Document:

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.Exhibit

Exhibit 10.2

PROMISSORY NOTE 

$4,725,000.00    
November 22, 2016
Rosemont, Illinois

1.Agreement to Pay.  FOR VALUE RECEIVED, RRE SUNNYSIDE HOLDINGS, LLC, a Delaware limited liability company (“Borrower”), hereby promises to pay to the order of MB FINANCIAL BANK, N.A., a national banking association, its successors and assigns (“Lender”), the principal sum of Four Million Seven Hundred Twenty Five Thousand and 00/100 Dollars ($4,725,000.00) (“Loan”), or so much thereof as may be advanced pursuant to that certain Loan and Security Agreement of even date herewith between Borrower and Lender (“Loan Agreement”), on or before November 22, 2019 (the “Maturity Date”), at the place and in the manner hereinafter provided, together with interest thereon at the rate or rates described below, and any and all other amounts which may be due and payable hereunder from time to time.  The Maturity Date is subject to extension and acceleration pursuant to the terms and provisions of the Loan Agreement, the provisions of which are hereby incorporated by reference as if set forth fully herein.
2.Interest.  
2.1    Interest Prior to Default.
(a)Interest Rate.  Interest shall accrue on the principal balance of this Note outstanding from the date hereof through the Maturity Date at the “Interest Rate,” which shall mean the Adjusted LIBOR Rate (as hereafter defined), unless converted to the Prime Rate (as hereafter defined) pursuant to Sections 3.1, 3.2 or 3.3 below.  The “Adjusted LIBOR Rate” means a per annum rate of interest equal to the LIBOR Rate (as hereinafter defined) for the relevant Interest Period (as hereafter defined), plus Two and Fifty one-hundredths percent (2.50%), such Adjusted LIBOR Rate to remain fixed for such Interest Period.  “Prime Rate” means a floating per annum rate of interest equal to the Prime Rate (as hereinafter defined), but in no event less than Two and and Fifty one-hundredths percent (2.50%) per annum.  Changes in the Prime Rate to be charged hereunder based on the Prime Rate shall take effect immediately upon the occurrence of any change in the Prime Rate.  Any portion of the principal amount of this Note bearing interest at the Prime Rate is referred to herein as a “Prime Rate Loan”.  Any portion of the principal amount of this Note bearing interest at the Adjusted LIBOR Rate is referred to herein as a “LIBOR Rate Loan”. 
(b)Prime Rate.  As used herein, “Prime Rate” shall mean the floating per annum rate of interest most recently announced by Lender at Rosemont, Illinois as its prime or base rate.  A certificate made by an officer of Lender stating the Prime Rate in effect on any given day, for the purposes hereof, shall be conclusive evidence of the Prime Rate in effect on such day.  The Prime Rate is a base reference rate of interest adopted by Lender as a general benchmark from which Lender determines the floating interest rates chargeable on various loans to borrowers with varying degrees of creditworthiness and Borrower acknowledges and agrees that Lender has made no representations whatsoever that the Prime Rate is the interest rate actually offered by Lender to borrowers of any particular creditworthiness.
(c)LIBOR Rate.  As used herein, “LIBOR Rate” means a rate of interest equal to the LIBOR rate for each Interest Period quoted by Lender from Bloomberg Financial Markets system (or such other authoritative source as selected by Lender in its sole discretion), which shall be the LIBOR Rate for each Interest Period in effect two (2) Banking Days (as defined below) prior to the first day of each Interest Period (rounded upward to the nearest 1/10,000 of 1.00%).  Lender may unilaterally adjust the LIBOR Rate for any reserve requirement and any subsequent costs arising 

