Document:

KMPR 2013 03.31.13 EX 10.1 Stock Option and SAR Agreement for Non-Employee Directors

Exhibit 10.1

Kemper Corporation 2011 Omnibus Equity Plan

NON-EMPLOYEE DIRECTOR

NON-QUALIFIED STOCK OPTION AND SAR AGREEMENT

This NON-QUALIFIED STOCK OPTION AND SAR AGREEMENT (the “Agreement”) is made as of this ______ day of _________ (“Grant Date”), between KEMPER CORPORATION, a Delaware corporation (the “Company”), and ________________ (the “Option Holder”)  for an award consisting of 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 of the Common Stock of the Company at the purchase price of $______ per share.

SIGNATURES

As of the date set forth above, the parties have executed this Agreement:

KEMPER CORPORATION             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 this Non-Qualified Stock Option and SAR Agreement.

_________________________

_________________________
Print Name

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  As of 5/1/13

Exhibit 10.1

RECITALS

A.    The Board of Directors and Shareholders of the Company have adopted the 2011 Omnibus Equity Plan (the “Plan”), to be administered by the Compensation Committee of the Company's Board of Directors (the “Committee”).

B.    The Plan provides, among other things, for grants of awards to non-employee directors of the Company, of the type, in the amounts and subject to such terms as shall be determined from time to time by the Board of Directors after considering any recommendation by the Committee.

C.    This Agreement sets forth the terms of awards that may be granted to non-employee directors of the Company as determined by the Board of Directors from time to time in the form of an option to purchase shares of Common Stock of the Company (“Common Stock”) and tandem stock appreciation rights (“SAR”); neither the Option nor the SAR granted hereby is 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.  

(a)  The Company grants the Option to the Option Holder, which will be 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 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.

(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(f) 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 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 on page one above (or, if applicable, such price as adjusted pursuant to Section 9 hereof), multiplied by (B) the number of such shares subject to the Option (or portion thereof) which is so surrendered.

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Exhibit 10.1

2.    Vesting.  The Option and SAR shall be exercisable in full by the Option Holder as of the 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 in the manner and under the terms specified in §3 hereof, or such lesser number of shares as may be available through the exercise of the SAR.  The number of shares subject to this Option that 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.  

(a)    Each exercise of this Option shall be by means of a written notice of exercise delivered to the Company by the Option Holder or his or her Representative (as defined in the Plan). Such notice shall identify the Options being exercised.  When applicable, the notice shall also specify the number of shares of Common Stock 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 shares of Common Stock 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.  

(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).  The Company shall issue to the Option Holder a number of shares of 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 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 SAR, or an Option exercise in which the Option Holder elects to pay some or all of the exercise price and/or any related withholding taxes by Constructive or Actual Delivery of shares of shares of Common Stock (or, in the case of such taxes, by directing the Company to withhold shares that would otherwise be issued upon exercise of such Option), the date that the Company receives written notice of such exercise; or (iii) in all other cases, the date that the Company receives the purchase price.  

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Exhibit 10.1

(d)    This Option and SAR may be exercised only by the Option Holder or his or her Representative, 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 Representative, may exercise the Option and the SAR on behalf of the spouse of the Option Holder or such spouse's successors in interest.

(e)    Upon the exercise of this Option or SAR, 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 exercise.

(f)    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, as reported by the New York Stock Exchange (or such other exchange on which the shares of Common Stock are primarily traded) 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.    Termination of Services.  Any outstanding portion of this Option and SAR shall terminate 90 days after the date of termination of the Option Holder's services as a director for any reason other than his or her death or total and permanent disability as defined in Section 22(e)(3) of the Code (“Termination Event”).  If the Option Holder's services as a director cease because of a Termination Event, any portion of this Option and SAR that remains outstanding at such time shall expire one year after the date of the Termination Event.    

6.    Extension of Expiration in Certain Cases.  From time to time, the Company may declare “blackout” periods during which the Option Holder may be prohibited from engaging in certain transactions in Company securities.  In the event that the scheduled Expiration Date of this Option and SAR 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 the Option Holder, be extended until such time as fifteen (15) consecutive business days have elapsed after the 

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Exhibit 10.1

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 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 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 the Option Holder hereby agrees to indemnify the Company in the event of any violation by the Option Holder of such Act, rules, regulations or laws.

8.    Transferability.  This Option and SAR 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 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.    Certain Adjustments and Change in Control. 

