UFOC

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Sample UFOC

FRANCHISE OFFERING CIRCULAR

AVALAR NETWORK, INC.

6430 Medical Center Street, Suite 100

Las Vegas, Nevada 89148

(877) 985-8988

AVALAR NETWORK, INC. franchises AVALAR real estate brokerage offices that specialize in the sale and leasing of residential and commercial properties. In states where it is permitted, AVALAR offices can also provide mortgage brokerage services to complement their real estate sales and leasing activities. AVALAR franchises include a special revenue sharing program, known as Path to Success®, that allows AVALAR franchisees and others to participate in a portion of the franchisor's royalty income by sponsoring new AVALAR brokers and sales affiliates as described in the attached Franchise Agreement.

The initial franchise fee for an AVALAR office franchise is $15,000.00 for the first office plus $2,500.00 for each additional office that the franchisee owns on the date of the Franchise Agreement. During the term of the Franchise Agreement, additional AVALAR offices can be added, subject to the franchisor' for a franchise fee of $2,500.00 each.

The estimated initial investment required to open an AVALAR office, excluding the initial franchise fee, is between $48,300.00 and $450,500.00 depending, for the most part, on the size, furnishings, and equipment of the franchisee's office facilities.

Risk Factors:

1.   THE FRANCHISE AGREEMENT REQUIRES YOU TO ARBITRATE AND/OR LITIGATE WITH US ONLY IN LAS VEGAS, NEVADA. REQUIRING YOU TO ARBITRATE OR LITIGATE EST LAS VEGAS, NEVADA, MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO ARBITRATE IN NEVADA THAN IN YOUR HOME STATE IF YOU ARE LOCATED OUTSIDE OF NEVADA.

2.  THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

Information about comparisons of franchisors is available. Call the state administrators listed in Exhibit 2 or your public library for sources of information.

Registration of this franchise with a state does not mean that the state recommends it or has verified the information in this offering circular. If you leam that anything in this offering circular is untrue, contact the Federal Trade Commission and the appropriate state franchise law administrator listed on Exhibit 2.

Effective Date: September 1, 2006, except as noted on the state-specific addendum to this circular

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0806

AVALAK*

FRANCHISE AGREEMENT

FRANCHISE OFFERING CIRCULAR

TABLE OF CONTENTS

1.  THE FRANCHISOR, ITS PREDECESSORS, AND AFFILIATES......................................1

2.  BUSINESS EXPERIENCE.....................................................................................................2

3.  LITIGATION...........................................................................................................................3

4.  BANKRUPTCY......................................................................................................................3

5.  INITIAL FRANCHISE FEE....................................................................................................3

6.  OTHER FEES..........................................................................................................................4

7.  INITIAL INVESTMENT.........................................................................................................5

8.  RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES..................................8

10.  FINANCING..........................................................................................................................9

11.  FRANCHISOR'S OBLIGATIONS......................................................................................10

12.  TERRITORY.......................................................................................................................11

13.  TRADEMARKS..................................................................................................................12

14.  PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION................................13

15.  OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE

FRANCHISED BUSINESS........................................................................................................13

16.  RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL.......................................14

17. RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION..................14

18.  PUBLIC FIGURES..............................................................................................................17

19.  EARNINGS CLAIMS.........................................................................................................17

20.  LIST OF FRANCHISE OUTLETS.....................................................................................18

21.  FINANCIAL STATEMENTS..............................................................................................21

22.  CONTRACTS......................................................................................................................21

23.  RECEIPT.............................................................................................................................21

EXHIBITS

1.  Financial Statements                      B. Continuing Guaranty

2.  State Franchise Law Administrators C. Disclosure and Confidentiality Agreement

3.  List of A VALAR offices                 D. General Release

A. Franchise Agreement                     E. Acknowledgment of Receipt

(including Path to Success®)

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1. THE FRANCHISOR, ITS PREDECESSORS, AND AFFILIATES

We are AVALAR NETWORK, INC., the franchisor of AVALAR offices. In this Franchise Offering Circular we refer to ourselves as "we", "us", "our", and similar words.

In this circular the words "you" and "your" refer to the person or people who are buying an AVALAR franchise. Those words also refer to a corporation, limited liability company, partnership, or any other entity that is buying the franchise.

Our principal business address is 6430 Medical Center Street, Suite 100, Las Vegas, Nevada, 89148. Our mailing address is P.O. Box 82010, Las Vegas, Nevada 89180. Our registered agent for service of process, if applicable, is listed in the Addendum to this Franchise Offering Circular.

We are a corporation that was incorporated in California on July 10, 1999, under the name RE 100, Inc. We changed our name to AVALAR NETWORK, INC. on August 28, 2001. We reincorporated in Nevada on February 21, 2003, and assigned all of our assets to the Nevada Corporation on that date. Other than as set forth, we have no predecessors or affiliates.

