Confidentiality

Many field proven, overlapping programs are needed to effectively maintain confidentiality when a company is sold. We recognize that confidentiality is vital to the interests of both Capital Alliance and the selling company. In over 30 years of interacting in the marketplace, we have refined a comprehensive approach to assure the maximum amount of confidentiality in regards to a company's sale. This program has proven to be highly effective.

Every good confidentiality program is constantly monitored. We are intensely interested in learning about any breach of confidentiality in order to minimize its impact and to be assured that our policies and programs remain the best in the industry. Our experience in the last 10 years has been that confidentiality breaches are very rare on programs we control and are almost always caused by uninformed or underinformed people involved in the process. Therefore, education and execution of proper procedures are an important part of our confidentiality program.

The following material outlines some of the aspects of the Capital Alliance Confidentiality Program. This outline should give you basic insight into how this comprehensive and effective program has operated in a wide variety of industries and environments.

The Capital Alliance Documentation Program

• Each selling company is assigned a Capital Alliance code number, e.g. SDE-3852, which is then used in all communications in order to maintain confidentiality about the company's name. We avoid the use of the company's actual name in all interactions.
  
• The key selling shareholders approve all documentation that is prepared by Capital Alliance.
  
• Initially, only blind, generic written material is presented to high level officers of prospective acquirers.
  
• The selling company's presentation material, The Acquisition Opportunity Report, is enclosed in a plain blue cover.
  
• Envelopes used by Capital Alliance are shaded on the inside so that they must be opened to be read.
  
• A confidentiality reminder statement is the initial page of each Acquisition Opportunity Report.
  
• Well established guidelines are used by all Capital Alliance professionals to assure that the confidentiality standards are properly addressed on each program.
  
• Internal reviews examine the documentation and execution of each program to assure that each program meets the confidentiality standards of Capital Alliance.

• All mail from Capital Alliance is sent to a seller's office marked “Personal and Confidential - To Be Opened Only By.”
  
• If desired, all mail will be sent to a selling shareholder's home.
  
• High frequency of mail and telephone communication is avoided at the seller's office.
  
• No detailed telephone messages are left with employees of a selling company - the most detailed message we leave is our personal name, our company name, and our telephone number.
  
• No faxes are sent to a selling company unless the selling principal verbally confirms that they are immediately available at the fax machine to monitor the receipt of the fax.
  
• Our fundamental approach is “one-on-one, pinpoint communications” between the program director at Capital Alliance and the key selling shareholder. All discussions with other employees of the selling company are avoided.

• Only researched, selected acquirer prospects are contacted with written, blind, generic information about a selling company.
  
• The overall approach to contacting specific acquirer prospects is carefully reviewed with the key selling shareholder - sensitive parties are discussed and often excluded, i.e. customers/vendors/competitors/other sensitive parties.
  
• Acquirer prospects within a 100 mile radius of a selling company are usually excluded unless otherwise directed by the seller.
  
• The usual initial contact to acquirer prospects is through the presentation of blind, generic information using the company's code number. These contacts are made by mail or fax with a confidentiality agreement enclosed. Sometimes we will call acquirer prospects and then send them a fax.

Overall Approaches When Contacting Acquirer Prospects

• Our normal experience is that, from the sample of screened acquirer prospects that are contacted in the blind, a relatively small percentage of these acquirer prospects will be given information disclosing the identity of the selling company. Therefore, few acquirer prospects even know the name of the selling company.
  
• Contacts are usually made at corporate headquarters, at the CEO level where important decisions are made and confidential matters are more frequently processed.
  
• We avoid interacting with the following parties because they talk too much!
  
  • marketing departments of any company
  • industry consultants
  • industry trade organizations
  • business brokers/intermediaries/real estate brokers
  • anyone who has previously demonstrated to us that they do not handle confidential matters correctly

• Acquirer prospects are reminded of the importance of confidentiality throughout the process.
  
• Acquirer prospects are requested in writing to direct all initial communications, particularly mail communications through Capital Alliance.
  
• Acquirers are coached verbally regarding confidentiality issues related to a specific program.
  
• Acquirers are requested in writing to limit distribution of written material and any other information about a selling company.
  
• If a confidentiality breach is detected, the offending individual is identified and directly confronted with the situation, including discussion of possible legal action.

• Acquirers can pose as consultants/financial analysts/appraisers/joint venture partners/customers/bankers/etc. while visiting the selling company.
  
• Little or no communication is undertaken with employees during plant visits.
  
• Audits or reviews of files are prohibited except during the final phases after the basic terms are agreed by both parties and final contract drafting is underway.
  
• Capital Alliance professionals are involved in very few plant tours so that employees of the selling company do not become suspicious of a common visitor.
  
• Initial meetings are sometimes conducted at off-plant sites such as hotel rooms, etc.
  
• Restaurants are carefully selected so that confidential conversations can be conducted.
  
• Since acquirer prospects are well prepared with written material about a selling company before any meetings, initial meetings typically last only 2-4 hours.
  
• The Capital Alliance policy is to schedule no more than two meetings with a specific acquirer and a selling company unless price and terms negotiations have substantially progressed.

• During discussions around the offices of Capital Alliance, selling companies are discussed generically, e.g. “the auto parts manufacturing company in the Midwest.” Company names are avoided.
  
• Identity information about selling companies is concealed around the office; company codes are used.
  
• When Capital Alliance personnel are out of the office, the administrative staff will not state where the Capital Alliance person is located unless an extreme emergency is verified.
  
• Telephone and other discussions avoid the use of a selling company's actual name. Our people are trained to initially discuss programs generically.
  
• Many of our people have worked on government classified programs in the past. We use many of these well proven procedures on a daily basis.

This outline does not represent all aspects of the Capital Alliance Confidentiality Program, but it should demonstrate some of the ways we address this most important subject. We are confident of the effectiveness of our confidentiality program because it has worked well in so many situations and industries in the past.


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