DATA ROOM CHECKLIST To be cross-checked by Lawyers

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Mariah Jennings
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1 DATA ROOM CHECKLIST To be cross-checked by Lawyers Responsibility Status Date 1. Regulatory 1. Commentary on overall relationship with regulators over last five years 2. Extracts from any relevant auditors reports 3. List of outstanding complaint cases 4. Details of any compliance failures, reprimands etc.(n/a) Policy & Procedures Manual 5. Details of all material correspondence with regulators over last five years 6. Details of unusual regulatory orders or limitations to which the company or any employee are subject 2. Legal & Compliance matters 1. Litigation - nature and amounts 2. Probable outcome of litigation effect on business 3. Unsatisfied judgements against the Company 4. Other disputes (i.e. with regulators) 5. Statutory Data: a) Certificate of incorporation/ certificates of incorporation on change of name b) Licences to trade c) Business authorisations, approvals d) Statutory books (shareholders register, directors register etc.) e) Minutes f) Memorandum and Articles of Association 6. Copies of all major contracts (not referred to elsewhere) 7. Hire purchase, hiring, conditional or credit sale agreements (not referred to elsewhere) 8. Commercial agreements with third parties for the provision of services 9. Copies or terms of standard policies for each type of insurance risk covered 10. Details of contracts with banks 11. Data protection registration certificate

2 12. Own Insurance arrangements: a) property covered b) nature and amount of cover c) period of cover d) annual premiums e) date of next renewal f) list outstanding claims 13. All intellectual property owned or used by the Company, a) trade and business names b) copyrights c) trademarks (registered or unregistered) and service marks d) registered or unregistered designs, e) know-how or other similar rights 14. Copies of contracts containing change of control clauses (Schemes/Retrocession) 3. Financial information (3 years history for numbers) 1. Annual reports 2. Budget 2001 and commentary (P&L and Balance Sheet) and 2003 year end forecast (P&L and Balance Sheet). Detail behind forecast down to business unit level, when available 4. Comparison of current year performance to budget (Budget / Actual for 2000) 5. Explanation of non-recurring items and unusual changes in financials 1999, Management accounts for the past 4 years by quarter 7. Analysis of revenues by source 8. Analysis of costs by type and function 9. Key ratios 10. Investments: a) most recent analysis of investment portfolio by asset class b) analysis of investment income, gains and losses and yields c) investment policy d) details of any investment management agreements e) performance versus benchmarks

3 11. Financing: a) description of terms of short term debt b) long-term debt c) lines of credit d) copies of guarantees, letters of comfort 12. Share capital: (Per accounts) a) current number of shares b) current shareholding structure c) recent capital issues d) pricing e) special terms, arrangements f) options 13. Tax: (Tax returns?) a) expected corporation tax rate for the next two years b) tax returns up to date c) details of tax history d) tax strategy e) unusual tax situations f) amount of tax-loss carry forwards and restrictions on their utilisation 14. Solvency: a) supporting documentation for the calculation of solvency ratios for regulatory purposes b) projections 15. Details of Bank Accounts, overdraft facilities, and other arrangements with Banks 16. Details of any off-balance sheet items, i.e. finance leases, etc. 4. Accounting and Reporting (3 years history for numbers) 1. Reporting systems and arrangements 2. Description of internal controls 3. Internal audit processes 4. Any recent internal audit reports 5. Audit management letters 6. Any recent internal or external actuarial reports

4 7. Auditor s report on regulatory or other issues 5. Actuarial/Claims Reserving 1. Details of reserving methodologies used 2. Other actuarial information concerning Clio s business 3. List of largest claims from each year of the last 3 years 4. Triangulations by line of business identifying a) Gross and net results b) paid and incurred c) IBNR d) Run-off business separately e) Other (i.e quality of business by source) 5. Details of any contingent liabilities 6. Retrocession 1. Details of retrocession arrangements 2. Copies of treaties 3. Schedule of outward retrocession premiums and retrocession result 4. Analysis of costs/commissions 5. Details of any profit studies 7. Products 1. Product portfolio: a) underwriting policy/guidelines for all products, b) marketing material c) underwriting policy/guidelines for unusually large exposures or retentions outside normal cases d) description of the main products (including technical assumptions). e) Changes in product lines over last 5 years 2. New business projections for 2001 by product line and by brokers 3. Summary of planned new product development 4. Competitive analysis used in designing new products

