EXHIBIT 3(c)
INVESTMENT LETTER AND AGREEMENT
December 28, 2004
DRYCLEAN USA, Inc. Xx. Xxxx X. Xxxxxxxxxx
000 X.X. 00xx Xxxxxx 0000 Xxxxxxxxxx Xxx
Xxxxx, Xxxxxxx 00000 Xxxxx, Xxxxxxx 00000
The undersigned hereby agrees to reacquire from you 250,000 shares of
Common Stock, $.025 par value per share (the "Reacquired Shares"), of DRYCLEAN
USA, Inc. (the "Company") in consideration for a reduction by $362,500 ($1.45
per Reacquired Share) in the principal amount of that certain Promissory Note in
the original principal amount of $ 737,500.00 issued by you to the undersigned
on July 22, 2004. The Promissory Note is secured by the Reacquired Shares and an
additional 500,000 shares of the Company's Common Stock pursuant to a Security
Agreement dated July 22, 2004 between the undersigned and you. As a result, the
principal amount of the Promissory Note has been reduced to $375,000 and
Reacquired Shares are hereby released from the lien created under such Security
Agreement (reducing the number of shares of the Company's Common Stock subject
to such lien to 500,000 shares). Except therefor, such Promissory Note and
Security Agreement remain in full force and effect without amendment or
modification.
As an inducement to you to transfer the Reacquired Shares to the
undersigned, and 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 of 1933, as amended (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 Chairman of the Board of Directors, 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
Securities and Exchange Commission as the undersigned has deemed necessary
including, without limitation, the Company's Annual Report on Form 10-K for the
year ended June 30, 2004, Quarterly Report on Form 10-Q for the quarter ended
September 30, 2004, all Current Reports on Form 8-K filed by the Company since
July 1, 2004 and the Proxy Statement used in connection with the Company's 2004
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 the exemption afforded by
Rule 144 promulgated by the Securities and Exchange Commission under the
Securities Act ("Rule 144") will not become available for at least one year from
the date of payment for the Reacquired Shares and 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
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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
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EXHIBIT A
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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.
