This is an example of a DGC checklist we use to help our clients create a customized due diligence process for investigating and analyzing the acquisition of another company.

The following is a preliminary list of documents and supplemental information for review in connection with the possible acquisition of ___________ (the “Company”). Requests for documents or information regarding the Company extend to similar documents or information regarding the Company’s subsidiaries (the “Subsidiaries”) and all predecessors of the Company and the Subsidiaries, as well as where relevant, the division.

I. General Corporate Documents

1. Charter Documents

• Certificates of incorporation and all amendments thereto of the Company and Subsidiaries.
• Certificate of Good Standing from state of incorporation.
• By-Laws and all amendments thereto of the Company and Subsidiaries.
• Minutes of meetings of the stockholders, boards of directors and committees of the boards of directors of the Company and Subsidiaries for the last five fiscal years and the period between the end of the last fiscal year and the date of review (the “Review Period”).
• Schedule listing jurisdictions in which the Company and Subsidiaries are qualified to do business or are otherwise operating and each jurisdiction in which the Company and Subsidiaries is licensed by any official or agency, including instruments or certificates evidencing qualification of the Company and subsidiaries to do business as a foreign corporation, where required.

2. Organization

• Organizational charts of the Company and Subsidiaries.
• List of officers and directors of the Company and Subsidiaries.
• List of shareholders of the Company and Subsidiaries.
• List of stock, other securities of or interests in any corporation, partnership, association or other entity.

3. Capital Stock

• Securities authorized and outstanding (including stock books and records).
• Agreements relating to the purchase, sale or issuance of securities, including any options or rights to acquire securities, or any stock appreciation rights or similar interests.
• Agreements relating to registration rights, voting of securities, preemptive rights, restrictive share transfers or similar rights.

4. Policy & Procedure.

• List of Corporate authorities.
• Copies of Corporate Policy and Procedure.

II. Contracts

1. Loan agreements, credit agreements, promissory notes, indentures and comparable financing agreements, particularly those with restrictive covenants, and instruments pursuant to which securities of the Company or any Subsidiary are outstanding, such as indentures, warrant agreements, etc.
2. Mortgages, trust agreements and security agreements.
3. Agreements of the Company and Subsidiaries concerning material mergers, consolidations or acquisitions or dispositions of assets within the last five fiscal years and the Stub Period.
4. Guarantees, keep-well agreements and similar agreements of the Company and Subsidiaries.
5. Agreements of the Company and Subsidiaries with major customers and government agencies, particularly requirements contracts, take-or-pay contracts, etc.
6. License and royalty agreements.
7. Letters of credit, performance guarantees and bonds.
8. Distribution agreements of the Company and Subsidiaries.
9. Any contract over twelve months in term and any contract expired with a term of twelve months or longer
10. Maintenance contracts on property, plant and equipment.
11. Agreements or commitments of the Company and Subsidiaries for major capital expenditures.
12. List of the 20 largest suppliers for each of the two most recent fiscal years and for the Stub Period, showing for each period the dollar amount of the purchases from each supplier, and each supplier’s relationship to total company purchases.
13. Futures contracts and other agreements relating to hedging.
14. Provide all systems licenses and maintenance agreements.
15. Provide all agreements with advertising agencies and promotional vendors.
16. List of customers and the dollar amount of purchases for each of the two most recent years and for the Review Period. For the-top 20 customers, show the percentage relationship to total sales.
17. Powers of attorney granted and other agency agreements.
18. Joint venture and partnership agreements.
19. Packaging contracts.
20. Any other material contracts.
21. Foreign exchange agreements
22. Leases

