SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material pursuant to Rule 14a-12
FIRST MID-ILLINOIS BANCSHARES, INC.
(Name of Registrant as Specified in its Charter)
FIRST MID-ILLINOIS BANCSHARES, INC.
(Name of Person(s) Filing Proxy Statement)
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:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction: (5) Total fee paid:
|_| 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:
(2) Form, Schedule or Registration Statement No. : (3) Filing Party:
(4) Date Filed:
April 19, 2005
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 4:00 p.m. on
May 25, 2005, in the lobby of First Mid-Illinois Bank & Trust, 1515 Charleston
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 2004 Report to the Owners and its Annual Report
on Form 10-K for the recently completed fiscal year. At the meeting, we will
report on Company operations and the outlook for the year ahead. Directors and
officers of the Company, as well as a representative of KPMG LLP, the Company's
independent auditors, will be present to respond to any appropriate questions
stockholders may have.
I encourage you to attend the meeting in person. Whether or not you plan to
attend the meeting, please act promptly to vote your shares. You may vote your
shares by completing, signing and dating the enclosed proxy card and returning
it in the accompanying postage paid envelope provided. You also may vote your
shares by telephone or through the Internet by following the instructions set
forth on the proxy card. If you attend the meeting, you may vote your shares in
person, even if you have previously submitted a proxy in writing, by telephone
or through the Internet. This will ensure that your shares are represented at
the meeting. If you have any questions concerning these matters, please contact
me at (217) 258-0415 or Christie Wright, Manager of Shareholder Services, 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.
/s/ William S. Rowland
William S. Rowland
Chairman and Chief Executive Officer
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1515 Charleston Avenue * P.O. Box 499 * Mattoon, IL 61938 * Phone:(217) 258-0493
Notice of
Annual Meeting of Stockholders
To Be Held May 25, 2005
First Mid-Illinois Bancshares, Inc.
1515 Charleston Avenue, P.O. Box 499
Mattoon, Illinois 61938
(217) 258-0493
NOTICE IS HEREBY GIVEN, that the Annual Meeting of Stockholders of First
Mid-Illinois Bancshares, Inc. will be held in the lobby of First Mid-Illinois
Bank & Trust, 1515 Charleston Avenue, Mattoon, Illinois, on Wednesday, May 25,
2005 at 4:00 p.m. local time.
The meeting is for the purpose of considering and acting upon:
1. The election of three directors of the Company; and
2. Such other matters as may properly come before the meeting or any
adjournments thereof.
The Board of Directors has fixed the close of business on April 1, 2005 as the
record date for the determination of the stockholders entitled to vote at the
meeting and any adjournments thereof.
You are requested to act promptly to vote your shares by completing, signing and
returning the enclosed proxy card in the enclosed return envelope or by
telephone or through the Internet by following the instructions set forth on the
proxy card.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William S. Rowland
William S. Rowland
Chairman and Chief Executive Officer
Mattoon, Illinois
April 19, 2005
Proxy Statement
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GENERAL INFORMATION
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of First Mid-Illinois Bancshares, Inc. to be
voted at the Annual Meeting of Stockholders to be held in the lobby of First
Mid-Illinois Bank & Trust, 1515 Charleston Avenue, Mattoon, Illinois, on
Wednesday, May 25, 2005 at 4:00 p.m. local time. The Board of Directors would
like to have all stockholders represented at the meeting. Please complete, sign
and return your proxy card in the enclosed return envelope, telephone the
toll-free number listed on your proxy card, or use the Internet site listed on
your proxy card.
The accompanying Notice of Annual Meeting, this Proxy Statement and the
proxy card are first being mailed to stockholders on or about April 19, 2005.
The Company's Annual Report on Form 10-K for the recently completed fiscal year,
which includes the consolidated financial statements of the Company, is also
enclosed.
The Company is a diversified financial services company which serves the
financial needs of central Illinois. The Company owns all the outstanding
capital stock of First Mid-Illinois Bank & Trust, N.A., a national banking
association (the "Bank"), with offices in Mattoon, Charleston, Effingham,
Altamont, Neoga, Sullivan, Arcola, Taylorville, Tuscola, Monticello, DeLand,
Urbana, Decatur, Highland, Pocahontas, Champaign, and Maryville, Illinois;
Mid-Illinois Data Services, Inc., a data processing company ("Data Services");
and The Checkley Agency, Inc., an insurance agency ("Checkley").
Only holders of record of the Company's Common Stock at the close of
business on April 1, 2005 (the "Record Date") will be entitled to vote at the
annual meeting or any adjournments or postponements of such meeting. On the
Record Date, the Company had 4,443,296 shares of Common Stock issued and
outstanding. In the election of directors, and for any other matters to be voted
upon at the annual meeting, each issued and outstanding share of Common Stock is
entitled to one vote.
You may revoke your proxy at any time before it is voted. Unless so
revoked, the shares represented by such proxies will be voted at the annual
meeting and all adjournments thereof.
You may revoke your proxy at any time before it is voted by delivering written
notice of revocation to the Secretary of the Company at 1515 Charleston Avenue,
P.O. Box 499, Mattoon, Illinois 61938, by executing and delivering a
subsequently dated proxy, by voting by telephone or through the Internet on a
later date, or by attending the annual meeting and voting in person. Proxies
solicited by the Board of Directors of the Company will be voted in accordance
with the directions given therein. Where no instructions are indicated, proxies
will be voted in accordance with the recommendations of the Board of Directors
with respect to the proposal described herein.
A quorum of stockholders is necessary to take action at the annual meeting. The
presence, in person or by proxy, of the holders of a majority of the shares of
Common Stock of the Company entitled to vote at the meeting will constitute a
quorum. Votes cast by proxy or in person at the meeting will be tabulated by the
inspector of election appointed for the meeting and will be counted as present
for purposes of determining whether a quorum is present. The inspector of
election will treat broker non-votes as present and entitled to vote for
purposes of determining whether a quorum is present. "Broker non-votes" refers
to a broker or other nominee holding shares for a beneficial owner not voting on
a particular proposal because the broker or other nominee does not have
discretionary voting power regarding that item and has not received instructions
from the beneficial owner.
The expenses of solicitation, including the cost of printing and mailing,
will be paid by the Company. Proxies are being solicited principally by mail, by
telephone, and by e-mail. In addition, directors, officers and regular employees
of the Company may solicit proxies personally, by telephone, by fax or by
special letter. The Company may also reimburse brokers, nominees and other
fiduciaries for their reasonable expenses in forwarding proxy materials to
beneficial owners.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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The following table sets forth, as of March 1, 2005, the number of shares
of Common Stock beneficially owned by each person known by the Company to be the
beneficial owner of more than five percent of the outstanding shares of Common
Stock (who are not also directors), each director nominee of the Company, each
director, the "named executive officers" (as defined below) and all director
nominees, directors and executive officers of the Company as a group.
