TRUSTCO BANK CORP NY
5 Sarnowski Drive, Glenville, New York 12302
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Shareholders Of TrustCo Bank Corp NY:
Notice is hereby given that the Annual Meeting of Shareholders of TrustCo Bank
Corp NY ("TrustCo"), a New York corporation, will be held at TrustCo's Trust
Building, 192 Erie Boulevard, Schenectady, New York 12305, on May 20, 2002, at
10:00~a.m. local time, for the purpose of voting upon the following matters:
1. Election of directors.
2. Ratification of the appointment of KPMG LLP as independent auditors for 2002.
3. Any other business that properly may be brought before the meeting or any
adjournment thereof.
By Order of the Board of Directors,
Henry C. Collins
Secretary
April 5, 2002
PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER YOU
PLAN TO ATTEND THE MEETING OR NOT. YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR
TO THE MEETING, OR AT THE MEETING.
TRUSTCO BANK CORP NY
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
May 20, 2002
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of TrustCo Bank Corp NY ("TrustCo"), a New York
corporation, of proxies to be voted at the Annual Meeting of Shareholders to be
held at 10:00~a.m. local time on Monday, May 20, 2002, at TrustCo's Trust
Building, 192 Erie Boulevard, Schenectady, New York 12305. This proxy statement
and the form of proxy were first mailed to shareholders on or about April~5,
2002. Any shareholder executing a proxy solicited hereby has the power to revoke
it by giving written notice to the Secretary of TrustCo at any time prior to the
exercise of the proxy.
TrustCo will solicit proxies primarily by mail, although proxies also may
be solicited by directors, officers, and employees of TrustCo and Trustco Bank,
National Association, Glenville, New York ("Trustco Bank"), a wholly-owned
subsidiary of TrustCo, personally or by telephone, but such persons will receive
no additional compensation for such services. TrustCo has also retained Regan &
Associates, Inc. to aid in the solicitation of proxies for a solicitation fee of
$4,500 plus expenses. The entire cost of this solicitation will be paid by
TrustCo.
Only shareholders of record of TrustCo's common stock at the close of
business on March 25, 2002 are entitled to notice of and to vote at the Annual
Meeting. Each shareholder of record on that date is entitled to one vote for
each share of TrustCo common stock held by them. Abstentions on properly
executed proxy cards will be counted for purposes of determining a quorum at the
meeting; however, shares not voted by brokers and other entities holding shares
on behalf of beneficial owners will not be so counted. Such abstentions and
broker non-votes will not be counted in calculating voting results on those
matters for which the shareholder has abstained or the broker has not voted. As
of March~1, 2002, there were 71,953,097 outstanding shares of TrustCo's common
stock.
Whole shares of common stock held for the account of shareholders
participating in TrustCo's Dividend Reinvestment and Stock Purchase Plan will be
voted in the same manner as those shareholders authorize their shares held of
record to be voted. If shareholders return a signed proxy card but fail to
instruct how the shares registered in their names shall be voted, the shares
held in their dividend reinvestment accounts will be voted "for" the election of
TrustCo's nominees and "for" the ratification of KPMG LLP as TrustCo's
independent auditor.
2
THE ANNUAL MEETING
A description of the items to be considered at the Annual Meeting and other
information is set forth below.
Item 1. Election of Directors
The first item to be acted upon at the Annual Meeting is the election of
three directors to serve on the TrustCo Board of Directors, each of whom shall
serve for a three-year term. The nominees for election as directors for terms
expiring at TrustCo's 2005 Annual Meeting are Robert T. Cushing, Richard J.
Murray, Jr., and William D. Powers.
TrustCo's Amended and Restated Certificate of Incorporation provides that
TrustCo's Board of Directors will consist of not less than seven nor more than
twenty members, with, under TrustCo's Bylaws, the total number of directors to
be fixed by resolution of the board or the shareholders. Currently, the number
of directors is fixed at ten.
TructCo's Certificate of Incorporation and Bylaws require TrustCo's board
to be divided into three classes, as nearly equal in number as possible, with
one class to be elected each year for a term of three years. Directors who reach
the mandatory retirement age of 75 during their term of office cease to be
directors and must vacate their office. Newly created directorships resulting
from an increase in the number of directors and vacancies occurring in the Board
of Directors for any reason may be filled by the vote of a majority of the
directors then in office. Directors who are elected by the Board of Directors
shall hold office until the next meeting of shareholders at which the election
of directors is in the regular order of business. Each nominee must receive the
affirmative vote of a majority of the outstanding shares of TrustCo common stock
in order to be elected a director.
The pages that follow set forth information regarding TrustCo's nominees,
as well as information regarding the remaining members of TrustCo's board.
Proxies will be voted in accordance with the specific instructions contained
therein. Shares will be voted "for" the election of TrustCo's nominees unless
contrary instructions are set forth on the enclosed TrustCo proxy card. If any
such nominee becomes unavailable to serve, the shares represented by all valid
proxies will be voted for the election of such other person as TrustCo's board
may recommend, or the board may reduce the number of directors to eliminate the
vacancy. Each of TrustCo's nominees has consented to being named in this Proxy
Statement and to serve if elected. The Board of Directors has no reason to
believe that any nominee will decline or be unable to serve if elected.
Information with regard to the business experience of each director and the
ownership of common stock on December~31, 2001 has been furnished by each
director or has been obtained from TrustCo's records. TrustCo's common stock is
the only class of equity security outstanding.
3
INFORMATION ON TRUSTCO DIRECTORS AND NOMINEES
NOMINEES FOR ELECTION AS TRUSTCO DIRECTORS(1) FOR
THREE-YEAR TERM TO EXPIRE IN 2005
Shares of TrustCo Common Stock
Beneficially Owned
- ---------------------------------------------------------------------- ----------------------- -----------------------
Name and Principal Occupation(2) No. of Shares (3) Percent of Class
- ---------------------------------------------------------------------- ----------------------- -----------------------
- ---------------------------------------------------------------------- ----------------------- -----------------------
Robert T. Cushing, Age 46, Executive Officer of TrustCo (Vice 931,066 1.29
President and Chief Financial Officer) and Trustco Bank (Senior Vice
President and Chief Financial Officer). Joined Trustco Bank in
1994. Director of TrustCo and Trustco Bank since 2001.
Richard J. Murray, Jr., Age 73, Chief Executive Officer, R. J. Murray 701,995 *
Co., Inc. (air-conditioning and heating distributors). Director of
TrustCo and Trustco Bank since 1985.
William D. Powers, Age 60, Partner, Powers, Crane & Company, LLC 34,623 *
(consultants); former Chairman, New York Republican State Committee.
Director of TrustCo and Trustco Bank since 1995.
OTHER TRUSTCO DIRECTORS
Shares of TrustCo Common Stock
Beneficially Owned
- ---------------------------------------------------------------------- ----------------------- -----------------------
Name and Principal Occupation(2) No. of Shares (3) Percent of Class
- ---------------------------------------------------------------------- ----------------------- -----------------------
- ---------------------------------------------------------------------- ----------------------- -----------------------
Barton A. Andreoli, Age 62, President, Towne Construction & Paving 45,547 *
Corp. Director of TrustCo and Trustco Bank since 1993.
Joseph A. Lucarelli, Age 61, President, Bellevue Builders Supply, 50,468 *
Inc. Director of TrustCo and Trustco Bank since 1999.
Anthony J. Marinello, M.D., Ph.D., Age 46, Physician. Director of 40,133 *
TrustCo and Trustco Bank since 1996.
___________________
See footnotes on page 5.
