Declaration of Compliance

JT Business Advisors Co., Ltd. is a registered support organization under the government’s M&A Support Organization Registration System, and hereby declares that it complies with the “SME M&A Guidelines (3rd Edition)” (August 2024) established by the Small and Medium Enterprise Agency.

JT Business Advisors Co., Ltd. complies with the SME M&A Guidelines and implements the following initiatives and measures.

Initiatives to Ensure and Improve the Quality of Support

1. We fulfill our obligations based on contracts with clients.
2. • We conduct brokerage and financial advisory services with the care of a prudent manager (duty of care).
   • We do not seek to benefit ourselves or third parties at the expense of the client’s interests.
   • (In the case of brokers) We are fair and impartial toward all clients and do not prioritize the interests of one party over another or take actions that unduly harm the interests of either party.
3. Regardless of contractual obligations, we respect the client’s intentions and take actions to realize their interests as a matter of professional ethics.
4. The representative recognizes that (1) improving knowledge and capabilities and (2) ensuring proper business execution are essential for ensuring and improving the quality of support, and communicates the importance of these initiatives both internally and externally. Furthermore, we implement initiatives consistent with these messages.
5. We implement effective measures to enhance knowledge and capabilities.
6. We implement measures to ensure the proper performance of duties by officers and employees engaged in support services.
7. When outsourcing part of our operations to third parties, we implement measures to ensure the proper execution of duties by those external contractors.

Specific Guidelines for Conduct in the M&A ProcessDecision-Making

1. Based on specialized expertise, we provide practical proposals to clients to support their M&A decision-making. In doing so, we observe the following points.
2. • We explicitly explain to clients the anticipated significant advantages and disadvantages to the best of our knowledge.
   • We are mindful of our duty of care as a prudent manager regarding the handling of a client’s corporate information prior to the conclusion of an intermediary or financial advisory agreement, and we handle such information appropriately.
3. We will conduct advertising and sales activities aimed at concluding brokerage or FA agreements appropriately, in compliance with the following guidelines.
4. *Note: In conducting advertising and sales activities, compliance with professional ethics is required. Furthermore, please note that if such activities are deemed excessive—based on past responses or frequency—to the extent that they cause significant disruption to the business operations of the targeted small and medium-sized enterprises or the lives of their managers, we may be held liable for tort under the Civil Code.
5. • If a target of advertising or sales indicates that it has no intention of proceeding with an M&A transaction, does not wish to enter into a brokerage or FA agreement, or does not wish to continue receiving advertising or sales approaches (hereinafter referred to as an “intention to cease”), we will not refuse such an intention and will immediately cease advertising and sales activities.
   • In cases where a client expresses an intent to suspend, we will systematically record and share the details of such intent.
   • If we decide to resume advertising or sales activities toward a client who has expressed an intent to suspend, we will do so only after careful consideration and based on an organizational decision (meaning a decision made through an organizational process—not limited to a single representative acting under clearly defined criteria—that is systematically recorded and verifiable afterward).
   • From the perspective of appropriately supporting the decision-making of small and medium-sized enterprises (SMEs) that are the targets of our advertising and sales activities, we will not engage in the following types of advertising or sales activities:
   • 1. Advertising or sales activities conducted without disclosing our company name, the name of the person making the solicitation, or the fact that the purpose of the solicitation is to enter into a brokerage agreement or FA agreement
     2. Advertising or sales activities that pressure clients into making an immediate decision without allowing sufficient time to decide whether to enter into a brokerage or FA agreement and proceed with the M&A process
     3. Advertising or sales activities that contain false, inaccurate, or misleading information regarding matters that could influence the decision to enter into a brokerage or FA agreement and proceed with the M&A process, such as the likelihood or conditions of the M&A’s completion (e.g., the following)
   • Advertising or sales activities that falsely claim, or lead to the mistaken belief, that a company has an intention to acquire (or sell) when such intention does not exist, has not been confirmed, or the company does not actually exist
   • Advertising or sales activities that present an excessive valuation regarding the transfer price
   • Information regarding the financial condition or future prospects of the seller (or buyer) that differs from the facts, or that misleads the client into believing the situation is better or more favorable than it actually is
   • Any other statements that make definitive judgments regarding the likelihood of an M&A transaction or its terms

