UFOC

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


Sample UFOC

TABLE OF CONTENTS ITEM                                                                                                              PAGE

1

2

4

5

5

6

11

16

17

19

19

23

24

26

26

26 27 30 31 32 40 40 41

1

The Franchisor, its Predecessors and Affiliates

2

Business Experience

3

Litigation

4

Bankruptcy

5

Initial Franchise Fee

6

Other Fees

7

Initial Investment

8

Restrictions on Sources of Products and Services

9

Franchisee's Obligations

10

Financing

11

Franchisor's Obligations

12

Territory

13

Trademarks

14

Patents, Copyrights and Proprietary Information

15

Obligation to Participate in the Actual Operation of the Franchise Business

16

Restrictions on What the Franchisee May Sell

17

Renewal, Termination, Transfer and Dispute Resolution

18

Public Figures

19

Earnings Claims

20

List of Franchises

21

Financial Statements

22

Contracts

23

Receipt

(i)


EXHIBITS

A.       Names and Addresses of State Administrators and                                     41A Federal Trade Commission

B.        List of Registered Agents                                                                        41B

C.        Financial Statements                                                                               41C

D.       Franchise Agreement                                                                              41D

E.        State Addenda                                                                                        4IE

F.        Personal Guaranty                                                                                  41F

G.       Non-Disclosure, Confidentiality and                                                         41G Non-Competition Agreement

H. Acknowledgement of Receipt                                                                  41H

I. Table of Contents for Manuals                                                                 411

(ii)


ITEM1

THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES

To make it easier to read this Offering Circular, "OUR", "US, and "WE", means Expetec Corporation, the franchisor. Any reference to "System" means the franchise system of Expetec Corporation. "YOU", "YOUR", or "YOURS" means the person or entity which buys the franchise. If the buyer of the franchise is a corporation, partnership, limited partnership, limited liability partnership, limited liability company, joint venture, or other business organization, the terms "YOU", "YOUR", or "YOURS" also include the individual owners of interests in those entities. If YOU hire a manager to supervise the day-to-day operations of YOUR business, the terms "YOU", "YOUR", or "YOURS" include, where appropriate, YOUR manager.

Expetec Corporation is a South Dakota corporation that was organized on November 3,1995. On November 21,2003, WE changed OUR name from Computer Doctor International, Inc., to Expetec Corporation. Expetec Corporation offers franchises under the mark Expetec. OUR principal business address is 12 2nd Avenue SW, Aberdeen, South Dakota 57401. OUR agents for service of process are disclosed in Exhibit B.

OUR franchisees offer and sell information technology products and services related to network security, business continuity, web services, and design and administration of networks and systems. In addition, franchisees offer and sell information technology consulting services, and mobile repair, maintenance, upgrade, installation, and warranty services for computers, telecommunications and other office equipment. OUR franchisees can also sell computers and computer hardware, parts, and accessories. These products and services are provided from office locations and on site. WE have offered franchises to the public since January, 1996. WE , will operate an Expetec business in Aberdeen, South Dakota which is similar to the franchise offered.

As an Expetec franchisee, YOU operate a business which offers and sells information technology products and services; those services are related to network security, business continuity, web services, and design and administration of networks and systems. In addition YOUR business will sell and provide information technology consulting services, and in-office and mobile repair, maintenance, upgrade, installation, and warranty services for computers, telecommunications, and other office equipment. YOUR business can also sell computers, computer hardware, parts, accessories, and equipment. These products and services are provided from an office location and on site. An office location, will typically consist of 300 to 700 square feet of space.

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YOUR business must be operated in conformance with the specified standards of the System. Also, as a part of the System, YOU may be required to participate in promotional programs and other efforts to promote the overall success of the System. It is YOUR obligation to select the specific site for YOUR business subject to OUR right to disapprove YOUR site if the planned site is in proximity to any governmental or business activity which could detrimentally affect the System.

