Document:

Life Diagnostics Agreement

[ * ] INDICATES CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

MANUFACTURING AND SUPPLY AGREEMENT

Stellar Biotechnologies, Inc. and Life Diagnostics, Inc.

Life Diagnostics, Inc., a Pennsylvania corporation with administrative offices at 906 Old Fern Hill Road, West Chester, PA 19380 (“LIFE DX”) and Stellar Biotechnologies, Inc., a Canadian corporation  having a place of business at 332 E. Scott Street, Port Hueneme, CA 93041 (”STELLAR”), together “The Parties”, agree as follows:

Recitals

Whereas, LIFE DX develops, manufactures and sells diagnostic tests and related products for research and clinical markets;

Whereas, STELLAR manufactures and commercializes keyhole limpet hemocyanin (KLH); 

Whereas, STELLAR desires to engage LIFE DX to develop, manufacture, assemble, test, label, package, and ship certain Commercial Products (as defined below); 

Whereas, LIFE DX wishes to provide such services;

Now therefore, in consideration of the mutual covenants and conditions contained in this Agreement, the parties agree as follows.

(1)

Definitions

a.

“Agreement” shall mean this agreement, together with any Exhibits referenced herein.

b.

“Confidential Information” shall have the meaning as set forth in the Confidential Disclosure Agreement entered into as of August 1, 2011 by and between LIFE DX and STELLAR (“Confidential Disclosure Agreement”) and including certain business relationships and Intellectual Property as set forth herein.

c.

“Effective Date” shall be the latest date on which the Agreement is fully executed by LIFE DX and STELLAR.

d.

“STELLAR Intellectual Property” means copyrights, patents, trade secrets and mask works, whether or not registered, filed, applied for or the like, and all related rights and all tangible and intangible works, manifestations and aspects of same existing as of the Effective Date and created or coming into existence during the term of this Agreement. As used herein, “patents” includes all inventions, invention disclosures, provisional applications, applications, letters patents and all foreign counterparts and foreign equivalents of same, and any and all divisions, continuations, continuations-in-part, revisions, renewals, reissues, extensions and like of the foregoing.

e.

“LIFE DX Intellectual Property” means copyrights, patents, trade secrets and mask works, whether or not registered, filed, applied for or the like, and all related rights and all tangible and intangible works, manifestations and aspects of same existing as of the Effective Date and created or coming into existence during the term of this Agreement. As used herein, “patents” includes all inventions, invention disclosures, provisional applications, applications, letters patents and all foreign counterparts and foreign equivalents of same, and any and all divisions, continuations, continuations-in-part, revisions, renewals, reissues, extensions and like of the foregoing.

f.

“Project Period” shall be for a period of four (4) years beginning October 18, 2011 and shall be automatically extended for twenty-four (24) month periods unless terminated according the terms and conditions set forth herein.

g.

“Project” shall mean any and all activities including any of Product Development, Product Manufacture and/or supply of Commercial Product paid for by STELLAR.

h.

“Product Development” shall mean any activity required to design, formulate, set-up conditions for, establish reagents for, produce, verify or validate a Commercial Product including, but not limited to, evaluating, inspecting, testing or analyzing diagnostic products or samples, prototypes, components, reagents and the like for purposes of e.g. determining performance, quality, range of reactivity and the like during the Project, as further illustrated in Exhibit A.

i.

“Product Manufacture” shall mean production, assembly and final packaging of Enzyme-Linked Immuno-Sorbent Assay Test Kits (ELISA) as finished Commercial Products for transfer to STELLAR. For purposes of clarity, ELISA test kit shall have the meaning as; an immunoassay that uses a signal generating compound, e.g. an enzyme or fluorophore, linked to an antibody or antigen as a marker for the detection of a specific protein, especially an antigen or antibody and shall include the necessary components and reagents to perform said immunoassay. The scope of Commercial Products may be extended periodically by mutual agreement of The Parties. 

j.

“Commercial Products” shall mean, individually or together, six (6) STELLAR branded ELISA Test Kits for mouse (IgG and IgM), rat (IgG and IgM) and non-human primate (IgG and IgM), manufactured by LIFE DX under the Project, with product specifications as defined in Exhibit B (“Specifications”) which may be modified from time to time by written consent of both parties.  

k.

“Project Director” shall mean Chris Chadwick, Ph.D., President and CEO of LIFE DX.

l.

“STELLAR Liaison” shall be STELLAR employee Herb Chow, Ph.D., Vice President of Product Development, or a STELLAR representative appointed by President and CEO of STELLAR as primary contact to the Project Director.

m.

“Results” shall mean any and all work products, data and output produced in the course of the Project including, without limitation, laboratory notebook information, written or electronically recorded notes and descriptions; biological materials; procedures; assay conditions, antigens, antibodies and other purified reagent preparations; and assay reagents. 

n.

“Exclusive Basis” shall mean that LIFE DX shall not provide the services of the Project to any other commercial entity and STELLAR shall not for the period of the Agreement engage any other commercial entity to perform the services of the Project, as set forth further below. 

o.

“Product Milestone Activities” are set forth in Exhibit A.

p.

“STELLAR Customer(s)” shall mean an entity placing an order with STELLAR.

(2)

Engagement of LIFE DX

a.

STELLAR hereby engages LIFE DX, on an Exclusive Basis, for the Project, e.g. to manufacture, assemble, inspect, test, label, package and ship the Commercial Products, in accordance with the terms of this Agreement, exclusively for sale to STELLAR. 

b.

STELLAR shall transfer certain Confidential Information to LIFE DX to perform the Project.  LIFE DX will maintain the security of the Confidential Information in accordance with the terms of the Confidential Disclosure Agreement.

c.

