Unitrin, Inc. 1995 Non-Employee Director Stock Option Plan

NON-QUALIFIED STOCK OPTION AGREEMENT

 

This NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") is made as of this
______ day of _________, between UNITRIN, INC., a Delaware corporation (the
"Company"), and ________________, the ("Option Holder").

RECITALS

A. The Board of Directors and Shareholders of the Company have adopted the 1995
Non-Employee Director Stock Option Plan.

B. The Plan provides, among other things, for the automatic grant of stock
options to non-employee directors of the Company in the amounts and at the times
set forth in the Plan.

C. The option granted hereby is not intended to qualify as an "incentive stock
option" under Section 422A of the Internal Revenue Code of 1986, as amended.

D. Terms used herein and not otherwise defined shall have the meanings given to
such terms in the Plan.

NOW, THEREFORE, the parties hereto agree as follows:

1. Grant of Option

. The Company grants to the Option Holder the right and option to purchase on
the terms and conditions hereinafter set forth, all or any part of an aggregate
of four thousand (4,000) shares of the Common Stock of the Company (the
"Option") at the purchase price of $_____ per share, exercisable from time to
time in accordance with the provisions of this Agreement during a period
expiring on the tenth anniversary of the date of this Agreement or such later
date as may result from the application of Section 6 (the "Expiration Date").
This Option is also subject to early termination in accordance with Section 5.

2. Vesting

. The Option Holder may not purchase any shares by exercise of this Option
between the date of this Agreement and the first anniversary date hereof. The
shares subject to this Option shall become exercisable in full by the Option
Holder commencing on the first anniversary date of this Agreement. Subject to
earlier termination under Section 5 or the terms of the Plan and no later than
the Expiration Date, the Option Holder may purchase all or any part of the
shares subject to this Option which are currently exercisable in the manner and
under the terms specified in Section 3 hereof. The number of shares subject to
the Option which the Option Holder may purchase shall be reduced by the number
of shares previously purchased by the Option Holder pursuant to the Agreement.

3. Manner of Exercise

. Each exercise of this Option shall be by means of a written notice of exercise
delivered to the Company. Such notice shall identify the Options being
exercised. When applicable, the notice shall also specify the number of Mature
Shares (as defined in the Plan) that the Option Holder plans to deliver in
payment of all or part of the exercise price. Before shares will be issued, the
full purchase price of the shares subject to the Options being exercised shall
be paid to the Company using the following methods, individually or in
combination: (i) in cash or by certified, cashier's or (as funds clear) personal
check payable to the order of the Company; (ii) by Constructive or Actual
Delivery (as defined in the Plan) of Mature Shares with a fair market value as
of the close of business on the date of exercise equal to or greater than the
purchase price; (iii) by wire transfer to an account specified by the Company,
or (iv) by delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds to pay such full purchase price (in which case
the exercise will be effective upon the earlier of the trade date or receipt of
such proceeds by the Company for the related sale of shares). The Company
reserves the right to accept shares of stock of the Company in payment of the
purchase price of an option only if such shares have been held by the Option
Holder for a specified minimum period of time during which such shares were not
exchanged to effectuate another option exercise. This Option may not be
exercised for a fraction of a share and no partial exercise of this Option may
be for less than: (i) one hundred (100) shares; or (ii) the total number of
shares then eligible for exercise, if less than one hundred (100) shares.

This Option may be exercised: (i) during the lifetime of the Option Holder only
by the Option Holder or in the event a guardian or legal representative is
appointed during the Option Holder's lifetime to handle the affairs of the
Option Holder, such guardian or legal representative; and (ii) after the Option
Holder's death by his or her transferees by will or the laws of descent or
distribution, and not otherwise, regardless of any community property interest
therein of the spouse of the Option Holder, or such spouse's successors in
interest. If the spouse of the Option Holder shall have acquired a community
property interest in this Option, the Option Holder, or the Option Holder's
permitted successors in interest, may exercise the Option on behalf of the
spouse of the Option Holder or such spouse's successors in interest.

