Document:

KMPR 2011 9.30.2011 EX 10.18 Kemper Corporation Severance Plan

Exhibit 10.18

KEMPER CORPORATION
SEVERANCE PLAN
Kemper Corporation (the “Company”) adopted the Kemper Corporation Severance Plan (the “Plan”) effective January 1, 2002 for the benefit of certain employees of the Company and its Subsidiaries and Affiliates, on the terms and conditions hereinafter stated.  The Plan is being amended and restated as of August 25, 2011.  
The Plan, as set forth herein, is intended to help retain qualified employees, maintain a stable work environment and provide economic security to certain employees of the Company and its Subsidiaries and Affiliates in the event of a Qualifying Termination following a Change in Control.  The Plan, as a “severance pay arrangement” within the meaning of Section 3(2)(B)(i) of ERISA, is intended to be excepted from the definitions of “employee pension benefit plan” and “pension plan” set forth under Section 3(2) of ERISA, and is intended to meet the descriptive requirements of a plan constituting a “severance pay plan” within the meaning of regulations published by the Secretary of Labor at Title 29, Code of Federal Regulations, § 2510.3-2(b).  
Section 1.DEFINITIONS.  As hereinafter used:
1.1    “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.
1.2    “Annual Compensation” shall mean:
(a)    with respect to a Severed Employee who was a salaried employee immediately prior to his or her Qualifying Termination, such Severed Employee’s rate of annual base salary as in effect immediately prior to such Severed Employee’s Qualifying Termination, without regard to any decrease in such salary constituting Good Reason; 
(b)    with respect to a Severed Employee who was compensated primarily based on commissions immediately prior to his or her Qualifying Termination, the total commissions earned by such Severed Employee with respect to the 12 full calendar month period ending immediately prior to such Severed Employee’s Qualifying Termination, without regard to any decrease in the rate of such commissions constituting Good Reason;
(c)    with respect to a Severed Employee who was compensated based on an hourly rate of pay immediately prior to his or her Qualifying Termination, the total hourly wages earned by such Severed Employee with respect to the 12 full calendar month period ending immediately prior to such Severed Employee’s Qualifying Termination, without regard to any decrease in the Severed Employee’s hourly rate of pay constituting Good Reason;
1.3    “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.
1.4    “Board” shall mean the Board of Directors of the Company, or any successor thereto.
1.5    “Cause” shall mean, with respect to a termination of the Employee’s 

Exhibit 10.18

employment with the Employer, (a) fraud, misappropriation of or intentional material damage to the property or business of the Company (including its Subsidiaries and Affiliates), which in any such case is materially injurious to the Company (including its Subsidiaries and Affiliates), monetarily or otherwise, or (b) the conviction of the Employee for the commission of a felony.
1.6    A “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:
(a)    any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or any of its Subsidiaries or Affiliates) representing 25% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (c) below; or 
(b)    the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least two-thirds of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or
(c)    there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a merger or consolidation which results in the directors of the Company immediately prior to such merger or consolidation continuing to constitute at least a majority of the board of directors of the Company, the surviving entity or any parent thereof or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or any of its Subsidiaries or Affiliates) representing 25% or more of the combined voting power of the Company’s then outstanding securities; or 
(d)    the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the entity to which such assets are sold or disposed or any parent thereof.
1.7    “Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.
1.8    “Employee” shall mean any person who is employed by the Employer on a 

Exhibit 10.18

full-time basis (as determined under the Employer’s policies) and whose compensation is reported on a Form W-2, excluding any Employee who has an individual severance agreement that provides for benefits in connection with a Change in Control.  For purposes of the Plan, an Employee shall be considered to continue to be employed by the Employer on a full-time basis during sick leave, military leave or any other leave of absence approved by the Employer.
1.9    The “Employer” of an Employee shall mean the Company or any Subsidiary or Affiliate of the Company by which such Employee is employed.
1.10    “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.
1.11    “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
1.12    “Good Reason” shall mean any action taken by the Employer which results in a material negative change to the Employee in the employment relationship, such as the duties to be performed, the conditions under which such duties are to be performed or the compensation to be received for performing such services.  A termination by the Employee shall not constitute termination for Good Reason unless the Employee shall first have delivered to the Employer written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than 90 days after the occurrence of such event), and there shall have passed a reasonable time (not less than 30 days) within which the Company may take action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by the Employee.  
1.13    “Level I Employee” shall mean any Employee who is primarily compensated by commissions with at least three continuous years of service with the Employer as of the date of such Employee’s Qualifying Termination.
1.14    “Level II Employee” shall mean any Employee who is not primarily compensated by commissions and whose Annual Compensation is greater than $150,000.
1.15    “Level III Employee” shall mean any Employee who is not primarily compensated by commissions and whose Annual Compensation is at least $100,000 and not more than $150,000.
1.16    “Level IV Employee” shall mean any Employee who is not primarily compensated by commissions and whose Annual Compensation is at least $50,000 and less than $100,000.
1.17    “Level V Employee” shall mean any Employee who is not primarily compensated by commissions and whose Annual Compensation is less than $50,000.
1.18    “Payment Date” means, with respect to a Severed Employee, the March 15th that next follows the calendar year in which the Severed Employee’s Severance Date occurred.
1.19    “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (a) the Company or any of its Subsidiaries or Affiliates, (b) a trustee or other fiduciary holding 

Exhibit 10.18

securities under an employee benefit plan of the Company or any of its Subsidiaries or Affiliates, (c) an underwriter temporarily holding securities pursuant to an offering of such securities, (d) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company, (e) any individual, entity or group whose ownership of securities of the Company is reported on Schedule 13G pursuant to Rule 13d-1 promulgated under the Exchange Act (but only for so long as such ownership is so reported) or (f) Singleton Group LLC or any successor in interest to such entity.
1.20    “Plan Administrator” shall mean the committee appointed to administer the Plan.  Such committee shall be selected by the Board.  Following a Change in Control, a person may be appointed to such committee only by a two-thirds majority of the individuals who were members of the Board immediately prior to such Change in Control.
1.21    A “Potential Change in Control” shall be deemed to occur in the event that (a) the Company enters into an agreement, the consummation of which would result in a Change in Control, (b) the Company or any Person publicly announces an intention to take or to consider taking action which, if consummated would constitute a Change in Control, (c) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or any of its Subsidiaries or Affiliates) or (d) the Board adopts a resolution to the effect that, for purposes of the Plan, a Potential Change in Control has occurred.
1.22    “Qualifying Termination” shall mean a termination of an Employee’s employment during the 2-year period immediately following a Change in Control, either (a) by the Employer without Cause or (b) by the Employee for Good Reason.  A termination of employment will not be deemed to have occurred upon (i) the transfer of the Employee to employment with a Subsidiary or Affiliate of the Company or (ii) the divestiture of a business with which the Employee is primarily associated if the Employee is offered comparable employment by the successor company.
1.23    “Severance Benefits” shall mean the payments and benefits provided to Severed Employees pursuant to Sections 2.1, 2.2, and 2.3 hereof. 
1.24    “Severance Date” shall mean the date on which an Employee incurs a Qualifying Termination.
1.25    “Severance Weeks” means, for each Employee, one week for (a) each full year such Employee has been continuously employed by the Employer, plus (without duplication), if there has been a break in such Employee’s employment with the Employer, (b) each full year of employment for which such Employee has received credit under any retirement plan or program maintained by the Employer for employment prior to such break, but in no event less than four (4) weeks or more than twenty six (26) weeks (thirteen (13) weeks in the case of a Level I Employee).  For purposes of calculating an Employee’s full years of employment, (x) any partial year of employment of at least thirty five (35) weeks shall count as a full year of employment and (y) employment at one Employer shall count (without duplication) toward the number of years of employment at another Employer, provided that (i) there is no break (other than as the result of 

