Document:

exhibit4-1.htm

EXHIBIT 4.1

CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF

SERIES C 8% NON-CUMULATIVE PERPETUAL CONVERTIBLE PREFERRED STOCK

OF

FIRST MID-ILLINOIS BANCSHARES, INC.

 

It is hereby certified that:

 

1.           The name of the corporation (hereinafter called the “Corporation”) is

 

FIRST MID-ILLINOIS BANCSHARES, INC.

 

	
2.

	
The restated certificate of incorporation of the Corporation, filed May 21, 1986, with the Secretary of State of the State of Delaware, as amended from time to time, authorizes the issuance of 18,000,000 shares of common stock, $4.00 par value per share (“Common Stock”), and 1,000,000 shares of preferred stock, without par value, and expressly vests in the board of directors of the Corporation (the “Board of Directors”) the authority provided therein to issue any or all of said shares in one or more series and by resolution or resolutions, with such voting powers, full or limited, or no voting powers, and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolutions adopted by the Board of Directors.

 

	
3.

	
The Board of Directors of the Corporation, pursuant to the authority expressly vested in it as aforesaid, has adopted the following resolutions creating an issue of Series C 8% Non-Cumulative Perpetual Convertible Preferred Stock.

 

RESOLVED, that the Series C 8% Non-Cumulative Perpetual Convertible Preferred Stock be issued subject to the following rights, preferences, privileges and restrictions:

 

1. Issuance.  The Board of Directors (the “Board”) of the Corporation has determined that 5,500 shares of the authorized and unissued preferred stock be identified as “Series C 8% Non-Cumulative Perpetual Convertible Preferred Stock” and has authorized such shares for issuance at a price of $5,000 per share (hereinafter referred to as the “Preferred Stock”).

 

2. Dividends.

 

(a) Dividends on the Preferred Stock will be payable semi-annually in arrears, when, as and if authorized by the Board of Directors and declared by the Corporation out of legally available funds, on a non-cumulative basis on the $5,000 per share liquidation preference, at an annual rate equal to 8%.  Subject to the foregoing, dividends will be payable in arrears on April 1 and October 1 of each year (each, a “Dividend Payment Date”) commencing on October 1, 2011 or, if any such day is not a business day, the next business day.  Each dividend will be payable to holders of record as they appear on the Corporation’s stock register on the fifteenth day of the month prior to the month in which the relevant Dividend Payment Date occurs.  Each period from and including a Dividend Payment Date (or the date of the issuance of the Preferred Stock) to but excluding the following Dividend Payment Date is herein referred to as a “Dividend Period.”  Dividends payable for each Dividend Period will be computed on the basis of a 360-day year consisting of twelve 30-day months.  If a scheduled Dividend Payment Date falls on a day that is not a business day, the dividend will be paid on the next business day as if it were paid on the scheduled Dividend Payment Date, and no interest or other amount will accrue on the dividend so payable for the period from and after that Dividend Payment Date to the date the dividend is paid.

 

  

  

  

(b) Dividends on the Preferred Stock will be non-cumulative.  If for any reason the Board of Directors does not authorize and the Corporation does not declare full cash dividends on the Preferred Stock for a Dividend Period, the Corporation will have no obligation to pay any dividends for that period, whether or not the Board of Directors authorizes and the Corporation declares dividends on the Preferred Stock for any subsequent Dividend Period.  The Corporation is not obligated to and will not pay holders of the Preferred Stock any interest or sum of money in lieu of interest on any dividend not paid on a Dividend Payment Date.  The Corporation is also not obligated to and will not pay holders of the Preferred Stock any dividend in excess of the dividends on the Preferred Stock that are payable as described above.  There is no sinking fund with respect to dividends.

 

(c) The Corporation may not declare or pay or set apart for payment full dividends on any series of preferred stock ranking, as to dividends, equally with or junior to the Preferred Stock unless the Corporation has previously declared and paid or set apart for payment, or the Corporation contemporaneously declares and pays or sets apart for payment, full dividends on the Preferred Stock for the most recently completed Dividend Period.  When dividends are not paid in full on the Preferred Stock and any series of preferred stock ranking equally as to dividends, all dividends upon the Preferred Stock and such equally ranking series will be declared and paid pro rata.  For purposes of calculating the pro rata allocation of partial dividend payments, the Corporation will allocate dividend payments based on the ratio between the then-current dividend payments due on shares of Preferred Stock and the aggregate of the current and accrued dividends due on any equally ranking series.  The Corporation will not pay interest or any sum of money instead of interest on any dividend payment that may be in arrears on the Preferred Stock.  Unless the Corporation has paid or declared and set aside for payment full dividends on the Preferred Stock for the most recently completed Dividend Period, the Corporation will not:

 

	
  

	
•       declare or make any dividend payment or distribution on any junior ranking stock, other than a dividend paid in junior ranking stock, or

	
  

	
•

	
redeem, purchase, otherwise acquire or set apart money for a sinking fund for the redemption of any junior or equally ranking stock, except by conversion into or exchange for junior ranking stock.

As used herein, “junior to the Preferred Stock,” “junior ranking stock” and like terms refer to the Corporation’s  Common Stock and any other class or series of the Corporation’s capital stock over which the Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on the Corporation’s liquidation, dissolution or winding up, and “equally ranking” and like terms refer to any other class or series of the Corporation’s capital stock that ranks on a parity with the Preferred Stock in the payment of dividends or in the distribution of assets on the Corporation’s liquidation, dissolution or winding up, including the Corporation’s outstanding Series B 9% Non-Cumulative Perpetual Convertible Preferred Stock.  Subject to the conditions described above, and not otherwise, dividends (payable in cash, stock, or otherwise), as may be determined by the Board of Directors or a duly authorized committee of the board, may be declared and paid on the Corporation’s Common Stock and any other stock ranking equally with or junior to the Preferred Stock from time to time out of any assets legally available for such payment, and the holders of the Preferred Stock will not be entitled to participate in those dividends.

  

  

  

3. Conversion.  The holders of the Preferred Stock shall have the following conversion rights (the “Conversion Rights”) and be subject to the following provisions with respect to the conversion of Preferred Stock:

 

(a) Right to Convert.  Each share of Preferred Stock may be converted at any time at the option of the holder into fully paid and nonassessable shares of Common Stock, at the Conversion Price (as hereafter defined) therefor in effect at the time of conversion determined as provided herein, at the option of the holder thereof, at any time after the date of issuance of such shares, at the office of the Corporation or any transfer agent for the Preferred Stock or Common Stock.

