Due Diligence Checklist
Note: the following due
is only a sample, and will differ from the actual list used during your
Organization of the Company
Describe the corporate or other structure of the legal entities that
comprise the Company. Include any helpful diagrams or charts. Provide a
the officers and directors of the Company and a brief description of
2. Long-form certificate of good standing and articles or certificate
incorporation from Secretary of State or other appropriate official in
Company's jurisdiction of incorporation, listing all documents on file
respect to the Company, and a copy of all documents listed therein.
3. Current by-laws of the Company.
4. List of all jurisdictions in which the Company is qualified to do
business and list of all other jurisdictions in which the Company owns
leases real property or maintains an office and a description of
each such jurisdiction. Copies of the certificate of authority, good
certificates and tax status certificates from all jurisdictions in
Company is qualified to do business.
5. All minutes for meetings of the Company's board of directors, board
committees and stockholders for the last five years, and all written
consents in lieu of meetings thereof.
6. List of all subsidiaries and other entities (including partnerships)
which the Company has an equity interest; organizational chart showing
ownership of such entities; and any agreements relating to the
interest in any such entity.
and Control of the Company
Capitalization of the Company, including all outstanding capital stock,
convertible securities, options, warrants and similar instruments.
2. List of securityholders of the Company (including option and warrant
holders), setting forth class and number of securities held.
3. Copies of any voting agreements, stockholder agreements, proxies,
transfer restriction agreements, rights of first offer or refusal,
rights, registration agreements or other agreements regarding the
control of the Company.
financial statements with notes thereto for the past three fiscal
years of the Company, and the latest interim financial statements since
of the last fiscal year and product sales and cost of sales (including
royalties) analysis for each product which is part of assets to be sold.
2. All current budgets and projections including projections for
sales and cost of sales.
3. Any auditors (internal and external) letters and reports to
for the past five years (and management's responses thereto).
4. Provide a detailed breakdown of the basis for the allowance for
5. Inventory valuation, including turnover rates and statistics, gross
profit percentages and obsolescence analyses including inventory of
product which is part of assets to be sold.
6. Letters to auditors from outside counsel.
7. Description of any real estate owned by the Company and copies of
deeds, surveys, title insurance policies (and all documents referred to
therein), title opinions, certificates of occupancy, easements, zoning
variances, condemnation or eminent domain orders or proceedings, deeds
trust, mortgages and fixture lien filings.
8. Schedule of significant fixed assets, owned or used by the Company,
including the identification of the person holding title to such assets
material liens or restrictions on such assets.
9. Without duplication from Section D below, or separate intellectual
property due diligence checklist, schedule of all intangible assets
customer lists and goodwill) and proprietary or intellectual properties
or used in the Company, including a statement as to the entity holding
right to such assets and any material liens or restrictions on such
Include on and off balance sheet items.
all patents, trademarks, tradenames, service marks and copyrights
owned or used by the Company, all applications therefor and copies
search reports related thereto and information about any liens or other
restrictions and agreements on or related to any of the foregoing
duplication from attached intellectual property due diligence
of any studies, appraisals, reports, analyses or memoranda within
the last three years relating to the Company (i.e., competition,
pricing, technological developments, software developments, etc.).
2. Current descriptions of the Company that may have been prepared for
purpose, including any brochures used in soliciting or advertising.
3. Descriptions of any customer quality awards, plant
qualification/certification distinctions, ISO certifications or other
certificates viewed by the Company as significant or reflective of
4. Copies of any analyst or other market reports concerning the Company
known to have been issued within the last three years.
5. Copies of any studies prepared by the Company regarding the
insurance currently in effect and self-insurance program (if any),
with information on the claim and loss experience thereunder.
6. Any of the following documents filed by the Company or affiliates of
Company and which contain information concerning the Company: annual
SEC Form 10-K; quarterly reports on SEC Form 10-Q; current reports on
Compliance with Laws
of all licenses, permits, certificates, authorizations,
registrations, concessions, approvals, exemptions and other operating
authorities from all governmental authorities and any applications
and a description of any pending contemplated or threatened changes in
2. A description of any pending or threatened proceedings or
before any court or any regulatory authority.
