Document:

Unitrin, Inc. 2002 Stock Option Plan

  
 Exhibit 10.4

  
 UNITRIN, INC. 
 2002 STOCK OPTION PLAN 
 Amended and
Restated 
  
 1. PURPOSE 
  
 The purpose of the Unitrin, Inc. 2002 Stock Option Plan is to secure for Unitrin, Inc. and
its shareholders the benefits arising from stock ownership by selected executive and other key employees of Unitrin, Inc. or its subsidiaries or affiliates and such other persons as the Committee (as defined hereafter) may from time to time
determine. 
  
 2. DEFINITIONS 
  
 As used herein, the following words or terms have the meanings set forth below: 

 
 “Affiliate” means any person or entity controlled directly or indirectly
by the Company, whether by equity ownership, contract or otherwise and shall include direct and indirect subsidiaries of the Company and mutual companies the management of which is controlled by the Company or its subsidiaries. 
  
 “Board” means the Board of Directors of the Company. 
  
 “Code” means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute. 
  
 “Committee” means the
Compensation Committee of the Board or any successor committee. The Committee shall be composed of two or more persons who qualify both as “outside directors” under Section 162(m) of the Code and related regulations and “non-employee
directors” under Rule 16b-3 of the Securities Exchange Act of 1934, or any successor provisions. 
  
 “Common Stock” means the common stock of the Company. 
  
 “Company” means Unitrin, Inc., a Delaware corporation. 
  
 “Constructive or Actual Delivery” means either: (i) presentation to the Company of a recent brokerage account statement or other written evidence satisfactory to the Committee evidencing beneficial
ownership by the Participant of Shares other than Shares held in 401(k), pension, IRA or similar accounts, or (ii) physical delivery of certificates evidencing Shares, properly indorsed for transfer to the Company or with an appropriately executed
stock power. 
  

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 “Disability” or “Disabled” refers to a physical or mental condition that: (i) would qualify a
Participant for benefits under a long-term disability insurance plan under which such Participant is covered, or (ii) in the absence of any such plan, would cause such Participant to be unable to substantially perform his or her duties as an
employee, director, consultant or advisor, as the case may be. 
  
 “Exercise Price” means the price at which the Shares underlying an Option may be purchased upon exercise of the Option. 
  
 “Fair Market Value,” as used to refer to the price of a Share on a particular day, means the closing price for the Common Stock for that day as
subsequently reported in The Wall Street Journal, or if no prices are quoted for that day, the last preceding day on which such prices are quoted (or, if for any reason no such price is available, in such other manner as the Committee may
deem appropriate to reflect the fair market value of the Common Stock.) 
  
 “ISO” means an Option that satisfies the requirements of Code Section 422(b) and any regulations promulgated thereunder from time to time, or any successor provisions thereto. 
  
 “Mature Shares” means Shares that satisfy the following requirements:

  
 (i) have been owned by a Participant free of any
encumbrances, vesting requirements or similar restrictions for at least six (6) months; and 
  
 (ii) have not been exchanged or surrendered by Constructive or Actual Delivery in full or partial payment of the Exercise Price and/or the related tax withholding obligations arising out of an Option exercise within
the previous six months. 
  
 The Committee may from time to time increase or
decrease the six-month holding periods specified in (i) and (ii) above in order to satisfy applicable legal or accounting requirements or to secure advantageous treatment for the Company or the Participants under any provision of law or any
accounting rule, pronouncement or interpretation by the Financial Accounting Standards Board or its successor. The Committee may eliminate the holding periods in (i) and (ii) above in the event that there are no legal or accounting requirements that
they be imposed or if there is no longer any advantage to the Company or the Participants that they be imposed and such elimination is otherwise consistent with applicable legal and accounting requirements. The Company may also reinstate holding
periods in order to satisfy applicable legal or accounting requirements or to secure advantageous treatment for the Company or the Participants of the type contemplated above. 
  