 

(b) Conversion Price.  Each share of Preferred Stock shall be convertible into the number of shares of Common Stock that results from dividing $5,000 by the Conversion Price per share in effect at the time of conversion for each share of Preferred Stock.  The Conversion Price per share for the Preferred Stock at the date on which such share of Preferred Stock is originally issued (the “Original Issue Date”) shall be $20.29 (the “Conversion Price”) and shall be subject to adjustment from time to time as provided herein.

 

(c) Mandatory Conversion; Unpaid Dividends.

 

(i) The Corporation shall have the right at any time after the fifth anniversary of the Original Issue Date of shares of the Preferred Stock constituting a majority of the shares issued (the “Mandatory Conversion Date”) to call and convert all (but not less than all) of the outstanding shares of Preferred Stock into shares of Common Stock if, on the date the Corporation gives the Conversion Notice (as hereinafter defined), (x) the tangible book value per share of the Corporation’s Common Stock equals or exceeds 115% of the tangible book value per share of the Corporation’s Common Stock at December 31, 2010, and (y) the NASDAQ Bank Index (denoted by CBNK:IND) equals or exceeds 115% of the NASDAQ Bank Index at December 31, 2010.  “Tangible book value per share of our common stock” at any date means the result of dividing the Corporation’s total common stockholders equity at that date, less the amount of goodwill and intangible assets, determined in accordance with U.S. generally accepted accounting principles, by the number of shares of common stock then outstanding, net of any shares held in the treasury.

 

(ii) Not less than 30 days nor more than 60 days prior to the Mandatory Conversion Date, written notice (the “Conversion Notice”) shall be mailed, first class postage prepaid, to the holders of the shares of the Preferred Stock at their address last shown on the records of the Corporation.  The Conversion Notice shall state: (A) the number of shares being converted; (B) what the Mandatory Conversion Date and Conversion Price are; (C) that the holders’ voluntary Conversion Rights (as herein defined) shall terminate; and (D) that each holder is to surrender to the Corporation, in the manner and at the place designated, the certificates representing the shares of Preferred Stock to be converted.

 

(iii) On or before the Mandatory Conversion Date, the holders of shares of Preferred Stock being converted shall surrender the certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Conversion Notice, and thereupon a certificate or certificates for the number of shares of Common Stock into which such shares of Preferred Stock have been converted shall be issued to the person whose name appears on such surrendered certificate or certificates as the owner thereof, and each surrendered certificate shall be cancelled and retired.

 

  

  

  

(iv) If the Conversion Notice shall have been duly given, and if on the Mandatory Conversion Date the required number of shares of Common Stock are issuable, all shares of Preferred Stock shall no longer be outstanding, shall be cancelled and retired and shall cease to exist.  Each certificate formerly representing any shares of the Preferred Stock shall thereafter represent only the right to receive (A) the corresponding shares of Common Stock, plus cash in lieu of any fractional shares of Common Stock due upon conversion of shares of Preferred Stock, (B) the amount of dividends or other distributions with a record date after the Mandatory Conversion Date but prior to the surrender date, and with a payment date at, prior or subsequent to surrender date, not paid with respect to the Common Stock issuable upon conversion, less the amount of any withholding taxes which may be required thereon and (C) the amount equal to any authorized, declared and unpaid dividends, without accumulation of any undeclared dividends, on such Preferred Stock (the “Net Accrued Dividends”) through such Mandatory Conversion Date.

 

(d) Mechanics of Voluntary Conversion; Unpaid Dividends.

 

(i) Before any holder of Preferred Stock shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent of the Preferred Stock or Common Stock, and shall give written notice by mail, postage prepaid, to the Corporation at such office that he elects to convert the same and shall state therein the number of shares of Preferred Stock being converted and the name or names in which the certificate or certificates for shares of Common Stock are to be issued.  Thereupon the Corporation shall promptly issue and deliver at such office to such holder of Preferred Stock or to the nominee or nominees of such holder a certificate or certificates for the number of shares of Common Stock to which he shall be entitled.

 

(ii) Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.  A holder of Preferred Stock who surrenders shares of Preferred Stock for conversion shall be entitled to receive from the Corporation on the date of such surrender an amount in cash equal to the Net Accrued Dividends on such surrendered shares of Preferred Stock, but any future dividends with respect to the surrendered shares of Preferred Stock shall cease to accrue after such surrender and all rights with respect to such shares shall forthwith after such surrender terminate.

 

(e) Adjustment for Stock Splits and Combinations.  If the Corporation shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately decreased; conversely, if the Corporation shall at any time or from time to time after the Original Issue Date reduce the outstanding shares of Common Stock by a stock combination, the Conversion Price then in effect immediately before the combination shall be proportionately increased.  Any adjustment under this paragraph 3(e) shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

  

  

  

(f) Adjustment for Certain Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price for the Preferred Stock then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price for the Preferred Stock by a fraction:

 

(i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

 

(ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price for the Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price for the Preferred Stock shall be adjusted pursuant to this paragraph 3(f) as of the time of actual payment of such dividends or distributions.

 

(g) Adjustments for Other Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had their Preferred Stock been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period under this paragraph 3 with respect to the rights of the holders of the Preferred Stock.  Notwithstanding the foregoing, to the extent the Corporation has a rights plan in effect with respect to the Common Stock on any date upon which Preferred Stock is converted, upon conversion, the holder will receive, in addition to the shares of Common Stock, the rights under the rights plan, unless, prior to such date, the rights have separated from the shares of Common Stock in accordance with the provisions of such rights plan.

 

(h) Adjustment for Reclassification, Exchange or Substitution.  If the Common Stock issuable upon the conversion of the Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares of stock dividend provided for above, or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this paragraph 3), then and in each such event the holder of each share of Preferred Stock shall have the right thereafter to convert such share into the kind and amounts of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change, by holders of the number of shares of Common Stock into which such shares of Preferred Stock might have been converted immediately prior to such reorganization, reclassification or change, all subject to further adjustment as provided herein.

 

  

  

  

(i) Reorganization, Mergers, Consolidations or Sales of Assets.  If at any time or from time to time there shall be a capital reorganization of the Common Stock (other than a subdivision, combination, reclassification or exchange of shares provided for elsewhere in this paragraph 3) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all or substantially all the Corporation’s properties and assets to any other person, then, as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the holders of the Preferred Stock shall thereafter be entitled to receive upon conversion of the Preferred Stock, the number of shares of stock or other securities or property of the Corporation, or of the successor Corporation resulting from such merger or consolidation or sale, to which a holder of that number of shares of Common Stock deliverable upon conversion of the Preferred Stock would have been entitled on such capital reorganization, merger, consolidation or sale.  In any such case, appropriate adjustment shall be made in the application of the provisions of this paragraph 3 with respect to the rights of the holders of the Preferred Stock after the reorganization, merger, consolidation or sale to the end that the provisions of this paragraph 3 (including adjustment of the Conversion Prices and the number of shares purchasable upon conversion of the Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable.

