SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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|_| Preliminary Proxy Statement
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|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
FINANCIAL INSTITUTIONS, INC.
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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|X| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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computed pursuant to Exchange Act Rule 0-11 (set forth the
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
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fee was paid previously. Identify the previous filing by
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4. Date Filed: NA
[LOGO] Financial Institutions, Inc.
NOTICE OF 2004 ANNUAL MEETING OF SHAREHOLDERS
DEAR SHAREHOLDERS:
The Annual Meeting of Shareholders of Financial Institutions, Inc. will be held
at the Company's offices at 220 Liberty Street, Warsaw, New York 14569 on
Wednesday, May 5, 2004, at 10:00 a.m. for the following purposes:
1. To elect three directors for three-year terms;
2. To elect one director for a two-year term; and
3. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business of March 12, 2004 as the
record date for the determination of shareholders entitled to notice of and to
vote at the meeting.
It is important that your shares be represented and voted at the Annual Meeting
whether or not you plan to attend. Accordingly, we request you vote at your
earliest convenience. You may vote by mail, telephone or Internet. Further
instructions are contained on the enclosed proxy ballot card.
Thank you for your cooperation and support.
On behalf of the Board of Directors,
/s/ Peter G. Humphrey
Peter G. Humphrey
Chairman of the Board, President and Chief Executive Officer
April 5, 2004
Financial Institutions, Inc.
www.fiiwarsaw.com
220 Liberty Street P. O. Box 227 Warsaw, New York 14569
PROXY STATEMENT
This Proxy Statement is furnished in connection with solicitation of proxies on
behalf of the Board of Directors of Financial Institutions, Inc. ("FII") for the
Annual Meeting of Shareholders of FII to be held on May 5, 2004.
The principal executive office of FII is located at 220 Liberty Street, Warsaw,
New York 14569. The main telephone number for FII is (585) 786-1100.
The close of business of March 12, 2004 has been fixed as the record date for
determination of the shareholders entitled to notice of, and to vote at, the
meeting. On that date there were outstanding and entitled to vote 11,172,673
shares of common stock, each of which is entitled to one vote on each matter at
the meeting. The approximate date on which this Proxy Statement and the enclosed
proxy card are being sent to shareholders is April 5, 2004.
Shareholders of record may vote by telephone, via the Internet or by mail. The
toll-free telephone number and Internet web site are listed on the enclosed
proxy. If you vote by telephone or via the Internet you do not need to return
your proxy card. If you choose to vote by mail, please mark the ballot boxes,
date and sign it, and then return it in the enclosed envelope (no postage is
necessary if being mailed within the United States). If your shares are held in
the name of a bank, broker or other holder of record, you will receive
instructions from the holder of record that you must follow in order for your
shares to be voted. Each proxy submitted will be voted at the meeting in
accordance with the choices specified thereon and, if no choices are specified,
will be voted for the election of directors as set forth in this proxy
statement. A shareholder giving a proxy has the right to revoke it at any time
before it has been voted by (i) giving written notice to that effect to the FII
Corporate Secretary, (ii) executing and delivering a proxy bearing a later date
which is voted at the Annual Meeting, or (iii) attending and voting in person at
the Annual Meeting.
ELECTION OF DIRECTORS and INFORMATION WITH RESPECT TO
BOARD OF DIRECTORS
FII's Board of Directors is divided into three classes, one of which is elected
at each Annual Meeting for a term of three years and until their successors have
been elected and qualified. The Board of Directors believes that the nominees
listed below will be available and able to serve as directors, but, if for any
reason any of them should not be, the persons named in the proxy may exercise
discretionary authority to vote for a substitute proposed by the Board of
Directors. The holders of a majority in interest of all common stock issued,
outstanding and entitled to vote are required to be present in person or to be
represented by proxy at the meeting in order to constitute a quorum for
transaction of business. Directors are elected by a plurality of the votes cast
by shareholders entitled to vote in the election. Proxies indicating abstentions
and broker non-votes are counted as present for quorum purposes but are not
counted for or against the election of directors. FII's By-laws govern the
methods for counting votes and vest this responsibility in the Inspectors of
Election appointed to perform this function.
1
Board composition changes since the last Annual Meeting include the appointment
of Joseph F. Hurley and the resignation of Bryan G. vonHahmann. The Board of
Directors currently consists of twelve members and the Board has resolved that,
absent any further changes in the composition of the Board prior to the Annual
Meeting, upon expiration of the terms of Jon J. Cooper and Wolcott J. Humphrey,
Jr., who are not standing for reelection, the number of directors constituting
the entire Board shall be fixed at ten. The current Director nominees are listed
in the following two tables:
======================================================================================================================
Age as of Expiration of
Director Nominees for Annual Director Expiration of Term Upon Company Positions and
a Three-year Term Meeting Since Current Term Election Principal Occupations
======================================================================================================================
Samuel M. Gullo 55 2000 2004 2007 Owner and Operator of Family
Furniture, a retail
furniture sales business;
President and Chief
Executive Officer of
American Classic Outfitters,
Inc., an apparel
manufacturer; Owner of: SMG
Development, LLC -
industrial real estate
holdings; Owner of Adams
Holding, LLC - commercial
real estate holdings.
Director of Wyoming County
Bank.
----------------------------------------------------------------------------------------------------------------------
Joseph F. Hurley 47 2003 2004 2007 Founder and Chief Executive
Officer of
Savingforcollege.com LLC, a
publishing and professional
education company that
focuses on Section 529
qualified tuition programs.
Partner in Bonadio & Co.,
LLP, a public accounting
firm. Director of Burke
Group, Inc. and The FI
Group, Inc.
----------------------------------------------------------------------------------------------------------------------
James H. Wyckoff 52 1985 2004 2007 University Professor with
the Departments of Public
Administration and Economics
at State University of New
York Albany.
----------------------------------------------------------------------------------------------------------------------
2
======================================================================================================================
Age as of Expiration of
Director Nominee for a Annual Director Expiration of Term Upon Company Positions and
Two-year Term Meeting Since Current Term Election Principal Occupations
======================================================================================================================
Pamela Davis Heilman 55 2002 2005 2006 Partner in the law firm
Hodgson Russ LLP since
1984. Vice President
Business Division for last
five years.
----------------------------------------------------------------------------------------------------------------------
The following table sets forth information about the continuing directors.
