SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
DRYCLEAN USA, Inc.
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(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required
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4) Date Filed:
DRYCLEAN USA, INC.
290 N.E. 68TH STREET
MIAMI, FLORIDA 33138
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 18, 2005
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Miami, Florida
October 21, 2005
To the Stockholders of
DRYCLEAN USA, Inc.:
NOTICE IS HEREBY GIVEN that the 2005 Annual Meeting of Stockholders of
DRYCLEAN USA, Inc., a Delaware corporation (the "Company"), will be held on
Friday, November 18, 2005, at 11:00 A.M., Eastern standard time, at the offices
of the Company and the Company's subsidiary, Steiner-Atlantic Corp., 290 N.E.
68th Street, Miami, Florida, for the purpose of considering and acting upon the
following matters:
(1) The election of seven (7) directors to serve until the next annual
meeting of stockholders and until the election and qualification of their
respective successors; and
(2) The transaction of such other business as may properly be brought
before the meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on October 10, 2005
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting.
By Order of the Board of Directors,
Lloyd Frank,
Secretary
THE RETURN OF YOUR SIGNED PROXY AS PROMPTLY AS POSSIBLE WILL GREATLY FACILITATE
ARRANGEMENTS FOR THE MEETING. NO POSTAGE IS REQUIRED IF THE PROXY IS RETURNED IN
THE ENCLOSED ENVELOPE AND MAILED IN THE UNITED STATES.
DRYCLEAN USA, INC.
290 N.E. 68TH STREET
MIAMI, FLORIDA 33138
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PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 18, 2005
----------------
INTRODUCTION
This Proxy Statement, to be mailed to stockholders on or about October 21,
2005, is furnished in connection with the solicitation by the Board of Directors
of DRYCLEAN USA, Inc., a Delaware corporation (the "Company"), of proxies in the
accompanying form (the "Proxy" or "Proxies") for use at the 2005 Annual Meeting
of Stockholders of the Company (the "Meeting") to be held on Friday, November
18, 2005, and at any adjournments or postponements thereof. The Meeting will be
held at the place and time stated in the notice attached hereto.
All Proxies properly and timely received will be voted in accordance with
the specifications made thereon or, in the absence of any specification, for the
election of all of the nominees named herein to serve as directors. Any Proxy
given pursuant to this solicitation may be revoked by the person giving it
provided such notice or new proxy is received before the vote by (i) notice in
writing or by a later dated proxy received by the Company at 290 N.E. 68th
Street, Miami, Florida 33138, Attention: President, or (ii) by voting in person
at the Meeting.
Only holders of record of the Company's Common Stock (the "Common Stock")
as of the close of business on October 10, 2005 (the "Record Date") are entitled
to notice of, and to vote at, the Meeting or any adjournments or postponements
thereof for which a new record date is not fixed. As of the close of business on
the Record Date, there were issued and outstanding 7,024,450 shares of Common
Stock. Stockholders whose Common Stock is held in "street name" (that is, whose
shares are held by, and registered in the name of, a broker or other nominee)
who wish to vote at the Meeting will need to obtain a proxy form from the
institution that holds their shares and follow the voting instructions on that
form.
The presence, in person or represented by proxy, of a majority of the
outstanding Common Stock will constitute a quorum for the transaction of
business at the Meeting. Brokers that are members of the New York Stock Exchange
have discretion to vote the shares of their clients that the broker holds in
street name for its customers but as to which the broker has received no voting
direction from the beneficial owner of the shares with respect to non-contested
elections of directors and certain other matters. Brokers are, therefore,
expected to vote such shares on the election of directors. If a broker, nominee
or other fiduciary holding shares in "street name" votes some, but not all, of
the shares held by it as record owned for one or more beneficial owner of shares
on one or more matters, the shares not voted by it on a matter are called
"broker non-votes." Proxies submitted which contain abstentions or broker
non-votes will be deemed present at the Meeting for determining the presence of
a quorum.
Each share of Common Stock held as of the Record Date is entitled to one
vote on each matter to be acted upon at the Meeting. A plurality of the votes
(that is, the seven persons receiving the highest number of affirmative votes)
of the shares present in person or represented by proxy at the Meeting and
entitled to vote on the election of directors will be required for the election
of directors. Accordingly, shares as to which authority to vote is withheld from
Proxies and broker non-
votes will have no effect on the outcome of the vote on the election of
directors. While the Company knows of no matters other than the election of
directors to be brought before the Meeting (see "Miscellaneous - Other
Matters"), if any other matters are brought before the Meeting, under Delaware
law approval thereof will require the affirmative vote of either (depending on
the nature of the matter) a majority of the Common Stock present in person or
represented by proxy at the Meeting and entitled to vote on the subject matter
or a majority of all outstanding shares of Common Stock. Abstentions will have
the effect of a negative vote on all such matters. Broker non-votes will have no
effect on the outcome of the vote on a matter requiring approval by a majority
of those entitled to vote on the matter, but will have the effect of a negative
vote on any matter requiring approval by a majority of all outstanding shares of
Common Stock.
OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information, as at September 30, 2005, with
respect to the shares of Common Stock that are beneficially owned by (i) any
person (including any "group," as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) who is known to the Company to be the
beneficial owner of more than five percent of the Company's outstanding Common
Stock, (ii) the executive officers of the Company named in the Summary
Compensation Table under the caption "Executive Compensation," below, (iii) each
director and nominee to serve as a director of the Company and (iv) all
executive officers and directors of the Company as a group:
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP (1) OF CLASS (2)
---------------- ------------- ------------
William K. Steiner 1,800,977 25.6% (3)
290 N.E. 68th Street
Miami, FL 33138
Michael S. Steiner 1,760,577 25.1% (3)
290 N.E. 68th Street
Miami, FL 33138
Alan I. Greenstein 1,013,200 14.4% (3)
290 N.E. 68th Street
Miami, FL 33138
Venerando Indelicato 304,937 (4) 4.3%
David Blyer 10,000 (5) *
Lloyd Frank 34,119 (6) *
Alan M. Grunspan 21,200 (7) *
Stuart Wagner 15,000 (8) *
Executive officers and 4,960,010 (9) 70.3%
directors as a group
(8 persons)
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Footnotes appear on the following page.
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(1) Except as noted in the following footnotes, all beneficially owned shares
are owned with sole voting and investment power.
(2) Asterisk indicates less than one percent.
(3) See "Stockholders Agreement," below, for information regarding a
Stockholders Agreement entered into among William K. Steiner, Michael S.
Steiner and Alan I. Greenstein pursuant to which they have agreed to vote
an aggregate of 4,520,954 shares (64.4%) of the Company's outstanding
Common Stock for the election of those persons designated between them as
the directors of the Company. As a result, and giving effect to the
additional shares owned by each that are not subject to the Stockholders
Agreement, Messrs. William K. Steiner, Michael S. Steiner and Alan I.
Greenstein may be deemed to be the beneficial owners of 4,561,454 (64.9%),
4,521,054 (64.4%) and 4,534,154 (64.5%), respectively, of the Company's
Common Stock, of which 40,500, 100 and 13,200 shares of the Company's
Common Stock, respectively, are held by them with sole voting power and, in
each case, 4,520,954 shares are held with shared voting power. Each has
sole dispositive power of all of the shares reflected as beneficially owned
by him in the table.
(4) Includes (a) 163,718 shares (2.3% of the Company's outstanding Common
Stock) owned by Mr. Indelicato and his wife as co-trustees under his living
trust under which the sole lifetime beneficiary is Mr. Indelicato and (b)
141,219 shares (2.0% of the Company's outstanding Common Stock) owned by
Mr. Indelicato and his wife as co-trustees under the living trust of Mr.
Indelicato's wife under which the sole lifetime beneficiary is Mr.
Indelicato's wife. Mr. Indelicato disclaims beneficial ownership of the
shares owned by his wife's living trust.
(5) Represents shares which are not outstanding but which are subject to
issuance upon the exercise of a stock option that is presently exercisable
in full.
(6) Includes 21,494 shares owned by Mr. Frank's wife, as to which Mr. Frank
disclaims beneficial ownership.
(7) Includes 10,000 shares which are not outstanding but which are subject to
issuance upon the exercise of a stock option that is presently exercisable
in full.
(8) Represents (a) 5,000 shares owned by Mr. Wagner's wife, as to which Mr.
Wagner disclaims beneficial ownership, and (b) 10,000 shares which are not
outstanding but which are subject to issuance upon the exercise of a stock
option that is presently exercisable in full.
(9) Includes (a) 26,494 shares owned by spouses of directors, as to which such
directors disclaim beneficial ownership, and (b) 30,000 shares which are
not outstanding but which are subject to issuance upon the exercise of
stock options that are presently exercisable in full.
STOCKHOLDERS AGREEMENT
William K. Steiner, Michael S. Steiner and Alan I. Grunspan are parties to
a Stockholders Agreement, dated July 22, 2004 (the "Stockholders Agreement"),
pursuant to which William K. and Michael S. Steiner (together with any
transferees to whom either of them transfers Shares, as defined below, to the
extent of the Shares so transferred, collectively, the "Steiner Family
Stockholders") and Mr. Greenstein (together with any transferee to whom he
transfers Shares, to the extent of the Shares so transferred, collectively, the
"Greenstein Stockholders") have agreed, except to the extent otherwise agreed
from time to time by (a) the holders of a majority of the Shares held by the
Greenstein Stockholders and (b) the holders of a majority of the Shares held by
the Steiner Family Stockholders, to vote the 1,760,477, 1,760,477 and 1,000,000
shares of the Company's Common Stock currently own of record by William K.
