Franchise Agreement Dated August 1, 2005

EXHIBIT 10.27 FRANCHISE AGREEMENT THIS FRANCHISE AGREEMENT is made as of the 16 day of OCTOBER, 2002.
BETWEEN: LULULEMON ATHLETICA INC. , 2113 West 4th Avenue, Vancouver, British Columbia, V6K 1N6
(hereinafter called the " Franchisor" or " Lululemon" )
OF THE FIRST PARTAND: OQQO ENTERPRISES INC. of 1257 a Haultain St, Victoria B.C.
(hereinafter called the " Franchisee" )
OF THE SECOND PART RECITALS WHEREAS: A. Franchisor has developed a format, system and plan for the operation of retail stores featuring and offering for sale Lululemon Athletica trade-marked clothing and accessories, and related products and services, all of controlled quality, in accordance with Franchisor' s prescribed standards, specifications, policies and procedures, under the name, trade mark and style of " Lululemon Athletica" (the " system" ); B. Franchisor owns and controls the trade name and trade mark Lululemon Athletica and related trade marks and designs used in connection with the franchised business and system (the " Marks" or the " Trade Marks" ); and C. Franchisee has applied for a franchise to operate a Lululemon Athletica retail store utilizing and in conformity with Franchisor' s business method, format and system and the Trade Marks at one or more approved retail locations, and to distribute Lululemon Athletica trade-marked clothing and accessories within the Franchised Territory set out below, and Franchisor has agreed to supply Lululemon Athletica trade-marked clothing and accessories and to grant such a franchise to Franchisee upon the terms and conditions of this Agreement. NOW THEREFORE in consideration of the premises and of the mutual covenants and agreements herein contained, and for other consideration acknowledged by the parties to be of good and sufficient value, the parties agree as follows: 1. Definitions In this Agreement, the following capitalized terms shall have the following meanings unless the context requires otherwise:


(a) " Agreement" means this Agreement and all schedules thereof and any subsequent agreement in writing which amends or supplements this Agreement; (b) " Approved Retail Location" means the retail location which has been approved by Lululemon for the operation by Franchisee of a retail sales outlet as set forth in Schedule " B" , as may be amended or supplemented from time to time; (c) " Commencement Date" means the Commencement Date as set forth in Schedule " B" ; (d) " CPI" means the Consumer Price Index For Canada, All Items (Not Seasonally Adjusted), 1992 = 100, Annual, or any successor index thereto, as published by Statistics Canada or any successor Agency thereto; (e) " Effective Date" means the Effective Date as set forth in Schedule " B" ; (f) " Franchise" means a business operated by a Franchisee which is engaged in the retail sale of Lululemon Products in the Territory or any part thereof; (g) " Franchise Agreement" means an agreement between Lululemon and a Franchisee or prospective Franchisee the subject matter of which relates to the acquisition or operation of a Franchise; (h) " Franchise Fee" means a direct or indirect payment (whether payable on a onetime or recurring basis) which is required to be paid by a Franchisee to Lululemon, or to any affiliate of Lululemon, as consideration for the grant of a right to acquire or operate a Franchise; (i) " Franchised Territory" means the same thing as " Territory" ; (j) " Franchisee" means Franchisee as the authorized retailer of Lululemon Products at an Approved Retail Location, as well as a person at arm' s length to Franchisee who is granted a right or license by Lululemon to operate a Franchise in the Territory, (k) " Gross Sales" means, for a specified period, the gross sales of all Products sold by the Franchisee at an Approved Retail Location during that period less: (i) returns of Product at the Approved Retail Location during that period, (ii) refunds and allowances made by the Franchisee at the Approved Retail Location during that period, (iii) any store credits redeemed by the Franchisee at the Approved Retail Location during that period, (iv) any amounts received by the Franchisee from the sale of gift certificates at the Approved Retail Location during that period (it being understood that the redemption of gift certificates will be included as Gross Sales), and