Name and Address Amount and Nature of Percent of Common
of Beneficial Owner Beneficial Ownership(1) Stock Outstanding
Principal Stockholders
David R. Hodgman
c/o Schiff Hardin LLP
6600 Sears Tower
Chicago, Illinois 60606 255,966 (2) 5.8%
Director Nominees, Directors and Named Executive
Officers:
Charles A. Adams 375,931 (3) 8.5% (18)
Kenneth R. Diepholz 41,608 (4) *% (18)
Joseph R. Dively 2,850 (5) *% (18)
Steven L. Grissom 290,728 (6) 6.5% (18)
Richard Anthony Lumpkin 419,216 (7) 9.4% (18)
Daniel E. Marvin, Jr. 94,327 (8) 2.1% (18)
Gary W. Melvin 190,726 (9) 4.3% (18)
Sara Jane Preston 15,447 (10) *% (18)
William S. Rowland 80,340 (11) 1.8% (18)
Ray Anthony Sparks 187,858 (12) 4.2% (18)
John W. Hedges 17,467 (13) *% (18)
Robert J. Swift, Jr. 2,580 (14) *% (18)
Stanley E. Gilliland 44,602 (15) 1.0% (18)
Michael L. Taylor 9,062 (16) *% (18)
All directors and executive
officers as a group (17 persons) 1,786,301 (17) 38.7% (19)
(1) Unless otherwise indicated, the nature of beneficial ownership for shares
shown in this column is sole voting and investment power. The information
contained in this column is based upon information furnished to the Company
by the persons named above.
(2) The above amount includes 127,983 shares held by the Richard Anthony
Lumpkin 1990 Personal Income Trust for the benefit of Benjamin Iverson
Lumpkin dated April 20, 1990, and 127,983 shares held by the Richard
Anthony Lumpkin 1990 Personal Income Trust for the benefit of Elizabeth
Lumpkin Celio dated April 20, 1990. Mr. Hodgman, who serves as co-trustee
of the aforementioned trusts, disclaims beneficial ownership of the
foregoing 255,966 shares held by these trusts.
(3) The above amount includes 84,030 shares held by Mr. Adams individually. The
above amount also includes 253,481 shares of Common Stock held by a
corporation which Mr. Adams is deemed to control; 5,202 shares held by Mr.
Adams' spouse, over which shares Mr. Adams has no voting and investment
power; 28,718 shares held for the account of Mr. Adams under the Company's
Deferred Compensation Plan; and options to purchase 4,500 shares of Common
Stock.
(4) The above amount includes 13,255 shares held by Mr. Diepholz individually.
The above amount also includes 15,228 shares held for the account of Mr.
Diepholz under an Individual Retirement Account; and options to purchase
13,125 shares of Common Stock.
(5) The above amount includes 600 shares held by Mr. Dively individually and
options to purchase 2,250 shares of common stock.
(6) The above amount includes 26,137 shares held by Mr. Grissom. The above
amount also includes 127,983 shares held by the Richard Anthony Lumpkin
1990 Personal Income Trust for the benefit of Benjamin Iverson Lumpkin
dated April 20, 1990, and 127,983 shares held by the Richard Anthony
Lumpkin 1990 Personal Income Trust for the benefit of Elizabeth Lumpkin
Celio dated April 20, 1990. Mr. Grissom, who serves as co-trustee of the
aforementioned trusts, disclaims beneficial ownership of the foregoing
255,966 shares held by these trusts. The above amount also includes options
to purchase 8,625 shares of Common Stock.
(7) The above amount includes 180,566 shares held by Mr. Lumpkin individually.
The above amount also includes 88,732 shares held by The Lumpkin Family
Foundation, of which Mr. Lumpkin serves as a trustee, and of which shares
beneficial ownership is disclaimed; 66,989 shares held by SKL Investment
Group, of which Mr. Lumpkin is a voting member; 37,746 shares held by the
Richard Adamson Lumpkin Trust dated February 6, 1970 for the benefit of
Richard Anthony Lumpkin, under which Mr. Lumpkin has sole voting and
investment power; 32,058 shares held for the account of Mr. Lumpkin under
the Company's Deferred Compensation Plan; and options to purchase 13,125
shares of Common Stock.
(8) The above amount includes 20,282 shares held by Mr. Marvin individually.
The above amount also includes 19,750 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; 2,307 shares held by Mr.
Marvin's grandchildren, over which Mr. Marvin has shared voting and
investment power; 24,091 shares held for the account of Mr. Marvin under an
Individual Retirement Account; 6,897 shares held for the account of Mr.
Marvin under the Company's Deferred Compensation Plan; and options to
purchase 21,000 shares of Common Stock.
(9) The above amount includes 153,580 shares held by Mr. Melvin. The above
amount also includes 24,021 shares held for the account of Mr. Melvin under
the Company's Deferred Compensation Plan; options to purchase 13,125 shares
of Common Stock.
(10) The above amount includes 4,425 shares held by Ms. Preston individually.
The above amount also includes 2,397 shares held for the account of Ms.
Preston under the Company's Deferred Compensation Plan; and options to
purchase 8,625 shares of Common Stock.
(11) The above amount includes 635 shares held by Mr. Rowland individually. The
above amount also includes 16,522 shares for the account of Mr. Rowland
under an Individual Retirement Account; 5,460 shares held for the account
of Mr. Rowland under the Company's 401(k) Plan; 4,038 shares held for the
account of Mr. Rowland under the Company's Deferred Compensation Plan; and
options to purchase 53,685 shares of Common Stock.
(12) The above amount includes 107,348 held by Mr. Sparks. The above amount also
includes 57,682 shares held by Sparks Investment Group, LP, and 2,600 held
by the Sparks Foundation over which Mr. Sparks shares voting and investment
power; 5,730 shares held by Mr. Sparks' spouse, over which shares Mr.
Sparks has no voting and investment power; 675 shares by Mr. Sparks' child,
over which Mr. Sparks has shared voting and investment power; 11,573 shares
held for the account of Mr. Sparks under the Company's Deferred
Compensation Plan; and options to purchase 2,250 shares of Common Stock.
(13) The above amount includes 375 shares held by Mr. Hedges individually. The
above amount also includes 881 shares held for the account of Mr. Hedges
under the Company's 401(k) Plan; 2,029 shares held for the account of Mr.
Hedges under the Company's Deferred Compensation Plan; and options to
purchase 14,182 shares of Common Stock.
(14) The above amount includes 1,277 shares held for the account of Mr. Swift
under the Company's 401(k) Plan; and 1,303 shares held for the account of
Mr. Swift under the Company's Deferred Compensation Plan.
(15) The above amount includes 12,198 shares held by Mr. Gilliland. The above
amount also includes 3,412 shares held for the account of Mr. Gilliland
under an Individual Retirement Account; 11,466 shares held for the account
of Mr. Gilliland under the Company's 401(k) Plan; 2,218 shares held for the
account of Mr. Gilliland under the Company's Deferred Compensation Plan;
and options to purchase 15,308 shares of Common Stock.
