The following format for completing Due Diligence Examinations of companies seeking a public or private equity offering has been approved by NADOS.

It is suggested that the NADOS member who originates an offering should compile this information into a loose-leaf note book divided and identified by each section. It should be made available to any other member who is requested to participate in the sale of the proposed offering.

General Information, Section A

A-1 Full legal name and all assumed names of company, full physical address, state of incorporation, and brief business description. Same for all subsidiaries.

A-2 Forecasts of monthly income statements, balance sheets and cash flow projections as detailed as possible for the balance of the current and next three fiscal years, the assumptions upon which the forecasts are based, including proforma assumptions.

A-3 Three year business plan and use of proceeds.

A-4 Location of principal facilities.

A-5 Product brochures or similar information, sales forms, purchase orders and similar documents used by the company or its subsidiaries in the ordinary course of business.

 Management, Section B

B-1 Schedule of stock ownership, listing as to each class of stock; total shares authorized, total issued, names of the 5 largest holders, and any entity holding more than 5% of the class.

B-2 Organization Chart

B-3 Resume of all key executive employees and key employee job descriptions.

B-4 Summary of any existing or proposed employment contracts and employee benefit plans to which the company or any subsidiaries is a party.

B-5 Summary of any management contracts between the company and any other person or entity.

B-6 Summary of any indemnification contracts or similar arrangements for officers and directors of the company and its subsidiaries.

B-7 Schedule showing any family relationship among officers and directors of the company and its subsidiaries.

B-8 Summary of all pension or profit sharing plans for the company or any of its subsidiaries.

B-9 Summary of management compensation for all principal officers, all directors, and any significant affiliated parties of officers or directors.

Financial Information, Section C

C-1 Financial statements* for the past three years ended, including the most recent 10K’s, 100’s, proxy statements, annual and quarterly reports to shareholders. SEC CUSPID number for each reporting company and Form 3, Form 4, and Form 5 filed on behalf of the company and/or all officers and directors. *Financial statements should be Audited if available, if not then submit Reviewed if available, or Compiled statements.

C-2 Most recent interim financial statements prepared since the date of the last year end statement. The statement should be less than 90 days old.

C-3 Copies of IRS Tax Returns for the past three year ends. Tax ID number of parent corporation.

C-4 Schedule of any contingent liabilities and obligations not appearing on the balance sheets, including all unasserted and/or threatened claims and such things as leases, guarantees, letters of credit, unfunded pension, deferred payments, etc..

C-5 Copies of any prospectus or private placement memoranda relating to securities issued by the company or its subsidiaries during the past three years.

C-6 List of banking and credit relationships of the company and its subsidiaries, including name of financial institutions, description of outstanding debts and loans or credit commitments, interest rates, and payment terms.

C-7 List of any default or default waiver under any existing borrowing or credit agreements.

C-8 List of all mortgages and other documents constituting liens on the property of the company or any of its subsidiaries.

C-9 Explanation of any default waiver under any existing borrowing or credit agreements.

C-10 Summary of material litigation, arbitration, and governmental proceedings to which the company, its subsidiaries, or any of their directors or officers have been party within the past three years or which is or has been threatened against any of them.

 C-11 Schedule of all contracts or understandings involving payment equal to 5% or more of the companies annual revenues, including material supply, purchase and distribution contracts to which the company or any subsidiary is a party and a schedule indicating any default or alleged default thereunder.

C-12 List of five major customers.

C-13 Summary of aging of accounts receivable, accounts payable, and description of condition of the inventories.

C-14 Commercial credit reports on the company and its subsidiaries from Dun and Bradstreet or TRW.

C-15 Results of a search of UCC records for IRS liens and UCC filings.

C-16 Results of a search of litigation records from county records.

C-17 Results of search of securities violations from the state and SEC, and criminal background check on the company and its key officers and directors. All searches should cover the past ten years.

Miscellaneous, Section D

D-1 All other documents viewed by the company as material to its operation, or to a proposed acquisition.

D-2 List of company memberships in any national, state, or local organizations.

D-3 Copies or summary of any agreements to pay finder’s or broker’s fees in relation to the proposed financing.

D-4 Copies of any current studies, or analyses of the company, its products, services, or prospects.

D-5 List of law firms, accounting firms, advertising agencies, and other professional organizations which have represented the company in any material matters in the past three years, including addresses, phone numbers, and names of principal account representatives.

D-6 Summary of any material correspondence with federal or state regulatory agencies such as OSHA, ERISA, etc..

D-7 Copies of Articles of Incorporation, and Bylaws of the company.

D-8 Minutes of meeting of the Board of Directors, and Shareholders for the past year.

D-9 Schedule of all current insurance coverage for the company including risk covered, carrier, and expiration date.

D-10 Full information concerning any acquisition anticipated including valuation procedures.

  VERSION: August 26, 1998