Use this sheet in conjunction with, and not in lieu of, the Asset Transaction checklist.

Transcription

1 LEGAL, LAND/LEASE, INSURANCE, PRODUCTION AND ACCOUNTING DUE DILIGENCE CHECKLIST ADDITIONAL DUE DILIGENCE ITEMS IN THE CONTEXT OF CORPORATE/STOCK TRANSACTIONS Use this sheet in conjunction with, and not in lieu of, the Asset Transaction checklist. I. LEGAL Person Assigned Task Due Date Task Review all of Seller s corporate documents including minutes of shareholders meetings, board meetings, audit, compensation, and any other board committees and written actions or consents in lieu of meetings for the past three years. Review all of Seller s corporate documents including Charter, Articles, By-laws, Good Standing Certificates, and authorizations to conduct business. Review capitalization of Seller including debt and equity securities that have been authorized and those outstanding, any matter relating to the issuance, purchase, sale, or other transfer of securities, option, stock appreciation rights, restricted or performance based stock units, or other benefit plans, voting rights, or other shareholder agreements or arrangements. Review all legal letters to auditors for the past five years. Review opinion of counsel letters regarding pending or threatened litigation. Obtain and review all employment, termination, consulting, non- 1

2 competition, loan guaranty, or other agreements with any current or former director, officer, consultant, independent contractors, or any employees; note especially any change of control provisions. Review all employee handbooks and disseminated employee policies, all pension, profit sharing, retirement, severance pay, sickness, disability, life insurance, legal, health-medical-surgicalhospital, dental, vacation, day care center, death benefit, and any employee pension benefit plans or other ERISA items and confirm proper funding and maintenance of such plans. Interview officers and supervisors regarding any potential or pending claim over the past five years related to the workplace such as OSHA or other safety issues, discrimination, harassment, ADA, worker s compensation, unemployment and disability insurance, withholding, Fair Labor Standards Act, and the like and determine if there exists any agreements or arrangements with unions or any agreement or requirement to engage in collective bargaining. Review all office leases, real property acquisition documents, equipment leases, documents pertaining to any equipment or storage yards or field offices, automobile leases, drilling contracts, master service agreements, consulting agreements, boarding agreements, master time charters, maintenance agreements, and all license and maintenance agreements regarding work stations and technical software, review any contracts and equipment pertaining to computer and phone systems, photocopy machines, and all other office furniture, 2

3 decorations, and other company assets such as vehicles and other long-term vendor contracts and assess compliance therewith. Review all loan agreements, credit agreements, security agreements, financing statements, notes, and other obligations of Seller, its compliance therewith and remaining obligations created thereby. II. INSURANCE Review and copy all existing insurance policies. Determine status of any existing claims, claims which have been asserted or settled within the past three years, or matters which might give rise to claims in the future under any existing policy. Review all existing bonds and letters of credit including operator, plugging, and lessees bonds. Review all master service agreements and certificates of insurance. Review all applications for renewal of insurance coverage and supporting documentation. Determine aircraft/water craft exposure. Review all real and personal property schedules to determine fact and sufficiency of coverage. III. ACCOUNTING Review selected mandatory production reports. Review audit work papers. 3

4 Review and analyze general ledger, chart of accounts, accounting policy listings, and audit committee minutes. Review and analyze collectability of receivables and appropriateness of payables. Review any inter-company transactions. Determine existence of unrecorded liabilities including off balance sheet items. Determine existence and, if any, analyze recent material transfers. Analyze ongoing requirements regarding pensions, benefit programs, health insurance, COBRA, other plans, and employee benefits. IV. HUMAN RESOURCES/ADMINISTRATION Analyze and determine net book value of other assets and liabilities, and review and analyze working capital account. Review and analyze all current employees of Seller including positions held, salaries, years of service, vacation status, and other accrued benefits. Determine Seller employees to be retained and integration process. Review all employee benefit plans including pension plans, health insurance, 401(k), incentive plans, and any others. Analyze these in the context of assumed responsibility or going forward in the nature of integration. Determine relocation issues. V. TAX MATTERS 4

5 Review past three years tax returns and work papers including all federal, state, and local income and franchise tax returns and any amendments thereto. Determine states where Seller is qualified to do business and sufficiency of such. Determine existence and applicability of Section 29 tax credits. Review and analyze all carry-forwards including expiration dates such as NOL s, AMT NOL s, capital losses, charitable contributions, IDC, FTC, and AMT credits. Review state apportionment schedules and business income versus nonbusiness income issues. Review and analyze all communications with any taxing authority for the past three years, reviewing any audit or revenue agent reports, statute of limitation waivers and/or extensions, appeals documentation, settlement documentation, and consent agreements. Review federal and state estimated payments and any extension requests. Review and analyze FICA and FUTA returns and payment history. Review ad valorem and production tax filings and escrow accounts. Review state and local property tax renditions, assessments, and payments and prepare appropriate inventory lists for equipment yards and other inventoried equipment. 5

6 Review and analyze state and local sales and use tax returns for the past three years together with any exemption certificates. Review and analyze compliance with 1099 rules. Review and analyze escheat compliance. 6