======================================================================================================================
Age as of
Annual Director
Director Name Meeting Since Expiration of Term Company Positions and Principal Occupations
======================================================================================================================
John R. Tyler, Jr. 69 2000 2006 Retired as corporate attorney in 2000.
Formerly Partner of Nixon Peabody LLP,
specializing in banking regulation and
corporate finance. Director of Bath
National Bank.
----------------------------------------------------------------------------------------------------------------------
James E. Stitt 55 2003 2006 President and Chief Executive Officer of
Alcas Corporation, a manufacturer of Cutco
brand of cutlery since 2001. President and
Chief Operating Officer of Alcas
Corporation from 1999 - 2001. Director of
First Tier Bank & Trust.
----------------------------------------------------------------------------------------------------------------------
Peter G. Humphrey 49 1983 2005 Chairman of the Board, President and Chief
Executive Officer of FII since 1994.
Director of the New York Bankers
Association. Director of the Buffalo
Branch of the Federal Reserve Bank of New
York. Chairman of the Boards of Wyoming
County Bank, The National Bank of Geneva,
Bath National Bank and First Tier Bank &
Trust. Director of Burke Group, Inc. and
The F. I. Group, Inc.
----------------------------------------------------------------------------------------------------------------------
Barton P. Dambra 62 1993 2005 President of Markin Tubing LP, a
manufacturer of steel tubing with worldwide
sales. Director of The National Bank of
Geneva.
----------------------------------------------------------------------------------------------------------------------
John E. Benjamin 62 2002 2005 President of 3 Rivers Development
Corporation, a not-for-profit business for
the public and private economic development
of businesses and government in the greater
Corning, New York area. Director of Bath
National Bank.
----------------------------------------------------------------------------------------------------------------------
3
----------------------------------------------------------------------------------------------------------------------
Susan R. Holliday 48 2002 2005 President and Publisher of the Rochester
Business Journal, Inc., a business
newspaper, since 1988. Director of RGS
Energy Group, Inc. from 1997 - 2002.
Advisory Board member of RGE since 2002
----------------------------------------------------------------------------------------------------------------------
In 2003, the Board of Directors held ten meetings. All directors attended more
than 75% of the Board meetings and the meetings of Committees on which they
serve with the exception of Jon J. Cooper, who was unable to attend three of the
ten Board meetings. There is no required attendance policy with respect to the
Annual Meeting of Shareholders, however 100% of the directors did attend the
2003 FII Annual Meeting. John R. Tyler, Jr. is the Lead Director, and presides
at executive sessions of non-management directors.
The Board of Directors has established the following three standing committees:
Audit; Management Development & Compensation; and Nominating/Governance. All
three committees function under written charters, which outline the respective
authority, membership, meetings, duties and responsibilities.
The Audit Committee reviews the general scope of the audit conducted by the
independent auditors, and matters relating to our financial reporting, internal
control systems and credit quality. In performing its function, the Audit
Committee meets separately with representatives of the independent auditors,
internal auditors, loan review firm and senior management. In 2003, the Audit
Committee held seven meetings. The Audit Committee membership is currently
comprised of Barton P. Dambra as Chairperson, John R. Tyler, Jr., Susan R.
Holliday, James E. Stitt, and Joseph F. Hurley. After a review of the
requirements, his qualifications and experience including being a New York State
Certified Public Accountant, along with discussions with outside legal counsel,
the Board has concluded that Barton P. Dambra fully meets the required "audit
committee financial expert" definition. See further discussion of committee in
the separate Audit Committee Report on pages 9 -10.
The Management Development & Compensation Committee is responsible for making
recommendations to the Board of Directors with respect to the compensation of
our executive officers, for establishing policies relating to our overall
compensation plans, practices and employee benefits, and overseeing management
development and succession plans. The Committee also administers our Management
Stock Incentive Plan and grants awards to eligible employees under the plan. The
Management Development & Compensation Committee membership is currently
comprised of Pamela Davis Heilman as Chairperson, Samuel M. Gullo, and John E.
Benjamin. In 2003, the Management Development & Compensation Committee held
twelve meetings.
The Nominating/Governance Committee is charged with assisting the Board of
Directors in identifying qualified individuals to become directors, determining
membership on Board committees and addressing corporate governance issues. The
Nominating/Governance Committee membership is currently comprised of John R.
Tyler, Jr. as Chairperson, James H. Wyckoff, Pamela Davis Heilman, and John E.
Benjamin. Committee members are considered independent under the NASDAQ rules.
In 2003, the Nominating/Governance Committee held seven meetings. This
4
committee's charter is available on pages 20 - 21 as Exhibit B as well as on
FII's website at www.fiiwarsaw.com. The FII Nominating / Governance Committee
will consider nominations made by shareholders or directors received timely
pursuant to FII's By-laws. The evaluation process will include, but not limited
to, determining (i) whether the nominee would be independent as defined in the
Corporate Governance Guidelines, (ii) that the nominee fits the qualifications
set forth in the FII Board Succession Plan, and (iii) that the nominee fits the
Board's then current needs for diversity, geographic distribution, and
professional expertise. Written nominations should be directed to the FII
Director of Human Resources. The committee will evaluate all nominees on the
same basis, provided that current directors who are eligible for reelection may
be evaluated solely on the basis of their record of performance as an FII
director.
In 2003 directors who were not employed by FII or our subsidiary banks were paid
an annual retainer of $10,000, 50% in cash and 50% in FII common stock, and a
separate fee for each Board and Committee meeting that they attended. The 2003
fee schedule for attending each meeting was as follows: $1,000 per Board
meeting, $600 per committee meeting for a Committee Chairperson, and $500 per
committee meeting for each other member. We do not compensate directors who are
employed by us or our subsidiary banks for service as directors. Under the 1999
Directors Stock Incentive Plan, our non-employee directors receive option grants
of 1,000 shares of FII common stock annually. The annual option grants to
non-employee directors in May 2003 contained an exercise price of $20.50 and a
three-year vesting period. An eligible director whose service begins on a date
other than the date of an Annual Meeting of Shareholders receives a pro rata
option grant.
5
STOCK OWNERSHIP
The following table sets forth information, based upon representations by such
persons or entities, believed by FII to be the beneficial owners of more than 5%
of its outstanding common stock. Unless otherwise indicated, each person named
below held sole voting and investment power over the shares held.