Conclusion of Brokerage and FA Agreements

1. We will conclude a brokerage or FA agreement that aligns with the actual nature of our business operations.
2. Prior to concluding the agreement, we will provide the client with a written document detailing important matters related to the brokerage or FA agreement (items (1) through (17) below), offer a clear explanation, and obtain the client’s consent.
3. • The difference between a broker, who enters into contracts with both the seller and the buyer and advises both parties, and an FA, who enters into a contract with only one party and advises only that party, along with the characteristics of each (including, if applicable, the fact that the broker receives fees from both parties).
   • The scope and content of services provided (the scope and content of services provided for each process, such as valuation, matching, and negotiation).
   • Qualifications held by the assigned representative (e.g., Certified Public Accountant, Tax Accountant, Small and Medium Enterprise Management Consultant, Attorney, Administrative Scrivener, Judicial Scrivener, Social Insurance and Labor Consultant, other accounting certifications such as Bookkeeping Certification or Business Accounting Certification, etc.), years of experience, and track record of successful transactions
   • Matters regarding fees (calculation criteria, amount, minimum fee, deduction of fees already received, payment schedule, etc.)
   • Expenses to be paid by the client in addition to fees (types of expenses, payment schedule, etc.)
   • (For intermediaries) Matters regarding the other party’s fees (calculation criteria, minimum fee, payment timing, etc.)
   • Matters regarding confidentiality (if the client is subject to a confidentiality obligation, a statement to that effect; facts subject to confidentiality; partial waiver of the confidentiality obligation when disclosing information to professionals such as licensed practitioners or the Business Succession and Handover Support Center, etc.)
   • Matters regarding restrictions on direct negotiations (whether the client is prohibited from identifying potential candidates on their own and from engaging in direct negotiations with such candidates; the scope of candidates subject to restrictions and the scope of permissible negotiation purposes, etc.)
   • Exclusivity clause (whether a second opinion is permitted, etc.)
   • Tail clause (tail period, applicable M&A transactions, etc.)
   • Contract Term (Contract duration, matters regarding renewal (extension of term), etc.)
   • Matters regarding termination of the contract; if the client is permitted to terminate the brokerage or FA agreement prematurely, details regarding such premature termination
   • Matters regarding liability (exemption from liability) (Conditions under which liability for damages arises, scope of compensation, etc.)
   • Clauses remaining in effect after contract termination (Applicable clauses, their duration of validity, etc.)
   • (For brokers) Matters where a conflict of interest between the parties is anticipated
   • (When explaining to the seller) Overview of due diligence to be conducted on the buyer (entity conducting the due diligence, financial due diligence, compliance due diligence, operational due diligence, etc.)
   • (When explaining to the seller) Participation in industry-wide information-sharing mechanisms (if not participating, state so)
4. Matters regarding fees, the scope of services provided, and the counterparty’s fees will be explained as follows.
5. • We will clearly explain matters related to fees and describe the scope of services we provide in exchange for those fees. Specifically, we will provide a written document (including delivery via electronic means such as email) explaining the fee calculation criteria—such as the success fee rate, the base amount for fees (transfer price, net assets, total assets under management, etc.), the minimum fee amount, and the timing of fee accrual (retainer fee, monthly fee, interim payment, success fee)—as well as the specific services to be provided.
   • Regarding the services provided, we will organize and explain in writing (including provision via electronic means such as email) what services are provided for each stage of the “M&A Process” (including a statement to that effect if no services are provided for a particular stage). Specifically, for each “M&A Process” listed in the table in Chapter 2, Section II, Item 4(1) of the Guidelines, we will organize the main services to be provided and provide an appropriate explanation (examples are listed in the “Main Services Provided” column of the table).
   • We will explain the qualifications held by the responsible personnel (e.g., Certified Public Accountant, Certified Tax Accountant, Small and Medium Enterprise Management Consultant, Attorney-at-Law, Administrative Scrivener, Judicial Scrivener, Social Insurance and Labor Consultant, and other accounting-related certifications such as Bookkeeping Certification and Business Accounting Certification), as well as their years of experience and track record of successful deals.
   • If, during the pre-contract explanation, the client is not satisfied and requests negotiations with the intermediary or financial advisor regarding services or fees, we will consider responding in good faith.
   • (In the case of an intermediary) Prior to concluding the intermediary agreement, in addition to matters regarding the fees received from the client, we will provide a written document (e.g., via email) regarding the counterparty’s fees (fee rate, fee base amount (transfer price/net assets/total assets transferred, etc.), minimum fee amount, timing of fee accrual (retainer fee/monthly fee/ interim payments/success fees), etc. We will provide a written explanation to the client (including provision via electronic means such as email), noting that the total fees, including those of the counterparty, may affect the completion of the M&A transaction or its terms (such as the transfer price).
   • If we increase the counterparty’s fees explained prior to the conclusion of the brokerage agreement, we will disclose the details of the increase to the client.
   • If we reduce the client’s fees, we will re-explain to the client that we have not increased the counterparty’s fees as originally explained.
   • (In the case of an FA) If we receive payment from the FA supporting the counterparty, we will explain to the client the amount, purpose, and timing of the payment.
6. The explanations in items 10 and 11 above shall be provided to the person authorized to enter into the contract (in the case of an individual, the individual; in the case of a corporation, the representative or a person authorized to enter into the contract).
7. Following the explanations in items 10 and 11 above, we will allow the client sufficient time to consider the matter in order to make an appropriate decision regarding the conclusion of the contract.