Steiner, Michael S. Steiner and Mr. Greenstein,
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respectively (collectively the "Shares"), to elect as directors of the Company
(x) one designee as may be selected by the holders of a majority of the Shares
held by the Greenstein Stockholders and (y) such other designees as may be
selected by the holders of a majority of the Shares held by the Steiner Family
Stockholders. Should any designee of the Greenstein Stockholders or the Steiner
Family Stockholders resign, determine not to seek re-election to the Company's
Board of Directors, be removed from office, die, become incapacitated or
otherwise cease to serve on the Board, and should such designee not be replaced
by the Board with the a designee recommended to the Board by the stockholder
group who designated the director being replaced, or should such designee's term
of office expire, the parties to the Stockholders Agreement are to take all such
action as may be permitted under the Company's Certificate of Incorporation or
By-laws and laws of its state of incorporation to promptly call a special or
other meeting of stockholders of the Company and vote, or execute a written
consent, to elect as the successor to such former director a person designated
by the holders of a majority of the Shares held by the stockholder group whose
designee is to be replaced. The Stockholders Agreement is to terminate on the
earliest to occur of (i) the date agreed to in writing by the owners of record
of a majority of the Shares and (ii) the liquidation of the Company or the
Company's merger with, or sale of substantially all of its assets to, or another
change in control transaction with, another entity that is approved by the
Board, following which transaction or series of transactions the stockholders of
the Company immediately prior to the first of such transactions do not own more
than 50% of the outstanding voting power of the resulting entity at the
effective date of the last of such transactions. The slate of nominees proposed
in this Proxy Statement to serve as directors was approved by each of William K.
Steiner, Michael S. Steiner and Alan I. Greenstein.
ELECTION OF DIRECTORS
Unless otherwise directed, the persons named in the enclosed Proxy intend
to cast all votes pursuant to Proxies received for the election of Messrs.
Michael S. Steiner, William K. Steiner, Venerando J. Indelicato, David Blyer,
Lloyd Frank, Alan M. Grunspan and Stuart Wagner (said persons being hereinafter
referred to as the "nominees") as directors upon their nomination at the
Meeting. Directors elected at the Meeting will serve until the next Annual
Meeting of Stockholders and until their respective successors are elected and
qualified. All nominees were elected by stockholders at the Company's 2004
Annual Meeting of Stockholders.
In the event that any of the nominees should become unavailable to serve as
a director for any reason, the holders of Proxies have discretionary authority
to vote for one or more alternate nominees who may be designated by the Board of
Directors. The Company believes that all of the nominees are available to serve
as directors.
BACKGROUND OF NOMINEES
Michael S. Steiner, 49, has been President, Chief Executive Officer and a
director of the Company since November 1998 and President and Chief Executive
Officer of Steiner-Atlantic Corp., a subsidiary of the Company ("Steiner") since
1988.
William K. Steiner, 75, has been Chairman of the Board and a director of
the Company since November 1998 and Chairman of the Board and a director of
Steiner since he founded Steiner in 1960.
Venerando Indelicato, 72, was President of the Company from December 1967
until November 1998 and since that time has been Treasurer and Chief Financial
Officer of the Company. Mr. Indelicato has been a director of the Company since
1967.
David Blyer, 45, has served as a director of the Company since November
1998. Mr. Blyer was Chief Executive Officer and President of Vento Software, a
developer of software for
-4-
specialized business applications, from 1994, when he co-founded that company,
until mid-2002. Since that time, Mr. Blyer has been an independent consultant.
Lloyd Frank, 80, has been a director of the Company since 1977. Mr. Frank
has been counsel to the law firm of Troutman Sanders LLP since April 2005. Prior
thereto, Mr. Frank was a member of Jenkens & Gilchrist Parker Chapin LLP and its
predecessor from 1977 until the end of 2003 and counsel to that firm from
January 2004 until he joined Troutman Sanders LLP. The Company retained Troutman
Sanders LLP and Jenkens & Gilchrist Parker Chapin LLP during the Company's last
fiscal year and is retaining Troutman Sanders LLP during the Company's current
fiscal year. Mr. Frank is also a director of Park Electrochemical Corp. and Volt
Information Sciences, Inc.
Alan M. Grunspan, 46, has served as a director of the Company since May
1999. Since December 2004, Mr. Grunspan has been a member of the law firm of
Carlton Fields LLC. Mr. Grunspan was a member of the law firm of Kaufman
Dickstein & Grunspan, P.A. from 1989 until he joined Carlton Fields LLC.