STELLAR shall supply Keyhole Limpet Hemocyanin (KLH) and other reagents for use in the Project.  LIFE DX shall not use, , the STELLAR-supplied KLH or reagents in any manner other than in the Project without prior written consent of STELLAR.

d.

LIFE DX hereby warrants that it will use its best efforts to undertake the Project e.g. to conduct Product Development activities and supply Commercial Products to STELLAR and will allocate sufficient use of its facilities, resources, capital equipment, materials, tools and labor to enable it to deliver the Commercial Products in the quantities as required by STELLAR and as mutually agreed upon by The Parties. 

e.

LIFE DX will apply its best efforts to undertake and complete the Project using accepted professional standards of workmanship and effort, in accordance with the timeline in Exhibit A.

f.

Any new intellectual property, discovered by STELLAR or LIFE DX, pertaining to STELLAR Intellectual Property in the course of the project shall be assigned to STELLAR.  Any new intellectual property discovered by LIFE DX or STELLAR, pertaining to LIFE DX Intellectual Property in the course of the Project shall be assigned to LIFE DX.  LIFE DX hereby grants STELLAR a worldwide, non-exclusive license to the LIFE DX Intellectual Property developed during the course of the Project, solely as it pertains to the manufacture of Commercial Product.  For purposes of clarity, the worldwide, non-exclusive license does not extend to other LIFE DX Intellectual Property.

g.

LIFE DX will manufacture the Commercial Products exclusively for STELLAR.  LIFE DX will also have the right to list the Commercial Products on the LIFE DX website.  If Commercial Products are directly sold by and through LIFE DX, STELLAR will receive a royalty equivalent to 50% of the Commercial Product retail sales price less production costs per kit, production costs not to exceed $[ * ] per ELISA test kit.  In addition, both parties will agree on discounts, rebates and other price modifications to the Commercial Product retail sales price.  For purposes of clarity, Commercial Product sold by and through LIFE DX will have a retail sales price no less than Commercial Product as sold by and through STELLAR, of which the retail sales price at no less than $[ * ] per ELISA test kit.  STELLAR will notify LIFE DX of any change to the retail sales price of Commercial Product and these changes will be reflected at LIFE DX within thirty (30) days of such notification. 

h.

Control of the Project shall rest with LIFE DX and the Project Director.  STELLAR shall have opportunities to advise LIFE DX and the Project Director regarding conduct of the Project.  Project Director may substitute technical staff involved in Project with the prior approval of STELLAR.

i.

Final Results of the Project will be delivered in the form of a written report, which shall identify the methods used and the results obtained, including a listing of all antibodies or reagents produced in the course of Project.

(3)

Payment for Product Development Activities

a.

LIFE DX and STELLAR agree that payment for the Project shall be made to LIFE DX from STELLAR (i) upon mutual agreement of the successful execution and completion of the specific Product (Exhibit A) and (ii) upon receipt of a written expense invoice.  STELLAR shall use reasonable steps to mitigate out of pocket expenses by LIFE DX.

b.

LIFE DX shall provide an accounting of Project costs. STELLAR shall pay LIFE DX in US dollars by means of a check, money order or wire transfer payable to LIFE DX, or in other mutually agreed upon manner as defined above.  Checks shall be sent to Project Director or wired to a mutually agreed upon bank account.

(4)

Forecasts and Purchase Orders

a.

At the beginning of each calendar month, STELLAR will submit to LIFE DX a non-binding, written forecast of STELLAR’s expected requirements for Commercial Product for that month.  From time to time, STELLAR will submit written or electronic Purchase Orders to LIFE DX for Commercial Products to be delivered to STELLAR or to STELLAR Customer(s).  Any such Purchase Order shall contain those details upon which the parties mutually agree.

b.

LIFE DX will respond to any STELLAR Purchase Order with: (i) a written or electronic Purchase Order confirmation statement (including quantity and ship date) and (ii) an actual ship date confirmation statement (which shall include the packing list) upon shipment of the ordered Product. The terms and conditions in this Agreement shall supersede and replace all preprinted form terms and conditions set forth on any Purchase Order acknowledgment.

1.

LIFE DX shall confirm Purchase Order within 72 hours from the receipt of the order.

2.

LIFE DX shall use all reasonable efforts to deliver ordered Commercial Product to STELLAR within fourteen (14) days of receipt of a Purchase Order.

c.

LIFE DX shall ship Product to the location(s) designated by STELLAR in the Purchase Order using FedEx.  LIFE DX shall pack all Product ordered in a manner suitable for shipment and sufficient to withstand the effects of shipping, including handling during loading and unloading.

d.

STELLAR may reject any Product units which do not meet Commercial Product Specifications.  To reject a Product, STELLAR shall notify LIFE DX in writing, within thirty (30) days of delivery of Product, of its rejection and shall return to LIFE DX the rejected Product.  LIFE DX shall credit STELLAR for any Product units returned by STELLAR on the next month’s invoice to STELLAR. 

(5)

Pricing and Payment 

a.

STELLAR agrees to pay LIFE DX $[ * ] per each ELISA test kit purchased from LIFE DX.

b.

LIFE DX shall invoice STELLAR monthly for any product ordered in the previous calendar month, less any Product rejected by STELLAR during that period.

c.

STELLAR shall pay for Commercial Product within ninety (90) days of receipt of LIFE DX’s invoice.  Unless otherwise agreed upon in advance, STELLAR shall pay LIFE DX in US dollars by means of a check, money order or wire transfer to a bank designated by LIFE DX.  

(6)

Risk Management

a.