 2 

 “Non-Qualified Option” means an Option that does not satisfy the requirements for an ISO. 
  
 “Option” means an option granted to a Participant under this Plan to
purchase a designated number of Shares. 
  
 “Option Agreement”
means an agreement between the Company and a Participant evidencing the terms and conditions of a particular Option. 
  
 “Participant” means an individual selected by the Committee to receive an Option or Stock Appreciation Right under the Plan. 
  
 “Representative” means an executor, administrator, guardian, trustee or
other representative of a Participant who has legal authority to exercise such Participant’s Options or Stock Appreciation Rights on behalf of such Participant or such Participant’s estate. 
  
 “Restorative Option” means an Option granted to a Participant under Section
8 of the Plan. 
  
 “Retirement” or “Retires” means the
termination of a Participant’s employment with the Company and/or its subsidiaries or affiliates after attaining age 55. 
  
 “Shares” means shares of the Common Stock. 
  
 “Stock Appreciation Right” means a right of the type described in Section 9 of the Plan. 
  
 “Substantial Cause” means (a) the commission of a criminal act against, or in derogation of, the interests of the Company
or its subsidiaries or affiliates; (b) knowingly divulging confidential information about the Company or its subsidiaries or affiliates to a competitor or to the public or using such information for personal gain, including, without limitation, by
trading in Company securities on the basis of material, non-public information; or (c) the performance of any similar action that the Committee, in its sole discretion, may deem to be sufficiently injurious to the interests or reputation of the
Company or its subsidiaries or affiliates to constitute substantial cause for the termination of services by a Participant as an employee, director, consultant or advisor. Nothing in this Plan shall be construed to imply that a Participant’s
employment or other relationship with the Company or its subsidiaries or affiliates may only be terminated for Substantial Cause. 
  

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 3. THE COMMITTEE 
  
 The Plan shall be administered by the Committee, which shall have authority: 
  

	 	(i)	to construe and interpret the Plan and to prescribe, amend and rescind rules and regulations relating to the Plan; 

  

	 	(ii)	to make all determinations as to eligibility pursuant to Section 5(a) of the Plan; 

  

	 	(iii)	to grant Options and Stock Appreciation Rights as more fully described in Section 5(b) below; 

  

	 	(iv)	to make adjustments or modifications to, or to waive, the terms of any outstanding Options or Stock Appreciation Rights, provided that such actions are consistent with the terms of
the Plan and do not adversely affect or impair the rights under such Options or Stock Appreciation Rights; 

  

	 	(v)	to approve and determine the duration of leaves of absence which may be granted to Participants without constituting a termination of their employment for the purposes of the Plan;
and 

  

	 	(vi)	to make all other determinations necessary or advisable for the administration of the Plan. 

  
 All determinations and interpretations made by the Committee shall be binding and conclusive on all Participants and their Representatives,
successors in interest and beneficiaries. Any action of the Committee with respect to administration of the Plan shall be taken at a meeting of the Committee at which a quorum is present or by written consent of its members. 
  
 4. SHARES SUBJECT TO PLAN 
  
 Subject to adjustment as provided in Section 13(a) hereof, the maximum number of Shares that
may be issued pursuant to the exercise of Options and Stock Appreciation Rights shall not exceed five million (5,000,000) Shares in total. The maximum number of Shares that may be issued to an individual Participant under the Plan shall be one-third
of such total. If any Option granted under the Plan shall expire or terminate for any reason (other than surrender at the time of exercise of a related Stock Appreciation Right), without having been exercised in full, the unpurchased Shares subject
thereto shall again be available for grant under the Plan. Any Shares that are used by Constructive or Actual Delivery as full or partial payment for the Exercise Price of an Option and/or the withholding taxes arising from the exercise of such
Option, or that are withheld from the 

  

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Shares that would otherwise be issued upon exercise of such Option in full or partial payment of such withholding taxes, shall in each case be added to the
aggregate number of Shares available for issuance under this Plan. 
  
