10-Q

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2002

Commission file number 0-24000

ERIE INDEMNITY COMPANY

(Exact name of registrant as specified in its charter)

PENNSYLVANIA	25-0466020
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
100 Erie Insurance Place, Erie, Pennsylvania	16530
(Address of principal executive offices)	(Zip Code)

                               (814) 870-2000
Registrant’s telephone number, including area code

                               Not applicable
Former name, former address and former fiscal year, if changed since last report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No      

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Class A Common Stock, no par value, with a stated value of $.0292 per share—
63,677,106 shares as of November 1, 2002.

Class B Common Stock, no par value, with a stated value of $70 per share—
3,050 shares as of November 1, 2002.

The common stock is the only class of stock the Registrant is presently authorized to issue.

1

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
	CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
	CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
	ITEM 11.STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
SIGNATURES
CERTIFICATIONS
Amendment and Restatement of Bylaws
Service Agreement
Supplemental Retirement Plan
Reinsurance Pooling Agreement
Aggregate Excess of Loss Insurance
Retirement Plan for Employees
Deferred Compensation Plan
Employee Savings Plan
First Amendment to Employee Savings Plan
2001 Annual Incentive Plan
Deferred Comp. Plan for Outside Directors
Employment Agreement
Form of Attorney-in-fact Provision
Certification of Jeffrey A. Ludrof
Certification of Philip A. Garcia
First Amendment to Second Restated Agreement

INDEX

ERIE INDEMNITY COMPANY

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Financial Position—September 30, 2002 and December 31, 2001
	Consolidated Statements of Operations—Three and nine months ended September 30, 2002 and 2001
	Consolidated Statements of Comprehensive Income—Three and nine months ended September 30, 2002 and 2001
	Consolidated Statements of Cash Flows—Nine months ended September 30, 2002 and 2001
	Notes to Consolidated Financial Statements—September 30, 2002
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings
Item 6.	Exhibits and Reports on Form 8-K
Item 11.	Statement Regarding Computation of Per Share Earnings
SIGNATURES
OFFICER CERTIFICATIONS

2

PART I. FINANCIAL INFORMATION

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

				(Dollars in thousands)
				September 30,		December 31,
				2002		2001
				(Unaudited)
			ASSETS
INVESTMENTS
	Fixed maturities at fair value (amortized cost of $620,274 and $543,423, respectively)			$	646,172	$	559,873
	Equity securities at fair value (cost of $165,772 and $159,727, respectively)				181,919		193,798
	Limited partnerships (cost of $93,197 and $79,668, respectively)				88,952		81,596
	Real estate mortgage loans				5,601		5,700
		Total investments		$	922,644	$	840,967
	Cash and cash equivalents				76,190		88,213
	Accrued investment income				12,496		9,138
	Premiums receivable from Policyholders				240,448		186,175
	Prepaid federal income tax				4,383		14,056
	Reinsurance recoverable from Erie Insurance Exchange				570,128		491,055
	Note receivable from Erie Family Life Insurance Company				15,000		15,000
	Other receivables from Erie Insurance Exchange and affiliates				191,167		149,600
	Reinsurance recoverable non-affiliates				273		372
	Deferred policy acquisition costs				21,635		17,018
	Property and equipment				13,419		14,635
	Equity in Erie Family Life Insurance Company				47,254		44,683
	Prepaid pension				40,017		25,451
	Other assets				39,636		39,203
		Total assets		$	2,194,690	$	1,935,566

(Continued)

See Notes to Consolidated Financial Statements.

3

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

				(Dollars in thousands)
				September 30,			December 31,
				2002			2001
				(Unaudited)
	LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
	Unpaid losses and loss adjustment expenses			$	629,618		$	557,278
	Unearned premiums				390,639			311,969
	Commissions payable and accrued				137,383			110,121
	Accounts payable and accrued expenses				41,044			46,164
	Deferred income taxes				10,054			12,945
	Dividends payable				10,895			10,930
	Employee benefit obligations				16,783			20,904
			Total liabilities	$	1,236,416		$	1,070,311
SHAREHOLDERS’ EQUITY
	Capital Stock
		Class A common, stated value $.0292 per share; authorized 74,996,930 shares; 67,080,000 shares issued in 2002; 63,677,106 and 63,836,323 shares outstanding in 2002 and 2001, respectively		$	1,957		$	1,955
		Class B common, stated value $70 per share; authorized 3,070 shares; 3,050 shares issued and outstanding in 2002 and 3,070 shares issued and outstanding in 2001			213			215
	Additional paid-in capital				7,830			7,830
	Accumulated other comprehensive income				31,266			35,222
	Retained earnings				1,018,868			913,406
			Total contributed capital and retained earnings	$	1,060,134		$	958,628
	Treasury stock, at cost 3,402,894 shares in 2002 and 3,195,677 shares in 2001				(101,860	)		(93,373	)
			Total shareholders’ equity	$	958,274		$	865,255
			Total liabilities and shareholders’ equity	$	2,194,690		$	1,935,566

See Notes to Consolidated Financial Statements.

4

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

			Three Months Ended						Nine Months Ended
			September 30						September 30
			2002			2001			2002			2001
			(Amounts in thousands, except per share data)
MANAGEMENT OPERATIONS:
	Management fee revenue		$	209,068		$	167,308		$	593,895		$	480,805
	Service agreement revenue			1,192			7,089			16,310			20,339
		Total revenue from management operations	$	210,260		$	174,397		$	610,205		$	501,144
	Cost of management operations			144,801			119,353			421,097			349,796
		Income from management operations	$	65,459		$	55,044		$	189,108		$	151,348
INSURANCE UNDERWRITING OPERATIONS:
	Premiums earned		$	42,171		$	34,766		$	119,824		$	100,857
	Losses and loss adjustment expenses incurred			35,044			35,017			98,431			88,074
	Policy acquisition and other underwriting expenses			13,416			10,338			37,343			28,696
		Total losses and expenses		48,460			45,355			135,774			116,770
		Underwriting loss		($6,289	)		($10,589	)		($15,950	)		($15,913	)
INVESTMENT OPERATIONS:
	Net investment income		$	13,867		$	12,347		$	40,705		$	36,855
	Net realized loss on investments			(4,047	)		(5,451	)		(8,628	)		(2,726	)
	Equity in earnings of Erie Family Life Insurance Company			106			327			1,091			2,513
	Equity in earnings (losses) of limited partnerships			803			(229	)		1,110			1,279
		Net revenue from investment operations	$	10,729		$	6,994		$	34,278		$	37,921
		Income before income taxes	$	69,899		$	51,449		$	207,436		$	173,356
	Provision for income taxes			23,737			17,019			69,247			57,011
		Net income	$	46,162		$	34,430		$	138,189		$	116,345
		Net income per share	$	0.65		$	0.48		$	1.94		$	1.63
		Weighted average shares outstanding		71,006			71,346			71,109			71,380
	Dividends declared per share:
		Class A	$	0.17		$	0.1525		$	0.51		$	0.4575
		Class B		25.50			22.875			76.50			68.625

See Notes to Consolidated Financial Statements.

5

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

				Three Months Ended						Nine Months Ended
				September 30						September 30
				2002			2001			2002			2001
				(Dollars in thousands)
Net Income				$	46,162		$	34,430		$	138,189		$	116,345
	Unrealized gains (losses) on securities:
		Unrealized holding gains (losses) arising during period			5,153			(10,602	)		(19,030	)		(8,021	)
		Less: Losses included in net income			4,047			5,451			8,628			2,726
			Net unrealized holding gains (losses) arising during period		9,200			(5,151	)		(10,402	)		(5,295	)
	Income tax (expense) benefit related to unrealized gains (losses)				(3,220	)		1,802			3,641			1,853
	Net appreciation (depreciation) of investments				5,980			(3,349	)		(6,761	)		(3,442	)
	Minimum pension liability adjustment				0			0			4,315			0
	Less: Tax asset related to pension liability adjustment				0			0			(1,510	)		0
	Net pension liability adjustment				0			0			2,805			0
Other comprehensive income (loss), net of tax					5,980			(3,349	)		(3,956	)		(3,442	)
Comprehensive income				$	52,142		$	31,081		$	134,233		$	112,903

See Notes to Consolidated Financial Statements.

6

ERIE INDEMNITY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

					Nine Months Ended September 30,
					2002			2001
					(Amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
		Net income			$	138,189		$	116,345
		Adjustments to reconcile net income to net cash provided by operating activities:
				Depreciation and amortization		2,909			2,306
				Deferred income tax expense		726			3,820
				Amortization of deferred policy acquisition costs		21,516			17,852
				Equity in income of limited partnerships		(1,110	)		(1,279	)
				Realized loss on investments		8,628			2,726
				Net amortization of bond discount		(318	)		(156	)
				Undistributed losses (earnings) of Erie Family Life Insurance Company		196			(1,317	)
				Deferred compensation		341			119
		Increase in accrued investment income				(3,358	)		(1,231	)
		Increase in receivables				(174,815	)		(148,346	)
		Policy acquisition costs deferred				(26,133	)		(21,283	)
		Increase in prepaid expenses and other assets				(14,476	)		(11,497	)
		(Decrease) increase in accounts payable and accrued expenses				(5,265	)		5,698
		Increase in commissions payable and accrued				27,262			11,803
		Increase in income taxes payable				9,673			22,313
		Increase in loss reserves				72,340			54,383
		Increase in unearned premiums				78,669			48,331
			Net cash provided by operating activities		$	134,974		$	100,587
	CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments:
			Fixed maturities			($248,428	)		($161,360	)
			Equity securities			(41,655	)		(43,267	)
			Limited partnership investments			(34,448	)		(20,488	)
		Sales/maturities of investments:
			Fixed maturity sales			83,978			79,485
			Fixed maturity calls/maturities			80,950			61,249
			Equity securities			33,949			39,881
			Mortgage loans			99			850
			Limited partnership sales or distributions			22,028			5,687
		Purchase of property and equipment				(1,334	)		(1,821	)
		Purchase of computer software				(359	)		(818	)
		Loans to agents				(2,527	)		(6,903	)
		Collections on agent loans				2,000			1,788
			Net cash used in investing activities			($105,747	)		($45,717	)
	CASH FLOWS FROM FINANCING ACTIVITIES
		Dividends paid to shareholders				($32,763	)		($29,507	)
		Purchase of treasury stock				(8,487	)		(6,687	)
			Net cash used in financing activities			($41,250	)		($36,194	)
		Net (decrease) increase in cash and cash equivalents				(12,023	)		18,676
		Cash and cash equivalents at beginning of period				88,213			38,778
			Cash and cash equivalents at end of period		$	76,190		$	57,454
Supplemental disclosures of cash flow information:
	Income tax payments				$	69,326		$	31,571

See Notes to Consolidated Financial Statements.

7

ERIE INDEMNITY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
All dollar amounts are in thousands except per share data

NOTE A — BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements, which include the accounts of Erie Indemnity Company and its wholly owned property and casualty insurance subsidiaries, Erie Insurance Company (EIC), Erie Insurance Company of New York (EINY) and Erie Insurance Property & Casualty Company, have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (GAAP) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K for the year ended December 31, 2001 as filed with the Securities and Exchange Commission on March 12, 2002.

NOTE B — RECLASSIFICATIONS

Certain amounts previously reported in the 2001 financial statements have been reclassified to conform to the current period’s presentation. Such reclassifications were minor in nature and did not impact earnings.

NOTE C — EARNINGS PER SHARE

Earnings per share is based on the weighted average number of Class A shares outstanding (63,789,404 and 64,011,614 at September 30, 2002 and 2001, respectively), giving effect to the conversion of the weighted average number of Class B shares outstanding (3,050 in 2002 and 3,070 in 2001) at a rate of 2,400 Class A shares for one Class B share. In August 2002, 20 shares of Class B voting stock were converted to 48,000 non voting shares of Class A common stock. Weighted average equivalent shares outstanding totaled 71,006,149 for the quarter ended September 30, 2002 and 71,345,939 for the same period one year ago. For the nine months ended September 30, 2002 weighted average equivalent shares outstanding were 71,109,404 compared to 71,379,614 for the nine months ended September 30, 2001.

NOTE D — INVESTMENTS

Marketable equity securities consist primarily of common and non redeemable preferred stocks while fixed maturities consist of bonds, notes and redeemable preferred stock. Management considers all fixed maturities and marketable equity securities available-for-sale. Management determines the appropriate classification of fixed maturities at the time of purchase and reevaluates such designation as of each statement of financial position date. Available-for-sale securities are stated at fair value, with the unrealized gains and losses, net of deferred tax, reported as a separate component of accumulated other comprehensive income in shareholders’ equity. When a decline in the value of investments is considered to be other-than-temporary by management, the investments are written down to their estimated realizable value. Investment impairments are evaluated on an individual security basis and investments considered impaired are recorded as realized losses on investments in the Consolidated Statements of Operations. In the third quarter of 2002 and 2001, the Company recognized impairment charges totaling $6,975 and $5,736, respectively.

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE D — INVESTMENTS (Continued)

The following is a summary of available-for-sale securities:

					Gross		Gross		Estimated
			Amortized		Unrealized		Unrealized		Fair
			Cost		Gains		Losses		Value
September 30, 2002
Fixed maturities:
U.S. treasuries & government agencies			$	8,281	$	727	$	82	$	8,926
States & political subdivisions				52,071		3,371		0		55,442
Special revenue				96,068		5,506		0		101,574
Public utilities				42,820		1,524		988		43,356
U.S. industrial & miscellaneous				360,806		24,573		8,997		376,382
Foreign				47,177		2,070		2,691		46,556
		Total bonds	$	607,223	$	37,771	$	12,758	$	632,236
Redeemable preferred stock				13,051		885		0		13,936
		Total fixed maturities	$	620,274	$	38,656	$	12,758	$	646,172
Equity securities:
Common stock:
	U.S. banks, trusts & insurance companies		$	1,846	$	784	$	484	$	2,146
	U.S. industrial & miscellaneous			19,777		14,023		1,632		32,168
	Foreign			417		233		0		650
Non redeemable preferred stock:
	Public utilities			11,902		125		114		11,913
	U.S. banks, trusts & insurance companies			22,189		1,478		486		23,181
	U.S. industrial & miscellaneous			89,166		4,651		3,785		90,032
	Foreign			20,475		1,404		50		21,829
		Total equity securities	$	165,772	$	22,698	$	6,551	$	181,919
		Total available-for-sale securities	$	786,046	$	61,354	$	19,309	$	828,091

9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE D — INVESTMENTS (Continued)

					Gross		Gross		Estimated
			Amortized		Unrealized		Unrealized		Fair
			Cost		Gains		Losses		Value
December 31, 2001
Fixed maturities:
U.S. treasuries & government agencies			$	11,211	$	502	$	0	$	11,713
States & political subdivisions				42,392		1,817		88		44,121
Special revenue				110,267		3,496		345		113,418
Public utilities				25,150		1,156		36		26,270
U.S. industrial & miscellaneous				311,757		8,989		1,438		319,308
Foreign				26,634		859		17		27,476
		Total bonds	$	527,411	$	16,819	$	1,924	$	542,306
Redeemable preferred stock				16,012		1,555		0		17,567
		Total fixed maturities	$	543,423	$	18,374	$	1,924	$	559,873
Equity securities:
Common stock:
	U.S. banks, trusts & insurance companies		$	3,284	$	814	$	16	$	4,082
	U.S. industrial & miscellaneous			28,718		31,570		579		59,709
Nonredeemable preferred stock:
	Public utilities			2,370		12		3		2,379
	U.S. banks, trusts & insurance companies			14,685		938		58		15,565
	U.S. industrial & miscellaneous			91,185		2,573		2,111		91,647
	Foreign			19,485		1,039		108		20,416
		Total equity securities	$	159,727	$	36,946	$	2,875	$	193,798
		Total available-for-sale securities	$	703,150	$	55,320	$	4,799	$	753,671

The Company participates in a securities lending program whereby certain securities from its portfolio are loaned to other institutions through a lending agent. A fee is paid to the Company by the borrower. Collateral, comprised of cash and government securities, that exceeds the market value of the loaned securities is maintained by the lending agent in the event a borrower becomes insolvent or fails to return securities. The Company had loaned securities with a market value of $37,396 and $38,503 secured by collateral of $39,067 and $39,645 at September 30, 2002 and 2001, respectively. The Company maintains the loaned securities on its Consolidated Statements of Financial Position as part of its invested assets. The Company has incurred no losses on the loan program since the program’s inception.

10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE D — INVESTMENTS (Continued)

The components of net realized loss on investments as reported in the Consolidated Statements of Operations are included below. The securities that were recognized as impaired during the third quarter of 2002 were in the energy industry segment. Impairment charges taken in the third quarter of 2001 related to the internet, telecommunications equipment, semi-conductor and software development industry segments.

		Three Months Ended						Nine Months Ended
		September 30						September 30
		2002			2001			2002			2001
Fixed maturities:
Gross realized gains		$	2,585		$	1,056		$	5,515		$	3,697
Gross realized losses			(31	)		(316	)		(84	)		(503	)
Impairment charge			(6,975	)		0			(15,341	)		0
	Net realized (loss) gain	($	4,421	)	$	740		($	9,910	)	$	3,194
Equity securities:
Gross realized gains		$	475		$	190		$	7,989		$	4,045
Gross realized losses			(101	)		(645	)		(4,380	)		(4,229	)
Impairment charge			0			(5,736	)		(2,327	)		(5,736	)
	Net realized gain (loss)	$	374		($	6,191	)	$	1,282		($	5,920	)
	Net realized loss on investments	($	4,047	)	($	5,451	)	($	8,628	)	($	2,726	)

Limited partnerships include U.S. and foreign private equity, real estate and fixed income investments. The private equity limited partnerships invest in small-to medium-sized companies. Limited partnerships are recorded using the equity method, which approximates the Company’s share of the carrying value of the partnership. Unrealized gains and losses on private equity limited partnerships are reflected in shareholders’ equity in accumulated other comprehensive income, net of deferred taxes. The Company has not guaranteed any of the partnership liabilities.

