January 30, 2008

PURPOSE

The Board of Directors has established the Management Development & Compensation Committee to assist the Board in fulfilling its oversight and fiduciary responsibilities to Financial Institutions, Inc. (FII) and its subsidiaries (collectively, the “Company”).

COMPOSITION

The Management Development & Compensation Committee shall consist of no fewer than 3 directors. All members of the Management Development & Compensation Committee shall meet the independence requirements of the SEC and NASDAQ.

The Board on the recommendation of the Nominating/Governance Committee shall appoint the members of the Management Development & Compensation Committee. Management Development & Compensation Committee members may be replaced by the Board at any time.

MEETINGS

The Management Development & Compensation Committee will meet at least 3 times annually, or more frequently as circumstances warrant. Meetings should allow for independent and separate discussions with senior management and other resources as deemed necessary to ensure candid and open communication. The Chairman of the Board or any member of the Committee may call meetings of the Committee and shall report on any Committee meetings held at the next scheduled Board meeting following the Committee meeting.

RESPONSIBILITIES

The Management, Development & Compensation Committee will:

• Review and approve corporate goals and objectives relevant to the CEO and Key Executive Officers compensation.
  
  
• Evaluate the CEO’s performance in light of those goals and objectives.
  
  
• Review and approve compensation levels of Key Executive Management.
  
  
• Determine the compensation level, short and long-term incentive awards and other benefits for the CEO and other Company Executive Officers considering the Company’s performance and relative shareholder return, the value of similar incentive awards to CEO’s and other executive officers at comparable companies, and such other circumstances as the Committee deems relevant.
  
  
• Approve and present to the Board base compensation grades, incentive compensation plans and equity-based plans for the Company’s Executives and Senior Management staff.
  
  
• Make recommendations to the Board with respect to major modifications to the Company’s 401(k) and pension plans.
  
  
• Approve implementation or revision of any major compensation or benefit program.
  
  
• Evaluate competitive compensation levels for Executives and Senior Management based on reliable industry analyses and approve the “peer group” to be included in the competitive compensation analysis.
  
  
• Approve all grants under the Capital Management Stock Incentive Plan and administer the Plan in accordance with its terms.
  
  
• Retain and terminate any consulting firms engaged to assist in the evaluation of director, CEO, or senior executive compensation, or Company benefit programs, including the approval of fees and other compensation paid for these services.
  
  
• Review and approve contracts or other transactions with current or former executive officers of the Corporation including consulting arrangements, employment contracts, change of control agreements, severance or termination arrangements. Report Committee actions to the full Board.
  
  
• Evaluate competitive compensation levels for directors, including the Chairman of the Board, based on reliable industry analysis against an approved peer group. Make recommendations for director compensation to the full Board for approval.
  
  
• Review Executive and Senior Management development programs and succession plans for the Company’s Executive Officers.
  
  
• Prepare a report for inclusion in FII’s proxy statement that states the Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of SEC Regulation S-K with management and, based on such review and discussions, the Committee recommends to the Board that the Compensation Discussion and Analysis be included in the Proxy Statement.
  
  
• Be available to review any significant matters pertaining to executive staffing.
  
  
• Seek appropriate third party expert advise, 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.
  
  
• The Committee shall annually review its own performance by distributing to its members a written self-assessment. It will also review annually this Charter and determine the Committee’s compliance with the Committee Charter. Changes to the Committee Charter will be presented to the Board for approval.
  
  
• The Committee will discharge such other duties as are delegated to it by the Board.