FIRST MID-ILLINOIS BANCSHARES, INC.
April 15, 1998
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of First Mid-Illinois
Bancshares, Inc., I cordially invite you to attend the Annual Meeting of
Stockholders of First Mid-Illinois Bancshares, Inc. to be held at 11:00 a.m. on
May 20, 1998, at the Ramada Inn located at 300 Broadway Avenue, Mattoon,
Illinois. The accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement discuss the business to be conducted at the meeting. We have also
enclosed a copy of the Company's 1997 Annual Report to Stockholders. At the
meeting we shall report on Company operations and the outlook for the year
ahead.
Your Board of Directors has nominated three persons to serve as Class III
directors. Each of the nominees are incumbent directors. The Board also
recommends that you approve the adoption of a Stock Incentive Plan, as set
forth in the accompanying Proxy Statement. In addition, the Company's
management has selected and recommends that you ratify the selection of KPMG
Peat Marwick LLP to continue as the Company's independent public accountants
for the year ending December 31, 1998.
We recommend that you vote your shares for the director nominees and in favor
of the proposals.
I encourage you to attend the meeting in person. WHETHER OR NOT YOU PLAN TO
ATTEND, HOWEVER, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN
IT IN THE ACCOMPANYING POSTPAID RETURN ENVELOPE AS PROMPTLY AS POSSIBLE. This
will ensure that your shares are represented at the meeting.
If you have any questions concerning these matters, please do not hesitate to
contact me at (217) 258-0493. We look forward with pleasure to seeing and
visiting with you at the meeting.
Very truly yours,
FIRST MID-ILLINOIS BANCSHARES, INC.
Daniel E. Marvin, Jr.
Chairman
<PAGE>
FIRST MID-ILLINOIS BANCSHARES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 20, 1998
FIRST MID-ILLINOIS BANCSHARES, INC.
1515 CHARLESTON AVENUE
P.O. BOX 499
MATTOON, ILLINOIS 61938
(217) 258-0493
To the stockholders of FIRST MID-ILLINOIS BANCSHARES, INC.
The Annual Meeting of the Stockholders of First Mid-Illinois Bancshares, Inc.,
a Delaware corporation (the "Company"), will be held at the RAMADA INN, 300
BROADWAY AVENUE, EAST IN ROOMS A, B AND C, Mattoon, Illinois, on Wednesday, May
20, 1998, at 11:00 a.m., local time, for the following purposes:
1. to elect three Class III directors for a term of three years.
2. to approve the adoption of the First Mid-Illinois Bancshares, Inc. 1997
Stock Incentive Plan.
3. to approve the appointment of KPMG Peat Marwick LLP as independent public
accountants for the Company for the fiscal year ending December 31, 1998.
4. to transact such other business as may properly be brought before the
meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 1, 1998, as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the meeting.
By order of the Board of Directors
Daniel E. Marvin, Jr.
Chairman
Mattoon, Illinois
April 15, 1998
<PAGE>
FIRST MID-ILLINOIS BANCSHARES, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of First Mid-Illinois Bancshares, Inc. (the "Company") of
proxies to be voted at the Annual Meeting of Stockholders to be held at the
RAMADA INN, 300 BROADWAY AVENUE, EAST IN ROOMS A, B AND C, Mattoon, Illinois,
on Wednesday, May 20, 1998, at 11:00 a.m., local time, and at any adjournments
or postponements thereof.
The Board of Directors would like to have all stockholders represented at the
meeting. Please sign and return your proxy card in the enclosed
self-addressed, stamped envelope. You have the power to revoke your proxy at
any time before it is voted, and the giving of a proxy will not affect your
right to vote in person if you attend the meeting.
The mailing address of the Company*s principal executive offices is 1515
Charleston Avenue, P.O. Box 499, Mattoon, Illinois 61938. This Proxy Statement
and the accompanying proxy card are being mailed to stockholders on or about
April 15, 1998. The 1997 Annual Report of the Company, which includes
consolidated financial statements of the Company, is enclosed.
The Company is a diversified financial services company which serves the
financial needs of east central Illinois. It is the parent company of First
Mid-Illinois Bank & Trust, N.A. (the "Bank"), a regional banking entity which
has locations in Mattoon, Altamont, Arcola, Effingham, Charleston, Sullivan,
Tuscola, Urbana and Neoga, Illinois. Mid-Illinois Data Services, Inc., a data
processing company ("MIDS"), is also a wholly owned nonbanking subsidiary of
the Company. The Bank and MIDS are sometimes referred to as the
"Subsidiaries."
