FRANCHISE

AGREEMENT

This agreement is made on and will be effective from…………………………..

Parties:

Ittehad Textile Ind.

(Pvt.) Ltd. (“Principal”)
Dost Street, Samundri
Road,
Faisalabad.

And,

XYZ (“Franchisee”)
CNIC # 00000-0000000-0
Current Address:
Permanent Address:

Outlet Address:

Recital:

The principal owns the trade marks (as set out in schedule i to this agreement)
and intellectual property rights in respect of the products and wishes to appoint
the franchisee to sell the products in the territory. The principal hereby expressly
declares that the trademarks mentioned in this agreement belong to the
principal, and that at this time the principal is not aware of any dispute
concerning these trademarks in any country, and further that the principal shall
take all necessary legal, commercial and statutory steps, that it deems necessary
to ensure that the trademarks continue to remain the sole property of the
principal during the term of this agreement.

Terms and conditions:

Franchise Agreement Ittehad Textile Ind. (Pvt.) PAGE

Ltd. 1
1. Definitions

Products: means principal products including Loose Fabric, Pret & etc.

Territory means the following city/cities.

“Area, City”

Exclusive means only for the territory defined above and no other franchise will
be given without the consent of the existing franchisee.

Non-exclusive means the territory is already shared or will be shared by other

franchise, own store or other form of sales point.

Gross Sales means the values of sales including discounts, rebates etc.

Net Sales means the amount/value of sales excluding discounts, rebates etc.

2. Appointment

The principal hereby appoints the franchisee to market and sell the products in
the above territory under NON-EXCLUSIVE appointment. The franchisee
undertakes to sell the products under the principal’s brand names under its own
account.

The non-exclusive appointment means the Principal will give more franchises in
the same territory. The non-Exclusive franchisee will be asked first for the
opportunity and then after their refusal to take the new franchise will be given to
someone else. In case there is more than one franchise, a close bid will be asked
from all interested. The maximum offer will get the franchise contract. Exclusive
contract term means there will be only one franchise in the same territory, within
area limit of 10 KM which may also be changed as decided by principal.

Franchise Agreement Ittehad Textile Ind. (Pvt.) PAGE

Ltd. 2
3. Brand and company name

Franchisee is entitled and obliged to use the principal brand and product names
during the tenure of the agreement on the products and the stores / corners from
where the products will be sold in the territory. The franchisee shall not be
entitled to register or use principal as part of its company name, nor shall it
register any brands, companies or product names that are similar to the principal
brands.

4. Sale of products and subsequent distribution & selling

4.1 The franchisee shall sale the products only supplied by the
principal and sell the products within the territory specified above.
The franchisee is not to sell the products through sales agents or to a
sub-franchisee or to any party whom the franchisee has reason to
believe will resell the products outside the territory unless with the
prior written approval of the principal.

4.2 The franchisee will be responsible for the product condition and
quantity. The product damaged/ not saleable or theft is charged to
franchisee on Retail Value minus franchisee commission. Its
compulsory for franchisee to do the insurance of the total stock lying
at the store. The Principal will get insurance policy through a
recognized company on behalf of Franchisee and the cost of
insurance policy will be charged to franchisee. It pertinent to mention
here that Principal is not bound to consult with franchisee regarding
insurance policy and whatever the cost of insurance shall have to be
paid by the franchisee.

5. Brand promotion activities, advertising, public relations & store

environment

5.1 The franchisee shall support the principal brands through specific
brand-promotion activities. These brand-promotions will be designed
and executed from principal head office. The franchisee will be part of
development of such promotions.

5.2 Franchisee will receive POS materials, territory specific

advertising materials from principal head office. The print, cable,
satellite and radio will be managed by principal head office (where
applicable). In some cases the head office of principal might ask the
franchisee to support or coordinate head office on behalf with some
local vendor.

5.3 Franchisee will have to participate in all such promotions. The

promotions will be designed in following categories and franchise has
to participate accordingly.
5.4 All shop renovation & indoor store advertising including
Fascia Board erected in front of (at upper outside of) the store
is on account of the franchisee which shall include
advertisement fee imposed by Local Authorities like PHA etc.
and outdoor print & electronic media/campaign, Hording,
Steamers etc will be Principal’s responsibility.

5.4.1 Thematic Promotions/PR activities

Franchisee will participate in thematic campaigns to keep brand

strong in the territory. Franchisee has to bear the cost of
advertising material and media cost by themselves. In some cases
the franchisee could drop the campaigns or excuse the support but
should have strong reason and should have approval from
management of Principal.