Stuart Wagner, 74, has served as a director of the Company since November
1998. Mr. Wagner has been retired since 2001. From 1975 to 1997, Mr. Wagner
served as President and Chief Executive Officer of Wagner Products Corp., a
manufacturer and distributor of products in the HVAC industry, a company which
he founded, and served as a consultant to Diversified Corp., which acquired
Wagner Products Corp., from 1997 until 2001. Mr. Wagner is also a director of
Watsco, Inc.
Michael S. Steiner is the son of William K. Steiner. There are no other
family relationships among any of the directors and executive officers of the
Company. All directors serve until the next annual meeting of stockholders and
until the election and qualification of their respective successors. All
officers serve at the pleasure of the Board of Directors.
DIRECTORS' INDEPENDENCE
The Board of Directors has determined that David Blyer, Lloyd Frank, Alan
Grunspan and Stuart Wager (constituting a majority of the Board of Directors)
are "independent directors" pursuant to Section 121A of the standards for
listing of the American Stock Exchange LLC ("AMEX"), on which the Company's
Common Stock is listed. In reaching its conclusion, the Board determined that
these individuals do not have a material relationship with the Company that
would interfere with their exercise of independent judgment, and do not have any
of the specific relationships set forth in that Section that would disqualify
them from being considered independent directors.
CONTROLLED COMPANY
As a result of the Stockholders Agreement, Messrs. William K. Steiner,
Michael S. Steiner and Alan I. Greenstein are a group with shared voting power
over an aggregate of 64.4% of the Company's Common Stock. They own an additional
..8% of the Company's Common Stock which is not subject to the Stockholders
Agreement. Accordingly, the Company is a "controlled company" under the listing
standards of AMEX. Therefore, the Company is not subject to AMEX's rules
otherwise requiring companies like the Company to have a Board of Directors
consisting of at least 50% "independent directors," governing the determination
of executive compensation and governing the nomination of directors. The Company
has, however, voluntarily complied with AMEX's minimum independent director and
executive compensation determination rules.
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MEETINGS OF THE BOARD OF DIRECTORS
During the Company's fiscal year ended June 30, 2004, its Board of
Directors held five meetings. Each director attended at least 75% of the
meetings of the Board of Directors and the committees on which he served that
were held during that fiscal year.
It is the Company's policy that, absent extenuating circumstances, all
members of the Board of Directors attend meetings of stockholders. All of the
members of the Board attended the Company's 2004 Annual Meeting of Stockholders
except William K. Steiner and Stuart Wagner.
COMMITTEES OF THE BOARD
The Board of Directors has standing Audit and Compensation Committees. The
Board does not have a standing Nominating Committee.
The Board's Audit Committee consists of Alan M. Grunspan (Chairman), David
Blyer and Stuart Wagner. The Audit Committee provides assistance to the
Company's Board of Directors in fulfilling the Board's oversight
responsibilities. The Audit Committee operates under a written charter adopted
by the Board of Directors, which the Committee annually reviews, assesses and,
with respect to which, if it deems it appropriate, recommends changes to the
Board. A copy of the Audit Committee's charter was attached to the Proxy
Statement used in connection with the Company's 2004 Annual Meeting of
Stockholders. Under its charter, the Audit Committee serves as an independent
and objective party to monitor the Company's financial and accounting reporting
process and internal control system; reviews and appraises the performance,
qualifications and independence of the Company's independent auditor; and
provides an open avenue of communication among the Company's independent
auditor, financial and senior management and the Board. Among other things, the
Audit Committee reviews the financial reports and other financial information
provided by the Company to the Securities and Exchange Commission and the
public; the Company's systems of internal control over financial reporting; and
the Company's auditing, accounting and financial reporting processes generally.
The Audit Committee also is responsible for the appointment and retention of,
and oversees the work of, the Company's independent auditor, confirms the
independence of the independent auditor and approves the fees and other
compensation to be paid to the independent auditors. A report of the Audit
Committee appears under the caption "Audit Committee Report," below. The Audit
Committee held four meetings during the year ended June 30, 2005.
The Board of Directors has concluded that each of the members of the Audit
Committee is an "independent director" under Section 121A of the standards for
listing of the AMEX, as well as Rule 10A-3 promulgated by the Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, and
is able to read and understand fundamental financial statements, including a
company's balance sheet, income statement and cash flow statement. The Board of
Directors has concluded that Stuart Wagner, a member of the Audit Committee, is
an "audit committee financial expert," within the meaning of Item 401(h) of
Regulation S-K promulgated by the SEC.
The members of the Compensation Committee are David Blyer, Lloyd Frank and
Stuart Wagner, each of whom is an "independent director" under Section 121A of
the AMEX listing standards for purposes of sitting on the Company's Compensation
Committee. This Committee determines the compensation of all executive officers,
administers the Company's employee stock option plans (including granting
options), approves changes in the Company's Section 401(k) profit sharing plan
and reviews the Company's other employee benefit arrangements. The Company's
Chief Executive Officer is not permitted to be present during the deliberations
or voting on his compensation. The Compensation Committee did not meet during
the year ended June 30, 2005.
