UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Torvec, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
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and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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TORVEC, INC.
Notice of 2008
Annual Meeting of Shareholders
And Proxy Statement
Torvec Stationery
December 1, 2008
Dear Shareholders,
Our 2008 annual meeting of shareholders will be held at the Casa Larga Vineyards, 2287 Turk Hill
Road, Fairport, New York 14450 on Thursday, January 29, 2009. The annual meeting will begin
promptly at 7:00 p.m., Eastern Standard Time.
Please read the following proxy statement so that you will know what we plan to do at the meeting.
Also, please sign your Proxy Card and return it in accordance with the instructions accompanying
the Card. This way, your shares will be voted as you direct even if you can not attend the meeting.
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Gary A. Siconolfi
Chairman of the Board
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TABLE OF CONTENTS
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5
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6
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12
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Business Consultant Stock Plan
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3
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46
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48
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4
TORVEC, INC.
NOTICE OF ANNUAL MEETING
OF
COMMON SHAREHOLDERS
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Time:
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7:00 p.m., Eastern Time, Thursday, January 29, 2009
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Place:
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Casa Larga Vineyards
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2287 Turk Hill Road
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Fairport, New York 14450
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Proposals
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1. The election of directors;
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2. The ratification of the selection of Eisner, LLP as Torvecs
independent registered public accounting firm for 2008.
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Who Can Vote
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You can vote if you were a common shareholder of record at the
close of business on December 1, 2008.
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Internet Availability
of Proxy Materials
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Under rules recently adopted by the Securities and Exchange
Commission, we are now furnishing proxy materials on the
Internet. Instructions on how to access and review the proxy
materials on the Internet can be found on the Notice of Internet
Availability of Proxy Materials (Notice) sent to all common
shareholders. The Notice also includes instructions for common
shareholders on how to access the proxy card to vote over the
Internet.
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December 1, 2008
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Herbert H. Dobbs
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Secretary
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5
TORVEC, INC
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PROXY STATEMENT
Date of Proxy Statement: December 1, 2008
Date of Distribution: December 12, 2008
Annual Meeting of Common Shareholders January 29, 2009
Our Board of Directors is soliciting proxies for the 2008 annual meeting of common shareholders.
This proxy statement contains important information for you to consider when deciding how to vote
on the matters brought before the meeting. Please read it carefully.
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING OF COMMON SHAREHOLDERS
What is a Proxy?
A proxy is another person that you legally designate to vote your common stock. If you designate
someone as your proxy in a written document, that document also is called a proxy or a proxy card.
What is a Proxy Statement?
A proxy statement is a document that regulations issued by the U.S. Securities and Exchange
Commission require that we give to you when we ask you to sign a proxy card to vote your common
stock at the annual meeting of common shareholders.
What is the Purpose of the Annual Meeting?
At our annual meeting, common shareholders will act upon the matters outlined in the notice of
meeting, specifically, the election of directors and the ratification of the selection of the
companys independent registered public accounting firm. Also, management will report on the state
of the company and respond to questions from shareholders.
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What is the record date and what does it mean?
The record date for the annual meeting is December 1, 2008. The record date is established by the
board of directors as required by New York law and the companys bylaws. Holders of common stock at
the close of business on the record date are entitled to receive notice of the meeting and to vote
their common shares at the meeting, and any adjournments or postponements of the meeting.
How many common shares must be present at the annual meeting to conduct business?
The companys bylaws provide that holders of at least 33 1/3% of the common shares outstanding on
the record date must be present at the annual meeting, either by attending the annual meeting in
person or by submitting a properly signed proxy card. This requirement is called a quorum.
We do not anticipate the lack of a quorum on January 29, 2009. If that event were to occur, we
would adjourn the meeting to a later date and provide timely notice to all common shareholders of
the new date and time of the adjourned meeting.
Who is entitled to vote at the annual meeting?
Holders of the companys $.01 par value common stock at the close of business on the record date
may vote at the annual meeting. Holders of the companys convertible Preferred Shares cannot vote
at the meeting.
On December 1, 2008, 32,695,556 shares of common stock were outstanding and, thus, are eligible to
be voted at the annual meeting.
What are the voting rights of holders of the companys common stock?
Holders of common stock are eligible to vote on all matters to come before the meeting and possess
100% of the voting power. Each outstanding share of common stock on the record date will be
entitled to one vote on each matter to be voted upon.
7
What is the difference between a shareholder of record and a street name holder?
If your common shares are registered directly in your name with Continental Stock & Trust Company,
the companys common stock transfer agent, you are considered the shareholder of record with
respect to those shares. If your shares are held in the name of a stock brokerage account or a bank
or other nominee, you are considered the beneficial owner of those shares, and your shares are held
in street name.
How do I vote my common shares?
You may vote on the Internet.
As we explained in the Notice of Internet Availability of Proxy Materials (Notice) sent to all
common shareholders of record, all common shareholders have the ability to access the Proxy
Statement and the companys Annual Report on a website referred to in the Notice. The Notice
includes instructions on how to access these materials over the Internet as well as instructions on
how you can access the proxy card to vote over the Internet. The website has mechanisms in place to
protect your anonymity.
In the alternative, you may vote by mail.
The Notice also contains instructions on how you can request to receive a printed copy of the proxy
materials by mail at no charge. To vote by mail, please sign and date your proxy card and return it
in the enclosed, prepaid and addressed envelope. If you mark your voting instructions on the proxy
card, your shares will be voted as you instruct.
In addition, any common shareholder may request to receive proxy materials in printed form or
electronically by email on an ongoing basis. Choosing to receive future proxy materials by email
will save the company the cost of printing and mailing documents
to
shareholders and will reduce the impact of annual meetings on the environment. A shareholders
election to receive proxy materials by email will remain in effect until the shareholder terminates
it.
In the alternative, you may vote in person at the annual meeting.
To assist you, we will pass out a generic proxy card to anyone who wants to vote at the annual
meeting in case you have forgotten your proxy card.
If you hold your shares in street name, your stockbroker, bank or other nominee will provide you
with a voting instruction card for you to use in directing the broker or other nominee how to vote
your shares. If your shares are held in street name and you wish to attend the annual meeting, you
must notify your broker, bank or other nominee and obtain the proper documentation to vote your
shares at the annual meeting.
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Can I change my vote?
Yes. You can revoke your vote at any time before the beginning of the annual meeting in any one of
four ways:
1. You may revoke your vote on the Internet by visiting the website designated in the Notice of
Internet Availability of Proxy Materials and by following the instructions in the Notice which
explain how to revoke your previous vote and, if you wish, change your vote;
2. You may sign and mail another proxy card with a later date;
3. You may vote in person at the annual meeting; or
4. You
may give notice of revocation to us by writing Herbert H. Dobbs,
Secretary,
Torvec, Inc., 1999 Mount Read Blvd., Building 3, Rochester, New York 14615
Are votes confidential? Who counts the votes?
The votes of all common shareholders will be held in confidence from the directors and officers of
the company except: (a) as necessary to meet applicable legal requirements and to assert or defend
claims for or against the company; (b) in case of a contested proxy solicitation; (c) if a
shareholder makes a written comment on the proxy card or otherwise communicates his or her vote to
management; or (d) to allow the inspectors of election to certify the results of the vote.
The board of directors has appointed inspectors of election to determine if a quorum is present so
that business can be conducted and to count the votes cast by the shareholders on the two proposals
to be presented at the meeting.
Can I vote my common shares in person at the annual meeting?
Yes. If you are a shareholder of record, you may vote your common shares at the meeting by
completing a proxy card at the meeting and furnishing the card marked with your instructions and
properly signed and dated to either the companys secretary, Herbert H. Dobbs or to its corporate
counsel, Richard B. Sullivan.
You must submit your proxy card prior to the beginning of the meeting for your vote to count.
9
If you are a street name holder, you may vote your common shares in person only if you obtain a
signed proxy from your broker, bank or other nominee giving you the right to vote your shares.
Even if you plan to attend the meeting, we recommend you submit your proxy as described above so
that your vote will be counted if you later decide not to attend the meeting.
What are my choices when voting?
In the election of directors, you may vote for all nominees, or you may vote against one or more
nominees. The proposal related to the election of directors is described in this proxy statement
beginning on page 11. For the proposal to ratify the independent registered public accounting firm,
you may vote for the proposal, against the proposal or you may abstain from voting on the proposal.
This proposal is described in this proxy statement beginning on page 43.
What are the Boards recommendations?
The board of directors recommends a vote FOR all of the nominees for director (Proposal 1) and
recommends a vote FOR ratifying the selection of Eisner LLP as the companys independent registered
public accounting firm for 2008 (Proposal 2).
What if I do not specify how I want my common shares voted?
If you properly sign, date and submit your proxy card but do not specify on your proxy card how you
want to vote your shares, then either Keith E. Gleasman or James Y. Gleasman or both of them will
vote your shares FOR all of the nominees for director (Proposal 1) and FOR the selection of Eisner
LLP as the companys independent registered public accounting firm for 2008 (Proposal 2).
What percentage of the vote is required for a proposal to be approved?
In accordance with the companys bylaws, the board of directors has determined that there shall be
seven directors. The seven nominees with the highest number of votes cast will be elected as
directors. The board has nominated seven individuals for election as directors. There are no other
nominees. Thus, if a quorum is present at the meeting, all of the boards nominees will be elected
as directors, regardless of the percentage of the vote each may receive.
10
The proposal to ratify the selection of Eisner LLP as the companys independent registered public
accounting firm for 2008 will require a majority of votes cast at the annual meeting.
The total number of votes cast at the meeting includes only those common shares actually voted and
does not include abstentions. While an abstention does count for the purpose of determining
whether holders of 33 1/3% of the total number of outstanding shares are present at the annual
meeting to conduct business (i.e. a quorum), abstentions do not count for the purpose of
determining whether a majority of the votes cast were cast in favor or against a proposal.
Suppose I receive multiple proxy cards?
This means that your shares are held in more than one account. In order to make sure you have voted
all of your common shares, please make sure you have properly signed, dated and mailed each proxy
card you may have received.
Are there any other matters to be acted upon at the annual meeting?
We do not know of any other matters to be presented or acted upon at the meeting. Under our bylaws,
no business besides that stated in the meeting notice may be transacted at any meeting of
shareholders.
Who is soliciting my vote and who is paying for the solicitation?
The board of directors is soliciting your vote at the annual meeting by distributing this proxy
statement to all common shareholders. The board will also request brokerage firms, nominees,
custodians and fiduciaries to forward proxy materials to all beneficial owners of our common stock.
