Declaration of Compliance with the SME M&A Guidelines (3rd Edition)

Ataraxia Partners hereby declares that it will comply with the “SME M&A Guidelines (3rd Edition)” established by Japan’s Small and Medium Enterprise Agency, and that it will implement the following initiatives and measures in the M&A and business-succession support services provided through KEISHO.

1. Ensuring and improving the quality of support

We will faithfully perform our contractual obligations to clients and carry out M&A support services with the care of a prudent manager.

We will not pursue our own interests or those of a third party at the expense of the client.

When acting as an intermediary, we will maintain a fair and impartial position toward both the transferor and the transferee, and we will not unduly prefer the interests of one party or unduly harm the interests of the other.

We will also strive to maintain and improve the knowledge and capabilities required for M&A support, and will establish the systems needed to ensure appropriate performance of work, information management, complaint handling, and other aspects of support quality.

Where part of the work is entrusted to attorneys, certified public accountants, tax accountants, or other external professionals, we will appropriately manage the scope of the entrusted work, information handling, and confidentiality.

2. Support for M&A decision-making

For SMEs considering M&A, we will, in light of the circumstances of each matter, explain as clearly as possible the advantages, disadvantages, and material risks of M&A.

We will respect that the final decision on whether to proceed with an M&A is the client’s own, and we will provide sufficient materials and time for consideration.

3. Advertising and solicitation

When conducting advertising or solicitation relating to M&A support, we will make clear the name of Ataraxia Partners or Keisho, the name of the person in charge, and that the contact is for the purpose of entering into an M&A support agreement.

If the other party indicates that they do not wish to receive further solicitation, we will respect that intention and promptly cease such activity.

We will not make false or misleading statements, or present definitive judgments, regarding matters that may affect a decision to enter into a contract, including the likelihood that an M&A will close, the transfer price, or the existence of candidate companies.

4. Explanations before entering into an FA or intermediary agreement

Before a contract is concluded, we will explain at least the following matters to the client in writing or by electronic means:

• The difference between financial-advisory (FA) services and intermediary services
• The scope and content of the services provided by Keisho
• The qualifications, experience, and M&A support track record of the person in charge
• The types of fees, calculation basis, amounts or rates, minimum fees, and timing of payment
• Costs that may arise in addition to fees
• In the case of intermediary services, fees received from the other party
• Matters relating to confidentiality
• Matters relating to restrictions on direct negotiation
• Whether an exclusivity clause exists, and its content
• Whether a tail clause exists, and its content
• Contract term and renewal
• Termination and mid-term cancellation
• Matters relating to liability and disclaimers
• Provisions that survive termination of the contract
• Conflicts of interest that may arise in the case of intermediary services
• An overview of the investigations to be conducted on prospective transferees
• Status of participation in the information-sharing system concerning inappropriate transferees

After confirming that the client has sufficiently understood these matters, we will allow a reasonable period for consideration before the contract is concluded.

5. Transparency of fees and services provided

With respect to Keisho’s fees, where there is a success-fee calculation basis, a base fee amount, a rate, a minimum fee, a retainer, an interim fee, a monthly fee, or any other charge, we will clearly explain the content and the timing of such charges in advance.

We will also specify, for each stage of the M&A process, the concrete services Keisho provides in return for those fees.

6. Valuation

Where we present a valuation or a reference price for enterprise value or business value, we will explain the valuation method used, the principal assumptions, and the nature of the result.

Where a simplified valuation is performed as part of intermediary services, we will make clear that it is reference information and not a definitive enterprise-value appraisal, and we will recommend, as appropriate, consultation with a certified public accountant, tax accountant, or other professional.

7. Matching and disclosure of information

Where information that could identify the transferring company is disclosed to a prospective transferee, we will, as a rule, obtain the transferor’s consent in advance and take appropriate information-management measures, including a non-disclosure agreement.

We will not disclose information concerning the transferor beyond the scope necessary for the progress of the M&A process.

8. Support for negotiation and contract execution

We will explain the overall M&A process and subsequent procedures to the client in an understandable manner, and will support the smooth progress of issue-framing, negotiation, due diligence, definitive agreements, and closing.

For matters requiring legal, tax, or other professional judgment, we will recommend, as appropriate, consultation with attorneys, certified public accountants, tax accountants, or other suitable professionals.

9. Due diligence

We will explain the importance of due diligence to the client and support the preparation of necessary materials, coordination with professionals, scheduling, and related matters.

When acting as an intermediary, we will not ourselves make a final professional judgment on due diligence that requires professional qualifications, and we will recommend the use of qualified professionals as needed.

10. Definitive agreements and closing

Before a definitive agreement is signed, we will support the client in recognising material risk items.

With respect to management guarantees, representations and warranties, closing conditions, payment of consideration, and other material matters, we will recommend, as appropriate, consultation with professionals and financial institutions.

At closing, we will confirm and coordinate necessary documents, settlement procedures, and other implementation items.

11. Exclusion of inappropriate transferees

To protect the interests of the transferring company, we will, according to the circumstances of the matter, confirm the following with respect to prospective transferees:

• Financial capacity to pay the transfer consideration
• Ability to continue the target business after the M&A
• The substance of the business
• Representatives, officers, major shareholders, and similar persons
• Relationships with anti-social forces
• Past M&A disputes and other compliance issues

If we obtain information giving rise to material concern, we will, as appropriate, discontinue matching or carefully reconsider the matter.

When acting as an intermediary, if we become aware of material information indicating that a transferee is inappropriate, we will disclose it to the transferor as needed.

12. Exclusivity, restrictions on direct negotiation, and tail clauses

Where an exclusivity clause is included, we will limit its necessity and scope to a reasonable range.

We will not unduly prevent the client from obtaining a second opinion from another professional as needed.

Where direct negotiation is restricted, the restriction will, as a rule, be limited to candidates introduced or involved by Keisho and to negotiations relating to the relevant M&A.

Where a tail clause is included, we will limit its duration and the candidates to which it applies to a reasonable range.

13. Handling conflicts of interest in intermediary services

When providing intermediary services, we will make clear that we are an intermediary contracting with both the transferor and the transferee.

Where fees are received from both sides, we will explain that fact and the fee structure before the contract is concluded.

We will not unduly favour one party by receiving additional remuneration from that party, unduly favour repeat clients, or otherwise harm the client’s interests through a conflict of interest.

14. Confidentiality and freedom to seek advice

We will appropriately manage confidential information received from clients in accordance with contract and applicable law.

We will not unduly restrict the client from consulting attorneys, certified public accountants, tax accountants, financial institutions, Business Succession and Handover Support Centres, the information desk of the M&A Support Institution Registration System, or other appropriate advisers.

15. Continuous improvement

In accordance with the purpose of the SME M&A Guidelines, Ataraxia Partners will strive for continuous improvement in the quality, transparency, fairness, and ethics of Keisho’s M&A support services.