The general market for Expetec services consists of businesses, offices, schools, and other entities which use technology related equipment. To promote the growth of YOUR business, YOU will need to actively and continuously seek new customers. In most instances, YOU or a designated salesperson will make "cold calls" on potential accounts within YOUR Franchised Area. YOU will also need to foster continuing relationships with existing customers. YOUR predominant competition for retail product sales are local, independently owned businesses, selling the same types of products and services; competitors also include national chains of retail stores, some of which are franchised, which sell the same products and services, and national manufacturers who specialize in direct sales to consumers. YOUR business may also be in competition with national contract providers which provide similar services for large scale users; those large contract providers are not normally available to, or economical for, smaller businesses, offices, and schools. The products and services provided by Expetec franchisees are generally not provided through other independently owned and operated franchised businesses.

YOU are subject to the laws and regulations which apply to all businesses generally. YOU also need to investigate and determine the existence of local laws or regulations which may apply to YOUR business.

WE have no predecessors. As explained in Item 8, YOU are required to buy specific proprietary products for sale to customers; those products can be purchased from US or from any authorized vendor or manufacturer. YOU are not required to buy any services from US except those related to website hosting. YOU are not required to buy any other products, or services from US.

ITEM 2

BUSINESS EXPERIENCE

Chairman of the Board and Director: Tom Aman

In February, 2006, Tom Aman became Chairman of the Board, and a Director of Expetec Corporation. Since 1996, Mr. Aman has been involved in real estate development as the

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President of Blackstone Developers, L.L.C., in Aberdeen, South Dakota. Mr. Aman is also a partner of JetCo., a licensed South Dakota financial company in Aberdeen, South Dakota, specializing in providing venture capital for emerging businesses. Tom Aman has approximately 50 years of business experience as a self-employed entrepreneur. Mr. Aman founded Aman Collection Service in Aberdeen, South Dakota, in 1957. That business merged with Wells Fargo Corporation, in Aberdeen, South Dakota, in 1996. Mr. Aman serves on the board of directors of various charitable and philanthropic organizations.

Vice Chairman of the Board and Director: Norg Sanderson

In February, 2006, Norg Sanderson became Vice Chairman of the Board, and a Director of Expetec Corporation. From 1979 to 2004, Mr. Sanderson served as President and Chief Executive Officer of Student Loan Finance Corporation in Aberdeen, South Dakota. Mr. Sanderson continues to serve as Vice Chairman of the Board of Student Loan Finance Corporation. Mr. Sanderson serves as Treasurer and Managing Member of Blackstone Developers, L.L.C., a real estate development company in Aberdeen, South Dakota. Mr. Sanderson is also a partner of JetCo., a licensed South Dakota financial company in Aberdeen, South Dakota, specializing in providing venture capital for emerging businesses. Mr. Sanderson serves on the board of directors of various charitable and philanthropic organizations.

President and Director: Joan Ganie- Fischer

Effective October, 2005, Joan Ganje-Fischer became President of Expetec Corporation; in February, 2006, Ms. Ganje-Fischer became a Director of Expetec Corporation. Ms. Ganje-Fischer has been a developer and operator of franchised hotels throughout the Midwestern United States for 26 years. Ms. Ganje-Fischer has been a principal in an Expetec franchise since 1998. From 1979 to 1993, Ms. Ganje-Fischer served as an officer of Super 8 Motels, Inc., in Aberdeen, South Dakota.

Vice President of Finance and Director: Steve Kohles

Effective September, 2005, Steve Kohles became affiliated with Expetec Corporation; in February, 2006, Mr. Kohles became a Director of Expetec Corporation. From 2005 to the present, Mr. Kohles has been self-employed as a business and financial consultant in Aberdeen, South Dakota. From 1989 to _2005, Mr. Kohles served as Chief Executive Officer, Chief Financial Officer, and a member of the Board of Directors of Student Loan Finance Corporation in Aberdeen, South Dakota. Mr. Kohles is a Certified Public Accountant. Mr. Kohles serves on the board of directors of various charitable and philanthropic organizations.