On January 6, 2003, we acquired all assets of the CPS Alliance Corporation, the owner and licensor of the service mark "CPS-Creative Property Services". Some of the remaining CPS offices use the CPS name in conjunction with the name AVALAR. The CPS names and marks are not offered as part of the AVALAR franchise.

We grant franchises only to experienced real estate and mortgage brokerage professionals. AVALAR offices specialize in the sale and leasing of residential and commercial real estate. The AVALAR franchise is also made available to mortgage brokerage offices, sometimes in conjunction with real estate sales and leasing activities where that is permitted by applicable law. While the Franchise Agreement permits the use of the AVALAR name, the use of that name, whether as the sole name of the business subject to the Franchise Agreement or in conjunction with the individual business name of the franchisee, is not required. However, in this circular we will refer to a franchised office as an "AVALAR" office.

The franchise offered by this circular is only for an AVALAR office franchise. We offer to qualifying candidates franchises to be area developers of AVALAR offices by means of a different Franchise Offering Circular.

Granting AVALAR franchises and Area Developer Agreements, and overseeing our franchised AVALAR offices, is our only business.

We have been offering AVALAR franchises since September 1999. We have not offered franchises in any other lines of business and do not do business under any other names, other than for overseeing the remaining CPS offices.

AVALAR franchisees, their full time and part time employees, and others affiliated with us and with the AVALAR system, are eligible to participate in our Path to Success revenue sharing

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AVALAR Franchise Agreement Franchise Offering Circular -0806

program which is described in Exhibit A to our Franchise Agreement. Under that program members share in a portion of our royalty income to the extent they have been designated as the sponsor of new AVALAR sales associates, no matter for which AVALAR office those sales associates work.

AVALAR offices are normally located in urban residential and business locations. AVALAR offices normally occupy from 500 to 10,000 square feet. The general real estate buying and leasing public is the market for the services provided by AVALAR offices. The market for the services provided by AVALAR offices is highly developed and very competitive. AVALAR offices compete with independent, chain, franchised, and other real estate and mortgage brokers who provide services similar to those provided by AVALAR offices. Usually AVALAR offices compete with other real estate sales organizations and brokers, as well as with mortgage brokers and real estate lenders in the same areas in which A VALAR offices are located.

AVALAR offices are subject to the normal laws and regulations affecting real estate and mortgage brokerage offices, as well as those pertaining to businesses in general. Most states have special licensing laws applicable to real estate brokers, sales agents, and mortgage brokers. It is your responsibility to learn about and comply with those laws.

2. BUSINESS EXPERIENCE

Chuck Scoble - President, Chief Financial Officer, Secretary, and Director

Mr. Scoble assumed his offices upon our formation. He has been in the real estate business since 1971 and has been a licensed real estate broker since 1985. In addition to his positions with us, Mr. Scoble was President and a Director of CPS Alliance Corporation, which he joined in 1992, until it was merged with us in 2003.

Sandrea Scoble Vice President and Director

Ms. Scoble, the wife of Chuck Scoble, became our Vice President and a Director of

AVALAR NETWORK, INC., in March 2002. From late 1997, until___she was the operating

member of Sonoma Design Center LLC in Santa Rosa, California, a furniture and design consulting company of which Mr. Scoble was also a member. Ms. Scoble was also a Director of CPS Alliance Corporation from 1995 until it merged with us in 2003.

Terrence Hubbard Director of Business Development

Mr. Hubbard became our Director of Business Development in March 2002. From April 1999, until he became our Director of Business Development, Mr. Hubbard served as a sales and business consultant to us and was also employed by CPS Alliance Corporation as a sales and investment consultant.

Jason Lawrence Director of Business Development - East Coast

Mr. Lawrence, a licensed real estate professional, assumed his current position with us in November, 2003. From November, 2000, until he joined AVALAR NETWORK, INC. he was

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Director of Sales and Marketing-International Meetings and Incentives of the Orlando/Orange County Convention and Visitors Bureau, Inc.

Julia Chambers - Director of Business Development, Southern California -Arizona - New Mexico - Hawaii

Julia Chambers joined us in January 2006. From December 2002 until she joined A VALAR, she was the Director of Franchise Sales for Realty Executives Inter-Mountain Region. From 1999, until she joined Realty Executives Ms. Chambers was the Controller of Catalyst RX, Bethesda, Maryland.

3.  LITIGATION

Neither we, our predecessors, affiliates, nor the persons identified in Item 2 of this circular are and have been engaged in any litigation that is required to be discussed in this offering circular.

4.  BANKRUPTCY

Neither we, our predecessors, affiliates, nor the persons identified in Item 2 of this offering circular have been involved as a debtor in proceedings under the U. S. Bankruptcy Code which is required to be discussed in this offering circular.

5.  INITIAL FRANCHISE FEE

You must pay us an initial franchise fee when you sign your Franchise Agreement of $15,000.00 for your first AVALAR office plus $2,500.00 for each additional office you own as of the date of the Franchise Agreement. If you add any offices while the Franchise Agreement is in effect, you must pay an additional fee of $2,500.00 for each of those offices. You will not be entitled to a refund of any of your initial franchise fee if the number of offices you maintain is reduced.

