8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
April 27, 2011
FIRST MID-ILLINOIS BANCSHARES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware	0-13368		37-1103704
(State of Other Jurisdiction	(Commission File Number)		(IRS Employer
of Incorporation)			Identification No.)
1515 CHARLESTON AVENUE
MATTOON, IL		61938
(Address of Principal Executive Offices)		(Zip Code)
(217) 234-7454
(Registrant’s Telephone Number, including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]	Written communications pursuant to Rule 425 under the Securities Act (17CFR 230.425)
[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12)
[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b))
[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR 240.13e-4(c))

Item 1.01.   Entry into a Material Definitive Agreement.

The information set forth in Item 5.02 below is incorporated herein by reference.

Item 5.02    Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On April 27, 2011, the Boards of Directors of First Mid-Illinois Bancshares, Inc. (the “Company”) and First Mid-Illinois Bank & Trust, NA, a subsidiary of the Company (the “Bank”), appointed, as of May 9, 2011, Joseph R. Dively, age 51, the Senior Executive Vice President of the Company and the President of the Bank.  Also on April 27, 2011, the Boards of Directors of the Company and the Bank appointed John W. Hedges, as of the same date, Senior Executive Vice President of the Bank, where he will act as the Bank’s Senior Executive Vice President and Chief Credit Officer.  Mr. Hedges will remain Executive Vice President of the Company.  A copy of the press release announcing Mr. Dively and Mr. Hedge’s new officer positions at the Company and the Bank is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

Mr. Dively has been a member of the Boards of Directors of the Company and the Bank since 2004.  Since 2009, he has also served as a member of the Boards of Directors of Mid-Illinois Data Services, Inc. and The Checkley Agency, Inc., which does business as First Mid Insurance Group, each of which are subsidiaries of the Company.  Prior to assuming his new officer positions with the Company and the Bank, Mr. Dively has served, since 2003, as the Senior Vice President of Consolidated Communications Holdings, Inc., a Mattoon, Illinois based telecommunications holding company.  In 2010, Consolidated Communications Holdings, Inc. and its affiliates provided paging, mobile, long distance/800 and private line services, voice mail, customer premise equipment services and repair services to the Company and its subsidiaries in the amount of $455,347.   Mr. Dively has worked for Consolidated Communications Holdings, Inc. and its affiliates since 1991.

On April 27, 2011, the Company and Mr. Dively entered into an Employment Agreement, effective May 9, 2011 and continuing until December 31, 2014, under which Mr. Dively agrees to serve as the President of the Bank and Senior Executive Vice President of the Company (the “Dively Agreement”).  Under the Dively Agreement, Mr. Dively will receive an annual base salary of $300,000 and will participate in the Company’s Incentive Compensation Plan, with potential annual cash incentive compensation of up to 50% of his annual base salary, Deferred Compensation Plan and 2007 Stock Incentive Plan.  The Dively Agreement also provides Mr. Dively with severance benefits in the event of the termination of his employment under certain circumstances and contains certain confidentiality and non-competition and non-solicitation provisions.  The Dively Agreement is filed as Exhibit 10.1 hereto and is incorporated by reference herein.

Also on April 27, 2011, the Company and Mr. Hedges entered into an Employment agreement, effective April 27, 2011 and continuing until December 31, 2014, under which Mr. Hedges agrees to serve as Executive Vice President of the Company (the “Hedges Agreement”). Under the Hedges Agreement, Mr. Hedges will receive an annual base salary of $210,000 and will continue to participate in the Company’s Incentive Compensation Plan and the Deferred Compensation Plan. The Hedges Agreement also provides Mr. Hedges with severance benefits in the event of the termination of his employment under certain circumstances and contains certain confidentiality and non-competition and non-solicitation provisions.  The Hedges Agreement is filed as Exhibit 10.2 hereto and is incorporated by reference herein.

Item 9.01.  Financial Statements and Exhibits.

(d) Exhibits

10.1 Employment Agreement between First Mid-Illinois Bancshares, Inc. and Joseph R. Dively, effective May 9, 2011.

10.2 Employment Agreement between First Mid-Illinois Bancshares, Inc. and John W. Hedges, effective April 27, 2011.

99.1 Press Release, dated April 27, 2011.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

FIRST MID-ILLINOIS BANCSHARES, INC.

Dated:  April 27, 2011                                                                          /s/ William S. Rowland

William S. Rowland

President and Chief Executive Officer

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made and entered into this 27th day of April, 2011, by and between First Mid-Illinois Bancshares, Inc. (“the Company”), a corporation with its principal place of business located in Mattoon, Illinois, and Joseph R. Dively (“Executive”).

In consideration of the promises and mutual covenants and agreements contained herein, the parties hereto acknowledge and agree as follows:

ARTICLE ONE

TERM AND NATURE OF AGREEMENT

1.01           Term of Agreement.  The term of this Agreement shall commence as of May 9, 2011 and shall continue until December 31, 2014.  Thereafter, unless Executive’s employment with the Company has been previously terminated, Executive shall continue his employment with the Company on an at will basis and, except as provided in Articles Five, Six and Seven, this Agreement shall terminate unless extended by mutual written agreement.

