EXHIBIT 10.3
UNITRIN INC.
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1995 Non-Employee Director Stock Option Plan
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Amended and Restated
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May 5, 1999
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1. Purpose.
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The purpose of this 1995 Non-Employee Director Stock Option Plan ("Plan") of
Unitrin, Inc. ("Company") is to encourage ownership in the Company by non-
employee directors of the Company and to attract and retain qualified non-
employee personnel to serve as directors of the Company.
2. Administration.
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The Plan will be administered by a committee or committees (which term
includes subcommittees) consisting of two or more persons appointed by the Board
of Directors of the Company. The composition of any committee responsible for
administration of the Plan shall comply with the applicable requirements of Rule
16b-3 of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
including, if applicable, the requirement that certain plans be administered by
"disinterested administrators". Members of a committee will serve for such term
as the Board of Directors may determine, subject to removal by the Board of
Directors at any time. With respect to any matter, the term "Committee" refers
to the committee that has been delegated authority with respect to such matter.
Subject to the provisions of the Plan, the Committee shall have authority: (i)
to construe and interpret the Plan; (ii) to define the terms used herein; (iii)
to prescribe, amend and rescind rules and regulations relating to the Plan; (iv)
to make such changes to the Plan as may become necessary or advisable to comply
with Rule 16b-3 of the Exchange Act; and (v) 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 in the Plan and their legal representatives and beneficiaries.
Notwithstanding anything to the contrary in this Plan, the Committee shall not
have the authority to make any determination or to take any action that would
cause the Plan to cease to comply with the terms and conditions of Rule 16b-3
under the Exchange Act.
3. Shares Subject to the Plan.
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The shares to be offered under the Plan shall consist of authorized but
unissued shares or treasury shares of the Company's common stock ("Common
Stock") and, subject to adjustment as provided in paragraph 13 hereof, the
aggregate amount of Common Stock which may be subject to options granted
pursuant to paragraphs 5a, 5b and 5c hereunder ("Options") shall not exceed
200,000 shares. If any Option granted under the Plan shall expire or terminate
for any reason, without having been exercised or vested in full, as the case may
be, the unpurchased shares subject thereto shall again be available for Options
to be granted under the Plan. Options granted under the Plan will not be
qualified as
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"incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended ("Code"). All Options granted under the Plan shall be granted
within 10 years of August 2, 1995.
4. Eligibility.
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Each director of the Company who first becomes a director after November 1,
1993 and is not an employee of the Company or any subsidiary of the Company and
each director who has retired as an employee of the Company or a subsidiary of
the Company shall be eligible to participate in the Plan ("Eligible Directors").
Each Option granted under the Plan shall be governed by an agreement in such
form as the Committee shall from time to time approve.
5. Stock Option Grants.
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a. Initial Option Grants.
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An Option covering 2,000 shares of Common Stock shall be granted to each
Eligible Director on the date of adoption of the Plan by the Board of Directors,
subject to approval by the Company's shareholders at the Company's 1996 Annual
Meeting. If a director first becomes an Eligible Director subsequent to the
adoption of this Plan, an Option covering 2,000 shares of Common Stock shall be
granted to such director on the date that he or she first becomes eligible.
b. Annual Option Grants.
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An Option covering 2,000 shares of Common Stock will be granted to each
Eligible Director automatically at the conclusion of each Company Annual
Meeting.
c. Retainer Option Grants.
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Eligible Directors may file with the Committee or its designee at least six
months prior to the commencement of a fiscal year of the Company ("Plan Year")
an irrevocable election to receive an Option in lieu of the Annual Retainer for
service during the Plan Year ("Retainer Option"). Retainer Options will be
granted on January 2 of a Plan Year (or if January 2 is not a business day, on
the next succeeding business day) for service during such Plan Year. The number
of shares of Common Stock to be subject to a Retainer Option shall be equal to
the nearest number of whole shares determined by dividing the Annual Retainer by
the fair market value of a share of Common Stock on the date of grant. For these
purposes "Annual Retainer" shall mean the amount of money which the Eligible
Director would be entitled to receive for serving as a director during the Plan
Year, but shall not include the amount of money which the Eligible Director
would be entitled to receive for any other services to be provided to the
Company.
Notwithstanding the foregoing, elections to receive Retainer Options may be
made at any time during a Plan Year so long as such elections are made at least
six months in advance of receiving the corresponding Retainer Options and the
director making such election first becomes an Eligible Director less than six
months before the commencement of the subject Plan Year. In any such case, the
Retainer Option shall be granted on the first business day which is six months
and one day after the date of the
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director's election to receive a Retainer Option. Such Retainer Option shall
pertain only to that portion of the Annual Retainer remaining to be paid during
such Plan Year on or after the date of grant.
d. Duration of Options.
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Subject to paragraph 9, below, each Option granted pursuant to this paragraph
5 and all rights associated therewith shall expire ten years from the date of
grant.
e. Purchase Price.
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The purchase price of the stock covered by each Option shall be the fair
market value (as defined in paragraph 6) of a share of Common Stock as of the
date of the grant of such Option.
f. Exercise of Options.
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Options granted hereunder shall be exercisable during an Option holder's
lifetime only by the Option holder or by his or her guardian or legal
representative. Each Option granted under this Plan shall be exercisable in full
one year after the date of the grant. No Option may be exercised for a fraction
of a share and no partial exercise of any 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.
The purchase price for the shares shall be paid in full at the time of
exercise: (i) in cash or by check payable to the order of the Company; (ii) by
delivery of shares of Common Stock already owned by, and in the possession of,
the Option holder; or (iii) by delivering 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 the Option price (in which
case the exercise will be effective upon receipt of such proceeds by the
Company). Shares of Common Stock used to satisfy the exercise price of an Option
shall be valued at their fair market value determined in accordance with
paragraph 6 hereof.
