Exhibit 10.3


 


Bendon Limited


8 Airpark Drive, Airport Oaks


Auckland 2022, New Zealand


 


	 	December 19, 2016 


 


Naked Brand Group Inc.


95 Madison Avenue, 10thFloor


New York, NY 10016


 


Gentlemen:


 


This letter is to confirm our understanding concerning the terms
of a proposed transaction between Bendon Limited (“Bendon”) and Naked Brand Group Inc. (“Naked”).


 


1.
           Bendon and Naked will negotiate in good faith a
definitive merger agreement (the “Agreement”) pursuant to which, on the closing date of the transaction
contemplated by the Agreement (“Closing Date”), (i) a wholly-owned subsidiary of Naked (“Merger Sub”)
would merge with and into Bendon (the “Merger”) and (ii) as consideration in the Merger, assuming Naked currently
has 6,268,731 common shares outstanding (which includes the conversion of $224,000 of Notes currently outstanding into
215,385 of common shares), Naked would issue to the holders of ordinary shares of Bendon (the “Bendon Shares”) an
aggregate of 118,812,163 shares of common stock of Naked (the “Naked Shares”). The Merger will be structured to
be accomplished without taxation to the holders of Bendon Shares to the extent possible. Bendon shall be the surviving
corporation in the Merger, continuing in existence as a wholly-owned subsidiary of Naked. Shares issued to Bendon will be
subject to adjustment based on Naked having Net Assets (as defined below) of $1.359 million (the “Net Asset
Amount”) (provided that if equity or options are issued to cancel all or any portion of the Hochman Obligation (as
defined below), the Net Asset Amount shall increase by that same amount) and Bendon having Net Debt (as defined below) of
$52.4 million as of the Closing (the “Net Debt Amount”) as follows:


 




     


     


    

 


	
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		(a)	In the event Naked’s Net Assets are less than the Net Asset Amount (the “Net
                                                                                 Asset Shortfall Amount”) at the Closing, Naked shall issue additional Naked Shares to the holders of Bendon Shares in
                                                                                 an amount equal to the product obtained by multiplying (i) the difference between the Net Asset Amount and the Net Asset
                                                                                 Shortfall Amount and (ii) 11.634. In the event Naked’s Net Assets are more than the Net Asset Amount (the “Net
                                                                                 Asset Excess Amount”) at the Closing, then the aggregate amount of Naked Shares issuable to the holders of
                                                                                 Bendon Shares shall be reduced by the amount of Naked Shares equal to the product obtained by multiplying (i) the difference
                                                                                 between the Net Asset Amount and the Net Asset Excess Amount and (ii) 11.634. Provided, however, that in either event, such
                                                                                 adjustment shall only be made to the extent such Net Asset Shortfall Amount or Net Asset Excess Amount is greater than or
                                                                                 less than $150,000, as applicable. As soon as possible after the execution of this letter but in no event later than the
                                                                                 Pre-merger Financing (defined below), Naked and Bendon will mutually agree to an operating budget (the “Budget”)
                                                                                 for the period from the date of the Pre-merger Financing until the Closing Date. Any change, at any time, in the Budget shall
                                                                                 cause a dollar-for-dollar change in the Net Asset Amount. The Board will also establish a committee to oversee the Budget,
                                                                                 which committee shall be comprised of the four directors and include two existing directors and the New Directors (as defined
                                                                                 in Section 7 of this letter). The Budget will be reviewed by such committee on a regular basis. No material adverse
                                                                                 deviations from the Budget will be made without approval from the committee.



