SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
COMMUNITY BANCORP.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) 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.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date Filed:
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April _, 2007
Dear Fellow Shareholders:
You are cordially invited to the Annual Meeting of the Shareholders of
Community Bancorp., which will be held at 5:30 p.m. at the Elks Club, Derby,
Vermont, on Tuesday, May 15, 2007. As in prior years, a dinner will be served
following the meeting.
Our proxy materials and Annual Report for 2006 are enclosed for your
review. This year, we have nominated St. Johnsbury businessman Peter J. Murphy
to stand for election to a three year term on the Board of Directors. Peter is
the President and a principal of Murphy Realty Co., Inc., a commercial real
estate development company based in St. Johnsbury. Mr. Murphy would replace
Director Dale R. Wells, who has decided not to stand for reelection to the
Board. We appreciate Mr. Wells' many years of service on the Board and his
valuable perspective as a business leader in our St. Johnsbury market area.
In addition to election of directors and ratification of the selection of
the Company's external auditors, this year you will be asked to vote on an
amendment to the Company's Amended and Restated Articles of Incorporation, to
increase the number of authorized shares of common stock from 6,000,000 to
10,000,000 shares, and to authorize the creation of a new class of stock
consisting of 1,000,000 shares of preferred stock issuable in one or more
series, with relative rights and preferences of each series to be determined by
the Board of Directors at the time of issuance. For the reasons explained in
the enclosed proxy statement, we urge you to vote in favor of the amendment.
I encourage you to sign, date and return your proxy card promptly so that
your shares will be represented and can be voted at the meeting whether or not
you are present in person. You may withdraw your proxy and vote in person at
the meeting if you choose to do so.
As always, thank you for your continued support of Community Bancorp.
I look forward to seeing you at the annual meeting.
Sincerely,
COMMUNITY BANCORP.
Richard C. White
Chairman & CEO
RCW/cb
Enclosures
[LOGO]
COMMUNITY BANCORP.
Derby Road
Route 5
Derby, Vermont 05829
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 15, 2007
The annual meeting of shareholders of Community Bancorp. will be held at
the Elks Club, Derby, Vermont, on Tuesday, May 15, 2007, at 5:30 p.m., for the
following purposes:
1. To elect four directors to the class whose term will expire at the
annual meeting of shareholders in 2010;
2. To amend Article Five of the Company's Amended and Restated
Articles of Incorporation to (i) increase the number of authorized
common shares from 6,000,000 to 10,000,000, and (ii) create a new
class of preferred shares issuable in one or more series, with the
rights and preferences of such shares established by the Board of
Directors at the time of issuance;
3. To ratify the selection of the independent public accounting firm
of Berry, Dunn, McNeil & Parker as the Company's external auditor
for the fiscal year ending December 31, 2007; and
4. To transact such other business as may properly be brought before
the meeting.
The close of business on March 13, 2007, has been fixed as the record
date for determining shareholders entitled to notice of, and to vote at, the
annual meeting.
By Order of the Board of Directors,
CHRIS BUMPS
Corporate Secretary
Derby, Vermont
April __, 2007
YOUR PROXY IS ENCLOSED. PLEASE FILL IN, DATE, SIGN AND RETURN YOUR PROXY
PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE WHETHER OR NOT YOU PLAN TO BE
PRESENT AT THE MEETING. YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
IT IS IMPORTANT THAT YOU RETURN YOUR COMPLETED PROXY PROMPTLY.
1
INDEX
PROXY STATEMENT 1
ANNUAL MEETING OF SHAREHOLDERS 1
GENERAL VOTING INFORMATION 1
Who is entitled to vote at the annual meeting? 1
How many shares are entitled to vote at the meeting? 1
How many votes do I have? 1
How do I vote? 1
How do I vote if my shares are held in the name of a broker or bank? 1
How do I vote if my shares are held in the Company's 401(k) Plan? 2
Can I change my vote after submitting the proxy card? 2
What are "broker non-votes"? 2
What constitutes a quorum and how are votes counted for that purpose? 3
What does it mean if I received more than one proxy card? 3
How are proxies being solicited and who pays the expenses? 3
How many votes are required for the election of directors (Article 1)? 3
How many votes are required to approve the proposed amendment to the
Company's Amended and Restated Articles of Incorporation (Article 2?) 4
How many votes are required to ratify the selection of Berry, Dunn,
McNeil & Parker as the Company's independent auditor? 4
How many votes are required to approve any other matter that
may come before the meeting? 4
May shareholders submit nominations for election as directors or for
consideration of other matters? 4
SHARE OWNERSHIP INFORMATION 5
Section 16(a) Beneficial Ownership Reporting Compliance 6
ARTICLE 1 6
ELECTION OF DIRECTORS 6
Directors' Fees and Other Compensation 9
Directors' Deferred Compensation Plan 10
Directors' Retirement Plan 10
Vote Required 11
CORPORATE GOVERNANCE 11
Director Independence 11
Board Meeting Attendance 12
Board Committees 12
Shareholder Communications with the Board 14
Attendance at Annual Shareholders Meeting 15
Compensation Committee Interlocks and Insider Participation 15
Transactions with Management 15
AUDIT COMMITTEE REPORT 15
EXECUTIVE OFFICERS 17
COMPENSATION DISCUSSION AND ANALYSIS 17
COMPENSATION COMMITTEE REPORT 17
EXECUTIVE COMPENSATION 18
2
ARTICLE 2 18
PROPOSAL TO AMEND ARTICLES OF INCORPORATION TO INCREASE COMMONSHARES
AND CREATE A CLASS OF PREFERRED STOCK 18
Vote Required 20
ARTICLE 3 20
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS 20
Pre-Approval Required for Services of Independent Auditors 21
Fees Paid to Independent Auditors 21
Vote Required 21
ANNUAL REPORT 22
SHAREHOLDER NOMINATIONS AND PROPOSALS 22
Shareholder Nominations 22
Shareholder Proposals 22
Use of Discretionary Authority in Connection with Shareholder
Nominations and Proposals 23
Inclusion of Shareholder Proposals in Company Proxy Materials 23
OTHER MATTERS 23
VOTING QUESTIONS OR ASSISTANCE 23
EXHIBIT A 25
Proposed Amendment to Increase Authorized Common Stock and Create a
Class of Preferred Stock 25
1
COMMUNITY BANCORP.
Derby Road
Route 5
Derby, Vermont 05829
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 15, 2007
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Community Bancorp. (the "Company") for use
at the annual meeting of shareholders and any adjournments of that meeting. The
annual meeting will be held on Tuesday, May 15, 2007, at 5:30 p.m. at the Elks
Club in Derby, Vermont. The proxy statement and related proxy card are first
being sent to shareholders on or about April __, 2007.
GENERAL VOTING INFORMATION
Who is entitled to vote at the annual meeting?
Only shareholders of record on the record date for the meeting are entitled to
vote. The record date is the close of business on March 13, 2007.
How many shares are entitled to vote at the meeting?
As of the record date for the meeting (March 13, 2007), there were 4,130,213
shares of the Company's common stock issued and outstanding, each of which is
entitled to one vote with respect to each matter to be voted on at the meeting.
How many votes do I have?
Each issued and outstanding share of the Company's common stock, $2.50 par
value per share, is entitled to one vote on each matter presented for vote at
the meeting.
How do I vote?
If you are a shareholder of record, you may vote by completing and returning
the enclosed proxy card in the postage-paid envelope or by voting in person at
the meeting. You are a shareholder of record if you own Company common stock in
your own name on the stock records maintained by our transfer agent, which is
currently Registrar and Transfer Company. A written ballot will be distributed
at the meeting for those shareholders of record who wish to vote in person.
2
How do I vote if my shares are held in the name of a broker or bank?
If your shares are held by a broker or bank, you must obtain a proxy from them
and follow the voting instructions on that form. This is the case because your
broker or bank, not you, is the record holder of the shares for purposes of
determining who is entitled to vote the shares at the meeting and is therefore
the party in whose name the shares must be voted.