The company will pay all expenses for this solicitation, including the reimbursement of its
transfer agent, brokerage firms, banks and other nominees for their reasonable out-of-pocket
expenses in forwarding proxy material to beneficial owners. While the company has not retained the
services of a proxy solicitor
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it has retained advisory services with respect to the Internet
hosting, posting and document conversion of its proxy materials as well as to permit Internet
voting.
How will I find out the outcome of the voting?
We will announce preliminary voting results at the meeting. We will publish the final results in
our annual report on
Form 10-K
for the fiscal year ending December 31, 2008,
which we will file with the Securities and Exchange Commission. You can get a copy of our annual
report by writing Torvec, Inc., Mount Read Industrial Facility, 1999 Mount Read Blvd., Rochester,
New York 14615 or by contacting the Securities and Exchange Commission at (800) 732-0330 for the
location of its nearest public reference room, or through the Edgar System at www.sec.gov.
11
ELECTION OF DIRECTORS
(Proposal 1 on the Proxy Card)
Under our Bylaws, our board of directors is elected annually to serve until the next annual meeting
of common shareholders and until the directors successors are duly elected and shall qualify.
Unless authority to vote for the election of directors is withheld or the proxy card is marked to
the contrary, executed and valid proxies received will be voted FOR the election of the seven
nominees named below. All of the nominees are currently directors of the company. Daniel R. Bickel,
Herbert H. Dobbs, James Y. Gleasman, Keith E. Gleasman, Joseph B. Rizzo and Gary A. Siconolfi were
elected at the annual meeting of shareholders in January, 2008. Asher J. Flaum was appointed by the
board of directors on October 10, 2008 to complete the term of David M. Flaum. While we have no
reason to believe that any nominee will not be available as a candidate, should such a situation
arise, the proxy may be voted for the election of other persons as directors.
Vote Required
Nominees for election to the board of directors must receive a plurality of the common shares cast
at the annual meeting, either in person or by proxy.
Recommendation
The board of directors recommends a vote FOR each of the nominees presented for election to the
board
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12
The names of the nominees, their ages as of December 1, 2008 and certain other information about
them and about the governance of the company are set forth below to assist you in making a decision
as to how to cast your vote.
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Served As
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Nominee
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Principal Occupation
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Age
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Director Since
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Gary A. Siconolfi
325 VanVoorhis Avenue
Rochester, NY 14617
(1)
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Chairman of the Board
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57
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10/31/02
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James Y. Gleasman
987 Elmwood Avenue
Brighton, New York 14618
(2)
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Chief Executive Officer,
Interim Chief Financial Officer,
Director
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68
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02/20/98
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Keith E. Gleasman
11 McCoordwoods Drive
Fairport, NY 14450
(3)
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President, Director
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61
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09/26/96
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Herbert H. Dobbs
448 West Maryknoll Road
Rochester Hills, MI 48309
(4)
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Secretary, Director
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02/20/98
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Daniel R. Bickel
39 Whippletree Road
Fairport, New York 14450
(5)
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Certified Public Accountant,
Director
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60
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10/31/02
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Asher J. Flaum
49 Sunrise Park
Pittsford, New York 14534
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Real Estate Developer,
Director
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10/10/08
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Joseph B. Rizzo
39 State Street, Suite
700
Rochester, New York 14614
(7)
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Attorney, Director
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9/9/05
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Mr. Siconolfi was the owner and general manager of Panorama Dodge, Inc., Penfield, New York from 1984-1995 and of
Panorama Collision, Inc., East Rochester, New York from 1989-1995. He started and managed a highly successful auto/truck
dealership and collision business, building the business to annual sales of $20 million, with 5 departments and 65
employees.
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Prior to opening the dealership and collision business, Mr. Siconolfi acquired an excellent foundation in the automotive
business, working in sales, sales management and general management at Vanderstyne Ford, Schrieber Buick, Judge Motor
Corporation and Meisenzahl Auto Parts, all in the Rochester area. He has completed 100+ programs sponsored by Chrysler
Corporation, Ford Motor Company and General Motors in fields such as management, sales management, sales, customer
relations, human resources and service training. He earned numerous awards given by these companies.
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A very active participant in his community, Mr. Siconolfi is currently involved in commercial real estate.
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(2)
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James Y. Gleasman has been a director and consultant of the company since its inception. His business background
includes the following:
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Life-long entrepreneur.
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Skilled in management, finance, strategic planning, organizing and marketing.
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Principal inventor of the infinitely variable transmissions (IVT); co-inventor of several
other patented inventions.
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Established manufacturing of the Torsen
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differential in Argentina, Brazil, etc.
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Former principal with two companies formerly owned by the Gleasman family.
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Set business strategies for small companies dealings with large companies.
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Joint venture partner with Clayton Brokerage Co. of St. Louis, MO.
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Owned financial-consulting business.
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Negotiated with numerous Asian Corporations (including Mitsubishi and Mitsui).
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Educated in Asian philosophy, business practices and culture.
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(3)
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Keith E. Gleasman is co-inventor with Vernon E. Gleasman on all Torvec patents. Mr. Gleasmans strengths include his extensive
marketing and sales executive experience, in addition to his design and development knowledge. His particular expertise has been in
the area of defining and demonstrating the products to persons within all levels of the automotive industry, race crew members,
educators and students.
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As former Vice President of Sales for the unrelated Gleason Corporation (Power Systems Division), designed and conducted seminars on vehicle driveline systems for
engineers at the U.S. army tank automotive command.
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Designed a complete nationwide after-market program for the Torsen differential, which included trade show participation for the largest after-market shows in the
U.S., SCORE and SEMA.
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Extensive after-market experience including pricing, distribution, sales catalogs, promotions, trade show booths designs and vehicle sponsorships.
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Responsible for over 300 articles in trade magazines highlighting the Torsen differential (e.g., Popular Science, Auto Week, Motor Trend, Off-Road, and Four
Wheeler).
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Designed FTV vehicle (from concept to assembly).
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Assisted in developing engineering and manufacturing procedures for the Torsen differential and for all of the Torvec products.
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Instructed race teams on use of the Torsen differential (Indy cars, Formula 1, SCCA Trans-Am, IMSA, GTO, GTU, GT-1, NASCAR, truck pullers and off-road racers).
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Has been trained for up-to-date manufacturing techniques such as NWH, statistical process control and MRP II.
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Mr. Gleasman has extensive technical and practical experience, covering all aspect of the companys products such as, promotion,
engineering and manufacturing.
15
(4)
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Dr. Dobbs, Ph.D., P.E., has worked at every level from design engineer to technical director of an Army Major Commodity Command at the
two-star level. He has worked as a hands-on engineer and scientist in industry and government, commanded field units, managed Army R &
D programs and laboratories and currently has his own practice as a consultant engineer. His broad background has helped guide the
companys growth and development.
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During his career he has:
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Worked as a manufacturing engineer.
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Worked as a design engineer in the aircraft and missile industry.
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Managed Army laboratories as a captain, lieutenant colonel and colonel.
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Organized, implemented and operated the theater-wide Red Ball Express quick response supply system in Vietnam to get disabled weapons and other critical
equipment repaired and back into combat as rapidly as possible.
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Done basic research on multi-phase turbulent fluid dynamics supporting development of the gas turbine primary power system now used in the M1 Abrams Main Battle
Tank (MBT).
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Managed advanced development of the laser guided 155mm-artillery shell now known as the Copperhead.
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Served in Taiwan as a member of the U.S. Military Assistance Advisory Group (MAAG) working with the Republic of China Army General Staff.
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Served as liaison officer between the Army and Air Force for development of the laser seeker for the Hellfire missile.
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Guided development of a new family of tactical vehicles for the Army, including the High Mobility Multipurpose Wheeled Vehicle (HMMWV) now known as the Hummer,
which uses the Torsen
®
differential.
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Served as Technical Director of U.S. Army Tank-automotive Command* (TACOM), which then employed some 6,400 people and is responsible for all support of U.S.
military ground vehicles (a fleet of 440,000) from development to ultimate disposal with a budget of nearly $10 billion a year. He was also responsible for
negotiation and management of military automotive R&D agreements with the French and German Ministries of Defense.
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*
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Now the U.S. Army Tank-Armaments Command.
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At the end of 1985, Herbert H. Dobbs left government service and started his own consulting practice and began working with the Gleasmans to develop
and market Vernon Gleasmans and Torvecs inventions. Herbert H. Dobbs holds a Ph.D. in Mechanical Engineering from the University of Michigan and
is a registered professional engineer in Michigan. He holds several patents of his own and, among many affiliations, is a member of SAE, ASME, NSPE,
AAAS, Sigma XI, AUSA, NDIA and the U.S. Army Science Board. The last named organization is a small group of senior technical and managerial people
chosen from industry and academia to provide direct advice to the Secretary of the Army, the Chief of Staff, and the Department of the Army
concerning issues of policy, budgets, doctrine, organization, training and technology.
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16
(5)
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Daniel R. Bickel is a partner in the accounting firm of Bickel & Dewar, C.P.A.s, an accounting firm providing a variety of accounting services to
small to medium sized business. The services provided include audits, reviews, compilations, business and personal consulting, business acquisition
and sale assistance and income tax preparation. Mr. Bickel is a graduate of the Rochester Institute of Technology. He has been licensed in New York
State as a certified public accountant for almost 30 years and is a member of the American Institute of Certified Public Accountants and the New
York State Society of Certified Public Accountants. He has served as an officer and director of numerous non-profit and civic organizations.
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(6)
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Asher J. Flaum is President of Flaum Management Co., Inc., a full service real estate company that owns and manages a portfolio of several million
square feet of commercial real estate including retail, office, industrial, development projects as well as provides complete real estate brokerage
services through its real estate brokerage division. Through his active involvement with Flaum Management, Mr. Flaum focuses on real property
management, development, acquisitions and finance, leasing and brokerage services. He has participated in multiple real estate transactions
involving Fortune 500, national and regional companies. A licensed real estate broker, Mr. Flaum is a member of the International Council of
Shopping Centers (ICSC) and a member of the New York State Commercial Association of Realtors (NYSCAR). Mr. Flaum, who has a B.S. degree from
Syracuse University, serves on the board of directors and finance committee of the Jewish Community Federation and on the board of directors of
Constellation Brands Marvin Sands Performing Arts Center (CMAC).