 


		(b)	In the event Bendon’s Net Debt exceeds the Net Debt
Amount (the “Net Debt Excess Amount”), then the aggregate amount of Naked Shares issuable to the holders of Bendon
Shares shall be reduced by the amount of Naked Shares equal to the product obtained by multiplying (i) the difference between
the Net Debt Excess Amount and the Net Debt Amount and (ii) 0.833. In the event Bendon’s Net Debt is less than the Net Debt
Amount (the “Net Debt Shortfall Amount”), then Naked shall issue additional Naked Shares to the holders of Bendon
Shares in an amount equal to the product obtained by multiplying (i) the difference between the Net Debt Shortfall Amount and
the Net Debt Amount and (ii) 0.833. Provided, however, that in either event, such adjustment shall only be made to the extent
such Net Debt Excess Amount or Net Debt Shortfall Amount is greater than or less than $1,000,000, as applicable.



 




     


     


    

 





	
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		(c)	For purposes of
                                         this letter, (i) “Net Assets” means, with respect to Naked, the combined
                                         consolidated cash and cash equivalents, including all short-term money market instruments
                                         and treasury bills and similar instruments, as well as accounts receivable (current,
                                         i.e. within 90 days), inventory, prepaid expenses and deposits less such party’s
                                         combined consolidated indebtedness (i.e., all indebtedness for borrowed money and capitalized
                                         leases and equivalents, all accounts payable and accrued liabilities, deferred compensation
                                         and lines of credit and other obligations evidenced by promissory notes or similar instruments,
                                         as well as cash overdrafts) of such party and (ii) “Net Debt” means, with
                                         respect to Bendon, the combined consolidated indebtedness (i.e., all indebtedness for
                                         borrowed money and capitalized leases and equivalents, all accounts payable and accrued
                                         liabilities, deferred compensation and lines of credit and other obligations evidenced
                                         by promissory notes or similar instruments, as well as cash overdrafts) of such party,
                                         less such party’s combined consolidated cash and cash equivalents, including all
                                         short-term money market instruments and treasury bills and similar instruments, as well
                                         as accounts receivable (current, i.e. within 90 days), inventory, prepaid expenses and
                                         deposits. The parties have agreed to the Net Debt calculation for Bendon based upon the
                                         information set forth on Exhibit A attached hereto.



 


2.
          As of the Closing Date, Bendon will have an aggregate of up to
$15 million of convertible debt outstanding, such debt maturing within twelve (12) months from the date of this letter with a
conversion price of $1.04 per share or greater (the “Existing Convertible Debt”). Eric Watson, on behalf of
Bendon, agrees that should less than 66% of the Existing Convertible Debt be converted into equity of Bendon or Naked, as the
case may be, prior to maturity, he or a party introduced by him will loan Naked an amount equal to the difference of 66% of
the Existing Convertible Debt at Closing and the amount of convertible debt that was converted into equity (the “New
Loan”). The New Loan will be used by Naked to repay a like amount of the convertible debt. The New Loan will have a set
maturity of two (2) years from the date of this origination and bear interest at a rate of 15% per annum, which interest
shall be compounding annually and payable in cash. To the extent the Existing Convertible Debt is converted at an effective
conversion price of less than $1.04 per share of Naked common stock, Eric Watson shall surrender a number of shares of Naked
common stock to Naked equal to the excess of (A) the number of shares actually issued to the holders of the Existing
Convertible Debt, over (B) the number of shares that would have been issued to such holders at an effective conversion price
of $1.04 per share of Naked common stock.


 


3.            As of the date of this letter, Bendon has outstanding demand
promissory notes in an aggregate principal amount of $5 million. Prior to Closing, Bendon will amend the terms of such demand promissory
notes so that they have a set maturity of two


 




     


     


    

 





	
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(2) years from the date of this letter and bear interest at a rate
of 15% per annum, which interest shall be compounding annually and payable in cash.


 


4.            The
parties agree that the following shall be the proposed timeline for the Merger:


 


		·	Naked
Board to approve Merger, in concept, subject to Agreement (30 calendar days);



 


		·	Filing
of preliminary proxy statement to obtain Required Stockholder Approval (defined below) (45-75 calendar days).