How do I vote if my shares are held in the Company's 401(k) plan?
If you are a participant in the Company stock fund under the Company's
Retirement Savings 401(K) Plan, you will receive a proxy card to vote the
pro-rated number of shares in which you own an interest indirectly through that
fund, together with a postage-paid envelope to return your completed proxy card
to Registrar and Transfer Company, the Company's transfer agent, which will
tabulate the votes of plan participants. A single proxy card is then submitted
to the Company reflecting the aggregate of the votes on all completed proxies
submitted by plan participants.
Can I change my vote after submitting the proxy card?
Yes. If you submit your proxy card for shares registered in your name and later
decide that you wish to change or revoke your proxy, you may do so at any time
before the proxy is exercised at the annual meeting, by
o giving written notice of revocation to Chris Bumps, Corporate
Secretary, Community Bancorp., P.O. Box 259, Derby, Vermont 05829
o executing a later-dated proxy card and giving written notice to the
Corporate Secretary; or
o voting in person after giving written notice of revocation of your
proxy to the Corporate Secretary.
If you need another proxy card to revoke an earlier proxy or if you have any
questions, please call the Corporate Secretary at 802-334-7915.
The last vote you submit will supersede all your prior vote(s).
If your shares are held through a broker or other nominee and you wish to
change your vote, you should contact the broker or nominee for instructions.
Similarly, if your shares are held in the Company's 401(K) Plan and you wish to
change your vote, you should contact Registrar and Transfer Company for
instructions. Contact information for Registrar and Transfer Company is shown
on the last page of this proxy statement.
What are "broker non-votes"?
Shares held in "street name" by brokers (meaning shares held in the name of
brokers or their nominees but actually owned by the brokers' customers) may
only be voted by the record holder. Generally, a broker may vote shares
beneficially owned by its customer without seeking voting instructions from the
beneficial owner only on routine matters such as election of directors and
ratification of the selection of the independent auditors. If a matter is not
routine, but rather is considered "nondiscretionary" under ordinary brokerage
industry practices, the broker may not vote the shares without instructions
from the beneficial owner. When a broker submits proxies
3
voting less than all of the shares held of record for any reason (including
with respect to non-routine matters where instructions have not been received
from the beneficial owner), the "missing" votes are so-called "broker
non-votes."
Article 2 (Increase in Common Stock and Creation of a New Class of Preferred
Stock) is considered nondiscretionary and thus a broker may not vote shares
held in street name on that proposal without instructions from the beneficial
owner.
What constitutes a quorum and how are votes counted for that purpose?
In order to convene the meeting, a quorum must be present, and in order to take
action on any matter, a quorum must be present as to such matter. A majority
(more than 50%) of the outstanding shares of the Company's common stock,
present in person or represented by proxy and entitled to vote, will constitute
a quorum to convene the meeting and to take action as to each matter to be
acted upon at the meeting. "Broker non-votes" as to routine matters and shares
represented by proxies or ballots, including those marked "WITHHOLD" on Article
1 (Election of Directors) or "ABSTAIN" on Article 3 (Ratification of Selection
of Independent Auditors), will be treated as shares present or represented at
the meeting and entitled to vote for purposes of determining a quorum. Broker
non-votes as to non-routine matters, such as Article 2 (Increase in Common
Stock and Creation of a New Class of Preferred Stock), will not be considered
present and entitled to vote for purposes of determining a quorum as to such
matters because, without instructions from the beneficial owner, the broker
does not have authority to represent or vote those shares at the meeting.
Shares represented by proxies or ballots marked "ABSTAIN" on Article 2 will be
considered present and entitled to vote for purposes of determining a quorum on
such matter.
What does it mean if I received more than one proxy card?
If you received more than one proxy card, your shares are registered in
different names (for example, "John Smith" and "J. Smith") or are in more than
one account. Sign and return all proxy cards to ensure that all your shares are
voted. For instructions on how to register all your accounts in the same name
and address, you should contact the Corporate Secretary at 802-334-7915 or the
Company's transfer agent, Registrar and Transfer Company, at the contact
location shown on the last page of this proxy statement.
How are proxies being solicited and who pays the expenses?
Proxies are being solicited by mail. They may also be solicited by the
Company's directors and officers and by the directors, officers and employees
of the Bank. Those individuals may solicit proxies personally or by telephone
or electronic communication but they will not receive any additional
compensation for such efforts. In addition, the Company has arranged with
brokerage houses, banks and other custodians, nominees and fiduciaries to send
the proxy materials to their principals and will reimburse them for
out-of-pocket expenses they incur in forwarding the materials.
4
How many votes are required for the election of directors (Article 1)?
In accordance with the Company's bylaws, in order to be elected under Article 1
(Election of Directors) a nominee for director must receive the affirmative
vote of at least a majority of the shares present in person or represented by
proxy at the meeting and entitled to vote. Broker non-votes, if any, and shares
represented by proxies or ballots marked "WITHHOLD" on Article 1 (Election of
Directors), with respect to one or more individual nominees or to the entire
slate of nominees, will have the same effect on the outcome of the election as
a vote against the nominees or slate of nominees, as the case may be.
Votes on Article 1 will be counted and the vote results announced at the annual
meeting by the inspectors of election.
How many votes are required to approve the proposed amendment to the Company's
Amended and Restated Articles of Incorporation (Article 2)?
Approval of the proposal to amend the Company's Amended and Restated Articles
of Incorporation for the purpose of authorizing additional shares of common
stock and the creation of a new class of preferred stock will require that more
votes be cast "FOR" the proposal than "AGAINST" it. Broker non-votes, if any,
and shares represented by proxies or ballots marked "ABSTAIN" on Article 2 will
have no effect on the outcome of the vote on Article 2.
How many votes are required to ratify the selection of Berry, Dunn, Mcneil &
Parker as the Company's independent auditor (Article 3)?
Approval of selection of the Company's independent auditor will require that
more votes are cast "FOR" than are cast "AGAINST" the proposal. Shares
represented by proxies or ballots marked "ABSTAIN" on Article 3 (Ratification
of Selection of Independent Auditors) and broker non-votes, if any, are not
treated as votes cast and, therefore, will have no effect on the outcome of the
vote on Article 3.
Votes on Article 3 will be counted and the vote results announced at the annual
meeting by the inspectors of election.
How many votes are required to approve any other matter that may come before
the meeting?
As of the date of this proxy statement, the management and directors of the
Company do not know of any other matter that may be put to a vote at the
meeting. If such a matter does arise, any shares represented by proxies may be
voted at the discretion of the attorneys-in-fact named in the proxies, to the
extent permitted by law, in accordance with the recommendations of management.
Approval of any such other matter would ordinarily require that more votes be
cast for the matter than against. Abstentions from voting and broker non-votes,
if any, are not treated as votes cast and therefore, would have no effect on
the vote to approve any such other matter.
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May shareholders submit nominations for election as directors or for
consideration of other matters?
The Company's bylaws include a process shareholders should follow if they wish
to submit director nominations or propose other action for vote by the
shareholders. The deadline for submissions relating to the 2007 annual meeting
was initially fixed at January 2, 2007, but was extended to March 26, 2007 in
view of the delayed annual meeting date this year. The deadline for submissions
for the 2008 annual meeting is January 8, 2008 Additional information about
this process is contained elsewhere in this proxy statement under the caption
"SHAREHOLDER NOMINATIONS AND PROPOSALS."
In addition, the Corporate Governance/Nominating Committee of the Board of
Directors will consider recommendations made by shareholders for possible board
nominees. Additional information about this process is contained elsewhere in
this proxy statement under the caption "CORPORATE GOVERNANCE-Board
Committees-Corporate Governance/ Nominating Committee."
