EX-10.6






May 21, 2012



George D. Hagi


1795 Wildey Road


Nunda, NY 14517



Re: SEPARATION AGREEMENT AND RELEASE OF ALL CLAIMS



Dear Dan:



Your employment with Five Star Bank (the “Company”) will end on June 30, 2012. This letter
explains the separation benefits that the Company will make available to you and what you need to
do to receive them.



If you sign this letter and do not revoke it as set forth in Paragraph 23, below, then this
letter will constitute the Separation Agreement and Release of All Claims (the “Agreement”) between
you and the Company on the terms of your separation from employment.



1. Separation Date. Your employment with the Company will end at the close of
business on June 30, 2012 (the “Separation Date”).



2. Final Paycheck. You will receive your regular wages and employment-related
benefits through the Separation Date, all of which will be paid in accordance with the Company’s
regular payroll schedule and benefit policies and practices. You will receive the amounts
described in this Paragraph 2 even if you decide not to sign this Agreement, provided you work
through the Separation Date.



3. Compensation and Benefits. Except as specifically described in Paragraph 5 below,
all of your compensation and employment-related benefits will end on either the Separation Date or
the last day of the month in which your employment ends, depending upon the benefit. You will
receive additional information regarding the date on which each benefit ends as well as your rights
to insurance continuation (at your expense) and your retirement benefits. To the extent that you
have such rights, nothing in this Agreement will impair them. By signing this Agreement, you agree
that upon receipt of the amounts described in Paragraph 2, you have received all wages, benefits
and other compensation due to you.



4. Company Property. By no later than the Separation Date, you shall return to the
Company all documents (and all copies thereof) and other property belonging to the Company that you
have in your possession or control, with the exception of any property that the Company authorizes
you in writing to retain.  The documents and property to be returned by you include, but are not
limited to, all files, correspondence, e-mail, memoranda, notes, notebooks, regulatory filings,
drawings, records, plans, forecasts, reports, studies, analyses, compilations of data, proposals,
agreements, financial information, research and development information, member information,
marketing information, operational and personnel information, specifications, code, software,
databases, computer-recorded information, tangible property and equipment (including, but not
limited to, facsimile machines, mobile telephones and servers), vehicles, credit cards, entry
cards, identification badges and keys; and any materials of any kind which contain or embody any
proprietary or confidential information of the Company or its parents, subsidiaries or affiliates
(and all reproductions thereof in whole or in part).  You agree to make a diligent search to locate
any such documents, property and information.  If you have used any personally-owned computer,
server, or e-mail system to receive, store, review, prepare or transmit any Company confidential or
proprietary data, materials or information, then within five days of your last day of employment,
you shall provide the Company with a computer-useable copy of all such information and then
permanently delete and expunge such confidential or proprietary information from those systems. You
agree to provide the Company access to your system as requested to verify that the necessary
copying and/or deletion has been completed.



5. Separation Benefits. In consideration of your acceptance of this Agreement, the
Company will provide you with the separation benefits described in this Paragraph 5.




	 	a.	 	You will receive a separation pay benefit in the total amount
of two hundred twenty one thousand and four hundred dollars ($221,400.00), less
required payroll deductions and withholdings. This separation pay benefit is
equivalent to (i) six (6) months of your current base salary ($110,700.00); and
(ii) a discretionary bonus payment ($110,700.00). This separation pay benefit
will be paid in a single lump sum payment on the Company’s first regular pay
period after the “Effective Date” of this Agreement as defined in Paragraph 23,
below.






	 	b.	 	After June 30, 2012, you may participate in the Company’s group
health insurance plans to the extent required by Consolidated Omnibus Budget
Reconciliation Act (“COBRA”). If you choose to continue your medical and
dental insurance through COBRA, Five Star Bank agrees to supplement your
monthly COBRA premium(s) beginning with July 1, 2012 and continuing through
December 31, 2012. During this time, you will be required to pay the monthly
employee rate(s). You agree that your portion of the COBRA insurance premiums
will be withheld from the payment described in Paragraph 5(a). If you choose
to continue COBRA coverage after this period, you will be required to pay the
full monthly premium plus a 2% administrative fee. Your COBRA qualifying event
date is July 1, 2012.