4
OTHER TRUSTCO DIRECTORS (continued)
Shares of TrustCo Common Stock
Beneficially Owned
- ---------------------------------------------------------------------- ----------------------- ----------------------
Name and Principal Occupation(2) No. of Shares (3) Percent of Class
- ---------------------------------------------------------------------- ----------------------- ----------------------
Robert A. McCormick, Age 65, President of TrustCo and Trustco Bank 3,204,646 4.30
since 1982. President and Chief Executive Officer of TrustCo and
Trustco Bank since 1984. Chairman of TrustCo and Trustco Bank since
2001. Director of TrustCo and Trustco Bank since 1980.
Nancy A. McNamara, Age 52, Executive Officer of TrustCo (Vice 1,289,938 1.78
President) since 1992 and Trustco Bank (Senior Vice President) since
1988. Joined Trustco Bank in 1971. Director of TrustCo and Trustco
Bank since 1991.
James H. Murphy, D.D.S., Age 73, Orthodontist. Director of TrustCo 71,508 *
and Trustco Bank since 1991.
William J. Purdy, Age 67, President, Welbourne & Purdy Realty, Inc. 43,270 *
Director of TrustCo and Trustco Bank since 1991.
INFORMATION ON TRUSTCO EXECUTIVE OFFICERS
NOT LISTED ABOVE
Shares of TrustCo Common Stock
Beneficially Owned
- ---------------------------------------------------------------------- ----------------------- ----------------------
Name and Principal Occupation(2) No. of Shares (3) Percent of Class
- ---------------------------------------------------------------------- ----------------------- ----------------------
Henry C. Collins, Age 47, Executive Officer of TrustCo and Trustco 72,792 *
Bank (Secretary) since 2001. Administrative Vice President and
General Counsel of Trustco Bank since 1995. Joined Trustco Bank in
1994.
Robert J. McCormick, Age 38, Executive Officer of TrustCo (Vice 659,917 *
President) and Trustco Bank (Senior Vice President) since 2001.
Joined Trustco Bank in 1995. Robert J. McCormick is the son of
Robert A. McCormick, Chairman, President, and Chief Executive
Officer of TrustCo and Trustco Bank.
~~
See footnotes on page 5.
5
TRUSTCO DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS AS A GROUP (12 INDIVIDUALS)
BENEFICIALLY OWN 7,145,903 SHARES OF COMMON STOCK, WHICH REPRESENT 9.25% OF THE
OUTSTANDING SHARES.
Footnotes:
(1) Directors of TrustCo Bank Corp NY are also directors of Trustco Bank and
Trustco Savings Bank.
(2) Each of the directors has held, or retired from, the same position or
another executive position with the same employer during the past five years,
except William D. Powers, who formed Powers, Crane & Company, LLC, in 2001 after
serving as Chairman of the New York Republican State Committee for at least the
previous five years.
(3) Each director and executive officer named herein has sole voting and
investment power with respect to the shares listed above except as noted below.
Voting or investment power is shared by the spouse or other immediate family
members with respect to the number of shares indicated for the following
directors or officers: Anthony J. Marinello, 774 shares; Robert J. McCormick,
7,656 shares. Voting or investment power is held by the spouse or other
immediate family members with respect to the number of shares indicated for the
following directors or officers, each of whom disclaims beneficial ownership of
such securities: Robert T. Cushing, 191,844 shares; Anthony J. Marinello, 9,144
shares; Robert A. McCormick, 68,994 shares; and Nancy A. McNamara, 2,493 shares.
Voting authority for 27,128 shares owned beneficially by Robert J. McCormick is
vested in Trustco Bank as trustee for a trust, the beneficiary of which is
Robert J. McCormick. The amount of shares with respect to Robert J. McCormick
includes 147,568 shares beneficially owned in his capacity as trustee but for
which Robert J. McCormick has no other beneficial interest, and options to
acquire 265,498 shares that are held in a trust for the benefit of Robert J.
McCormick. The number of shares owned by each of the directors and executive
officers includes options to acquire the following number of shares: Barton A.
Andreoli, 27,831 shares; Henry C. Collins, 50,811 shares; Robert T. Cushing,
736,289 shares; Joseph A. Lucarelli, 5,290 shares; Anthony J. Marinello, 18,499
shares; Robert A. McCormick, 2,777,682 shares; Robert J. McCormick, 176,948
shares; Nancy A. McNamara, 1,038,665 shares; James H. Murphy,~D.D.S., 38,450
shares; Richard J. Murray, Jr., 7,935 shares; William D. Powers, 10,977 shares;
and William J. Purdy, 38,450 shares.
* Less than 1%.
Director Fees, Committees and Attendance
TrustCo's board held eight meetings during 2001. Each director attended at
least 80% or more of the aggregate of the meetings of the TrustCo board and of
the committees on which he or she served. Average attendance at both board and
committee meetings was 97.2%. Each director who is not an employee of TrustCo,
Trustco Bank, or Trustco Savings Bank currently receives for his services as
director a fee in the amount of $2,750 for each meeting attended of the TrustCo,
Trustco Bank, or Trustco Savings Bank Board of Directors, and $1,375 per meeting
attended of any TrustCo, Trustco Bank, or Trustco Savings Bank committee of
which he or she is a member. Directors who are employees of TrustCo, Trustco
Bank, or Trustco Savings Bank do not receive directors' fees or other additional
remuneration for Board of Directors' meetings or for special assignments.
6
TrustCo directors who are not also employees of TrustCo or its subsidiaries
are eligible to participate in the TrustCo Bank Corp NY Directors Performance
Bonus Plan, which was adopted by the TrustCo board in 1997. Under the Directors
Performance Bonus Plan, non-employee directors are eligible to be awarded
"units," the value of which is based upon the appreciation in value of TrustCo's
common stock between the date of the award and the occurrence of a "change in
control" as defined in the Directors Performance Bonus Plan. The units so
awarded vest, and payments under the Directors Performance Bonus Plan are to be
made, only upon the occurrence of a change in control. Each non-employee
director has been awarded 34,981 units under the Directors Performance Bonus
Plan at a base price of $5.95 per unit (except for Mr. Lucarelli, whose base
price is $8.59 per unit) (after adjustment to reflect the 15% stock split on
November~13, 2001, a 15% stock split on November 14, 2000, and a two for one
stock split on November~12, 1999). In accordance with the TrustCo Bank Corp NY
Directors Stock Option Plan, on March 16, 2001 each nonemployee director was
awarded 2,645 stock options with an exercise price of $9.62, after adjustment to
reflect the 15% stock split on November 13, 2001.
TrustCo's Nominating Committee held one meeting in 2001. The four directors
currently serving on the Nominating Committee are Robert A.~McCormick
(Chairman), Barton~A. Andreoli, Robert T. Cushing, and Richard J.~Murray, Jr.
The function of the Nominating Committee is to consider and recommend to
TrustCo's Board of Directors nominees for election to the board. Each of the
nominees slated for election at the Annual Meeting is an incumbent and was
considered and selected by the Board of Directors upon the recommendation of the
Nominating Committee. The Nominating Committee will consider written
recommendations by shareholders for nominees for election to the board. Such
written recommendations must be delivered or mailed to the board not less than
14 and not more than 50 days prior to any meeting of Shareholders called for the
election of directors, or not later than 7 days prior to the meeting if less
than 21 days' notice of the meeting is provided.
TrustCo's Audit Committee held four meetings in 2001. The three directors
serving on the Audit Committee are Richard J.~Murray, Jr. (Chairman), James
H.~Murphy, D.D.S., and William J.~Purdy. The function of the Audit Committee is
to review TrustCo's, Trustco Bank's, and Trustco Savings Bank's internal audit
procedures, and also to review the adequacy of internal accounting controls for
TrustCo, Trustco Bank, and Trustco Savings Bank. In addition, the Audit
Committee annually recommends the use of particular external audit firms by
TrustCo, Trustco Bank, and Trustco Savings Bank in the coming year, after
reviewing performance of the existing vendors and available audit resources.