Limited partnerships that have declined in value below cost and for which the decline is considered to be other-than-temporary by management are written down to realizable value. These impairments are made directly on an individual limited partnership basis and are considered a loss in the Equity in Earnings of Limited Partnerships in the Consolidated Statements of Operations. The components of Equity in Earnings of Limited Partnerships as reported in the Consolidated Statements of Operations are included below. There were no impairment charges recognized in the third quarter of 2002. For the nine months ended September 30, 2002, impairment charges related to limited partnerships were $1,381. There were no impairments recognized during the nine month period ended September 30, 2001.

		Three Months Ended					Nine Months Ended
		September 30					September 30
		2002		2001			2002			2001
Private equity		$	524	($	961	)	($	2,734	)	($	373	)
Real estate			232		456			3,712			1,318
Fixed income			47		276			132			334
	Total equity in earnings (losses) of limited partnerships	$	803	($	229	)	$	1,110		$	1,279

11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE D — INVESTMENTS (Continued)

During 2001, the Company entered into several foreign currency forward contracts which are by definition derivatives. The purpose of these contracts is to hedge future capital calls related to the Company’s limited partnership commitments. However, under accounting rules, these contracts are not considered hedges. The forward contracts have no cash requirements at the inception of the arrangement. At September 30, 2002 there were no contracts outstanding. For the quarter ended September 30, 2002 changes in value totaling $85 were recognized in earnings as realized losses in the Consolidated Statements of Operations. Gains on these contracts totaled $214 for the nine months ended September 30, 2002 and $50 for the nine months ended September 30, 2001.

NOTE E — SUMMARIZED FINANCIAL STATEMENT INFORMATION OF AFFILIATE

The Company owns 21.6% of Erie Family Life Insurance Company (EFL) common shares outstanding and accounts for this investment using the equity method of accounting. EFL is a Pennsylvania- domiciled life insurance company operating in 10 states and the District of Columbia. Dividends paid to the Company for the nine months ended September 30, 2002 and 2001 totaled $1,257 and $1,163, respectively.

The following represents unaudited condensed financial statement information for EFL on a GAAP basis:

	Nine Months Ended		Nine Months Ended
	September 30, 2002		September 30, 2001
Revenues	$	79,598	$	79,066
Benefits and expenses		70,604		61,302
Income before income taxes		8,994		17,764
Income taxes		3,112		6,147
Net income	$	5,882	$	11,617
Comprehensive income	$	18,675	$	22,285
Dividends paid to shareholders	$	5,812	$	5,387
Net unrealized appreciation on investment securities at September 30, net of deferred taxes	$	31,152	$	14,355

NOTE F — NOTE RECEIVABLE FROM ERIE FAMILY LIFE INSURANCE COMPANY

The Company is due $15,000 from EFL in the form of a surplus note. The note bears an annual interest rate of 6.45% and all payments of interest and principal on the note may be repaid only out of unassigned surplus of EFL and are subject to prior approval by the Pennsylvania Insurance Commissioner. Interest on the surplus note is scheduled to be paid semi-annually. The note will be payable on demand on or after December 31, 2005. EFL accrued interest of $242 in the third quarters of 2002 and 2001 which is payable to the Company.

NOTE G — TREASURY STOCK

The Company has in place a stock repurchase plan under which the Company may repurchase as much as $120,000 of its outstanding Class A common stock through December 31, 2002. Treasury shares are recorded in the Consolidated Statements of Financial Position at cost. The Company filed a registration statement on Form S-3 with the Securities and Exchange Commission on September 20, 2002. The Company has suspended share repurchases under this plan until the secondary offering has been completed.

12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE H — COMMITMENTS

The Company has contractual commitments to invest up to $116,000 related to its limited partnership investments at September 30, 2002. These commitments will be funded as required by the partnership’s agreements through September 2007. At September 30, 2002, the total commitment to fund limited partnerships that invest in private equity securities is $80,000, real estate activities $20,000 and fixed income securities $16,000. The Company expects to have sufficient cash flows from operations to meet these partnership commitments.

NOTE I — SEGMENT INFORMATION

The Company operates its business as two reportable segments — management operations and property and casualty insurance underwriting. The Company’s principal operations consist of serving as attorney-in-fact for the Erie Insurance Exchange (the Exchange). In its capacity as attorney-in-fact, the Company sells, underwrites and issues property and casualty insurance policies for the Exchange. These activities constitute the Company’s management operations. The Company’s property and casualty insurance underwriting operations arise through direct business of its insurance subsidiaries and by virtue of the intercompany pooling agreement between its subsidiaries and the Exchange which includes assumed reinsurance from non-affiliated domestic and foreign sources. The performance of the management operations segment is evaluated principally based on revenue growth and the profitability is measured by the gross margin from management operations, while profitability of the property and casualty insurance operations segment is evaluated principally based on the combined ratio. Accounting policies for segments are the same as described in the summary of significant accounting policies Note 2, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2001 as filed with the Securities and Exchange Commission on March 12, 2002.

The Exchange and its property and casualty subsidiary, Flagship City Insurance Company, combined with the Company’s property and casualty insurance subsidiaries (collectively, the Property and Casualty Group) provide personal and commercial lines insurance through independent agents. The performance of the personal and commercial lines is evaluated based upon the underwriting results as determined under statutory accounting practices (SAP) for the total pooled business of the Property and Casualty Group. Assets are not allocated to segments and are reviewed in total by management for purposes of decision making. No single customer or agent provides 10% or more of revenues for the Property and Casualty Group.

13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE I — SEGMENT INFORMATION (Continued)

Summarized financial information for these operations is presented below:

				Three Months Ended						Nine Months Ended
				September 30						September 30
				2002			2001			2002			2001
Management operations:
Revenue:
	Management fee revenue			$	209,068		$	167,308		$	593,895		$	480,805
	Service agreement revenue				1,192			7,089			16,310			20,339
	Net revenue from investment operations				7,735			1,785			25,973			22,987
Total operating revenue				$	217,995		$	176,182		$	636,178		$	524,131
Cost of management operations				$	144,801		$	119,353		$	421,097		$	349,796
Income before taxes				$	73,194		$	56,829		$	215,081		$	174,335
Net income				$	48,127		$	38,400		$	142,509		$	116,923
Property and casualty insurance underwriting operations:
Revenue:
	Premiums earned:
		Commercial lines		$	11,910		$	9,042		$	33,890		$	25,627
		Personal lines			29,449			24,778			83,461			72,137
		Reinsurance			1,966			1,667			5,724			5,024
			Total premiums earned (SAP)		43,325			35,487			123,075			102,788
		GAAP adjustments			(1,154	)		(721	)		(3,251	)		(1,931	)
			Total premiums earned (GAAP)		42,171			34,766			119,824			100,857
	Net revenue from investment operations				2,994			5,209			8,305			14,934
Total operating revenue				$	45,165		$	39,975		$	128,129		$	115,791
Expense:
	Losses and expenses:
		Commercial lines		$	12,448		$	10,089		$	37,351		$	28,554
		Personal lines			35,184			28,132			97,775			79,434
		Reinsurance			2,348			8,355			5,265			12,213
			Total losses and expenses (SAP)		49,980			46,576			140,391			120,201
		GAAP adjustments			(1,520	)		(1,221	)		(4,617	)		(3,431	)
			Total losses and expenses (GAAP)	$	48,460		$	45,355		$	135,774		$	116,770
Loss before taxes				($	3,295	)	($	5,380	)	($	7,645	)	($	979	)
Net loss				($	1,965	)	($	3,970	)	($	4,320	)	($	578	)

14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE I — SEGMENT INFORMATION (Continued)

The following table presents the management fee revenue by line of business:

	Three Months Ended				%			Nine Months Ended				%
	September 30				Change			September 30				Change
	2002		2001					2002		2001
Private passenger auto	$	111,942	$	92,807		20.6	%	$	313,786	$	262,901		19.4	%
Commercial auto		16,699		13,007		28.4			50,884		39,963		27.3
Homeowner		35,705		28,916		23.5			92,017		76,373		20.5
Commercial multi-peril		20,568		14,665		40.3			62,371		44,619		39.8
Workers’ compensation		16,394		11,678		40.4			52,173		38,829		34.3
All other lines of business		7,760		6,235		24.5			22,664		18,120		25.1
Total	$	209,068	$	167,308		25.0	%	$	593,895	$	480,805		23.5	%

15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE I — SEGMENT INFORMATION (Continued)

The growth rate of policies in force and policy retention trends (the percentage of current Policyholders who have renewed their policies) directly impact the Company’s management and property and casualty insurance subsidiaries operating segments. Below is a summary of each by line of business for the Property and Casualty Group’s insurance business.

Growth rate of policies in force for Property and Casualty Group insurance operations:

	Private		12-mth.					12-mth.			All other		12-mth.			Total
	passenger		growth					growth			personal lines		growth			Personal
Date	auto		rate			Homeowners		rate			of business		rate			Lines
12/31/2000		1,337,280		4.9	%		986,654		7.5	%		192,909		10.3	%		2,516,843
03/31/2001		1,356,651		5.3			1,003,517		7.7			197,849		10.7			2,558,017
06/30/2001		1,382,419		5.9			1,029,339		8.1			204,614		10.9			2,616,372
09/30/2001		1,408,092		6.3			1,053,014		8.4			210,220		11.4			2,671,326
12/31/2001		1,432,747		7.1			1,075,816		9.0			215,134		11.5			2,723,697
03/31/2002		1,469,617		8.3			1,104,806		10.1			222,061		12.2			2,796,484
06/30/2002		1,512,335		9.4			1,146,639		11.4			231,951		13.4			2,890,925
09/30/2002		1,554,425		10.4			1,190,651		13.1			240,410		14.4			2,985,486

			12-mth.					12-mth.					12-mth.			All other		12-mth.			Total
	CML*		growth			CML*		growth			Workers’		growth			CML* lines		growth			Commercial
Date	auto		rate			multi-peril		rate			comp.		rate			of business		rate			Lines
12/31/2000		87,567		5.8	%		148,910		10.1	%		47,156		8.4	%		65,077		7.1	%		348,710
03/31/2001		89,388		7.0			152,260		10.6			48,104		8.7			66,309		8.0			356,061
06/30/2001		91,794		7.9			157,804		10.8			49,711		9.5			67,964		8.9			367,273
09/30/2001		94,204		8.8			162,246		11.1			50,984		9.6			70,048		9.0			377,482
12/31/2001		96,100		9.7			166,214		11.6			52,033		10.3			71,539		9.9			385,886
03/31/2002		98,926		10.7			171,283		12.5			53,320		10.8			73,392		10.7			396,921
06/30/2002		102,447		11.6			179,761		13.9			55,607		11.9			75,884		11.7			413,699
09/30/2002		105,353		11.8			185,608		14.4			57,375		12.5			78,131		11.5			426,467

Policy retention trends for Property and Casualty Group insurance operations:

	Private															All other
	passenger			CML*						CML*			Workers’			lines of
Date	auto			auto			Homeowners			multi-peril			comp.			business			Total
12/31/2000		92.31	%		89.80	%		90.70	%		87.92	%		88.48	%		87.89	%		91.01	%
03/31/2001		92.24			90.29			90.66			88.58			89.06			88.03			91.03
06/30/2001		92.25			90.35			90.63			88.36			88.76			88.18			91.01
09/30/2001		92.22			90.16			90.38			88.18			88.53			88.16			90.89
12/31/2001		92.24			90.53			90.24			88.03			88.43			88.15			90.85
03/31/2002		92.26			90.86			90.24			88.77			89.34			88.11			90.91
06/30/2002		92.35			91.12			90.35			88.95			89.46			88.30			91.02
09/30/2002		92.50			90.79			90.54			88.69			89.51			88.15			91.12

*CML = Commercial

16

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with the historical financial information and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report on Form 10-K for the year ended December 31, 2001 as filed with the Securities and Exchange Commission on March 12, 2002.

BACKGROUND

Erie Indemnity Company (the Company) operates predominantly as a provider of sales, underwriting and policy issuance services to Erie Insurance Exchange (the Exchange) and also as an underwriter of insurance risk through its property and casualty insurance subsidiaries. The financial results of the Exchange are not consolidated with the Company. The Exchange and its property and casualty insurance subsidiary, Flagship City Insurance Company, and the Company’s three property and casualty insurance subsidiaries, Erie Insurance Company, Erie Insurance Company of New York and Erie Insurance Property & Casualty Company (collectively, the Property and Casualty Group) write personal and commercial lines property and casualty insurance coverages exclusively through approximately 8,000 independent agents.

OPERATING RESULTS

Financial Overview

Consolidated net income for the nine months ended September 30, 2002 increased 18.8% to $138,189,091, from $116,345,197 during the same period in 2001. Income from management operations grew as a result of a 23.5% increase in direct written premiums of the Property and Casualty Group. Results from insurance underwriting operations were about the same in the first nine months of 2002 compared to the same period in 2001. Insurance underwriting results reflect wind storm-related catastrophe losses and increased technology spending related to the eCommerce initiative in 2002 and World Trade Center losses in 2001. In addition, charges of $17,668,090 and $5,736,463 were taken for impaired investments contributing to net realized losses on investments in the first nine months of 2002 and 2001, respectively.

Consolidated net income for the third quarter of 2002 increased 34.1% to $46,161,999, from $34,430,497 during the third quarter of 2001. Income from management operations grew as a result of a 25.0% increase in direct written premiums of the Property and Casualty Group. Losses in the insurance underwriting operations for the quarter were the result of deteriorating loss ratios on direct business combined with catastrophe losses. Revenue from investment operations increased as a result of increases in net investment income combined with increased equity in earnings of limited partnerships.

During the third quarter of 2002, the Company increased its estimated effective tax rate from 33.3% to 34%. Investment income on tax-advantaged securities has remained fairly stable while the total taxable income of the Company continues to grow, making the tax advantaged income a smaller percentage of total income. The increase in the effective tax rate produced an additional $488,551, or $.01 per share charge, in the provision for income taxes for 2002.

17

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

For the nine months ended September 30, 2002, operating income (net income excluding net realized losses and related federal income taxes) increased 21.7% to $143,797,370, from $118,116,935 reported for the same period in 2001. Operating income per share increased to $2.02 per share in the first nine months of 2002 from $1.65 per share for the same period in 2001, an increase of 22.2%.

Operating income increased 28.5% to $48,792,748 for the quarter ended September 30, 2002 from $37,973,228 for the same period in 2001. Operating income per share for the third quarter of 2002 was $.69 per share, up from $.53 per share for the same period one year ago, an increase of 29.1%.

RESULTS OF OPERATIONS

Analysis of Management Operations

The Company’s principal source of revenue is derived from its management fee revenue earned for providing sales, underwriting and policy issuance services as attorney-in-fact for the Exchange. The management fee is currently 25.0% of the direct written premiums of the Property and Casualty Group. Management fee revenue increased 23.5% to $593,894,850 for the nine months ended September 30, 2002, from $480,804,743 for the same period in 2001. Management fee revenue increased 25.0% to $209,068,067 for the three months ended September 30, 2002 from $167,307,976 for the same period in 2001 (see also Note I “Segment Information” which details management fee revenue by line of business).

The direct written premiums of the Property and Casualty Group grew 25.0% to $836,272,269 in the third quarter of 2002 from $669,231,901 for the same period in 2001. For the nine month period in 2002, direct premiums written increased 23.5% to $2,375,579,406 compared to $1,923,218,968 written for the first nine months of 2001. Direct written premiums of the Property and Casualty Group grew 22.5% on a rolling twelve-month basis with personal lines growing 18.8% while commercial lines grew 32.8%.

Increases in average premium per policy, increases in new policy growth and continuing favorable policy retention rates were all contributing factors in the growth of direct written premiums.

The average premium per policy increased 9.5% to $877 for the twelve months ended September 30, 2002 from $801 for the same period in 2001. In private passenger auto (which accounted for 53.1% of the direct written premiums of the Property and Casualty Group and over 1.5 million policies in force), the average premium per policy increased 7.2% to $1,023 for the twelve months ended September 30, 2002 from $954 during the same period one year ago.

Continued growth in new policies also drove the gains experienced in the Property and Casualty Group’s direct written premium. Personal lines new business premium grew 45.0% for the third quarter of 2002 while commercial lines new premium grew 54.2% during the same period. For the nine months ended September 30, 2002 new business premium grew 45.3% and 56.8% for personal and commercial lines, respectively. Policies in force increased by 11.9% to 3,411,953 at September 30, 2002 from 3,048,808 at September 30, 2001.

18

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Policy retention increased to 91.1% for the twelve months ended September 30, 2002 from 90.9% for the same period one year ago, for all lines of business combined (see Note I, “Segment Information” which contains policies in force and policy retention trends by line of business).

