Due Diligence Questionnaire

for Corporate Mergers and Acquisitions

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Due Diligence is a research and analysis of a company or organization done in preparation for a business transaction.  It is a comprehensive appraisal of a business undertaken by a prospective Acquiring Company, especially to establish its assets and liabilities and evaluate its commercial potential.  All due diligence information should be ready and available for purchaser of securities the moment both parties have signed the Letter of Intent (LOI).

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GENERAL CORPORATE MATERIALS

 

Minutes and Written Consents in Lieu of Meeting

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• Minutes of shareholders' meetings.

• Minutes of board of directors' meetings.

• Minutes of meetings of committees of the board of directors.

• Written consents in lieu of shareholders' or directors' meetings.

 

Charter Documents

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• Certificate of Incorporation, all amendments, merger documents and other charter documents.

• By-Laws.

• Recent good standing and tax certificates.

• List of jurisdictions and certificates of authority in which the Company is qualified to do business or is otherwise operating.

 

Organization

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• Officer, director and committee lists.

• Management structure.

• Shareholder list (including, in the case of shareholders that are entities owning more than 1% of the stock of the Company, the identity of the ultimate owners).

 

Capital Stock

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• Securities authorized, issued and outstanding.

• Stock Ledger.

• Agreements relating to the purchase, sale or issuance of securities.

• Agreements relating to voting of securities.

• Verification of authorization and issuance of all outstanding capital stock (and treasury stock, if any) and options.

 

SALES OF SECURITIES

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• A list of all private issuances or sales of securities of any class by the Company or any officer, director or affiliate of the Company, including the title of such security, the amount of such security issued or sold, the date of such issuance or sale, and the unit price of such security.

• All private placement memorandum and other selling documentation, and all amendments, supplements, and exhibits thereto, filed and/or utilized in connection with the issuances or sales of securities referred to in II.A above, and all material instruments, documents and agreements relating to such issuances or sales.

 

LITIGATION

 

• Litigation and claims threatened or pending against the Company or any of its directors or officers, and all complaints, answers and other material pleadings in respect thereof. 

• Litigation and claims settled or concluded. 

• Consent decrees and injunctions. 

• Counsel letter to independent public accountants concerning pending or threatened litigation.

 

COMPLIANCE WITH LAWS

 

• Citations and notices received from government agencies. 

• Pending investigations and governmental proceedings. 

• Government permits and consents. 

• Reports to and correspondence with government agencies.

 

PERSONNEL

 

• Employment contracts. 

• Consulting Contracts. 

• Employee benefit plans. 

• Contracts with unions. 

• Loans and guarantees to directors, officers or employees. 

• Non-competition agreements. 

• Employee stock option plans and option agreements, performance bonus plans and all other employee benefit plans. 

• Compensation breakdown information for all officers and directors. 

• Officer's and directors' questionnaires prepared by Company counsel. 

• A list of key employees and consultants of the Company, indicating their salaries and bonuses for the year ended December 31, 2019 and the year ended December 31, 2020. 

• All confidentiality or non-competition agreements to which key employees and consultants of the Company are parties from prior employment. 

• All other management perquisites, fringe benefits, and profit sharing, pension, deferred compensation, and similar plans or arrangements currently in effect (provide a written description of any such arrangements which are not in writing).

 

REAL PROPERTY

 

• Summary of major properties. 

• Deeds. 

• Leases of real property. 

• Surveys. 

• Title insurance policies. 

• Appraisals of any material property of the Company. 

• List of easements or other similar rights affecting the properties owned or leased by the Company and documentation relating thereto. 

• List of easements or other similar rights owned by the Company on property not owned or leased by the Company and documentation relating thereto. 

• Summary of Properties for Sale, including Offering Price and Outstanding Indebtedness

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OTHER PROPERTY

 

• Financing leases and sale and lease-back agreements. 

• Conditional sale agreements. 

• Equipment leases. 

• Patents, trademarks, copyrights and other intellectual property and intangible assets.

 

FINANCING

 

• Credit agreements, indentures and other debt agreements or instruments. 

• Loans and guarantees of third party obligations. 

• Debt agreement compliance calculations, compliance certificates and reports from independent public accountants indicating debt agreement compliance. 

• Correspondence with lenders and other debt security holders and indenture trustees. 

• Consents from lenders for borrowings by the Company. 

• Recent UCC, lien and title searches of all appropriate jurisdictions.

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OTHER AGREEMENTS

 

• Marketing Agreements. 

• Supply Agreements. 

• Rental agreements and arrangements. 

• Purchase and requirements contracts. 

• Joint venture and partnership agreements. 

• License and royalty agreements. 

• Franchise agreements. 

• Management, service and technical assistance or support agreements. 

• Construction agreements and performance guarantees. 

• Advertising agreements. 

• Agreements relating to the acquisition and disposition of companies, assets or operations. 

• Secrecy, confidentiality and nondisclosure agreements. 

• Commission, brokerage and agency agreements. 

• Contracts outside the ordinary course of business. 

• All standard forms of agreements used by the Company. 

• A list and description of all significant oral contracts and commitments. 

• A list of all contracts and commitments under which a default has occurred or is claimed to have occurred, setting forth:

      1. Nature of default;

      2. Name of party in default;

      3. Monetary amount claimed; and

      4. Current status of contract or claim. 

• All agreements to which the Company is or was, since inception, party and in which any officer, director, employee or security of the Company has or had an interest, whether directly or indirectly. 

• Other agreements and documents material to the business of the Company.

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FINANCIAL INFORMATION

 

• Audited Financial Statements for last three fiscal years. 

• Interim Financial Statements for _, 2017 and _, 2017 quarters. 

• Capital expenditure programs. 

• Inventory valuation and pricing policies. 

• Correspondence with independent public accountants, including accountants' management reports. 

• Reports, studies and plans prepared by management concerning the Company's past, current and predicted business or financial condition. 

• Reports and studies prepared by outside consultants concerning the Company's business or financial condition. 

• Reports and materials prepared for the board of directors or a committee thereof. 

• The following information with respect to the accounts receivable of the Company;

      1. A list of the 20 largest debtors as of a recent date;

      2. An aging schedule of the accounts receivable as of a recent date; and

      3. A description of the payment terms of accounts receivable.

 

MARKET STUDIES; MARKETING INFORMATION

 

• All market studies, feasibility studies, analyses, and similar reports concerning the Company. 

• All marketing and other descriptive brochures.

 

SUPPLIERS

 

• A list of all significant suppliers (representing in excess of 5% of annual purchases) of the Company, with an indication of the amount paid to each such supplier during the last fiscal year, and the estimated number of alternative suppliers. 

• All executory contracts, as amended to date, with each of the above-referenced suppliers.

 

COMPETITORS

 

• A list of major competitors of the Company by market and geographic area.

 

TAX MATTERS

 

• Federal, state and local tax returns for the past two years. 

• All correspondence with the Internal Revenue Service concerning adjustments or questioning compliance. 

• All audit papers relating to audited years.

 

INSURANCE

 

• A schedule of all insurance policies maintained by the Company (including directors and officers liability insurance), including type of coverage, annual premiums therefor, name of insurer, and term.

 

OTHER MATERIAL DOCUMENTS

 

• Information or articles concerning the Company and its business published in magazines, trade journals, newspapers and the like. 

• Reports on the Company by engineers, regulatory agencies, investment advisory firms and the like. 

• Company studies of new products or lines of business. 

• All press releases issued with respect to the Company