Exhibit 10.7

[YEAR] PERFORMANCE STOCK UNIT AWARD AGREEMENT

Pursuant to the

FINANCIAL INSTITUTIONS, INC.

2015 LONG-TERM INCENTIVE PLAN

 

Name of Participant:    Date of Grant:    Number of Restricted Stock Units:   
Service Period:    The three-year period beginning on [DATE] and ending on
[DATE] Earned RSUs and Vesting Schedule:    The Number of Restricted Stock Units
set forth above shall become Earned RSUs based on the achievement of the
applicable Performance Goals during the applicable Performance Period and shall
vest based on completion of the Service Period in accordance with Exhibit A.

This PERFORMANCE STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of
[DATE], is made between Financial Institutions, Inc. (the “Company”) and the
above-named individual (the “Participant”) to record the grant to the
Participant of a Performance Stock Unit Award (the “Award”) on the Date of Grant
set forth above pursuant to Section 6.5 and Section 6.6 of the Financial
Institutions, Inc. 2015 Long-Term Incentive Plan (the “Plan”). The Award is
intended to qualify as “performance-based compensation” under Code
Section 162(m), and will be interpreted and administered accordingly.
Capitalized terms not defined in this Agreement shall have the meaning given to
such terms under the Plan.

The Company and the Participant hereby agree as follows:

Section 1. Grant of Restricted Stock Units. The Company hereby grants to the
Participant, as of the Date of Grant, subject to and in accordance with the
terms and conditions of the Plan and this Agreement, a Performance Stock Unit
Award for the Number of Restricted Stock Units set forth above (the “Restricted
Stock Units”).

Section 2. Achievement and Vesting of Restricted Stock Units. Subject to
Section 4 below, and the achievement of the applicable Performance Goals during
the applicable Performance Period (both as set forth on Exhibit A), provided
that the Participant provides substantial services and remains in continuous
employment with the Company or a Subsidiary through the end of the Service
Period set forth above, the Earned RSUs shall vest on the last day of the
Service Period. Except as otherwise provided by Section 4 below, if the
Participant ceases to provide substantial services or remain in continuous
employment with the Company or a Subsidiary for any reason before the completion
of the Service Period, the unvested Restricted Stock Units shall be immediately
forfeited. Notwithstanding the foregoing, before the Award will be earned and
paid, the Committee must determine and certify in accordance with the
requirements of Code Section 162(m) that the Performance Goals and other
material terms of the Award have been satisfied, and if applicable, the level of
performance achieved.

Section 3. Timing and Form of Payout. Except as otherwise provided by Section 4
below and subject to Section 8 below, as soon as practicable following the last
day of the Service Period (the “Payment Date”), but no later than the end of the
calendar year in which the Payment Date occurs or if later, by the 15th day of
the third month following the Payment Date, the vested Earned RSUs shall be paid
to the Participant, at the Company’s option (i) by the Company delivering to the
Participant a number of shares of Common Stock equal to the number of vested
Earned RSUs as of the Payment Date or (ii) in a lump sum cash payment equal in
the aggregate to the Fair Market Value of a share of Common Stock on the Payment
Date multiplied by the number of such vested Earned RSUs as of the Payment Date.
If the Earned RSUs are paid in shares of Common Stock, the Company shall issue
the shares of Common Stock either (a) in certificate form or (b) in book entry
form, registered in the name of the Participant. Notwithstanding anything herein
to the contrary, the Company shall have no obligation to issue shares of Common
Stock in payment of the Earned RSUs unless such issuance and such payment shall
comply with all relevant provisions of law and the requirements of any Stock
Exchange on which the shares of Common Stock are traded.

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Section 4. Effects of Certain Events.