Please refer to the discussion under "Audit Committee Report" below for a more
detailed description of the Audit Committee's activities.
TrustCo's Stock Option Committee held two meetings in 2001. The three
directors serving on the Stock Option Committee are Joseph A. Lucarelli
(Chairman), Barton A. Andreoli, and William D.~Powers. The function of the Stock
Option Committee is to administer the 1995 TrustCo Bank Corp NY Stock Option
Plan, as well as the Directors Performance Bonus Plan and the TrustCo Bank Corp
NY Performance Bonus Plan, which were adopted by the board in 1997.
The Personnel Advisory Committee of Trustco Bank held two meetings in 2001.
The three directors serving on the Personnel Advisory Committee are Joseph A.
Lucarelli (Chairman), Barton~A. Andreoli, and William D. Powers. The function of
the Personnel Advisory Committee is to review general compensation practices of
Trustco Bank and Trustco Savings Bank and to recommend to the Board of Directors
of Trustco Bank the salary and benefits for Trustco Bank's three executive
officers who are also directors of TrustCo.
7
TrustCo Executive Officers
The current executive officers of TrustCo are Chairman, President, and
Chief Executive Officer Robert~A. McCormick; Vice President and Chief Financial
Officer Robert~T. Cushing; Vice Presidents Robert J. McCormick and Nancy~A.
McNamara; and Secretary Henry C. Collins.
Trustco Bank Executive Officers
The current executive officers of Trustco Bank are Chairman, President, and
Chief Executive Officer Robert~A. McCormick; Senior Vice President and Chief
Financial Officer Robert~T. Cushing; Senior Vice Presidents Robert J. McCormick
and Nancy~A. McNamara; and Administrative Vice President, Secretary, and General
Counsel Henry C. Collins.
Trustco Savings Bank Executive Officers
The current executive officers of Trustco Savings Bank are Chairman
Robert~A. McCormick; President and Chief Executive Officer Robert~T. Cushing;
Administrative Vice President Robert J. McCormick; Vice President and Chief
Financial Officer Linda C. Christensen; Vice President and Chief Lending Officer
Donald J. Csaposs; and Secretary Henry~C. Collins.
TrustCo, Trustco Bank and Trustco Savings Bank Executive Officer Compensation
The following table sets forth, for the fiscal year ended December~31,
2001, the compensation paid to or accrued on behalf of each of the five most
highly compensated executive officers of TrustCo, Trustco Bank, and Trustco
Savings Bank. The value of incidental personal benefits, which may not be
directly related to job performance, has been included, where applicable,
according to the Securities and Exchange Commission requirements. Each of the
executive officers described in the following table, except Henry C. Collins,
has an employment agreement and a supplemental retirement agreement described in
subsequent pages.
8
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
Securities
Other Underlying All Other
Annual Options/ Compensa-tion
Salary Bonus Compensation SARs ($)(4)
Year ($) ($)(1) ($)(2) (#)(3)
- -------------------------------- ---------- ---------------- ------------------ ------------------- ------------------ ------------
Robert~A. McCormick
Chairman, President, 2001 $950,000 $1,900,000 $362,035 264,500 $8,550,000
and Chief Executive 2000 900,000 1,665,000 94,162 264,500 --
Officer, TrustCo and 1999 850,000 1,317,500 93,148 264,500 --
Trustco Bank
- -------------------------------- ---------- ---------------- ------------------ ------------------- ------------------ ------------
- -------------------------------- ---------- ---------------- ------------------ ------------------- ------------------ ------------
Robert T. Cushing
Vice President, Chief 2001 340,000 680,000 24,966 105,800
Financial Officer, 2000 315,000 582,750 26,626 105,800
TrustCo; Senior Vice 1999 300,000 465,000 20,555 105,800
President, Chief
Financial Officer,
Trustco Bank
- -------------------------------- ---------- ---------------- ------------------ ------------------- ------------------ ------------
- -------------------------------- ---------- ---------------- ------------------ ------------------- ------------------ ------------
Robert J. McCormick
Vice President, TrustCo; 2001 236,425 170,530 5,533 52,900
Senior Vice President, 2000 172,000 20,680 6,838 52,900
Trustco Bank
- -------------------------------- ---------- ---------------- ------------------ ------------------- ------------------ ------------
- -------------------------------- ---------- ---------------- ------------------ ------------------- ------------------ ------------
Nancy A. McNamara
Vice President, TrustCo; 2001 340,000 680,000 31,030 105,800
Senior Vice President 2000 315,000 582,750 35,271 105,800
Trustco Bank 1999 300,000 465,000 40,306 105,800
- -------------------------------- ---------- ---------------- ------------------ ------------------- ------------------ ------------
- -------------------------------- ---------- ---------------- ------------------ ------------------- ------------------ ------------
Henry C. Collins
Secretary, TrustCo; 2001 165,000 19,800 2,805 15,870
Administrative Vice
President, General
Counsel, Trustco
Bank
- -------------------------------- ---------- ---------------- ------------------ ------------------- ------------------ ------------
(1) Bonus amounts include payments to senior executive officers of TrustCo as
short-term incentive compensation pursuant to the incentive program described in
greater detail herein under the caption "Personnel Advisory Committee Report on
Executive Compensation."
(2) Includes amounts reimbursed by TrustCo for the payment of taxes pursuant to
established benefit plans.
(3) Stock Option data has been adjusted to reflect the 15% stock split on
November 13, 2001, a 15% stock split on November 13, 2000, and a two for one
stock split on November 12, 1999.
(4) The amendment to Robert A. McCormick's supplemental retirement agreement
resulted in a constructive termination of his employment agreement, resulting in
the vesting of previously accrued severance benefits in the amount of
$8,550,000, as shown above. This amendment is discussed in greater detail below
in the "Personnel Advisory Committee Report on Executive Compensation."
9
Option/SAR Grants in Last Fiscal Year
The following table sets forth information with respect to each of
TrustCo's executive officers concerning grants of stock options for the year
ended December 31, 2001.
Potential Realizable Value
At Assumed Annual Rates
Number of % of Total Of Stock Price Appreciation
Securities Options/SARs Exercise or For Option Term(4)
Underlying Granted to Base Price
Options/SARs Employees in ($/Sh)(3) Expiration 5% 10%
Name Granted (#)(1) Fiscal Year(2) Date
- ----------------------------- ------------------- ------------------ ------------- -------------- --------------- -----------------
Robert A. McCormick 264,500 30.2% $9.75 3/16/2011 $1,621,385 $4,110,330
Robert T. Cushing 105,800 12.1% 9.75 3/16/2011 648,554 1,644,132
Robert J. McCormick 52,900 6.0% 9.75 3/16/2011 324,277 822,066
Nancy A. McNamara 105,800 12.1% 9.75 3/16/2011 648,554 1,644,132
Henry C. Collins 15,870 1.8% 9.75 3/16/2011 97,283 246,620
(1) Options, which were granted on March~16, 2001, become exercisable in five
annual installments beginning March~16, 2001. Stock Option data has been
adjusted for the 15% stock split on November~13, 2001.
(2) The total number of options granted in 2001 was 876,703, of which 544,870
(62.2%) were issued to the executive officers named above, 23,805 (2.7%) were
issued to non-employee directors, and 308,028 (35.1%) were issued to officers
and employees of TrustCo, Trustco Bank, and Trustco Savings Bank, other than the
executive officers named above.
(3) Exercise or base price is equal to the mean between the closing dealer bid
and asked price for the common stock as quoted by Nasdaq on the date of the
grant adjusted for the 15% stock split on November 13, 2001.
(4) The amounts included reflect pre-tax gain. The dollar amounts under these
columns are the result of calculations at the 5% and 10% rates set by the S.E.C.
and, therefore, are not intended to forecast possible future appreciation, if
any, of TrustCo's stock price, including any appreciation in the event of a
change in control. TrustCo's per share stock price would be $15.88 and $25.29 if
it increased by 5% and 10% respectively, compounded annually over the option
term.
