UFOC

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

Sample UFOC

PROSHRED FRANCHISE OFFERING CIRCULAR

TABLE OF CONTENTS Item                                                                                                     Page

1       The Franchisor, its Predecessors and Affiliates................................ 1

2      Business Experience........................................................................ 3

3      Litigation......................................................................................... 6

4      Bankruptcy...................................................................................... 6

5      Initial Franchise Fee........................................................................ 7

6      Other Fees....................................................................................... 8

7      Initial Investment............................................................................. 10

8      Restrictions on Sources of Products and Services...........................15

9      Franchisee's Obligations.................................................................. 16

10      Financing......................................................................................... 18

11       Franchisor's Obligations.................................................................. 18

12      Territory.......................................................................................... 25

13      Trademarks...................................................................................... 27

14      Patents, Copyrights and Proprietary Information............................ 29

15      Obligation to Participate in the Actual Operation

of the Franchise Business................................................................ 30

16      Restrictions on What the Franchisee May Sell................................ 30

17      Renewal, Termination, Transfer and Dispute Resolution................. 31

18      Public Figures.................................................................................. 35

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TABLE OF CONTENTS

(Continued) Item                                                                                                     Page

19       Earnings Claims............................................................................... 35

20       List of Outlets.................................................................................. 37

21        Financial Statements.........................................................................38

22       Contracts.......................................................................................... 39

23       Receipt............................................................................................. 39

EXHIBITS

A         State Regulatory Authorities and Agents for Service of Process

B         List of Proshred Franchisees

C         List of Former Proshred Franchisees

D         Financial Statements

E         Prospective Franchisee Confidentiality and Non-Competition Agreement

F         Franchise Deposit Agreement

G         Franchise Agreement and Schedules

H         Franchisee Certification

I           Referral Sources

J          State Specific Amendments

K         Acknowledgement of Receipt

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Iteml

THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES

To simplify the language in this offering circular, "Proshred", "we" or "us" means Proshred Franchising Corp., the franchisor. "You" means the person who buys the franchise, and it may refer to the owner or owners of the buyer entity. We do business under the name Proshred.

Proshred is a Delaware corporation organized October 7, 2002. Our principal business address is 245 Yorkland Blvd., Suite 100, Toronto, Ontario M2J 4W9, Canada. Proshred is a wholly-owned subsidiary of Professional Shredding Corporation ("PSC"), a corporation formed in Ontario, Canada, on September 27, 2004, for the purpose of acquiring the shares of Proshred.

PSC is a wholly-owned subsidiary of PSP Corporation ("PSP"), a corporation formed in Ontario, Canada, on September 27, 2004. PSP holds the shares of PSC in trust for Professional Shredding Partnership (the "Partnership"), a general partnership formed in Ontario, Canada, on September 27, 2004. The partners of the Partnership are Heron Capital Corporation ("HCC"), a corporation formed in Ontario, Canada, on July 9, 1997, and The Heron Group Inc. ("HGI"), a corporation formed in Ontario, Canada, on July 26, 1996. The principal business address of PSC, PSP, the Partnership, HCC and HGI is the same as ours in Toronto, Ontario, Canada.

HCC is an international franchise management and development company. HCC manages the business of Proshred and of another affiliate, PMP Corporation ("PMP"), a corporation formed in Ontario, Canada, on November 26, 2004. PMP is the master franchisee of the Two Men and a Truck system for all of Canada. It became the master franchisee on January 1, 2005. PMP sublicensed the exclusive rights to grant Two Men and a Truck franchises in Canada to its wholly-owned subsidiary, TMT Franchising Corp. ("TMT"), a corporation formed in Ontario, Canada, on November 26, 2004. TMT's sole business is the Two Men and a Truck franchising business in Canada. The principal business address of PMP and TMT is the same as ours in Toronto, Ontario, Canada. As of the date of this offering circular, TMT had sold five franchises. Aside from its franchise business, the Heron group of affiliated companies (the "Heron Group") is a diversified, fully integrated real estate company engaged in residential construction and land development.

