Kemper Corporation 2009 Performance Incentive Plan ANNUAL INCENTIVE AWARD AGREEMENT

2.    Vesting and Forfeiture.

(a)    Performance Period. The Performance Period (the “Performance Period”) for this Award shall be the period set forth in the attached Exhibit. Subject to

the forfeiture and early vesting provisions referenced in Section 2(b) below, the Award will vest on the last day of the Performance Period only to the extent set forth and in accordance with the terms of Exhibit A with regard to the performance condition(s) referenced therein.

(b)    Forfeiture or Early Vesting upon Retirement, Death, Disability or Other Events. During the Performance Period, the Award may be subject to forfeiture or early vesting upon the termination of the Award Holder’s employment due to retirement, death, disability or other events as provided in Section (d) below, or as otherwise provided in accordance with the provisions of Articles 6 or 11 of the Plan, which are incorporated in and made a part of this Agreement.

(c)     Certain Definitions.

(i) “Service” means that the Award Holder is employed by the Company or an Affiliate.

(ii) “Retirement Eligible” means that the Award Holder has either attained age 60 and completed 10 years of Service as an Employee or attained age 65 and completed 5 years of Service as an Employee.

(d)     Retirement Eligible. (i) Except as otherwise provided in (d)(ii), if the Award Holder is Retirement Eligible but not in Service on the last day of the Performance Period (“Vesting Date”), 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).

(ii) If, on or prior to the Vesting Date, as defined in (d)(i) above, the Award Holder is Retirement Eligible and either (A) becomes an employee of a competitor of the Company or any of its Affiliates or otherwise engages in any activity that is competitive with the Company or any of its Affiliates, as determined by the Company in its sole discretion, or (B) the Award Holder’s Service is terminated for Substantial Cause, then the Award shall be forfeited to the Company.

3.    Withholding of Taxes; Section 409A. The Company shall withhold from any payouts under the Award the amounts the Company is required to withhold to satisfy any applicable tax withholding requirements based on minimum statutory withholding rates for

federal and state tax purposes, including any payroll taxes. The Company intends that the Award hereunder shall either be exempt from the application of, or compliant with, the requirements of Section 409A and this Award Agreement shall be interpreted and administered in accordance with such intent. 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 Section 409A.

7.    Agreement Subject to Award Plan. The Award hereby granted is 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 may be amended from time to time hereafter 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. To the extent that the terms or conditions of this Agreement conflict with the terms or conditions of the Plan, the Plan shall govern.

8.    Arbitration. Notwithstanding the terms of any other agreement in effect between the parties, all disputes related to this Agreement or any RSUs granted hereunder shall be submitted to final and binding arbitration with the American Arbitration Association (“AAA”) pursuant to the AAA Employment Arbitration Rules and Mediation Procedures (“AAA Rules”) as amended from time to time. A copy of the AAA Rules is available to the Award Holder upon written request to the Company’s Director of Human Resources at One East Wacker Drive,

Chicago, Illinois 60601 (or such other address as the Company may specify from time to time), or may be obtained online at: www.adr.org.

To initiate arbitration, either party must file a Demand for Arbitration (“Demand”) in the manner described in the AAA Rules. After a Demand has been filed and served, either party may request that the dispute initially be mediated pursuant to the AAA Rules, in which event such dispute shall be mediated. If mediation does not fully resolve the dispute or if neither party requests mediation, then the matter will be subject to arbitration before a single arbitrator who shall have the power to award any types of legal or equitable relief (other than punitive damages) available in a court of competent jurisdiction, including, but not limited to, attorneys’ fees and costs, and all defenses that would be applicable in a court of competent jurisdiction shall be available. Unless provided otherwise in the arbitrator’s award, each party will pay its own attorneys’ fees and costs. To the extent required by law or the AAA Rules, all administrative costs of arbitration (including reimbursement of filing fees) and the fees of the arbitrator will be paid by the Company. The parties agree that no class action proceedings (or joinder or consolidation with claims of any other person) may be brought in connection with this Agreement without the written consent of both parties.

11.    Clawbacks. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement, including (but not limited to) Section 2 above, the rights, payments, and benefits with respect to this Award are subject to reduction, cancellation, forfeiture, or recoupment by the Company if and to the extent required by applicable law, regulation of the Securities and Exchange Commission, or rule or listing requirement of the New York Stock Exchange (collectively “Applicable Requirements”) in connection with an accounting restatement or under such other circumstances as specified in the Applicable Requirements. Any action taken by the Company under this provision shall be made pursuant to the Committee’s determination, which shall be final, binding and conclusive.