3


Vice President of Franchise Development and Director: Stephen Hogg

Effective September, 2005, Stephen Hogg became affiliated with Expetec Corporation; in February, 2006, Mr. Hogg became a Director of Expetec Corporation. From 2004_ to the present, Mr. Hogg has been self-employed as a business consultant specializing in coordinating funding from venture capital providers for emerging business in Aberdeen, South Dakota. From 1993 to 2004, Mr. Hogg served in various capacities with Hogg Restaurant Service, a $50 million broad line food service distributor in Aberdeen, South Dakota; at the conclusion of his tenure with Hogg Restaurant Service, Mr. Hogg was President and a member of the board of directors.

Franchise Development: Lisa J. Hinz

Lisa J. Hinz as been associated with Expetec Corporation since October, 1999. From January, 1998, to August, 1999, Ms. Hinz was a sales associate and assistant manager with Computer Doctor of Aberdeen, South Dakota (a local store); in August, 1999, Ms. Hinz was promoted to store manager.

Operations Manager; Bryan German

Bryan German has been associated with Expetec Corporation since August, 2000. Mr. German was initially hired as a franchise sales representative. Mr. German has served in various capacities with Expetec Corporation and has a broad knowledge of the products and services sold by franchisees. From 1990 to 2000, Mr. German was employed by Delta Airlines in Atlanta, Georgia as an analyst in operations management.

ITEM 3

LITIGATION

On March 25, 2005, Expetec Corporation commenced arbitration before the American Arbitration Association, against Richard DeFazio and RLD Technologies, Inc., alleging Mr. DeFazio breached his Expetec Franchise Agreement by failing to operate his franchise, as required, and by failing to pay required fees and royalties. On April 4, 2005, Mr. DeFazio and RLD Technologies, Inc., filed a Complaint against Expetec Corporation in Rhode Island state court alleging breach of contract, fraud in connection with funds loaned by Expetec Corporation to Mr. DeFazio for the purchase of his franchise, fraud in connection with Mr. DeFazio's purchase of a service van, unjust enrichment/quantum meruit, and promissory estoppel. Expetec Corporation timely removed the Complaint to United States District Court for the District of Rhode Island, Richard DeFazio and RLD Technologies, Inc. v. Expetec

4


Corporation f/k/a Computer Doctor International, Inc., CANo. 2005-180-S, and moved to dismiss the Complaint on the basis that the claims asserted in the Complaint were subject to mandatory arbitration in accordance with the Franchise Agreement. On September 6,2005, the Magistrate Judge recommended that the Complaint be dismissed in its entirety. Mr. DeFazio and RLD Technologies, Inc., appealed the Magistrate Judge's recommendation to the District Court, which issued an Order on January 20, 2006, adopting the Magistrate Judge's recommendation, and granting Expetec's motion to dismiss the case. In February 2006, the parties entered into a confidential settlement agreement, pursuant to which Mr. DeFazio and RLD Technologies, Inc. agreed to provide financial consideration to Expetec Corporation and to not compete for a specified period, with the pending arbitration proceeding being dismissed.

Other than this action, no litigation is required to be disclosed in this offering circular.

ITEM 4

BANKRUPTCY

No person previously identified in Items 1 or 2 of this offering circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code required to be disclosed in this Item.

ITEM 5

INITIAL FRANCHISE FEE

When YOU buy an Expetec franchise, YOU must pay an Initial Franchise Fee of $45,000 or $35,000. The amount of the fee that YOU pay depends upon the population of YOUR Franchised Area. If YOUR Franchised Area has a population of more than 40,000 people (a Large Market Franchise), YOU will pay an Initial Franchise Fee of $45,000. If YOUR Franchised Area has a population between 15,000 and 40,000 people (a Mid Market Franchise), YOU will pay an initial franchise fee of $35,000. Generally, WE will not sell franchises for areas which have populations of less than 15,000 people. YOUR Franchised Area will be defined by geographic boundaries. The geographic size of YOUR Franchised Area will depend on the population in the area.