1.02           Employment .  The Company agrees to employ Executive as Senior Executive Vice President of First Mid-Illinois Bancshares, Inc. and as President of its wholly owned subsidiary, First Mid-Illinois Bank & Trust, N.A. commencing May 9, 2011. Executive accepts such employment by the Company on the terms and conditions herein set forth.  The duties of Executive shall be determined by the Company’s Board of Directors and Executive shall adhere to the policies and procedures of the Company and shall follow the supervision and direction of the Board in the performance of such duties.  During the term of his employment, Executive agrees to devote his full working time, attention and energies to the diligent and satisfactory performance of his duties hereunder.  Executive shall not, while he is employed by the Company, engage in any activity which would (a) interfere with, or have an adverse effect on, the reputation, goodwill or any business relationship of the Company or any of its subsidiaries; (b) result in economic harm to the Company or any of its subsidiaries; or (c) result in a breach of Section Six of the Agreement.

ARTICLE TWO

COMPENSATION AND BENEFITS

While Executive is employed with the Company during the term of this Agreement, the Company shall provide Executive with the following compensation and benefits:

2.01           Base Salary.  The Company shall pay Executive an annual base salary of $300,000 per fiscal year, payable in accordance with the Company’s customary payroll practices for executive employees.  The Board may review and adjust Executive’s base salary from year to year; provided, however, that during the term of Executive’s employment, the Company shall not decrease Executive’s base salary.

2.02           Incentive Compensation Plan.  Executive shall participate in the First Mid-Illinois Bancshares, Inc. Incentive Compensation Plan in accordance with the terms and conditions of such Plan.  Pursuant to the Plan, Executive shall have an opportunity to receive incentive compensation of up to a maximum of 50% of Executive’s annual base salary.  The incentive compensation payable for a particular fiscal year will be based upon the attainment of the performance goals in effect under the Plan for such year and will be paid in accordance with theterms of the Plan and at the sole discretion of the Board.

2.03           Deferred Compensation Plan.  Executive may participate in the First Mid-Illinois Bancshares, Inc. Deferred Compensation Plan in accordance with the terms and conditions of such Plan.

2.04           Stock Incentive Plan.  Executive may participate in the First Mid-Illinois Bancshares, Inc. 2007 Stock Incentive Plan.

2.05           Vacation.  Executive shall be entitled to four (4) weeks of paid vacation each year during the term of this Agreement.

2.06 Fringe Benefits.  The Company shall provide the following additional fringe benefits to Executive:

(a)   Use of a Company-owned or leased vehicle for professional and personal use.

(b)   An amount equal to the annual dues for a Class “H” membership at the Mattoon Golf and Country Club.

2.07           Other Benefits.  Executive shall be eligible (to the extent he qualifies) to participate in any other retirement, health, accident and disability insurance, or similar employee benefit plans as may be maintained from time to time by the Company for its other executives or employees subject to and on a consistent basis with the terms, conditions and overall administration of such plans.

2.08           Business Expenses.  Executive shall be entitled to reimbursement by the Company for all reasonable expenses actually and necessarily incurred by him on its behalf in the course of his employment hereunder and in accordance with expense reimbursement plans and policies of the Company from time to time in effect for executive employees.

2.09           Withholding.  All salary, incentive compensation and other benefits provided to Executive pursuant to this Agreement shall be subject to withholding for federal, state or local taxes, amounts withheld under applicable employee benefit plans, policies or programs, and any other amounts that may be required to be withheld by law, judicial order or otherwise or by agreement with, or consent of, Executive.

ARTICLE THREE

DEATH OF EXECUTIVE

This Agreement shall terminate prior to the end of the term described in Section 1.01 upon Executive’s termination of employment with the Company due to his death.  Upon Executive’s termination due to death, the Company shall pay Executive’s estate the amount of Executive’s annual base salary and any accrued but unused vacation time earned through the date of such death and any incentive compensation earned for the preceding fiscal year that is not yet paid as of the date of such death.

ARTICLE FOUR

TERMINATION OF EMPLOYMENT

Executive’s employment with the Company may be terminated by Executive or by the Company at any time for any reason.  Upon Executive’s termination of employment prior to the end of the term of the Agreement, the Company shall pay Executive as follows:

4.01  Termination by the Company for Other than Cause.  If the Company terminates Executive’s employment for any reason other than Cause, the Company shall pay Executive the following:

(a)  An amount equal to Executive’s monthly base salary in effect at the time of such termination of employment for a period of twelve months thereafter.  Such amount shall be paid to Executive periodically in accordance with the Company’s customary payroll practices for executive employees.

(b)  The base salary and accrued but unused paid vacation time earned through the date of termination and any incentive compensation earned for the proceeding fiscal year that is not yet paid.

