s consolidated balance sheet prepared in accordance with GAAP, exceeded (y) the net sales price of such capital stock or assets, as the case may be; provided, that such absolute amount thereof shall not be less than zero.



	•	The company’s “consolidated net equity” will be equal to, as of any date, the sum of (i) the company’s consolidated total assets (as determined in accordance with GAAP) as of such date, plus (ii) the aggregate amount of asset impairments (as determined in accordance with GAAP) that were taken relating to any businesses owned by the company as of such date, plus (iii) the company’s consolidated accumulated amortization of intangibles (as determined in accordance with GAAP), as of such date minus (iv) the company’s consolidated total liabilities (as determined in accordance with GAAP) as of such date.



	•	A business’ “contribution-based profits” will be equal to, for any measurement period as of any calculation date, the sum of (i) the aggregate amount of such business’ net income (loss) (as determined in accordance with GAAP and as adjusted for minority interests) with respect to such measurement period (without giving effect to (x) any capital gains or capital losses realized by such business that arise with respect to the sale of capital stock or assets held by such business and which sale gave rise to a sale event and the calculation of profit allocation or (y) any expense attributable to the accrual or payment of any amount of profit allocation or any amount arising under the supplemental put agreement, in each case, to the extent included in the calculation of

such business’ net income (loss)), plus (ii) the absolute aggregate amount of such business’ loan expense with respect to such measurement period, minus (iii) the absolute aggregate amount of such business’ allocated share of the company’s overhead with respect to such measurement period.

• The company’s “cumulative capital gains” will be equal to, as of any calculation date, the aggregate amount of capital gains realized by the company as of such calculation date, after giving effect to any capital gains realized by the company on such calculation date, since its inception.

• The company’s “cumulative capital losses” will be equal to, as of any calculation date, the aggregate amount of capital losses realized by the company as of such calculation date, after giving effect to any capital losses realized by the company on such calculation date, since its inception.

• The company’s “cumulative gains and losses” will be equal to, as of any calculation date, the sum of (i) the amount of cumulative capital gains as of such calculation date, minus (ii) the absolute amount of cumulative capital losses as of such calculation date.

• The “high water mark” will be equal to, as of any calculation date, the highest positive amount of the company’s cumulative capital gains and losses as of such calculation date that were calculated in connection with a qualifying trigger event that occurred prior to such calculation date.

• The “high water mark allocation” will be equal to, as of any calculation date, the product of (i) the amount of the high water mark as of such calculation date, multiplied by (ii) 20%.

• A business’ “level 1 hurdle amount” will be equal to, as of any calculation date, the product of (i) (x) the quarterly hurdle rate of 1.75% (7% annualized), multiplied by (y) the number of fiscal quarters ending during such business’ measurement period as of such calculation date, multiplied by (ii) a business’ average allocated share of our consolidated equity for each fiscal quarter ending during such measurement period.

• A business’ “level 2 hurdle amount” will be equal to, as of any calculation date, the product of (i) (x) the quarterly hurdle rate of 2.1875% (8.75% annualized, which is 125% of the 7% annualized hurdle rate), multiplied by (y) the number of fiscal quarters ending during such business’ measurement period as of such calculation date, multiplied by (ii) a business’ average allocated share of our consolidated equity for each fiscal quarter ending during such measurement period.

• A business’ “loan expense” will be equal to, with respect to any measurement period as of any calculation date, the aggregate amount of all interest or other expenses paid by such business with respect to indebtedness of such business to either the company or other company businesses with respect to such measurement period.

• The “measurement period” will mean, with respect to any business as of any calculation date, the period from and including the later of (i) the date upon which the company acquired a controlling interest in such business and (ii) the immediately preceding calculation date as of which contribution-based profits were calculated with respect to such business and with respect to which profit allocation were paid (or, at the election of the allocation member, deferred) by the company up to and including such calculation date.

• The company’s “overhead” will be equal to, with respect to any fiscal quarter, the sum of (i) that portion of the company’s operating expenses (as determined in accordance with GAAP) (without giving effect to any expense attributable to the accrual or payment of any amount of profit allocation or any amount arising under the supplemental put agreement to the extent included in the calculation of the company’s operating expenses), including any management fees actually paid by the company to our manager, with respect to such fiscal quarter that are not attributable to any of the businesses owned by the company (i.e., operating expenses that do not correspond to operating expenses of such businesses with respect to such fiscal quarter), plus (ii) the company’s accrued interest expense (as determined in accordance with GAAP) on any outstanding third party indebtedness of the company with respect to such fiscal quarter, minus (iii) revenue, interest

income and other income reflected in the company’s unconsolidated financial statements as prepared in accordance with GAAP.

• A “qualifying trigger event” will mean, with respect to any business, a trigger event that gave rise to a calculation of total profit allocation with respect to such business as of any calculation date and (ii) where the amount of total profit allocation so calculated as of such calculation date exceeded such business’ level 2 hurdle amount as of such calculation date.

• A business’ “quarterly allocated share of our consolidated equity” will be equal to, with respect to any fiscal quarter, the product of (i) the company’s consolidated net equity as of the last day of such fiscal quarter, multiplied by (ii) a fraction, the numerator of which is such business’ adjusted net assets as of the last day of such fiscal quarter and the denominator of which is the sum of (x) the company’s adjusted net assets as of the last day of such fiscal quarter, minus (y) the aggregate amount of any cash and cash equivalents as such amount is reflected on the company’s consolidated balance sheet as prepared in accordance with GAAP that is not taken into account in the calculation of any business’ adjusted net assets as of the last day of such fiscal quarter.

• A business’ “quarterly share of the company’s overhead” will be equal to, with respect to any fiscal quarter, the product of (i) the absolute amount of the company’s overhead with respect to such fiscal quarter, multiplied by (ii) a fraction, the numerator of which is such business’ adjusted net assets as of the last day of such fiscal quarter and the denominator of which is the company’s adjusted net assets as of the last day of such fiscal quarter.

• An entity’s “third party indebtedness” means any indebtedness of such entity owed to any third party lenders that are not affiliated with such entity.

Supplemental Put Agreement

In addition to the provisions discussed above, 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 will have the right to cause the company to purchase the allocation interests then owned by our manager upon termination of the management services agreement. Termination of the management services agreement, by any means, will not affect our manager’s rights with respect to the allocation interests that it owns. In this regard, our manager will retain its put right and its allocation interests after ceasing to serve as our manager.

If (i) the management services agreement is terminated at any time other than as a result of our manager’s resignation or (ii) our manager resigns on any date that is at least three years after the closing of this offering, then our manager will have the right, but not the obligation, for one year from the date of such termination or resignation, as the case may be, to elect to cause the company to purchase all of allocation interests then owned by our manager for the put price as of the put exercise date.

For purposes of this provision, the “put price” shall be equal to, as of any exercise date, (i) if we terminate the management services agreement, the sum of two separate, independently made calculations of the aggregate amount of manager’s profit allocation as of such exercise date or (ii) if our manager resigns, the average of two separate, independently made calculations of the aggregate amount of manager’s profit allocation as of such exercise date, in each case, calculated assuming that (x) all of the businesses are sold in an orderly fashion for fair market value as of such exercise date in the order in which the controlling interest in each business was acquired or otherwise obtained by the company, (y) the last day of the fiscal quarter ending immediately prior to such exercise date is the relevant calculation date for purposes of calculating manager’s profit allocation as of such exercise date. Each of the two separate, independently made calculations of the manager’s profit allocation for purposes of calculating the put price shall be performed by a different investment bank that is engaged by the company at its cost and expense. The put price will be adjusted to account for a final “true-up” of the manager’s profit allocation.

Our manager and the company can mutually agree to permit the company to issue a note in lieu of payment of the put price when due; provided, that if our manager resigns and terminates the management services agreement, then the company will have the right, in its sole discretion, to issue a note in lieu of payment of the put price when due. In either case the note would have an aggregate principal amount equal to the put price, would bear interest at a rate of 8.00% per annum, would mature on the first anniversary of the date upon which the put price was initially due and would be secured by a lien on our equity interests in each of our businesses.

The company’s obligations under the supplemental put agreement are absolute and unconditional. In addition, the company will be subject to certain obligations and restrictions upon exercise of our manager’s put right until such time as the company’s obligations under the supplemental put agreement, including any related note, have been satisfied in full, including:


	•	subject to the company’s right to issue a note in the circumstances described above, the company must use commercially reasonable efforts to raise sufficient debt or equity financing to permit the company to pay the put price or note when due and obtain approvals, waivers and consents or otherwise remove any restrictions imposed under contractual obligations or applicable law or regulations that have the effect of limiting or prohibiting the company from satisfying its obligations under the supplemental put agreement or note;


	•	our manager will have the right to have a representative observe meetings of the company’s board of directors and have the right to receive copies of all documents and other information furnished to the board of directors;



	•	the company and its businesses will be restricted in their ability to sell or otherwise dispose of their property or assets or any businesses they own and in their ability to incur indebtedness (other than in the ordinary course of business) without granting a lien on the proceeds therefrom to the manager, which lien will secure the company’s obligations under the supplemental put agreement or note;


	•	the company will be restricted in its ability to (i) engage in certain mergers or consolidations, (ii) sell, transfer or otherwise dispose of all or a substantial part of its business, property or assets or all or a substantial portion of the stock or beneficial ownership of its businesses or a portion thereof, (iii) liquidate, wind-up or dissolve, (iv) acquire or purchase the property, assets, stock or beneficial ownership or another person, or (v) declare and pay distributions.