Proshred franchises the right in the U.S.A. to sell on-site services for the destruction and disposal of documents and other sensitive and confidential materials under the trademark PROSHRED® and other trademarks. Proshred's customers are primarily businesses and other organizations that need to maintain the confidentiality of their proprietary information, whether for competitive reasons, legal requirements or otherwise. Proshred's solution allows business customers ("clients") and individual customers to witness the destruction, on site, of their selected paper documents, computer

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disks and other media that contain sensitive and confidential proprietary information. Proshred franchisees also offer a residential and home office service called the RISC Management Program. RISC stands for Residential Information Security Container.

The Proshred system includes collection containers, shredding equipment that is designed to our specifications, a customized scheduling, billing and customer relationship management (CRM) software package called Shredlogic that runs on a PC, and franchise manuals. The manuals include Preopening, Supplies & Equipment, Human Resources, Administration, Sales and Marketing, Operations, ISO Program and a Customer Service Professional Handbook.

There are no regulations specific to the operation of a mobile shredding business. However, your operation of a Proshred franchise may be subject to local environmental laws regarding the disposal or recycling of certain materials. Because you will be operating one or more trucks, your business will be subject to trucking and transportation laws, including daily safety checks, maintaining log books, observing weight restrictions for front and rear axles, and so forth. There may be other laws applicable to your business. It is your responsibility to comply with all these laws and to keep in force all permits and licenses required by public authorities. We urge you to consult with your legal advisor about applicable laws.

Your direct competitors include Iron Mountain Incorporated, Recall, Shred-It America, Inc., Cintas, Brinks and many small, independent mobile shredding businesses. Indirect competition includes office shredding machines and recycling programs.

Proshred Holdings Limited ("Holdings") founded the Proshred mobile shredding and recycling business in the mid-1980s in Toronto, Canada, and sold its first franchise in Canada in 1991. In June, 2002, a subsidiary of Proshred Security International Inc. ("PSN"), an Ontario corporation, acquired the assets of the Proshred business from Holdings. The founder of PSII had owned and operated Proshred franchises in various locations in Ontario, Alberta, Manitoba and Quebec, Canada since the early 1990s. On July 23, 2004, PSII sold to Iron Mountain Canada Corporation all of PSII's assets relating to its Proshred business operations in Canada. On September 29, 2004, PSII sold the Proshred business operations in the U.S.A. to PSC and its affiliates in the Heron Group.

PSP acquired the U.S. Proshred trademarks on September 29, 2004, as part of the overall acquisition of the Proshred business in the U.S.A. by the Heron group of companies. We have an exclusive license from PSP to use and sublicense the use of the Proshred trademarks in the U.S.A. (See Item 13.)

In January 2004, we transferred to a franchisee the business of our one company-owned outlet in New York, New York. We now have no company-owned outlets in

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the U.S.A., although we may decide in the future to add corporate store operations that will complement and not compete with the franchise operations.

During the period from 1997 through June 1, 2002, HCC and an affiliated Ontario corporation called MTS Limited had an ownership interest in a company called Mini-Tankers USA, Inc., a Washington corporation ("MTUSA"), that offered on-site diesel refueling franchises. On June 1, 2002, MTUSA agreed to buy back the shares of MTUSA owned by HCC and MTS Limited.

Except as noted above, neither Proshred nor any of its predecessors or affiliates has offered franchises in other lines of business.

Our agents for service of process are listed in Exhibit A of this offering circular.

Item 2

BUSINESS EXPERIENCE

Grant Simpson - Chairman of the Board of Heron Capital Corporation

Grant Simpson is the Chairman of the Board of Heron Capital Corporation, a position he has held since 1997. Mr. Simpson is also Vice President of The Heron Group Inc., a position he has held since 1980. He holds and has held each of these positions in Toronto, Ontario, Canada. Mr. Simpson is responsible for real estate acquisition, funding and development for the Heron group of companies.

John Prittie - President

John Prittie has been President of Proshred and of PSP Corporation since September 2004. He has been President of PMP Corporation and TMT Franchising Corp. since November 2004. Since July 1997, he has also been President and Chief Executive Officer of Heron Capital Corporation. He is responsible for the overall operations of these companies, all of which are located in Toronto, Ontario, Canada. Mr. Prittie served as Director of Mini-Tankers USA, Inc. (MTUSA) from June 1999 to January 2003, and as President of MTUSA from June 1999 to June 2003.