(c)  Continued coverage for executive and/or Executive’s family under the Company’s health plan pursuant to Title I, Part 6 of the Employee Retirement Income Security Act of 1974 (“COBRA”) and for such purpose the date of Executive’s termination of employment shall be considered the date of the “qualifying event” as such term is defined by COBRA.  During the twelve month period beginning on the date of such termination, the Executive shall be charged for such coverage in the amount that he would have paid for such coverage had he remained employed by the Company, and for the duration of the COBRA period, the Executive shall be charged for such coverage in accordance with the provisions of COBRA.

For purposes of this Agreement, “Cause” shall mean Executive’s (i) conviction in a court of law of (or entering a plea of guilty or no contest to) any crime or offense involving fraud, dishonesty or breach of trust or involving a felony; (ii) performance of any act which, if known to the customers, clients, stockholders or regulators of the Company, would materially and adversely impact the business of the Company; (iii) act or omission that causes a regulatory body with jurisdiction over the Company to demand, request, or recommend that Executive be suspended or removed from any position in which Executive serves with the Company; (iv) substantial nonperformance of any of his obligations under this Agreement; (v) misappropriation of or intentional material damage to the property or business of the Company or any affiliate; or (vi) breach of Article Five or Six of this Agreement.

4.02           Termination Following a Change in Control.  Notwithstanding Section 4.01, if, following a Change in Control, Executive’s employment is terminated by the Company (or any successor thereto) for any reason other than Cause, or if Executive terminates his employment because of a decrease in his then current base salary or a substantial diminution in his position and responsibilities, the Company (or any successor thereto) shall pay Executive the following:

(a) Two times Executive’s annual base salary in effect at the time of such termination.  Such amount shall be paid periodically in accordance with the Company’s or successor’s customary payroll practices for executive employees.

(b) An amount equal to the incentive compensation earned by or paid to Executive for the fiscal year immediately preceding the year in which Executive’s termination of employment occurs.  Such amount shall be paid to Executive in a lump sum as soon as practicable after the date of his termination.

(c) The base salary and accrued but unused paid vacation time earned through the date of termination and any incentive compensation earned for the preceding fiscal year that is not yet paid.

(d) Continued coverage for Executive and/or Executive’s family under the Company’s health plan pursuant to Title I, Part 6 of the Employee Retirement Income Security Act of 1974 (“COBRA”) and for such purpose the date of Executive’s termination of employment shall be considered the date of the “qualifying event” as such term is defined by COBRA.  During the twelve month period beginning on the date of such termination, the Executive shall be charged for such coverage in the amount that he would have paid for such coverage had he remained employed by the Company, and for the duration of the COBRA period, the Executive shall be charged for such coverage in accordance with the provisions of COBRA.

For the purposes of this Agreement, “Change of Control” shall have the meaning as set forth in the First Mid-Illinois Bancshares, Inc. 2007 Stock Incentive Plan (or successor stock incentive plan maintained by the Company).

4.03           Other Termination of Employment.  If, prior to the end of the term of this Agreement, the Company terminates Executive’s employment for Cause, or if Executive terminates his employment for any reason other than as described in Section 4.02 above, the Company shall pay Executive the base salary and accrued but unused paid vacation time earned through the date of such termination and any incentive compensation earned for the preceding fiscal year that is not yet paid.

4.04           Key Employee Status.  If at the time of such termination of employment Executive is a “Key Employee” as defined in Section 416(i) of the Internal Revenue Code (without reference to paragraph thereof), and the amounts payable to Executive pursuant to Article Four are subject to Section 409A of the Internal Revenue Code, payment of such amounts shall not commence until six months following Manager’s termination of employment, with the first payment to include the payments that otherwise would have been made during such six-month period.

ARTICLE FIVE

CONFIDENTIAL INFORMATION

5.01           Non-Disclosure of Confidential Information.   During his employment with Company, and after his termination of such employment, for any reason, with the Company, Executive shall not, in any form or manner, directly or indirectly, use, divulge, disclose or communicate to any person, entity, firm, corporation or any other third party, any Confidential Information, except as required in the performance of Executive’s duties hereunder, as required by law or as necessary in conjunction with legal proceedings.

5.02           Definition of Confidential Information.  For the purposes of this Agreement, the term “Confidential Information” shall mean any and all information either developed by Executive during his employment with the Company and used by the Company or its affiliates or developed by or for the Company or its affiliates of which Executive gained knowledge by reason of his employment with the Company that is not readily available in or known to the general public or the industry in which the Company or any affiliate is or becomes engaged.  Such Confidential Information shall include, but shall not be limited to, any technical or non-technical data, formulae, compilations, programs, devices, methods, techniques, procedures, manuals, financial data, business plans, lists of actual or potential customers, lists of employees and any information regarding the Company’s or any affiliate’s products, marketing or database.  The Company and Executive acknowledge and agree that such Confidential Information is extremely valuable to the Company and may constitute trade secret information under applicable law.  In the event that any part of the Confidential Information becomes generally known to the public through legitimate origins (other than by the breach of this Agreement by Executive or by other misappropriation of the Confidential Information), that part of the Confidential Information shall no longer be deemed Confidential Information for the purposes of this Agreement, but Executive shall continue to be bound by the terms of this Agreement as to all other Confidential Information.

