CMTV Community Bancorp Inc (QX)

Directors’ Fees and Other Compensation

Only the outside (non-employee) directors are paid for their service on the Boards of the Company and the Bank. All fees are paid in cash. The Company and the Bank do not pay any stock-based compensation to directors.

The schedule of fees in effect during 2020 for our nonemployee directors was as follows:

This fee structure is designed to compensate our outside directors for attendance at Board meetings, as well as for the time they spend in activities directly related to their service on the Board for which they receive no additional compensation, such as attendance at the annual directors’ retreat and attendance at educational seminars or programs on pertinent banking or corporate governance topics.

Directors’ Deferred Compensation Plan

The directors may choose to defer current receipt of some or all of their Company or Bank director fees under the Company’s Deferred Compensation Plan for Directors. Deferrals are credited to a cash account that bears interest at the rate the Bank pays on a three-year certificate of deposit, as adjusted from time to time. Payments are deferred until the director’s retirement, death or disability, or at an earlier or later date elected by the director. The director may choose to receive his or her deferrals and accumulated interest in a lump sum or monthly installments. Deferred fees and accumulated interest represent a general unsecured obligation of the Company. No assets of the Company or the Bank have been segregated to satisfy the Company’s obligations under the Plan.

Directors’ Retirement Plan

Prior to 2005, the Company maintained a non-qualified retirement plan for the Company’s outside directors. Non-employee directors who served on the Board of the Company or the Bank for at least five years between 1994 and 2004 are entitled to receive upon retirement a lump sum payment of $1,000 for each year of Board service. For this purpose, service as a director of the Company and of the Bank during the same year is not counted separately. Following a re-evaluation of the Company’s benefit plans affected by IRC Section 409A, the Company terminated any further accruals under the plan for years after 2004 and Board fees were increased to compensate for the loss of this retirement benefit.

As of December 31, 2020, the total remaining accrued and unpaid benefit for all directors covered by the plan was $33,000. The participating directors are fully vested in their accrued benefits and would be entitled to payout of the full benefit upon retirement from the Board for any reason, regardless of age. Directors Adams, Couture, and Lalime each have an accumulated lump sum retirement benefit of $11,000. Accrued benefits do not earn interest, are not adjusted for inflation and will be paid out to participants when they retire from the Board. All benefit accruals under the plan represent a general unsecured obligation of the Company. No assets of the Company or the Bank have been segregated to satisfy the Company’s obligations under the plan.

Vote Required

Election of a nominee for director will require the affirmative vote of a majority of the shares present at the virtual meeting or represented by proxy at the annual meeting and entitled to vote. A vote to “WITHHOLD AUTHORITY” as to a nominee will have the same effect as a vote against such nominee.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1 TO ELECT INCUMBENT DIRECTORS AUSTIN, BAKER, BOUFFARD, CONANT AND LALIME TO A THREE YEAR TERM.

CORPORATE GOVERNANCE

Director Independence

The primary responsibility of the Board of Directors is to provide objective, independent judgment in its management oversight function, and our Board’s composition, which is heavily weighted toward independent directors, reflects that principle. Although the Company’s common stock is not listed on NASDAQ, our Board uses the definition of independence contained in the NASDAQ listing standards in its annual evaluation of Board member independence. Under current NASDAQ standards, a director is considered independent if he or she is not an officer or employee of the Company or the Bank and does not have any other relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out his or her responsibilities as a director. Under NASDAQ standards, a director of the Company is not considered independent if he or she:

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 apply, a director or nominee will not be considered independent.

Based on the information available to it, the Company’s Board of Directors has determined that each of the incumbent directors is independent within the meaning of the listing standards of NASDAQ, except for director, President and CEO Kathryn Austin and director Jacques Couture, who is the brother of the Company’s Corporate Secretary and Treasurer and the Bank’s Executive Vice President and CFO, Louise Bonvechio.