(a)  The provisions of Articles 4.4 and 19.2 of the Plan relating to certain adjustments in the case of stock splits, reorganizations, equity restructurings and similar matters described therein are hereby incorporated in and made a part of this Agreement.  Any such adjustments 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.

(b)  This Option and SAR may be subject to termination or early vesting in connection with a Change in Control in accordance with the provisions of Section 18.3 of the Plan.

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Exhibit 10.1

10.    Participation by the 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.

11.    No Rights as a Stockholder Until Issuance of Shares.  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 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) the Option Holder in the form of certificates, (ii) a brokerage or other account for the benefit of the 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 the Option Holder.

12.    No Right to Continue as a Director.  Nothing herein contained shall be construed as an agreement by the Company, expressed or implied, that the 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.

13.    Agreement Subject to the Plan.  The Option and SAR hereby granted are 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 and SAR 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.

14.    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 Delaware without application of its conflicts of laws and principles.

15.    Miscellaneous.  This Agreement, together with the Plan, is the entire agreement of the parties with respect to the Option and SAR granted hereby and may not be amended except in a writing signed by both Kemper Corporation and the Option Holder or his/her Representative.

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  As of 5/1/13KMPR 2013 03.31.13 EX 10.2 Deferred Stock Unit Agreement for Non-Employee Directors

Exhibit 10.2

Kemper Corporation 2011 Omnibus Equity Plan

NON-EMPLOYEE DIRECTOR

DEFERRED STOCK UNIT AWARD AGREEMENT

This DEFERRED STOCK UNIT AWARD AGREEMENT (the “Agreement”) is made as of this ______ day of _________ (“Grant Date”), between KEMPER CORPORATION, a Delaware corporation (the “Company”), and ________________ (the “Award Holder”)  for an award consisting of  the grant of an aggregate of ________________ deferred stock units (the “Deferred Stock Units”), each Deferred Stock Unit representing the right to receive one share of the Common Stock of the Company (“Common Stock”) on the terms and conditions hereinafter set forth.

SIGNATURES

As of the date set forth above, the parties have executed this Agreement:

KEMPER CORPORATION             AWARD  HOLDER

By:       _____________________                       _______________________
             «Authorized Officer»                «Name»

By his or her signature below, the spouse of the Award Holder agrees to be bound by all of the terms and conditions of this Deferred Stock Unit Award Agreement.

_________________________

_________________________
[Name]

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  As of 5/1/13

Exhibit 10.2

RECITALS

A.    The Board of Directors and Shareholders of the Company have adopted the 2011 Omnibus Equity Plan (the “Plan”), to be administered by the Compensation Committee of the Company's Board of Directors (the “Committee”).

B.    The Plan provides, among other things, for grants of awards to non-employee directors of the Company, of the type, in the amounts and subject to such terms as shall be determined from time to time by the Board of Directors after considering any recommendation by the Committee.

C.    This Agreement sets forth the terms of awards that may be granted to non-employee directors of the Company as determined by the Board of Directors from time to time in the form of Deferred Stock Units. 

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.  

The Company hereby grants the Deferred Stock Units to the Award Holder, subject to the terms set forth in this Agreement.  The Deferred Stock Units granted pursuant to this Award shall not entitle the Award Holder to any rights of a shareholder of Common Stock. 

2.    Vesting.  The Deferred Stock Units shall be fully vested as of the date of this Agreement.  No shares of Common Stock shall be issued to the Award Holder in settlement of Deferred Stock Units prior to the time specified in Section 3.  

3.    Conversion of Deferred Stock Units; Issuance of Common Stock. Except as otherwise provided in Sections 6 and 7, upon the date (“Departure Date”) of the Award Holder's departure from the Company's Board of Directors for any reason that is considered a “separation from service” as defined in Section 409A of the Internal Revenue Code of 1986 and its accompanying regulations (“Code Section 409A”) the Company shall promptly cause to be issued shares of Common Stock in book-entry form, registered in the Award Holder's name (or in the name of the Award Holder's Representative, as the case may be), in payment of whole Deferred Stock Units.  Except as otherwise provided in Section 7, in no event shall the date that Common Stock is issued to the Award Holder (“Settlement Date”) occur later than ninety (90) days following the Award Holder's Departure Date). 

