EXHIBIT 10.8
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.
2. ADMINISTRATION
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.
3. ELIGIBLE EMPLOYEES
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.

 

 

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4. SHARES AVAILABLE
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:

  (1)   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)   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:

  •   total shareholder return

  •   earnings per share

  •   efficiency ratio

  •   net charge offs

  •   cash flow growth and/or

  •   return on equity.

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.

  (3)   any other conditions the Committee may prescribe, including a
non-compete requirement.

(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 performance-based goals have been attained. Such
certification may be made by noting the attainment of the goals in the minutes
of the Committee’s meetings.
(d) Except as otherwise determined by the Committee, 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.
(e) Except for the restrictions set forth in this Plan and those specified by
the Committee in any restricted stock agreement, a holder of restricted stock
shall possess all the rights of a holder of the Company’s Common Stock
(including voting and dividend rights); provided, however, that prior to vesting
the certificates representing such shares of restricted stock shall be held by
the Company for the benefit of the participant and the participant shall deliver
to the Company a stock power executed in blank covering such shares. As the
shares vest, certificates representing such shares shall be released to the
participant. The Committee shall have the discretion to determine at the time of
the restricted stock grant (as memorialized in the restricted stock agreement
with the participant) whether dividends payable on the participant’s unvested
shares shall be (i) paid to the participant or (ii) reinvested in additional
shares of restricted stock. If dividends on unvested shares are reinvested in
additional shares of restricted stock, all dividends payable on the unvested
shares shall be reinvested in the Company’s Common Stock, treated as restricted
stock until the underlying restricted shares vest, and, upon such vesting,
released to the participant. If the underlying shares do not vest, all shares
purchased with the reinvested dividends shall be forfeited.
(f) All other provisions of the Plan not inconsistent with this section shall
apply to restricted stock or the holder thereof, as appropriate, unless
otherwise determined by the Committee.

 

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8. GENERAL RESTRICTION ON ISSUANCE OF STOCK CERTIFICATES
The Company shall not be required to deliver any certificate upon the grant,
vesting or exercise of any award or option until it has been furnished with such
opinion, representation or other document as it may reasonably deem necessary to
ensure compliance with any law or regulation of the Securities and Exchange
Commission or any other governmental authority having jurisdiction under this
Plan. Certificates delivered upon such grant or exercise may bear a legend
restricting transfer absent such compliance. Each award shall be subject to the
requirement that, if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the shares
subject to such award upon any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such awards or the issue or purchase of shares thereunder, such awards may not
vest or be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee in the exercise of its reasonable
judgment.
9. IMPACT OF TERMINATION OF EMPLOYMENT
(a) Options. If the employment of a participant terminates by reason of the
participant’s disability or death, any option may be exercised, in the case of
disability, by the participant or, in the case of death, the participant’s
designated beneficiary (or personal representative if there is no designated
beneficiary) at any time prior to the earlier of the expiration date of the
option or the expiration of one year after the date of disability or death, but
only if, and to the extent that the participant was entitled to exercise the
option at the date of disability or death. If the employment of a participant
terminates on account of retirement, all of the participant’s outstanding
options shall become immediately vested and these options together with
previously vested but unexercised options may be exercised prior to the earlier
of the expiration date of the option or the expiration of 13 months from the
date of retirement. For this purpose, “retirement” means any termination of
employment on or after a participant is entitled to receive an early retirement
benefit under any defined benefit pension plan maintained by the Company or an
affiliate in which the participant has any accrued benefit. If the participant
does not have an accrued benefit in any such plan, “retirement” means the
participant’s termination of employment on or after he has reached age 55. Upon
termination of the participant’s employment for any reason other than
retirement, disability or death, all nonvested options held by the participant
shall be forfeited and any options that are vested on the date of termination
may be exercised prior to the earlier of the expiration date of the option or
the expiration of 90 days from the date of termination. An option that remains
exercisable after the expiration of three months from termination of employment
shall be treated as a NQSO after three months even if it would have been treated
as an ISO if exercised within three months of termination. Notwithstanding the
foregoing, an option may not be exercised after retirement if the Committee
reasonably determines that the termination of employment of such participant
resulted from willful acts, or failure to act, by the participant detrimental to
the Company or any of its subsidiaries.

 

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(b) Restricted Stock Grants.