 5.
ELIGIBILITY AND GRANTING AUTHORITY 
  
 a) Eligibility.
The following persons shall be eligible to receive grants of Options or Stock Appreciation Rights under this Plan: 
  
 (i) executive and other key employees of the Company or of any subsidiary or affiliate of the Company who are selected by and in the sole discretion of:
(a) the Committee or, (b) if applicable, an executive officer of the Company who has been delegated such authority in accordance with Section 5(b)(ii) below; and 
  
 (ii) any key person selected by the Committee in its sole discretion who renders services to: (i) the Company or a Company
subsidiary or affiliate as a member of its board of directors, or (ii) the Company or a Company subsidiary or affiliate as a consultant or advisor pursuant to a written agreement. 
  
 Any persons selected pursuant to Section 5(a)(ii) above shall only be eligible to receive Non-Qualified Options (including
Restorative Options issued with respect to such Options). 
  
 b) Granting Authority. Subject to the provisions of the Plan, the authority and discretion to determine the Participants to whom and the time or times at which Options shall be granted, whether an Option will be an ISO or a
Non-Qualified Option, whether to couple a Stock Appreciation Right with an Option and the terms and conditions of such Right, the number of Shares to be subject to each Option, the Exercise Price, the number of installments, if any, in which each
Option may vest, the expiration date of each Option and all other terms and conditions of each Option shall reside with the following persons: 
  
 (i) the Committee; and 
  
 (ii) if authorized by a resolution adopted by the Board, one or more executive officers of the Company may be delegated such authority and discretion,
provided that no such officer may grant Options or Rights to himself or herself or to any officer of the Company who is subject to the reporting and short-swing liability provisions of Section 16 of the Securities Exchange Act of 1934. 

 

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 6. TERMS OF OPTIONS 
  
 a) Duration. Each Option and all rights associated therewith, shall expire on such date as the Committee may determine, subject to earlier
termination as provided in this Plan. All Options granted under this Plan shall be granted on or before February 1, 2012, except for Restorative Options which may continue to be granted after February 1, 2012 until the expiration dates of the
original Options from which such Restorative Options arose, subject in all events to the limitations in Section 8(b). 
  
 b) Exercise Price. The Exercise Price for each Share that is the subject of an Option shall be determined by the Committee and shall not be less
than the Fair Market Value of the Common Stock on the date of grant, subject to adjustment pursuant to Section 13. 
  
 c) Vesting. Each Option granted under this Plan shall vest and be exercisable in such installments, if any, during the period prior to its
expiration date as the Committee shall determine, and, unless otherwise specified in an Option Agreement, no Option shall be exercisable for at least six months after grant except in the case of the death or Disability of the Participant.

  
 d) Non-Transferability. Unless otherwise provided in
an Option Agreement, an Option (and any accompanying Stock Appreciation Right) shall, by its terms, be non-transferable by the Participant, either voluntarily or by operation of law, otherwise than by will or the laws of descent and distribution,
and shall be exercisable during the Participant’s lifetime only by the Participant (or, in the case of the incapacity of the Participant, by the Participant’s Representative) regardless of any community property interest therein of the
spouse of the Participant, or such spouse’s successors in interest. If the spouse of the Participant shall have acquired a community property interest in such Option (or accompanying Stock Appreciation Right), the Participant, or the
Participant’s Representative, may exercise the Option (or accompanying Stock Appreciation Right) on behalf of the spouse of the Participant or such spouse’s successors in interest. 
  
 e) Option Agreements. The terms of each Option granted pursuant to
this Plan shall be evidenced by an Option Agreement in a form approved by the Committee and signed by both the Company and the Participant, except that a Restorative Option may be evidenced by a certificate or statement issued by the Company that
recites the essential terms of such Option. 
  

