United Capital 10-K 2011
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2010
COMMISION FILE NUMBER: 1-10104
UNITED CAPITAL CORP.
(Exact name of registrant as specified in its charter)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes ý No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. ¨ Yes ý No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.ý Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ¨ Yes ¨ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K/A or any amendment to this Form 10-K/A ý.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ý
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes ý No
The aggregate market value of the shares of the voting stock held by nonaffiliates of the registrant as of June 30, 2010 was approximately $44,284,000.
The number of shares of the registrant’s $.10 par value common stock outstanding as of April 29, 2011 was 8,955,347.
As of April 29, 2011, the executive officers and directors of United Capital Corp. (“we,” “our” or the “Company”) are as follows:
A.F. PETROCELLI, has been Chairman of the Board and Chief Executive Officer of the Company since December, 1987, President of the Company since June, 1991 and from June, 1983 to March, 1989 and a Director of the Company since June, 1981. Mr. Petrocelli is also a director of Nathan’s Famous, Inc. (“Nathan’s”), a chain of fast food restaurants. Mr. Petrocelli was nominated to the Board because of his exceptional day-to-day leadership as our Chief Executive Officer and extensive knowledge of our operations and industries.
MICHAEL T. LAMORETTI, has been a Director of the Company since April, 2005 and has been a Vice President in the Company’s real estate operations since 1994. Mr. Lamoretti is a son-in-law of Mr. Petrocelli. Mr. Lamoretti is a member of the Real Estate Board of New York, the International Council of Shopping Centers and a member of the board of the Great Neck Plaza Management Council. Mr. Lamoretti was nominated to the Board because of his breadth of knowledge about real estate matters, as well as the Company’s businesses and operations and his extensive contacts and relationships in the community.
HOWARD M. LORBER, has been a Director of the Company since 1991. In addition, Mr. Lorber has been the President and Chief Executive Officer of Vector Group Ltd. since January 2006. Previously, Mr. Lorber served as the President and Chief Operating Officer of Vector Group Ltd. from January 2001 until December 2005 and has served as a director of Vector Group Ltd. since January 2001. From November 1994 to December 2005, Mr. Lorber served as President and Chief Operating Officer of New Valley Corporation, where he also served as a Director. Mr. Lorber was Chairman of the Board of Hallman & Lorber Associates, Inc., consultants and actuaries of qualified pension and profit sharing plans, and various of its affiliates from 1975 to December 2004 and has been a consultant to these entities since January 2005 until becoming a stockholder in June 2010; a stockholder and a registered representative of Aegis Capital Corp., a broker-dealer and a member firm of the Financial Industry Regulatory Authority, from 1984 to 2009; Chairman of the Board of Directors since 1987 and Chief Executive Officer from November 1993 to December 2006 of Nathan’s; Chairman of the Board of Ladenburg Thalmann Financial Services, Inc. from May 2001 to July 2006 and Vice Chairman since July 2006; and a director of Borders Group Inc. since June 2010. Mr. Lorber is also a trustee of Long Island University. Mr. Lorber was nominated to the Board because of his experience as a real estate investor and expertise as an executive officer and a director at numerous companies which qualifies him as a “financial expert” under the Securities and Exchange Commission’s rules and regulations.
ROBERT M. MANN, has been a Director of the Company since June 2001. Mr. Mann has been a private investor for more than five years. Mr. Mann was nominated to the Board because of his executive management expertise which adds significant value and diversity to our board. Also, he is a prominent businessman in the New York area and has many contacts to generate new business.
ANTHONY J. MICELI, has been a Director, a Vice President and Chief Financial Officer of the Company since June, 1996 and prior thereto was the Corporate Controller of the Company for more than eight years. Mr. Miceli is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants and New Jersey Society of Certified Public Accountants. Mr. Miceli was nominated to the Board because of his expertise in accounting, financial reporting, internal controls, corporate governance, risk management, and regulatory compliance, as well as his vast business and day-to-day operational knowledge.