III. Financial and Accounting: Materials

1. Summary of major accounting policies, noting any which are not in accordance with GAAP.
2. Supplementary reports of auditors concerning the Company and Subsidiaries during the last three fiscal years.
3. Consolidated and consolidating financial statements of the Company and Subsidiaries for the last three fiscal years and for the Review Period.
4. Reports by auditors concerning limited reviews of interim financial statements of the Company and Subsidiaries during the last two fiscal years.
5. Letters from lawyers to auditors in connection with the last two fiscal years audited financial statements of the Company and Subsidiaries.
6. Representation letters of management of the Company and Subsidiaries to the auditors during the last two fiscal years and the Review Period.
7. Most recent schedule showing the aging of accounts receivable, and Bad Debts experience over the last three years. Also, identify the Company’s Bad Debt accounting policy.
8. Business plan or budget for the current fiscal year and any long range financial or strategic plans.
9. Any internal forecasts or projections prepared within the last fiscal year or the Review Period.
10. List of bank accounts and safe deposit boxes, purpose of each account, and a list of authorized signatures.
11. List bank lines of credit.
12. Describe investments including cost basis and current value.
13. List pre-paid expenses for last three year end audit periods and Review Period.
14. List customer return information for last two fiscal years and the accounting policy.
15. List of prior year standard costs by SKU.
16. Provide a detailed Trial Balance for last three year end audit periods and the Review Period.
17. Provide Chart of Accounts
18. Provide a list of all Off Balance Sheet Assets or Liabilities
19. SKU profitability (ranked highest to lowest)
20. Provide detail to the Accounts Payable Balance for last three year end audit periods and Review Period
21. Identify basis for Trademark & Secret Formula valuations on the Balance Sheet
22. Provide detail to Accrued Liabilities Balance for the last three year end audit periods and the Review Period
23. Describe accounting policies for LIFO Inventory Valuation

IV .Real Property

1. Schedule of owned properties, including a brief description of material liens, of the Company and Subsidiaries.
2. Schedule listing leased real properties, including a brief description, lease term and annual rents.
3. Deeds conveying Real Property to the Company and Subsidiaries.
4. Leases (including any sale-leaseback arrangements) and installment or other purchase agreements of the Company and Subsidiaries covering major plants, facilities and equipment.
5. Title insurance and other documentary evidence of title to the real properties of the Company and Subsidiaries.
6. Encumbrances and other matters affecting the real property and fixtures of the Company and Subsidiaries.
7. Government permits relating to real property.
8. Surveys, maps, plats.
9. Mortgages, deeds of trust, UCC fixture filings and other security
10. Instruments with respect to real or personal property of the Company or any Subsidiary.
11. Insurance policies which cover products liability and/or environmental impairment.
12. Known or suspected environmental problems associated with neighboring or related property.
13. All plans for present and pending real estate development and renovation projects.
14. List of formerly owned or leased real property.
15. Schedule of fixed assets showing each material asset or group of assets cost, depreciation reserve, method of depreciation, estimated useful life, condition, and if insured, insurance value and policy number.
16. Appraisals on real property, or intellectual property.
17. List of automobiles, trucks and other registered equipment, and identify if owned or leased.

V. Personnel

1. All collective bargaining agreements of the Company and Subsidiaries and any information on current or prior organizing efforts.
2. Employee benefit plans including retirement, pension, savings, profit- sharing, stock option or other equity plans, health benefit and welfare plans, and other employee benefit plans, including any multi-employer plan, and any descriptions thereof covering employees of the Company and Subsidiaries.
3. Trust agreements, forms of stock option agreements, most recent IRS Form 5500 and the most recent actuarial report as to funding of the plans, etc.
4. Deferred compensation and similar agreements covering employees of the Company and Subsidiaries.
5. Loans and guarantees to or from directors, officers or employees of the Company and Subsidiaries.
6. IRS or Department of Labor determination letters for any of the plans.
7. All communications to or from the IRS, the Department of Labor or the Pension Benefit Guaranty Corporation (“PBGC”) concerning reportable events (current or former).
8. List of any audits or other investigations being conducted by the IRS, Department of Labor or PBGC with respect to any plan and any administrative proceedings in connection therewith.
9. List of all executive officers, including compensation and bonuses, any fringe benefits, including perquisites such as automobiles, apartments, etc.
10. Employment contracts of executive officers and others, particularly any that are not terminable at will.
11. Consulting, severance, change of control, retention and termination agreements, arrangements or policies with current and former employees.
12. Any agreements or policy statements providing for severance benefits including upon a change of control.
13. Indemnification agreements with officers and directors, including any director and officer insurance.
14. Records relating to significant employment disputes.
15. Analysis of retiree medical and other benefits.
16. Copies of personnel policies, personnel manuals and employee handbooks.
17. Affirmative action plans.
18. List all employees, their titles and/or position descriptions.
19. Worker’s compensation claim activity for last three years.
20. Employee turnover statistics for last three years.