(16) The above amount includes 1,092 shares held by Mr. Taylor individually. The
above amount also includes 376 shares held for the account of Mr. Taylor
under the Company's 401(k) Plan; and options to purchase 7,594 shares of
Common Stock.
(17) Includes an aggregate of 179,644 shares obtainable upon the exercise of
options.
(18) Percentage is calculated on a partially diluted basis, assuming only the
exercise of stock options by such individual which are exercisable within
60 days.
(19) Percentage is calculated on a fully diluted basis, assuming the exercise of
all stock options which are exercisable within 60 days by individuals
included in the above table.
* Less than 1%.
As of March 1, 2005, the Bank acted as sole or co-fiduciary with respect to
trusts and other fiduciary accounts which own or hold 194,155 shares or 4.4% of
the outstanding Common Stock of the Company, over which the Bank has sole voting
and investment power with respect to 170,681 shares or 3.8% of the outstanding
Common Stock and shared voting and investment power with respect to 23,474
shares or .5% of the outstanding Common Stock.
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PROPOSAL I - ELECTION OF DIRECTORS
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The directors of the Company are divided into three classes having
staggered terms of three years. At the annual meeting, the stockholders will be
entitled to elect three Class I directors for a term expiring in 2008. The
number of directors is ten, comprised of three Class I directors, four Class II
directors, and three Class III directors.
For this year's annual stockholders meeting, the Board of Directors has
nominated for election as Class I directors Kenneth R. Diepholz, Steven L.
Grissom, and Gary W. Melvin. Messrs. Diepholz, Grissom and Melvin have served as
directors of the Company since 1990, 2000 and 1990, respectively. The three
individuals receiving the highest number of votes cast will be elected as
directors of the Company and will serve as Class I directors for three year
terms expiring in 2008. Broker non-votes, because they are not considered votes
cast, will not be counted in the vote totals. 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.
The following table sets forth as to each nominee and director continuing
in office, his or her name, age, principal occupation and the year he or she
first became a director of the Company. Unless otherwise indicated, the
principal occupation listed for each person below has been his or her occupation
for the past five years.
Age at Year First Year
April Became Term
Name 1, 2005 Principal Occupation Director Expires
DIRECTOR NOMINEES
Kenneth R. Diepholz 66 Director of the Bank (since 1984) and of the Company; 1990 2005
President, Ken Diepholz Chevrolet, Inc. (until 2000)
and Vice President, Ken Diepholz Chevrolet, Inc.
(since 2000); Vice President, Diepholz Auto Group
(since 2003); President, D-Co Coin Laundry; President,
Augusta Lakes; Owner, Diepholz Rentals.
Steven L. Grissom 52 Director of the Bank and the Company (since 2000); 2000 2005
Treasurer and Secretary of Consolidated
Communications, Inc. (since 2003); Administrative
Officer of SKL Investment Group, LLC (since 1997);
Treasurer of Illinois Consolidated Telephone Company
(since 1989); Secretary of Illinois Consolidated
Telephone Company (since 2003).
Gary W. Melvin 56 Director of the Bank (since 1984) and of the Company; 1990 2005
Director of Data Services (since
1987); President and Co-Owner,
Rural King Stores.
DIRECTORS CONTINUING IN OFFICE
Joseph R. Dively 45 Director of the Bank and the Company (since 2004); 2004 2006
Senior Vice President of Consolidated Communications,
Inc. and President of Illinois Telephone Operations
(since 2003); Vice President of Illinois Consolidated
Telephone Company (until 2002).
Richard Anthony Lumpkin 70 Director of the Bank (since 1966) and of the Company; 1982 2006
Chairman of the Board of Homebase Acquisition, LLC
(since 2003); Chairman of the Board of Consolidated
Communications, Inc. (since 2003); Chairman of the
Board of Consolidated Communications Ventures Company
(since 2004); Director of Ameren Corporation (since
1995); Vice Chairman, McLeod USA Inc. (until 2002);
Chairman, President, and CEO, Illinois Consolidated
Telephone Company (until 2002); in 1997, Illinois
Consolidated Telephone Company merged with McLeod USA;
in January 2002, McLeod USA filed a pre-negotiated
plan of reorganization through a Chapter 11 petition
filed in the U.S. Bankruptcy Court for the District of
Delaware in order to complete a recapitalization; in
April 2002, this plan of reorganization became
effective and McLeod USA emerged from Chapter 11
protection; in December 2002, a corporation led by Mr.
Lumpkin (Homebase Acquisition, LLC) completed its
acquisition of Illinois Consolidated Telephone Company
and other operating entities from McLeod USA in
connection with the recapitalization; Director of
Illuminet Holdings, Inc. (until 2001).
Sara Jane Preston 64 Director of the Bank (since 1999) and of the Company; 2000 2006
Director of Checkley (since 2002); retired President
and CEO of Charleston National Bank and the southern
Illinois lending operations of its successor
organizations (Boatmen's National Bank, NationsBank
and BankAmerica).
William S. Rowland 58 Chairman, President, Chief Executive Officer and 1991 2006
Director of the Company; Executive Vice President
(1997-1999), Treasurer and Chief Financial Officer
(1989-1999) of the Company; Director of Data Services
(since 1989); Director (since 1999), Chairman (since
1999), and Executive Vice President (1989-1999) of the
Bank; Director of Checkley (since 2002).
Charles A. Adams 63 Director of the Bank (since 1989) and of the Company; 1984 2007
Director of Data Services (since
1987); Director of Checkley
(since 2002); President, Howell
Paving, Inc.
Daniel E. Marvin, Jr. 66 President Emeritus, Eastern Illinois University (since 1982 2007
2002); Chairman, President, Chief Executive Officer
(1983-1999) and Director of the Company; Director
(since 1980), Chairman (1983-1999), and President and
Chief Executive Officer (1983-1997) of the Bank;
Director of Data Services (1987-1992).
Ray Anthony Sparks 48 Director of the Bank (since 1997) and of the Company; 1994 2007
Director of Data Services (since 1996); Director of
Checkley (since 2002); former President of Elasco
Agency Sales, Inc. and Electrical Laboratories and
Sales Corporation; private investor, Sparks Investment
Group, LP.
The Board of Directors recommends a vote "FOR" the election of
Directors Diepholz, Grissom and Melvin for a term of three years.
Age at
April 1,
Name 2005 Principal Occupation
NAMED EXECUTIVE OFFICERS
John W. Hedges 57 President of the Bank (since 1999) and Executive
Vice President of the Company (since 1999); former
Senior Vice President, National City Bank (until
1999).
Robert J. Swift, Jr. 53 Executive Vice President of the Bank (since 2000)
and Vice President of the Company (since 2000);
former Senior Vice President, Central Trust Bank
(until 2000).
Stanley E. Gilliland 60
Executive Vice
President of the
Bank (since
1994) and Vice
President of the
Company (since
1984).
Michael L. Taylor 36 Executive Vice President and Chief Financial Officer
of the Bank (since 2000) and Vice President and
Chief Financial Officer of the Company (since 2000);
Vice President of AMCORE Bank (until 2000).