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DIRECTOR NOMINATION PROCESS
As a "controlled company" under AMEX's listing standards, the Company is
not required to cause nominees for director to be selected or recommended to the
Board by either a nominating committee comprised solely of independent directors
or by a majority of the Company's independent directors. The Board of Directors
has determined not to form a nominating committee because it is a "controlled
company," with more than a majority of the Company's Common Stock owned by three
stockholders who have agreed to vote together in the election of directors and
can, therefore, elect all directors (see "Stockholders Agreement" and
"Controlled Company," above) and because there has historically been few
vacancies on the Board.
Instead, the full Board of Directors, a majority of whom meet the
"independent director" criteria under the AMEX listing standards, participates
in the consideration of director nominees. The Board does not have a charter
governing its nomination process.
While the Board will consider nominees recommended by stockholders, it has
not actively solicited recommendations from stockholders. Although the Board has
not established specific minimum qualifications, or specific qualities or skills
for prospective nominees, the Board will consider, among other things a
potential nominee's financial and business experience, educational background,
understanding of the Company's business and industry, skills that would
complement rather than duplicate skills of existing Board members, demonstrated
ability in his or her professional field, integrity and reputation, willingness
to work productively with other members of the Board and represent the interests
of stockholders as a whole, and time availability to perform the duties of a
director, as well as the then current size and composition of the Board. No
weight is assigned to any of the factors and the Board may change its emphasis
on certain of these factors from time to time in light of the needs of the
Company at the time. The Board will evaluate nominees of stockholders using the
same criteria as it uses in evaluating other nominees to the Board.
A stockholder seeking to recommend a prospective nominee should submit the
recommendation to the Board in the manner described under "Stockholder
Communications with Directors," below, and within the time frame described in
the second sentence under the caption "Miscellaneous - Stockholder Proposals,"
below. The recommendation should include, in addition to the name and business
or residence address of the nominee, the written consent of the person being
recommended to being named in the Company's proxy statement relating to the
stockholder vote on his or her election and to serving as a director if elected.
The recommendation must also include all information that would be required to
be disclosed concerning such nominee in solicitations of proxies for the
election of directors pursuant to Regulation 14A under the Exchange Act,
including, but not limited to, the information required by Items 401, 403 and
404 of Regulation S-B of the SEC. In addition, the stockholder recommending the
proposed nominee must provide the recommending stockholder's name, address and
number of shares of the Company's Common Stock owned by such stockholder as they
appear on the Company's stockholder records and the length of time the shares
have been owned by the recommending stockholder (or, if held in "street name," a
written statement from the record holder of the shares confirming the
information concerning such stock ownership of the recommending stockholder) and
whether the recommendation is being made with or on behalf of one or more other
stockholders (and, if so, similar information with respect to each other
stockholder with or on behalf of whom the recommendation is being made).
Each nominee for election named in this Proxy Statement is standing for
re-election. William K. Steiner, Michael S. Steiner and Alan I. Greenstein, who
are parties to a Stockholders Agreement relating the voting of 64.4% of the
Company's Common Stock, have agreed to vote for the nominees named in this Proxy
Statement. See "Ownership of Certain Beneficial Owners and Management -
Stockholders Agreement," above.
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STOCKHOLDER COMMUNICATIONS WITH DIRECTORS
Stockholders may communicate directly with the Board or one or more
specific directors by sending a written communication to: Board of Directors or
a specific director, c/o the Company's President, 290 N.E. 68th Street, Miami,
Florida 33138. The Company's President will forward the communication to the
director or directors to whom it is addressed, except for communications that
are (1) advertisements or promotional communications, (2) related solely to
complaints by users of the Company's products or services that are ordinary
course of business customer service and satisfaction issues or (3) clearly
unrelated to the Company's business, industry, management, Board or committee
matters. The President will make all communications not specifically addressed
to any one director available to each member of the Board at the Board's next
regularly scheduled meeting.
CODES OF BUSINESS CONDUCT AND ETHICS
The Company has adopted a Code of Business Conduct and Ethics that applies
to all of its directors, officers and employees, which is supplemented by a Code
of Conduct that additionally applies to its Chief Executive Officer and senior
financial officers. Copies of these codes are available on the Company's website
at www.drycleanusa.com by clicking on "Investors."
AUDIT COMMITTEE REPORT
Management has the primary responsibility for the Company's financial
reporting process, including its consolidated financial statements, while the
Board is responsible for overseeing the Company's accounting, auditing and
financial reporting practices and the Company's independent public accountants
have the responsibility for the examination of the Company's annual consolidated
financial statements, expressing an opinion on the conformity of those financial
statements with accounting principles generally accepted in the United States
and issuing a report thereon. The responsibilities of the Audit Committee are
described under the caption "Election of Directors - Committees of the Board."