If you do not begin the operation of your AVALAR office or offices within 6 months from the date of the Franchise Agreement, we have the right to terminate your Franchise Agreement. If we terminate your Franchise Agreement for this reason, we will refund 90% of the initial franchise fee you have paid to us minus the cost of any third party software we may have purchased on your behalf.

You have the right to terminate your Franchise Agreement for any reason within the first 12 months of its term. If you do so, we will refund 90% of the initial franchise fee you paid us, less the amount we have spent for any software you are allowed to retain, within 30 days of your complying with the duties on termination set forth in your Franchise Agreement, including returning to us all computer software and all other items we provided, or caused to be provided, to you because of your affiliation with the AVALAR network. You must comply with duties on termination set forth in your Franchise Agreement within 15 days of your giving us your notice of termination in order to receive your refund. If you do not satisfy your duties on termination within this time period, you will not be entitled to a refund. This right to terminate only applies to your initial AVALAR

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Franchise Agreement and not to any extensions or renewals of that agreement or to any other agreements between us.

6. OTHER FEES

The following chart lists the other fees you must pay us in connection with the A VALAR franchise described in this circular.

Name of Fee

(See Note 1)

Amount

Due Date

Remarks

Royalty

5% of the monthly gross commission income ("GCI") generated by you and by each of your sales associates up to a maximum of GCI of $100,000.00 per person per 12 month period and then 2% of GCI for each such person for the balance of that period (See Note 2)

Monthly by the 10th day of each month based on your income for the prior month

Gross commission income includes all proceeds you receive from all real estate sales, leasing, and mortgage brokerage transactions conducted by or through your office, minus approved deductions.

Minimum Monthly Reporting Fee

$250.00

Monthly by the 10th day of each month.

Late Charge

$150.00 flat fee

Monthly in the event we do not receive your report and royalty fee payment by the 10th of the month.

If applicable law limits the amount of the late charge, the late charge will equal the maximum interest rate allowed on loans between businesses.

Audit Fees

Cost of audit plus late charge on past due balances

As incurred

Due only if an audit of your books shows an understatement of gross commission income of 3% or more for any reporting period or if the audit is needed because you have failed to follow our reporting requirements.

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4

Name of Fee

(See Note 1)

Amount

Due Date

Remarks

Special Visit Fee

Not to exceed $400.00 per day plus our out of pocket expenses

In advance of the service or as we otherwise direct

This fee is for special visits to your office over and above those we provide to you at no extra charge.

Relocation Charge

$500.00

At the time we approve your new location

This fee is to compensate us for our efforts in connection with your relocated office.

Transfer Fee

Our costs involved in connection with the transfer, not to exceed $1,500.00 per office transferred.

When billed

This fee is to compensate us for the costs to us in connection with the transfer of your franchise to a new owner.

Special Meeting Fee

Varies

In advance of meeting

If we hold special training courses, conventions, meetings, or special programs, we can charge those attending a fee for the event. The fees, if charged, will vary with the event.

NOTES:

1. These fees are payable to us and are not refundable except as described in Item 5 above. Royalties and other amounts paid to us are not refundable even if you terminate your Franchise Agreement within the first 12 months of your operation.

2. The amount of royalty per sales associate is determined on an individual basis, not in the aggregate.

7. INITIAL INVESTMENT

The following chart shows your estimated initial investment for an AVALAR office.

Item

Amount

Method of Payment

When Due

To Whom

Payment is to be

Made

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Item

Amount

Method of Payment

When Due

To Whom

Payment is to be

Made

Initial Franchise

Fee

(See Note 1)

$15,000.00 for your initial office, $2,500 for each additional office that you own on the date of the Franchise Agreement

Lump sum

Upon signing the

Franchise

Agreement

AVALAR NETWORK, INC.

Office Lease

Usually between $1.50 and $2.00 per square foot per month

$750.00-$20,000.00 per month

Lump sum

Monthly

Landlord or sublessor

Construction, remodeling, and leasehold improvements (See Note 3)

$15,000 to $150,000

Normally in

progress

payments

As arranged with supplier

General contractor

Equipment, computers, decor, furniture, fixtures, decorations, etc.

$5,000 to $100,000

As arranged with supplier

As arranged with supplier

Suppliers of furniture, fixtures, computers, equipment, etc.

Office supplies, brochures, stationery, etc.

$500.00 to $10,000

As arranged with supplier

As arranged with supplier

Vendors

Signs

$1,000 to $4,000

As arranged with supplier

As arranged with supplier

Sign company

Security deposits, utility deposits, business licenses, and other prepaid expenses (See Note 4)

$500 to $3,500

As arranged with supplier

As needed

Landlord, utility companies, government agencies, etc.

Insurance

$1,000 to $10,000

As required by insurance carrier

As required by insurance carrier

Property, liability, casualty, errors & omissions, and other insurance carriers.