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(7)
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Joseph B. Rizzo, Partner and Head of the Litigation Department of the law firm of Gallo & Iacovangelo, LLP, was born January 17, 1965, in Buffalo,
New York. Graduated from Pittsford Mendon High School, 1982; State University of New York at Buffalo, B.A., English, 1986; State University of New
York at Buffalo, School of Law, Juris Doctor, 1989. Admitted to practice law in the State of New York, 1990. Associate Attorney with the law firm of
Speyer & Perlberg, New York, New York, 1989 to 1995. Joined law firm of Gallo & Iacovangelo, LLP, Rochester, New York in 1995 and became a Partner
and Head of the firms Litigation Department, 1997 to present. Mr. Rizzo is a published legal commentator and a lecturer for the New York State Bar
Association. He is a member of the New York State Bar Association and the National Crime Victims Bar Association. Appears in the Strathmores Whos
Who 2005-2006 Edition for outstanding leadership and achievement in the practice of law.
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17
Relationships; Agreements
Keith E. and James Y. Gleasman are brothers. There are no other family relationships among any of
the directors or executive officers of the company. There are no agreements or arrangements for the
nomination or the appointment of any persons to the board of directors.
CORPORATE GOVERNANCE
Torvec believes it is important to disclose to you a summary of our major corporate governance
practices. Some of these practices have been in place since the companys inception. Others have
been adopted in response to legislative and regulatory changes.
We will continue to assess and refine our corporate governance practices and share them with you.
Role of the Board of Directors
All corporate authority resides in the board of directors as the representative of the
shareholders. The board has delegated authority to management in order to implement Torvecs
mission of maximizing long-term shareholder value, while adhering to the laws of the jurisdictions
where we operate and at all times observing the highest ethical standards.
Such delegated authority includes the authorization of spending limits and the authority to hire
consultants and employees and terminate their services. The board retains responsibility to
recommend candidates to the shareholders for election to the Board of Directors. The board retains
responsibility for selection and evaluation of the chief executive officer, determination of senior
management compensation, approval of the annual budget, assurance of adequate systems, procedures
and controls, as well as assisting in the preparation and approval of strategic plans. Additionally, the board provides advice and
counsel to senior management.
18
All major decisions are considered by the board as a whole; however, the board has chosen to
exercise certain of its responsibilities through committees of the board. The board has established
three standing committees an Audit Committee, a Nominating Committee, and a Governance and
Compensation Committee. On July 8, 2005, the board temporarily created an Executive Committee,
composed of a majority of its members and granted to it the full authority of the board, in
accordance with and subject to the provisions of section 712 of the New York Business Corporation
Law.
It is the companys policy that all directors attend the annual shareholders meeting. All persons
who were directors on the date of last years annual shareholders meeting attended such meeting
except for David M. Flaum who was unavoidably out of town on the date of the shareholders meeting.
Operation of the Board and its Committees
The companys common stock is traded on the over-the-counter bulletin board, an electronic
inter-dealer quotation system that displays real-time quotes, last-sale prices and volume
information. While the bulletin board is owned by the National Association of Securities Dealers,
Inc., the companys common stock is not listed for trading on the NASDAQ system or any stock
exchange.
Despite the companys common stock not being so listed, the board has voluntarily adopted and
implemented the NASDs listed company rules regulating the composition and operation of the board
and its committees as in effect from time to time since the companys common stock began trading in
January, 1999.
The board of directors of the company met and/or took official action 4 times during the year from
January 1, 2008 through December 1, 2008. During this period, each incumbent director attended,
either in person or by telephonic conference as permitted by the companys Bylaws, approximately
100% of the total number of meetings held during the period for which he was a director and
approximately 100% of the total number of meetings of the committees of the board on which he
served during the period for which he was a member of such committee(s).
Director Independence
Under NASDs rules applicable to listed companies, a majority of the board must be independent.
This requirement means that a majority of the companys board must be composed of persons who are
not executive officers or employees of the company or who have a relationship with the company
which, in the boards opinion, would interfere with the exercise of independent judgment in
carrying out his responsibilities as a director. In addition, a person can not be considered
independent if he is compensated by the company
for any reason other than for service rendered as a member of the board and/or its committees.
19
Based upon these independence standards and all of the relevant facts and circumstances, the board
determined that Daniel R. Bickel, Herbert H. Dobbs, Asher J. Flaum (and during his term of service,
David M. Flaum), Joseph B. Rizzo and Gary A. Siconolfi (constituting 5 members of a 7 person board)
are independent. In making this determination, the board noted that none of these directors is an
executive officer or employee of the company and that each is compensated by the company under its
Nonmanagement Directors Plan and Commercializing Event Plan solely for service as members of the
board and its committees. The board also considered that while Mr. Rizzo is a partner in a law firm
that has been engaged in representing the company in certain litigation during the past three
years, such relationship does not impair his independence since the amount of fees paid by the
company in any one year during such period did not exceed the greater of $200,000 or 5% of such law
firms gross revenues. In addition, while Mr. Rizzos firm continues to represent certain directors
in ongoing litigation, his firm no longer represents the company. Further, the board considered
that while David M. Flaum and Asher J. Flaum are affiliates of the companys landlord, 1999 Mt.
Read Blvd, LLC. such relationship does not impair either persons independence since the amount of
fees paid by the company since the inception of the lease (a period of less than one year) does not
exceed the greater of $200,000 or 5% of such landlords gross revenues during such period.
Code of Ethics/Committee Charters
The
board has adopted, implemented and published on the companys
website (
www.torvec.com
) the
companys code of business conduct which applies to all members of the Board, all executive and
financial officers and all employees and consultants of the company, its divisions and its
subsidiaries. The code mandates that all company personnel observe the highest standards of
business and personal conduct in the performance of their duties and responsibilities, especially
in dealing with other company personnel, our shareholders, the general public, the business
community, customers, suppliers, and governmental authorities. It addresses conflicts of interest,
corporate opportunities, confidentiality, fair dealing, protection and proper use of corporate
assets, compliance with laws, rules and regulations and requires the reporting of any illegal or
unethical behavior.
We require our employees, our officers and directors to talk to supervisors, managers or other
appropriate personnel to report and discuss any known or suspected unethical, illegal or criminal
activity involving the company and/or its employees. We have established a compliance network which
allows employees, officers and directors to anonymously report any known or suspected violation of
policies and rules set forth in the code of business conduct.
Waivers or amendments of the codes provisions are generally not permitted, may be granted only by
the board of directors, and if granted, will be disclosed promptly by the company by posting the
waiver or amendment on the companys website and by filing a current report (
Form 8-K
) with the
Securities and Exchange Commission. There were no waivers of the code during 2008.
20
The board has also adopted, implemented and posted on the companys website the companys financial
integrity and compliance program. The program mandates that the companys results of operations and
financial position must be recorded in accordance with the requirements of law and generally
accepted accounting principles and that all books, records and accounts must be maintained in
reasonable detail so that they accurately and fairly reflect the business transactions and
disposition of assets of the company. The written policy requires all personnel responsible for the
preparation of financial information to ensure that the companys financial policies and internal
control procedures are followed and holds each person involved in creating, processing and
recording financial information accountable for the integrity of the financial reporting process.
The program establishes a network for the receipt, retention, and treatment of complaints received
by the company regarding accounting, internal accounting controls or auditing matters and provides
for the submission (including the confidential anonymous submission) by company personnel of any
concerns they might have regarding questionable accounting or auditing practices.
On November 9, 2004, the board adopted a statement of corporate governance principles which
establishes policies governing the role of the board of directors, its relationship to management,
qualifications of directors, independence of directors, the size of the board and selection
process, board committees, independence of committee members, meetings of independent directors,
shareholder communications, board and committee agendas, ethics and conflicts of interest,
reporting and access to advisers
.
The statement can be found on the companys website and was
attached to the proxy statement filed in connection with the annual meeting of shareholders in
January, 2005.
The board adopted an Audit Committee charter delineating the composition and the responsibilities
of the Audit Committee which became effective on April 17, 2000. The charter was revised by the
board on January 15, 2003 to further delineate the Committees responsibilities and authority in
accordance with provisions of the Sarbanes-Oxley Act of 2002. The charter is on the companys
website at www.torvec.com. It was filed as an appendix to the proxy statements distributed to
shareholders in connection with the 2003 and 2006 annual meetings.
On November 9, 2004, the board adopted a Nominating Committee charter, a copy of which was attached
to the companys proxy statement filed in connection with the annual meeting of shareholders held
in January, 2005. The Nominating Committee charter is on the
companys website at
www.torvec.com
.
21
Policy/Procedure for Review/ Approval of Related Party Transactions
Business transactions between Torvec and its officers or directors, including companies in which a
director or officer (or an immediate family member) has a substantial ownership interest or a
company where such director or officer (or an immediate family member) serves as an executive
officer (related party transactions) are not prohibited. In fact, certain related party
transactions can be beneficial to the company and to its shareholders.
It is important, however, to ensure that any related party transactions are beneficial to the
company. Accordingly, any related party transaction, regardless of amount, is submitted to the
Governance and Compensation Committee in advance for review and approval. All existing related
party transactions are reviewed at least annually by the Governance and Compensation Committee. All
related party transactions are reviewed by the companys general counsel to determine the
appropriateness of each related party transaction. The Committee may, at its discretion, consult
with outside legal counsel.
No related party transaction may be approved by the Committee if such transaction, regardless of
its benefit to the company, would violate the companys written code of business conduct, its
written financial integrity and compliance program and/or its statement of corporate governance
principles.
Any director or officer with an interest in a related party transaction is expected to recluse
himself from considering the matter and voting upon it. In all cases, a director or officer with an
interest in a related party transaction may not attempt to influence company personnel in making
any decision with respect to the transaction.
Executive Sessions of Independent Directors
The companys independent directors meet in executive session without management or non-independent
directors present. Currently, Gary A. Siconolfi presides at all executive sessions of the
independent directors.
Committees of the Board
The Audit Committee
Number of Members: 3
Members:
Daniel R. Bickel (Chair)
Herbert H. Dobbs
Gary A. Siconolfi
22
Number of Meetings in 2008: 4
Functions:
The primary function of the Audit Committee as stated in its charter is to assist the board of
directors in fulfilling its oversight responsibilities relating to monitoring the quality,
reliability and integrity of the companys external financial reporting process, the adequacy of
the companys internal controls particularly with respect to the companys compliance with legal
and regulatory requirements and corporate policy, and the independence and performance of the
companys registered public accounting firm who is ultimately accountable and must report directly
to the Audit Committee. More specifically, the Audit Committee is directly responsible for:
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the appointment, compensation, retention and oversight of the work of
the independent, registered public accounting firm engaged (including the resolution
of disagreements between management and the auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or related work or
performing other audit, review or attest services;
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the pre-approval of all auditing and legally permissible non-auditing
services to be performed by the companys independent, registered public accounting
firm;
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the disclosure by the company of all pre-approved non-audit services
in periodic reports filed by the company with the Securities and Exchange
Commission;
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the disclosure by the company of the number and name(s) of each Audit
Committee member who is an audit committee financial expert as defined by the
charter in accordance with rules promulgated by the Securities and Exchange
Commission;
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the establishment of internal procedures for complaints concerning the
companys accounting, internal accounting controls or auditing matters;
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the review of internal controls, accounting practices, and financial
reporting, including the results of the annual audit and the review of the interim
financial statements with management and the independent, registered public
accounting firm;
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the engagement of independent counsel and advisors as it determines
necessary to carry out its duties and the funding therefore.