As a part of the Initial Franchise Fee, YOU will receive a license to use the customer relationship management (CRM) software; YOU will also receive a computer server, and a QuickBooks® license. Additionally, YOU will receive 6 days of training at OUR headquarters in Aberdeen, South Dakota; WE will arrange for and pay for YOUR travel

5


expenses and lodging; WE do not pay for any food or miscellaneous expenses. WE also provide 4 days of on-site training prior to the time that YOU open YOUR business.

The Initial Franchise Fee is paid in a lump sum. No part of the fee is refundable.

ITEM 6 OTHER FEES

Name of Fee

Amount

Due Date

Remarks

Royalty2

12% of Gross Profit

Marketing Fund2

3% of Gross Profit

Payable monthly on or before the 20th day of each month; YOUR obligation begins the first calendar month after YOU open YOUR business

Payable monthly on or before the 20th day of each month; YOUR obligation begins the first calendar month after YOU open YOUR business

Gross Profit includes substantially all revenue generated by YOUR business for services and products provided to customers, less YOUR actual cost for acquiring the products for sale. Gross Profit do not include sales tax or use tax. Section 4(B)1

This fee is paid monthly; this fee will be expended in OUR sole discretion. Sections 4(C) and 7(G)

Initial Training3

WE will arrange for and pay for YOUR travel expenses and lodging expenses for training in Aberdeen, South Dakota; YOU, however, will be liable for the payment of all of YOUR food and miscellaneous expenses and all employment related, travel, lodging, and food expenses for additional trainees

The expenses are due as required by providers of

services

Sections 6(A)(8) and 7(C) require that YOU and any manager must successfully complete OUR standard training. See Item 11

6


Name of Fee Transfer2

Amount

Late Fees and Dishonored Check Fees2

Audit2

$6,500

Renewal Fee

$30 per occurrence, plus a $5 per day charge

Cost of audit, plus sums underpaid, plus interest on underpayment, plus expenses

$0

Due Date

Before WE approve of the transfer

When YOU pay delinquent payments, and when "bad" checks are made good

10 days after WE notify YOU

N/A

Remarks

Payable when YOU sell, or otherwise transfer YOUR business, or a portion of YOUR business. No fee if YOUR business is transferred to an entity which YOU control. Sections 17(B) and 17(C)

YOU must pay fees if YOUR payments to US are late; there is also a fee ifYOUgiveUSacheck which is not honored by YOUR bank. Section 4(D)

Payable only if audit shows a material underreporting of Gross Profit. Section 16(C)

WE do not charge a renewal fee

Indemnification

Unspecified

Unspecified

Manuals

$1,000.00

30 days after billing

Personal Guaranty

Unspecified

Immediately upon demand by US

YOU are required to indemnify US against losses for certain occurrences and situations; Section 6(G)

Payable only if YOU do not return all manuals to US within 30 days after the termination or transfer of YOUR franchise; Section 6(Q)

YOU must personally guarantee all franchisee obligations in the Franchise Agreement

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Name of Fee Liquidated damages

Interest2

Amount

Due Date

Taxes

Additional Training

Meeting Attendance3

Books and Records

SO

The highest rate allowed by applicable law, but not more than 2% per month

Amount assessed by federal, state, and local tax authorities on Royalties or other sums paid to US

Actual employment related, travel, lodging, and meal expenses of the trainees and/or OUR staff

Unspecified

Unspecified

N/A

Immediately upon being billed by US

When WE invoice YOU

Before the actual training or immediately upon being billed by US

As required by entities providing travel, lodging, meals, and associated services to YOU

Unspecified

Remarks

WE do not assess liquidated damages

Section 6(S) requires YOU to pay interest on any delinquent sums owed to US

Includes sales, gross receipt, value added, use or similar taxes, but not income tax (or any optional alternative to income tax) assessed against US. Section 4 (E)

Section 7(C) provides that upon request by YOU, additional training can be provided at YOUR sole expense

Section 6(K) requires YOU to attend certain meetings; except for registration fees, if any, none of these costs are paid to US

Sections 6(H), 16(A), and 16(C) require YOU to maintain and provide information, books, and records to US; complying with this requirement can result in an expense to YOU