Grand Opening advertising

$1,000 to $3,000

As arranged

with

suppliers

As needed

Newspapers, radio, etc.

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Item

Amount

Method of Payment

When Due

To Whom

Payment is to be

Made

Other pre-opening expenditures

$1,000 to $5,000

As arranged

with

suppliers

As needed

Attorney, accountant, and other providers.

Additional funds required before opening and during initial phase of business operation (See Note 5)

$6,000 to $30,000

As needed

As needed

Working capital, ongoing expenses, etc.

Total $48,300.00-$450J000.00 Investment:

(See Note 6)

NOTES:

1. You can terminate your Franchise Agreement for any reason within the first 12 months and receive

a refund of 90% of your initial franchise fee minus the cost of any third party software we may have purchased on your behalf.

2.  Most AVALAR offices are in urban areas and can be located in office buildings, free standing buildings, street locations, or shopping centers but not in a home. With our approval, you can temporarily locate your A VALAR office in an executive suite or similar facility while you are attempting to locate a permanent location for your office but not for longer than 6 months. An executive suite may be used as a branch office with our prior approval. A VALAR offices range in size from approximately 500 square feet to 10,000 square feet. Rents will vary depending on what additional charges are payable to the landlord and what services are provided as part of the rent. Charges can include such things as insurance, taxes, assessments, common area maintenance, heating, ventilating, and air conditioning, garbage, janitorial services, and similar charges. We have made no allowance on this chart for any rent that you may have to pay before your office is open for business. The need for rent payments before opening will depend on the terms of your lease.

3.  The cost for leasehold improvements can vary depending on the previous use of the space being

improved, costs of labor and materials in the area, local building and other code requirements, landlord construction criteria, the amount of the landlord's contribution to leasehold improvement expenses, if any, and other factors.

4. Lease security deposits normally equal 1 or 2 months rent.

5.  This is an estimate of the additional cash you will need over and above the net income of your

A VALAR office for your initial 3 to 6 months of operation. These estimates are based on the 30 years of experience of our principal executive officer in establishing numerous real estate offices. While these figures are based on our best estimates, we cannot guarantee that you will not have additional cash needs during this period and beyond. Your need for additional funds will depend on factors such as whether this franchise is for a new office or is in connection with the

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conversion of an existing office, your management skill, experience, and business ability, local economic conditions, the local market for real estate and mortgage brokerage services, competition, the sales level you reach during the initial period of your operation, and so forth.

6. The refundability of payments is up to the individual vendors with whom you contract. No allowance has been made in this chart for any principal or interest expenses required before the opening of your office. The need for this type of expense will vary with the terms of any financing you get in connection with your office.

8.  RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

Once we enter into a Franchise Agreement, if you want to open any additional AVALAR offices, we must approve your office location before you can lease or otherwise acquire it. You can only use your office for providing the services we approve.

We do not approve the suppliers of the items you purchase, only the quality and characteristics of those items. We provide you with our Corporate Style Guide that details the standards for your use of our trademarks and service marks. Neither we nor any of our affiliates are suppliers of any items you must purchase although in the future we, or they, may become so. We derive no income or other benefit from your purchases, although if we or our affiliates become suppliers of items you purchase, then we and our affiliates would derive revenues from those sales.

You agree to maintain an account with an Internet Service Provider so that we can communicate with you via e-mail.

We do not charge suppliers for doing business with AVALAR offices. We do not have a purchasing cooperative.

No special benefits are given to franchisees who purchase merchandise or services from any special source.

9.   FRANCHISEE'S OBLIGATIONS

THE FOLLOWING TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AGREEMENT. IT WILL HELP YOU FIND MORE DETAILED INFORMATION ABOUT YOUR OBLIGATIONS IN THIS AGREEMENT AND IN OTHER ITEMS OF THIS OFFERING CIRCULAR.