  (1)   Passage of Time Vesting. If a participant has been awarded restricted
stock whose vesting is conditioned solely on the passage of time, any
termination of employment for any reason, shall result in the forfeiture of all
restricted stock awards that were not vested prior to the termination of
employment except as otherwise provided by the Committee.

  (2)   Performance-Based Vesting. If a participant has been awarded restricted
stock whose vesting is based solely on the attainment of performance-based goals
or partly on the attainment of performance-based goals and partly on the passage
of time, any termination of employment except death, disability or retirement on
or after age 62 (or early retirement after age 55) shall result in the
forfeiture of all restricted stock awards that were not vested prior to the
termination of employment. A participant who terminates employment on account of
death, disability or retirement may, if the performance-based criteria are
eventually attained, be awarded (or, in the event of death, the participant’s
designated beneficiary or personal representative if there is no designated
beneficiary shall be awarded) up to a pro rata portion of the restricted shares
based on the participant’s length of service as of his or her termination of
employment over the length of the award period ending on the date the
performance-based criteria are satisfied (or the passage of time would have been
satisfied, if later, for an award based in part on performance goals and in part
on the passage of time). The Committee shall have the discretion whether to
grant a full pro rata portion of the restricted shares, a lesser portion or no
shares at all under this subsection (b)(ii).

(c) Acts Not Constituting Termination of Employment. Unless otherwise determined
by the Committee, an authorized leave of absence shall not constitute a
termination of employment for purposes of this Plan. In addition, participants
who transfer employment within the Financial Institutions group of companies
shall not be considered to have terminated employment. Any such transferred
participants shall remain eligible to exercise previously granted options and to
vest in restricted stock awards in accordance with their terms as if no
termination occurred and shall be eligible to receive additional awards pursuant
to the terms of employment with their new employer.
Notwithstanding the forgoing, the Committee may adopt different rules than set
forth above to apply to a participant’s stock option awards or restricted stock
grants when a participant’s employment terminates, including, without
limitation, forfeiting options that are not vested when the participant’s
employment terminates. Such rules shall be set forth in the participant’s award
agreement.

 

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10. ADJUSTMENT OF SHARES
In the event of any change in the Common Stock of the Company by reason of any
stock dividend, stock split, recapitalization, reorganization, merger,
consolidation, split-up, combination, or exchange of shares, or rights offering
to purchase Common Stock at a price substantially below fair market value, or of
any similar change affecting the Common Stock, the number and kind of shares
authorized under Section 4, the number and kind of shares which thereafter are
subject to an award under the Plan and the number and kind of unexercised
options and unvested shares set forth in awards under outstanding agreements and
the price per share shall be adjusted automatically consistent with such change
to prevent substantial dilution or enlargement of the rights granted to, or
available for, participants in the Plan.
11. WITHHOLDING TAXES
Whenever the Company proposes or is required to issue or transfer shares of
Common Stock under the Plan, or whenever restricted stock vests, the Company
shall have the right to require the recipient to remit to the Company an amount
sufficient to satisfy any federal, state and/or local income and employment
withholding tax requirements prior to the delivery of any certificate or
certificates for such shares or to take any other appropriate action to satisfy
such withholding requirements. Notwithstanding the foregoing, subject to such
rules as the Committee may promulgate and compliance with any requirements under
Rule 16b-3, the recipient may satisfy such obligation in whole or in part by
electing to have the Company withhold shares of Common Stock from the shares to
which the recipient is otherwise entitled.
12. NO EMPLOYMENT RIGHTS
The Plan and any awards granted under the Plan shall not confer upon any
participant any right with respect to continuance as an employee of the Company
or any subsidiary, nor shall they interfere in any way with the right of the
Company or any subsidiary to terminate the participant’s position as an employee
at any time.
13. RIGHTS AS A SHAREHOLDER
The recipient of any option under the Plan shall have no rights as a shareholder
with respect thereto unless and until certificates for the underlying shares of
Common Stock are issued to the recipient. The recipient of a restricted stock
grant shall have all rights of a shareholder except as otherwise limited by the
terms of this Plan.
14. AMENDMENT AND DISCONTINUANCE
This Plan may be amended, modified or terminated by the Committee or by the
shareholders of the Company, except that the Committee may not, without approval
of the shareholders, adopt a Plan amendment to materially increase the benefits
accruing to participants under the Plan, increase the maximum number of shares
as to which awards may be granted under the Plan, change the basis for making
performance-based awards for participants whose compensation is subject to
Section 162(m), change the minimum exercise price of options, change the class
of eligible persons, extend the period for which awards may be granted or
exercised, or withdraw the authority to administer the Plan from the Committee
or a committee of the Committee consisting solely of outside directors unless
the Board determines that inside directors may serve on the Committee.
Notwithstanding the foregoing, to the extent permitted by law, the Committee may
amend the Plan without the approval of shareholders, to the extent it deems
necessary to cause the Plan to comply with Securities and Exchange Commission
Rule 16b-3 or any successor rule, as it may be amended from time to time. Except
as required by law, no amendment, modification, or termination of the Plan may,
without the written consent of a participant to whom any award shall theretofore
have been granted, adversely affect the rights of such participant under such
award.