10
Aggregated Option/SAR Exercises in Last Fiscal Year, and Fiscal Year-End
Option/SAR Values
Number of
Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#)(3) FY-End ($)(4)
Shares Acquired Value Exercisable/ Exercisable/
Name On Exercise (#)(1) Realized($)(2) Unexercisable Unexercisable
- ----------------------------- ---------------------- ------------------ ----------------------- ----------------------------
Robert A. McCormick 383,959 $2,751,146 2,777,682/484,035 $19,733,681/1,431,421
Robert T. Cushing 29,774 197,392 736,289/193,614 4,496,091/572,568
Robert J. McCormick -- -- 442,446/96,807 3,126,651/286,284
Nancy A. McNamara 38,735 277,548 1,038,665/193,614 7,321,403/572,568
Henry C. Collins -- -- 50,811/29,042 211,648/85,885
(1) Stock Option data has been adjusted for the 15% stock split on November~13,
2001, a 15% stock split on November~13, 2000, and a two for one stock split on
November~12, 1999.
(2) The amounts included reflect pre-tax gain. Amounts shown represent the
difference between the stock option grant price and the market value of the
stock on the date of exercise.
(3) The number of options shown includes options exercisable on December 31,
2001 or within 60 days of that date.
(4) The amounts included reflect pre-tax gain. Value of unexercised in-the-money
options and SARs is based on the December~31, 2001, closing price for TrustCo
common stock of $12.57.
TrustCo Retirement Plans
Trustco Bank and Trustco Savings Bank have a defined benefit retirement
plan pursuant to which annual retirement benefits are based on years of service
to a maximum of 30 years and average annual earnings of the highest five
consecutive years during the final ten years of service. The defined benefit
retirement plan is fully funded by Trustco Bank contributions. In addition,
TrustCo has a supplemental retirement plan, which is an actuarial plan, under
which additional retirement benefits are accrued for eligible executive
officers. Under the supplemental retirement plan, the amount of supplemental
retirement benefits is based upon annual contributions which are actuarially
calculated to achieve a benefit at normal retirement which approximates the
differences between (i)~the total retirement benefit the participant would have
received under the defined benefit retirement plan without taking into account
limitations on compensation, annual benefits and years of service; and (ii)~the
retirement benefit the participant is projected to receive under the defined
benefit retirement plan at normal retirement. The supplemental retirement plan
provides benefits based on years of service to a maximum of 40 years. The
supplemental account balance of a participant on any Valuation Date on or after
December 31, 2001 shall not exceed seven million dollars.
11
The following table shows the approximate retirement benefits which would
have been payable in 2001 to salaried employees, under both the defined benefit
retirement plan and the supplemental retirement plan, assuming retirement of
such person at age~65, and payment of benefits in the form of a life annuity.
Earnings used in calculating benefits under these plans are approximately equal
to cash amounts reflected as salary plus bonus in the Summary Compensation
Table. These plans permit service and earnings to continue to be credited for
employment after age~65. The benefits set forth in the following table are in
addition to those which may be received as Social Security benefits. The years
of service at normal retirement age~65 for the executive officers (other than
Robert~A. McCormick) named in the Summary Compensation Table would be as
follows: Robert~T. Cushing, 27~years; Robert J. McCormick, 33~years; Nancy~A.
McNamara, 43~years; and Henry~C. Collins, 25~years.
Robert~A. McCormick is not a participant in the supplemental retirement
plan, but has a separate agreement with Trustco Bank under which additional
retirement benefits are accrued. Under the terms of Mr.~McCormick's agreement,
benefits are generally calculated on the actuarial basis used in the
supplemental retirement plan; however, as of December 31, 2001, Mr.~McCormick's
supplemental account balance was frozen at its December 31, 2001 value, except
for future accruals of interest.
Pension Plan Table
-----------------------------------------------------------------------------------------
Annual Benefits for Years of Service
-----------------------------------------------------------------------------------------
Remuneration 10 20 30 40
- -------------------------------------------------------------------------------------------------------------------
$200,000 $36,200 $73,400 $112,000 $151,500
400,000 76,200 152,400 230,400 310,400
600,000 116,200 232,400 350,400 470,400
800,000 156,200 312,400 470,400 630,400
1,000,000 196,200 392,400 590,400 790,400
1,200,000 236,200 472,400 710,400 950,400
1,400,000 276,200 552,400 830,400 1,110,400
1,600,000 316,200 632,400 950,400 1,270,400
1,800,000 356,200 712,400 1,070,400 1,430,400
2,000,000 396,200 792,400 1,190,400 1,590,400
2,200,000 436,200 872,400 1,310,400 1,750,400
2,400,000 476,200 952,400 1,430,400 1,910,400
2,600,000 516,200 1,032,400 1,550,400 2,070,400
2,800,000 556,200 1,112,400 1,670,400 2,230,400
3,000,000 596,200 1,192,400 1,790,400 2,390,400
3,200,000 636,200 1,272,400 1,910,400 2,550,400
3,400,000 676,200 1,352,400 2,030,400 2,710,400
3,500,000 696,200 1,392,400 2,090,400 2,790,400
Generally, an employee who has attained age~55 and has ten years of service
has the right to elect to immediately begin receiving adjusted retirement
benefits less than those indicated in the table upon any separation from service
with Trustco Bank and Trustco Savings Bank. The Internal Revenue Code places a
maximum limit on the benefits that can be provided under qualified retirement
plans such as Trustco Bank's defined benefit retirement plan. For 2001, the
annual Internal Revenue Code limit for a straight-life annuity benefit at normal
retirement age was $140,000, which amount is actuarially reduced for
participants who retire and begin receiving benefits early.
12
Trustco Bank's supplemental retirement plan provides that supplemental
benefits will be paid in a single lump sum to a participant who terminates
employment for reasons other than retirement on or after his normal retirement
date. A participant who retires on or after his normal retirement date may elect
to be paid the supplemental benefits upon separation of service from Trustco
Bank or Trustco Savings Bank in one of the benefit forms provided under the
defined benefit retirement plan or in a single lump sum or installments over a
five-year period. Also under the supplemental retirement plan, Trustco Bank, in
its discretion, may at any time elect to make a lump sum distribution of a
participant's supplemental benefit. The amount of this single payment is equal
to the participant's supplemental account balance under the plan. Robert~A.
McCormick's separate agreement provides that Trustco Bank, in its discretion,
may at any time elect to make a lump sum distribution of his supplemental
benefit.
The supplemental retirement plan and Robert~A. McCormick's separate
agreement are unfunded for tax purposes. However, Trustco Bank has established
an irrevocable trust to fund its obligations under these and other executive
compensation plans. Trustco Bank is required to make annual contributions to the
trust, although the assets of the trust remain subject to Trustco Bank's general
creditors in the event of insolvency.
Personnel Advisory Committee Report on Executive Compensation
The Personnel Advisory Committee of Trustco Bank determines the
compensation of employees and officers of TrustCo, Trustco Bank, and Trustco
Savings Bank, including the executive officers named in the Summary Compensation
Table that appears elsewhere in this Proxy Statement. Each of the executive
officers named in the Summary Compensation Table, other than Henry C. Collins,
has an employment agreement with each of TrustCo and Trustco Bank. These
employment agreements are described elsewhere in this Proxy Statement.