Obligation

Section in Franchise Agreement

Item in Offering Circular

a. Site selection and acquisition/lease

Section 5.1

Items 8 & 11

b. Pre-Opening purchases/leases

Section 6.02

Item 7

c. Site development and other pre-opening requirements

Sections 5.1, 5.3, 6.1-6.4

Items 7 & 11

d. Initial and ongoing training

Sections 7.01 &7.2

Item 11

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Obligation

Section in Franchise Agreement

Item in Offering Circular

e. Opening

Section 5.3

Item 11

f. Fees

Sections 3.1-3.3, 4.7, 5.7, 7.2, 8.9, 9.1-9.5,12.5, 12.8, 16.10, & 16.14

Items 5 & 6

g. Compliance with standards and policies/Operating Manual

Sections 8.1-8.6, 8.10-8.15, 10.1, 10.2 & 10.4

Items 8 & 11

h. Trademarks and proprietary information

Sections 2.1-2.6,10.1, 10.2, 10.4, 15.1-15.15, & 17.9.2

Items 13 & 14

i. Restrictions on products/services offered

Sections 2.2, 5.8, & 8.4

Items 8 & 16

j. Warranty and customer service requirements

Section 8.3

None

k. Territorial development and sales quotas

Not applicable

Item 12

1. Ongoing product/service purchases

Section 10.3

Item 8

m. Maintenance, appearance and remodeling requirements

Section 6.5

Item 8

n. Insurance

Sections 13.1-13.8

None

o. Advertising

Sections 10.1-10.4

Items 6 & 11

p. Indemnification

Sections 14.8-14.11

None

q. Owner's participation/management & staffing

Sections 8.3, 8.12, & 8.16

Items 11 & 15

r. Records/reports

Sections 8.8, 9.4, & 12.3-12.5

Item 17

s. Inspections/audits

Sections 8.8, 12.5 & 12.6

Items 6 & 11

t. Transfers

Sections 16.1-16.28

Item 17

u. Renewal

Sections 4.3-4.8

Item 17

v. Post-termination obligations

Sections 17.9-17.16

Item 17

w. Non-competition covenants

Sections 18.1-18.5

Item 17

x. Dispute resolution

Sections 19.1-19.5

Item 17

y. Relocation

Sections 5.7 & 17.5

Item 17

10. FINANCING

We do not offer or provide any type of financing for our office franchises.

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11. FRANCHISOR'S OBLIGATIONS

Except as listed below, we need not provide any assistance to you.

Pre-Qpenins Assistance

Before you open your AVALAR office, we will consult with you on the telephone regarding the design and construction of your AVALAR office. (Franchise Agreement Section 6.3)

Continuing Assistance

During the operation of your AVALAR office we provide the following services:

1.  You are allowed the continuing use of our service marks, trademarks, commercial symbols, and other proprietary property. (Franchise Agreement Section 2.1)

2.  You will have the use of our manuals and the other materials we make available to our franchisees. (Franchise Agreement Sections 8.1 and 8.2)

3.   During our normal weekday business hours, we will have a representative available to consult with you by telephone regarding the operation of your AVALAR office. (Franchise Agreement Section 8.7)

4.   We administer our Path to Success revenue sharing program and provide you with the payments and reports called for by that program. (Franchise Agreement Section 11 and Exhibit A to the Franchise Agreement)

Advertising

We do not have a local, regional, or national advertising program. We do not require you to spend any minimum amount on advertising your AVALAR office. The amount you chose to spend on advertising is up to you. You can create your own advertising. However, if we object to any of your advertising, promotion, or public relations activities, you must discontinue the items or activities to which we object. (Franchise Agreement Section 10) See the Franchise Agreement sections referred to in Item 9 above.

Operations Manuals

Before you purchase an AVALAR franchise, you will be allowed to review our manuals. However, before we can let you see the manuals, you will have to sign the Disclosure and Confidentiality Agreement that is attached to this Franchise Offering Circular.

Selection of Your Office Location

You determine your own office location or locations and the terms of your lease. However, you cannot operate your AVALAR business from a home office. With our approval, you can temporarily locate your AVALAR office in an executive suite or similar facility while you are

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attempting to locate a permanent location for your office but not for longer than 6 months. An executive suite may be used as the location of one of your branch offices with our prior approval. (Franchise Agreement Section 5.1)

Your A VALAR office must be open for business within 6 months of when you sign your Franchise Agreement. (Franchise Agreement Section 5.3) If it is not, we can terminate your Franchise Agreement and retain 10% of your initial franchise fee. (Franchise Agreement Section 5.3) See also Item 5 above.

Time Needed to Open an A VALAR Office

The typical length of time between the signing of the Franchise Agreement and the opening of your office is 2 to 4 weeks if you already have a suitable office or up to 5 months if you must find and open a new location. Factors that can affect the time in which a new office can be built and opened include the time needed to secure a location and lease, the time needed to obtain building permits, requirements of local zoning laws and other ordinances, the availability of labor and materials, delays in installing equipment, fixtures, decor, and so forth.

Orientation

We have no required training course. However, we offer a complementary broker orientation to new AVALAR brokers and office managers at our headquarters in Las Vegas, Nevada. We recommend that each AVALAR franchisee attend our orientation within 90 days of signing his or her Franchise Agreement. There is no fee for attending the orientation program. However, you will have to pay for your own travel, lodging, and similar expenses and those of any employees you bring to the program. We may offer additional courses, seminars, conventions, meetings, and similar programs for our franchisees or for their employees. However, neither you nor your employees are required to attend. You will have to pay for your own travel, lodging, and similar expenses and those of your employees.

12. TERRITORY

The franchise is granted only for the specific location or locations that are mutually approved. You are granted a protected territory in connection with your AVALAR office that will normally be a one-mile radius around your office location. Except under the circumstances discussed below, a protected territory is the geographic area within which we agree not to open another company-owned or franchised office a principal activity of which is real estate brokerage. We have the right to open and franchise AVALAR offices at any other location, other than within your protected territory, even if those offices compete with you or otherwise adversely affect your business.