 


5.
           Naked, as the publicly held holding company for Bendon,
will amend its charter documents on the Closing Date to, among other things, change its name to a name designated by Bendon
to reflect the business of Bendon (“Name Change”) and to increase Naked’s authorized capitalization to
allow for the issuance of the Naked Shares in the Merger (“Capitalization Amendment”). The Board of Directors of
Naked from and after the Closing Date will consist of either five or seven persons, one of whom will be the nominee of the
existing Naked shareholders, specifically Carole Hochman, with the remaining persons to be selected by Bendon.


 


6.
           Promptly after signing the Agreement, but in any case no
later than 75 calendar days, Naked shall file the preliminary proxy statement to solicit the vote of the stockholders
of Naked on the approval of the issuance of the Naked Shares in the Merger, the Name Change, the Capitalization Amendment and
on such other matters as may be required by applicable law or regulation or mutually agreed upon by Naked and Bendon
(the “Required Stockholder Approval”). Management of Naked will agree that they and their respective
affiliates (collectively, the “Naked Management Group”) will vote the shares of common stock of Naked currently
controlled by them (which represents approximately 15.1% of the issued and outstanding shares of Naked) in favor of the
foregoing items. At the time of the Pre-merger Financing (defined below), the Naked Management Group shall obtain voting
agreements from holders of an additional 13.3% of the issued and outstanding shares of Naked to vote in favor of the
foregoing items. Between the time of the Pre-merger Financing to the execution of the Agreement, the Naked Management Group
shall obtain voting agreements from holders of an additional 1% of the issued and outstanding shares of Naked to vote in
favor of the foregoing items. Each holder executing a voting agreement shall also agree to refrain from selling Naked Shares
until the completion of the Merger. The Naked Management Group agrees to use its commercially reasonable efforts to obtain
the additional votes for the Required Stockholder Approval (which may be completed through the foregoing voting agreements or
other similar arrangements). Bendon and its management will agree that they and their respective affiliates will vote the
shares of common stock of Naked controlled by them in favor of the foregoing items.


 




     


     


    

 





	
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7.            Simultaneously with the completion of the Pre-merger Financing,
the board of directors of Naked will expand the number of members on its board of directors by two and fill such newly-created
vacancies with two individuals appointed by Bendon (one of which will be Justin Davis Rice and another individual that qualifies
as “independent” as determined in accordance with the rules of the NASDAQ Stock Market LLC) (the “New Directors”).
The Board will also establish a committee to oversee the Budget, which committee shall be comprised of the three directors (including
the New Directors). The Budget will be reviewed by such committee on a regular basis. No material adverse deviations from the Budget
will be made without approval from the committee.


 


8.           Key employees of Bendon will be offered employment with Naked,
to be effective upon completion of the Merger, at the discretion of Bendon. Carole Hochman will also be offered continued employment
pursuant to an employment agreement, on substantially the same terms as set forth on Exhibit A.


 


9.           The Agreement will contain customary representations and
warranties concerning Bendon and Naked and their respective business and financial condition. All such representations and warranties
will expire on the Closing Date.


 


10.
         Simultaneously with the execution of the Agreement, each member of the
Naked Management Group as of the date of this letter that is a stockholder of Naked shall agree in writing not to sell
such shares for a period of one year after the Closing Date, subject to customary exceptions.


 


11.          Within ten (10) business days from
the date of this letter, parties introduced by, but not affiliated with, Bendon (“Bendon Purchasers”) shall purchase
the lesser of $2,500,000 shares of Naked’s common stock at a purchase price of $1.04 per share or such amount that may be
sold pursuant to Naked’s registration statement on Form S-3 (the “Pre-merger Financing”). In the event a portion
of the shares in the Pre-Merger Financing cannot be issued pursuant to the Form S-3, then the aggregate Pre-merger Financing shall
be reduced by the amount of such shortfall (“Pre-Merger S-3 Shortfall”). The “Net Asset Amount” shall also
be reduced by the Pre-Merger S-3 Shortfall.