Each party to this Agreement agrees to hold harmless the other party from injuries, damages and loss arising from the negligent acts and omissions its employees, officers and agents under this Agreement.  Each of the parties assumes no responsibility to the other party for any indirect or consequential damages suffered by another party to this Agreement, or by any person, firm or corporation not a party to this Agreement.  Each party shall maintain at its sole expense adequate insurance for self-insurance coverage to satisfy its obligations under this Agreement.  This provision shall survive termination of this Agreement.

(7)

Termination

 

a.

STELLAR may terminate this Agreement by giving one hundred twenty (120) days written notice to LIFE DX.  LIFE DX may terminate this Agreement by giving one hundred twenty (120) days written notice to STELLAR. In the event of such termination by LIFE DX, LIFE DX will take all reasonable steps to identify, qualify and validate a comparable manufacturing site and facility and will transfer all methods, processes, reagents, data and information necessary for the manufacture of all STELLAR Commercial Products under this Agreement.

(8)

Disputes:  Responsive to Notice for Performance, The Parties agree to use good faith efforts to negotiate any disputes.

(9)

Severability.  If any term or provision contained in this Agreement is or becomes illegal, null or void or against public policy, for any reason, or is held by any court of competent jurisdiction to be incapable of being construed or limited in a manner to make it enforceable, or is otherwise held by such court to be illegal, null or void or against public policy, the remaining terms and provisions in this Agreement shall not be affected thereby.  Furthermore, in lieu of any invalid or unenforceable term or provision, the parties hereto intend that there be added as a part of this Agreement a valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible.

(10)

Facsimiles; Counterparts.  Facsimile transmission of any signed original document and/or retransmission of any signed facsimile transmission will be deemed the same as delivery of an original.  At the request of any party, the parties shall confirm facsimile transmission by signing a duplicate original document.  This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all of which will constitute one and the same instrument.

(11)

Further Assurances.  Each party agrees to promptly execute and deliver such documents and promptly due such other acts as are reasonably requested by the other as may be necessary or appropriate to effectuate the purposes of this Agreement.

(12)

Entire Agreement.  This Agreement, together with the attached schedule and the Confidential Disclosure Agreement, which are incorporated herein by reference, constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and all prior and contemporaneous agreements, representations, negotiations and understandings of the parties hereto, oral or written, are hereby superseded and merged herein.  Each party to this Agreement acknowledges that no representations, inducements, promises or agreements have been made, orally or otherwise, by any party, or, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement or promise not contained in this Agreement will be valid or binding.  No supplement, modification or amendment of this Agreement will be binding unless executed in writing by the parties hereto.  No waiver of any of the provisions of this Agreement will be deemed to constitute a waiver of any provision, whether or not similar, nor will any waiver constitute a continuing waiver.  No waiver will be binding unless executed by the party making the waiver.

(13)

Notices.  All notices, requests, demands and other communications under this Agreement must be in writing and will be deemed to have been duly given on the date of service if served personally, via facsimile or nationally-recognized overnight delivery service on the party to whom notice is to be given, or forty-eight (48) hours following deposit of such notice in the first class mail, registered or certified, return receipt requested, postage prepaid and properly addressed as follows:

To STELLAR at:

Stellar Biotechnologies

332 E. Scott Street

Port Hueneme, CA 93041

Attn.:  Frank Oakes, President

Telephone:  805 488-2147

Facsimile:  805 488-1278

To LIFE DX at:

Life Diagnostics, Inc

906 Old Fern Hill Road

West Chester, PA 19380

Attn.:  Chris Chadwick, CEO

Telephone:  610 431-7707

Facsimile:  610 431-7818

(14)

Captions and Headings.  The captions and headings of the sections and subsections of this Agreement are included for convenience only and are not to be considered in construing or interpreting this Agreement.

(15)

Construction.  The language of this Agreement will be interpreted and construed simply and in accordance with its fair meaning, and must not be construed strictly for or against any party hereto by reason of its draftsmanship or for any other reason whatsoever.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

EXHIBIT A

PRODUCT DEVELOPMENT PLAN

				
	Timeline and Development Costs / Expenses for KLH ELISA Test Kits

	 
	 
	 

	 
	 
	 
	 

	Mouse anti-KLH ELISA Test Kits - IgG and IgM

	Time (wks)

	 
	Cost

	1.  Isolate anti-KLH IgG and IgM for calibration studies

	 
	 
	 

	Requires at least 25 ml serum from 7- and 21-day post immunization animals

	 
	 
	 

	At ~0.25 ml/mouse + 100 mice X 2 + 200 mice total

	 
	$

	[ * ]

	 
	 
	 
	 

	Affinity isolation and characterization of anti-KLH subunit IgG and IgM

	2

	$

	[ * ]

	 
	 
	 
	 

	Validate IgG and IgM ELISAs

	5

	$

	[ * ]

	 
	 
	 
	 

	2.  Compare anti-KLH responses of subunit KLH, IMG KLH, Sigma KLH, bioSyn KLH

	 
	 
	 

	Requires 30 mice total

	2

	$

	[ * ]

	 
	 
	 
	 

	3.  Reagent costs (misc tdb)

	 
	$

	[ * ]

	 
	 
	 
	 

	subtotal

	 
	$

	[ * ]

	 
	 
	 
	 

	Rat anti_KLH ELISA Test Kits - IgG and IgM

	 
	 
	 

	1.  Isolate anti-KLH IgG and IgM for calibration studies

	 
	 
	 

	Requires at least 50 ml serum from 7- and 21-day post immunization animals

	 
	 
	 

	At ~5.0 ml/rat = 10 rats X 2 = 20 rats total

	 
	$

	[ * ]

	 
	 
	 
	 

	Affinity isolation and characterization of anti-KLH subunit IgG and IgM

	2

	$

	[ * ]

	 
	 
	 
	 

	Validate IgG and IgM ELISAs

	5

	$

	[ * ]