SHARE OWNERSHIP INFORMATION
The following table shows the amount of common stock beneficially owned
by all incumbent directors, nominees for director and executive officers of the
Company individually and as a group as of March 13, 2007, the record date for
the meeting. Except as otherwise indicated in the footnotes to the table, the
named individuals possess sole voting and investment power over the shares
listed.
Number of Shares Beneficially
Owned and Percent of Class
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Number of Shares Percent of Class
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Directors, Nominees & Executive Officers
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Thomas E. Adams (1) 26,415 .65%
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Aminta K. Conant 400 .01%
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Jacques R. Couture (2) 8049 .19%
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Elwood G. Duckless (3) 144,015 3.49%
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Michael H. Dunn (4) 74,837 1.81%
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Rosemary M. Lalime 51,573 1.25%
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Marcel M. Locke (5) 12,501 .30%
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Stephen P. Marsh (6) 54,252 1.31%
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Dorothy R. Mitchell 915 .02%
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Anne T. Moore 22,109 .55%
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Peter J. Murphy 2,180 .05%
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Dale R. Wells (7) 17,029 .41%
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Richard C. White (8) 59,434 1.44%
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Alan A. Wing (9) 9,214 .22%
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All Directors, Nominees & Executive
Officers as a Group (14 in number) (10) 484,360 11.73%
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(1) Includes 10,996 shares held in an IRA for Mr. Adams' benefit.
(2) Includes (i) 4,523 shares held by Mr. Couture jointly with his wife, as
to which voting and investment power is shared; (ii) 76 shares held
jointly with Mr. Couture's son; and (iii) 972 shares held in an IRA for
Mr. Couture's benefit. Does not include 975 shares held in an IRA for the
benefit of Mr. Couture's spouse, as to which beneficial ownership is
disclaimed.
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(3) Includes 27,023 shares held in trust for the benefit of Mrs. Duckless.
Mr. Duckless has shared voting and investment power over such shares.
(4) Includes 8,687 shares held by a company of which Mr. Dunn is President
and over which he has sole voting power.
(5) Includes 5,534 shares held by Mr. Locke jointly with his wife, as to
which voting and investment power is shared.
(6) Includes (i) 28,606 shares held by Mr. Marsh jointly with his wife, as to
which voting and investment power is shared; (ii) 24,720 shares
indirectly owned by Mr. Marsh through his participation in the Community
Bancorp. stock fund under the Company's Retirement Savings Plan; and
(iii) 27,644 shares pledged as collateral for a loan with a nonaffiliated
bank.
(7) Includes 7,433 shares held in an IRA for Mr. Wells' benefit.
(8) Includes (i) 53,194 shares indirectly owned by Mr. White through his
participation in the Community Bancorp. stock fund under the Company's
Retirement Savings Plan; (ii) 5,120 shares held in an IRA for Mr. White's
benefit; and (iii) 1,437 shares held by Mr. White jointly with his wife,
as to which voting and investment power is shared.
(9) All such shares are held by Mr. Wing indirectly through his participation
in the Company stock fund under the Company's Retirement Savings Plan.
(10) Includes 67,199 shares as to which voting and investment power is shared.
In addition, as of March 13, 2007, 552,012 shares (7.68%) of the
Company's issued and outstanding common stock) were held in fiduciary or
custodial capacity by the Company's affiliated trust and investment management
company, Community Financial Services Group, LLC ("CFSG"), including 317,146
shares, or 6.68%, held on behalf of the Retirement Savings (401(k)) Plan
trustee and participants, including the three executive officers named in the
share ownership table. It is the practice of CFSG not to vote shares of the
Company's common stock unless instructions are received from the beneficial
owner.
Except as set forth above, the Company is not aware of any individual,
group, corporation or other entity owning beneficially more than 5% of the
Company's outstanding common stock. The Company has no other authorized class
of stock.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (SEC) and to furnish the
Company with copies of all such reports. The Company has reviewed the copies of
the Section 16 reports filed by the directors and officers, or written
representations from them that no Forms 5 were required to be filed for 2006.
Based solely on such review, and except as noted in the following paragraph,
the Company believes that all Section 16 filing requirements applicable to its
officers and directors for 2006 were complied with.
The Initial Report of Beneficial Ownership on Form 3 filed by Director
Dorothy Mitchell after her election to the Board in May, 2006 inadvertently
omitted 105 shares of the Company's Common Stock held by her in a brokerage
account. The omission was corrected on Ms. Mitchell's Annual Statement of
Changes in Beneficial Ownership on Form 5, filed with the SEC on February 12,
2007.
7
ARTICLE 1
ELECTION OF DIRECTORS
The Amended and Restated Articles of Association and the By-laws of the
Company provide for a Board of no fewer than nine and no more than twenty-five
directors, to be divided into three classes, as nearly equal in number as
possible, each class serving for a period of three years. The Board of
Directors currently consists of twelve members and the Board has voted to fix
the number of directors at twelve for the ensuing year. After more than ten
years of valuable service on the Board, as well as prior service on the Bank's
St. Johnsbury Advisory Board, Director Dale R. Wells has decided not to stand
for reelection. The Board has nominated Peter J. Murphy to fill the resulting
vacancy. Mr. Murphy has served on the Bank's St. Johnsbury Advisory Board since
its formation in 1995, and like Mr. Wells, he is a businessman based in our St.
Johnsbury market area.
Additional information on the general criteria the Committee uses to
evaluate potential Board candidates is set forth below under the caption
"CORPORATE GOVERNANCE - Board Committees - Corporate Governance/Nominating
Committee."
Unless authority is withheld, proxies solicited hereby will be voted in
favor of the four nominees to hold office until the 2010 annual meeting of
shareholders, or until their respective successors are elected and qualify. If
for any reason not now known by the Company, any of such nominees should not be
able to serve, proxies will be voted for a substitute nominee or nominees
designated by the Board of Directors, or to fix the number of directors at
fewer than twelve, as the directors in their discretion may deem advisable.
The following table sets forth certain information concerning each of the
nominees and incumbent directors:
Director of
Community
Bancorp.
Name and Age Principal Employment Since(1)
Nominees to serve (if elected) until 2010 annual meeting:
Michael H. Dunn, Age 65 Book Dealer 1998
Derby, VT
Marcel M. Locke, Age 67 Former Proprietor (now retired) 1986
Parkview Garage
Orleans, VT
Stephen P. Marsh, Age 59 President, Chief Operating Officer, 1998
Treasurer and Director, Community
Bancorp.; President, Chief Operating
Officer and Director, Community
National Bank
Derby, VT
8
Peter J. Murphy, Age 48 President and Principal
Murphy Realty Co., Inc.
St. Johnsbury, VT
(commercial real estate development)
Incumbent Directors to serve until 2009 annual meeting:
Aminta K. Conant, Age 53 Director of Lean Six Sigma 2006
Lydall, Inc.
St. Johnsbury, VT
(auto heat shield manufacturer)
Elwood G. Duckless, Age 66 Past President (now retired) 1987
Newport Electric Co.
Newport, VT
Rosemary M. Lalime, Age 60 Principal Broker and Owner 1985
Coldwell Banker All Seasons Realty
Newport, VT
Anne T. Moore, Age 63 Principal Real Estate Broker 1993
Taylor Moore Agency Inc.
Derby, VT
(insurance and real estate)
Incumbent Directors to serve until 2008 annual meeting:
Thomas E. Adams, Age 60 Owner, NPC Realty Co., Inc. 1986
Holland, VT
Jacques R. Couture, Age 56 Dairy Farmer/Maple Producer 1992
Westfield, VT
Dorothy R. Mitchell, Age 62 Board member, Vermont Student 2006
Assistance Corporation; and Co-Chair,
Vermont Historical Society Capital
Campaign (both community service
volunteer positions)
Montpelier, VT
Richard C. White, Age 61 Chairman, Chief Executive Officer and 1983
Director, Community Bancorp. and
Community National Bank
Derby, VT
9
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(1) Each nominee and each incumbent director is also a director of Community
National Bank. The dates indicated in the table reflect only service on
the Board of Directors of the Company and not Community National Bank or
its regional advisory boards.