By granting you a protected territory we are not precluded from owning or being the franchisor of competing units owned, operated, and/or franchised by any person or entity with whom or which we merge, by whom or which we are acquired, or which we acquire or otherwise become affiliated after the date of your Franchise Agreement. However, no such affiliate will own, operate, or franchise offices using the A VALAR names or marks.

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Granting you a protected territory does not preclude us, our affiliates, and our other franchisees from listing properties, soliciting clients, making sales, or performing services of any kind in any area or to any clients either as sellers or buyers even within your protected territory. Similarly, you are not precluded from listing properties, soliciting clients, making sales, or performing services in any area or to any clients.

The continuation of your protected territory does not depend on your achieving a specific sales volume, market penetration, or other contingency. Your protected territory will not be altered during the term of your Franchise Agreement.

You can relocate your AVALAR office or offices only with our prior written consent. See Item 6 regarding our relocation fee.

By granting you an AVALAR franchise, we have no obligation to grant you additional AVALAR franchises or to allow you to open additional AVALAR offices.

13. TRADEMARKS

As part of the franchise, we grant you a nonexclusive license to use the name "AVALAR®" as the name of your business.

Our service mark, "AVALAR®", was registered on the Principal Register of the United States Patent and Trademark Office on June 1, 2004. That registration bears number 2847911.

We received a registration for our Path to Success service mark on the Principal Register of the United States Patent and Trademark Office on July 24, 2001. That registration bears number 75774914.

There are no presently-effective determinations of the Patent and Trademark Office, the Trademark Trial and Appeal Board, the trademark admimstrator of any state, or any court relevant to your use of the licensed name in any state. There are no pending interference, opposition, or cancellation proceedings, nor any litigation, involving the licensed name.

We are aware of no superior prior rights or infringing uses that could materially affect your use of our principal marks.

There are no agreements currently in effect which significantly limit our rights to use or license the use of the foregoing names in any manner material to your franchise.

You have to make reasonable efforts to check the area in which you propose to open your AVALAR office to find out whether there are any confusingly-similar names being used in that region.

Even though we license you to use our name, you are not allowed to use the name AVALAR or any similar name in the name of the corporation, limited liability company, or other business entity that owns your AVALAR franchise, or in the name of any other corporation or other business entity in which you have an interest.

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If your use of the licensed name is ever challenged, you must notify us immediately. Subsequent to your notification, we will decide what action to take. We will pay all fees and costs in any action resulting from that challenge. We also will pay any damages for which you are held liable in any such action so long as you have used the licensed name as required by the Franchise Agreement and have notified us promptly of the claim. You should also notify us immediately if you learn of anyone using any names, marks, or symbols that are similar to ours. You must cooperate with us fully in handling any proceedings involving the licensed name.

If we determine that another person or entity has prior rights to use the AVALAR name in the market area in which your AVALAR office is located and as a result we decide that we cannot allow you to use or to continue to use our name, you will have the right to terminate your Franchise Agreement or you can work with us to find a new name for your office or offices. If we cannot agree on a replacement name within a reasonable time, either of us can terminate the Franchise Agreement.

You agree in the Franchise Agreement not to do anything that may interfere with our rights to our names and marks. You acquire no rights in any licensed names, marks, or symbols because you use them. All of the rights and goodwill associated with the licensed names, marks, or symbols belong to us.

14.  PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION

We have applied to the United States Patent and Trademark Office for a business process patent covering our Path to Success program. The application was filed on March 25, 2002, and was assigned serial number 10/104533. Whether or not the patent is granted, we have the right to use our Path to Success program as discussed above and a denial of our patent application will not adversely affect our program.

Our manuals and any other proprietary material we may have or develop, are our trade secrets. We also claim copyright protection for these manuals and materials although we have not filed any copyright applications concerning them. You must protect our manuals and other trade secret material from unauthorized disclosure. You must use our proprietary material only as we direct.

15.  OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISED BUSINESS

The Franchise Agreement does not require you to personally supervise the operation of your AVALAR office or offices although we recommend that you do so. Whether or not you are the on-premises supervisor of your office, you must use your best efforts to produce the maximum volume of business from yourAVALAR office to the exclusion of any other business interests or activities if that is required to meet your responsibilities. You are ultimately responsible for the operation of yourAVALAR office and compliance with the Franchise Agreement.

If required by law, your AVALAR office must be under the supervision of a licensed real estate broker. Since we do not have a mandatory training program, your office supervisor does not

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need to comply with any training requirements. Unless required by law, the supervisor of your office need not have an ownership interest in your office. If we require, your office supervisor must sign our nondisclosure agreement in which he or she promises to maintain the confidentiality of our proprietary material and information.

16.  RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL

As discussed in Item 8 above, your AVALAR office can only provide those services we specify or have approved. You must provide all of the services we denote as mandatory although we agree in the Franchise Agreement that any such additional services must be related to the real estate brokerage or mortgage loan business.