4. Fair Market Value of Common Stock. The fair market value of a share of Common
Stock shall be determined for purposes of this Agreement by reference to the
closing price of a share of Common Stock on the New York Stock Exchange, as
reported by The Wall Street Journal for the Grant Date or date of exercise, as
applicable, or if such date is not a business day, for the business day
immediately preceding such date, (or, if for any reason no such price is
available, in such other manner as the Committee may deem appropriate to reflect
the then fair market value thereof).

5. Cessation of Services, Death or Permanent Disability

. All rights of the Option Holder in this Option shall terminate three (3)
months after the date of the termination of Option Holder's service as a
director of the Company for any reason other than: (i) the death of Option
Holder; (ii) cessation of services as a director because Option Holder, although
nominated by the Board of Directors, is not elected by the shareholders to the
Board of Directors; or (iii) retirement of Option Holder because of total and
permanent disability as defined in Section 22(e)(3) of the Internal Revenue Code
of 1986, as amended (each of which events is hereafter collectively referred to
as a "Termination Event"). If Option Holder ceases to be a director of the
Company because of a Termination Event, then this Option shall vest immediately
to the extent not already vested and shall expire twelve (12) months (and not
three months) after the date of such Termination Event. In the event of Option
Holder's death, any vested, unexercised portion of this Option may be exercised
by the person or persons to whom the Option Holder's rights under the Option
shall pass by any reason of the death of the Option Holder, whether by will or
by the applicable laws of descent and distribution. However, in no event may the
Option be exercised to any extent by anyone after the Expiration Date.

6. Extension of Expiration in Certain Cases. From time to time, the Company may
declare "blackout" periods during which directors and covered employees are
prohibited from engaging in certain transactions in Company securities. In the
event that the scheduled Expiration Date of this Option shall fall within a
blackout period that has been declared by the Company and that applies to the
Option Holder, then the Expiration Date shall automatically, and without further
notice to Option Holder, be extended until such time as fifteen (15) consecutive
business days have elapsed after the scheduled Expiration Date without
interruption by any blackout period that applied to the Option Holder.

7. Shares to be Issued in Compliance with Federal Securities Laws and Other
Rules

. No shares issuable upon the exercise of this Option shall be issued and
delivered unless and until there shall have been full compliance with all
applicable requirements of the Securities Act of 1933, as amended (whether by
registration or satisfaction of exemption conditions), all applicable listing
requirements of the New York Stock Exchange (or such other exchange(s) or
market(s) on which shares of the same class are then listed) and any other
requirements of law or of any regulatory bodies having jurisdiction over such
issuance and delivery. The Company shall use its best efforts and take all
necessary or appropriate actions to assure that such full compliance on the part
of the Company is made. By signing this Agreement, the Option Holder represents
and warrants that none of the shares to be acquired upon exercise of this Option
will be acquired with a view towards any sale, transfer or distribution of said
shares in violation of the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations promulgated thereunder, or any applicable "blue sky"
laws, and that Option Holder hereby agrees to indemnify the Company in the event
of any violation by Option Holder of such Act, rules, regulations or laws.

8. Withholding of Taxes

. Upon the exercise of this Option, the Company shall require the Option Holder
or the Option Holder's permitted successor in interest to pay the Company the
amount of taxes, if any, which the Company may be required to withhold with
respect to such shares.

9. Transferability

. This Option and all other rights and privileges granted hereby shall not be
transferred, assigned, pledged or otherwise encumbered in any way, whether by
operation of the law or otherwise except by will or the laws of descent and
distribution. Without limiting the generality of the preceding sentence, no
rights or privileges granted hereby may be assigned or otherwise transferred to
the spouse or former spouse of the Option Holder pursuant to any divorce
proceedings, settlement or judgment. Upon any attempt so to transfer, assign,
pledge, encumber or otherwise dispose of this Option or any other rights or
privileges granted hereby contrary to the provisions hereof, this Option and all
other rights and privileges contained herein shall immediately become null and
void and of no further force or effect.

10. Adjustment for Reorganizations, Stock Splits, etc.

If the outstanding shares of the Common Stock of the Company are increased,
decreased, changed into, or exchanged for a different number or kind of shares
or securities of the Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split, or other
similar transaction, an appropriate and proportionate adjustment shall be made
in the maximum number and kind of shares receivable upon the exercise of this
Option, without change in the aggregate purchase price applicable to the
unexercised portion of this Option but with a corresponding adjustment in the
price for each share or other unit of any security covered by this Option. No
fractional shares of stock shall be issued under the Plan on any such
adjustment.