3. Describe any circumstance where the Company has been or may be
violating any law or failing to possess any material license, permit or
authorization. List all citations and notices from governmental or
4. Schedule of the latest dates of inspection of the Company's
each regulatory authority that has inspected such facilities.
5. Description of the potential effect on the Company of any pending or
proposed regulatory changes of which the Company is aware.
6. Copies of any information requests from, correspondence with,
or to, filings with or other material information with respect to any
regulatory bodies which regulate a material portion of the Company's
Limit response to the last five years unless an older document has a
impact on the Company.
7. Copies of all other studies, surveys, memoranda or other data on
regulatory compliance including: spill control, environmental clean-up
environmental preventive or remedial matters, employee safety
import or export licenses, common carrier licenses, problems, potential
violations, expenditures, etc.
8. State whether any consent is necessary from any governmental
embark upon or consummate the proposed transaction.
9. Schedule of any significant U.S.
import or export restrictions that relate to the Company's operations.
10. List of any export, import or customs permits or authorizations,
certificates, registrations, concessions, exemptions, etc., that are
in order for the Company to conduct its business and copies of all
etc. granted to the Company that are currently in effect or pending
11. Any correspondence with or complaints from third parties relating
marketing, sales or promotion practices of the Company.
1. A list
of facilities or other properties currently or formerly owned,
leased, or operated by the Company and its predecessors, if any.
2. Reports of environmental audits or site assessments in the
the Company, including any Phase I or Phase II assessments or asbestos
relating to any such facilities or properties.
3. Copies of any inspection reports prepared by any governmental agency
insurance carrier in connection with environmental or workplace safety
health regulations relating to any such facilities or properties.
4. Copies of all environmental and workplace safety and health notices
violations, complaints, consent decrees, and other documents indicating
noncompliance with environmental or workplace safety and health laws or
regulations, received by the Company from local, state, or federal
authorities. If available, include documentation indicating how such
5. Copies of any private party complaints, claims, lawsuits or other
documents relating to potential environmental liability of the Company
6. Listing of underground storage tanks currently or previously present
the properties and facilities listed in response to Item 1 above,
permits, licenses or registrations relating to such tanks, and
underground storage tank removals and any associated remediation work.
7. Descriptions of any release of hazardous substances or petroleum
the Company to have occurred at the properties and facilities listed in
response to Item 1, if such release has not otherwise been described in
documents provided in response to Items 1-6 above.
8. Copies of any information requests, PRP notices, "106 orders,"
or other notices received by the Company pursuant to CERCLA or similar
foreign laws relating to liability for hazardous substance releases at
9. Copies of any notices or requests described in Item 8 above,
potential liability for hazardous substance releases at any properties
facilities described in response to Item 1.
10. Copies of material correspondence or other documents (including any
relating to the Company's share of liability) with respect to any
identified in response to Items 8 and 9.
11. Copies of any written analyses conducted by the Company or an
consultant relating to future environmental activities (i.e., upgrades
control equipment, improvements in waste disposal practices, materials
substitution) for which expenditure of funds greater than $10,000 is
certain or reasonably anticipated within the next five years and an
the costs associated with such activities.
12. Description of the workplace safety and health programs currently
place for the Company's business, with particular emphasis on chemical
1. List of
all litigation, arbitration and governmental proceedings relating
to the Company to which the Company or any of its directors, officers
employees is or has been a party, or which is threatened against any of
indicating the name of the court, agency or other body before whom
date instituted, amount involved, insurance coverage and current
describe any similar matters which were material to the Company and
adjudicated or settled in the last ten years.
2. Information as to any past or present governmental investigation of
proceeding involving the Company or the Company's directors, officers
3. Copies of all attorneys' responses to audit inquiries.
4. Copies of any consent decrees, orders (including applicable
or similar documents to which the Company is a party, and a brief
of the circumstances surrounding such document.
