FINANCIAL INSTITUTIONS,
INC.
2009 DIRECTORS’ STOCK
INCENTIVE PLAN
1. BACKGROUND
AND PURPOSE
Financial Institutions, Inc. (the
“Company”) hereby establishes the Financial
Institutions, Inc. 2009 Directors’ Stock Incentive Plan (the
“Plan”). The purpose of the Plan is to enable the
Company to attract and retain outside directors 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 directors nonqualified stock
options (“NQSOs” or “options”) and
restricted stock grants, individually or in combination, under this
Plan pursuant to the rules set forth in Sections 83 of the
Internal Revenue Code, as amended from time to time.
The Plan shall be administered by the
Company’s Board of Directors (the “Board”).
Subject to the provisions of the Plan, the Board shall possess the
authority, in its discretion, (a) to determine the directors
of the Company to whom, and the time or times at which, NQSOs and
restricted stock grants (both 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 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 Board’s
determinations shall be conclusive and binding. No member of the
Board shall be liable for any action taken or decision made in good
faith relating to the Plan or any award granted
hereunder.
Members of the Board of Directors of the Company
and the directors of its subsidiaries who, in either case, are not
also employees of the Company or its subsidiaries are eligible to
participate in this Plan.
An aggregate of 250,000 shares of the Common
Stock (par value $.01 per share) of the Company (subject to
substitution or adjustment as provided in Section 9 hereof)
shall be available for the grant of awards under the Plan. Such
shares may be authorized and unissued shares. 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.
If an option expires, terminates or is cancelled without being
exercised, new options may thereafter be granted covering such
shares. 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 awards may be granted more than ten years
after the effective date of the Plan.
The Board may determine the appropriate mix of
options or restricted stock awards that should be granted to a
participant in a calendar year. However, the maximum amount of
shares that are subject to an award or awards that are granted to a
single participant in a single calendar year is limited by the
following rules:
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The
maximum number of shares that may be granted to a single
participant in a single calendar year in the form of an award of a
restricted stock grant is: (i) 800 shares for the first three
years of this Plan; (ii) 900 shares for the next three years
of this Plan; and (iii) 1000 shares for the last four years of
this Plan.
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The
maximum number of shares that are subject to an option granted to a
single participant in a single calendar year is: (i) 2,000
shares for the first three years of this Plan; (ii) 2,250
shares for the next three years of this Plan; and (iii) 2,500
shares for the last four years of this Plan.
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In
the event that the Board determines to grant participants a mix of
restricted stock awards and options in a single calendar year the
maximum number of shares that are subject to an option that may
granted to a single participant for that calendar year shall be
reduced by: 1.64 multiplied by the number of shares of restricted
stock granted to the participant under an award for that calendar
year.
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5. TERMS AND
CONDITIONS OF NQSOS
Each NQSO granted under the Plan shall be
evidenced by an NQSO option agreement in such form as the Board
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.
(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.
(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.
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(d) Exercise Terms . Each option
granted under the Plan shall become exercisable pursuant to a
vesting schedule established by the Board 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 of the date of grant. The
Board 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.
(e) 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 OF RESTRICTED STOCK GRANTS
The Board may, evidenced by such written
agreement as the Board shall from time to time prescribe, grant to
an eligible director 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 6(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 upon satisfaction
of one or more of the following criteria as the Board may
prescribe:
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(1)
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the
completion of a specified period of service after the date of
grant; provided that the Board may also grant shares that vest
immediately upon the date of grant.
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(2)
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the
attainment of performance-based goals established by the Board as
of the date of grant. The Board may establish such performance
goals based on one or more of the following targets:
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total shareholder return
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earnings per share growth
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return on equity and/or
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or
any other target it may from time to time deem appropriate in its
discretion.
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(3)
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any
other conditions the Board may prescribe.
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(c) Except as otherwise determined by the
Board or in the restricted stock agreement, all rights and title to
restricted stock granted to a participant under the Plan shall
terminate and be forfeited to the Company upon failure to fulfill
all conditions and restrictions applicable to such restricted
stock.
(d) Except for the restrictions set forth
in this Plan and those specified by the Board in any restricted
stock agreement, a holder of restricted stock s
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