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Due Diligence Check List

Corporate and Organizational

Certified copy of certificate of incorporation of [Company] (the Company), as currently in effect.
Certified copy of bylaws of the Company, as currently in effect.
Access to minute books of the Company.
Access to stock books and stock transfer ledgers of the Company.
List of states and foreign countries in which the Company is qualified to do business, including names and addresses of registered agents and list of states and foreign countries in which the trade names of the Company are registered.
Long-form Good Standing Certificate, including payment of taxes for state of incorporation and every state and foreign country in which the Company is qualified to do business.
List of states and foreign countries in which tax returns are filed because of the ownership of property or conduct of business by the Company.
List of states and foreign countries, if any, in which the Company is not qualified to do business and does not file tax returns but in which it maintains an office, a stock of goods, employees, or an agent who is a resident of any state in which he or she solicits orders.
Current organizational chart for the Company and subsidiaries, operating divisions, and hierarchy of officers.
All names under which the Company or any predecessor thereof has done business in the past five years.

Subsidiaries

List of subsidiaries of the Company.
Certified copies of certificates of incorporation and bylaws of each subsidiary, and access to minute books and stock transfer ledgers of each subsidiary.
Information requested in questions 1-9 of the Corporate & Organizational section, shown separately for each subsidiary.

Securities

Statement of outstanding and treasury shares of common stock, preferred stock (including a complete description of the rights attaching to such preferred shares), and any other securities of the Company and each subsidiary.
Stockholders' list, giving name and address of each stockholder of the Company and its subsidiaries and of any voting trustees, his or her affiliation with the Company, the type of security held, the date of issue by the Company (the consideration received by the Company therefore), and the number of shares of such security owned by each such stockholder or trust.
List of holders of any options or rights to purchase any securities of the Company (including warrants), giving name, number of options held, option prices, date(s) of grant, expiration dates, position in the Company or subsidiary, and number of shares owned (excluding those subject to option).
Copies of all stock option agreements, stock option plans, and warrants.
Copies of all stockholder agreements and all other agreements with respect to securities of the Company or its subsidiaries.
All reports to stockholders of the Company prepared within the past five years.
Indicate whether there are any stockholders or stock certificates whose whereabouts are unknown, or any stockholders from whom it will be difficult to obtain approval of the transaction or stock certificates, as appropriate.
A description of all contractual restrictions on transfer of the Company's capital stock or assets.
Copies of registration rights or preemptive rights agreements.

Business Descriptions

All market studies, feasibility studies, analyses, and similar reports concerning the Company prepared within the past five years. All marketing and other descriptive brochures regarding the Company prepared within the past five years.
All press releases issued by the Company during the past five years, and any press clippings that refer to the Company, if available.
Recent analyses of the Company or its industries prepared by investment bankers, engineers, management consultants, accountants, or others, including marketing studies, credit reports, and other types of reports, financial or otherwise.

Financing Documents

All currently effective loan agreements, indentures (including industrial revenue bond indentures), debt instruments, and other financing instruments, and all related material documentation, to which the Company is a party.
A list of all mortgages, liens, pledges, security interests, charges, or other encumbrances to which any property (real or personal) of the Company is subject and all related material documentation.
All correspondence with lenders and other debt security holders for the past five years (including all consents, notices, or waivers of default from lenders with respect to borrowings by the Company).
Schedule of all short-term and long-term debt (including capitalized leases, guarantees, and other contingent obligations).
Any presentations given to creditors in connection with obtaining credit or prepared for potential lenders in connection with any proposed financings.
Copies of collateral reports from floorplanning and/or A/R lines of credit at year end for the past 3 years, and the latest 3 months.
Copies of floorplanning audits and reviews (or grant permission to lender to release).