11. Participation by Option Holder in Other Company Plans

. Nothing herein contained shall affect the right of the Option Holder to
participate in and receive benefits under and in accordance with the then
current provisions of any pension, insurance, profit sharing or other welfare
plan or program of the Company or of any subsidiary of the Company in which
non-employee directors of the Company are otherwise eligible to participate.

12. No Rights as a Stockholder Until Issuance of Shares

. Neither the Option Holder nor any other person legally entitled to exercise
this Option shall be entitled to any of the rights or privileges of a
shareholder of the Company in respect of any shares issuable upon any exercise
of this Option unless and until such shares shall have been issued and delivered
to: (i) Option Holder in the form of certificates, (ii) a brokerage or other
account for the benefit of Option Holder either in certificate form or via
"DWAC" or similar electronic means, or (iii) a book entry or direct registration
account in the name of Option Holder.

13. No Right to Continue as a Director

. Nothing herein contained shall be construed as an agreement by the Company,
expressed or implied, that Option Holder has a right to continue as a director
of the Company for any period of time or at any particular rate of compensation.

14. Agreement Subject to Stock Option Plan

. The Option hereby granted is subject to, and the Company and the Option Holder
agree to be bound by, all of the terms and conditions of the Plan, as the same
shall be amended from time to time in accordance with the terms thereof, but no
such amendment shall adversely affect the Option Holder's rights under this
Option without the prior written consent of the Option Holder. In the event that
the terms or conditions of this Agreement conflict with the terms or conditions
of the Plan, the Plan shall govern.

15. Restorative Stock Options

. A Restorative Option (as defined in the Plan) will be granted in connection
with the exercise of this Option and any Restorative Option resulting from this
Option if: (i) the Option Holder elects to pay some or all of the exercise price
of such Option (the "Underlying Option") and/or any related withholding taxes by
Constructive or Actual Delivery of Mature Shares (or, in the case of such taxes,
by directing the Company to withhold shares that would otherwise be issued upon
exercise of such Underlying Option); and (ii) the Fair Market Value of a share
of the Company's Common Stock on the exercise date exceeds the exercise price of
a share of Common Stock subject to the Underlying Option by at least fifteen
percent (15%).

The number of shares of Common Stock subject to the Restorative Option shall be
equal to the sum of: (a) any Mature Shares used by Constructive or Actual
Delivery to pay the exercise price and/or the related withholding taxes, and (b)
any shares of Common Stock withheld in connection with the exercise in payment
of withholding taxes. The exercise price of the Restorative Option shall be
equal to one hundred percent (100%) of the Fair Market Value of a share of the
Common Stock on the date the Underlying Option is exercised. The Restorative
Option shall be fully vested beginning six months after the date of its grant
and shall expire on the expiration date of the Underlying Option. All other
terms of the Restorative Option shall be identical to the terms of the
Underlying Option.

No Restorative Option shall be granted if on the date of exercise of the
Underlying Option: (i) the Option Holder does not meet the eligibility
requirements under Section 4 of the Plan; (ii) such Option would be scheduled to
expire within twelve (12) months; or (iii) the Fair Market Value of a share of
the Company's Common Stock does not meet the fifteen percent (15%) appreciation
requirement set forth above.

To the extent the Option Holder is granted a Restorative Option under the Plan
pursuant to the exercise of this Option, the undersigned Option Holder and his
or her spouse agree to be bound by all the terms and conditions of this Option
Agreement and the Plan with respect to such Restorative Option.

16. Execution

. This Option has been granted, executed and delivered as of the day and year
first above written at Chicago, Illinois, and the interpretation, performance
and enforcement of this Agreement shall be governed by the laws of the state of
Illinois without application of its conflicts of laws and principles.

 

UNITRIN, INC. OPTION HOLDER

 

 

By: __________________________ _________________________________

Richard C. Vie

 

By his or her signature below, the spouse of the Option Holder agrees to be
bound by all of the terms and conditions of the foregoing Option Agreement.

 

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