Exhibit 10.1

FINANCIAL INSTITUTIONS, INC.

2015 LONG-TERM INCENTIVE PLAN

Approved by the MD&C Committee: January 14, 2015

Approved by the Board for Directors: January 28, 2015

Approved by Shareholders: May 6, 2015

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FINANCIAL INSTITUTIONS, INC.

2015 LONG-TERM INCENTIVE PLAN

TABLE OF CONTENTS

 

     Page  

ARTICLE I PURPOSE AND EFFECTIVE DATE

     1   

1.1

 

Purpose

     1   

1.2

 

Effective & Expiration Date

     1   

1.3

 

Successor Plan

     1   

ARTICLE II DEFINITIONS

     1   

2.1

 

Award

     1   

2.2

 

Award Agreement

     1   

2.3

 

Board

     1   

2.4

 

Cash Awards

     1   

2.5

 

Cause

     1   

2.6

 

Change in Control

     2   

2.7

 

Code

     2   

2.8

 

Committee

     2   

2.9

 

Common Stock

     2   

2.10

 

Company

     2   

2.11

 

Director

     2   

2.12

 

Director Awards

     2   

2.13

 

Disability

     2   

2.14

 

Effective Date

     2   

2.15

 

Employee

     2   

2.16

 

Exchange Act

     2   

2.17

 

Exercise Price

     2   

2.18

 

Fair Market Value

     2   

2.19

 

Good Reason

     3   

2.20

 

Incentive Stock Option

     3   

2.21

 

Incumbent Board

     3   

2.22

 

Indemnified Person

     3   

2.23

 

Involuntary Termination

     3   

2.24

 

Non-Qualified Stock Option

     3   

2.25

 

Option

     3   

2.26

 

Over 10% Owner

     3   

2.27

 

Participant

     3   

2.28

 

Performance Goal

     3   

2.29

 

Performance Period

     3   

2.30

 

Performance Stock Award

     3   

2.31

 

Performance Stock Unit Award

     4   

2.32

 

Plan

     4   

2.33

 

Plan Year

     4   

2.34

 

Prior Plans

     4   

2.35

 

Replaced Award

     4   

2.36

 

Replacement Award

     4   

2.37

 

Reporting Person

     4   

2.38

 

Restricted Period

     4   

2.39

 

Restricted Stock Award

     4   

2.40

 

Restricted Stock Unit Award

     4   

2.41

 

Stock Appreciation Right

     4   

2.42

 

Strike Price

     4   

2.43

 

Subsidiary

     4   

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TABLE OF CONTENTS

(continued)

 

     Page  

2.44

 

Termination of Employment

     4   

ARTICLE III ELIGIBILITY AND PARTICIPATION

     4   

3.1

 

Eligibility

     4   

3.2

 

Participation

     4   

ARTICLE IV STOCK SUBJECT TO PLAN

     5   

4.1

 

Types of Shares

     5   

4.2

 

Aggregate Limit

     5   

4.3

 

Calculation of Shares

     5   

4.4

 

Participant Limits

     5   

ARTICLE V ADMINISTRATION

     6   

5.1

 

Action of the Committee

     6   

5.2

 

Duties and Powers of the Committee

     6   

5.3

 

Delegation

     6   

5.4

 

No Liability; Indemnification

     6   

ARTICLE VI AWARDS UNDER THE PLAN

     7   

6.1

 

Terms and Conditions of All Awards.

     7   

6.2

 

Options

     8   

6.3

 

Stock Appreciation Rights

     10   

6.4

 

Restricted Stock Awards

     10   

6.5

 

Restricted Stock Unit Awards

     11   

6.6

 

Qualified Performance Awards, Including Cash Awards

     12   

6.7

 

Director Awards

     13   

6.8

 

Other Awards

     13   

ARTICLE VII CHANGE IN CONTROL

     13   

7.1

 

Effect of a Change in Control

     13   

7.2

 

Definition

     14   

ARTICLE VIII TERMINATION AND AMENDMENT

     15   

8.1

 

Termination and Amendment of Plan

     15   

8.2

 

Amendment of Award Agreements

     15   

8.3

 

No Repricing

     15   

ARTICLE IX GENERAL PROVISIONS

     16   

9.1

 

Changes in Capitalization; Merger; Liquidation

     16   

9.2

 

Code Section 409A

     16   

9.3

 

Right to Terminate Employment or Service

     16   

9.4

 

Non-Alienation of Benefits

     16   

9.5

 

Restrictions on Delivery and Sale of Shares; Legends

     17   

9.6

 

FDIA Limitations

     17   

9.7

 

Compensation Recovery Policy

     17   

9.8

 

Listing and Legal Compliance

     17   

9.9

 

Choice of Law

     17   

9.10

 

Plan Binding on Successors

     17   

9.11

 

Interpretation

     17   

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FINANCIAL INSTITUTIONS, INC.

2015 LONG-TERM INCENTIVE PLAN

Financial Institutions, Inc. (the “Company”) hereby establishes the Financial
Institutions, Inc. 2015 Long-Term Incentive Plan (the “Plan”) for the benefit of
eligible Employees and Directors.

ARTICLE I

PURPOSE AND EFFECTIVE DATE

1.1 Purpose. The purpose of the Plan is to advance the interests of the Company,
its Subsidiaries, and its stockholders and to promote the growth and
profitability of the Company and its Subsidiaries by (a) providing incentives to
certain Employees and Directors of the Company and its Subsidiaries to stimulate
their efforts toward the continued success of the Company and to operate and
manage the business affairs of the Company in a manner that will provide for the
long-term growth and profitability of the Company; (b) providing certain
Employees and Directors with a means to acquire a proprietary interest in the
Company, acquire shares of Common Stock, or to receive compensation which is
based upon appreciation in the value of Common Stock; and (c) providing a means
of obtaining, rewarding, and retaining Employees and Directors.

1.2 Effective & Expiration Date. The Plan shall become effective as of May 6,
2015 (the “Effective Date”), upon the approval of the Plan by the Company’s
stockholders on that date. No Award will be granted under the Plan more than ten
(10) years after the Effective Date, but all Awards granted on or prior to such
date will continue in effect thereafter subject to the terms thereof and of the
Plan.

1.3 Successor Plan. The Plan is established as a successor to the 2009
Management Incentive Plan and 2009 Directors’ Stock Incentive Plan (the “Prior
Plans”). No additional awards shall be made under the Prior Plans after the
Effective Date. As provided by Section 4.2, shares of Common Stock authorized
under the Prior Plans as of the Effective Date shall be available for issuance
or transfer under this Plan. Outstanding awards under the Prior Plans shall
continue in effect according to their terms as in effect before the Effective
Date (subject to such amendments as the Committee determines, consistent with
the Prior Plans, as applicable).

ARTICLE II

DEFINITIONS

2.1 Award. Award shall mean, collectively, the Options, Restricted Stock Awards,
Restricted Stock Unit Awards, Stock Appreciation Rights, Cash Awards, Director
Awards, and other equity awards that may be granted under the Plan.

2.2 Award Agreement. Award Agreement shall mean a written or electronic
agreement entered into between the Company and a Participant setting forth the
terms and conditions of an Award made to such Participant under this Plan, such
Award Agreement to be in such form as shall be prescribed by the Committee from
time to time.