Financial Statements

Audited financial statements, both consolidated and consolidating, for the Company and its subsidiaries for the past three fiscal years.
All unaudited interim financial statements of the Company prepared since the date of the most recent audited financial statements.
Separate consolidating statement for significant subsidiaries or divisions.
Brief description of contingent liabilities involving the Company.
Name of accountants and length of relationship with accountants; indicate whether the accountants own any interest in or hold any position with the Company or its subsidiaries.
Management financial reports to the directors, or any committee thereof, of the Company prepared during the past five years.
Correspondence with the Company's accountants prepared or received during the past five years, including all management letters from accountants.
Brief description of depreciation policy.
Brief description of nature of prepaid or deferred income or expenses.
Copy of any sales projections and estimates, and copy of current budget and any budget projections including a discussion of any assumptions used in the preparation thereof.
Copy of accounting policies; brief description of any change in accounting policies or procedures during the past five years.
Copies of all reports by accountants to management of the Company or any of its subsidiaries concerning the Company for the past five years.
Brief description of outstanding commitments for capital expenditures in excess of $5,000.
Any documents relating to material write-downs or write-offs of notes, accounts receivable, or other assets other than in the ordinary course of business.

Tax Matters

Copies of all federal, state, local, and foreign income and franchise tax returns filed by the Company and its subsidiaries for the past five years concerning the business, assets, or income of the Company.
All correspondence with the Internal Revenue Service or state or local tax authorities concerning adjustments or questioning compliance.
List of returns and the years thereof that have been audited by federal, state, or local tax authorities, and copies of determination letters related thereto.
List of state and local taxes to which the Company or any subsidiary is subject with respect to the business, assets, or income of the Company, showing assessment date, date return is to be filed, and date tax due.
Describe and provide copies of all agreements, consents, elections, and waivers filed or made with the IRS or other taxing authorities, including, but not limited to, those relating to I.R.S. (341 and the relevant statutes of limitations).
List and describe all pending or threatened disputes with regard to tax matters involving the Company or any of its subsidiaries.
Copies of "S corporation" elections, IRS notices of acceptance, and any other information pertinent to the Company's "S corporation" status, where applicable.
Copies of any tax indemnification, tax sharing, or tax allocation agreements involving the Company and other members of an affiliated group, including any joint venture agreements that have the effect of tax allocation agreements, and a statement setting forth how such agreement was carried out for the past five years.
Copies of all legal or accounting tax opinions received by the Company during the past five calendar years relating to the Company's tax reporting.

Officers & Directors, Employees, Benefit Plans, and Labor Disputes

Name, address, and telephone numbers (home and business) of each director and officer of the Company and each subsidiary (and, if applicable, principal occupation), and aggregate compensation at present and for the previous fiscal year.
All liability insurance policies for directors and officers of the Company or its subsidiaries.
Number of persons employed by the Company and by each subsidiary in terms of function (executive, sales, clerical, research, labor, or other appropriate classification).
Name and address of each person who has a power of attorney to act on behalf of the Company or any subsidiary, and copies of such powers of attorney.
List of all labor union contracts and collective bargaining arrangements to which the Company or any subsidiary is a party, the number of employees covered by each such agreement, and the anticipated expiration dates thereof; and furnish copies of such contracts.
Brief description of "labor unrest" situations, all pending or threatened labor strikes, or other trouble experienced by the Company and its subsidiaries during the past five fiscal years.
List and brief description of the current status of all unfair labor practices complaints lodged during the past three fiscal years involving the Company and its subsidiaries.
Brief description of any pending or threatened request for arbitration, grievance proceedings, labor disputes, strikes, or disturbances affecting the Company or any subsidiary, and history of recent union negotiations.
All performance bonus plans adopted by the board of directors of the Company during the past five years.
- Brief description and copies of all employee benefit plans, group life insurance plans, major medical plans, medical reimbursement plans, supplemental unemployment benefit plans or welfare plans (for hourly employees), or salary continuation plans, or other perquisites, and a brief description of policy regarding bonuses, salary review, severance pay, moving expenses, tuition reimbursement, loans, advances, vacations, holidays, sick leaves, and other benefits.
- For each pension or profit-sharing plan, including multiemployer plans, if any, furnish copies of plan documents, including amendments (and a description of any changes in these plans proposed, agreed upon, or under consideration); actuarial reports, if applicable; trust instruments and trust balance sheets, if any; summary plan descriptions; the latest application for determination to the IRS; any IRS determination letter; and the latest Annual Report on Form 5500, 5500-C, or 5500-K. With respect to each such pension plan that is a "multiemployer plan," furnish a statement of the employer's "withdrawal liability" within the meaning of ERISA 4211.
Details on any terminated pension plans and unfunded pension liabilities.
- List of all employees of the Company who received compensation exceeding $50,000 in the last fiscal year, giving name, date of birth, date hired, position, and compensation for the last fiscal year, and, to the extent available, similar information for all other employees, and retired employees who are receiving or will be entitled to receive any payment not described previously in item 9.
- Describe all written or oral employment or consulting agreements (other than union contracts) to which the Company or any subsidiary is a party or bound and, if any of the same are in writing, furnish copies thereof (except for employment contracts that can be terminated at will by the Company or a subsidiary without cost or liability).
- Brief description of all confidentiality, noncompetition, or similar agreements between the Company or any subsidiary and any of their present or former officers, employees, directors, consultants, or agents. If any of such agreements are in writing, furnish copies thereof.
- Brief description of all consulting and management agreements, arrangements, or understandings to which the Company or any subsidiary is a party and, if the same are in writing, furnish copies thereof.
- Description of all deferred compensation programs affecting officers, directors, or employees of the Company. State the amount accrued and/or paid during the most recent fiscal year under such programs, and amounts of accruals there under through a recent date.
A description of the manner in which the Company fulfills its workers' compensation and unemployment compensation insurance obligations in each state (i.e., insured or self-insured, etc.).
Documents representing or relating to workers' compensation or disability policies, and any material claims with respect thereto.
Copy of employee handbook or any similar document.