Exhibit 10.18

vacation or sick leave, military leave or other approved leave of absence) in the employment between the two Employers or (ii) such Employee has received credit under any retirement plan or program maintained by the Employer for such years of employment prior to such break.
1.26    “Severed Employee” shall mean an Employee who has incurred a Qualifying Termination.
1.27    “Subsidiary” shall mean any entity at least 50% of the voting securities of which are Beneficially Owned by the Company.
Additional definitions are set forth within the Plan and shall have the meanings ascribed to them in the Plan.
Section 2.    BENEFITS.
2.1    The Company shall pay (or shall cause the Severed Employee’s Employer to pay) to each Severed Employee a severance payment (the “Severance Payment”) equal to:
(a)    in the case of a Level I Employee, the product of (i) one-fifty-second (1/52) of his or her Annual Compensation and (ii) his or her Severance Weeks.
(b)    in the case of a Level II Employee, one year’s Annual Compensation plus the product of (i) one-fifty-second (1/52) of his or her Annual Compensation and (ii) his or her Severance Weeks.
(c)    in the case of a Level III Employee, thirty-five-fifty seconds (35/52) of his or her Annual Compensation plus the product of (i) one-fifty-second (1/52) of his or her Annual Compensation and (ii) his or her Severance Weeks.
(d)    in the case of a Level IV Employee, seventeen-fifty seconds (17/52) of his or her Annual Compensation plus the product of (i) one-fifty-second (1/52) of his or her Annual Compensation and (ii) his or her Severance Weeks.
(e)    in the case of a Level V Employee, the product of (i) one-fifty-second (1/52) of his or her Annual Compensation and (ii) his or her Severance Weeks.
The Severance Payment shall be paid to such Severed Employee in a lump sum as soon as practicable following the Severed Employee’s Qualifying Termination, but no later than the Payment Date.  The Severance Payment that a Severed Employee receives under the Plan shall not be taken into account for purposes of determining benefits under any other qualified or nonqualified plans of the Employer.
2.2    For a period equal to a number of weeks (not to exceed fifty-two (52) in total) equal to the sum of (i) the Severed Employee’s Severance Weeks and (ii) in the case of (a) Level I Employees, eight (8) weeks, (b) Level II and III Employees, fifty-two (52) weeks, (c) Level IV Employees, thirty-five (35) weeks, and (d) Level V Employees, seventeen (17) weeks (the “Welfare Benefit Continuation Period”), the Company shall provide (or shall cause the Severed Employee’s Employer to provide) the Severed Employee and anyone entitled to claim under or through such Severed Employee with all Employer-provided benefits under any group health plan (including any 

Exhibit 10.18

dental coverage) and life insurance plan of the Employer (as in effect immediately prior to such Severed Employee’s Severance Date or, if more favorable to the Severed Employee, immediately prior to the Change in Control) for which employees of the Employer are eligible, to the same extent as if such Severed Employee had continued to be an employee of the Employer during the Welfare Benefit Continuation Period, at no greater cost to the Severed Employee than the cost to the Severed Employee immediately prior to such date.  To the extent that the Severed Employee’s participation in Employer benefit plans is not practicable, the Company shall arrange to provide, at the Company’s sole expense, the Severed Employee and anyone entitled to claim under or through such Severed Employee with equivalent health and life insurance benefits under an alternative arrangement during the Welfare Benefit Continuation Period.  The coverage period for purposes of the group health continuation requirements of Section 4980B of the Code shall commence at the expiration of the Welfare Benefit Continuation Period.  The benefits described in this Section 2.2 shall end as of the date the Severed Employee becomes covered under any group health plan maintained by a subsequent employer which provides benefits to the Severed Employee (and anyone entitled to claim the benefits described in this Section 2.2 under or through such Severed Employee) not materially less favorable than the benefits described in this Section 2.2, and which does not exclude any pre-existing condition that the Severed Employee or his or her dependents may have at that time. 
2.3    Outplacement.
(a)    Each Level II and III Employee who is entitled to receive a Severance Payment under Section 2.1 shall also be entitled to receive outplacement services consisting of counseling, networking, spousal programs and the use of a private office.  Such outplacement services will be provided for a maximum of thirty-nine (39) weeks by a reputable organization selected by the Company.  These outplacement services will be paid for by the Company.
(b)    Each Level IV Employee who is entitled to receive a Severance Payment under Section 2.1 shall also be entitled to receive outplacement services consisting of counseling, group workshops and the use of a semi-private office.  Such outplacement services will be provided for a maximum of twenty-six (26) weeks by a reputable organization selected by the Company.  These outplacement services will be paid for by the Company.
(c)    Each other Employee who is entitled to receive a Severance Payment under Section 2.1 shall also be entitled to receive outplacement services consisting of group workshops, resume writing assistance and help-line support. Such outplacement services will be provided for a maximum of eight (8) weeks by a reputable organization selected by the Company.  These outplacement services will be paid for by the Company.
2.4    In the event of a claim by an Employee as to the amount or timing of any payment or benefit under the Plan, such Employee shall present the reason for his or her claim in writing to the Plan Administrator.  The Plan Administrator shall, within 90 days after receipt of such written claim, send a written notification to the Employee as to its disposition.  In the event the claim is wholly or partially denied, such written notification shall (a) state the specific reason or reasons for the denial, (b) make specific reference to pertinent Plan provisions on which the denial is based, (c) provide a description of any additional material or information necessary for the 