The company also has agreed to indemnify our manager for any losses or liabilities it incurs or suffers in connection with, arising out of or relating to its exercise of its put right or any enforcement of terms and conditions of the supplemental put agreement.

As an obligation of the company, the put price will be paid prior to the payment of distributions to our shareholders. If we do not have sufficient liquid assets to pay the put price when due, we may be required to liquidate assets or incur debt in order to pay the put price.

PRO FORMA CAPITALIZATION

The following table sets forth our unaudited pro forma capitalization, assuming the underwriters’ overallotment option is not exercised, after giving effect to the closing of this offering and sale of our shares at the assumed public offering price of $15.00 per share (the mid-point of the expected public offering price range) and the application of the estimated net proceeds of such sale (after deducting underwriting discounts and commissions (including the financial advisory fee to be paid to Ferris, Baker Watts, Incorporated) and our estimated offering expenses) as well as the proceeds from the separate private placement transactions and the initial borrowing under our third party credit facility. The pro forma capitalization gives effect to:


	•	loans retiring;

	•	debt issuances;

	•	minority interests; and

	•	acquisitions.

See the section entitled “Use of Proceeds” for more information.

You should read this information in conjunction with the financial statements and the notes related thereto, the unaudited pro forma condensed combined financial statements and the notes related thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all of which are included elsewhere in this prospectus.


			(Unaudited)
			Pro Forma As of
			December 31, 2005

			($ in thousands)
Cash and cash equivalents			$	16,146

Long-term debt:
		Total long-term debt		50,000

Shareholders’ equity:
	Shares: (no par value); 500,000,000 shares authorized; 20,000,000 shares issued and outstanding as adjusted for the offering⁽¹⁾
		Total shareholders’ equity		277,535

		Total capitalization	$	327,535


⁽¹⁾	Each trust share representing one undivided beneficial interest in the trust property.

PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(Unaudited)

Compass Diversified Trust and Compass Group Diversified Holdings LLC were organized on November 18, 2005 for the purpose of making the acquisitions described below, using the net proceeds from this offering, the separate private placement transactions and our initial borrowings under our third party credit facility. The following unaudited pro forma condensed combined balance sheet as of December 31, 2005, gives effect to the acquisition of:



	•	approximately 94.4% of CBS Personnel;


	•	approximately 75.4% of Crosman;

	•	approximately 70.2% of Advanced Circuits; and

	•	approximately 73.0% of Silvue,

each on a fully diluted basis, as if all these transactions had been completed as of December 31, 2005. The purchase prices for certain of these acquisitions are subject to adjustment. The actual amount of such adjustments, which we do not expect to be material, will depend upon the actual closing date for the acquisition. Each of these acquisitions requires the satisfaction of conditions precedent set forth in the related stock purchase agreement. See the section entitled “The Acquisitions of and Loans to Our Initial Businesses” for more information about the calculation of the percentage of equity interest we are acquiring of each initial business and the conditions to be satisfied for each acquisition.

The following unaudited pro forma condensed combined statements of operations for the year ended December 31, 2005, gives effect to these transactions as if they all had occurred at the beginning of the fiscal period presented. The “as reported” financial information in the unaudited pro forma condensed combined balance sheet at December 31, 2005, and for the year ended December 31, 2005, for CBS Personnel, Advanced Circuits and Silvue are derived from the audited financial statements for the periods indicated therein of each of the businesses, all of which are included elsewhere in this prospectus. The “as reported” financial information in the unaudited pro forma condensed combined balance sheet at January 1, 2006, for Crosman is derived from unaudited financial statements that are included elsewhere in this prospectus. The “as reported” financial information in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2005, for Crosman is derived from unaudited financial statements that are not included elsewhere in this prospectus. These financial statements reflect the combination of the unaudited financial information for the period from July 1, 2005 to January 1, 2006 with the unaudited financial information for the period from January 1, 2005 to June 30, 2005. This combination was required due to Crosman having a June 30th fiscal year-end. The “as reported” financial information for Compass Diversified Trust at December 31, 2005, is derived from the audited financial statements of Compass Diversified Trust as of December 31, 2005, which is included elsewhere in this prospectus.

We refer to CBS Personnel, Crosman, Advanced Circuits and Silvue as the consolidated businesses, and the following unaudited pro forma condensed combined financial statements, or the pro forma financial statements, have been prepared assuming that our acquisitions of the consolidated businesses will be accounted for under the purchase method of accounting. Under the purchase method of accounting, the asset acquired and the liabilities assumed will be recorded at their respective fair value at the date of acquisition. The total purchase price has been allocated to the assets acquired and liabilities assumed based on estimates of their respective fair values, which are subject to revision if the finalization of the respective fair values results in a material difference to the preliminary estimate used.

The company will enter into the management services agreement with our manager, pursuant to which our manager will provide management services for a management fee. In addition, our manager will receive a profit allocation as a holder of 100% of the allocation interests in the company. See the section entitled “Our Manager — Our Relationship With Our Manager — Our Manager as a Service Provider — Management Fee” for a discussion of how the management fee will be calculated and “Our Manager — Our Relationship With Our Manager — Our Manager as an Equity Holder — Manager’s Profit Allocation” for a discussion of how profit allocation will be calculated.

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 the businesses that we own. In this respect, we expect that The Compass Group will cause its affiliates to assign any outstanding management services agreements with our initial businesses to our manager in connection with the closing of this offering. The Compass Group is the entity for which our management team worked prior to the closing of this offering and which is a subsidiary of CGI. See the section entitled “Our Manager — Our Relationship With Our Manager — Our Manager as a Service Provider — Offsetting Management Services Agreements” for information about these agreements.

The unaudited pro forma condensed combined statements of operations are not necessarily indicative of operating results that would have been achieved had the transactions described above been completed at the beginning of the period presented and should not be construed as indicative of future operating results.

You should read these unaudited pro forma condensed combined financial statements in conjunction with the accompanying notes, the financial statements of the initial businesses to be acquired and the consolidated financial statements for the trust and the company, including the notes thereto, and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located elsewhere in this prospectus.

Compass Diversified Trust

Condensed Combined Pro Forma Balance Sheet

at December 31, 2005

(Unaudited)


																	Pro Forma
		Compass				CBS				Advanced							Combined
		Diversified				Personnel		Crosman		Circuits		Silvue					Compass
		Trust				As		As		As		As		Pro Forma			Diversified
		As Reported		Offering*		Reported		Reported**		Reported		Reported		Adjustments			Trust

		($ in thousands)

Assets
Current Assets:
	Cash and cash equivalents	$	100	$	284,775	$	992	$	796	$	1,602	$	1,516	$	(273,635	) ⁽¹⁾	$	16,146
	Accounts receivable, net						62,840		19,794		2,847		2,240					87,721
	Inventories						—		12,316		328		627					13,271
	Prepaid expenses and other current assets						3,472		2,302		132		343					6,249
	Deferred offering cost		3,308				—		—		—		—		(3,308	) ⁽²⁾		—
	Deferred tax assets						1,525		1,262		111		398					3,296
	Current assets of discontinued operations		—		—		—		—		—		901					901

	Total current assets		3,408		284,775		68,829		36,470		5,020		6,025		(276,943	)		127,584
Property and equipment, net							2,876		10,069		3,185		1,257		722	⁽³⁾		18,109
Investment in subsidiary							—		520		—		—		2,803	⁽⁴⁾		3,323
Goodwill							59,295		30,951		50,659		11,266		12,558	⁽⁵⁾		164,729
Intangible and other assets, net							9,525		13,585		21,106		12,697		86,322	⁽⁶⁾		143,235
Deferred tax assets							1,227		—		—		—					1,227

Total assets		$	3,408	$	284,775	$	141,752	$	91,595	$	79,970	$	31,245	$	(174,538	)	$	458,207



Liabilities and shareholders’ equity
Current liabilities:
	Current portion of long-term debt	$		$		$	2,037	$	4,100	$	3,875	$	1,621	$	(11,633	) ⁽⁷⁾	$	—
	Accounts payable						8,777		5,863		848		465					15,953
	Accrued expenses		3,309				33,700		4,635		2,551		3,596		(3,308	) ⁽⁸⁾		44,483
	Current liabilities of discontinued operations		—		—		—		—		—		291					291

	Total current liabilities		3,309		—		44,514		14,598		7,274		5,973		(14,941	)		60,727
Long-term debt							31,154		47,605		45,688		11,591		(86,038	) ⁽⁹⁾		50,000
Workers’ compensation							12,949		—		—		—					12,949
Deferred taxes							—		3,522		249		4,489		30,967	⁽¹⁰⁾		39,227
Other liabilities							—		692		131		253					1,076

	Total liabilities		3,309		—		88,617		66,417		53,342		22,306		(70,012	)		163,979
Minority interest			99				—		—		—		—		16,594	⁽¹¹⁾		16,693
Redeemable preferred stock							—		—		—		90		(90	)⁽¹²⁾		—
Total shareholders’ equity					284,775		53,135		25,178		26,628		8,849		(121,030	) ⁽¹³⁾		277,535

Total liabilities and shareholders’ equity		$	3,408	$	284,775	$	141,752	$	91,595	$	79,970	$	31,245	$	(174,538	)	$	458,207


*	Reflects the issuance of shares and the net proceeds from this offering (after deducting underwriting discounts and commissions, including the financial advisory fee payable to Ferris, Baker Watts, Incorporated, of $15,225) and net proceeds from the separate private placement transactions.