The Personnel Advisory Committee of the Board of Directors of Trustco Bank,
the present members of which are Joseph~A. Lucarelli (Chairman),
Barton~A.~Andreoli, and William~D. Powers (none of whom was an officer of
TrustCo, Trustco Bank, or Trustco Savings Bank during fiscal year 2001),
furnished the following report on executive compensation to the Board of
Directors of Trustco Bank, which has been adopted by TrustCo's Board of
Directors for the year ended December~31, 2001:
Under the supervision and direction of the Personnel Advisory Committee,
TrustCo, Trustco Bank, and Trustco Savings Bank have developed compensation
policies, plans, and programs which seek to enhance the profitability of TrustCo
and Trustco Bank, and ultimately shareholder value, by aligning closely the
financial interests of TrustCo's senior management with those of its
shareholders. It continues to be the purpose and intent of the Personnel
Advisory Committee to design a compensation program which reflects the standards
of performance of Trustco Bank, with particular emphasis on setting goals tied
to return on shareholder equity previously defined by the Board of Directors of
Trustco Bank.
13
The function of the Personnel Advisory Committee is to review the general
compensation structure for the senior executive officers of Trustco Bank (Robert
A. McCormick, Robert T. Cushing, Robert J. McCormick, and Nancy A. McNamara) and
to recommend to the Board of Directors of Trustco Bank the salary and benefits
of such senior executive officers. The components of executive compensation for
the senior executive officers include salary, bonus, stock options, and cash
payments under the defined benefit retirement plan, the supplemental retirement
plan, and TrustCo's Executive Officer Incentive Plan, and, in Robert
A.~McCormick's case, in his separate agreement. The Personnel Advisory Committee
evaluates individual performance and corporate profitability to determine the
level of any compensation adjustment to take effect as of January of the
following year. The Personnel Advisory Committee also identifies persons within
Trustco Bank eligible to participate in the two incentive plans and the
supplemental retirement plan.
The Personnel Advisory Committee met twice during the year, on April~17,
2001 and October 16, 2001. The Stock Option Committee, whose members are the
same as that of the Personnel Advisory Committee, met separately on January 16,
2001 and March~16, 2001, to (1)~identify eligible participants in the 1995
TrustCo Bank Corp NY Stock Option Plan, and (2)~award option grants for the
current plan year. The Stock Option Committee considered discussions
PricewaterhouseCoopers LLP had with management regarding general stock option
issues and trends when formulating its final decision on grants awarded under
the 1995 Stock Option Plan. PricewaterhouseCoopers LLP provided information
regarding industry trends for general compensation levels and option levels in
the industry. PricewaterhouseCoopers LLP is not the independent auditor for
TrustCo, but provides various consulting services for TrustCo from time to time.
While TrustCo does not have a target ownership level for equity holdings by its
executives, the Stock Option Committee takes into account the amount and value
of options currently held by eligible participants when granting option awards.
Options may be granted in varying amounts so as to create relative ownership
parity among the executive officers participating in the 1995 TrustCo Bank Corp
NY Stock Option Plan.
It is the aim of the Personnel Advisory Committee to determine salary and
benefit levels of executive compensation principally upon the basis of overall
corporate performance, although elements of corporate performance may vary from
year to year in the discretion of the Personnel Advisory Committee and among
executive officers. In making any such determination, the Personnel Advisory
Committee will consider a number of factors including, among others, TrustCo's
and Trustco Bank's return on equity, attainment of net income goals and total
asset targets, overall profitability from year to year, banking experience of
individual officers, scope of responsibility within the overall organization,
performance and particular contributions to TrustCo and Trustco Bank during the
course of the year, and other relevant factors, including involvement in
community matters which may better position the organization to serve the
immediate needs of Trustco Bank's market. The Personnel Advisory Committee uses
broad discretion when determining compensation levels and considers all of the
above criteria. It does not assign a specific weight to any of these factors
when establishing salary and benefit levels.
14
The Personnel Advisory Committee may also consider compensation programs
offered to executives performing similar duties for competing depository
institutions and their holding companies, with a particular focus on the level
of compensation paid by comparable institutions. To assist in this evaluation,
an industry group of twenty regional bank holding companies, which group is
comprised of the institutions which constitute the SNL Financial LC Super
Regional Bank Index, was identified by the Personnel Advisory Committee for
performance and compensation comparisons. While Trustco Bank is comparatively
smaller in terms of total asset size than some members of this peer group, the
Personnel Advisory Committee believes that Trustco Bank compares favorably with
these institutions in terms of overall corporate performance. The Personnel
Advisory Committee further takes into consideration what it considers to be the
unique size of TrustCo's executive group as compared to other financial
institutions. Trustco Bank and TrustCo currently operate with five executive
officers, whereas many institutions in this peer group have a larger pool of
executive officers.
During 2001, at the suggestion of Robert A. McCormick, the Personnel
Advisory Committee considered and recommended major changes to the compensation
of Mr. McCormick which, although triggering additional benefits under his
employment agreement, are designed to significantly reduce the annual
compensation paid to Mr. McCormick. Effective December 31, 2001, Mr. McCormick's
supplemental retirement agreement was amended to freeze his accrued benefit at
the level of such benefit as of December 31, 2001 (approximately $9,400,000)
except for the future accrual of interest thereon. The amendment resulted in a
constructive termination of his employment agreement, resulting in the vesting
of previously accrued severance benefits totaling three times his annual salary
plus bonus ($8,550,000). This amount has been deferred automatically under the
Executive Officer Incentive Plan until such time as the payment of the severance
benefits is no longer subject to the limitation on deductible compensation set
forth in Internal Revenue Code Section 162(m). In addition, TrustCo and Trustco
Bank entered into a new employment agreement with Mr. McCormick, effective
January 1, 2002, pursuant to which his annual salary was reduced from $950,000
to $500,000, resulting in a corresponding reduction in his annual bonus. Mr.
McCormick's new employment contract provides benefits in the event of a change
in control.
As a result of the actions taken by Mr. McCormick and the board, TrustCo
and Trustco Bank will realize an annual savings of approximately $4,100,000.
Also at the suggestion of Mr. McCormick, the Personnel Advisory Committee
considered and recommended changes to the annual compensation of Robert Cushing
and Nancy McNamara to reduce their annual compensation from $340,000 to
$300,000, with a corresponding decrease in their annual bonuses. In addition,
the accrued benefits of each senior vice president under the Supplemental
Executive Retirement Plan will be subject to a cap of $7,000,000.
The Personnel Advisory Committee recommended approval of an employment
agreement for Robert J. McCormick on terms substantially the same as the terms
of the amended employment agreements of Robert~T. Cushing and Nancy~A. McNamara.
The Personnel Advisory Committee considered and recommended various
amendments to benefit plans and arrangements for executives and directors,
including, but not limited to, amendments relating to the vesting and timing of
benefit payments in the event of a change of control. In addition, the Executive
Officer Incentive Plan was amended to permit pro rata awards for executives who
terminate within one year prior to or two years after a change in control that
are not less than the pro rata portion for the immediately preceding year, to
provide for the payment of interest and penalties if benefits are deemed taxable
prior to distribution, to eliminate the automatic deferral of the payment of
bonuses (payable for 2002 and thereafter) that are not deductible under Internal
Revenue Code Section 162(m), and to require the automatic deferral of
termination benefits under an executive's employment agreement if such amounts
are not deductible under Section 162(m).
15
The Personnel Advisory Committee continues to believe that Trustco Bank is
better able to attract, retain, and motivate Trustco Bank's senior executive
officers to achieve superior performance if a relatively large percentage of
their compensation is at risk. In other words, Trustco Bank's compensation for
its senior executive officers is designed with an objective of providing less
total compensation when TrustCo's performance is poorer than a peer group of
companies (currently, the companies comprising the SNL Financial LC Super
Regional Bank Index), and providing superior total compensation when performance
is superior to that of the peer group.
