Due+Diligence+Checklist+Master.doc

due diligence checklist masteryesno1.basic corporate documents1.1 articles/certificate of incorporation, including _ _all amendments.1.2 bylaws, including all amendments._ _1.3 minutes of all meetings of directors, committees of directors, and shareholders, including notices of all such meetings where written notices were given, and all written consents to action without a meeting._ _1.4 list of all states and foreign countries in which the company owns or leases real property, conducts business and/or is qualified to do business. copies of any such foreign qualifications._ _1.5 business or operating plans and financial projections._ _1.6 spreadsheet setting forth all issuances or grants of stock, options and warrants by the company, listing the names of the issues or grantees, the amounts issued or granted, the dates of the issuances or grants, the price per share and the type of consideration received by the company in each case._ _1.7 list of all current record and beneficial owners of shares, including names, addresses, tax identification numbers and numbers of shares held by each (including number of vested and unvested shares and vesting schedules). indicate if vesting of any such shares will accelerate on a merger or change of control of the company._ _1.8 list of all options and warrants currently outstanding, including names, addresses, tax identification numbers, and numbers of options and/or warrants held by each (including number of vested and unvested shares, exercise prices and vesting schedules). indicate if vesting of any such options will accelerate on a merger or change of control of the company._ _1.9 same information as specified in (1.7) and (1.8) above forall holders of other outstanding securities._ _1.10samples of stock certificates._ _1.11all stock option plans and forms of optionagreements that have been used by the company._ _1.12forms of warrants and any other outstanding securities,including any convertible debt._ _1.13voting agreements or trusts, shareholder agreementsor other similar agreements covering any portion of thecompanys shares._ _1.14trust indentures._ _1.15stock purchase agreements._ _1.16any other agreements relating to sales of securitiesby the company, including offering circulars, prospectuses, etc._ _1.17permits and other state or federal securities law filingsrelating to the issuance or transfer of companyssecurities, including section 83(b) elections._ _1.18agreements relating to registration rights._ _1.19agreements relating to rights of first refusal, co-sale orother preemptive rights._ _1.20any other employee stock plans (including section 423stock purchase plans), other than stock option plans._ _1.21all written communications with shareholders, includingletters from the president, proxy statements, annual reports, etc. for the last three fiscal years._ _1.22merger, consolidation, acquisition and asset purchaseor sale agreements and all related documents._ _1.23stockholders or partnership agreements._ _1.24list of equity investments in third parties (including subsidiaries) and all related documents._ _2. company and industry2.1provide external and internal research reportsprepared on the company, its industry and/or key competitors, if available. marketing materials_ _2.2discussion or prepare a description of the industry (including regions in which the company competes) including:-historical and projected market size by region served,-historical and projected short-term and long-term growth,-primary market drivers,-industry leaders and market share in the hospitals primary region,-pricing trends and price drivers,-cost trends and cost drivers,-industry risks and opportunities,-other industry trends._ _2.3list all known competitors and potential competitors._ _2.4provide brief description of key competitors,including name, location, summary financialinformation, and potential advantagesand disadvantages relative to the company._ _3. financial information3.1provide copies of audited financial statements for the 3most recently completed fiscal years and explain anysignificant differences with internal financial statementsprovided (discussion)._ _3.2 provide consolidated and consolidating balance sheets at month-end for 3 most recently completed fiscal years and the current year-to-date period. _ _3.3provide customer split by white vs. grey collar clients for past three years (annual). discuss profitability by customer_ _3.4provide detailed breakdown of all accrued liabilities for most recent balance sheet and by month for 2006._ _3.5 provide consolidated income statements by month for 12 most recently completed months._ _3.6 provide annual consolidated income statements for the 3 most recently completed fiscal years._ _3.7 provide consolidating annual income statements for the 3 most recently completed fiscal years segmented by entity._ _3.8discuss seasonality for the 3 most recently completedfiscal years, if applicable._ _3.9provide annual cash flow statements for 3 most recentlycompleted fiscal years._ _3.10prepare a roll forward of accounts receivable by monthfor the 3 most recently completed months(beginning balance + sales collections bad debt expense + write-offs + misc. adjustments = ending balance)_ _3.11explain significant changes in line items for the following:- income statements for the 3 most recently completed fiscalyears and the estimated current fiscal year (margin analysis).- income statements for the current year-to-date period and thecorresponding prior year year-to-date period (margin analysis).- income statements for the most recently completed month and the corresponding prior year month (margin analysis).- balance sheets at year-end for the 3 most recently completedfiscal years and the most recent month-end.- working capital at quarter-end for the most recentlycompleted fiscal years, the most recent quarter-end and themost recent date available.3.12provide accounts receivable aging at for the most recent month ended and the most recently completed fiscal year _ _3.13provide schedule of top ten customers by annual sales for the past 3 years.explain reason for any major customer losses during that time period._ _3.14provide accounts payable aging for the latest year-end and the most recently completed period._ _3.15provide monthly internal executive management reportingpackages for the most recently completed fiscal year andthe current year-to-date period._ _3.16provide copies of all borrowing base certificates preparedduring the most recently completed fiscal year and thecurrent year-to-date period._ _3.17prepare list and description of significant accounting andfinancial issues, internal or external, relating to thecompany or its industry (payroll tax, l/cs, etc.)