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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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 its subsidiaries.
The Company does not maintain any standing nominating committee. The entire
Board performs the functions of a nominating committee, and considers and acts
on all matters relating to the nomination of individuals for election as
directors. The Board does not believe it needs a separate nominating committee
because the Board has the time and resources to perform the function of
selecting director nominees. Also, more than two-thirds of the directors satisfy
the independence requirements of the New York Stock Exchange. When the Board
performs its nominating function, the Board acts in accordance with the
Company's Certificate of Incorporation.
Stockholders entitled to vote for the election of directors may submit
candidates for consideration by the Company if the Company receives timely
written notice, in proper form, for each such director nominee. If the notice is
not timely and in proper form, the nominee will not be considered by the
Company. To be timely for the annual meeting, the notice generally must be
received within the time frame set forth in "Notice Provisions For Stockholder
Nominations of Directors" below. To be in proper form, each written nomination
must set forth: (1) the name, age, business address and, if known, the residence
address of the nominee, (2) the principal occupation or employment of the
nominee for the past five years, and (3) the number of shares of stock of the
Company beneficially owned by the nominee and by the nominating stockholder.
In the consideration of director nominees, including any nominee that a
stockholder may submit, the Board of Directors considers, at a minimum, the
following factors for new directors, or the continued service of existing
directors: (a) the ability of the prospective nominee to represent the interests
of the stockholders of the Company; (b) the prospective nominee's standards of
integrity, commitment and independence of thought and judgment; (c) the
prospective nominee's ability to dedicate sufficient time, energy and attention
to the diligent performance of his or her duties; and (d) the extent to which
the prospective nominee contributes to the range of talent, skill and expertise
appropriate for the Board.
Members of the audit committee are Messrs. Adams, Diepholz, Dively,
Grissom, Marvin, Melvin, and Sparks, and Ms. Preston. The audit committee
assists the Board of Directors in overseeing the corporate financial reporting
process and the internal and the independent outside audits of the Company. The
audit committee met eight times in 2004.
The members of the compensation committee are Messrs. Adams, Diepholz,
Dively, Grissom, Lumpkin, Marvin, Melvin, and Sparks, and Ms. Preston. 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 companies in the
region, fringe benefits, including modification of the retirement plan, and
incentive compensation. The compensation committee met three times in 2004.
A total of 14 regularly scheduled and special meetings were held by the
Board of Directors of the Company during 2004. During 2004, all directors
attended at least 75 percent of the meetings of the Board and the committees on
which they served.
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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
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The members of the audit committee of the Company during the fiscal year
ended December 31, 2004 were Messrs. Sparks (Chairman), Adams, Diepholz, Dively,
Grissom, Marvin, and Melvin, and Ms. Preston. The Board of Directors determined
that each member of the audit committee satisfies the independence requirements
of the New York Stock Exchange.
The Securities and Exchange Commission requires that boards of directors
determine whether any audit committee member qualifies as an "audit committee
financial expert." The Board of Directors determined that Steven L. Grissom is
an audit committee financial expert.
The audit committee acts pursuant to a written charter that was reviewed
and reassessed for adequacy and reaffirmed by the Board of Directors on January
25, 2005. The audit committee will continue to review and reassess the charter
from time to time but not less than annually. A copy of this Audit Committee
Charter is attached as Appendix A to this Proxy Statement.
The audit committee reviewed and discussed with management the Company's
audited financial statements as of and for fiscal year ended December 31, 2004.
The audit committee also discussed with the independent auditors, KPMG LLP,
the matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended, by the Auditing Standards Board
of the American Institute of Certified Public Accountants. The audit committee
received the written disclosures from KPMG LLP required by Independence
Standards Board Standard No. 1, Independence Discussions with Audit Committees,
as amended, and discussed with KPMG LLP the independence of that firm.
Based on the review and discussion referred to above, the audit committee
affirmed the determination of the Board of Directors that the financial
statements referred to above be included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2004.
In addition, the audit committee considered whether the provision of
services by KPMG LLP not related to the audit of the financial statements
referred to above and to the reviews of the interim financial statements
included in the Company's Forms 10-Q for the quarters ended March 31, 2004, June
30, 2004, and September 30, 2004 were compatible with maintaining the
independence of KPMG LLP.
This audit committee report is submitted by the audit committee of the
Board of Directors:
Ray Anthony Sparks, Chairman Steven L. Grissom
Charles A. Adams Daniel E. Marvin, Jr.
Kenneth R. Diepholz Gary W. Melvin
Joseph R. Dively Sara Jane Preston
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FEES OF INDEPENDENT AUDITORS
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Audit Fees. The aggregate fees billed for professional services rendered by
KPMG LLP for the audit of the Company's annual financial statements for the
fiscal years ended December 31, 2004 and 2003, audit of the Company's internal
control over financial reporting as of December 31, 2004, and the review of the
financial statements included in the Company's Quarterly Reports on Form 10-Q
for said fiscal years were $233,800 and $103,100, respectively.
Audit-Related Fees. The aggregate fees billed for professional services
rendered by KPMG LLP for audit-related services for the fiscal years ended
December 31, 2004 and 2003 (namely, employee benefit plan audit) were $10,000
and $9,600, respectively.
Tax Fees. The aggregate fees billed for professional services rendered by
KPMG LLP for the fiscal year ended December 31, 2004 were $4,850 for compliance
and $3,500 for a stock split tax treatment memorandum. Tax fees for the fiscal
year ended December 31, 2003 were $19,948 for amended tax returns and $4,350 for
compliance.
All Other Fees. The aggregate fees billed for professional services
rendered by KPMG LLP for all products and services other than the foregoing for
the fiscal years ended December 31, 2004 and 2003 were zero and zero,
respectively.
The audit committee preapproves all auditing services and permitted
non-audit services provided by the independent auditors. These services may
include audit services, audit-related services, tax services and other services.
The audit committee preapproved all services performed by the independent
auditors in 2004.
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EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
Summary Compensation Information. The following table summarizes
compensation for services to the Company and the Company's subsidiaries for the
years ended December 31, 2004, 2003 and 2002 paid to or earned by any person
serving as the Chief Executive Officer of the Company, and the four other most
highly compensated executive officers of the Company, who are sometimes herein
referred to as the "named executive officers."
