FINANCIAL INSTITUTIONS,
INC.
2009 MANAGEMENT STOCK INCENTIVE
PLAN
1. BACKGROUND
AND PURPOSE
Financial Institutions, Inc. (the
“Company”) hereby establishes the Financial
Institutions, Inc. 2009 Management Stock Incentive Plan (the
“Plan”). The purpose of this Plan is to enable the
Company and its subsidiaries to attract and retain key employees
and provide them with an incentive to maintain and enhance the
Company’s long-term performance record. It is intended that
this purpose will best be achieved by granting eligible key
employees incentive stock options (“ISOs”),
non-qualified stock options (“NQSOs”), and restricted
stock grants, individually or in combination, under this Plan
pursuant to the rules set forth in Sections 83, 162(m), 421
and 422 of the Internal Revenue Code, as amended from time to
time.
The Plan shall be administered by the
Company’s Compensation Committee (the
“Committee”). This Committee shall consist of at least
two members of the Company’s Board of Directors all of whom
shall, unless the Board determines otherwise, be “outside
directors” as this term is defined in Code Section 162(m) and
regulations thereunder and “non-employee directors” as
this term is used in Rule 16b-3, or any successor provision,
promulgated pursuant to the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Subject to the provisions
of the Plan, the Committee shall possess the authority, in its
discretion, (a) to determine the employees of the Company to
whom, and the time or times at which, ISOs and/or NQSOs (ISOs and
NQSOs are collectively referred to as “options”), and
restricted stock grants (all three types of grants are collectively
referred to as “awards”) shall be granted; (b) to
determine at the time of grant whether an award will be an ISO, a
NQSO, a restricted stock grant or a combination of these awards and
the number of shares to be subject to each award; (c) to
prescribe the form of the award agreements and any appropriate
terms and conditions applicable to the awards and to make any
amendments to such agreements or awards; (d) to interpret the
Plan; (e) to make and amend rules and regulations relating to
the Plan; and (f) to make all other determinations necessary
or advisable for the administration of the Plan. The
Committee’s determinations shall be conclusive and binding.
No member of the Committee shall be liable for any action taken or
decision made in good faith relating to the Plan or any award
granted hereunder.
Awards may be granted under the Plan only to
employees of the Company and its subsidiaries (which shall include
all corporations of which at least fifty percent of the voting
stock is owned by the Company directly or through one or more
corporations at least fifty percent of the voting stock of which is
so owned) who have the capability of making a substantial
contribution to the success of the Company.
The total number of shares of the
Company’s Common Stock (par value of $.01 per share)
available in the aggregate for awards under this Plan shall not
exceed 690,000 shares. Of those 690,000 shares, not more than
500,000 shares of Common Stock shall be available for ISO awards
during the term of the Plan. For purposes of calculating the number
of shares of Common Stock available under the Plan, each share of
Common Stock granted pursuant to a restricted stock award shall
count as 1.64 shares of Common Stock. Shares to be granted may be
authorized and unissued shares or may be treasury
shares.
The total number of shares covered by all awards
granted under this Plan to any one participant in any one calendar
year may not exceed 300,000. The Committee may issue awards in any
combination it may choose provided that the total number of shares
under all such awards to any one participant does not exceed the
annual 300,000 individual aggregate limit.
If an award expires, terminates or is canceled
without being exercised or becoming vested, new awards may
thereafter be granted under the Plan covering such shares unless
Rule 16b-3 provides otherwise. No award may be granted more
than 10 years after the effective date of the Plan.
5. TERMS AND
CONDITIONS OF ISOS
Each ISO granted under the Plan shall be
evidenced by an ISO option agreement in such form as the Committee
shall approve from time to time, which agreement shall conform with
this Plan and contain the following terms and
conditions:
(a) Exercise Price . The exercise
price under each option shall equal the fair market value of the
Common Stock at the time such option is granted, or, if there was
no trading in such stock on the date of such grant, the closing
price on the last preceding day on which there was such trading. If
an option is granted to an officer or employee who at the time of
grant owns stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company (a
“10-percent Shareholder”), the purchase price shall be
at least 110 percent of the fair market value of the stock
subject to the option.
(b) Duration of Option . Each
option by its terms shall not be exercisable after the expiration
of ten years from the date such option is granted. In the case of
an option granted to a 10-percent Shareholder, the option by its
terms shall not be exercisable after the expiration of five years
from the date such option is granted.