2.3 Board. Board shall mean the board of directors of the Company.

2.4 Cash Awards. Cash Awards shall mean the cash awards that may be made to an
eligible Participant pursuant to Section 6.6.

2.5 Cause. Cause as a reason for the termination of a Participant’s employment
shall have the meaning assigned such term in the executive, employment,
severance or similar agreement, if any, between the Participant and the Company
or a Subsidiary. If the Participant is not a party to an executive, employment,
severance, or similar agreement with the Company or a Subsidiary in which such
term is defined, then unless otherwise defined in the applicable Award
Agreement, Cause shall mean the commission by the Participant of, or the
determination by the Board, based on reasonable evidence of misconduct as
presented by a law enforcement agency, or as a result of an internal or external
audit or investigation, that the Participant has committed: (a) a criminal
offense involving the violation of state or federal law; (b) a breach of
fiduciary duty; (c) an act of

 

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dishonesty, fraud, or material misrepresentation; or (d) any act of moral
turpitude which the Board determines has or may be reasonably expected to have a
detrimental impact on the Company’s business or operations, or which may
prevent, because of its demonstrated or demonstrable effect on employees,
regulatory agencies, or customers, the Participant from effectively performing
his duties. Any reference to the Company in this definition includes each of its
Subsidiaries.

2.6 Change in Control. Change in Control shall have the meaning specified in
Section 7.2.

2.7 Code. Code shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations and other guidance issued thereunder, as such
law, regulations, and guidance may be amended from time to time.

2.8 Committee. Committee shall mean the Management Development & Compensation
Committee of the Board, each member of which is a “non-employee director” within
the meaning of Rule 16b-3 under the Exchange Act, is an “outside director”
within the meaning of Code Section 162(m) and meets the independence
requirements of the Nasdaq Stock Market listing standards.

2.9 Common Stock. Common Stock shall mean the common stock of the Company, $0.01
par value per share.

2.10 Company. Company shall mean Financial Institutions, Inc., a New York
corporation, and its successors and assigns.

2.11 Director. Director shall mean any non-employee member of the board of
directors of the Company or a Subsidiary.

2.12 Director Awards. Director Awards shall mean the director awards that may be
made to an eligible Director pursuant to Section 6.7.

2.13 Disability. Except as otherwise provided by this Section 2.13, Disability
shall have the meaning assigned such term in the executive, employment,
severance, or similar agreement, if any, between the Participant and the Company
or a Subsidiary, and if the Participant is not a party to an executive,
employment, severance, or similar agreement with the Company or a Subsidiary in
which such term is defined, then unless otherwise defined in the applicable
Award Agreement and except as otherwise provided by this Section 2.13,
Disability shall have the meaning assigned such term in the long-term disability
plan or policy maintained, or if applicable, most recently maintained, by the
Company or any Subsidiary for the Participant. If no long-term disability plan
or policy was ever maintained on behalf of the Participant, or if the
determination of Disability relates to an Incentive Stock Option, Disability
shall mean the condition described in Code Section 22(e)(3).

2.14 Effective Date. Effective Date shall have the meaning specified in
Section 1.2.

2.15 Employee. Employee shall mean an employee of the Company or a Subsidiary.

2.16 Exchange Act. Exchange Act shall mean the Securities Exchange Act of 1934,
as amended from time to time, and the rules and regulations thereunder, as such
law, rules and regulations may be amended from time to time.

2.17 Exercise Price. Exercise Price shall mean the price at which a share of
Common Stock may be purchased by a Participant pursuant to the exercise of an
Option.

2.18 Fair Market Value. Fair Market Value of Common Stock shall mean the closing
price of the Common Stock as reported on the Nasdaq Stock Market on the relevant
valuation date or, if there were no Common Stock transactions on such day, on
the next preceding date on which there were Common Stock transactions.

 

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2.19 Good Reason. Good Reason as a reason for a Participant’s termination of
employment shall have the meaning assigned such term in the executive,
employment, severance, or similar agreement, if any, between the Participant and
the Company or a Subsidiary. If the Participant is not a party to an executive,
employment, severance, or similar agreement with the Company or a Subsidiary in
which such term is defined, then unless otherwise defined in the applicable
Award Agreement, “Good Reason” shall mean (a) a material diminution in the
Participant’s base salary from the level immediately prior to the Change in
Control; or (b) a material change in the geographic location at which the
Participant must primarily perform the Participant’s services (which shall in no
event include a relocation of the Participant’s current principal place of
business to a location less than fifty (50) miles away) from the geographic
location immediately prior to the Change in Control; provided, however, no
termination shall be deemed to be for Good Reason unless (i) the Participant
provides the Company with written notice setting forth the specific facts or
circumstances constituting Good Reason within ninety (90) days after the initial
existence of the occurrence of such facts or circumstances, (ii) to the extent
curable, the Company has failed to cure such facts or circumstances
within thirty (30) days of its receipt of such written notice, and (iii) the
effective date of the termination for Good Reason occurs no later than one
hundred eighty (180) days after the initial existence of the facts or
circumstances constituting Good Reason.

2.20 Incentive Stock Option. Incentive Stock Option shall mean an Option to
purchase Common Stock which is granted under the Plan with the intention that it
qualify as an “incentive stock option” as that term is defined under Code
Section 422.

2.21 Incumbent Board. Incumbent Board shall have the meaning specified in
Section 7.2(d).

2.22 Indemnified Person. Indemnified Person shall have the meaning specified in
Section 5.4(a).

2.23 Involuntary Termination. Involuntary Termination shall mean termination of
a Participant’s employment or service by the Company or a Subsidiary without
Cause or by the Participant for Good Reason. For avoidance of doubt, an
Involuntary Termination shall not include a termination of the Participant’s
employment or service by the Company or a Subsidiary for Cause or due to the
Participant’s death, Disability, or voluntary resignation other than for Good
Reason.

2.24 Non-Qualified Stock Option. Non-Qualified Stock Option shall mean an Option
to purchase Common Stock which is granted under the Plan and that is not an
Incentive Stock Option.

2.25 Option. Option shall mean a Non-Qualified Stock Option or an Incentive
Stock Option granted pursuant to Section 6.2.

2.26 Over 10% Owner. Over 10% Owner shall mean an individual who, at the time an
Incentive Stock Option is granted to such individual, owns Common Stock
possessing more than ten percent (10%) of the total combined voting power of the
Company or one of its Subsidiaries, determined by applying the attribution rules
of Code Section 424(d).

2.27 Participant. Participant shall mean an Employee or Director who has been
granted an Award.

2.28 Performance Goal. Performance Goal shall mean a performance goal for a Cash
Award, Performance Stock Award or Performance Stock Unit Award that is intended
to satisfy the requirements for “performance-based compensation” under Code
Section 162(m), and shall mean a performance goal described in Section 6.6(d).

2.29 Performance Period. Performance Period shall mean a performance period for
a Cash Award, Performance Stock Award or Performance Stock Unit Award that is
intended to satisfy the requirements for “performance-based compensation” under
Code Section 162(m), and shall mean a performance period described in
Section 6.6(c).

2.30 Performance Stock Award. Performance Stock Award shall mean an Award as
described in Section 6.4(c).

 

3

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2.31 Performance Stock Unit Award. Performance Stock Unit Award shall mean an
Award as described in Section 6.5(b).