Approved Supplier

Service CEO Maintenance Fee3

See Item 8

$300 for first license and $200 for each additional license

See Item 8

Payable annually beginning on the 1st anniversary of the opening of YOUR business;

See Item 8

Ongoing maintenance fee for software license; these fees may increase during the term of YOUR franchise. Section 4(G)

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Name of Fee

Amount

Due Date

Remarks

Internet Web Site

2

$ 12 each month

Hosting

Periodic Refurbishing3

Insurance

Firewall License Fee

Public Offering Fee2

Dispute Resolution Costs

Unspecified

Varies depending upon the location of YOUR franchise and certain factors under YOUR control

$90

$15,000

Costs, expenses, reasonable attorneys' fees

Electronic Fund Transfer

Any sums charged by YOUR bank

Twentieth day of every month

Unspecified

Within billing period established by YOUR insurance company

Annually when billed by vendor

Before a public offering of YOUR equity interests occurs

When dispute resolution concludes

As required by YOUR Bank

YOU must pay US for hosting YOUR site on the worldwide web; this fee may increase during the term of YOUR franchise. Section 4(H)

Section 6(G)(3) requires YOU to maintain certain types of insurance; the amounts of insurance will vary, over the course of the franchise term, as conditions change4

Ongoing maintenance fee for firewall license; this fee may increase during the term of YOUR franchise. Section 4(1)

Fee payable when YOU make YOUR first registered public offering of YOUR equity securities, after which they are freely transferable. Section 17(E)

Prevailing party is reimbursed by non-prevailing party for litigation expenses to interpret or enforce the franchise agreement or collect amounts owed. Section 8(B)

YOU must pay US by electronic funds transfer. Section 4(F).

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Name of Fee                           Amount                             Due Date                             Remarks

Late Reporting Fee2             $50 per record per               Immediately upon                If YOU are late in

incident                              demand by US                     providing US with any

report or financial record, YOU must pay a fee of $50 per record per incident. Sections 6(H) and 16(A)

'All section references regard sections in the Franchise Agreement.

2These fees are payable to US, and are non-refundable.

3These fees are payable to service provider in accordance with provider's requirements.

■"WE currently require general liability insurance, and automobile liability insurance, insured on an occurrence basis, with a minimum of $ 1,000,000 coverage per person or occurrence.

(The remainder of this page has been intentionally left blank)

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ITEM 7

YOUR ESTIMATED INITIAL INVESTMENT (LARGE MARKET FRANCfflSE)

Investment

Amount

Method of Payment

When Due

To Whom Pavment is Made

Initial Franchise Fee (Note 1)

$45,000

Lump Sum

When YOU sign the Franchise Agreement

US

Travel and Lodging Expenses for Training (Note 2)

$0

Food While Training (Note 3)

$100-$300

As Incurred

As Incurred

Food Service Providers

Vehicle (Note 4)

$3,600-$7,200

As Incurred

As Incurred

Note 4

Office Space (Note 5)

$500-$2,000

As Incurred

As Incurred

Note 5

Facility Improvements, Office Equipment and Supplies (Note 6)

$1,000-$5,000

As Incurred

As Incurred

Suppliers

Operating Capital (3-6 months) (Note 7)

$22,000 -$45,000

As Incurred

As Incurred

Employees, Vendors, Utilities, Lessor, and US

Miscellaneous Opening Costs (Note 8)

$1,000-$3,000

As Incurred

As Incurred

Suppliers, Utilities, etc.

Insurance (Note 9)

$600-$2,000

Lump Sum

Before beginning business

Insurer

Pre-Opening Marketing (Note 10)

$8,000 -$12,000

As Incurred

Before opening Business

Media and service providers

TOTAL

$81,800-$121,500

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NOTES:

(1)      YOU must pay the entire Initial Franchise Fee when YOU sign a Franchise Agreement. YOU will not receive any training or be permitted to operate as an Expetec business until the Initial Franchise Fee is paid. (See Item 5 for an explanation of the Initial Franchise Fee.)

