Unitrin, Inc. 1997 Stock Option Plan

NON-QUALIFIED STOCK OPTION AND SAR AGREEMENT

 

This NON-QUALIFIED STOCK OPTION AND SAR AGREEMENT ("Agreement") is made as of
this ___ day of ___________, 200_ ("Grant Date") between UNITRIN, INC., a
Delaware corporation (the "Company"), and [name] (the "Option Holder").

 

RECITALS

A. The Board of Directors of the Company has adopted the Unitrin, Inc. 1997
Stock Option Plan, including all amendments to date (the "Plan").

The Plan provides for the granting to selected executive and other key
employees, and other persons furnishing services to the Company or any
subsidiary or affiliate of the Company, as the Stock Option Committee (the
"Committee") may from time to time determine, of options to purchase shares of
Common Stock of the Company and tandem stock appreciation rights ("SAR(s)").

B. Pursuant to the Plan, the Plan shall be administered by the Committee
appointed by and comprised of members of the Board of Directors.

C. Pursuant to the Plan, the Committee has determined that it is to the
advantage and best interest of the Company and its stockholders to grant a
non-qualified stock option (and tandem SAR) to the Option Holder covering
[shares] [number] shares of the Company's Common Stock as an inducement to
remain in the service of the Company and as an incentive for increased effort
during such service, and has approved the execution of this Non-Qualified Stock
Option and SAR Agreement between the Company and the Option Holder.

D. Neither the option nor the SAR granted hereby is intended to qualify as an
"incentive stock option" under Section 422A of the Internal Revenue Code of
1986, as amended.

NOW, THEREFORE, the parties hereto agree as follows:

 

1. Grant.

(a) The Company grants to the Option Holder the right and option (the "Option")
to purchase on the terms and conditions hereinafter set forth, all or any part
(subject to the limitations of Section 3) of an aggregate of [shares][number]
shares of the Common Stock of the Company 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 Grant Date
(the "Expiration Date") or earlier in accordance with Section 3(e) or Section 5.

(b) The Option is coupled with a SAR that is exercisable to the extent, and only
to the extent, that the Option is exercisable under the vesting provisions of
Section 2. The term of the SAR shall expire on the Expiration Date and shall be
subject to early termination pursuant to Section 3(e) and Section 5. The SAR
shall entitle the Option Holder to surrender the Option (or any portion thereof,
subject to Section 3(a)) to the Company unexercised and receive in exchange for
the surrender of the Option (or the surrendered portion thereof) that number of
shares of the Company's common stock having an aggregate value equal to: (A) the
excess of the fair market value of one share of such stock (as determined in
accordance with Section 4) over the purchase price per share specified in
Section 1(a) above (or, if applicable, such price as adjusted pursuant to
Section 9 or Section 14 hereof), multiplied by (B) the number of such shares
subject to the Option (or portion thereof) which is so surrendered.

2. Vesting. The Option Holder may not purchase any shares by exercise of this
Option or the SAR prior to the six-month anniversary of the Grant Date ("Initial
Vesting Date"). The shares subject to this Option and the SAR shall become
exercisable in four (4), equal annual installments of twenty-five percent (25%)
commencing on the Initial Vesting Date, and shall be fully exercisable on the
third anniversary of the Initial Vesting Date. 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 (subject to the limitations of
Section 3) of the shares subject to this Option which are currently exercisable,
or such lesser number of shares as may be available through the exercise of the
SAR. The total number of shares subject to the Option, including the number of
shares subject to the Option which are currently exercisable by the Option
Holder each shall be reduced by the number of shares previously acquired by the
Option Holder pursuant to this Agreement.

3. Manner of Exercise.

(a) 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) by check payable to the order of the Company in an amount equal
to the purchase price, (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
electronic transfer of funds to an account of the Company, or (iv) by other
means acceptable to the Committee. This Option may not be exercised for a
fraction of a share and no partial exercise of this Option may be for less than
fifty (50) shares or the total number of shares then eligible for exercise, if
less than fifty (50) shares, unless the Option/SAR is scheduled to expire within
six months of the date of the exercise.

