Exhibit
10.18


 


Esurance Holdings, Inc.


Esurance Restricted Unit Plan


 


1.              Purpose of the Plan: The Purpose of
the Esurance Holdings, Inc. Esurance Restricted Unit Plan (the “Plan”) is
to advance the interest of Esurance Holdings, Inc. (the “Company”) and its
owners by providing cash incentives to service providers who may have a
material impact on the financial performance of the Company.


 


2.              Summary:  From time to time, the Board
of Directors of the Company (the “Board”) may grant to executives of, or consultants
to, the Company or its subsidiaries (each, a “Participant”) a number of units (“Esurance
Restricted Units” or “ERUs”) whose ultimate payment value (the “Award Value”)
is determined in relation to the economic performance of the Esurance Segment
over specified periods of time (each such period, an “Award Period”) as set
forth in this Plan.  Esurance Restricted
Units granted for any Award Period ending on or before December 31, 2010
will have an initial ERU Value of $1,565.00, which value will increase or
decrease based upon periodic Net EROC (such value, as increased or decreased
over time, the “ERU Value”).  At the end
of each Award Period, the Board will determine (i) the final ERU Value of
each ERU based upon annual Net EROC over such Award Period.  The Award Value of any vested ERUs for an
Award Period shall be equal to the product of (x) the number of ERUs for
an Award Period in the applicable Grant and (y) the ERU Value of an ERU
for the applicable Award Period, as finally determined by the Board.


 


3.              Administration:  The Plan shall be administered by the Board,
or by persons or committees designated by the Board from time to time to whom
the Board may delegate any of its rights, powers or authorities under this
Plan.  The Board shall have the authority
to select the Participants, to determine the size and terms of the Grants, to
modify the terms of any Grant, to determine the time when grants will be made,
to determine the Award Periods applicable to a Grant, to determine the terms of
a Participant’s Grant (which need not be identical or uniform), to determined
the Net EROC calculations and to make such other determinations that are not
prohibited by this Plan.  The Board is
authorized to interpret the Plan to establish, amend and rescind any rules and
regulations relating to the Plan and to make any other determinations that it
deems necessary or desirable.  Any
decision of the Board in the interpretation and administration of the Plan
shall lie within its sole and absolute discretion and shall be final conclusive
and binding on all parties concerned. 
Determinations made by the Board under the Plan need not be uniform and
may be made selectively among Participants regardless of whether such
Participants are similarly situated. The Company shall have the right to deduct
from any payment made under the Plan any taxes required by law to be withheld
with respect to such payment.


 


4.              Eligibility and Participation:  The Board shall select the Participants from
among the executives and consultants who are in a position to have a material 


 


1

















 


impact on the financial results of the Company.  The designation of the Participants may be
made individually or by groups or classifications of executives or consultants,
as the Board deems appropriate.  No
executive or consultant shall have any right to be designated as a Participant
and the designation of an executive or consultant as a Participant shall not
obligate the Board to continue such executive or consultant as a Participant in
subsequent Award Periods.


 


5.              Grants:


 


(a)   Grant:  Each Grant agreement shall specify at least (i) the
number of ERUs granted, (ii) the Award Period(s), (iii) the Vesting Date(s),
and (iv) the method for determining the Award Value of ERUs.


 


(b)   Performance
Measures:  The performance
measures and the method for determining the Award Value of ERUs for any Grant
shall be as determined by the Board and as stated in the Grant agreement, which
determinations shall be final, binding and not subject to challenge by
Participants.


 


(c)   Payment:  As soon as practicable after the end of an
Award Period, the Board shall with respect to all Grants relating to such Award
Period (i) determine the ERU Value of any vested ERUs for the applicable
Award Period.  Unless otherwise
determined by the Board or set forth in a Grant agreement, the Award Value of a
Grant for an Award Period shall be equal to the product of (x) the number
of ERUs in the applicable Grant and (y) the ERU Value of an ERU for the
applicable Award Period, as finally determined by the Board.  Except as provided in Section 7, payment
in respect of a Participant’s ERUs will be settled and paid in cash within 2 1⁄2
months after the end of the Award Period.


 


(d)   Award
Periods:  The Board may issue
ERU Grants with Award Periods covering one or two years.