Brad Foster - Chief Financial Officer

Brad Foster has been the Chief Financial Officer of Proshred and PSP Corporation since October 2004. He is also the Chief Financial Officer of The Heron Group Inc., a position he has held since June 2002. He holds and has held each of these positions in Toronto, Ontario, Canada. From August 1999 to May 2002, Mr. Foster was Chief Financial Officer for Mini-Tankers USA, Inc., in Mississauga, Ontario, Canada.

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Timothy Tibbs - Executive Vice President Operations

Timothy Tibbs has been Executive Vice President Operations of Proshred and PSP Corporation, and Vice President of Heron Capital Corporation, since October 2004 in Toronto, Ontario, Canada. From 1999 until 2004, Mr. Tibbs was Director of Business Development for Mini-Tankers USA, Inc., in Mississauga, Ontario, Canada.

Jeff Hasham - Vice President Finance and Administration

Jeff Hasham became Vice President Finance and Administration in March 2005, in Toronto, Ontario, Canada. From 2004 to 2005, Mr. Hasham was Vice President of Finance at World Vintners Inc., in Markham, Ontario, Canada. From 2002 to 2004, Mr. Hasham was the Chief Financial Officer at Mini-Tankers USA, Inc. in Mississauga, Ontario, Canada. From 2000 to 2002, he was the Chief Financial Officer at The ALEA Group Inc. in Richmond Hill, Ontario. From 1999 to 2000, Mr. Hasham was a Senior Analyst at Nortel Networks in Brampton, Ontario.

James Reid - Director of Franchise Development

James Reid became Director of Franchise Development of Proshred and PSP Corporation in March 2005, in Toronto, Ontario, Canada. From 2002 to March 2005, Mr. Reid was Ontario Business Development Manager for FleetMind Solutions, also in Toronto. From 2000 to 2002, Mr. Reid was a consultant for Adaptive Tutoring Systems, and from 1999 to 2000, he was a consultant for Mini-Tankers Canada, both of which were in Toronto.

Andrew Parry - Manager of Marketing and Training

Andrew Parry became Manager of Marketing and Training of Proshred and PSP Corporation in May 2005, in Toronto, Ontario, Canada. From September 2003 to May 2005, Mr. Parry was manager of Marketing for B-Wyze Solutions in Richmond Hill, Ontario, Canada. During the period from September 1998 to August 2002, Mr. Parry was a student at Wilfrid Laurier University. As part of his studies, he had the following co-op placements: From September 2001 to December 2001, he was Marketing Coordinator for Bell Mobility, both in Toronto, Ontario, Canada. From January 2001 to April 2001, he was Marketing Coordinator for Microsoft Canada in Toronto, Ontario, Canada. From May 2000 to August 2002, he was an Account Executive for Pricewaterhouse-Coopers in Belfast, Northern Ireland, UK.

Elliot Krangle - Vice Chairman of the Board

Elliot Krangle has been Vice Chairman of the Board of Proshred and PSP Corporation since May 2006. From October 2004 until May 2006, Mr. Krangle was Chairman of the Board of Proshred and PSP Corporation. Mr. Krangle is also Chairman of the Board of The Heron Group Inc., a position he has held since 1977. He holds and has

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held each of these positions in Toronto, Ontario, Canada. Mr. Krangle is responsible for strategic planning and corporate development of the Heron group of companies.

Hugh Heron - Chairman of the Board

Hugh Heron has been Chairman of the Board of Proshred and PSP Corporation since May 2006. From October 2004 until May 2006, Mr. Heron was Vice Chairman of the Board of Proshred and PSP Corporation. Mr. Heron is also President of The Heron Group, a position he has held since 1979. He holds and has held each of these positions in Toronto, Ontario, Canada.

Referral Sources

We have a contract with TES Franchising, LLC, a Connecticut limited liability company, doing business under the trade name The Entrepreneur's Source ("TES"), to act as a source of referrals to us of prospective franchisees. TES finds referrals through its network of franchised independent consultants ("TES Consultants"). TES Consultants refer prospective franchisees to Proshred and many other franchisors.

TES Consultants do not sell franchises. They represent the interests of their clients by coaching them on their entrepreneurial options. The TES Consultant does not discuss the purchase or sale of any particular franchise. Only Proshred personnel may engage in those discussions with you.

