Attached files
file | filename |
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10-K - 10-K REPORT FOR COMMUNITY BANCORP. - COMMUNITY BANCORP /VT | cmtv_10-k2019.htm |
EX-32.2 - CERTIFICATE PURSUANT TO SECTION 18 U.S.C. PURSUANT TO SECTION 906 OF THE SARBANE - COMMUNITY BANCORP /VT | exhibit32_2certificationl.htm |
EX-32.1 - CERTIFICATE PURSUANT TO SECTION 18 U.S.C. PURSUANT TO SECTION 906 OF THE SARBANE - COMMUNITY BANCORP /VT | exhibit32_1certificationk.htm |
EX-31.2 - CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF - COMMUNITY BANCORP /VT | exhibit31_2certificationl.htm |
EX-31.1 - CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF - COMMUNITY BANCORP /VT | exhibit31_1certificationk.htm |
EX-23 - CONSENTS OF EXPERTS AND COUNSEL - COMMUNITY BANCORP /VT | exhibit23_consent2019.htm |
EX-21 - SUBSIDIARIES OF THE REGISTRANT - COMMUNITY BANCORP /VT | exhibit21_subsidiaries.htm |
EX-13 - PORTIONS OF THE ANNUAL REPORT TO SECURITY HOLDERS FOR THE LAST FISCAL YEAR INCOR - COMMUNITY BANCORP /VT | exhibit13_2019annualrepor.htm |
EXHIBIT 4(iii)
DESCRIPTION OF COMMUNITY BANCORP. COMMON STOCK
The
following briefly summarizes certain provisions of our Amended and
Restated Articles of Association (“Articles”), our Amended and
Restated Bylaws (“Bylaws”) and the Vermont Business
Corporation Act, codified in Title 11A of the Vermont Statutes
Annotated (the “VBCA”) that holders of our common
stock may deem important. The description below is qualified in its
entirety by reference to the terms and provisions of our Articles
and Bylaws, which have been filed previously with the Commission
and are listed as Exhibits 3(i) and 3(iii), respectively, to our
Annual Report on Form 10-K.
Authorized Common Stock; General Information
Under
our Articles, we are authorized to issue up to 15,000,000 shares of
common stock having a par value of $2.50 per share. The common
stock is the only class of the Company’s securities that is
registered under Section 12 of the Securities Exchange Act of 1934,
as amended.
Our
common stock is non-assessable and holders of the stock do not have
any cumulative voting, conversion, redemption, preemptive or
special liquidation rights.
Authorized Preferred Stock; Effect of Preferred Stock on Rights of
Common Shareholders
In
addition to our common stock, our Articles also authorize the
issuance of up to 1,000,000 shares of preferred stock, without par
value. The preferred shares are issuable in one or more series,
having such rights and preferences as the Board of Directors may
determine prior to issuance. Pursuant to that authority, in 2007
the Company issued 25 shares of Series A Fixed-to-Floating Rate
Non-Cumulative Perpetual Preferred Stock having a liquidation
preference of $100,000 per share (the “Series A Shares”). The text of the
Series A Shares Designation is set forth as Exhibit A to the
Company’s Articles. As of the date of this Annual Report, 15
shares of preferred stock remained
outstanding.
In some
circumstances the rights of the holders of our Series A Shares may
affect the holders of our common stock. For example, we would not
be permitted to pay dividends on our common stock at any time there
were an arrearage on dividend payments to the holders of the Series
A Shares. Similarly, upon any voluntary or involuntary dissolution,
liquidation or winding up of the Company, the holders of our Series
A Shares would be entitled to receive their liquidation preference
($100,000 per share) out of any assets available for distribution
to the shareholders, before any assets may be distributed to the
holders of our common stock. In addition, certain corporate actions
would require the unanimous affirmative vote of the holders of the
Series A Shares voting as a separate class, even if the matter were
approved by the Board of Directors or the holders of the common
stock. In particular, the unanimous consent of the holders of our
Series A Shares is required to approve any of the following: (1)
the issuance of additional Series A Shares; (2) the creation of any
class or series of preferred shares having parity with, or
preference over, the Series A Shares in payment of dividends or
liquidation preference; or (3) amendment of the Company’s
Articles of Association in any manner that would materially and
adversely affect the rights or preferences of the Series A Shares.
Except for these matters, the holders of the Series A Shares do not
have voting rights.
Because
our Articles authorize 1,000,000 shares of preferred stock, the
Board of Directors has the authority to create additional series of
preferred shares out of the remaining authorized and unissued
shares of preferred stock, including preferred shares that might
have similar or greater preferences over the common shares. Any
such preferred stock issuances would not require the vote or
consent of the common shareholders.