5.03           Delivery upon Termination.   Upon termination of Executive’s employment with the Company for any reason, Executive shall promptly deliver to the Company all correspondence, files, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, and any other documents or data concerning the Company’s or any affiliate’s customers, database, business plan, marketing strategies, processes or other materials which contain Confidential Information, together with all other property of the Company or any affiliate in Executive’s possession, custody or control.

ARTICLE SIX

NON-COMPETE AND NON-SOLICITATION COVENANTS

6.01      Covenant Not to Compete.  During the term of this Agreement and for a period of two years following the later of the termination of Executive’s employment for any reason, Executive shall not, on behalf of himself or on behalf of another person, corporation, partnership, trust or other entity, within a one hundred mile radius of any location where the Company or any affiliate conducts business.

(a)  Directly or indirectly own, manage, operate, control, participate in the ownership, management, operation or control of, be connected with or have any financial interest in, or serve as an officer, employee, advisor, consultant, agent or otherwise to any person, firm, partnership, corporation, trust or other entity which owns or operates a business similar to that of the Company or its affiliates.

(b)  Solicit for sale, represent, and/or sell Competing Products to any person or entity who or which was the Company’s customer or client during the last two years of Executive’s employment.  “Competing Products,” for purposes of this Agreement, means products or services which are similar to, compete with, or can be used for the same purposes as products or services sold or offered for sale by the Company or any affiliate or which were in development by the Company or any affiliate within the last two years of Executive’s employment.

6.02           Covenant Not to Solicit.  For a period of two years following the later of the termination of Executive’s employment for any reason or the last day of the term of this Agreement, Executive shall not:

(a)  Attempt in any manner to solicit from any client or customer business of the type performed by the Company or any affiliate or persuade any client or customer of the Company or any affiliate to cease to do such business or to reduce the amount of such business which any such client or customer has customarily done or contemplates doing with the Company or any affiliate, whether or not the relationship between the Company or affiliate and such client or customer was originally established in whole or in part through Executive’s efforts.

(b)  Render any services of the type rendered by the Company or any affiliate for any client or customer of the Company.

(c)  Solicit or encourage, or assist any other person to solicit or encourage, any employees, agents or representatives of the Company or an affiliate to terminate or alter their relationship with the Company or any affiliate.

(d)  Do not cause to be done, directly or indirectly, any acts which may impair the relationship between the Company or any affiliate with their respective clients, customers or employees.

ARTICLE SEVEN

REMEDIES

Executive acknowledges that compliance with the provisions of Articles Five and Six herein is necessary to protect the business, goodwill and proprietary information of the Company and that a breach of these covenants will irreparably and continually damage the Company for which money damages may be inadequate.  Consequently, Executive agrees that, in the event that he breaches or threatens to breach any of these provisions, the Company shall be entitled to both (a) a temporary, preliminary or permanent injunction in order to prevent the continuation of such harm; and (b) money damages insofar as they can be determined.  In addition, the Company will cease payment of all compensation and benefits under Articles Three and Four hereof.  In the event that any of the provisions, covenants, warranties or agreements in this Agreement are held to be in any respect an unreasonable restriction upon the Executive or are otherwise invalid, for whatsoever cause, then the court so holding shall reduce, and is so authorized to reduce, the territory to which it pertains and/or the period of time in which it operates, or the scope of activity to which it pertains or effect any other change to the extent necessary to render any of the restrictions of this Agreement enforceable.

ARTICLE EIGHT

MISCELLANEOUS

8.01           Successors and Assignability.

 (a)  No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

 (b)  No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to payments or benefits hereunder which may be transferred only by will or the laws of descent and distribution.

8.02           Entire Agreement.    This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and may not be modified except in writing by the parties hereto.  Furthermore, the parties hereto specifically agree that all prior agreements, whether written or oral, relating to Executive’s employment by the Company shall be or no further force or effect from and after the date of hereof.

8.03           Severability.  If any phrase, clause or provision of this Agreement is deemed invalid or unenforceable, such phrase, clause or provision shall be deemed severed from this Agreement, but will not affect any other provisions of this Agreement, which shall otherwise remain in full force and effect.  If any restriction or limitation in this Agreement is deemed to be unreasonable, onerous or unduly restrictive, it shall not be stricken in its entirety and held totally void and unenforceable, but shall be deemed rewritten and shall remain effective to the maximum extent permissible within reasonable bounds.

8.04           Controlling Law and Jurisdiction.  This Agreement shall be governed by and interpreted and construed according to the laws of the State of Illinois.  The parties hereby consent to the jurisdiction of the state and federal courts in the State of Illinois in the event that any disputes arise under this Agreement.

8.05 Notices.  All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of

service if served personally on the party to whom notice is to be given; (b) on the day after delivery to an overnight courier service; (c) on the day of transmission if sent via facsimile to the facsimile number given below; or (d) on the third day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid and properly addressed, to the party as follows:

If to Executive: Joseph R. Dively

13179 E CR 720N

Charleston, IL 61920

If to the Company: First Mid-Illinois Bancshares, Inc.