In assisting the Board in fulfilling its oversight responsibility with respect
to the Company's year ended June 30, 2005, the Audit Committee:
o Reviewed and discussed the audited consolidated financial statements for
the fiscal year ended June 30, 2005 with management and Morrison, Brown,
Argiz & Farra, LLP ("Morrison, Brown"), the Company's independent public
accountants;
o Discussed with Morrison, Brown the matters required to be discussed by
Statement on Auditing Standards No. 61 relating to the conduct of the
audit; and
o Received the written disclosures and the letter from Morrison, Brown
regarding its independence as required by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees." The Audit
Committee also discussed Morrison, Brown's independence with Morrison,
Brown and considered whether the provision of non-audit services rendered
by Morrison, Brown was compatible with maintaining its independence under
SEC rules governing the independence of a company's outside auditors (see
"Miscellaneous - Auditors").
Based on the foregoing review and discussions, the Audit Committee
recommended to the Board that the Company's audited consolidated financial
statements for the fiscal year ended June 30, 2005 be included in the Company's
Annual Report on Form 10-KSB filed with the SEC for that year.
Respectfully,
David Blyer
Alan M. Grunspan
Stuart Wagner
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation of
Michael S. Steiner, the Company's only executive officer whose cash compensation
exceeded $100,000 during the Company's fiscal year ended June 30, 2004 for
services in all capacities to the Company during the Company's 2004, 2003 and
2002 fiscal years:
Annual Compensation
-------------------
Name and All Other
Principal Position Year Salary Compensation(1)
- ------------------ ---- ------ ---------------
Michael S. Steiner, 2005 $250,000 $1,166(1)
President and Chief 2004 250,000 1,082
Executive Officer 2003 250,000 875
Alan I. Greenstein, 2005 $125,000 --
Executive Vice President 2004 (2) 12,019 --
and Chief Operating Officer
- ----------------------
(1) "All Other Compensation" for fiscal 2005 represents the Company's matching
contribution in fiscal 2005 for Michael S. Steiner under the Company's
Profit Sharing Plan pursuant to Section 401(k) of the Internal Revenue Code
of 1986, as amended.
(2) Mr. Greenstein joined the Company in May 2004.
OPTION GRANTS AND EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES
No options were granted to, or exercised by, Michael S. Steiner or Alan I.
Greenstein during the Company's fiscal year ended June 30, 2005 nor were any
options held by Messrs. Steiner or Greenstein at June 30, 2005.
STANDARD REMUNERATION OF DIRECTORS
Each non-employee director receives a fee of $5,000 per annum. The Chairman
of the Audit Committee (presently Alan M. Grunspan) receives an additional fee
of $5,000 per annum for services in that capacity. Directors are also reimbursed
for out-of-pocket expenses incurred in connection with performing their duties.
In the event that the Board of Directors holds more than four meetings during a
fiscal year in addition to its annual meeting held on the date of the Annual
Meeting of Stockholders, each director receives $750 for each such additional
meeting such director attends.
The Company's 1994 Non-Employee Director Stock Option Plan expired as to
future grants on August 23, 2004. Prior to its expiration, each non-employee
director of the Company serving on August 24, 1994 was then granted, and each
person who subsequently became a non-employee director for the first time was
granted at the time of election to the Board, an option to purchase 10,000
shares of the Company's Common Stock at an exercise price equal to 100% of the
fair market value of the Company's Common Stock on the date of grant. Each
option is for a term of ten years and vests over a four-year period commencing
one year after the date of grant (with vesting credit given for any service on
the Board of Directors prior to the date of grant). In August 2004, Lloyd Frank,
a director of the Company, exercised an option granted to him in August 1994
pursuant to this plan to purchase 10,000 shares of the Company's Common Stock at
$1.00 per share.
-9-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases 27,000 square feet of warehouse and office space from
William K. Steiner, a principal stockholder, Chairman of the Board of Directors
and a director of the Company. On September 9, 2005, the Company and Mr. Steiner
entered into a new lease for this space for a three-year period beginning
November 1, 2005 at an annual rental of $94,500, with annual increases
commencing November 1, 2006 of 3% over the rent in the prior year. The Company
is also to bear real estate taxes, utilities, maintenance, non-structural
repairs and insurance. The new lease contains two three-year renewal options in
favor of the Company. The rent (exclusive of real estate taxes, utilities,
maintenance, repairs and insurance borne by the Company) under the former lease,
which expired by its terms on October 31, 2005, was $83,200 for the year ended
June 30, 2005. The Company believes that the terms of the new lease are, and the
old lease were, comparable to terms that would be obtained from an unaffiliated
third party for similar property in a similar locale.