2.32 Plan. Plan shall have the meaning assigned to such term in the Preamble
hereof.

2.33 Plan Year. Plan Year shall mean the calendar year.

2.34 Prior Plans. Prior Plans shall have the meaning specified in Section 1.3.

2.35 Replaced Award. Replaced Award shall have the meaning specified in
Section 7.1(a).

2.36 Replacement Award. Replacement Award shall have the meaning specified in
Section 7.1(a).

2.37 Reporting Person. Reporting Person shall mean an officer or director of the
Company or a Subsidiary subject to the reporting requirements of Section 16 of
the Exchange Act.

2.38 Restricted Period. Restricted Period shall mean the period of time during
which Restricted Stock Awards granted pursuant to Section 6.4 or Restricted
Stock Unit Awards granted pursuant to Section 6.5 are subject to restrictions.

2.39 Restricted Stock Award. Restricted Stock Award shall mean an Award of
Common Stock subject to restrictions determined by the Committee as described in
Section 6.4.

2.40 Restricted Stock Unit Award. Restricted Stock Unit Award shall mean an
Award as described in Section 6.5.

2.41 Stock Appreciation Right. Stock Appreciation Right shall mean an Award of a
stock appreciation right as described in Section 6.3.

2.42 Strike Price. Strike Price shall mean the measuring price per share of
Common Stock for a Stock Appreciation Right used to determine the payment of
such Stock Appreciation Right.

2.43 Subsidiary. Subsidiary shall mean any corporation or other entity, whether
domestic or foreign, in which the Company has or obtains, directly or
indirectly, a proprietary interest of more than fifty percent (50%) by reason of
stock ownership or otherwise.

2.44 Termination of Employment. Termination of Employment shall mean the
termination of the employment or other service relationship between a
Participant and the Company and its Subsidiaries, regardless of whether
severance or similar payments are made to the Participant, for any reason,
including, but not by way of limitation, a termination by resignation,
discharge, death, Disability, or retirement, as determined by the Committee
pursuant to Section 6.1(i)(3).

ARTICLE III

ELIGIBILITY AND PARTICIPATION

3.1 Eligibility. Subject to the limitation on eligibility for Awards of
Incentive Stock Options set forth in Section 6.2(g), any Employee or Director of
the Company or a Subsidiary, who is selected by the Committee is eligible to
receive an Award under the Plan.

3.2 Participation. Unless otherwise determined by the Committee, as a condition
precedent to participation in the Plan, each Employee or Director selected to
receive an Award shall enter into an Award Agreement with the Company, agreeing
to the terms and conditions of the Plan and the Award granted.

 

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ARTICLE IV

STOCK SUBJECT TO PLAN

4.1 Types of Shares. The shares of Common Stock subject to the provisions of
this Plan shall either be shares of authorized but unissued Common Stock, shares
of Common Stock held as treasury stock or previously issued shares of Common
Stock reacquired by the Company, including shares purchased on the open market.

4.2 Aggregate Limit. Subject to adjustment in accordance with Section 9.1, the
maximum number of shares of Common Stock reserved exclusively for issuance upon
an award of or exercise or payment pursuant to Awards under the Plan shall be
the sum of the following: (a) the number of shares remaining available for
issuance under the Prior Plans on the Effective Date; and (b) any shares of
Common Stock that are subject to outstanding awards under the Prior Plans on the
Effective Date that are subsequently canceled, expired, forfeited, or otherwise
not issued or are settled in cash. All or any of this maximum number of shares
of Common Stock reserved under the Plan may be issued pursuant to Awards of
Incentive Stock Options or pursuant to any one or more other Awards.

4.3 Calculation of Shares.

(a) For purposes of calculating the total number of shares of Common Stock
available for grants of Awards hereunder, the following shall apply:

(1) The number of shares of Common Stock available for grants of Awards
hereunder shall be reduced by the number of shares for which Awards are actually
granted; and

(2) The grant of a Performance Stock Award or Performance Stock Unit Award shall
be deemed to be equal to the maximum number of shares of Common Stock which may
be issued under such Award.

(b) Shares Added Back. If less than the maximum number of shares of Common Stock
which may be issued under a Performance Stock Award or Performance Stock Unit
Award are earned and issued, only the number of shares of Common Stock actually
issued shall count against the above limit, and the excess of the maximum over
the actual number of shares of Common Stock issued shall again become available
for grants under the Plan. Further, if any Award under the Plan shall expire,
terminate, be canceled (including cancellation upon the Participant’s exercise
of a related Award), or is unsettled for any reason without having been
exercised in full, or if any Award shall be forfeited to the Company, the
unexercised, unsettled, or forfeited Award, shall not count against the
aggregate limitations under Section 4.2 and shall again become available for
grants under the Plan.

(c) Shares NOT Added Back. Shares of Common Stock equal in number to the shares
tendered or withheld in payment of an Option Exercise Price or in settlement of
any other Award, and shares of Common Stock that are tendered or withheld in
order to satisfy any federal, state, or local tax liability, shall count against
the aggregate limitations in Section 4.2 and shall not become available again
for grants under the Plan. Provided further, the full number of shares of Common
Stock subject to a Stock Appreciation Right shall count against the above limit,
and any shares that were estimated to be used for such purposes and were not in
fact so used shall not become available again for grants under the Plan.

(d) Cash settlements of Awards will not count against the above limits.

4.4 Participant Limits.

(a) Subject to adjustment in accordance with Section 9.1, the total number of
shares of Common Stock for which Awards may be granted in any Plan Year to any
Employee shall not exceed three hundred thousand (300,000) shares of Common
Stock.

 

5

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(b) The aggregate grant date fair value of Awards granted in any Plan Year to
any Director shall not exceed one hundred thousand dollars ($100,000); provided,
however, such limit shall not apply to Awards granted to Directors pursuant to
Section 6.7 in lieu of cash-based director fees that the Director elects to
receive in the form of shares of Common Stock equal in value to the cash-based
director fees that the Director would otherwise have received.

ARTICLE V

ADMINISTRATION

5.1 Action of the Committee. The Plan shall be administered by the Committee. In
administering the Plan, the Committee’s actions, determinations, and
interpretations made in good faith shall not be subject to review and shall be
final, binding, and conclusive on all interested parties.

5.2 Duties and Powers of the Committee. The Committee shall have the power to
grant Awards in accordance with the provisions of the Plan and may grant Awards
singly, in combination, or in tandem. Subject to the provisions of the Plan,
including the prohibition against repricing set forth in Section 8.3, the
Committee shall have the discretion and authority to determine: (a) the
Employees and Directors to whom Awards will be granted; (b) the number of shares
of Common Stock subject to each Award; (c) the terms and conditions of each
Award, including, without limitation, the applicable vesting schedule and
forfeiture provisions of the Award, Exercise Price, Strike Price, performance
goals, performance periods; Restriction Periods and exercise periods; (d) the
acceleration of vesting, exercise, or payment and/or any other consequence under
the Award in the event of an occurrence of a Change in Control; and (e) such
other matters applicable to an Award as are permissible under the Plan. Except
as otherwise required by the Plan, the Committee shall have the authority to
interpret and construe the provisions of the Plan and the Award Agreements, and
to make determinations pursuant to any Plan provision or Award Agreement which
shall be final and binding on all persons.