1515 Charleston Avenue

Mattoon IL 61938

Facsimile: 217-258-0485

Any party may change its address for the purpose of this Section by giving the other party written notice of its new address in the manner set forth above.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

FIRST MID-ILLINOIS BANCSHARES, INC.

By: ____________________________________

Title: ___________________________________

EXECUTIVE:

_________________________________________

Joseph R. Dively

EX-10.2

Exhibit 10.2

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made and entered into this 27th day of April, 2011, by and between First Mid-Illinois Bancshares, Inc. (“the Company”), a corporation with its principal place of business located in Mattoon, Illinois, and John W. Hedges (“Executive”).

In consideration of the promises and mutual covenants and agreements contained herein, the parties hereto acknowledge and agree as follows:

ARTICLE ONE

TERM AND NATURE OF AGREEMENT

1.01           Term of Agreement.  The term of this Agreement shall commence as of April 27, 2011 and shall continue until December 31, 2014.  Thereafter, unless Executive’s employment with the Company has been previously terminated, Executive shall continue his employment with the Company on an at will basis and, except as provided in Articles Five, Six and Seven, this Agreement shall terminate unless extended by mutual written agreement.

1.02           Employment.  The Company agrees to employ Executive as Executive Vice President and Executive accepts such employment by the Company on the terms and conditions herein set forth.  The duties of Executive shall be determined by the Company’s Chief Executive Officer and Executive shall adhere to the policies and procedures of the Company and shall follow the supervision and direction of the Chief Executive Officer or his designee in the performance of such duties.  During the term of his employment, Executive agrees to devote his full working time, attention and energies to the diligent and satisfactory performance of his duties hereunder.  Executive shall not, while he is employed by the Company, engage in any activity which would (a) interfere with, or have an adverse effect on, the reputation, goodwill or any business relationship of the Company or any of its subsidiaries; (b) result in economic harm to the Company of any of its subsidiaries; or (c) result in a breach of Section Six of the Agreement.

ARTICLE TWO

COMPENSATION AND BENEFITS

While Executive is employed with the Company during the term of this Agreement, the Company shall provide Executive with the following compensation and benefits:

2.01           Base Salary.  The Company shall pay Executive an annual base salary of $210,000 per fiscal year, payable in accordance with the Company’s customary payroll practices for executive employees.  The Chief Executive Officer or his designee may review and adjust Executive’s base salary from year to year; provided, however, that during the term of Executive’s employment, the Company shall not decrease Executive’s base salary.

2.02           Incentive Compensation Plan.  Executive shall continue to participate in the First Mid-Illinois Bancshares, Inc. Incentive Compensation Plan in accordance with the terms and conditions of such Plan.  Pursuant to the Plan, Executive shall have an opportunity to receive incentive compensation of up to a maximum of 35% of Executive’s annual base salary.  The Chief Executive Officer or his designee may review and adjust the maximum percentage from year to year, provided, however, that during the term of Executive’s employment, the Company shall not decrease this percentage.  The incentive compensation payable for a particular fiscal year will be based upon the attainment of the performance goals in effect under the Plan for such year and will be paid in accordance with theterms of the Plan and at the sole discretion of the Board.

2.03           Deferred Compensation Plan.  Executive shall continue to participate in the First Mid-Illinois Bancshares, Inc. Deferred Compensation Plan in accordance with the terms and conditions of such Plan.

2.04           Vacation.  Executive shall be entitled to three (3) weeks of paid vacation each year during the term of this Agreement.

2.05 Fringe Benefits.  The Company shall provide the following additional fringe benefits to Executive:

(a)   Use of a Company-owned or leased vehicle for professional and personal use.

(b)   An amount equal to the annual dues for a Class “A” membership at the Mattoon Golf and Country Club.

(c)   Use of a cellular phone for work-related calls.

(d)   An Internet connection for Executive’s home.

2.06           Other Benefits.  Executive shall be eligible (to the extent he qualifies) to participate in any other retirement, health, accident and disability insurance, or similar employee benefit plans as may be maintained from time to time by the Company for its other executives or management employees subject to and on a consistent basis with the terms, conditions and overall administration of such plans.

2.07           Business Expenses.  Executive shall be entitled to reimbursement by the Company for all reasonable expenses actually and necessarily incurred by him on its behalf in the course of his employment hereunder and in accordance with expense reimbursement plans and policies of the Company from time to time in effect for executive employees.

2.08           Withholding.  All salary, incentive compensation and other benefits provided to Executive pursuant to this Agreement shall be subject to withholding for federal, state or local taxes, amounts withheld under applicable employee benefit plans, policies or programs, and any other amounts that may be required to be withheld by law, judicial order or otherwise or by agreement with, or consent of, Executive.