Service agreement revenue decreased by 19.8% to $16,309,790 for the nine months ended September 30, 2002, from $20,339,426 for the same period in 2001. Service agreement revenue decreased to $1,191,868 for the three months ended September 30, 2002 from $7,088,812 for the same period in 2001. Included in service agreement revenue are service charges the Company collects from Policyholders for providing extended payment plans on policies written by the Property and Casualty Group. During the third quarter of 2002 the Company began recognizing service charge income on a billed basis, which resulted in a one-time reduction in service charge income of $7.4 million. The effect on net income per share after taxes and other adjustment items was $.06 per share. The service charge revenue for the third quarter of 2002 was ($2,285,675), compared to $4,299,884 for the quarter ended September 30, 2001.

Also included in service agreement revenue is service income received from the Exchange as compensation for the management and administration of voluntary assumed reinsurance from non-affiliated insurers. These fees (equal to 7% of assumed reinsurance for all periods presented) increased to $3,477,543 for the three months ended September 30, 2002 from $2,788,928 for the same period in 2001. Service income for the nine months ended 2002 and 2001 totaled $9,598,205 and $8,307,365, respectively. During the fourth quarter of 2001, the Exchange obtained significant price increases on treaties it renewed for 2002. In addition, the Exchange reduced its aggregate exposure in non-affiliated assumed voluntary reinsurance by non-renewing unprofitable business, generally excluding terrorism coverage, and restricting its exposure on certain types of risks.

The cost of management operations increased 21.3% for the third quarter of 2002 to $144,800,981 from $119,353,171 during the third quarter of 2001. For the nine months ended September 30, 2002 the cost of management operations grew by 20.4% to $421,096,679 compared to $349,796,546 for the same period in 2001.

Commission costs totaled $105,855,984 for the third quarter of 2002, a 24.7% increase over the $84,910,266 reported in the third quarter of 2001. Commissions to independent Agents, which are the largest component of the Cost of Management Operations, include scheduled commissions, contingency awards, accelerated commissions and promotional incentives earned by independent Agents. Scheduled commissions, including Agent contingency awards, increased 24.9% to $103,870,732 for the quarter ended September 30, 2002. Agent contingency awards are based upon underwriting profitability of the direct business written with the Property and Casualty Group by the independent Agent. The estimate for the Agent contingency awards is modeled on a monthly basis using the two prior years actual underwriting data by Agency combined with the current year to date actual data. Company estimates use projected underwriting data for the remainder of the current year in order to model the 36-month underwriting results by Agency.

Accelerated commissions are offered to newly recruited Agents in addition to normal commission schedules. Charges incurred for accelerated commissions above normal scheduled rate commissions increased $583,034 to $2,322,752 for the quarter ended September 30, 2002.

19

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Promotional incentive expenses for the quarter ended September 30, 2002 were $600,000 which related entirely to a 2002 sales incentive contest for the Company’s independent Agents.

For the nine months ended September 30, 2002 commission costs grew by 23.9% to $302,582,286 from $244,147,299 for the same period in 2001. Charges for accelerated commission costs, above normal scheduled rate commissions, totaled $6,754,817 compared to $4,995,396 for the same period one year ago. The accrual recorded for the sales incentive contest was $1,800,000 for the nine months ended September 30, 2002.

The cost of management operations excluding commission costs, increased 13.1% for the three months ended September 30, 2002 to $38,944,997 from $34,442,905 recorded in the third quarter of 2001. Personnel costs, including salaries, employee benefits, and payroll taxes, are the second largest component in cost of operations. Personnel costs increased as employment grew by 8.4% as strong policy sales growth drove staff increases in sales support, underwriting and policy issuance functions. The Company’s personnel costs totaled $22,049,850 for the three month period ended September 30, 2002, compared to $19,659,120 for the same period in 2001, an increase of 12.2%. For the first nine months of 2002, personnel costs increased 10.2% to $68,800,021, from $62,453,399 for the same period in 2001.

Also included in cost of management operations are amounts related to information technology hardware and infrastructure from the Property and Casualty Group’s eCommerce initiative launched in June 2001. Company expenses totaled $192,728 for the third quarter 2002 compared to $354,748 from the same period one year ago. For the nine months of 2002 and 2001 these costs totaled $2,509,081 and $486,378, respectively. These expenditures will continue to be incurred in future periods as the program develops (see “Factors That May Affect Future Results” section herein).

As part of the eCommerce initiative, a significant portion of the Erie Insurance Group’s information technology resources have been deployed to work on the Property and Casualty Group’s eCommerce program. As such, certain personnel costs are currently being allocated to the property and casualty insurance operations of the Property and Casualty Group as part of the eCommerce project under the terms of a Technology Cost Sharing Agreement. However, once the eCommerce program is completed some of these personnel costs will again be deployed by the Company and related expenses will be absorbed in its cost of management operations. There are approximately 60 full time equivalent staff, or 15% of total Erie Insurance Group information technology staff, currently deployed to work on the eCommerce program. The cost of management operations could increase by as much as $8.0 million per year when the staff is reassigned outside of the Technology Cost Sharing Agreement tasks.

The gross margins from management operations (net revenue divided by total revenue) were 31.1% and 31.6% in the third quarters of 2002 and 2001, respectively. Gross margins were 31.0% and 30.2% for the first nine months of 2002 and 2001, respectively.

20

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Analysis of Insurance Underwriting Operations

The underwriting loss from the insurance operations of the Company’s property and casualty insurance subsidiaries, Erie Insurance Company (EIC) and Erie Insurance Company of New York (EINY), which together assume a 5.5% share of the underwriting results of the Property and Casualty Group under an intercompany pooling agreement, improved to an underwriting loss of $6,289,314 during the third quarter of 2002 compared to underwriting losses of $10,588,452 during the same period in 2001. The underwriting losses in the third quarter 2002 resulted from a deteriorated loss ratio on direct business compared to the same period of 2001, and continued development of catastrophe losses during the current period. Also contributing to the third quarter 2002 underwriting results were increased underwriting expenses related to the application development costs of the Property and Casualty Group’s eCommerce technology program and assigned risk buyout program costs. The 2001 underwriting losses include the adverse impact from the attack on the World Trade Center through the reinsurance business of the property and casualty insurance operations.

The Company had an underwriting loss of $15,950,012 for the first nine months of 2002 compared to an underwriting loss of $15,912,690 for the same period in 2001. Losses resulting from spring storm-related catastrophes were partly responsible for the underwriting loss in 2002. The underwriting results for the first nine months of 2002 also reflect increased underwriting expenses related to the eCommerce technology program and assigned risk buyout program costs.

The Company’s property and casualty insurance subsidiaries’ share of the Property and Casualty Group’s direct business generated underwriting losses of $5,907,437 and $3,900,364 for the third quarters of 2002 and 2001, respectively. For the nine months ended September 30, 2002 underwriting losses from the Company’s 5.5% of the Property and Casualty Group’s direct business was $16,409,065 compared to $8,723,395 in 2001. The increased loss ratio resulted primarily from adverse development of the loss reserves for prior accident years, principally in uninsured motorist and underinsured motorist (UM/UI) coverage in the personal and commercial automobile lines. The actual loss development of UM/UI exceeded established reserves for prior periods. Loss development has also been above expected development on UM/UI coverages due to unfavorable precedents set by court decisions and an evolving arbitration system. The Company is addressing these loss trends principally by increasing premium rates and through more stringent underwriting and re-underwriting of insurance policies. Over the past two years, rate increases were filed by members of the Property and Casualty Group, including the Company’s property and casualty subsidiaries, for certain lines of business in various states to offset growing loss costs in those lines of business (See “Factors That May Affect Future Results, Insurance Premium Rate Increases” section herein).

Catastrophes are an inherent risk of the property and casualty insurance business and can have a material impact on the Company’s insurance underwriting results. In addressing this risk, the Company has developed what it believes are reasonable underwriting standards and monitors the Property and Casualty Group’s exposure by geographic region. Additionally, EIC and EINY have in effect an all-lines aggregate excess of loss agreement with the Exchange (discussed below), which should substantially mitigate the effect of catastrophe losses on the Company’s financial position. The Company’s share of catastrophe losses, as defined by the Property and Casualty Group, was $1,479,519 for the three months ended September 30, 2002. Included in this amount was $1,000,535 in continued development of the storm-related catastrophes that

21

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

occurred during the second quarter. Also included in this amount was $234,195 related to tornados that hit the state of Indiana in late September. The Company’s share of catastrophe losses was $330,000 for the third quarter of 2001. Catastrophe losses of the Company’s property and casualty insurance subsidiaries were $5,427,709 and $1,470,778 for the nine months of 2002 and 2001, respectively.

The Company’s property and casualty insurance subsidiaries’ unaffiliated net assumed reinsurance business generated underwriting losses of $381,877 and $6,688,088 in the third quarters of 2002 and 2001, respectively. The third quarter 2001 loss includes the Company’s 5.5% share of the Property and Casualty Group’s estimated incurred losses from the September 11th terrorist attack on the World Trade Center. These losses, net of recoveries under the excess of loss agreement with the Exchange totaled $5.8 million before taxes. There has been no additional reserve development in 2002 relating to the estimated incurred reinsurance losses related to this terrorist attack. Through September 30, 2002 loss payments made by the Property and Casualty Group related to the attack have totaled $35,622,505 with an additional $114,377,495 set up as reserves for case and incurred but not reported claims. Underwriting income from the Company’s property and casualty unaffiliated voluntary assumed reinsurance business totaled $459,053 for the nine months ended September 30, 2002 compared to an underwriting loss of $7,189,295 for the same period one year ago.

EIC and EINY’s aggregate excess of loss reinsurance agreement with the Exchange limits their net retained share of ultimate net losses in any applicable accident year. Under the agreement, the Exchange assumes losses that exceed 72.5% of the Company’s earned premium for each accident year. The Exchange is liable for 95.0% of the amount of such excess up to, but not exceeding, 15.0% of the Company’s earned premium. EIC and EINY are liable for amounts in excess of the coverage in the excess of loss agreement. This reinsurance treaty is excluded from the intercompany pooling agreement. EIC and EINY pay a premium equal to 1.01% of their net premium earned to the Exchange for this coverage. The deposit premium paid to the Exchange for the agreement totaled $1,423,226 and $1,449,617 for the nine months ended September 30, 2002 and 2001, respectively. Recoveries during the third quarter 2002 amounted to $400,448, compared to recoveries of $2,505,138 for the same period one year ago. Recoveries recorded during the third quarter of 2002 totaled $294,880 for accident year 2000, and $381,271 for 1999 offset by a reduction in loss recoveries for accident year 2001 of $275,703. Recoveries totaled $1,970,959 for the first nine months of 2002 compared to $3,058,718 for the same period one year ago. No cash payments have been made between companies in 2002 or 2001 for recoveries under this agreement since related losses are reserved but not yet paid.

Included in the Company’s underwriting expenses are the Company’s share of eCommerce initiative expenses for application development costs which are covered under the technology cost sharing agreement. These costs total $945,903 and $410,443 for the quarters ended September 30, 2002 and 2001, respectively. For the nine months ended September 30, 2002 and 2001 eCommerce cost sharing agreement expenses totaled $3,001,813 and $601,981, respectively. These shared costs will continue to be incurred in future periods as the program develops (see “Factors That May Affect Future Results” section, herein).

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The Company experienced an increase in costs associated with assigned risk buyout programs in 2002. Under a buyout program, one insurer pays another insurer to assume the first insurer’s obligations to participate in a state-mandated involuntary coverage program, such as an assigned risk plan for those who are unable to obtain automobile insurance in the voluntary market because of underwriting ineligibility. The third quarter costs in 2002 were $204,995 compared to $143,812 for the same period in 2001. The buyout programs include Limited Assignment Distribution (LAD), which covers personal automobile risks, and Commercial Limited Assignment Distribution (CLAD), pertaining to commercial automobile risks. The Property and Casualty Group has a CLAD program in Pennsylvania and both LAD and CLAD programs in New York, Illinois, Virginia and West Virginia. These programs provide that a servicing carrier perform all administrative functions relative to the assigned risk policies, including collecting premiums and making payments for losses and loss adjustment expenses. The Property and Casualty Group makes payments to the servicing carrier, which includes an administrative fee, as well as a fee for rate inadequacy costs above the collected premium.

The increase in LAD/CLAD expense is almost exclusively attributable to the program in the state of New York, which had costs of $201,423 compared to $139,684 during the third quarters of 2002 and 2001, respectively. The rise in costs in New York is the result of significant increases in both the population of assigned risk policies and increased LAD contract fees attributable to deteriorating rate adequacy of the New York residual market. Additionally, the Property and Casualty Group’s market share in the state has increased, resulting in more assigned risk policies being allocated to the Property and Casualty Group.

The combined ratio for the Company’s property and casualty insurance operations calculated under Generally Accepted Accounting Principles (GAAP) was 114.9% and 130.5% for the three months ended September 30, 2002 and 2001, respectively. The GAAP combined ratio represents the ratio of loss, loss adjustment, acquisition, and other underwriting expenses incurred to premiums earned. During the third quarter of 2002, this ratio was impacted by 3.8 points related to adverse development on loss reserves of the prior accident years, 3.5 points related to catastrophe losses incurred and by 2.2 combined ratio points related to eCommerce expenses. The higher ratio in 2001 reflects the impact of the September 11th attacks which amounted to 16.7 combined ratio points in the third quarter 2001. The GAAP combined ratio, excluding adverse development of prior years, catastrophe losses and eCommerce expenses, was 105.4% for the quarter ended September 30, 2002. For the nine months of 2002 and 2001, the GAAP combined ratio was 113.3% and 115.8%, respectively.

Analysis of Investment Operations

Net revenue from investment operations for the third quarter of 2002 increased to $10,729,397 from $6,994,026 in the third quarter of 2001. Net revenue from investment operations includes net investment income, realized capital losses, equity in limited partnerships and equity in earnings of Erie Family Life Insurance Company (EFL). Net investment income rose 12.3% to $13,867,678 for the quarter ended September 30, 2002. Increases in investments in taxable bonds contributed to the growth in net investment income for the quarter. For the nine months ended September 30, 2002 net investment income increased 10.4% to $40,704,633 compared to $36,855,462 for the same period one year ago.

As a result of impairment charges taken in the third quarters of 2002 and 2001 the Company realized net losses on investments of $4,047,306 and $5,450,356, respectively. The third

23

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

quarter 2002 impairment charges that totaled $6,975,269 were for fixed maturity investments in the energy sector. For the nine months ended September 30, 2002 net revenue from investment operations declined 9.6% to $34,278,296 from $37,921,163 for the same period in 2001. This decrease primarily resulted from a $5,902,391 increase in net realized losses from investments. Impairment charges for the nine months ended September 30, 2002 and 2001 totaled $17,668,090 and $5,736,463, respectively.

Equity in earnings of limited partnerships was $802,967 for the quarter ended September 30, 2002 compared to losses of $229,464 for the same period in 2001. Private equity and fixed income limited partnerships realized earnings of $570,841 for the three months ended September 30, 2002 compared to losses of $684,613 for the same period of 2001. Real estate limited partnerships reflected earnings of $232,126 for the three months ended September 30, 2002 compared to earnings of $455,149 for the same period of 2001. In the third quarters of 2002 and 2001 there were no impairment charges related to limited partnerships. Equity in earnings of limited partnerships totaled $1,109,903 and $1,278,587 for the first nine months of September 30, 2002 and 2001, respectively.

The Company’s investment in EFL is accounted for under the equity method of accounting. The Company’s 2002 third quarter earnings from its 21.6 percent ownership of EFL totaled $106,058, down from the $326,953 recorded in the third quarter of 2001. Equity in earnings of EFL for the nine-month period ended September 30, 2002 totaled $1,091,882 down from the $2,512,865 recorded in the same period in 2001.

The decrease in earnings from EFL for the third quarter and nine months ended September 30, 2002 when compared to the same period in 2001, were the result of increased impairment charges taken by EFL on their investments in 2002.

FINANCIAL CONDITION

Investments

The Company’s investment strategy takes a long-term perspective emphasizing investment quality, diversification and superior investment returns. Investments are managed on a total return approach that focuses on current income and capital appreciation. The Company’s investment strategy also provides for liquidity to meet the short- and long-term commitments of the Company. At September 30, 2002, the Company’s investment portfolio of investment-grade bonds, common stock, preferred stock and cash and cash equivalents totaled $889.0 million, or 40.6%, of total assets. These investments provide the liquidity the Company requires to meet the demands on its funds.

The Company reviews the investment portfolio to evaluate positions that may have incurred other-than-temporary declines in value. For all investment holdings, general economic conditions and/or conditions specifically affecting the underlying issuer or its industry are considered in evaluating impairment in value. In addition to specific factors, the primary factors considered in the Company’s review of investment valuation are the length of time the market value is below cost and the amount the market value is below cost.

For common equity securities (including private equity limited partnerships) where the decline in market value is more than 20% below cost for a period exceeding six months, there is a strong indication of other-than-temporary impairment. Under these circumstances the Company

24

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

considers market conditions, industry characteristics and the fundamental operating results of the issuer before deciding whether to sell the investment at a loss, to recognize an impairment charge to operations or to do neither. For common equity securities that have declined more than 20% below cost for a period exceeding twelve months, the position is presumed impaired and is either sold or recognized as impaired in the Consolidated Statements of Operations. There were no impairment charges related to equity securities in the third quarter of 2002. However, impairment charges related to equity securities totaled $5,736,463 in the third quarter of 2001. For the nine month period ended September 30, 2002 and 2001 impairment charges relating to equity securities totaled $2,326,980 and $5,736,463, respectively. In the third quarters of 2002 and 2001 no private equity limited partnership values were written down. For the nine month period ended September 30, 2002 impairment charges relating to private equity limited partnerships totaled $1,380,625. There were no impairment charges relating to private equity limited partnerships in 2001.