ARNOLD S. PENNER, has been a Director of the Company since 1989 and has worked for more than the past five years as a private real estate investor and as a self-employed real estate broker in New York. Mr. Penner was nominated to the Board because of his past extensive business background and his expertise in the real estate industry.
MICHAEL J. WEINBAUM, has been a Director of the Company since April, 2005 and has been a Vice President in the Company’s real estate operations since 1994. Mr. Weinbaum is a son-in-law of Mr. Petrocelli. Mr. Weinbaum has also been a director of Patriot National Bancorp, Inc. since October 2010 and is a member of the International Council of Shopping Centers. Mr. Weinbaum was nominated to the Board because of his breadth of knowledge about real estate matters, as well as the Company’s businesses and operations and his extensive contacts and relationships in the community.
The Company operates within a comprehensive plan of corporate governance for the purpose of defining responsibilities, setting high standards of professional and personal conduct and assuring compliance with such responsibilities and standards. The Company regularly monitors developments in the area of corporate governance. In July 2002, Congress passed the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) which, among other things, establishes, or provides the basis for, a number of new corporate governance standards and disclosure requirements. In addition, the NYSE Amex has instituted corporate governance and listing requirements.
The Company has an Audit Committee consisting of Messrs. Lorber, Mann and Penner. The Company has determined that Mr. Lorber is a “Financial Expert” as defined by the rules promulgated under the Sarbanes-Oxley Act.
Code of Business Conduct and Ethics
We have also adopted a Code of Business Conduct and Ethics for directors, officers and employees of the Company. It is intended to promote honest and ethical conduct, full and accurate reporting and compliance with laws as well as other matters. Such Code of Business Conduct and Ethics can be found on the Company’s website at www.unitedcapitalcorp.net and was filed as an exhibit to the Company’s report on Form 10-Q for the quarter ended June 30, 2006.
The Company’s chief executive officer, chief financial officer and other two executive officers are referred to below individually as the Named Executive Officer (“NEO”) and collectively as the Named Executive Officers (“NEOs”).
Compensation Philosophy and Objectives
The philosophy of our Compensation and Stock Option Committee is to closely align compensation paid to executive officers with the achievement of the Company’s annual and long-term performance goals. In establishing compensation for our NEOs, the following are the Compensation and Stock Option Committee’s objectives:
To achieve these objectives, our overall compensation program aims to pay our NEOs competitively, consistent with our success and their contribution to that success.
We have not retained a compensation consultant to review our policies and procedures with respect to executive compensation, although the Compensation and Stock Option Committee may elect to retain such a consultant in the future, if it determines that so doing would be helpful in developing, implementing or maintaining compensation plans.
The Compensation and Stock Option Committee annually reviews the aggregate level of executive compensation, as well as the mix of elements used to compensate our NEOs. In addition, the Compensation and Stock Option Committee has historically taken into account input from publicly available data relating to the compensation practices and policies of other companies within and outside our industry. The Compensation and Stock Option Committee considers our executive compensation versus the compensation paid by such peer companies. While such comparisons may not always be appropriate as a stand-alone tool for setting compensation due to the aspects of our business and objectives that may be unique, we generally believe that such information is an important part of our compensation-related decision-making process.
Although, generally, we believe that executive base salaries should be targeted taking into consideration the median range of salaries for executives in similar positions at comparable companies, we recognize that, to attract and retain superior key individuals, such as the NEOs, the Compensation and Stock Option Committee may determine that it is in our best interests to negotiate total compensation packages with our NEOs that may deviate from the general principle of targeting total compensation at the median level of our peers. The Company does not benchmark compensation against the compensation of other companies. Actual pay for each NEO is determined within this structure, driven by performance of the NEO over time, as well as our annual performance.
Due to Mr. Petrocelli’s unique qualifications, and his position in the Company, we have an employment agreement with Mr. Petrocelli. We entered into an Amended and Restated Employment Agreement with Mr. Petrocelli dated as of November 17, 2003 (the “Employment Agreement”), providing for the employment of Mr. Petrocelli as Chairman of the Board, President and Chief Executive Officer. The Employment Agreement provided a base salary and for the potential payment of bonuses, as determined by the Compensation and Stock Option Committee. Effective January 2006, the Compensation and Stock Option Committee determined that the base salary will be $800,000.
