Typical suggestion for a Due Diligence Checklist

1. CORPORATE ORGANIZATION

   1. Articles of Incorporation

   2. Bylaws

   3. Recent Changes in Corporate Structure

   4. Shareholder List

      1. Show Number of Outstanding Shares and Percent Owned

      2. Stock Option or Share Appreciation Rights Plans

   5. Parent, Subsidiaries and Affiliates

   6. Shareholder's Agreements

   7. Minutes of the Board of Directors

   
   

2. BUSINESS INFORMATION

   1. Product Offering

   2. Depreciation Method

   3. Patents

   4. Management Information System

   
   

3. MARKETING

   1. Pricing Strategy

   2. Patents

   3. Distribution Channels

   4. Promotion Tactics

   5. Customer Base

      1. Top Ten Customers By Product Line - Showing Volume

      2. Market Share By Product Line

   
   

4. BUSINESS PLAN

   1. Most Recent Five Year Business Plan

   2. Prior Business Plan

   
   

5. FINANCIAL STATEMENTS

   1. 5 Years of Historical Audited Statements

      1. Income Statement

      2. Balance Sheet

      3. Statement of Cash Flows

      4. Change in Equity Statement

   2. Year-to-Date Internally Generated Monthly Statements

   3. Most Recent Five Year Projections

   4. Monthly Sales Projections Taking Seasonality Into Account

   
   

6. TAX STATUS

   1. Historical Tax Rate

   2. Net Operating Losses

   
   

7. OPERATING DATA

   1. Accounts Receivable

      1. Turnover or Days

      2. Aging

      3. Control and Credit Policy

      4. Seasonality

   2. Inventory

      1. Turnover or Days

      2. Obsolescence Policy

      3. Sources of Supply

      4. Valuation Method

   3. Backlog

      1. By Product Line

      2. Five Year History

      3. Current

      4. Seasonal Issues

   
   

8. CONTRACTS

   1. List Major Contracts by Product Line

   2. Terms

   
   

9. CAPITAL EXPENDITURES

   1. Last Five Years

   2. Five Year Gross Projection

   3. Detailed Priority List With As Much Analysis as Possible

   
   

10. EQUIPMENT

    1. List

    2. Age

    3. Appraisal

       1. Orderly Liquidation Value

       2. Replacement Value

    
    

11. DEBT AND LEASES

    1. Lender

    2. Terms

    3. Interest Rate

    4. Payment Schedule

    
    

12. LITIGATION

    1. Current

       1. Description

       2. Potential Damages

    2. Potential

       1. Description

       2. Potential Damages

    
    

13. PROPERTY

    1. Description

    2. Recent Acquisitions or Spin-Offs

    3. Expansion Plans

    
    

14. INSURANCE

    1. Property

    2. Liability

    3. Workman's Compensation

    4. Other

    
    

15. COMPETITION

    1. By Product Line

       1. Name, Address and Phone Number

       2. Size of Overall Company

       3. Size of the Business Unit that is the Competitor

       4. Market Share

       5. Competitive Advantages and Disadvantages

    2. Trade Publications

       1. Name, Address and Phone Numbers

    
    

16. MANAGEMENT

    1. Organizational Chart

    2. Resumes

    3. Ownership Interest

    4. Compensation and Contracts

    5. Performance Evaluation Criteria

    6. Profit or Gain Sharing Policies

    
    

17. EMPLOYEE RELATIONS

    1. Unions

       1. Name of Union

       2. Name of Local President, Address and Phone Number

       3. Copy of Contract

    
    

18. PENSION PLANS

    1. Funding Status

    2. Balance Sheet Treatment

    3. Ten Year Projected Cash Expense

    
    

19. RETIREE MEDICAL BENEFITS LIABILITIES

    1. Funding Status

    2. Balance Sheet Treatment

    3. Ten Year Projected Cash Expense

    
    

20. ENVIRONMENTAL LIABILITIES

    1. Description

    2. Phase One Studies

    3. Phase Two Studies

    4. Five Year Projected Remediation Cost

    5. Five Year Projected Compliance Cost

    
    

21. LAST CORPORATE TRANSACTIONS

    1. Description of Each

    2. Purchase and Sale Agreement of Each

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