Valuation (Corporate Valuation / Business Valuation)

1. When conducting a valuation, we will explain the valuation methods and assumptions to the client in advance and obtain the client’s agreement regarding the valuation methods and price range.

Selection of the Acquirer (Matching)

1. Name Clear (disclosure of detailed materials such as a company profile containing the seller’s name) is conducted after obtaining consent from the seller and entering into a confidentiality agreement with the prospective buyer, following the presentation of a non-disclosure sheet (teaser) or similar document to candidates who have expressed interest.
2. We obtain consent from the seller individually for each prospective buyer to whom information will be disclosed.
3. We take care to ensure that detailed information regarding the seller does not leak or be disclosed externally prior to the execution of the confidentiality agreement.

Negotiations

1. We provide close support during negotiations by explaining the overall picture and future process of SME M&A as clearly as possible, even to clients who are unfamiliar with the process.

Due Diligence (DD)

1. When conducting due diligence (DD), we will encourage and assist the seller in preparing the documents requested by the buyer.

Negotiation and Execution of the Final Agreement

1. During the period leading up to the execution of the final agreement, we assist in ensuring that the agreement is concluded in a manner that satisfies both the seller and the buyer to the greatest extent possible, while minimizing the risk of disputes arising between the parties after the M&A transaction is completed (if risks remain despite such minimization, we ensure that the parties fully understand those risks).
2. We will conduct adjustments and provide explanations to the client regarding risks that could potentially lead to disputes between the parties after the final agreement is signed and following closing. Specifically, we will implement the following measures: *However, regarding preliminary consultations with financial institutions, we will support the seller’s management in making appropriate decisions by first explaining the points to consider when providing information to such institutions prior to the M&A transaction (such as the handling of information if the M&A does not proceed).
3. • Regarding the handling of management guarantees by the selling party’s management, we will discuss the policy with the selling party’s management and consider the appropriate course of action.
   • We will carefully listen to the selling party’s management regarding their intentions concerning management guarantees, and explain that consulting with professionals (particularly attorneys) or the Business Succession and Handover Support Center, as well as consulting with financial institutions and other parties to whom the guarantees are provided prior to the completion of the M&A, are also viable options.
4. If the seller wishes to consult with professionals such as lawyers or financial institutions regarding the handling of management guarantees, we will not refuse such consultations and will exclude the consulted professionals and financial institutions from the scope of confidentiality clauses in brokerage agreements, FA agreements, and similar contracts. Furthermore, if there is a confidentiality clause in the agreement with the buyer, we will urge the buyer to exclude the consulted professionals and financial institutions from the scope of that confidentiality clause.
5. Regarding the treatment of management guarantees in the final agreement, if the release or transfer of the guarantee to the transferee is contemplated, we will consider clearly stipulating the release or transfer of the guarantee as an obligation of the transferee in the final agreement. Specifically, after establishing the release or transfer of the guarantee as an obligation of the transferee, we will work toward incorporating provisions such as setting the release or transfer of the guarantee as a closing condition, or including clauses that address the scenario where the transfer of the guarantee does not occur (e.g., termination clauses or indemnification clauses).