 




     


     


    

 





	
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12.         All holders of options, warrants and other rights to purchase
or convert or exchange into Bendon Shares (“Bendon Stock Rights”) whose instruments governing their Bendon Stock Rights
do not provide that, upon the Merger, such Bendon Stock Rights will automatically be converted into similar options, warrants,
rights and convertible securities of Naked (“New Naked Stock Rights”) will agree in writing to exchange their Bendon
Stock Rights, upon consummation of the Merger, for substantially equivalent New Naked Stock Rights, in each instance satisfactory
to Bendon.


 


13.         The closing of the Merger will be conditioned upon:


 


(a)
        Naked receiving the Required Stockholder Approval, the parties agreeing that they will work expeditiously towards obtaining the
Required Stockholder Approval following the execution of the Agreement; and


 


(b)
        Naked Shares being listed on The Nasdaq Capital Market.


 


14.
         During the period beginning on the date of this letter and ending on
the earlier of the date the Agreement is executed or this letter is terminated, neither Naked nor any of its officers,
directors, employees, representatives or agents will (a) discuss, directly or indirectly, without the prior written consent
of Bendon, any proposal or offer from any person other than Bendon and its affiliates, relating to a possible business
combination of Naked or the sale of all or substantially all of the assets of Naked or shares of Naked capital stock or
convertible debt of Naked (a “Competing Transaction”); (b) provide any non-public information with respect to
Naked to any third party (other than information that is normally provided in the ordinary course of operations to third
parties where there is no reason to believe that such information may be utilized to evaluate a possible
Competing Transaction), or (c) enter into any agreement, agreement in principle or other commitment (whether or not legally
binding) relating to any Competing Transaction, or knowingly solicit, initiate or encourage the submission of any proposal or
offer from any person or entity (including any of their officers, directors, employees, representatives or agents) relating
to any Competing Transaction. Naked shall (x) immediately terminate any negotiations with respect to a Competing Transaction
concurrent with the signing of this letter and (y) promptly notify Bendon in the case of the receipt by  Naked or any of its
officers, directors, employees, representatives or agents of any proposal, offer or submission with respect to a Competing
Transaction after the signing of this letter. Naked shall use commercially reasonable efforts to cause its officers,
directors, employees, representatives or agents to comply with the provisions of this Section 14.


 




     


     


    

 


	
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15.
         During the period from the signing of this letter through the execution
of the Agreement (the “Restricted Period”), Naked shall: (i) conduct its business in the ordinary course in a
manner consistent with past practice; (ii) maintain its properties and other assets in good working condition (normal
wear and tear excepted); and (iii) use its best efforts to maintain the business and employees, customers, assets and
operations as an ongoing concern in accordance with past practice. During such Restricted Period, without limiting the
foregoing, Naked shall also not: (i) declare, set aside or pay any dividend on, or other distribution (whether in cash, stock
or property) in respect of, any of Naked’s stock, or purchase, redeem or otherwise acquire any of Naked’s stock
or any other securities of Naked or any options, warrants, calls or rights to acquire any such shares or other securities,
(ii) split, combine or reclassify any of Naked’s stock, (iii) issue any shares of Naked stock or any other securities,
(iv) sell any assets of Naked other than in the ordinary course of business consistent with past practice, (v) incur any debt
other than trade debt in the ordinary course of business consistent with past practice or (vi) enter into any agreement,
whether written or oral, to do any of the foregoing. Notwithstanding the foregoing, Naked will be permitted to issue Naked
stock or options (A) in the Pre-merger Financing and (B) in exchange for, or in connection with, the cancellation of
outstanding obligations to Carole Hochman (“Hochman Obligation”) that are outstanding on the date of this letter.
If equity or options are issued to cancel all or any portion of the Hochman Obligation, the Net Asset Amount shall increase
by that same amount. During the Restricted Period, Bendon shall notify Naked upon the occurrence of any of the following
material events: (i) the issuance of any shares of Bendon stock or any other Bendon securities, or (ii) the incurrence of any
debt other than trade debt in the ordinary course of business consistent with past practice.