Securities All Other
Name and Annual Underlying Compen-
Principal Position Year Compensation(1) Options(#) sation
Salary(2) Bonus
William S. Rowland, Chairman, 2004 $ 214,000 $ 87,740 12,000 $18,198(3)
President and Chief Executive Officer 2003 $ 200,000 $ 87,000 12,000 $17,898(3)
of the Company 2002 $ 187,000 $ 74,800 12,000 $17,898(3)
John W. Hedges, Executive Vice 2004 $ 150,000 $ 38,850 4,875 $11,331(4)
President of the Company 2003 $ 140,000 $ 40,915 4,875 $10,855(4)
2002 $ 130,000 $ 40,950 4,875 $10,257(4)
Robert J. Swift, Jr., Vice President 2004 $ 128,000 $ 27,562 3,375 $ 9,334(4)
of the Company 2003 $ 126,500 $ 27,198 3,375 $ 9,222(4)
2002 $ 126,500 $ 23,719 3,375 $ 9,013(4)
Stanley E. Gilliland, 2004 $ 118,400 $ 22,045 3,375 $ 8,427(4)
Vice President of the Company 2003 $ 116,000 $ 22,838 3,375 $ 8,330(4)
2002 $ 113,500 $ 23,409 3,375 $ 8,215(4)
Michael L. Taylor, Vice President and 2004 $ 110,000 $ 23,444 3,375 $ 8,007(4)
Chief Financial Officer of the Company 2003 $ 100,000 $ 22,063 3,375 $ 7,324(4)
2002 $ 94,000 $ 22,443 3,375 $ 6,987(4)
(1) None of the named executive officers received any perquisites or other
personal benefits, securities, or property in an amount exceeding 10% of
his salary and bonus during 2004, 2003, and 2002.
(2) Includes deferred amounts.
(3) Represents the Company's contributions to its retirement plan for 2004,
2003, and 2002 of $12,300, $12,000 and $12,000, 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 for
each year.
(4) Represents the Company's contributions to its retirement plan for each
given year.
The following table sets forth information regarding individual grants of
stock options made in 2004 to the named executive officers.
Number of Percent of Potential Realizable Value
Securities Total Options at Assumed
Underlying Granted to Exercise Expir- Annual Rates of Stock Price
Options Employees in Price ation Appreciation for
Name Granted (#)(1) Fiscal Year Per Share Date Options Term
5% 10%
William S. Rowland 12,000 22% $ 41.00 12/14/14 $ 309,360 $784,080
John W. Hedges 4,875 9% $ 41.00 12/14/14 $ 125,678 $318,533
Robert J. Swift, Jr. 3,375 6% $ 41.00 12/14/14 $ 87,008 $220,523
Stanley E. Gilliland 3,375 6% $ 41.00 12/14/14 $ 87,008 $220,523
Michael L. Taylor 3,375 6% $ 41.00 12/14/14 $ 87,008 $220,523
(1) The options become exercisable with respect to 25% of the shares covered
thereby beginning on January 1, 2006 and on each of the following three
anniversaries of this date.
The following table sets forth information regarding the year-end values of
unexercised stock options held by the named executive officers.
Number of Securities
Underlying Unexercised
Options at Fiscal Value of Unexercised
Year-End (#) In-the-Money
Shares Options at
Acquired on Value Fiscal Year-End(1)
Name Exercise (#) Realized
Exercisable Unexercisable Exercisable Unexercisable
William S. Rowland -- -- 55,125 18,375 $1,238,846 $256,230
John W. Hedges -- -- 14,063 6,937 $ 300,429 $92,492
Robert J. Swift, Jr. 2,531.25 $78,410(2) -- 5,062 -- $69,744
Stanley E. Gilliland 2,250.00 $59,737(2) 17,438 5,062 $ 396,174 $69,744
Michael L. Taylor 843.75 $17,297(2) 7,594 5,062 $ 159,452 $69,744
(1) This amount represents the difference between the market value of one share
of the Company's Common Stock on December 31, 2004 ($38.00) and the option
exercise price times the total number of shares subject to exercisable or
unexercisable options.
(2) This amount represents the difference between the market value of one share
of the Company's Common Stock on the day of exercise and the option
exercise price times the number of shares exercised.
Supplemental Executive Retirement Plan. The Company's supplemental
executive retirement plan (the "SERP") applies to senior management employees
recommended by the President and designated by the compensation committee. Mr.
Rowland is the only member of current management which has been so designated.
The SERP provides for Mr. Rowland to receive an annual benefit of a maximum of
$50,000 for a 20 year period following his retirement. This benefit is subject
to a vesting schedule with full benefit vesting at age 63. The Company serves as
beneficiary of life insurance policies on Mr. Rowland with a death benefit of
$750,000.
Employment Agreements. In January 2005, the Company entered into a new
employment agreement with William S. Rowland. The employment agreement generally
provides for an initial base salary, which may be increased but not decreased,
and a bonus of up to 50% of base salary, as well as other benefits under the
agreement. The agreement has an initial term of three years, which may be
extended upon mutual agreement. In the event of termination of Mr. Rowland's
employment by the Company without cause, the Company will be obligated to pay an
amount equal to one year's salary. Under certain circumstances, if Mr. Rowland's
employment discontinues following a change in control of the Company, the
successor to the Company is obligated, among other things, to pay an amount
equal to two years' base salary. The employment agreement includes a covenant
which limits the ability of Mr. Rowland to compete with the Bank for a period of
two years following the termination of his employment. In October 2002, the
Company entered into a similar agreement with John W. Hedges, which provides for
a bonus of up to 35% of base salary, and a payment in an amount equal to two
years' base salary if employment discontinues following a change in control of
the Company.
In August 2003, the Company entered into a similar agreement with Robert J.
Swift, Jr., which provides for a bonus of up to 25% of base salary and a payment
in an amount equal to one year's base salary if employment discontinues
following a change in control of the Company. In May 2004, the Company entered
into a similar agreement with Stanley E. Gilliland, which provides for a bonus
of up to 25% of base salary and a payment in an amount equal to one year's base
salary if employment discontinues following a change in control of the Company.
In May 2004, the Company entered into a similar agreement with Michael L.
Taylor, which provides for a bonus of up to 25% of base salary and a payment in
an amount equal to one year's base salary if employment discontinues following a
change in control of the Company.
Compensation Committee Interlocks and Insider Participation. The members of
the compensation committee of the Board of Directors of the Company for the
fiscal year ended December 31, 2004 were Messrs. Diepholz (Chairman), Adams,
Dively, Grissom, Lumpkin, Marvin, Melvin, and Sparks, and Ms. Preston. During
the fiscal year ended December 31, 2004, no member of the compensation committee
was an officer or employee or a former officer of the Company or its
subsidiaries, other than Mr. Marvin, the former Chairman, President and Chief
Executive Officer of the Company. Also, during the fiscal year ended December
31, 2004, Mr. Rowland served as a member of the compensation committee and as
director of Coles Together, a not-for-profit economic development organization,
and Mr. Grissom served as Treasurer of Coles Together; Messrs. Hedges and Sparks
served as directors, and Mr. Grissom served as President, of Mattoon Area
Industrial Development Corporation, a not-for-profit industrial development
corporation; Ms. Preston and Messrs. Dively and Hedges served as members of the
compensation committee and as directors of Sarah Bush Lincoln Health Systems, a
not-for-profit medical facility; and Ms. Preston served as director of Eastern
Illinois University Foundation, a not-for-profit organization. See also "Certain
Relationships and Related Transactions."
Compensation Committee Report. It is the compensation committee's
responsibility 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 senior management of the Company.