 

  (a) Change in Control. Subject to the terms of the Plan, if prior to the
completion of the Service Period set forth above there is a Change in Control:

 

  (i) if Replacement Awards are not provided to the Participant to replace
unvested Restricted Stock Units, then the number of the Participant’s Earned
RSUs shall be determined at the target level of performance, and such Earned
RSUs shall vest as of such date. If the Change in Control qualifies as a “change
in control” for purposes of Code Section 409A, then subject to Section 8 below,
such vested Earned RSUs shall be paid to the Participant as soon as practicable
following the Change in Control, but no later than the end of the calendar year
in which the Change in Control occurs, or if later, by the 15th day of the third
month following the Change in Control. Otherwise such vested Earned RSUs shall
be paid at the time specified under Section 3 above.

 

  (ii) if Replacement Awards are provided to the Participant to replace unvested
Restricted Stock Units, then in the event of the Participant’s Involuntary
Termination during the period of two (2) years immediately following the Change
in Control, the number of Earned Shares under such Replacement Awards shall be
determined at the target level of performance, and such Earned RSUs shall vest
as of such date, and subject to Section 8 below, shall be paid to the
Participant as soon as practicable following the Involuntary Termination, but no
later than the end of the calendar year in which the Involuntary Termination
occurs, or if later, by the 15th day of the third month following the
Involuntary Termination.

 

  (b) Death or Disability. If during the Service Period, the Participant’s
employment with the Company or a Subsidiary terminates due to death or
Disability, then performance shall be determined as of the date of the
Participant’s termination of employment due to death or Disability, and the
Earned RSUs, if any, from such performance, subject to Section 8 below, shall
vest and be paid to the Participant (or in the event of the Disability of the
Participant, to the legal representative of the Participant, or in the event of
the death of the Participant, to the legal representative of the Participant’s
estate, or if no legal representative has been appointed, to the successor in
interest determined under the Participant’s will) on a pro-rata basis as soon as
practicable following the Participant’s termination of employment due to death
or Disability, but no later than the end of the calendar year in which the
termination of employment due to death or Disability occurs, or if later, by the
15th day of the third month following the termination of employment due to death
or Disability. The pro-rata portion shall be determined by multiplying the
number of Earned RSUs by a fraction, the numerator of which is the number of
completed months in the Service Period during which the participant was employed
by the Company or a Subsidiary, and the denominator of which is the number of
months in the Service Period.

 

  (c) Retirement. If a Participant terminates employment during the Service
Period due to Retirement, then the Award shall continue and a pro-rata number of
Earned RSUs shall vest and be paid at the time and form of payment specified by
Section 2 and Section 3 above based on actual performance through the end of the
applicable Performance Period. Unless Exhibit A provides otherwise, the pro-rata
portion shall be determined by multiplying the number of Earned RSUs by a
fraction, the numerator of which is the number of completed months in the
Service Period during which the participant was employed by the Company or a
Subsidiary, and the denominator of which is the number of months in the Service
Period.

“Retirement” shall mean the resignation or voluntary termination of employment
after attainment of age 65 and ten or more years of service with the Company or
a Subsidiary.

Section 5. Dividend Equivalents. No dividend equivalents shall accrue or be paid
to the Participant with respect to any Restricted Stock Units.

Section 6. Rights as Shareholder. In addition to the transfer and other
restrictions set forth elsewhere in this Agreement and in the Plan, the
Participant, as holder of the Restricted Stock Units, shall not possess any
rights of a holder of Common Stock (including voting and dividend rights) with
respect to the shares of Common Stock underlying such Restricted Stock Unit
Award until such time as the Restricted Stock Unit Award vests, is paid and the
shares of Common Stock are issued to the holder of the Restricted Stock Unit
Award.

 

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Section 7. No Transferability. The Restricted Stock Units may not be sold,
transferred, pledged, assigned, encumbered, or otherwise alienated or
hypothecated other than by will or the laws of descent and distribution. Earned
RSUs shall be payable only to the Participant during the Participant’s lifetime,
or in the event of the Disability of the Participant, to the Participant or the
legal representative of the Participant, or in the event of the death of the
Participant, to the legal representative of the Participant’s estate, or if no
legal representative has been appointed to the successor in interest determined
under the Participant’s will.