In evaluating corporate performance for purposes of establishing short-term
incentive compensation awards for senior executive officers under the Executive
Officer Incentive Plan, the Personnel Advisory Committee evaluated TrustCo's
performance as compared with TrustCo's profit plan for the year, and also
evaluated financial results (generally return on equity) as compared with the
index for the current year. In the opinion of the Personnel Advisory Committee,
return on equity is the most significant measure of performance of TrustCo and
its relative importance to shareholders. Therefore, the target pools were
established to provide senior executive officers with an incentive to increase
return on equity performance. The Personnel Advisory Committee then established
a percentage of target pool to be paid as short-term incentive compensation
under the Executive Officer Incentive Plan. The target pool payment would be
made to senior executives officers based on TrustCo's return on average equity
for the year. The range of target returns on average equity was from 14%, which
equates to a 40% payout of base compensation, to 20% return on average equity,
which equates to a 125% payout of base compensation. The incentive plan provides
a 15 basis point increase in bonus payout for each 1% increase in average return
on equity beyond 20%. Senior executive officers would receive no incentive
compensation award for return on average equity below 14%. Return on average
equity in 2001 was 25.31%
In consideration of the potential benefits payable under the incentive
program described above, senior executive officers are not eligible to
participate in Trustco Bank's Profit Sharing Plan.
The Personnel Advisory Committee's actions concerning compensation were
ultimately judgments based upon the committee's ongoing assessment and
understanding of TrustCo and its senior executive officers, performance of its
senior executive officers, and whether or not cash payments or incentive
payments would provide an appropriate award or incentive to the senior executive
officers' contribution to TrustCo's past and future performance.
With respect to total compensation paid to Robert A. McCormick during 2001,
the Personnel Advisory Committee reviewed, among other criteria noted above, the
consistent growth in performance and shareholder equity since his appointment as
President in 1982 and Chief Executive Officer in 1984, and his ability to
effectively influence and lead the executive team to attain this performance
level. The Personnel Advisory Committee exercises broad discretion when
considering these criteria and does not assign a specific weight to any of these
factors. Mr.~McCormick did not participate in the discussions regarding his
compensation.
PERSONNEL ADVISORY COMMITTEE:
Joseph A. Lucarelli, Chairman
Barton A.~Andreoli
William D. Powers
16
Audit Committee Report
The Audit Committee of TrustCo's board is responsible for providing
independent, objective oversight of TrustCo's accounting functions, internal
controls, and financial reporting process. The Audit Committee is composed of
three directors, each of whom is independent as defined by the National
Association of Securities Dealers' listing standards. The Audit Committee
operates under a written charter approved by the Board of Directors. A copy of
the charter is attached to this Proxy Statement as Appendix A.
Management is responsible for TrustCo's internal controls and financial
reporting process. TrustCo's independent accountants, KPMG LLP ("KPMG"), are
responsible for performing an independent audit of TrustCo's consolidated
financial statements in accordance with auditing standards generally accepted in
the United States of America and to issue a report thereon. The Audit
Committee's responsibility is to monitor and oversee the financial reporting and
audit processes.
In connection with these responsibilities, the Audit Committee met with
management and KPMG to review and discuss TrustCo's December~31, 2001
consolidated financial statements. The Audit Committee also discussed with KPMG
the matters required by Statement on Auditing Standards No. 61 (Communication
with Audit Committees) and received the written disclosures from KPMG required
by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees).
Audit Fees. KPMG billed TrustCo for audit fees of $189,000 for professional
services rendered in connection with the audit of TrustCo's consolidated
financial statements for the fiscal year ended December 31, 2001 and the limited
reviews of the interim consolidated financial statements included in TrustCo's
quarterly Forms 10-Q.
Financial Information Systems Design and Implementation Fees. There were no
financial information systems design and implementation fees billed to TrustCo
by KPMG for services rendered during the fiscal year ended December 31, 2001.
Other Fees. Additional fees billed to TrustCo by KPMG for various services
during the fiscal year ended December 31, 2001 were as follows: $143,030 for tax
return preparation and related issues, $10,760 for fees associated with tax
examination issues, $27,585 for audits of benefit plans and compensation/benefit
issues, $19,260 for fees in relation to the completed acquisition of Landmark
Financial Corp., $17,295 for fees in relation to business acquisitions, and
$7,645 for fees related to other nonaudit matters.
17
The Audit Committee discussed KPMG's independence with KPMG and has
considered whether the nonaudit services provided by KPMG during the fiscal year
ended December 31, 2001 were compatible with maintaining KPMG's independence.
The committee has concluded that the nonaudit services provided do not impair
the independence of KPMG.
Based upon the Audit Committee's discussions with management and the
independent accountants, and its review of the information described in the
preceding paragraph, the Audit Committee has recommended that the Board of
Directors include the audited consolidated financial statements in TrustCo's
Annual Report on Form 10-K for the year ended December 31, 2001, to be filed
with the Securities and Exchange Commission.
AUDIT COMMITTEE:
Richard J. Murray, Jr., Chairman
James H. Murphy, D.D.S.
William J. Purdy
Share Investment Performance
The following graphs show changes over five-year and ten-year periods in
the value of $100 invested in: (1)~TrustCo's common stock; (2)~the Standard &
Poor's 500 index; and (3)~an industry group of twenty other regional bank
holding companies compiled by SNL Financial LC, called the Super Regional Bank
Index. The ten-year period is presented in addition to the five-year period
required by the S.E.C. because it provides additional perspective. TrustCo
management believes that longer term performance is of greater importance to
TrustCo shareholders. The banks comprising the Super Regional Bank Index are:
AmSouth Bancorp, BB&T Corp., Comercia Inc, Fifth Third Bancorp, First Tennessee
National Corp., Huntington Bancshares Inc., KeyCorp, M&T Bank Corp., Marshall &
Ilsley Corporation, National City Corp., PNC Financial Services Group, Popular
Inc, Regions Financial Corp., SouthTrust Corp., SunTrust Banks Inc, Union
Planters Corp., U.S. Bancorp, Wachovia Corp., Wells Fargo & Co., and Zions
Bancorp.
The year-end pre-tax values of each investment are based on share price
appreciation plus dividends paid, with cash dividends reinvested the date they
were paid.
18
TrustCo Bank Corp NY
Total Return Performance
[graph omitted]
Period Ending
-------------------------------------------------------------------
Index 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- --------------------------------------------------------------------------------
TrustCo Bank Corp NY 100.00 153.67 202.36 186.00 206.70 257.51
S&P 500 100.00 133.37 171.44 207.52 188.62 166.22
Super-Regional Banks 100.00 145.12 156.47 127.71 159.48 154.90
SNL Securities LC
2002
TrustCo Bank Corp NY
Total Return Performance
[graph omitted]
Period Ending
-------------------------------------------------------------------------------------------------------------
Index 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ------------------------------------------------------------------------------------------------------------------------------------
TrustCo Bank Corp NY 100.00 130.49 183.38 188.83 260.86 304.55 468.02 616.28 566.48 629.50 784.24
S&P 500 100.00 107.62 118.47 120.03 165.13 202.89 270.59 347.84 421.04 382.69 337.23
Super-Regional Banks 100.00 127.80 133.70 126.47 197.28 273.43 396.80 427.82 349.18 436.06 423.53
SNL Securities LC
2002
19
Employment Contracts and Termination of Employment Arrangements
TrustCo and Trustco Bank have entered into employment agreements with
Robert~A. McCormick, Robert~T. Cushing, Robert J. McCormick, and Nancy~A.
McNamara.
McCormick Employment Agreement
Mr. McCormick's current employment agreement was executed as of January~1,
2002. The Agreement renews on January 1, 2005 and on January 1 of each third
year thereafter for a three-year term until Mr. McCormick receives a non-renewal
notice or he reaches the mandatory retirement age of 70 (or the then-mandatory
retirement age, whichever is greater).