**	Information is as of January 1, 2006.

Compass Diversified Trust

Condensed Combined Pro Forma Statement of Operations

for the year ended December 31, 2005

(Unaudited)


																		Pro Forma
			CBS						Advanced									Combined
			Personnel			Crosman			Circuits			Silvue						Compass
			As			As			As			As			Pro Forma			Diversified
			Reported			Reported*			Reported			Reported			Adjustments			Trust

			($ in thousands)
Net Sales			$	543,012		$	77,049		$	41,969		$	17,093		$			$	679,123
Cost of Sales				441,685			57,319			18,102			3,816			481	⁽²⁾		521,403

Gross profit				101,327			19,730			23,867			13,277			(481	)		157,720
Operating expenses:
	Staffing Expense			54,249			—			—			—						54,249
	Selling, general and administrative expense			26,723			10,029			8,283			7,491			(2,080	) ⁽⁴⁾		57,331
																6,885	⁽⁵⁾
	Research and development expense			—			—			—			1,072			1,240	⁽⁶⁾		2,312
	Amortization expense			1,902			686			717			709			6,419	⁽¹⁾		10,433

Operating income (loss)				18,453			9,015			14,867			4,005			(12,945	)		33,395
Other income (expense):
	Interest income			—			—			233			—						233
	Interest expense			(4,453	)		(5,097	)		(1,491	)		(1,439	)		4,120	⁽³⁾		(8,360	)
	Other income (expense), net			138			(2,531	)		—			90						(2,303	)

Income (loss) before provision for income taxes and minority interest				14,138			1,387			13,609			2,656			(8,825	)		22,965
Provision for income taxes				5,150			426			1,001			1,258			3,215	⁽⁷⁾		11,050
Income (loss) from discontinued operations				—			—			—			133						133
Minority interest in income of subsidiary				—			—			—			—			3,265	⁽⁸⁾		3,265

		Net income (loss)	$	8,988		$	961		$	12,608		$	1,531		$	(15,305	)	$	8,783

Pro forma net income per share																		$	0.44

Pro forma weighted average number of shares outstanding																			20,000

Supplemental Information:
	Depreciation Expense		$	1,426		$	2,203		$	884		$	404		$	481		$	5,398

	Capital Expenditures		$	1,018		$	1,747		$	1,184		$	178		$	—		$	4,127


*	Reflects the combination of the unaudited financial information for the period from July 1, 2005 to January 1, 2006 with the unaudited financial information for the period from January 1, 2005 to June 30, 2005. This combination was required due to Crosman having a June 30th fiscal year-end.

Notes To Pro Forma Condensed Combined Financial Statements

(Unaudited)

This information in Note 1 provides all of the pro forma adjustments from each line item in the pro forma Condensed Combined Financial Statements. Note 2 describes how the adjustments were derived for each of the initial businesses that we are acquiring. Unless otherwise noted, all amounts are in thousands of dollars ($000).


Note 1.	Pro Forma Adjustments


	*Balance Sheet:*


1. Cash and cash equivalents
	Net proceeds from private debt placement to finance acquisitions	$	43,900	a
	Net proceeds from offering and private placement transactions to finance acquisitions		(311,535	)b
	Compass Diversified Trust		(6,000	)g

		$	(273,635	)

2. Deferred Offering Costs
	Compass Diversified Trust	$	(3,308	)g

3. Property, plant and equipment, net
	Crosman	$	(141	)d(1)
	Silvue		863	f(1)

		$	722

4. Investment in subsidiary
	Crosman	$	2,803	d(1)

5. Goodwill
	CBS Personnel	$	(1,673	)c(1)
	Crosman		(6,970	)d(1)
	Advanced Circuits		12,391	e(1)
	Silvue		8,810	f(1)

		$	12,558

6. Intangible and other assets, net
	Debt issuance cost incurred as part of private debt placement	$	6,100	a
	CBS Personnel		63,941	c(1)
	Crosman		4,495	d(1)
	Advanced Circuits		(406	)e(1)
	Silvue		13,432	f(1)
	Silvue		(1,240	)h(1)

		$	86,322


	7. Current portion of long-term debt
		CBS Personnel	$	(2,037	)c(1)
		Crosman		(4,100	)d(1)
		Advanced Circuits		(3,875	)e(1)
		Silvue		(1,621	)f(1)

			$	(11,633	)

	8. Accrued Expenses
		Compass Diversified Trust	$	(3,308	)g

	9. Long-term debt
		Private Debt Placement	$	50,000	a
		CBS Personnel		(31,154	)c(1)
		Crosman		(47,605	)d(1)
		Advanced Circuits		(45,688	)e(1)
		Silvue		(11,591	)f(1)

			$	(86,038	)

10. Deferred tax liability
		CBS Personnel	$	24,298	c(1)
		Crosman		1,708	d(1)
		Silvue		4,961	f(1)

			$	30,967

11. Minority interest
		CBS Personnel	$	3,340	c(1)
		Crosman		5,275	d(1)
		Advanced Circuits		5,502	e(1)
		Silvue		2,477	f(1)

			$	16,594

12. Redeemable preferred stock
		Silvue	$	(90	)f(1)

13. Total shareholders’ equity
		CBS Personnel	$	(53,135	)c(1)
		Crosman		(25,178	)d(1)
		Advanced Circuits		(26,628	)e(1)
		Silvue		(8,849	)f(1)
		Compass Diversified Trust		(6,000	)g
		Silvue		(1,240	)h(1)

			$	(121,030	)


	*Statement of Operations:*


		Year Ended
		December 31,
		2005

1. Amortization expense
	CBS Personnel	$	3,898	a(1)
	Crosman		(168	)b(1)
	Advanced Circuits		1,944	c(1)
	Silvue		745	d(1)

		$	6,419

2. Depreciation expense
	Crosman	$	116	b(3)
	Silvue		365	d(3)

		$	481

3. Interest expense
	CBS Personnel	$	4,453	a(2)
	Crosman		5,097	b(2)
	Advanced Circuits		1,491	c(2)
	Silvue		1,439	d(2)
	Compass Diversified Trust		(8,360	)g

		$	4,120

4. Elimination of prior management fee
	CBS Personnel	$	(1,011	)a(3)
	Crosman		(580	)b(4)
	Advanced Circuits		(139	)c(3)
	Silvue		(350	)d(4)

		$	(2,080	)

5. New management fee
	Compass Diversified Trust	$	6,885	e

6. Research and development expense
	Silvue	$	1,240	f

7. Provision for income taxes
	Compass Diversified Trust	$	3,215	h

8. Minority interest in income of subsidiaries
	Compass Diversified Trust	$	3,265	i


Note 2.	Pro Forma Adjustments by Acquisition

As a further illustration, we have grouped the pro forma adjustments detailed in Note 1 to the Pro Forma Condensed Financial Statements by each initial business to show the combined effect of the pro forma adjustments on each initial business.

Balance Sheet


a.	Reflects the net proceeds received in connection with the third party credit facility (after deducting debt issuance cost and closing fees of $6.1 million):


Cash	$	43,900
Other assets		6,100
Long-term debt		(50,000	)

	$	—


b.	Reflects the use of net proceeds from the offering and private debt placement to finance acquisitions, including equity redemptions, and debt repayments:


CBS Personnel	$	120,956
Crosman		70,087
Advanced Circuits		82,674
Silvue		37,818

	$	311,535


c.	CBS Personnel Acquisition

The following information represents the pro forma adjustments made by us in Note 1 to reflect our acquisition of a 94.4% equity interest in, and loans to, CBS Personnel for a total cash investment of approximately $121.0 million. This investment of $121.0 million was assigned to assets of $204.1 million, current liabilities of $42.5 million consisting of the historical carrying values for accounts payable and accrued expenses, $37.3 million to deferred tax and other liabilities and $3.3 million to minority interest. The asset allocation represents $68.8 million of current assets valued at their historical carrying values, property and equipment of $2.9 million valued through a preliminary asset appraisal, $74.8 million of intangible and other assets and $57.6 million of goodwill representing the excess of the purchase price over identifiable assets. The preliminary intangible asset values consist principally of customer relationships valued at $61.6 million, trade names valued at $10.4 million and non-piracy covenants of $0.6 million.

The trade names were valued at $10.4 million using a royalty savings methodology, in which an asset is valuable to the extent that ownership of the asset relieves the company from the obligation of paying royalties for the benefits generated by the asset. The key assumptions in this analysis were a royalty rate equal to 0.25% of revenues, a royalty revenue base equal to 100% of CBS’s revenues, a risk-adjusted discount rate of 15.5%, and an indefinite remaining useful life.