ARTICLE THREE

DEATH OF EXECUTIVE

This Agreement shall terminate prior to the end of the term described in Section 1.01 upon Executive’s termination of employment with the Company due to his death.  Upon Executive’s termination due to death, the Company shall pay Executive’s estate the amount of Executive’s base salary plus his accrued but unused vacation time earned through the date of such death and any incentive compensation earned for the preceding fiscal year that is not yet paid as of the date of such death.

ARTICLE FOUR

TERMINATION OF EMPLOYMENT

Executive’s employment with the Company may be terminated by Executive or by the Company at any time for any reason.  Upon Executive’s termination of employment prior to the end of the term of the Agreement, the Company shall pay Executive as follows:

4.01           Termination by the Company for Other than Cause.  If the Company terminates Executive’s employment for any reason other than Cause, the Company shall pay Executive the following:

(a) An amount equal to Executive’s monthly base salary in effect at the time of such termination of employment for a period of twelve (12) months thereafter.  Such amount shall be paid to Executive periodically in accordance with the Company’s customary payroll practices for executive employees.

(b) The base salary and accrued by unused paid vacation time earned through the date of termination and any incentive compensation earned for the preceding fiscal year that is not yet paid.

(c) Continued coverage for Executive and/or Executive’s family under the Company’s health plan pursuant to Title I, Part 6 of the Employee Retirement Security Act of 1974 (“COBRA”) and for such purpose the date of Executive’s termination of employment shall be considered the date of the “qualifying event” as such term is defined by COBRA.  During the twelve month period beginning on the date of such termination, the Executive shall be charged for such coverage in the amount that he would have paid for such coverage had he remained employed by the Company, and for the duration of the COBRA period, the Executive shall be charged for such coverage in accordance with the provisions of COBRA.

For purposes of this Agreement, “Cause” shall mean Executive’s (i) conviction in a court of law of (or entering a plea of guilty or no contest to) any crime or offense involving fraud, dishonesty or breach of trust or involving a felony; (ii) performance of any act which, if known to the customers, clients, stockholders or regulators of the Company, would materially and adversely impact the business of the Company; (iii) act or omission that causes a regulatory body with jurisdiction over the Company to demand, request, or recommend that Executive be suspended or removed from any position in which Executive serves with the Company; (iv) substantial nonperformance of any of his obligations under this Agreement; (v) misappropriation of or intentional material damage to the property or business of the Company or any affiliate; or (vi) breach of Article Five or Six of this Agreement.

4.02           Termination Following a Change in Control.  Notwithstanding Section 4.01, if, following a Change in Control and prior to the end of the term of this Agreement, Executive’s employment is terminated by the Company (or any successor thereto) for any reason other than Cause, or if Executive terminates his employment because of a decrease in his then current base salary or a substantial diminution in his position and responsibilities, the Company (or any successor thereto) shall pay Executive the following:

(a) Two times Executive’s annual base salary in effect at the time of such termination.  Such amount shall be paid periodically in accordance with the Company’s or successor’s customary payroll practices for executive employees.

(b) An amount equal to the incentive compensation earned by or paid to Executive for the fiscal year immediately preceding the year in which Executive’s termination of employment occurs.  Such amount shall be paid to Executive in a lump sum as soon as practicable after the date of his termination.

(c) The base salary and accrued but unused paid vacation time earned through the date of termination and any incentive compensation earned for the preceding fiscal year that is not yet paid.

(d) Continued coverage for Executive and/or Executive’s family under the Company’s health plan pursuant to Title I, Part 6 of the Employee Retirement Income Security Act of 1974 (“COBRA”) and for such purpose the date of Executive’s termination of employment shall be considered the date of the “qualifying event” as such term is defined by COBRA.  During the twelve month period beginning on the date of such termination, the Executive shall be charged for such coverage in the amount that he would have paid for such coverage had he remained employed by the Company, and for the duration of the COBRA period, the Executive shall be charged for such coverage in accordance with the provisions of COBRA.

For purposes of this Agreement, “Change in Control” shall have the meaning as set forth in the First Mid-Illinois Bancshares, Inc. 2007 Stock Incentive Plan (or successor stock incentive plan maintained by the Company).

4.03     Other Termination of Employment.  If, prior to the end of the term of this Agreement, the Company terminates Executive’s employment for Cause, or if Executive terminates his employment for any reason other than as described in Section 4.02 above, the Company shall pay Executive the base salary and accrued but unused paid vacation time earned through the date of such termination and any incentive compensation earned for the preceding fiscal year that is not yet paid.

4.04      Key Employee Status.  If at the time of such termination of employment Executive is a “Key Employee” as defined in Section 416(i) of the Internal Revenue Code (without reference to paragraph thereof), and the amounts payable to Executive pursuant to Article Four are subject to Section 409A of the Internal Revenue Code, payment of such amounts shall not commence until six months following Executive’s termination of employment, with the first payment to include the payments that otherwise would have been made during such six-month period.