5.3 Delegation. The Committee may designate and authorize individual officers or
employees of the Company or a Subsidiary who are not members of the Committee to
carry out its responsibilities hereunder under such conditions or limitations as
the Committee may set, other than its authority and responsibility with regard
to Awards granted to a Reporting Person or Awards that are intended to satisfy
the requirements for “performance-based compensation” under Code Section 162(m).
References in the Plan to Committee shall include the individuals to whom the
Committee has delegated to the extent of the authority so delegated.

5.4 No Liability; Indemnification.

(a) No Director, member of the Committee, or officer or employee to whom any
duty or power relating to the administration or interpretation of the Plan has
been delegated (each, an “Indemnified Person”), shall be liable to any person
for any act or determination made in good faith with respect to the Plan or any
Award.

(b) Each Indemnified Person shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by such Indemnified Person in connection
with or resulting from any claim, action, suit or proceeding to which the
Indemnified Person may be a party or in which the Indemnified Person may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by the Indemnified Person in
settlement thereof, with the Company’s approval, or paid by the Indemnified
Person in satisfaction of any judgment in any such action, suit, or proceeding
against him or her, provided the Indemnified Person shall give the Company an
opportunity, at its own expense, to handle, and defend the same before the
Indemnified Person undertakes to handle and defend it on his or her own behalf.
The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such Indemnified Persons may be entitled
under the Company’s Certificate of Incorporation or policies, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.

 

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ARTICLE VI

AWARDS UNDER THE PLAN

6.1 Terms and Conditions of All Awards.

(a) Shares and Cash Awards Subject to Grant. The number of shares of Common
Stock and/or the amounts of Cash Awards as to which an Award may be granted will
be determined by the Committee in its sole discretion, subject to the
Participant limits in Section 4.4 and Section 6.6.

(b) Award Agreement. Each Award Agreement is subject to the terms of the Plan
and any provisions contained in the Award Agreement that are inconsistent with
the Plan shall be superseded by the terms of the Plan.

(c) Date of Grant. The date as of which an Award is granted will be the date on
which the Committee has approved the terms and conditions of the Award and has
determined the recipient of the Award and the number of shares of Common Stock
or amount of cash covered by the Award, and has taken all such other actions
necessary to complete the grant of the Award.

(d) Transfer and Exercise. Awards are not transferable or assignable except by
will or by the laws of descent and distribution and are exercisable, during a
Participant’s lifetime, only by the Participant, or in the event of the
Disability of the Participant, by the Participant or the legal representative of
the Participant, or in the event of the death of the Participant, by the legal
representative of the Participant’s estate, or if no legal representative has
been appointed, by the successor in interest determined under the Participant’s
will. Any transfer or attempted transfer of an Award by a Participant not made
in accordance with the Plan and the applicable Award Agreement will be void and
of no effect, and the Company will not recognize, or have the duty to recognize,
any transfer not made in accordance with the Plan and the applicable Award
Agreement, and an Award attempted to be transferred will continue to be bound by
the Plan and the applicable Award Agreement.

(e) Payment. Awards for which any payment is due from a Participant including,
without limitation, the Exercise Price of an Option or the tax withholding
required with respect to an Award pursuant to Section 6.1(g), may be made in any
form or manner authorized by the Committee in the Award Agreement or by
amendment thereto, including, but not limited to:

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

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

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

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

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

(f) Dividend Equivalents. If the Committee so determines and provides in an
Award Agreement, Participants may be credited with any dividends paid with
respect to the shares of Common Stock underlying an Award (other than an Option
or Stock Appreciation Right) in a manner determined by the Committee in its sole
discretion. The Committee may apply any restrictions to such dividend
equivalents that the Committee deems appropriate. The Committee, in its sole
discretion, may determine the form of payment of dividend equivalents, including
cash or shares of Common Stock. Notwithstanding the foregoing, any dividend
equivalents on an Award the vesting or payment of which is dependent upon

 

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the achievement of one or more performance goals shall accrue and be paid only
if and to the extent the shares of Common Stock underlying the Award become
vested or payable.

(g) Withholding. The Company shall deduct from all cash payments under the Plan
the amount of any federal, state, or local taxes required to be withheld.
Whenever the Company proposes or is required to issue or transfer shares of
Common Stock under the Plan, or upon the vesting of any Restricted Stock Award,
the Company has the right to require the recipient to remit to the Company an
amount sufficient to satisfy the amount of any federal, state, or local taxes
required to be withheld as a condition of and prior to the delivery or release
of such shares.

(h) Deferred Compensation. Notwithstanding the Committee’s discretion to
determine the terms and conditions of Awards under the Plan, the Committee may
require or permit the deferral of the receipt of Awards (other than an Option or
Stock Appreciation Right) upon such terms as the Committee deems appropriate and
in accordance with the requirements of Code Section 409A.

(i) Treatment of Awards upon Termination of Employment.

(1) All Awards granted under the Plan, including all unexercised Options whether
vested or non-vested, shall immediately be forfeited and may not thereafter vest
or be exercised in the event a Participant incurs a Termination of Employment
for Cause.

(2) Except as otherwise provided by Section 6.1(i)(1), any Award under the Plan
to a Participant who has experienced a Termination of Employment or termination
of some other service relationship with the Company and its Subsidiaries may be
cancelled, accelerated, paid or continued, as provided in the applicable Award
Agreement or as the Committee may otherwise determine to the extent not
prohibited by or inconsistent with the provisions of the Plan, taking into
consideration such other factors as the Committee determines are relevant to its
decision whether to continue an Award.

(3) Subject to Section 6.1(i)(1), the Committee will, in its absolute
discretion, determine the effect of all matters and questions relating to a
Termination of Employment as it affects an Award, including, but not by way of
limitation, the question of whether a leave of absence constitutes a Termination
of Employment.

6.2 Options. At the time any Option is granted, the Committee will determine
whether the Option is to be an Incentive Stock Option or a Non-Qualified Stock
Option. Each Incentive Stock Option granted under the Plan shall be clearly
identified as to its status as an Incentive Stock Option and the applicable
Award Agreement shall reflect such status. Subject to the special conditions
applicable to Incentive Stock Options set forth in Section 6.2(g) and the
special conditions applicable to substitute Options set forth in Section 6.2(f),
Options awarded under the Plan shall be subject to the following terms and
conditions:

(a) Exercise Price. Subject to adjustment in accordance with Section 9.1, the
Exercise Price per share of Common Stock purchasable under any Option shall be
determined by the Committee in its sole discretion and set forth in the
applicable Award Agreement; provided, however, the Exercise Price may not be
less than the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted.

(b) Option Term. The exercise period for each Option granted under the Plan
shall be determined by the Committee in its sole discretion and set forth in the
applicable Award Agreement.

(c) Conditions to Exercise. The Committee may impose such conditions and
restrictions on the exercise of an Option as it may deem appropriate. Each
Option granted under the Plan shall be exercisable at such time or times, or
upon the occurrence of such event or events, and for such number of shares of
Common Stock as determined by the Committee in its sole discretion and set forth
in the applicable Award Agreement.

 

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(d) Exercise of Option. An Option shall be exercised by (i) delivery to the
Company of a written notice of exercise (on the form or in the manner specified
by the Company for such notice) with respect to all or a specified number of
shares of Common Stock subject to the Option, and (ii) payment to the Company of
the full amount of the Exercise Price in a manner permissible under
Section 6.1(e) and the applicable Award Agreement.