Only holders of record of the Company*s Common Stock, par value $4.00 per share
(the "Common Stock"), at the close of business on April 1, 1998 will be
entitled to vote at the annual meeting or any adjournments or postponements of
such meeting. On April 1, 1998, the Company had approximately 1,978,400 shares
of Common Stock, and 620 shares of Preferred Stock, no par value (the
"Preferred Stock"), issued and outstanding. In the election of directors, and
for all other matters to be voted upon at the annual meeting, each issued and
outstanding share of Common Stock is entitled to one vote. Stockholders voting
FOR the election of directors on the enclosed proxy will be deemed to have
given their proxy to vote for the election of all directors except as otherwise
noted on the proxy. Holders of the Preferred Stock are not entitled to vote
their Preferred Stock at the annual meeting. All shares of Common Stock
represented at the annual meeting by properly executed proxies received prior
to or at the annual meeting, and not revoked, will be voted at the meeting in
accordance with the instructions thereon. If no instructions are indicated,
properly executed proxies will be voted for the nominees and for adoption of
the proposals set forth in this Proxy Statement.
A majority of the shares of the Common Stock, present in person or represented
by proxy, shall constitute a quorum for purposes of the annual meeting.
Abstentions and broker non-votes will be counted for purposes of determining a
quorum. Directors shall be elected by a plurality of the votes present in
person or represented by proxy. In all other matters, the affirmative vote of
the majority of shares present in person or represented by proxy at the annual
meeting and entitled to vote on the subject matter shall be required to
constitute stockholder approval. Abstentions will be treated as votes against
a proposal and broker non-votes will have no effect on the vote.
ELECTION OF DIRECTORS
At the Annual Meeting of the Stockholders to be held on May 20, 1998, the
stockholders will be entitled to elect three (3) Class III directors for a term
expiring in 2001. The directors of the Company are divided into three classes
having staggered terms of three years. Each of the nominees for election as
Class III directors are incumbent directors. The Company has no knowledge that
any of the nominees will refuse or be unable to serve, but if any of the
nominees becomes unavailable for election, the holders of the proxies reserve
the right to substitute another person of their choice as a nominee when voting
at the meeting. Set forth below is information, as of April 1, 1998,
concerning the nominees for election and for the other persons whose terms of
office will continue after the meeting, including age, year first elected a
director of the Company and business experience during the previous five years
of each. The three nominees, if elected at the annual meeting, will serve as
Class III directors for three year terms expiring in 2001.
NOMINEES
Position with the Company and
Name Director the Subsidiaries and Occupation
(AGE) SINCE FOR THE LAST FIVE YEARS
CLASS III
(TERM EXPIRES 2001)
Charles A. Adams 1984 Director of the Bank (since 1989), of
(Age 56) MIDS (since 1987) and of the Company;
President, Howell Paving, Inc.
Daniel E. Marvin, Jr. 1982 Chairman, President, Chief Executive
(Age 59) Officer and Director of the Company;
Director (since 1980), Chairman (since
1983), President and Chief Executive
Officer (1983-1997) of the Bank;
Director of MIDS (1987-1992).
Ray Anthony Sparks 1994 Director of the Bank (since 1997) and
(Age 41) of the Company; Director of MIDS (since
1996); former President of Elasco
Agency Sales, Inc. and Electrical
Laboratories and Sales Corporation;
private investor.
CONTINUING DIRECTORS
CLASS I
(TERM EXPIRES 1999)
Kenneth R. Diepholz 1990 Director of the Bank (since 1984) and
(Age 59) of the Company; President, Diepholz
Chevrolet, Oldsmobile, Cadillac and
Geo; Owner, D-Co Coin Laundry and
Diepholz Rentals.
Gary W. Melvin 1990 Director of the Bank (since 1984) and
(Age 48) of the Company; Director of MIDS (since
1987); Co-Owner, Rural King Stores.
CLASS II
(TERM EXPIRES 2000)
Richard Anthony Lumpkin 1982 Director of the Bank (since 1966) and
(Age 63) of the Company; former Chairman of the
Board of Consolidated Communications
Inc. (until 1997), Director Ameren CIPS
(since 1995); Vice Chairman, McCloud
USA, Inc. (since 1997); Chairman,
Illinois Consolidated Telephone Company
(since 1997).
William G. Roley 1985 Director of the Bank (since 1992) and
(Age 68) of the Company; retired, former owner
of Roley Real Estate.
William S. Rowland 1991 Executive Vice President (since 1997),
(Age 51) Treasurer and Chief Financial Officer
(since 1989) and Director of the
Company; Director of MIDS (since 1989);
Executive Vice President of the Bank
(since 1989).
ALL OF THE COMPANY*S DIRECTORS WILL HOLD OFFICE FOR THE TERMS INDICATED, OR
UNTIL THEIR RESPECTIVE SUCCESSORS ARE DULY ELECTED AND QUALIFIED. THERE ARE NO
ARRANGEMENTS OR UNDERSTANDINGS BETWEEN ANY OF THE DIRECTORS, EXECUTIVE OFFICERS
OR ANY OTHER PERSON PURSUANT TO WHICH ANY OF THE COMPANY*S DIRECTORS OR
EXECUTIVE OFFICERS HAVE BEEN SELECTED FOR THEIR RESPECTIVE POSITIONS.