ARTICLE FIVE

CONFIDENTIAL INFORMATION

5.01           Non-Disclosure of Confidential Information.    During his employment with Company, and after his termination of such employment with the Company, Executive shall not, in any form or manner, directly or indirectly, use, divulge, disclose or communicate to any person, entity, firm, corporation or any other third party, any Confidential Information, except as required in the performance of Executive’s duties hereunder, as required by law or as necessary in conjunction with legal proceedings.

5.02           Definition of Confidential Information.  For the purposes of this Agreement, the term “Confidential Information” shall mean any and all information either developed by Executive during his employment with the Company and used by the Company or its affiliates or developed by or for the Company or its affiliates of which Executive gained knowledge by reason of his employment with the Company that is not readily available in or known to the general public or the industry in which the Company or any affiliate is or becomes engaged.  Such Confidential Information shall include, but shall not be limited to, any technical or non-technical data, formulae, compilations, programs, devices, methods, techniques, procedures, manuals, financial data, business plans, lists of actual or potential customers. Lists of employees and any information regarding the Company’s or any affiliate’s products, marketing or database.  The Company and Executive acknowledge and agree that such Confidential Information is extremely valuable to the Company and may constitute trade secret information under applicable law.  In the event that any part of the Confidential Information becomes generally known to the public through legitimate origins (other than by the breach of this Agreement by Executive or by other misappropriation of the Confidential Information), that part of the Confidential Information shall no longer be deemed Confidential Information for the purposes of this Agreement, but Executive shall continue to be bound by the terms of this Agreement as to all other Confidential Information.

5.03           Delivery upon Termination.   Upon termination of Executive’s employment with the Company for any reason, Executive shall promptly deliver to the Company all correspondence, files, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, and any other documents or data concerning the Company’s or any affiliate’s customers, database, business plan, marketing strategies, processes or other materials which contain Confidential Information, together with all other property of the Company or any affiliate in Executive’s possession, custody or control.

ARTICLE SIX

NON-COMPETE AND NON-SOLICITATION COVENANTS

6.01      Covenant Not to Compete.  During the term of this Agreement and for a period of two years following the later of (i) the termination of Executive’s employment for any reason or (ii) the last day of the term of the Agreement, Executive shall not, on behalf of himself or on behalf of another person, corporation, partnership, trust or other entity, within a one hundred mile radius of any location where the Company or any affiliate conducts business:

(a)  Directly or indirectly own, manage, operate, control, participate in the ownership, management, operation or control of, be connected with or have any financial interest in, or serve as an officer, employee, advisor, consultant, agent or otherwise to any person, firm, partnership, corporation, trust or other entity which owns or operates a business similar to that of the Company or its affiliates.

(b)  Solicit for sale, represent, and/or sell Competing Products to any person or entity who or which was the Company’s customer or client during the last two years of Executive’s employment.  “Competing Products,” for purposes of this Agreement, means products or services which are similar to, compete with, or can be used for the same purposes as products or services sold or offered for sale by the Company or any affiliate or which were in development by the Company or any affiliate within the last two years of Executive’s employment.

6.02           Covenant Not to Solicit.  For a period of two years following the later of (i) the termination of Executive’s employment for any reason or (ii) the last day of the term of this Agreement, Executive shall not:

(a)  Attempt in any manner to solicit from any client or customer business of the type performed by the Company or any affiliate or persuade any client or customer of the Company or any affiliate to cease to do such business or to reduce the amount of such business which any such client or customer has customarily done or contemplates doing with the Company or any affiliate, whether or not the relationship between the Company or affiliate and such client or customer was originally established in whole or in part through Executive’s efforts.

(b)  Render any services of the type rendered by the Company or any affiliate for any client or customer of the Company.

(c)  Solicit or encourage, or assist any other person to solicit or encourage, any employees, agents or representatives of the Company or an affiliate to terminate or alter their relationship with the Company or any affiliate.

(d)  Do not cause to be done, directly or indirectly, any acts which may impair the relationship between the Company or any affiliate with their respective clients, customers or employees.

ARTICLE SEVEN

REMEDIES

Executive acknowledges that compliance with the provisions of Articles Five and Six herein is necessary to protect the business, goodwill and proprietary information of the Company and that a breach of these covenants will irreparably and continually damage the Company for which money damages may be inadequate.  Consequently, Executive agrees that, in the event that he breaches or threatens to breach any of these provisions, the Company shall be entitled to both (a) a temporary, preliminary or permanent injunction in order to prevent the continuation of such harm; and (b) money damages insofar as they can be determined.  In addition, the Company will cease payment of all compensation and benefits under Articles Three and Four hereof.  In the event that any of the provisions, covenants, warranties or agreements in this Agreement are held to be in any respect an unreasonable restriction upon the Executive or are otherwise invalid, for whatsoever cause, then the court so holding shall reduce, and is so authorized to reduce, the territory to which it pertains and/or the period of time in which it operates, or the scope of activity to which it pertains or effect any other change to the extent necessary to render any of the restrictions of this Agreement enforceable.