====================================================================================
Name Address Number of Percent of
Shares Class(6)
====================================================================================
Estate of Donald G. Humphrey C/O Nixon Peabody LLP
Rochester, NY 14604 591,979 5.16%
------------------------------------------------------------------------------------
Wyoming County Bank 55 North Main Street
(Held in Trusts) Warsaw, NY 14569 869,989 7.58%
------------------------------------------------------------------------------------
James H. Wyckoff 2122 Rosendale Road
Niskayuna, NY 12309 915,127(3) 7.98%
------------------------------------------------------------------------------------
220 Liberty Street
Peter G. Humphrey Warsaw, NY 14569 582,869(2) 5.08%
------------------------------------------------------------------------------------
The following table sets forth information, as of March 12, 2004, with respect
to the beneficial ownership of FII's common stock (including vested portion of
options) by (a) each of the continuing directors and nominees, (b) the
continuing "Named Executive Officers" specified in the Summary Compensation
Table, and (c) all directors and executive officers of FII as a group.
================================================================================
Number of Shares
Name of Common Stock(1) Percent of Class(6)
================================================================================
Peter G. Humphrey 582,869(2) 5.08%
--------------------------------------------------------------------------------
Barton P. Dambra 12,597 *
--------------------------------------------------------------------------------
Samuel M. Gullo 7,748 *
--------------------------------------------------------------------------------
John R. Tyler, Jr 3,197 *
--------------------------------------------------------------------------------
Joseph F. Hurley 953 *
--------------------------------------------------------------------------------
James H. Wyckoff 915,127(3) 7.98%
--------------------------------------------------------------------------------
John E. Benjamin 881 *
--------------------------------------------------------------------------------
Pamela Davis Heilman 681 *
--------------------------------------------------------------------------------
Susan R. Holliday 6,681 *
--------------------------------------------------------------------------------
James E. Stitt 507 *
--------------------------------------------------------------------------------
Jon J. Cooper 44,932 *
--------------------------------------------------------------------------------
Douglas L. McCabe 27,875 *
--------------------------------------------------------------------------------
Randolph C. Brown 33,938(4) *
--------------------------------------------------------------------------------
Thomas D. Grover 1,537 *
--------------------------------------------------------------------------------
Directors and executive officers as a 2,617,312(5) 22.82%
group (18 persons)
--------------------------------------------------------------------------------
* Denotes less than 1%
(1) Includes amounts subject to stock options granted exercisable within 60
days of March 12, 2004: 75,200; 3,800; 2,951; 2,200; 67; 3,000; 533; 333;
333; 67; 41,332; 24,667; 29,068; 1,037 for individuals listed
respectively. For the group this totals 221,681 shares.
(2) Includes 301,019 shares held by trusts over which, Mr. Humphrey, as
trustee, exercises voting and disposition powers.
6
(3) Includes 661,600 shares held in trust accounts - as trustee, Mr. Wyckoff
exercises voting and disposition powers. Includes 26,700 shares held in a
family foundation - as a Board member of the foundation, Mr. Wyckoff
shares voting and disposition powers.
(4) Includes 50 shares held in a custodian account for his son.
(5) Includes 869,989 shares held by Wyoming County Bank as Trustee under
various trust agreements.
(6) The percent of class assumes the exercise of all outstanding vested
options issued to Directors and management and, therefore, on a pro forma
basis, 11,470,768 shares of common stock outstanding.
7
STOCK PERFORMANCE GRAPH
The Stock Performance Graph compares the cumulative total return on FII's common
stock against the cumulative total return of the NASDAQ Stock Market Index of
U.S. Stocks and the SNL Securities L.C. ("SNL") $1 Billion - $5 Billion Bank
Asset Size Index, for the period since June 25, 1999, when FII began trading
publicly, through December 31, 2003. The graph assumes that $100 was invested on
June 25, 1999 in FII's common stock and the indices, and that all dividends were
reinvested.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
---------------------------------------------------------------------------------------------------
Period Ending
-----------------------------------------------------------------
Index 06/25/99 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
---------------------------------------------------------------------------------------------------
Financial Institutions, Inc. 100.00 82.28 95.32 167.91 214.84 212.24
NASDAQ - Total US 100.00 159.62 96.09 76.23 52.70 79.39
SNL $1B-$5B Bank Index 100.00 94.69 107.45 130.56 150.71 204.95
---------------------------------------------------------------------------------------------------
Source : SNL Financial LC, Charlottesville, VA (434) 977-1600
(C) 2004
8
AUDIT COMMITTEE REPORT
The Audit Committee of the Company assists the Board of Directors in its general
oversight of the Company's financial reporting process, internal controls and
audit functions. The Audit Committee is comprised solely of independent members,
including a financial expert, as defined by the NASDAQ rules, and operates under
a written charter adopted by the Board of Directors. The Committee reviews and
assesses the adequacy of its charter on an annual basis. See the Audit Committee
charter as Exhibit A on pages 18 - 19.
Management is responsible for the Company's internal controls and financial
reporting process. The Company's independent accountants, KPMG LLP ("KPMG"), are
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with auditing standards generally accepted in
the United States of America and to issue a report thereon. The Audit
Committee's responsibility is to monitor and oversee the financial reporting and
audit processes.
In connection with these responsibilities, the Company's Audit Committee met
with management and the independent accountants to review and discuss the
Company's December 31, 2003 consolidated financial statements. The Audit
Committee also discussed with the independent accountants the matters required
by Statement on Auditing Standards No. 61 (Communication with Audit Committees).
The Audit Committee received written disclosures from the independent
accountants required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and considered the
compatibility of non-audit services with KPMG's independence.
I. Audit Fees
Fees billed by KPMG for professional services rendered in connection with the
audits of the Company's consolidated financial statements, the limited reviews
of the interim consolidated financial statements included in the Company's Forms
10-Q and consents and review of documents filed with the SEC were $170,500 for
fiscal year ended December 31, 2003 and $255,475 for fiscal year ended December
31, 2002.
II. Audit Related Fees
Audit-related services consist of audits of the Company's broker-dealer
subsidiary's financial statements, financial statements of employee benefit
plans, acquisition due diligence, regulatory compliance procedures, and
consultation concerning financial accounting and reporting standards. These fees
were $46,500 for fiscal year ended December 31, 2003 and $60,410 for fiscal year
ended December 31, 2002.