1

from a change in government regulation, or may substitute an alternative rate in the event the LIBOR Rate becomes unavailable.  Lender’s determination of the LIBOR Rate is conclusive, absent manifest error.  As used in this definition, “Banking Day” means any day other than a Saturday, Sunday or any other day on which banks in London, England or Chicago, Illinois are required or permitted to close.
(d)Interest Period.  “Interest Period” shall mean, with regard to any LIBOR Rate Loan, successive one (1) month periods, beginning on the fifteenth (15th) day of each month; provided, however, that:  (i) each Interest Period occurring after the initial Interest Period of any LIBOR Loan shall commence on the day on which the preceding Interest Period for such LIBOR Loan expires; and (ii) the final Interest Period for any LIBOR Loan must be such that its expiration occurs on or before the Maturity Date.  If at any time an Interest Period expires less than one month before the Maturity Date, such LIBOR Loan shall automatically convert to a Prime Loan on the last day of the then existing Interest Period, without further demand, presentment, protest or notice of any kind, all of which are hereby waived by Borrower.
2.2    Interest After Default.  From and after the Maturity Date or upon the occurrence and during the continuance of an Event of Default (as hereafter defined), interest shall accrue on the balance of principal remaining unpaid during any such period at an annual rate (“Default Rate”) equal to Five percent (5.00%) plus the Loan Rate; provided, however, in no event shall the Default Rate exceed the Maximum Legal Rate (as hereafter defined).  The interest accruing under this section shall be immediately due and payable by Borrower to the holder of this Note upon demand and shall be additional indebtedness evidenced by this Note.
2.3    Interest Calculation.  Interest on this Note shall be calculated on the basis of a 360‐day year and the actual number of days elapsed in any portion of a month in which interest is due. If any payment to be made by Borrower hereunder shall become due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing any interest in respect of such payment. As used herein, “Business Day” shall mean any day other than a Saturday, Sunday or a legal holiday on which banks are authorized or required to be closed for the conduct of commercial banking business in Chicago, Illinois.
2.4    Maximum Interest Rate.  In no event shall charges constituting interest payable by Borrower exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any part or provision of this Note is in contravention of any such law or regulation, such part or provision shall be deemed amended to conform thereto.  No agreements, conditions, provisions or stipulations contained in this Note or any other instrument, document or agreement among Borrower, Lender or default of Borrower, or the exercise by Lender of the right to accelerate the payment of the maturity of principal and interest, or to exercise any option whatsoever contained in this Note or any other Loan Document, or the arising of any contingency whatsoever, shall entitle Lender to contract for, charge, or receive, in any event, interest exceeding the maximum rate of interest permitted by applicable state or federal law in effect from time to time (hereinafter “Maximum Legal Rate”).  In no event shall Borrower be obligated to pay interest exceeding such Maximum Legal Rate and all agreements, conditions or stipulations, if any, which may in any event or contingency whatsoever operate to bind, obligate or compel Borrower to pay a rate of interest exceeding the Maximum Legal Rate, shall be without binding force or effect, at law or in equity, to the extent only of the excess of interest over such Maximum Legal Rate.  In the event any interest is contracted for, charged or received in excess of the Maximum Legal Rate (“Excess Payment”), Borrower acknowledges and stipulates that any such contract, charge, or receipt shall be the result of an accident and bona fide error, and that any Excess Payment received by Lender for the account of Lender shall be first applied to reduce the principal then unpaid hereunder; second, to reduce the other Obligations; and third, returned to Borrower, it being the intention of the parties hereto not to enter at any time into a usurious or otherwise illegal relationship.  Borrower recognizes that, with fluctuations in the 