Exhibit 10.18

Employee to perfect the claim and an explanation of why such material or information is necessary, and (d) set forth the procedure by which the Employee may appeal the denial of his or her claim.  In the event an Employee wishes to appeal the denial of his or her claim, he or she may request a review of such denial by making application in writing to the Plan Administrator within 60 days after receipt of such denial.  Such Employee (or his or her duly authorized legal representative) may, upon written request to the Plan Administrator, review any documents pertinent to his or her claim, and submit in writing issues and comments in support of his or her position.  Within 60 days after receipt of a written appeal (unless special circumstances require an extension of time, but in no event more than 120 days after such receipt), the Plan Administrator shall notify the Employee of the final decision.  The final decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based.
2.5    Any further dispute or controversy arising under or in connection with the Plan with respect to an Employee shall be settled exclusively by arbitration at a location within fifty miles from the location of such Employee’s  job with an Employer  immediately prior to the Change in Control (determined without regard to any relocation thereof which constitutes Good Reason) in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in the Plan shall apply. Judgment may be entered on the award of the arbitrator in any court having jurisdiction.  Each party shall bear its own expenses of such arbitration.
2.6    Cap.
(a)    Notwithstanding any other provision of the Plan, in the event that any payment or benefit received or to be received by the Employee in connection with a Change in Control or the termination of the Employee’s employment (whether pursuant to the terms of the Plan or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person Affiliated with the Company or such Person) (all such payments and benefits, including the Severance Benefits, being hereinafter called “Total Payments”) would not be deductible (in whole or part), by the Company, Affiliate or Person making such payment or providing such benefit as a result of Code section 280G, then, to the extent necessary to make such portion of the Total Payments deductible (and after taking into account any reduction in the Total Payments provided by reason of Code section 280G in such other plan, arrangement or agreement), the cash Severance Payments shall first be reduced (if necessary, to zero), and all other Severance Payments shall thereafter be reduced (if necessary, to zero); provided, however, that the Employee may elect to have the noncash Severance Payments reduced (or eliminated) prior to any reduction of the cash Severance Payments.
(b)    For purposes of this limitation, (i) no portion of the Total Payments the receipt or enjoyment of which the Employee shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Code section 280G(b) shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel (“Tax Counsel”) reasonably acceptable to the Employee and selected by the accounting firm which was, immediately prior to the Change in Control, the Company’s independent auditor (the “Auditor”), does not constitute a “parachute payment” within the meaning of Code section 280G(b)(2), including by reason of Code section 280G

Exhibit 10.18

(b)(4)(A), (iii) the Severance Benefits shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clauses (i) or (ii)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of Code section 280G(b)(4)(B) or are otherwise not subject to disallowance as deductions by reason of Code section 280G, in the opinion of Tax Counsel, and (iv) the value of any noncash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Auditor in accordance with the principles of Code sections 280G(d)(3) and (4).
(c)    If it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that, notwithstanding the good faith of the Employee and the Company in applying the terms of this Section 2.6, the Total Payments paid to or for the Employee’s benefit are in an amount that would result in any portion of such Total Payments being subject to the Excise Tax, then, if such repayment would result in (i) no portion of the remaining Total Payments being subject to the Excise Tax and (ii) a dollar-for-dollar reduction in the Employee’s taxable income and wages for purposes of federal, state and local income and employment taxes, the Employee shall have an obligation to pay the Company upon demand an amount equal to the sum of (i) the excess of the Total Payments paid to or for the Employee’s benefit over the Total Payments that could have been paid to or for the Employee’s benefit without any portion of such Total Payments being subject to the Excise Tax; and (ii) interest on the amount set forth in clause (i) of this sentence at the rate provided in Code section 1274(b)(2)(B) from the date of the Employee’s receipt of such excess until the date of such payment.
Section 3.    PLAN ADMINISTRATION.
3.1    The Plan shall be interpreted, administered and operated by the Plan Administrator, which shall have complete authority, in its sole discretion subject to the express provisions of the Plan, to determine who shall be eligible for Severance Benefits, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable for the administration of the Plan.
3.2    All questions of any character whatsoever arising in connection with the interpretation of the Plan or its administration or operation shall be submitted to and settled and determined by the Plan Administrator in an equitable and fair manner in accordance with the procedure for claims and appeals described in Section 2.4 hereof.
3.3    The Plan Administrator may delegate any of its duties hereunder to such person or persons from time to time as it may designate.
3.4    The Plan Administrator is empowered, on behalf of the Plan, to engage accountants, legal counsel and such other personnel as it deems necessary or advisable to assist it in the performance of its duties under the Plan.  The functions of any such persons engaged by the Plan Administrator shall be limited to the specified services and duties for which they are engaged, and such persons shall have no other duties, obligations or responsibilities under the Plan.  Such persons shall exercise no discretionary authority or discretionary control respecting the management of the Plan.  All reasonable expenses thereof shall be borne by the Company.

Exhibit 10.18

Section 4.    PLAN MODIFICATION OR TERMINATION.
The Plan may be amended by the Plan Administrator or terminated by the Board at any time; provided, however, that (a) no termination or amendment of the Plan may reduce the Severance Benefits to be paid or provided under the Plan to an Employee if the Employee’s termination of employment with the Employer has occurred prior to such termination of the Plan or amendment of its provisions and (b) during the pendency of a Potential Change in Control and during the two-year  period following a Change in Control, the Plan may not be terminated or amended, if such amendment would be adverse to the interests of any Employee or his or her beneficiary, without the consent of such Employee or beneficiary.
Section 5.    GENERAL PROVISIONS.
5.1    Except as otherwise provided herein or by law, none of the payments, benefits or rights of any Employee shall be subject to any claim of any creditor, and, in particular, to the fullest extent permitted by law, all such payments, benefits and rights shall be free from attachment, garnishment, trustee’s process, or any other legal or equitable process available to any creditor of such Employee.  No Employee shall have the right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments which he or she may expect to receive, contingently or otherwise, under the Plan.
5.2    Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Employee, or any person whomsoever, the right to be retained in the service of the Employer, and all Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted.
5.3    If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included.
5.4    The Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Company, expressly and unconditionally to assume and agree to perform the Company’s obligations under the Plan, in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place. In such event, the term “Company,” as used in the Plan, shall mean the Company as herein before defined and any successor or assignee to the business or assets which by reason hereof becomes bound by the terms and provisions of the Plan.
5.5    The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.
5.6    The Plan shall not be funded.  No Employee shall have any right to, or interest in, any assets of the Company which may be applied by the Company to the payment of benefits or other rights under the Plan.
5.7    Any benefit payable to or for the benefit of a minor, an incompetent person 