 

(j) Sale of Shares Below Conversion Price.

 

(i) If at any time or from time to time after the Original Issue Date, the Corporation shall issue or sell Additional Shares of Common Stock (as hereinafter defined), other than as a dividend as provided in paragraph 3(f) above, and other than upon a subdivision or combination of shares of Common Stock as provided in paragraph 3(e) above, for a consideration per share less than the Conversion Price for the Preferred Stock (or, if an adjusted Conversion Price shall be in effect by reason of a previous adjustment, then less than such adjusted Conversion Price), then and in each case the applicable Conversion Price for the Preferred Stock shall be reduced, as of the opening of business on the date of such issue or sale, to a price determined by multiplying the Conversion Price by a fraction, the numerator of which shall be the sum of (A) the number of shares of Common Stock outstanding immediately prior to such issue or sale plus (B) the number of shares of Common Stock that the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at the Conversion Price, and the denominator of which shall be the sum of (X) the number of shares of Common Stock outstanding immediately prior to such issue or sale plus (Y) the number of such Additional Shares of Common Stock so issued.

 

(ii) For the purpose of making any adjustment in the Conversion Price or number of shares of Common Stock purchasable on the conversion of Preferred Stock as provided above, the consideration received by the Corporation for any issue or sale of securities shall,

 

(A) to the extent it consists of cash, be computed at the net amount of cash received by the Corporation after deduction of any underwriting or similar commissions, concessions or compensation paid or allowed by the Corporation in connection with such issue or sale,

 

(B) to the extent it consists of services or property other than cash, be computed at the fair value of such services or property as determined in good faith by the Board of Directors; and

 

  

  

  

(C) if Additional Shares of Common Stock, Convertible Securities (as hereinafter defined), or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Corporation for a consideration that covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board of Directors to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options.

 

(iii) For the purpose of the adjustment provided in subparagraph (i) of this paragraph 3(j), if at any time or from time to time after the Original Issue Date the Corporation shall issue any rights or options for the purchase of, or stock or other securities convertible into, Additional Shares of Common Stock (such convertible stock or securities being hereinafter referred to as “Convertible Securities”), then, in each case, if the Effective Price (as hereinafter defined) of such rights, options or Convertible Securities shall be less than the then existing Conversion Price for the Preferred Stock, the Corporation shall be deemed to have issued at the time of the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Corporation for the issuance of such shares, or an amount equal to the total amount of the consideration, if any, received by the Corporation for the rights or options or Convertible Securities, plus, in the case of such options or rights, the minimum amounts of consideration, if any, payable to the Corporation upon exercise or conversion of such options or rights.  For purposes of the foregoing, “Effective Price” shall mean the quotient determined by dividing the total of all such consideration by such maximum number of Additional Shares of Common Stock.  No further adjustment of the Conversion Price adjusted upon the issuance of such rights, options or Convertible Securities shall be made as a result of the actual issuance of Additional Shares of Common Stock on the exercise of any such rights or options or the conversion of any such Convertible Securities.

 

If any such rights or options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Conversion Price adjusted upon the issuance of such rights, options or Convertible Securities shall be readjusted to the Conversion Price that would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation upon such exercise, plus the consideration, if any, actually received by the Corporation for the granting of all such rights or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted plus the consideration, if any, actually received by the Corporation on the conversion of such Convertible Securities.

 

  

  

  

(iv) For the purpose of the adjustment provided for in subparagraph (i) of this paragraph 3(j), if at any time or from time to time after the Original Issue Date the Corporation shall issue any rights or options for the purchase of Convertible Securities, then, in each such case, if the Effective Price thereof is less than the current Conversion Price, the Corporation shall be deemed to have issued at the time of the issuance of such rights or options the maximum number of Additional Shares of Common Stock issuable upon conversion of the total amount of Convertible Securities covered by such rights or options and to have received as consideration for the issuance of such Additional Shares of Common Stock an amount equal to the amount of consideration, if any, received by the Corporation for the issuance of such rights or options, plus the minimum amounts of consideration, if any, payable to the Corporation upon the conversion of such Convertible Securities.  For purposes of the foregoing, “Effective Price” shall mean the quotient determined by dividing the total amount of such consideration by such maximum number of Additional Shares of Common Stock.  No further adjustment of such Conversion Price adjusted upon the issuance of such rights or options shall be made as a result of the actual issuance of the Convertible Securities upon the exercise of such rights or options or upon the actual issuance of Additional Shares of Common Stock upon the conversion of such Convertible Securities.

 

The provisions of subparagraph (iii) above for the readjustment of such Conversion Price upon the expiration of rights or options or the rights of conversion of Convertible Securities, shall apply mutatis mutandis to the rights, options and Convertible Securities referred to in this subparagraph (iv).

 

(k) Definition.  The term “Additional Shares of Common Stock” as used herein shall mean all shares of Common Stock issued or deemed issued by the Corporation after the Original Issue Date, whether or not subsequently reacquired or retired by the Corporation, other than (i) shares of Common Stock issued upon conversion of the Preferred Stock and (ii) any shares of Common Stock (as adjusted for all stock dividends, stock splits, subdivisions and combinations) issued to employees, officers, directors, consultants or other persons performing services for the Corporation (if so issued solely because of any such person’s status as an officer, director, employee, consultant or other person performing services for the Corporation and not as part of any offering of the Corporation’s securities) pursuant to any stock option plan, stock purchase plan or management incentive plan, agreement or arrangement approved by the Board.

 

(l) Accountants’ Certificate of Adjustment.  In each case of an adjustment or readjustment of the Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of the Preferred Stock, the Corporation, at its expense, shall cause independent certified public accountants of recognized standing selected by the Corporation (who may be the independent certified public accountants then auditing the books of the Corporation) to compute such adjustment or readjustment in accordance herewith and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of the Preferred Stock at the holder’s address as shown in the Corporation’s books.  The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based including a statement of (i) the consideration received or to be received by the Corporation for any Additional Shares of Common Stock issued or sold or deemed to have been issued or sold, (ii) the Conversion Price at the time in effect for each series of the Preferred Stock and (iii) the number of Additional Shares of Common Stock and the type and amount, if any, of other property which at the time would be received upon conversion of the Preferred Stock.