	 
	 
	 
	 

	2.  Compare anti-KLH responses of subunit KLH, IMG KLH, Sigma KLH, BioSyn KLH

	 
	 
	 

	Requires 30 rats total

	2

	$

	[ * ]

	 
	 
	 
	 

	3.  Reagent costs (misc tdb)

	 
	$

	[ * ]

	 
	 
	 
	 

	subtotal

	 
	$

	[ * ]

	 
	 
	 
	 

	Monkey anti-KLH ELISA Test Kits - IgG and IgM

	 
	 
	 

	1.  Isolate anti_KLH IgG and IgM for calibration studies

	 
	 
	 

	Requires at least 1000 ml serum from normal animals

	 
	$

	[ * ]

	 
	 
	 
	 

	Affinity isolation and characterization of anti-KLH subunit IgG and IgM

	2

	$

	[ * ]

	 
	 
	 
	 

	Validate IgG and IgM ELISAs

	5

	$

	[ * ]

	 
	 
	 
	 

	2.  Compare anti-KLH responses of subunit KLH, IMG KLH, Sigma KLH, bioSyn KLH 

	 
	 
	 

	(recommends not - too expensive)

	 
	 
	 

	 
	 
	 
	 

	3.  Compare anti-KLH responses of Rhesus and Cyno

	2

	$

	[ * ]

	 
	 
	 
	 

	4.  Reagent costs (misc tdb)

	 
	$

	[ * ]

	 
	 
	 
	 

	subtotal

	 
	$

	[ * ]

	 
	 
	 
	 

	TOTAL COST (est)

	 
	$

	[ * ]

	 
	 
	 
	 

	time requirements are estimates. Development for all six (6) test kits will be run in parallel. Total projected development time

is ~3-5 months

	 

	Some initial start-up expenses may be required but remaining balance payable upon completion of the activity

EXHIBIT B

COMMERCIAL PRODUCT SPECIFICATIONS

			
	Product Specifications

	Performance 

	Acceptance 

	Mouse Anti-KLH IgG ELISA Kit with control

	·

Quantitative detection of standards in ng/mL of IgG 

·

Kit stability: 6 months at 2 to 8C from the date of purchase

·

Total assay CV ≤ 10%

	Equivalent or better

	Mouse Anti-KLH IgM ELISA Kit 

with control

	·

Quantitative detection of standards in ng/mL of IgM 

·

Kit stability: 6 months at 2 to 8C from the date of purchase

·

Total assay CV ≤10%

	Equivalent or better

	Rat Anti-KLH IgG ELISA Kit with control

	·

Quantitative detection of standards in ng/mL of IgG corresponding to the units published in Life #4010-1 product insert

·

Kit stability: 6 months at 2 to 8C from the date of purchase

·

Total assay CV ≤ 10%

	Equivalent or better

	Rat Anti-KLH IgM ELISA Kit with control

	·

Quantitative detection of standards in ng/mL of IgG corresponding to the units published in Life #4000-2C product insert

·

Kit stability: 6 months at 2 to 8C from the date of purchase

·

Total assay CV ≤ 10%

	Equivalent or better

	Monkey Anti-KLH IgG1 ELISA Kit with control

	·

Quantitative detection of standards in ng/mL of IgG 

·

Kit stability: 6 months at -20C from the date of purchase

·

Total assay CV ≤ 10%

	Equivalent or better

	Monkey Anti-KLH IgM ELISA Kit with control

	·

Quantitative detection of standards in ng/mL of IgG 

·

Kit stability: 6 months at -20C from the date of purchase

·

Total assay CV ≤ 10%

	Equivalent or better

Insert PIs (Herb and Chris to provide)

Mock-up of Stellar–brand labels (kit box, bulk packaging, vials, etc.) (see attachment)EX-10.1

AMENDED AND RESTATED

EXECUTIVE AGREEMENT

This Amended and Restated Executive Agreement (“Agreement”) is made and entered into as of the
2nd day of July, 2012 (“Effective Date”), between Financial Institutions, Inc. (“FII”),
a bank holding company chartered under the laws of the State of New York, having its principal
office at 220 Liberty St., Warsaw, New York 14569; and Peter G. Humphrey (the “Executive”), an
individual residing at 1446 South Rd., Scottsville, New York, 14546.

RECITALS:

WHEREAS, the Executive is employed by Financial Institutions, Inc. as President & Chief
Executive Officer; and

WHEREAS, the Executive and FII are parties to an Executive Agreement dated June 8, 2005 (the
“Original Executive Agreement”); and

WHEREAS, Section 4.5 of the Original Executive Agreement provides that the parties can amend
the Original Executive Agreement in writing; and

WHEREAS, FII and the Executive desire to set forth certain terms upon which the Executive is
employed by Financial Institutions, Inc.

NOW, THEREFORE, in consideration of the mutual promises and of the covenants contained in this
Agreement, FII and the Executive agree that the terms set forth herein constitute the Amended and
Restated Executive Agreement, and agree as follows:

ARTICLE 1

Confidentiality

Section 1.1 Confidential Information. The Executive has become acquainted with
and will have access to confidential or proprietary information and trade secrets related to the
business of the FII, its subsidiaries and any affiliates or joint ventures (collectively with FII,
the “Companies”), including but not limited to: (i) trade secrets, business plans, business
processes, practices, methods, software programs, operating plans, marketing plans, financial
reports, credit information, lending practices, operating data, budgets, pricing strategies and
information, terms of agreements with customers and others, customer lists, reports,
correspondence, security procedures, tapes, disks, tangible property and specifications owned by or
used in the Companies’ businesses; (ii) operating strengths and weaknesses of the Companies’
officers, directors, employees, agents, suppliers and customers; (iii) information pertaining to
future developments such as, but not limited to, software development or enhancement, future
marketing plans or ideas, and plans or ideas for new services or products; (iv) all information
which is learned or developed by the Executive in the course and performance of his duties under
this Agreement, including without limitation, reports, information and data relating to the
Companies’ acquisition strategies; and (v) other tangible and intangible property which is used in
the business and operations of the Companies but not made publicly available ((i) through (v) are,
collectively, “Confidential Information”). The Executive understands that the above list is not
exhaustive and that Confidential Information also includes other information that is marked or
otherwise identified as confidential or proprietary or that would otherwise appear to a reasonable
person to be confidential or proprietary in the context and circumstances in which the information
is known or used. The Executive understands and acknowledges that this Confidential Information
and the Companies’ ability to reserve it for its exclusive knowledge and benefit is of great
competitive importance and commercial value to the Companies and that improper use or disclosure of
the Confidential Information by the Executive might cause the Companies to incur financial costs,
loss of business advantages, liability under confidentiality agreement with third parties, civil
damages and criminal penalties.

Section 1.2 Treatment of Confidential Information. Both during and after the
conclusion of the Executive’s employment, the Executive will not, directly or indirectly, disclose,
use or make known for the Executive’s or another’s benefit any Confidential Information of the
Companies or use such Confidential Information in any way except in the best interests of the
Companies in the performance of the Executive’s duties for FII. The Executive will take all
necessary steps to safeguard the Companies’ Confidential Information. In addition, to the extent
that FII has entered into a Confidentiality Agreement with any other person or entity, the
Executive agrees to comply with the terms of such Confidentiality Agreement and to be subject to
the restrictions and limitations imposed by such agreement as if the Executive was a party thereto.
Nothing herein shall be construed to prevent disclosure of Confidential Information as may be
required by applicable law or regulation, or pursuant to the valid order of a court of competent
jurisdiction or an authorized government agency, provided that the disclosure does not exceed the
extent of disclosure required by such law, regulation or order. The Executive shall promptly
provide written notice of any such order to an authorized officer of the Companies.

ARTICLE 2

Non-competition and Non-solicitation

Section 2.1 Applicable Period. The non-competition provisions of Section 2.2
and the non-solicitation provisions of Section 2.3 shall apply to the Executive as follows:

(a) Termination without Compensation. In the event that: (1) FII terminates the employment of
the Executive for any reason; or (2) the Executive terminates employment with FII for any reason,
and, in each case, such termination does not entitle the Executive to compensation or benefits
under this Agreement or any other arrangement with FII (excluding for this purpose, any payments or
distributions from or related to any tax-qualified retirement plan maintained for the benefit of
the Executive), then the provisions of Section 2.2 and Section 2.3 shall apply to the Executive
during the term of this Agreement and during the six-month period following the Executive’s
termination of employment.

(b) Termination with Compensation. In the event that: (1) FII terminates the employment of
the Executive for any reason; or (2) the Executive terminates employment with FII for any reason,
and, in each case, such termination does not entitle the Executive to compensation or benefits
under this Agreement and the Executive is entitled to compensation or benefits under another
arrangement with FII (excluding for this purpose, any payments or distributions from or related to
any tax-qualified retirement plan maintained for the benefit of the Executive), then the provisions
of Section 2.2 and Section 2.3 shall apply to the Executive during the term of this Agreement and
following the Executive’s termination of employment for the period of time equal to the greater of:
(i) the period of time during which the Executive is receiving any compensation or benefits from
FII (excluding for this purpose, any payments or distributions from or related to any tax-qualified
retirement plan maintained for the benefit of the Executive); or (ii) the six-month period
following the Executive’s termination of employment.

(c) Termination Following a Change of Control. In the event that FII terminates the
employment of the Executive or the Executive terminates employment with FII, and, in each case,
such termination entitles the Executive to compensation or benefits under this Agreement, then the
provisions of Section 2.2 and Section 2.3 shall apply to the Executive during the term of this
Agreement and following the Executive’s termination of employment for the period of time during
which the Executive is receiving any compensation or benefits from FII under this Agreement.

Section 2.2 Non-competition. During the applicable period set forth above in
Section 2.1, the Executive shall not engage, anywhere within New York State or in any area outside
of New York State in which the Companies conduct business, whether directly or indirectly, or
through any employee, agent, attorney or any other person or party acting on behalf of the
Executive, as principal, owner, officer, director, agent, employee, consultant or partner, in the
management of a bank holding company, commercial bank, savings bank, credit union or any other
financial services provider that competes with the Companies or their products or programs
(“Restricted Activities”), provided that the foregoing shall not restrict the Executive from
engaging in any Restricted Activities which FII directs the Executive to undertake or which FII
otherwise expressly authorizes. The foregoing shall not restrict the Executive from owning less
than 5% of the outstanding capital stock of any company which engages in Restricted Activities,
provided that the Executive is not otherwise involved with such company as an officer, director,
agent, employee or consultant. The Executive agrees that this Section, the scope of the territory
covered, the actions restricted thereby, and the duration of such covenant are reasonable and
necessary to protect the legitimate business interests of FII and the Companies.

Section 2.3 Non-solicitation. During the applicable period set forth above in
Section 2.1, the Executive shall not, directly or indirectly, without the written consent of FII:
(i) recruit or solicit for employment any employee, representative or agent of the Companies or
encourage any such employee, representative or agent to leave his or her employment or discontinue
his or her relationship with the Companies, or (ii) solicit, induce or influence any customer,
supplier, lessor or any other person or entity which has a business relationship with the Companies
to discontinue or reduce the extent of such relationship with the Companies.