DIRECTORS OF THE COMPANY RECEIVED A $1,800 QUARTERLY RETAINER FOR SERVING ON
THE BOARD OF DIRECTORS IN 1997. DIRECTORS WHO ARE NOT EMPLOYEES OF THE COMPANY
ALSO RECEIVED OPTIONS TO PURCHASE 500 SHARES OF THE COMPANY'S COMMON STOCK AT
$23.51 PER SHARE FOR THEIR SERVICE IN 1997, AND RECEIVED OPTIONS TO PURCHASE
500 SHARES OF COMMON STOCK AT $33.73 PER SHARE FOR THEIR SERVICE IN 1998. SUCH
OPTIONS HAVE TERMS OF TEN YEARS AND BECAME EXERCISABLE ON THEIR RESPECTIVE DATE
OF GRANT. ADDITIONALLY, THE COMPANY PROVIDES RETIREMENT PENSION BENEFITS TO
NON-EMPLOYEE DIRECTORS WHO HAVE ATTAINED THE AGE OF 70 AND WHO HAVE SERVED AS A
DIRECTOR FOR A MINIMUM OF TEN YEARS UPON RETIREMENT. THE PENSION IS EQUAL TO
75% OF THE COMPENSATION RECEIVED BY THE DIRECTOR FROM THE COMPANY IN THE YEAR
PRIOR TO RETIREMENT. DIRECTORS WHO ARE NOT EMPLOYEES OF THE COMPANY ALSO
RECEIVE HEALTH INSURANCE.
BOARD COMMITTEES AND MEETINGS
The Board of Directors of the Company has established an audit committee and a
compensation committee. These committees are composed entirely of outside
directors. The Board has also created other Company-wide committees composed
of officers of the Company and the Subsidiaries.
Members of the audit committee are Messrs. Adams, Diepholz, Lumpkin, Melvin,
Roley and Sparks. The audit committee reports to the Board of Directors and
has the responsibility to review and approve internal control procedures,
accounting practices and reporting activities of the Subsidiaries. The
committee also has the responsibility for establishing and maintaining
communications between the Board and the independent auditors and regulatory
agencies. The audit committee reviews with the independent auditors the scope
of their examinations, with particular emphasis on the areas to which either
the audit committee or the auditors believe special attention should be
directed. It also reviews the examination reports of regulatory agencies and
reports to the full Board regarding matters discussed therein. Finally, it
oversees the establishment and maintenance of effective controls over the
business operations of the Subsidiaries. The Audit Committee met four times in
1997.
The members of the compensation committee are Messrs. Adams, Diepholz, Lumpkin,
Melvin, Roley and Sparks. The compensation committee reports to the Board of
Directors and has responsibility for all matters related to compensation of
executive officers of the Company, including review and approval of base
salaries, conducting a review of salaries of executive officers compared to
other financial services holding companies in the region, fringe benefits,
including modification of the retirement plan, and incentive compensation. The
compensation committee met two times in 1997.
A total of eleven regularly scheduled and special meetings were held by the
Board of Directors of the Company during 1997. During 1997, all directors
attended at least 75 percent of the meetings of the Board and the committees on
which they served.
TRANSACTIONS WITH MANAGEMENT
Directors and officers of the Company and the Subsidiaries and their
associates, were customers of and had transactions with the Company and the
Subsidiaries during 1997. Additional transactions may be expected to take
place in the future. All outstanding loans, commitments to loan, transactions
in repurchase agreements and certificates of deposit and depository
relationships, in the opinion of management, were made in the ordinary course
of business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time or comparable transactions with
other persons and did not involve more than the normal risk of collectibility
or present other unfavorable features.
EXECUTIVE COMPENSATION
The following table shows the compensation earned for the last three fiscal
years by the Chief Executive Officer and those executive officers of the
Company and the Subsidiaries whose 1997 salary and bonus exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
(a) (b) (c) (D) (G) (H)
Fiscal SECURITIES
Year UNDERLYING ALL OTHER
Name and Ended OPTIONS/SARS(#) COMPENSATION
Principal Position December 31st Salary($)<F1> BONUS ($) ($)
<S> <C> <C> <C> <C> <C>
Daniel E. Marvin, Jr., 1997 $170,338 $45,608 7,500 $27,093<F2>
President & Chief Executive 1996 170,338 59,848 --- 26,390<F2>
Officer 1995 164,000 48,163 --- 26,001<F2>
William S. Rowland, Executive 1997 $110,000 $21,450 4,000 $13,912<F3>
Vice President, Treasurer and 1996 105,338 23,570 --- 13,517<F3>
Chief Financial Officer 1995 101,000 21,651 --- 12,756<F3>
Stanley E. Gilliland, Vice 1997 $96,000 $15,264 2,000 $6,686<F4>
President 1996 91,338 15,435 --- 6,426<F4>
1995 86,000 15,738 --- 5,917<F4>
Jack R. Kuczynski, Vice 1997 $98,045 $16,569 1,000 $6,448<F4>
President 1996 51,625 9,419 --- ---
1995 --- --- --- ---
<FN>
<F1> Includes deferred amounts.