Exhibit 10.18

or other person incapable of giving a receipt therefor shall be deemed paid when paid to such person’s guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge the Company, the Plan Administrator and all other parties with respect thereto.  If a Severed Employee dies prior to the payment of all benefits due such Severed Employee, such unpaid amounts shall be paid to the executor, personal representative or estate of such Employee.
5.8    The Severance Benefits that a Severed Employee may be entitled to receive pursuant to the Plan are not intended to be duplicative of any similar benefits to which a Severed Employee may be entitled from the Company or any of its Subsidiaries or Affiliates under any other severance plan, agreement, policy or program maintained by the Company or any of its Subsidiaries or Affiliates or to which the Company or any of its Subsidiaries or Affiliates is a party.  Accordingly, to the extent permissible under Code section 409A, the Company shall reduce the benefits to which a Severed Employee may be entitled under the Plan to take account of any other similar benefits to which the Severed Employee is entitled from the Company or any of its Subsidiaries or Affiliates; provided, however, that if the amount of benefits to which such Severed Employee is entitled under such other severance plan, agreement, policy or program is greater than the benefits to which the Severed Employee is entitled under the Plan, the Severed Employee will be entitled to receive the full amount of the benefits to which such Employee is entitled under such other plan, agreement, policy or program and no benefits under the Plan.
5.9    Any notice or other communication required or permitted pursuant to the terms hereof shall have been duly given when delivered or mailed by United States mail, first class, postage prepaid, addressed to the intended recipient at his, her or its last known address.
5.10    The Plan shall be construed and enforced according to the laws of the State of Illinois, without giving effect to its principles of conflicts of law, to the extent not preempted by federal law, which shall otherwise control.
Section 6.    409A COMPLIANCE
6.1    The Plan shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements of Code section 409A and the regulations and other guidance issued thereunder.
6.2    Notwithstanding anything in the Plan to the contrary, to the extent that the requirements of Code section 409A apply to any amount or benefit that would otherwise be payable or distributable hereunder by reason of the Employee’s termination of employment, such amount or benefit will not be payable or distributable to the Employee by reason of such circumstance unless the circumstances giving rise to such termination of employment meet any description or definition of “separation from service” in Code section 409A and applicable regulations, without giving effect to any elective provisions that may be available under such definition, except that in determining whether there is a separation from service with the employer (as defined in the regulations under Code section 409A), the employer shall be determined as follows:
(a)    In applying Code section 1563(a)(1), (2) and (3) for purposes of determining a controlled group of corporations under Code section 414(b), the phrase “at 

Exhibit 10.18

least 50 percent” shall be used instead of “at least 80 percent” each place it appears in Code section 1563(a)(1), (2) and (3); and
(b)    In applying Treasury Regulation Section 1.414(c)-2 for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Code section 414(c), “at least 50 percent” is used instead of “at least 80 percent” each place it appears in Treasury Regulation Section 1.414(c)-2.
6.3    Nothing in this Section 6 prohibits the vesting of any amount upon a termination of employment, however defined.  If this Section 6 prevents the payment or distribution of any amount or benefit, such payment or distribution shall be made on the date, if any, on which an event occurs that constitutes a Code section 409A-compliant “separation from service” or such later date as may be required by Section 6.4 below.
6.4    Notwithstanding anything in the Plan to the contrary, if any amount or benefit is nonqualified deferred compensation for purposes of Code section 409A that would otherwise be payable or distributable under the Plan by reason of the Employee’s separation from service during a period in which he is a Specified Employee (as defined in the regulations under Code section 409A), then, subject to any permissible acceleration of payment by the Company under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes):
(a)    If the payment or distribution is payable in a lump sum, the Employee’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of Employee’s death or the first day of the seventh month following the Employee’s separation from service; and 
(b)    If the payment or distribution is payable over time, the amount of such non-exempt deferred compensation that would otherwise be payable during the six-month period immediately following the Employee’s separation from service will be accumulated and the Employee’s right to receive payment or distribution of such accumulated amount will be delayed until the earlier of the Employee’s death or the first day of the seventh month following the Employee’s separation from service, whereupon the accumulated amount will be paid or distributed to the Employee on such date and the normal payment or distribution schedule for any remaining payments or distributions will resume.
6.5    With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits that are not exempt from Code section 409A, (a) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (b) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any of the Employee’s taxable years shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other of the Employee’s taxable years, provided that the foregoing clause (b) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code section 105(b) solely because such arrangement provides for a limit on the amount of expenses that may be reimbursed over some or all of the period the arrangement is in effect and (c) such payments shall be made on or before the last day of the Employee’s taxable year following the taxable year in which the expenses was incurred.KMPR 2011 9.30.2011 EX 10.19 2009 Performance Incentive Plan

Exhibit 10.19

KEMPER CORPORATION
2009 Performance Incentive Plan

Amended and Restated as of August 25, 2011

TABLE OF CONTENTS

    Page

	
					
	Article 1
	 
	Establishment, Purpose, and Duration
	1

	 
	1.1
	

	Establishment
	1

	 
	1.2
	

	Purpose of this Plan
	1

	 
	 
	 
	 

	Article 2
	 
	Definitions
	1

	 
	2.1
	

	“Affiliate”
	1

	 
	2.2
	

	“Annual Award Limit” or “Annual Award Limits”
	1

	 
	2.3
	

	“Annual Incentive Award”
	1

	 
	2.4
	

	“Award”
	1

	 
	2.5
	

	“Award Instrument”
	1

	 
	2.6
	

	“Board” or “Board of Directors”
	2

	 
	2.7
	

	“Code”
	2

	 
	2.8
	

	“Committee”
	2

	 
	2.9
	

	“Company”
	2

	 
	2.10
	

	“Corporate Performance Measures”
	2

	 
	2.11
	

	“Covered Employee”
	2

	 
	2.12
	

	“Disability or Disabled”
	2

	 
	2.13
	

	“Effective Date”
	2

	 
	2.14
	

	“Employee”
	2

	 
	2.15
	

	“Employer”
	2

	 
	2.16
	

	“Individual Performance Measures”
	2

	 
	2.17
	

	“Multi-Year Incentive Award”
	2

	 
	2.18
	

	“Participant”
	2

	 
	2.19
	

	“Performance-Based Compensation”
	2

	 
	2.20
	

	“Performance Measures”
	2

	 
	2.21
	

	“Performance Period”
	3

	 
	2.22
	

	“Plan”
	3

	 
	2.23
	

	“Plan Year”
	3

	 
	2.24
	

	“Retirement” or “Retires”
	3

	 
	2.25
	

	“Section 162(m)”
	3

	 
	2.26
	

	“Section 409A”
	3

	 
	2.27
	

	“Subject Employees”
	3

	 
	 
	 
	 

	Article 3
	 
	Eligibility and Participation
	3

	 
	3.1
	

	Eligibility
	3

	 
	3.2
	

	Actual Participation
	3

	 
	 
	 
	 

	Article 4
	 
	Grant, Earning and Payment  of Awards
	3

	 
	4.1
	

	Grant of Awards
	3

	 
	4.2
	

	Award Instruments
	3

	 
	4.3
	

	Awards to Covered Employees
	4

	 
	4.4
	

	Awards to Other Participants
	4

TABLE OF CONTENTS

    Page

	
					
	 
	4.5
	

	Timing of Payments
	4

	 
	 
	 
	 

	Article 5
	 
	Performance Measures
	5

	 
	5.1
	

	Performance Measures
	5

	 
	5.2
	

	Individual Performance Measures
	5

	 
	5.3
	

	Corporate Performance Measures
	5

	 
	5.4
	

	Unusual and Nonrecurring Events
	6

	 
	5.5
	

	Committee Discretion
	7

	 
	 