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23
All members of the Audit Committee are independent as independence is defined in Rule
4200(a)(15)
of the National Association of Securities Dealers, Inc. listing standards and as defined by Rule
10A-
3(b)(1)(ii)
promulgated by the Securities and Exchange Commission. Daniel R. Bickel has been
appointed the Audit Committees financial expert as defined by the Audit Committees charter in
accordance with rules promulgated by the Securities and Exchange Commission.
The Nominating Committee
Number of Members: 3
Members:
Joseph B. Rizzo (Chair)
Daniel R. Bickel
Gary A. Siconolfi
Number of Meetings in 2008: 2
Functions:
As specified in its charter, the purpose of the Nominating Committee is to identify, consider and
recommend qualified individuals to the Board for election as directors, including the slate of
directors that the board proposes for election by shareholders at the annual meeting. The charter
sets forth the following policy and procedures with respect to the consideration of any director
candidates recommended by security holders:
Shareholders wishing to directly nominate candidates for election to the board of directors
at an annual meeting must do so by giving notice in writing to the chairman of the
Nominating Committee, Torvec, Inc., Mount Read Industrial Facility, 1999 Mount Read Blvd.,
Rochester, New York 14615. The notice with respect to any annual meeting must be delivered
to the chairman not less than 120 days prior to the first anniversary of the preceding
years annual meeting. The notice shall set forth (a) the name and address of the
shareholder who intends to make the nomination; (b) the name, age, business address and
residence address of each nominee; (c) the principal occupation or employment of each
nominee; (d) the class and number of shares of Torvec securities which are beneficially owned by each nominee
and by the nominating shareholder; (e) any other information concerning the nominee that
must be disclosed in nominee and proxy solicitations pursuant to Regulation 14A of the
Securities Exchange Act of 1934; and (f) the executed consent of each nominee to serve as a
director of Torvec if elected
.
24
Nominations submitted in accordance with the foregoing procedure will be considered and voted upon
by the Nominating Committee. Any shareholder nominee recommended by the Committee and proposed by
the board for election at the next annual meeting of shareholders shall be included in the
companys proxy statement for such annual meeting.
The Nominating Committee charter also sets forth the qualifications and a specific description of
skills that members of the board of the company should possess, regardless of by whom nominated:
In recommending candidates, the Committee shall consider the candidates mix of skills,
experience with businesses and other organizations of comparable size, reputation,
background and time availability (in light of anticipated needs), the interplay of the
candidates experience with the experience of other board members, the extent to which the
candidate would be a desirable addition to the board and any committees of the board and any
other factors the Committee deems appropriate. At a minimum, the Committee shall address the
following skill sets in evaluating director candidates: accounting or finance, business or
management experience, industry knowledge, customer base experience or perspective,
international marketing and business experience, strategic planning and leadership
experience.
Directors should possess the highest personal and professional ethics, integrity and values,
and be committed to representing the long-term interest of the shareholders. They must also
have an inquisitive and objective perspective, practical wisdom and mature judgment. The
board should represent diverse experience at policy making levels in business, government,
education and technology, and in areas that are relevant to the companys worldwide
activities.
Directors must be willing to devote sufficient time to carrying out their duties and
responsibilities effectively, and should be committed to serve on the board for an extended
period of time. Directors should consider offering their resignation in the event that
significant change in their personal circumstances, including their health, family
responsibilities, or a change in their principal job responsibilities, would preclude them
from devoting sufficient time to carrying out their responsibilities effectively.
The board does not believe that arbitrary term limits on director service are appropriate,
nor does it believe that directors should expect to be renominated automatically. The
contribution of each member as a member of a committee or the
board shall be evaluated each year by the Committee before his renomination is recommended
to the board.
25
Each of member of the Nominating Committee is an independent director as defined by Rule
10A-
3(b)(1)(ii)
promulgated by the Securities and Exchange Commission and as defined by Rule
4
200(a)(15)
of the National Association of Securities Dealers, Inc.
The Governance and Compensation Committee
Number of Members: 3
Members:
Gary A. Siconolfi (Chair)
Daniel R. Bickel
Joseph B. Rizzo
Number of Meetings: 2
Functions:
The purpose of the Governance and Compensation Committee is to regularly monitor the effectiveness
of managements policies and decisions including the execution of the companys strategies in order
to insure that the company represents the shareholders interests, including optimizing long term
as well as short term financial returns. The Committee develops and recommends to the board
corporate governance principles and guidelines and reviews the charter and composition of each
committee of the board and makes recommendations to the board for the adoption of or revisions to
committee charters, the creation of additional committees or the elimination of committees.
26
The Committee also:
(1) establishes and reviews the overall executive compensation philosophy and strategy of the
company and oversees the companys various compensation programs and plans.
(
2) reviews and makes recommendations to the board of directors on employment and business
consultants compensation policies, forms and levels of annual compensation, including specifically,
the performance and level of annual compensation of the executive officers and top management
personnel of the company;
(3) specifically reviews the annual compensation of the chief executive officer in the light of
established goals and objectives and based upon such evaluation, makes specific recommendations to
the board regarding such compensation;
(
4) reviews and makes recommendations to the board on the operation, performance and administration
of the companys employee benefit plans, including the companys Business Consultants Stock Plan,
the Nonmanagement Directors Plan and Commercializing Event Plan.
All members of the Committee are independent within the meaning of Rule 10A-
3(b)(1)(ii)
and Rule
4
200(a)(15)
promulgated by the Securities and Exchange Commission and the National Association of
Securities Dealers, Inc. respectively.
The Executive Committee
Number of Members: 5
Members:
Gary A. Siconolfi (Chair)
Daniel R. Bickel
Herbert H. Dobbs
James Y. Gleasman
Keith E. Gleasman
Number of Meetings: 1
Functions
On July 8, 2005, the board of directors created an Executive Committee. The members of the
committee constitute a majority of the companys board, and is composed of 2 of the companys
founders who have guided the company from inception, a long-term advisor to the Gleasman family and
the company, especially on military matters (Dr. Dobbs), and an individual who was nominated and
elected for the express purpose of representing the interests of all of the companys shareholders,
including its minority shareholders (Mr. Siconolfi).
27
As permitted by section 712 of the New York Business Corporation Law and the companys Bylaws, the
Executive Committee has and may exercise all of the powers and authority of the board (including
but not limited to engaging such attorneys and advisors on terms determined by the Executive
Committee, including the payment of retainers, fees and expenses of such advisors, with such
reasonable retainers, fees and expenses of such advisors to be paid by the company), provided,
however, that the Executive Committee does not have the authority to:
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(i)
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submit matters requiring shareholder approval under the Business
Corporation Law ;
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(ii)
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fill vacancies in the board of directors or in any committee;
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(iii)
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fix compensation of the directors for serving on the board of
directors or on any committee;
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(iv)
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amend or repeal the companys Bylaws; or
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(v)
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amend or repeal any resolution of the board which by its terms is not
amenable or repealable
.
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COMMITTEE REPORTS
Audit Committee Report
The Audit Committee operates under a written charter adopted by the board of directors on April 17,
2000 and amended on January 15, 2003. A copy of the written charter may be found on the companys
website,
www.torvec.com
. During 2008, the members of the Audit Committee were Daniel R. Bickel,
chairman, Herbert H. Dobbs and Gary A. Siconolfi. All of these persons meet the independence
standards contained in the listing rules of the National Association of Securities Dealers, Inc.,
rules promulgated by the Securities and Exchange Commission and the companys corporate governance
principles.
The Audit Committee is directly responsible for the appointment, compensation and oversight of the
work of the independent, registered public accounting firm employed by the company (including
resolution of any disagreements between management and the auditor regarding financial reporting)
to prepare and issue an audit report or relative work with respect to the companys financial
statements.
The Audit Committee has the responsibility to preapprove all audit services and non-audit services
to be performed by the companys registered accounting firm.
28
In carrying out its responsibilities, the Audit Committee requires the companys independent,
registered public accounting firm to timely of report to it:
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all critical accounting policies and practices to be used in any audit
of the companys financial statements;
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all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management, the ramifications of the use of such alternative
disclosures and treatments and the treatment preferred by the
companys independent, registered public accounting firm; and
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other material written communications between the independent,
registered public accounting firm and management, such as any
management letter or schedule of unadjusted differences.
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Management has represented to the Audit Committee that our financial statements were prepared in
accordance with generally accepted accounting principles. The Audit Committee met, reviewed and
discussed the audited financial statements contained in the companys Annual Report on Form 10-K
for its year ended December 31, 2007 with management and separately, with the companys
independent, registered public accounting firm. The Audit Committee discussed with the companys
independent, registered public accounting firm the matters required to be discussed by Statement on
Auditing Standards Nos. 61 and 90 (Communication with Audit Committees) relating to the conduct of
the audit.
The Audit Committee has received the written disclosures and accompanying letter from the companys
independent, registered public accounting firm required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees) disclosing to the Audit Committee all
relationships between such firm and the company that may reasonably bear on independence and
confirming the such firms independence. The Audit Committee discussed the issue of independence
with the companys independent registered accounting firm and received confirmation of such
discussion from such firm.
Based upon its review of the audited financial statements and the discussions referred to in this
report, the Audit Committee recommended to the board of directors that the audited financial
statements of the company for its fiscal year ended December 31, 2007 be included in the companys
Annual Report on
Form 10-K
for the year ended December 31, 2007 for filing with the Securities and
Exchange Commission.
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Daniel R. Bickel, Chairman
Herbert H. Dobbs
Gary A. Siconolfi
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29
Compensation Committee Report
The Governance and Compensation Committee has reviewed and discussed with management the
Compensation Discussion and Analysis (CD & A). Based upon this review and discussion, the Committee
recommended to the board of directors that the CD&A be included in this proxy statement.