 

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15. CHANGE IN CONTROL
(a) Notwithstanding other provisions of the Plan, in the event of a change in
control of the Company (as defined in subsection (c) below), all of a
participant’s restricted stock awards shall become immediately vested to the
same extent as if all restrictions had been satisfied and all options shall
become immediately vested and exercisable, unless directed otherwise by a
resolution of the Committee adopted prior to and specifically relating to the
occurrence of such change in control.
(b) In the event of a change in control each participant holding an exercisable
option (i) shall have the right at any time thereafter during the term of such
option to exercise the option in full notwithstanding any limitation or
restriction in any option agreement or in the Plan, and (ii) may, subject to
Committee approval and after written notice to the Company within 60 days after
the change in control, or, if the participant is an officer subject to
Section 16 of the Exchange Act and to the extent required to exempt the
transaction under Rule 16b-3, during the period beginning on the third business
day and ending on the twelfth business day following the first release for
publication by the Company after such change of control of a quarterly or annual
summary statement of earnings, which release occurs at least six months
following grant of the option, whichever period is longer, receive, in exchange
for the surrender of the option or any portion thereof to the extent the option
is then exercisable in accordance with clause (i), an amount of cash equal to
the difference between the fair market value (as determined by the Committee) on
the date of surrender of the Common Stock covered by the option or portion
thereof which is so surrendered and the option price of such Common Stock under
the option.
(c) For purposes of this section, “change in control” means:

  (1)   there shall be consummated

(i) any consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which any shares of the
Company’s common stock are to be converted into cash, securities or other
property, provided that the consolidation or merger is not with a corporation
which was a wholly-owned subsidiary of the Company immediately before the
consolidation or merger; or
(ii) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of all, or substantially all, of the assets of the
Company; or

  (2)   the shareholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or

 

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  (3)   any person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) shall become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act), directly or indirectly, of 20% or more of
the Company’s then outstanding common stock, provided that such person shall not
be a wholly-owned subsidiary of the Company immediately before it becomes such
20% beneficial owner; or

  (4)   individuals who constitute the Company’s Board of Directors on the date
hereof (the “Incumbent Board”) cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least three quarters of the directors
comprising the Incumbent Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
director, without objection to such nomination) shall be, for purposes of this
clause (4), considered as though such person were a member of the Incumbent
Board.

16. EFFECTIVE DATE
The effective date of the Plan shall be the date this Plan is approved by the
affirmative vote of the owners of a majority of the Company’s outstanding shares
of Common Stock.
17. DEFINITIONS
Any terms or provisions used herein which are defined in Sections 83, 162(m),
421, or 422 of the Internal Revenue Code as amended, or the regulations
thereunder or corresponding provisions of subsequent laws and regulations in
effect at the time awards are made hereunder, shall have the meanings as therein
defined.
18. 409A
All awards granted under this Plan are intended to be exempt from the
requirements of Section 409A of the Internal Revenue Code of 1986, as amended,
and the terms of such awards shall be applied and interpreted in accordance with
that intent.
19. GOVERNING LAW
To the extent not inconsistent with the provisions of the Internal Revenue Code
that relate to awards, this Plan and any award agreement adopted pursuant to it
shall be construed under the laws of the State of New York.

 

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            FINANCIAL INSTITUTIONS, INC.
    Dated: May 6, 2009  By:   /s/ Peter G. Humphrey         Title: President   

Date of Shareholder Approval: May 6, 2009

 

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