Compensation for senior management generally includes base salary, annual
performance-based incentives and long-term stock incentives. The committee uses
a "peer group" of financial institutions, including Illinois banks, public
banking companies in the general area and commercial banks in the Midwest region
in assessing competitive compensation trends and pay levels.
Base Salaries. Base salaries for executive officers are reviewed annually
and may be adjusted, when appropriate, to reflect competitive practices, changes
in roles and responsibilities, and individual performance.
Annual Incentive Compensation. Annual incentive amounts are payable
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. The formulas for measuring performance
and awarding bonuses objectively link financial and individual performance with
bonus amounts.
Long Term Stock Incentive Compensation. Stock incentive awards are made
under the stockholder-approved First Mid-Illinois Bancshares, Inc. 1997 Stock
Incentive Plan (the "Plan"). The Plan is intended to provide a means whereby
executive officers may sustain a sense of proprietorship and personal
involvement in the continued success of the Company, and to encourage them to
remain with and devote their best efforts to the business of the Company,
thereby advancing the interest of the Company and its stockholders.
Chief Executive Officer Compensation. The compensation package for Mr.
Rowland was determined in the same manner as for all other executive officers,
except for Mr. Rowland's annual incentive compensation as described below. In
December 2003, the compensation committee reviewed Mr. Rowland's base salary by
evaluating the responsibilities of his position and his experience and
performance. In addition, the compensation committee reviewed the comparison to
base salaries for chief executive officers at peer group companies, and
determined to increase Mr. Rowland's 2004 base salary from $200,000 in 2003 to
$214,000 for 2004. Mr. Rowland's 2004 annual incentive compensation was based
100% on the Company's total performance without reference to any particular
operating unit of the Company or personal objectives. The Company's total
performance was measured by comparing the financial results of the Company to
the 2004 earnings per share goal established by the compensation committee in
November 2003. The compensation committee established $2.15 as the superior
level of earnings per share in 2004 necessary for Mr. Rowland to receive a
payout of 100% of his annual incentive compensation. Since earnings per share in
2004 were $2.13, Mr. Rowland received an 82% payout, amounting to 41% of his
base salary. Finally, in 2004, Mr. Rowland was awarded 12,000 stock options
under the Plan.
The 2004 earnings per share of $2.13 represented a $.25 or 13% improvement
from 2003's level. Also, the Company's market share increased and various other
improvements were made in the Company's operating and administrative functions.
Accordingly, Messrs. Rowland, Hedges, Swift, Gilliland, and Taylor were awarded
incentive bonuses of $87,740, $38,850, $27,562, $22,045, and $23,444,
respectively.
The relationships between the base salaries and incentive compensation of
Messrs. Rowland, Hedges, Swift, Gilliland, and Taylor for 2004, 2003, and 2002
were as follows:
Incentive Compensation as a Percentage of Base Salary
2004 2003 2002
William S. Rowland 41% 44% 40%
John W. Hedges 26% 29% 32%
Robert J. Swift, Jr. 22% 22% 19%
Stanley E. Gilliland 19% 20% 21%
Michael L. Taylor 21% 22% 24%
This compensation committee report is submitted by the compensation
committee of the Board of Directors:
Kenneth R. Diepholz, Chairman Daniel E. Marvin, Jr.
Charles A. Adams Gary W. Melvin
Joseph R. Dively Sara Jane Preston
Steven L. Grissom Ray Anthony Sparks
Richard Anthony Lumpkin
--------------------------------------------------------------------------------
COMMON STOCK PERFORMANCE GRAPH
--------------------------------------------------------------------------------
The following Common Stock price performance 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 from December 31, 1999 through December 31, 2004. The amounts
shown assume the reinvestment of dividends.
Cumulative Total Return
----------- ----------- ----------- ----------- ----------- -----------
12/99 12/00 12/01 12/02 12/03 12/04
FIRST MID-ILLINOIS BANCSHARES, INC. 100.00 84.25 105.78 125.19 211.60 269.34
S & P 500 100.00 90.89 80.09 62.39 80.29 89.02
NASDAQ BANK 100.00 117.64 125.14 127.22 163.14 184.84
[GRAPHIC OMITTED][GRAPHIC OMITTED]
--------------------------------------------------------------------------------
COMMUNICATIONS WITH DIRECTORS
--------------------------------------------------------------------------------
Any stockholder may communicate with any director by sending written
correspondence addressed to such director in care of the Secretary of the
Company at First Mid-Illinois Bancshares, Inc., 1515 Charleston Avenue, Mattoon,
Illinois 61938. The Secretary or the designee thereof will forward such
correspondence to the relevant director.
The Company expects directors to attend the annual meeting, absent
scheduling or other similar conflicts. All of the directors attended the annual
meeting in 2004.
--------------------------------------------------------------------------------
DIRECTORS' COMPENSATION
--------------------------------------------------------------------------------
Directors of the Company received a $3,000 quarterly retainer for serving
on the Board of Directors in 2004. Directors who are not employees of the
Company also were granted in 2004 options to purchase 2,250 shares of the
Company's Common Stock at an exercise price of $41.00 per share. Such options
have terms of ten years and became exercisable on their date of grant. Directors
who are not employees of the Company also receive health insurance.
Audit committee members received $500 for each audit committee meeting
attended in 2004 and the audit committee chairman also received a $2,000 annual
retainer. The audit committee financial expert also received a $1,500 annual
retainer in 2004.
Compensation committee members received $250 for each compensation
committee meeting attended in 2004 and the compensation committee chairman also
received a $1,000 annual retainer.
--------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------------------------------
Directors and officers of the Company and its subsidiaries and their
associates were customers of and had transactions with the Company and its
subsidiaries during 2004. 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. Specific 2004 transactions are described below.
Messrs. Lumpkin and Grissom served as directors of the Company and were the
beneficial owners of more than five percent of the Company's Common Stock. In
addition, Messrs. Lumpkin and Grissom have beneficial ownership in the equity
holders of MACC, LLC and Effingham Hi-Tech Partners and the capital stock of
Agracel, Inc. MACC, Effingham High-Tech and Agracel had outstanding loans with
the Bank. The highest outstanding aggregate balances during 2004 and the
December 31, 2004 aggregate balances and interest rates of this indebtedness for
MACC was $931,834 and $831,202 at 5.00 percent; for Effingham High-Tech was
$2,480,835 and $2,114,289 at 5.375 percent; and for Agracel was $6,059,743 and
$5,691,175 at 5.50 percent.
Consolidated Communications, Inc., of which Mr. Lumpkin is Chairman and a
beneficial owner, and of which Mr. Grissom is Treasurer and Secretary and a
beneficial owner and of which Mr. Dively is Senior Vice President and a
beneficial owner, and its affiliates provided paging, long distance/800 and
private line services, voice mail and customer premise equipment services to the
Company in the amount of $476,006.
On February 9, 2004, the Company acquired 37,500 shares of Common Stock
from Mr. Lumpkin for $1,187,500 and 37,500 shares of Common Stock from SKL
Investment Group, LLC, of which Mr. Lumpkin is a voting member, for $1,187,500.