(2)       YOUR travel and lodging expenses, as arranged by US, while YOU are training in Aberdeen, South Dakota, are paid by US. If YOU are not satisfied with the arrangements WE have made for travel and/or lodging, YOU will have to pay the difference between the cost of the travel and/or lodging arrangements WE have made, and the cost of YOUR actual travel and/or lodging expenses, if greater. Any alternate travel and/or lodging arrangements made by YOU are subject to OUR approval. WE estimate that YOU will spend from $1,000 to $2,000 for any additional person who attends OUR training program. The mode of transportation used to travel to Aberdeen, South Dakota, and the distance traveled, will have an effect on the total costs.

(3)      YOU are responsible for paying all expenses for YOUR food requirements, and the food requirements of any additional trainees, while traveling, and while attending OUR training program in Aberdeen, South Dakota

(4)       YOU must purchase, lease, or otherwise acquire a vehicle for operating YOUR business. The vehicle will be used by YOUR technician. The vehicle must be all white in color, and must have the approved Expetec marks affixed to both sides of the vehicle. The vehicle must be maintained in a neat, clean, and undamaged condition; if damage occurs, it must be repaired in a prompt and timely manner. The projected range of costs represent estimated annual costs for a leased or financed vehicle. YOU will also need a vehicle to make sales calls; this can be YOUR personal vehicle. WE have no requirements or specifications regarding the vehicle except that it must be maintained in a neat, clean, and undamaged condition.

(5)      Because of the myriad of potential locations that are available throughout the United States, it is impossible for US to project a range for rent payments, or loan repayments if YOU purchased a site. As with most businesses, location is important and it is necessary for YOU to determine the best location for YOUR business taking into consideration the cost for that location in relation to what YOU can afford.

12


(6) YOU will need to make improvements to the premises utilized for YOUR business to comply with OUR specifications. Such improvements can include general furniture, fixtures, and equipment. The exact amount that YOU spend will depend on several factors, including the pre-existing condition of the premises and whether YOU elect to exceed the minimum requirements for renovations. The cost for these improvements is also related to the size of YOUR office.

(7)       Upon opening any new business, there is always a period between providing customers with products and services and the receipt of payment for those products and services. To pay YOUR operating expenses until YOU have established a stabilized cash flow, YOU will need operating capital. YOU must provide YOUR own operating capital in accordance with OUR requirements.

(8)      There are always unforeseen costs which arise during the opening of any business. Utility hookups, telephone installation, utility deposits, sign permits, and the purchase of miscellaneous items such as cleaning supplies and light bulbs are some examples of these unforeseen costs. The range is only an approximation of the expenses which YOU might experience.

(9)       Insurance rates are variable throughout the country. YOUR rates may be higher.

(10)     WE have a pre-opening marketing plan which YOU must follow. The pre-opening marketing plan is intended to help build awareness of YOUR business, and the products and services offered by YOUR business, before YOU open. YOUR participation in the pre-opening marketing plan is mandatory. WE will provide the promotional information YOU must use. Television, radio, internet, newspaper, direct mail, and telephone contacts are examples of the media YOU may use depending upon the market in YOUR Franchised Area.

None of the fees and costs payable to US are refundable. Fees and costs payable to suppliers and other third parties are generally not refundable unless YOU negotiate that right with them.

13


YOUR ESTIMATED INITIAL INVESTMENT (MID MARKET FRANCHISE)

Investment

Amount

Method of Payment

When Due

To Whom Payment is Made

Initial Franchise Fee (Note 1)

$35,000

Lump Sum

When YOU sign the Franchise Agreement

US

Travel and Lodging Expenses for Training (Note 2)

$0

Food While Training (Note 3)

$100-$300

As Incurred

As Incurred

Food Service Providers

Vehicle (Note 4)

$3,600-$7,200

As Incurred

As Incurred

Note 4

Office Space (Note 5)

$500-$2,000

As Incurred

As Incurred

Note 5

Facility Improvements, Office Equipment and Supplies (Note 6)

$1,000-$5,000

As Incurred

As Incurred

Suppliers

Operating Capital (3-6 months) (Note 7)

$22,000 -$45,000

As Incurred

As Incurred

Employees, Vendors, Utilities, Lessor, and US

Miscellaneous Opening Costs (Note 8)

$1,000-$3,000

As Incurred

As Incurred

Suppliers, Utilities, etc.