5. Copies of all letters of counsel to independent public accountants
concerning pending or threatened litigation.
6. Any reports or correspondence related to the infringement by the
or a third party of intellectual property rights.
Significant Contracts and Commitments
Contracts relating to any completed (during the past 10 years) or
proposed reorganization, acquisition, merger, or purchase or sale of
substantial assets (including all agreements relating to the sale,
acquisition or disposition of any and all divisions, subsidiaries or
businesses) of or with respect to the Company.
2. All joint venture and partnership agreements to which the Company is
3. All material agreements encumbering real or personal property owned
the Company including mortgages, pledges, security agreements or
4. Copies of all real property leases relating to the Company (whether
Company is lessor or lessee), and all leasehold title insurance
5. Copies of all leases of personal property and fixtures relating to
Company (whether the Company is lessor or lessee), including, without
limitation, all equipment rental agreements.
6. Guarantees or similar commitments by or on behalf of the Company,
than endorsements for collection in the ordinary course and consistent
7. Indemnification contracts or arrangements insuring or indemnifying
director, officer, employee or agent against any liability incurred in
8. Loan agreements, notes, industrial revenue bonds, compensating
arrangements, lines of credit, lease financing arrangements,
purchases, etc. relating to the Company or its assets and copies of any
security interests or other liens securing such obligations.
9. No-default certificates and similar documents delivered to lenders
the last five (or shorter period, if applicable) years evidencing
with financing agreements.
10. Documentation used internally for the last five years (or shorter
period, if applicable) to monitor compliance with financial covenants
in financing agreements.
11. Any correspondence or documentation for the last five years (or
period, if applicable) relating to any defaults or potential defaults
12. Contracts involving cooperation with other companies or restricting
13. Contracts relating to other material business relationships,
a. any current service, operation or maintenance contracts;
b. any current contracts with customers;
c. any current contracts for the purchase of fixed assets; and
d. any franchise, distributor or agency contracts.
14. Without duplicating Section D above or the intellectual property
diligence schedule hereto, contracts involving licensing, know-how or
assistance arrangements including contracts relating to any patent,
service mark and copyright registrations or other proprietary rights
the Company and any other agreement under which royalties are to be
15. Description of any circumstances under which the Company may be
to repurchase or repossess assets or properties previously sold.
16. Data processing agreements relating to the Company.
17. Copies of any contract by which any broker or finder is entitled to
fee for facilitating the proposed transaction or any other transactions
involving the Company or its properties or assets.
18. Management, service or support agreements relating to the Company,
any power of attorney with respect to any material assets or aspects of
19. List of significant vendor and service providers (if any) who, for
whatever reason, expressly decline to do business with the Company.
20. Samples of all forms, including purchase orders, invoices, supply
21. Any agreements or arrangements relating to any other transactions
between the Company and any director, officer, stockholder or affiliate
Company (collectively, "Related Persons"), including but not limited
a. Contracts or understandings between the Company and any Related
regarding the sharing of assets, liabilities, services, employee
insurance, data processing, third-party consulting, professional
b. Contracts or understandings between Related Persons and third
supply inventory or services through Related Persons to the Company.
c. Contracts or understandings between the Company and any Related
contemplate favorable pricing or terms to such parties.
d. Contracts or understandings between the Company and any Related
regarding the use of hardware or software.
e. Contracts or understandings regarding the maintenance of equipment
Related Person that is either sold, rented, leased or used by the
f. Description of the percentage of business done by the Company with
g. Covenants not to compete and confidentiality agreements between the
and a Related Person.
h. List of all accounts receivable, loans and other obligations owing
to or by
the Company from or to a Related Person, together with any agreements
22. Copies of all insurance and indemnity policies and coverages
the Company including policies or coverages for products, properties,
risk, casualty and workers compensation. A description of any
retro-premium plan or policy, together with the costs thereof for the
years. A summary of all material claims for the last five years as well
aggregate claims experience data and studies.