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Prime Rate and the Maximum Legal Rate, such a result could inadvertently occur.  By the execution of this Agreement, Borrower covenants that (i) the credit or return of any Excess Payment shall constitute the acceptance by Borrower of such Excess Payment, and (ii) Borrower shall not seek or pursue any other remedy, legal or equitable, against Lender or any of Lender, based in whole or in part upon contracting for, charging or receiving of any interest in excess of the maximum authorized or receiving of any interest in excess of the maximum authorized by applicable law.  For the purpose of determining whether or not any Excess Payment has been contracted for, charged or received, all interest at any time contracted for, charged or received in connection with this Note shall be amortized, prorated, allocated and spread in equal parts during the entire term of this Note.
3.LIBOR Provisions.
3.1    Additional Costs; Capital Adequacy. 
(a) Additional Costs.  In the event any government authority subjects Lender to any new or additional charge, fee, withholding or tax of any kind with respect to any loans hereunder or changes the method of taxation of such loans or changes the reserve or deposit requirements applicable to such loans, Borrower shall pay to Lender such additional amounts as will compensate Lender for such costs or lost income resulting therefrom as reasonably determined by Lender.  Borrower shall promptly pay to Lender from time to time such reasonable amounts as Lender may reasonably determine to be necessary to compensate Lender for any reasonable costs actually incurred by Lender that it reasonably determines are attributable to its making or maintaining of any LIBOR Rate Loans or its obligation to make any LIBOR Rate Loans hereunder, any reduction in any amount receivable by Lender under this Note or any of the other Loan Documents in respect of the Loan or such obligation or the maintenance by Lender of capital in respect of the Loan (such increases in costs and reductions in amounts receivable being herein called “Additional Costs”), resulting from any Regulatory Change (as hereafter defined) that: (i) changes the basis of taxation of any amounts payable to Lender under this Note or any of the other Loan Documents in respect of the Loan; or (ii) imposes or modifies any reserve, special deposit or similar requirements (other than Regulation D of the Board of Governors of the Federal Reserve System or other reserve requirement to the extent utilized in the determination of the Adjusted LIBOR Rate for the Loan) relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, Lender; or (iii) has or would have the effect of reducing the rate of return on capital of Lender to a level below that which Lender could have achieved but for such Regulatory Change (taking into consideration Lender’s policies with respect to capital adequacy).  “Regulatory Change” means, with respect to Lender, any change in Applicable Law (as defined in the Loan Agreement) effective after the date hereof (including without limitation, Regulation D of the Board of Governors of the Federal Reserve System) or the adoption or making after such date of any interpretation, directive or request applying to a class of banks, including such Lender, of or under any Applicable Law (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any Governmental Authority (as defined in the Loan Agreement) or monetary authority charged with the interpretation or administration thereof or compliance by any Lender with any request or directive regarding capital adequacy.
(b)Lender’s Suspension of LIBOR Rate Loans.  If, by reason of any Regulatory Change, Lender either (a) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of Lender that includes deposits by reference to which the interest rate on LIBOR Rate Loans is determined as provided in this Note or a category of extensions of credit or other assets of Lender that includes LIBOR Rate Loans or (b) becomes subject to restrictions on the amount of such a category of liabilities or assets that it may hold, then, if Lender so elects by notice to Borrower, 

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the obligation of Lender to make LIBOR Rate Loans hereunder shall be suspended until such Regulatory Change ceases to be in effect.
(c)Notification and Determination of Additional Costs.  Lender agrees to notify Borrower of any event occurring after the date of this Note entitling Lender to compensation under any of the preceding subsections of this Section as promptly as practicable; provided, however, the failure of Lender to give such notice shall not release Borrower from any of its obligations hereunder; provided, however, that notwithstanding the foregoing provisions of this Section, Lender shall not be entitled to compensation for any such amount relating to any period ending more than six (6) months prior to the date that Lender first notifies Borrower in writing thereof.  Lender agrees to furnish to Borrower a certificate setting forth the basis and amount of each request by Lender for compensation under this Section.  Absent manifest error (that is an obvious mathematical error), determinations by Lender of the effect of any Regulatory Change shall be conclusive, provided that such determinations are made on a reasonable basis and in good faith.
3.2    Suspension of LIBOR Rate Loans.  Anything herein to the contrary notwithstanding, if, on or prior to the determination of any Adjusted LIBOR Rate for any Interest Period, Lender reasonably determines (which determination shall be conclusive) that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Adjusted LIBOR Rate for such Interest Period, then Lender shall give Borrower prompt notice thereof and, so long as such condition remains in effect, Lender shall be under no obligation to, and shall not, make additional LIBOR Rate Loans and Borrower shall, on the last day of each current Interest Period for each outstanding LIBOR Rate Loan, either repay such Loan or convert such Loan into a Prime Rate Loan.
3.3    Illegality.  Notwithstanding any other provision of this Note, if it becomes unlawful for Lender to honor its obligation to make or maintain LIBOR Rate Loans hereunder, then Lender shall promptly notify Borrower thereof and Lender’s obligation to make LIBOR Rate Loans shall be suspended until such time as Lender may again make and maintain LIBOR Rate Loans.
3.4    Compensation.  Borrower shall pay to Lender, upon the request of Lender, such amount or amounts as shall be sufficient (in the reasonable opinion of Lender) to compensate it for any loss, cost or expense that Lender determines is attributable to any payment or prepayment (whether mandatory or optional) of a LIBOR Rate Loan made by Lender for any reason (including, without limitation, acceleration) on a date, other than the last day of the Interest Period for such Loan. Upon Borrower’s request, Lender shall provide Borrower with a statement setting forth the basis for requesting such compensation and the method for determining the amount thereof.  Lender may use any reasonable averaging and attribution methods generally applied by Lender and may include, without limitation, administrative costs as a component of such loss, cost or expense.  Absent manifest error, determinations by Lender in any such statement shall be conclusive, provided that such determinations are made on a reasonable basis and in good faith.
3.5    Assumptions Concerning Funding of LIBOR Rate Loans.  Calculation of all amounts payable to Lender under this Section 3 shall be made as though Lender had actually funded LIBOR Rate Loans through the purchase of deposits in the relevant market bearing interest at the rate applicable to such LIBOR Rate Loans in an amount equal to the amount of the LIBOR Rate Loans and having a maturity comparable to the relevant Interest Period; provided, however, that Lender may fund each of its LIBOR Rate Loans in any manner it sees fit and the foregoing assumption shall be used only for calculation of amounts payable under this Section 3.
4.Payment Terms.  
4.1    Principal and Interest.  Payments of principal and interest due under this Note, if not sooner declared to be due in accordance with the provisions hereof, shall be made as follows:

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(a)Payments of Interest.  Commencing on December 15, 2016 and on the same day of each successive month thereafter until the Maturity Date (each a “Payment Date”), Borrower shall make monthly payments to Lender of interest at the Interest Rate on the unpaid principal balance of the Loan outstanding from time to time.
(b)Principal Payments.  In addition to the interest payments required to be made pursuant to Section 4.1(a) above, commencing on December 15, 2016 and on each Payment Date thereafter, Borrower shall make monthly payments of principal, as set forth in the amortization schedule attached hereto as Schedule A.
(c)Payment at Maturity Date.  The unpaid principal balance of this Note, if not sooner paid or declared to be due in accordance with the terms hereof, together with all accrued and unpaid interest thereon and any other amounts due and payable hereunder or under any of the other Loan Documents (as hereafter defined), shall be due and payable in full on the Maturity Date.
4.2    Prepayment.  This Note may be prepaid only on the last day of an Interest Period; provided, however, that Borrower may prepay a LIBOR Rate Loan, either in whole or in part, prior to such day so long as Borrower gives Lender five (5) days prior to written notice and such prepayment shall be accompanied by a simultaneous payment of the Additional Costs described in Section 3.1 above, plus accrued interest on the LIBOR Rate Loan being prepaid through the date of prepayment (unless less than all of the principal amount of such LIBOR Rate Loan is being prepaid, in which case such interest shall be due and payable on the next scheduled interest payment date).  No amount prepaid on this Note may be borrowed again.
4.3    Application of Payments.  Prior to the occurrence of an Event of Default, all payments and prepayments on account of the indebtedness evidenced by this Note shall be applied  as follows: (a) first, to fees, expenses, costs and other similar amounts then due and payable to Lender pursuant to the Loan Documents, including, without limitation any, Additional Costs or late charges due hereunder, (b) second, to accrued and unpaid interest on the principal balance of this Note, (c) third, to the payment of principal due in the month in which the payment or prepayment is made, (d) fourth, to any escrows, impounds or other amounts which may then be due and payable under the Loan Documents (as hereinafter defined), (e) fifth, to any other amounts then due Lender hereunder or under any of the Loan Documents (as hereafter defined), and (f) last, to the unpaid principal balance of this Note in the inverse order of maturity.  Any prepayment on account of the indebtedness evidenced by this Note shall not extend or postpone the due date or reduce the amount of any subsequent monthly payment of principal and interest due hereunder.  After an Event of Default has occurred and is continuing, payments may be applied by Lender to amounts owed hereunder and under the Loan Documents in such order as Lender shall determine, in its sole discretion.
4.4    Method of Payments.  All payments of principal and interest hereunder shall be paid by automatic debit, wire transfer, check or in coin or currency which, at the time or times of payment, is the legal tender for public and private debts in the United States of America and shall be made at such place as Lender or the legal holder or holders of this Note may from time to time appoint in the payment invoice or otherwise in writing, and in the absence of such appointment, then at the offices of Lender at 6111 N. River Road, Rosemont, IL 60018.  Payment made by check shall be deemed paid on the date Lender receives such check; provided, however, that if such check is subsequently returned to Lender unpaid due to insufficient funds or otherwise, the payment shall not be deemed to have been made and shall continue to bear interest until collected.  Notwithstanding the foregoing, the final payment due under this Note must be made by wire transfer or other immediately available funds.  Interest, principal payments and any fees and expenses owed Lender from time to time will be deducted by Lender automatically on the due date from Borrower’s account with Lender, as designated in writing by Borrower.  Borrower will maintain sufficient funds in the account on the dates Lender enters debits authorized by this Note.  If there are insufficient funds in the account on 