(b) Each exercise of the SAR shall be by means of a written notice of exercise
delivered to the Company, specifying whether the Option Holder is surrendering
all or a portion of the Option and, if only a portion of the Option is being
surrendered, how many shares are included in such portion (to the extent
determinable by the Option Holder). Upon satisfaction of the Option Holder's
obligation to pay the Company the amount of all taxes that the Company is
required to withhold in connection with such exercise as specified in Section 7
below, the Company shall issue to the Option Holder a number of shares of the
Company's common stock computed in accordance with Section 1(b) and the Option
and the SAR (or the surrendered portions thereof) shall be deemed extinguished.
The SAR may only be settled in shares of the Company's common stock and not by
payment of cash to the Option Holder. Any fractional share that would otherwise
result from an exercise of the SAR shall be rounded down to the nearest whole
share.

(c) The date of exercise shall be: (i) in the case of a broker-assisted cashless
exercise, the earlier of (A) the trade date of the related sale of stock, or (B)
the date that the Company receives the purchase price; (ii) in the case of a
Restorative Option (as defined in the Plan) or SAR, the date that the Company
receives written notice of exercise; or (iii) in all other cases, the date that
the Company receives the purchase price.

(d) This Option and SAR may be exercised (i) during the lifetime of the Option
Holder only by the Option Holder or the Option Holder's Representative (as
defined in the Plan); and (ii) after the Option Holder's death, by the
Representative of the Option Holder's estate or 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 and the SAR, the Option
Holder, or the Option Holder's permitted successors in interest, may exercise
the Option and the SAR on behalf of the spouse of the Option Holder or such
spouse's successors in interest.

(e) Except as provided in Section 14 below with respect to the coupling of a SAR
to a Restorative Option, in the event the Option (or any portion thereof) is
exercised, then the SAR (or the corresponding portion) shall terminate. In the
event that the SAR (or any portion thereof) is exercised, then the Option (or
the corresponding portion) shall likewise terminate.

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. The provisions of
Sections 11 or 12 of the Plan are hereby incorporated into and made a part of
this Agreement.

6. Shares to be Issued in Compliance with Federal Securities Laws and Exchange
Rules. No shares issuable upon the exercise of this Option or SAR 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 any principal securities exchange
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.

7. Withholding of Taxes. Upon the exercise of this Option and SAR, the Company
shall require the Option Holder or the Option Holder's permitted successor in
interest to pay the Company the amount of any taxes which the Company may be
required to withhold with respect to such shares. Subject to the limitations set
forth in the next three sentences, the Option Holder or his/her Representative
may elect to satisfy all or any portion of such tax withholding obligations
either by: (i) any of the methods described in Sections 3(a)(i) through 3(a)(iv)
above, or (ii) directing the Company to withhold shares that would otherwise
have been issued pursuant to the exercise of this Option or SAR. Neither the
Option Holder nor his/her Representative shall have the right to utilize shares
already owned by the Option Holder or to have shares withheld, in either case,
in excess of the minimum number required to satisfy applicable tax withholding
requirements based on minimum statutory withholding rates for federal and state
tax purposes, including payroll taxes. Shares used in either of the foregoing
ways to satisfy tax withholding obligations will be valued at their fair market
value on the date of exercise. In the case of an exercise of the SAR, the
Company retains the right to require the Option Holder to pay any and all
withholding taxes arising out of such exercise solely in cash.

8. No Assignment. This Option and SAR and all rights and privileges granted
hereby (including the right of exercise) shall not be transferred, assigned,
pledged or hypothecated 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 to transfer, assign, pledge, hypothecate or otherwise
dispose of this Option or SAR or any other rights or privileges granted hereby
contrary to the provisions hereof, this Option and SAR and all other rights and
privileges contained herein shall immediately become null and void and of no
further force or effect.

9. Adjustment for Reorganizations, Stock Splits, etc. The provisions of Section
14 of the Plan relating to certain adjustments in the case of stock splits,
reorganizations, equity restructurings, change of control events and similar
matters described therein are hereby incorporated in and made a part of this
Agreement.

Adjustments under this Section 9 shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. No fractional shares of stock shall be
issued under the Plan on any such adjustment.