(e) No Rights as a Stockholder. The holder of an Option, as such, shall have
none of the rights of a stockholder of the Company with respect to the shares of
Common Stock underlying such Option until such time as the Option vests, is
exercised and the shares of Common Stock are issued to the holder of the Option.

(f) Special Provisions for Substitute Options. Notwithstanding anything to the
contrary in this Section 6.2, any Option issued in substitution for an option
previously issued by another entity, which substitution occurs in connection
with a corporate transaction, may provide for an Exercise Price and may contain
such other terms and conditions as the Committee may prescribe to cause such
substitute Option to contain as nearly as possible the same terms and conditions
(including the applicable vesting and termination provisions) as those contained
in the previously issued option being replaced thereby; provided, however, the
number of shares of Common Stock and the Exercise Price of any Option issued in
substitution for an option previously issued by another entity shall be
determined in accordance with the requirements of Code Section 409A.

(g) Special Conditions for Incentive Stock Options. Notwithstanding anything to
the contrary in Section 6.1 or this Section 6.2, Incentive Stock Options shall
be subject to the following terms and conditions:

(i) Incentive Stock Options may only be granted to Employees of the Company or
of a Subsidiary that qualifies as a “subsidiary corporation” within the meaning
given such term by Code Section 424.

(ii) The aggregate Fair Market Value (determined as of the date an Incentive
Stock Option is granted) of the shares of Common Stock with respect to which
Options intended to meet the requirements of Code Section 422 become exercisable
for the first time by an Employee during any calendar year (under all plans of
the Company and its Subsidiaries) may not exceed one hundred thousand dollars
($100,000); provided, however, if such limitation is exceeded, the portion of
such Incentive Stock Option(s) which cause the limitation to be exceeded will be
treated as Non-Qualified Stock Option(s).

(iii) No Incentive Stock Option may be granted after ten (10) years from the
date that the Plan is approved by the Company’s stockholders.

(iv) With respect to each grant of an Incentive Stock Option to a Participant
who is an Over 10% Owner, the Exercise Price may not be less than one hundred
ten percent (110%) of the Fair Market Value of the Common Stock subject to the
Incentive Stock Option on the date the Incentive Stock Option is granted.

(v) The exercise period for an Incentive Stock Option must be no longer than ten
(10) years from the date that the Incentive Stock Option is granted, or in the
case of an Incentive Stock Option granted to an Over 10% Owner, the exercise
period may be no longer than five (5) years after the date that the Incentive
Stock Option is granted.

(vi) For an Incentive Stock Option issued in substitution for an incentive stock
option previously issued by another entity, which substitution occurs in
connection with a transaction to which Code Section 424(a) is applicable, both
the number of shares of Common Stock and the Exercise Price of the substitute
Incentive Stock Option shall be computed in accordance with Code Section 424.

 

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(vii) Incentive Stock Options granted under the Plan are intended to comply with
Code Section 422, and the provisions of the Plan and the Award Agreements for
any Incentive Stock Options granted under the Plan shall be construed in such
manner as to effectuate that intent.

6.3 Stock Appreciation Rights. A Stock Appreciation Right shall entitle the
Participant to receive at the time of payment or exercise, for a specified or
determinable number of shares of the Common Stock, an amount equal to a
percentage (not to exceed 100%) of the excess of Fair Market Value of a share of
Common Stock over the applicable Strike Price per share of Common Stock. Each
Stock Appreciation Right shall be subject to the following terms and conditions:

(a) Strike Price. Subject to adjustment in accordance with Section 9.1, the
Strike Price per share of Common Stock under any Stock Appreciation Right shall
be determined by the Committee in its sole discretion and set forth in the
applicable Award Agreement; provided, however, the Strike Price may not be less
than the Fair Market Value of the Common Stock subject to the Stock Appreciation
Right on the date the Stock Appreciation Right is granted.

(b) Conditions to Exercise. The Committee may impose such conditions and
restrictions on the exercise of a Stock Appreciation Right as it may deem
appropriate. Each Stock Appreciation Right granted under the Plan shall be
exercisable or payable at such time or times, or upon the occurrence of such
event or events, and in such amounts as determined by the Committee in its sole
discretion, and set forth in the applicable Award Agreement.

(c) No Rights as a Stockholder. The holder of a Stock Appreciation Right, as
such, shall have none of the rights of a stockholder of the Company with respect
to the shares of Common Stock underlying such Stock Appreciation Right until
such time as the Stock Appreciation Right vests, is exercised, or paid and the
shares of Common Stock are issued to the holder of the Stock Appreciation Right.

(d) Settlement. Upon settlement of a Stock Appreciation Right, the Company shall
pay to the Participant the appreciation in cash, shares of Common Stock (valued
at the aggregate fair market value), or a combination thereof, as provided in
the Award Agreement or, in the absence of such provision, as the Committee may
determine.

6.4 Restricted Stock Awards. Each Restricted Stock Award shall be made in such
number of shares of Common Stock, upon such terms and conditions on such shares,
for such Restricted Period and with such dividend or voting rights during the
Restricted Period as determined by the Committee in its sole discretion and set
forth in the applicable Award Agreement. Restricted Stock Awards shall be
subject to the following terms and conditions:

(a) Consideration. The Committee may require a payment from the Participant in
exchange for the grant of a Restricted Stock Award or may grant a Restricted
Stock Award without any consideration from the Participant other than his
service to or on behalf of the Company or its Subsidiaries.

(b) Shares. A Restricted Stock Award granted pursuant to the Plan may be
evidenced by book entry or in such manner as the Committee shall determine, and
the Committee may take any action it deems necessary or advisable to reflect
that the shares of Common Stock that are part of the Restricted Stock Award are
subject to its applicable terms, conditions, and restrictions applicable, until
the restrictions thereon shall have lapsed.

(c) Vesting. Each Restricted Stock Award shall vest over a Restricted Period
based upon the passage of time or upon the achievement of performance goals (or
a combination of both), as determined by the Committee. Restricted Stock Awards
subject to performance goals may be designated as Performance Stock Awards. A
Restricted Stock Award may also, in the Committee’s discretion, provide

 

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for earlier termination of the Restricted Period in the event of the retirement,
death, or Disability of the Participant, or in the event of a Change in Control.

(d) Rights as Stockholder. Unless otherwise determined by the Committee and set
forth in the applicable Award Agreement, a grant of a Restricted Stock Award
shall immediately entitle the Participant to voting and dividend rights with
respect to the shares of Common Stock subject to the Award. In addition, the
Committee may determine and set forth in an Award Agreement that any dividends
or other distributions on the shares of Common Stock subject to the Award be
deferred or that the Award be credited with an additional number of shares of
Restricted Stock determined using the amount of dividends that would have been
paid on the number of shares of Common Stock underlying the Award and the Fair
Market Value of a share of Common Stock on the applicable dividend payment date,
and in each case subject to the same vesting and forfeiture restrictions that
apply to the shares of Common Stock subject to the Award; provided, however,
with respect to a Restricted Stock Award the vesting of which is based on the
achievement of performance goals, the dividends and other distributions on the
shares of Common Stock subject to the Award shall in all cases either (i) be
deferred and payment thereof contingent on the vesting of the shares of Common
Stock with respect to which such dividends and other distributions are paid, or
(ii) be credited with additional shares of Restricted Stock with the same
vesting and forfeiture restrictions that apply to the shares of Common Stock
subject to the Award with respect to which such dividends and other
distributions are paid.