Messrs. Diepholz, Melvin, Sparks, Adams, and Grissom who each served as
director of the Company, had outstanding loans with the Bank. In addition,
Messrs. Adams and Grissom were the beneficial owners of more than five percent
of the Company's Common Stock. In the case of Mr. Diepholz, these loans included
loans to Mr. Diepholz's sons, Robert D. Diepholz, Kenneth R. Diepholz, Jr., and
Ronald Diepholz. The highest outstanding aggregate balances during 2004 and the
December 31, 2004 aggregate balances and interest rates of this indebtedness was
$9,178,370 and $8,325,513 at interest rates ranging between 5.25 and 6.75
percent for Mr. Diepholz; $1,736,755 and $1,511,887 at an interest rate of 5.25
percent for Mr. Melvin; $1,863,923 and $1,345,250 at an interest rate of 5.25
percent for Mr. Sparks; $1,093,009 and $833,009 at an interest rate of 5.25
percent for Mr. Adams; and $121,036 and $35,457 at an interest rate of 5.50
percent for Mr. Grissom.
--------------------------------------------------------------------------------
NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS OF DIRECTORS
--------------------------------------------------------------------------------
Any stockholder wishing to nominate an individual for election as a
director must comply with certain provisions in the Company's Certificate of
Incorporation. The Company's Certificate of Incorporation establishes an advance
notice procedure with regard to the nomination, other than by or at the
direction of the Board of Directors of the Company, of candidates for election
as directors. Generally, such notice must be delivered to or mailed to and
received by the Secretary of the Company not fewer than 14 days or more than 60
days before a meeting at which directors are to be elected. The stockholder must
also comply with certain other provisions set forth in the Company's Certificate
of Incorporation relating to the nomination of an individual for election as a
director. For a copy of the Company's Certificate of Incorporation, which
includes the provisions relating to the nomination of an individual for election
as a director, an interested stockholder should contact the Secretary of the
Company at 1515 Charleston Avenue, P.O. Box 499, Mattoon, Illinois 61938.
--------------------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS
--------------------------------------------------------------------------------
KPMG LLP acted as independent certified public accountants of the Company
and its subsidiaries for the fiscal year ending December 31, 2004. KPMG LLP has
served as the Company's independent auditors since 1992. A representative from
KPMG LLP is expected to be present at the annual meeting, will have the
opportunity to make a statement and will be available to respond to appropriate
questions. The Company has not yet appointed its independent auditors for the
fiscal year ending December 31, 2005 and expects to make that appointment later
in the year.
--------------------------------------------------------------------------------
INCLUSION OF STOCKHOLDER PROPOSALS IN PROXY MATERIALS
--------------------------------------------------------------------------------
In order to be eligible for inclusion in the Company's proxy materials for
next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's main office at 1515
Charleston Avenue, P.O. Box 499, Mattoon, Illinois 61938, no later than December
21, 2005. Any such proposal shall be subject to the requirements of the proxy
rules adopted under the Securities Exchange Act of 1934.
--------------------------------------------------------------------------------
OTHER MATTERS
--------------------------------------------------------------------------------
The Board of Directors of the Company does not intend to present any other
matters for action at the annual meeting, and the Board has not been informed
that other persons intend to present any other matters for action at the annual
meeting. However, if any other matters should properly come before the annual
meeting, the persons named in the accompanying proxy intend to vote thereon,
pursuant to the proxy, in accordance with the recommendation of the Board of
Directors of the Company.
--------------------------------------------------------------------------------
SECTION 16 - BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
--------------------------------------------------------------------------------
Based solely upon its review of reports on Forms 3, 4 or 5 and any
amendments furnished to the Company under Section 16 of the Securities Exchange
Act of 1934, and written representations from the executive officers and
directors that no other reports were required, the Company believes that all of
these Forms were filed on a timely basis by reporting persons during the fiscal
year ended December 31, 2004, except that late reports were filed by Messrs.
Adams, Hedges, Lumpkin, Melvin, Sparks, Swift, and Rowland, and Ms. Preston with
respect to deferred compensation received in shares or stock units on March 31,
2004. The transactions were reported to the Securities and Exchange Commission
on April 5, 2004.
Appendix A
FIRST MID-ILLINOIS BANCSHARES, INC.
(the "Company")
Charter of the Audit Committee of the Board of Directors
As adopted January 25, 2005
Purpose
The Audit Committee is appointed by the Board of Directors to assist the Board
in monitoring: (1) the integrity of the Company's financial statements, (2) the
Company's compliance with legal and regulatory requirements, (3) the independent
auditor's qualifications and independence, and (4) the performance of the
Company's internal audit function and independent auditor.
The Audit Committee shall prepare the report required by the Securities and
Exchange Commission (the "SEC") to be included in the Company's annual proxy
statement.
Membership
The Audit Committee shall consist of no fewer than three members. Each member of
the Audit Committee shall meet the independence and experience requirements of
the Federal Deposit Insurance Corporation Act of 1991 and the regulations
relating thereto and the Securities Exchange Act of 1934 (the "Exchange Act")
and the applicable rules and regulations of the SEC, as well as the independence
requirements of the New York Stock Exchange.
Each member of the Audit Committee shall, in the judgment of the Board, have a
basic understanding of finance and accounting and be able to read and understand
fundamental financial statements. At least one member of the Audit Committee
shall be an "audit committee financial expert" as defined by the SEC. Audit
Committee members shall be appointed by the Board of Directors. Audit Committee
members may be replaced by the Board.
Meetings
The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly. The Audit Committee shall meet with management, the
head of the internal audit department, and the independent auditor in separate
executive sessions periodically, but not less frequently than annually, to
discuss anything the Audit Committee or these groups believe should be
discussed. The Audit Committee may request any officer or employee of the
Company or the Company's outside counsel or independent auditor to attend a
meeting of the Audit Committee or to meet with any members of, or consultants
to, the Audit Committee, and to provide pertinent information as necessary. If
the Chair of the Audit Committee is not present at a given meeting, the members
of the Audit Committee present at such meeting may designate a Chair for that
meeting by unanimous vote.
Authority and Responsibilities
The Audit Committee shall have the sole authority to appoint or replace the
independent auditor (subject, if applicable, to shareholder ratification). The
Audit Committee shall be directly responsible for the compensation and oversight
of the work of the independent auditor (including resolution of disagreements
between management and the independent auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or related work. The
independent auditor shall report directly to the Audit Committee.
The Audit Committee shall preapprove all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Company by its independent auditor, subject to the de minimis exceptions for
non-audit services described in Section 10A(i)(1)(B) of the Exchange Act which
are approved by the Audit Committee prior to the completion of the audit.
The Audit Committee shall have the authority, to the extent it deems necessary
or appropriate, to retain independent legal, accounting, or other advisors. The
Company shall provide for appropriate funding, as determined by the Audit
Committee, for payment of compensation to the independent auditor for the
purpose of rendering or issuing an audit report and to any advisors employed by
the Audit Committee.