5.4.2 Franchisee will be deducted upto 100% from its

commission where franchisee will give discount to any customer at
his own.

5.4.3 Credit card charges shall be borne half (50%) by the

Principal and half (50%) by the Franchisee.

5.5 Franchisee has to participate with best effort in all other

advertising and public relations programs launched by principal time
to time. The support could in the form of activity, PR or any other
form.

5.6 Franchisee is allowed to do activities in their territory, but all

publicity involving the products and/or the brand names “principal”
shall be submitted to the principal for written approval prior to
publishing or launching.

5.7 The franchisee shall comply with the brand identity guidelines
under store environment for the respective brand. In the matter
hereof, the franchisee will duplicate materials, finishing or special
treatments as specified in the respective Fitting-out plans and
material sample boards as provided by the principal from time to
time. In the event that the specified materials are not found locally,
the franchisee can offer alternative materials which comply closely
with the standards specified in the fitting-out plans, but will be
required to seek principal’s approval beforehand. For any fixtures,
building materials and /or custom-made signature fittings that the
franchisee is unable to produce according to principal’s specifications,
the principal will fabricate or source and resell to the franchisee and
all packing/delivery costs arising thereof shall be borne by the
franchisee.
 5.8 Whenever a catalogue is made by the principal for any category,
free copies will be delivered to the franchisee.

6. Sales Targets

6.1 The franchisee shall achieve such monthly and annual sales
targets as set and agreed with the principal from time to time. The
franchisee will provide a quarterly review of sales volume/quantity
achieved for each category to assist in the making of these annual
targets.

6.2 The franchise which will achieve their sales targets will get
monitory rewards announced later by the principal.
 6.3 Principal will issue a warning letter to franchise which fails to
achieve sales targets and not been able to satisfy the management
for the reason. Franchisee who will receive four such warning letters
could get termination of the contract. (This means action will be done
on fourth letter)

7. Exclusivity clause (terms and conditions)

The franchisee could take other franchises of various brands. The franchisee has
to disclose all brand names already in his possession. Any additional brand
franchisee wants to acquire should be informed and written approval should be
taken from principal. As a policy, principal will not allow close competitor with
same franchisee.

Once the franchise is operational and then franchisee wants to add stocks of any
other brand, any other kind besides House of Ittehad in the same premises then
he will have to get special approval from the Principal.

8. Investment

The franchisee has to follow the following investment terms for this agreement;

8.1 The minimum store size will be 1000 sq. ft and maximum shall
be dependent on Location and Area. The principal solely reserves the
right to change and vary the space according to the market and
location.

8.2 The cost of store interior will be the responsibility of franchisee.

The Principal will provide the store interior layout drawings which
shall be prepared & designed by an Architect/Engineer. The Architect
will be appointed by the Principal. The cost of layout drawings and
interior consultancy will be the responsibility of franchisee which shall
be required to pay before the time of signing of Franchisee Contract.

8.3 The Franchise total security deposit will be minimum Rs. 4

million which is refundable at the time of termination of this
agreement. Refundable security will be returned after clearing all
returnable stocks and if any assets provided by the company. Total
security amount shall have to be paid as advance and only after
deposit of total amount of security the stock will be issued to
franchisee, in case of non-deposit of security amount the franchisee
will be responsible for delay or any other consequences. In case of
excessive delay or cancellation of agreement the amount of expenses
incurred by the company on marketing or any other head, will also be
adjusted from the amount of security deposit given by franchisee and
amount will be returned after adjustment of all expenses. Franchisee
will provide cheques amounting to Rs. 5 million (5 cheques of 1
 million each) as security (undated and open), which the Principal can
use in case of any default or breach of agreement by Franchisee.

8.4 Franchisee margin shall be 21% flat on all categories.

8.5 The commission will always be calculated on net sales value

(means sales amount after discounts, rebates, credit card charges &
etc)

8.6 Principal will provide shopping bags and packaging material in

accordance with company policy, free of cost to a certain limit.
Franchisee is not allowed to use any other material for packaging
unless prior approval in writing of principal.

8.7 All stationary requirements for office use of franchisee will be

arranged by franchisee.

8.8 Principal will provide the material related to brand. The forms of
loyalty cards, inward/outward pass books, printed receipts etc.

8.9 Software will be provided by principal. One time cost of Rs

100,000 will be charged from franchisee. All maintenance, up-
gradation will be responsibility of principal. However computer
hardware, like CPU, LCD, Card Reader and networking equipment, bill
printer and scanner will be the responsibility of the franchisee.