Section 2.4 Return of Amounts. In consideration for the promises made by the
Executive in Article 1, Section 2.2 and Section 2.3 herein, FII agrees to provide the Executive
with the payments and benefits described in Article 3 of this Agreement. In the event that the
Executive breaches any of the provisions of this Article or of Article 1, the payments and benefits
provided for by Article 3 as well as any other compensation or benefits under another arrangement
with FII (excluding for this purpose, any payments or distributions from or related to any
tax-qualified retirement plan maintained for the benefit of the Executive) shall cease immediately
and FII shall have no further liability for such payments after the date of the Executive’s breach.
FII will immediately have the right to seek redress for such breach as set forth in Section 4.1
below, recover any payments made to the Executive pursuant to Article 3 as of the date of the
breach, and recover any other damages that have been caused by the breach of his Agreement.
Further, failure to comply with the provisions of this Article or of Article 1 or commission of an
act which is an instance of Cause prior to or after, any exercise, payment or delivery pursuant to
an exercise of any stock option or vesting of any incentive equity award (“Award”) shall cause such
exercise, payment or delivery to be rescinded. FII will notify the Executive in writing of any
such rescission within two years after such exercise, payment or delivery. Within ten days after
receiving such notice from FII, the Executive shall pay to FII the amount of any gain realized or
payment received as a result of the rescinded exercise, payment or delivery pursuant to an Award.
The Executive hereby agrees that the cancellation and rescission provisions of this Agreement are
reasonable and agrees not to challenge the reasonableness of such provisions, even where forfeiture
of options or equity awards granted is the penalty for violation. Further, the Executive hereby
agrees that the provisions of this Section amend and shall be controlling with respect to all
Awards existing as of the date of this Agreement and any Awards granted subsequent to the date of
this Agreement.

ARTICLE 3

Benefits Following a Change of Control

Section 3.1 Definitions.

(a) “Base Salary Amount” means the annual base salary payable by FII to the Executive and
includable by the Executive in gross income for the most recent calendar year ending before the
date on which the Change of Control occurred.

(b) A “Change of Control” will be deemed to have occurred if:

(1) any person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934 (“Act”)), other than FII or a subsidiary of FII, becomes the beneficial owner (within
the meaning of Rule 13d-3 under the Act) of FII securities possessing twenty percent (20%) or more
of the voting power for the election of directors of FII; or

(2) there is consummated

(i) any consolidation, share exchange or merger of FII in which FII is not the continuing or
surviving corporation or pursuant to which any shares of FII’s common stock are to be converted
into cash, securities or other property, provided that the transaction is not with a corporation
which was a subsidiary of FII immediately before the transaction; 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 FII; or

(3) “approved directors” constitute less than a majority of the entire Board of Directors,
with “approved directors” defined to mean the members of the Board of Directors of FII as of the
date of this Agreement and any subsequently elected members who are nominated or approved by at
least three quarters of the approved directors on the Board prior to such election;

provided, however, that in no instance shall a Change of Control occur unless such event also
constitutes a change in the ownership or effective control of FII or a change in the ownership of a
substantial portion of FII’s assets, each within the meaning assigned to such terms by Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations promulgated and
other official guidance issued thereunder (collectively, “Section 409A”).

(c) “Cause” means the commission by the Executive of, or the determination by the Board of
Directors, 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 Executive has committed:
(i) a criminal offense involving the violation of state or federal law; (ii) a breach of fiduciary
duty; (iii) an act of dishonesty, fraud or material misrepresentation; or (iv) any act of moral
turpitude which the Board of Directors determines has or may be reasonably expected to have a
detrimental impact on FII’s business or operations, or which may prevent, because of its
demonstrated or demonstrable effect on employees, regulatory agencies or customers, the Executive
from effectively performing his duties.

(d) “Continuation Multiple” means three.

(e) “Continuation Period” means 36 months.

(f) “Good Reason” means:

(1) There has been a material diminution, compared to those existing as of the date the Change
of Control occurs, in the Executive’s responsibilities, duties, title, reporting responsibilities
within the business organization, status, role, authority or aggregate compensation; provided,
however, that (i) the Executive must provide FII with written notice of the Executive’s intent to
terminate employment and a description of the event the Executive believes constitutes Good Reason
within 60 days after the initial existence of the event; and (ii) FII shall have 15 days after the
Executive provides the notice described above to cure the default that constitutes Good Reason (the
“Cure Period”). The Executive will have 30 days following the end of the Cure Period (if FII has
not cured the event that otherwise constituted Good Reason) to terminate his or her employment,
after which Good Reason will no longer exist; or

(2) Removal of the Executive from the position of President & Chief Executive Officer, other
than (i) elevation to a higher ranking executive officer position with FII, or (ii) with the
written consent of the Executive; or

(3) Relocation of the Executive’s principle place of employment by more than 75 miles from its
location immediately prior to the Change of Control other than with the written consent of the
Executive.

Section 3.2 Termination Following a Change of Control. If a Change of Control
occurs during the Executive’s employment, and if within the twelve month period following such
Change of Control, either (i) FII terminates the employment of the Executive other than for Cause,
or (ii) the Executive terminates his employment because of Good Reason (in either case a “Special
Termination Date”), the Executive will be entitled to receive such benefits as are provided in this
Article.

Section 3.3 Cash Payments. Subject to Section 4.6(e), following the Special
Termination Date, FII will pay the Executive an amount equal to the product of (i) the Continuation
Multiple; and (ii) the sum of:

(a) the Base Salary Amount; plus

(b) the greater of:

(1) the average of the annual incentive compensation actually earned by and paid to the
Executive for the three most recent calendar years ending before the date on which the Change of
Control occurred; or

(2) the average of the annual incentive compensation that was earned by and would have been
paid to the Executive based on the actual attainment of the relevant performance measures for the
three most recent calendar years ending before the date on which the Change of Control occurred but
for the limitations imposed on such payments under the Troubled Asset Relief Program and the
American Reinvestment and Recovery Act of 2009. For the avoidance of doubt, in either case, if the
Executive was not eligible to participate in an annual incentive compensation program for any year
in the prior three-year period, the average will be calculated based on the years in which the
Executive was eligible to participate in an annual incentive compensation program.