Board Leadership Structure and Risk Oversight

Our Board of Directors believes that each business is unique, and that therefore, the appropriate board leadership structure will depend upon each company’s unique circumstances and needs at the time. In the past the positions of Board Chair and CEO at the Company generally have been held by the same individual. However, the Board has sometimes chosen to alter this pattern, such as following the CEO’s retirement. The positions were separated from 2008-2010, as Stephen Marsh transitioned into his management leadership role following the retirement of the previous CEO, Richard White, who remained as Board Chair during the transition period. The positions of CEO and Board Chair were again combined beginning in 2011, with Mr. Marsh serving in both capacities through the end of 2016. Following Mr. Marsh’s retirement as CEO at the end of 2016 and Kathy Austin’s appointment as his successor in January 2017, the CEO and Board Chair positions are again separated. The Board believes that division of the CEO and Board Chair positions during a period of management succession contributes to the smooth transition of the Company’s top executive leadership position, while at the same time ensuring that the outgoing CEO’s valuable experience, judgment and service remain available to the Company in a prominent leadership role during the transition period.

The Board believes that the Company has been well served over the years by a leadership structure guided by the Corporate Governance/Nominating Committee that includes a Board Chair with in-depth managerial and operational knowledge of the banking industry and the Company’s business operations and markets. This structure fosters clear accountability, efficient and effective decision-making and focus on strategic priorities. The Board also believes this structure helps to facilitate the efficient and timely flow of information between management and the Board.

While the Board of Directors believes that having the position of Board Chair held by the current or immediate past CEO is conducive to our Company’s efficient operation and strategic development, the Board is also mindful of its obligation to provide independent oversight of management. In order to enhance its oversight function, the Board has created the position of lead independent director, which is currently held by long-serving director Rosemary Lalime. The lead director presides over executive sessions of the independent directors. The Board believes that this structure strikes an appropriate balance by providing for both a Board Chair with extensive executive experience with the Company and knowledge of its operations, and a lead director to help ensure that the Board provides independent oversight and perspective.

The Board of Directors plays an active role, as a whole and also at the committee level, in oversight of the risks facing the Company and ensuring that management has the skills and resources to identify and manage the risks within the organization. While risks are inherent in any business, effective management of those risks can contribute significantly to the ultimate success of an enterprise. As a community banking organization, we face a number of risks, including general and local economic risk, credit risk, interest rate risk, liquidity risk, operational risk, strategic risk and reputational risk. Management is responsible for the day-to-day management of risks the Company faces, while the Board, as a whole and through its committees, is responsible for the general oversight of risk management. In order to identify and manage the Company’s risks more effectively, the Risk Management Committee of the Bank’s Board of Directors is provided with a detailed review and analysis of the risks facing the Company on a quarterly basis. This facilitates the Committee’s oversight role by providing the Committee members with information on the Company’s enterprise-wide risk program framework and on the Company’s methods of identifying, monitoring, managing and controlling risks. Other Board committees also contribute significantly to the Board’s oversight role in risk management. In particular, the Audit Committee plays an important role in monitoring and assessing our financial, legal and organizational risks and at least one member of the Committee sits on the Company’s Disclosure Control Committee, which reviews our periodic reports under the Securities Exchange Act prior to filing with the SEC. The Compensation Committee monitors and assesses risks associated with our compensation policies and practices, including the establishment of appropriate incentives that encourage performance without also encouraging excessive risk-taking. The Board’s Corporate Governance/Nominating Committee contributes to risk mitigation by its formulation of the Company’s corporate governance policies, which help to establish a “tone at the top” that values and encourages diligence, honesty and integrity in the conduct of the Company’s business. Committees of the Bank’s Board of Directors, in addition to the Risk Management Committee referred to above, also contribute to the Company’s risk management program. Additionally, the Board and executive management engage in strategic planning at an off-site retreat annually, which provides an opportunity to focus on long-term goals and challenges.

Board and Shareholder Meeting Attendance

The Company’s Board of Directors held four regular meetings and four special meetings during 2020. Each incumbent director attended at least 75% of the aggregate of all Company Board meetings and meetings of Company Board committees on which he or she served during the year. All of the Company’s incumbent directors also attended meetings of the Bank’s Board, which meets more frequently than the Company’s Board, and meetings of its committees on which they serve.

All directors are encouraged and expected to attend the annual shareholders meeting. All of the Company’s incumbent directors attended the 2020 annual meeting.