You acknowledge and agree that, in the absence of this Agreement, you are not entitled to the
separation benefits set forth in this Paragraph 5.



6. Future Inquiries. In the event that the Company receives an inquiry from a future
prospective employer, the Company will disclose the position you held and the duration of your
employment.



7. RELEASE OF ALL CLAIMS



(a) By signing this Agreement you agree that you are releasing and waiving your right to bring
any legal claim of any nature against the Company. The claims you are giving up include, but are
not limited to, claims related, directly or indirectly, to your employment relationship with the
Company, including your separation from employment. This Agreement is intended to be interpreted
in the broadest possible manner to include all actual or potential legal claims you may have
against the Company, except as expressly provided otherwise in Paragraph 7(e).



(b) Specifically, you agree that you are fully and forever giving up all of your legal rights
and claims against the Company, whether or not presently known to you, that are based on events
occurring before you sign this Agreement. You agree that the legal rights and claims you are
waiving include all rights and claims under, as amended, Title VII of the Civil Rights Act of 1964,
the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act of 1990,
the Rehabilitation Act of 1973, the Civil Rights Acts of 1866 and 1991, the Americans With
Disabilities Act of 1990, the Genetic Information Nondiscrimination Act of 2008, the Equal Pay Act
of 1963, the New York Human Rights Law and any similar federal, state or local statute, regulation,
order or common law. You specifically agree that you are releasing claims of discrimination based
upon age, race, color, sex, sexual orientation or preference, marital status, religion, national
origin, citizenship, veteran status, disability, genetic predisposition or carrier status and other
legally protected categories.



(c) You also agree that the legal rights and claims you are giving up include your rights
under, as amended, the Family and Medical Leave Act of 1993, the Employee Retirement Income
Security Act of 1974 (“ERISA”), the federal Worker Adjustment and Retraining Notification Act of
1988, the New York Worker Adjustment and Retraining Notification Act, the New York Labor Law and
any similar federal, state or local statute, regulation, order or common law. You agree that the
legal rights and claims you are giving up include all common law rights and claims, such as a
breach of express or implied contract, tort (whether negligent or intentional), wrongful discharge,
constructive discharge, infliction of emotional distress, defamation, promissory estoppel, and any
claim for fraud, omission or misrepresentation. You also agree that you are giving up and forever
releasing any right you may have to attorneys’ fees for any of the rights and claims described in
this Paragraph 7.



(d) You agree that the release of all claims described in this Paragraph 7 applies not only to
the Company, but also to Financial Institutions, Inc., the Company’s predecessors, successors and
their past, current and future parents, subsidiaries, related entities, and all of their members,
shareholders, officers, directors, agents, attorneys, employees, and assigns.



(e) The claims you are giving up and releasing do not include your vested rights, if
any, under any qualified retirement plan in which you participate, and your COBRA, unemployment
insurance and workers’ compensation rights, if any. Nothing in this Agreement shall be construed
to constitute a waiver of: (i) any claims you may have against the Company that arise from events
that occur after the date that you sign this Agreement; (ii) your right to file an
administrative charge with any governmental agency alleging employment discrimination or
challenging the validity of this release of all claims; (iii) your right to participate in any
administrative or court investigation, hearing or proceeding; or (iv) any other right that you
cannot waive as a matter of law. You agree, however, to waive and release any right to receive any
individual remedy or to recover any individual monetary or non-monetary damages as a result of any
administrative charge, complaint or lawsuit filed by you or anyone on your behalf. In addition,
the release of all claims set forth in this Agreement does not affect your rights as expressly
created by this Agreement, and does not limit your ability to enforce this Agreement.



8. No Pending Action. You represent that, as of the date that you sign this
Agreement, you have not filed any charge, complaint or action against the Company in any forum.
This Agreement may be used as a complete defense in the future if you bring a lawsuit based on any
claim that you have released.