Such amount shall be payable to the Executive in equal installments over the Continuation
Period in accordance with FII’s regular payroll procedures in effect from time to time; but in no
event less frequently than monthly.

Section 3.4 Benefits. Subject to Section 4.6(e), FII will, for the
Continuation Period, but not to exceed a period of eighteen (18) months, continue to provide health
and dental benefits to the Executive and his covered dependants. Health and dental coverage
provided under this provision will run contemporaneously with any continuation of health care
coverage that may be required to be provided under “COBRA.” FII will pay the premiums for such
coverage provided the Executive delivers a signed COBRA enrollment authorization within the period
of time required by COBRA.

Section 3.5 Acceleration of Equity Awards. On the Special Termination Date,
all restricted stock awards, stock options and other rights that the Executive may hold to purchase
or otherwise acquire common stock of FII will immediately become fully vested at the maximum level
and, in the case of stock options, exercisable in full for the total number of shares that are or
might become purchasable thereunder, in each case without further condition or limitation except,
in the case of stock options, the giving of notice of exercise and the payment of the purchase
price thereunder (but without amendment of the plan under which they were issued).

Section 3.6 Death of the Executive. If the Executive dies before receiving all
monthly payments payable to the Executive under this Article, FII will pay to the Executive’s
spouse, if he or she survives the Executive or, if no spouse survives the Executive, then to the
Executive’s estate, all such remaining unpaid monthly payments as if the Executive had not died. If
the Executive was receiving health and dental benefits pursuant to Section 3.4 at the time of
death, FII will continue to provide such health and dental benefits to the dependents of the
Executive for the duration of the period specified in Section 3.4, as if the Executive had not
died.

Section 3.7 Indemnification of the Executive. In the event a Change of Control
occurs, FII will indemnify the Executive for reasonable legal fees and expenses subsequently
incurred by the Executive through legal counsel approved in advance by FII (which approval will not
be unreasonably withheld) in seeking to obtain or enforce any right or benefit provided under this
Agreement, including but not limited to the rights and benefits provided under this Article,
provided, however, that such right to indemnification will not apply unless the Executive or the
Executive’s beneficiaries are successful in establishing, privately or otherwise, that Executive’s
or their position is substantially correct, or that FII’s position is substantially wrong or
unreasonable. Subject to the foregoing restrictions, FII will pay reasonable costs and expenses,
including counsel fees, which the Executive or the Executive’s beneficiaries may incur in
connection therewith directly to the provider of the services or as may otherwise be directed by
the Executive or the Executive’s beneficiaries. Payments payable hereunder by FII will be made not
later than thirty (30) days after a request for payment has been received from the Executive with
such evidence of indemnifiable fees and expenses as FII may reasonably request.

ARTICLE 4

Miscellaneous

Section 4.1 Remedies. The Executive specifically agrees that any breach or
threatened breach of Articles 1 and 2 would cause irreparable injury to the Companies, that money
damages may not provide an adequate remedy to the Companies, and that FII will accordingly have the
right and remedy (i) to obtain an injunction prohibiting the Executive from violating or
threatening to violate such provisions, (ii) to have such provisions specifically enforced by any
court of competent jurisdiction, and (iii) to require the Executive to account for and pay over to
FII all compensation, profits, monies, accruals, increments or other benefits derived or received
by the Executive as the result of any transactions constituting a breach of such provisions.
Nothing herein shall be construed as prohibiting FII from pursuing any other remedies available to
it for such breach or threatened breach, including the recovery of money damages. The Executive and
FII believe that the restrictions and covenants in this Agreement are reasonable and enforceable
under the circumstances. However, if any one or more of the provisions in this Agreement shall, for
any, reason be held to be excessively broad as to time, duration, geographic scope, activity, or
subject, it shall be construed by limiting and reducing it so as to be enforceable to the extent
compatible with law and with the Executive’s and FII’s intentions as stated herein. The obligations
of the Executive and FII under this Agreement will survive the termination of the Executive’s
employment and the expiration or termination of this Agreement. FII and the Executive hereby (a)
consent to the jurisdiction of the United States District Court for the Western District of New
York, or, if such court does not have subject matter jurisdiction over such matter, the applicable
Supreme Court of Erie, Monroe or Wyoming Counties, State of New York, and (b) irrevocably agree
that all actions or proceedings arising out of or relating to this Agreement shall be litigated in
such court. FII and the Executive accept for itself or himself and in connection with its or his
properties, generally and unconditionally, the exclusive jurisdiction and venue of the aforesaid
courts and waive any defense of forum nonconveniens or any similar defense.

Section 4.2 Notice. All written communications to the parties required by this
Agreement must be in writing and (a) delivered by registered or certified mail, return receipt
requested, (such notice to be effective 4 days after the date it is mailed) or (b) sent by
facsimile transmission, with confirmation sent by way of one of the above methods, to the party at
the address first given above (or to any other address as the party designates in a writing
complying with this Section, delivered to the other party).

Section 4.3 At-Will Employment. This Agreement does not give the Executive any
right to continued employment with FII for any period of time. The Executive’s employment with FII
remains at-will and may be terminated at any time by the Executive or FII.

Section 4.4 Withholding. FII will deduct or withhold from all payments made to
the Executive pursuant to this Agreement, all amounts that may be required to be deducted or
withheld under any applicable Social Security contribution, income tax withholding or other similar
law now in effect or that may become effective during the term of this Agreement.