Tax Fees
Aggregate fees for tax compliance and advisory services for the fiscal year
ended December 31, 2003 were $81,250 and $83,720 for the fiscal year ended
December 31, 2002.
All Other Fees
No additional fees than reported as audit fees, audit related fees and tax fees
were billed by KPMG for the fiscal years ended December 31, 2003 and December
31, 2002.
9
Procedures have been adopted that require Audit Committee pre-approval of
permissible services to be performed by the independent accountant, including
the fees and other compensation to be paid; certain routine additional
professional services not to exceed $10,000 per quarter may be performed at the
request of the Company without such approval. The additional professional
services include tax assistance, research and compliance, assistance in research
of accounting literature, and assistance in due diligence activities. A listing
of the additional services provided to the Company each quarter, if any, is
provided to the Company's Audit Committee at the first scheduled meeting after
the end of the quarter. Reporting of these services is a standing agenda item
for each Audit Committee meeting.
Based upon the Audit Committee's discussions with management and the independent
accountants, and its review of the information described above, the Audit
Committee recommended that the Board of Directors include the audited
consolidated financial statements in the Company's Annual Report on Form 10-K
for the year ended December 31, 2003, to be filed with the Securities and
Exchange Commission.
AUDIT COMMITTEE
Barton P. Dambra, Chairperson
John R. Tyler, Jr.
Susan R. Holliday
James E. Stitt
Joseph F. Hurley
COMPENSATION OF EXECUTIVE OFFICERS
MANAGEMENT DEVELOPMENT & COMPENSATION COMMITTEE REPORT
The Management Development and Compensation Committee (Committee), which serves
as the Compensation Committee of the Company, is composed entirely of
independent directors as defined by the rules of the National Association of
Securities Dealers, Inc. As described in the Committee charter, the primary
responsibilities of the Committee include:
o Approving the design of the compensation program for the Company's
executives that includes:
- Base salary and benefits,
- Short-term incentive cash compensation, and
- Long-term stock option program.
o Establishing policies relating to overall compensation practices and
employee benefits.
In designing these programs, the Committee focuses on several important goals:
o Aligning the interests of executives with shareholders' goals of
maximizing long-term share value and return.
o Attracting, retaining and motivating high-performing executives in
the most cost-efficient manner.
10
o Creating a high-performing and satisfying workplace.
In 2003, the Company conducted a comprehensive review of its employee
compensation and benefit programs. The objectives of the study were several: to
maintain programs that would enable the Company to attract and retain quality
employees; to control the overall costs of compensation and benefits; to support
the key business and strategic objectives of the Company, and to validate that
current salary ranges and structures used are in line with those of comparable
financial institutions.
The Committee determined that the Company's aggregate employee compensation and
benefit costs compared very favorably with other financial services industries
of similar size, when measured as a percentage of average assets, total revenue,
total non-interest expense, as well as total cost per employee. Benefit plan and
incentive compensation designs were reviewed as well. As a result, changes were
made in benefit plan design that should reduce overall expense over time while
allowing the Company to remain competitive in the labor market.
The Company's compensation program reflects a mix of stable and at risk
compensation. The Committee believes that this structure fairly rewards
executives and aligns their interests with those of shareholders in an efficient
manner. The method of determining compensation for senior executives is
described in more detail below.
Base salary. The performance of each senior executive is evaluated annually
against the duties outlined in that person's position description as well as
annual goals that have been identified for the upcoming year. Based on the
outcome of the performance evaluation, an annual base rate is established.
Formal salary ranges have been developed based upon duties as described in each
position description. The Committee periodically reviews the ranges which have
been set to make sure they adequately reflect the position descriptions and the
Company's overall management structure. To ensure competitive salaries, the
Committee regularly reviews industry compensation surveys and market rates
generally for organizations of similar size. While these benchmarks are used as
guidelines, individual performance is considered first when base compensation is
established. The Committee intends that salaries be set roughly at peer medians
accounting for size, cost of living differences and organizational performance.
Year-to-year increases in base salary depend upon prior year performance,
determined through the formal evaluation process. Merit increases are based on
the individual's performance rating and the executive's placement within the
salary range for his or her position.
Incentive compensation. The incentive compensation program provides senior
executives with additional incentive to meet performance targets set by the
Committee. Senior executives receive bonus compensation at year-end, based upon
the Company's performance and the performance of their business unit relative to
targets established at the beginning of the year. Targets are based on prior
year performance, an assessment of the current and expected opportunities and
market conditions and the specific strategic objectives established for the
current year. Incentive compensation also is based on objective performance with
respect to return on equity, net interest margin, non-interest income relative
to average assets and non-interest expense relative to average assets. These
targets are aligned with the Company's strategic direction and focus. Because
Company objective targets were not achieved, bonus compensation for each senior
executive was reduced by at least 50% versus 2002.
11
Stock options. To encourage growth in shareholder value, the Committee provides
senior executives with stock options. The stock option plan, which was approved
by the shareholders, is intended to encourage share ownership in order to
motivate and retain key officers who are in a position to substantially affect
the long-term success of the Company. The Committee believes that stock options,
which provide value to participants only when the Company's shareholders benefit
from stock price appreciation, are an important component of aligning the
interests of executives with those of the Company's shareholders. The Company's
senior executives received a five-year grant of stock options in 1999 as part of
the program which expired on December 31, 2003. Effective January 1, 2004, the
Committee adopted a new five-year program under which stock options are granted
annually to all participants, including senior executives, based on a multiple
of base salary. In designing the program, the Committee weighed the incentive
gains from stock options with the accompanying dilution of ownership to arrive
at a plan which is beneficial to the long run interests of the Company's
shareholders.
The principal components of the 2003 compensation program for named executives
are summarized in the table on the next page.
Chief Executive Officer. Mr. Peter Humphrey's compensation is determined in
generally the same manner as other senior executives, as described above, but
with particular focus on overall company performance versus objective targets.
Using these criteria, the Committee conducts an annual evaluation of Mr.
Humphrey's performance to determine year-to-year changes in his base salary and
his incentive compensation. As a result of his annual review in 2002, his base
salary for 2003 was increased by 7% over his base salary for 2002. For purposes
of determining his incentive compensation for 2003, Mr. Humphrey's review
focused on the Company's financial performance in 2003, its strategic and
tactical achievements during the year and its organizational development and
utilization of senior executives and the Board of Directors. Although Mr.