There are no restrictions on the customers to whom you can provide authorized services.

See also Items 9 and 12 above.

17. RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION

The following table lists certain important provisions of the Franchise Agreement. You should read these provisions in the Franchise Agreement attached to this offering circular.

Provision

Section in Franchise Agreement

Summary

a. Term of the Franchise

Section 4.1

The initial franchise term is 5 years.

b. Renewal or extension of the term

Section 4.3

The franchise can be renewed for unlimited 5 year periods

c. Requirements for you to renew or extend

Sections 4.3-4.12

You must give us notice of your desire to renew at least 6 months before the expiration of the term; you must not be in default at the time of notice or at the time of renewal; you must not have received more than 2 notices of valid defaults during the term; you must sign our then-current form of Franchise Agreement; and you will have to sign a general release of all claims against us.

d. Termination by you

Section4.2, 15.11 & 17.8

You can terminate the Franchise Agreement for any reason within the first 12 months of its term. If you do so, we will refund 90% of your initial franchise fee minus the cost of any third party software we may have purchased on your behalf. If we determine that you cannot use our name in your market area, you can terminate the Franchise Agreement or, if you prefer, we can try to agree on a new name for you to use. If we commit a violation under the Franchise Agreement and fail to cure it within 30 days after notice from you of the default, plus such reasonable additional time as may be needed, you can seek all rights allowed by the law governing the Franchise Agreement.

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Provision

Section in Franchise Agreement

Summary

e. Termination by us without cause

Sections 15.11

We can terminate the Franchise Agreement if we determine that you cannot use our name in your market area and we cannot agree on a new name for you to use.

f. Termination by us with cause

Sections 17.1-17.5

We can terminate your Franchise Agreement if you violate any of its terms. Some violations result in the immediate termination of the Agreement and others will only result in termination if you do not correct the violation after notice and an opportunity to cure.

g. "Cause" defined-defaults which can be cured

Sections 17.3-17.6

If your conduct reflects negatively in a material manner on your office or our system; if you fail to pay any sums due to us; if we reasonably determine that your office poses a health or safety danger; if your interest in the franchise is not transferred within the time period allowed following your death or legal incapacity; if you do not open within 6 months of the date of the Franchise Agreement; if you commit any other violation of the Franchise Agreement that does not result in the immediate termination of that Agreement and do not cure the violation within 30 days after notice; or if your office lease expires and you do not relocate to an acceptable site within 90 days.

h. "Cause" defined-defaults which cannot be cured

Sections 17.1, 17.2 &

17.4

If you are declared bankrupt or insolvent; if you abandon your business; if you have made any material misrepresentation to us in acquiring the franchise; if you fail to comply with any applicable law or regulation and do not cure it within the time allowed; if during any 12 month period we give you 3 or more notices of material violations of the Franchise Agreement; if your business or the franchise is seized by a government official or creditor; if you are convicted of a felony or other applicable criminal misconduct; if you underreport your gross commission income intentionally or in any event more than 5% in any quarter; if you try to sell or transfer the franchise or allow another to use the assets licensed to you other than as allowed by the Franchise Agreement; if any other agreement between us or between you and any of our affiliates is terminated because of your default; if you lose your lease because of your default; or if you solicit and/or attempt to recruit in any way a salesperson or employee of another A VALAR franchisee.

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Provision

Section in Franchise Agreement

Summary

i. Your obligations on termination/ nonrenewal

Sections 17.9-17.13

You must pay all of your accounts with us; you must stop using our name and other proprietary material; you must change the look of your office to make it appear different from AVALAR offices; you must return all manuals and other material we have provided to you; you must cancel any fictitious business name registrations in which you use our name; you must notify all concerned individuals, entities, and agencies that you are no longer affiliated with us; you must not identify yourself or your office as having been affiliated with us; you must continue to pay us until you have accomplished your duties following termination; if the Franchise Agreement was terminated because of your default, you must pay us liquidated damages; and you must comply with your covenants not to compete.

j. Assignment of contract by us

Section 16.22

We can transfer our interest in the Franchise Agreement without your prior approval. We agree that any transfer we make will not materially interfere with your AVALAR office.

k. Transfer by you-definition

Sections 16.1-16.3

Any full or partial transfer of the franchise, the property used in your office, or any ownership interest in any entity owning the franchise or the concerned property.

1. Our approval of a transfer by you

Section 16.4

We must approve any transfer.

m. Conditions for our approval of transfer

Sections 16.5-16.17 & 16.19

All information on the transferee and the terms of the transfer must be provided to us; you and your transferee must comply with all procedures and sign all documents we require; upon the transfer of 50% or more of the ownership of the franchise your transferee must sign our then-current Franchise Agreement; you agree to pay our transfer fee; you agree to sign a general release of all claims against us; if an entity owns this franchise, a new principal may have to be appointed.

n. Our right of first refusal to acquire your business

None

o. Our option to purchase your business

None

p. Your death or disability

Sections 16.23-16.27

Your interest in the franchise is transferable by will or intestate succession upon your death or by your court-appointed guardian if you are declared to be legally incompetent. Your estate can sell your interest in the franchise to an approved transferee within 6 months after your executor or administrator or guardian is appointed. All of our transfer conditions apply to these types of transfers.