9. Future Cooperation. You agree that upon reasonable request of the Company, you
will do whatever is reasonably necessary to assure an orderly transition of your work and
responsibilities, and to fully cooperate with these efforts.



10. Confidential Information. You agree and acknowledge as follows:



(a) In the course of your employment with the Company you have acquired access to and become
acquainted with confidential information about the professional business and financial affairs of
the Company.



(b) You shall not at any time, whether before or after the termination of your employment,
use, copy, disclose or make available any Confidential Information (as defined in Paragraph 10(c)
below) to any individual, corporation, partnership, trust, governmental body or other entity;
except that you may use, copy or disclose any Confidential Information (i) to the extent it becomes
publicly available through no fault on your part, and (ii) to the extent you are required to do so
pursuant to applicable law or pursuant to a final order of a court or arbitrator having
jurisdiction thereof; provided, however, that prior to such disclosure you shall promptly notify
the Company in writing of any such order or request to disclose and shall cooperate fully with the
Company in protecting against any such disclosure by narrowing the scope of such disclosure and/or
obtaining a protective order with respect to the permitted use of the Confidential Information.



(c) For purposes of this Agreement, “Confidential Information” shall mean all information
pertaining to the business and operations of the Company that is not generally available to the
public and the Company desires to keep confidential, including, but not limited to, information
relating to the Company’s products, services, relationship with its regulators, suppliers, business
partners, operations, research, trade secrets, intellectual property, finances and all documents
and other tangible items relating to or containing any such information. You acknowledge that the
Confidential Information is vital, sensitive, confidential and proprietary to the Company.



11. No Derogatory Statements. You agree that you will not directly or indirectly
make, or cause to be made, written or oral statements or other communication that is derogatory or
disparaging to the Company or the Company’s predecessors, successors or their past, current or
future parents, subsidiaries, related entities, or any of their members, shareholders, officers,
directors, agents, attorneys, employees, or assigns.



12. Confidentiality. The terms of this Agreement, the benefit being paid under it and
the fact of its payment, are confidential and may not be disclosed by you except that you may
disclose this information as required by law and/or to your spouse, attorney, accountant or other
professional advisor to whom you must make the disclosure in order for them to render professional
services to you. You will instruct them, however, to maintain the confidentiality of this
information just as you must.



13. Future Employment. You agree that neither you, nor anyone acting on your behalf,
will apply for or seek employment with the Company in the future.



14. Remedies. In the event that you breach any of your obligations under this
Agreement or as otherwise imposed by law, the Company may, at its option, obtain monetary damages,
a court order requiring you to comply with this Agreement, or other remedies as appropriate.



15. No Admission of Liability. You agree that neither any payment under this
Agreement, nor any term or condition of it, shall be construed by either you or the Company, at any
time, as an admission of liability or wrongdoing by the Company.



16. Binding Nature. The rights and benefits of the Company under this Agreement shall
be transferable to, or enforceable by or against, the Company’s successors and assigns. You agree
that this Agreement also binds all persons who might assert a legal right or claim on your behalf,
such as your heirs, personal representatives and assigns, now and in the future.



17. Scope of Agreement. You agree that no promise, inducement or other agreement not
expressly contained or referred to in this Agreement has been made conferring any benefit upon you.
You also agree that this Agreement contains the entire agreement between the Company and you
regarding your termination and supersedes and renders null and void any and all prior or
contemporaneous oral or written understandings, statements, representations or promises.
Notwithstanding the foregoing, you acknowledge that nothing set forth herein shall alter in any
manner your continuing obligations pursuant to the terms of that certain Executive Agreement dated
January 3, 2006 between you and Financial Institutions, Inc., including the provisions contained
therein regarding Confidentiality (Article 1), Non-Competition (Article 2) and Non-Solicitation
(Article 2), and you agree that such continuing obligations survive the termination of your
employment with the Company and continue to be binding upon you after the Separation Date.