Humphrey achieved many of his and the Company's performance goals for 2003,
especially in the area of strategic initiatives, the Company's 2003 financial
performance inhibited his ability to earn his full incentive compensation, and
his 2003 bonus decreased 64% versus the prior year.
MANAGEMENT DEVELOPMENT & COMPENSATION COMMITTEE
Pamela Davis Heilman, Chairperson
John E. Benjamin
Samuel M. Gullo
12
SUMMARY COMPENSATION TABLE
The following table sets forth certain information about the compensation
received by our Chief Executive Officer and our four other most highly
compensated executive officers (collectively, the "Named Executive Officers") in
the capacities indicated.
Long-Term
Compensation
Annual Compensation Awards
-----------------------------------------------------------------------
Securities All Other
Underlying Compen-
Name and Salary Bonus Options/SARS Payouts sation (1) (2) (3)
Principal Position Year ($) ($) (#) ($) ($)
--------------------------------------------------------------------------------------------------------------------------
Peter G. Humphrey 2003 366,167 55,977 0 0 66,370
President & Chief Executive 2002 341,703 154,022 0 0 61,481
Officer of FII 2001 319,844 166,872 0 0 41,680
Jon J. Cooper 2003 213,623 45,756 0 0 31,466
Senior Vice President of FII and 2002 199,653 95,819 0 0 23,619
President & Chief Executive Officer 2001 184,500 96,845 0 0 24,536
of Wyoming County Bank
Randolph C. Brown 2003 166,701 33,000 0 0 32,758
Senior Vice President of FII and 2002 130,286 66,049 0 0 21,942
President & Chief Executive Officer 2001 120,745 64,325 0 0 32,707
of The National Bank of Geneva
Douglas L. McCabe 2003 162,831 25,361 0 0 3,000
Senior Vice President of FII and 2002 155,861 67,839 0 0 11,000
President & Chief Executive Officer 2001 150,000 35,898 37,000 0 4,128
of Bath National Bank
Thomas D. Grover 2003 151,825 35,000 0 0 0
Senior Vice President and Chief
Risk Officer of FII.
----------
(1) Includes, for 2003, matching and additional performance contributions made
by us under our 401(k) plan in the amounts of $3,000, $3,000, $3,000, and
$3,000, for Messrs. Humphrey, Cooper, Brown, and McCabe, respectively.
Also includes the entire amount of endorsement split-dollar life insurance
premiums paid by us (including amounts that will be recovered by us upon
payment of the policy or other events) in the amounts of $50,831, $28,466,
and $29,758 for life insurance policies for Messrs. Humphrey, Cooper, and
Brown, respectively. Additionally for Mr. Humphrey the amount includes
$12,539 as consideration for relinquishing his interest in a previous
split dollar insurance policy arrangement.
(2) Includes, for 2002, matching and additional performance contributions made
by us under our 401(k) plan in the amounts of $11,000 each for Messrs.
Humphrey, Cooper, Brown, and McCabe. Also includes the entire amount of
split-dollar life insurance premiums paid by us (including amounts that
will be recovered by us upon payment of the policy or other events) in the
amounts of $50,481, $12,619, and $10,942 for life insurance policies for
Messrs. Humphrey, Cooper, and Brown, respectively.
(3) Includes, for 2001, matching and additional performance contributions made
by us under our 401(k) plan in the amounts of $8,295, $9,030, $4,889 and
$4,128 for Messrs. Humphrey, Cooper, Brown, and McCabe respectively. Also
includes the entire amount of split-dollar life insurance premiums paid by
us (including amounts that will be recovered by us upon payment of the
policy or other events) in the amounts of $33,385, $15,506, and $27,818
for life insurance policies for Messrs. Humphrey, Cooper, and Brown,
respectively.
13
STOCK OPTION GRANTS IN LAST FISCAL YEAR
======================================================================================================================
Market Price Potential Realizable Value at
Securities % of Total Exercise ($ per share) Assumed Annual Rate of Stock
Underlying Options or Base if different Price Appreciation for
Options Granted to Price than Option Term(3)
Granted Employees ($ per exercise Expiration -------------------------------
Name (#) in 2003 Share) price Date 0% ($) 5% ($) 10% ($)
======================================================================================================================
Randolph C. Brown 3,000(1) 4.56% $24.68 N/A 7/28/2013 $0 $46,571 $118,026
----------------------------------------------------------------------------------------------------------------------
Thomas D. Grover 2,712(2) 4.12% $22.51 N/A 2/18/2013 $0 $38,399
$97,314
----------------------------------------------------------------------------------------------------------------------
(1) Vests in 3 equal installments annually beginning on 7/28/2004.
(2) Vests in 3 equal installments annually beginning on 2/18/2004.
(3) These values are based on assumed rates of appreciation only. Actual
gains, if any, on shares acquired on option exercises are dependent on the
future performance of FII's common stock. There can be no assurances that
the values reflected in this table will be achieved.
OPTION EXERCISES IN LAST FISCAL YEAR AND
YEAR END OPTION VALUES
====================================================================================================================
Aggregate Number of Securities Value of Unexercised
Option Underlying Unexercised Options In-The-Money
Exercises of Fiscal Year End Options at Fiscal Year End(1)
====================================================================================================================
Shares
Acquired Value
on Exercise Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
====================================================================================================================
Peter G. Humphrey None -- 75,200 18,800 $1,070,096 $267,542
Jon J. Cooper None -- 41,332 10,333 $ 588,154 $147,038
Randolph C. Brown None -- 29,068 10,267 $ 413,638 $114,059
Douglas L. McCabe None -- 24,667 12,333 $ 169,709 $ 84,851
Thomas D. Grover None -- 67 2,845 $ 194 $ 15,898
--------------------------------------------------------------------------------------------------------------------
(1) The value of unexercised stock options represents the difference between
the exercise prices of the stock options and the closing price of FII's
common stock on the NASDAQ national market on December 31, 2003, which was
$28.23 per share.