• *Specific conditions include: (a) the transferee obtaining a formal statement of intent from the financial institution or other entity to which the guarantee is provided, confirming that the guarantee can be released or transferred after the final agreement is executed but before closing; (b) If, based on the results of said statement of intent, the procedures for the cancellation or transfer of the guarantee can proceed, the transferee shall submit the documents required for such procedures to the financial institution or other entity providing the guarantee after the final agreement is executed but prior to closing, and shall prepare the necessary documents for the registration of the change of representative.
• *Furthermore, to ensure thoroughness, it may be advisable to simultaneously carry out the procedures for registering the change of representative and the procedures for releasing or transferring the guarantee on the closing date (with the financial institution present, if necessary).
• *As a means to ensure the reliable cancellation or transfer of the guarantee, one possible method is for the transferee to repay the debt covered by the transferor’s management guarantee using the transferee’s own financial resources at closing, and for the transferee to subsequently refinance the debt separately.
• Explain to the client that due diligence (DD) is a critical process for both the transferor and the transferee.
• Explain to the client that the content of representations and warranties should be appropriately reviewed based on the results of due diligence (DD). Also explain that if there are provisions without defined timeframes or liability caps, or if the scope of application is not clearly defined, the transferring party may bear excessive liability for representations and warranties, creating a risk of disputes between the parties.
• Regarding post-closing payments and procedures, adjustments and revisions to payments after the final agreement, the seller’s asset and loan settlement after the final agreement, and the period from the final agreement to closing, we will not lightly propose clauses or schemes that could give rise to this risk at a stage where sufficient coordination between the parties has not yet been achieved. Instead, we will carefully review such matters, and if we do propose them, we will do so based on an organizational decision (meaning a decision made through an organizational process under clearly defined criteria, rather than by a single individual, and and which is systematically recorded and verifiable after the fact). When making such a proposal, we will explain the details of the risk and the potential consequences should the risk materialize as specifically as possible.

*It is desirable to explain the details of this risk and the potential consequences should it materialize to the parties as specifically as possible at the stage when this risk is recognized.

1. Upon execution of the final agreement, we will urge the client to reconfirm the contents of the agreement to ensure there are no omissions.

*If the final contract contains risk factors that could lead to disputes between the parties after the contract is signed or after closing, it is desirable to provide a detailed explanation—as specific as possible—of those risk factors and the potential consequences should they materialize, prior to signing the final contract.

Closing

1. After finalizing the specific procedures for closing, we will confirm on the day of closing that the purchase price has been reliably remitted by the transferee.