 


(e)   Number of
ERUs:  With respect to all
Award Periods ending on or prior to December 31, 2010, the Board is
authorized to make Grants of up to the number of ERUs specified below:


 


	
  Award
  Period

  	
   

  	
  ERUs

  	
   

  
	
  2009-2010

  	
   

  	
  1556

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2009

  	
   

  	
  1728

  	
   

  



 


6.              Termination of Employment:  Except as set forth in Section 7 or
otherwise in a Grant agreement, a Participant shall immediately forfeit all
outstanding Grants upon any termination of employment with the Company and its
subsidiaries, and, if applicable, any termination of a Related Employment
assignment, prior to the last day of the Award Period with respect to which
such ERU Grants relate.


 


2

















 


7.              Change in Control:


 


(a)           If a Qualifying Termination Event occurs with respect to a
Participant within 24 months after a Change in Control, then each Grant of ERUs
made to a Participant prior to the Change of Control with respect to which the
payment of Award Value has not been made as of such Qualifying Termination
Event shall be canceled and such Participant shall be entitled to receive in
respect of each such canceled Grant a payment equal to the Participant’s Pro
Rata Portion of the ERU Value of the ERUs determined as follows:  (i) ERU Value of the ERUs shall be
calculated from the beginning of the Award Period through the Change in Control
based on actual Net EROC for such period as determined by the Board of the
Company immediately prior to the Change in Control, (ii) ERU Value of the ERUs
shall be calculated from the Change in Control through the date of the
Qualifying Termination Event based on actual Net EROC for such period as
determined in good faith by the post-Change in Control Board of Holdings, and (iii) ERU
Value of the ERUs shall be calculated from the Qualifying Termination Event
through the end of the Award Period based on the target annual Net EROC for the
Grant (as determined by the Board at the time of the applicable Grant).  Such payment shall be made within 2 1⁄2 months
of the Qualifying Termination Event.


 


“Pro
Rata Portion” means a fraction, the numerator of which is the number of whole
months beginning with the start of the Award Period during which the
Participant was continuously employed by the Company or any its subsidiaries
(or in a Related Employment assignment) through the date of termination and the
denominator of which is the number of whole months in the Award Period.


 


(b)           Notwithstanding anything herein to the contrary, if,
following a Change in Control, a Participant’s employment with the Company or
one of its subsidiaries remains continuous through the end of an Award Period
then the Participant shall be paid with respect to those Grants for which he
would have been paid had there not been a Change in Control, and the Award
Value of such ERU Grants shall be determined in accordance with Section 5
above.


 


8.              Amendments or Termination:  The Board may amend, alter or terminate this
Plan at any time and for any reason, but, except as otherwise provided herein, no
amendment, alteration or termination shall be made which would impair any of
the rights or obligations under any outstanding ERU Grant without such
Participant’s written consent; provided, however, that the Board may amend the
Plan and any Grant agreement, whether ERUs are vested or not, in such manner as
it deems necessary to permit outstanding or future Grants to comply with all
applicable requirements of the Internal Revenue Code of 1986, as amended, or
any successor thereto, or other applicable laws.


 


9.              No Right to Employment or
Engagement:  Neither the
Plan nor any action taken hereunder shall be construed as giving any
Participant or other person any right to continue to be employed by, or to
continue to perform services for, the 


 


3

















 


Company or any subsidiary, and the right to terminate the employment of
or performance of services by any Participant at any time and for any reason is
specifically reserved to the Company and its subsidiaries.


 


10.       Nontransferability of Grants:  A Grant shall not be transferable or
assignable by the Participant, other than as described in Section 16 of
this Plan.


 


11.       Reduction of Grants:  Notwithstanding anything to the contrary
herein, the Board, in its sole discretion (but subject to applicable law), may
reduce any amounts payable to any Participant hereunder in order to satisfy any
liabilities owed by Participant to the Company or any of its subsidiaries.


 


12.       Claims Procedure:  In general, any claim for benefits under the
Plan shall be filed with the Board by a Participant or beneficiary.  The Board will consider the claim promptly.  Any claim for benefits under the Plan must be
filed within one year of the date of the action giving rise to the claim.


 


13.       Miscellaneous Provisions:  The Company is the sponsor and legal obligor
under the Plan and shall make all payments hereunder.  The Plan is unfunded.  The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to ensure the payment of any amounts under the Plan, and the Participant’s
rights to any payment hereunder shall be no greater than the rights of the
Company’s unsecured creditors.  All
references to Sections herein shall be deemed to be references to the specified
sections of this Plan.