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 7. EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS 
  
 a) Notice by Participant. Each Participant (or such
Participant’s Representative) who desires to exercise an Option or Stock Appreciation Right shall give advance written notice of such exercise to the Company in such form as may be prescribed from time to time by the Committee or the management
of the Company. 
  
 b) Payment for Exercises of
Options. Before shares will be issued in connection with an Option exercise, the Exercise Price of an Option shall be paid in full: (i) by check payable to the order of the Company, (ii) by Constructive or Actual Delivery of Mature Shares, (iii)
by electronic transfer of funds to an account of the Company, (iv) if authorized by the Committee, by a promissory note by the Participant payable to or to the order of the Company, upon such terms and conditions and secured by such collateral as
may be required by the Committee, or (v) any combination of the foregoing. Mature Shares used by Constructive or Actual Delivery to satisfy the Exercise Price of an Option shall be valued at their Fair Market Value on the date of exercise.

  
 c) Partial Exercises. No Option or Stock Appreciation
Right may be exercised for a fraction of a share and no partial exercise of any Option or Stock Appreciation Right may be made for less than fifty (50) shares unless the total number of Shares covered by an Option is less than 50 at the time of
exercise or unless an Option or Stock Appreciation Right is scheduled to expire within six months of the date of exercise. 
  
 d) Withholding Taxes. Upon the exercise of a Non-Qualified Option or a Stock Appreciation Right, the Company shall have the right to: (i) require
such Participant (or such Participant’s Representative) to pay the Company the amount of any taxes which the Company may be required to withhold with respect to such exercise, or (ii) deduct from all amounts paid in cash with respect to the
exercise of a Stock Appreciation Right the amount of any taxes which the Company may be required to withhold with respect to such cash amounts. Subject to the limitation set forth in the next sentence, a Participant or such Participant’s
Representative may elect to satisfy all or any portion of the tax withholding obligations arising from the exercise of an Option or Stock Appreciation Right either by: (1) any of the methods described in Section 7(b), or (2) directing the Company to
withhold Shares that would otherwise be issued pursuant to such exercise. No Participant or Participant’s Representative shall have the right to utilize Constructive or Actual Delivery of Mature Shares or 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. 
  

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 e) Exercise of Stock Appreciation Rights. Exercises of Stock Appreciation Rights shall be done in
accordance with provisions of Sections 7(a) and 9. 
  
 8. RESTORATIVE OPTIONS

  
 a) Grant and Terms of Restorative Options. Subject
to the remaining provisions of this Section 8, if a Participant elects to pay some or all of the Exercise Price of an 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), then such Participant shall be granted a Restorative Option to purchase additional Shares without
any further action required on the part of the Committee or any officer of the Company. The number of Shares 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 withheld from an exercise in payment of withholding taxes. The Exercise Price of the Restorative Option shall be equal to the Fair Market Value 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. 
  
 b)
Limitations on Restorative Options. No Restorative Options shall be granted: (i) to any Participant who does not meet any of the standards for eligibility set forth in Section 5(a) on the date of exercise of the Underlying Option, or (ii) if, on
the date of exercise of the Underlying Option, such Option is scheduled to expire within six (6) months. 
  
 9. STOCK APPRECIATION RIGHTS 
  
 If
deemed appropriate by the Committee, any Option may be coupled with a Stock Appreciation Right at the time of the grant of the Option, or the Committee may grant a Stock Appreciation Right to any Participant at any time after granting an Option to
such Participant but prior to the expiration date of such associated Option. Such Stock Appreciation Right shall be subject to such terms and conditions consistent with the Plan as the Committee shall impose, provided that: 
  
 (i) A Stock Appreciation Right shall be exercisable to the extent, and only
to the extent, the associated Option is exercisable and shall be exercisable only for such 

  

 8 

 
period as the Committee may determine (which period may expire prior to the expiration date of the Option); 
  