The non-piracy covenants were valued at $0.6 million using an excess earnings methodology, in which an asset is valuable to the extent that the asset enables its owner to earn a return in excess of the required returns on, and of the other assets utilized in, the business. The non-piracy covenants protect CBS from a loss of revenue due to former employees soliciting customers during the 12 months after their termination date. The key assumptions in this analysis were an economic margin of approximately 1.8% (on average) of the revenues protected by the non-piracy covenants, an estimate that 65% of CBS’s revenues were initially protected by the non-piracy covenants (reflecting the revenue base attributable to the covenantors), a covenantor attrition (reflecting the rate at which the employment of CBS’s employees subject to non-piracy covenants is expected to terminate) of 50% per annum, a risk-adjusted discount rate of 18%, and a remaining useful life of three years.

The customer relationships were valued at $61.6 million using an excess earnings methodology, in which an asset is valuable to the extent that the asset enables its owner to earn a return in excess of the required returns on, and of the other assets utilized in, the business. The key assumptions in this analysis were an economic margin of approximately 3.5% (on average) of revenues attributable to CBS’s customer relationships, an estimate that 90% of CBS’s revenues come from recurring customers, a customer attrition

rate (reflecting the rate at which CBS’s customer relationships are lost) of 12.5% per annum, a risk-adjusted discount rate of 20%, and a remaining useful life of 11 years.

The value assigned to minority interest was derived from the historical equity value at December 31, 2005 multiplied by the minority interest ownership percentage calculated on a fully diluted basis.


	1. Reflects (1) purchase accounting adjustments to reflect CBS Personnel assets acquired and liabilities assumed at their estimated fair values, (2) redemption of existing debt of CBS Personnel and (3) elimination of historical shareholders’ equity:


Goodwill	$	(1,673	)
Intangible and other assets		63,941
Current portion of long-term debt		2,037
Long-term debt		31,154
Deferred tax liability		(24,298	)
Establishment of minority interest		(3,340	)
Elimination of historical shareholders’ equity		53,135

	$	120,956


d.	Crosman Acquisition

The following information represents the pro forma adjustments made by us in Note 1 to reflect our acquisition of a 75.4% equity interest in, and loans to, Crosman for a total cash investment of approximately $70.1 million. This investment of $70.1 million was assigned to assets of $91.8 million, current liabilities of $10.5 million consisting of the historical carrying values for accounts payable and accrued expenses, $5.9 million to deferred tax and other liabilities and $5.3 million to minority interest. The asset allocation represents $36.5 million of current assets valued at their historical carrying values, property and equipment of $9.9 million valued through a preliminary asset appraisal, $3.3 million for the investment in a subsidiary, $18.1 million of intangible and other assets and $24.0 million of goodwill representing the excess of the purchase price over identifiable assets. The preliminary intangible asset values consist principally of $0.8 million for technology, licenses agreements valued at $1.1 million, distributor relationships of $2.9 million and trade names valued at $13.3 million.

The trade names were valued at $13.3 million using a royalty savings methodology, in which an asset is valuable to the extent that ownership of the asset relieves the company from the obligation of paying royalties for the benefits generated by the asset. The key assumptions in this analysis were a royalty rate equal to 4% of sales, a royalty sales base equal to approximately 94% of Crosman’s total sales, a risk-adjusted discount rate of 20.0%, and an indefinite remaining useful life.

The technology (consisting of a specific product technology) was valued at $0.8 million using a royalty savings methodology, in which an asset is valuable to the extent that ownership of the asset relieves the company from the obligation of paying royalties for the benefits generated by the asset. The key assumptions in this analysis were a royalty rate equal to 3% of sales, an initial royalty sales base equal to approximately $10.6 million per annum (representing sales of products utilizing the technology), an obsolescence factor (reflecting the rate at which the utility of the core technology degrades relative to time) of 10% per annum, a risk-adjusted discount rate of 25%, and a remaining useful life of 11 years.

The licensing agreement (representing Crosman’s right to use the Remington name on the sale of certain products) was valued at $1.1 million using an excess earnings methodology, in which an asset is valuable to the extent that the asset enables its owner to earn a return in excess of the required returns on, and of the other assets utilized in, the business. The key assumptions in this analysis were an economic margin of approximately 5.3% (on average) of sales made pursuant to the licensing agreement (which is net of a 4.5% royalty payable to the licensor), next-year sales under the agreement of $4.7 million with 3% growth per annum during the remaining term of the agreement, the expected renewal of the agreement for

a subsequent four-year term starting at the end of 2007, a risk-adjusted discount rate of 20%, and a remaining useful life of 6 years.

The distributor relationships were valued at $2.9 million using an excess earnings methodology, in which an asset is valuable to the extent that the asset enables its owner to earn a return in excess of the required returns on and of the other assets utilized in the business. The key assumptions in this analysis were an economic margin of approximately 6.5% (on average) of sales attributable to Crosman’s distributor relationships, an estimate that 2006 sales to these distributors would be $10.5 million, an attrition rate (reflecting the rate at which Crosman’s distributor relationships are lost) of 10% per annum, a risk-adjusted discount rate of 20%, and a remaining useful life of 11 years.

The value assigned to minority interest was derived from the historical equity value at December 31, 2005 multiplied by the minority interest ownership percentage calculated on a fully diluted basis. The Crosman minority interest was reduced by an outstanding loan in the amount of $1.2 million due from the minority holders in connection with the issuance of their equity interest.


	1. Reflects (1) purchase accounting adjustments to reflect Crosman assets acquired and liabilities assumed at their estimated fair values, (2) redemption of existing debt of Crosman and (3) elimination of historical shareholders’ equity:


Property and equipment	$	(141	)
Investment in subsidiary		2,803
Goodwill		(6,970	)
Intangible and other assets		4,495
Current portion of long-term debt		4,100
Long-term debt		47,605
Deferred tax liability		(1,708	)
Establishment of minority interest		(5,275	)
Elimination of historical shareholders’ equity		25,178

	$	70,087


e.	Advanced Circuits Acquisition

The following information represents the pro forma adjustments made by us in Note 1 to reflect our acquisition of a 70.2% equity interest in, and loans to, Advanced Circuits for a total cash investment of approximately $82.7 million. This investment of $82.7 million was assigned to assets of $91.9 million, current liabilities of $3.4 million consisting of the historical carrying values for accounts payable and accrued expenses, deferred tax and other liabilities of $0.3 million and $5.5 million to minority interest. The asset allocation represents $5.0 million of current assets valued at their historical carrying values, property and equipment of $3.2 million valued through a preliminary asset appraisal, $20.7 million of intangible and other assets and $63.0 million of goodwill representing the excess of the purchase price over identifiable assets. The preliminary intangible asset values consist principally of customer relationships valued at $18.1 million and technology valued at $2.6 million.

The technology was valued at $2.6 million using a royalty savings methodology, in which an asset is valuable to the extent that ownership of the asset relieves the company from the obligation of paying royalties for the benefits generated by the asset. The key assumptions in this analysis were a royalty rate equal to 7% of sales, an initial royalty sales base equal to 100% of Advanced Circuits’ sales, an obsolescence factor (reflecting the rate at which the utility of the technology degrades relative to time) of 50% per annum, a risk-adjusted discount rate of 18%, and a remaining useful life of four years.

The customer relationships were valued at $18.1 million using an excess earnings methodology, in which an asset is valuable to the extent that the asset enables its owner to earn a return in excess of the required returns on, and of the other assets utilized in, the business. The key assumptions in this analysis

were an economic margin of approximately 18.5% (on average) of sales attributable to Advanced Circuits’ customer relationships, an estimate that 75% of Advanced Circuits’ sales come from recurring customers, a customer attrition rate (reflecting the rate at which Advanced Circuits’ customer relationships are lost) of 20% per annum, a risk-adjusted discount rate of 18%, and a remaining useful life of nine years.

The value assigned to minority interest was derived from the historical equity value at December 31, 2005 multiplied by the minority interest ownership percentage calculated on a fully diluted basis. The Advanced Circuits minority interest was reduced by an outstanding loan in the amount of $3.5 million due from the minority holders in connection with the issuance of their equity interest.


	1.	Reflects (1) purchase accounting adjustments to reflect Advanced Circuits assets acquired and liabilities assumed at their estimated fair values, (2) redemption of existing debt of Advanced Circuits and (3) elimination of historical shareholders’ equity:


Goodwill	$	12,391
Intangible and other assets		(406	)
Current portion of long-term debt		3,875
Long-term debt		45,688
Establishment of minority interest		(5,502	)
Elimination of historical shareholders’ equity		26,628

	$	82,674


f.	Silvue Acquisition

The following information represents the pro forma adjustments made by us in Note 1 to reflect our acquisition of a 73.0% equity interest in, and loans to, Silvue for a total cash investment of approximately $37.8 million. This investment of $37.8 million was assigned to assets of $54.4 million, current liabilities of $4.4 million consisting of the historical carrying values for accounts payable and accrued expenses, $9.7 million to deferred tax and other liabilities and $2.5 million to minority interest. The asset allocation represents $6.0 million of current assets valued at their historical carrying values, property and equipment of $2.1 million valued through a preliminary asset appraisal, $26.2 million of intangible and other assets and $20.1 million of goodwill representing the excess of the purchase price over identifiable assets. The preliminary intangible asset values consist principally of customer relationships of $18.7 million, core technology of $3.7 million, trade names of $1.7 million and in process research and development of $1.2 million.