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Gary A. Siconolfi, Chairman
Daniel R. Bickel
Herbert H. Dobbs
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Compensation
Committee Interlocks and Insider Participation
The Governance and Compensation Committee is composed of Gary A. Siconolfi, Daniel R. Bickel and
Herbert H. Dobbs. None of these persons is a current or former employee of the company. Herbert H.
Dobbs currently serves as a director and as the companys secretary and Gary A. Siconolfi is
currently chairman of the board of directors and a former secretary. None of these individuals
serves as a member of the board of directors or as an executive officer of any company which
provides services to the company.
SHAREHOLDER COMMUNICATIONS
We encourage all shareholders to communicate with management and with our directors, including our
independent directors. Any shareholder wishing to communicate directly with management should
e-mail or address regular mail to:
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Officer
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Mailing Address
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E-mail
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James Y. Gleasman
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Torvec, Inc.
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jgleasman@torvec.com
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Chief Executive Officer,
Interim Chief Financial Officer
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Mt. Read Industrial Facility
1999 Mt. Read Blvd.
Rochester, New York 14615
|
|
|
|
|
|
|
|
Keith E. Gleasman
President
|
|
Torvec, Inc.
Mt. Read Industrial Facility
1999 Mt. Read Blvd.
Rochester, New York 14615
|
|
kgleasman@torvec.com
|
30
Any shareholder wishing to communicate directly with any of our independent directors should e-mail
him as follows:
|
|
|
Herbert H. Dobbs
|
|
dr.hh.dobbs@earthlink.net
|
|
|
|
Joseph Rizzo
|
|
josephrizzo@gallolaw.com
|
|
|
|
Daniel R. Bickel
|
|
dbickel@frontiernet.net
|
|
|
|
Gary A. Siconolfi
|
|
gary1015@rochester.rr.com
|
|
|
|
Asher J. Flaum
|
|
aflaum@flaummgt.com
|
|
|
|
Regular mail may be addressed to:
|
|
Torvec Independent Directors
|
|
|
c/o Torvec, Inc.
|
|
|
Mt. Read Industrial Facility
|
|
|
1999 Mt. Read Blvd.
|
|
|
Rochester, New York 14615
|
|
|
|
|
|
Attention: Gary A. Siconolfi
|
COMPENSATION DISCUSSION AND ANALYSIS
The company is a development stage company which means that the company has not generated
significant revenues on an ongoing basis. Since its inception in September, 1996, the companys
principal business activity has consisted of research, development and patenting its automotive
technologies worldwide. Since inception through December 1, 2008, the company has relied primarily
on monies generated by the sale of its common and Preferred equity to sustain its business. During
2007 and 2008, the company generated limited revenues from the sale of certain of its products. The
board of directors has adopted and has consistently followed a policy to expend the proceeds of
equity sales and any revenues generated by the sale of its products directly on the costs and expenses associated
with the actual development and manufacture of its products (including the development of
prototypes, pre-production and production-ready models, and the leasing of research and testing
facilities).
31
Current Compensation Philosophy
In the light of the above described facts and circumstances, the board has developed a current
compensation philosophy based upon the following elements:
|
|
compensation payable to the companys chief executive officer, interim chief financial officer
and president for services rendered is to be paid in cash but actual payment is to be deferred
until the company has the requisite cash to pay these officers. The determination of whether the
company has the requisite cash is to be made solely by the board of directors in the light of
approved budgets, existing and anticipated capital requirements and existing and estimated cash
flows. Unpaid amounts are accumulated and carry over from one year to the next. The rate of
compensation payable to each of these two officers is currently $300,000 and pursuant to the
deferral policy, no amount owing to each of such officers pursuant to this compensation plan has
actually been paid to them through December 1, 2008;
|
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|
|
current compensation payable for services rendered by individuals, including engineering,
business consulting, legal and patent services, as well as for services rendered by non-executive
management and the companys nonmanagement directors, is to be paid to the extent feasible pursuant
to the companys business consultants stock plan. The company has registered common shares
issuable under the plan so that nonaffiliates are able to sell such shares immediately and
affiliates are able to sell such shares without regard to the restricted stock provisions of Rule
144 promulgated by the Securities and Exchange Commission;
|
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|
|
the number of common shares to be issued in satisfaction of consultants invoices is to be
calculated as of the date of the invoice or, in the case of retainer agreements, on the date(s)
specified in the retainer agreement(s). With respect to calculating the number of shares to be
issued under the Nonmanagement Directors Plan and to the companys general counsel, the number of
shares is to be calculated based upon the closing price of the companys $.01 par value common
stock on the last trading day of each calendar quarter immediately preceding the date of payment;
|
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|
|
all of the policies described above were adopted by the board of directors upon the
recommendation of the Governance and Compensation Committee, a committee composed
of independent directors. The specific annual rates of current compensation payable to each of the
individuals is set by this committee and is commensurate with the level of current compensation
payable for the services rendered by persons in the capacities indicated in the greater
metropolitan Rochester, New York region.
|
32
Long-Term Compensation Philosophy
The core of the boards long-term compensation philosophy is based upon its realization that the
companys shareholders will be rewarded only by a business transaction involving the
commercialization of one or more of the companys automotive technologies. This means that the
company sells, licenses, enters into supply contracts, receives purchase orders and/or enters into
any other arrangement for any of the companys technologies in a manner designed to generate
revenue for the company. This can also mean that the company itself is acquired in a business
combination such that the companys shareholders will receive cash, the buyers stock or a
combination of cash and purchaser stock.
The board concluded that while directors, officers and key management personnel should be provided
with a long-term financial incentive to commercialize the companys technologies, such incentive
should be provided only upon a commercializing event which benefits the companys shareholders. The
board also concluded that such incentive should be directly proportional to the dollar amount of
gross revenue expected to be generated by the commercializing event.
To accomplish this goal, the board adopted a commercializing event plan designed to reward the
companys directors, executive officers and specified management and engineering personnel for the
successful completion of one or more commercializing events. Under the plan, business consultants
shares will be issued to participants in the plan if and only if a revenue-producing business
transaction is consummated.
The commercializing event plan (2007 Event Plan) provides as follows:
Participants
All directors, executive officers, management and engineering personnel engaged by the company.
Any other individual recommended by the Governance Committee and approved by the board of directors
from time
to time.
Effective Date of 2007 Event Plan
October 10, 2007
33
Salient Terms of the 2007 Event Plan
Upon the happening of any commercializing event, each of the directors, executive officers and
specified management personnel are entitled to share equally in 6% of the gross revenues derived or
to be derived from the transaction and/or transactions constituting a commercializing event. Upon
the happening of any commercializing event, each of the specified engineering consultants shall be
entitled to share equally in 2% of the gross revenues derived and/or to be derived from the
transaction and/or transactions constituting a commercializing event.
The amount payable to each individual who was a participant in the 2007 Event Plan as of the 2007
Event Plans effective date, October 10, 2007, shall be paid in business consulting shares of the
company at a rate of $3.00 per share, the closing price of the companys common stock on the OTCBB
on such date. This means, by way of illustration, that for each $1,000,000 or proportionate amount
thereof in gross revenue generated by a commercializing event, each individual who was a director,
officer or specified management participant as of October 10, 2007 shall be entitled to receive
2,222 business consulting shares ($1,000,000 multiplied by .06 divided by nine participants divided
by $3.00). Each specified engineering participant as of October 10, 2007 shall be entitled to
receive 1,667 business consulting shares ($1,000,000 multiplied by .02 divided by four participants
divided by $3.00).
Additional individuals may be added to the 2007 Event Plan from time to time, either at the 6%
management level or at the 2% engineering level. With respect to each additional individual,
however, the actual number of shares issuable as the result of any commercializing event shall be
calculated based upon the closing price of the companys common stock on the OTCBB (or if the
companys shares are listed on an exchange, including NASDAQ, on such exchange) on the date the
individual becomes a participant in the 2007 Event Plan. In no event, however, may the calculation
be based upon a rate which is less than $3.00 per share.
In order to actually receive payment under the 2007 Event Plan, each participant must be both a)
employed by, a consultant to or associated with Torvec and b) judged to be in good standing with
the company at the time of any and all such payments, all as determined by the board of directors
as of the date of the Boards authorization of payments to be made under the 2007 Event Plan.
For purposes of 2007 Event Plan, a commercializing event shall consist in any completed
transaction, or series of completed transactions, regardless of form, structure or size and/or
dollar amount by which the company and/or its shareholders derive gross revenue or are expected to
derive gross revenue under the terms of the transaction and/or the terms of any agreement or
working arrangement entered into by the company. For purposes of the 2007 Event Plan, payments to
be made to participants with respect to each given commercializing event shall be made in full upon
the finalization of the commercializing event even if the company is to be paid in installments or
some other type of
revenue-deferred
arrangement. Where payments are to be made pursuant to an arrangement, such as a license
or supply contract, where the aggregate consideration to be received by the company as the result
of the commercializing event is not stated, the aggregate dollar-value ascribed to the license,
supply contract or similar instrument based upon an estimate of the total dollars to be received
over the term of the instrument shall be utilized for purposes of fixing the gross revenues to be
derived from the commercializing event.
34
Participants in the 2007 Event Plan shall be entitled to receive payments regardless of the number
of commercializing events with respect to each individual piece of technology.
On March 28, 2008 the board of directors approved amendments to the 2007 Event Plan recommended by
the Governance and Compensation committee to clarify that:
1) for purposes of the good standing requirement, all participants are considered to be in good
standing unless a unanimous vote of the board of directors determines otherwise. In making this
determination, the board is required to consider whether a person has engaged in conduct which has
significantly harmed the company and to consider that any material violation of the companys Code
of Conduct shall constitute prima facie evidence that the company has been harmed;
2) participants shall be entitled to payment even though the participant is not actively engaged as
a consultant to or employee of the company if the reason for not being so engaged is due to death,
disability from accident, disease or similar circumstance beyond the participants control or is on
a leave of absence approved by an authorized officer;
3) the 2007 Event Plan shall terminate no earlier than October 10, 2017 but that subject to such
condition, the 2007 Event Plan may be terminated by the board of directors in its sole direction;
4) the benefits provided by the 2007 Event Plan may not be reduced during its term as to amount,
time, method, manner of payment and/or any other material condition;
5) distributions under the 2007 Event Plan shall be made on a commercializing event by
commercializing event basis;
6) if the entire company is acquired in a transaction where Torvecs common shareholders receive
shares issued by the acquiring company, the number of shares distributable to the participants in
the 2007 Event Plan shall be calculated based upon the greater of $3.00 or trading price of the
acquiring company on the date the acquisition is announced publically.