Board Committees

The Board of Directors has established three standing committees to help it in fulfilling its responsibilities: Audit; Compensation; and Corporate Governance/Nominating. Members of the committees are nominated by the Corporate Governance/Nominating Committee and appointed by the Board. Except as otherwise noted below, all members of the three standing committees are considered to be independent under the NASDAQ standards described above. Director Jacques Couture, the Chair of the Corporate Governance/Nominating Committee, is not considered independent under NASDAQ standards due to his sibling relationship with Corporate Secretary and Treasurer, and Bank Executive Vice President and CFO Louise Bonvechio. President and CEO Kathryn Austin, who serves on the Compensation and Corporate Governance/Nominating Committees, is not considered independent under the NASDAQ standards due to her executive management positions with the Company. Additional information about each of the three standing committees is set forth below.

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 performs the functions of a human resources committee for Community National Bank. A report of the Committee regarding executive compensation 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, Kathryn Austin, Bruce Baker, David Bouffard, Aminta Conant, Stephen Marsh and James Wheeler. Director Baker joined the Committee on January 1, 2021. During 2020, the Committee met three 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 Company’s corporate governance environment. 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 and reviews Board compensation. The Committee also reviews and makes recommendations to the Board as to the size, structure, composition and functions of the Bank’s advisory council.

The Committee also acts as a screening and nominating committee for candidates considered for appointment or 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:

The Nominating/Corporate Governance Committee does not currently have a formal diversity policy. However, the Committee and the Board believe that it is important and desirable for the Board to include members with diverse business experience, backgrounds and viewpoints. In considering candidates for the Board, the Committee reviews their particular qualifications, strengths and attributes individually and in relation to the Board as a whole, with the aim of complementing and strengthening the overall composition of the Board.

Evaluation of external 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.

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 bylaws 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 OTHER PROPOSALS—Bylaw Requirements for Shareholder Nominations and Other Proposals.” 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), Kathryn Austin, David Laforce, Stephen Marsh, Emma Marvin, Dorothy Mitchell, Jeffrey Moore and Fred Oeschger. During 2020, 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. The Audit Committee 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 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 “PROPOSAL 2 – RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS—Fees Paid to Independent Auditors.” The Committee is also involved in the review of the Company’s periodic reports filed with the SEC, including participation by one of its members in the meetings of the Company’s Disclosure Control Committee.

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. These procedures are in addition to the Board’s general policy, described below, regarding shareholder communications with the Board.

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 for 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), Bruce Baker, David Bouffard, Aminta Conant, Rosemary Lalime and James Wheeler. Director Baker joined the Committee on January 1, 2021. All members of the Audit Committee are considered independent directors under the applicable NASDAQ standard as well as under the standards applicable to FDIC-insured depository institutions and their holding companies with assets of $500 million or more. During 2020, the Committee met four times. A report of the 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]; Community Bancorp.—Shareholder Communications; c/o Assistant Corporate Secretary, Community Bancorp., 4811 US Route 5, Newport, Vermont 05855. The Assistant Corporate Secretary will forward communications to the Board or appropriate committee or individual director.

Code of Conduct and Ethics

The Company maintains a Code of Ethics for Senior Financial Officers and the Principal Executive Officer, which is available on the Company's website at www.communitybancorpvt.com.  There were no waivers of any provision of the Code during 2020.

Transactions with Related Persons and Certain Other Directorships

Director Bruce Baker is a member of the law firm Clarke Demas & Baker PLLC, which performed various legal services for the Bank, on arm’s length terms, during 2020.

Director Fredric Oeschger is the President and principal shareholder of Fred’s Energy, a plumbing and heating contractor and fuel oil distributor based in Orleans, Vermont, from which the Company and the Bank purchased plumbing and heating services and heating oil, on arm’s length terms, during 2020.

Director James Wheeler, Jr. is a member of the law firm Downs Rachlin Martin PLLC, which performed various legal services for the Company and the Bank, on arm’s length terms, during 2020.

Some of the Company’s directors and executive officers, and some of the corporations and firms with which these individuals are associated, are deposit 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 and do not involve more than normal risk of collectability 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.

Except for Director Fred Oeschger, to the best of management’s knowledge, none of the Company’s directors or executive officers has served during the past five years as a director of another company with a class of securities registered under section 12 of the Exchange Act or of a company subject to the reporting requirements of section 15(d) of that Act, or any registered investment company. On April 2, 2018, Mr. Oeschger was appointed to the Board of Directors of Genethera, Inc., a corporation based in Colorado which has a class of securities registered under section 12 of the Exchange Act.  Mr. Oeschger resigned from the Board of Genethera, Inc. on December 6, 2018.