BENEFIT PLANS
FII maintains a defined benefit retirement plan that covers all of our full- and
part-time employees who satisfy the eligibility requirements. Employees are
eligible to participate in the plan if they have completed one year of
employment and are at least 21 years of age. Participants with five or more
years of service are entitled to annual pension benefits beginning at 62 years
of age. The amount of the retirement benefit is 1.75% of the participant's
highest average five consecutive years' compensation multiplied by the number of
years of service up to 35 years, plus 1.25% of the participant's highest average
five consecutive years' compensation for service in excess of 35 years, not to
exceed 40 years of creditable service, less 0.49% of the average of the
participant's final three years' compensation multiplied by the number of years
of service up to 35 years. If a participant terminates employment with us before
completing five years of service, such person forfeits the right to receive plan
benefits. Total plan expense charged to our operations for 2003, 2002 and 2001
and was $1,364,000, $726,000, and $270,000, respectively, and the market value
of the assets held by the plan at December 31, 2003 was approximately $17.56
million. The following table sets forth
14
the estimated plan benefits payable upon retirement for various levels of
compensation and years of service:
================================================================================
Years of Service
================================================================================
Compensation 15 20 25 30 35
------------ -- -- -- -- --
================================================================================
$150,000 30,518 40,691 50,864 61,037 71,209
$175,000 36,143 48,191 60,239 72,287 84,334
$200,000 41,768 55,691 69,614 83,537 97,459
$250,000 41,768 55,691 69,614 83,537 97,459
$300,000 41,768 55,691 69,614 83,537 97,459
$350,000 41,768 55,691 69,614 83,537 97,459
$400,000 41,768 55,691 69,614 83,537 97,459
$450,000 41,768 55,691 69,614 83,537 97,459
$500,000 41,768 55,691 69,614 83,537 97,459
$550,000 41,768 55,691 69,614 83,537 97,459
$600,000 41,768 55,691 69,614 83,537 97,459
$625,000 41,768 55,691 69,614 83,537 97,459
--------------------------------------------------------------------------------
For purposes of determining benefits under the plan, compensation includes
salary and bonus but cannot exceed $200,000. The benefit computation is based on
a life annuity with a five-year certain. The Social Security Offset (included in
the above figures) is 0.49% times the three-year final average salary up to
covered compensation times the number of years of creditable service up to 35
years. This offset assumes a 2003 benefit for a participant of age 65. The
estimated credited years of service for each of the Named Executive Officers as
of December 31, 2003 were as follows: Peter G. Humphrey, 24.417; Jon J. Cooper,
5.750; Randolph C. Brown, 11.167; Douglas L. McCabe, 2.667, and Thomas D. Grover
..25.
FII also maintains a contributory profit sharing plan pursuant to Internal
Revenue Code Section 401(k) covering substantially all employees. At least one
year of service is required to be eligible for employer-matching contributions.
Participants may contribute up to 50% of their compensation to the Plan, subject
to IRS limitations. Each year we determine, at our discretion, the amount of
matching contributions. Total plan expense for 2003, 2002, and 2001 was
$299,000, $1,057,000, and $708,000, respectively.
EMPLOYMENT AGREEMENTS
FII has a three-year employment agreement with Peter G. Humphrey providing for
his employment as FII's President and Chief Executive Officer. The agreement
includes change of control and change of authority provisions. If his employment
is terminated within twelve months after a change in control and a change of
authority (as those terms are defined in the agreement), Mr. Humphrey will
receive an amount equal to the sum of 300% of the base salary plus the average
annual incentive compensation paid FII to him for the most recent three tax
years ending before the date on which the change of control and change of
authority occurred. In the event of termination without cause (as defined in the
agreement) Mr. Humphrey will receive an amount equal to the sum of two years
base salary plus the average of the annual incentive compensation paid for the
most recent two tax years ending before the date on which termination occurred.
Messrs. Cooper, Brown, McCabe, and Burke are CEOs of our subsidiaries and have
employment agreements with them providing employment as the subsidiaries'
President and Chief Executive Officer. Each agreement is for a three-year term
and includes
15
change of control and change of authority provisions. If the executive's
employment is terminated within twelve months after a change in control and a
change of authority (as those terms are defined in the agreement), the executive
will receive an amount equal to the sum of 200% of the base salary plus the
average annual incentive compensation paid by FII to him for the most recent two
tax years ending before the date on which the change of control and change of
authority occurred. In the event of termination without cause (as defined in the
agreement) the executive will receive an amount equal to the sum of one year
base salary and the annual incentive compensation paid for the most recent tax
year ending before the date termination occurred.
INDEPENDENT AUDITORS
KPMG LLP has served as the independent auditors of FII since 1995.
Representatives of KPMG LLP are expected to be present at the Annual Meeting.
They will be given an opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Our directors, executive officers and many of our substantial shareholders and
their affiliates are also customers. "Affiliates" include corporations,
partnerships and other organizations in which they are officers or partners, or
in which they and their immediate families have at least a 10% interest. During
2003, our subsidiary banks made loans in the ordinary course of business to many
of our directors, officers, principal shareholders and their affiliates, and to
directors, officers and their affiliates of our subsidiary banks. On December
31, 2003, the aggregate principal amount of loans to the FII directors, named
executive officers and their affiliates was $3,096,000. Loans outstanding by
subsidiary banks to certain officers, directors or companies in which they have
10% or more beneficial ownership (including officers and directors of FII as
well as its subsidiaries) approximated $25,651,000 at December 31, 2003. Loans
made by our subsidiary banks to officers, directors or companies in which they
have a 10% or more beneficial interest (including officers and directors of FII
as well as its subsidiaries) were made in the ordinary course of business on
substantially the same terms, including interest rate and collateral, as
comparable transactions with other customers and did not involve more than the
normal risk of collectibility or present other unfavorable features. Loans to
directors, executive officers and substantial shareholders are subject to
limitations contained in the Federal Reserve Act, which requires that such loans
satisfy certain criteria. We expect to have such transactions or transactions on
a similar basis with our directors, executive officers, principal shareholders
and their associates in the future.
FII engaged the law firm of Hodgson Russ LLP to provide legal services to FII
during 2003. Director Pamela Davis Heilman is currently a partner with this law
firm.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires FII's directors
and executive officers and persons who own more than 10% of a registered class
of FII's equity securities to file with the U.S. Securities and Exchange
Commission reports of transactions in and ownership of FII common stock.
Officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish FII with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such reports and
16
representations that no other reports are required, all Section 16(a) filing
requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with during the fiscal year ended December 31,
2003 except that Randolph C. Brown and Patrick C. Burke each filed one late
report.