Each incumbent director and nominee has held the principal occupation
shown in the table for at least the last five years, except for (i) Mr. White,
who, prior to January 6, 2004, also served as President of both the Company and
the Bank, and (ii) Mr. Marsh, who, prior to becoming President and Chief
Operating Officer of the Company and the Bank on January 6, 2004, served as
Vice President of the Company and Executive Vice President and Chief Financial
Officer of the Bank.
DIRECTORS' FEES AND OTHER COMPENSATION
Directors of the Company who are not salaried employees of the Bank
receive an annual retainer of $5,500 for serving on the Board and a fee of $275
per Board meeting and $275 per committee meeting. In addition, a member of the
Audit Committee participates in the meetings of management's Disclosure Control
Committee, which reviews the Company's periodic reports filed with the SEC, and
receives a per meeting fee of $275 for attendance at such meetings. Directors
of the Company also generally serve as directors of the Bank. Bank Board
members who are not salaried employees of the Bank receive an annual retainer
of $5,500, a fee of $275 per Board meeting and a fee of $275 per committee
meeting. Directors of the Company and the Bank are allowed up to five absences
per year from Board and/or committee meetings without forfeiting the per
meeting fee for a missed meeting. In addition to the fees for meetings of the
Bank's Board of Directors and committee participation, each Bank director
attends at least seven meetings per year of the Bank's local advisory boards
and receives a fee of $275 per meeting, except for Mr. White and Mr. Marsh, who
do not receive any fees for such attendance. This fee structure is intended to
compensate the Bank's directors for attendance at Board meetings as well as for
the time spent by them in activities directly related to their service on the
Board for which they receive no additional compensation, including but not
limited to attendance at the annual directors' retreat and attendance at
educational seminars or programs on pertinent banking or corporate governance
topics.
From time to time directors may perform evaluations of loan collateral
for the Bank and are reimbursed for such services at the rate of $25 per hour.
The table below summarizes the aggregate compensation paid to the
Company's non-employee directors for service on the Boards of the Company and
the Bank during 2006:
2006 Director Compensation
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Fees Earned or All Other
Name Paid in Cash Compensation(2) Total
-----------------------------------------------------------------------
Thomas E. Adams $20,500 $20,500
-----------------------------------------------------------------------
Aminta K. Conant $13,250 $13,250
-----------------------------------------------------------------------
Jacques R. Couture $18,500 $18,500
-----------------------------------------------------------------------
Elwood G. Duckless $19,000 $19,000
-----------------------------------------------------------------------
Michael H. Dunn $18,750 $19,500
-----------------------------------------------------------------------
Rosemary M. Lalime $12,350 $19,000
-----------------------------------------------------------------------
Marcel M. Locke $18,750 $784 $19,534
-----------------------------------------------------------------------
Dorothy R. Mitchell $12,350 $12,350
-----------------------------------------------------------------------
Anne T. Moore $18,750(1) $18,750
-----------------------------------------------------------------------
Dale R. Wells $19,250 $19,250
-----------------------------------------------------------------------
--------------------
(1) All fees were deferred under the Directors' Deferred Compensation Plan
(described below).
(2) Fees paid for collateral appraisals.
10
The Company does not pay any stock-based compensation to its directors, nor
does it pay any preferential or above market rate of interest on accrued
deferred fees under the Directors' Deferred Compensation Plan (described below)
or on accrued retirement benefits under the Directors' Retirement Plan
(described below).
Directors' Deferred Compensation Plan
Under the terms of the Company's Deferred Compensation Plan for
Directors, directors of the Company and/or the Bank may elect to defer current
receipt of some or all of their director fees. Deferrals are credited to a cash
account which bears interest at the rate in effect for the Bank's three-year
certificate of deposit, as adjusted from time to time. Payments are deferred
until the participant's retirement, death or disability, or at an earlier or
later date elected by the participant and are made in a lump sum or in monthly
installments, as selected by the participant. Amounts deferred and accumulated
interest on deferrals represent a general unsecured obligation of the Company
and no assets of the Company or the Bank have been segregated to satisfy the
Company's obligations under the Plan. Deferrals under the Plan were temporarily
suspended during 2005, as management evaluated the impact of the federal
American Jobs Creation Act of 2004 (the "Act") on the Plan. Effective January
1, 2006, deferrals were permitted to resume. It is expected that the plan will
be amended prior to year end 2007 to comply with the terms of the Act,
following issuance by the IRS later this year of final regulations implementing
new Internal Revenue Code section 409A, added by the Act. Pending such formal
amendment, the plan will be administered in compliance with the Act.
Directors' Retirement Plan
Prior to 2005, directors who served on the Board of the Company and/or
the Bank for at least five years and who were not salaried employees of the
Bank were entitled to receive upon retirement from the Board a lump sum payment
of $1,000 for each year of Board service. For this purpose, service rendered as
a director of the Company and of the Bank was not compensated separately.
Following a re-evaluation of the Company's plans affected by the American Jobs
Creation Act of 2004, during 2005 the Company terminated any further accruals
under the plan for years after 2004 and Board compensation was adjusted to
compensate for the loss of this retirement benefit. Prior to termination of the
plan, $82,000 had been accrued by the Company as a retirement benefit expense
under this arrangement. Benefit amounts accrued under the plan do not earn
interest and will be paid out to participants upon their retirement from the
Board. The retirement benefits under this arrangement represent a general
unsecured obligation of the Company and no assets of the Company or the Bank
have been segregated to satisfy the Company's obligations under the
arrangement.
11
Vote Required
Election of a nominee for director will require the affirmative vote of a
majority of the shares present in person or represented by proxy at the annual
meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ARTICLE 1.
CORPORATE GOVERNANCE
Director Independence
Based on the information available to it, the Company's Board of
Directors has determined that director nominee Peter Murphy and all incumbent
directors are independent within the meaning of the listing standards of the
National Association of Securities Dealers (NASD), except for Messrs. White and
Marsh, who are executive officers of the Company.
Under current NASD standards, an independent director is a person other
than an officer or employee of the Company or the Bank or any other individual
having a relationship which, in the opinion of the Board of Directors, would
interfere with the exercise of independent judgment in carrying out his or her
responsibilities as a director. Under NASD standards, a director of the Company
is not considered independent if he or she:
o has been employed in any capacity by the Company or the Bank during
the past three years;
o has accepted, or has a close family member who accepted, any
payments from the Company or the Bank in excess of $60,000 in any
consecutive twelve-month period during the last three years, except
for
o payments relating to ordinary loan or deposit relationships
with the Bank
o compensation for Board service
o compensation paid to a close family member who is not an
executive officer of the Company or the Bank
o certain retirement benefits or non-discretionary compensation
and
o payments arising solely from investments in the Company's
common stock;
o has a close family member who during the past three years was an
executive officer of the Company or the Bank;
o has been a principal, or has a close family member who was a
principal, of any organization to which the Company made or from
which it received payments, in any of the past three years, that
exceeded the greater of $200,000 or 5% of the annual consolidated
gross revenues of the other entity;
o has been an executive officer of any other entity, or has a close
family member who was an executive officer of any other entity,
where any of the Company's executives serves on that other entity's
compensation committee; or
o has been, or had a family member who was, a partner or employee of
the Company's independent auditor at any time during the last three
years.
In determining whether a director or nominee for director is independent,
the Board considers all relevant facts and circumstances and may consider a
director or nominee not to be independent even if none of the disqualifying
factors listed above applies. However, if any of the above disqualifying
factors applies, a director or nominee will not be considered independent.