Section 4.5 Miscellaneous. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be enforceable under applicable law. However, if any
provision of this Agreement is deemed unenforceable under applicable law by a court having
jurisdiction, the provision will be unenforceable only to the extent necessary to make it
enforceable without invalidating the remainder of it or any of the remaining provisions of this
Agreement. No course of action or failure to act by FII or the Executive will constitute a waiver
by the party of any right or remedy under this Agreement, and no waiver by either party of any
right or remedy under this Agreement will be effective unless made in writing. This Agreement: (a)
may not be amended, modified or terminated orally or by any course of conduct pursued by FII or the
Executive, but may be amended, modified or terminated only by a written agreement duly executed by
FII and the Executive; (b) is binding upon and inures to the benefit of FII and the Executive and
each of their respective heirs, representatives, successors and assignees, except that the
Executive may not assign any of the Executive’s rights or obligations pursuant to this Agreement;
(c) constitutes the entire agreement between FII and the Executive with respect to such subject
matter; and (d) will be governed by, and interpreted and construed in accordance with, the laws of
the State of New York, without regard to principles of conflicts of law. This Agreement will be
effective for the period commencing on the Effective Date and ending on the date the Executive
terminates employment with FII, with the exception of provisions that, by their terms, remain in
force beyond the Executive’s termination of employment with FII.

Section 4.6 Section 409A.

(a) The compensation and benefits under this Agreement are intended to comply with or be
exempt from the requirements of Section 409A, and this Agreement will be interpreted in a manner
consistent with that intent.

(b) The preceding provisions, however, shall not be construed as a guarantee by FII of any
particular tax effect to the Executive under this Agreement. FII shall not be liable to the
Executive for any payment made under this Agreement that is determined to result in an additional
tax, penalty or interest under Section 409A, nor for reporting in good faith any payment made under
this Agreement as an amount includible in gross income under Section 409A.

(c) References to “termination of employment” and similar terms used in this Agreement mean,
to the extent necessary to comply with Section 409A, the date that the Executive first incurs a
“separation from service” within the meaning of Section 409A.

(d) To the extent any reimbursement provided under this Agreement is includable in the
Executive’s income, such reimbursements shall be paid to the Executive not later than December 31st
of the year following the year in which the Executive incurs the expense and the amount of
reimbursable expenses provided in one year shall not increase or decrease the amount of
reimbursable expenses to be provided in a subsequent year.

(e) Notwithstanding anything in this Agreement to the contrary, if at the time of the
Executive’s separation from service with FII the Executive is a “specified employee” as defined in
Section 409A, and any payment payable under this Agreement as a result of such separation from
service is required to be delayed by six months pursuant to Section 409A, then FII will make such
payment on the date that is six months following the Executive’s separation from service with FII.
The amount of such payment will equal the sum of the payments that would have been paid to the
Executive during the six-month period immediately following the Executive’s separation from service
had the payment commenced as of such date. Each payment under this Agreement shall be designated as
a “separate payment” within the meaning of Section 409A.

Section 4.7 Excise Tax Cap. In the event that the Executive becomes entitled
to any payment or benefit under this Agreement (such benefits together with any other payments or
benefits payable to the Executive under any other agreement with the Executive, or plan or policy
of FII, are referred to in the aggregate as the “Total Payments”), if all or any part of the Total
Payments will be subject to the tax imposed by Section 4999 of the Code, or any similar tax that
may hereafter be imposed (the “Excise Tax”), then:

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

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

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

(d) For purposes of making the reduction of amounts payable under this Agreement, such amounts
will be eliminated in compliance with the requirements of Section 409A and in the following order:
(1) any cash compensation, (2) any health or welfare benefits, and (3) any equity compensation.
Reductions of such amounts will take place in the chronological order with respect to which such
amounts would be paid from the date of the Executive’s termination of employment absent any
acceleration of payment.

Section 4.8 Regulatory Prohibition. Notwithstanding any other provision of
this Agreement to the contrary, any payments made to the Executive pursuant to this 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. 1828(k)) and 12 C.F.R. Part 359.

Section 4.9 Dodd-Frank Clawback. Notwithstanding any other provision of this
Agreement to the contrary, in order to comply with Section 10D of the Securities Exchange Act of
1934, as amended, and any regulations promulgated, or national securities exchange listing
conditions adopted, with respect thereto (collectively, the “Clawback Requirements”), if FII is
required to prepare an accounting restatement due to the material noncompliance of FII with any
financial reporting requirements under the securities laws, then any Employee who is a former or
current executive officer of FII shall return to FII, or forfeit if not yet paid, the amount of any
“incentive-based compensation” (as defined under the Clawback Requirements) received during the
three-year period preceding the date on which FII is required to prepare the accounting
restatement, based on the erroneous data, in excess of what would have been paid to the Employee
under the accounting restatement as determined by FII in accordance with the Clawback Requirements
and any policy adopted by FII pursuant to the Clawback Requirements.

(signature page immediately follows)

1

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written.

	 	 	 	 	 	 	 
	Financial Institutions, Inc.	 	 
	By:	 	 	 	/s/ John E. Benjamin
	 	 	 	 	 
	Name:	 	John E. Benjamin	 	 
	Title:	 	Chairman of the Board	 	 
	Date:	 	July 2, 2012	 	 
	EXECUTIVE:
	 	 	 	 
	Signature:
	 	/s/ Peter G. Humphrey
	 	 	 	 	 
	Name:

	 	 	 	 	 	Peter G. Humphrey
	Title:

	 	 	 	 	 	President & Chief Executive Officer
	Date:

	 	 	 	 	 	July 2, 2012

2

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