SOURCING BROTHERS Co., Ltd. (hereinafter referred to as “our company”) declares the following regarding compliance with the “Small and Medium-Sized M&A Guidelines(3rd Edition)”.

Efforts to Ensure and Improve the Quality of Support

1. We will fulfill our obligations under contracts with clients.
・I will not seek to benefit myself or third parties at the expense of my clients’ interests.
・(In the case of a broker) I will be fair and impartial to all clients, ensuring that I do not prioritize one client’s interests over another’s or harm one client’s interests unfairly.

2. Regardless of contractual obligations, as a matter of professional ethics, we will respect the client’s intentions and take actions to realize their benefits.

3. The representative recognizes that improving knowledge and skills and ensuring proper business execution are essential for ensuring and enhancing the quality of support. They communicate the importance of these efforts both internally and externally, and will implement actions consistent with the conveyed message.

4. We are implementing initiatives to enhance knowledge and skills.

5. We are conducting initiatives to ensure proper business practices among executives and employees involved in support services.

6. When outsourcing part of our operations to third parties, we are implementing initiatives to ensure the proper execution of tasks by external contractors.

Specific Guidelines for the M&A Process

7. We will provide practical proposals to clients based on professional expertise, supporting their M&A decision-making. In doing so, we will keep the following points in mind:
・We will explicitly explain any significant advantages and disadvantages that we are aware of to the client.
・We will recognize our duty of care (duty of good management) in handling the client’s corporate information prior to concluding any intermediary or FA contracts and will handle it appropriately.

8. Regarding the conclusion of intermediary or FA contracts, we will enter into contracts that align with the actual business model.

9. Before concluding the contract, we will provide the client with a written document outlining important matters related to the intermediary or FA contract (items (1) to (13) below) to ensure clear understanding and obtain the client’s consent:
(1)The differences between an intermediary, who contracts with both parties (the transferor and the transferee) and provides advice to both, and an FA, who contracts with only one party and advises only that party (including cases where the intermediary receives fees from both parties).
(2)The scope and content of the services provided (e.g., conducting matching, valuation, negotiations, scheme planning, etc.).
(3)Matters related to fees (calculation standards, amounts, minimum fees, deductions from fees already paid, payment timing, etc.).
(4)Costs other than fees that the client should pay (types of costs, payment timing, etc.).
(5)Matters related to confidentiality (if imposing confidentiality obligations on the client, the nature of those obligations, the facts subject to confidentiality, partial waivers of confidentiality obligations for professionals or public institutions, etc.).
(6)Matters related to restrictions on direct negotiations (if prohibiting the client from discovering candidates and engaging in direct negotiations with them, the details of those restrictions, and the scope of restricted subjects and purposes).
(7)Exclusive clauses (possibility of seeking a second opinion, etc.).
(8)Tail clauses (tail period, target M&A, etc.).
(9)Contract period (contract duration, matters related to renewal, etc.).
(10)If there are clauses that remain in effect after contract termination, those clauses and their validity period.
(11)Matters related to contract termination, including stating that the client can terminate the intermediary or FA contract mid-term.
(12)Matters related to liability (exemption) (conditions under which liability for damages arises, scope of compensation, etc.).
(13)(For intermediaries) matters that may lead to a conflict of interest with the client.

10. Explanations will be provided to individuals authorized to conclude contracts.

11. After the explanation, we will allow the client sufficient time for consideration.

12. When conducting valuations (business or enterprise valuations), we will explain the evaluation methods and assumptions to the client in advance and ensure their understanding of the evaluation methods and price ranges.

13. When selecting (matching) the transferee, we will take care to prevent detailed information about the transferor from leaking externally prior to the conclusion of a confidentiality agreement.

14. During negotiations, we will support the client by clearly explaining the overall picture of small to medium-sized M&A transactions and the subsequent flow of events in a way that is easy to understand, even for less experienced clients.

15. When conducting due diligence (DD), we will encourage and support the transferor in preparing the documents requested by the transferee.

16. Before concluding the final contract, we will encourage the client to re-confirm that there are no omissions in the contract details.

17. At closing, we will ensure that specific arrangements for closing are in place and confirm that the transfer price has been securely deposited by the transferee on the day of closing.

Points to Consider Regarding Contract Terms for Intermediary and FA Contracts

When establishing exclusive clauses, we will specifically adhere to the following points:

18. When establishing an exclusive clause, we will limit its scope as much as possible. Specifically, if the client clearly expresses the parts where they wish to seek the opinion of another support organization, and there is no reasonable reason to prevent this, we will allow the client to seek a second opinion from other support organizations. However, we will manage information by prohibiting the disclosure of information about the other party or limiting consultation to individuals with legal or contractual confidentiality obligations or public institutions such as business succession and handover support centers.

19. If an exclusive clause is established, the contract period will be set as a guideline of no longer than 6 months to 1 year.

20. We will include clauses that explicitly state that the client can terminate the intermediary or FA contract at any time (including oral statements).

Regarding restrictions on direct negotiations, we will specifically adhere to the following points:

21. The candidates subject to restrictions on direct negotiations will be limited to those candidates introduced by the M&A professional who has engaged with and contacted them (unless the client explicitly understands that they will not “discover candidates themselves” and will not “engage in direct negotiations with candidates they have discovered themselves,” assuming they will request the M&A professional to support the formation of an M&A with candidates they discovered).

22. Restrictions on direct negotiations will be limited to those conducted for the purpose of M&A between the client and the candidate.

23. The validity period of the clauses regarding restrictions on direct negotiations will be limited to until the intermediary or FA contract is terminated.

Regarding tail clauses, we will specifically adhere to the following points:

24. The tail period will be set as a guideline of no longer than 2 to 3 years.

25. The target of the tail clause will be strictly limited to the transferee that the M&A professional has engaged with, contacted, and introduced to the transferor.

Points to Consider When Conducting Intermediary Business

When conducting intermediary business, we will specifically adhere to the following points:

26. We will fulfill our obligations under contracts with clients, treating all clients fairly and equitably, without prioritizing the interests of one party or unfairly harming the interests of either party.

27. Before concluding the intermediary contract, we will inform both parties that the intermediary is contracting with both the transferor and the transferee (especially if the contract specifies that fees will be received from both parties).

28. Upon concluding the intermediary contract, we will explicitly explain to both parties the matters that may be considered a conflict of interest between them (e.g., that while entering into contracts with both the transferor and the transferee may facilitate communication and smooth procedures, it does not necessarily emphasize maximizing the transfer amount).

29. Additionally, if we recognize any matters that may present a conflict of interest between the two parties (including information that is advantageous or disadvantageous to only one party), we will promptly and clearly disclose this information to each party.

30. We will not conduct definitive valuations and will advise clients to seek the opinions of professionals as necessary.

31. When presenting results of valuations calculated simply (simplified valuations) as rough estimates or provisional amounts as reference materials to both parties, we will clearly indicate the following:
・It is not a definitive valuation but a simple calculation for reference.
・If one party’s intentions, opinions, etc. were taken into consideration in the simplified evaluation, the details of those intentions, opinions, etc.
・The ability to seek the opinions of professionals as necessary.

32. In negotiating support, we will ensure neutrality and fairness, working to protect the interests of both parties without favoring only one party’s interests.

33. We will not conduct due diligence ourselves nor decide on conclusions regarding the contents of the due diligence report, and we will advise clients to seek the opinions of professionals as necessary.

Other

34. In addition to the above, we will strive to respond in accordance with the principles of the Small and Medium-Sized M&A Guidelines.

End