<F2> Represents the Company's contributions to its retirement plan for 1997,
1996 and 1995 of $13,812, $13,109 and $12,720, respectively, and premium
payments for an insurance policy purchased to fund a supplemental retirement
and death benefit for Mr. Marvin in the amount of $13,281 for each year.
<F3> Represents the Company's contributions to its retirement plan for 1997,
1996 and 1995 of $8,014, $7,619 and $6,876, respectively, and an annual premium
payment for an insurance policy purchased to fund a supplemental retirement and
death benefit for Mr. Rowland in the amount of $5,898 in 1997 and 1996 and
$5,880 for 1995.
<F4> Represents the Company's contributions to its retirement plan.
</FN>
</TABLE>
STOCK OPTION INFORMATION
The following table sets forth certain information concerning the number and
value of stock options granted in the last fiscal year to the individuals named
in the Summary Compensation Table:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST
FISCAL YEAR
Individual Grants
Potential realizable value
at assumed annual rates of
stock price appreciation
for option term
(a) (B) (c) (d) (e) (F) (G)
% of Total
OPTIONS Options Granted
GRANTED to Employees in Exercise or Base Expiration
NAME (#)<F1> Fiscal Year Price ($/Sh) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Daniel E. Marvin, Jr. 7,500 38% $23.51 10/21/07 $110,888 $281,025
2,500 22% 33.73 12/10/07 53,025 134,400
William S. Rowland 4,000 21% $23.51 10/21/07 $59,140 $149,880
2,000 17% 33.73 12/10/07 42,420 107,520
Stanley E. Gilliland 2,000 10% $23.51 10/21/07 $29,570 $74,940
1,000 9% 33.73 12/10/07 21,210 53,760
Jack R. Kuczynski 1,000 5% $23.51 10/21/07 $14,785 $37,470
1,000 9% 33.73 12/10/07 21,210 53,760
<FN>
<F1> Options become exercisable in four equal annual portions beginning one
year from the date of grant. Options with an exercise price of $23.51 were
granted on October 21, 1997 as part of the respective officer's compensation
for service to the Company during the 1997 fiscal year. Options with an
exercise price of $33.73 were granted on December 10, 1997 as part of the
respective officer's 1998 compensation.
</FN>
</TABLE>
The following table sets forth certain information concerning the number and
value of stock options at December 31, 1997 held by the named executive
officers. No stock options were exercised during 1997 by such persons.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
Shares Number of Securities
Acquired Underlying Unexercised VALUE OF UNEXERCISED
on Value Options/SARs at FY-End IN-
Name Exercise Realized (#)(d) THE-MONEY
(a) (#)(b) ($)(c) EXERCISABLE UNEXERCISABLE OPTIONS/SARS
AT FY-END ($)(E)
EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Daniel E. Marvin, Jr. --- $--- --- 10,000 $--- $98,300
William S. Rowland --- $--- --- 6,000 $--- $53,900
Stanley E. Gilliland --- $--- --- 3,000 $--- $26,950
Jack R. Kuczynski --- $--- --- 2,000 $--- $14,580
</TABLE>
EMPLOYMENT AGREEMENTS
In December, 1997, the Company entered into employment agreements with Daniel
E. Marvin, Jr. and William S. Rowland. The employment agreements provide for
an initial base salary, which may be increased but not decreased, and a bonus
of up to 35% of base salary for Mr. Marvin and 25% for Mr. Rowland. Each
agreement has an initial term of three years, which may be extended upon mutual
agreement. In the event of termination of the respective officer's employment
by the Company without cause, the Company will be obligated to pay to such
officer an amount equal to one year's salary. In the event such person's
employment discontinues following a change in control of the Company, the
successor to the Company is obligated to make a lump sum payment to such
officer in amount equal to the greater of two years' base salary or the
aggregate base salary the officer would have received for the balance of the
three year term of the agreement. The employment agreements include a covenant
which limits the ability of each officer to compete with the Bank for a period
of two years following the termination of his employment. The Company has also
entered into a similar agreement with John M. Remsen, Jr., who became the
Bank's President in August, 1997.
The Compensation Committee has furnished the following report on executive
compensation. The incorporation by reference of this Proxy Statement into any
document filed with the Securities and Exchange Commission by the Company shall
not be deemed to include such report unless such report is specifically stated
to be incorporated by reference into such document.
COMPENSATION COMMITTEE REPORT
As members of the Compensation Committee, it is our duty to evaluate the
performance of management, review total management compensation levels and
consider management succession and other related matters. The Committee
reviews and approves in detail all aspects of compensation for the nine highest
paid officers within the Company and uses state, regional and national salary
studies to ascertain existing market conditions for personnel. No member of
the Committee is a former or current officer or employee of the Company or any
of the Subsidiaries.
The compensation philosophy of the Company is that a portion of the annual
compensation of each officer relates to and must be contingent upon the
performance of the Company, as well as the individual contribution of each
officer. As a result, a portion of each executive officer's annual
compensation is based upon the officer's performance, the performance of the
operating unit for which the officer has primary responsibility and the
performance of the Company as a whole. In 1993, the formulas for measuring
performance and awarding bonuses were refined and improved so as to more
objectively link financial and individual performance with bonus amounts.