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(v) any amounts collected by the Franchisee at the Approved Retail Location during that period on account of taxes; (l) " License Agreement" means the same thing as " Franchise Agreement" ; (m) " License Fee" means the same thing as " Franchise Fee" , except as otherwise specified in this Agreement in respect of the Approved Retail Locations; (n) " Licensed Product" means a third party product which is approved for sale by Lululemon in association with the Marks and which is distributed or sold by Franchisee; (o) " Lululemon Products" means clothing and accessories, other than Licensed Products, which (i) display the Marks, or (ii) are distributed or sold under a system of distribution or sale in which the use or display of the Marks is an integral part thereof; (p) " Marks" means the trade-marks, trade names and other commercial symbols and related logos as set forth in Schedule " C" hereto, including the trade names LULULEMON and LULULEMON ATHLETICA, together with such other trade names, trade-marks, symbols, logos, distinctive names, slogans, service marks, certification marks, logo designs, insignia or otherwise which may be designated by Lululemon from time to time; (q) " Products" means collectively Lululemon Products and Licensed Products; (r) " Territory" means the Territory as set forth in Schedule " B" ; (s) " Trade Marks" means the same thing as " Marks" . 2. Term, Renewal and License Fee (a) Subject to any right of earlier termination as provided for herein, the initial term of this Agreement shall be for a period of five (5) years (the " Initial Term" ). The Initial Term shall commence on the Commencement Date. (b) Provided that Franchisee achieves gross sales after taxes in either of the last of two (2) years of the Initial Term of the amount as set forth in Schedule " B" , it shall have the further right to renew this Agreement for subsequent terms of five (5) years each, unless Franchisee shall fail to meet the then-current terms and conditions of renewal as specified herein. The terms and conditions for renewal of this Agreement are as follows: (i) Franchisee shall notify Franchisor in writing at least three (3) months prior to the expiry of the term that it wishes to exercise this option to renew; (ii) Franchisee' s option to renew shall only be effective if at the time of its exercise and at the time of commencement of the renewal term Franchisee shall have fully complied with all of the material terms and conditions of this Agreement; (iii) in the event of non-compliance by Franchisee, if Franchisor shall determine not to allow Franchisee to renew this Agreement, then Franchisor shall notify

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Franchisee in writing setting forth Franchisor' s reasons for non-renewal, and Franchisor shall give as much notice of non-renewal to Franchisee as is reasonably practicable in the circumstances; (iv) Franchisee shall execute and deliver to Franchisor a new Franchise Agreement for the renewal term in Franchisor' s then-current standard form, which may include terms and conditions which differ from those contained in this Agreement The royalties payable by the Franchisee in the renewal term shall not exceed the percentage royalties payable during the last year of the Initial Term. (v) Franchisee shall carry out Franchisor' s reasonably required upgrading and improvements to the franchised business in order to conform with Franchisor' s then-current standards and specifications; and (vi) Franchisee shall reimburse Franchisor for all of its reasonable costs and expenses incurred in connection with the renewal, including inspection of the franchised business and providing any required additional training. (c) Franchisee shall pay Lululemon as a License Fee for this Agreement and one (I) Approved Retail Location: (i) the sum as set forth in Schedule " B" for the first year of the Initial Term, and (d) The License Fee shall be deemed to have been fully earned by and payable to Franchisor upon the granting of this Franchise, and no portion of the License Fee shall be refundable to or become not payable by Franchisee for any reason. (e) The License Fee to be paid for the first year of the Initial Term is payable within 30 days of the Effective Date. (f) The License Fee payable in each year following the first year of the Initial Term shall be paid within 30 days of the anniversary date of the Commencement Date. 3. Appointment and Use of Marks on Products (a) Subject to any termination or non-renewal of this Agreement, and except as otherwise provided in this Agreement, Lululemon appoints Franchisee, for so long as this Agreement remains in effect, as a non-exclusive retailer of Lululemon Products at one or more Approved Retail Locations in the Territory. (b) Each Approved Retail Location to be established and operated by Franchisee in the Territory must first be approved by Franchisor, such approval not to be unreasonably withheld or delayed, and, except for the Approved Retail Location set forth in Schedule " B" , shall be the subject of a separate Franchise Agreement to he entered into between the parties prior to its opening. Each such Franchise Agreement will contain the same financial obligations of Franchisee, and will otherwise contain substantially the same terms and conditions as are set forth in this Franchise Agreement pertaining to the Approved Retail Location if for any reason