 


16.          Bendon agrees that, until the earlier of (i) 45 days from
the execution of this letter (ii) the execution of the Agreement or (iii) the termination of this letter, except as provided for
herein, neither it nor any of its affiliates or any of their officers, directors, employees, or representatives acting on its behalf
of or in concert with it will, directly or indirectly, without prior approval in writing by Naked: (a) make any statement or proposal
to the Board of Directors of Naked or any or any committee thereof, any of their respective representatives or any of Naked’s
stockholders regarding, or make any public announcement, proposal or offer (including any “solicitation” of “proxies”
as such terms are defined or used in Regulation 14A of the Securities Exchange Act of 1934, as amended) with respect to, or otherwise
solicit, seek or offer to effect (including, for the avoidance of doubt, indirectly by means of communication with the press or
media) (i) any business combination, merger, tender offer, exchange offer or similar transaction involving Naked or any of its
subsidiaries, (ii) any restructuring, recapitalization, liquidation or similar transaction involving Naked or any of its subsidiaries,
(iii) any acquisition of (A) any loans of Naked or any of its subsidiaries, (B) any debt or equity securities issued by Naked or
any of its subsidiaries, (C) all or substantially all of the assets of Naked or any of its subsidiaries, or (D) any rights or options
to acquire interests in any of the foregoing, (iv) any proposal to seek representation on the Board of Directors of Naked or otherwise
seek to control or influence the management, Board of Directors or policies of Naked, (v) any request or proposal to waive, terminate
or amend the provisions of this letter or (vi) any proposal, arrangement or other statement that is inconsistent with the terms
of this letter; (b) instigate, encourage or assist any third party (including forming a “group” with any such third
party) to do, or enter into any discussions or agreements with any third party with respect to, any of the actions set forth in
clause (a) above; (c) take any action which would reasonably be expected to require Naked or any of its affiliates to make a public
announcement regarding any of the actions set forth in clause (a) above; or (d) acquire or propose or agree to acquire, of record
or beneficially, by purchase or otherwise, (i) any loans of Naked or any of its subsidiaries, (ii) any debt or equity securities
issued by Naked or any of its subsidiaries, (iii) all or substantially all of the assets of Naked or any of its subsidiaries, or
(iv) any rights or options to acquire interests in any of the foregoing.


 




     


     


    

 





	
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17.
        This letter will automatically terminate and be of no further force and
effect except for any provision that survives pursuant to the Agreement upon the earlier to occur of (a) the execution of the
Agreement by Bendon, Naked and Merger Sub, (b) the failure of Bendon to provide the Pre-merger Financing, (c) the
mutual agreement of Bendon and Naked, (d) a material adverse change in the economic terms of this letter which change(s) is
not the result of actions taken by the party which is acting to terminate this letter, and (e) a highly significant departure
by Bendon from its business as conducted as of the date of this letter. Notwithstanding the foregoing, if the definitive
agreement is not consummated by February 10, 2017 or the Closing Date does not occur within six months thereafter (each, a
“Merger Milestone”), then in either case, Naked shall issue Bendon an aggregate of 2,500,000 shares of Naked
common stock (as adjusted for stock splits, dividends or additional issuances after the date hereof); provided, however, that
Naked shall not be required to issue Bendon such shares if Bendon’s action(s) or lack thereof has been the principal
cause of or resulted in the failure of the parties to achieve a Merger Milestone. Additionally, if Naked’s common stock
is delisted from trading on The Nasdaq Capital Market prior to the execution of the Agreement, this letter shall terminate
and Naked shall issue Bendon an aggregate of 2,500,000 shares of Naked common stock (as adjusted for stock splits, dividends
or additional issuances after the date hereof). Any shares of Naked common stock issued to Bendon as a result of termination
of this letter will either be registered under a registration statement with the SEC or Naked will grant Bendon demand
registration rights with respect to such shares such that Bendon can require Naked to register the resale of such shares on
an appropriate registration statement at any time for up to five years from the letter’s termination.