35
On February 25, 2008, the company issued an aggregate 3,648 business consultants shares to thirteen
participants in the 2007 Event Plan (304 shares to each of nine director, executive officer and
specified management participants and 228 shares to each of four specified engineer participants)
upon the completed sale of six constant velocity joints to a military contractor.
On April 30, 2008, the company issued an aggregate 5,581 business consultant shares to thirteen
participants in the 2007 Event Plan (465 shares to each of nine director, officer and specified
management participants and 349 shares to each of four specified engineer participants) upon
receipt of the first quarterly reimbursement from Ice Engineering, LLC. with respect to the
companys assignment of its ice technology license.
36
SUMMARY COMPENSATION TABLE FOR YEARS
ENDED DECEMBER 31, 2005, 2006 and 2007
37
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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Equity
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
Plan
|
|
Deferred
|
|
All
|
|
|
Name and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Compen-
|
|
Compensation
|
|
Other
|
|
|
Principal
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
sation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
Richard E.
Ottalagana, Chief
Executive
Officer(1)
|
|
|
05
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(3
(4
|
)
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip A. Fain,
Chief Executive
Officer, Chief
Financial
Officer(3)
|
|
|
05
|
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
(6
(7
|
)
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith E. Gleasman,
President(5)
|
|
|
05
06
07
|
|
|
$
$
$
|
0
0
0
|
|
|
$
$
$
|
0
0
0
|
|
|
$
$
$
|
0
0
0
|
|
|
$
$
$
|
0
0
0
|
|
|
$
$
$
|
0
0
0
|
|
|
$
$
$
|
0
0
0
|
|
|
$
$
$
|
0
0
0
|
|
|
$
$
$
|
0
0
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Y.
Gleasman,Chief
Executive Officer,
Interim Chief
Financial
Officer(6)
|
|
|
05
06
07
|
|
|
$
$
$
|
0
0
0
|
|
|
$
$
$
|
0
0
0
|
|
|
$
$
$
|
0
0
0
|
|
|
$
$
$
|
0
0
0
|
|
|
$
$
$
|
0
0
0
|
|
|
$
$
$
|
0
0
0
|
|
|
$
$
$
|
0
0
0
|
|
|
$
$
$
|
0
0
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel M. Bronsky,
Chief Accounting
Officer(7)
|
|
|
05
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
12,980
|
|
|
$
$
|
25,200
12,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard B.
Sullivan
General
Counsel(8)
|
|
|
06
07
|
|
|
$
$
|
0
0
|
|
|
$
$
|
0
0
|
|
|
$
$
|
0
0
|
|
|
$
$
|
0
0
|
|
|
$
$
|
0
0
|
|
|
$
$
|
0
0
|
|
|
$
$
|
129,000
144,000
|
|
|
$
$
|
129,000
144,000
|
|
38
(1)
|
|
Richard E. Ottalagana served as chief executive officer from June 15, 2004 through March 3,
2005.
|
|
(2)
|
|
Mr. Ottalagana was compensated by the issuance of common shares and common stock purchase
warrants to CXO on the GO, LLC and CXO on the GO of Delaware, LLC, management consulting firms of
which he was a member. During fiscal 2005, the firms received 140,000 warrants and 90,705 common
shares and the company recorded a charge of approximately $444,000 for these warrants.
|
|
(3)
|
|
Philip A. Fain served as chief financial officer from June 15, 2004 through August 19, 2005 and
as chief executive officer from March 3, 2005 to August 19, 2005.
|
|
(4)
|
|
As a member of CXO on the GO, LLC and later, as a member of CXO on the GO of Delaware, LLC, Mr.
Fain was compensated during 2005 through the issuance of common shares and warrants to the
management consulting firm in the same manner and amount as stated for Mr. Ottalagana..
|
|
(5)
|
|
Mr. Keith E. Gleasman served as president during the years ended December 31, 2005, 2006 and
2007. For these years, Mr. Gleasman was not paid any compensation by the company in accordance
with their mutual agreement of January 1, 2004.
|
|
(6)
|
|
Mr. James Y. Gleasman became chief executive officer and interim chief financial officer on
August 19, 2006. Prior to assuming these positions, Mr. Gleasman served as chief strategist for the
company. For the years ended December 31, 2005 2006 and 2007, Mr. Gleasman was not paid any
compensation by the company in accordance with their mutual agreement of January 1, 2004.
|
|
(7)
|
|
Mr. Bronsky served as the chief accounting officer of the company until June, 2005.
|
|
(8)
|
|
Mr. Sullivan became general counsel to the company on December 16, 2005. He is paid quarterly
in business consultants stock based upon the closing price of the companys common stock as of the
last day of the previous quarter.
|
39
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Award
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
or Payout
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
of
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Shares
|
|
|
Shares,
|
|
|
Shares,
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
or Units
|
|
|
Units or
|
|
|
Units or
|
|
|
|
Securities
|
|
|
Securities
|
|
|
of Securities
|
|
|
|
|
|
|
|
|
|
|
or Units
|
|
|
of Stock
|
|
|
Other
|
|
|
Other
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
That
|
|
|
Rights
|
|
|
Rights
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
|
That
|
|
|
Have
|
|
|
That
|
|
|
That have
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
Not
|
|
|
Have Not
|
|
|
Not
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
James Y. Gleasman
|
|
|
39,575
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
5.00
|
|
|
|
2013
|
(1)
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Keith E. Gleasman
|
|
|
31,818
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
5.00
|
|
|
|
2013
|
(2)
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Samuel M. Bronsky
|
|
|
100,000
|
(3)
|
|
|
0
|
|
|
|
0
|
|
|
$
|
5.00
|
|
|
|
2011
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Richard
B.
Sullivan
|
|
|
|
(4)
|
|
|
0
|
|
|
|
0
|
|
|
$
|
.01
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
|
(1)
|
|
39,575 common stock purchase options exercisable for ten years at $5.00 per common share
expire on December 21, 2013.
|
|
(2)
|
|
31,818 common stock purchase options exercisable for ten years at $5.00 per common share
expire on December 21, 2013.
|
|
(3)
|
|
Mr. Bronsky was awarded 100,000 common stock options exercisable for ten years at $5.00
per share in his capacity as chief accounting officer.
|
|
(4)
|
|
Mr. Sullivan was awarded 120,000 warrants in 2005 exercisable at $.01 per common share for
certain business consultant services rendered during that year prior to his becoming general
counsel of the company. He exercised 48,000 of these warrants during 2005 and 72,000 of these
warrants in 2006.
|
40
DIRECTOR COMPENSATION FOR THE YEAR ENDED DECEMBER 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
and
|
|
|
|
|
|
|
|
|
|
Earned
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
or Paid
|
|
|
Stock
|
|
|
Option
|
|
|
Plan
|
|
|
Deferred
|
|
|
All Other
|
|
|
|
|
|
|
in Cash
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Earnings
|
|
|
($)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
Daniel R. Bickel (1)
|
|
$
|
0
|
|
|
|
37,665
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
37,665
|
|
Herbert H. Dobbs
(2)
|
|
$
|
0
|
|
|
|
25,514
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25,514
|
|
Joseph B. Rizzo
(3)
|
|
$
|
0
|
|
|
|
30,679
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
30,679
|
|
Gary A. Siconolfi
(4)
|
|
$
|
0
|
|
|
|
64,850
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
64,850
|
|
David M.
Flaum
(5)
|
|
$
|
0
|
|
|
|
25,514
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25,514
|
|
|
|
|
(1)
|
|
Daniel R. Bickel was paid $25,514 in business consultants shares for services rendered during
2007 as a director and $12,151 in business consultants shares for services rendered in 2007 as
chairman of the companys audit committee.
|
|
(2)
|
|
Herbert H. Dobbs was paid $25,514 in business consultants shares for services rendered during
2007 as a director.
|
41
|
|
|
(3)
|
|
Joseph B. Rizzo was paid $25,514 in business consultants shares for services rendered during
2007 as a director and $5,165 in business consultants shares for services rendered in 2007 as
chairman of the companys nominating committee.
|
|
(4)
|
|
Gary A. Siconolfi was paid $25,514 in business consultants shares for services rendered during
2007 as a director and $39,336 in business consultants shares for services rendered during 2007 as
chairman of the board, chairman of the companys executive committee and chairman of the company
governance and compensation committee.
|
|
(5)
|
|
David M. Flaum was paid $25,514 in business consultants shares for services rendered during
2007 as a director.
|
DISCUSSION OF DIRECTOR COMPENSATION
1) Participation in the Nonmanagement Directors Plan
At its meeting held on October 19, 2004, the board adopted a Nonmanagement Directors Plan for
directors who are not employees, consultants or part of management for services exclusively
rendered by them as directors, including services rendered as chairman of the companys standing
committees.
As originally adopted and as in force through July 1, 2006, the plan provided that nonmanagement
directors who have been board members for at least one full year and have attended, in person or by
telephonic conference as permitted by our by-laws, at least 75% of both board meetings and meetings
of committees of which they are a member were entitled to receive on a yearly basis, warrants to
purchase up to 12,000 common shares at a purchase price of $.01 per share. The warrants were issued
quarterly on a pro rata basis and were issued contingently in anticipation of a directors
satisfactory completion of one year of service and/or 75% of board/committee meetings. The warrant
term was for a period of ten years. In addition, the chairman of the audit committee was entitled
to earn as payment for services on such committee 5,000 warrants per year, payable quarterly
.
42
On October 13, 2006, the board modified the plan to provide that, effective for periods commencing
on and after July 1, 2006, a stipulated sum per annum should be paid to each nonmanagement director
solely for his service as a director, with the amount of such payment determined by the board from
time to time, based upon such considerations as risk, number of meetings, monitoring and reviewing
company compliance with the
Sarbanes-Oxley Act as well as all other applicable local, state, national and international rules
and regulations, development and implementation of policies, including establishing and reviewing
executive compensation, longevity, 24-hour a day availability, as well as oversight of managements
pursuit of one or more commercializing events for the companys technologies. Until adjusted in
accordance with such factors, the board determined that each nonmanagement director shall be paid
$25,200 per annum exclusively for board and committee service, payable pro rata on a quarterly
basis, provided each such director shall have attended, either in person or via telephonic
conference, 75% of the meetings of the board and of the committee(s) of which he is a member, such
attendance measured on an annual basis. Such amount shall be paid either in cash, business
consultants stock or a combination of both and is payable to a newly elected director on a
prospective basis upon his election as a director.
At the same meeting, the board also determined that a stipulated sum per annum should be paid to
those nonmanagement directors serving as chairman of the board, chairman of the executive
committee, chairman of the audit committee, chairman of the nominating committee and chairman of
the compensation and governance committee, exclusively for service rendered in such capacities.