 (ii) A Stock Appreciation Right shall entitle the Participant to surrender
to the Company unexercised the Option to which it is related, or any portion thereof (subject to Section 7(c)), and to receive from the Company in exchange therefor that number of Shares (rounded down to the nearest whole number) having an aggregate
value equal to the excess of the Fair Market Value of one Share over the Exercise Price per Share specified in such Option, multiplied by the number of Shares subject to the Option, or portion thereof, which is so surrendered; and 
  
 (iii) The Committee may elect to settle, or the Stock Appreciation Right may
permit the Participant to elect to receive (subject to approval by the Committee), any part or all of the Company’s obligation arising out of the exercise of a Stock Appreciation Right by the payment of cash equal to the aggregate Fair Market
Value of that part or all of the Shares it would otherwise be obligated to deliver, provided that in no event shall cash be payable to an officer or director of the Company upon exercise of a Stock Appreciation Right: (i) if the Stock Appreciation
Right was exercised during the first six months of its term; or (ii) unless the transaction is otherwise exempt from the operation of Section 16(b) of the Securities Exchange Act of 1934. 
  
 10. HOLDING OF COMMON STOCK 
  
 At the discretion of the Committee, any Option Agreement may provide that the Participant, by accepting such Option, represents and agrees, for the Participant and the
Participant’s permitted transferees, that none of the shares purchased upon exercise of the Option or any accompanying Stock Appreciation Right will be acquired with a view to any sale, transfer or distribution of said shares in violation of
the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, or any applicable state “blue sky” laws, and the Participant shall furnish evidence in form and substance satisfactory to the Company to that
effect, including an indemnification of the Company in the event of any violation of the Securities Act of 1933 or state blue sky law by such Participant.  
  
 11. CESSATION OF SERVICES 
  
 a) Termination of employment. If a Participant ceases to be an employee of the Company or any of its subsidiaries or affiliates other
than by reason of death, Disability or Retirement, then the following consequences shall apply: 
  
 (i) If the termination of employment was not for Substantial Cause, then the Participant shall have 90 days from the date of termination in which to
exercise all 

  

 9 

 
of his or her Options that were vested on such date and all such Options which are not exercised within such 90-day period shall expire and be of no further
force or effect. All Options that were not vested on the date of termination shall immediately expire and be of no further force or effect. A leave of absence approved in writing by the Committee shall not be deemed a termination of employment
provided that no Option may be exercised during a leave of absence, except during the first 90 days thereof unless otherwise consented to in writing by the Committee. The foregoing provisions shall apply equally to any Stock Appreciation Rights held
by the Participant. 
  
 (ii) If the termination of employment was
for Substantial Cause, then all of the Participant’s outstanding Options (and any accompanying Stock Appreciation Rights) shall immediately terminate (whether vested or not) as of the date of such termination and shall be of no further force or
effect. 
  
 b) Death or Disability. Effective for
original grants made hereunder on or after February 1, 2005, and for restorative grants relating to such original grants, if a Participant dies or becomes Disabled while employed by the Company or any of its subsidiaries or affiliates or while such
Participant was providing services as a director, consultant or advisor to any of such entities, then all Options granted to such Participant that were outstanding but not vested on such date shall immediately vest, and the Participant (or his or
her Representative) shall have one year from the date of death or the date the Participant first became Disabled in which to exercise all vested Options held by such Participant on such date. For original grants made hereunder prior to February 1,
2005, and for restorative grants relating to such original grants, if a Participant dies or becomes Disabled while employed by the Company or any of its subsidiaries or affiliates or while such Participant was providing services as a director,
consultant or advisor to any of such entities, then the Participant (or his or her Representative) shall have one year from the date of death or the date the Participant first became Disabled in which to exercise any Options that were vested on such
date. All Options that were not vested on such date shall immediately expire and be of no further force or effect. The provisions of this Section 11(b) shall apply equally to any Stock Appreciation Rights held by the Participant. 
  
 c) Retirement. If a Participant Retires, the following consequences
shall apply: 
  