 


14.       Taxes:  The Company and its subsidiaries shall have
the right to deduct from any payment made under the Plan any taxes required by
law to be withheld with respect to such payment.


 


15.       Choice of Law:  The Plan shall be governed by and construed
in accordance with the laws of the State of New York without regard to the
conflict of law principles thereof.


 


16.       Designation of Beneficiary by
Participant:  A Participant may name a beneficiary to
receive any payment to which he or she may be entitled in respect of a Grant in
the event of his or her death.  A
Participant may change his or her beneficiary from time to time.  If the Participant has not designated a
beneficiary, or if no designated beneficiary is living on the date on which any
amount becomes payable, that amount shall be paid to the Participant’s estate.  Any beneficiary designation by the
Participant must be in writing, signed by the Participant, on the form
prescribed by the Board (or its designee) and delivered to the Board (or its
designee) prior to the Participant’s death.


 


17.       Definitions:


 


Terms
used in the Plan or in a Grant shall have the following meanings:


 


4

















 


“Affiliate”
of any Person means any other Person controlled by, controlling or under common
control with such Person.


 


“After-Tax”
means, with respect to any amount, (i) such amount, multiplied by (ii) 1
minus the highest marginal tax rate for corporations applicable under the Code.


 


“Average
Deployed Capital” means, for any period, the average daily amount of
capital invested in, loaned to, or guaranteed on behalf of (including
reinsurance capital and sunk costs) the Esurance Segment by its Affiliates in
such period, as determined by the Board.


 


“Cause”
means (i) an act or omission by the Participant that constitutes a felony,
(ii) willful gross negligence or willful gross misconduct by the
Participant in connection with his employment by the Company or by a subsidiary
which causes, or is likely to cause, material loss or damage or substantial
public disgrace or disrepute to the Company, (iii) the commission of any
other act or omission by the Participant involving dishonesty, disloyalty or
fraud with respect to the Company or any of its subsidiaries, or (iv) the
Participant’s substantial and repeated failure to perform duties as reasonably
directed by the executive to whom Participant directly reports.


 


“Change
in Control” shall have occurred when (i) any person or group (within
the meaning of sections 13(d) or 14(d)2 of the Securities Exchange Act of
1934, as amended) other than White Mountains Insurance Group, Ltd (“WTM”) or
any of its subsidiary or affiliated companies, an underwriter temporarily
holding securities of the Company in connection with a public issuance thereof,
or an employee benefit plan of the Company or its affiliates, shall become the
beneficial owner (within the meaning of rule 13d-3 under the Exchange Act)
of a greater number of shares of the then outstanding common stock of the
Company than WTM and its subsidiary and affiliated companies, or (ii) WTM
and its subsidiary or affiliated companies are no longer the beneficial owners
of at least thirty-five percent or more of the then outstanding common stock of
the Company, or (iii) the Company has disposed of all or substantially all
of the assets of the Company to any person or group other than WTM or its
subsidiary and affiliate companies.


 


“Compensation
Expenses” means (i) cash long term incentive plan awards (including
Grants made under this Plan), and (ii) appreciation on all deferred
compensation balances regardless of investment choice.


 


“Economic
Net Income” means, for any period, the After-Tax net income (after all
Compensation Expenses) of the Esurance Segment for such period determined in
accordance with GAAP, adjusted to (i) standardize investment returns at
the ten-year treasury yield plus 100 basis points, and (ii) amortize
policy acquisition expenses over the term of the policy and its expected
renewals, in each case as determined by the Board.


 


5

















 


“Economic
Return” means, for any period, (i) Economic Net Income for such period
plus (ii) Franchise Value Added for such period.


 


“Economic
Value Added” means, for any period, (i) Economic Return for such
period before Compensation Expenses minus (ii) the product of (x) Average
Deployed Capital for such period multiplied by (y) 2.24%.


 


“ERU
Value” means (i) the value of an ERU as determined by the Board as of
the effective date of Grant, which value is $1,565.00, and multiplied by (ii) the
sum of one and the Net EROC for the applicable Award Period.


 


“Esurance
Restricted Unit” or “ERU” means a phantom unit under the Plan with a
value at any time equal to the ERU Value then in effect.