18. Legal Proceedings and Governing Law. This Agreement shall be construed and
governed by the laws of the State of New York. Disputes arising under it shall be heard
exclusively by the state or federal courts located in Monroe County, New York. Neither party
waives any right it may have to remove such an action to the United States District Court located
in Monroe County, New York. If either party breaches its obligations under this Agreement, then
the non-breaching party shall also be entitled to recover any and all reasonable costs and
expenses, including reasonable attorney’s fees, incurred by such non-breaching party in legal
proceedings to enforce the terms of this Agreement. If any provision of this Agreement, including
the waiver of claims under any particular statute, should be deemed unenforceable or invalid, the
remaining provisions shall, to the extent possible, be carried into effect, taking into account the
general purpose and spirit of this Agreement. Also, if a court finds that the release of claims
(set forth in Paragraph 7 above) is illegal, void or unenforceable, you agree, promptly upon
request, to execute a second release that is legal and enforceable, without further consideration,
payments or compensation.



19. Compliance with IRS Deferred Compensation Regulations. The compensation and
benefits under Paragraph 5 of this Agreement are intended to be exempt from Section 409A of the
Internal Revenue Code of 1986, as amended, and the Treasury Regulations and other official guidance
promulgated and issued thereunder, and this Agreement shall be administered and interpreted
consistent with that intent.



20. Voluntary Agreement. You agree that you are voluntarily signing this Agreement,
that you have not been pressured into agreeing to its terms and that you have enough information to
decide whether to sign it. If, for any reason, you believe that this Agreement is not entirely
voluntary, or if you believe that you do not have enough information, then you should not sign this
Agreement.



21. Attorney Consultation. You are advised to consult with an attorney of your choice
before signing this Agreement. By signing this Agreement, you acknowledge that you have had an
opportunity to do so.



22. Period to Consider Agreement. You have up to 21 calendar days from the date you
receive this Agreement or until June 30, 2012, whichever is later, to accept the terms of this
Agreement by signing and dating it in the space designated below, and returning it to me (an extra
copy of the Agreement is enclosed for your files). Both you and the Company agree that any
amendments to this Agreement made after the date that you first received it will not re-start the
21-day period of review. Notwithstanding the foregoing, under no circumstances may you sign and
return this Agreement before the Separation Date.



23. Revocation Period; Effective Date. After you have accepted this Agreement, you
will have an additional 7 calendar days in which to revoke your acceptance. If you do not revoke
your acceptance, then the 8th day after the date of your signature will be the
“Effective Date” of the Agreement, and you may not thereafter revoke it. To revoke this Agreement,
you agree to send written notice to: Rita M. Bartol, Director of Human Resources. You acknowledge
and agree that if you exercise your right to revoke this Agreement, your termination of employment
will nevertheless have occurred effective on the Separation Date, you will not be entitled to the
separation benefits in Paragraph 5, and you will immediately return to the Company any of such
benefits you have already received.



On behalf of Five Star Bank, I want to express appreciation for your efforts and service
during your employment. We wish you every success in your future endeavors.



Sincerely,



Five Star Bank



/s/ Rita M. Bartol

Rita M. Bartol

Director of Human Resources & Training

Senior Vice President




BY SIGNING THIS LETTER, I ACKNOWLEDGE THAT I HAVE HAD THE OPPORTUNITY TO REVIEW THIS AGREEMENT
CAREFULLY WITH AN ATTORNEY OF MY CHOICE. I HAVE READ THIS AGREEMENT, I UNDERSTAND ITS TERMS AND I
VOLUNTARILY AGREE TO THEM.



	 	 	 	 	 
	Dated: June 28, 2012

	 	

	 	

	 

	 	

	 	

	
 
	 	 	 	/s/ George D. Hagi
	
 
	 	 	 	 
	State of New York)

County of       

	 	

) SS:
	 	George D. Hagi











On this        day of       , 20      , before me personally came George D. Hagi, to me
known and known to me to be the individual described in and who executed the foregoing instrument,
and the above-named person acknowledged to me that said person executed the same.



Notary Public