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Provision

Section in Franchise Agreement

Summary

q. Noncompetition covenants during the term of the franchise

None

r. Noncompetition covenants after the franchise is terminated or expires

None

s. Modification of the agreement

Sections 20.1-20.3

The Franchise Agreement can be modified only by a written agreement signed by all parties to the agreement. We can modify our manuals and direct changes in the operation of your AVALAR office at any time and you must comply at your expense with these changes.

t. Integration/ merger clause

Sections 34.1-34.7

Commitments and agreements not contained in the Franchise Agreement or in a signed attachment to it are not enforceable.

u. Dispute resolution by arbitration or mediation

Sections 19.1-19.3

Except for certain claims, all disputes between us must be submitted to mediation before any lawsuit is instituted.

v. Choice of forum

Sections 19.1, 19.4 & 19.5

Except where required by applicable law, all mediation and litigation must be in Las Vegas, Nevada

w. Choice of Law

Sections 26.1 & 26.2

Except where prohibited by applicable law, Nevada law applies.

NOTE: These states have statutes which may supersede the terms of the Franchise Agreement in your relationship with us, including those terms regarding the termination and renewal of your franchise: ARKANSAS [Stat. Section 70-807]; CALIFORNIA [Bus. & Prof. Code Sections 20000-20043]; CONNECTICUT [Gen. Stat. Section 42-133e et seq.j; DELAWARE [Code Title 6, Ch. 25, Sections 2551-2556]; HAWAII [Rev. Stat. Section 482E-1]; ILLINOIS [815 ILCS 705/1-40]; INDIANA [Stat. Section 23-2-2.7]; IOWA [Code Sections 523H.1-523H.17]; MICHIGAN [Stat. Section 19.854(27)]; MINNESOTA [Stat. Section 80C.14]; MISSISSIPPI [Code Section 75-24-51]; MISSOURI [Stat. Section 407.400]; NEBRASKA [Rev. Stat. Section 87-401]; NEW JERSEY [Stat. Section 56:10-1]; SOUTH DAKOTA [Codified Laws Section 37-5A-51]; VIRGINIA [Code 13.1-557-574-13.1-564]; WASHINGTON [Code Section 19.100.180]; WISCONSIN [Stat. Section 135.03]. These and other states may have court decisions that may supersede the Franchise Agreement or your other agreements with us including the terms concerning the termination and renewal of your franchise. See the State-Specific Addendum to this circular for changes that may be applicable in your state.

18.  PUBLIC FIGURES

We do not use any public figure to promote our franchise.

19.  EARNINGS CLAIMS

Neither we nor anyone acting on our behalf is authorized to provide you with any written or oral information concerning your actual or potential sales, receipts, costs, income, profits,

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earnings, or similar information. Results can vary from office to office. We cannot estimate the results of any particular AVALAR office.

20. LIST OF FRANCHISE OUTLETS

FRANCHISED OFFICE STATUS SUMMARY FOR FISCAL YEARS 2004, 2005, & 2006

State

Transfer

Canceled Or Terminated

Not Renewed

Reacquired By Us

Left

The

System/

Other

Total From Left Columns

Franchisees

Operating

At Year End

Alabama

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

1/2/2

Arizona

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

1/1/2

California

0/0/0

0/1/0

0/0/0

0/0/0

1/3/1

1/4/1

31/42/51

Florida

0/0/0

0/1/0

0/0/0

0/0/0

0/1/5

0/2/5

5/15/18

Georgia

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/1/3

Hawaii

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/1/1

Idaho

0/0/0

0/0/0

0/0/0

0/0/0

0/0/1

0/0/0

0/0/0

Illinois

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/1/2

Maryland

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/1

Michigan

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/1/2

Missouri

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/1

Montana

0/0/0

0/0/0

0/0/0

0/0/0

0/0/1

0/0/1

0/0/0

Nevada

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

1/1/2

New Jersey

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/1/2

Ohio

0/0/0

0/0/1

0/0/0

0/0/0

0/0/0

0/0/1

0/2/4

Oregon

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/2/2

Pennsylvania

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/3/7

Tennessee

0/0/0

0/0/0

0/0/0

0/0/0

0/0/1

0/0/1

0/0/0

Texas

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/5/9

Virginia

0/0/0

0/0/0

0/0/0

0/0/0

0/0/1

0/0/1

0/0/3

Wisconsin

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/1

Washington DC

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/0

0/0/1

TOTALS

0/0/0

0/2/1

0/0/0

0/0/0

1/4/10

1/6/11

39/78/114

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The original documents were scanned as an image. The original file can be downloaded at the link above.