12
Board Meeting Attendance
The Company's Board of Directors held four regular meetings and five special
meetings during 2006. Each incumbent director attended at least 75% of the
aggregate of all such meetings. In addition, all of the Company's directors
serve on the Bank's Board of Directors, which meets monthly, and on various
Board committees. Each of the directors attended at least 75% of the scheduled
Bank Board and committee meetings during 2006, except for Aminta Conant, who
attended approximately 70% of such meetings. When nominated and elected to the
Board last year, Ms. Conant, an officer at a large manufacturing firm, had
several preexisting work-related commitments that conflicted with the Bank
Board and committee meeting schedule. Our expectation is that Ms. Conant will
be able to attend at least 75% of the Bank Board and committee meetings in
2007.
Board Committees
The Board of Directors has established three standing committees to help
it in fulfilling its responsibilities. Members of the committees are nominated
by the Corporate Governance/Nominating Committee and appointed by the Board.
All members of the three standing committees under "Director Independence" are
considered to be independent under the NASD standards described above.
Additional information about each of the three standing committees is set forth
below. The committee charters are available on the Company's website at
www.communitybancorpvt.com.
Compensation Committee. The responsibilities of the Company's
Compensation Committee include reviewing and making recommendations to the
Board of Directors concerning the compensation of the Company's executive
officers and directors, establishing performance goals under the Officer
Incentive Plan and approving matters relating to other compensation plans. The
Committee also reviewed management's Compensation Discussion and Analysis
contained in this proxy statement and incorporated by reference into the
Company's Annual Report on Form 10-K for the year ended December 31, 2006.
A report of the Committee regarding management's Compensation Discussion
and Analysis is set forth elsewhere in this proxy statement under the caption
"COMPENSATION COMMITTEE REPORT."
The members of the Compensation Committee are Rosemary Lalime (Chair),
Thomas Adams, Aminta Conant, Michael Dunn and Dale Wells. During 2006, the
Compensation Committee met two times. The Committee's charter is available on
the Company's website at www.communitybancorpvt.com.
Corporate Governance/Nominating Committee. The Corporate
Governance/Nominating Committee considers and makes recommendations on matters
related to the practices, policies and procedures of the Board and takes a
leadership role in shaping the corporate governance environment of the Company.
As part of its duties, the Committee assesses the size, structure and
composition of the Board and its committees, coordinates evaluation of Board
and committee performance, makes recommendations as to the structure of Board
meetings and flow of information to the Board, reviews Board compensation and
reviews and makes recommendations as to the size, structure, composition and
functions of the Bank's regional advisory boards.
13
The Committee also acts as a screening and nominating committee for
candidates considered for election to the Board. In this capacity it has
established minimum criteria for Board nominees. The Committee believes it
would be desirable for a Board candidate to possess the following
characteristics: (a) have experience in the management or leadership of a
substantial private business enterprise, educational, religious or not-for-
profit organization, or such other professional experience as the Committee
deems appropriate; (b) be a shareholder of the Company; (c) be willing and able
to devote full interest and attendance to the Board and its committees; (d)
bring business to the Company and its affiliate, Community Financial Services
Group, including personal, business and investment accounts; (e) help develop
business and promote the Company and its subsidiary and affiliate throughout
our service area; (f) provide advice and counsel to the Board and senior
management; (g) bring a diversity of interests to the Board as evidenced by
participation in community, charitable or other similar activities; (h) have
the ability to serve at least seven years before reaching the mandatory
retirement age; and (i) maintain integrity and confidentiality at all times.
Evaluation of candidates occurs on the basis of materials submitted by or on
behalf of the candidate. If a candidate continues to be of interest after
initial consideration by the Committee, additional information about her/him
will be obtained through inquiries to various sources and, if warranted,
interviews.
St. Johnsbury businessman Peter J. Murphy was suggested to management by
retiring Director Dale Wells. Management forwarded that recommendation, along
with several other names, to the Corporate Governance/ Nominating Committee for
consideration. The Committee believed strongly that Mr. Wells' successor should
be another business person from St. Johnsbury, and determined that Mr. Murphy
meets the Board's criteria for membership. Accordingly, the Committee
recommended Mr. Murphy for election by shareholders at the annual meeting.
The Committee will consider prospective nominees recommended by
shareholders. Any shareholder wishing to recommend a person for consideration
as a Board nominee should submit to the Committee the same information that
would be required under the Company's By-laws if the shareholder sought to make
a nomination from the floor at the annual meeting. The required information is
described elsewhere in this proxy statement under the caption "SHAREHOLDER
NOMINATIONS AND PROPOSALS-Shareholder Nominations." The Committee uses the same
criteria for evaluating candidates recommended by shareholders as it does for
those proposed by Board members or management.
The members of the Corporate Governance/Nominating Committee are Jacques
Couture (Chair), Rosemary Lalime, Marcel Locke, Dorothy Mitchell and Anne
Moore. During 2006, the Committee met two times. The Committee's charter is
available on the Company's website at www.communitybancorpvt.com.
Audit Committee. The Audit Committee, which operates under a written
charter, oversees the Company's accounting and financial reporting process,
internal controls and audits, and consults with management, the internal
auditors and the independent auditors on, among other items, matters related to
the annual audit, the published financial statements and the accounting
principles applied. As part of its duties, the Audit Committee appoints,
evaluates and retains the Company's independent auditors. It has responsibility
for the compensation, termination and oversight of the Company's independent
auditors and evaluates the independent auditors' qualifications, performance
and independence. The Committee has similar authority regarding selection and
oversight of the Company's internal auditor. In addition, the Audit Committee
pre-approves all services provided by the independent auditors, including both
audit and permitted non-audit services. Those services and fees are described
elsewhere in this proxy statement under the caption "RATIFICATION OF SELECTION
OF INDEPENDENT AUDITORS-Fees Paid to Independent Auditors."
14
The Audit Committee has established so-called "whistleblower procedures"
for the receipt, retention and treatment, on a confidential basis, of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters. These complaint procedures, as well as the Audit
Committee's charter, are posted on the Company's website at
www.communitybancorpvt.com.
Under SEC rules, companies must disclose whether at least one member of
the Audit Committee qualifies as a "financial expert." As defined by the SEC,
the concept of financial expert is heavily focused on individuals who have
prepared or audited public company financial statements or have had similar
management experience or responsibility or others performing those or
comparable functions. Given the Company's rural market area and the limited
number of public companies in it, the Board has not deemed it advisable to
require that the Audit Committee include a person qualifying as a financial
expert under this definition. The Board has considered the business experience,
past performance as a Board and/or Audit Committee member and other
qualifications of each of the members of the Audit Committee and has concluded
that each of them has demonstrated that he or she is capable of (i)
understanding generally accepted accounting principles ("GAAP") and financial
statements, (ii) assessing the general application of GAAP principles in
connection with the accounting for estimates, accruals and reserves, (iii)
analyzing and evaluating the Company's financial statements, (iv) understanding
internal controls and procedures for financial reporting, and (v) understanding
audit committee functions. Given the business experience and acumen of each of
the members of the Audit Committee, the Board believes that each of such
persons, although not a "financial expert" under the SEC definition, is
nevertheless qualified to carry out all of the duties and responsibilities of a
member of the Company's Audit Committee.
The members of the Audit Committee are Thomas Adams (Chair), Aminta
Conant, Elwood Duckless, Michael Dunn and Dale Wells. During 2006, the
Company's Audit Committee met seven times. A report of the Company's Audit
Committee is set forth elsewhere in this proxy statement under the caption
"AUDIT COMMITTEE REPORT."
Shareholder Communications with the Board
The Board welcomes communications from shareholders on matters relating
to the Company's business operations and corporate governance. Shareholders may
communicate with the Board, or its committees or individual directors, by
writing to the following address: Board of Directors [or Board Committee or
name of individual director]-Shareholder Communications; c/o Corporate
Secretary, Community Bancorp., P.O. Box 259, Derby, Vermont 05829. The
Corporate Secretary will forward communications to the Board or appropriate
committee or individual director.
15
Attendance at Annual Shareholders Meeting
All directors are encouraged and expected to attend the annual
shareholders meeting. All of the Company's ten incumbent directors attended the
2006 annual meeting, as did the two director nominees elected at that meeting.