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the date Lender enters any debit authorized by this Note, the debit will be reversed.  Borrower may terminate this direct debt arrangement at any time by sending written notice to Lender at the address specified above.
4.5    Late Charge.  If any payment of interest or principal due hereunder is not made within ten (10) days after such payment is due in accordance with the terms hereof, then, in addition to the payment of the amount so due, Borrower shall pay to Lender a “late charge” of five cents for each whole dollar so overdue to defray part of the cost of collection and handling such late payment.  Borrower agrees that the damages to be sustained by the holder hereof for the detriment caused by any late payment are extremely difficult and impractical to ascertain, and that the amount of five cents for each one dollar due is a reasonable estimate of such damages, does not constitute interest, and is not a penalty.
4.6     Loan Fee.  In consideration of Lender’s agreement to make the Loan, Borrower shall pay to Lender a non-refundable fee in the amount of Twenty One Thousand Two Hundred Sixty Two and 00/100 Dollars ($21,262.00), which shall be due and payable on the date hereof as a condition precedent to the disbursement of proceeds under this Note. 
4.7    Expenses and Indemnification.  Borrower shall pay all reasonable costs and expenses actually incurred by Lender in connection with the preparation of this Note and the Loan Documents, including, without limitation, reasonable attorneys’ fees and time charges of attorneys who may be employees of Lender or any affiliate or parent of Lender.  Borrower shall pay any and all stamp and other taxes, UCC search fees, filing fees and other costs and expenses in connection with the execution and delivery of this Note and the other instruments and documents to be delivered hereunder, and agrees to save Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such costs and expenses.  Borrower also agrees to defend (with counsel reasonably satisfactory to Lender), protect, indemnify and hold harmless Lender, any parent corporation, affiliated corporation or subsidiary of Lender, and each of their respective officers, directors, employees, attorneys and agents (each an “Indemnified Party”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and distributions of any kind or nature (including, without limitation, the disbursements and the reasonable fees of counsel for each Indemnified Party thereto, which shall also include, without limitation, attorneys’ fees and time charges of attorneys who may be employees of Lender, any parent corporation or affiliated corporation of Lender), which may be imposed on, incurred by, or asserted against, any Indemnified Party (whether direct, indirect or consequential and whether based on any federal, state or local laws or regulations, including, without limitation, securities, environmental laws and commercial laws and regulations, under common law or in equity, or based on contract or otherwise) in any manner relating to or arising out of this Note or any of the Loan Documents, or any act, event or transaction related or attendant thereto, the preparation, execution and delivery of this Note and the Loan Documents, the making or issuance and management of the Loan, the use or intended use of the proceeds of this Note and the enforcement of Lender’s rights and remedies under this Note, the Loan Documents any other instruments and documents delivered hereunder, or under any other agreement between Borrower and Lender; provided, however, that Borrower shall not have any obligations hereunder to any Indemnified Party with respect to matters caused by or resulting from the willful misconduct or gross negligence of such Indemnified Party.  To the extent that the undertaking to indemnify set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Borrower shall satisfy such undertaking to the maximum extent permitted by applicable law.  Any liability, obligation, loss, damage, penalty, cost or expense covered by this indemnity shall be paid to each Indemnified Party on demand, and failing prompt payment, together with interest thereon at the Default Rate from the date incurred by each Indemnified Party until paid by Borrower, shall be added to the obligations of Borrower evidenced by this Note and secured by 