The trade names were valued at $1.7 million using a royalty savings methodology, in which an asset is valuable to the extent that ownership of the asset relieves the company from the obligation of paying royalties for the benefits generated by the asset. The key assumptions in this analysis were a royalty rate equal to 1% of sales, a royalty sales base equal to 100% of Silvue’s sales, a risk-adjusted discount rate of 13.0%, and an indefinite remaining useful life.

The core technology was valued at $3.7 million using a royalty savings methodology, in which an asset is valuable to the extent that ownership of the asset relieves the company from the obligation of paying royalties for the benefits generated by the asset. The key assumptions in this analysis were a royalty rate equal to 5% of sales, an initial royalty sales base equal to 100% of Silvue’s sales, an obsolescence factor (reflecting the rate at which the utility of the core technology degrades relative to time) of 10% per annum, a risk-adjusted discount rate of 12%, and a remaining useful life of 13 years.

The customer relationships were valued at $18.7 million using an excess earnings methodology, in which an asset is valuable to the extent that the asset enables its owner to earn a return in excess of the required returns on, and of the other assets utilized in, the business. The key assumptions in this analysis were an economic margin of approximately 16.0% (on average) of sales attributable to Silvue’s customer

relationships, an estimate that 90% of Silvue’s sales come from recurring customers, a customer attrition rate (reflecting the rate at which Silvue’s customer relationships are lost) of 5% per annum, a risk-adjusted discount rate of 14%, and a remaining useful life of 16 years.

The IPR&D projects — backside coating and Gen-3 — were valued at $0.7 million and $0.5 million, respectively, using an excess earnings methodology, in which an asset is valuable to the extent that the asset enables its owner to earn a return in excess of the required returns on and of the other assets utilized in the business.

The key assumptions in the analysis of the backside coating project were remaining development costs of $100,000, a product launch in the last half of 2006, peak market share of 33% by 2010, 33% EBITDA margins and economic margins of approximately 6.9% (on average) of sales of the product, an obsolescence factor (reflecting the rate at which the utility of the product’s technology degrades relative to time) of 10% per annum starting in 2013, and a risk-adjusted discount rate of 25%.

The key assumptions in the analysis of the Gen-3 project were remaining development costs of $600,000, a product launch in 2008 with immediate incremental sales, 33% EBITDA margins and economic margins of approximately 7.5% (on average) of incremental sales, an obsolescence factor (reflecting the rate at which the utility of the product’s technology degrades relative to time) of 10% per annum starting in 2013, and a risk-adjusted discount rate of 20%.

The value assigned to minority interest was derived from the historical equity value at December 31, 2005 multiplied by the minority interest ownership percentage calculated on a fully diluted basis.


	1.	Reflects (1) purchase accounting adjustments to reflect Silvue assets acquired and liabilities assumed at their estimated fair values, (2) redemption of existing debt of Silvue and (3) elimination of historical shareholders’ equity:


Property and equipment	$	863
Goodwill		8,810
Intangible and other assets		13,432
Current portion of long-term debt		1,621
Long-term debt		11,591
Deferred tax liability		(4,961	)
Repayment of mandatorily redeemable preferred stock		90
Establishment of minority interest		(2,477	)
Elimination of historical shareholders’ equity		8,849

	$	37,818


g.	Purchase Accounting Adjustment

The following pro forma adjustment made by us in Note 1 reflects the payment of the public offering costs:


Cash	$	(6,000	)
Accrued Expenses		3,308
Deferred Offering Cost		(3,308	)
Shareholders’ Equity		6,000

	$	—


h.	In-Process Research & Development

Reflects the expensing of the in-process research and development (“IPR&D”) identified as part of the Silvue acquisition. This amount was expensed as of the date of acquisition since the IPR&D had no alternative use.


	*Statements of Operations:*


		Year Ended
		December 31,
		2005

A.	The following entries represent the pro forma adjustments made by us in Note 1 to reflect the effect of our acquisition of CBS Personnel upon the results of their operations for the year ended December 31, 2005 as if we had acquired CBS Personnel at the beginning of the fiscal year presented:
	1. Additional amortization expense of intangible assets resulting from the acquisition of CBS Personnel:
	Customer relationships of $61,600 which will be amortized over 11 years	$	5,600
	Non-piracy covenants of $600 which will be amortized over 3 years		200

	Subtotal		5,800
	Amortization included in historical financial statements		(1,902	)

		$	3,898


	2. Reduction of interest expense with respect to the $33.2 million long-term debt redeemed in connection with the acquisition of CBS Personnel	$	(4,453	)


	3. Elimination of management fees paid to prior owner of CBS Personnel in connection with management service contract	$	(1,011	)


B.	The following entries represent the pro forma adjustments made by us in Note 1 to reflect the effect of our acquisition of Crosman upon the results of their operations for the year ended December 31, 2005 as if we had acquired Crosman at the beginning of the fiscal year presented:
	1. Additional amortization expense of intangible assets resulting from the acquisition of Crosman:
	Technology of $780 which will be amortized over 11 years	$	71
	License agreement of $1,100 which will be amortized over 6 years		183
	Distributor relationships of $2,900 which will be amortized over 11 years		264

	Subtotal		518

	Amortization included in historical financial statements		(686	)

		$	(168	)


	2. Reduction of interest expense with respect to $51.7 million debt redeemed in connection with acquisition of Crosman	$	(5,097	)


	3. Additional depreciation expense resulting from the acquisition of Crosman	$	116


		Year Ended
		December 31,
		2005


	4. Elimination of management fees paid to prior owner of Crosman in connection with prior management services contract	$	(580	)


C.	The following entries represent the pro forma adjustments made by us in Note 1 to reflect the effect of our acquisition of Advanced Circuits upon the results of their operations for the year ended December 31, 2005 as if we had acquired Advanced Circuits at the beginning of the fiscal year presented:
	1. Additional amortization expense of intangible assets resulting from the acquisition of Advanced Circuits:
	Customer relationships of $18,100 which will be amortized over 9 years	$	2,011
	Technology of $2,600 which will be amortized over 4 years		650

	Subtotal	$	2,661

	Amortization included in historical financial statements		(717	)


		$	1,944


	2. Reduction of interest expense with respect to $49.6 million of debt redeemed in connection with the acquisition of Advanced Circuits	$	(1,491	)


	3. Elimination of management fee paid to prior owner of Advanced Circuits in connection with prior management service contract	$	(139	)


D.	The following entries represent the pro forma adjustments made by us in Note 1 to reflect the effect of our acquisition of Silvue upon the results of their operations for the year ended December 31, 2005 as if we had acquired Silvue at the beginning of the fiscal year presented:
	1. Additional amortization expense of intangible assets resulting from the acquisition of Silvue:
	Customer relationships of $18,700 which will be amortized over 16 years	$	1,169
	Core technology of $3,700 which will be amortized over 13 years		285

	Subtotal		1,454
	Amortization included in historical financial statements		(709	)

		$	745


	2. Reduction of interest expense with respect to $13.2 million of debt redeemed in connection with the acquisition of Silvue	$	(1,439	)


	3. Additional depreciation expense resulting from the acquisition of Silvue	$	365


	4. Elimination of management fees paid to prior owner of Silvue in connection with management service contract not assumed by us	$	(350	)


		Year Ended
		December 31,
		2005

E.	Adjustment to record the estimated management fee expense pursuant to the Management Services Agreement to be incurred in connection with the closing of this offering. This amount will represent the total management fee to be paid to the manager.
	The amounts were determined by using the combined pro forma balance sheet at December 31, 2005 and was calculated as follows:

	Total Assets	$	458,207
	Less: Total Liabilities Less Third Party Debt		113,979

	Adjusted Net Assets		344,228
	Management Fee %		2.0%

		$	6,885


F.	Adjustment to record expensing of the IPR&D acquired in connection with the acquisition of Silvue on January 1, 2005 since the IPR&D had no alternative use.	$	1,240

G.	Adjustment to record the estimated interest expense associated with the third party credit facility. The amounts were calculated as follows:

	Interest Expense on the $50.0 million term loan	$	(3,840	)
	Unused Fee on revolving loan commitment		(600	)
	Unused Fee on delayed term loan commitment and Letter of Credit override fee		(2,700	)
	Amortization of debt issuance cost of $6.1 million over 5 years		(1,220	)

		$	(8,360	)


H.	Adjustment to record the estimated tax expense associated with the pro forma adjustments to pre-tax income to reflect income tax expense for Advanced Circuits due to its change from a Subchapter S corporation. The amounts were calculated as follows:

	Advanced Circuits income before provision for income taxes	$	13,609
	Pro Forma Amortization Applicable to Advanced Circuits		(1,944	)
	Pro Forma Management Fee Applicable to Advanced Circuits		(362	)

	Adjusted Pre-Tax Income		11,303
	Provision for income taxes		4,216
	Historical Provision for income taxes		(1,001	)

		$	3,215


I.	Adjustment to record the minority interest in net income. The adjustment for minority interest was calculated by applying the minority ownership percentage for each business to the net income applicable to the minority interest holders.	$	3,265


Note 3.	Pro Forma Income from Continuing Operations per Share

Pro forma net income per share is $0.44 for the year ended December 31, 2005, reflecting the shares issued from this offering and the private placement transactions as if such shares were outstanding from the beginning of the respective periods and was calculated as follows:


	⁽¹⁾	Pro Forma weighted average number of shares outstanding was derived by dividing the estimated gross proceeds from the offering and private placement of $300.0 million by the assumed initial price per share of $15.