Compensation Committee Interlocks and Insider Participation
The Company is not aware of the existence of any interlocking
relationships between the senior management of the Company and that of any
other company.
Transactions with Management
The spouse and son of director Anne Moore are the principal shareholders
and executive officers of the Taylor Moore Agency, Inc. (an insurance agency
and real estate brokerage firm), and Mrs. Moore is an employee of the agency.
Since January 1, 2006, the Company and its subsidiary purchased various
insurance coverages through the agency and paid $291,619 in premiums for such
coverage. This amount represents gross premiums paid, and not commissions
earned by the agency.
Director nominee Peter J. Murphy is the President and a principal of
Murphy Realty Co., Inc., a commercial real estate development firm. Murphy
Realty Co., Inc. owns the Price Chopper Supermarket premises in St. Johnsbury
at which Community National Bank leases space for its St. Johnsbury branch.
Some of the incumbent directors, nominees and executive officers of the
Company, and some of the corporations and firms with which these individuals
are associated, are customers of Community National Bank in the ordinary course
of business, or have loans outstanding from the Bank, and it is anticipated
that they will continue to be customers of and indebted to the Bank in the
future. All such loans were made in the ordinary course of business, do not
involve more than normal risk of collectibility or 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 Bank
transactions with unaffiliated persons, although directors were generally
allowed the lowest interest rate given to others on comparable loans.
AUDIT COMMITTEE REPORT
The Audit Committee consists of five Directors, each of whom meets
applicable legal standards for independence. The Audit Committee's primary
responsibility is to oversee the Company's financial reporting process and to
report the results of its activities to the Board. Management is responsible
for preparing the Company's financial statements and the independent auditors
are responsible for auditing those statements.
16
Among the responsibilities of the Audit Committee include selecting an
accounting firm to be engaged as the Company's independent auditors.
Additionally, and as appropriate, the Audit Committee reviews and evaluates,
discusses and consults with the Company's management, the Company's internal
auditor and its independent auditors, regarding the following matters:
o The plan and budget for, and the independent auditors' report on,
the audit of the Company's financial statements;
o The Company's financial disclosure documents, including all
financial statements and reports filed with the SEC or sent to
shareholders;
o Changes in the Company's auditing practices, principles, controls
or methodologies, or in the Company's financial statements.
o Significant developments in auditing rules;
o The adequacy of the Company's internal auditing controls, and its
accounting, financial and auditing personnel; and
o The establishment and maintenance of an environment within the
Company that promotes and encourages quality financial reporting,
sound business risk practices and ethical behavior.
The Audit Committee is responsible for recommending to the Board that the
Company's financial statements be included in the Company's annual report. The
Committee took a number of steps in making this recommendation for the year
ended December 31, 2006. First, the Committee discussed with Berry, Dunn,
McNeil & Parker, the Company's independent accountants for 2006, those matters
Berry, Dunn, McNeil & Parker communicated to and discussed with the Committee
under Statement on Auditing Standards No. 61 (Communications with Audit
Committees), including information regarding the scope and results of the
audit. These communications and discussions are intended to assist the Audit
Committee in overseeing the financial reporting and disclosure process. Second,
the Committee discussed with, and received a letter from, Berry, Dunn, McNeil &
Parker concerning their independence from the Company and its management as
required under Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees). This discussion and disclosure informed the
Committee of Berry, Dunn, McNeil & Parker's independence and assisted the
Committee in evaluating such independence. The Committee also considered
applicable auditor independence standards under the Sarbanes-Oxley Act and
related regulations of the Securities and Exchange Commission. Finally, the
Committee reviewed and discussed the Company's financial statements with the
Company's management.
Based on the discussions with Berry, Dunn, McNeil & Parker, on the
independence discussions, and on the financial statement review, the Audit
Committee recommended to the Board that the financial statements be included in
the Company's 2006 Annual Report on Form 10-K for filing with the Securities
and Exchange Commission.
The Audit Committee has established procedures for the treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters. The Committee has also established procedures for
the confidential, anonymous submission by employees of concerns regarding
questionable accounting or auditing matters. No such complaints or concerns
were received in 2006.
17
Submitted by the Community Bancorp. Audit Committee,
Thomas E. Adams, Chair
Aminta Conant
Elwood G. Duckless
Michael H. Dunn
Dale R. Wells
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
executive officers of the Company.
Position(s) with the Company and Subsidiaries
Name and Age and Occupation for the Past Five Years
-------------------------------------------------------------------------------
Richard C. White, 61 Chief Executive Officer and Chairman and Director,
Community Bancorp. and Community National Bank (1)
Stephen P. Marsh, 59 President, Chief Operating Officer, Treasurer and
Director, Community Bancorp.; and President, Chief
Operating Officer and Director, Community National
Bank (2)
Alan A. Wing, 62 Vice President, Community Bancorp.; and Executive
Vice President, Community National Bank (3)
(1) Prior to January 6, 2004, Mr. White also served as President of both
Community Bancorp. and Community National Bank.
(2) Prior to becoming President and Chief Operating Officer of Community
Bancorp. and Community National Bank on January 6, 2004, Mr. Marsh served
as Vice President of Community Bancorp. and Executive Vice President and
Chief Financial Officer of Community National Bank.
(3) Prior to becoming Executive Vice President of Community National Bank on
January 6, 2004, Mr. Wing served as the Bank's Senior Vice President.
COMPENSATON DISCUSSION AND ANALYSIS
[TO BE SUPPLIED]
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with management the
foregoing Compensation Discussion and Analysis. Based upon this review and
discussion, the Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this proxy statement and in
the Company's Annual Report on Form 10-K for the year end December 31, 2006
filed with the SEC.
18
Submitted by the Community Bancorp. Compensation Committee,
Rosemary M. Lalime, Chair
Thomas E. Adams
Aminta Conant
Michael H. Dunn
Dale R. Wells
EXECUTIVE COMPENSATION
[TO BE SUPPLIED]
ARTICLE 2
PROPOSAL TO AMEND ARTICLES OF INCORPORATION TO INCREASE COMMON SHARES
AND CREATE A CLASS OF PREFERRED STOCK
Article Five of the Company's Amended and Restated Articles of
Incorporation currently authorizes the Company to issue up to 6,000,000 shares
of common stock, $2.50 par value per share. The proposed amendment would revise
Article Five to increase the authorized shares of common stock to 10,000,000
and, in addition, would authorize 1,000,000 shares of preferred stock, without
par value, issuable in one or more series. The Board believes that the proposed
increase in the authorized common stock and creation of a class of preferred
stock are important to the Company's future growth and success and are
therefore in the best interests of the Company and its shareholders. If the
amendment is approved, the Board would have the authority to issue additional
common shares and new preferred shares without further shareholder vote, unless
a vote was otherwise required by law.
Of the 6,000,000 authorized shares of common stock, as of the record date
for this meeting, there were 4,339,723 shares issued of which 4,130,213 (net of
repurchases) are currently outstanding. If the amendment is approved, the
additional shares of common stock would have identical rights and privileges as
currently outstanding shares of common stock.
The Company's Amended and Restated Articles of Incorporation do not
currently authorize any preferred stock. If the amendment is approved, the
Board would have the authority to issue, without additional shareholder
approval, up to 1,000,000 shares of what is commonly referred to as "blank
check" or "series preferred" stock, with authority vested in the Board to
create one or more series and to establish the designations and related rights
and preferences of any series, as permitted by Vermont law. The Board believes
that authorizing a class of series preferred stock will provide the Company
with greater flexibility in structuring acquisitions, joint ventures, capital
raising transactions and accomplishing other corporate purposes, without the
delay and expense of calling a special meeting to obtain a shareholder vote to
approve additional shares.