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the collateral securing this Note.  The provisions of this section shall survive the satisfaction and payment of this Note.
5.    Security.  This Note is secured by a Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing (“Mortgage”) of even date herewith made by Borrower to Lender creating a first mortgage lien on certain real property (“Premises”) legally described in Exhibit A attached to the Mortgage, an Assignment of Rents and Leases (“Assignment”) of even date herewith from Borrower to Lender, a Limited Guaranty of Payment (“Guaranty”) of even date herewith from Resource America, Inc., a Maryland corporation, and Resource Real Estate Innovations Office REIT, Inc., a Maryland corporation (collectively, “Guarantor”) to Lender and an Environmental Indemnity Agreement (“Indemnity Agreement”) of even date herewith from Borrower and Guarantor to Lender (this Note, Loan Agreement, Mortgage, Assignment, Guaranty, Indemnity Agreement and any other document now or hereafter given to evidence or secure payment of this Note or delivered to induce Lender to disburse the proceeds of the Loan, as such documents may hereafter be amended, restated or replaced from time to time, are hereinafter collectively referred to as the “Loan Documents”).  Reference is hereby made to the Loan Documents (which are incorporated herein by reference as fully and with the same effect as if set forth herein at length) for a statement of the covenants and agreements contained therein, a statement of the rights, remedies, and security afforded thereby, and all matters therein contained.
6.    Events of Default. The occurrence of any one or more of the following events shall constitute an “Event of Default” under this Note:
6.1    the failure by Borrower to pay (i) any installment of principal or interest payable pursuant to this Note on the date when due, or (ii) any other amount payable to Lender under this Note, the Mortgage or any of the other Loan Documents within ten (10) days after the date when any such payment is due in accordance with the terms hereof or thereof; or
6.2    the occurrence of any “Event of Default” as defined in the Loan Agreement, Mortgage or any of the other Loan Documents. 
7.    Remedies.  At the election of the holder hereof, and without notice, the principal balance remaining unpaid under this Note, and all unpaid interest accrued thereon and any other amounts due hereunder, shall be and become immediately due and payable in full upon the occur-rence of any Event of Default.  Failure to exercise this option shall not constitute a waiver of the right to exercise same in the event of any subsequent Event of Default.  No holder hereof shall, by any act of omission or commission, be deemed to waive any of its rights, remedies or powers hereunder or otherwise unless such waiver is in writing and signed by the holder hereof, and then only to the extent specifically set forth therein.  The rights, remedies and powers of the holder hereof, as provided in this Note, the Mortgage and in all of the other Loan Documents are cumulative and concurrent, and may be pursued singly, successively or together against Borrower, the Guarantors hereof, the Premises and any other security given at any time to secure the repayment hereof, all at the sole discretion of the holder hereof.  If any suit or action is instituted or attorneys are employed to collect this Note or any part hereof, Borrower promises and agrees to pay all reasonable costs of collection, including reasonable attorneys’ fees and court costs, actually incurred by Lender.
8.    Covenants and Waivers.  Borrower and all others who now or may at any time become liable for all or any part of the obligations evidenced hereby, expressly agree hereby to be jointly and severally bound, and jointly and severally:  (i) waive and renounce any and all homestead, redemption and exemption rights and the benefit of all valuation and appraisement privileges against the indebtedness evidenced by this Note or by any extension or renewal hereof; (ii) waive presentment and demand for payment, notices of nonpayment and of dishonor, protest of dishonor, and notice of protest; (iii) except as expressly provided in the Loan Documents, waive any and all notices in connection with the delivery and acceptance hereof and all other notices in connection with the performance, default, or enforcement of the payment hereof or hereunder; (iv) waive any and all lack of diligence and delays in the enforcement of the payment hereof; (v) agree that the liability of each Borrower, guarantor, endorser or obligor shall be unconditional and without regard to the liability of any other person or entity for the payment hereof, and shall not in any manner be 