SHAREHOLDER PROPOSALS
Any proposal which an FII shareholder wishes to have considered by the Board of
Directors for inclusion in FII's proxy statement for a forthcoming meeting of
shareholders must be submitted on a timely basis and meet the requirements of
the Securities Exchange Act and FII's By-laws. Proposals for the 2005 annual
meeting will not be deemed to be timely submitted unless they are received by
FII, directed to the President and Chief Executive Officer of FII, at its
principal executive offices, not later than December 7, 2004. Management proxies
will be authorized to exercise discretionary voting authority with respect to
any other matters unless FII receives such notice thereof at least 45 days prior
to the date of the Annual Meeting.
Shareholders may communicate with the Board of Directors or any individual
director by sending such communication to the attention of the Corporate
Secretary of FII who will forward all such communication to the Board or the
individual directors.
OTHER MATTERS
The FII Board of Directors knows of no other matters to be presented at the
meeting. However, if any other matters properly come before the meeting, the
persons named in the enclosed proxy will vote on such matters in accordance with
their best judgment.
The cost of solicitation of proxies will be borne by FII. In addition to
solicitation by mail, some officers and employees of FII may, without extra
compensation, solicit proxies personally or by telephone or telegraph and FII
will request brokerage houses, nominees, custodians and fiduciaries to forward
proxy materials to beneficial owners and will reimburse their expenses.
To the extent permitted under the Rules of the Securities and Exchange
Commission, the information presented in this Proxy Statement under the captions
`Audit Committee Report' (including the Audit Committee Charter), `Management
Development & Compensation Committee Report,' and `Stock Performance Graph'
shall not be deemed to be `soliciting material,' shall not be deemed filed with
the SEC and shall not be incorporated by reference in any filing by FII under
the Securities Exchange Act of 1934, as amended, whether made before or after
the date hereof and irrespective of any general incorporation language in any
such filing.
SHAREHOLDERS MAY RECEIVE A COPY OF FII'S ANNUAL REPORT ON FORM 10-K FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION WITHOUT CHARGE ON REQUEST TO THE
CORPORATE SECRETARY, FINANCIAL INSTITUTIONS, INC., 220 Liberty Street, Warsaw,
New York 14569.
April 5, 2004
17
Exhibit A
FII AUDIT COMMITTEE CHARTER
I. AUTHORITY and PURPOSE
The Board of Directors has established the Audit Committee to assist the
Board in fulfilling its oversight and fiduciary responsibilities. The
primary roles of the Audit Committee are to:
Serve as an independent and objective party to monitor FII's
financial reporting process and system of internal controls.
Review and assess the audit efforts of FII's internal audit
department and the independent accountants (external auditors). The
external auditors are ultimately accountable to the Board and the
Audit Committee.
Provide an open forum for communication among the independent
accountants, financial and senior management, the internal audit
department, and the Board of Directors.
The Audit Committee will fulfill its roles by carrying out the duties and
responsibilities as described in Section IV.
II. COMPOSITION
The Audit Committee shall be comprised of 3 or more directors as
determined by the Board, each of whom shall be independent Directors, as
defined by the National Association of Securities Dealers (NASD) and the
Securities and Exchange Commission (SEC), and free from any relationship
that, in the opinion of the Board, would interfere with the exercise of
his or her independent judgment as a member of the Committee. All members
of the Committee should possess a familiarity with basic finance and
accounting practices. At least one member of the Committee shall be deemed
an "audit committee financial expert", or the Company will provide the
required disclosure that the Committee does not include such an expert, as
defined by the SEC.
III. MEETINGS
The Audit Committee will meet at least four times annually, or more
frequently as circumstances warrant. Meetings should allow for independent
and separate discussions with the independent accountants, senior
management and the internal audit personnel as deemed necessary to ensure
candid and open communication.
IV. DUTIES and RESPONSIBILITIES
The following identify the specific areas and actions that the Audit
Committee is responsible for:
Recommend to the Board of Directors the selection, re-appointment
and/or termination of the independent accountants, considering their
independence and effectiveness.
Evaluate permissibility of all services to be performed by the
independent accountants, as well as pre-approve those engagements
deemed to be allowable, including the fees and other compensation to
be paid (for both audit and non audit services).
Evaluate independent accountants' adherence to partner rotation
requirements prior to annual recommendation and approval.
Review and approve the scope of the annual audit with the
independent accountants. Review FII's interim financial and
operating results with senior management and the independent
accountants.
Be available to review any significant or material matters
pertaining to the filing of the 10-Q or to the release of earnings
with the independent accountants.
18
IV. DUTIES and RESPONSIBILITIES (continued)
Prepare a report for inclusion in FII's proxy statement that states
that the committee has:
o Reviewed and discussed with management FII's annual
financial statements, including any report, opinion or
review rendered by the independent accountant.
o Discussed the matters that are required to be
communicated by Statement on Auditing Standards No. 61
(SAS 61), "Communication with Audit Committees" with the
external auditor.
o Received the written disclosures and the letter from the
external auditor on independence matters as required by
Independence Standards Board Standard Number 1.
o Discussed independence issues with the external auditor.
o Recommended to the Board of Directors that the audited
financial statements be filed with the SEC.
Review and update the Committee's charter annually, and publish the
charter in the proxy statement at least every three years, or in the
next proxy statement after any significant amendment to the charter.
Discuss the coordination of audit effort with the internal auditor
and external auditor to assure completeness of coverage, reduction
of redundant work, and the effective use of audit resources.
Review and approve the scope of the internal audit activities on an
annual basis.
Review the internal audit reports issued for areas of the holding
company, non-bank subsidiaries and those of concern of banking
subsidiaries.
Approve the selection of external audit firms to perform internal
audit work, as needed, to complement the internal audit program,
considering their independence and effectiveness, as well as approve
the fees and other compensation to be paid.
Recommend to the Board of Directors the selection, re-appointment
and/or termination of the independent external loan review entity,
considering their independence and effectiveness, as well as approve
the fees and other compensation to be paid.
Review and approve the scope of the external loan review.
Review the reports issued by the external loan review entity along
with any management responses to recommendations.
Review and pre-approve the engagement and compensation of any other
public accounting firm employed for the purpose of issuance of audit
report or related work at the holding company or any subsidiary.
Seek appropriate third party expert advice, including legal counsel
opinions, when matters of a significant and material nature arise
that cannot be resolved in the normal course of business.
Report Committee activities/actions to the Board of Directors at
each meeting of the Board following a Committee meeting.