(e) Qualified Performance Awards. The Committee may, but is not required to,
structure any Performance Stock Award so as to qualify as “performance-based
compensation” under Code Section 162(m) by granting such Award pursuant to and
in accordance with the requirements of Section 6.6.

6.5 Restricted Stock Unit Awards. Restricted Stock Unit Awards shall entitle the
Participant to receive, at a specified future date or event, payment of a
specified number of shares of Common Stock or an amount equal to all or a
portion of the Fair Market Value of a specified number of shares of Common Stock
at the end of the applicable Restricted Period. Each Restricted Stock Unit Award
shall be made in such number of shares of Common Stock, upon such terms and
conditions, for such Restricted Period and with such dividend equivalent rights
during the Restricted Period as determined by the Committee in its sole
discretion and set forth in the applicable Award Agreement. Restricted Stock
Unit Awards shall be subject to the following terms and conditions:

(a) Consideration. The Committee may require a payment from the Participant in
consideration of a payment of a Restricted Stock Unit Award or may grant a
Restricted Stock Unit Award without any consideration from the Participant other
than his service to or on behalf of the Company or its Subsidiaries.

(b) Vesting. Each Restricted Stock Unit Award shall vest over a Restricted
Period based upon the passage of time or upon the achievement of performance
goals (or a combination of both), as determined by the Committee. Restricted
Stock Unit Awards subject to performance goals may be designated as Performance
Stock Unit Awards. A Restricted Stock Unit Award may also, in the Committee’s
discretion, provide for earlier termination of the Restricted Period in the
event of the retirement, death, or Disability of the Participant, or in the
event of a Change in Control.

(c) No Rights as a Stockholder. The holder of a Restricted Stock Unit Award, as
such, shall have none of the rights of a stockholder of the Company 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.

(d) Settlement. A Restricted Stock Unit Award may be settled by the delivery of
shares of Common Stock, their cash equivalent Fair Market Value, any combination
thereof or in any other form of consideration, as determined by the Committee
and set forth in the applicable Award Agreement.

(e) Qualified Performance Awards. The Committee may, but is not required to,
structure any Performance Stock Unit Award so as to qualify as
“performance-based compensation” under Code Section 162(m) by granting such
Award pursuant to and in accordance with the requirements of Section 6.6

 

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6.6 Qualified Performance Awards, Including Cash Awards. The Committee may grant
Performance Stock Awards, Performance Stock Unit Awards, and/or Cash Awards that
are intended to qualify as “performance-based compensation” under Code
Section 162(m) by conditioning the Award on the attainment of Performance Goals;
provided that the Committee shall establish the Performance Goals at such time
required under Code Section 162(m), while the outcome of the Performance Goals
are substantially uncertain. At the time of the grant of a Cash Award,
Performance Stock Award or Performance Stock Unit Award pursuant to this
Section 6.6, the Committee will determine the following:

(a) Amount or Number of Shares. Subject to Section 6.6(b), the Committee will
determine and specify the dollar value of the Cash Award or the number of shares
of the Performance Stock Award or Performance Stock Unit Award that will become
payable upon the achievement of specified Performance Goals during a specified
Performance Period.

(b) Award Limits. The maximum amount payable under the Plan to a Participant as
a Cash Award for any Performance Period that is intended to satisfy the
requirements for “performance-based compensation” under Code Section 162(m)
shall be five hundred thousand dollars ($500,000) per calendar year. In the case
of an Award with a multiyear Performance Period, this dollar limit shall apply
separately to each calendar year (or portion thereof) in the Performance Period
of such Cash Award. The grant of any Performance Stock Award or Performance
Stock Unit Award that is intended to satisfy the requirements for
“performance-based compensation” under Code Section 162(m) shall be subject to
the limit set forth in Section 4.4(a).

(c) Performance Period. The Committee will determine at the time of grant of an
Award under this Section 6.6, the Performance Period applicable to the Award
during which the Performance Goals shall be measured, which may be subject to
earlier lapse or other modification in the event of the retirement, death, or
Disability of the Participant, or in the event of a Change in Control, provided,
however, that no such adjustment will be made where such action would result in
the loss of the otherwise available exemption of the Award under Code
Section 162(m).

(d) Performance Goals. Any grant of an Award under this Section 6.6 will specify
one or more Performance Goals established by the Committee which, if achieved,
will result in payment of the Award, and may specify in respect of any such
specified Performance Goal a minimum acceptable level or levels of achievement
and a formula for determining the number of shares or amount of the Award that
will be earned if performance is at or above the specified minimum or threshold
level or levels, or is at or above the target level or levels, but falls short
of the specified maximum level or levels. The grant of an Award under this
Section 6.6 will specify that, before the Award will be earned and paid, the
Committee must determine and certify that the Performance Goals and other
material terms of the Award have been satisfied, and if applicable, the level of
performance achieved. Performance Goals shall mean any one or more of the
following criteria:

(i) Share price, including market price per share and share price appreciation.

(ii) Earnings, including (a) earnings per share; (b) gross or pre-tax profits;
(c) post-tax profits; (d) operating profit; (e) operating earnings; (f) growth
in earnings or growth in earnings per share; and (g) total earnings.

(iii) Return on equity, including (a) return on invested capital; (b) return or
net return on assets or net assets; (c) return on investment; (d) return on
capital; (e) financial return ratios; (f) value of assets; and (g) change in
assets.

(iv) Cash flow(s), including (a) operating cash flow; (b) net cash flow;
(c) free cash flow; and (d) cash flow on investment.

(v) Revenue, including gross or net revenue and changes in annual revenues.

 

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(vi) Margins, including adjusted pre-tax margin and operating margins.

(vii) Income, including net income and consolidated net income.

(viii) Costs and expenses, including (a) operating or administrative expenses;
(b) expense or cost levels; (c) reduction of losses, loss ratios, or expense
ratios; (d) reduction in fixed costs; (e) expense reduction levels;
(f) operating cost management; and (g) cost of capital.

(ix) Financial ratings, including (a) credit rating; (b) capital expenditures;
(c) debt; (d) debt reduction; (e) working capital; (f) capital ratios;
(g) average invested capital; and (h) attainment of balance sheet or income
statement objectives.

(x) Market share, including (a) volume; and (b) market share or market
penetration with respect to specific geographic areas.

(xi) Shareholder return, including (a) total shareholder return; (b) shareholder
return based on growth measures or the attainment of a specified share price for
a specified period of time; and (c) dividends.