We pay TES a fee for providing the services of the TES Consultants to prospective franchisees. TES, in turn, compensates the TES Consultants upon the successful placement of a TES client.

The activities of TES or of the TES Consultants may be deemed to be "franchise brokers" under the laws of some states.

For more information on TES and the TES Consultants, see Exhibit I.

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Item 3

LITIGATION

Shred-It USA, Inc. v. Ronald Sacco, Proshred Security Corp. and Proshred Franchising Corp., Index No. 03/601750 (NY Co.). On June 4, 2003, the purchaser of assets of a business formerly owned by Ron Sacco, the former Director of U.S. Franchising for PSIl, brought this action against Ron Sacco, Proshred Security Corp. and the franchisor alleging that Mr. Sacco breached a restrictive covenant allegedly entered into with the plaintiff on or about April 23, 1999, which purportedly expired on or about April 23, 2004, and alleging that Proshred Security Corp. and the franchisor interfered with Mr. Sacco's purported contract with Shred-It. The plaintiff sought damages and injunctive relief. The parties agreed in April 2004 to a stipulation resolving the case, which the court approved on May 5, 2004. The stipulation provides for no liability to Proshred or . to Mr. Sacco. As the sole condition to the settlement, Mr. Sacco agreed that he will not seek to sell franchises or otherwise compete with Shred-It USA, Inc. in the States of New York, New Jersey or Connecticut for a one-year period. Mr. Sacco is no longer affiliated with Proshred.

Except for this action, no litigation is required to be disclosed in this offering circular.

Item 4

BANKRUPTCY

On October 6, 2003, Mini-Tankers USA, Inc. (MTUSA) filed a voluntary petition pursuant to Chapter 11 of the United States Bankruptcy Code. On November 5, 2004, the bankruptcy court approved the debtor's plan of liquidation. (U.S. Bankruptcy Court for the Western District of Washington, Case No. 03-22887-TTG.) Jeff Hasham, Proshred's Vice President Finance and Administration, was the Chief Financial Officer at MTUSA from 2002 to 2004, the period of that company's Chapter 11 restructuring and liquidation. John Prittie, President of Proshred, was a director of MTUSA from June 1999 to January 2003, and President of MTUSA from June 1999 to June 2003. Brad Foster, Proshred's Chief Financial Officer, was Chief Financial Officer of MTUSA from August 1999 to May 2002. Timothy Tibbs, Proshred's Executive Vice-President Operations, was MTUSA's Director of Business Development from 1999 until 2004. During the period from 1997 through June 1, 2002, Mini-Tankers USA, Inc. was affiliated with the Heron Group.

Other than this action, 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.

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Item 5

INITIAL FRANCHISE FEE

All franchisees pay a $35,000 franchise fee for each Territory Unit purchased. See Item 12 for a description of your territory.

A Territory Unit is defined as a geographic area comprised of approximately 7,000 locations of businesses, nonprofit entities, governmental agencies and the like that each have ten or more employees. The initial franchise fee will be calculated on a fractional basis. For example, a territory with 10,500 firms with ten or more employees is 1.5 times larger than a territory with 7,000 such firms. $35,000 times 1.5 is equal to $52,500.

$5,000 of the initial franchise fee is paid in the form of a deposit at the time you submit your franchise application for a single Territory Unit, and $10,000 of the initial franchise fee is paid as a deposit when you submit your application for an area that comprises more than one Territory Unit. The balance of the franchise fee is payable when you sign the franchise agreement, unless we agree to finance a portion of your initial fee. See Item 7, Note 2, for a description of our financing terms. If we do not approve your application, or if you withdraw your application, we may retain an amount equal to our out-of-pocket expenses, but not more than $2,500 We refund the remainder of the deposit to you, and you are not liable for the balance. Proshred does not give refunds under other circumstances.

We also require each franchisee to pay $2,000 toward our advertising fund at the time they sign their franchise agreement. (See Item 11 for a description of the advertising fund.)

We offer U.S. veterans who qualify as franchisees a 20% discount on the initial franchise fee.

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Item 6

OTHER FEES

Name of Fee

Royalty

Amount

6.5% of total gross revenue, but not less than $650 per month

Information

1.5% of total

Technology

gross revenue,

Services

but not less than

Fee

$150 per month

and not more than

$1,500 per month

Advertising

Not less than 1 %

Fee

of total gross

revenue and not

more than 3% of

total gross reve-

nue per month

Date Due

Paid weekly by way of electronic debits of your bank account. The amount debited each week is based on a 3-month historical weekly average.