MISCELLANEOUS
AUDITORS
The 2005 Annual Report to Stockholders of the Company, including financial
statements and report thereon of Morrison, Brown, Argiz & Farra, LLP ("Morrison,
Brown"), accompanies this Proxy Statement but is not incorporated in and is not
to be deemed a part of this Proxy Statement.
The Company's Audit Committee has selected Morrison, Brown to act as
independent auditors for the Company during the year ending June 30, 2006. The
Audit Committee nevertheless retains the discretion to select different auditors
should it then deem it in the Company's interests.
Representatives of Morrison, Brown are expected to be present at the
Meeting with the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions addressed by
stockholders.
On June 30, 2005, the Audit Committee dismissed BDO Seidman LLP ("BDO
Seidman") as the Company's registered public accountants and retained Morrison,
Brown as the Company's new independent public accountants. BDO Seidman's reports
on the Company's financial statements for the years ended June 30, 2003 and 2004
did not contain any adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles.
There were no disagreements with BDO Seidman, whether or not resolved, on any
matter of accounting principles or practices, financial statements disclosure,
or auditing scope or procedure which, if not resolved to BDO Seidman's
satisfaction, would have caused BDO Seidman to make reference to the subject
matter of the disagreement in connection with its report. No such disagreement
was discussed with the Board of Directors or any committee of the Board of
Directors of the Company. BDO Seidman did not advise the Company of the
existence of any matter described in Item 304(a)(1)(iv)(B) of SEC Regulation
S-B. The Company authorized BDO Seidman to respond fully to the inquiries of
Morrison, Brown. On July 6, 2005, BDO Seidman issued a letter to the SEC
agreeing with the foregoing statements made by the Company insofar as they
related to BDO Seidman.
Neither the Company nor anyone on behalf of the Company consulted Morrison,
Brown regarding (a) either the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the financial statements of the Company, and
no written or oral advice of Morrison, Brown was provided with respect to any
accounting, auditing, or financial reporting issue or (b) any matter that was
either the
-10-
subject of a disagreement or any event described in Item 304(a)(1)(iv) of SEC
Regulation S-B. The Company has also provided Morrison, Brown with a copy of its
Report on Form 8-K with respect to the change in registered public accountants
and provided Morrison, Brown with the opportunity to furnish the Company with a
letter addressed to the SEC containing any new information, clarification of the
Company's expression of its views or the respects in which Morrison, Brown does
not agree with the disclosures made in the Report.
AUDIT FEES
Morrison, Brown's fees for its audit of the Company's annual consolidated
financial statements for the year ended June 30, 2005, audit of a subsidiary's
fiscal 2005 financial statements required to be included in the subsidiary's
Uniform Franchise Offering Circular and review of the Company's quarterly
interim financial statements for fiscal 2006 are $58,000. BDO Seidman's fees for
its audit of the Company's annual consolidated financial statements for the year
ended June 30, 2004, audit of a subsidiary's fiscal 2004 financial statements
included in the subsidiary's Uniform Franchise Offering Circular and review of
the Company's quarterly interim financial statements for fiscal 2005 were
$57,000.
AUDIT-RELATED FEES
Neither Morrison, Brown nor BDO Seidman rendered audit related services to
the Company during either fiscal 2005 or fiscal 2004.
TAX FEES
Morrison, Brown provided no tax services during fiscal 2005 but will
prepare and file the Company's federal, state and local tax returns for fiscal
2005 for a fee of $10,000. BDO Seidman's fee billed for tax compliance, tax
advice and tax planning during fiscal 2005 relating to preparing and filing the
Company's federal, state and local income tax returns for fiscal 2004 was
$5,500.
ALL OTHER FEES
Neither Morrison, Brown nor BDO Seidman provided other services to the
Company during either fiscal 2005 or fiscal 2004.
In connection with the standards for independence of a company's
independent public auditions, the Audit Committee has considered whether the
provision of such services is compatible with maintaining the independence of
Morrison, Brown and BDO Seidman.
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
It is the policy of the Audit Committee that all audit, audit related, tax
and other permissible non-audit services provided by the Company's independent
auditor be pre-approved. It is expected that pre-approval will be for periods up
to one year and be set forth in an engagement letter approved by the Audit
Committee of the Board that is detailed as to the particular services or
category of services to be provided and subject to a specific budget. The policy
also requires additional approval of any engagements that was previously
approved but is anticipated to exceed the pre-approved fee budget level. The
policy permits the Chair of the Audit Committee to pre-approve the Company's
principal independent auditor's services where the Company deems it necessary or
advisable that such services commence prior to the next regularly scheduled
meeting of the Audit Committee provided that the Audit Committee Chair is
required to report to the full Audit Committee on any pre-approval
determinations made in this manner.