 

  

  

  

(m) Notices of Record Date.  In the event of any reclassification or recapitalization of the capital stock of the Corporation, any merger or consolidation of the Corporation, or any transfer of all or substantially all the assets of the Corporation to any other corporation, entity or person, or any voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, the Corporation shall mail to each holder of Preferred Stock (other than any such holder who is also a holder of record, or the affiliate of a holder of record, of the Corporation’s Common Stock, or is a director or executive officer, or an affiliate of a director or executive officer, of the Corporation) at least 20 days prior to the record date specified therein, a notice specifying (A) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective and (B) the time, if any is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up.

 

(n) Fractional Shares.  No fractional shares of Common Stock shall be issued upon conversion of shares of Preferred Stock.  In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of the Corporation’s Common Stock on the date of conversion, as determined in good faith by the Corporation’s Board of Directors.  Whether or not the fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder holds at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.

 

(o) Reservation of Stock Issuable Upon Conversion.  The Corporation shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Preferred Stock.  As a condition precedent to the taking of any action which would cause an adjustment to the Conversion Price, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient in order that it may validly and legally issue the shares of its Common Stock issuable based upon such adjusted Conversion Price.

 

(p) Notices.  Any notice required by the provisions of this paragraph 3 to be given to the holder of shares of the Preferred Stock shall be deemed given (i) when delivered by hand, (ii) when delivered by Federal Express or a similar overnight courier to each holder of record at his or her address appearing on the books of the Corporation or (iii) five days after being deposited in any United States Post Office enclosed in a postage prepaid, registered or certified envelope addressed to each holder of record at his or her address appearing on the books of the Corporation.

 

(q) Payment of Taxes.  The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of Preferred Stock or shares of Common Stock or other securities issued on account of Preferred Stock pursuant hereto or certificates representing such shares or securities.  The Corporation shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Preferred Stock or Common Stock or other securities in a name other than that in which the shares of Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.

 

  

  

  

(r) No Dilution or Impairment.  The Corporation shall not amend its restated certificate of incorporation, as amended, or participate in any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or performance of any of the material terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the conversion rights of the holders of the Preferred Stock against dilution or other impairment.

 

4. Voting Rights.

 

(a) The Preferred Stock shall have no voting rights except as provided herein or as otherwise from time to time required by law.

 

(b) Whenever dividends payable on the Preferred Stock have not been paid for four or more Dividend Periods, whether or not consecutive, the holders shall have the right, with holders of any other series of securities of the Corporation ranking equally with the Preferred Stock as to dividends that have similar voting rights and on which dividends likewise have not been paid, including the Series B Preferred Stock (the “Voting Parity Securities”), voting together as a class, at a special meeting called at the request of holders of at least 20% of the shares of Preferred Stock outstanding or of holders of at least 20% of the shares of any Voting Parity Securities (unless such request for a special meeting is received less than 90 calendar days before the date fixed for the next annual or special meeting of the Corporation’s stockholders, in which event such election shall be held only at such next annual or special meeting of the Corporation’s stockholders) or at the Corporation’s next annual or special meeting of the Corporation’s stockholders, to elect two additional directors to the Board of Directors; provided that the election of any such director does not cause the Corporation to violate the applicable corporate governance requirements or any applicable exchange or trading market where the Common Stock is then listed or quoted, as the case may be; and provided, further, that at no time will the Corporation’s Board of Directors include more than two directors elected pursuant to this paragraph 4(b).  At any meeting held for the purpose of electing such a director, the presence in person or by proxy of the holders of shares representing at least a majority of the voting power of the Preferred Stock and any Voting Parity Securities, voting together as a class, shall be required to constitute a quorum of such shares.  The affirmative vote of the holders of Preferred Stock and holders of any Voting Parity Securities, voting together as a class, representing a majority of the voting power of such shares present at such meeting, in person or by proxy, shall be sufficient to elect any such director.

 

(c) Upon the election of any such directors, the number of directors that comprise the board of directors shall be increased by such number of directors.  Such directors shall be elected to terms that are the shorter of the next annual meeting of the Corporation and such time as full dividends have been paid on the Preferred Stock for at least four consecutive Dividend Periods.  In the event such term expires prior to the time full dividends have been paid on the Preferred Stock for at least four consecutive Dividend Periods, any such directors may be elected to successive terms of similar duration until full dividends have been paid on the Preferred Stock for at least four consecutive Dividend Periods.  Holders of Preferred Stock, together with holders of any Voting Parity Securities, voting together as a class, may remove any director they elected.  Any vacancy created by the removal of any such director shall be filled only by the vote of the holders of the Preferred Stock and holders of any Voting Parity Securities, voting together as a class.  If the office of either such director becomes vacant for any reason other than removal, the remaining director may choose a successor who will hold office for the unexpired term of the vacant office.

 

  

  

  

(d) So long as any shares of Preferred Stock remain outstanding, the Corporation shall not, without the vote, in person or by proxy, or written consent of the holders of at least 75% of the shares of the Preferred Stock, voting as a separate class:

 

(i) amend the restated certificate of incorporation, as amended, to authorize, or increase the authorized amount of, any shares of any class or series of stock ranking senior to the Preferred Stock with respect to payment of dividends or distribution of assets on our liquidation; as well as any amendment of our restated certificate of incorporation, as amended, or amended and restated bylaws that would alter or change the voting powers, preferences or special rights of the Preferred Stock so as to materially and adversely affect them; provided that the amendment of the restated certificate of incorporation, as amended, so as to authorize or create, or to increase the authorized amount of any shares of any class or series or any securities convertible into shares of any class or series of our stock ranking on a parity with or junior to the Preferred Stock with respect to dividends and in the distribution of assets on our liquidation, dissolution or winding-up shall not be deemed to materially and adversely affect the voting powers, preferences or special rights of the Preferred Stock; or

 

(ii) consummate a binding share exchange, a reclassification involving the Preferred Stock or a merger or consolidation of the Corporation with another entity; provided, however, that the holders of Preferred Stock shall have no right to vote under this provision or otherwise under Delaware law if in each case (A) both (1) the Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity (or its ultimate parent) that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and (2) the Preferred Stock remaining outstanding or the new preferred securities, as the case may be, have such powers, preferences and special rights, taken as a whole, as are not materially less favorable to the holders thereof than the powers, preferences and special rights of the Preferred Stock, or (B) the Corporation has exercised its mandatory conversion rights pursuant to paragraph 3(c) hereof in connection with such consummation.

 

(e) The number of votes that each share of Preferred Stock and any Voting Parity Securities participating in the votes described above shall be calculated on an as converted basis or, if not all of such stock is convertible or exchangeable for Common Stock, shall be in proportion to the liquidation preference of such share.