During 1997, the Company's net income amounted to $4,726,000, a $560,000
(13.4%) improvement from 1996's level. In addition, the Company's market share
increased significantly and various other improvements were made in the
Company's operating and administrative functions. Accordingly, Messrs. Marvin,
Rowland Gilliland and Kuczynski were awarded incentive bonuses of $45,608,
$21,450, $15,264 and $16,569, respectively. The relationships between the base
salaries and incentive compensation of Messrs. Marvin, Rowland, Gilliland and
Kuczynski for 1997, 1996 and 1995 were as follows:
Incentive Compensation as a % of Base Salary
1997 1996 1995
Mr. Marvin 27% 35% 29%
Mr. Rowland 20% 22% 21%
Mr. Gilliland 16% 17% 18%
Mr. Kuczynski 17% 18% - %
The members of the Compensation Committee are:
Charles A. Adams, Kenneth R. Diepholz, Richard A. Lumpkin, Gary W. Melvin,
William G. Roley and Ray Anthony Sparks
The incorporation by reference of this Proxy Statement into any document filed
with the Securities and Exchange Commission by the Company shall not be deemed
to include the following performance graph unless such graph is specifically
stated to be incorporated by reference into such document.
PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder return on a
$100 investment in the Company's Common Stock to the cumulative total return of
the S & P 500 Index and the Nasdaq Bank Stock Index for the period December 31,
1992 through December 31, 1997. The S&P 500 Index and the Nasdaq Bank Stock
Index were calculated at the Company's request by Research Data Group, San
Francisco, California.
CUMULATIVE TOTAL RETURN{*}
* Total return assumes reinvestment of dividends
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
<S> <C> <C> <C> <C> <C> <C>
First Mid-Illinois Bancshares, Inc. $100 $130 $134 $178 $217 $345
Nasdaq Bank Stocks $100 $114 $114 $169 $223 $377
S&P 500 $100 $110 $112 $153 $189 $252
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the Company*s
Common Stock beneficially owned on February 28, 1998 with respect to all
persons known to the Company to be the beneficial owner of more than five
percent of the Company Common Stock, each director and nominee, each executive
officer named in the Summary Compensation Table and all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL AND AMOUNT AND NATURE OF PERCENT
NUMBER OF PERSONS IN GROUP BENEFICIAL OWNERSHIP<F1> OF CLASS
<S> <C> <C>
5% STOCKHOLDERS
Margaret Lumpkin Keon 136,421<F2> 6.8%
16 Miller Avenue
Suite 203
Mill Valley, California 94941
Mary Lumpkin Sparks 190,997<F3> 9.6%
2438 Campbell Road, N.W.
Albuquerque, New Mexico 87104
DIRECTORS
Charles A. Adams 131,635<F4> 6.4%
Kenneth R. Diepholz 31,961<F5> 1.6%
Richard Anthony Lumpkin 404,864<F6> 19.8%
Daniel E. Marvin, Jr. 31,142<F7> 1.6%
Gary W. Melvin 91,605<F8> 4.5%
William G. Roley 40,889<F9> 2.1%
William S. Rowland 9,942<F10> *
Ray Anthony Sparks 39,695<F11> 2.0%
OTHER NAMED EXECUTIVE OFFICERS
Stanley E. Gilliland 7,407<F12> *
Jack R. Kuczynski 3,034 *
All directors and executive
officers as a group
(13 persons) 793,999<F13> 35.8%
_____________
* Less than one percent.
<FN>
<F1> The information contained in this column is based upon information
furnished to the Company by the persons named above and the members of the
designated group. Amounts include 1,000 shares obtainable by each of Messrs.
Adams, Diepholz, Lumpkin, Melvin, Roley and Sparks through the exercise of
options which are currently exercisable or which will become exercisable within
60 days of the date of the information provided. The nature of beneficial
ownership for shares shown in this column is sole voting and investment power,
except as set forth in the footnotes below.
<F2> The above amount includes 20,210 shares obtainable through the conversion
of Preferred Stock held by Ms. Keon and 116,031 shares held under the Margaret
L. Keon Trust, established under Article 5 of the Mary G. Lumpkin Trust dated
January 31, 1984, of which trust Ms. Keon is trustee and beneficiary.
<F3> The above amount includes 20,210 shares obtainable through the conversion
of Preferred Stock and 116,537 shares held under the Mary L. Sparks Trust,
established under Article 5 of the Mary G. Lumpkin Trust dated January 31,
1984, with respect to which shares Mrs. Sparks has no voting or investment
power. The shares held by this trust are also included in the number of shares
reported as beneficially owned by Mr. Richard A. Lumpkin in this table. The
above amount also includes 1,190 shares held directly by Mrs. Sparks and 53,060
shares held in trust for the benefit of Richard Anthony Lumpkin's adult
children for which Mrs. Sparks serves as trustee and of which shares Mrs.
