EXHIBIT 3(d)
INVESTMENT LETTER AND AGREEMENT
December 6, 2005
Xx. Xxxx X. Xxxxxxxxxx
0000 X.X. 000 Xxxxxx
Xxxxxxxxx Xxxxx, XX 00000
On November 8, 2005, the undersigned advised you that you were in
default under, and demanded repayment of, that certain Promissory Note dated
July 22, 2004 in favor of the undersigned in the original principal amount of
$737,500 (the "Promissory Note") pursuant to which you acquired an aggregate of
750,000 shares of Common Stock, $.025 par value per share (the "Shares"), of
DRYCLEAN USA, Inc. (the "Company"). The Shares were pledged to secure your
obligations under the Promissory Note pursuant to that certain Security
Agreement dated July 22, 2004 from you in favor of the undersigned. On December
28, 2004, the undersigned agreed to reduce the principal amount of the
Promissory Note by $362,500 in consideration for your return to the undersigned
of 250,000 of the Shares. This will confirm our mutual understanding that the
undersigned agrees to accept your offer to transfer to the undersigned all of
your right, title and interest in and to 258,620 of the Shares (the "Reacquired
Shares") in consideration for the discharge of your remaining obligations under
the Promissory Note, subject to the condition that, in the event the application
of such Shares to your obligations under the Promissory Note, or any part
thereof, at any time is rescinded or must otherwise be restored or returned by
the undersigned upon or as a result of your insolvency, bankruptcy or
reorganization, whether by order of any court, or otherwise, then the Promissory
Note and the security interest granted pursuant to the Security Agreement (and
the Security Agreement itself) shall each be reinstated and shall continue to
apply with respect to all amounts rescinded, restored or returned, all as though
such payment or application had never been made.
You acknowledge that the Reacquired Shares are "restricted securities,"
are not registered for resale under the Securities Act of 1933, as amended (the
"Securities Act"), and, therefore, may only be sold in a private placement to a
limited number of qualified purchasers or under Rule 144 ("Rule 144")
promulgated by the Securities and Exchange Commission (the "SEC") under the
Securities Act in limited quantities and otherwise in compliance with that Rule.
Furthermore, the sale of a significant quantity of the Reacquired Shares in a
foreclosure, private placement or market sale could only be made at a
significant discount from market, especially since they represent only a
minority interest in the Company in which a majority of the outstanding shares
of Common Stock are owned by two related stockholders. In addition, the
Reacquired Shares are subject to certain voting obligations pursuant to a
Stockholders Agreement to which you are a party with the two principal
stockholders of the Company.
As an inducement to the Company to effectuate the transfer, the
undersigned hereby acknowledges, represents, warrants and agrees as follows:
(a) None of the Reacquired Shares is currently being registered under
the Securities Act or any state securities laws. The undersigned understands
that his reacquisition of the Reacquired Shares hereunder is intended to be
exempt from registration under the Securities Act by virtue of Section 4(1) of
the Securities Act based, in part, upon the representations, warranties and
agreements contained in this Investment Letter;
(b) The undersigned has been President, a director and a principal
stockholder of the Company since November 1, 1998.
(c) The undersigned has reviewed all of the Company's filings with the
SEC as the undersigned has deemed necessary including, without limitation, the
Company's Annual Report on Form 10-K for the year ended June 30, 2005, Quarterly
Report on Form 10-Q for the quarter ended September 30, 2005, all Current
Reports on Form 8-K filed by the Company since July 1, 2005 and the Proxy
Statement used in connection with the Company's 2005 Annual Meeting of
Stockholders. The undersigned has analyzed the risks attendant to an investment
in the Reacquired Shares and has made his decision to reacquire the Reacquired
Shares based on his own analysis of the Company's business, financial condition,
results of operations and prospects without representation or warranty with
respect thereto from either you or the Company. The undersigned understands that
his investment in the Reacquired Shares involves a high degree of risk.