The bonus paid to Mr. Petrocelli, is based on, among other things, the Company’s prior year performance and the Company’s total revenue for the previous year. At the Company’s 2009 Annual Meeting of Stockholders, the stockholders approved a proposal which provided that in any year that the total revenues of the Company exceed $50 million, the Chief Executive Officer would be entitled to receive a bonus. Since the Company’s revenues exceeded $50 million for the year ended December 31, 2010, Mr. Petrocelli received a bonus. The Compensation and Stock Option Committee awarded a bonus of $800,000 to Mr. Petrocelli due to the strong operating performance of the Company in 2010.
Mr. Petrocelli’s Employment Agreement contains non-competition, non-solicitation, and confidentiality provisions which apply for one-year after cessation of employment. In the event of a change of control of the Company, as defined in the Employment Agreement, we will pay Mr. Petrocelli a lump sum severance payment equal to three years salary and purchase outstanding options owned by Mr. Petrocelli. The Employment Agreement provides for successive one-year terms, unless either we or Mr. Petrocelli gives the other written notice that the Employment Agreement is terminated, and also provides a death benefit which the Company secures through an insurance policy.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), prohibits a publicly held corporation, such as the Company, from claiming a deduction on its federal income tax return for compensation in excess of $1 million paid for a given fiscal year to the Chief Executive Officer (or person acting in that capacity) at the close of the corporation’s fiscal year and the four most highly compensated officers of the corporation, other than the chief executive officer, at the end of the corporation’s fiscal year. The $1 million compensation deduction limitation does not apply to “performance-based compensation.” The Company believes that the bonus received by Mr. Petrocelli in 2011 for services rendered during 2010 is “performance-based” since the Company’s revenues exceeded $50 million for the year ended December 31, 2010, which is the performance criterion the Company is required to achieve in order for the Chief Executive Officer to be eligible to receive a bonus, as approved by the Company’s stockholders at the Company’s 2009 Annual Meeting of Stockholders. In addition, the Company believes that any compensation received by executive officers in connection with the exercise of options granted under the Incentive and Non-Qualified Stock Option Plan (the “Plan”) or the 1988 Joint Incentive and Non-Qualified Stock Option Plan (the “Joint Plan”) qualifies as “performance-based compensation.”
Termination or Change in Control
The only NEO that the Company has an employment contract with is Mr. Petrocelli. In the event of a change of control of the Company, as defined in the Employment Agreement, the Company shall pay Mr. Petrocelli a lump sum severance payment equal to three years salary at his current rate and purchase outstanding options owned by Mr. Petrocelli. The aggregate intrinsic value of the outstanding options owned by Mr. Petrocelli as of December 31, 2010 was approximately $29,383,000, which represents the difference between the Company’s closing stock price on such date ($32.50) and the exercise price of each option, multiplied by the number of “in-the-money” options.
SUMMARY COMPENSATION TABLE
The following table sets forth compensation, including costs paid by the Company related to certain perquisites, to the NEOs with respect to the fiscal years ended December 31, 2010 and 2009.
Grant of Equity Awards
The Company did not grant any stock options in the fiscal year ended December 31, 2010 to any employees, including the NEOs.
Outstanding Equity Awards at Year-End
The following table sets forth information regarding the outstanding options that have been granted to our NEOs under each of the Plan and the Joint Plan, but remain unexercised or unvested as of December 31, 2010.