Overview: This Exhibit A sets forth the terms that will determine the amount of the cash payout, if any, that the Award Holder may be entitled to receive pursuant to the Award based on the outcome of the applicable performance measures over the Performance Period.

Performance Period: January 1, ____ through December 31, ____.

Weighted Target Bonus Percentage: The Target Bonus Percentage is expressed as a percentage of the Award Holder’s Base Salary, as defined below, and is weighted based on Corporate Performance Measures and Individual Performance Measures (if applicable) as shown in Table 1.

Base Salary: Base Salary is the Award Holder’s annual base salary in effect as of April 1 of the Performance Period.

Individual Performance Measures: Individual Performance Measures may be quantitative or qualitative in nature. If applicable, as shown in Table 1, Individual Performance Measures will be established by the CEO or the Award Holder’s Operating Company President or supervisor and evaluated in his or her sole discretion in determining the payout for the portion of the Award based upon Individual Performance Measures. In no event can the total payout under all portions of this Award exceed [ ]% of the Award Holder’s Base Salary.

Corporate Performance Measures: The Corporate Performance Measures applicable to this Award are Consolidated Operating Profit Margin (weighted 80%) and Earned Premium Revenue Growth (weighted 20%), as defined herein. The applicable performance measures are shown in the attached Performance Grid, which shows Consolidated Operating Profit Margin on the X axis and Earned Premium Revenue Growth on the Y axis.

Consolidated Operating Profit Margin: Consolidated Operating Profit Margin (weighted 80%) is defined as Consolidated Net Operating Income (Loss) divided by Earned Premium Revenues. This measure will incorporate any adjustments made to applicable operating segment results for variances from estimated catastrophe losses and loss adjustment expenses in accordance with the “CAT Loss Collar” approved by the Compensation Committee.

Consolidated Net Operating Income (Loss): Consolidated Net Operating Income (Loss) is computed by excluding from net income (loss) from continuing operations the after-tax impact of 1) net realized gains (losses) on sales of investments, 2) net impairment losses recognized in earnings related to investments and 3) other significant nonrecurring or infrequent items that may not be indicative of ongoing operations. Significant non-recurring items are excluded when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, and (b) there has been no similar charge or gain within the prior two years.

Earned Premium Revenue Growth: Earned Premium Revenue Growth (weighted 80%) is defined as the percentage increase in Earned Premium Revenues in ____ from such revenues in ____.

Earned Premium Revenues: Earned Premium Revenues is defined as earned premiums as reported in the Financial Analysis Summaries or its reporting equivalent for all insurance company operating segments.

Target Multiplier: At the end of the Performance Period, the Award Holder will be assigned a Target Multiplier, which is derived from the attached Performance Grids based on the outcome of the Corporate Performance Measures.

Threshold and Maximum Target Multiplier Levels under Corporate Performance Measures: Threshold and maximum Target Multiplier levels for Corporate Performance Measures under the Award are incorporated into the attached Performance Grids. The threshold Target Multiplier level is set at 25%, below which no payout will be made, and the maximum Target Multiplier level is set at 200%.

Corporate Award Percentage: The Target Multiplier will be applied against the Award Holder’s Weighted Target Bonus Percentage for Corporate Performance Measures to arrive at the Corporate Award Percentage.

Individual Award Percentage: If applicable, an Individual Multiplier will be determined from an evaluation of the Award Holder’s performance and will be applied against the Award Holder’s Weighted Target Bonus Percentage for Individual Performance Measures to arrive at the Individual Award Percentage.

Award Calculation: The determination of the amount of the payout, if any, under the Award will be calculated by adding the Award Holder's Corporate Award Percentage and Individual Award Percentage (if any), and multiplying the sum by the Award Holder's Base Salary.

Corporate Award Percentage = Target Multiplier * Weighted Target Bonus Percentage for Corporate Measures

Individual Award Percentage = Individual Multiplier * Weighted Target Bonus Percentage for Individual Measures

Total Award Payable = (Corporate Award Percentage + Individual Award Percentage) * Base Salary

Illustrative Example: Below is an illustrative example of a calculation for a potential payout under the Award for a sample Award Holder with a Base Salary of $100,000 and a Target Bonus Percentage of 10% based on Corporate Performance Measures and of 10% based on Individual Performance Measures.

Adjustments: This Award may be adjusted by the Compensation Committee of the Kemper Corporation Board of Directors, or by the Kemper Corporation’s Chief Executive Officer in accordance with the terms of the Plan, including without limitation, Sections 5.4, 5.5 and 12.2.