VI. Litigation. Governmental Proceedings. Regulations and Permits

1. Active litigation files involving the Company or Subsidiaries, including letters asserting claims, complaints, answers, briefs, motion papers, etc.
2. Provide copy of Product Warranty Policy.
3. List of all warranty and product claims for last 5 years including name of claimant, product involved, date of injury or incident, and type of injury where applicable.
4. List all federal, state and local permits and licenses issued for any operational unit or activity.
5. Opinions of counsel as to any pending litigation involving the Company or Subsidiaries.
6. List of prior litigation involving the Company or Subsidiaries (last five years) and notification as to disposition, plus files, if requested.
7. Consent decrees, judgments, claims, complaints and other orders of courts or governmental bodies, and settlement agreements, involving the Company or Subsidiaries (EPA, OSHA, OEO, EEOC and Workers’ Compensation, etc.), including those applicable industry-wide.
8. Notices, letters, etc. involving the Company or Subsidiaries alleging) violations of or requesting compliance with laws, regulations, etc. or requests for information with respect to antitrust laws, securities laws, environmental laws, OSHA, etc.
9. Correspondence with any governmental agency concerning “sensitive payments”
10. Existing or proposed legislation and regulations that would affect the Company or Subsidiaries or their industry

VII. Environmental Matters

1. Documents concerning any toxic waste, hazardous substances or other environmental problems relating to facilities now or previously owned or leased by the Company or any Subsidiary, including notices of violation or noncompliance from any federal, state, local or foreign environmental agency and copies of all correspondence with environmental agencies.
2. All material environmental permits issued by any environmental agency and all material reports under environmental statutes or rules.
3. Environmental audits, review, assessments, engineering studies) and remediation cost estimates of facilities now or previously owned or leased by the Company or any Subsidiary.
4. Notices of potential liability as a potentially responsible party (“PRP”) with respect to Superfund or other sites; information as to the financial strength and participation of other PRPs.
5. Any complaints or other indications of potential environmental liability.
6. Identify all chemicals and toxic products used in the manufacturing process, and the locations of all such chemicals disposed of during the past five years.
7. Material Safety Data sheets (MSDS) for all products including products produced or used in the manufacturing process (chemicals, fluids, coolants, etc).

VIII. Insurance

1. Schedule of insurance coverage and copies of all insurance policies or contracts, including product liability insurance and property insurance, and files, if requested.
2. Insurance claims and actual loss history for last three years
3. Projected premiums and historical premiums for the last three years and any material changes in insurance coverage (projected or historical) for the last three years.

IX. Related Parties and Inter-Company Transactions

1. Contracts or other direct or indirect arrangements between the division and the Company or any affiliate of the Company.
2. Inter-corporate agreements of the Company and Subsidiaries.

X. Tax Matters

1. Any tax sharing agreements between the Company and Subsidiaries in connection with filing consolidated returns.
2. Income tax returns for the last three years for the Company and Subsidiaries (federal, state and local).
3. Deferred income tax schedules.
4. Information concerning foreign subsidiaries, intangible holding companies) and/or any Domestic International Sales Corporation.
5. Independent auditors’ most recent tax reserve analysis.
6. List of unaudited income tax returns (federal, state and local).
7. All information concerning any claim asserted against the Company and Subsidiaries by any taxing authority.
8. Correspondence and other documents concerning any ongoing tax audit of the Company or of any Subsidiary.