ARTICLE EIGHT

MISCELLANEOUS

8.01 Successors and Assignability.

(a)  No rights or obligations of the Company under this Agreement may be transferred except that the Company will require any successor (whether direct or indirect, by

purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

(b) No rights or obligations of Executive under this Agreement may be assigned or transferred by Manager other than his rights to payment or benefits hereunder which may be transferred only by will or the laws of descent and distribution.

8.02           Entire Agreement.  This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and may not be modified except in writing by the parties hereto; provided, however, that any amendment or modification that the Company in its sole discretion deems necessary to comply with the American Jobs Creation act, and regulations promulgated thereunder, shall not require the consent of Executive as long as such amendment or modification does not reduce the absolute dollar amount of benefits payable hereunder.  Furthermore, the parties hereto specifically agree that all prior agreements, whether written or oral, relating to Executive’s employment by the Company shall be of no further force or effect from and after the date hereof.

8.03           Severability.  If any phrase, clause or provision of this Agreement is deemed invalid or unenforceable, such phrase, clause or provision shall be deemed severed from this Agreement, but will not affect any other provisions of this Agreement, which shall otherwise remain in full force and effect.  If any restriction or limitation in this Agreement is deemed to be unreasonable, onerous or unduly restrictive, it shall not be stricken in its entirety and held totally void and unenforceable, but shall be deemed rewritten and shall remain effective to the maximum extent permissible within reasonable bounds.

8.04           Controlling Law and Jurisdiction.  This Agreement shall be governed by and interpreted and construed according to the laws of the State of Illinois.  The parties hereby consent to the jurisdiction of the state and federal courts in the State of Illinois in the event that any disputes arise under this Agreement.

8.05 Notices.  All notices, requests, demands and other communications under this

Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of service if served personally on the party to whom notice is to be given; (b) on the day after delivery to an overnight courier service; (c) on the day of transmission if sent via facsimile to the facsimile number given below; or (d) on the third day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid and properly addressed, to the party as follows:

If to Executive: John W. Hedges

#4 Pinehurst

Mattoon, IL  61938

If to the Company: First Mid-Illinois Bancshares, Inc.

1515 Charleston Avenue

Mattoon IL 61938

Facsimile: 217-258-0485

Attention: Chairman

Any party may change its address for the purpose of this Section by giving the other party written notice of its new address in the manner set forth above.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

FIRST MID-ILLINOIS BANCSHARES, INC.

By: ____________________________________

          William S. Rowland

Title: Chairman of the Board

EXECUTIVE:

_________________________________________

EX-99.1

Exhibit 99.1

April 27, 2011

First Mid-Illinois Bancshares, Inc. Mattoon, Illinois, today announced that Joseph R. Dively will join its management team as President of First Mid-Illinois Bank & Trust, NA and Senior Executive Vice President of First Mid-Illinois Bancshares, Inc. effective May 9, 2011.  Dively has served on the Boards of both the bank and the parent company since 2004 and will continue to serve on these Boards.  Dively is currently a Senior Vice President with Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) which is also based in Mattoon.  He joined Consolidated in 1991.

First Mid Chairman and CEO Bill Rowland said, “Joe has worked with First Mid and its management team for a number of years as a Director and is therefore extremely familiar with our organization.   He brings a wealth of talent and a wide diversity of experiences to the position and I am confident he will provide quality leadership for many years to come.”  Rowland added, “The business of banking is a good business to be in but economic and regulatory forces are making it ever more challenging.  As we thought about our options for the future, it was clear that we needed someone with Joe’s energy, intellect and business experience.  We are fortunate Joe has decided to join First Mid.”

John Hedges, who will assume the role of Senior Executive Vice President and Chief Credit Officer for First Mid-Illinois Bank & Trust added, “First Mid is committed to excellence in everything we do, whether it be serving our shareholders, our customers or the communities where we operate.  Joe and I have known and worked with each other for many years at the bank and on the Board of Sarah Bush Lincoln Health Center.  I think this is a great opportunity for our bank and its people as we prepare First Mid for the future.”

 Joe Dively said, “I am excited about this opportunity and First Mid’s future. Having worked closely with First Mid management and the Board for seven years, I have tremendous confidence that we are well-positioned to grow our services and the footprint of First Mid.  I have thoroughly enjoyed my twenty years with Consolidated Communications and have built many personal and lasting relationships with co-workers and customers. I leave knowing they will continue to do exceptionally well and that their future will be bright. ”

A central Illinois native, Dively has a bachelor’s degree in business administration from Eastern Illinois University and has completed executive education courses at Harvard University and The University of Chicago, Graduate School of Business.  Dively has served as the Chairman of the Illinois Chamber of Commerce, Chairman of the Board of Sarah Bush Lincoln Health Center, and as the Chair of the Business School Advisory Board at Eastern Illinois University. Prior to joining Consolidated, Dively held a variety of sales and marketing positions with Caterpillar and IBM.

First Mid, headquartered in Mattoon, Illinois, has assets of $1.5 billion and provides banking, wealth management and insurance services to communities throughout central Illinois.  Its stock trades in the over the counter market under the symbol “FMBH.”  More information about First Mid is available at www.firstmid.com.