For fixed maturity investments, the Company individually analyzes all positions whose market value has declined more than 20% below cost. The Company considers market conditions, industry characteristics and the fundamental operating results of the issuer to determine if the decline is due to changes in interest rates, changes relating to a decline in credit quality, or other issues affecting the investment. Positions that have incurred market price decline of over 20% for a period greater than six months where the creditworthiness of the issuer or other factors indicate a decline that is other- than-temporary are either sold or recognized as impaired and reflected as a charge to the Company’s operations. Impairments recognized in the third quarter of 2002 related to fixed maturity investments totaled $6,975,269 (See “Analysis of Investment Operations” section).

For the nine month period ended September 30, 2002 impairment charges relating to fixed maturity investments totaled $15,341,110. There were no impairments recognized during the nine month period of 2001 for fixed maturity investments.

If the Company’s policy for determining the recognition of impaired positions were different, the Company’s Consolidated Statements of Financial Position and Results of Operations could be significantly impacted. Management believes its investment valuation philosophy and accounting practices result in appropriate and timely measurement of value and recognition of impairment.

The Company’s investments are subject to certain risks, including interest rate and price risk. The Company monitors exposure to interest rate risk through periodic reviews of asset and liability positions. Estimates of cash flows and the impact of interest rate fluctuations relating to the investment portfolio are monitored regularly. Generally, the Company does not hedge its exposure to interest rate risk, as it has the ability to hold its fixed maturity investments to maturity.

The Company’s portfolio of marketable equity securities, which is carried on the Consolidated Statements of Financial Position at estimated fair value, has exposure to price risk, the risk of potential loss in estimated fair value resulting from an adverse change in prices. The Company’s objective is to earn competitive relative returns by investing in a diverse portfolio of high-quality, liquid securities. Portfolio characteristics are analyzed regularly and market risk is actively managed through a variety of techniques. Portfolio holdings are diversified across industries; concentrations in any one company or industry are limited by parameters established by management and the Company’s Board of Directors.

25

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liabilities

The process of estimating the liability for unpaid losses and loss expenses is inherently judgmental and can be influenced by factors subject to variation. Possible sources of variation include changing claim frequency and severity, changing rates of inflation as well as changes in other economic conditions, judicial trends and legislative changes. It is unlikely that future losses and loss adjustment expenses will develop exactly as projected. The Company continually refines reserves as experience develops and new information becomes known. The Company reflects adjustments to reserves in the results of operations in the periods in which the estimates are changed.

At September 30, 2002, the Property and Casualty Group’s estimated total loss exposure related to the events of September 11th remained at $150 million. Disputes concerning whether the September 11th attack on the World Trade Center should be considered one or two insurable events are currently being litigated. The Property and Casualty Group’s $150 million loss estimate anticipates that the events of September 11th is considered one event. If the attack comes to be considered as two events, the total potential exposure for the Property and Casualty Group, the Company believes, would increase between $50 million and $75 million. The effect on the Company, as a result, would be additional losses between $2.7 million and $4.1 million. The net losses, after taking into consideration the excess of loss reinsurance agreement, would be minimal to the Company.

A recent court decision by a federal judge in New York ruled that the September 11th attack on the World Trade Center was a single occurrence under the terms of the insurance policies used by three of the 22 property insurers of the World Trade Center. The ruling would limit the insurers liability to a single payment for one series of events as opposed to two payments for two separate occurrences. Subsequent to this ruling, the leaseholder of the World Trade Center notified the federal judge of the intent to appeal in the U.S. Court of Appeals for the Second Circuit. Prior to this ruling, a November 2002 trial date had been set to hear the case for the remaining insurers of the World Trade Center. The World Trade Center leaseholder has also requested the November trial be delayed until an appellate court decision is reached on the ruling of the New York federal judge.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measure of an entity’s ability to secure enough cash to meet its contractual obligations and operating needs. Operating cash flows are generated from the Company’s management operations, the net cash flow from the EIC’s 5% and the EINY’s .5% participation in the underwriting results of the intercompany pooling agreement with the Exchange, and the Company’s investment income from affiliated and non-affiliated investments. With respect to the management fee, funds are generally received from the Exchange on a premiums collected basis. The other receivable from the Exchange and affiliates represents the management fee receivable from premiums written but not yet collected as well as the management fee receivable on premiums collected in the current month, net of operating expenses paid by the Exchange. The Company pays commissions on premiums collected rather than written premiums. Cash outflows are variable because of the fluctuations in settlement dates for liabilities for unpaid losses and because of the potential for large losses, either individually or in aggregate.

At September 30, 2002 and December 31, 2001, the Company’s receivables from its affiliates totaled $761,294,991 and $640,655,330, respectively. The receivables are the result of the management fee, cash payments for affiliates and the intercompany pooling agreement. They represent a concentration of credit risk. The management fee receivable due from the Exchange

26

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

included in this total, is generally collected within a year and totaled $189,455,080 at September 30, 2002 and $147,344,684 at December 31, 2001. Another component of this receivable is the receivables for the intercompany pooling activity which rose 16.1% to $570,128,358 at September 30, 2002 from the $491,055,048 at December 31, 2001. This represents the increases in direct loss reserves, loss adjustment expense reserves and unearned premium reserves ceded to the Exchange under the pooling agreement. There is a direct correlation between the increase in direct written premium of the Company’s subsidiaries and the increase in direct loss reserves, loss adjustment expense reserves and unearned premium reserves ceded to the Exchange. These increases were the result of the $93,248,134, or 26.2% increase in direct written premium of the Company’s subsidiaries for the nine months ended September 30, 2002 when compared to the same period in 2001.

The Company generates sufficient net positive cash flow from its operations to fund its commitments and build its investment portfolio, thereby increasing future investment returns. The Company also maintains a high degree of liquidity in its investment portfolio in the form of readily marketable fixed maturities, equity securities and short-term investments. Net cash flows provided by operating activities were $134,974,376 and $100,586,985 for the nine months ended September 30, 2002 and 2001, respectively.

Dividends declared and paid to shareholders for the quarters ended September 30, 2002 and 2001, totaled $10,906,248 and $9,832,321, respectively. Dividends declared and paid for the nine months ended September 30, 2002 were $32,763,292 compared to $29,506,890 for the same period in 2001. There are no regulatory restrictions on the payment of dividends to the Company’s shareholders, although there are state law restrictions on the payment of dividends from the Company’s insurance subsidiaries to the Company. Dividends from insurance subsidiaries are not material to the Company’s cash flows.

Cash flows from financing activities include the purchase of treasury stock. During the first nine months of 2002, 207,217 shares were repurchased at a total cost of $8,486,839 or an average price of $40.96 compared to 194,200 shares repurchased for the same period in 2001 at a total cost of $6,686,588 or an average price of $34.43. The Company has discontinued share repurchases under this plan.

Company management continues to plan for space needs to accommodate increased personnel in its Home Office complex. The Company is in the design phase to build additional office and parking facilities on its current Home Office campus in Erie, Pennsylvania. The current estimate to build these facilities ranges between $50 million and $60 million.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Management Fees

The rate for the management fee paid to the Company by the Exchange is determined by the Company’s Board of Directors. The rate may be changed periodically by the Board at its discretion but may not exceed 25%. The Company’s Board of Directors also acts in a fiduciary capacity with respect to the operation of the Exchange. The Board considers several factors in determining the management fee rate, including the relative financial strength of the Exchange and the Company and the long-term capital needs of the Exchange, in order to foster growth and competitiveness as well as maintain its superior financial strength, which ultimately benefits the entire Erie Insurance Group

27

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

(including the Company, the Property and Casualty Group and EFL). Because the management fee revenue from the Exchange provides the majority of the Company’s revenue, the income of the Company is dependent upon the ability of the Exchange to maintain its financial condition and its ability to continue to offer competitive insurance products in the marketplace. The management fee rate charged the Exchange was 25% for all periods presented herein. If the Board were to decrease the management fee rate 1% (from 25% to 24%) for the nine months ended September 30, 2002 it would have resulted in a $23,755,794 reduction to the management fee revenue as reported on the Consolidated Statements of Operations. The per share impact, after federal income taxes, would be approximately $.22 per share.

Financial Condition of the Exchange

The relative financial condition of the Company and that of the Exchange are the principal areas evaluated at least annually by the Company’s Board of Directors in their determination of the management fee rate. The Exchange is also the lead insurer in the underwriting results of the Property and Casualty Group. The financial statements of the Exchange are prepared in accordance with Statutory Accounting Principles (SAP) required by the NAIC Accounting Practices and Procedures Manual, as modified to include prescribed or permitted practices of the Commonwealth of Pennsylvania. Financial statements prepared under SAP provide a more conservative approach than under GAAP. Under SAP, the principle focus is on the solvency of the insurer in order to protect the interests of the policyholders. Some significant differences between SAP and GAAP include the following:

• SAP provides a more conservative approach to the valuation of invested assets

• SAP recognizes expenses when incurred and does not allow for the establishment of deferred policy acquisition cost assets

• Statutory deferred tax calculations follow GAAP with certain modifications for the realization criteria of deferred tax assets and the recording of the impact of changes in its deferred tax balances

• GAAP requires the establishment of an asset for the estimated salvage and subrogation that will be recovered in the future. Under SAP a company may establish this recoverable but is not required to do so. The Exchange does not establish salvage and subrogation recoveries.

The selected financial data below as of and for the nine months ended September 30, 2001 and 2002 is derived from the Exchange’s unaudited financial statements prepared in accordance with

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

SAP. In the opinion of management, all adjustments consisting only of normal recurring accruals, considered necessary for a fair presentation have been included. The financial data set forth below is only a summary.

	Nine months ended
	September 30,			September 30,
(In thousands) (Statutory Accounting Basis)	2002			2001
		(Unaudited)
Premiums earned	$	2,140,526		$	1,792,450
Loss and loss adjustment expenses	$	1,727,052		$	1,568,896
Insurance underwriting and other expenses		718,881			551,623
Net underwriting loss	($	305,407	)	($	328,069	)
Investment income (loss), net		48,237			(32,489	)
Federal income tax benefit		(68,925	)		(43,230	)
Net loss	($	188,245	)	($	317,328	)

	As of
	September 30,		December 31,
(In thousands) (Statutory Accounting Basis)	2002		2001
	(Unaudited)
Cash and invested assets	$	5,238,660	$	5,990,511
Total assets		6,190,240		6,998,794
Claims and unearned premium reserves		3,663,000		3,200,836
Total liabilities		4,042,623		3,953,243
Policyholders’ surplus	$	2,147,617	$	3,045,551

The Exchange’s Policyholders’ surplus has declined over the past nine months primarily as a result of continued underwriting losses (see “Analysis of Insurance Underwriting Operations”) combined with unrealized losses from their common equity securities. Common equity securities represent a significant portion of the Exchange’s investment portfolio. They are exposed to price risk, volatility of the capital markets and general economic conditions. As such the Exchange had unrealized losses totaling $749,342,000, net of statutory deferred taxes, for the first nine months of 2002.

To the extent that the Exchange incurs additional investment losses resulting from declines in the value of its marketable securities, the Exchange’s policyholders’ surplus will be further adversely affected. If the surplus of the Exchange were to decline significantly from its current level, the Property and Casualty Group could find it more difficult to retain its existing business and attract new business. A decline in the business of the Property and Casualty Group would have an adverse effect on the amount of the management fees the Company receives and the underwriting results of the Property and Casualty Group in which the Company has a 5.5% participation. In addition, a decline in the surplus of the Exchange from its current level would make it more likely that the management fee rate received by the Company would be reduced.

Catastrophe Risk

The Property and Casualty Group is currently obtaining quotes for treaty reinsurance to protect the 2003 accident year underwriting results of the Exchange and other members of the Property

29

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

and Casualty Group from catastrophes and other adverse underwriting events. The lower surplus levels of the Exchange, along with increasing catastrophe risk exposure as a result of accelerating policy growth, have resulted in management’s decision to actively pursue the purchase of treaty reinsurance coverage. The Exchange’s reported surplus totaled $2.1 billion at September 30, 2002 compared to $3.0 billion at December 31, 2001.

The risk of not maintaining reinsurance coverage in the event of a significant catastrophe or a series of moderate catastrophes in the same year means that surplus levels could be exposed to dramatic decline should such catastrophes occur. A dramatic decline in the surplus levels would result in pressure to reduce premium writings, and thereby, curtail growth. Without the benefit of higher surplus levels, the leverage of the Exchange is reduced and so is the opportunity to grow. Reinsurance for catastrophe exposure reduces the variability of earnings and protects the balance sheet and income statement against large and infrequent events.

The Company’s current reinsurance agreement in effect with the Exchange mitigates catastrophe loss exposure risk to the Company’s property and casualty insurance subsidiaries, but does not mitigate the exposure of the Exchange or the Property and Casualty Group as a whole.

Insurance Premium Rate Increases

Rate increases filed by the Property and Casualty Group for certain lines of business in various states were sought to offset growing loss costs in those lines. The Company continually evaluates pricing levels balancing competitive conditions and the need to maintain the solid financial condition of the insurers of the Property and Casualty Group. Pricing actions contemplated or taken by the insurers of the Property and Casualty Group are subject to various regulatory requirements of the states in which the insurers operate. Premium increases anticipated due to pricing actions approved through September 30, 2002 could amount to approximately $122 million in premium for the Property and Casualty Group in 2002 and $97 million in premium for the Property and Casualty Group in 2003. There is also the potential for an additional $49 million in premium for the Property and Casualty Group in 2003 resulting from pricing actions contemplated or filed and awaiting approval. The majority of the anticipated increase stems from the private passenger and commercial auto lines of business as well as the homeowners line of business. Further rate actions continue to be contemplated for 2003.

Geographic Expansion

On December 6, 2001, the Company announced the Erie Insurance Group’s (the Group) intention to expand its operations into Minnesota. Minnesota will be the 12th state served by the Group, in addition to the District of Columbia. Beginning in the third quarter of 2004, the Group intends to write all lines of insurance it currently offers, including auto, home, business, life and annuities in Minnesota.

Insurance Company Insolvencies

The insurance companies of the Property and Casualty Group pay assessments under the solvency or guaranty laws of the various states in which they are licensed. Pennsylvania-based PHICO Insurance Company, which became insolvent in late 2001, could impact future underwriting results of the Property and Casualty Group and consequently the Company. The impact of this insolvency on the Company’s financial results cannot be reasonably estimated at

30

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

this time, thus no liability has been established by the Company to date. However, a charge to the Company’s insurance underwriting operations is likely to be made as more information becomes available.

Terrorism

The property and casualty subsidiaries of the Company are exposed to both direct insurance and reinsurance losses arising from possible future terrorist actions. The property and casualty subsidiaries are exposed to such losses by virtue of their 5.5% participation in the intercompany pooling agreement with the Exchange. Their exposure is limited by the terms of an excess of loss agreement that is in place with the Exchange.

The tragic September 11th attacks resulted in staggering losses for the insurance industry and have caused uncertainty in the insurance and reinsurance market. The industry has been compelled to re-examine policy language and to address the potential for future threats of terrorist events and losses. The Property and Casualty Group’s personal and commercial property and casualty insurance policies were not intended to cover the risk of terrorist events and losses such as those suffered in the September 11th attacks. It is difficult to predict and measure the risks associated with possible future terrorist attacks.

To address the industry’s terrorism exposure, insurers have been working with Congress, the White House and other interested parties to enact legislation that would help spread the risk of future terrorist losses. On June 18, 2002 the Senate passed Senate Bill 2600, the Terrorism Reinsurance Act, which provides for shared public and private compensation for insured losses resulting from acts of terrorism. The Senate Bill includes a participating company deductible based on a percentage of market share. The federal government would assume liability for 80% of the portion of covered terrorism-related losses in 2002 that exceed participating companies’ deductibles, but do not exceed $10 billion in total and 90% of the losses in excess of the deductible when the total loss exceeds $10 billion. In 2003, the level would increase to $15 billion if renewed. The Senate program would be effective for one year, with the option to extend it for a second year.

Commercial property and casualty lines, including workers’ compensation and business interruption, would be required to participate. Personal lines insurers may participate by election. The bill creates a federal cause of action for damages resulting from terrorism. Punitive damages are not restricted and will not be paid by the federal government. The Senate Bill has moved to committee and conferees have been appointed to resolve differences between the Senate Bill and the House Bill previously approved in 2001, which provides for financial assistance through a loan-payback procedure and includes additional protections against lawsuits, such as a restriction on punitive damages. The tort reform measures have been one of the major areas of disagreement. A compromise litigation/liability management proposal that has gained some support consolidates cases in federal court, prohibits payment of punitive damages from government funds and limits punitive damages except in cases of criminal behavior. Passage of a compromise bill remains uncertain; however, President Bush recently met with lawmakers to push for resolution of the impasse and addressed the business community and the financial services industry to urge congressional action on terrorism legislation.