Dividends
After
payment of all accrued dividends on any outstanding preferred
shares having a dividend preference over the common shares, holders
of our common stock are entitled to participate equally in
dividends when and if the Board of Directors declares dividends on
shares of common stock out of funds legally available for
shareholder distribution, and are entitled to participate equally
with other common shareholders in any stock dividends. The
availability of funds for the Company to pay dividends depends
largely on the availability of funds for our subsidiary Bank to pay
dividends to the Company. In some circumstances, applicable banking
laws could limit those available funds. In addition, payment of
dividends by the Company might require approval of the Federal
Reserve in some circumstances, such as if regulatory capital levels
are deemed insufficient or if dividends exceed net income for the
previous four quarters, net of dividend paid during such
quarters.
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As
described above, the Series A Shares have a dividend preference
over the common shares. (See “Authorized Preferred Stock; Effect of Preferred
Stock on Rights of Common Shareholders”)
Voting Rights
Holders
of our common stock are entitled to one vote for each share held of
record on all matters voted on by the common shareholders,
including the election of directors. A quorum for the conduct of
business is a majority of the shares of common stock entitled to
vote on the matter, represented in person or by proxy at the
meeting.
Generally,
a matter submitted to vote of our common shareholders is approved
if more votes are cast in favor of the matter than against it, at a
meeting at which a quorum is present. In some cases, such as
mergers and certain amendments to the Company’s Articles, the
VBCA or our Articles or Bylaws may impose a higher vote
requirement.
Under
the VBCA, election of directors is by a plurality of the votes
cast, unless the articles of incorporation provide for a higher
vote. Our Articles and Bylaws do so, as they require that director
nominees receive at least a majority of the votes cast at a meeting
of shareholders at which a quorum is present.
As
described above, in some circumstances the unanimous affirmative
vote of the holders of the Series A Shares would be required to
approve certain matters, even if approved by the Board of Directors
or the common shareholders. (See “Authorized Preferred Stock; Effect of Preferred
Stock on Rights of Common Shareholders”
above.)
Limitation of Director Liability
As
permitted by the VBCA, Article Ten of the Company's Articles
provides that a director will not have any personal liability to
the Company or its shareholders for money damages for any act or
omission based on a failure to discharge his or her statutory
duties as a director, except for liability relating to (i) any
improper financial gain to which the director was not entitled;
(ii) an intentional reckless infliction of harm on the Company or
its shareholders; (iii) authorization of unlawful distributions; or
(iv) an intentional or reckless criminal act. Any future amendment
or repeal of the liability limiting provision would apply
prospectively only and not to any act or omission occurring before
the effective date of such amendment or repeal.
Liquidation Rights
In the
event of the Company’s liquidation, dissolution or
winding-up, holders of our common stock would have the right to a
ratable portion of assets remaining after payment of the
Company’s creditors and satisfaction in full of the prior
claims of any preferred shareholders (including the holders of the
Series A Shares).
As
described above, the Series A Shares have a liquidation preference
over the common shares. (See “Authorized Preferred Stock; Effect of Preferred
Stock.”)
Advance Notice By-Law
Section
2.13 of our Bylaws requires that shareholders provide advance
notice to the Company if they intend to submit director nominations
or other matters for vote at a meeting of shareholders. Specified
information about the nominee or proposal must generally be
furnished to the Company no earlier than 180 days nor later than
120 days prior to the date of the annual meeting. Special rules
apply for the deadline if the annual meeting is to be held on a
date other than the third Tuesday in May, and for special meetings
of shareholders. These notice requirements apply whether or not a
shareholder seeks to include his or her proposal in the
Company’s proxy materials for the meeting under applicable
rules of the Securities and Exchange Commission.
2
Certain Provisions That May Have an Anti-Takeover
Effect
As
discussed below, our Articles and Bylaws contain certain provisions
that may deter attempts to takeover the Company.
Board of Directors Classification; High Vote for
Removal. We
have a staggered, or classified, Board of Directors. Our Board of
Directors is divided into three classes with the members of each
class serving a three-year term. The members of only one class of
directors are elected each year by the common shareholders at our
annual meeting of shareholders. It would therefore take at least
two years to elect (or replace) a majority of our directors. In
addition, our Articles and Bylaws provide that directors may be
removed from office only for cause and by the affirmative vote of
the holders of at least 75% of the outstanding shares of capital
stock entitled to vote in an election of directors (that is, the
common stock).
High Vote for Certain Amendments to our Articles and Bylaws.
In order to amend our Articles, Vermont law requires that our Board
of Directors adopt a resolution setting forth the amendment,
declare the advisability of the amendment and call a shareholders'
meeting to adopt the amendment. Generally, under the VBCA, approval
of amendments to our Articles requires that the affirmative votes
of the common shareholders outnumber the negative votes, or in some
cases requires the affirmative vote of a majority of our
outstanding common stock. Approval of amendments to our Bylaws may
be by vote of the directors or the common shareholders. As
described in the next paragraph, however, certain amendments to our
Articles and Bylaws may require a supermajority shareholder
vote.