 

5. Redemption Rights.

 

(a) The Corporation shall have the right at any time after the fifth anniversary of the Original Issue Date of the shares of the Preferred Stock constituting a majority of the shares issued (the “Redemption Date”) to call and redeem all (but not less than all) of the outstanding shares of Preferred Stock at a price of $5,000 per share, plus any authorized, declared and unpaid dividends thereon, without accumulation of any undeclared dividends, through the Redemption Date (the “Redemption Price”).  Redemption of the Preferred Stock is subject to receipt by the Corporation of any required prior approvals from the Board of Governors of the Federal Reserve System or any other regulatory authority.

 

  

  

  

(b) Not less than 30 days nor more than 60 days prior to the Redemption Date, written notice (the “Redemption Notice”) shall be mailed, first class postage prepaid, to the holders of the shares of the Preferred Stock at their address last shown on the records of the Corporation.  The Redemption Notice shall state: (i) the number of shares being redeemed; (ii) what the Redemption Date and Redemption Price are; (iii) that the holders’ voluntary Conversion Rights (as defined in paragraph 3) shall terminate; and (iv) that each holder is to surrender to the Corporation, in the manner and at the place designated, the certificates representing the shares of Preferred Stock to be redeemed.

 

(c) On or before the Redemption Date, the holders of shares of Preferred Stock being redeemed, unless a holder has exercised his or her right to convert the shares as provided in paragraph 3 hereof, shall surrender the certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof.

 

(d) If the Redemption Notice shall have been duly given, and if on or before the Redemption Date the Redemption Price has been set aside by the Corporation, then all shares of Preferred Stock shall no longer be outstanding, shall be cancelled and retired and shall cease to exist.  Each certificate formerly representing any shares of the Preferred Stock shall thereafter represent only the right to receive the Redemption Price.

 

6. Liquidation.  Upon the dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of the Preferred Stock, with holders of any other series of securities of the Corporation ranking equally with the Preferred Stock as to liquidation preferences, including the Series B Preferred Stock (the “Liquidation Parity Securities”), shall be entitled to receive out of the assets of the Corporation available for distribution to stockholders, the amount of $5,000 per share, plus any authorized, declared and unpaid dividends through the date of such distribution, without accumulation of any undeclared dividends, before any payment or distribution shall be made on the Common Stock.  In the event the assets of the Corporation available for distribution to the holders of shares of the Preferred Stock and the Liquidation Parity Securities that are not junior to the Preferred Stock upon any dissolution, liquidation or winding up of the Corporation shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to this paragraph 6, then all of the assets of the Corporation to be distributed shall be distributed ratably to the holders of Preferred Stock and the Liquidation Parity Securities.  After the payment to the holders of the shares of the Preferred Stock of the full amounts provided for in this paragraph 6, the holders of the Preferred Stock and the Liquidation Parity Securities as such shall have no right or claim to any of the remaining assets of the Corporation.

 

7. Information Rights.  The holders of shares of Preferred Stock shall be entitled to receive audited annual financial statements of the Corporation, as soon as such statements become available.

 

 

  

  

  

FURTHER RESOLVED, that the statements contained in the foregoing resolutions creating and designating the said issue of Preferred Stock and fixing the number, powers, preferences and relative, optional, participating, and other special rights and the qualifications, limitations, restrictions, and other distinguishing characteristics thereof shall, upon the effective date of said series, be deemed to be included in and be a part of the restated certificate of incorporation, as amended, of the Corporation pursuant to the provisions of Sections 104 and 151 of the Delaware General Corporation Law.

 

Signed and attested to on February 11, 2011.

 

Attest:

/s/ William S. Rowland                                                             /s/ Michael L. Taylor 

William S. Rowland                                                                  Michael L. Taylor

Chairman & CEO                                                                       EVP & CFO

 

 

STATE OF ILLINOIS                                           )

) SS:

COUNTY OF COLES                                           )

 

BE IT REMEMBERED that, on February 11, 2011, before me, a Notary Public duly authorized by law to take acknowledgement of deeds, personally came William S. Rowland, Chairman & CEO of First Mid-Illinois Bancshares, Inc., and Michael L. Taylor, EVP & CFO of First Mid-Illinois Bancshares, Inc., who duly signed the foregoing instrument before me and acknowledged that such signing is his or her act and deed, that such instrument as executed is the act and deed of said corporation, and that the facts stated therein are true.

 

GIVEN under my hand on February 11, 2011.

 

 

/s/ Peggy S. Towle                                                      

                                Notary Publicexhibit4-2.htm

EXHIBIT 4.2

FORM OF

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of ______________, 2011, by and among First-Mid Illinois Bancshares, Inc., a Delaware corporation (the “Corporation”), and the persons who have executed the signature page hereto (the “Preferred Shareholders”).  Capitalized terms used and not otherwise defined in this Agreement have the meanings that Section 7 assigns to those terms.

 

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1. Piggyback Registrations.

 

(a) Right to Piggyback.  Whenever the Corporation proposes to register any of its Common Stock for sale under the Securities Act and the registration form to be used may be used for the registration of a public offering of Shares (a “Piggyback Registration”), the Corporation will give prompt written notice to all holders of Shares of its intention to effect such a registration and will include in such registration all Shares with respect to which the Corporation has received written requests for inclusion in such registration within 20 days after the receipt of the Corporation’s notice.  For the avoidance of doubt, all holders of all outstanding Preferred Shares (as defined below) shall receive the aforementioned Piggyback Registration rights.

 

(b) Piggyback Expenses.  The Registration Expenses of the Corporation and of the holders of Shares will be paid by the Corporation in all Piggyback Registrations.

 

(c) Priority on Primary Registrations.  If a Piggyback Registration is in part an underwritten primary registration on behalf of the Corporation, and not an offering described in Section 1(d), and the managing underwriters advise the Corporation in writing that in their opinion the number of shares of Common Stock requested to be included in such registration exceeds the number that can be sold in such offering without adversely affecting the marketability of the offering, the Corporation will include in such registration (i) first, the number of shares of Common Stock the Corporation proposes to sell in such registration; and (ii) second, the number of Shares and other shares of Common Stock requested to be included in such registration pursuant to contractual obligations of the Corporation, pro rata among the respective holders of such Shares or such other Common Stock on the basis of the number of Shares or shares of such other Common Stock owned by each such holder, in each case, up to the aggregate number of shares of Common Stock that in the opinion of such managing underwriters can be sold without adversely affecting the Corporation or the marketability of such offering.