	 
	 

	Article 6
	 
	Termination of Employment; Leave of Absence
	7

	 
	6.1
	

	Death or Disability
	7

	 
	6.2
	

	Retirement
	7

	 
	6.3
	

	Divestiture of Employer
	7

	 
	6.4
	

	Other Termination Provisions
	8

	 
	6.5
	

	Leave of Absence
	8

	 
	 
	 
	 

	Article 7
	 
	Transferability of Awards
	8

	 
	7.1
	

	Transferability
	8

	 
	7.2
	

	Domestic Relations Orders
	8

	 
	 
	 
	 

	Article 8
	 
	Arbitration
	8

	 
	 
	 

	Article 9
	 
	Compliance with Section 409A
	9

	 
	 
	 

	Article 10
	 
	Rights of Participants
	9

	 
	10.1
	

	Employment
	9

	 
	10.2
	

	Participation
	9

	 
	 
	 
	 

	Article 11
	 
	Change of Control
	9

	 
	 
	 

	Article 12
	 
	Administration
	10

	 
	12.1
	

	General
	10

	 
	12.2
	

	Authority of the Committee
	10

	 
	12.3
	

	Performance Based Compensation
	10

	 
	 
	 
	 

	Article 13
	 
	Amendment, Modification, Suspension, and Termination
	10

	 
	13.1
	

	Amendment, Modification, Suspension, and Termination
	10

	 
	13.2
	

	Awards Previously Granted
	11

	 
	 
	 
	 

	Article 14
	 
	Tax Withholding
	11

	 
	 
	 

	Article 15
	 
	Successors
	11

	 
	 
	 

TABLE OF CONTENTS

    Page

	
					
	Article 16
	 
	General Provisions
	11

	 
	16.1
	

	Forfeiture Events
	11

	 
	16.2
	

	Severability
	11

	 
	16.3
	

	Unfunded Plan
	11

	 
	16.4
	

	Non-exclusivity of this Plan
	11

	 
	16.5
	

	Governing Law
	12

	 
	16.6
	

	Beneficiaries
	12

Kemper Corporation  
2009 Performance Incentive Plan

Amended and Restated
Effective August 25, 2011 

Article 1Establishment, Purpose, and Duration
1.1    Establishment.  Kemper Corporation, a Delaware corporation (hereinafter referred to as the “Company”), hereby establishes the 2009 Performance Incentive Plan (the “Plan”).  The Plan is effective as of February 3, 2009  (“Effective Date”), and was amended and restated effective August 25, 2011.  This Plan permits the grant by the Company and its Affiliates of Annual Incentive Awards and Multi-Year Incentive Awards, as defined hereafter.  In accordance with Section 162(m), provisions of this Plan applicable to Awards to Covered Employees shall be subject to approval by the Company’s shareholders, at a meeting duly held in accordance with the Company’s Amended and Restated Bylaws and applicable law.  Any Awards granted to Covered Employees  in advance of the requisite shareholders’ vote shall be made contingent upon such approval by the Company’s shareholders.  In no event shall any amounts be paid with respect to Awards granted to Covered Employees unless and until the requisite shareholder approval has been obtained. 
1.2    Purpose of this Plan.  The purpose of this Plan is to motivate and reward eligible executive-level Employees through annual and multi-year cash incentive awards tied to the achievement of performance goals established hereunder, and to attract and retain superior Employees through these incentives.  This Plan is designed so that Awards to Covered Employees qualify as Performance-Based Compensation under Section 162(m) in order to preserve the Company’s federal income tax deduction for incentive compensation paid to such Employees.   
Article 2    Definitions
Whenever used in this Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.
2.1    “Affiliate” means any person or entity controlled directly or indirectly by the Company, whether by equity ownership, contract or otherwise and shall include direct or indirect subsidiaries of the Company and mutual companies the management of which is controlled by the Company and its subsidiaries.  
2.2    “Annual Award Limit” or “Annual Award Limits” have the meaning set forth in Section 4.3.
2.3    “Annual Incentive Award” means an arrangement under which a Participant is given the opportunity to earn a cash bonus based on the achievement of performance goals measured over a Performance Period of one year or less.
2.4    “Award”  means, individually or collectively, a grant under this Plan of an 

Annual Incentive Award or a Multi-Year Incentive Award, in each case subject to the terms of this Plan. 
2.5    “Award Instrument”  means either: (a) a written agreement between a Participant and his or her Employer setting forth the terms and conditions applicable to an Award, or (b) a written or electronic statement issued by an Employer to a Participant describing the terms and conditions of such Award.
2.6     “Board” or “Board of Directors”  means the Board of Directors of the Company.
2.7    “Code”  means the U.S. Internal Revenue Code of 1986, as amended from time to time, or any successor statute.
2.8    “Committee”  means the Compensation Committee of the Board or any subcommittee thereof, or any other committee designated by the Board to administer this Plan. 
2.9    “Company”  means Kemper Corporation, a Delaware corporation, and any successor thereto as provided in Article 15 herein.
2.10    “Corporate Performance Measures” is defined in Section 5.3. 
2.11    “Covered Employee”  means any Employee who is or may become a “Covered Employee,” as defined in Section 162(m). 
2.12    “Disability or Disabled”  when used with respect to a particular Participant, means a physical or mental condition that: (a) is of a type that would generally trigger benefits under the Company’s long-term disability plan (as in effect from time to time), whether or not such Participant is actually enrolled in such plan; or (b) in the absence of any such plan, would cause such Participant to be unable to substantially perform his or her duties as an Employee, as determined in the sole discretion of the Committee.  Notwithstanding the foregoing, if an Award becomes subject to Section 409A, “Disability” and “Disabled” shall be defined as required thereunder. 
2.13    “Effective Date”  has the meaning set forth in Section 1.1.
2.14    “Employee”  means any employee of the Company or any Affiliate of the Company.
2.15    “Employer” means, with respect to a given Employee, whichever of the Company or its Affiliates is the employer of such Employee.
2.16    “Individual Performance Measures” is defined in Section 5.2.
2.17    “Multi-Year Incentive Award” means an arrangement under which a Participant is given the opportunity to earn a cash award based on the achievement of one or  more performance goals measured over a Performance Period of more than one year.