Insurance (Note 9)

$600-$2,000

Lump Sum

Before beginning business

Insurer

Pre-Opening Marketing fNote 10)

$8,000 -$12,000

As Incurred

Before opening Business

Media and service providers

TOTAL

$71,800-$111,500

NOTES:

(1) YOU must pay the entire Initial Franchise Fee when YOU sign a Franchise Agreement. YOU will not receive any training or be permitted to operate as an Expetec business until the Initial Franchise Fee is paid. (See Item 5 for an explanation of the Initial Franchise Fee.)

14


(2)      YOUR travel and lodging expenses, as arranged by US, while YOU are training in Aberdeen, South Dakota, are paid by US. If YOU are not satisfied with the arrangements WE have made for travel and/or lodging, YOU will have to pay the difference between the cost of the travel and/or lodging arrangements WE have made, and the cost of YOUR actual travel and/or lodging expenses, if greater. Any alternate travel and/or lodging arrangements made by YOU are subject to OUR approval. WE estimate that YOU will spend from $1,000 to $2,000 for any additional person who attends OUR training program. The mode of transportation used to travel to Aberdeen, South Dakota, and the distance traveled, will have an effect on the total costs.

(3)       YOU are responsible for paying all expenses for YOUR food requirements, and the food requirements of any additional trainees, while traveling, and while attending OUR training program in Aberdeen, South Dakota

(4)      YOU must purchase, lease, or otherwise acquire a vehicle for operating YOUR business. The vehicle will be used by YOUR technician. The vehicle must be all white in color, and must have the approved Expetec marks affixed to both sides of the vehicle. The vehicle must be maintained in a neat, clean, and undamaged condition; if damage occurs, it must be repaired in a prompt and timely manner. The projected range of costs represent estimated annual costs for a leased or financed vehicle. YOU will also need a vehicle with which YOU will make sales calls; this can be YOUR personal vehicle. WE have no requirements or specifications regarding the vehicle except that it must be maintained in a neat, clean, and undamaged condition.

(5)      Because of the myriad of potential locations that are available throughout the United States, it is impossible for US to project a range for rent payments, or loan repayments if YOU purchased a site. As with most businesses, location is important and it is necessary for YOU to determine the best location for YOUR business taking into consideration the cost for that location in relation to what YOU can afford.

(6)      YOU will need to make improvements to the premises utilized for YOUR business to comply with OUR specifications. Such improvements can include general furniture, fixtures, and equipment. The exact amount that YOU spend will depend on several factors, including the pre-existing condition of the premises and whether YOU elect to exceed the minimum requirements for renovations. The cost for these improvements is also related to the size of YOUR office.

15


(7)      Upon opening any new business, there is always a period between providing customers with products and services and the receipt of payment for those products and services. To pay YOUR operating expenses until YOU have established a stabilized cash flow, YOU will need operating capital. YOU must provide YOUR own operating capital in accordance with OUR requirements.

(8)      There are always unforeseen costs which arise during the opening of any business. Utility hookups, telephone installation, utility deposits, sign permits, and the purchase of miscellaneous items such as cleaning supplies and light bulbs are some examples of these unforeseen costs. The range is only an approximation of the expenses which YOU might experience.

(9)      Insurance rates are variable throughout the country. YOUR rates may be higher.

(10)     WE have a pre-opening marketing plan which YOU must follow. The pre-opening marketing plan is intended to help build awareness of YOUR business, and the products and services offered by YOUR business, before YOU open. YOUR participation in the pre-opening marketing plan is mandatory. WE will provide the promotional information YOU must use. Television, radio, internet, newspaper, direct mail, and telephone contacts are examples of the media YOU may use depending upon the market in YOUR Franchised Area.