5 8. Distribution 1. Distribution channels, current and future plans 2. Commissions: a) Detailed commission structure for each product and each channel, b) Commission and premium deals c) Current and future planned accounting policy in connection with acquisition costs 3. Analysis of sales by Broker (last 3 years) 4. Description of any marketing activities, budget, and plan 9. Board of directors and management/key personnel 1. Current organisation chart and 2001 organisation chart if different 2. Resumés of key individuals, including management recently appointed 3. Names ages and remuneration of principal executives and directors, background and employment contracts 4. Bonus, pension, profit sharing, health insurance plans, shadow option schemes and overall benefits costs 5. New hires under consideration or proposed or other anticipated changes to the board/ management 6. Severance payments made or under consideration 7. Redundancy payment arrangements 8. Contracts with the Company 10. Employees 1. Number of employees: a) By department/company/function etc b) Current vacancies c) Staffing issues etc. 2. Schedule of employees (name; job title; length of service; age) 3. Copies of employment contracts 4. Salaries and wages (by department / total / individual and other benefits (bonus; car)) 5. Details of pay rises 6. Pay and promotions system and grading structure

6 7. Quality of workforce (qualifications, etc.) 8. Pension & employee benefit plans (profit sharing, health ins, etc.) a) copies of current documents governing scheme[s] b) contracting out certificates (if any) c) actuarial reports d) current members booklet e) employer/employee contributions f) list of scheme members (age, sex, pensionable service, and list of employees expected to become members in next 12 months) g) indemnities given by Company not apparent from the documentation h) outstanding payments or contributions 9. Material employment issues/problems etc. including: a) maternity leave b) long term sick leave c) disciplinary action in last 12 months d) grievances raised by employees 10. Union arrangements 11. Employee handbook 12. Outstanding offers of employment 13. Notices received terminating current employment 14. Loans made to employees (rates of interest, repayment terms) 15. Consultants (contracts for services; fees) 16. Copies of agency agreements 11. Systems and administration/processes 1. Details of all computerised systems a) hardware b) operating and application software c) architecture overview d) internet application e) EDI arrangements f) details of upgrades in last 12 months (any more required) 2. Performance statistics for key systems

7 3. Operational issues for key systems 4. Support/back-up arrangements/contingency planning 5. Details of Software licences and any disputes with vendors 6. Systems development plans 7. Company policy and procedures manual 8. Annual operating cost a) split between: personnel; rental and indirect and direct systems costs (depreciation, fees, power etc.) 9. Summary of outsourced computer services 10. Details of IT strategy, annual spend and budget 11. E-business arrangements 12. Details of all major manual systems 13. Maintenance and support 12. Premises 1. In respect of any leasehold property please specify: location, square footage, unexpired duration, renewal terms, break clause terms, cost per square foot, current market value per square foot; copies of lease 2. In respect of any freehold property please specify: book value and market value, location, options, square footage 3. Rates and other fixed costs 4. Appraisals, surveys and engineers reports and depreciation rates of buildings and land 13. Background, corporate history, organisation and structure 1. Brief history of the organisation 2. Background to current situation 3. Corporate structure 4. Mergers and acquisitions over the past 10 years - details of companies acquired and sold including prices paid and terms and conditions 5. Milestones in the development of the Company 14. Competition 1. Company s competitive advantages/disadvantages } For discussion only

8 2. Major competitive threats and opportunities } 15. Strategy 1. Copy of business plan / strategy paper 2. Details of existing e-commerce initiatives 3. E-commerce plans 4. Details of web-site

A Typical Due Diligence Checklist for Start-Up Companies and Entrepreneurs Seeking Debt and Equity Financing

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