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the parties do not enter into a separate Franchise Agreement, then the terms and conditions of this Franchise Agreement will apply to each such Approved Retail Location, except that the Effective Date will be read as fifteen (15) days prior to the opening date of such Approved Retail Location; and the Commencement Date will be read as being the same as the opening date of such Approved Retail Location; and the amount of sales that Franchisee will be required to achieve after taxes in either of the last two (2) years of the Initial Term in order to have the right to renew the Franchise Agreement for a subsequent term of five (5) years will be adjusted upwards from the Commencement Date of this Agreement to the first day of the last year of the initial Term which pertains to such Approved Retail Location in accordance with increases in the CPI over such period. (c) During the currency of this Agreement, but except as otherwise provided in this Agreement, Lululemon shall permit Franchisee to hold itself out as an authorized retailer of Lululemon Products. (d) Franchisee shall prepare and submit for Lululemon' s review and reasonable approval a budget for the development and first year' s operations of each Approved Retail Location, at the time of presenting each proposed retail location to Lululemon for its approval Lululemon will provide assistance to Franchisee, but only for the purposes of guidance. Franchisee will be solely responsible to work with its own advisors in preparing and finalizing such budgets. (e) In the event that Franchisee wishes to relocate any existing Approved Retail Location to another location due to: (i) unfavourable business conditions; or (ii) a change in the nature or character of the area where the Approved Retail Location is located; or (iii) the Approved Retail Location is no longer adequate to support actual or potential business volumes, then Franchisee shall submit a written request to Lululemon requesting such permission and providing the reasons for such request and Lululemon, acting reasonably, shall consider and respond to any such request and shall notify Franchisee in writing within 30 days following receipt of such request of its decision thereof. (f) During the first twenty-four (24) months of the Initial Term, Lululemon shall not, without Franchisee' s prior written consent, which consent may be withheld in the Franchisee' s sole discretion, enter into any franchise, license or distribution agreement for the operation of a retail outlet in the Territory or grant any other party a license to use the Marks in association with the wholesale or retail marketing, sale or promotion of Products in the Territory. (g) During the last thirty-six (36) months of the initial Term and any renewal term as provided for in this Agreement, Lululemon shall not, without Franchisee' s prior written consent, which consent may be withheld in the Franchisee' s sole discretion, enter into any franchise, license or distribution agreement for the operation of a retail outlet in the Focus Area Exclusive Zone as set forth in Schedule " B" or grant any other party a license to use the Marks in

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association with the wholesale or retail marketing, sale or promotion of Products in the Focus Area Exclusive Zone as set forth in Schedule " B" . (h) During the last thirty-six (36) months of the Initial Term and any renewal term as provided for in this Agreement, so long as Franchisee is in compliance with all of the material terms and conditions of this Agreement, Lululemon shall not enter into any Franchise Agreement or grant any other party a license or right to use the Marks in association with the wholesale or retail marketing, sale or promotion of Products in the Territory unless it first gives not less than 90 days' prior written notice to Franchisee of its intention to do so and grants to Franchisee in such notice a right of first refusal to enter into such proposed Franchise Agreement, license or right of use, as applicable, on terms and conditions which are no less favourable to Franchisee than those which it has offered to such third party. Any such notice shall contain the terms and conditions of such third party offer and shall notify Franchisee that it may accept such offer on giving written notice of its acceptance to Lululemon within the time so provided, which shall not be less than 30 days from the date of receipt by the Franchisee of the notice provided for in this paragraph. If Franchisee rejects a right of first refusal, then notwithstanding any other provisions in this Agreement, Franchisor shall be entitled to proceed and enter into the proposed agreement on substantially the same terms and conditions as contained in such notice. If the terms and conditions of the proposed agreement will change materially or substantially from those contained in such notice, this shall again give rise to a right of first refusal to Franchisee as described above. Notwithstanding the foregoing, the Franchisor acknowledges and agrees that nothing in this Paragraph shall be construed as granting to it the right to enter into any franchise, license or distribution agreement for the operation of a retail outlet in the Focus Area Exclusive Zone as set forth in Schedule " B" or grant any other party a license to use the Marks in association with the wholesale or retail marketing, sale or promotion of Products in the Focus Area Exclusive Zone as set forth in Schedule " B" , otherwise than in compliance with Paragraph (g). (i) Notwithstanding the above provisions, Lululemon shall have the right to establish its own retail locations in the Territory other than the Focus Area Exclusive Zone as set forth in Schedule " B" during the last thirty-six (36) months of the Initial Term, and at any time thereafter, acting in a commercially reasonable manner as to their locations not being too close in proximity to the Approved Retail Locations of Franchisee. (j) Franchisee shall not use any Mark in association with any third party product or engage in the retail sale of any third party product at an Approved Retail Location unless shipped by Lululemon Athletica. (k) Franchisee will be responsible for the reasonable cost of adding the Approved Retail Location and subsequent Approved Retail Locations of Franchisee to Lululemon' s existing master website. Lululemon will refer leads from prospective retail customers in the Territory to Franchisee, or upon the establishment of additional retail locations, to the retail location which is closest to the prospective retail customer' s place of residence. (l) Franchisor will fill all orders from customers for Lululemon Products which are received over the Internet from within the Territory. Franchisor will pay the net profits from such sales to Franchisee at the end of each calendar quarter, calculated as follows. The gross