8.10 The Principal will provide uniforms 2 times in a year to the staff
of Franchise. The cost of uniforms (Fabrics & Stitching Labour) will be
borne by Principal. Franchisee will be bound to appoint minimum 4
staff members except Branch Manager, however, the franchisee shall
be required to increase no. of staff members more than 4 keeping in
view of outlet/store area as well as keeping in view the business need
of store/outlet.

8.11 All store advertising, government fees, taxes related to store is

the responsibility of franchisee.

8.12 Principal is not responsible or liable for any loss results during
the course of business operations. The terms and business viability is
completely explained to the franchisee.

8.13 All rates offered are ex-Factory (Godown) Faisalabad, the

carriage charges are the responsibility of the franchisee upto 50% of
total amount. However stock return charges (Shop to Head Office)
shall be borne by principal. If franchisee demands stock then he will
bear the carriage charges except in case of initial launch.

8.14 The franchisee will be responsible for the product condition and
quantity. The product damaged/ not saleable or theft is charged to
franchisee on Retail Price minus Franchisee Commission Rate.

8.15 A special incentive will be given to branch keeping in view the

achieved percentage of given monthly and annual targets. This
incentive shall be based on the evaluation of following points.

Sales target 50%

Cash deposit on daily basis without shortage 25%
Company staff surprise visit satisfactory feedback 15%
Customer feedback 10%
 Total 100%
9. Payment terms & Tax Obligations

All sales will be deposited to Principal (into specified bank account) on daily basis
and the margin amount will be sent to the franchisee by Principal up to 10 th of
succeeding month. Payment of margin shall be made through cross cheque after
deduction of tax (12% for filer and 24% for non-filer). All accounts will be settled
down up to 10th of next month. In case franchisee does not deposit amount daily
and non- deposit exceeds Rs. 100,000 then a penalty of 2% shall be charged to
the franchisee and will remain compounding with every passing day.

10. Duration and conditions for extension

The agreement is for a period of 05 years which may be extended for further
term as mutually agreed, provided that written notice of the franchisee’s
intention for such extension is given to the principal not less than six (6) months
before the expiry of the subsisting term.

11. Termination

Either party shall be entitled to terminate this agreement forthwith by giving

notice in writing to the other party in any of the following events:

11.1 If the franchisee is in default in respect of any of its obligations

under this agreement, the principal may terminate this agreement by
serving one (1) month notice to the franchisee otherwise franchisee
shall serve minimum six (06) months’ notice in case he/she wishes to
terminate the agreement.

11.2 If the other party enters into liquidation or a resolution is passed

or an order is made for the winding up of the said party, whether
voluntary or compulsory (save for the purpose of reconstruction or
amalgamation); or if the other party becomes insolvent, is unable to
pay its debts as they fall due, stops, suspends or threatens to stop or
suspend payment of all or a material part of its debts; or makes a
general assignment or an arrangement or composition with or for the
benefit of its creditors.

11.3 On the appointment of a receiver, custodian, manager, judicial

manager or similar officer over the affairs or assets of the other party
or the taking of any steps with respect to the making of such
appointment.

11.4 If there is at any time a material change in the management,

ownership or control of the franchisee.

11.5 If the franchisee at any time challenges the validity of any

 intellectual property rights of principal brands or the products.

12. Consequences of termination

Upon the expiry or termination of this agreement:

12.1 The franchisee shall cease to have the right to use the
intellectual property and shall immediately eliminate all
representations of or references to the trade mark from its stationery,
advertisements, brochures, premises, vehicles or any other things
used or maintained by the franchisee and the franchisee shall not
hold out in any manner whatsoever that it has any connection with
the principal, the products or the intellectual property.

12.2 The franchisee shall immediately deliver up to the principal all

copies of the franchise guidelines, and other information and
documents belonging to the principal, and all items of equipment,
display materials and things held on loan or hire from the principal.

12.3 The franchisee shall destroy, at its own expense, all material of
advertising, boards, shop fascia etc.

12.4 All stocks will be returned in good condition. The stocks not sale
able will also be handed over to principal. The cost of not sale able
stock will be charged to Franchisee (at the retail value).

12.5 The cost of shop renovation, all related expenses, permissions,

taxes etc done by the franchisee will not be entertained in adjustment
at the time of termination of franchisee.

12.6 The franchisee shall settle all outstanding accounts and perform
all outstanding obligations.

12.7 The franchisee shall execute all documents reasonably required

by the principal relating to discontinuation of its use of the intellectual
property.