2.18    “Participant”  means any Employee to whom an Award is granted.
2.19    “Performance-Based Compensation”  means compensation under an Award that satisfies the requirements of Section 162(m). 
2.20    “Performance Measures”  means measures described in Article 5 on which performance goals for Awards are based and, for measures applicable to Covered Employees, the measures which are approved by the Company’s shareholders pursuant to this Plan in order to qualify Awards as Performance-Based Compensation.  
2.21    “Performance Period”  means the period of time with respect to which the achievement of performance goals is measured to determine the amount of the payout, if any, of an Award.
2.22    “Plan”  is defined in Section 1.1 above.
2.23    “Plan Year”  means a calendar year.
2.24    “Retirement” or “Retires”  means the voluntary termination of employment by a Participant who has attained age 55, is eligible for early retirement under a retirement plan sponsored by the Company, and makes an election to begin receiving retirement benefits under such retirement plan. 
2.25    “Section 162(m)”  means Section 162(m) of the Code, or any successor provision,  and the regulations, rulings and other guidance issued thereunder by the Internal Revenue Service. 
2.26    “Section 409A”  means Section 409A of the Code, or any successor provision,  and the regulations, rulings and other guidance issued thereunder by the Internal Revenue Service. 
2.27    “Subject Employees” means the executive officers of the Company and the officers of the Company’s Affiliates who are generally referred to by the Company as the operating company presidents and group executives, and includes the Covered Employees.
Article 3    Eligibility and Participation
3.1    Eligibility.  All executive-level Employees, as determined in the discretion of the Committee (or in the discretion of the Company’s Chief Executive Officer or other executive officer pursuant to a delegation of authority made pursuant to the terms of this Plan), shall be eligible to participate in this Plan.
3.2    Actual Participation.  For Awards to Subject Employees, the Committee shall have the sole power and authority, in its discretion, to select Award recipients and determine the terms of Awards on its own initiative or to approve, modify or reject Award recommendations from the management of the Company or its Affiliates, and no such Awards shall be granted without the prior, express approval of the Committee.  For Awards to other Employees, the 

Committee may delegate to the Company’s Chief Executive Officer (and such other executive officers of the Company as determined appropriate by the Committee in its discretion), the power and authority to select such additional Award recipients and to approve and determine the terms of such Awards.
Article 4    Grant, Earning and Payment of Awards
4.1    Grant of Awards.  At any time and from time to time, Annual Awards and/or Multi-Year Awards may be granted to Participants under the terms and provisions of this Plan.  
4.2    Award Instruments.  Each Award to a Participant shall be evidenced by an Award Instrument that specifies the applicable Performance Period, Performance Measures, performance goals, threshold, maximum and target payouts and such other provisions as have been approved for such Participant in accordance with this Plan, including, without limitation, such provisions as maybe determined necessary or advisable to comply with Article 9.
4.3    Awards to Covered Employees.  
(a)    Annual Award Limit.  The maximum amount paid to a Covered Employee in any one Plan Year under an Annual Incentive Award or a Multi-Year Incentive Award may not exceed $2,000,000 (“Annual Award Limit”).
(b)    Performance Goals.  Within ninety (90) days of the beginning of each Performance Period (or, if earlier, before twenty-five percent (25%) of the period of service to which the Performance Measures relate has elapsed), the Committee shall establish or approve the performance goals for the Performance Period for Awards to Covered Employees. The performance goals established by the Committee shall be stated in terms of an objective formula or standard and shall be based on one of, or a combination of, the Corporate Performance Measures set forth in Section 5.3.  
(c)    Data and Calculations.  After each Performance Period, the Company shall compile data and perform calculations as may be necessary to assess results and achievements of performance goals that were previously established for such Performance Period. 
(d)    Satisfaction of Performance Goals.  After each Performance Period, the Company shall submit a written report to the Committee providing such data and calculations necessary to enable the Committee to assess the results and achievement of performance goals for such Performance Period that were previously established for Awards granted to Covered Employees.   The Committee shall review such report and make a determination for each Participant as to the degree of achievement of each performance goal based upon the actual results for such Performance Period.  Prior to the payout of any Award to a Covered Employee, the Committee shall certify in accordance with Section 162(m) the extent to which the performance goal(s) for the applicable Performance Period have been satisfied.
(e)    Payouts.  The Committee, in its sole discretion, may reduce the amount of 

the payout that otherwise would be due to a Covered Employee upon application of the performance goals for the Performance Period applicable to an Award to the extent necessary to prevent a payout in excess of the Annual Award Limit for such Award.  Under no circumstances may the Committee increase the amount of any Award that otherwise would be payable to a Covered Employee upon application of the performance goals for the applicable Performance Period.  
4.4    Awards to Other Participants.  With respect to Participants other than Covered Employees, data shall be provided by the Company and a determination shall be made by the Committee or, pursuant to a delegation of authority made in accordance with the terms of this Plan, by the Company’s Chief Executive Officer or other executive officer, as to the degree of achievement of each performance goal based upon the actual results for the Performance Period.
4.5    Timing of Payments.  Awards shall be paid, in cash, as soon as practicable after the end of a Performance Period in accordance with the terms of the Award Instrument (but in no event later than March 15 of the calendar year immediately following the end of the Performance Period).
Article 5    Performance Measures
5.1    Performance Measures.  Payouts of all Awards shall be conditioned upon the attainment of performance goals that are established for the relevant Performance Periods based upon specified Performance Measures.  Performance goals for Awards to Participants other than Covered Employees may be based on Individual Performance Measures, Corporate Performance Measures, or a combination of the two.  Performance goals for Awards granted to Covered Employees may only be based upon Corporate Performance Measures.  
5.2    Individual Performance Measures.  Performance goals may be established for Awards to a Participant who is not a Covered Employee based on individual performance measures which may be quantitative or qualitative in nature (“Individual Performance Measures”). In the case of an Award based upon a combination of Individual Performance Measures and Corporate Performance Measures, specific limits may be imposed on the portion of the payout that is based upon Individual Performance Measures.  Such limits may be expressed in terms of the total dollar amount or the percentage of the Award’s payout that may be attributable to the attainment of Individual Performance Measures.
5.3    Corporate Performance Measures.  Unless and until the Committee proposes for shareholder vote and the shareholders of the Company approve a change in the Performance Measures set forth in this Section 5.3, the corporate performance goals upon which the payment of an Award may be conditioned shall be limited to the following Performance Measures (“Corporate Performance Measures”): 
		
	(a)
	Net earnings or net income (before or after taxes); 

		
	(b)
	Operating earnings per share;

		
	(c)
	Net sales or revenue growth;

		
	(d)
	Operating income and/or average increase in dollars of operating income of the Company or any of its Subsidiaries or operating units;

		
	(e)
	Return measures (including, but not limited to, return on assets, capital, invested capital, investment portfolio performance returns or yields, equity, sales, or revenue);

		
	(f)
	Cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on equity);

		
	(g)
	Earnings before or after taxes, interest, depreciation, and/or amortization;

		
	(h)
	Gross or operating margins;

		
	(i)
	Productivity ratios;

		
	(j)
	Share price (including, but not limited to, growth measures and total shareholder return);

		
	(k)
	Expense targets;

		
	(l)
	Margins;

		
	(m)
	Operating efficiency;

		
	(n)
	Market share;

		
	(o)
	Customer satisfaction; 

		
	(p)
	Working capital targets; 

		
	(q)
	Bad debt experience; 

		
	(r)
	Reduction in costs; 

		
	(s)
	Economic value added or EVA® (net operating profit after tax minus the sum of capital multiplied by the cost of capital); and

		
	(t)
	Insurance company underwriting income, combined ratios, loss ratios or expense ratios.