Note 4.	Other Estimates

In addition to the pro forma adjustments above, we expect to incur incremental administrative expenses, professional fees and management fees as a public company after the consummation of the transactions described above. Such fees and expenses include accounting, legal and other consultant fees, SEC and listing fees, directors’ fees and directors’ and officers’ insurance. We currently estimate these fees and expenses will total approximately $5.0 million during our first year of operations. The actual amount of these expenses and fees could vary significantly.

SELECTED FINANCIAL DATA

The company and the trust were formed on November 18, 2005 and have conducted no operations and have generated no revenues to date. We will use the proceeds of the offering, in part, to acquire and capitalize our initial businesses.

The selected financial data for CBS Personnel at December 31, 2005 and 2004, and for fiscal years ended December 31, 2005, 2004 and 2003 were derived from the audited consolidated financial statements of CBS Personnel included elsewhere in this prospectus.

The selected financial data for Crosman at June 30, 2005 and 2004, and for fiscal year ended June 30, 2005 were derived from the audited consolidated financial statements of Crosman included elsewhere in this prospectus. The selected financial data for Crosman for the year ended June 30, 2003 (predecessor) and for the periods July 1, 2003 to February 9, 2004 (predecessor) and February 10, 2004 to June 30, 2004 (successor) were derived from the audited financial statements of Crosman. The selected financial data of Crosman at January 1, 2006 and for the six months ended January 1, 2006 and December 26, 2004 were derived from Crosman’s unaudited consolidated financial statements included elsewhere in this prospectus.

The selected financial data for Advanced Circuits at December 31, 2005 (successor) and 2004 (predecessor), and for the periods September 20, 2005 to December 31, 2005 (successor) and January 1, 2005 to September 19, 2005 (predecessor) and for the years ended December 31, 2004 and 2003 (predecessor) were derived from Advanced Circuits’ audited consolidated and combined financial statements included elsewhere in this prospectus.

The selected financial data for Silvue at December 31, 2005 and 2004 (restated), and for fiscal years ended December 31, 2005 were derived from the audited consolidated financial statements of Silvue included elsewhere in this prospectus. The selected financial data for Silvue for the period January 1, 2004 to September 2, 2004 (predecessor) and September 3, 2004 (inception) to December 31, 2004 and for the year ended December 31, 2003 (predecessor) were derived from the audited financial statements of Silvue.

The unaudited financial data for Crosman shown below may not be indicative of the financial condition and results of operations of Crosman for any other period. The unaudited financial data, in the opinion of management, include all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of such data.


	Fiscal Year Ended December 31,

CBS Personnel	2003			2004			2005

	($ in thousands)
Statements of Operations Data:
Revenues	$	194,717		$	315,258		$	543,012
Direct cost of revenues		155,368			254,987			441,685

Gross Profit		39,349			60,271			101,327
Operating expenses:
Staffing		23,081			31,974			54,249
Selling, general and Administrative		12,132			17,796			26,723
Amortization		491			1,051			1,902

Income from operations		3,645			9,450			18,453
Other income (expense):
Interest expense		(2,929	)		(2,100	)		(4,453	)
Other Income		224			148			138

Income before provision for income taxes		940			7,498			14,138
Provision for income taxes		(117	)		(85	)		(5,150	)

Net income	$	823		$	7,413		$	8,988

Cash Flow Data:
Cash provided by operating activities	$	3,944			6,581			14,654
Cash (used in) investing activities		(302	)		(30,059	)		(1,018	)
Cash (used in) provided by financing activities		(3,736	)		23,970			(13,176	)

Net (decrease) increase in cash	$	(94	)	$	492		$	460

Supplemental Information:
Depreciation Expense	$	1,431		$	1,344		$	1,426


	At December 31,

	2004		2005

	($ in thousands)
Balance Sheet Data:
Total current assets	$	66,371	$	68,829
Property and equipment, net		3,081		2,876
Goodwill		59,307		59,295
Other intangibles, net and other assets		11,228		10,752

Total assets		139,987		141,752
Current liabilities		41,499		44,514
Long-term debt		43,893		31,154
Workers’ Compensation and other liabilities		10,684		12,949

Total liabilities		96,076		88,617
Shareholders’ equity		43,911		53,135


													(Unaudited)
				Predecessor			Successor
	Year			July 1, 2003			February 10,			Year			Six Months Ended
	Ended			to			2004 to			Ended
	June 30,			February 9,			June 30			June 30,			December 26,			January 1,
Crosman	2003			2004			2004			2005			2004			2006

	($ in thousands)
Statements of Operations Data:
Net sales	$	53,333		$	38,770		$	24,856		$	70,060		$	38,234		$	45,223
Cost of sales		37,382			26,382			17,337			50,874			26,471			32,916

Gross Profit		15,951			12,388			7,519			19,186			11,763			12,307
Operating expenses:
Selling, general and administrative		8,749			5,394			4,119			10,526			5,393			4,896
Amortization		132			70			258			629			310			367

Operating income		7,070			6,924			3,142			8,031			6,060			7,044
Other income (expense):
Interest expense		(1,978	)		(402	)		(1,588	)		(4,638	)		(2,236	)		(2,695	)
Other income (expense)		424			(1,560	)		(281	)		(2,792	)		(68	)		193

Income before provision for income taxes		5,516			4,962			1,273			601			3,756			4,542
Provision for income taxes		(2,122	)		(1,824	)		(463	)		(112	)		(1,407	)		(1,721	)

Net income	$	3,394		$	3,138		$	810		$	489		$	2,349		$	2,821

Cash Flow Data:
Cash provided by (used in) operating activities	$	4,360		$	8,551		$	89		$	3,110		$	(6,133	)	$	647
Cash (used in) investing activities		(572	)		(1,181	)		(65,809	)		(2,014	)		(944	)		(677	)
Cash (used in) provided by financing activities		(3,865	)		(7,146	)		65,905			(527	)		7,346			53

Net (decrease) increase in cash	$	(77	)	$	224		$	185		$	569		$	269		$	23

Supplemental Information:
Depreciation Expense	$	2,295		$	1,205		$	847		$	2,146		$	1,069		$	1,121


					(Unaudited)
	At June 30,				At
					January 1,
	2004		2005		2006

	($ in thousands)
Balance Sheet Data:
Total current assets	$	25,497	$	28,622	$	36,470
Property, plant and equipment, net		10,583		10,513		10,069
Goodwill		30,951		30,951		30,951
Intangible and other assets		14,900		14,097		14,105

Total assets		81,931		84,183		91,595
Current liabilities		10,072		11,001		14,598
Notes payable under revolving line of credit		7,138		10,385		11,329
Long-term debt		37,917		35,334		35,033
Capitalized lease obligations and other liabilities		4,878		5,117		5,457

Total liabilities		60,005		61,837		66,417
Shareholders’ equity		21,926		22,346		25,178


							Predecessor			Successor
	Predecessor			Predecessor			January 1,			September 20,
	Year Ended			Year Ended			2005 to			2005 to
	December 31,			December 31,			September 19,			December 31,
Advanced Circuits	2003			2004			2005			2005

	($ in thousands)
Statements of Operations Data:
Net sales	$	27,796		$	36,642		$	29,726		$	12,243
Cost of sales		14,568			17,867			12,960			5,143

Gross Profit		13,228			18,775			16,766			7,100
Operating expenses:
General and administrative		5,521			6,564			5,835			2,448
Amortization of intangibles		—			—			—			717

Income from operations		7,707			12,211			10,931			3,935
Other income (expense):
Interest Expense		(204	)		(242	)		(173	)		(1,318	)
Interest income		16			42			164			70
Other income		15			82			—			—

Income before provision for income taxes		7,534			12,093			10,922			2,687
Provision for income taxes		—			—			—			(1,001	)

Net income	$	7,534		$	12,093		$	10,922		$	1,686

Cash Flow Data:
Cash provided by operating activities	$	8,021		$	12,689		$	11,503		$	3,170
Cash (used in) investing activities		(2,167	)		(1,310	)		(502	)		(74,724	)
Cash (used in) provided financing activities		(4,458	)		(8,830	)		(17,453	)		73,156

Net increase (decrease) in cash	$	1,396		$	2,549		$	(6,452	)	$	1,602

Supplemental Information:
Depreciation Expense	$	729		$	869		$	715		$	169


	At December 31,

	2004		2005

	($ in thousands)
Balance Sheet Data:
Total current assets	$	9,564	$	5,020
Property and equipment, net		6,669		3,185
Goodwill and other assets		556		71,765

Total assets		16,789		79,970
Current liabilities		3,422		7,274
Long-term debt		2,787		45,688
Other liabilities		131		380

Total liabilities		6,340		53,342
Shareholders’ equity		10,449		26,628


				Predecessor			Successor
	Predecessor			January 1,			September 3,			Successor
	Year Ended			2004 to			2004 to			Year Ended
	December 31,			September 2,			December 31,			December 31,
Silvue	2003			2004			2004			2005