Regulators in the states in which the Property and Casualty Group does business, with the exception of New York, have approved limited optional terrorism exclusion endorsements for use on commercial property and liability lines within the framework developed by Insurance Services

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Office (ISO). These endorsements exclude claims for terrorist acts involving the release of biological, chemical, nuclear or radioactive materials. In other incidents of terrorism, thresholds must be met before the exclusion will apply. For both property and liability coverage the total of insured property damage, including business interruption, must exceed $25 million. For liability coverage, the exclusion will also apply if more than 50 people sustain death or serious physical injury. The Property and Casualty Group has made the necessary filings and obtained approval for use of these optional exclusions where deemed necessary.

ISO has also made filings for use of optional terrorism exclusion endorsements on commercial auto policies, within the framework approved for commercial property and liability lines. The Property and Casualty Group has recently made the necessary filings and obtained approval for use of these optional exclusions on commercial auto and garage auto policies, if deemed necessary. Approval has been obtained in all states in which the Property and Casualty Group does business except New York, Virginia and Illinois.

The National Association of Insurance Commissioners (NAIC) has recently passed a consensus in support of denial of terrorism exclusions on personal lines policies. NAIC action is advisory and states have approval authority; however, it is likely that many states will follow the NAIC resolution. Through its trade organizations and grassroots efforts, the Property and Casualty Group continues to work toward a federal solution to the terrorist threats facing personal lines insurers.

The Company’s substantial portfolio of equity and fixed income investments could also be affected by potential future terrorist actions which may affect the level of economic activity as well as investor confidence in the U.S. capital markets.

Exposure to Losses for Mold

The industry continues to work to understand mold and toxic mold and control exposures and losses involving property damage and personal injuries, arguably related to mold. Due to media coverage and heightened awareness, the Property and Casualty Group is seeing an increase in the number of claims with a mold component from both first party and third party coverages in personal and commercial lines. While the level of activity has not reached significant proportions, this trend is expected to continue. The costs associated with these losses, both investigative and remedial, will continue to rise. The opinions of state insurance departments regarding mold coverages and exclusions continue to be unpredictable. The Company has recommended changes to policy language for the Property and Casualty Group policies that would limit exposure in personal lines policies in the future. Mold exclusions and limitations for commercial lines are currently under review. Exclusions and limitations in personal lines policies will be filed in various states for implementation in 2003.

Information Technology Costs

In 2001, the Erie Insurance Group began a comprehensive program of eCommerce initiatives in support of the Erie Insurance Group’s Agency force and back office policy underwriting, issuance and administration. The eCommerce program is intended to improve service and efficiency, as well as result in increased sales. The first major component of the eCommerce program (network and desktop hardware deployment) was completed during the second quarter of 2002. Also, the Erie Insurance Group completed the release of the new web interface to a limited number of Agents and employees in July 2002. In August 2002, the eCommerce program took

32

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

advantage of a significant business opportunity to work with Accenture, a well-known provider of information technology services and solutions, to develop the Erie Insurance Group’s eCommerce system called ERIEConnection_sm. The Erie Insurance Group is now working with Accenture to be the chief integrator and manager of the eCommerce program and to provide software applications that meet the Company’s needs . Management of Erie Insurance Group believes this approach will allow the eCommerce program to meet the established budget goals. The Company estimates its share of eCommerce costs in 2003 will amount to approximately $.09 to $.12 per share after income taxes.

Contingencies

In February, 2000 a civil class action lawsuit was filed against Erie Insurance Company and Erie Insurance Exchange (collectively, the ERIE) in Philadelphia, Pennsylvania. The Exchange issued an automobile insurance policy to the Plaintiff. The class action complaint alleges that the Plaintiff was involved in an accident and that her insured vehicle was damaged in the accident. The Complaint alleges that the ERIE acted improperly when it used non-original equipment manufacturer (non-OEM) parts in repairing the damage to the Plaintiff’s vehicle. In March, 2002, the courts granted the Plaintiff’s Revised Motion for Class Certification.

The ERIE is seeking to appeal the certification of the class. In addition, the ERIE has joined, as additional defendants in the class action lawsuit, other non-OEM manufacturers and distributors of crash parts. Although it is too early to assess the probable outcome or the amount of damages of this civil class action lawsuit, the Company believes the ERIE has meritorious legal and factual defenses to this lawsuit and these defenses will be vigorously pursued. As such, no liability has been established by the Company or any of the companies in the Property and Casualty Group to date for this lawsuit. The Company’s exposure to liability arising from this litigation is limited to the 5.5% share of the Company’s property and casualty subsidiaries underwriting results under the intercompany pooling agreement. See also Part II – Item 1. “Legal Proceedings”.

Like other members of the insurance industry, the Company is the target of an increasing number of class action lawsuits like the one described above as well as other types of litigation. This litigation is based on a variety of issues including insurance and claim settlement practices. The Company assesses the likelihood of any adverse outcomes to these matters as well as potential ranges of probable losses. There can be no assurance that actual outcomes will not differ from those assessments.

Employee Benefit Obligations

The Company has a noncontributory defined benefit pension plan covering substantially all Employees. It is the only funded pension plan of the Company. At September 30, 2002 Company management evaluated the fair market value of the pension assets against the accumulated benefit obligation. The approximate fair market value of the pension asset at September 30, 2002 is $135.6 million, which continues to exceed the accumulated benefit obligation of approximately $80 million, therefore an additional minimum liability in connection with the plan was not considered necessary. Also, the discount rates being used in the plan to determine the accumulated benefit obligation were reviewed and an estimated 2003 pension expense was calculated. Based on this preliminary review, the estimated pension expense in 2003 is not expected to be materially different from the 2002 pension expense as it relates to the financial results of the Company.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s exposure to market risk is primarily related to fluctuations in prices and interest rates. Quantitative and qualitative disclosures about market risk resulting from changes in prices and interest rates are included in Item 7A. in the Company’s 2001 Annual Report on Form 10-K. There have been no material changes in such risks or the Company’s periodic reviews of asset and liability positions during the nine months ended September 30, 2002. The information contained in the investments section of Management’s Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference.

The Company is also exposed to credit risk through its portfolios of fixed maturity securities, mortgage loans and to a lesser extent short-term investments. This risk is defined as the potential loss in market value resulting from adverse changes in the borrower’s ability to repay the debt. The Company’s objective is to earn competitive returns by investing in a diversified portfolio of securities. The Company manages this risk by performing up front underwriting analysis and regular reviews by its investment staff. The fixed maturity investments are also maintained between minimum and maximum percentages of invested assets.

The Company has significant receivables from the Exchange, which are subject to credit risk. Company results are directly related to the financial strength of the Exchange. Credit risks related to the receivables from the Exchange are evaluated monthly. Since the Company’s inception, it has collected all amounts due from the Exchange in a timely manner (generally within 120 days).

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain forward-looking statements contained herein involve risks and uncertainties. These statements include certain discussions relating to management fee revenue, cost of management operations, underwriting, premium and investment income volume, business strategies, profitability and business relationships and the Company’s other business activities during 2002 and beyond. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential” and similar expressions. These forward-looking statements reflect the Company’s current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that may cause results to differ materially from those anticipated in those statements. Many of the factors that will determine future events or achievements are beyond our ability to control or predict.

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ITEM 4. CONTROLS AND PROCEDURES

Within 90 days prior to the date of filing of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and its Chief Financial Officer, of the design and operation of the Company’s disclosure controls and procedures. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective for gathering, analyzing and disclosing the information the Company is required to disclose in the reports it files under the Securities Exchange Act of 1934, within the time periods specified in the SEC’s rules and forms. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to the date of this evaluation.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Brenda L. Foultz v. Erie Insurance Exchange and Erie Insurance Company

This civil class action lawsuit was filed in February of 2000 in the Court of Common Pleas of Philadelphia County, Pennsylvania. Erie Insurance Exchange and Erie Insurance Company (collectively, the ERIE) are the named defendants in the suit. The Erie Insurance Exchange issued an automobile insurance policy to the Plaintiff. The Class Action Complaint alleges that the Plaintiff was involved in an accident and that her insured vehicle was damaged in the accident. The Complaint alleges that the ERIE acted improperly when it prepared estimates using non-OEM parts in repairing the damage to the Plaintiff’s vehicle. In repairing the Plaintiff’s vehicle, two “non-OEM parts” were used. The two non-OEM parts used in repairing the Plaintiff’s vehicle were the left and right front lens and housing assemblies. The Plaintiff’s Complaint asserts that all non-OEM crash parts are inferior, defective and substandard, and do not return a damaged vehicle to its condition prior to the accident.

The Complaint, as amended, contains four counts. In the Count I, Plaintiff alleges that the ERIE’s conduct constitutes a breach of contract under its insurance policy. Count II of the Complaint alleges that the ERIE’s conduct violates the Pennsylvania Unfair Trade Practices and Consumer Protection law. Count III alleges that the ERIE’s conduct violates the Pennsylvania bad faith statute. In Count IV of the Complaint Plaintiff requested declaratory relief and an injunction prohibiting the ERIE from using non-OEM parts. The Plaintiff later voluntarily dismissed Count IV. The ERIE answered the Complaint and denied liability on all of the counts. The ERIE also filed a Joinder Complaint in January of 2001 against the manufacturer and distributor of the non-OEM parts alleged by the Plaintiff to be defective. The Court issued an Order permitting the ERIE’s joinder of TYC Brother Industrial Co. Ltd., the manufacturer of the parts at issue, and Genera Corporation, the distributor of the parts. TYC Brother Industrial Co. Ltd. and Genera have also denied any and all liability.

On March 13, 2002, the Court of Common Pleas of Philadelphia County granted the Plaintiff’s Revised Motion for Class Certification. The Court certified the following class:

All persons in the United States (1) who have been insured by an automobile policy issued by Erie Insurance Company or any other member of the Exchange; (2) who have made a claim at any time on or after February 2, 1994 for vehicle repairs pursuant to their Erie Insurance policies; and (3) have had non-OEM crash parts specified for their repairs. Excluded from the Class are officers, directors and employees of Erie Insurance Company, Exchange, and their subsidiaries.

The ERIE is seeking to appeal the certification of the class. In addition, the ERIE has joined, as additional Defendants in the class action lawsuit, other non-OEM manufacturers and distributors of crash parts. The Company believes the Exchange and Erie Insurance Company have meritorious legal and factual defenses to this lawsuit and these defenses will be vigorously pursued. In the event an adverse verdict is rendered against the Erie Insurance Exchange and Erie Insurance Company, both Erie Insurance Group companies will vigorously pursue any claims they may have against the non-OEM manufacturers and suppliers.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

Exhibit
Number	Description of Exhibit
3(ii)	Amended and Restated By-laws of Registrant effective September 9, 2002
10.1	Amended and Restated Service Agreement between Registrant and Erie Insurance Company effective January 1, 1992
10.2	Amended and Restated Supplemental Retirement Plan for Certain Members of the Erie Insurance Group Retirement Plan for Employees, effective December 31, 1995
10.3	Amended and Restated Reinsurance Pooling Agreement effective January 1, 1995 between Erie Insurance Company and its wholly-owned subsidiary Erie Insurance Company of New York and Erie Insurance Exchange
10.4	Amended and Restated Aggregate Excess of Loss Reinsurance Contract effective January 1, 1998 between Erie Insurance Exchange, by and through its Attorney-in-Fact, Erie Indemnity Company and Erie Insurance Company and its wholly-owned subsidiary Erie Insurance Company of New York
10.5	Amended and Restated Retirement Plan for Employees of Erie Insurance Group, effective December 31, 2000
10.6	Amended and Restated Deferred Compensation Plan for Outside Directors of Registrant, effective January 1, 2001
10.7	Amended and Restated Employee Savings Plan of Erie Insurance Group, effective January 1, 2001
10.8	First Amendment and Restatement to Employee Savings Plan of Erie Insurance Group effective January 1, 2001
10.9	2001 Annual Incentive Plan of Erie Indemnity Company
10.10	Amended and Restated Deferred Compensation Plan for Outside Directors of Registrant effective April 30, 2002
10.11	Employment Agreement effective May 9, 2002 by and between Erie Indemnity Company and Jeffrey A. Ludrof
10.12	Form of Subscriber’s Agreement whereby policyholders of Erie Insurance Exchange Appoint Registrant as their Attorney-in-Fact
99.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes–Oxley Act of 2002
99.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes–Oxley Act of 2002
99.3	First Amendment to Second Restated Agreement of H.O. Hirt Trust effective December 22, 1980

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Reports on Form 8-K

On July 24, 2002, the Company filed a report on Form 8-K, reporting under Item 7 that the Company’s Board of Directors held a special meeting on July 23, 2002. At the meeting, the Board voted to increase the number of directors from 12 to 13; elected Jeffrey A. Ludrof, the Company’s President and Chief Executive Officer, to the Board; and accepted the resignation of Stephen A. Milne, the retired President and Chief Executive Officer of the Company.

On September 13, 2002, the Company filed a report on Form 8-K, reporting under Item 4 that the Company’s Audit Committee selected Ernst & Young, LLP to be the Company’s independent auditors for the fiscal year ending December 31, 2003. Malin, Bergquist & Company, LLP, the Company’s current independent auditors will continue on as the Company’s independent auditors for the fiscal year ending December 31, 2002. As mentioned in the Form 8-K, there were no disagreements with Malin, Bergquist & Company on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure during the Company’s two most recent fiscal years and throughout the date of the Form 8-K filing.

ITEM 11. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS

		Three Months Ended				Nine Months Ended
		September 30				September 30
		2002		2001		2002		2001
Class A weighted average common shares outstanding (stated value $.0292) Class B common shares outstanding (stated value $70)			63,686,149		63,977,939		63,789,404		64,011,614
	Conversion of Class B shares to Class A shares (one share of Class B For 2,400 shares of Class A)		7,320,000		7,368,000		7,320,000		7,368,000
Total weighted average shares outstanding			71,006,149		71,345,939		71,109,404		71,379,614
Net income		$	46,161,999	$	34,430,497	$	138,189,091	$	116,345,198
Net income per share		$	0.65	$	0.48	$	1.94	$	1.63

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Erie Indemnity Company
	(Registrant)
Date: November 6, 2002	/s/ Jeffrey A. Ludrof
	Jeffrey A. Ludrof, President & CEO
	/s/ Philip A. Garcia
	Philip A. Garcia, Executive Vice President & CFO

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CERTIFICATIONS

I, Jeffrey A. Ludrof, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Erie Indemnity Company;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 6, 2002
	/s/ Jeffrey A. Ludrof
	Jeffrey A. Ludrof, President & CEO

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CERTIFICATIONS

I, Philip A. Garcia, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Erie Indemnity Company;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a.	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c.	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a.	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 6, 2002
	/s/ Philip A. Garcia
	Philip A. Garcia, Executive Vice President & CFO