Same as Royalty fee

Same as Royalty fee

Remarks

Gross revenue includes all sales derived from the franchised business, but does not include revenue attributable to your acquisition of other shredding companies in your territory. Gross revenue does not include sales or use tax.

No allowance is made for bad debts. However, pricing and discounts are determined solely by you.

May be increased each year in proportion to increases in the consumer price index.

Gross revenue does not include revenue attributable to your acquisition of other shredding companies in your territory. Funds are deposited into a segregated account and a full accounting is provided annually. The franchisee advisory committee assists us in setting the agenda and rates.

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Name of

Amount

Date Due

Fee

Additional

A reasonable fee,

Before the training o

training,

to be negotiated,

assistance begins

consulting,

generally $750

advisory or

per day

other assis-

tance

Transfer

Not more than

At the time the

50% of the stan-

transfer is consum-

dard initial fee

mated

then charged for

new franchises

per Territory Unit

Late charge

Interest equal to 1.5% per month or the highest rate allowed by law, whichever is less

Audit

Cost of audit plus

Within 15 days after

the amount of any

receipt of the audit

underpayment

report

and interest on

such amount at

1.5% per month

Renewal fee

Not more than

Before renewal

Remarks

trained without charge

Determined by us from time to time

Payable on overdue amounts

Payable only if audit shows an understatement of 2% or more

Determined by us from time 25% of the stan-                                            to time

dard initial fee then charged for new franchises per Territory Unit

All fees noted above are imposed by and payable to us and are non-refundable.

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Item 7

INITIAL INVESTMENT Your Estimated Initial Investment

Amount

Method of Payment

When Due

To Whom

Payment is to

be Made

Initial franchise fee

$35,000 per

Territory Unit (Note 1)

Lump sum

$5,000 or $10,000 with application. Balance due at signing of the franchise agreement or pursuant to the financing terms (Note 2)

Proshred

Initial advertising

$2,000

Lump sum

Upon signing the

Proshred

fund contribution

franchise agreement

Travel and living

$5,000 to

As incurred

During training

Airlines,

expenses while

$10,000

hotels, restau-

training

(Note 3)

rants and others

Customized truck

$200,000

Deposit and

Deposit with order

Approved

shredding equip-

to

ongoing

and then monthly

supplier and

ment and truck

$240,000

lease/finance

payments

finance com-

supplies

(Note 4)

payments

pany

Secure containers

$7,500 to

Lump sum

Before opening

Approved

(bins, consoles,

$12,500

supplier

boxes, etc.) and

(Note 5)

storage bags for

customer sites

Standard configu-

$10,000-

Deposit and

Deposit with order

Approved

ration PC, printer,

$20,000

ongoing

and then monthly

suppliers

software, training

(Note 6)

lease/finance

payments

and setup

payments

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Method of

To Whom

Amount

Payment

When Due

Payment is tc be Made

Initial launch direct

$7,500

Lump sum

First 3 months

Local suppli-

mail marketing

per

ers and ap-

materials, bro-

Territory

proved suppli-

chures, prepara-

Unit

ers

tion of press

(Note 7)

releases, sales

and promotional

materials, mailing

lists, etc.

Office furniture,

$10,000

Deposit and

Deposit with order

Local suppli-

fixtures and equip-

to

ongoing

and then monthly

ers and ap-

ment (security

$20,000

lease/finance

payments

proved suppli-

system, fax,

(Note 8)

payments

ers

photocopier,

desks, file cabi-

nets, white boards,

chairs, pictures,

tables, printer

stands, etc.)