(d) The undersigned has such knowledge and experience in financial, tax
and business matters so as to enable him to utilize the information made
available to him in connection with his reacquisition of the Reacquired Shares
to evaluate the merits and risks of an investment in the Reacquired Shares and
to make an informed investment decision with respect thereto;
(e) The undersigned is an "accredited investor," as that term is
defined in Rule 501(a) of Regulation D of the Securities Act (such definition is
provided on Exhibit A annexed hereto).
(f) The undersigned is reacquiring the Reacquired Shares solely for the
undersigned's own account for investment and not with a view to resale or
distribution of any of the Reacquired Shares;
(g) The undersigned may be required to bear the economic risk of the
investment indefinitely because none of the Reacquired Shares may be sold,
hypothecated or otherwise disposed of unless subsequently registered under the
Securities Act and applicable state securities laws or an exemption from
registration is available. The Company is not obligated to register the
Reacquired Shares under the Securities Act or any state securities law. Any
resale of the Reacquired Shares can be made only pursuant to (i) a Registration
Statement under the Securities Act which is effective and current at the time of
sale or (ii) a specific exemption from the registration requirements of the
Securities Act. In claiming any such exemption, the undersigned will, prior to
any offer or sale or distribution of any Reacquired Shares advise the Company
and, if requested, provide the Company with a favorable written opinion of
counsel, in form and substance satisfactory to counsel to the Company, as to the
applicability of such exemption to the proposed sale or distribution;
(h) The undersigned also understands that any sales in reliance on Rule
144, if then available, can be made only in accordance with the terms and
conditions of that rule, including, among other things, a requirement that the
Company then be subject to, and current, in its periodic filing requirements
under the Securities Exchange Act of 1934 (the "Exchange Act") and, among other
things, a limitation on the amount of Reacquired Shares (and other shares of the
Company's Common Stock owned by the undersigned) that may be sold in specified
time periods and the manner in which the sale can be made; that, while the
Company's Common Stock is registered under the Exchange Act and the Company is
presently subject to the periodic reporting requirements of the Exchange Act,
there can be no assurance that the Company will
remain subject to such reporting obligations or current in its filing
obligations; and that, in case Rule 144 is not applicable to a disposition of
the Reacquired Shares, compliance with the registration provisions of the
Securities Act or some other exemption from such registration provisions will be
required; and
(i) Legends shall be placed on the certificates evidencing the
Reacquired Shares to the effect that such shares of Common Stock have not been
registered under the Securities Act or applicable state securities laws and
appropriate notations thereof will be made in the Company's stock books. Stop
transfer instructions will be placed with the transfer agent of the securities
constituting the Reacquired Shares.
Very truly yours,
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
AGREED:
/s/ Xxxx X. Xxxxxxxxxx
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Xxxx X. Xxxxxxxxxx
-3-
Exhibit A
The term "accredited investor" refers to any person or entity who comes
within any of the following categories:
1. Any bank as defined in Section 3(a)(2) of the Act or any savings and
loan association or other institution as defined in Section 3(a)(5)(A) of the
Act whether acting in its individual or fiduciary capacity; any broker or dealer
registered pursuant to Section 15 of the Securities Exchange Act of 1934; any
insurance company as defined in Section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of the Investment Company Act of 1940;
any Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958; any plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets in
excess of $5,000,000; any employee benefit plan within the meaning of Title I of
the Employment Retirement Income Security Act of 1974 ("ERISA"), if the
investment decision is made by a plan fiduciary, as defined in Section 3(21) of
ERISA, which is either a bank, a saving and loan association, insurance company
or registered investment advisor, or if the employee benefit plan has total
assets in excess of $5,000,000, or, if a self-directed plan, with investment
decisions made solely by persons that are accredited investors;
2. Any private business development company as defined in Section
202(a)(22) of the Investment Advisors Act of 1940;
3. Any organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
4. Any director or executive officer of the Company;
5. Any natural person whose individual net worth, or joint net worth
with that person's spouse, at the time of his purchase, exceeds $1,000,000;
6. Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year;
7. Any trust, with total assets in excess of $5,000,000 not formed for
the specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person as described in Rule 506 of Regulation D; or
8. Any entity in which all of the equity owners are accredited
investors.