As further provided in paragraph 15, effectiveness of the Plan is subject to
approval of the Company's shareholders at the Company's 1996 Annual Meeting. No
Options issued prior to such approval shall be exercisable.
6. Fair Market Value of Common Stock.
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For purposes of the Plan, the fair market value of a share of Common Stock
shall be determined by reference to the closing price on the Nasdaq Stock Market
(or the principal stock exchange on which the Common Stock is then listed) or,
if the Common Stock is not then listed on the Nasdaq Stock Market (or on a stock
exchange), by reference to the mean between the bid and asked price of a share
as supplied by the National Association of Securities Dealers (or its successor
in function), in each case as reported by The Wall Street Journal, for the date
on which the Option is granted or exercised, as the case may be, 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 for such date, then by reference to
the most recent closing price or the mean between the bid and asked price of a
share for the
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last date on which the Common Stock was traded.
7. Withholding Tax.
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Upon the exercise of Options issued hereunder, the Company shall have the
right to require the Option holder to pay the Company the amount of taxes, if
any, which the Company may be required to withhold with respect to such shares.
8. Transferability.
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Options granted hereunder shall not be transferable, other than by will or
the laws of descent and distribution, except to the extent: (i) transfer is
permitted by Rule 16b-3 of the Exchange Act; and (ii) approved by the
Committee. Subject to the foregoing, Options shall not be assigned, pledged or
otherwise encumbered by the holder thereof, either voluntarily or by operation
of law.
9. Termination of Directorship.
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All rights of a director in an Option, to the extent that the Option has not
been exercised, shall terminate three months after the date of the termination
of his or her services as a director for any reason other than: (i) the death
of the director; (ii) cessation of services as a director because the
individual, although nominated by the Board of Directors, is not elected by the
shareholders to the Board of Directors; or (iii) retirement because of total
and permanent disability as defined in Section 22(e)(3) of the Code
(collectively, "Termination Events"). If a director ceases to be a director of
the Company because of a Termination Event, his or her unvested Options shall
vest immediately. All vested Options shall expire twelve months after the date
of a Termination Event.
10. No Right to Continue as a Director.
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Neither the Plan nor the granting of an Option under the Plan shall
constitute or be evidence of any agreement or understanding that any director
has a right to continue as a director for any period of time or at any
particular rate of compensation.
11. Restrictions on Disposition of Shares.
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Each Option shall provide that the holder, by accepting such Option,
represents and agrees, for the Option holder and the Option holder's permitted
transferees, that none of the shares acquired upon exercise of such 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, and the rules
and regulations promulgated thereunder, or any applicable "blue sky" laws, and
the holder of such Option shall furnish evidence satisfactory to the Company
(including a written and signed representation) to that effect in form and
substance satisfactory to the Company, including an indemnification of the
Company in the event of any violation by such person of the Securities Act of
1933, as amended, or state blue sky law.
12. Privileges of Stock Ownership.
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No Option holder shall have any of the rights or privileges of a shareholder
of the Company in respect of any shares of Common Stock issuable with respect
to such Option
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until certificates representing such shares shall have been issued and
delivered. No shares shall be issued and delivered upon the exercise of an
Option 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 National Association of Securities Dealers or any national
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.
13. Adjustments.
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If the outstanding shares of the Common Stock 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 kind of shares as to which Options may be granted
under this Plan. A corresponding adjustment changing the number or kind of
shares allocated to unexercised Options, which shall have been granted prior to
any such change, and to the number of shares covered by initial and annual
Option grants under paragraph 5, shall likewise be made. Any such adjustment in
the outstanding Options shall be made without change in the aggregate purchase
price applicable to the unexercised portion of the Options but with a
corresponding adjustment in the price for each share or other unit of security
covered by the Option.
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 stock of the Company to another corporation, the
Plan shall terminate, and all Options theretofore granted shall immediately
become exercisable.
No fractional shares of stock shall be issued under the Plan on any such
adjustment.
14. Amendment and Termination of Plan.
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The Board of Directors may at any time terminate the Plan. The Board of
Directors may also at any time amend or revise the terms of the Plan, provided
that no such amendment or revision shall become effective without the approval
of the Company's shareholders if such approval is required in order to comply
with Rule 16b-3 of the Exchange Act or any other applicable law or regulation.
Notwithstanding the foregoing, Plan provisions relating to the amount, price
and timing of Options may be amended only by action of the shareholders, but
not more than once every six months, other than to
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comport with changes in the Code or the Employee Retirement Income Security Act
of 1974, as amended, or the rules in effect thereunder.
Notwithstanding the foregoing, no amendment or termination of the Plan shall,
without specific action of the Board of Directors and the consent of the Option
holder, in any way modify, amend, alter or impair any rights or obligations
under any Option theretofore granted under the Plan.
15. Effective Date of Plan.
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Effectiveness of the Plan is subject to approval by the holders of the
outstanding voting stock of the Company as hereinafter provided at the
Company's 1996 annual meeting of shareholders. The Plan shall be deemed
approved by the holders of the outstanding voting stock of the Company by: (i)
the affirmative vote of the holders of a majority of the voting shares of the
Company represented and voting at a duly held meeting at which a quorum is
present; or (ii) the written consent of the holders of a majority of the
outstanding voting shares of the Company. Notwithstanding anything in this Plan
to the contrary, any Options granted under the Plan prior to obtaining such
shareholder approval shall be granted under the conditions that the Options so
granted: (1) shall not be vested, transferable (if permitted in accordance with
paragraph 8 above) other than by will or the laws of descent and distribution
or exercisable prior to such approval; and (2) shall become null and void if
such shareholder approval is not obtained.
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