 

(d) Priority on Secondary Registrations.  If a Piggyback Registration is solely an underwritten secondary registration on behalf of holders of Common Stock (other than Shares) who have the contractual right to initiate such a registration, and the managing underwriters advise the Corporation in writing that in their opinion the number of shares of Common Stock requested to be included in such registration exceeds the number that can be sold in such offering without adversely affecting the Corporation or the marketability of the offering, the Corporation will include in such registration (i) first, the number of shares of Common Stock (other than Shares) requested to be included in such offering by the holders initially requesting such registration pursuant to such contractual rights, to the extent such holders have the contractual right to have such shares included in such registration prior to Shares; (ii) second, the number of shares of Common Stock the Corporation proposes to sell in such registration; and (iii) third, the number of Shares requested to be included in such registration, pro rata among the respective holders thereof on the basis of the number of Shares requested by them to be included in such registration, in each case, up to the aggregate number of shares of Common Stock that in the opinion of such managing underwriters can be sold without adversely affecting the Corporation or the marketability of such offering.

 

  

  

  

(e) Selection of Underwriters.  If any Piggyback Registration is an underwritten offering, the Corporation will be entitled to select the managing underwriter(s).

 

(f) Other Registrations.  If the Corporation has previously filed a registration statement with respect to Shares pursuant to this Section 1, and if such previous registration has not been withdrawn or abandoned, the Corporation will not file or cause to be effected any other registration of any of its equity securities or securities convertible or exchangeable into or exercisable for its equity securities under the Securities Act (except on Form S-4 or Form S-8 or any successor forms), whether on its own behalf or at the request of any holder or holders of such securities, until a period of at least one hundred eighty (180) days has elapsed from the date such previous registration became effective.

 

2. Holdback Agreements.  Notwithstanding anything to the contrary contained in this Agreement, neither the Corporation nor any holder of Shares will effect any public sale or distribution of the Corporation’s equity securities during the seven days prior to or during the period of 90 days (or such shorter period as the Corporation may agree for the holders of Shares) beginning on the effective date of  any underwritten Piggyback Registration (except as part of such underwritten registration or pursuant to registrations on Form S-8 or any successor form), unless the underwriter(s) managing such underwritten registration otherwise agree. Notwithstanding anything in this Section 2 to the contrary, no holder of Shares will be released from the restrictions on public sale and distributions contained in this Section 2 unless all holders of Shares are so released.

 

3. Registration Procedures.  Whenever the holders of Shares have requested that any Shares be registered pursuant to this Agreement, the Corporation will, subject to the provisions of Section 6, use its commercially reasonable efforts to effect the registration and the sale of such Shares in accordance with the intended method of disposition thereof, and pursuant thereto the Corporation will as expeditiously as possible:

 

(a) prepare and file with the Securities and Exchange Commission a registration statement with respect to such Shares and use its commercially reasonable efforts to cause such registration statement to become effective;

 

(b) notify each holder of Shares included in such registration of the effectiveness of such registration statement and prepare and file with the Securities and Exchange Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the earlier of (i) a period of not less than two years and (ii) the date as of which there are no longer any shares covered by such registration statements that are Shares, in each case in order to comply with the provisions of the Securities Act with respect to the disposition of all shares of Common Stock covered by such registration statement;

 

(c) furnish to each seller of Shares such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus), exhibits, and such other documents as such seller and underwriter, if any, may reasonably request in order to facilitate the disposition of the Shares owned by such seller in accordance with the procedures described therein;

 

  

  

  

(d) use its best efforts to register or qualify such Shares under such other securities or blue sky laws of such jurisdictions as any seller and underwriter reasonably requests and do any and all other acts and things that may be reasonably necessary or advisable to enable such seller and underwriter to consummate the disposition in such jurisdictions of the Shares owned by such seller (provided that the Corporation will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction);

 

(e) notify each seller of such Shares, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements in such prospectus not misleading and, at the request of any such seller, promptly prepare and file a supplement or amendment to such prospectus and/or registration statement so that, as thereafter delivered to the purchasers of such Shares, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements in such prospectus not misleading;

 

(f) cause all such Shares to be listed on each securities exchange on which similar securities issued by the Corporation are then listed;

 

(g) provide a transfer agent and registrar for all such Shares not later than the effective date of the first registration statement relating to Shares;

 

(h) enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the holders of a majority of the Shares reasonably request in order to expedite or facilitate the disposition of the Shares requested to be included in such offering (including effecting a stock split or a combination of shares);

 

(i) make available for inspection by any seller of Shares, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Corporation, and cause the Corporation’s officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement;

 

(j) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any securities included in such registration statement for sale in any jurisdiction, use its commercially reasonable efforts to obtain promptly the withdrawal of such order;

 

(k) use its commercially reasonable efforts to cause its management to participate fully in the sale process relating to such offering, including the preparation of the applicable registration statement and the preparation and presentation of any “road shows,” whether domestic or international;

 

(l) use its commercially reasonable efforts to cause all Shares covered by the applicable registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers of such Shares to consummate the disposition of such Shares in accordance with the procedures set forth in such registration statement;

 

(m) furnish to each seller of Shares a signed counterpart addressed to such seller and the underwriters, if any, of:

 

  

  

  

(i) an opinion of counsel for the Corporation (in customary form), dated the effective date of such registration statement (and, if such registration relates to an underwritten public offering, an opinion dated the date of the closing under the underwriting agreement), covering such matters as the sellers may reasonably request, and

 

(ii) a “comfort” letter, dated the effective date of such registration statement (and, if such registration relates to an underwritten public offering, a letter dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified the Corporation’s financial statements included in such registration statement, covering substantially the same matters with respect to such registration statement (and the prospectus included in such registration statement) and, in the case of the accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to the underwriters in underwritten public offerings of securities;

 

(n) notify the holders of Shares and the managing underwriter or underwriters, if any, promptly and confirm such advice in writing promptly thereafter:

 

(i) when the registration statement, the prospectus or any prospectus supplement related to such registration statement or any post-effective amendment to such registration statement has been filed, and, with respect to such registration statement or any post-effective amendment to such registration statement, when the same has become effective;

 

(ii) of any request by the Securities and Exchange Commission for amendments or supplements to the registration statement or the prospectus or for additional information;

 

(iii) of the issuance by the Securities and Exchange Commission of any stop order suspending the effectiveness of the registration or the initiation of any proceedings by any Person for that purpose; and

 

(iv) of the receipt by the Corporation of any notification with respect to the suspension of the qualification of any Shares for sale under the securities or blue sky laws of any jurisdiction or the initiation or threat of any proceeding for such purpose;

 

(o) at least five days before filing a registration statement or prospectus and as promptly as practicable prior to filing any amendments or supplements thereto, furnish to legal counsel representing the holders of the Shares covered by such registration statement copies of all such documents proposed to be filed;

 

(p) use commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a registration statement filed in connection herewith, or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Shares for sale in any jurisdiction, at the earliest possible moment;

 

(q) cooperate with each holder of Shares covered by the applicable registration statement and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Shares to be sold, which certificates will not bear any restrictive legends and will be in a form eligible for deposit with the transfer agent for the Common Stock, and enable such Shares to be in such denominations and registered in such names as the managing underwriters, if any, or holders may request at least two business days prior to any sale of Shares; and

 

  

  

  

(r) use its commercially reasonable efforts to provide a CUSIP number for the Shares, not later than the effective date of such registration.