4.     Dividend Equivalents. If a cash dividend is declared and paid by the Company with respect to the Common Stock, the Award Holder shall be entitled to 

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Exhibit 10.2

receive a cash payment equal to the total cash dividend the Award Holder would have received had the Award Holder's Deferred Stock Units been actual shares of Common Stock.  The cash payment shall be made on the date that the dividends are payable to holders of Common Stock (the “Dividend Payment Date”).  The rules of Treas. Reg. § 1.409A-3(d) shall be applied in determining whether a cash payment is made on the Dividend Payment Date. 

5.    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, as reported by the New York Stock Exchange (or such other exchange on which the shares of Common Stock are primarily traded) for the Grant Date, Vesting Date, Settlement Date or dividend payment date, 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).

6.    Code Section 409A. The Company intends that the award hereunder shall comply with Code Section 409A.  If the Award Holder is a “specified employee” (within the meaning of Code Section 409A and determined pursuant to procedures adopted by the Company) as of the Departure Date and subject to Code Section 409A(a)(2)(B)(i), payment shall be made on the first day following the six (6) month anniversary of the Award Holder's Departure Date (or, if earlier than the end of the six (6) month period, the date of the Award Holder's death). In no event shall the Company and/or its affiliates be liable for any tax, interest or penalties that may be imposed on the Award Holder (or the Award Holder's estate) under Code Section 409A.

7.    Shares to be Issued in Compliance with Federal Securities Laws and Other Rules.  No shares issuable in settlement of the Deferred Stock Units 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 Award Holder represents and warrants that none of the shares to be acquired in settlement of the Deferred Stock Units 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 the Award Holder hereby agrees to indemnify the Company in the event of any violation by the Award Holder of such Act, rules, regulations or laws.  The Company will use its best efforts to complete all actions necessary for such compliance so that settlement can occur within the period specified in Section 3; provided that if the 

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  As of 5/1/13

Exhibit 10.2

Company reasonably anticipates that settlement within such period will cause a violation of applicable law, settlement may be delayed provided that settlement occurs at the earliest date at which the Company reasonably anticipates that such settlement will not cause a violation of applicable law, all in accordance with Treasury Regulation Section 1.409A-2(b)(7)(ii).

8.    Transferability.  The Deferred Stock Units 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 Award Holder pursuant to any divorce proceedings, settlement or judgment.  Upon any attempt so to transfer, assign, pledge, encumber or otherwise dispose of the Deferred Stock Units or any other rights or privileges granted hereby contrary to the provisions hereof, the Deferred Stock Units and all other rights and privileges contained herein shall immediately become null and void and of no further force or effect.  

9.    Certain Adjustments and Change in Control. 

(a)  The provisions of Articles 4.4 and 19.2 of the Plan relating to certain adjustments in the case of stock splits, reorganizations, equity restructurings and similar matters described therein are hereby incorporated in and made a part of this Agreement.  Any such adjustments 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.

(b)  The Deferred Stock Units may be subject to termination or early vesting in connection with a Change in Control in accordance with the provisions of Article 18.3 of the Plan.

10.    Participation by the Award Holder in Other Company Plans.  Nothing herein contained shall affect the right of the Award 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.

11.    No Rights as a Stockholder Until Issuance of Shares.  Except as otherwise provided in Section 4, neither the Award Holder nor any Representative of the Award Holder shall be entitled to any of the rights or privileges of a shareholder of the Company in respect of any shares issuable in settlement of the Deferred Stock Units unless and until such shares shall have been issued and delivered to:  (i) the Award Holder in the form of certificates, (ii) a brokerage or other account for the benefit of the 

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  As of 5/1/13

Exhibit 10.2

Award 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 the Award Holder.  

12.    No Right to Continue as a Director.  Nothing herein contained shall be construed as an agreement by the Company, expressed or implied, that the Award Holder has a right to continue as a director of the Company for any period of time or at any particular rate of compensation.

13.    Agreement Subject to the Plan.  The Deferred Stock Units hereby granted are subject to, and the Company and the Award 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 Award Holder's rights under this Agreement without the prior written consent of the Award 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.

14.    Execution.  This Deferred Stock Unit Award Agreement has been 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 Delaware without application of its conflicts of laws and principles.

15.    Miscellaneous.  This Agreement, together with the Plan, is the entire agreement of the parties with respect to the Deferred Stock Units granted hereby and may not be amended except in a writing signed by both the Company and the Award Holder or his/her Representative.

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