Until further adjusted, the board determined that the chairman of the board shall be paid $7,500
per annum, the chairman of the executive committee shall be paid $12,000 per annum, the chairman of
the audit committee shall be paid $12,000 per annum, the chairman of the nominating committee shall
be paid $5,100 per annum and the chairman of the governance and compensation committee shall be
paid $5,100 per annum. Such amounts are to be paid pro rata on a quarterly basis with payments made
in cash, business consultants stock or a combination of both and is payable to a newly elected
chairman on a prospective basis upon his election as chairman. With respect to amounts payable to
chairmen for calendar 2006, such amounts shall be payable retroactively to January 1, 2006(except
for the audit committee chairman who has received payment for the six month period ended June 30,
2006).
Each unexercised, nonmanagement director warrant outstanding as of October 13, 2006 was amended to
provide that such warrants may be exercised only upon the happening of the earlier to occur of the
following events: death or disability of the director, termination of his service as a director,
change in control of the company or the sale, license or other commercial transfer of a
substantial amount of the companys assets, all of such terms to be interpreted in accordance with
the provisions of section 409A of the Internal Revenue Code of 1986 and the regulations promulgated
thereunder.
On October 10, 2007, the governance and compensation committee recommended and on October 31, 2007,
the Board of Directors approved amendments to the Nonmanagement Directors Plan, effective for the
quarter commencing July 1, 2007 and for all subsequent quarters commencing thereafter.
43
The first amendment provided for an across the board increase of 5% per annum to the amounts
payable for board service and an additional across the board increase of 5% per annum for service
as chairman of the committees enumerated. Thus, under the first amendment, each director would
receive $26,460 for board and committee service per
annum. The chairman of the audit committee would receive an additional $13,125 per annum and the
chairman of the nominating committee would receive an additional $5,355 per annum.
In recognition of the circumstance that the chairman of the board, chairman of the governance and
compensation committee and the chairman of the executive committee is the same individual, the
value of such service performed by such individual and the fact that the time expended by such
individual in service to the company in each of these positions has expanded greatly as the result
of the Sarbanes-Oxley Act, the Board approved an increase in the fee payable to such person to
$110,000 per annum.
Daniel R. Bickel, Herbert H. Dobbs, David M. Flaum, Joseph B. Rizzo and Gary A. Siconolfi were each
eligible to participate in the Nonmanagement Directors Plan in
2007.
Keith E. Gleasman and James Y. Gleasman were not eligible to participate since theare executive
officers of the company.
2) Participation in 1998 Stock Option Plan
On December 1, 1997, the companys board of directors adopted the companys 1998 Stock Option Plan
pursuant to which officers, directors, key employees and/or consultants of the company may be
granted incentive stock options and/or non-qualified stock options to purchase up to an aggregate
of 2,000,000 shares of the companys common stock. On May 27, 1998, the companys shareholders
approved the 1998 Stock Option Plan. On December 17, 1998, the company registered the shares
reserved for issuance under the 1998 Stock Option Plan under the Securities Act of 1933.
With respect to incentive stock options, the Stock Option Plan provided that the exercise price of
each such option must be at least equal to 100% of the fair market value of the common stock on the
date that such option is granted (110% of fair market value in the case of shareholders who, at the
time the option is granted, own more than 10% of the total outstanding common stock), and required
that all such options have an expiration date not later than the date which is one day before the
tenth anniversary of the date of the grant of such options (or the fifth anniversary of the date of
grant in the case of 10% shareholders). However, in the event that the option holder ceases to be
an employee of the company, such option holders incentive options immediately terminate. Pursuant
to the provisions of the Stock Option Plan, the aggregate fair market value, determined as of the
date(s) of grant, for which incentive stock options are first exercisable by an option holder
during any one calendar year cannot exceed $100,000.
44
With respect to non-qualified stock options, the Stock Option permitted the exercise price to be
less than the fair market value of the common stock on the date the option is granted and permitted
Board discretion with respect to the establishment of the terms of such options. Unless the Board
otherwise determined, in the event that the option holder ceases to be an employee of the company,
such option holders non-qualified options immediately
terminate.
As of December 31, 2007, current and former officers and directors held 491,848 common stock
options, exercisable until 2013 at $5.00 per share.
No options were granted under the Nonmanagement Directors Plan to any director during the year
ended December 31, 2007.
The Stock Option Plan terminated on May 27, 2008. Consequently, no new options will be granted
under the Stock Option Plan although outstanding options remain exercisable in accordance with
their terms.
45
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal No. 2 on the Proxy Card)
The Audit Committee has appointed Eisner LLP as the independent registered public accounting firm
responsible for the independent audit of our financial statements for the year ended December 31,
2008. This appointment is subject to shareholder ratification.
Torvecs management is responsible for the companys internal controls and the financial reporting
process. The independent registered public accounting firm (Eisner LLP) is responsible for
performing an independent audit of the companys consolidated financial statements and issuing an
opinion on the conformity of those audited financial statements with United States generally
accepted accounting principles.
Audit Fees
Eisner LLP served as the companys independent registered public accounting firm for the years
ended December 31, 2006 and 2007. The aggregate amount the company paid for professional services
rendered by Eisner LLP for the audit of the companys annual consolidated financial statements
included in the companys Annual Report on
Form 10-K
, for the review of the companys consolidated
financial statements included in the companys Quarterly Reports on
Form 10-Q
, and for services
normally provided in connection with statutory and regulatory filings or engagements for each of
those years was:
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
$
|
116,499
|
|
|
$
|
170,500
|
|
46
Audit-Related Fees
The aggregate amount the company paid for professional services rendered by Eisner LLP for audit
related services, including but not limited to accounting consultations, assistance with
interpretation of financial accounting and reporting standards, for the years ended December 31,
2006 and 2007 was:
Tax Fees
The company did not engage Eisner LLP for any tax services for the years ended December 31, 2006
and 2007.
All Other Fees
The company did not engage Eisner LLP for any other services for the years ended December 31, 2006
and 2007.
Total
Fees
The company paid Eisner LLP a total of $116,499 for the year ended December 31, 2007 in fees, up $
54,001 from the total paid for 2006.
47
Pre-Approval Policies and Procedures
Article II of our Audit Committee charter, as amended, specifically provides that the Audit
Committee must pre-approve all auditing and legally permissible non-auditing services to be
performed by the companys registered public accounting firm. In accordance with such mandate the
Audit Committee has established a set of procedures governing the pre-approval process. Under the
procedure, for each fiscal year, the Committee first shall determine the general nature and scope
of the audit, audit-related, tax and other legally permissible non-audit services to be performed
by the companys registered accounting firm. Prior to the performance of any services, the
Committee shall require such firm to submit to the Committee one or more engagement letter(s)
delineating specific audit, audit-related, tax and other legally permissible non-audit services to
be rendered (together with a schedule of fees with respect to each of such services). Upon receipt
of such
engagement letter(s), the Committee shall review and approve such engagement letter(s) in
advance of the performance of any such services, including the specific advance approval of fees in
connection with each of such services. Upon approval and execution of each of such
engagement letter(s) by the Committee, the registered public accounting firm shall perform such
pre-approved services in accordance with the terms and conditions of each engagement letter and
shall not engage in any other services unless each of said services, if any, shall have been
specifically approved (including the specific approval of all fees associated therewith) by the
Audit Committee in advance of the rendering any such service.
Vote Required
This proposal requires the affirmative vote of a majority of the common shares cast at the annual
meeting, whether in person or by proxy.
Recommendation of the Board:
The Board of Directors recommends a vote FOR the ratification of Eisner LLP as the companys
independent registered public accounting firm for the year ended December 31, 2008.
48
STOCK OWNERSHIP BY DIRECTORS,
OFFICERS AND 5 PERCENT OWNERS
The following table shows how much Torvec common stock is owned by each of our directors, nominees,
named executive officers and by persons who have told us they own at least 5% of our common stock,
all calculated as of December 1, 2008.
The percentages set forth in the table are based upon the number of common shares outstanding as of
December 1, 2008.
The number of common shares owned by each person reflects his or her beneficial ownership of our
common stock, meaning the number includes common shares which may be acquired by that person by the
exercise of options and/or warrants on or within 60 days after December 1, 2008. The number also
includes common shares owned by each person indirectly, such as through a trust.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
Percent
|
|
Name of
|
|
of
|
|
|
Common Stock
|
|
Beneficial Owner
|
|
Beneficial Ownership
|
|
|
Owned
|
|
|
|
|
|
|
|
|
|
|
Margaret F. Gleasman
|
|
|
2,790,016
|
(1)
|
|
|
8. 51
|
%
|
|
|
|
(1)
|
|
Includes 95,455 shares which may be purchased through
the exercise of ten year options granted on January 5,
2004 exercisable at $5.00 per share.
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Percent
|
|
Name of
|
|
|
|
Shares
|
|
|
of Shares
|
|
Beneficial Owner
|
|
Position
|
|
Owned
|
|
|
Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary A. Siconolfi
|
|
Chairman of Board
|
|
|
387,924
|
(1)
|
|
|
1.12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
James Y. Gleasman
|
|
Chief Executive Officer, Interim
Chief Financial Officer, Director
|
|
|
5,883,388
|
(2)
|
|
|
17.97
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Keith E. Gleasman
|
|
President, Torvec, Inc.; Director
|
|
|
9,326,879
|
(3)
|
|
|
28.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Herbert H. Dobbs
|
|
Director
|
|
|
374,760
|
|
|
|
1.15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Daniel R. Bickel
|
|
Director
|
|
|
102,492
|
(4)
|
|
Less than 1%
|
|
|
|
|
|
|
|
|
|
|
|
Joseph B. Rizzo
|
|
Director
|
|
|
7,819
|
|
|
Less than 1%
|
|
|
|
|
|
|
|
|
|
|
|
Asher J. Flaum
|
|
Director
|
|
|
421,502
|
(5)
|
|
|
1.27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
All Directors as a Group
|
|
|
|
|
13,704,764
|
(6)
|
|
|
41.13
|
%
|
|
|
|
(1)
|
|
Includes 100,000 shares which may be purchased through the exercise of a ten
year option granted on October 15, 2003, exercisable at $5.00 per share.
|
|
(2)
|
|
Includes 39, 575 shares which may be purchased through the exercise of ten year
options granted on January 5, 2004, exercisable at $5.00 per share. Includes
1,400,000 shares held by the Vernon E. Gleasman Grandchildrens Trust and
1,400,000 shares held by the Margaret F. Gleasman Grandchildrens Trust of
which Mr. Gleasman is co-trustee.