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affected by any indulgence or forbearance granted or consented to by Lender to any of them with respect hereto; (vi) consent to any and all extensions of time, renewals, waivers, or modifications that may be granted by Lender with respect to the payment or other provisions hereof, and to the release of any security at any time given for the payment hereof, or any part thereof, with or without substitution, and to the release of any person or entity liable for the payment hereof; and (vii) consent to the addition of any and all other makers, endorsers, guarantors, and other obligors for the payment hereof, and to the acceptance of any and all other security for the payment hereof, and agree that the addition of any such makers, endorsers, guarantors or other obligors, or security shall not affect the liability of Borrower, any guarantor and all others now liable for all or any part of the obligations evidenced hereby.  This provision is a material inducement for Lender making the Loan to Borrower.
9.    Other General Agreements.
9.1    Business Purpose.  The Loan is a business loan which comes within the purview of Section 205/4, paragraph (1)(c) of Chapter 815 of the Illinois Compiled Statutes, as amended.  Borrower agrees that the Loan evidenced by this Note is an exempted transaction under the Truth In Lending Act, 15 U.S.C., Section 1601, et seq.
9.2    Time.  Time is of the essence hereof.
9.3    Governing Law.  This Note is governed and controlled as to validity, enforcement, interpretation, construction, effect and in all other respects by the statutes, laws and decisions of the State of Illinois.  This Note may not be changed or amended orally but only by an instrument in writing signed by the party against whom enforcement of the change or amendment is sought.
9.4    No Joint Venture.  Lender shall not be construed for any purpose to be a partner, joint venturer, agent or associate of Borrower or of any lessee, operator, concessionaire or licensee of Borrower in the conduct of its business, and by the execution of this Note, Borrower agrees to indemnify, defend, and hold Lender harmless from and against any and all damages, costs, expenses and liability that may be incurred by Lender as a result of a claim that Lender is such partner, joint venturer, agent or associate.
9.5    Disbursement.  This Note has been made and delivered at Chicago, Illinois and all funds disbursed to or for the benefit of Borrower will be disbursed in Chicago, Illinois.
9.6    Joint and Several Obligations.  If this Note is executed by more than one party, the obligations and liabilities of each Borrower under this Note shall be joint and several and shall be binding upon and enforceable against each Borrower and their respective successors and assigns.  This Note shall inure to the benefit of and may be enforced by Lender and its successors and assigns.
9.7    Severable Loan Provisions.  The provisions of this Agreement are intended to be severable.  If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.
9.8    Assignability.  Lender may at any time assign its rights in this Note and the Loan Documents, or any part thereof and transfer its rights in any or all of the collateral, and Lender thereafter shall be relieved from all liability with respect to such collateral.  In addition, Lender may at any time sell one or more participations in the Note.  Borrower may not assign its interest in this Note, or any other agreement with Lender or any portion thereof, either voluntarily or by operation of law, without the prior written consent of Lender.  
10.    Notices.  All notices required under this Note will be in writing and will be transmitted in the manner and to the addresses required by the Loan Agreement, or to such other addresses as Lender and Borrower may specify from time to time in writing.

11.    Consent to Jurisdiction.  TO INDUCE LENDER TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO LENDER’S SOLE AND 

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ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY ARISING OUT OF OR RELATED TO THIS NOTE WILL BE LITIGATED IN COURTS HAVING SITUS IN CHICAGO, ILLINOIS.  BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY COURT LOCATED WITHIN CHICAGO, ILLINOIS, WAIVES PERSONAL SERVICE OF PROCESS UPON BORROWER, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED IN THE MORTGAGE AND SERVICE SO MADE WILL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT.
12.    Waiver of Jury Trial.  BORROWER AND LENDER (BY ACCEPTANCE OF THIS NOTE), HAVING BEEN REPRESENTED BY COUNSEL, EACH KNOWINGLY AND VOLUNTARILY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS NOTE OR ANY RELATED AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THIS NOTE OR (b) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS NOTE, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING WILL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.  BORROWER AGREES THAT IT WILL NOT ASSERT ANY CLAIM AGAINST LENDER ON ANY THEORY OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES.
13.    Customer Identification - USA Patriot Act Notice; OFAC and Bank Secrecy Act.  Lender hereby notifies Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “Act”), and Lender’s policies and practices, Lender is required to obtain, verify and record certain information and documentation that identifies Borrower, which information includes the name and address of Borrower and such other information that will allow Lender to identify Borrower in accordance with the Act. In addition, Borrower shall (a) ensure that no person who owns a controlling interest in or otherwise controls Borrower or any subsidiary of Borrower is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or included in any Executive Orders, (b) not use or permit the use of the proceeds of the Loan to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (c) comply, and cause any of its subsidiaries to comply, with all applicable Bank Secrecy Act laws and regulations, as amended
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, Borrower has executed and delivered this Promissory Note as of the day and year first written above.

BORROWER:

RRE SUNNYSIDE HOLDINGS, LLC, a Delaware limited liability company

By: /s/ Alan F. Feldman
Name:     Alan F. Feldman            
Title:     Chief Executive Officer        

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