Section 8. Withholding Taxes. As a condition of and prior to the payout of any
Restricted Stock Units, the Company shall be entitled to require the Participant
to remit to the Company an amount sufficient to satisfy the amount of any
federal, state, or local taxes required to be withheld with respect to the
vesting and payout of the Earned RSUs, or any other taxable event related
thereto. The Committee may permit the Participant to make such payment in any
form or manner authorized by the Committee in its sole discretion, including,
but not limited to one or more of the forms specified below:

 

  (a) U.S. dollars by personal check, bank draft, or money order payable to the
Company, by money transfer or direct account debits;

 

  (b) Delivery to the Company of a number of shares of Common Stock having an
aggregate fair market value of not less than the minimum tax withholding
required for the Award;

 

  (c) Involvement of a stockbroker in accordance with the federal margin rules
set forth in Regulation T;

 

  (d) A cashless exercise if and to the extent permissible by applicable law; or

 

  (e) Any combination of the above forms and methods.

In the event the Participant fails to provide timely payment of all sums
required by the Company pursuant to this Section 8, the Company shall have the
right and option, but not obligation, to treat such failure as an election by
the Participant to provide all or any portion of such required payment by means
of tendering vested shares of Common Stock.

Section 9. Adjustments. As provided by the Plan, in the event of any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, stock dividend, combination or exchange of shares, exchange for other
securities, reclassification, reorganization, recapitalization, or any other
increase or decrease in the number of outstanding shares of Common Stock
effected without consideration to the Company, the specified number of
Restricted Stock Units shall be proportionately adjusted to prevent dilution or
enlargement of the rights granted to, or available for, the Participant
hereunder. Furthermore, if and to the extent permissible for purposes of the
“performance-based compensation” exception under Code Section 162(m), the
Committee shall adjust the Performance Goals to the extent (if any) it
determines that the adjustment is necessary or advisable to preserve the
intended incentives and benefits to reflect any material change in corporate
capitalization, any material corporate transaction (such as a reorganization,
combination, separation, merger, acquisition, or any combination of the
foregoing), or any complete or partial liquidation of the Company, or any other
similar special circumstances, including the issuance of a significant number of
shares of Common Stock.

Section 10. No Employment Rights. Nothing in the Plan or this Agreement confers
upon the Participant any right with respect to continuance of employment by the
Company or any of its Subsidiaries, or affects the right of the Company or any
of its Subsidiaries may have to terminate the Participant’s employment at any
time.

Section 11. Coordination with Plan. The Participant hereby acknowledges receipt
of a copy of the Plan and agrees to be bound by all of the terms and provisions
thereof including any that may conflict with those contained in this Agreement.

Section 12. Notices. All notices to the Company shall be in writing and sent to
the Company’s Director of Human Resources at the Company’s offices. Notices to
the Participant shall be addressed to the Participant at the Participant’s
address as it appears on the Company’s records.

Section 13. Amendment. The Company may alter, amend or terminate this Agreement
only with the Participant’s consent, except as otherwise expressly provided by
the Plan or this Agreement.

 

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Section 14. Governing Law. This Agreement shall be governed by the laws of the
State of New York to the extent not preempted by federal law, without reference
to principles of conflict of laws, and construed accordingly.

Section 15. Compensation Recovery Policy. Notwithstanding any other provision of
this Agreement to the contrary, any Restricted Stock Units granted and/or shares
of Common Stock issued hereunder, and/or any amount received with respect to any
sale of any such shares of Common Stock, shall be subject to potential
cancellation, recoupment, rescission, payback or other action in accordance with
the terms of the Company’s compensation recovery policy, if any, or any similar
policy that the Company may adopt from time to time (the “Policy”). The
Participant agrees and consents to the Company’s application, implementation and
enforcement of (i) the Policy that may apply to the Participant and (ii) any
provision of applicable law relating to cancellation, rescission, payback or
recoupment of compensation, including, but not limited to Section 10D of the
Exchange Act, and expressly agrees that the Company may take such actions as are
necessary to effectuate the Policy or applicable law without further consent or
action being required by the Participant. To the extent that the terms of this
Agreement and the Policy or any similar policy conflict, then the terms of such
policy shall prevail.