Properties, Leases, and Insurance

List of real estate owned, leased, or used by the Company, stating whether owned or leased (whether as lessor or lessee) and brief description of property, structures, zoning, estoppel letters, reversions or remainders, lease provisions (including assignment and renewal), use, and location; furnish copies of mortgages, deeds, surveys, maps, profits, rights of way, easements, leases, and other contracts.
Copies of title insurance policies or lawyers' abstract reports covering real estate.
Copies of zoning variances and local permits.
List of agreements with railroads, pipeline agreements, agreements relating to water rights (such as certificates of appropriation), mining claims (patented and unpatented), and royalty agreements.
List of fixed assets, machinery, and equipment (whether owned, leased, or used by the Company), giving for each material asset or group of assets cost, depreciation reserve, method of depreciation, insured value, estimated remaining useful life, condition suitability for use, and (if available) appraised value.
- List of automobiles, trucks, and other registered equipment owned, leased, or used by the Company, giving a brief description of equipment and lease provisions (if any), year made, state of registration, registration number, cost, estimated remaining useful life, and insured value.
List of premises at which any assets of the Company are currently located or located from time to time, including (without limitation) terminals, plants, storage facilities, sales offices, and warehouses, and written agreements with respect thereto.
Brief description of portfolio investments of the Company (except in subsidiaries), including cost basis and current value.
All currently effective purchase contracts, leases, or other arrangements concerning material items of equipment used by the Company.
All professional appraisals of any material property of the Company.
List and brief description of all liens, security interests, or mortgages on the property of the Company or any of its subsidiaries, and location and name of office where documents or financing statements relating thereto are filed.
Copies of all material leases of or security agreements for personal property of the Company, including conditional sales contracts, equipment leases, chattel mortgages, accounts receivable, financing agreements, and factoring agreements.
List of all insurance policies relating to the business, assets, or properties of the Company (including directors' and officers' liability insurance), giving insurance company, policy number, term of coverage, property or risk covered, appraisal value of covered property (where appropriate), extent of coverage, annual premium, and amount of premiums that are prepaid or are unpaid from prior years. Furnish copies of all such policies.
A description of all insurance claims (over $5,000 in amount) currently pending.
Schedule of Company's loss experience per insurance year.
Copies of title insurance policies for all owned real estate.

Intellectual Property
Patents, Trademarks, Copyrights, and Trade Secrets

Schedule of patent registrations and applications identifying each patent by title, registration (application) number, date of registration (application), and country.
Schedule of trademark (service mark and trade dress) registrations and applications identifying each mark and including date of registration (application), registration (application) number, status (that is, registered, renewed, abandoned, Section 8 and 15 affidavits, submitted, etc.), and country or state where registered. In those instances where registration has not been sought, identify the mark, trade dress or trade name, and its date of first use anywhere in the United States.
Schedule of copyright registrations and applications identifying each copyright by title, registration number, and date of registration.
Manual or other written document detailing the procedures for maintaining the secrecy of trade secrets.
Licensing agreements, merchandising agreements (naming Company as licensee or licensor), or assignments relating to patents, technology, trade secrets, trademarks (service marks), trade dress, and copyrights.
Communications to or from third parties relating to the validity or infringement of Company's patents, technology, trade secrets, trademarks (service marks), trade dress, and copyrights.
Studies or reports relating to the validity or value of Company's patents, technology, trade secrets, trademarks (service marks), trade dress, and copyrights, and the licensing or merchandising thereof.
Agreements pursuant to which any patent, trademark, service mark, or trade name has been sold or transferred by or to the Company and evidence of recording thereof.

