KATO USA Minimum Advertised Pricing (MAP) Policy Objective: To ensure that our dealer-product relationships are consistent and value based. The MAP Policy: Minimum Advertised Pricing (MAP) is the minimum or lowest price Kato USA distributors and/or their dealers will be allowed to advertise Kato products. Kato USA actively supports the advertising and promotion of its products by its dealers and distributors through materials provided by Kato USA at no or nominal cost and through advertisements placed by Kato USA. We at Kato USA have determined that we shall not support advertising, cooperative advertising or promotional materials that have the effect of diminishing or detracting from the perceived value of Kato products. A Minimum Advertised Price (MAP) on all Kato products will be in effect for all products announced and shipped after February 7, 2008. This policy applies to all Kato USA distributors and their dealers selling Kato USA offered items. We have implemented this MAP policy to preserve our reputation for providing customers with high quality and valued products. The MAP policy is instituted under the following guidelines: 1. The MAP for all Kato products shall equal the MSRP for all items listed on each Kato price sheet, catalog or product announcement for dealers and distributors. MAP pricing is established by Kato USA and may be adjusted by Kato USA at its sole discretion. 2. The MAP pricing shall remain in effect from the announcement period and through the period of 60 days from the date of the initial shipment of the product for all new products and re-runs. Page: 1 of 4 KATO U.S.A., INC. 100 Remington Rd., Schaumburg, IL 60173-3705 Phone 847-781-9500 Fax 847-781-9570 www.katousa.com KATO USA Minimum Advertised Pricing (MAP) Policy (continued) 3. The MAP policy applies to all advertisements of Kato products in any and all media, including, but not limited to, flyers, posters, coupons, mailers, inserts, newspapers, magazines, catalogs, mail order catalogs, e-mail news letters, e-mail solicitations, internet or similar electronic media, television, radio, and public signage. The MAP policy is not applicable to any in-store advertising that is displayed only in the store and not distributed to any customer(s). 4. The inclusion in advertising of free or discounted products (made by Kato or another manufacturer) with a product covered by the MAP policy would be contrary to the policy if it has the effect of discounting the advertised price of the covered product below the MAP. 5. If pricing is displayed, any strike-through or other alteration of the Minimum Advertised Price is prohibited. 6. MAP applies only to advertised prices and does not apply to the price at which the products are actually sold or offered for sale to an individual consumer within the dealer’s retail location, at trade shows or over the telephone. Kato USA dealers and distributors remain free to sell these products at any prices they choose. A Kato USA dealer constitutes any retailer selling Kato USA offered products. 7. MAP does not establish maximum advertised prices. All dealers and distributors may offer Kato products at any price in excess of the MAP. Internet auctions may not display or have reserved bid or other acceptable prices below the MAP price. 8. Kato USA’s MAP policy does not in any way limit the ability of any dealer to advertise that “they have the lowest prices” or, they “will meet or beat any competitors price”, that consumers should “call for a price” or phrases of similar import as long as the price advertised or listed for the products is not less than the MAP. Page 2 of 4 KATO U.S.A., INC. 100 Remington Rd., Schaumburg, IL 60173-3705 Phone 847-781-9500 Fax 847-781-9570 www.katousa.com KATO USA Minimum Advertised Pricing (MAP) Policy (continued) 9. From time to time Kato USA may discontinue models or engage in promotions with respect to certain products. In such events, Kato USA reserves the right to modify or suspend the MAP with respect to the affected products by notifying all dealers and distributors of such change. Kato USA further reserves the right to adjust the MAP with respect to all or certain products at its sole discretion. Such changes shall apply equally to all Kato USA dealers and distributors. 10. Intentional or repeated failure to abide by this policy will result in termination of dealership or distributorship and the retailer will be prohibited access to purchasing future merchandise through Kato USA or Kato USA Authorized Distributors. Kato USA will not provide prior notice or issue warnings before taking any action under this policy. This MAP policy has been established by Kato USA to help ensure the reputation of Kato USA as a producer of precision railroad models for their customers while also helping to promote and maintain a healthier and more profitable retail environment. Sincerely, Hiroshi Kato President Kato USA, Inc.