23. List of any other agreements or group of related agreements with
same party or group of affiliated parties continuing over a period of
six months from the date or dates thereof, not terminable by the
Company on 30
24. Copies of all supply agreements relating to the Company and a
description of any supply arrangements.
25. Copies of all contracts relating to marketing and advertising.
26. Copies of all construction agreements and performance guarantees.
27. Copies of all secrecy, confidentiality and nondisclosure agreements.
28. Copies of all agreements related to the development or acquisition
29. Copies of all agreements outside the ordinary course of business.
30. Copies of all warranties offered by the Company with respect to its
product or services.
31. List of all major contracts or understandings not otherwise
disclosed under this section, indicating the material terms and parties.
32. For any contract listed in this Section I, state whether any party
default or claimed to be in default.
33. For any contract listed in this Section I, state whether the
requires the consent of any person to assign such contract or
assign such contract to any lender.
NOTE: Remember to include all amendments, schedules, exhibits and side
letters. Also include brief description of any oral contract listed in
Employees, Benefits and Contracts
of the Company's employee benefit plans as most recently amended,
including all pension, profit sharing, thrift, stock bonus, ESOPs,
welfare plans (including retiree health), bonus, stock option plans,
deferred compensation plans and severance plans, together with the
a. all applicable trust agreements for the foregoing plans;
b. copies of all IRS determination letters for the foregoing qualified
c. latest IRS forms for the foregoing qualified plans, including all
reports, schedules and attachments;
d. latest copies of all summary plan descriptions, including
the foregoing plans;
e. latest actuarial evaluations with respect to the foregoing defined
f. schedule of fund assets and unfunded liabilities under applicable
2. Copies of all employment contracts, consulting agreements, severance
agreements, independent contractor agreements, non-disclosure
non-compete agreements relating to any employees of the Company.
3. Copies of any collective bargaining agreements and related plans and
trusts relating to the Company (if any). Description of labor disputes
to the Company within the last three years. List of current
efforts and projected schedule of future collective bargaining
4. Copies of all employee handbooks and policy manuals (including
affirmative action plans).
5. Copies of all OSHA examinations, reports or complaints.
6. The results of any formal employee surveys.
Copies of returns for the three prior closed tax years and all open tax
years for the Company (including all federal and state consolidated
together with a work paper therefor wherein each item is detailed and
documented that reconciles net income as specified in the applicable
statement with taxable income for the related period.
2. Audit and revenue agents reports for the Company; audit adjustments
proposed by the Internal Revenue Service for any audited tax year of
Company or by any other taxing authority; or protests filed by the
3. Settlement documents and correspondence for last six years involving
4. Agreements waiving statute of limitations or extending time
5. Description of accrued federal, state and local withholding taxes
FICA for the Company.
6. List of all state, local and foreign jurisdictions in which the
pays taxes or collects sales taxes from its retail customers
taxes are paid or collected in each jurisdiction).
Information regarding any material contingent liabilities and material
unasserted claims and information regarding any asserted or unasserted
violation of any employee safety and environmental laws and any
unasserted pollution clean-up liability.
2. List of the ten largest customers and suppliers for each product or
service of the Company.
3. List of major competitors for each business segment or product line.
4. Any plan or arrangement filed or confirmed under the federal
laws, if any.
5. A list of all officers, directors and stockholders of the Company.
6. All annual and interim reports to stockholders and any other
communications with securityholders.
7. Description of principal banking and credit relationships (excluding
matters), including the names of each bank or other financial
nature, limit and current status of any outstanding indebtedness, loan
credit commitment and other financing arrangements.
8. Summary and description of all product, property, business risk,
health, group life and key-man insurance.
9. Copies of any UCC or other lien, judgment or suit searches or
related to the Company in relevant states conducted in the past three
10. Copies of all filings with the Securities and Exchange Commission,
blue sky authorities or foreign security regulators or exchanges.
11. All other information material to the financial condition,
assets, prospects or commercial relations of the Company.