Contracts and Arrangements

All standard forms of agreements used by the Company.
All warranty agreements, including all forms of product warranties, of the Company currently in force with respect to completed and executory material contracts.
A list and description of all significant oral contracts and commitments.
All currently effective guarantees given by the Company concerning the payment or performance of obligations of third parties.
All sales agency and distribution agreements.
A list of all contracts and commitments under which a default has occurred or is claimed to have occurred, setting forth the following:
- Nature of default;
- Name of party in default;
- Monetary amount claimed; and
- Current status of contract or claim.
A list of all contracts subject to renegotiation (indicating those contracts currently being renegotiated).
All agreements to which the Company is (or was within the past five years) a party and in which any officer, director, employee, or shareholder of any such companies has (or had) an interest (whether directly or indirectly).
Copies of all agreements not to be performed within three months or involving over $25,000 whether or not entered into in the ordinary course of business, except (a) agreements for the sale of merchandise or standard sales order forms entered into in the ordinary course of business, and (b) agreements referred to elsewhere herein.
Copies of all contracts with advertising or public relations agencies.
Copies of all standard forms of sales and purchase orders.
A list of all significant suppliers (representing in excess of 5 percent of annual purchases) of the Company, with an indication of the amount paid to each such supplier during the Company's most recent fiscal year and the estimated number of alternative suppliers.
All executory contracts, as amended to date, with each of the above-referenced suppliers, and all related purchase orders.
Brief description of contractual or customary credit terms available from suppliers and manufacturers, and copies of all agreements with suppliers and manufacturers.
List and briefly describe all agreements and arrangements with distributors, dealers, sales agents, or representatives. Furnish copies of all such written agreements.
List and briefly describe all agreements and arrangements whereby the Company or any subsidiary acts as a distributor. Furnish copies of all such written agreements.
List and briefly describe all agreements relating to the supply of [material] and other raw materials and supplies. Furnish copies of all such written agreements.
Copies of all forms of product warranties or guarantees, if any, given by the Company or any of its subsidiaries.
Copies of all agreements and other documentation relating to the acquisition of any business constituting a part of the Company, or sale or proposed sale of any business owned by it in the past five years.
Copies of joint venture or partnership agreements to which the Company or any subsidiary is a party.
Copies of all franchise or distribution agreements between the Company or any of its subsidiaries and any third party concerning the manufacture, sale, or distribution of the Company's or its subsidiaries' products or services. If any such agreements are oral, summarize the terms thereof.
Copies of all agreements not previously listed with suppliers, independent agents, salespersons, or others involving the payment of commissions; or other consideration or discounts with respect to the manufacture, sale, or distribution of the Company's or its subsidiaries' products or services. If any such agreements are oral, summarize the terms thereof.
Brief description of any contracts restricting the ability of the Company or any subsidiary to compete in any line of business with any person or entity, or committing the Company or any subsidiary to continue in any line of business.
Advise if there are any facts or circumstances that may give rise to the cancellation or termination of, or claim for damages or loss under, any of the agreements, arrangements, or understandings referred to herein.
List and describe all leases, licenses, agreements, and contracts involving the payment of more than $25,000 in the aggregate, currently in the process of negotiation.
Copies of agreements granting to the Company any right of first refusal to acquire any business or assets, or pursuant to which the Company has granted any such rights.
List the material terms of all contracts and arrangements for:
- Trucking and other delivery
- Warehouse space
Copies of all material research and development agreements.
All technology license agreements to which the Company is a party, as licensor or licensee.
Documents relating to the Company's internal determinations as to whether it can, or should, fulfill a particular contract.

Litigation

Environmental and Related Matters

Receivables

Inventories

Acquisition Documents and Sales of Securities

Liabilities

Transactions with Officers, etc.

Customers

Filings and Reports

Licenses and Certifications

Consents

Vendor and Distributor Relationships