(c) Options Nontransferable . Each
option by its terms shall not be transferable by the participant
otherwise than by will or the laws of descent and distribution and
shall be exercisable, during the participant’s lifetime, only
by the participant, the participant’s guardian or the
participant’s legal representative. To the extent required
for the option grant and/or exercise to be exempt under
Rule 16b-3, options (or the shares of Common Stock underlying
the options) must be held by the participant for at least six
months following the date of grant.
(d) Exercise Terms . Each option
granted under the Plan shall become exercisable pursuant to a
vesting schedule established by the Committee at the time an option
is granted. Options may be partially exercised from time to time
during the period extending from the time they first become
exercisable until the tenth anniversary (fifth anniversary for a
10-percent Shareholder) of the date of grant. The Committee may
impose such other terms and conditions on the exercise of options
as it deems appropriate to serve the purposes for which this Plan
has been established.
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(e) Maximum Value of ISO Shares .
No ISO shall be granted to an employee under this Plan or any other
ISO plan of the Company or its subsidiaries to purchase shares as
to which the aggregate fair market value (determined as of the date
of grant) of the Common Stock which first become exercisable by the
employee in any calendar year exceeds $100,000.
(f) Payment of Exercise Price . An
option shall be exercised upon written notice to the Company
accompanied by payment in full for the shares being acquired. The
payment shall be made in cash, by check or, if the option agreement
so permits, by delivery of shares of Common Stock of the Company
beneficially owned by the participant, duly assigned to the Company
with the assignment guaranteed by a bank, trust company or member
firm of the New York Stock Exchange, or by a combination of the
foregoing. Any such shares so delivered shall be deemed to have a
value per share equal to the fair market value of the shares on
such date. For this purpose, fair market value shall equal the
closing price of the Company’s Common Stock on the listing
exchange on the date the option is exercised, or, if there was no
trading in such stock on the date of such exercise, the closing
price on the last preceding day on which there was such
trading.
6. TERMS AND
CONDITIONS FOR NQSOS
Each NQSO granted under the Plan shall be
evidenced by a NQSO option agreement in such form as the Committee
shall approve from time to time, which agreement shall conform to
this Plan and contain the same terms and conditions as the ISO
option agreement except that the 10-percent Shareholder
restrictions in Sections 5(a) and 5(b) and the maximum value of
share rules of Section 5(e) shall not apply to NQSO grants. To the
extent an option initially designated as an ISO exceeds the value
limit of Section 5(e), it shall be deemed a NQSO and shall
otherwise remain in full force and effect.
7. TERMS AND
CONDITIONS OF RESTRICTED STOCK GRANTS
The Committee may, evidenced by such written
agreement as the Committee shall from time to time prescribe, grant
to an eligible employee a specified number of shares of the
Company’s Common Stock which shall vest only after the
attainment of the relevant restrictions described in Section 7(b)
below (“restricted stock”). Such restricted stock shall
have an appropriate restrictive legend affixed thereto. A
restricted stock grant shall be neither an option nor a sale, but
shall be subject to the following conditions and
restrictions:
(a) Restricted stock may not be sold or
otherwise transferred by the participant until ownership vests,
provided however, to the extent required for the restricted stock
grant to be exempt under Rule 16b-3, the restricted stock must
be held by the participant for at least six months following the
date of vesting.
(b) Ownership shall vest only following
satisfaction of one or more of the following criteria as the
Committee may prescribe:
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(1)
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the
passage of two years, or such longer period of time as the
Committee in its discretion may provide, from the date of
grant.
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(2)
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the
attainment of performance-based goals established by the Committee
as of the date of grant. If the participant’s compensation is
subject to the $1 million cap of Code Section 162(m), the
Committee may establish such performance goals based on one or more
of the following performance measures:
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total shareholder return
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cash flow growth and/or
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Performance
measures may be established on a corporate, divisional, business
unit or consolidated basis and measured absolutely or relative to
the Company’s peers. If the participant’s compensation
is not intended to qualify as performance based compensation within
the meaning of Code Section 162(m), the Committee may
establish the performance goal on the basis of the preceding
performance measures or any other measure it may from time to time
deem appropriate in its discretion.
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(3)
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any
other conditions the Committee may prescribe, including a
non-compete requirement.
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(c) Unless the Committee determines
otherwise, the Committee shall grant and administer all
performance-based awards under (b)(2) above with the intent of
meeting the criteria of Code Section 162(m) for performance-based
compensation with respect to participants whose compensation is
subject to Code Section 162(m). To this end, the outcome of
all targeted goals shall be substantially uncertain on the date of
grant; the goals shall be established no later than 90 days
following the commencement of service to which the goals relate;
the minimum period for attaining each performance goal shall be one
year; and the Committee shall certify at the conclusion of the
performance period whether the
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