Mr. McCormick's employment agreement provides that his annual compensation
will be his annual base salary plus his executive incentive bonus as they are
negotiated with TrustCo and Trustco Bank. The annual base salary may not be less
than Mr. McCormick's annual base salary for the preceding calendar year (except
in the initial year of the agreement). Mr.~McCormick is entitled to participate
fully in any disability, death benefit, retirement, executive incentive
compensation, or pension plans maintained by TrustCo and/or Trustco Bank.
However, as described in greater detail herein under the caption "Personnel
Advisory Committee Report on Executive Compensation," Mr.~McCormick has ceased
to be eligible to participate in the Trustco Bank Profit Sharing Plan in
consideration of the potential benefits under the TrustCo Executive Officer
Incentive Plan described above. In the event Mr. McCormick's employment is
terminated within twelve months prior to or two years after a change in control,
for any reason, other than good cause, or retirement at the mandatory retirement
age, then he shall receive an amount equal to 2.99 times his then-current annual
compensation, to be paid in a single lump sum within ten days of his
termination. Upon the announcement of a change in control, Mr. McCormick may
notify TrustCo and Trustco Bank of his intent to terminate employment as of the
date of the change in control and receive his termination benefits no later than
fifteen days prior to consummation of the change in control. Mr. McCormick is
also entitled to the pro rata portion of his annual award under the Executive
Officer Incentive Plan, payable no later than 15 days prior to the closing date
of the change in control or, if the change in control is unannounced, within ten
days after the change in control. Mr. McCormick's employment agreement also
provides for a gross-up payment in the event that the amounts payable to him
upon his termination under the employment agreement or any other agreement are
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code.
Upon termination of his employment due to retirement or disability, TrustCo
and/or Trustco Bank shall provide to Mr. McCormick and his wife, for the rest of
Mr. McCormick's life, or the life of his spouse, the same health insurance
benefits provided to Mr. McCormick and his family by TrustCo and Trustco Bank
under their medical insurance plan prior to his termination. TrustCo and Trustco
Bank will also provide to Mr. McCormick for his life the same life insurance
benefits provided to retirees by TrustCo and Trustco Bank under their life
insurance plan.
20
Mr. McCormick's employment agreement defines termination to include (a)~any
reduction in Mr. McCormick's then-current annual compensation (including
executive incentive compensation), disability, death, retirement, pension, or
profit sharing benefits (unless such reductions shall be applied to all Trustco
Bank employees as part of a validly adopted plan of cost containment), or his
responsibilities or duties; (b)~either TrustCo's or Trustco Bank's relocation or
a change in Mr. McCormick's base location; (c)~receipt of a non-renewal notice
pursuant to Mr. McCormick's employment agreement; or (d)~the unilateral election
of Mr. McCormick to terminate his employment agreement. Notwithstanding the
foregoing, the parties to Mr. McCormick's employment agreement have agreed that
Mr. McCormick's ineligibility to participate in the Trustco Bank Profit Sharing
Plan shall not have effected a termination of such employment agreement.
Senior Executive Officers' Employment Agreements
The employment agreements for TrustCo's executive officers named in the
Summary Compensation Table (except for Henry C. Collins, who does not have an
employment agreement), were executed as of January 1, 2002 and include terms
substantially similar to the terms of Robert~A. McCormick's employment agreement
(which is described above).
General Provisions
In addition to termination payments for Mr. McCormick and the named
executive officers, each employment agreement provides for (a)~the payment in
full of each employee's compensation due, including retirement, pension, and
profit sharing plans, through the termination date, (b)~the continuation of
health insurance benefits for the longer of the executive's life or the life of
his spouse and group life insurance benefits for the executive, (c)~the cost of
any legal expenses as a result of such termination, and (d) the transfer of the
executive's company car (at book value) and country club membership.
Performance Bonus Plan
Under the TrustCo Bank Corp NY Performance Bonus Plan, officers and key
employees of TrustCo and its subsidiaries are eligible to be awarded units, the
value of which is based upon the appreciation in value of TrustCo's common stock
between the date of the award and the occurrence of a "change in control" as
defined in the plan. The units so awarded vest, and payments under the plan are
to be made, fifteen days prior to the closing date of an announced change in
control or upon the occurrence of an unannounced change in control or upon a
participant's termination of employment with TrustCo within the year prior to a
change of control. In 1997, Robert~A. McCormick was awarded 1,399,205 units, and
Robert~T. Cushing and Nancy~A. McNamara were each awarded 524,702 units, all at
a base price of $5.95 per unit (after adjustment for the 15% stock split on
November~13, 2001, a 15% stock split on November~13, 2000, and a two for one
stock split on November~12, 1999).
21
THE TRUSTCO BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE TRUSTCO
DIRECTOR NOMINEES AS TRUSTCO DIRECTORS, WHICH IS ITEM 1 ON THE TRUSTCO PROXY
CARD.
Item 2. Ratification of the Appointment of Independent Auditors
KPMG were the independent auditors for TrustCo for the year ended
December~31, 2001, and the Board of Directors has again selected and appointed
them as the independent auditors for the year ending December~31, 2002. A
resolution will be presented at the Annual Meeting to ratify their appointment
as independent auditors. The independent auditors will report on the
consolidated financial statements of TrustCo for the current calendar year and
will perform such other non-audit services as may be required of them.
Representatives of KPMG are expected to be present at the Annual Meeting to make
a statement if they so desire and are also expected to be available to respond
to appropriate questions that may be raised.
During the year ended December~31, 2001, KPMG provided various audit and
non-audit professional services to TrustCo. Audit services so provided included
examination of the consolidated financial statements of TrustCo, review,
assistance, and consultation in connection with the filing of the Form 10-K
Annual Report with the S.E.C., and assistance with accounting and financial
reporting requirements. Nonaudit services so provided included the preparation
and planning of corporate tax returns, audits of benefit plans and compensation
issues, and assistance in relation to potential business acquisitions. Please
refer to the report of TrustCo's Audit Committee, provided above.
Vote Required
The affirmative vote of a majority of all of TrustCo's issued and
outstanding shares of common stock is required to ratify the appointment of KPMG
as TrustCo's independent auditors for the year ending December~31, 2001.
THE TRUSTCO BOARD RECOMMENDS THAT TRUSTCO SHAREHOLDERS VOTE FOR THIS
PROPOSAL, WHICH IS ITEM~2 ON THE TRUSTCO PROXY CARD.
Item 3. Other Matters
TrustCo's Board of Directors is not aware of any other matters that may
come before the Annual Meeting. However, the proxies may be voted with
discretionary authority with respect to any other matters that may properly come
before the Annual Meeting.
S.E.C. FORM 10-K:
TrustCo will provide without charge a copy of its annual report on Form
10-K upon written request. Requests and related inquiries should be directed to:
Henry C. Collins, Secretary, TrustCo Bank Corp NY, P.O. Box 1082, Schenectady,
New York 12301-1082.
Ownership of TrustCo Common Stock by Certain Beneficial Owners
22
TrustCo is not aware of any person who, as of the date hereof, is the
beneficial owner of more than 5% of its common stock.
At March~1, 2002, the Trust Department of Trustco Bank held 4,549,724
shares of TrustCo common stock as executor, trustee, and agent (6.32% of
outstanding shares) not otherwise reported in this Proxy Statement. Neither
TrustCo nor Trustco Bank has any beneficial interest in these shares.
Transactions with TrustCo and Trustco Bank Directors, Executive Officers and
Associates
Some of the directors and executive officers of TrustCo and Trustco Bank,
and some of the corporations and firms with which these individuals are
associated, are also customers of Trustco Bank in the ordinary course of
business, or are indebted to Trustco Bank in respect to loans of $60,000 or
more, and it is anticipated that they will continue to be customers of and
indebted to Trustco Bank in the future. All such loans, however, were made in
the ordinary course of business, do not involve more than normal risk of
collectibility, do not present other unfavorable features, and were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the same time for comparable Trustco Bank transactions with
unaffiliated persons. As of March~1, 2002, the total amount of such loans
represented 1.57% of shareholders' equity of TrustCo.