None of the fees and costs payable to US are refundable. Fees and costs payable to suppliers and other third parties are generally not refundable unless YOU negotiate that right with them.

ITEM 8

RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

The uniqueness and success of the System are dependent, in large part, on the uniformity, quality, and pricing of YOUR products and services. To accomplish this, YOU must buy fixtures, equipment, vehicles, supplies, signage, products, and printed materials which reflect OUR high quality image. WE expect YOU to comply with customary business office standards when YOU purchase fixtures, equipment, vehicles, supplies, signage, products, and printed materials.

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WE do have certain proprietary products which YOU must offer and sell. Because of the proprietary nature of the products, those products can only be purchased from US or from the authorized vendors or manufacturers of the products. There will be no other sources for proprietary products. YOU are not required to purchase fixtures, equipment, vehicles, supplies, signage, products, or printed material from US. WE will give YOU a list of recommended suppliers which can provide YOU with most of the items that YOU will need. YOU are not required to purchase anything from recommended suppliers.

YOU and YOUR staff may be required to sign a Non-Disclosure, Confidentiality, and Non-Competition Agreement which prohibits YOU from divulging proprietary and confidential

information to compete with US, or OUR franchisees.

WE plan to negotiate purchase arrangements with suppliers if the arrangements will be of a general benefit to franchisees. If possible, and if appropriate, the purchase arrangements will include price terms. WE do not provide material benefits to YOU based on YOUR use of designated or approved sources. There are no purchasing or distribution cooperatives.

ITEM 9 FRANCHISEE'S OBLIGATIONS

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

Obligation

a.   Site selection and acquisition/lease

b.   Pre-opening purchases/ leases

c.   Site development and other pre-opening requirements

d.   Initial and ongoing training

e.   Opening

f.   Fees

Section in Franchise Agreement

Item in Offering Circular

Sections 18(F), 18(G), and 18(H) Items 1 and 11

Sections 6(A)(15), 6(C)(1), and           Items 7 and 8

6(J)

Sections 6(A)(generally), 6(C)(1), Items 6, 7, and 11 6(E), 6(F), 6(J), 7(B), and 7(C)

Sections 6(A)(8) and 7(C)

Not applicable Section 4

Item 11

Not applicable Items 5 and 6

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Obligation

g. Compliance with standards and policies/Operating Manual

Section in Franchise Agreement

Sections 6(A)(1) and 6(Q)

Item in Offering Circular

Item 11

h. Trademarks and proprietary information

Sections 5, 6(A)(7), 6(B), 6(C), 6(D), 6(1), 6(L)(3), 7(F), and 9(C)

Items 8, 13, and 14

i. Restrictions on products/services offered

j. Warranty and customer service requirements

Sections 6(A)(3), 6(A)( 12), 6(A)(15),and6(J)

Items 8 and 16

Sections 6(A)(5), 6(A)( 14), and           Items 1, 6, and 7

6(A)(17)

k. Territorial development and sales quotas

i. Ongoing product/service purchases

m. Maintenance, appearance, and remodeling requirements

Not applicable

Section 6(A)( 15)

Sections 6(0)

Items 7, 12, 17, and 22

Items 8 and 16

Not applicable

n. Insurance

Section 6(G)(3)

Items 6 and 7

o. Marketing

Sections 6(A)(4), 6(A)(6), 6(A)(18), 6(C), 6(1), 6(N), and 6(T)

Items 6 and 7

p. Indemnification

Sections 6(G)(1), 6(G)(2), and 6(G)(4)

Item 6

q. Owner's participation/ management/staffing

Sections 6(A)(13), 6(A)(17), and 17(A)

Item 15

r. Records/reports

Sections 6(A)(9), 6(H), and 16

Item 6

s. Inspections/audits

Sections 6(F), 16(A), and 16(C)

Item 6

t. Transfer

Sections 6(M) and 17

Item 17

u. Renewal

Section 3(B)

Item 17

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