GIFT BAG PROCEDURE NOVEMBER 2008 Koala Publishing

After much internal discussion and analysis of feedback from all sources, a number of business parameters regarding Gift Bags were established as follows: 1)Margins for Distributors who fully handle/distribute Gift Bags must be substantially higher than the margins earned by Distributors who only partially handle /merchandise. 2)Existing Card/Wrap customers will always have priority when allocating/assigning Koala Gift Bag Racks. 3)Koala Gift Bag Racks must be serviced by Koala Distributors unless a customer insists on doing it themselves or the customer is a Direct Sales account. 4)Koala will not supply Gift Bag Racks on loan willy nilly. Supply will be restricted to existing good volume Card/Wrap accounts and to select high potential Gift Bag only accounts. 5)Any Gift Bag Racks that don’t meet minimum sales / throughput levels within 6 months, will be taken back for placement elsewhere.(Cost of poor performing racks is prohibitive and cannot be sustained.) GIFT BAG PROCEDURE OCTOBER 08

6)All Gift Bags sold via distributor and/or direct are on a firm sales – no returns basis. 7)Gift Bags Titles that prove to be slow sellers (it’s unrealistic to expect that every image produced over the years will always be a strong seller) will not be allowed to clog up our Gift Bag racks and retailers will be given an additional discount to clear these titles, remove them from our racks and hang elsewhere in their store or destroy them. (As Retailers are realizing high margins on Bags to offset the Firm Sale Only Condition the discount offered to clear select titles will be relatively small) 8)Specialty Gift Bag Titles (Xmas, Valentines, etc) must be removed from Koala Gift Bag Racks and either stored by retailer for following year or heavily discounted by retailer similar to post-Xmas Sales in January to clear, as again Koala insistent that its racks must not be allowed to be clogged up. 9)Distributors servicing Koala Gift Bag Racks in their customer stores must raise separate invoices on customer for Gift Bags to eliminate any possible confusion between Firm Sales on gift bags versus our Vendor Supply, Sale or Exchange conditions, for our card and folded wrap products. 10) New distributorships will automatically include bags, no options. GIFT BAG PROCEDURE OCTOBER 08 cont…

Koala Gift Bag – Supply & Servicing Options Distributor: All existing card and wrap customers and those non card customers with spinner rack or wall hanging unit. OPTION 1: DISTRIBUTOR BUYS GIFT BAGS FROM KOALA, STOCKS SAME, SERVICES GIFT BAG RACKS AND DOES EVERYTHING EXACTLY AS PER CARD/WRAP WITH ONE EXCEPTION, DISTRIBUTOR MAKES OUT AN INVOICE FROM SEPARATE INVOICE BOOK THAT STATES; FIRM SALE – NO RETURNS OR EXCHANGES (KOALA SELLS TO THE DISTRIBUTOR ON THE SAME BASIS ) GIFT BAGS Small TBA MEDLGEX/LGEWINEJUMBO BUYING PRICE BOX SELLING PRICE INNER 12 UNITS PACK SELLING PRICE MARGINS PER BAG FROM TO OPTION 2: DISTRIBUTOR RECOMMENDS ORDER TO CUSTOMER, GETS SIGNATURE, FAXES TO KOALA. KOALA PACKS OUT EACH ACCOUNT ORDER SEPARATELY AND BI-MONTHLY SENDS AND INVOICES DISTRIBUTOR ALONG WITH NORMAL CARD ORDERS. DISTRIBUTOR VISITS STORES AND INSTALLS PREPARED ORDER AND INVOICES CUSTOMER DISTRIBUTOR RECEIVES 5c FOR SMALL AND 9C FOR EVERY OTHER BAG SOLD

PROCESS: OPTION 1: Distributor’s will receive an initial allocation based on the number of gift bag spinners, wall hanging units in their territory. This will include Xmas product. We will not send Jumbo Xmas bags, these need to be ordered by distributor. The distributor will receive a quantity of bags at no charge to offset any early stock issues. Koala will provide a quantity of flat boxes to assist with sorting and transport. Until further notice Koala will allow distributors to as required but must be in minimums of 12’s (sleeves) and a minimum of 144 for small, medium, wine, large, 108 for extra large and 48 for Jumbo. You can order in sets or bulk, make up your own on the order form the same as cards. These will all be invoiced under Koala and the credit terms will be the same as cards and wrap EXCEPT that gift bags are firm sale to distributors. Distributor’s are expected to service gift bags in the same manner as cards, where Koala has spinners or wall units ie making the rack presentable and filling. Where stores have their own displays it is up to the individual distributor on how they wish to handle. There are a number of large volume customers in this category and it can be very worthwhile to assist wherever possible. All Koala Central accounts will buy at the best price (carton price) regardless of the quantity supplied. Distributors are to invoice Koala central accounts in the same manner as cards and send invoice and deliver docket to Koala. End of month procedure and re-imbursement will be identical to cards and wrap. Distributors are to enter all information into SARS as per new SARS manual.

PROCESS: OPTION 1: cont…. Gift bags are always supplied as a firm sale, however Koala is somewhat unique in as far as we are supplying spinners. Whilst we will maintain the rack the store must acknowledge orders and accept firm sale. We don’t want slow selling bags limiting our sales potential and we need to be pro-active in the clearance of these items. We should advise store to re-locate to another area and discount such items, we would recommend Medium and Large at $1 and Extra Large at $1.50. The retailer doesn’t lose money. New rack installations, Koala will continue to pay the $30 installation fee in addition to the commission for the bags to distributors but as with all racks a $10 delivery fee will be charged. Distributor to forward claim at month end with appropriate booking forms. Distributor’s must follow pricing matrix for non central accounts and sell at 6 pack, 12 pack or box prices, we must maintain integrity within the industry. These prices provide a very generous return to distributors. Gift bags must be ordered with card and wrap orders. Orders can be supplied separately but distributor will have to pay the freight.

PROCESS: OPTION 2: Distributor will take orders, service and maintain all existing Koala card and wrap customers and those who have gift bag spinners and wall hanging racks. They will fax order direct to Koala, these orders should have an accompanying header providing distributor details. Gift bag customers without racks are supplied at the discretion of the distributor, otherwise by Koala direct. Koala will compile orders and send with next card and wrap order to distributors. Distributor will be invoiced for this stock and they will in turn invoice customer and complete all the details as per Option 1. Complete SARS and re-imbursement at month end will be 9c per bag, (5c small) credited against your account at the 10th of the month. Installations will be the same as option 1.