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revenues received by Franchisor from electronic commerce retail sales of Lululemon Products to customers in the Territory shall have deducted therefrom Franchisor' s cost of goods sold, the shipping and insurance costs for delivery of such goods to customers, royalties at the rate provided for herein, plus the amounts of all returns, refunds, allowances, credits, goods and services taxes and sales taxes applicable to such sales, and the resulting amount will constitute the net profits from such sales. (m) Franchisee shall not solicit or fill any orders from prospective wholesale or retail customers located outside the Territory; provided that nothing in this paragraph shall prevent the Franchisee from selling Products at an Approved Retail Location to persons resident outside the Territory. (n) Franchisee shall be entitled to fill any and all athletic team orders in the Territory. 4. Reservation of Rights to Franchisor (a) Franchisor may also acquire, develop, operate, licence and franchise other types of retail locations which may involve the distribution and sale of similar products and services but which operate under different trade marks and which may be located anywhere including nearby to the Approved Retail Locations and within the Franchised Territory, and in particular Franchisor may establish a lower-priced brand of athletic apparel intended for mall-based dedicated retail stores, and Franchisor shall incur no liability to Franchisee in connection therewith. (b) Franchisor may go public, be acquired by or merge with a competing business which may involve the distribution and sale of similar products and services under different trade marks and which may have locations anywhere including nearby to the Approved Retail Locations and within the Franchised Territory, and Franchisor shall incur no liability to Franchisee in connection therewith. (c) Notwithstanding any other provision of this Agreement, Franchisor may itself or through an affiliate acquire, develop, operate, licence or franchise any form of business anywhere which is not specifically granted, franchised and licensed to Franchisee under this Agreement; and it may do so under a same, similar or a different trade-mark; and any such form of business may be competitive with the franchised business but operate under a different trade-mark; and if any such business uses a similar trade-mark, Franchisor will act in a commercially reasonable manner in the exercise of such rights and will endeavour through such use of a similar trade mark to enhance the overall public recognition and goodwill thereof, and Franchisor shall incur no liability to Franchisee in connection therewith. Franchisor or its affiliates shall not operate, license or franchise any business which would be competitive with the franchised business within the Focus Area Exclusive Zone as set forth in Schedule " B" during the first twenty-four (24) months of the Initial Term of this Agreement. 5. Management Personnel Franchisee acknowledges that Franchisor has granted this Franchise on the representations of Franchisee that one of the (2) current principals of Franchisee shall participate actively on a full-time basis in the management and operation of the franchised business and

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work at least 5 days a week (40 hrs) on average on the store floor. Franchisee shall not appoint replacement management personnel without the prior written approval of Franchisor who will not unreasonably withhold such approval but who in granting such approval may prescribe, as a condition thereof, that any such replacement management personnel satisfactorily complete the training requirements set out herein. Franchisor reserves the right to charge a reasonable standard fee and its reasonable expenses incurred in providing such training. 6. Training of Franchisee (a) Franchisor shall furnish Franchisee and the management personnel, if any, proposed to be employed by Franchisee in the franchised business including at each Approved Retail Location with initial training of three (3) days in duration in respect of the management, administration and operation of a Lululemon Athletica franchised business. The training shall be given at a location designated by Franchisor. Franchisor will pay no compensation for any services performed by trainees during such training and all expenses incurred by Franchisee or the trainees in connection with such training shall be for the account of Franchisee. Such initial training is intended to enable Franchisee or its management personnel thereafter to hire and train its assistant manager and other employees. Franchisor shall also furnish Franchisee with retail store opening assistance of seven (7) days in duration but only upon the opening of the first Approved Retail Location of Franchisee. The cost of such initial training for up to three (3) persons at the same time and of such retail store opening assistance is included in the License Fee. Additional persons will be accommodated for such initial training or for subsequent equivalent training at Franchisee' s request, or in the event that the initial trainees shall fail to satisfactorily complete such initial training and Franchisee is required to hire a manager or replacement manager to satisfactorily complete such initial training, and in the event of a change of management personnel for the franchised business Franchisor reserves the right to charge a reasonable standard fee and its reasonable expenses incurred in providing such additional training. (b) Franchisee and each manager, if any, of the franchised business shall satisfactorily complete such training prior to the commencement of the franchised business, or in the case of a new manager, prior to or immediately upon and after taking charge, unless waived by Franchisor in its discretion by reason of such person' s prior training and experience or by reason of Franchisee' s ability to satisfactorily train its management personnel. Franchisee shall advise Franchisor of its proposed operational structure and personnel prior to the commencement of business, and Franchisor will determine and advise Franchisee as to which personnel will require training. Franchisor may require retraining of any personnel at any time based upon performance. Franchisor may specify additional training which may be mandatory at any time due to system upgrades or changes. Franchisor may also conduct follow-up training seminars covering various topics from time to time. Franchisor may designate one (1) of such follow-up training seminars per year to be mandatory for Franchisee and its management personnel. Franchisee acknowledges that Franchisor' s training programs and materials are proprietary confidential information forming part of the Lululemon Athletica system. (c) If additional assistance or training over and above that normally furnished by Franchisor is required or requested by Franchisee at any time, Franchisor and Franchisee shall discuss and reasonably agree upon, what is required and Franchisor will furnish such additional