41 EX-3.II 3 j9708001exv3wii.txt AMENDMENT AND RESTATEMENT OF BYLAWS EXHIBIT 3(ii) AMENDMENT AND RESTATEMENT OF BYLAWS -- of -- ERIE INDEMNITY COMPANY September 9, 2002 ARTICLE I Offices Section 1.01. Principal Office. The principal office of Erie Indemnity Company, a Pennsylvania business corporation, shall be located in the City of Erie, Pennsylvania. ARTICLE II Meetings of Shareholders Section 2.01. Annual Meeting. The Annual Meeting of Shareholders shall be held each year, at a day and time fixed by the Board of Directors. At the Annual Meeting, the Shareholders then entitled to vote shall elect Directors and shall transact such other business as may properly be brought before the meeting. In elections for Directors, voting need not be by ballot, except upon demand made by a Shareholder entitled to vote at the election and before the voting begins. Section 2.02. Special Meetings. (a) Call of Special Meetings. Special meetings of the Shareholders may be called at any time by: (1) the Chairman of the Board, (2) the Chief Executive Officer, (3) the Board of Directors, (4) the Chairman of the Executive Committee, or (5) Shareholders entitled to cast at least twenty percent (20%) of the votes that all Shareholders are entitled to cast at the particular meeting. 1 (b) Fixing of Time for Meeting. At any time, upon written request of any person who has called a special meeting, it shall be the duty of the Secretary to fix the day and time of the meeting, which shall be held not more than 60 days after the receipt of the request. If the Secretary neglects or refuses to fix the day and time of the meeting, the person or persons calling the meeting may do so. Section 2.03. Place of Meeting. The place of meeting for any Annual or Special Meeting of Shareholders of the corporation shall be at the principal office of the corporation, unless another place is designated by the Board of Directors in the notice of the meeting. Section 2.04. Notice of Meeting. (a) General Rule. Written notice of every meeting of the Shareholders stating the place, day and time of the meeting shall be given by, or at the direction of, the Secretary to each Shareholder of record entitled to vote at the meeting at least: (1) ten days prior to the day named for a meeting called to consider a fundamental transaction under 15 Pa.C.S. Chapter 19; or (2) five days prior to the day named for the meeting in any other case. If the Secretary neglects or refuses to give notice of a meeting, the person or persons calling the meeting may do so. In the case of a Special Meeting of Shareholders, the notice shall specify the general nature of the business to be transacted. (b) Manner of Giving Notice. Whenever written notice is required to be given to any Shareholder, it may be given either personally or by sending a copy thereof by first class or express mail, postage prepaid, or by telegram (with messenger service specified), telex or TWX (with answerback received) or courier service, charges, prepaid, or by telecopier, to the address (or to the telex, TWX, telecopier or telephone number) of the Shareholder appearing on the books of the corporation. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched or, in the case of telecopier, when received. (c) Adjourned Shareholder Meetings. When a meeting of Shareholders is adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the Board fixes a new record date for the adjourned meeting. (d) Notice of Action by Shareholders on Bylaws. In the case of a meeting of Shareholders that has as one of its purposes action on the bylaws, written notice shall be given to each Shareholder that the purpose, or one of the purposes, of the meeting is to consider the 2 adoption, amendment or repeal of the bylaws. There shall be included in, or enclosed with, the notice a copy of the proposed amendment or a summary of the changes to be effected thereby. Section 2.05. Quorum. (a) General Rule. A meeting of Shareholders of the corporation duly called shall not be organized for the transaction of business unless a quorum is present. The presence, in person or by proxy, of Shareholders entitled to cast at least a majority of the votes that all Shareholders are entitled to cast on a particular matter to be acted upon at the meeting shall constitute a quorum for the purposes of consideration and action on the matter. Shares of the corporation owned, directly or indirectly, by it and controlled, directly or indirectly, by the Board of Directors of this corporation, as such, shall not be counted in determining the total number of outstanding shares for quorum purposes at any given time. (b) Withdrawal of a Quorum. The Shareholders present at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough Shareholders to leave less than a quorum. (c) Adjournment for Lack of Quorum. If a meeting cannot be organized because a quorum has not attended, those present may, except as provided in the Business Corporation Law, adjourn the meeting to such time and place as they may determine. (d) Adjournments Generally. Any meeting at which Directors are to be elected shall be adjourned only from day to day, or for such longer periods not exceeding 15 days each as the Shareholders present and entitled to vote shall direct, until the Directors have been elected. Any other regular or special meeting may be adjourned for such period as the Shareholders present and entitled to vote shall direct. Section 2.06. Informal Action by Shareholders. Any action required or permitted to be taken at a meeting of the Shareholders or of a class of Shareholders may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the Shareholders who would be entitled to vote at a meeting for such purpose shall be filed in writing with the Secretary of the corporation. Section 2.07. Shareholder Proposals. (a) Shareholder Proposals Relating to Candidates for Election as Directors. (1) A Shareholder, whether or not entitled to vote in the election of Directors, may propose to the Nominating Committee of the Board of Directors one or more persons who the Shareholder believes would be appropriate candidates for election by Shareholders as a Director at any meeting of Shareholders at which Directors are to be elected. Such proposal shall be made by notice in writing, delivered in person or by first class United States mail postage prepaid or by reputable overnight delivery service, to the Nominating Committee of the Board of Directors of the corporation to the attention of the Secretary of the corporation at the 3 principal office of the corporation, within the time limits specified herein and otherwise in accordance with this Section 2.07(a). (2) In the case of an annual meeting of Shareholders, any such written proposal by a Shareholder must be received by the Nominating Committee not less than 90 calendar days nor more than 120 calendar days before the first anniversary of the date on which the corporation first mailed its proxy statement to Shareholders for the annual meeting of Shareholders in the immediately preceding year; provided, however, that in the case of an annual meeting of Shareholders that is called for a date which is not within 30 calendar days before or after the first anniversary date of the annual meeting of Shareholders in the immediately preceding year, any such written proposal by a Shareholder must be received by the Nominating Committee within five business days after the earlier of the date the corporation shall have mailed notice to its Shareholders that an annual meeting of Shareholders will be held, issued a press release, filed a periodic report with the Securities and Exchange Commission (the "SEC"), or otherwise publicly disseminated notice that an annual meeting of Shareholders will be held. (3) In the case of a special meeting of Shareholders, any such written proposal by a Shareholder must be received by the Nominating Committee within five business days after the earlier of the date that the corporation shall have mailed notice to its Shareholders that a special meeting of Shareholders will be held, issued a press release, filed a periodic report with the SEC, or otherwise publicly disseminated notice that a special meeting of Shareholders will be held. (4) Such written proposal by a Shareholder shall set forth (A) the name and address of the Shareholder who has made the proposal, (B) the name, age, business address and, if known, residence address of each person so proposed, (C) the principal occupation or employment for the past five years of each person so proposed, (D) the number of shares of capital stock of the corporation beneficially owned within the meaning of SEC Rule 13d-1 by each person so proposed and the earliest date of acquisition of any such capital stock, (E) a description of any arrangement or understanding between each person so proposed and the proposing Shareholder with respect to such person's proposal, election as a Director, and actions to be proposed or taken by such person if elected as a Director, (F) the written consent of each person so proposed to serve as a Director if nominated and elected as a Director and (G) such other information regarding each such person as would be required under the proxy solicitation rules of the SEC if proxies were to be solicited for the election as a Director of each person so proposed. (5) If a written proposal by a Shareholder submitted to the Nominating Committee fails, in the reasonable judgment of the Nominating Committee, to contain the information specified in clause (4) hereof or is otherwise deficient, the Chairperson of the Nominating Committee shall, as promptly as is practicable under the circumstances, provide written notice to the Shareholder of such failure or deficiency in the written proposal by a Shareholder and such Shareholder shall have five business days from receipt of such notice to submit a revised proposal that corrects such failure or deficiency in all material respects. 4 (b) Shareholder Proposals Relating to Matters Other Than Candidates for Election as Directors. (1) A Shareholder of the corporation may bring a matter (other than a proposal to the Nominating Committee of a candidate for election as a Director which is covered by subsection (a) of this Section 2.07) before a meeting of Shareholders only if (A) such matter is a proper matter for Shareholder action and such Shareholder shall have provided notice in writing, delivered in person or by first class United States mail postage prepaid or by reputable overnight delivery service, to the Secretary of the corporation at the principal office of the corporation, within the time limits specified herein or (B) the Shareholder complies with the provisions of Rule 14a-8 under the Securities Exchange Act of 1934 (as amended) relating to inclusion of Shareholder proposals in the corporation's proxy statement. (2) In the case of an annual meeting of Shareholders, any such written notice of presentation of a matter by a Shareholder must be received by the Secretary of the corporation not less than 90 calendar days nor more than 120 days before the first anniversary of the date on which the corporation first mailed its proxy statement to Shareholders for the annual meeting of Shareholders in the immediately preceding year; provided, however, that in the case of an annual meeting of Shareholders that is called for a date which is not within 30 calendar days before or after the first anniversary date of the annual meeting of Shareholders in the immediately preceding year, any such written notice of presentation by a Shareholder of a matter must be received by the Secretary of the corporation within five business days after the earlier of the date the corporation shall have mailed notice to its Shareholders that an annual meeting of Shareholders will be held, issued a press release, filed a periodic report with the SEC, or otherwise publicly disseminated that an annual meeting of Shareholders will be held. (3) In the case of a special meeting of Shareholders, any such written notice of presentation of a matter by a Shareholder must be received by the Secretary of the corporation within five business days after the earlier of the date the corporation shall have mailed notice to its Shareholders that a special meeting of Shareholders will be held, issued a press release, filed a periodic report with the SEC, or otherwise publicly disseminated notice that a special meeting of Shareholders will be held. (4) Such written notice of presentation of a matter by a Shareholder shall set forth information regarding such matter equivalent to the information regarding such matter that would be required under the proxy solicitation rules of the SEC if proxies were solicited for Shareholder consideration of such matter at a meeting of Shareholders. (5) If a written notice of presentation of a matter submitted by a Shareholder to the Board of Directors fails, in the reasonable judgment of the Board of Directors, to contain the information specified in clause (iv) hereof or is otherwise deficient, the Chairperson of the Board of Directors shall, as promptly as is practicable under the circumstances, provide written notice to the Shareholder who submitted the written notice of presentation of a matter of such failure or deficiency in the written notice of presentation of a matter and such Shareholder shall 5 have five business days from receipt of such notice to submit a revised written notice of presentation of a matter that corrects such failure or deficiency in all material respects. (6) Only matters submitted in accordance with the foregoing provisions of this Section 2.07(b) shall be eligible for presentation at such meeting of Shareholders, and any matter not submitted to the Board of Directors in accordance with such provisions shall not be considered or acted upon at such meeting of Shareholders. Section 2.08. Waiver of Notice. Whenever any written notice is required to be given to any Shareholder, a waiver thereof in writing signed by the Shareholder entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Attendance of a person at any meeting shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Section 2.09. Voting and Other Action by Proxy. (a) General Rule. (1) Every Shareholder entitled to vote at a meeting of Shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person to act for the Shareholder by proxy. (2) The presence of, or vote or other action at a meeting of Shareholders, or the expression of consent or dissent to corporate action in writing, by a proxy of a Shareholder shall constitute the presence of, or vote or action by, or written consent or dissent of the Shareholder. (3) Where two or more proxies of a Shareholder are present, the corporation shall, unless otherwise expressly provided in the proxy, accept as the vote of all shares represented thereby the vote cast by a majority of them and, if a majority of the proxies cannot agree whether the shares represented shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among those persons. (b) Minimum Requirements. Every proxy shall be executed in writing by the Shareholder or by the duly authorized attorney-in-fact of the Shareholder and filed with the Secretary of the corporation. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until written notice thereof has been given to the Secretary of the corporation. An unrevoked proxy shall not be valid after three years from the date of its execution unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised written notice of the death or incapacity is given to the Secretary of the corporation. 6 (c) Expenses. Unless otherwise restricted in the articles, the corporation shall pay the reasonable expenses of solicitation of votes, proxies or consents of Shareholders by or on behalf of the Board of Directors or its nominees for election to the Board, including solicitation by professional proxy solicitors and otherwise. Section 2.10. Voting by Fiduciaries and Pledgees. Shares of the corporation standing in the name of a trustee or other fiduciary and shares held by an assignee for the benefit of creditors or by a receiver may be voted by the trustee, fiduciary, assignee or receiver. A shareholder whose shares are pledged shall be entitled to vote the shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee, but nothing in this section shall affect the validity of a proxy given to a pledgee or nominee. Section 2.11. Voting by Joint Holders of Shares. (a) General Rule. Where shares of the corporation are held jointly or as tenants in common by two or more persons, as fiduciaries or otherwise: (1) if only one or more of such persons is present in person or by proxy, all of the shares standing in the names of such persons shall be deemed to be represented for the purpose of determining a quorum and the corporation shall accept as the vote of all the shares the vote cast by a joint owner or a majority of them; and (2) if the persons are equally divided upon whether the shares held by them shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among the persons without prejudice to the rights of the joint owners or the beneficial owners thereof among themselves. (b) Exception. If there has been filed with the Secretary of the corporation a copy, certified by an attorney-at-law to be correct, of the relevant portions of the agreement under which the shares are held or the instrument by which the trust or estate was created or the order of court appointing them or of an order of court directing the voting of the shares, the persons specified as having such voting power in the document latest in date of operative effect so filed, and only those persons, shall be entitled to vote the shares but only in accordance therewith. Section 2.12. Voting by Corporations. (a) Voting by Corporate Shareholders. Any corporation that is a Shareholder of this corporation may vote by any of its officers or agents, or by proxy appointed by any officer or agent, unless some other person, by resolution of the Board of Directors of the other corporation or a provision of its articles or bylaws, a copy of which resolution or provision certified to be correct by one of its officers has been filed with the Secretary of this corporation, is appointed its general or special proxy in which case that person shall be entitled to vote the shares. 7 (b) Controlled Shares. Shares of this corporation owned, directly or indirectly, by it and controlled, directly or indirectly, by the Board of Directors of this corporation, as such, shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares for voting purposes at any given time. Section 2.13. Determination of Shareholders of Record. (a) Fixing Record Date. The Board of Directors may fix a time prior to the date of any meeting of Shareholders as a record date for the determination of the Shareholders entitled to notice, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall be not more than 90 days prior to the date of the meeting of Shareholders. Only Shareholders of record on the date fixed shall be so entitled notwithstanding any transfer of shares on the books of the corporation after any record date fixed as provided in this subsection. The Board of Directors may similarly fix a record date for the determination of Shareholders of record for any other purpose. When a determination of Shareholders of record has been made as provided in this section for purposes of a meeting, the determination shall apply to any adjournment thereof unless the Board fixes a new record date for the adjourned meeting. (b) Determination When a Record Date is not Fixed. If a record date is not fixed: (1) The record date for determining Shareholders entitled to notice of or to vote at a meeting of Shareholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day immediately preceding the day on which the meeting is held. (2) The record date for determining Shareholders entitled to express consent or dissent to corporate action in writing without a meeting, when prior action by the Board of Directors is not necessary, shall be the close of business on the day on which the first written consent or dissent is filed with the Secretary of the corporation. (3) The record date for determining Shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. Section 2.14. Voting Lists. (a) General Rule. The officer or agent having charge of the transfer books for shares of the corporation shall make a complete list of the Shareholders entitled to vote at any meeting of Shareholders, arranged in alphabetical order, with the address of and the number of shares held by each. The list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any Shareholder during the whole time of the meeting for the purposes thereof. (b) Effect of List. Failure to comply with the requirements of this section shall not affect the validity of any action taken at a meeting prior to a demand at the meeting by any 8 Shareholder entitled to vote thereat to examine the list. The original share register or transfer book, or a duplicate thereof kept in this Commonwealth, shall be prima facie evidence as to who are the Shareholders entitled to examine the list or share register or transfer book or to vote at any meeting of Shareholders. Section 2.15. Judges of Election. (a) Appointment. In advance of any meeting of Shareholders of the corporation, the Board of Directors may appoint Judges of Election, who need not be Shareholders, to act at the meeting or any adjournment thereof. If Judges of Election are not so appointed, the presiding officer of the meeting may, and on the request of any Shareholder shall, appoint Judges of Election at the meeting. The number of Judges shall be one or three. A person who is a candidate for office to be filled at the meeting shall not act as a Judge. (b) Vacancies. In case any person appointed as a Judge fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Board of Directors in advance of the convening of the meeting or at the meeting by the presiding officer thereof. (c) Duties. The Judges of Election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all Shareholders. The Judges of Election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three Judges of Election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. (d) Report. On request of the presiding officer of the meeting, or of any Shareholder, the Judges shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated therein. ARTICLE III Directors Section 3.01. General Powers. All powers vested by law in the corporation shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the Board of Directors. Section 3.02. Number, Tenure and Qualifications. The Board of Directors shall consist of not less than seven (7), nor more than sixteen (16), Directors (the exact number to be fixed from time to time by resolution of the Board), the majority of whom shall be citizens and 9 residents of the United States, each of whom shall be at least eighteen (18) years of age, elected at the Annual Meeting of Shareholders, to serve until the ensuing Annual Meeting and until a successor is elected and qualified or until his or her earlier death, resignation or removal. Not less than one-third of the Directors shall be persons who are not officers or employees of the corporation or of any entity controlling, controlled by, or under common control with the corporation and who are not beneficial owners of a controlling interest in the voting securities of the corporation. "Control," "controlling," "controlled by" and "under common control with" as used herein, shall be given those meanings prescribed by Section 1201 of Pennsylvania Act 178 of 1992 (40 P.S. Section 991.1401). No person who is seventy (70) years of age or older shall be elected a Director unless already a Director in office and qualifying under one or more of the following exceptions if such person is: (a) seventy-five (75) years of age or older on the date of the 1990 Annual Meeting; or (b) under seventy-five (75) years of age on the date of the 1990 Annual Meeting, provided however, that such person cannot continue to serve beyond the end of the term in which becoming seventy-five (75) years of age; or (c) seventy (70) years of age or older and serving as a Trustee of the H. O. Hirt Trust, so long as the Trust holds the majority Class B, or equivalent, voting shares of the corporation; or (d) seventy (70) years of age or older and serving, or previously served, in at least one of the two highest full-time executive positions of the corporation for a period of at least one (1) year. Section 3.03. Meetings. The Annual Meeting of the Board of Directors shall be held immediately after the Annual Meeting of Shareholders for the purpose of organization and the election of officers, and notice thereof shall be given in the same manner as hereinbefore provided in the case of the Annual Meeting of Shareholders. The Board of Directors shall provide, by resolution, for the holding of at least four (4) regular meetings including the annual meeting on specified days or dates without notice. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board or by the President, or by at least three (3) Directors. Written notice of every special meeting of Directors stating the place, day and time of the meeting shall be given not less than five (5) days before the meeting, either personally or by first class or express mail or by telegraph, telex or TWX (with answerback received) or courier services, charges prepaid, or by telecopier. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched or, in the case of telecopier, when received. Section 3.04. Waiver of Notice. Whenever any written notice is required to be given to any Director, a waiver thereof in writing signed by the Director entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Attendance of a person at any meeting shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Section 3.05. Quorum. A majority of the Directors in office of the corporation shall be necessary to constitute a quorum for the transaction of business; provided, however, that a 10 quorum shall consist of at least five (5) Directors if the Board consists of only seven (7) Directors. At least one Director who is not an officer or employee of the corporation or of any entity controlling, controlled by or under common control with the corporation and who is not a beneficial owner of a controlling interest in the voting securities of the corporation must be present for a quorum of Directors. The acts of a majority of the directors present and voting at a meeting at which a quorum is present shall be the acts of the Board of Directors. Section 3.06. Limiting Liability of Directors. A. A Director of the corporation shall stand in a fiduciary relation to the corporation and shall perform his duties as a Director, including his duties as a member of any committee of the Board of Directors upon which he may serve, in good faith, in a manner he reasonably believes to be in the best interest of the corporation, and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. In performing his duties, a Director shall be entitled to rely in good faith on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by any of the following: (1) One or more officers or employees of the corporation whom the Director reasonably believes to be reliable and competent in the matters present, or (2) Counsel, public accountants or other persons as to matters which the Director reasonably believes to be within the professional or expert competence of such persons, or (3) A committee of the Board of Directors upon which he does not serve, duly designated in accordance with law, as to matters within its designated authority, which committee the Director reasonably believes to merit confidence. A Director shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that would cause his reliance to be unwarranted. B. In discharging the duties of their respective positions, the Board of Directors, committees of the Board of Directors and individual Directors, may, in considering the best interest of the corporation, consider the effects of any action upon employees, upon suppliers and customers of the corporation and upon communities in which offices or other establishments of the corporation are located, and all other pertinent factors. The consideration of these factors shall not constitute a violation of subsection A of this section. C. Absent breach of fiduciary duty, lack of good faith or self-dealing, any action taken as a Director or any failure to take any action as a Director shall be presumed to be in the best interests of the corporation. D. Section 1715 of 15 Pa.C.S. shall not be applicable to the corporation. (Added 4/27/91.) 11 E. A Director of the corporation shall not be personally liable for monetary damages as such for any action taken, or any failure to take any action, unless: (1) The Director has breached or failed to perform his duties of his office under subsections A through C of this section, and (2) The breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. F. The provisions of subsection E of this section shall not apply to: (1) The responsibility or liability of a Director pursuant to any criminal statute, or (2) The liability of a Director for the payment of taxes pursuant to local, state or federal law. Section 3.07. Executive Committee. (a) General Rule. There shall be an Executive Committee which, except as provided in subsection (b), shall have and exercise all power and authority of the Board of Directors between meetings of the Board. The Executive Committee shall consist of not fewer than three (3) regular members including the Chief Executive Officer of the corporation who shall be Chairman of the Executive Committee, unless another member shall be designated by resolution of the Board. All of the regular members shall be designated by resolution of the Board. Not less than one-third of the committee must be Directors who are not officers or employees of the corporation or of any entity controlling, controlled by, or under common control with the corporation and who are not beneficial owners of a controlling interest in the voting securities of the corporation. The Executive Committee shall meet at any time and place designated and at least six hours oral or written notice given by or on behalf of the Chairman of the Executive Committee, and shall report promptly to the entire Board of Directors the substance of any action taken by the Executive Committee, which action may be changed by the Board without prejudice to intervening rights. (b) Limitation on Authority. The Executive Committee shall not have any power or authority as to the following: (1) The submission to Shareholders of any action requiring approval of Shareholders under the Business Corporation Law. (2) The creation or filling of vacancies in the Board of Directors. (3) The adoption, amendment or repeal of these bylaws. (4) The amendment or repeal of any resolution of the Board that by its terms is amendable or repealable only by the Board. 12 (5) Action on matters committed by a resolution of the Board of Directors to another committee of the Board. Section 3.08. Audit Committee and Audit. (a) Appointment. The Board of Directors shall appoint annually an Audit Committee which shall consist of not less than three (3) Directors who are not officers or employees of the corporation or of any entity controlling, controlled by, or under common control with the corporation and who are not beneficial owners of a controlling interest in the voting securities of the corporation. The Audit Committee shall determine the nature and extent of the audit of the records and of the verification and certification of the accounts of the corporation. The Audit Committee, in its capacity as a committee of the Board, shall be directly responsible for the appointment, compensation, and oversight of the work of any registered public accounting firm employed by the Company (including resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work, and each such registered public accounting firm shall report directly to the Audit Committee. (Amended 9/9/02) (b) Audit. The Audit Committee shall present the audit in full to the Board of Directors at a meeting of the Board which shall be held at least two weeks prior to the next Annual Meeting of Shareholders. The audit of the corporation need not be mailed to Shareholders, but it shall be available for inspection by any Shareholders at the office of the corporation during usual business hours and at the Annual Meeting. Section 3.09. Nominating Committee. The Board of Directors shall appoint annually a Nominating Committee which shall consist of not less than three (3) Directors who are not officers or employees of the corporation or of any entity controlling, controlled by, or under common control with the corporation and who are not beneficial owners of a controlling interest in the voting securities of the corporation. The Nominating Committee shall, prior to the Annual Meeting, determine and nominate candidates for the office of Directors of the corporation to be elected by the shareholders to serve terms as established by the bylaws and until their successors are appointed. Section 3.10. Executive Compensation Committee. The Board of Directors shall appoint annually an Executive Compensation committee which shall consist of not less than three (3) Directors who are not officers or employees of the corporation or of any entity controlling, controlled by, or under common control with the corporation and who are not beneficial owners of a controlling interest in the voting securities of the corporation. The Executive Compensation Committee shall be responsible for evaluating the performance of the principal officers of the corporation and recommending to the Board of Directors the selection and compensation of the principal officers. The Executive Compensation Committee shall also be responsible for the drafting of reports, disclosures, evaluations and other documents relating to executive compensation for filing with State and Federal regulatory authorities. 13 Section 3.11. Alternate Committee Members. The Board of Directors may designate one or more Directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee or for the purpose of any written action by the committee. In the absence or disqualification of a member and alternate member or members of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another Director to act at the meeting in the place of the absent or disqualified member. Section 3.12. Other Committees. The Board of Directors may designate from time to time any other committees as the Board may deem necessary and appropriate. The Board may set the number of members of any such committee and may appoint such members. Not less than one-third of any committee created hereunder must be Directors who are not officers or employees of the corporation or of any entity controlling, controlled by, or under common control with the corporation and who are not beneficial owners of a controlling interest in the voting securities of the corporation. Section 3.13. Informal Action by Directors. Any action required or permitted to be taken at a meeting of the Directors may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the Directors in office is filed with the Secretary of the corporation. Any action without a meeting of the Board shall be limited to those situations where time is of the essence and not in lieu of a regularly scheduled meeting. Section 3.14. Vacancies. Vacancies in the Board of Directors, including vacancies resulting from an increase in the number of Directors, may be filled by a majority vote of the remaining members of the Board though less than a quorum, or by a sole remaining Director, and each person so selected shall be a director to serve for the balance of the unexpired term, and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. Section 3.15. Removal of Directors. (a) Removal by the Shareholders. The entire Board of Directors, or any class of the Board, or any individual Director may be removed from office without assigning any cause by the vote of Shareholders, or of the holders of a class or series of shares, entitled to elect Directors, or the class of Directors. In case the Board or a class of the Board or any one or more Directors are so removed, new Directors may be elected at the same meeting. The Board of Directors may be removed at any time with or without cause by the unanimous vote or consent of Shareholders entitled to vote thereon. (b) Removal by the Board. The Board of Directors may declare vacant the office of a Director who has been judicially declared of unsound mind or who has been convicted of an offense punishable by imprisonment for a term of more than one year or if, within 60 days after notice of his or her selection, the Director does not accept the office either in writing or by attending a meeting of the Board of Directors. 14 Section 3.16. Compensation. The Board of Directors has the responsibility and authority to determine the compensation of directors and officers elected by the Board of Directors in connection with their service to the corporation and a Director may be a salaried officer of the corporation, who shall not receive any additional compensation as a Director. The acceptance of gifts of significant value from persons associated with the corporation may impair the ability of the Board of Directors to establish appropriate levels of compensation and incentives for directors and officers elected by the Board of Directors that the Board considers appropriate. For these reasons, a director or an officer elected by the Board of Directors may not accept, or arrange for any member of his or her immediate family to receive, gifts or gratuities of other than nominal or insignificant value from any of the following persons or members of their immediate families: a director or officer elected by the Board of Directors, an employee of the corporation, or any person elected by the Board of Directors who is known to be a beneficial owner of more than 5 percent of the outstanding capital stock of any class of the corporation. If a gift or gratuity of more than nominal or insignificant value is received from any such persons, the gift or gratuity must be returned and the Board of Directors notified. Gifts or gratuities from any person to any member of the immediate family of such person are not prohibited by this bylaw. ARTICLE IV Officers Section 4.01. Number. The officers of the corporation shall be a Chairman of the Board, a President, a Secretary, a Treasurer, and as many Executive Vice Presidents, and Senior Vice Presidents as from time to time may be determined by the Board of Directors. The President, Secretary and Treasurer may not be the same person. The Treasurer must be a natural person. There shall also be as many Vice Presidents and Assistant Officers as from time to time may be determined by the Chief Executive Officer. Other officers, including the office of Vice Chairman of the Board, as from time to time may be determined may be added by resolution of the Board of Directors. Section 4.02. Election, Appointment and Term of Office. The Board of Directors shall elect annually at their first meeting following the Annual Meeting of Shareholders, the following officers to serve until the next Annual Meeting of Directors and until their successors are duly elected and qualified or until their earlier death, resignation or removal: (1) the three highest paid officers of the corporation, (2) the Chairman of the Board and the President if they are not among the three highest paid officers, and (3) such other officers as the Board of Directors from time to time may designate by resolution. 15 All officers not required to be elected by the Board or not designated by the Board to be elected by the Board shall be appointed by the Chief Executive Officer to serve at his or her pleasure. Section 4.03. Standard of Care. An officer of the corporation shall perform his or her duties as an officer in good faith, in a manner he or she reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. A person who so performs his or her duties shall not be liable by reason of having been an officer of this corporation. Section 4.04. Duties and Responsibilities. Officers of the corporation shall have the duties and responsibilities assigned to them in their respective position descriptions approved by the Chief Executive Officer in addition to the following duties and responsibilities of the various offices: (a) Chairman of the Board. The Chairman of the Board shall be the Chief Executive Officer of the corporation unless otherwise provided by resolution of the Board of Directors and shall have general supervision of the business, affairs and property of the corporation and over its several officers. The Chairman of the Board shall preside at all meetings of the Shareholders and of the Board of Directors, and shall perform such other duties as from time to time may be assigned by the Board of Directors. The Chairman of the Board shall be ex-officio member of all committees, if any, but shall have no vote on the Audit Committee and the Executive Compensation Committee. (b) President. The President, in the absence of the Chairman of the Board, or a Vice Chairman of the Board, if any, shall preside at all meetings of the Shareholders and the Board of Directors. The President shall have and exercise all the powers and authority of the Chairman of the Board when the Chairman and a Vice Chairman, if any, are absent or unable to act during a vacancy in the office of the Chairman of the Board. The President shall also have such other duties and responsibilities as from time to time may be assigned by the Chief Executive Officer or the Board of Directors. (c) Secretary. The Secretary, or an Assistant Secretary, shall be present at all meetings of the Board of Directors and of the Shareholders, and the Secretary shall keep a record of all proceedings of the Board and its committees and the Shareholders. The Secretary shall notify the Shareholders and members of the Board of all regular and special meetings, have charge of the corporate seal and of the books and records of the corporation pertaining to actions of the Board or the Shareholders, and shall have such other duties and authority as prescribed by the Pennsylvania Business Corporation Law and any other applicable law. The Secretary shall also perform such duties as are customary and incident to the office of the Secretary and shall have such other duties as from time to time may be assigned by the Chief Executive Officer or the Board of Directors. (d) Treasurer. The Treasurer shall have the care and custody of all funds and securities of the corporation, depositing the same in the name of the corporation with such bank 16 or banks as the Board of Directors may select. The Treasurer shall also perform such duties as are customary and incident to the office of Treasurer and shall have such other duties as from time to time may be assigned by the Chief Executive Officer or the Board of Directors. (e) Executive Vice Presidents. An Executive Vice President shall, in the absence of the President, perform all the duties of the President. If there is more than one Executive Vice President, the Chief Executive Officer may designate one of them to be senior. Executive Vice Presidents shall also have such other duties and responsibilities as from time to time may be assigned by the Chief Executive Officer or the Board of Directors. (f) Senior Vice Presidents, Vice Presidents, Assistant Vice Presidents and Other Officers. Senior Vice Presidents, Vice Presidents and Assistant Vice Presidents and other officers shall perform such duties as from time to time may be assigned by the Chief Executive Officer. The duties and responsibilities of the Vice Chairman of the Board shall be assigned by resolution of the Board of Directors. Section 4.05. Compensation. The compensation of officers elected by the Board of Directors shall be fixed by the Board of Directors subject to change from time to time as the Board may determine; and the compensation of officers, assistant officers, and agents appointed by the Chief Executive Officer shall be fixed by the Chief Executive Officer subject to change from time to time as the Chief Executive Officer shall determine. ARTICLE V Share Certificates and Their Transfer Section 5.01. Share Certificates. (a) Form. Certificates for shares of the corporation shall be in such form as approved by the Board of Directors, and shall state that the corporation is incorporated under the laws of Pennsylvania, the name of the person to whom issued, and the number and class of shares and the designation of the series (if any) that the certificate represents. The share register or transfer books and blank share certificates shall be kept by the Secretary or by any transfer agent or registrar designated by the Board of Directors for that purpose. (b) Issuance. The share certificates of the corporation shall be numbered, dated, and registered in the share register on transfer books of the corporation as they are issued. They shall be signed by the Chairman of the Board or the President and by the Secretary or the Treasurer, and shall bear the corporate seal, which may be a facsimile, engraved or printed; but where such certificate is signed by a transfer agent or a registrar the signature of any corporate officer upon such certificate may be a facsimile, engraved or printed. In case any officer who has signed, or whose facsimile signature has been placed upon, any share certificate shall have ceased to be such officer because of death, resignation or otherwise, before the certificate is issued, it may be issued with the same effect as if the officer had not ceased to be such at the date of its issue. The 17 provisions of this Section 5.01 shall be subject to any inconsistent or contrary agreement at the time between the corporation and any transfer agent or registrar. Section 5.02. Transfer of Shares. Transfer of shares of the corporation shall be made on the books of the corporation by the registered holder thereof or by his attorney thereunto authorized by a power of attorney, duly executed and filed with the Secretary of the corporation and upon surrender for cancellation of the certificate or certificates for such shares. No transfer shall be made inconsistent with the provisions of the Uniform Commercial Code, 13 Pa.C.S.Sections8101 et. seq., and its amendments and supplements. Section 5.03. Record Holder of Shares. The corporation shall be entitled to treat the person in whose name any share or shares of the corporation stand on the books of the corporation as the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person. Section 5.04. Lost, Destroyed or Mutilated Certificates. The holder of any shares of the corporation shall immediately notify the corporation of any loss, destruction or mutilation of the certificate therefore, and the Secretary may, in his discretion, cause a new certificate or certificates to be issued to such holder, in case of mutilation of the certificate, upon the surrender of the mutilated certificate or, in case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction and, if the Secretary shall so determine, the deposit of a bond in such form and in such sum, and with such surety or sureties, as he may direct. ARTICLE VI Corporate Actions Section 6.01. Voting Securities of Other Corporations. Securities held by the corporation in any other corporation shall be voted in person or by proxy by the Chief Executive Officer or any other person duly authorized by the Chief Executive Officer. ARTICLE VII Indemnification of Directors, Officers & Employees Section 7.01. (The provisions of this Section were adopted by the Shareholders on April 28, 1987.) The Company shall indemnify any Director, officer or employee, who was or is a party to, or is threatened to be made a party to or who is called as a witness in connection with any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the corporation by reason of the fact that he is or was a Director, officer or employee of the corporation, or is or was serving at the request of the corporation as a Director, officer or employee of another corporation, partnership, joint 18 venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding unless the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, contract, vote of Shareholders, vote of disinterested Directors or pursuant to the direction, howsoever embodied, of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action on another capacity while holding such office. It is the policy of the corporation that indemnification of, and advancement of expenses to, Directors, officers and employees of the corporation shall be made to the fullest extent permitted by law. To this end, the provisions of this Article VII shall be deemed to have been amended for the benefit of Directors, officers and employees of the corporation effective immediately upon any modification of the Business Corporation Law of the Commonwealth of Pennsylvania (the "BCL") or the Directors' Liability Act of the Commonwealth of Pennsylvania (the "DLA") which expands or enlarges the power or obligation of corporations organized under the BCL or subject to the DLA to indemnify, or advance expenses to, Directors, officers and employees of the corporation. The corporation shall pay expenses incurred by an officer, Director or other employee, in defending a civil or criminal action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a Director, officer or employee and shall inure to the benefit of the heirs, executors and administrators of such person. The corporation shall have the authority to create a fund of any nature, which may, but need not be, under the control of a trustee, or otherwise secure or insure in any manner, its indemnification obligations, whether arising under these Bylaws or otherwise. This authority shall include, without limitation, the authority to (i) deposit funds in trust or in escrow, (ii) establish any form of self-insurance, (iii) secure its indemnity obligation by grant of a security interest, mortgage or other lien on the assets of the corporation, or (iv) establish a letter of credit, guaranty or surety arrangement for the benefit of such persons in connection with the anticipated indemnification or advancement of expenses contemplated by this Article VII. The provision of this Article VII shall not be deemed to preclude the indemnification of, or advancement of expenses to, any person who is not specified in Section 7.01 of this Article VII, but whom the corporation has the power or obligation to indemnify, or to advance expenses for, under the provisions of the BCL or the DLA or otherwise. The authority granted by this section shall be exercised by the Board of Directors of the corporation. 