12.8 The franchisee shall, if at the request of the principal, transfer to

the principal or its nominee, at no charge to the principal, the
telephone and facsimile numbers used at the outlet(s) operated by
the franchisee.

12.9 The principal shall have the option which shall be exercised
within sixty (60) days from the date of termination or expiry by
written notice to the franchisee to obtain a lease of the premises or a
transfer or assignment of the existing lease or tenancy of the
premises from the franchisee so as to continue the business there
whether by itself or through its other franchisee(s) and the franchisee
shall:

i. If it owns the premises, grant a lease to the principal or its

nominee at market price and subject to such terms and
 conditions as are usual in leases of the same nature; or

ii.If the premises are leased from another party, use its best
endeavors to procure from the landlord a transfer or
assignment of the lease for the premises to the principal or its
nominee within a reasonable time.
13. Stocks

13.1 Franchisee will have to receive STR within 24 hours of receiving

of stock or have to notify within 24 hours of receiving of physical
stock regarding missing or damaged stocks received from distribution
center, otherwise no claim will be entertained.

13.2 Franchisee will have to return the stock (Loose Fabric, Pret,
Bags, Accessories etc) in actual condition otherwise shall be charged
to the Franchisee.

14. Stock Taking.

14.1 The Principal may conduct stock taking at any time of the
franchisee store. The date, time of stock taking will be decided by the
Principal and franchisee is bound to follow the schedule accordingly.
The shortage found during the stock taking will be charged at retail
price less commission. No excuse of Franchisee will be acceptable for
the shortage of stocks (e.g. personal shopping of franchisee or manual
billing etc). Surprise audit can be conducted at any time and no
reason what so ever will be acceptable in this regard.

14.2 In case damage stock is counted during the audit/stock taking,

either on the request of franchisee or otherwise, will not be accepted
at DC in any case.

15. General

15.1 All the rules of income tax and sales tax applicable on both the
parties shall be binding on each party in their own capacities.

15.2 Franchisee shall install security cameras at branch and these

cameras should be accessible to Principal.

15.3 Each party acknowledges that in entering into this agreement,

they have obtained independent legal and financial advice on the
terms and conditions of this agreement.

15.4 Neither party may assign its rights under this agreement without
the written consent of the other party. The franchisee shall not
assign, mortgage, charge or otherwise deal with any of its rights
under this agreement as sub-licensee, or as sub-franchisee in the
territory.

15.5 This agreement shall not be amended except by an instrument in

writing signed by the parties.

15.6 This agreement is governed by, and must be construed in

 accordance with, the laws of Pakistan. Any dispute arising out of or in
connection with this agreement, including any questions regarding its
existence, validity or termination, shall be referred to and finally
resolved by arbitration in Pakistan.

15.7 The parties agree to do all acts, matters and things, including
the execution of all agreements required for the purposes of this
agreement.

15.8 A breach of, or default under this agreement or of any right,

power, authority, discretion or remedy created or arising upon a
breach of, or default under this agreement is not waived by any
failure to exercise or delay in exercising or partial exercise of any
right, power, authority, discretion or remedy under this agreement
and may only be waived in writing by the party granting the waiver.

15.9 There are no other representations, promises, warranties,

covenants or undertakings between the parties and this agreement
supersedes all previous agreements in respect of its subject matter
and embodies the entire agreement between the parties.

15.10 The covenants, conditions, provisions and warranties contained

in this agreement will not merge or terminate upon completion of the
transactions contemplated by this agreement but to the extent that
they have not been fulfilled and satisfied or are capable of having
effect will remain in full force and effect.

15.11 Principal has the right to shuffle the stock as per company
requirements and the franchisee will be required to comply with any
such instructions as and when required.

15.12 If any provision in this agreement is held to be invalid or

unenforceable in whole or in part, such provision shall be severed
from this agreement and the validity of any other provision in this
agreement or of the remainder of the provision being severed shall
not be affected.

15.13 In case of non-compliance with any of the provision of

agreement (short cash deposit etc.) the Principal is entitled to take all
legal actions against franchisee without prior intimation and the
Franchisee hereby allow the Principal for the same.
Signed by:

For & on behalf of; For & on Behalf of;

Ittehad Textile Ind. (Pvt.) Ltd. XYZ
Mr. Adil Arain Mr.
CNIC #

In the presence of:-

Mr. Imran Nawaz Mr. Ghufran Muhammad

CNIC# CNIC#
Address: Chak # 230 R.B Jhang Road, Fsd. Address: H # P-572, ST # 4, Warispura, Faisalabad.