Real estate,

$10,000

Lump sum

Before opening and

Landlord,

deposits and

to

and monthly

monthly

yellow page

prepaid expenses

$20,000 (Note 9)

supplier, insurance, government, utility companies, local suppliers

Leasehold im-

$5,000 to

Lump sum

Before opening

Local suppli-

provements

$10,000 (Note 10)

ers

Customer service

$15,000

Deposit and

Deposit with order

Local suppli-

van

to

ongoing

and then monthly

ers

$25,000

lease/finance

payments

(Note 11)

payments

Professional fees

$2,500 to

Lump sum

As required

Local firms

- legal, accounting

$7,500

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17

and market research

Miscellaneous start-up expenses

Additional Funds -working capital

Total

Amount

(Note 12)

$5,000 (Note 13)

$50,000 to

$75,000 per Territory Unit -12 months (Note 14)

$364,500 to

$489,500 (Note 15)

Method of Payment

When Due

Lump sum Before opening

As required During start-up period

To Whom

Payment is to

be Made

Local suppliers

Employees, suppliers, utility companies, leasing/financing companies, etc.

We do not require you to set up an office in each territory when you purchase a franchise comprised of multiple Territory Units. Accordingly, the initial investment may be lower for each additional Territory Unit. We determine the number of offices that are required to meet the expected demand in your territory.

Note 1: $35,000 per Territory Unit. A Territory Unit is defined as a geographic area comprised of approximately 7,000 locations of businesses, nonprofit entities, governmental agencies and the like that each have ten or more employees. The initial franchise fee may be calculated on a fractional basis. For example, an area with 10,500 firms with 10 or more employees is 1.5 times larger than a territory with 7,000 such firms. $35,000 times 1.5 is equal to $52,500. See Item 5 for the conditions when this fee is partly refundable. No other payments to Proshred are refundable.

Note 2: The deposit is $5,000 for a single Territory Unit, and $10,000 for an area that comprises more than one Territory Unit. We occasionally defer payment on a portion of the initial franchise fees for franchisees who purchase franchises that comprise multiple Territory Units and meet our credit standards. The amount of financing offered will vary depending upon the applicant and the amount of the initial franchise fees. We typically charge interest at an annual rate equal to two percentage points above the prime rate, as published by the Wall Street Journal, and we typically require payment of the entire balance within three years after the franchised business opens. The debt is evidenced by a promissory note, a copy of which is attached as Schedule IX to the Franchise Agreement. If the franchisee is not an individual, the shareholders or members and their spouses must personally guaranty the debt. The debt can be

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prepaid without penalty. If you do not pay the note on time, or if you breach the Franchise Agreement, we can call the loan and demand immediate payment of the entire outstanding balance. We also have the right to terminate your franchise if you do not make your payments on time. As an alternative to demanding immediate payment and terminating your franchise if you do not make your payments on time, we have the right to reduce the size of your territory. You must pay our attorneys' fees and court costs if a collection action is necessary. You waive your rights to presentment for payment and notice before a collection action may be started against you. We do not have a practice, nor have we ever had the practice, to sell, assign or discount to any third party in whole or in part any note, contract or instrument executed by a franchisee.

Note 3: These amounts include airfare, accommodation, meals, car rental, telephone charges, dry cleaning and other living expenses for the training of at least two people. Training includes two weeks in Toronto and one week at a mentor location somewhere in the United States.

Note 4: We expect that most franchisees will lease or finance the shredding truck and equipment and truck supplies. New shredding trucks from Proshred's approved suppliers range from $200,000 to $240,000. Most franchisees are likely to provide a 10% to 20% deposit and lease or finance the balance. Based on a five-year finance arrangement at 8% and a 20% deposit, the monthly payment would be approximately $3,569.

Note 5: The initial order should be large enough to last for the first two to three months of operation and will include a minimum of the following: twenty-three small size consoles and cardboard inserts; sixteen 95-gallon bins; twenty 65-gallon bins; fifty-six regular consoles and cardboard inserts; twenty-five personal document containers; twenty five bags; and five hundred Residential Information Security Containers.

Note 6: See Item 11 for a description of the computer training and setup.

Note 7: The key to a successful launch is proactive marketing. You are required to purchase a mailing list for targeted customers and to complete at least three direct mail campaigns in your first three months of operation. You will also need to purchase other sales, marketing and promotional materials.

Note 8: Office equipment includes a VOIP phone system, postage meter, security system, 3-4 desks, board room table, file cabinets, chairs, shelving units, white board, cork board, wall map, pictures, plants, signage, etc. Costs will vary depending upon whether the furniture, fixtures and equipment are purchased new or used, the number of units and their size, capability, functionality, etc. Financing/leasing options may be available through various local suppliers.