-11-
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than 10%
of the Company's Common Stock, to file initial reports of ownership, and reports
of changes of ownership, of the Company's equity securities with the SEC and
furnish copies of those reports to the Company. Based solely on a review of the
copies of the reports furnished to the Company to date and written
representations that no other reports were required, the Company believes that
all reports required to be filed by such persons with respect to the Company's
fiscal year ended June 30, 2005 were timely filed.
STOCKHOLDER PROPOSALS
From time to time stockholders may present proposals for consideration at a
meeting of stockholders which may be proper subjects for inclusion in the
Company's proxy statement and form of proxy relating to that meeting.
Stockholder proposals intended to be included in the Company's proxy statement
and form of proxy relating to the Company's Annual Meeting of Stockholders
presently scheduled to be held in November 2005 must be received by the Company
at its principal executive offices, 290 N.E. 68th Street, Miami, Florida 33138,
by June 23, 2006. Any such proposals, as well as any questions relating thereto,
should be directed to the President of the Company. As to any proposals intended
to be presented by a stockholder without inclusion in the Company's proxy
statement and form of proxy for the Company's next Annual Meeting of
Stockholders, the proxies named in the Company's form of proxy for that meeting
will be entitled to exercise discretionary authority on that proposal unless the
Company receives notice of the matter on or before September 6, 2006. However,
even if such notice is timely received, such proxies may nevertheless be
entitled to exercise discretionary authority on that matter to the extent
permitted by SEC regulations.
ADDITIONAL INFORMATION
The cost of solicitation of Proxies, including the cost of reimbursing
banks and brokers for forwarding proxy soliciting material to their principals,
will be borne by the Company. Proxies may be solicited without extra
compensation by certain officers and regular employees of the Company by mail
and, if determined to be necessary, by telephone, telecopy, telegraph or
personal interviews.
OTHER MATTERS
The Board of Directors does not intend to bring before the Meeting any
matters other than those specifically described above and knows of no matters
other than the foregoing to come before the Meeting. If any other matters or
motions properly come before the Meeting, it is the intention of the persons
named in the accompanying form of Proxy to vote such Proxy in accordance with
their judgment on such matters or motions, including any matters dealing with
the conduct of the Meeting.
By Order of the Board of Directors,
Lloyd Frank,
Secretary
Dated: October 21, 2005
-12-
DRYCLEAN USA. INC.
|X| PLEASE MARK VOTES
AS IN THIS EXAMPLE
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 18, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael S. Steiner, Venerando J. Indelicato
and Lloyd Frank, and each of them, proxies, with full power of substitution, to
vote at the Annual Meeting of Stockholders of DRYCLEAN USA, Inc. to be held on
Friday, November 18, 2005 (including any adjournments or postponements thereof)
according to the number of votes the undersigned might cast and with all powers
the undersigned would possess if personally present, upon the matter specified
hereon, as more fully described in the accompanying Notice of such meeting and
Proxy Statement, receipt of which is hereby acknowledged, and with discretionary
power upon such other business as may come before the meeting, hereby revoking
any proxies heretofore given.
Election of Directors:
MICHAEL S. STEINER, WILLIAM K. STEINER, FOR WITH- FOR ALL
VENERANDO J. INDELICATO, DAVID BLYER, LLOYD FRANK, ALAN M. GRUNSPAN HOLD EXCEPT
AND STUART WAGNER
|_| |_| |_|
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE(S), MARK "FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN
THE SPACE PROVIDED BELOW.
Please be sure to sign and date | Date EACH PROPERLY EXECUTED PROXY WILL BE VOTED
this Proxy in the box below | IN ACCORDANCE WITH THE SPECIFICATIONS MADE
| ABOVE.IF NO SPECIFICATIONS ARE MADE, THE SHARES
- ------------------------------------------------------------------------------ REPRESENTED BY THIS PROXY WILL BE VOTED "FOR"
ALL LISTED NOMINEES.
Stockholder sign above Co-holder (if any) sign above
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Detach above card, sign, date and mail in postage paid envelope provided.
DRYCLEAN USA, INC.
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Please sign your name or names exactly as set forth hereon. When stock is
in the name of more than one person, each such person should sign the proxy.
When signing as attorney, executor, administrator, trustee or guardian, please
indicate the capacity in which you are acting. Proxies executed by corporations
should be signed by a duly authorized officer.
STOCKHOLDERS WHO DESIRE TO HAVE STOCK VOTED AT THE MEETING ARE REQUESTED TO
FILL IN, DATE, SIGN AND RETURN THIS PROXY. NO POSTAGE IS REQUIRED IF RETURNED IN
THE ENCLOSED ENVELOPE AND MAILED IN THE UNITED STATES.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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