The Audit Committee shall make regular reports to the Board of Directors. The
Audit Committee shall review and reassess the adequacy of this Charter annually
and recommend any proposed changes to the full Board for approval. The Audit
Committee shall review the Audit Committee's own performance annually.
The Audit Committee shall:
Financial Statement and Disclosure Matters
o Review and discuss with management and the independent auditor the annual
audited financial statements, including disclosures made in management's
discussion and analysis, and recommend to the Board whether the audited
financial statements should be included in the Company's Form 10-K.
o Establish a Disclosure Committee whose membership shall include, but not be
limited to, the Audit Committee Chair, an audit committee financial expert,
the Chief Executive Officer, and the Chief Financial Officer for the
purpose of reviewing and discussing with management and the independent
auditor the Company's quarterly financial statements prior to the filing of
the Company's Form 10-Q, including the results of the independent auditor's
procedures with respect to the quarterly financial statements.
o Review and discuss reports from the independent auditor on:
o All critical accounting policies and practices to be used.
o All alternative treatments of financial information within generally
accepted accounting principles ("GAAP") that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent
auditor.
o Other material written communications between the independent auditor
and management such as any management letter or schedule of unadjusted
differences.
o Discuss with management and the independent auditor significant financial
reporting issues and judgments made in connection with the preparation of
the Company's financial statements, including any significant changes in
the Company's selection or application of accounting principles, any major
issues as to the adequacy of the Company's internal controls, and any
special steps adopted in light of material control deficiencies.
o Discuss with management the Company's earnings press releases, including
the use of "pro forma" or "adjusted" non-GAAP information, as well as
financial information and earnings guidance provided to analysts and rating
agencies. Such discussion may be done generally (consisting of discussing
the types of information to be disclosed and the types of presentations to
be made).
o Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements.
o Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61, Communication with Audit
Committees, relating to the conduct of the audit.
o Review the disclosures and certification made by the Company's Chief
Executive Officer and Chief Financial Officer under Sections 302 and 906 of
the Sarbanes-Oxley Act of 2002.
Oversight of the Company's Relationship with the Independent Auditor
o Obtain and review a report from the independent auditor regarding, and
discuss with the independent auditor, at least annually, all relationships
between the independent auditor and the Company (including the matters set
forth in Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees). Review and evaluate at least annually
the qualifications, performance and independence of the independent
auditor, including considering whether the provision of permitted non-audit
services is compatible with maintaining the auditor's independence.
o Ensure the rotation of audit partners as required by Section 10A(j) of the
Exchange Act.
o Recommend to the Board of Directors policies for the Company's hiring of
employees or former employees of the independent auditor.
o Review with the independent auditor any audit problems or difficulties and
management's response.
o Discuss with management and the independent auditor the scope of the annual
audit, significant accounting policies, and audit conclusions regarding
significant accounting estimates.
Oversight of the Company's Internal Audit Function
o Review the appointment, performance, and replacement of the head of the
internal audit department.
o Review the significant reports to management prepared by the internal audit
department and management's responses and follow-ups to these reports.
o Discuss with the independent auditor and management the internal audit
department responsibilities, budget and staffing, and any recommended
changes in the planned scope of the internal audit.
Compliance Oversight Responsibilities
o Obtain from the independent auditor assurance that Section 10A(b) of the
Exchange Act regarding the detection of illegal activity has not been
implicated.
o Obtain reports from management, the head of the internal audit department,
and the independent auditor that the Company and its wholly-owned
subsidiaries are in conformity with applicable legal requirements and the
Company's Codes of Ethics. Advise the Board with respect to the Company's
policies and procedures regarding compliance with applicable laws and
regulations and with the Company's Codes of Ethics.
o Establish procedures for the receipt, retention, and treatment of
complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters, and the confidential, anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters.
o Discuss with management and the independent auditor any correspondence with
regulators or governmental agencies and any published reports which raise
material issues regarding the Company's financial statements or accounting
policies.
Limitation of Audit Committee's Role
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with GAAP and applicable rules
and regulations. These are the responsibilities of management and the
independent auditor.
[ ] Mark this box with an X if you have made
changes to your name or address details above.
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Annual Meeting Proxy Card
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PLEASE REFER TO THE REVERSE SIDE FOR INTERNET AND TELEPHONE VOTING INSTRUCTIONS
A Election of Directors
1.The Board of Directors recommends a vote FOR the listed nominees.
For Withhold
01 Kenneth R. Diepholz |_| |_|
02 Stephen L. Grissom |_| |_|
03 Gary W. Melvin |_| |_|
B Issue
2. In their discretion, on such other matters that may properly come before
the meeting and any adjournments thereof.
Mark this box with an X if you plan to attend the meeting |_|
C Authorized Signatures -- Sign Here -- This section must be completed for
your instructions to be executed.
Note: Please sign your name(s) EXACTLY as your name(s) appear(s). All joint
holders, must sign. When signing as attorney, trustee, executor, administrator,
guardian or corporate officer, please provide your FULL title.
Signature 1 - Please keep signature within the box
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Signature 2 - Please keep signature within the box
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Date (dd/mm/yyyy)
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Proxy - FIRST MID-ILLINOIS BANCSHARES, INC.
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PROXY is Solicited By the Board of Directors
For the Annual Meeting of Stockholders - May 25, 2005
The undersigned hereby appoints Stanley E. Gilliland, John W. Hedges and Robert
J. Swift, Jr., or any of them acting in the absence of the others, with full
power of substitution, as 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 and voting at
the Annual Meeting of Stockholders of First Mid-Illinois Bancshares, Inc., to be
held in the lobby of the First Mid-Illinois Bank & Trust, 1515 Charleston
Avenue, Mattoon, Illinois, on May 25, 2005, at 4:00 p.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 and, in their discretion, upon such other business
as may come before the meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH SPECIFICATIONS MADE. IF NO CHOICE IS
INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES LISTED
HEREON.
YOUR VOTE IS IMPORTANT!
PLEASE VOTE YOUR SHARES BY TELEPHONE, THROUGH THE INTERNET, OR BY COMPLETING,
SIGNING, DATING AND RETURNING THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed and dated on the reverse side.)
Internet and Telephone Voting Instrustions
You can vote by telephone OR Internet! Available 24 Hours a day 7 days a week!
Instead of mailing your proxy, you may choose one of the two voting methods
outlined below to vote your proxy.
To vote using the Telephone (within U.S. and Canada)
* Call toll free 1-877-233-3044 in the United States or Canada any time
on a touch tone telephone. There is NO CHARGE to you for the call.
* Follow the simple instructions provided by the recorded message.
To vote using the Internet
* Go to the following website:
WWW.COMPUTERSHARE.COM/US/PROXY
* Enter the information requested on your computer screen and follow the
simple instructions.
If you vote by telephone or the Internet, please DO NOT mail back this proxy
card. Proxies submitted by telephone or the Internet must be received by 1:00
a.m., Central Time, on May 25, 2005.
THANK YOU FOR VOTING