Perform any other activities consistent with this Charter, FII's
By-laws and governing law, as the Committee or the Board deems
necessary or appropriate.
19
Exhibit B
FII Nominating / Governance Committee Charter
AUTHORITY and PURPOSE
The Board of Directors has established the Nominating/Governance Committee
(the "Committee") to assist the Board of Directors (the "Board") in:
o identifying qualified individuals to become directors;
o recommend to the Board qualified director nominees for
election at the shareholders annual meeting,
o determine membership on the Board committees;
o recommend a set of Corporate Governance Guidelines;
o conduct annual self-evaluations of the board and the Committee
and;
o report annually to the Board on the Chief Executive Officer
("CEO") succession plan.
COMMITTEE MEMBERSHIP
The Committee members shall be appointed, and may be replaced, by the
Board. The Committee shall consist of no fewer than three directors. All members
of the Committee shall meet the independence standards as specified in the
Company's corporate governance guidelines, SEC rules, and Nasdaq rules.
MEETINGS
The Committee shall meet as often as necessary to carry out its
responsibilities. Any Committee member may request the Chairman of the Committee
to call a meeting. The Chairman of Committee shall report on any Committee
meetings held at the next regularly scheduled Board meeting following the
Committee meeting.
DUTIES and RESPONSIBILITIES
The following identify the specific areas and actions that the
Nominating/Governance Committee is responsible for:
o The Committee shall recommend to the Board director nominees
for election at the shareholders' annual meeting.
o Prior to nominating an existing director for reelection to the
Board, the Committee shall consider and review among other
factors, the existing director's
i. Board and committee meeting attendance and
performance;
ii. length of Board service;
iii. experience, skills and contributions that the
existing director brings to the Board; and
iv. independence
o The Committee shall develop and administer programs for the
orientation of new directors and the continuing professional
development of all directors.
20
DUTIES and RESPONSIBILITIES, cont'd.
o A director nominee shall meet the director qualifications
specified in the Company's Corporate Governance Guidelines,
including that the director nominee possess personal and
professional integrity, has good business judgment, relevant
experience and skills and will be an effective director in
conjunction with the full board in collectively serving the
long-term interests of the Company's shareholders.
o The Committee shall have the sole discretion and authority to
retain any search firm to assist in identifying director
candidates, retain outside counsel and/or any other internal
or external advisors and approve all related fees and
retention terms.
o The Committee shall recommend to the Board for its approval
directors to be appointed as members on each Board committee.
Prior to recommending the reappointment of a director to a
Board committee, the Committee shall review the existing
director's independence, if required, skills, Board committee
meeting attendance, performance and contribution, and his or
her fulfillment of committee responsibilities. If a vacancy on
a Board committee occurs, the Committee shall recommend a
director with relevant experience and skills, and who is
independent, if required by the committee charter, to be
appointed to fill the vacancy. The Committee shall develop and
administer programs for the orientation of new directors and
the continuing development of all directors.
o The Committee shall recommend to the board for its approval
the Corporate Governance Guidelines. The Committee will
review, when required because of developments in the law, and,
in any event annually the Corporate Governance Guidelines and
recommend any proposed changes to the Board for approval.
o The Committee shall develop and recommend to the Board for its
approval an annual self-evaluation process for each director
and for the full Board that will be conducted and overseen by
the Committee. The Committee shall report to the full Board,
following the end of each fiscal year, the results of the
annual self-evaluation, including any comments from the
self-evaluations. However, any comments from the
self-evaluations regarding individual directors shall be
reported to the Chairman and CEO and if necessary, to the
relevant committee chairman.
o The Committee shall annually review its own performance by
distributing to its members a written self-assessment, which
shall be separate from the member's self-assessment of full
Board activity. The Chairman shall report the evaluation
results to the Board.
o The Committee shall make an annual report to the Board on
emergency as well as expected CEO succession planning. The
Committee will work with the full Board to recommend and
evaluate potential successors to the CEO. The CEO should at
all times make available his or her recommendations and
evaluations of potential CEO successors, along with a review
of any development plans recommended for such individuals.
o Concerns that are expressed by staff of FII or its
subsidiaries or FII Shareholders regarding matters (a) which
are outside the scope of the Company's Code of Ethics for CFO,
Senior Financial Officers and CEO, and (b) which allege a
violation by any director, officer or employee of FII or its
subsidiaries of the Company's Code of Business Conduct and
Ethics shall be reported by the appropriate management
officials to the Committee for review and investigation and
the Committee shall recommend to the Board a plan to resolve
each such incident.
o The Committee shall review and reassess the adequacy of this
Charter annually and recommend any proposed changes to the
Board for approval.
21
FINANCIAL INSTITUTIONS, INC.
ANNUAL MEETING OF SHAREHOLDERS
May 5, 2004
The undersigned hereby appoints Peter G. Humphrey, Ronald A. Miller, and Sonia
M. Dumbleton or any of them, with full powers of substitution, attorneys and
proxies to represent the undersigned at the Annual Meeting of Shareholders of
FII to be held on May 5, 2004 and at any adjournment or adjournments thereof,
with all the power which the undersigned would possess if personally present,
and to vote as set forth on the reverse all shares of stock which the
undersigned may be entitled to vote at said meeting, hereby revoking any earlier
proxy for said meeting.
(Continued and to be signed on the other side.)
Please Detach and Mail in the Envelope Provided
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY
WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF DIRECTORS AS SET FORTH IN THE PROXY STATEMENT.
The Board of Directors recommends that shareholders vote FOR proposal 1.
1. Election of Directors
FOR all WITH-
nominees HOLD For All
listed for all Except
nominees
listed
Nominees:
Samuel M. Gullo
Joseph F. Hurley
James H. Wyckoff
Pamela Davis Heilman
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
--------------------------------------
2. In accordance with their judgment in connection with the transaction of
such other business, if any, as may properly come before the meeting.
PLEASE COMPLETE, DATE, SIGN AND
RETURN IN THE ENCLOSED ENVELOPE
*** YOUR PROXY VOTE IS IMPORTANT ***
No matter how many shares you own, please sign, date and mail your proxy now,
even if you plan to attend the meeting.
It is important that you vote so that FII will not have to bear the unnecessary
expense of another solicitation of proxies.
Signed: _______________________________________ Dated: __________________ , 2004
NOTE: Name of shareholder(s) should be signed exactly as it appears on this
proxy.