Measures to Exclude Unsuitable Acquirers

1. To exclude unsuitable acquirers to the greatest extent possible, we will implement the following measures.

• We will conduct due diligence on the acquirer to confirm whether they have the intention and ability to perform the Final Agreement and take over the target business.
• Furthermore, we will explain the overview of the due diligence on the acquirer to the client (the seller) prior to the conclusion of the brokerage agreement or FA agreement (or, in the case of an M&A platform, prior to registration on the M&A platform). Specifically, we will review the content of the due diligence to be conducted for each “Due Diligence Item” listed in the table in Chapter 2, Section II-6(1) of the Guidelines and provide an explanation to the client.
• 1. Regarding the specific details of the due diligence, we will conduct appropriate investigations from the following perspectives: verification of the acquirer’s financial condition and business operations; and compliance-related checks, such as whether the acquirer (including representatives, officers, shareholders, and other related parties) is affiliated with antisocial forces or has been involved in past M&A-related disputes. With regard to the financial situation in particular, we will conduct appropriate verification from the perspectives of whether the target company can raise the anticipated level of consideration for the transfer and whether it is in a position to continue operating the target business after the M&A transaction.
  2. Regarding the timing of the investigation, in addition to conducting it prior to signing an intermediary agreement or FA agreement with the acquirer (or, in the case of an M&A platform, prior to registration on the M&A platform), we will also conduct necessary investigations as the M&A process progresses to ensure that the acquirer is fully vetted by the time the final agreement is signed.
  3. Regarding investigation methods, we typically review the acquirer’s tax returns and commercial registry records, and conduct compliance checks that include representatives, officers, shareholders, and other relevant parties listed therein. However, in cases where the seller is insolvent or the acquirer’s creditworthiness is particularly critical to the M&A transaction’s success, we conduct investigations with particular care. In such cases, we ensure appropriate verification of the acquirer’s financial condition by reviewing, at a minimum, their financial statements and tax returns.
  4. If information regarding an unsuitable acquirer—such as a failure to fulfill the final contract—is obtained through mechanisms such as information sharing within the industry or reports from acquirers we have supported in the past, we will establish a system to ensure that such information is not confined to individual staff members but is shared organizationally, enabling us to carefully evaluate whether to provide matching support to that acquirer.
  5. Regarding the provision of new support to the transferee in question, we will carefully consider the matter by scrutinizing the content of the information obtained and taking into account the potential disadvantage to the transferor resulting from similar conduct; if such support is to be provided, it will be done based on an organizational decision (meaning a decision made through an organizational process under clearly defined criteria, rather than by a single person in charge, which is recorded organizationally and can be verified retrospectively).
  6. (In the case of intermediaries) If information regarding inappropriate conduct by the acquirer is obtained, it shall be disclosed to the seller.

Points to Note Regarding Contractual Provisions in Brokerage and FA AgreementsWith regard to exclusivity clauses, we shall act in compliance with the following points in particular.

1. When establishing an exclusivity clause, the scope of its application shall be limited as much as possible. Specifically, after the client has clearly identified to the intermediary or FA the areas where they wish to seek opinions from other support organizations, and provided there are no reasonable grounds to prevent this, the client shall be permitted to seek a second opinion from other support organizations. However, due consideration shall be given to information management, such as prohibiting the disclosure of information regarding the other party, or limiting the parties consulted to those subject to statutory or contractual confidentiality obligations, or public institutions such as the Business Succession and Handover Support Center.
2. When establishing an exclusivity clause, the contract term shall be set with a target duration of no more than 6 months to 1 year.
3. We shall include a clause (including verbal statements) clearly stipulating that the client may terminate the brokerage or FA agreement at any time.

Regarding clauses restricting direct negotiations, we shall act in strict compliance with the following points.

1. Candidates subject to restrictions on direct negotiations shall be limited solely to those candidates with whom the M&A specialist has been involved, has made contact, or has introduced (except in cases where the client has explicitly agreed not to “discover candidates on their own” and not to “negotiate directly with candidates they have discovered on their own” (assuming a scenario where the client requests the M&A specialist to provide support for concluding an M&A transaction with a candidate discovered by the client)).
2. Negotiations subject to restrictions on direct contact shall be limited to those conducted for the purpose of M&A between the client and the target.
3. The term of validity of the clause regarding restrictions on direct contact shall be limited to the period until the termination of the brokerage agreement or FA agreement.