 

Each holder of Shares who is an officer or employee of the Corporation agrees that if and for so long as such holder serves as an officer of the Corporation or is employed by the Corporation, such holder will participate fully in the sale process relating to such offering, including the preparation of the related registration statement and the preparation and presentation of any related road shows.  Any holder of Shares requested to be included in such offering may withdraw any or all of such Shares from such offering by written notice to the Corporation to that effect (whereupon such withdrawn Shares will no longer be considered to have been requested to be included in such offering), and no such withdrawal will adversely affect the rights of any holder of Shares requested to be included in such offering.

 

4. Registration Expenses.

 

(a) All expenses incidental to the Corporation’s performance of or compliance with this Agreement, including all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, fees and disbursements of custodians, and fees and disbursements of counsel for the Corporation and all independent certified public accountants, underwriters (excluding discounts and commissions) and other Persons retained by the Corporation (all such expenses being herein called “Registration Expenses”), will be borne by the Corporation, and the Corporation will pay its internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Corporation are then listed.

 

(b) In connection with each Piggyback Registration, the Corporation will reimburse the holders of Shares included in such registration for the reasonable fees and disbursements of one law firm chosen by the holders of a majority of the Shares.

 

5. Indemnification.

 

(a) The Corporation agrees to indemnify, to the extent permitted by law, each holder of Shares, such holder’s officers and directors and each Person who controls such holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus, or any document incorporated by reference thereto, or any amendment of such registration statement or supplement to such registration statement, or any document incorporated by reference thereto, or any omission or alleged omission of a material fact required to be stated in such registration statement or necessary to make the statements in such registration statement, or any document incorporated by reference thereto, not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Corporation by such holder expressly for use in such registration statement or by such holder’s failure to deliver to the purchaser a copy of the related  registration statement or prospectus or any amendments or supplements to such registration statement after the Corporation has furnished such holder with copies of the same, in each case to the extent that such document was required to be delivered and the damages, liabilities or expenses are caused by a failure to deliver such document.  In connection with an underwritten offering, the Corporation will indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the holders of Shares.

 

  

  

  

(b) In connection with any registration in which a holder of Shares is participating, each such holder will furnish to the Corporation in writing such information and affidavits as the Corporation reasonably requests for use in connection with any related registration statement or prospectus and, to the extent permitted by law, will indemnify the Corporation, its directors and officers and each Person who controls the Corporation (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in any such registration statement, prospectus or preliminary prospectus or any amendment of such registration statement or supplement to such registration statement or any omission or alleged omission of a material fact required to be stated in such registration statement or necessary to make the statements in such registration statement not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder or on such holder’s behalf, in such holder’s capacity as a holder of Shares and not in such holder’s capacity as a director or officer of the Corporation, if applicable, expressly for use therein; provided that the obligation to indemnify will be individual, not joint and several, for each holder and will be limited to the net amount of proceeds received by such holder from the sale of Shares pursuant to the registration statement, prospectus or amendment upon which the claim for indemnification is based.

 

(c) Any Person entitled to indemnification under this Section 5 will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice will not impair any Person’s right to indemnification hereunder to the extent such failure has not prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party.  If such defense is assumed, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld).  An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one law firm for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim.

 

(d) The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and will survive the transfer of securities and the termination of this Agreement.  No indemnifying party, in the defense of any such claim or litigation, will, except with the consent of any indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term of such settlement a requirement that the claimant or plaintiff give to such indemnified party a release from all liability in respect to such claim or litigation.

 

(e) If the indemnification provided for in this Section 5 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to in this Agreement, each indemnifying party, in lieu of indemnifying such indemnified party thereunder, will, to the extent permitted by applicable law, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the omissions or violations (or alleged omissions or violations) that resulted in such loss, claim, damage or liability.  The relative fault of the indemnifying party and of the indemnified party will be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that in no event will any contribution by a holder hereunder exceed the net proceeds from the offering received by such holder less any amounts paid pursuant to Section 5(b).  The Corporation and each holder of Shares agrees that it would not be just and equitable if contribution pursuant to this Section 5(e) were determined by any method of allocation that does not take into account the equitable considerations referred to in this Section 5(e).  No Person guilty of fraudulent misrepresentation (within the meaning of subsection 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

  

  

  

6. Participation in Underwritten Registrations.  No Person may participate in any registration pursuant to this Agreement that is underwritten unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements reasonably approved by the Person or Persons entitled pursuant to this Agreement to approve such arrangements, and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents that are standard and customary and are required under the terms of such underwriting arrangements.

 

7. Definitions.

 

“Agreement” is defined in the preamble.

 

“Common Stock” means the common stock of the Corporation.

 

“Corporation” has the meaning set forth in the preamble.

 

“Person” means a natural person, a partnership, a corporation, an association, a joint stock company, a trust, an estate, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

 

“Piggyback Registration” is defined in Section 1(a).

 

“Preferred Shareholders” is defined in the preamble.

 

 “Preferred Shares” means the Series C 8% Non-Cumulative Perpetual Convertible Preferred Stock of the Corporation that the each of the Preferred Shareholders have agreed to purchase pursuant to the Subscription Agreement and the Series B 9% Non-Cumulative Perpetual Convertible Preferred Stock of the Corporation.

 

“Registration Expenses” is defined in Section 4(a).

 

“Rule 144” means Rule 144 promulgated under the Securities Act, as in effect from time to time.

 

“Securities Act” means the Securities Act of 1933, as amended and in effect from time to time.

 

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended and in effect from time to time.

 

  

  

  

“Shares” means at any time (i) any shares of Common Stock then outstanding which were issued upon conversion of the Preferred Shares; (ii) any shares of Common Stock then issuable upon conversion of then outstanding Preferred Shares; (iii) any shares of Common Stock then outstanding which were issued as, or were issued directly or indirectly upon the conversion or exercise of other securities issued as, a dividend or other distribution with respect to or in replacement of other Shares; and (iv) any shares of Common Stock then issuable directly or indirectly upon the conversion or exercise of other securities which were issued as a dividend or other distribution with respect to or in replacement of other Shares.  Any particular Shares will cease to be Shares for all purposes when (x) such Shares have been distributed to the public pursuant to an offering registered under the Securities Act or sold to the public through a broker, dealer or market maker in compliance with Rule 144 (or any similar rule then in force) or (y) on the date when the holder of such Shares is able to sell all such securities during any three month period, without registration, pursuant to Rule 144 under the Securities Act.  For purposes of this Agreement, a Person will be deemed to be a holder of Shares whenever such Person has the right to acquire such Shares (upon conversion or exercise or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected.