 (i) If the Participant continues to render
services to the Company or any of its subsidiaries or affiliates as a director, or as a consultant or advisor pursuant to a written agreement, then all Options held by such Participant shall continue in full force and effect in accordance with their
terms for so long as such Participant continues to satisfy at least one of the eligibility requirements of Section 5(a). Thereafter, if the Participant dies or becomes Disabled, the provisions of Section 11(b) above shall apply, or if the
Participant at any time fails to satisfy at least one of the eligibility requirements of Section 5(a), then the provisions of Section 11(a)(i) above (including time limits for the exercise of vested Options) shall apply as if the Participant had
experienced a termination of employment thereunder. The foregoing provisions shall apply equally to any Stock Appreciation Rights held by the Participant. 
  
 (ii) If the Participant does not at the time of Retirement satisfy any of the eligibility requirements of Section 5(a), then the Participant shall have
one year 

  

 10 

 
from the date of retirement in which to exercise all of his or her Options that were vested on such date and all such Options which are not exercised within
such one-year period shall expire and be of no further force or effect. All Options that were not vested on the date of Retirement will immediately expire and be of no further force or effect. The foregoing provisions shall apply equally to any
Stock Appreciation Rights held by the Participant. 
  
 d) Sale
or Divestiture of Employer. In the event that the Company sells or divests its controlling interest in any subsidiary or if its control of an affiliate ceases, then any employee of such subsidiary or affiliate who is a Participant shall have 90
days from the date of such sale, divestiture or cessation of control (or one year in the case of a Participant who has attained the age of 55 on such date) in which to exercise all of his or her Options that were vested on such date and all such
Options which are not exercised within such 90-day (or one year) period shall expire and be of no further force or effect. All Options that were not vested on the date of such sale, divestiture or cessation of control shall immediately expire and be
of no further force or effect. The foregoing provisions shall apply equally to any Stock Appreciation Rights held by the Participant. 
  
 12. PRIVILEGES OF STOCK OWNERSHIP 
  
 No Participant shall have any of the rights or privileges of a shareholder of the Company in respect of any Shares issuable upon exercise of any Option or Stock
Appreciation Right until Shares shall have been issued and delivered: (i) to the Participant in the form of certificates, (ii) to a brokerage or other account for the benefit of the Participant either in certificate form or via “DWAC” or
similar electronic means, or (iii) to a book entry or direct registration account in the name of the Participant. No shares shall be issued and delivered upon the exercise of any Option or accompanying Stock Appreciation Rights unless and until
there has been compliance with all applicable requirements of the Securities Act of 1933, as amended (whether by registration or satisfaction of an available exemption), all applicable listing requirements of the New York Stock Exchange or any other
national securities exchange or market on which the Common Stock is then listed and any other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery. 
  
 13. ADJUSTMENTS 
  
 a) Stock splits, reorganizations, etc. If the outstanding Shares 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, reverse stock split or other similar transaction, an appropriate and
proportionate adjustment shall be made in the maximum number and 

  

 11 

 
kind of shares or securities as to which Options (and accompanying Stock Appreciation Rights) may thereafter be granted under this Plan. A corresponding
adjustment changing the number or kind of shares or securities allocated to unexercised Options (and any accompanying Stock Appreciation Rights), or portions thereof, which shall have been granted prior to any such change, shall likewise be made.
Any such adjustment in an outstanding Option (or Stock Appreciation Right) shall be made without change in the aggregate purchase price applicable to the unexercised portion of such Option (or Stock Appreciation Right) but with a corresponding
adjustment in the Exercise Price for each Share or other unit of any security covered by the Option (or Stock Appreciation Right). 
  