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assistance or training. Franchisor reserves the right to charge a reasonable standard fee and its reasonable expenses incurred in providing such additional assistance or training. (d) Each person trained before the opening of a first franchise will work seven (7) days in an existing Lululemon Athletica franchise before signing the agreement. (e) The Signor of the franchise agreement will take a course called the " Forum" presented by Landmark Communication before the store opening Failure to complete this course before the store opening will result in default of this agreement. 7. Consultation Lululemon agrees to consult with Franchisee from time to time as to market conditions, merchandising trends and potential product line opportunities in the Territory. Lululemon will act reasonably and give due consideration to Franchisee' s views on such matters; however, Franchisee acknowledges that Lululemon will have final discretion to determine matters related to the production and design of all Lululemon Products. Franchisee will report to Lululemon as reasonably required from time to time as to market conditions, merchandising trends and potential product line opportunities in the Territory. 8. Pricing, Ordering and Payment (a) Franchisee will provide Lululemon with sales dollar amount forecast of its requirement for Lululemon Products at least six (6) months in advance of the desired delivery date. (b) Lululemon. shall sell Lululemon Products to Franchisee at an amount equal to Lululemon' s actual cost of manufacturing and delivery to Lululemon' s Vancouver warehouse, plus ten percent (10%). The cost of manufacturing is defined as all fabrics, trims and findings, labour costs, screening. hang tags, labels, prewashing and other production services, allowances and taxes. The 10% added is an arbitrary figure attached to pay for design and manufacturing overhead. (c) Franchisee will receive a percentage of total Lululemon monthly production based on the Franchisee' s forecast for the month weighted by the ratio of Franchisee' s forecast compared to the total of all stores' forecasts combined. The quantity and breakdown of goods delivered to Franchisee with regard to styles, colors and sizes will be solely dictated by Franchisor. The franchisee will pay fifty percent (50%) of the forecasted cost of goods for each month as a downpayment. Such payment shall be made to Lululemon by electronic bank transfer or cheque and shall be provided not less than sixty-five (65) days prior to the first day of the scheduled delivery month of such order. Lululemon shall not commence production of any Lululemon Products ordered by Franchisee until such time as it has received the applicable Downpayment. Franchisee shall pay the balance of the actual purchase price to Lululemon by electronic bank transfer on or before the first day of the scheduled delivery month of such order, or by cheque not less than five (5) days prior to the first day of the scheduled delivery month of such order. During the first three (3) months of the Initial Term of this Agreement, if requested by Franchisee and deemed to be necessary by Franchisee for cash flow purposes, Franchisor will allow Franchisee to pay the balance of the actual purchase price just prior to the scheduled

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delivery. For the months of November and December only, 100% of the forecast cost of goods amount will be paid 65 days in advance (d) At the end of each month, Lululemon will send a statement of shipping status and an invoice. Any shortfalls or overages in shipments of Lululemon Products shipped to Franchisee at the end of any month will be carried forward to the following month for shipment (if a shortfall) or for treatment as a partial fulfillment of a subsequent order (if an overage), provided that payments for Lululemon Products delivered to Franchisee shall be made in accordance with the payment terms set forth herein. (e) The Lululemon Products so ordered shall be delivered to Franchisee fob. on the transport carrier of Franchisee' s choice from Lululemon' s Vancouver warehouse and payment of the remaining balance of the purchase price shall be due on the first day of the month of delivery and shall be paid to Lululemon by credit card authorization or electronic bank transfer. (f) Franchisor will endeavour to send the franchisee product above the forecast amount on request of the franchisee and dependant on availability of inventory. Such shipments will be paid for by electronic transfer before the goods are shipped. 9. Title and Risk of Loss Title to and the risk of loss in any products ordered by one party from the other party shall pass at the time of delivery. 10. Winning Formula Franchisee will adhere in a commercially reasonable manner to the Winning Formula described in the attached Schedule " A" and as amended by Lululemon from ...