Insurance for Indemnification of Officers and Directors
TrustCo renewed insurance for the indemnification of its executive officers
and directors and executive officers and directors of Trustco Bank from AIG
effective for the one-year period from October~10, 2001 to October~10, 2002. The
cost of this insurance was $65,110, and coverage is provided to all executive
officers and directors of TrustCo, Trustco Bank, and Trustco Savings Bank.
TrustCo's Board of Directors has no knowledge of any claims made or sum paid
pursuant to such insurance policy during 2001.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
TrustCo's directors and executive officers, and persons who own more than 10% of
a registered class of TrustCo's equity securities to file initial reports of
ownership and reports of changes of ownership in TrustCo's common stock and
other equity securities with the S.E.C. and to furnish TrustCo with copies of
all Section 16(a) reports they file.
Based solely on a review of the copies of such reports furnished to
TrustCo, and written representations that no other reports were required during
the fiscal year ended December~31, 2001, all Section 16(a) filing requirements
have been met, except Robert J. McCormick did not timely file a Section 16(a)
report with respect to shares owned by a minor child. (A Form 3 filed by Robert
J. McCormick on February 6, 2001, inadvertently omitted shares owned by a minor
child.)
23
SHAREHOLDER PROPOSALS
Shareholder proposals to be considered for inclusion in a proxy statement
in connection with any forthcoming annual meeting of shareholders of TrustCo
must be submitted to TrustCo on a timely basis. Proposals for inclusion in
TrustCo's proxy statement and form of proxy for the annual meeting of
shareholders expected to be held in May of 2003 must meet the requirements
established by the Securities and Exchange Commission for shareholder proposals
and must be received by TrustCo at its principal executive offices no later than
December~6, 2002. Proposals intended to be considered at the 2003 annual meeting
but that are not to be included in TrustCo's proxy statement must be received at
TrustCo's principal executive offices not later than February~19, 2003. Any such
proposals, together with any supporting statements, should be directed to the
Secretary of TrustCo.
TRUSTCO SHAREHOLDERS
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, PLEASE
SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING TRUSTCO PROXY CARD IN THE
ENVELOPE PROVIDED. IF YOU PLAN TO ATTEND THE ANNUAL MEETING AND ARE A
SHAREHOLDER OF RECORD, PLEASE MARK THE PROXY CARD APPROPRIATELY AND RETURN IT.
HOWEVER, IF YOUR SHARES ARE NOT REGISTERED IN YOUR OWN NAME, PLEASE ADVISE THE
SHAREHOLDER OF RECORD (YOUR BANK, BROKER, ETC.) THAT YOU WISH TO ATTEND. THAT
FIRM MUST PROVIDE YOU WITH EVIDENCE OF YOUR OWNERSHIP, WHICH WILL ENABLE YOU TO
GAIN ADMITTANCE TO THE ANNUAL MEETING.
24
APPENDIX A.
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board of Directors to assist the
Board in monitoring (1) the integrity of the consolidated financial statements
of the Company, (2) the compliance by the Company with legal and regulatory
requirements, and (3) the independence and performance of the Company's internal
and external auditors. The members of the Audit Committee shall meet the
independence and experience standards of both The Federal Deposit Insurance
Corporation Improvement Act and The National Association of Securities Dealers.
The members of the Audit Committee shall be appointed by the Board of Directors.
The Audit Committee may request any officer or employee of the Company or
the Company's independent auditor to attend a meeting of the Committee.
The Audit Committee shall meet at least three times annually, or more
frequently as circumstances dictate. The Committee will make regular reports to
the Board.
The Audit Committee shall:
1. Review and assess the adequacy of this charter and recommend any
proposed changes to the Board for approval.
2. Review the annual audited consolidated financial statements with
management, including major issues regarding accounting and auditing
principles and practices as well as the adequacy of the internal
controls that could significantly affect the Company's financial
statements.
3. Review with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures impacting the Company's consolidated financial statements.
4. Review with management the Company's quarterly consolidated
financial statements and Form 10-Q filings, including the results of
the independent auditor's review.
5. Evaluate the performance of the independent auditor and recommend
that the Board either appoint or replace the independent auditor.
6. Meet with the independent auditor prior to the audit to review the
planning for the engagement.
7. Receive reports from the independent auditor regarding the
auditor's independence.
8. Obtain from the independent auditors the required disclosures
regarding any material misstatement of the Consolidated Financial
Statements and to the extent that they come to their attention, any
instances of fraud or illegal acts which are required to be disclosed
in accordance with the Private Securities Litigation Reform Act of
1995.
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9. Review the appointment of the Company's internal auditor.
10. Review the significant reports to the Committee prepared by the
internal auditor and management's responses.
11. Review and recommend the internal audit program for Board
approval.
12. Discuss with the independent auditor the matters required to be
discussed by the Statement on Auditing Standards No. 61 relating to
the conduct of the audit.
13. Review with the independent auditor any problems or difficulties
the auditor may have encountered and any management letter provided by
the auditor and the Company's response to that letter. Such review
should include:
a. Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access
to required information, and any disagreements with management.
b. Any significant changes required in the scope of the audit.
c. Any significant recommendations concerning the internal audit
program.
14. Review with the Company's General Counsel legal matters that may
have a material impact on the financial statements, the Company's
compliance policies, and any material reports or inquires received
from regulators or governmental agencies that have not been previously
reviewed by the full Board of Directors.
15. Report to the Board of Directors (as required by the Comptroller
of the Currency) on the performance of supervisory and audit functions
in relation to fiduciary activities.
16. Prepare any report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy
statement.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's consolidated financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to conduct investigations, to
resolve disagreements, if any, between management and the independent auditor or
to assure compliance with laws and regulations and the Company's Code of
Conduct.
March 19, 2002
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APPENDIX B
TRUSTCO BANK CORP NY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
May 20, 2002
The Board of Directors recommends a vote "FOR" proposals 1 and 2 below.
1. Election of Robert T. Cushing, Richard J. Murrray, Jr., and William D. Powers
as directors for three-year terms.
[ ] FOR ALL
[ ] WITHHELD FOR ALL
[ ] FOR ALL EXCEPT the following nominees:__________________________________
2. Ratification of the Appointment of KPMG LLP as Independent Auditors
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
SPECIAL NOTES
[ ] I plan to attend meeting. [ ] I plan to bring a guest.
[ ] Comments on reverse side
SIGNATURES___________________________________ DATE_______________, 2002
Please sign and date this proxy card exactly as your name(s) appears above and
return it promptly whether or not you plan to attend the meeting. If signing for
a corporation or partnership or as an agent, attorney or fiduciary, indicate the
capacity in which you are signing. If you do attend the meeting and decide to
vote by ballot, such vote will supersede this proxy.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TRUSTCO BANK CORP
NY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD AT TRUSTCO BANK CORP. NY,
TRUST BUILDING, - 6TH FLOOR, 192 ERIE BOULEVARD, SCHENECTADY, NEW YORK, ON MAY
20, 2002.
The undersigned hereby appoints M. Norman Brickman and William F. Terry, and
each of them, the proxy or proxies of the undersigned, with full power of
substitution, to vote all shares of common stock of TrustCo Bank Corp NY which
the undersigned is entitled to vote at the Annual Meeting, and at any
adjournments or postponements thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, IT WILL
BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2 AND IN THE
DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
Please sign and date this proxy card on the reverse side and mail promptly in
the enclosed postage-paid envelope. If you do not sign and return a proxy or
attend the meeting and vote by ballot, your shares cannot be counted.
Comments:_______________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(If you have written in the above space, please mark the "Comments" box on the
other side of this card.)
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