 




     


     


    

 





	
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18.         Naked shall, by 8:30 a.m. (New York City time) on the trading
day immediately following the closing of the Pre-merger Financing, issue a press release and a Current Report on Form 8-K, disclosing
the material terms and conditions of the transactions contemplated by this letter. From and after the issuance of such press release
and Current Report on Form 8-K to be filed in accordance with the preceding sentence, Naked represents to the Bendon Purchasers
that it shall have publicly disclosed all material, non-public information delivered to any of the Bendon Purchasers by Naked or
any of its respective officers, directors, employees or agents in connection with the transactions contemplated by this letter.
Other than as provided for in the preceding two sentences, neither party hereto (without the written consent of the other) will
make any public announcement or other dissemination (public or private) of information concerning our discussions and the contemplated
transactions. Either party may, however, make any disclosure which its counsel advises is required by applicable law or regulation,
in which case the non-disclosing party will be advised and the parties will use their best efforts to cause a mutually agreeable
release or announcement to be issued. The parties may also make appropriate disclosure to their executive officers, directors,
prospective and existing investors and professional advisors.


 


19.          Each party shall bear its own expenses in connection with
the proposed Merger.


 


20.
         During the period from the date hereof to the Closing Date each party
will give to the other party, and to the other party’s respective accountants, counsel and other representatives, full
access during normal business hours to all of their property, contracts, commitments, books and records, and will furnish to
the other party all such documents and copies of documents and information with respect to its affairs as the other party
may, from time to time, reasonably request. Each party and their respective accountants, counsel and other representatives
shall hold all information received by them in confidence except information which (a) at the time of disclosure was in the
public domain, (b) after disclosure, became part of the public domain other than as a result of a breach of this covenant or
(c) is required to be disclosed pursuant to legal process.


 


21.          THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER
OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY JURISDICTION OTHER THAN THOSE
OF THE STATE OF NEW YORK.


 




     


     


    

 





	
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22.
        This letter may be executed in counterparts, each of which shall be deemed to
be an original, but all of which together shall constitute one agreement. The headings of the various sections of this letter
have been inserted for reference only and shall not be deemed to be a part of this letter.


 


23.
         Except with regard to Sections 14 through 23 hereof (which constitute
binding agreements of the parties), this letter is intended only as an expression of the parties to proceed to
negotiate, draft and execute a definitive form of Agreement on the terms and conditions contained herein and shall not be
deemed to constitute a legally binding commitment of the parties hereto, it being the parties’ intention to proceed
with the Merger herein only if a definitive Agreement is executed and delivered by the parties. The parties each recognize
that matters material to the transaction which are not addressed herein may be raised by one another for inclusion in the
Agreement.


 


It is our desire to move expeditiously
towards completion of the Merger on the basis of the terms and conditions contained herein. To indicate your desire to proceed
with the Merger and your agreement with the terms of this letter, please sign below.


 


	 	 	Very truly yours,
	 	 	 
	 	 	BENDON LIMITED
	 	 	 
	 	By:	/s/  Justin Davis-Rice
	 	 	Name: Justin Davis-Rice
	 	 	Title: Chairman


 


ACCEPTED AND AGREED TO AS OF DECEMBER 19, 2016


 


NAKED BRAND GROUP INC.





	 	 	 
	By:	/s/ Carole Hochman	 
	 	Name: Carole Hochman	 
	 	Title: Chief Executive Officer	 


 




     


     


    

 


EXHIBIT A


 


See attached.