The Company has a noncontributory defined benefit pension plan (the “Pension Plan”) that covers substantially all full-time employees including the NEOs of the Company. The Company contributed $650,000 and $150,000 to the Pension Plan for the years ended December 31, 2010 and 2009, respectively. The Company contributed approximately $550,000 to the Plan during the first quarter of 2011. Subject to compensation limitations under the Employee Retirement Security Act of 1974 which were $245,000 in 2010, benefits are computed as follows: For each year of credited service after June 30, 1989, the sum of one percent (1%) of annual compensation, as defined, up to $25,000 plus one and one-half percent (1 ½ %) of annual compensation in excess of $25,000. The Pension Plan, which provides defined benefits based on years of service and compensation level, was frozen in September 2009 ceasing the accrual of further benefits. As of December 31, 2010, each of our NEOs are fully-vested in the Pension Plan with a present value of accumulated benefits for Mr. Petrocelli, Mr. Lamoretti, Mr. Miceli, and Mr. Weinbaum in the amount of approximately $1,394,000, $38,000, $72,000, and $41,000, respectively.
The Company also has a Supplemental Retirement and Death Benefit Program (the “Supplemental Program”) which was terminated over ten years ago. All participants at that time retained their benefits under the plan. Messrs. Petrocelli and Miceli are included in this group. As of December 31, 2010, the net present value of Mr. Petrocelli’s and Mr. Miceli’s benefits under the Supplemental Program were approximately $134,000 and $52,000, respectively. Under the Supplemental Program, participants, upon death or retirement at the age of 55 or later, receive a supplemental benefit, as defined, in equal quarterly installments over a ten year period, as stated in the plan. Retirement benefits are proportionally reduced for early retirement prior to age of 65.
The Company provides most salaried employees with the opportunity to participate in a 401(k) Plan, which is a tax-qualified retirement savings plan under Section 401(k) of the Code. Eligible employees, who are 21 years of age and over, can participate on the first day of the calendar quarter following the date they have completed six months of service with the Company. Historically, the Company has not made matching contributions.
Directors of the Company who are not employees of the Company are entitled to receive compensation for serving as directors in the amount of $6,000 per annum and $500 per Board meeting and committee meeting attended. The following table reflects all compensation earned and paid to the non-employee directors of the Company during the 2010 calendar year for services rendered to the Company:
The aggregate number of outstanding stock options held by each independent, non-employee director as of December 31, 2010 was 60,000, 40,000 and 60,000 for Messrs. Lorber, Mann and Penner, respectively. No director was granted any stock options, stock awards or received any other compensation from the Company in the fiscal year ended December 31, 2010.
The following table sets forth information concerning ownership of the Company’s Common Stock, as of April 29, 2011, by each person known to be the beneficial owner of more than five percent of the Common Stock, each director, each executive officer and by all directors and executive officers of the Company as a group:
The Company maintained two stock option plans. Both plans provided for the granting of incentive or non-qualified stock options. The Company has no outstanding warrants or rights or plans which provide for the grant or issuance of warrants or rights. The following table gives information about stock option awards under these plans as of December 31, 2010. See Note 10 of Notes to Consolidated Financial Statements for further discussion on these plans.
The following sets forth the transactions involving the Company and its subsidiaries and its executive officers and/or Directors from January 1, 2010.
The Company has a 50% interest in an unconsolidated limited liability corporation, whose principal assets are two distribution centers leased to Kmart Corporation, which are accounted for as leveraged leases. Also participating in this transaction were Mrs. Petrocelli (the wife of Mr. Petrocelli, the Company’s Board Chairman), Mr. Lorber and Mr. Penner, Directors of the Company, as well as Ms. Madaleine Berley (the wife of Mr. Penner), who together have approximately an 8% interest in this transaction. Mr. Petrocelli disclaims beneficial ownership of the participation interest held by his wife and Mr. Penner disclaims beneficial ownership of the participation interest held by his wife. Income on leveraged leases is recognized by a method which produces a constant rate of return on the outstanding investment in the lease, net of the related deferred tax liability in the years in which the investment is positive. Accordingly, although the Company received $777,000 in cash distributions from this investment, it did not record any income during the year ended December 31, 2010. Cash distributions from this investment to each of Mrs. Petrocelli, Mr. Penner, Ms. Berley, and Mr. Lorber were approximately $36,000, $26,000, $26,000, and $26,000, respectively, in 2010. Mrs. Petrocelli, Mr. Penner, Ms. Berley, and Mr. Lorber originally invested $275,000, $200,000, $200,000 and $200,000, respectively, in the transaction.