Note 9: You are required to open an office to conduct business, although you may have one office that covers multiple Territory Units. The typical Proshred office

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consists of approximately 2,000 square feet in an industrial or commercial complex where truck parking is permitted. You will need space for sales offices and for storage of consoles, bins, boxes, etc. A high speed internet connection is required. Rent is estimated to be between $12,000 and $24,000 per year, depending on factors such as size, condition and location of the leased premises. You will typically be required to provide a deposit for first and last months' rent. Other deposits and prepaid expenses include licenses and permits required to conduct business and operate mobile shredding trucks, utility deposits, yellow page deposits, insurance deposits, etc.

Note 10: Whenever possible you should lease industrial/commercial space that has already been improved and has a roll-up door, 1 or 2 offices, a customer service area, a storage area, a meeting room, a rest room, a heating and cooling system, lighting and appropriate utility service, so that leasehold improvements will be minimal. Improvements may be required and will range in cost depending upon the scope of work.

Note 11: You will need a customer service van to attend sales appointments, deliver consoles, bins and boxes and visit with customers and staff in the field. We expect that most franchisees will lease or finance their van. New vans range in value from $15,000 to $25,000. Most franchises are likely to provide a 10% to 20% deposit and lease or finance the balance. Based on a 5 year finance arrangement at 8% with a 20% deposit, the monthly payment would be approximately $325.

Note 12: You should have your attorney and accountant review your UFOC and Franchise agreement and advise you on your start-up. You may wish to incorporate or establish a limited liability company to be the franchisee. Also, you may wish to conduct your own independent market research to determine market opportunity/potential.

Note 13: Includes truck items and tools, safety equipment, uniforms, office supplies including business cards, letter head and envelopes, pre-opening staff training, etc.

Note 14: This is an estimate of the additional funds you will require for working capital during the initial year of operation. These expenses include payroll costs. These are estimates and we cannot guarantee that you will not have additional expenses. Your costs during the initial phase will depend on such factors as: your ability to follow our guidelines; your managerial skills and business experience; local market conditions for paper shredding and recycling; local economic conditions; local competition; prevailing wage rates; and the sales level reached during the initial period of business. In addition, if you are relying on the franchise business for sole income, these expenses will have to be increased accordingly. The estimated expenses are based on the assumption that your expenses will be average and you will manage your expenses diligently. To assist you in growing the business, we require you to spend $7,500 per Territory Unit in initial marketing as well as 3% of your gross revenue per month on local marketing.

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Note 15: Proshred has relied on the extensive experience of its management in various franchise operations to compile these estimates. These figures are estimates only. You should review these figures carefully with a business advisor before making any decision to purchase the franchise.

Item 8

RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

We require that 100% of your purchases and leases of goods and services in establishing and operating the franchised business be specified or approved by us. We require that all such purchases be made from suppliers specified or approved by us. You must use only such vehicles, shredding equipment, vans, consoles, bins, boxes and other equipment as we approve or specify, from suppliers designated or approved by us as meeting our standards. In addition, you will place or display on all vehicles and equipment only such signs, emblems, lettering and logos, and use in the franchised business only such invoices, order forms, receipts, stationery and other paper goods and marketing supplies, as we specify or approve from time to time. We also require you to use the company that developed our Shredlogic software (described in Item 11), Windswept Integrated Technologies Inc., of Ottawa, Ontario, Canada, to assist you in the purchase, installation and initial training with respect to the required computer hardware and software shortly after you sign the franchise agreement.

The Proshred operations manual contains our required specifications and a list of suppliers that meet our standards. If we modify our specifications, we will notify you and our approved suppliers. We will also notify you if we revoke our approval of any supplier. If you propose to use any vehicle, equipment or other item that we have not approved or a supplier we have not approved, you must first notify us and submit to us sufficient specifications, photographs, drawings, pricing and other information to enable us to determine whether such item or supplier complies with our specifications and standards. We will use reasonable efforts to begin an investigation of the proposed supplier or product within 30 days of your request. We will notify you within 10 days after we complete our investigation whether we approve the proposed supplier or product. We have informal arrangements with suppliers to assist franchisees in obtaining equipment, goods and services at favorable prices. For example, we may obtain advantageous delivery, down payment and loan terms on vehicles for the benefit of all franchisees. We do not provide any other material benefits to you based on your use of designated or approved sources. We do not have any purchasing or distribution cooperatives.