XI. Intellectual Property

1. Schedule of all U.S. and foreign technology and intellectual property used or planned for use in the business, including all:
   • Patents, patent applications and inventions,
   • Trademarks, service marks, trade dress, logos, trade names and corporate names (including registrations and pending applications thereof),
   • Copyright registrations and summary description of all unregistered copyrightable works,
   • Computer software or mask works (i.e., semi-conductor chip rights) (including any registrations thereof) and
   • Any other technology or intellectual property.
2. Identify if any of the foregoing is subject to any restrictions or rights of any third parties (including governmental entities).
3. Copies of all agreements (and a summary description of any unwritten arrangements) affecting intellectual property used or planned for use in the business. Please include copies of any franchise agreements, research and development agreements, software licenses, royalty agreements, and other intellectual property or technology licenses.
4. Copies of any non-competition, non-disclosure or confidentiality agreements (including with employees). Copies of Company policies regarding confidential information.
5. Description of any claims of or against any third parties, pending or threatened litigation, and governmental or administrative investigations or proceedings, in each case relating to any intellectual property used or planned for use in the business.

XII. Marketing and Sales

1. Market surveys and studies
2. Consumer demographics.
3. Customer studies or trend analysis.
4. Provide sales backlog for each of the last two year end periods and for the Review Period.
5. Sales by SKU for last five years.
6. Competitive price lists and catalogs.
7. Competitive studies.
8. Marketing planning calendar, and list all trade shows attended.
9. Explain price strategy for channels of distribution.
10. Copies of Sales Programs, Price Lists and explain the deal structure for each channel and distribution.
11. Marketing and Communications Budget.
12. Market Share data; including total market size.
13. Studies and/or correspondence regarding any market opportunities (Product, Volume, Price, etc.).

XIII. Research and Development

1. Describe process to develop new products.
2. Research budget.
3. Description of Research and Development projects and expected completion dates.
4. Capital expenditures related to Research and Development including lead times for such items.

XIV. Manufacturing

1. Lead time on materials.
2. On-time delivery statistics for suppliers.
3. On-hand inventory quantities and dollars -raw materials, work in process and finished goods, and stores, tooling and essential materials.
4. Production lead time by SKU.
5. Describe manufacturing systems and support of manufacturing.
6. Provide process records for all SKUs.
7. Identify all off site tooling.
8. Productivity statistics and production control metrics.
9. Identify production schedule and number of shifts.
10. Identify plant capacities and note any constraints in plant capacities.
11. Provide detail to any manufacturing improvement studies, and capital expenditure opportunities.
12. Utility service agreements, and notifications of service upgrades required.
13. Last OSHA inspection results.

XV. Customer Service and Distribution

1. Customer service policies
2. Customer Service statistics, or metrics.
3. Freight rates and duty rates.
4. Import restrictions and duty classifications.

XVI. Joint Ventures: Misc.

1. Partnership and joint venture agreements of the Company and Subsidiaries, and any other agreement (e.g., a stockholders agreement) relating to any equity investment by the Company or a Subsidiary.
2. Brokerage or finder’s agreements of the Company and Subsidiaries.

XVII. General Information

1. Disclosure documents used in any private placements, bond financing, or institutional or bank loan applications.
2. Press releases, articles and brochures issued by or relating to the Company and Subsidiaries during last fiscal year and the Review Period
3. Copies of sale brochures, catalogs, labels, business forms, operations manuals, product lists, design documents, usage guides, advertising and promotional materials and any other Company publications
4. Internal reports and studies (e.g. sales department reports with respect to distributor/ representative developmental plans, new products and market research) of the Company and Subsidiaries and any reports concerning the Company and Subsidiaries prepared by consultants to the Company and Subsidiaries
5. Recent studies, if any, of the Company or the industries in which the Company and Subsidiaries operate published by investment banking firms, securities analysis, or management consultants.
6. Liability claims from any employee, third party, customer, vendor, or government

XVIII.  Interviews with Management

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