Such Performance Goals may be particular to an Employee or Director or the
division, department, branch or line of business, Subsidiary, or other unit in
which the Employee works, or may be based on the performance of the Company
generally. In addition, the Committee shall, in its discretion and to the extent
consistent with Code Section 162(m), if applicable, include or exclude from a
Performance Goal any of the following items: (1) asset write-downs;
(2) litigation or claim judgments or settlements; (3) the effect of changes in
tax laws, accounting principles, regulations, or other laws or regulations
affecting reported results; (4) any reorganization and restructuring programs;
(5) acquisitions or divestitures; (6) unusual nonrecurring or extraordinary
items identified in the Company’s audited financial statements, including
footnotes; (7) annual incentive payments or other bonuses; or (8) capital
charges

6.7 Director Awards. Subject to the limitations in Section 4.4(b), in addition
to the ability of Directors to receive Options, Stock Appreciation Rights,
Restricted Stock Awards, Restricted Stock Unit Awards, or other Awards under
this Article VI, Directors may also (a) receive Awards of outright shares of
Common Stock, and (b) be permitted to elect to receive, pursuant to procedures
established by the Committee, Awards of outright shares of Common Stock in lieu
of cash-based director fees that the Director elects to receive in the form of
shares of Common Stock with a fair market value equal to the cash-based director
fees that the Director would otherwise have received.

6.8 Other Awards. Subject to applicable law and the limits set forth in Article
IV, the Committee may grant to any Participant such other Awards that may be
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, shares of Common Stock or factors that may
influence the value of such shares, including, without limitation, convertible
or exchangeable debt securities, other rights convertible or exchangeable into
shares of Common Stock, purchase rights for shares of Common Stock, Awards with
value and payment contingent upon performance of the Company or specified
Subsidiaries, affiliates or other business units thereof or any other factors
designated by the Committee, and Awards valued by reference to the book value of
shares of Common Stock or the value of securities of, or the performance of
specified Subsidiaries or affiliates or other business units of the Company. The
Committee will determine the terms and conditions of such Awards. Shares of
Common Stock delivered pursuant to an Award in the nature of a purchase right
granted under this Section will be purchased for such consideration, paid for at
such time, by such methods, and in such forms, including, without limitation
shares of Common Stock, notes or other property, as the Committee determines.

ARTICLE VII

CHANGE IN CONTROL

7.1 Effect of a Change in Control. In the event of a Change in Control, unless
otherwise set forth in the applicable Award Agreement, or as provided in an
executive, employment, severance, or similar agreement, if

 

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any, between the Participant and the Company or a Subsidiary, the following
acceleration, exercisability, and valuation provisions will apply:

(a) Upon a Change in Control, each then-outstanding Option and Stock
Appreciation Right will become fully vested and exercisable, and the
restrictions applicable to each outstanding Restricted Stock Award, Restricted
Stock Unit, Other Award, or Cash Award will lapse, and each Award will be fully
vested (with any applicable performance goals deemed to have been achieved at a
target level as of the date of such vesting), except to the extent that an Award
meeting the requirements of Section 7.1(b) (a “Replacement Award”) is provided
to the Participant holding such Award in accordance with Section 7.1(b) to
replace or adjust such outstanding Award (a “Replaced Award”);

(b) An Award meets the conditions of this Section 7.1(b) (and hence qualifies as
a Replacement Award) if (i) it is of the same type (e.g., stock option for
Option, restricted stock award for Restricted Stock Award, restricted stock unit
award for Restricted Stock Unit Award, etc.) as the Replaced Award, (ii) it has
a value at least equal to the value of the Replaced Award, (iii) it relates to
publicly traded equity securities of the Company or its successor in the Change
in Control or another entity that is affiliated with the Company or its
successor following the Change in Control, (iv) the federal tax consequences to
the Participant holding the Replaced Award of the Replacement Award are not less
favorable to such Participant than the federal tax consequences of the Replaced
Award, and (v) its other terms and conditions are not less favorable to the
Participant holding the Replaced Award than the terms and conditions of the
Replaced Award (including, but not limited to, the provisions that would apply
in the event of a subsequent Change in Control). Without limiting the generality
of the foregoing, the Replacement Award may take the form of a continuation of
the Replaced Award if the requirements of the preceding sentence are satisfied.
The determination of whether the conditions of this Section 7.1(b) are satisfied
will be made by the Committee, as constituted immediately before the Change in
Control, in its sole discretion (taking into account the requirements of
Treasury Regulation 1.409A-3(i)(5)(iv)(B) and exemption or compliance of the
Replaced Award or Replacement Award from or with Code Section 409A). Without
limiting the generality of the foregoing, the Committee may determine the value
of Replaced Awards and Replacement Awards that are stock options by reference to
either their intrinsic value or their fair value; and

(c) Upon the Involuntary Termination, during the period of two (2) years
immediately following a Change in Control, of a Participant holding Replacement
Awards, (i) all Replacement Awards held by the Participant will become fully
vested and, if applicable, exercisable and free of restrictions (with any
applicable performance goals deemed to have been achieved at a target level as
of the date of such vesting), and (ii) all Options and Stock Appreciation Rights
held by the Participant immediately before such Involuntary Termination that the
Participant also held as of the date of the Change in Control and all stock
options and stock appreciation rights that constitute Replacement Awards will
remain exercisable for a period of 90 days following such Involuntary
Termination or until the expiration of the stated term of such stock option or
stock appreciation right, whichever period is shorter (provided, however, if the
applicable Award Agreement provides for a longer period of exercisability, that
provision will control).

7.2 Definition. For purposes of this Plan, a “Change in Control” of the Company
shall be deemed to have occurred upon the happening of any of the following
events:

(a) 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;

(b) The stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company;

(c) 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

 

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indirectly, of twenty percent (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 twenty percent
(20%) beneficial owner; or

(d) Individuals who constitute the Board 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 stockholders, 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 (d),
considered as though such person were a member of the Incumbent Board.

ARTICLE VIII

TERMINATION AND AMENDMENT

8.1 Termination and Amendment of Plan.

(a) Subject to the limitations of Section 8.3, the Board may amend or terminate
the Plan at any time; provided, however, the Board shall obtain stockholder
approval for any amendment to the Plan that increases the number of shares of
Common Stock available under the Plan, materially expands the classes of
individuals eligible to receive Awards, materially expands the type of awards
available for issuance under the Plan, or would otherwise require stockholder
approval under the Code or other applicable laws, or the Nasdaq Stock Market
listing standards.

(b) Notwithstanding Section 8.1(a), without the consent of the holder of an
Award, no such termination or amendment of the Plan may adversely affect the
then value of the Award or the rights of the holder of such Award, and with
respect to any Award which provides for the deferral of compensation subject to
the provisions of Code Section 409A, no termination or amendment of the Plan
shall have the effect of accelerating the payment of such Award if and to the
extent that such accelerated payment would violate Code Section 409A.

8.2 Amendment of Award Agreements. Subject to the limitations of Section 8.3,
the Board or the Committee may amend an Award Agreement at any time, in their
sole discretion; provided, however, without the consent of the holder of an
Award, no such amendment of an Award Agreement may adversely affect the then
value of the Award or the rights of the holder of such Award, and with respect
to any Award which provides for the deferral of compensation subject to the
provisions of Code Section 409A, no amendment of the Award Agreement shall have
the effect of accelerating the payment of such Award if and to the extent that
such accelerated payment would violate Code Section 409A.

8.3 No Repricing. Except as provided by Section 9.1, without the approval of the
Company’s stockholders, the Exercise Price of an Option or the Strike Price of a
Stock Appreciation Right may not be amended or modified after the grant of the
Option or Stock Appreciation Right, and an Option or Stock Appreciation Right
may not be surrendered or cancelled in consideration of, or in exchange for,
cash, other Awards, or the grant of a new Option or Stock Appreciation Right
having an Exercise Price or Strike Price below that of the Option or Stock
Appreciation Right that was surrendered or cancelled, and without the approval
of the Company’s stockholders, neither the Board nor the Committee may take any
other action with respect to an Option or Stock Appreciation Right that would be
treated as a repricing under the rules and regulations of the principal
securities exchange on which the shares of Common Stock are traded.