 


“Esurance
Segment” means the Company and its subsidiaries on a consolidated basis
with Answer Financial, Inc. and its subsidiaries, together with the assets
and liabilities of other direct or indirect subsidiaries of White Mountains
Insurance Group, Ltd. which are maintained in support of the business of the
Company and its subsidiaries and Answer Financial (including, without
limitation, quota shared business and reinsurance).


 


“Franchise
Value Added” means, for any period, the product, After-Tax, of (i) 0.3,
and (ii) the excess of the Esurance Segment’s direct written premium as of
the last day in the period over direct written premium as of the last day in
the prior period, as determined by the Board.


 


“GAAP”
means United States generally accepted accounting principles, as in effect from
time to time.


 


“Grant”
means an offer by the Board to an executive or consultant to participate in the
Esurance Restricted Unit Plan. Such Grant will specify the Award Period, the
number of ERUs being granted, any applicable Vesting Date and any other
relevant terms applicable to such Grant.


 


                “Net EROC” initially
means, for any period, a fraction (which may be greater than or less than one),
the numerator of which is the Economic Return for such period and the denominator
of which is the Average Deployed Capital for such period.


 


“Participant”
means a recipient of a Grant that has not otherwise been rescinded, forfeited
or settled.


 


“Person”
means an individual, a partnership, a corporation, a limited liability company,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.


 


6

















 


“Plan”
means this Esurance Holdings, Inc. Esurance Restricted Unit Plan, as
amended from time to time.


 


“Qualifying
Termination Event” means, with respect to a Participant, a Termination
Without Cause or a Constructive Termination, as defined below.


 


a.     Termination Without
Cause: An involuntary termination of the Participant’s employment with the
Company or its subsidiaries, or from Related Employment by such employer, other
than (i) due to the Participant’s death or disability (as defined by the
board of directors of the relevant employer), or (ii) for Cause.  A transfer of a Participant’s employment to a
Related Employment assignment shall not be considered a Termination without
Cause hereunder.  Notwithstanding
anything herein to the contrary, an involuntary termination of a Participant’s
employment with the Company or its subsidiaries due solely to the consummation
of a corporate transaction described in the definition of Change in Control
shall not be deemed to be a “Termination Without Cause” if the Participant is
employed by the acquiror or one of its Affiliates and the acquiror or one of
its Affiliates formally assumes the Company’s obligations under this Plan or
places the Participant in a similar or like plan with no diminution of the
value of the awards granted.


 


b.     Constructive Termination.  A termination of employment with an employer
in the Company or its subsidiaries, or from a Related Employment assignment, at
the initiative of the Participant that the Participant declares, by prior
written notice delivered to the Secretary of the Company or Related Employer
(as applicable), to be a Constructive Termination by the Company or such
Related Employer and which follows (i) a material decrease in his or her
base salary or (ii) a material diminution in the authority, duties or
responsibilities of his or her position as a result of which the Participant
determines in good faith that he or she cannot continue to carry out his/her
job in substantially the same manner as it was intended to be carried out
immediately before such diminution. 
Notwithstanding anything herein to the contrary, a Constructive
Termination shall not occur until and unless the Participant provides such
prior written notice within 90 days of the initial occurrence of the condition
giving rise to the declaration of Constructive Termination and 30 days have
elapsed from the date the Company or Related Employer receives such written
notice from the Participant and, during that period, the Company or Related
employer fails to cure, or cause to be cured, the condition serving as the
basis on which the declaration of Constructive Termination is given.


 


“Related
Employer” means an employer with respect to any Related Employment.


 


“Related
Employment” means the employment of a Participant by an employer other than
the Company or any of its subsidiaries, where (i) such employment is
undertaken by the Participant at the request of the Company, and (ii) such



 


7

















 


employment
is recognized by the Board, in its sole discretion, as Related Employment for
purposes of this Plan.


 


“Vesting
Date” means the last day of an Award Period on which date the forfeiture
provision in Section 6 of the Plan shall lapse with respect to the number
of ERUs granted for the applicable Award Period if the Participant has been
continuously employed with the Company beginning on the date of the Grant and
ending on the last day of the Award Period.


 


18.       Effective Date of the Plan:  The Plan shall be effective as of the
execution date witnessed below.


 


IN WITNESS WHEREOF, Esurance Holdings, Inc. has caused this Plan
to be executed this 18th day of March, 2009.


 


 


	
   

  	
  ESURANCE HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Gary C. Tolman

  
	
   

  	
  Its:

  	
  President & CEO

  



 


8