How does the Floors To Go CashBack program (Item 5) affect the franchisee's

IAL FEES**

A. Single Showroom Membership

As a new member, you will be charged an Initial Membership Fee of $10,000. This fee is payable as follows: (a) $1,000 is paid at the time your Membership Agreement is signed; and (b) the remaining $9,000 is paid through the FTG CashBack Program (described below) whereby you will grant FTG the right to retain all proceeds allocable to you from the FTG CashBack Program up to the $9,000 amount or for a five-year time period, whichever occurs first (referred to hereafter as the "CashBack Participation"). If the CashBack Participation does not generate proceeds to FTG of $9,000, whatever lesser amount of proceeds is collected by FTG over the five-year participation period on your behalf will be deemed payment in full for your Initial Membership Fee. If your Membership Agreement is terminated prior to completion of the initial five-year term, the remaining balance of the Initial Membership Fee shall be due and payable by you to us in cash immediately upon the date of any such termination.

The FTG CashBack Program consists of various floor covering and window treatment manufacturers offering CashBack incentives for the purchase of selected floor covering and window treatment products. When you purchase such selected carpets and/or floor coverings you will be credited with a cash rebate based upon a percentage of the selected carpets and/or floor coverings purchased. These percentages range up to 8% of the purchase price of selected items. Such cash rebates will be paid to FTG on your behalf when you earn such CashBack incentives. FTG will hold such funds, without liability for interest, and after verification of amounts received, and after setting off any amounts that you owe to FTG, will distribute such funds to you annually or semi-annually. You are eligible to participate in the FTG CashBack Program and will be notified on a regular basis of qualifying CashBack items received on your behalf.

The Initial Membership Fee entitles you to participate in the FTG System and to receive various marketing materials currently available through the FTG System. Proceeds from the Initial Membership Fee are, in part, profit to us and are, in part, used to pay some of the following costs and expenses incurred by us for: (1) obtaining and screening Members; (2) administering the territories; (3) providing assistance to Members; (4) accounting fees and legal fees; (5) protection of our commercial symbols, names, proprietary trademarks, service marks and copyrights; (6) developing new product lines, marketing programs and advertising materials; (7) paying salaries and benefits to our management and employees; and (8) marketing and selling memberships.

In addition to the Initial Membership Fee, you will be obligated to make certain other expenditures, which are described in Items 6 and 7 below. Some of these expenditures must be made before you can open your Showroom for business. However, other than the Initial Membership Fee, you will not be required to pay FTG or its affiliates any fees or amounts for services or goods received from them prior to the time you open your FTG Showroom for business.

The Initial Membership Fee is not refundable except that if you reach $350,000 of first quality, running line purchases, exclusive of promotional products, special purchases and

SP's, through the FTG System within the twelve-month period beginning on the 90^th day after the date your membership begins, your Initial Membership Fee will be waived, and all payments you have made for such fee will be refunded to you by FTG on or after the fifteenth month after the date your membership begins.

B.