Due Diligence Request Letter by startupcfo


More Info
									Via Email and Overnight Mail

              Re:    Series A Preferred Stock Financing of
                     the “Company”

Dear Sir or Madam:

        In connection with the above-referenced financing and for purposes of our due diligence
review, we request copies of materials concerning the Company’s (and any subsidiary’s)
(1) corporate records and charter documents, (2) Business Plan, (3) security issuances and
agreements concerning securities, (4) intellectual property, (5) material agreements,
(6) information regarding disputes and potential litigation and (7) employees and employee
benefits. These would include, without limitation, the following as they are applicable:

       1.     Corporate Records and Charter Documents

              (a)    All minutes of directors’ and stockholders’ meetings, and all written
                     consents of directors and stockholders.

              (b)    Certificate of Incorporation, Certificates of Designation, Rights, etc., and

              (c)    Organizational chart.

       2.     Business Plan and Financials

              (a)    Current Business Plan and any financial projections.

              (b)    Most recent financial statements.

       3.     Security Issuances and Agreements Concerning Securities

              (a)    A list of the Company’s stockholders, including issuance dates, certificate
                     numbers and original issuance price.

              (b)    A chronological list of option grants including grant date and exercise

              (c)    Copies of agreements relating to outstanding options, warrants, rights
                     (including conversion or preemptive rights) or agreements for the
                     purchase or acquisition of any of the Company’s securities and agreements
                     relating to the Company’s past stock issuances.

              (d)    The Company’s Stock Plan and all related form documents.
     (e)    Any documents evidencing registration rights for the Company’s
            securities, or evidencing any agreements among the Company’s
            stockholders or between the Company and its stockholders.

     (f)    A summary of the vesting schedules of any stock or options subject to
            vesting, including any vesting acceleration.

     (g)    Agreements relating to voting of securities and restrictive share transfers.

     (h)    Evidence of qualification or exemption under applicable federal and state
            blue sky laws for issuance or transfer of the Company’s securities.

     (i)    Copies of Internal Revenue Code Section 409A valuation reports or
            substantially equivalent reports.

4.   Intellectual Property

     (a)    A list of the Company’s trademarks, patents, copyrights and domain
            names (or any applications therefor), including documentation of filing or
            registration with the appropriate governmental entities.

     (b)    Any documentation relating to the transfer to the Company or any
            employee of any technology.

     (c)    Copies of the proprietary information and invention agreements signed by
            any service provider, including employees and consultants.

     (d)    A list of any employees or consultants who have not signed proprietary
            information and invention agreements, including a list of any periods of
            time when such employees or consultants performed services for the
            Company while not bound by such agreements.

     (e)    Any correspondence or documents relating to allegations of the
            Company’s infringement of the proprietary rights of others or allegations
            by the Company of infringement of the proprietary rights of the Company.

5.   Material Agreements

     (a)    Any agreements, understandings, instruments, contracts or proposed
            transactions to which the Company is a party or by which it is bound
            which involve obligations of, or payments to, the Company in excess of

     (b)    Any personal property leases.

     (c)    Any agreements concerning the purchase, lease or sublease of real
(d)   Any documents evidencing indebtedness for money borrowed or any other
      liabilities incurred by the Company.

(e)   Any documents evidencing any mortgages, liens, loans and encumbrances
      with respect to the Company’s property or assets.

(f)   Any documents evidencing any loans or advances made by the Company,
      including documents evidencing loans made to employees for any reason.

(g)   Any agreements, understandings or proposed transactions between the
      Company and any of its officers, directors, affiliates, or any affiliate
      thereof, including without limitation, non-competition agreements,
      employment agreements and non-form offer letters.

(h)   Any licenses or agreements of any kind with respect to the Company’s or
      others’ patent, copyright, trade secret or other proprietary rights,
      proprietary information or technology, including employee confidentiality

(i)   Any insurance policies held by the Company or of which the Company is
      a beneficiary and a summary of such policies, if available.

(j)   Any judgment, order, writ or decree by which the Company is bound or to
      which it is a party.

(k)   Any standard forms of agreements used by the Company.

(l)   Any joint venture or partnership agreements.

(m)   Any management, service or marketing agreements.

(n)   Any confidentiality or nondisclosure agreements.

(o)   Any agreements requiring consents or approvals in connection with the

(p)   Any documents containing severance payments or acceleration of stock or
      option vesting.

(q)   Any consulting contracts.

(r)   Any other agreements material to the business of the Company, or outside
      the ordinary course of business.

(s)   A list of officers and directors. If any officers are not currently devoting
      100 percent of their business time to the Company, please note them on
      this list.
6.   Information Regarding Disputes and Potential Litigation

     (a)    Any correspondence or documents relating to any pending or threatened
            action, suit or proceeding or any investigation, including, without
            limitation, those involving the Company’s employees in connection with
            their prior or present employment or use of technology.

     (b)    Any correspondence or documents relating to allegations of the
            Company’s infringement of the proprietary rights of others.

     (c)    Any correspondence or documents relating to any labor agreements or
            actions, union representation or strike or other labor dispute.

7.   Information Regarding Employees and Employee Benefits

     (a)    A list of the Company’s employees and consultants, including title, base
            salary, target bonus (if applicable), commission plan (if applicable),
            classification (including, if an employee, whether the employee is exempt
            or non-exempt) and state of residence.

     (b)    The Company’s standard form of offer letter and/or employment

     (c)    Any plans, agreements or arrangements that provide benefits contingent
            upon a change of control.

     (d)    Any severance or deferred compensation plans (including any salary
            deferral agreements, whether oral or written, with employees or

     (e)    Any employee benefit plan, including, without limitation, stock option
            plans, pension plans and insurance plans and correspondence with
            regulators with respect thereto.

     (f)    Any forms of agreements used in connection with any stock option plans
            (such as a form of option agreement, notice of exercise and restricted
            stock purchase agreement).

     (g)    All documents or other information relating to any loans made by the
            Company to its employees, directors or consultants.

     (h)    The Company’s employee handbook.

     (i)    If the Company has any foreign employees, a list (separated by country) of
            all benefits provided to foreign employees.
I look forward to working with you on this transaction.

                                         Very truly yours,

To top