The
vote of the holders of at least 75% of outstanding shares of our
capital stock entitled to vote in an election of directors (that
is, the holders of at least 75% of the common stock) is required to
adopt any amendment to our Articles and Bylaws that relates to the
size and classification of our Board of Directors, the vote
required to elect our directors and the term of service and
procedure for removal of our directors.
High Vote for Certain Business Combinations. Under our
Articles, certain Business Combinations (as defined) involving a
Substantial Shareholder (as defined) must be approved by the
holders of the Required Percentage (as defined) of the outstanding
common shares. However, this special vote requirement will not
apply, and the applicable vote requirements otherwise provided
under the VCBA will instead apply, to any Business Combination
involving a Substantial Shareholder if either (1) the Business
Combination is approved by at least two-thirds of the Disinterested
Directors (as defined), or (2) the per share consideration to be
received by the common shareholders in the Business Combination is
at least equal to the highest price paid by the Substantial
Shareholder in acquiring any shares of the Company’s common
stock prior to the Business Combination transaction.
For
purposes of this provision,
●
“Business Combination” includes any
merger, plan of share exchange or consolidation between the Company
or its subsidiary Bank and any Substantial Shareholder or any
entity controlled by or under common control with such shareholder;
any sale, lease or other of transfer of assets between the Company
or the Bank and any Substantial Shareholder or any entity
controlled by or under common control with such shareholder; any
reclassification of the Company’s securities that would have
the effect of increasing the proportionate voting power of a
Substantial Shareholder; and any other transaction involving a
Substantial Shareholder having the intent or effect to effect a
change in control of the Company.
●
“Substantial Shareholder” means an
individual or entity that, together with its affiliates and
associates, is the beneficial owner of 5% or more of the
Company’s outstanding common stock.
●
“Required Percentage” means at
least 53.4% of the outstanding common stock, which is the same
percentage as the vote of the common shareholders that approved
including the Business Combination provisions in the Articles at
the Company’s 2010 annual meeting of
shareholders.
●
“Disinterested Director” means (i)
a director of the Company who was serving as a director immediately
prior to the time the Substantial Shareholder became a Substantial
Shareholder, and who is not otherwise affiliated with the
Substantial Shareholder, and (2) any successor director who is
recommended by at least a majority of the Disinterested
Directors.
The
foregoing provisions of the Company’s Articles governing
Business Combinations involving a Substantial Shareholder may only
be amended by the affirmative vote of the holders of at least the
Required Percentage of the outstanding common shares.
3
Consideration of Other Constituencies. Under the VBCA,
a director must generally discharge his or her duties
●
in good faith;
●
with the care an ordinarily prudent person in a like position would
exercise under similar circumstances; and
●in a manner
he or she reasonably believes to be in the corporation's best
interests.
In
determining what is in a corporation's best interests, the VBCA
permits directors of corporations, such as Community Bancorp., that
have a class of voting stock registered under the Exchange Act, to
consider other interests beyond those of the corporation's
shareholders. In particular, directors may consider the interests
of the corporation's employees, suppliers, creditors and customers;
the economy of the state, region and nation; community and societal
considerations, including those of any community in which any
offices or facilities of the corporation are located; and any other
factors the director in his or her discretion reasonably considers
appropriate in determining what he or she reasonably believes to be
in the best interests of the corporation and its shareholders,
including the possibility that these interests may be best served
by the continued independence of the
corporation.
Potential Anti-takeover Effect of These Provisions. The
provisions described above, as well as the Company’s advance
notice bylaw and the ability of the Board of Directors to issue
preferred shares, may discourage attempts by others to acquire
control of the Company without negotiation with our Board of
Directors. This enhances our Board’s ability to attempt to
promote the interests of all of our shareholders. However, to the
extent that these provisions make us a less attractive takeover
candidate, they may not always be in our best interests or in the
best interests of our shareholders and in some circumstances may
prevent holders of our common stock from receiving a takeover
premium.
None of
the antitakeover provisions in the Company’s Articles or
Bylaws was adopted in response to any specific effort by a third
party to accumulate our stock or to obtain control of us by means
of merger, tender offer, solicitation in opposition to management
or otherwise.
Repurchase of Shares
Under
the VBCA, we may repurchase shares of our capital stock, except if
it would constitute an unlawful distribution to the selling
shareholder. In general, distributions are permissible under the
VBCA unless, after the distribution, we would be unable to pay our
debts as they become due in the usual course of business or our
total assets would be less than the sum of our total liabilities
plus the amount required to satisfy any preferential rights of
shareholders upon dissolution or liquidation (such as the
liquidation rights of the holders of the Series A
Shares).
Because
we are a registered bank holding company, repurchases of our shares
in excess of certain volume limitations would be subject to prior
approval by the Federal Reserve under the federal Bank Holding
Company Act and to certain restrictions and limitations in some
circumstances, such as if our regulatory capital levels were deemed
insufficient.
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