10. 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 employee welfare plan or program of
the Company or of any subsidiary of the Company.

11. No Rights as a Stockholder Until Issuance of Stock Certificate. Neither the
Option Holder nor any other person legally entitled to exercise this Option or
SAR shall be entitled to any of the rights or privileges of a stockholder of the
Company in respect of any shares issuable upon any exercise of this Option or
SAR unless and until the shares have been issued and delivered to: (i) Option
Holder in certificate form; (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.

12. Not an Employment or Service Contract. Nothing herein contained shall be
construed as an agreement by the Company, expressed or implied, to employ Option
Holder or contract for Option Holder's services, to restrict the Company's right
to discharge Option Holder or cease contracting for Option Holder's services or
to modify, extend or otherwise affect in any manner whatsoever, the terms of any
employment agreement or contract for services which may exist between the Option
Holder and the Company.

13. Agreement Subject to Stock Option Plan. The Option and SAR 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 Agreement without the prior written
consent of the Option Holder. To the extent that the terms or conditions of this
Agreement conflict with the terms or conditions of the Plan, the Plan shall
govern.

14. Restorative Stock Options. A Restorative Option (as defined in the Plan)
will be granted in connection with the exercise of this Option and a 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 5 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 pursuant to the
exercise of this Option, the Option Holder and his or her spouse agree to be
bound by all the terms and conditions of this Agreement and the Plan with
respect to such Restorative Option. Each Restorative Option that may result from
the exercise of this Option shall be deemed to be coupled with a SAR. Each
Restorative Option and tandem SAR shall be identical in terms with the original
Option and SAR provided for in Section 1(a) and (b) of this Agreement, except
that the Restorative Option and tandem SAR shall (i) have an exercise price per
share equal to the fair market value of the one share of the Company's common
stock on the date of the exercise giving rise to such Restorative Option, and
(ii) fully vest six months after its inception. No Restorative Option shall be
granted with respect to any Constructive or Actual Delivery of Mature Shares, or
any shares withheld, in either case to pay any applicable withholding taxes that
arise out of any exercise of the SAR.

15. Arbitration. All disputes related to this Agreement or any Options granted
hereunder, shall be submitted to binding arbitration with the American
Arbitration Association ("AAA") pursuant to the AAA National Rules for the
Resolution of Employment Disputes ("AAA Rules"). A copy of the AAA Rules is
available to the Option Holder upon written request to the Company's Director of
Human Resources at One East Wacker Drive, Chicago, Illinois 60601 (or such other
address as the Company may specify from time to time), or may be obtained online
at: www.adr.org.

To initiate arbitration, either party must file a Demand for Arbitration
("Demand") in the manner described in the AAA Rules. After a demand has been
filed and served, either party may request that the dispute initially be
mediated pursuant to the AAA Rules. If mediation does not fully resolve the
dispute, then the matter will be subject to arbitration before a single
arbitrator who shall have the power to award any types of legal or equitable
relief available in a court of competent jurisdiction, including, but not
limited to, attorneys' fees and costs, to the extent such relief is available
under applicable law, and all defenses that would be applicable in a court of
competent jurisdiction shall be available. All administrative costs of
arbitration (including reimbursement of filing fees) and the fees of the
arbitrator will be paid by the Company.

16. Execution. This Option and SAR have 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.

 

[ADD THE NEXT SECTION FOR ALL GRANTS TO THE FOLLOWING OFFICERS OF THE COMPANY:
CEO; COO; PRESIDENT; AND VICE PRESIDENTS]

17. Stock Holding Period. The Option Holder agrees to hold all shares of Common
Stock acquired upon the exercise of Options (including Restorative Options)
granted hereunder for a minimum of twelve months following the date of such
exercise. This holding period shall not apply to shares sold or tendered by the
Option Holder and/or withheld by the Company to pay the Option exercise price
and/or to settle tax liabilities related to the Option exercise.

 

 

UNITRIN, INC. OPTION HOLDER

 

 

By: _____________________ _______________________

[Authorized Officer] [Name]

 

 

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 Non-Qualified Stock
Option and SAR Agreement.

 

 

_________________________

 

_________________________

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