You pay us for your use of the Shredlogic software and its maintenance and support through the Information Technology Services Fee. (Section 9.4 of the Franchise Agreement.) Neither Proshred nor any of our affiliates is currently an approved supplier of any other products or services.

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No supplier makes any payment or provides any other material consideration to Proshred or its affiliates because of transactions with franchisees. From time to time, we may purchase marketing materials in bulk and offer them to you at our cost plus a 15% administrative fee to cover the stocking, handling and shipping charges.

You must have or purchase insurance covering your vehicles; all risk personal property insurance on the other assets used in your business; comprehensive general liability and property damage insurance with a policy limit of not less than U.S. $2 million; and all other insurance required by law. The policies must be written by insurers designated or approved by us. (Section 7 of the Franchise Agreement.)

See Item 11 for your further requirements relating to computers and software, and Item 16 for restrictions on what you may sell in the context of your franchised business.

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 puchases/leases

c.   Site development and other pre-opening requirements

d.   Initial and ongoing training

e.   Opening

f.   Fees

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Section in Franchise Agreement

Sections 2.1 and 3.2

Item in Offering Circular

Items 7, 11 and 12

Sections 4.2 - 4.6

Items 7, 8 and 11

Sections 3 - 4.6

Items 7 and 11

Sections 5.1 -5.4

Item 11

Section 4.1 Sections 9.1 -9.4

Item 11 Items 5 and 6

Obligation

g. Compliance with standards and policies/operating manual

h. Trademarks and proprietary information

i. Restrictions on products/services offered

j. Warranty and customer service requirements

k. Territorial development and sales quotas

I. Ongoing product/service purchases

m. Maintenance, appearance and remodeling requirements

n. Insurance

o. Advertising

p. Indemnification

q. Owner's participation / management / staffing

r. Records and reports

s. Inspections and audits

t. Transfer

u. Renewal

v. Post-termination obligations

Section in Franchise Agreement

Sections 5.6, 6.1, 6.2, 6.4 and 13.2

Sections 5.6 and 13.1 -13.6

Section 6.2

Section 6.4

Sections 1.1 (p) and 2.4, Schedule III

Sections 6.2 and 6.4

Section 6.1

Section 7

Section 10

Section 19

Sections 5.1 - 5.3 and 6.5

Section 11 Section 12 Section 17 Section 2.3 Section 15

Item in Offering Circular

terns 8, 11 and 16

terns 13 and 14 tern 16 tern 11 tern 12 tern 8 tern 11

terns 7 and 8 terns 7 and 11 tern 13 terns 11 and 15

tern 11 tern 11 tern 17 tern 17 tern 17

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Obligation

Section in Franchise Agreement

Item in Offering Circular

w. Non-competition cove- Section 16                                Items 16 and 17

nants

x. Dispute resolution               Section 20.17                           Item 17

Item 10

FINANCING

We occasionally defer payment of a portion of the initial franchise fees for franchisees that purchase franchises that comprise multiple Territory Units. The amount of financing offered will vary depending upon the applicant and the amount of the initial franchise fees. See Item 7, Note 2, for a description of the terms of this financing.

Except as set forth in Item 7, Note 2, we do not offer direct or indirect financing. We do not guaranty your note, lease or obligation.

Item 11

FRANCHISOR'S OBLIGATIONS

Except as disclosed below, Proshred need not provide any assistance to you. Before Opening

Before you open your business, Proshred will:

1.        Designate your exclusive territory. You will apply for a franchise for a specific exclusive territory. As such, your exclusive territory will be determined before you sign the Franchise Agreement and will be set forth in Schedule II of the Franchise Agreement. Your territory may consist of one or more Territory Units. A Territory Unit is defined as a geographic area comprised of approximately 7,000 locations of businesses, nonprofit entities, governmental agencies and the like that each have ten or more employees. (See Item 12.)

2.         Provide you with specifications and requirements for the vehicles, equipment, office furniture, computer system, telephones, uniforms and supplies you will use in your franchised business. (Section 4.5 of the Franchise Agreement.)

3.        Assist you in obtaining your vehicles, equipment, supplies and leasing or financing.

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