._ _3.18provide the companys detailed budget/forecast for thepast 3 years, the current year, and any future years, ifavailable, and explain significant assumptions (and comparisonto actual results)._ _3.19provide a copy of the companys accounting policies andprocedures manual, and describe significant changes in thepast 3 years._ _3.20provide description of any payroll taxes overdue and discussionof irs, or other, expectations for payment._ _3.21provide projection of letter of credit requirements and detail of current letter of credits outstanding (and expected collateralization)._ _3.22 provide summary of all existing debt, including amount, maturity, coupon creditor name and any relevant covenants. list any existing or expected defaults as it relates to covenants, including shareholders. _ _3.23copies of all correspondence, reports, and noticesrelating to any tax disputes, claims, assessments, audits orother proceedings with the internal revenue service, orany state, local, or foreign taxing authorities and a list of all actual or potential tax claims.3.24provide most recent trial balance detail_3.25ucc or other lien filings against the companys assets._4.services4.1provide complete list of services offered by the company, including type of services offered, mix by salesand projected trends/focus going forward._ _4.2provide list of pricing and margins by service provided for the past three years and most recent quarter. include gross and operating margins by client employee_ _4.3provide customer split by white vs. grey collar clients for past three years (annual)._ _4.4summarize terms of all major contracts with insurance and benefits providers._ _4.5describe any intended expansion of service offerings and estimate ofexpected billings and correlating margins on an aggregate basis as well as on a per client employee basis._ _4.6explain process of claims administration for both insurance and benefits. _ _4.7summarize contractual terms with customers and provide scheduleof annual client turnover for the past five years. _ _5.vendors5.1describe relationship with major insurers and benefit providers, including logistics, administration and fulfillment. list summary of major contractual terms with such providers_ _5.2 describe partnership with major vendors, including services provided, existing contracts and expected relationship going forward._ _5.3describe any recent or expected vendor or service quality issues,pricing issues, alternative benefits and insurance suppliers._ _6.capital expenditures6.1provide projected capital expenditures, if any, broken by category and timing._ _6.2provide schedule of any necessary technological or infrastructure related capital expenditures required to meet growth projections_ _7.governmental regulations and filings.7.1all material filings, compliance reports, deficiency notices, applications and licenses, employee bonding, and all documents relating to investigations or reviews conducted by, and all approvals, determinations, rulings and orders of, any federal, state, or local regulatory agency, including correspondence relating to actual or alleged violations of applicable laws, rules, orregulations._ _8.financing.8.1prepare summary list of all financing arrangements, includingoutstanding debt, lines of credit, leases, etc._ _8.2provide copies of loan agreements and all materialcorrespondence with lenders of seller, including any compliancereports or certificates submitted by seller or its independentpublic accountants._ _8.3provide copies of all line of credit agreements, debt instruments,financial or performance guarantees, indemnification agreements,mortgages, security agreements and related documents withrespect to any of the foregoing, and a schedule of all liens andequipment leases to which seller is a party and to which any of its assets are subject. _ _9.litigation and legal affairs.9.1 summary of all pending and threatened litigation in excess of $25,000. include current status of each and expected outcome by company management or legal counsel._ _9.2 certificate(s) of good standing of all targeted companies._ _9.3 documentation relating to lawsuits and relatedpleadings (i.e. complaints, answers, counterclaims,demurrers, etc.)._ _9.4 correspondence, memoranda or notes concerning inquiries from federal or state tax authorities._ _9.5 correspondence, memoranda or notes concerning inquiries from federal or state occupational safetyand hazard officials._ _9.6 correspondence, memoranda or notes concerninginquiries from federal or state authorities regarding equal opportunities violations._ _9.7 attorneys audit response or opinion letters to auditors in connection with audits._ _9.8 attorneys opinion letters to company concerning thepotential effects of any significant proposed or pendingchanges in any state or federal law, rule or regulation._ _10.employee-related information.10.1provide company organizational chart._ _10.2 provide summary of organizational changes pursuant to each acquisition over the past 3 years._ _10.3provide complete listing of employees with correspondingcompensation and job descriptions._ _10.4provide summary list of benefit and bonus plans offered toemployees._ _10.5provide resumes and prepare brief biographies of keymanagement._ _10.6describe conditions of the local labor market, such asshortages in certain skills, wage levels, etc._ _10.7copies of all bonus, profit-sharing, stock purchase,contributory savings, pension, incentive stock options,and other employee benefit plans or arrangements towhich seller is a party._ _10.8description of any labor disputes, grievances, requestsfor arbitration and pending proceedings relating to employees of seller._ _10.9description of employee turnover rate._ _10.10copies of severance policies and severance agreements._ _10.11copies of all sickness and disability schemes and maternity/paternity schemes._ _10.12details of the current accrued holiday pay liability._ _10.13details of employees (including directors) dismissed or maderedundant or whose contract was otherwise terminated in thelast 2 years who have made or are likely to make claims against the seller._ _10.14 all plan documents since the plans original adoption, including, trust agreements, plan amendments, adoption agreements, basic plan documents. _ _10.15 certified resolutions of the board of directors adopting the plan, adopting plan amendments, delegating fiduciary responsibility to any person or entity._ _10.16 two most recent form 5500s, as filed with the irs, including all schedules, attachments and audit reports, if any. _ _10.17 the most recent summary plan description and any summary of material modifications distributed to plan participants. _ _10.18 the most recent favorable determination letter or notification/opinion letter if standardized prototype. _ _10.19irs determination letter on termination._ _10.20final form 5500 filing._ _10.21board resolutions terminating the plan_ _10.22 copies of all employment agreements (or, if appropriate, forms of employment agreement)._ _10.23form of consulting agreements. _ _10.24schedule of all consultants by name, length of service and services performed._ _10.25employee handbook._ _10.26copy of non-qualified profit sharing plan documents._ _10.27copies of plan documents._ _10.28insurance policies._ _10.29rabbi trust agreements or other funding arrangements._ _10.30copy of dol notice for any top hat plans._ _11.insurance.11.1summary list of all insurance policies currently in place._ _11.2all insurance coverage and loss reports, surveys, and statistics and risk management reports for seller andits assets for the past 3 years._ _11.3copies of all insurance