If the amendment is approved, the Board would have the authority to
determine by resolution at the time of issuance, the following features of any
preferred shares, among others:
19
o the designation of the series, which may be by distinguishing
number, letter or title,
o the number of shares of the series,
o the amounts payable on, and the preferences, if any, of the shares
of the series in respect of dividends, and whether dividends, if
any, will be cumulative or noncumulative,
o dates at which dividends, if any, will be payable,
o the redemption rights and price or prices, if any, for shares of
the series,
o the terms and amounts of any sinking fund provided for the purchase
of redemption of shares of the series,
o the amounts payable on, and the preferences, if any, of the shares
of the series in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
company,
o whether the shares of the series will be convertible into or
exchangeable for shares of any other class of series, or any other
security, of the Company or any other company, and, if so, the
specification of such other class or series or other security, the
conversion or exchange price or prices or rate or rates, any
adjustments thereof, the date or dates at which the shares will be
convertible or exchangeable and any other terms and conditions upon
which the conversion or exchange may be made,
o the restrictions on the issuance of shares of the same series or of
any other class or series, and
o the voting rights, if any, of the holders of shares of the series.
The effect of the issuance of series preferred stock on the common
shareholders cannot be determined until the Board designates the specific
rights of the series being issued. However, the effects could include, among
other things, restricting dividends on the Company's common stock, diluting the
voting power of the common stock, reducing the market price of the common
stock, or impairing the liquidation rights of the common stock. In accordance
with applicable law, the Board would be required to make any determination to
issue shares of preferred stock based on its judgment as to the best interests
of the Company and its shareholders at the time of issuance.
Similarly, the issuance of additional shares of common stock may,
depending upon the circumstances under which such shares are issued, reduce
shareholders' equity per share and may reduce the percentage ownership or
voting power of common stock held by existing shareholders. In addition, the
holders of the Company's common stock would not have any preemptive rights to
subscribe to or purchase any additional common or preferred shares that might
be issued in the future. Should the amendment be approved, the Board does not
intend to seek shareholder approval prior to any issuance of additional shares
of common stock unless otherwise required by law.
The issuance of additional common or preferred stock could be used by the
Board to dilute the stock ownership or voting power of persons seeking to gain
control of the Company, making it more difficult for a third party to effect a
change in control. Similarly, the issuance of additional common or preferred
stock to persons allied with Company management could make it more difficult to
remove current management by diluting the stock ownership or voting rights of
persons seeking to cause their removal. The Board is not aware of any attempt,
or contemplated attempt, by any person to acquire control of the Company and,
notwithstanding its potential anti-takeover effects, the amendment is not being
proposed as an anti-takeover device.
20
The additional shares will provide the Company with the flexibility to
issue shares from time to time as may be desirable for the Company's business,
such as raising capital for ongoing operations or implementation of strategic
plans, business and asset acquisitions, stock splits and dividends, payment of
stock-based compensation should the Board deem it appropriate in the future,
and for other appropriate business purposes. The Board has not entered into any
commitments to issue additional common or preferred shares at this time and has
no present plans to issue any such shares.
While the proposed amendment may have anti-takeover ramifications, the
Board believes that the financial and strategic flexibility provided by the
amendment outweighs any disadvantages. To the extent that the amendment may
have anti-takeover effects, it may encourage persons seeking to acquire the
Company to negotiate directly with the Board, thus enabling the Board to
consider the proposed transaction in a manner that best serves the interests of
shareholders.
The text of Article Five of the Company's Amended and Restated Articles
of Incorporation, both as currently in effect and as proposed to be amended, is
set forth in Exhibit A to this proxy statement.
Vote Required
Under applicable Vermont law, approval of the proposed amendment to the
Company's Amended and Restated Articles of Incorporation will require that a
majority of the Company's issued and outstanding shares of common stock be
voted "FOR" the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ARTICLE 2.
ARTICLE 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board has appointed Berry, Dunn, McNeil &
Parker ("BDMP") as the Company's independent auditors to audit Community
Bancorp.'s consolidated financial statements for the year ending December 31,
2007. BDMP served as the Company's independent auditors for 2006 and 2005 and
also provided certain tax and other audit-related services in those years. See
"Fees Paid to Independent Auditors" below. Representatives of BDMP are expected
to attend the annual meeting, where they will be available to respond to
appropriate questions and, if they desire, to make a statement.
Although neither Vermont law nor the Company's By-laws requires the
submission of the selection of the Company's independent auditors to the
shareholders for approval, the Board of Directors believes it is appropriate to
give shareholders the opportunity to ratify the decision of the Audit
Committee. Neither the Audit Committee nor the Board has made any determination
as to what action, if any, would be taken if the shareholders do not ratify the
appointment of BDMP as the Company's independent auditors for 2007.
21
Pre-Approval Required for Services of Independent Auditors
As part of its duties, the Audit Committee is required to pre-approve
audit and non audit services performed by the Company's independent auditors,
in order to ensure that the provision of such services does not impair the
auditors' independence. Under applicable law, certain services may not be
performed by the auditors under any circumstances. Consistent with these legal
requirements, the Audit Committee's charter provides that all permitted
services must be approved by the Audit Committee in advance. However, the Audit
Committee may delegate this authority to a member of the Committee, who is
required to inform the entire Committee of any approval taken pursuant to that
delegated authority. The Audit Committee does not delegate to management its
responsibilities to pre-approve services performed by the independent auditors.
Each of the services performed by BDMP described under the captions below was
preapproved by the Audit Committee.
Fees Paid to Independent Auditors
Audit Fees. The aggregate fees billed for professional services rendered by
BDMP for the audit of the Company's annual financial statements included in
each of the Company's Forms 10-K and review of financial statements included in
each of the Company's Forms 10-Q for the years ended December 31, 2006 and
2005, and consent procedures related to the filing of Form S-3 in 2005 were
$79,346 and $75,500, respectively.
Audit-Related Fees. The aggregate fees billed for assurance and related
services rendered by BDMP related to the performance of the audit or review of
the Company's financial statements in the years ended December 31, 2006 and
2005 were $10,642 and $12,173, respectively. These services related to the
audit of the Company's employee benefit plan, implementation of the
Sarbanes-Oxley Act of 2002 and the application of accounting pronouncements.
Tax Fees. The aggregate fees billed for professional services rendered by BDMP
for tax compliance, tax advice and tax planning in the years ended December 31,
2006 and 2005 were $9,916 and $11,605, respectively. These services included
preparation of federal tax returns, review of estimated tax payments, review of
compliance with information reporting requirements and tax planning.
All Other Fees. There were no other fees billed for services provided by BDMP,
other than the services reported in the paragraphs above, in the years ended
December 31, 2006 and 2005.
Vote Required
Ratification of the selection of the Company's independent auditors for
the ensuing year will require that more votes be cast "FOR" than "AGAINST" the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ARTICLE 3.
22
ANNUAL REPORT
The Company's Annual Report to Shareholders for the year ended December
31, 2006, including consolidated financial statements and the report of BDMP
thereon, accompanies this proxy statement.
SHAREHOLDER NOMINATIONS AND PROPOSALS
Shareholder Nominations
A shareholder may make a nomination for director from the floor at the
annual meeting, under procedures specified in Section 2.12 of the Company's
By-Laws. Advance written notice of proposed nominations must be given to the
Company. Such notice must be received by the Company on or before January 8,
2008 in order for a nomination to be made from the floor at the 2008 annual
meeting. The notice of nomination should be sent to the attention of the
Corporate Secretary, Community Bancorp., P.O. Box 259, Derby, Vermont 05829 and
must contain the following information for each nomination: (a) the name and
address of the shareholder of record who intends to make the nomination, and if
acting on behalf of a beneficial owner, the name and address of such beneficial
owner; (b) the number of shares of the Company's common stock owned of record
or beneficially by the nominating shareholder; (c) a representation that the
nominating shareholder is a shareholder of record of stock of the Company
entitled to vote at the meeting and intends to appear in person or by proxy at
the meeting to nominate the person specified in the notice; (d) the name and
address of the person to be nominated; (e) a description of all arrangements or
understandings between the shareholder and the nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination is to
be made by the shareholder; (f) such other information regarding the nominee as
would have been required to be included in a proxy statement filed under the
proxy rules of the Securities and Exchange Commission had the nominee been
nominated by the Board of Directors; and (g) the written consent of the nominee
to serve as a director of the Company if elected.