Sparks disclaims beneficial ownership.
<F4> The above amount includes 16,018 shares of Common Stock and 80,840 shares
obtainable through the conversion of Preferred Stock held by a corporation over
which Mr. Adams is deemed to control. The above amount also includes 2,056
shares held by Mr. Adams' spouse, over which shares Mr. Adams has no voting and
investment power. The above amount does not include 1,623 shares held by adult
children of Mr. Adams.
<F5> The above amount includes 14,147 shares obtainable through the conversion
of Preferred Stock held by Mr. Diepholz.
<F6> The above amount includes 40,420 shares obtainable through the conversion
of Preferred Stock held by Mr. Lumpkin and by the Richard A. Lumpkin Trust, of
which Mr. Lumpkin is trustee and beneficiary, 54,684 shares held directly by
Mr. Lumpkin and 9,805 shares held by The Lumpkin Foundation, of which Mr.
Lumpkin serves as a director. The above amount also includes 116,537 shares
held under the Richard A. Lumpkin Trust, and further includes 20,210 shares
obtainable through the conversion of Preferred Stock and 116,537 shares held
under the Mary Lee Sparks Trust, of which Mr. Lumpkin is trustee. Each such
trust has been established under Article 5 of the Mary G. Lumpkin Trust dated
January 31, 1984. The above amount also includes 45,671 shares held by McCloud
USA, of which Mr. Lumpkin is Vice Chairman of the Board, and of which shares
beneficial ownership is disclaimed. The above amount does not include 68,080
shares held by adult children of Mr. Lumpkin and 53,060 shares held in trust
for the benefit of Mr. Lumpkin*s adult children of which trust Mr. Lumpkin is
not a trustee and of which shares beneficial ownership is also disclaimed.
<F7> The above amount includes 4,850 shares obtainable through the conversion
of Preferred Stock held by Mr. Marvin. The above amount also includes 3,115
shares held by Mr. Marvin's spouse, over which shares Mr. Marvin has no voting
or investment power and of which Mr. Marvin disclaims beneficial ownership, and
225 shares held by Mr. Marvin's grandchildren, over which Mr. Marvin has shared
voting and investment power.
<F8> The above amount includes 40,420 shares obtainable through the conversion
of Preferred Stock held by Mr. Melvin.
<F9> The above amount includes 4,042 shares obtainable through the conversion
of Preferred Stock held by Mr. Roley. The above amount also includes 4,042
shares obtainable through the conversion of Preferred Stock held by Mr. Roley's
spouse and 13,057 shares held by the Peggy A. Roley Trust, over which Mr. Roley
has no voting or investment power and of which Mr. Roley disclaims beneficial
ownership.
<F10> The above amount includes 4,850 shares obtainable through the conversion
of Preferred Stock held by Mr. Rowland.
<F11> The above amount includes 7,189 shares held by Mr. Sparks' children, over
which Mr. Sparks shares voting and investment power.
<F12> The above amount includes 2,021 shares obtainable through the conversion
of Preferred Stock held by Mr. Gilliland and 963 shares held by Mr. Gilliland
and his spouse, over which Mr. Gilliland has shared voting and investment
power.
<F13> Includes an aggregate of 215,842 shares obtainable through conversion of
Preferred Stock.
</FN>
</TABLE>
As of February 28, 1998, the Bank acted as sole or co-fiduciary with respect to
trusts and other fiduciary accounts which own or hold 99,151 shares or 5.0% of
the outstanding Common Stock of the Company, over which the Bank has sole
voting and investment power with respect to 83,051 shares or 4.2% of the
outstanding Common Stock and shared voting and investment power with respect to
16,100 shares or 0.8% of the outstanding Common Stock.
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company*s directors, executive officers and persons who own more than 10% of
the Company*s Common Stock file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Such persons are also required to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on the Company*s review of the copies of such forms, the Company is not
aware that any of its directors and executive officers or 10% stockholders
failed to comply with the filing requirements of Section 16(a) during the
period commencing January 1, 1997 through December 31, 1997.
PROPOSAL TO ADOPT STOCK INCENTIVE PLAN
On October 21, 1997, the Board of Directors unanimously adopted resolutions
approving the First Mid-Illinois Bancshares, Inc., 1997 Stock Incentive Plan
(the "Incentive Plan"), to promote equity ownership of the Company by directors
of the Company and selected officers and employees of the Bank, to increase
their proprietary interest in the success of the Company, and to encourage them
to remain in the employ of the Company and the Bank. While the Incentive Plan
is not generally subject to stockholder approval, the Company is submitting the
Incentive Plan to its stockholders for purposes of complying with certain
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
pertaining to incentive stock options, as described below.