 b) Equity Restructurings. The Committee may, but shall not be obligated to, make an appropriate reduction in the Exercise Price of any outstanding
Option, and/or grant additional Options to the holder of any outstanding Option, to compensate for the diminution in the intrinsic value of the Shares resulting from any non-reciprocal transaction (i.e., one in which the Company does not receive
consideration) between the Company and its shareholders, such as a spin-off, stock dividend, rights offering, or recapitalization through a special, substantial nonrecurring dividend. 
  
 c) Change of Control Events. Upon the dissolution or liquidation of the Company, or upon a reorganization, merger or
consolidation of the Company with one or more corporations as a result of which the Company is not the surviving corporation, or upon a sale of substantially all the property or more than eighty percent (80%) of the then outstanding Common Stock of
the Company to another corporation, this Plan shall terminate; provided, however, that notwithstanding the foregoing, the Board shall provide in writing in connection with such transaction for any one or more of the following alternatives
(separately or in combinations): (i) for each Option and any accompanying Stock Appreciation Rights theretofore granted to become immediately exercisable notwithstanding the provisions of Section 6(c) hereof, (ii) for the assumption by the successor
corporation of the Options and Stock Appreciation Rights theretofore granted or the substitution by such corporation for such Options and Stock Appreciation Rights theretofore granted of new options and rights covering the stock of the successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; (iii) for the continuance of the Plan by such successor corporation in which event the Plan and the Options and any
accompanying Stock Appreciation Rights therefore granted shall continue in the manner and under the terms so provided; or (iv) for the payment in cash or stock in lieu of and in complete satisfaction of such Options and rights. At the discretion of
the Committee, any Option Agreement may contain provisions to the effect that upon the happening of certain events, including a change in control of the Company (as defined by the Committee in such Option Agreement), any outstanding Options and
accompanying Stock Appreciation Rights not 

  

 12 

 
theretofore vested shall immediately become vested and exercisable in their entirety, notwithstanding any of the other provisions of the Option. 

 
 d) Authority of Committee. All adjustments under this Section 13
shall be made by the Committee, whose determination as to which adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional Shares shall be issued under the plan on any such adjustment. 
  
 14. AMENDMENT AND TERMINATION OF PLAN 
  
 The Board may at any time suspend or terminate the Plan or amend or revise the terms of the
Plan. In the event that any provision of applicable law mandates that any such amendment or revision be approved by the Company’s shareholders, then such amendment or revision shall be submitted to such shareholders for approval or ratification
within a time period that satisfies such law. In the case of other laws that require shareholder approval of amendments or revisions as a condition to receiving or preserving certain benefits (e.g., deductibility of certain compensation under
Section 162(m) of the Code) or achieving a “safe harbor” status, the Board shall have sole discretion to determine whether or not to submit amendments and revisions to the Company’s shareholders for approval. 
  
 Notwithstanding the foregoing, no amendment, suspension or termination of the Plan shall,
without specific action of the Board, in any way modify, amend, alter or impair any rights or obligations under any outstanding Option or accompanying Stock Appreciation Right unless the written consent of the holder of such Option or Right is first
obtained. 
  
 15. ARBITRATION 
  
 The Committee may, as a condition to granting Options or Stock Appreciation Rights, require
that a Participant agree in writing to submit all disputes or claims arising out of or relating to any such Options or Stock Appreciation Rights to binding arbitration in accordance with such terms as the Committee shall prescribe. 
  

 13Form of Stock Option Agmt. under 1995 Non-Employee Director Stock Option Plan

  
 Exhibit 10.5

  
 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 §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 §6 (the “Expiration Date”). This Option is also subject to early termination in accordance with
§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 

  

 1 

 
commencing on the first anniversary date of this Agreement. Subject to earlier termination under §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 §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. 
  

 2 

 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 §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 

  

 3 

 
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. 
  

 4 

 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. To the
extent the Option Holder is granted a restorative stock option under the Plan pursuant to the exercise of this Option, as evidenced by an optionee Statement issued to the Option Holder, 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. 
  

 5 

									
	 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. 
  

	
	 
	
	 
	 Print Name

  

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