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50
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(3)
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Includes 31,818 shares which may be purchased through the exercise of ten year
options granted on December 22, 2003, exercisable at $5.00 per share. Includes
30,000 shares owned by Mr. Gleasmans son. Includes 1,400,000 shares held by
the Vernon E. Gleasman Grandchildrens Trust and 1,400,000 shares held by the
Margaret F. Gleasmans Grandchildrens Trust of which Mr. Gleasman is
co-trustee. Includes 1,666,666 shares held by the James Y. Gleasman Childrens
Trust of which Mr. Gleasman is co-trustee.
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(4)
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Includes 25,000 shares which may be purchased through exercising a ten year
option granted on October 15, 2003, exercisable at $5.00 per share. Includes
29,750 warrants issued under the Nonmanagement Directors Plan.
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(5)
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Securities are owned directly by a company of which Mr. Flaum is a principal
and includes 400,000 common stock purchase warrants issued on August 18, 2006,
exercisable for ten years at $3.27 per share.
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(6)
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Includes an aggregate 196,393 shares which may be purchased through the
exercise of options all of which are exercisable at $5.00 per share, 1,400,000
shares held by the Vernon E. Gleasman Grandchildrens Trust, 1,400,000 shares
held by the Margaret F. Gleasman Grandchildrens Trust and 1,666,666 held by
the James Y. Gleasman Childrens Trust. The 2,800,000 shares owned by Vernon
and Margaret Gleasmans Grandchildrens Trusts are counted only once for this
calculation. Includes 29,750 warrants issued under the Nonmanagement Directors
Plan. Includes 30,000 shares owned by Keith E. Gleasmans sons. Includes
400,000 common stock purchase warrants exercisable for ten years at $3.27 per
share.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section
16(a)
of the Securities Exchange Act of 1934 requires our directors, our executive officers
and persons who own more than 10% of our common stock to file initial reports of ownership (Form 3)
and reports of changes in ownership of our common stock (Forms 4 and 5) with the Securities and
Exchange Commission. These persons are required by SEC regulations to furnish us with copies of all
section
16(a)
reports they file.
Based upon company records and other information, we believe that for the year ended December 31,
2007 and for the period January 1, 2008 through December 1, 2008, all our directors and executive
officers complied with all applicable filing requirements.
51
Shareholders Proposals for 2009
Common shareholders may present matters for consideration at our next annual meeting either by
having the matter included in the companys own Proxy Statement and listed on its Proxy Card or by
conducting his or her own proxy solicitation.
To have your proposal included in our Proxy Statement and listed on our Proxy Card for the 2009
annual meeting, you must submit your proposal to the company before August 9, 2009 in writing to
Herbert H. Dobbs, Secretary, Torvec, Inc., Mount Read Industrial Facility, 1999 Mount Read Blvd.,
Rochester, New York 14615. You may submit a proposal only if you have continuously owned at least
$2,000 worth or 1% in market value of the companys common stock for at least 1 year before you
submit your proposal to the company, and you must continue to hold this level of common security
ownership in our company through the 2009 annual meeting of shareholders.
If you decide to conduct your own proxy solicitation, you must provide the company with written
notice of your intent to present your proposal at the 2009 annual meeting, and the written notice
must be received by the company before November 2, 2009. If you submit a proposal for the
2009 annual meeting after November 2, 2009, management may or may not in its sole discretion,
present the proposal at the annual meeting, and the proxies for the 2009 annual meeting will confer
discretion on management proxy holders to vote against your proposal
.
Annual Report
The Annual Report (
Form 10-K
) for 2007, including the companys consolidated financial statements,
is being mailed to you together with this proxy statement.
Multiple Shareholders Sharing the Same Address
If you and other residents at your mailing address own shares of common stock in street name, your
broker or bank may have sent you a notice that your household will receive only one annual report
and proxy statement. This practice is known as householding and is designed to reduce our
printing and postage costs. However, if any shareholder residing at such an address wishes to
receive a separate annual report or proxy statement, he or she may telephone James Y. Gleasman, c/o
Investor Relations at 585-254-1100 or write us at Torvec, Inc., c/o Investor Relations, Mt. Read
Industrial Facility, 1999 Mt. Read Blvd., Rochester, New York 14615.
52
The notice of the annual meeting of shareholders, this proxy statement and accompanying proxy card
has been authorized by order of the board of directors.
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December 1, 2008
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/s/ HERBERT H. DOBBS
Herbert H. Dobbs, Secretary
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53
Torvec, Inc.
VOTE BY INTERNET OR TELEPHONE
QUICK * * * EASY * * *
IMMEDIATE
As a shareholder of Torvec, Inc., you have the option of voting your shares electronically through
the Internet or on the telephone, eliminating the need to return the proxy card. Your electronic
vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed,
dated and returned the proxy card. Votes submitted electronically over the Internet or by telephone
must be received by 7:00 p.m., Eastern Time, on January 28, 2009.
Vote Your Proxy on the Internet:
Go to www.continentalstock.com
Have your proxy card available when
you access the above website. Follow
the prompts to vote yours hares.
Vote Your Proxy by mail:
Mark, sign, and date your proxy card,
then detach it, and return it in the
postage-paid envelope provided.
PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING ELECTRONICALLY
6
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
6
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PROXY
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Management Recommends a VOTE FOR
Items 1 and 2
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FOR ALL NOMINEES
LISTED BELOW
(EXCEPT AS MARKED
TO THE CONTRARY
BELOW)
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WITHHOLD AUTHORITY
TO VOTE FOR ALL
NOMINEES LISTED
BELOW
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1.
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ELECTION OF DIRECTORS:
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Election of the directors listed below to serve until the next annual meeting of shareholders
and until their successors are duly elected and
qualified.
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o
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o
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NOMINEES:
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01 Gary A. Siconolfi, 02 James Y. Gleasman,
03 Keith E. Gleasman, 04 Herbert H. Dobbs,
05 Daniel R. Bickel, 06 Asher J. Flaum and
07 Joseph B. Rizzo
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INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through his name on the list above.
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Please mark
your votes
like this
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x
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2.
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APPOINTMENT OF AUDITORS:
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FOR
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AGAINST
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ABSTAIN
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Ratification of the
appointment of Eisner
LLP by the Audit
Committee of the board
of directors as the
companys Independent
Registered Public
Accounting Firm for the
year ending December
31, 2008
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o
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o
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o
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This Proxy will be voted as specified. If no specification is made, this Proxy will be
voted IN FAVOR OF PROPOSALS 1 and 2
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Torvec, Inc.
Annual Meeting January 29, 2009
Number of Shares Voted
COMPANY ID:
PROXY NUMBER:
ACCOUNT NUMBER:
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Signature
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Signature
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Date
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,
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2008.
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Joint owners should each sign. Executors, trustees, guardians, corporate officers, and other
representatives should give title
6
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
6
PROXY
TORVEC, INC.
Mt. Read Industrial Facility
1999 Mt. Read Blvd.
Rochester, New York 14615
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 29, 2009
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Torvec, Inc. hereby appoints and constitutes James Y. Gleasman
and Keith E. Gleasman, and either of them, the proxy or proxies of the undersigned with full
power of substitution and revocation, for and in the name of the undersigned to attend the annual
meeting of shareholders of the company to be held at the Casa Larga Vineyards, 2287 Turk Hill Road,
Fairport, New York 14450, on Thursday, January 29, 2009, at 7:00 P.M., local time, and any and all
adjournments of said meeting, and to vote all shares of stock of
Torvec, Inc., registered in the name of the undersigned and entitled
to vote at said meeting upon the matters set forth on the reverse side.
(Continued, and to be marked, dated and signed, on the other side)
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Torvec, Inc.
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Mt. Read Industrial Facility
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1999 Mt. Read Blvd.
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Rochester, New York 14615
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Dear Shareholder,
The annual meeting of shareholders of the company to be held at the Casa Larga Vineyards, 2287
Turk Hill Road, Fairport, New York 14450, on Thursday, January 29, 2009, at 7:00 P.M., local time.
Proposals to be considered at the Annual Meeting:
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(1)
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ELECTION OF DIRECTORS: to elect seven Directors to serve until the 2010 annual
meeting of shareholders of the Company.
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(2)
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APPOINTMENT OF AUDITORS: Ratification of the appointment of Eisner LLP by the Audit
Committee of the board of directors as the companys Independent Registered Public
Accounting Firm.
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Management recommends a vote FOR Items 1 and 2.
*Shareholders are cordially invited to attend the Annual Meeting and vote in person.
You May Vote Your Proxy When You View The Material On The Internet. You Will Be Asked To
Follow The Prompts To Vote Your Shares.
Your electronic vote authorizes the named proxies to vote your shares in the same manner as if
you marked, signed, dated and returned the proxy card.
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Vote Your Proxy on the Internet:
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Go to www.continentalstock.com
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Have your proxy card available when
you access the above website. Follow
the prompts to vote your shares.
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COMPANY ID:
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PROXY NUMBER:
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The Proxy Materials are available for review at:
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ACCOUNT NUMBER:
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http://www.cstproxy.com/torvec/2008
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Torvec, Inc.
Mt. Read Industrial Facility
1999 Mt. Read Blvd.
Rochester, New York 14615
Important Notice Regarding the Availability Of Proxy Materials For the Shareholder Meeting to Be
Held On January 29, 2009
This communication presents only an overview of the more complete proxy materials that are
available to you on the Internet. We encourage you to access and review all of the
important information contained in the proxy materials before voting.
If you would like to receive a paper or e-mail copy of these documents,
you must request one
.
There is no charge for such documents to be mailed to you. Please make your request for a copy as
instructed below on or before
January 22, 2009
to facilitate a timely delivery.
The following Proxy Materials are available to you to review at:
http://www.cstproxy.com/torvec/2008
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the Companys Annual Report for the year ending December 31, 2007.
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-
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the Companys
2009 Proxy Statement (including all attachments thereto)
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-
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the Proxy Card.
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-
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any amendments to the foregoing materials that are required to be furnished to
stockholders.
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ACCESSING YOUR PROXY MATERIALS ON LINE
Have this notice available when you request a paper copy of the proxy materials or to vote your
proxy electronically. you must reference your company I.D., 9-digit proxy number and 10-digit
account number.
REQUESTING A PAPER COPY OF THE PROXY MATERIALS
By telephone please call 1-888-221-0690,
or
By logging on to http://www.cstproxy.com/torvec/2008
or
By email at: proxy@continentalstock.com
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