ADMINISTRATION
The Incentive Plan is to be administered by the Stock Incentive Plan
Administrative Committee, which will be comprised of at least two non-employee
directors appointed by the Board of Directors (the "Stock Incentive
Committee"). The Stock Incentive Committee will have the authority, subject to
approval by the Board of Directors, to select the employees to whom awards may
be granted, to determine the terms of each award, to interpret the provisions
of the Incentive Plan and to make all other determinations for the
administration of the Incentive Plan. The Incentive Plan provides for the grant
of "incentive stock options," as defined under Section 422(b) of the Code,
options that do not so qualify (referred to herein as "nonstatutory options"),
restricted stock and stock appreciation rights ("SARs"), as determined in each
individual case by the Stock Incentive Committee. The Board of Directors has
reserved 100,000 shares of Common Stock for issuance under the Incentive Plan,
subject to adjustment for stock splits, stock dividends or similar
transactions. In general, if any award granted under the Incentive Plan
expires, terminates, is forfeited or is cancelled for any reason, the shares of
Common Stock allocable to such award may again be made subject to an award
granted under the Incentive Plan.
AWARDS
Directors of the Company and key policy-making employees of the Bank are
eligible to receive grants under the Incentive Plan. Director options will be
granted at the fair market value of the Common Stock on the date of grant.
Employee awards may be granted subject to a vesting requirement and in any
event will become fully vested upon a merger or change of control of the
Company. The exercise price of incentive stock options granted under the
Incentive Plan must at least equal the fair market value of the Common Stock
subject to the option (determined as provided in the plan) on the date the
option is granted. The exercise price of nonstatutory options and SARs will be
determined by the Stock Incentive Committee.
An incentive stock option granted under the Incentive Plan to an employee
owning more than 10% of the combined voting power of all classes of stock of
the Company must have an exercise price of at least 110% of the then current
fair market value of the shares of Common Stock issuable upon exercise of the
option and may not have an exercise term of more than five years. Incentive
stock options are also subject to the further restriction that the aggregate
fair market value (determined as of the date of grant) of Common Stock as to
which any such incentive stock option first becomes exercisable in any calendar
year, is limited to $100,000. To the extent options covering more than $100,000
worth of Common Stock first become exercisable in any one calendar year, the
excess will be nonstatutory options. For purposes of determining which, if any,
options have been granted in excess of the $100,000 limit, options will be
considered to become exercisable in the order granted.
Each director and key employee eligible to participate in the Incentive Plan
will be notified by the Stock Incentive Committee. The award agreement will
specify the type of award to be granted, the number of shares of Common Stock
(if any) to which the award relates, the terms and conditions of the award and
the date granted. In the case of an award of options, the award agreement will
also specify the price at which the shares of Common Stock subject to the
option may be purchased, the date(s) on which the option becomes exercisable
and whether the option is an incentive stock option or a nonstatutory option.
The full exercise price for all shares of Common Stock purchased upon the
exercise of options under the Incentive Plan may be paid by cash, personal
check, personal note, award surrender or Common Stock owned at the time of
exercise, as directed by the Stock Incentive Committee. Incentive stock
options granted under the Incentive Plan will remain outstanding and
exercisable for ten years from the date of grant or until the expiration of
ninety days (or such lesser period as the Stock Incentive Committee may
determine) from the employees date of termination of employment with the
Company. Nonstatutory options and SARs granted under the Incentive Plan remain
outstanding and exercisable for such period as the Stock Incentive Committee
may determine.
INCOME TAX
With respect to incentive stock options, no taxable income is recognized by the
option holder for income tax purposes at the time of the grant or exercise of
an incentive stock option, although neither is there any income tax deduction
available to the Company as a result of such a grant or exercise. Any gain or
loss recognized by an option holder on the later disposition of shares of
Common Stock acquired pursuant to the exercise of an incentive stock option
generally will be treated as capital gain or loss if such disposition does not
occur prior to one year after the date of exercise of the option, or two years
after the date the option was granted. With respect to nonstatutory stock
options, restricted stock or SARs, no taxable income will result to the
recipient of the awards, nor will the Company be entitled to an income tax
deduction. However, upon the exercise of nonstatutory stock options or SARs,
or the lapse of restrictions on restricted stock, the award holder will
generally recognize ordinary income equal to the difference between the
exercise price and the fair market value of the shares of Common Stock acquired
on the date of exercise, and the Company will be entitled to an income tax
deduction in the amount of the ordinary income recognized by the option holder.
In general, any gain or loss realized by the option holder on the subsequent
disposition of such shares will be a capital gain or loss.
AMENDMENT AND TERMINATION
The Incentive Plan expires ten years after its adoption, unless sooner
terminated by the Board of Directors. The Board has authority to amend the
Incentive Plan in such manner as it deems advisable, except that the Board of
Directors is not permitted, without stockholder approval, to amend the plan in
a manner which would prevent the grant of incentive stock options or increase
the number of shares of Common Stock available.
NEW PLAN BENEFIT TABLE
The following table sets forth certain information concerning the value and
number of Incentive Plan grants which have made with respect to the 1997 and
1998 fiscal years.