During 2009, the Company purchased a $5.0 million participation in a note (the “Participation”) secured by a warehouse located in New York of which Mrs. Petrocelli holds a 20% interest. The Participation, which matures in July 2012, bears interest at 18% per annum payable monthly. During November 2010, the Company sold a 2.5% interest in its remaining share of the Participation to the Company’s pension plan for $100,000.
The Company has Indemnity Agreements with certain directors (individually, each an “Indemnitee”), indemnifying each Indemnitee against the various legal risks and potential liabilities to which such individuals are subject due to their position with the Company, in order to induce and encourage highly experienced and capable persons such as the Indemnitees to continue to serve as Directors of the Company.
In April 2010, Messrs. Petrocelli, Lamoretti, Weinbaum, and Miceli exercised options to purchase 600,000, 66,000, 86,000, and 66,000 shares of the Company’s Common Stock, respectively, at exercise prices ranging from $6.53 to $11.93 per share and sold such shares to the Company at a price of $24.60, which was the closing price of the Company’s Common Stock on March 29, 2010. Also in April 2010, Mr. Mann exercised options to purchase 60,000 shares of the Company’s Common Stock at an exercise price of $11.93 and sold such shares to the Company at a price of $22.90, which was the closing price of the Company’s Common Stock on April 12, 2010. In addition, in May 2010, Mr. Lorber and Mr. Penner each exercised options to purchase 20,000 shares of the Company’s Common Stock at an exercise price of $6.53 per share and sold such shares to the Company at a price of $22.70 per share, which was the closing price of the Company’s Common Stock on May 26, 2010.
The Company has elected to be a controlled company pursuant to NYSE Amex rules. The Company is eligible to make this election because Mr. Petrocelli, the Company’s Chairman of the Board, President and Chief Executive Officer, beneficially owns more than 50% of the Company’s outstanding stock. As a result of being a controlled company, the Company is not required to comply with the following corporate governance requirements of the NYSE Amex: (i) majority of independent directors, (ii) fully independent nominating committee, and (iii) fully independent compensation committee. While the Company currently has a fully independent compensation committee, it does not have a majority of independent directors or a fully independent nominating committee. As a result, the quality of Board oversight may be reduced as compared with companies which have a fully independent nominating committee and a majority of independent directors and the Company has a greater risk of conflicts of interest without these safeguards. In addition, the lack of an independent nominating committee increases the possibility that the Company will not have independent directors serving on the Board of Directors.
The Board of Directors has determined that the following Directors of the Company are independent directors under NYSE Amex rules: Howard M. Lorber, Robert M. Mann, and Arnold S. Penner. As described above, the Company and Messrs. Lorber and Penner are involved in certain transactions. Notwithstanding such transactions, both Mr. Lorber and Mr. Penner are independent directors as such term is defined by NYSE Amex Rule 803(A) of the NYSE Amex listing standards.
The Company’s independent public accountants for the years ended December 31, 2010 and 2009 were Holtz Rubenstein Reminick LLP (“Holtz”).
The aggregate fees billed to or accrued by the Company by Holtz for services performed for the years ended December 31, 2010 and 2009 are as follows:
The aggregate audit fees for the years ended December 31, 2010 and 2009 were primarily related to the audit of the Company’s annual financial statements and review of those financial statements included in the Company’s quarterly reports on Form 10-Q. For the year ended December 31, 2010, audit fees also include fees for professional services rendered for work related to the effectiveness of internal controls over financial reporting.
Audit Related Fees
Audit related fees for the years ended December 31, 2010 and 2009 were primarily incurred in connection with the audits of the Company’s employee benefit plans.
Tax fees for the years ended December 31, 2010 and 2009 were primarily related to tax and other related services.
All Other Fees
The Company did not engage Holtz to provide any other services during the fiscal years ended December 31, 2010 and 2009.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: April 29, 2011