Any Corporate Performance Measure(s) may be defined in accordance with generally acceptable accounting principles or otherwise, and may be used to measure the performance of the Company and its Affiliates on a consolidated basis, or any Affiliate or business unit or segment of the Company individually, or any combination thereof, as the Committee may deem appropriate.  Any Corporate Performance Measure may also be compared against similar measures for a group of comparator or peer companies, or against a published or special index that the Committee, in its sole discretion, deems appropriate, or the Committee may select 

Performance Measure (j) above as compared to various stock market indices. 
5.4    Unusual and Nonrecurring Events.  An Award Instrument may provide that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any reorganization or restructuring; (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 (or a successor pronouncement) and/or in the Company’s periodic reports filed with the Securities and Exchange Commission for periods within the applicable Performance Period; and (f) acquisitions or divestitures.  In addition, an Award Instrument may provide the Committee with authority to make, in its discretion, adjustments to the established performance goals applicable to such Award to reflect changes to the job responsibilities of the Participant or the structure of the Company or its Affiliates that relate directly to such established performance goals for all or a portion of the applicable Performance Period.   To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be approved by the Committee and prescribed in a form that meets the requirements of Section 162(m).
5.5    Committee Discretion.  In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Measures for Awards to Covered Employees without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval.  
Article 6    Termination of Employment; Leave of Absence
6.1    Death or Disability.  Upon termination of the employment of a Participant due to death or Disability,  for each outstanding Award previously granted to the Participant, the Performance Period shall be deemed to have been completed and a payout of the Award shall be due to the Participant (or, in the case of death, to the Participant’s designated beneficiary, if any, or to his or her estate) at the level defined in the Award Instrument as the “target” level as if the applicable performance goal(s) had been achieved at such target level, but reduced on a pro-rata basis by multiplying the amount that would have been payable under the Award at such target level for the original Performance Period by a fraction, the numerator of which is the number of full months in the Performance Period during which the Participant was an active Employee and the denominator of which is the total number of months in the original Performance Period.  A partial month worked shall be counted as a full month if the Participant was an active Employee for fifteen (15) days or more in that month.  The Award shall be paid, in cash, as soon as practicable after the termination of employment (but in no event later than March 15 of the calendar year immediately following the end of such completed Performance Period). 
6.2    Retirement.  In the event that a Participant’s employment terminates due to Retirement, for each outstanding Award previously granted to the Participant, a payout of the Award shall be due, to the extent earned, based upon the actual results relative to the applicable performance goal(s) for such Award for the original Performance Period, but reduced on a pro-rata basis by multiplying the amounts that would have been payable under the Award for the original Performance Period by a fraction, the numerator of which is the number of full months 

in the Performance Period during which the Participant was an active Employee and the denominator of which is the total number of months in the original Performance Period.  A partial month worked shall be counted as a full month if the Participant was an active Employee for fifteen (15) days or more in that month.  The Award shall be paid, in cash, as soon as practicable after the completion of the original Performance Period when Award payouts are made to active Employees (but in no event later than March 15 of the calendar year immediately following the end of the Performance Period). 
6.3    Divestiture of Employer.  In the event that a Participant’s employment terminates upon and as result of the sale or divestiture by the Company or any of its Affiliates of its controlling interest in any Employer (“Divestiture”), for each outstanding Award previously granted to such Participant, the term of the applicable Performance Period shall be deemed revised so that the Performance Period ends on the effective date of the Divestiture, and a payout of the Award shall be due, to the extent earned, based on the actual results relative to the applicable performance goal(s) for such Award for the revised Performance Period.  The Award shall be paid, in cash, as soon as practicable after the termination of employment (but in no event later than March 15 of the calendar year immediately following the end of such completed Performance Period).  

6.4    Other Termination Provisions.  
(a)    Other Events.  In the event a Participant’s employment terminates for any reason other than death, Disability, Retirement, Divestiture, or an Event as defined in Article 11, including but not limited to, termination with or without cause by his or her Employer, or voluntary termination by the Participant, any outstanding Award shall be canceled and the Participant shall receive no payment for such Award under this Plan, unless, subject to Section 16.1, the Performance Period associated with any such Award had been completed at the time of the Participant’s termination of employment, in which case the payout, if any, pursuant to such Award shall be computed and paid in accordance with the relevant performance goals as if the Participant’s employment had not terminated. 
(b)    Other Provisions.  The Committee may, in its discretion, approve termination provisions in connection with particular Awards or Participants that differ from the terms of this Article 6 to the extent such provisions:  (i) are consistent with Section 162(m), if and as applicable; and (ii) do not adversely affect any Award previously granted under this Plan in any material way without the written consent of the Participant holding such Award.
6.5    Leave of Absence.  In the event that the Participant is on an approved leave of absence (other than a short-term disability leave) at the end of the Performance Period, or takes such a leave of absence at any time during the Performance Period, a payout of the Award shall be due, to the extent earned, based upon the actual results relative to the applicable performance goal(s) for such Award for the Performance Period, but reduced on a pro-rata basis by multiplying the amount that would have been payable under the Award for the Performance 

Period by a fraction, the numerator of which is the number of full months in the Performance Period during which the Participant was an active Employee not on such leave of absence and the denominator of which is the total number of months in the Performance Period.  A partial month worked shall be counted as a full month if the Participant was an active Employee for fifteen (15) days or more in that month.  The Award shall be paid, in cash, as soon as practicable after the completion of the original Performance Period when Award payouts are made to active Employees (but in no event later than March 15 of the calendar year immediately following the end of the Performance Period).