 

8. Rule 144.  For so long as the Common Stock of the Corporation remains registered under Section 12 of the Securities Exchange Act, the Corporation will use its commercially reasonable efforts to take such further action as any holder of Shares may reasonably request to the extent required from time to time to enable such holder to sell Shares without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 or (b) any similar rule or regulation hereafter adopted by the Securities and Exchange Commission.

 

9. Miscellaneous.

 

(a) No Inconsistent Agreements.  The Corporation will not after the execution of this Agreement enter into any agreement which is inconsistent with or violates the rights granted to the holders of Shares in this Agreement.

 

(b) Adjustments Affecting Shares.  The Corporation will not take any action, or permit any change to occur, which would materially and adversely affect the ability of the holders of Shares to include such Shares in a registration undertaken pursuant to this Agreement.

 

(c) Amendments and Waivers.  Except as otherwise provided in this Agreement, the provisions of this Agreement may be amended or waived only upon the written approval of the Corporation and the holders of a majority of the Shares; provided that no such approval will be required to approve any amendment made to reflect the terms and conditions of any new class or series of equity securities and any restrictions, rights, preferences and privileges associated therewith; and provided, further, that no such modification, amendment or waiver that by its terms adversely affects one or more of the holders of the Shares, as compared with its effect on other holders of the Shares, will be effective as against such adversely-affected holders of the Shares unless it is approved in writing by the holders of a majority of the Shares held by such adversely-affected holders of the Shares.  The failure of any party to enforce any of the provisions of this Agreement will in no way be construed as a waiver of such provisions and will not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.  No alteration, modification, waiver or impairment will be implied by reason of any previous waiver, extension of time, delay or omission in exercise, or other indulgence.

 

  

  

  

(d) Severability.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

 

(e) Entire Agreement.  This Agreement and the other agreements referred to herein embody the complete agreement and understanding among the parties to this Agreement with respect to the subject matter hereof and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof in any way.

 

(f) Successors and Assigns.  Except as otherwise provided in this Agreement, this Agreement will bind and inure to the benefit of and be enforceable by the Corporation and its successors and assigns and the holders of Shares and any subsequent holders of their respective Shares and the respective successors and assigns of each of them, so long as they hold Shares.

 

(g) Counterparts.  This Agreement may be executed in separate counterparts (including by facsimile or .pdf signature page) each of which will be an original and all of which taken together will constitute one and the same agreement.

 

(h) Remedies.  The parties to this Agreement will be entitled to enforce their rights under this Agreement specifically by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor.  The parties to this Agreement agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that the Corporation or any holder of Shares may at his, hers, or its election apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement.

 

(i) WAIVER OF JURY TRIAL.  EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (I) ARISING UNDER OR RELATING TO THIS AGREEMENT OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES TO THIS AGREEMENT IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE.  EACH PARTY TO THIS AGREEMENT HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION WILL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THIS AGREEMENT TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

(j) Notices.  All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given (i) on the date of personal delivery to the recipient or an officer of the recipient, or (ii) when sent by telecopy or facsimile machine to the number shown below on the date of such confirmed facsimile or telecopy transmission (provided that a confirming copy is sent via overnight mail), or (iii) on the Business Day after it is deposited for delivery by a nationally recognized commercial overnight delivery service, prepaid, or (iv) on the third Business Day after deposit in the United States mail, certified or registered mail, postage prepaid, return receipt requested.  Such notices, demands and other communications to be sent to any holder of Shares will be sent to such holder of Shares at the address set forth for such holder of Shares in the stock record books of the Corporation, and all such notices, demands and other communications to be sent to the Corporation will be sent to the Corporation at the address set forth below:

 

  

  

  

 

First Mid-Illinois Bancshares, Inc.

1515 Charleston Avenue

Mattoon, Illinois 61938

Facsimile: (217) 258-0485

Attention: Chief Executive Officer

 

and copies of notices to the Corporation (which will not constitute notice to the Corporation) will be sent to:

 

Schiff Hardin LLP

233 S. Wacker Drive

Suite 6600

Chicago, Illinois 60606

Facsimile: (312) 258-5600

Attention:  Peter L. Rossiter, Esq.

or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.

 

(k) Governing Law.   This Agreement shall be construed and interpreted in accordance with Delaware law without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

 

(l) No Strict Construction.  The parties to this Agreement have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties to this Agreement, and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

 

(m) Parties in Interest.  Nothing in this Agreement will be construed to be to the benefit of or enforceable by any Person that is not a party to this Agreement, including any creditor of the Corporation.  There are not third-party beneficiaries to or of this Agreement.

 

(n) Service of Process.  IN ANY AND ALL SUITS, LEGAL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, LEGAL ACTION OR PROCEEDING, EACH HOLDER OF THE SHARES WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS AND AGREES THAT SERVICE THEREOF MAY BE MADE IN ANY MANNER PROVIDED IN SECTION 9(j).

 

(o) Descriptive Headings.  The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

 

(p) Certain Terms.  The use of the word “including” in this Agreement means “including without limitation.”  Any terms used in this Agreement and defined in the plural will be deemed to include the singular as the context may require and any terms used in this Agreement defined in the singular will be deemed to include the plural as the context may require.  Wherever reference is made in this Agreement to the male, female or neuter genders, such reference will be deemed to include any of the other genders as the context may require.

 

  

  

  

(q) Transfer.  Prior to transferring any Shares, other than in a transfer pursuant to which such Shares cease to be Shares, to any Person, the Person transferring such shares will cause the prospective transferee to execute and deliver to the Company (for itself and as the agent of the other Shareholders), a counterpart to this Agreement pursuant to which the prospective transferee agrees to be bound by this Agreement to the same extent as the Person transferring such shares of Common Stock with respect to the shares of Common Stock so transferred.  Any purported transfer of Shares that is not effected in accordance with the preceding sentence will be null and void and will not be binding upon the Company or any Shareholder or create any right in favor of the purported transferee.

 

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[ The Remainder of This Page is Intentionally Left Blank ]

 

  

  

  

IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AGREEMENT effective as of the date first above written.

 

FIRST-MID ILLINOIS BANCSHARES, INC.

By:                                                                

Name:

Title:

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