December 17, 2004

Soundtraxx Announces "MAP" Policy

Soundtraxx is the 2nd major DCC manufacturer to announce a "Minimum Advertised Pricing" (MAP) to
assist bona fide dealers. NCE Corp took the first step in September. Here is a copy of their release to dealers.

MINIMUM ADVERTISED PRICING POLICY

SoundTraxx takes both our relationship with our dealers and our commitment to their success very seriously. If you don’t do well, we don’t do well. As such, you’ll find the following to be true:

• We never compete with our dealers. Customers are always referred to area dealers first. Anything sold directly to a consumer from the factory is at full list price.
• We attend all the major model railroad shows to demonstrate the product only, referring all buyers to the attending dealers.
• We advertise our products regularly in most major model railroad publications.
• All dealers are treated equally. Our discount structure applies to all dealers large or small. There are no special deals for ‘special’ dealers.

While it is tempting to sell direct, we recognize that we market a product that is difficult to sell if not heard. It’s important to display our product in as many places as possible, so that as many potential customers as possible can hear for themselves.

We fully support the efforts of our dealers who advertise and promote our products. However, as we clearly state in our Dealer Information and Order Policy, we reserve the right to revoke dealer privileges under any circumstance that we deem to be detrimental to SoundTraxx.

In recent years, the practice of selling our products at heavily discounted prices has increased to the point where we feel this is not conducive to good business. A growing number of hobby shops are struggling to make a profit, feeling the pressure to compete on price with Internet and catalog-based businesses. In an effort to support all of our dealers in a fair and equitable manner, we have decided to institute an MAP (Minimum Advertised Price) plan. Therefore, effective March 1, 2005, a Minimum Advertised Price plan will be in effect. The following describes the rules and conditions of the MAP Plan. If you do not understand something about the plan, please be sure to ask one of our staff for clarification. It is your responsibility to fully comprehend and follow the policy.

THE SOUNDTRAXX MAP POLICY

1. The Minimum Advertised Price for all SoundTraxx products shall be 20% less than the Manufacturer’s Suggested Retail Price (MSRP, or List Price) as stated on the most recent price list issued to dealers and posted on our website. MAP pricing is determined by SoundTraxx and will be strictly enforced.

2. The MAP policy applies to all advertisements of SoundTraxx products in any and all printed media, including, but not limited to catalogs, coupons, flyers, inserts, magazines, mail order catalogs, mailers or postcards, newsletters, newspapers, and posters. The MAP also applies to Internet-based advertising such as email newsletters, email solicitations, newsgroups, Internet ‘lists’, website advertising, internet auctions, and electronic billboards, pop-ups or bulletin boards. Finally, the MAP also governs any television or radio advertising.

3. Advertising any SoundTraxx product with a free or discounted product (whether manufactured by SoundTraxx or any other manufacturer), which has the effect of lowering the price below the MAP, is considered to be in violation of the policy, unless it is a company-sponsored, sanctioned event issued in writing.

4. Any advertisement that displays the MAP must do so without any modification or strike-through of that price. Alternatively, it is acceptable to list in lieu of the MAP, such descriptive phrases such as “call for price”, “compare our prices”, “no one beats our prices”, or some statement with a similar connotation.

5. MAP applies only to advertised pricing and not the price at which the product is actually sold. Prices quoted in the dealer’s establishment, within the confines of a tradeshow booth or on the telephone are not considered advertised prices and are not subject to the MAP. While dealers are encouraged to sell SoundTraxx products at a price point that affords them a profit on the sale, they continue to be free to set any price they deem necessary: the MAP policy does not establish maximum advertised pricing.

6. Product that has been officially discontinued by SoundTraxx is not subject to the MAP Policy. SoundTraxx will issue product cancellations in writing.

7. SoundTraxx reserves the right to modify, suspend or cancel the MAP pricing at any time and will notify dealers at least 30 days in advance of any intent to do so.

8. Any dealer who intentionally violates this policy will have his or her dealership privileges terminated. SoundTraxx reserves the right to first issue a warning to the offending dealer, however, no second chances exist, and SoundTraxx also reserves the right to terminate privileges without warning. We hope that this new policy will encourage our dealers to compete, not only on price, but also on the quality and quantity of services offered.