	($ in thousands)
Statements of Operations Data:
Net sales	$	10,446		$	7,604		$	4,532		$	17,093
Cost of sales		1,555			1,094			611			3,816

Gross Profit		8,891			6,510			3,921			13,277
Operating expenses:
Selling, general and administrative		5,276			4,006			2,320			7,491
Research and Development costs		550			448			637			1,072
Amortization of intangibles		—			—			209			709

Operating income		3,065			2,056			756			4,005
Other income (expense):
Interest income		8			5			—			—
Interest expense		(31	)		(5	)		(366	)		(1,439	)
Other income		377			175			136			90

Income before provision for income taxes		3,419			2,231			525			2,656
Provision for income taxes		1,062			735			472			1,257

Income from continuing operations		2,357			1,496			53			1,399
Income (loss) from discontinued operations		(843	)		(225	)		59			132

Net income	$	1,514		$	1,271		$	112		$	1,531

Cash Flow Data:
Cash provided by operating activities	$	1,853		$	1,378		$	867		$	2,338
Cash provided by (used in) investing activities		(859	)		(210	)		(8,460	)		24
Cash (used in) provided by financing activities		(228	)		(3,045	)		7,264			(1,692	)

Net increase (decrease) in cash	$	766		$	(1,876	)	$	(329	)	$	670

Supplemental Information:
Depreciation Expense	$	196		$	219		$	104		$	404


	At December 31,

	2004		2005

	($ in thousands)
Balance Sheet Data:
Total current assets	$	4,743	$	6,025
Property, plant and equipment, net		750		1,257
Goodwill		9,109		11,266
Other Intangibles, net and other assets		13,899		12,697

Total assets		28,501		31,245
Current liabilities		4,679		5,973
Long-term debt		11,788		11,591
Deferred income tax liability and other liabilities		4,458		4,742

Total liabilities		20,925		22,306
Cumulative redeemable preferred stock		90		90
Shareholders’ equity		7,486		8,849

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are and will be dependent upon the earnings of and cash flow from the businesses that we own to meet our corporate overhead and management fee expenses and to make distributions. These earnings, net of any minority interests in these businesses, will be available:



	•	first, to meet capital expenditure requirements, management fees and corporate overhead expenses of the company and the trust;


	•	second, to fund distributions by the company to the trust; and

	•	third, to be distributed by the trust to shareholders.

Acquisition of Initial Businesses

We will use approximately $312 million of the net proceeds of this offering, the separate private placement transactions, and our initial borrowing under our third party credit facility to acquire controlling interests in, and make loans to, our initial businesses. Approximately $140.8 million will be used to pay the purchase price and related costs of the acquisitions of our initial businesses and approximately $170.8 million will be used to make loans to each of the initial businesses. The terms and conditions of the stock purchase agreement were negotiated among representatives of CGI, on behalf of CGI, and representatives of our manager, on behalf of the company in the overall context of this offering. The acquisition of each of the initial businesses will be conditioned upon the consummation of our acquisition of each of the other initial businesses.

In connection with this offering, the company will use a portion of the net proceeds from this offering to acquire controlling interests in:


	•	CBS Personnel;

	•	Crosman;

	•	Advanced Circuits; and

	•	Silvue.

See the section entitled “The Acquisitions of and Loans to Our Initial Businesses” for more information about the calculation of the percentages of equity interest we are acquiring of each initial business.

In connection with this offering, the company will use a portion of the proceeds of this offering, the separate private placement transactions and our initial borrowing under our third party credit facility to make loans and financing commitments to each of our initial businesses. The following sets forth the amounts we expect to be outstanding at each of our initial businesses in connection with the closing of this offering:



	•	an aggregate amount of approximately $66.4 million will be funded to CBS Personnel;



	•	an aggregate amount of approximately $43.2 million will be funded to Crosman;



	•	an aggregate amount of approximately $47.4 million will be funded to Advanced Circuits; and



	•	an aggregate amount of approximately $13.8 million will be funded to Silvue.

The term loans will be used to repay all of the debt outstanding at each of our initial businesses immediately prior to the offering and to recapitalize each initial business. The revolving loans will be used to provide a source of revolving credit for each of our initial businesses, as necessary. See the section entitled “The Acquisitions of and Loans to Our Initial Businesses” for more information regarding the

percentage of equity interest we are acquiring of each business and the loans made by the company to each initial business.

Our loans to our initial businesses will be structured with standard third party terms, security and covenants. We expect these loans to have bullet maturities and substantial sweeps of excess cash flows at those businesses.

Critical Accounting Policies

The following discussion relates to critical accounting policies for the company, the trust and each of our initial businesses.

The preparation of our financial statements in conformity with GAAP will require management to adopt accounting policies and make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. Upon the completion of the acquisitions contemplated in the offering, we will base our estimates on historical information and experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions and judgments and uncertainties, and potentially could result in materially different results under different conditions. Our critical accounting policies are discussed below. These policies are generally consistent with the accounting policies followed by the businesses we plan to acquire. These critical accounting policies will be reviewed by our independent auditors and the audit committee of the company’s board of directors.

Supplemental Put Agreement

In connection with the completion of the offering, the company will 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 with our manager for a price to be determined in accordance with the supplemental put agreement. The company will record the supplemental put agreement at its fair value at each balance sheet date by recording any change in value through the income statement. The fair value of the supplemental put agreement is largely related to the value of the profit allocation that our manager, as holder of allocation interests, will receive. The valuation of the supplemental put agreement requires the use of complex models, which require highly sensitive assumptions and estimates. The impact of over-estimating or under-estimating the value of the supplemental put agreement could have a material effect on future operating results. In addition, the value of the supplemental put agreement will be subject to the volatility of the company’s operations which may result in significant fluctuation in the value assigned to this supplemental put agreement.

Revenue Recognition

The company recognizes revenue when it is realized or realizable and earned. The company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, the product has been shipped or the services have been provided to the customer, the sales price is fixed or determinable and collectibility is reasonably assured. Provisions for customer returns and other allowances based on historical experience are recognized at the time the related sale is recognized.

In addition, CBS Personnel recognizes revenue for temporary staffing services at the time services are provided by CBS Personnel employees and reports revenue based on gross billings to customers. Revenue from CBS Personnel employee leasing services is recorded at the time services are provided. Such revenue is reported on a net basis (gross billings to clients less worksite employee salaries, wages and payroll-related taxes). The company believes that net revenue accounting for leasing services more closely depicts the transactions with its leasing customers and is consistent with guidelines outlined in Emerging Issue Task Force (“EITF”) No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. The effect of using this method of accounting is to report lower revenue than would be otherwise reported.


	*Business Combinations*

The acquisitions contemplated in the offering and future acquisitions of businesses that we will control will be accounted for under the purchase method of accounting. The amounts assigned to the identifiable assets acquired and liabilities assumed in connection with acquisitions will be based on estimated fair values as of the date of the acquisition, with the remainder, if any, to be recorded as identifiable intangibles or goodwill. The fair values will be determined by our management team, taking into consideration information supplied by the management of the acquired entities and other relevant information. Such information will include valuations supplied by independent appraisal experts for significant business combinations. The valuations will generally be based upon future cash flow projections for the acquired assets, discounted to present value. The determination of fair values requires significant judgment both by our management team and by outside experts engaged to assist in this process. This judgment could result in either a higher or lower value assigned to amortizable or depreciable assets. The impact could result in either higher or lower amortization and depreciation expense.


	*Goodwill, Intangible Assets and Property and Equipment*

Significant assets that will be acquired in connection with the contemplated acquisitions will include customer relationships, noncompete agreements, trademarks, technology, property and equipment and goodwill.

Trademarks are considered to be indefinite life intangibles. Goodwill represents the excess of the purchase price over the fair value of the assets acquired. Trademarks and goodwill will not be amortized. However, we will be required to perform impairment reviews at least annually and more frequently in certain circumstances.

The goodwill impairment test is a two-step process, which will require management to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the fair value of each of our reporting units based on a discounted cash flow model using revenue and profit forecasts and comparing those estimated fair values with the carrying values, which include the allocated goodwill. If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill. The determination of a reporting unit’s “implied fair value” of goodwill requires the allocation of the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any unallocated fair value represents the “implied fair value” of goodwill, which will then be compared to its corresponding carrying value. The impairment test for trademarks requires the determination of the fair value of such assets. If the fair value of the trademark is less than its carrying value, an impairment loss will be recognized in an amount equal to the difference. We cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill and/or intangible assets. Such events include, but are not limited to, strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our customer base, and material adverse effects in relationships with significant customers.

The “implied fair value” of reporting units will be determined by our management and will generally be based upon future cash flow projections for the reporting unit, discounted to present value. We will use outside valuation experts when management considers that it would be appropriate to do so.

Intangibles subject to amortization, including customer relationships, noncompete agreements and technology are amortized using the straight-line method over the estimated useful lives of the intangible assets, which we will determine based on the consideration of several factors including the period of time the asset is expected to remain in service. We will evaluate the carrying value and remaining useful lives of intangibles subject to amortization whenever indications of impairment are present.