Regarding tail clauses, we will act in strict compliance with the following points:

1. The tail period shall generally be limited to a maximum of two to three years.
2. The scope of the tail clause is strictly limited to acquirers with whom the relevant M&A specialist has been involved or has had contact, and is limited solely to those introduced to the seller. Specifically, if the interaction is limited to the presentation of a long list, short list, or non-disclosure sheet (teaser), it shall not be subject to the tail clause. The scope is limited to acquirers to whom the seller has been introduced, provided that at least a “name clear” (sending a company profile to the acquirer and disclosing the seller’s name) has been performed.
3. *Note: While the guidelines indicate that the scope of the tail clause should be limited to acquirers to whom the seller has been introduced following a name clear, this does not necessarily imply that the validity of the tail clause is recognized in all cases where this condition is met.
4. If an exclusive representation clause is not included in the brokerage or FA agreement, and the client receives support from multiple M&A specialists, resulting in introductions to the same potential buyer from multiple M&A specialists, we will not charge a fee based on the tail clause if we are not selected by the client as the M&A specialist to assist in closing the deal.

Risks of Conflicts of Interest for Intermediaries and Practical Countermeasures (*Not required if not providing intermediary services)When providing intermediary services, we will act in compliance with the following points in particular.

1. Prior to concluding an intermediary agreement, we will inform both the seller and the buyer that we are an intermediary entering into an intermediary agreement with both parties (particularly, if the intermediary agreement stipulates that we will receive fees from both parties, we will state this fact).
2. Upon entering into the brokerage agreement, we will explicitly explain to each party any matters where a conflict of interest between the parties is anticipated. Furthermore, if we become aware of any information related to matters where a conflict of interest between the parties is anticipated (including information that is advantageous or disadvantageous only to one party), we will promptly and explicitly disclose such information to each party.
3. Since we are acting on behalf of both parties, we must remain neutral and impartial toward both parties and will not engage in any conduct involving a conflict of interest that would unduly benefit or disadvantage one party.
4. In particular, we will never engage in such conduct for the purpose of benefiting the broker or a third party, and the brokerage agreement shall stipulate, at a minimum, that the broker is obligated not to engage in the following acts:
5. • Acts of obtaining additional fees from the acquiring party and providing preferential treatment to said acquiring party (such as prioritizing matchmaking contrary to the parties’ needs or inducing an unreasonably low transfer price)
   • Acts of giving preferential treatment to repeat clients and providing preferential treatment to said clients (such as prioritizing matchmaking contrary to the parties’ needs or inducing an unreasonably low transfer price)
   • Acts of demanding, from the seller (buyer), a certain percentage of the difference between the desired transfer price and the actual transfer price as a reward, separate from the standard commission, when an M&A transaction is concluded at a transfer price higher (lower) than the seller’s (buyer’s) desired price
   • Acts of failing to convey information requested by one party to the other party, or of falsely conveying information to the other party that the first party did not actually disclose
   • Acts of withholding information that is advantageous or disadvantageous only to one party, rather than conveying it to that party
6. We do not perform definitive valuations; instead, we advise clients to seek the opinions of professionals such as certified public accountants or other experts as necessary.
7. When presenting the results of a valuation—calculated simply as a reference (simplified valuation)—as an approximate or provisional amount to both parties, the following points must be clearly stated to both parties:
8. • That this is not a definitive valuation but rather a simplified calculation provided for reference purposes only
   • If the intentions or opinions of one party were taken into account during the simplified valuation, the content of those intentions or opinions
   • That opinions from professionals such as licensed practitioners may be sought as necessary
9. In negotiations, we will strive to realize the interests of both parties with neutrality and fairness, without seeking to benefit only one party.
10. We will not conduct due diligence ourselves, nor will we determine conclusions regarding the content of due diligence reports; instead, we will advise the client to seek the opinions of professionals such as licensed practitioners as necessary.

Other

1. In addition to the above, we will endeavor to act in accordance with the spirit of the SME M&A Guidelines.