In addition to the above process for shareholder nominations from the
floor, the Compensation Committee will consider shareholder recommendations for
possible Board nominees. Information about this process is contained elsewhere
in this proxy statement under the caption "CORPORATE GOVERNANCE - Board
Committees - Corporate Governance / Nominating Committee."
Shareholder Proposals
A shareholder may present matters from the floor for action by the
shareholders at the annual meeting, under procedures specified in Section 2.12
of the Company's By-Laws. Advance written notice of any matters to be presented
must be given to the Company. Such notice must be received by the Company on or
before January 8, 2008 in order to be considered from the floor at the 2008
annual meeting. The notice should be sent to the attention of the Corporate
Secretary, Community Bancorp., P.O. Box 259, Derby, Vermont 05829 and must
contain the following information: (a) the name and address of the shareholder
who intends to make a proposal, and if acting on behalf of a beneficial owner,
the name and address of such beneficial owner; (b) the number of shares of the
Company's common stock owned of record or beneficially by the
shareholder-proponent; (c) a representation that the shareholder is a holder of
record of the stock of the Company entitled to vote at such annual meeting and
intends to appear in person or by proxy at the meeting to present his or her
proposal; (d) a brief description of the proposal; (e) the reasons for making
the proposal; and (f) any direct or indirect interest of the shareholder or any
person on whose behalf the shareholder is acting, in making such proposal.
Use of Discretionary Authority in Connection with Shareholder Nominations and
Proposals
Under the rules and regulations of the SEC, the Company will be permitted
to use its discretionary authority conferred in the proxy card for the annual
meeting to vote on a shareholder proposal or director nominee even if the
proposal or nominee has not been discussed in the Company's proxy statement,
unless the shareholder-proponent has given timely notice to the Company of his
or her intention to present the proposal or nominee for vote at the meeting.
Assuming timely notice has been given, the proxies will only be voted on the
matter pursuant to the grant of discretionary authority if the Company has
described the proposal in the proxy statement and indicated how the persons
named as proxies intend to vote on the matter. In order to be considered timely
for this purpose for the 2008 annual meeting, the shareholder-proponent must
furnish written notice to the Company of the proposal or nominee no later than
January 8, 2008, the same date as described above for notice of proposals to be
made from the floor at the annual meeting.
Inclusion of Shareholder Proposals in Company Proxy Materials
If a shareholder seeks to have his or her proposals included in the
Company's proxy materials for the 2008 annual meeting, the notification
deadline is earlier than noted in the preceding paragraphs. In order to be
considered for inclusion in the Company's proxy material for the 2008 annual
meeting, shareholder proposals must be submitted in writing to the Secretary of
the Company not later than December 17, 2007, and must comply in all respects
with applicable rules and regulations of the Securities and Exchange Commission
relating to such inclusion. Any such proposal will be omitted from or included
in the proxy material at the discretion of the Board of Directors of the
Company, subject to such rules and regulations.
Questions about any of the procedures for shareholder nominations or
proposals should be directed to the Corporate Secretary, Community Bancorp.,
P.O. Box 259, Derby, Vermont 05829.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors knows of
no business that may come before the 2007 annual meeting other than the two
items described in this proxy statement. If any other matters should properly
come before the meeting, it is expected that proxies will be voted on such
matters in accordance with the recommendations of management.
24
VOTING QUESTIONS OR ASSISTANCE
If you have any questions or require assistance with the voting process,
contact either Corporate Secretary Chris Bumps or the Company's stock transfer
agent, Registrar & Transfer Company, at the address or telephone number shown
below:
Chris Bumps, Corporate Secretary Registrar & Transfer Company
Community Bancorp. Attn: Investor Relations Dept.
P.O. Box 259 10 Commerce Drive
Derby, VT 04829 Cranford, NJ 07016
(802) 334-7915 (800) 368-5948
25
EXHIBIT A
Proposed Amendment to Increase Authorized Common Stock
and Create a Class of Preferred Stock
Text of Article Five of the Amended and Restated Articles of Incorporation as
currently in effect:
ARTICLE FIVE
STOCK
The aggregate number of shares the Corporation shall have authority to
issue is 6,000,000 shares, common, with a par value of $2.50 per share.
Text of Article Five of the Amended and Restated Articles of Incorporation as
proposed to be amended:*
ARTICLE FIVE
STOCK
Section A. The aggregate number of shares of common stock the Corporation shall
have authority to issue is [6,000,000] 10,000,000* shares, [common,] with a par
value of $2.50 per share.
Section B. The aggregate number of shares of preferred stock the Corporation
shall have authority to issue is 1,000,000, without par value, issuable in one
or more series. The Board of Directors of the Corporation is hereby authorized
to divide the shares of preferred stock into one or more series and to fix and
determine by resolution the relative rights and preferences of any series so
established, to the fullest extent permitted by law, including, without
limitation, any voting powers, dividend rights, conversion rights, preemptive
rights, liquidation preferences and redemption provisions.*
--------------------
[ ] Indicates deletion.
* Indicates new text.
PROXY
COMMUNITY BANCORP.
Proxy for Annual Meeting of Shareholders
May 15, 2007
The undersigned hereby appoints Leonard Lippens and Frank Allard, and each of
them individually, as his or her lawful agents and proxies with full power of
substitution in each, to vote all of the common stock of Community Bancorp.
that the undersigned is (are) entitled to vote at the Annual Meeting of
Shareholders to be held at the Elks Club, Derby, Vermont, on Tuesday, May 15,
2007 at 5:30 p.m. and at any adjournment thereof.
1. ELECTION OF FOUR DIRECTORS to the Class expiring in 2010
[ ] FOR ALL NOMINEES LISTED [ ] WITHHOLD AUTHORITY to vote for
BELOW all (except as marked to the contrary)
nominees listed below
To serve until the Annual Meeting in 2010: MICHAEL H. DUNN,
MARCEL M. LOCKE, STEPHEN P. MARSH and PETER J. MURPHY.
(INSTRUCTION: To withhold authority to vote for any individual nominee while
voting in favor of the others, strike a line through the nominee's name shown
above.)
2. TO AMEND THE COMPANY'S AMENDED AND RESTATED ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK TO 10,000,000
AND TO CREATE A NEW CLASS OF STOCK CONSISTING OF 1,000,000 SHARES OF
PREFERRED STOCK ISSUABLE IN ONE OR MORE SERIES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO RATIFY THE SELECTION OF THE INDEPENDENT PUBLIC ACCOUNTING FIRM OF
BERRY, DUNN, MCNEIL & PARKER AS THE COMPANY'S EXTERNAL AUDITORS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 2007.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the persons named above are authorized to act upon such
other business as may properly come before the meeting or any adjournment
thereof. If any such business is presented, it is the intention of the proxies
to vote the shares represented hereby in accordance with the recommendations of
management.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholders. If this Proxy is properly executed but no
direction is made, this Proxy will be voted FOR Items 1 and 2.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED
AT ANY TIME BEFORE IT IS EXERCISED.
Dated: _______________, 2007
---------------------------------- ----------------------------------
Signature(s) of Shareholder(s) Signature(s) of Shareholder(s)
Please sign exactly as name is printed on this proxy. When signing as attorney,
executor, administrator, trustee, guardian, officer, or in any other
representative capacity, please so indicate. All joint owners should sign.
DINNER RESERVATION
A dinner will be served for all registered shareholders immediately following
the Annual Meeting. Please indicate whether you plan to attend the dinner: I/We
____ will ____ will not attend the dinner. If stock is held jointly, indicate
the number attending the dinner.
[ ] One [ ] Two