Property and equipment are initially stated at cost. Depreciation on property and equipment will be computed using the straight-line method over the estimated useful lives of the property and equipment after consideration of historical results and anticipated results based on our current plans. Our estimated

100

useful lives represent the period the asset is expected to remain in service assuming normal routine maintenance. We will review the estimated useful lives assigned to property and equipment when our business experience suggests that they may have changed from our initial assessment. Factors that lead to such a conclusion may include physical observation of asset usage, examination of realized gains and losses on asset disposals and consideration of market trends such as technological obsolescence or change in market demand.

We will perform impairment reviews of property and equipment, when events or circumstances indicate that the value of the assets may be impaired. Indicators include operating or cash flow losses, significant decreases in market value or changes in the long-lived assets’ physical condition. When indicators of impairment are present, management determines whether the sum of the undiscounted future cash flows estimated to be generated by those assets is less than the carrying amount of those assets. In this circumstance, the impairment charge is determined based upon the amount by which the carrying value of the assets exceeds their fair value. The estimates of both the undiscounted future cash flows and the fair values of assets require the use of complex models, which require numerous highly sensitive assumptions and estimates.


	*Allowance for Doubtful Accounts*

The company records an allowance for doubtful accounts on an entity-by-entity basis with consideration for historical loss experience, customer payment patterns and current economic trends. The company reviews the adequacy of the allowance for doubtful accounts on a periodic basis and adjusts the balance, if necessary. The determination of the adequacy of the allowance for doubtful accounts requires significant judgment by management. The impact of either over or under estimating the allowance could have a material effect on future operating results.

The table below summarizes the allowance for doubtful accounts as a percentage of net sales and accounts receivable, respectively.


										Year Ended
	Year Ended December 31, 2005									June 30, 2005

	CBS Personnel			Advanced Circuits⁽²⁾			Silvue			Crosman⁽¹⁾

	($ in thousands)
Net Sales	$	543,012		$	41,969		$	17,093		$	70,060
Allowance for doubtful accounts	$	2,646		$	105		$	5		$	998
% of Revenue		0.48	%		0.25	%		0.03	%		1.42	%
Accounts Receivable	$	65,969		$	2,952		$	2,245		$	14,745
Allowance for doubtful accounts	$



		respect to the fiscal quarter in which the closing of this offering occurs, the company will pay our manager a management fee with respect to such fiscal quarter equal to the product of (i)(x) 0.5%, multiplied by (y) the company’s adjusted net assets as of such calculation date, multiplied by (ii) a fraction, the numerator of which is the number of days from and including the date of closing to and including the last day of such fiscal quarter and the denominator of which is the number of days in such fiscal quarter; provided, further, however, that, with respect to any fiscal quarter in which the management services agreement is terminated, the company will pay our manager a management fee with respect to such fiscal quarter equal to the product of (i)(x) 0.5%, multiplied by (y) the company’s adjusted net assets as of such calculation date, multiplied by (ii) a fraction, the numerator of which is the number of days from and including the first day of such fiscal quarter to but excluding the date upon which the management services agreement is terminated and the denominator of which is the number of days in such fiscal quarter.



	•	“Third party indebtedness” means any indebtedness of the company owed to third party lenders that are not affiliated with the company.



		year ended June 30, 2005, Crosman paid approximately $580,000 to an affiliate of The Compass Group under such management services agreement.



	•	Advanced Circuits and an affiliate of The Compass Group are parties to a five year, automatically renewable management services agreement, dated September 20, 2005. Under such management services agreement, Advanced Circuits is obligated to pay a fixed annual fee equal to $500,000, which is payable quarterly in arrears. In addition, Advanced Circuits is obligated to provide reimbursement for certain expenses in connection with the services performed under such management services agreement. Such management services agreement may be terminated upon the occurrence of an event of default, as set forth in such agreement. For the period from September 2005 to December 31, 2005, Advanced Circuits paid approximately $139,000 to an affiliate of The Compass Group under such management services agreement.



	•	Silvue and an affiliate of The Compass Group are a party to a three year, automatically renewable management services agreement, dated September 2, 2004 as amended September 30, 2004. Under such management services agreement, Silvue is obligated to pay a fixed annual fee equal to $350,000, which is payable quarterly in arrears. In addition, Silvue is obligated to provide reimbursement for certain expenses in connection with the services performed under such management services agreement. Such management services agreement may be terminated upon the occurrence of an event of default, as set forth in such agreement. For the year ended December 31, 2005, Silvue paid approximately $350,000 to an affiliate of The Compass Group under such management services agreement.



		such business’ net income (loss)), plus (ii) the absolute aggregate amount of such business’ loan expense with respect to such measurement period, minus (iii) the absolute aggregate amount of such business’ allocated share of the company’s overhead with respect to such measurement period.


	•	The company’s “cumulative capital gains” will be equal to, as of any calculation date, the aggregate amount of capital gains realized by the company as of such calculation date, after giving effect to any capital gains realized by the company on such calculation date, since its inception.

	•	The company’s “cumulative capital losses” will be equal to, as of any calculation date, the aggregate amount of capital losses realized by the company as of such calculation date, after giving effect to any capital losses realized by the company on such calculation date, since its inception.

	•	The company’s “cumulative gains and losses” will be equal to, as of any calculation date, the sum of (i) the amount of cumulative capital gains as of such calculation date, minus (ii) the absolute amount of cumulative capital losses as of such calculation date.

	•	The “high water mark” will be equal to, as of any calculation date, the highest positive amount of the company’s cumulative capital gains and losses as of such calculation date that were calculated in connection with a qualifying trigger event that occurred prior to such calculation date.


	•	The “high water mark allocation” will be equal to, as of any calculation date, the product of (i) the amount of the high water mark as of such calculation date, multiplied by (ii) 20%.



	•	A business’ “level 1 hurdle amount” will be equal to, as of any calculation date, the product of (i) (x) the quarterly hurdle rate of 1.75% (7% annualized), multiplied by (y) the number of fiscal quarters ending during such business’ measurement period as of such calculation date, multiplied by (ii) a business’ average allocated share of our consolidated equity for each fiscal quarter ending during such measurement period.



	•	A business’ “level 2 hurdle amount” will be equal to, as of any calculation date, the product of (i) (x) the quarterly hurdle rate of 2.1875% (8.75% annualized, which is 125% of the 7% annualized hurdle rate), multiplied by (y) the number of fiscal quarters ending during such business’ measurement period as of such calculation date, multiplied by (ii) a business’ average allocated share of our consolidated equity for each fiscal quarter ending during such measurement period.


	•	A business’ “loan expense” will be equal to, with respect to any measurement period as of any calculation date, the aggregate amount of all interest or other expenses paid by such business with respect to indebtedness of such business to either the company or other company businesses with respect to such measurement period.


	•	The “measurement period” will mean, with respect to any business as of any calculation date, the period from and including the later of (i) the date upon which the company acquired a controlling interest in such business and (ii) the immediately preceding calculation date as of which contribution-based profits were calculated with respect to such business and with respect to which profit allocation were paid (or, at the election of the allocation member, deferred) by the company up to and including such calculation date.



	•	The company’s “overhead” will be equal to, with respect to any fiscal quarter, the sum of (i) that portion of the company’s operating expenses (as determined in accordance with GAAP) (without giving effect to any expense attributable to the accrual or payment of any amount of profit allocation or any amount arising under the supplemental put agreement to the extent included in the calculation of the company’s operating expenses), including any management fees actually paid by the company to our manager, with respect to such fiscal quarter that are not attributable to any of the businesses owned by the company (i.e., operating expenses that do not correspond to operating expenses of such businesses with respect to such fiscal quarter), plus (ii) the company’s accrued interest expense (as determined in accordance with GAAP) on any outstanding third party indebtedness of the company with respect to such fiscal quarter, minus (iii) revenue, interest



		income and other income reflected in the company’s unconsolidated financial statements as prepared in accordance with GAAP.



	•	A “qualifying trigger event” will mean, with respect to any business, a trigger event that gave rise to a calculation of total profit allocation with respect to such business as of any calculation date and (ii) where the amount of total profit allocation so calculated as of such calculation date exceeded such business’ level 2 hurdle amount as of such calculation date.



	•	A business’ “quarterly allocated share of our consolidated equity” will be equal to, with respect to any fiscal quarter, the product of (i) the company’s consolidated net equity as of the last day of such fiscal quarter, multiplied by (ii) a fraction, the numerator of which is such business’ adjusted net assets as of the last day of such fiscal quarter and the denominator of which is the sum of (x) the company’s adjusted net assets as of the last day of such fiscal quarter, minus (y) the aggregate amount of any cash and cash equivalents as such amount is reflected on the company’s consolidated balance sheet as prepared in accordance with GAAP that is not taken into account in the calculation of any business’ adjusted net assets as of the last day of such fiscal quarter.


	•	A business’ “quarterly share of the company’s overhead” will be equal to, with respect to any fiscal quarter, the product of (i) the absolute amount of the company’s overhead with respect to such fiscal quarter, multiplied by (ii) a fraction, the numerator of which is such business’ adjusted net assets as of the last day of such fiscal quarter and the denominator of which is the company’s adjusted net assets as of the last day of such fiscal quarter.


	•	An entity’s “third party indebtedness” means any indebtedness of such entity owed to any third party lenders that are not affiliated with such entity.