NEW PLAN BENEFITS
FIRST MID-ILLINOIS BANCSHARES, INC. 1997 STOCK INCENTIVE PLAN
NAME AND POSITION DOLLAR VALUE ($){(1)} NUMBER OF UNITS
Daniel E. Marvin, President and
Chief Executive Officer $ --- 10,000
Other Named Executive Officers $ --- 11,000
Non-Executive Director Group $ --- 6,000
Non-Executive Officer and Employee Group $ --- 4,000
(1) All options will be exercisable at a price equal to 100% of the fair
market value of the underlying security on the date of the grant.
REQUIRED AFFIRMATIVE VOTE
The affirmative vote of the holders of a majority of the shares of Common Stock
present in person or by proxy at the annual meeting is required to ratify the
Incentive Plan under the Code.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSED STOCK
INCENTIVE PLAN.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Stockholders will be asked to approve the appointment of KPMG Peat Marwick LLP
as the Company*s independent public accountants for the year ending December
31, 1998. A proposal will be presented at the annual meeting to ratify the
appointment of KPMG Peat Marwick LLP. If the appointment of KPMG Peat Marwick
LLP is not ratified, the matter of the appointment of independent public
accountants will be considered by the Board of Directors. Representatives of
KPMG Peat Marwick LLP are expected to be present at the meeting and will be
given the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THIS
APPOINTMENT.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
For inclusion in the Company's Proxy Statement and form of proxy relating to
the 1999 Annual Meeting of Stockholders, stockholder proposals must be received
by the Company on or before December 16, 1998 and must otherwise comply with
the Company's bylaws.
GENERAL
Your proxy is solicited by the Board of Directors and the cost of solicitation
will be paid by the Company. In addition to the solicitation of proxies by use
of the mails, officers, directors and regular employees of the Company or the
Subsidiaries, acting on the Company*s behalf, may solicit proxies by telephone,
telegraph or personal interview. The Company will, at its expense, upon the
receipt of a request from brokers and other custodians, nominees and
fiduciaries, forward proxy soliciting material to the beneficial owners of
shares held of record by such persons.
OTHER BUSINESS
It is not anticipated that any action will be asked of the stockholders other
than that set forth above, but if other matters properly are brought before the
meeting, the persons named in the proxy will vote in accordance with their best
judgment.
FAILURE TO INDICATE CHOICE
If any stockholder fails to indicate a choice in items (1), (2) or (3) on the
proxy card, the shares of such stockholder shall be voted (FOR) in each
instance.
REPORT ON FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON REPRESENTING THAT HE OR
SHE WAS A BENEFICIAL OWNER OF THE COMPANY*S COMMON STOCK AS OF THE RECORD DATE
FOR THE MEETING, UPON WRITTEN REQUEST, A COPY OF THE COMPANY*S ANNUAL REPORT ON
FORM 10-K. SUCH WRITTEN REQUEST SHOULD BE SENT TO MR. WILLIAM S. ROWLAND,
FIRST MID-ILLINOIS BANCSHARES, INC., 1515 CHARLESTON AVENUE, P.O. BOX 499,
MATTOON, ILLINOIS 61938.
By order of the Board of Directors
Daniel E. Marvin, Jr.
Chairman
Mattoon, Illinois
April 15, 1998
ALL STOCKHOLDERS ARE URGED TO SIGN AND MAIL THEIR PROXIES PROMPTLY
PROXY CARD
FIRST MID-ILLINOIS BANCSHARES, INC.
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS -- MAY 20, 1998
The undersigned hereby appoints Stanley E. Gilliland, John M. Remsen, Jr. and
Alfred M. Wooleyhan, Jr., or any of them acting in the absence of the others,
with power of substitution, attorneys and proxies, for and in the name and
place of the undersigned, to vote the number of shares of Common Stock that the
undersigned would be entitled to vote if then personally present at the Annual
Meeting of the Stockholders of First Mid-Illinois Bancshares, Inc., to be held
at the Ramada Inn, 300 Broadway Avenue, East in Rooms A B and C, Mattoon,
Illinois 61938, on Wednesday, May 20, 1998, at 11:00 a.m., local time, or any
adjournments or postponements thereof, upon the matters set forth in the Notice
of Annual Meeting and Proxy Statement (receipt of which is hereby acknowledged)
as designated on the reverse side, and in their discretion, the proxies are
authorized to vote upon such other business as may come before the meeting:
- ----- Check here for address change.
- ----- Check here if you plan to attend the meeting.
New Address:
(Continued and to be signed on reverse side.)
<PAGE>
FIRST MID-ILLINOIS BANCSHARES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
Election of Directors: Charles A. Adams, Daniel E. Marvin, Jr. and Ray Anthony
Sparks
To approve the adoption of the First Mid-Illinois, Inc. 1997 Stock Incentive
Plan.
The Board of Directors recommends a vote FOR all proposals.
To ratify the selection of KPMG Peat Marwick LLP as auditors for the Company
for 1998.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH SPECIFICATION MADE. IF NO CHOICES
ARE INDICATED, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS.
Dated: , 1998
NOTE: Please sign exactly as your name(s) appears. For joint accounts, each
owner should sign. When signing as executor, administrator, attorney, trustee
or guardian, etc., please give your full title.
Signature(s)