Article 7    Transferability of Awards
7.1    Transferability.  Awards shall not be transferable other than by will or the laws of descent and distribution.  No Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be null and void. 
7.2    Domestic Relations Orders.  Without limiting the generality of Section 7.1, no domestic relations order purporting to authorize a transfer of an Award or any interest in an Award shall be recognized as valid.
Article 8     Arbitration
As a condition to receiving an Award grant, a Participant may be required to agree in writing to submit all disputes or claims arising out of or relating to any such Award to binding arbitration in accordance with such terms as prescribed when the Award is approved.  
Article 9    Compliance with Section 409A
Each Award that is granted under this Plan shall be designed and administered so that the Award is either exempt from the application of, or compliant with, the requirements of Section 409A.  To the extent that the Committee determines that any Award granted under this Plan is subject to Section 409A, the Award Instrument shall include such terms and conditions as the Committee determines, in its discretion, are necessary or advisable to avoid the imposition on the Participant of an additional tax under Section 409A.  Notwithstanding any other provision of this Plan or any Award Instrument (unless the Award Instrument provides otherwise with specific reference to this Section):  (i) an Award shall not be granted, deferred, accelerated, extended, paid out, settled, substituted, adjusted or modified under this Plan in a manner that would result in the imposition of an additional tax under Section 409A upon a Participant; and (ii) if an Award Instrument provides for the deferral of compensation within the meaning of Section 409A, no distribution or payment of any amount shall be made before a date that is six (6) months following the date of such participant’s separation from service (as defined in Section 409A) or, if earlier, the date of the Participant’s death.  Although the Company intends to administer this Plan so that Awards will be exempt from, or will comply with, the requirements of Section 409A, the Company does not warrant that any Award under this Plan will qualify for favorable tax treatment under Section 409A or any other provision of federal, state, local, or non-United States law.  Neither the Company, its Affiliates nor their respective directors, officers, employees or 

advisors shall be liable to any Participant (or any other individual claiming a benefit through the Participant) for any tax, interest or penalties the Participant may owe as a result of the grant, holding, vesting or payment of any Award under this Plan.
Article 10    Rights of Participants
10.1    Employment.  Nothing in this Plan or an Award Instrument shall interfere with or limit in any way the right of an Employer to terminate any Participant’s employment at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his or her employment for any specified period of time.  Neither an Award, an Award Instrument, nor any benefit arising under this Plan shall constitute an employment contract with the Company or any of its Affiliates and, accordingly, subject to Articles 12 and 13, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company, its Affiliates or their respective directors, officers, employees or advisors. 
10.2    Participation.  No Employee shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.
Article 11    Change of Control
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 Shares of the Company to another corporation (any of the foregoing, an “Event”), the applicable Performance Period for each Award then outstanding under this Plan shall be deemed revised so that such Performance Period ends on the effective date of the Event, and a payout of each such Award shall be due to the respective Participant in the amount which is the greater of the payout that would be due: (a) based upon the actual results for such revised Performance Period relative to the applicable performance goal(s) for such Award; or (b) at the level defined in the respective Award Instrument as the “target” level for such Award for such revised Performance Period.   The Award shall be paid, in cash, as soon as practicable after the Event (but in no event later than March 15 of the calendar year immediately following the end of the revised Performance Period).
Article 12    Administration  
12.1    General.  The Committee shall be responsible for oversight of the administration of this Plan, subject to this Article 12 and the other provisions of this Plan.  The Committee may retain attorneys, consultants, accountants, or other advisors, and the Committee, the Company and its Affiliates, and their respective officers and directors shall be entitled to rely upon the advice, opinions, or valuations of any such advisors. The fees of any such advisors shall be paid by the Company.  All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, beneficiaries, the Company, its Affiliates and all other interested individuals. 
12.2    Authority of the Committee.  

(a)     Power and Discretion.  The Committee shall have full and, except as otherwise expressly provided in this Plan, exclusive, power and discretion: (i) to interpret the terms and the intent of this Plan and any Award Instrument or other agreement or document ancillary to or in connection with this Plan,  and to adopt such rules, regulations, forms, instruments, and guidelines for administering this Plan as the Committee may deem necessary or proper;  (ii) subject to Article 13, to adopt modifications and amendments to this Plan or any Award Instrument, including without limitation, any that are necessary to comply with the laws of the jurisdictions in which the Company and its Affiliates operate or may operate.   
(b)    Delegation.  Notwithstanding the other provisions of this Plan, including Section 12.2(a), the Committee may in its discretion delegate such administrative duties or powers as it may deem advisable to one or more of its members and, except in connection with Awards to Subject Employees, to one or more officers of the Company or its Affiliates.  
12.3    Performance-Based Compensation.  To enable Awards to Covered Employees to qualify as Performance-Based Compensation,  this Plan shall be administered in a manner consistent with the terms and conditions of Section 162(m), as applicable.
Article 13    Amendment, Modification, Suspension, and Termination
13.1    Amendment, Modification, Suspension, and Termination.  Subject to Article 9 and Section 13.2, the Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate this Plan in whole or in part; provided, however, that, no material amendment of this Plan shall be made without shareholder approval if shareholder approval is required by law.  Furthermore, no amendment, modification, suspension or termination may impact the distribution of any Award that is subject to Section 162(m) or Section 409A, except as permitted by such applicable Section. 
13.2    Awards Previously Granted.  Notwithstanding any other provision of this Plan to the contrary, no termination, amendment, suspension, or modification of this Plan or an Award Instrument shall adversely affect in any material way any Award previously granted under this Plan, without the written consent of the Participant holding such Award. 
Article 14    Tax Withholding  
An Employer shall have the power and the right to deduct or withhold, or require a Participant to remit to the Employer, the amount of any taxes which the Employer may be required to withhold with respect to any taxable event arising from such Participant’s Awards.
Article 15    Successors
All obligations of the Company or any Affiliate under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company or such Affiliate, whether the existence of such successor is the result of a direct or indirect purchase, sale, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the 

Company or such Affiliate.
Article 16    General Provisions
16.1    Forfeiture Events.  An Award Instrument may specify that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award.  Such events may include, but shall not be limited to, termination of employment for cause, violation of material Company and/or Affiliate policies, breach of non-competition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its Affiliates. 
16.2    Severability.  In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
16.3    Unfunded Plan.  Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between any Participant and his or her Employer or the Company or any of its Affiliates.  Participants shall have no right, title, or interest whatsoever in or to any assets of their Employers or of the Company or any of its Affiliates with respect to the obligations arising out of any Awards.  To the extent that any person acquires a right to receive payments pursuant to an Award, such right shall be no greater than the right of a general unsecured creditor of the Participant’s Employer.  No special or separate fund shall be established and no segregation of assets shall be made to assure payment of amounts payable under this Plan.
16.4    Non-exclusivity of this Plan.  The adoption of this Plan shall not be construed as creating any limitations on the power of the Company or any of its Affiliates to adopt such other compensation arrangements as it may deem desirable for any Employee.
16.5    Governing Law.  This Plan and each Award Instrument shall be governed by the laws of the State of Illinois, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.  Unless otherwise provided in the Award Instrument (or other written agreement related to arbitration pursuant to Article 8), each Participant is deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Illinois and the state in which such Participant’s regular office is located, to resolve any and all issues that may arise out of or relate to this Plan or any related Award Instrument.
16.6    Beneficiaries. Each Participant may designate a beneficiary or beneficiaries to receive, in the event of such Participant’s death, any payments remaining to be made to the Participant under the Plan. Each Participant shall have the right to revoke any such designation and to redesignate a beneficiary or beneficiaries by written notice to the Employer to such effect. If a Participant dies without naming a beneficiary or if all of the beneficiaries named by a 

Participant predecease the Participant, then any amounts remaining to be paid under this Plan shall be paid to the Participant’s estate.

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