 

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ARTICLE IX

GENERAL PROVISIONS

9.1 Changes in Capitalization; Merger; Liquidation.

(a) The aggregate number of shares of Common Stock reserved for the grant of
Awards, for issuance upon the exercise or payment, as applicable, of each
outstanding Award and upon vesting of an Award; the annual limit per
Participant; the Exercise Price of each outstanding Option; the Strike Price of
each outstanding Stock Appreciation Right and the specified number of shares of
Common Stock to which each outstanding Award pertains shall be proportionately
adjusted for 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.

(b) In the event of a merger, consolidation, reorganization, extraordinary
dividend, spin-off, sale of substantially all of the Company’s assets, other
change in capital structure of the Company, or tender offer for shares of Common
Stock, the Committee may make such adjustments with respect to awards and take
such other action as it deems necessary or appropriate, including, without
limitation, the substitution of new Awards, or the adjustment of outstanding
Awards, the acceleration of Awards, the removal of restrictions on outstanding
Awards, or the termination of outstanding Awards in exchange for the cash value
determined in good faith by the Committee of the vested or unvested portion of
the Award, all as may be provided in the applicable Award Agreement or, if not
expressly addressed therein, as the Committee subsequently may determine in its
sole discretion. Any adjustment pursuant to this Section may provide, in the
Committee’s discretion, for the elimination without payment therefor of any
fractional shares that might otherwise become subject to any Award, but, except
as set forth in this Section, may not otherwise diminish the then value of the
Award.

(c) The existence of the Plan and the Awards granted pursuant to the Plan shall
not affect in any way the right or power of the Company or a Subsidiary to make
or authorize any adjustment, reclassification, reorganization or other change in
its capital or business structure, any merger or consolidation of the Company or
a Subsidiary, any issue of debt or equity securities having preferences or
priorities as to the Common Stock or the rights thereof, the dissolution or
liquidation of the Company or a Subsidiary, any sale or transfer of all or any
part of its business or assets, or any other corporate act or proceeding.

9.2 Code Section 409A. Options, Stock Appreciation Rights, Restricted Stock
Awards, and Director Awards granted under the Plan are intended to be exempt
from Code Section 409A, and Restricted Stock Unit Awards, Cash Awards, dividend
equivalents, and all other Awards awarded under the Plan are intended to be
exempt from or comply with Code Section 409A, and the Plan, Award Agreements and
the terms of Awards shall be administered and interpreted consistent with such
intention. In the event any provisions of the Plan or any Award Agreement are
determined by the Committee potentially to violate Code Section 409A, such
provisions shall be amended, as necessary, to be exempt from or comply with
Section 409A; and until adoption of any such amendment, the provisions shall be
construed and interpreted, to the extent possible, to be exempt from or comply
with Section 409A. Notwithstanding the foregoing, the Company makes no
representations that the payments and benefits provided under the Plan are
exempt from or comply with Section 409A, and in no event will the Company be
liable for all or any portion of any taxes, penalties, interest, or other
expenses that may be incurred by a Participant on account of non-compliance with
Section 409A.

9.3 Right to Terminate Employment or Service. Nothing in the Plan or in any
Award Agreement confers upon any Participant the right to continue as an
officer, employee, director, consultant or other service provider of the Company
or any of its Subsidiaries or affects the right of the Company or any of its
Subsidiaries to terminate a Participant’s employment or services at any time.

9.4 Non-Alienation of Benefits. Except as otherwise expressly provided by the
Plan, no Award or benefit under the Plan may be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,

 

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attachment, encumbrance, or charge; and any attempt to do so shall be void. No
such Award or benefit may, prior to receipt by the Participant, be in any manner
liable for or subject to the debts, contracts, liabilities, engagements, or
torts of the Participant.

9.5 Restrictions on Delivery and Sale of Shares; Legends. Each Award is subject
to the condition that if at any time the Committee, in its discretion, shall
determine that the listing, registration, or qualification of the shares of
Common Stock covered by such Award upon any securities exchange or under any
federal or state law is necessary or desirable as a condition of or in
connection with the granting of such Award or the purchase or delivery of shares
thereunder, the delivery of any or all shares of Common Stock pursuant to such
Award may be withheld unless and until such listing, registration, or
qualification shall have been effected. If a registration statement is not in
effect under the Securities Act of 1933 or any applicable state securities laws
with respect to the shares of Common Stock purchasable or otherwise deliverable
under Awards then outstanding, the Committee may require, as a condition of
exercise of any Option or as a condition to any other delivery of Common Stock
pursuant to an Award, that the Participant or other recipient of an Award
represent, in writing, that the shares received pursuant to the Award are being
acquired for investment and not with a view to distribution and agree that the
shares will not be disposed of except pursuant to an effective registration
statement, unless the Company shall have received an opinion of counsel that
such disposition is exempt from such requirement under the Securities Act of
1933 and any applicable state securities laws. The Company may include on
certificates representing shares delivered pursuant to an Award such legends
referring to the foregoing representations or restrictions or any other
applicable restrictions on resale as the Company, in its discretion, shall deem
appropriate.

9.6 FDIA Limitations. Any actions by the Company under the Plan or any Award
Agreement must comply with the law, including regulations and other interpretive
action, of the Federal Deposit Insurance Act, Federal Deposit Insurance
Corporation, or other entities that supervise any of the activities of the
Company. Specifically, any payments to the Participant by the Company, whether
pursuant to the Plan, an Award Agreement, or otherwise, are subject to and
conditioned upon their compliance with Section 18(k) of the Federal Deposit
Insurance Act, 12. U.S.C. Section 1828(k), and the regulations promulgated
thereunder in 12 C.F.R. Part 359.

9.7 Compensation Recovery Policy. Notwithstanding any provision of the Plan or
an Award Agreement, the amount of any cash paid under an Award, any shares of
Common Stock granted or issued under an Award, and 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, and the
Committee shall include a provision in Award Agreements to give effect to such
policy.

9.8 Listing and Legal Compliance. The Committee may suspend the exercise or
payment of any Award so long as it determines that securities exchange listing
or registration or qualification under any securities laws is required in
connection therewith and has not been completed on terms acceptable to the
Committee.

9.9 Choice of Law. The laws of the State of New York shall govern the Plan, to
the extent not preempted by federal law, without reference to the principles of
conflict of laws.

9.10 Plan Binding on Successors. The Plan shall be binding upon the successors
and assigns of the Company.

9.11 Interpretation. Whenever used in the Plan, nouns in the singular shall
include the plural and the plural shall include the singular, and the masculine
pronoun shall include the feminine gender. Headings of Articles and Sections in
the Plan are inserted for convenience and reference only, and they do not
constitute part of the Plan.

*        *        *         *        *

 

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    FINANCIAL INSTITUTIONS, INC. Dated: May 6, 2015     By:  

/s/ Martin K. Birmingham

    Name:   Martin K. Birmingham     Title:   President & Chief Executive
Officer

Date of Stockholder Approval: May 6, 2015

 

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