Section 16. Excise Tax Cap. In the event that a Participant becomes entitled to
any payment or benefit under this Agreement (such benefits together with any
other payments or benefits payable to the Participant under any other agreement
with the Participant, or plan or policy of the Company, are referred to in the
aggregate as the “Total Payments”), if all or any part of the Total Payments
will be subject to the tax imposed by Code Section 4999, or any similar tax that
may hereafter be imposed (the “Excise Tax”), then:

 

  (a) Within 30 days following the Participant’s termination of employment, the
Company will notify the Participant in writing: (1) whether the payments and
benefits under this Agreement, when added to any other payments and benefits
making up the Total Payments, exceed an amount equal to 299% of the
Participant’s “base amount” as defined in Code Section 280G(b)(3) (the “299%
Amount”); and (2) the amount that is equal to the 299% Amount.

 

  (b) The payments and benefits under this Agreement shall be reduced such that
the Total Payments do not exceed the 299% Amount, so that no portion of the
payments and benefits under this Agreement will be subject to the Excise Tax.
Any payment or benefit so reduced will be permanently forfeited and will not be
paid to the Participant.

 

  (c) The calculation of the 299% Amount and the determination of how much the
Participant’s payments and benefits must be reduced in order to avoid
application of the Excise Tax will be made by the Company’s public accounting
firm prior to the Participant’s termination of employment, which firm must be
reasonably acceptable to the Participant (the “Accounting Firm”). The Company
will cause the Accounting Firm to provide detailed supporting calculations of
its determinations to the Company and the Participant. Notice must be given to
the Accounting Firm within 15 business days after an event entitling the
Participant to a payment under this Agreement. All fees and expenses of the
Accounting Firm will be borne solely by the Company.

 

  (d) For purposes of making the reduction of amounts payable under this
Agreement, such amounts will be eliminated in compliance with the requirements
of Code Section 409A, to the extent applicable.

Section 17. Section 409A. This Agreement and the Restricted Stock Units
hereunder are intended to comply with Code Section 409A, and this Agreement
shall be administered and interpreted consistent with such intention.
Notwithstanding the foregoing, the Company makes no representations to the
Participant regarding the taxation of the Restricted Stock Units under this
Agreement, including, but not limited to, the tax effects of Code Section 409A,
and the Participant shall be solely responsible for the taxes imposed upon him
or her with respect to the Restricted Stock Units. References to “termination of
employment” and similar terms used in this Agreement mean, to the extent
necessary to comply with Code Section 409A, the date that the Participant first
incurs a “separation from service” within the meaning of Code Section 409A.
Notwithstanding anything in this Agreement to the contrary, if at the time of
the Participant’s separation from service, the Participant is a “specified
employee” for purposes of Code Section 409A, and payment under this Agreement as
a result of such separation from service is required by Code Section 409A to be
delayed by six months, then the Company shall make such payment on the day
following the six-month anniversary of the Participant’s separation from service
to the extent required to comply with Code Section 409A.

 

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IN WITNESS WHEREOF, the Company and the Participant have caused this Agreement
to be executed on the date set forth opposite their respective signatures, but
effective as of the Date of Grant.

 

Dated:                         FOR THE COMPANY:     By:  

 

    Name:  

 

    Title:  

 

Dated:                         PARTICIPANT:     By:  

 

    Name:  

 

 

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EXHIBIT A

PERFORMANCE PERIOD AND PERFORMANCE GOALS

Performance Period

The three-year period beginning on January 1, [YEAR] and ending on December 31,
[YEAR].

Performance Goals

XXX

Definitions.

XXX

Pro-Ration of Earned RSUs

XXX

 

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