19 Section 7.02. Proceedings Initiated by Indemnified Persons. Notwithstanding any other provision of this Article VII, the corporation shall not indemnify any person under this Article VII for any liability incurred in an action, suit or proceeding initiated (which shall not be deemed to include counterclaims or affirmative defenses) or participated in as an intervenor or amicus curiae by the person seeking indemnification unless such initiation of or participation in the action, suit or proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the Directors in office. This section does not apply to successfully prosecuting or defending the rights of any person to indemnification granted by or pursuant to this Article VII. ARTICLE VIII Amendments Section 8.01. Amendments. These bylaws may be altered, amended or repealed and new bylaws adopted, either (i) by vote of the Shareholders at any duly organized annual or special meeting of Shareholders, or (ii) with respect to those matters that are not by statute committed expressly to the Shareholders and regardless of whether the Shareholders have previously adopted or approved the bylaw being amended or repealed, by vote of a majority of the Board of Directors of the corporation in office at any regular or special meeting of Directors. Any change in these bylaws shall take effect when adopted unless otherwise provided in the resolution affecting the change. I hereby certify that the foregoing Bylaws were adopted at the 46th Annual Meeting of Shareholders of the ERIE INDEMNITY COMPANY held on the 27th day of April 1971, and were amended at the following meetings: the 52nd Annual Meeting of Shareholders, April 26, 1977; the Special Shareholders Meeting, August 21, 1979; the 233rd Board of Directors Meeting, November 13, 1979; the 242nd Board of Directors Meeting, March 4, 1981; the 248th Board of Directors Meeting, August 24, 1982; the 62nd Annual Meeting of Shareholders, April 28, 1987; the 280th Board of Directors Meeting, April 24, 1990; by unanimous consent resolution adopted by the Board of Directors on April 27, 1991; the 288th Board of Directors Meeting, December 19, 1991; the 297th Board of Directors Meeting, September 27, 1993; the 299th Board of Directors Meeting, March 1, 1994; the 313th Board of Directors Meeting, September 17, 1996; the 320th Board of Directors Meeting, March 11, 1998; the 325th Board of Directors Meeting, March 9, 1999; the 327th Board of Directors Meeting, June 15, 1999; the Special Board of Directors Meeting, August 16, 1999; and the 343rd Board of Directors Meeting, September 9, 2002. /s/ J.R. Van Gorder -------------------------------- J. R. Van Gorder, Secretary September 9, 2002 20 EX-10.1 4 j9708001exv10w1.txt SERVICE AGREEMENT EXHIBIT 10.1 - SERVICE AGREEMENT Amended And Restated This SERVICE AGREEMENT made and entered into by and between ERIE INSURANCE COMPANY, a Pennsylvania stock insurance company (hereinafter referred to as the "Company") and ERIE INDEMNITY COMPANY, a Pennsylvania stock corporation (hereinafter referred to as "Erie Indemnity"), both of which are headquartered in Erie, Pennsylvania. WITNESSETH: WHEREAS, the Company is a wholly owned subsidiary of Erie Indemnity; and WHEREAS, Erie Indemnity has served as the attorney-in-fact for the Erie Insurance Exchange, a Pennsylvania reciprocal inter-insurance exchange (hereinafter the "Exchange"), since the Exchange's inception in April, 1925; and WHEREAS, Erie Indemnity provides the Exchange with all management services pursuant to a Subscriber's Agreement with power of attorney executed by each Subscriber at the Exchange, and it is intended hereby that Erie Indemnity shall provide the same management services to the Company in like kind and quality as Erie Indemnity provides to the Exchange; and WHEREAS, the parties intend to amend and restate the Service Agreement in effect between them since 1989. NOW THEREFORE, in consideration of the mutual covenants contained herein and intending to be legally bound thereby, the parties agree as follows: Article I: MANAGEMENT SERVICES A. Erie Indemnity will provide all necessary and appropriate management services to the Company, including but not limited to the following services: issuing, changing, nonrenewing or cancelling policies; obtaining reinsurance; collecting premiums, receiving notices and proofs of loss; appearing for, compromising, prosecuting, defending, adjusting and settling losses and claims under the policies; accepting service of process on behalf of the Company; and generally managing and conducting the business and affairs of the Company. B. All the underwriting, claims, and investment services provided to the Company will be based upon the written criteria, standards and guidelines of the Company. The Company will have the ultimate and final authority over decisions and policies, including but not be limited to the acceptance, rejection or canceling of risks, the payment or non-payment of claims, and the purchase and sale of securities. C. Notwithstanding any other provisions of this Agreement, it is understood that the business and affairs of the Company shall be managed by its Board of Directors, and, to -1- the extent delegated by such board, by its appropriately designated officers. The Board of Directors and officers of Erie Indemnity shall not have any management prerogatives with respect to the business affairs and operations of the Company. Article II: MANAGEMENT FEE In consideration of Erie Indemnity's management services, the Company will pay Erie Indemnity a management fee, which fee shall be on a cost basis. The Company will pay such management fee on a monthly basis no later than thirty days after the end of the month in which the costs were incurred. Article III: REIMBURSEMENT In addition to paying Erie Indemnity the management fee in ARTICLE II, the Company will also fully reimburse Erie Indemnity on an actual cost basis for all investment expenses incurred by Erie Indemnity on behalf of the Company. The allocation method for shared expenses (facilities, equipment, personnel, computers, etc.) shall be consistent with the provisions of New York Regulation 30 (11 NYCRR 105,109). The Company will make such reimbursement to Erie Indemnity on a monthly basis no later than 30 days after Erie Indemnity notifies the Company of such incurred investment expenses. Article IV: RECORDS AND RIGHT TO AUDIT Erie Indemnity shall keep sufficient records for the express purpose of recording therein the nature and details of the management services and financial transactions performed for the Company pursuant to this Agreement. All books and records kept by Erie Indemnity that pertain to the management services and investment services performed by Erie Indemnity shall be owned by Erie Indemnity, but such books and records shall be maintained in a fiduciary capacity for the Company. The Company shall have the right to examine and audit, at the offices of Erie Indemnity at all reasonable times, all books and records of Erie Indemnity relating to any business which is the subject of this Agreement. This right shall survive termination of this Agreement and shall continue so long as either party has any rights or obligations under this Agreement. Article V: ARBITRATION As a condition precedent to any right of action hereunder, in the event of any difference of opinion hereafter arising with respect to this Agreement, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration before a panel of three arbitrators, all of whom shall be active or retired disinterested officers of property and casualty insurance companies. One arbitrator shall be chosen by Erie Indemnity, one shall be chosen by the Company, and the third, an umpire, to be chosen by the other two arbitrators before they enter upon arbitration. In the event of any party refusing or neglecting to appoint an arbitrator within 90 days after the other party requests it to do so, or if the arbitrators fail to appoint an umpire within 60 days after they have accepted their appointments, such arbitrator or umpire, as the case may be, shall, upon the application of any party, be appointed by The American -2- Arbitration Association and the arbitrators and the umpire shall thereupon proceed. The arbitrators shall consider this Agreement as an honorable engagement rather than merely as a legal obligation and they are relieved of all judicial formalities and may abstain from following the strict rules of law. The decision of the majority of the arbitrators shall be final and binding on all parties. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear the other expenses of the umpire and of the arbitration. Any such arbitration shall take place in Erie, Pennsylvania, or such other place as may be mutually agreed. Article VI: EFFECTIVE DATE AND TERMINATION This Agreement shall be effective as of January 1, 1992. The Agreement shall continue in full effect until it is amended or terminated by either party. Termination will take place 30 days after either party delivers a written notice to terminate to the other party. Article VII: MISCELLANEOUS This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. If any term, provision, covenant or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the provisions shall continue in full force and effect and shall in no way be affected, impaired or invalidated. IN WITNESS WHEREOF the parties hereto have amended the Service Agreement between the parties in effect since January 1, 1989 and caused this Service Agreement to supersede it. ERIE INSURANCE COMPANY By /s/ J.M. Petersen ----------------------------------------------------- J.M. Petersen President, Treasurer & Chief Financial Officer By /s/ T.M. Sider ----------------------------------------------------- T.M. Sider Senior Vice President & Controller -3- ERIE INDEMNITY COMPANY By /s/ T.B. Hagen --------------------------------------------------------------------- T.B. Hagen Chairman of the Board & Chief Executive Officer By /s/ J.R. Van Gorder --------------------------------------------------------------------- J.R. Van Gorder Executive Vice President, Secretary & General Counsel -4- EX-10.2 5 j9708001exv10w2.txt SUPPLEMENTAL RETIREMENT PLAN EXHIBIT 10.2 SUPPLEMENTAL RETIREMENT PLAN FOR CERTAIN MEMBERS OF THE ERIE INSURANCE GROUP RETIREMENT PLAN FOR EMPLOYEES (Amended and Restated as of December 31, 1995) The following are the provisions of the SUPPLEMENTAL RETIREMENT PLAN FOR CERTAIN MEMBERS OF THE ERIE INSURANCE GROUP RETIREMENT PLAN FOR EMPLOYEES (hereinafter referred to as the "Supplemental Plan") which was established effective as of December 31, 1986 by the ERIE INDEMNITY COMPANY (hereinafter referred to as the "Company") to provide for the payment of certain pension and pension-related benefits to certain employees of the Company and affiliated companies who are Participants under the ERIE INSURANCE GROUP RETIREMENT PLAN FOR EMPLOYEES (hereinafter referred to as the "Basic Plan"). The Company intends and desires by its adoption of the original Supplemental Plan and by its adoption of the amendments reflected herein, to recognize the value to the Company and affiliated companies of the past and present services of employees covered by the Supplemental Plan, to encourage their continued service to the Company and affiliated companies and to be able to attract and retain superior management personnel by making more adequate provision for their future retirement security than the Basic Plan provides. This document is intended to constitute a complete restatement of the Supplemental Plan and is effective December 31. 1995. SECTION 1 - INCORPORATION OF THE QUALIFIED PLAN 1.1 The Basic Plan with any amendments thereto in effect as of December 31, 1995, shall be attached hereto as Exhibit I and is hereby incorporated by reference into and shall be a part of this Supplemental Plan as fully as if set forth herein verbatim. Any amendment 1 made to the Basic Plan shall also be incorporated by reference into, and form a part of this Supplemental Plan effective as of the effective date of such amendment. The Basic Plan, whenever referred to in this Supplemental Plan, shall mean the Basic Plan existing as of the date the relevant determination is being made under this Supplemental Plan. To the extent the provisions of the Basic Plan, as applicable to the Supplemental Plan Benefits of Participants hereunder and all persons claiming by or through such Participants, are inconsistent with the provisions of this Supplemental Plan, the provisions of this Supplemental Plan shall govern. Notwithstanding any provision of this Supplemental Plan to the contrary, in no event shall the Supplemental Plan Benefits accrued and payable hereunder be paid from the Trust Fund under the Basic Plan or have any effect whatsoever upon the Basic Plan or the payment of benefits from the Trust Fund under the Basic Plan. Words and phrases with initial capital letters which are used in the Basic Plan and in this Supplemental Plan shall have the meanings assigned to them under the provisions of the Basic Plan unless otherwise specified herein or as otherwise qualified by the context in which the term is used in this Supplemental Plan. 1.2 Without limiting the generality of Section 1.1, the following terms shall be given the meanings described in this Section 1.2: (a) "Actuarial Equivalent" shall mean a benefit of equivalent value to the benefit otherwise described as determined on the basis of the actuarial assumptions specified under the Basic Plan as of the date of determination. (b) "Administrator" shall mean the Pension Administrator named by the Board of Directors of the Company under the Basic Plan. 2 (c) "Basic Plan" shall mean the Erie Insurance Group Retirement Plan for Employees, as in effect as of the date the relevant determination is being made under this Supplemental Plan. (d) "Executive Service" shall mean employment with an Employer as both a Covered Employee and a Senior Vice President or higher-ranking executive. (e) "Participant" shall mean a Covered Employee who has become a Participant in accordance with Section 3. Participant shall also include a former Covered Employee who had met the foregoing criteria as an Employee and who is, at the time of determination, receiving a benefit (or entitled to receive a benefit) payable from the Company pursuant to the terms of this Supplemental Plan. (f) "Restoration Benefit" shall mean the benefit provided under Section 42. (g) "Supplemental Plan" shall mean this Supplemental Retirement Plan for Certain Members of the Erie Insurance Group Retirement Plan for Employees, including any amendments hereto. (h) "Supplemental Plan Benefits" shall mean, to the extend applicable to any given Participant, the Restoration Benefit and the Supplemental Retirement Income Benefit. (i) "Supplemental Retirement Income Benefit" shall mean the benefit provided under Section 4 I. (j) "Years of Executive Service" shall mean each consecutive twelve-month period during which a Covered Employee has been employed in Executive Service, including leaves of absence. 3 1.3 Any terms used in this Supplemental Plan in the masculine shall be read and construed in the feminine where they would so apply, and any terms used in the singular shall be read and construed in the plural if so applicable. SECTION 2 - ADMINISTRATION 2.1 The Administrator shall be charged with the administration of the Supplemental Plan. The Administrator shall have all such powers as may be necessary to discharge its duties relative to the administration of the Supplemental Plan, including by way of illustration and not limitation, discretionary authority to interpret and construe the Supplemental Plan, to determine and decide all questions of fact, and all disputes arising under the Supplemental Plan including, but not limited to, the eligibility of any employee to participate hereunder, the validity of any election as may be necessary or appropriate hereunder and the right of any Participant, surviving spouse or Beneficiary to benefits payable hereunder. The Administrator shall have all power necessary to adopt, alter and repeal such administrative rules, regulations and practices governing the operation of the Supplemental Plan as it, in its sole discretion, may from time to time deem advisable. The Administrator shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Supplemental Plan unless attributable to willful misconduct. The Administrator shall be entitled to conclusively rely upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Company with respect to the Supplemental Plan. Any individual serving as Administrator shall not participate in any action or determination regarding solely his own benefits payable hereunder. Except as provided in Section 2.3, decisions of the Administrator made in good faith shall be final, conclusive and binding upon all parties. 4 2.2 Whenever the Administrator denies, in whole or in part, a claim for benefits filed by any person (hereinafter referred to as a "Claimant"), the Administrator shall transmit a written notice setting forth (i) the specific reasons for the denial of the claim, (ii) references to the specific provisions of the Supplemental Plan on which the denial is based, (iii) a description of any additional needed material or information and why such material or information is necessary, and (iv) further steps which the Claimant can take in order to have his claim reviewed (including a statement that the Claimant or his duly authorized representative may review the Supplemental Plan document and submit issues and comments regarding the claim to the Administrator). In addition, the written notice shall contain the date on which the notice was sent and a statement advising the Claimant that within ninety (90) days of the date on which such notice is received, he may request a review of the Administrator's decision. 2.3 Within ninety (90) days of the date on which the notice of denial of claim is received by the Claimant, the Claimant or his authorized representative may request that the claim denial be reviewed by filing with the Administrator a written request therefor, which request shall contain the following information: (a) the date on which the notice of denial of claim was received by the Claimant; (b) the date on which the Claimant's request was filed with the Administrator; provided, however, that the date on which the Claimant's request for review was fact filed with the Administrator shall control in the event that the date of the actual filing is later than the date stated by the Claimant pursuant to this clause b); 5 (c) the specific portions of the denial of his claim which the Claimant requests the Administrator to review; (d) a statement by the Claimant setting forth the basis upon which he believes the Administrator should reverse its previous denial of his claim for benefits and accept his claim as made; (e) whether the Claimant desires a hearing on the claim; and (f) any written material (included as exhibits) which the Claimant desires the Administrator to examine in its consideration of his position as stated pursuant to clause (d). If the Claimant has requested a hearing on the claim, such hearing shall be held within thirty (30) days after the date determined pursuant to clause (b) hereof. Within sixty (60) days of the date determined pursuant to clause (b) hereof (or, if special circumstances or the request for a hearing require an extension of time, within ninety (90) days of such date), the Administrator shall conduct a full and fair review of the decision denying the Claimant's claim for benefits and shall deliver its decision to the Claimant in writing. Such written decision shall set forth the specific reasons for the decision, including references to the specific provisions of this Supplemental Plan which were relied upon. The decision will be final and binding on all persons concerned. SECTION 3 - ELIGIBILITY AND PARTICIPATION 3.1 A Covered Employee may participate in the Supplemental Plan only as provided under Sections 3.2 and 3.3 and only if such Covered Employee may be considered management or highly compensated. 3.2 Any Covered Employee who was considered an eligible Employee under the Supplemental Plan as of December 30, 1995 and any former Covered Employee who is 6 receiving a benefit (or entitled to receive a benefit) from the Supplemental Plan shall be considered Participants as of December 31, 1995. Effective on and after December 31, 1995, any Covered Employee who enters Executive Service shall become a Participant in this Supplemental Plan (if not already a Participant under Section 3.3) as of the January 1 of the calendar year next following the calendar year in which the Employee enters Executive Service. A Covered Employee who satisfies the foregoing criteria of this Section 3.2 shall participate in the Supplemental Retirement Income Benefit provisions of this Supplemental Plan. The Administrator shall be responsible for identifying those Covered Employees who satisfy the criteria of this Section 3.2 and the time at which such criteria are satisfied. Notwithstanding the foregoing, a Participant (or his surviving spouse or Beneficiary) may become eligible for a Supplemental Retirement Income Benefit only in the event that: (a) such Participant is vested under the Basic Plan: (b) such Participant (or his surviving spouse or Beneficiary) is entitled to receive a benefit under the Basic Plan. (c) prior to his termination of employment with all Employers. such Participant has become vested in the Supplemental Retirement Income Benefit pursuant to the following schedule:

Years of Executive Service Vested Percentage -------------------------- ----------------- Less than 1 0% 1 but less than 2 20% 2 but less than 3 40% 3 but less than 4 60% 4 but less than 5 80% 5 or more 100%

provided, however, that in the event a Participant has satisfied, prior to January 1, 7 1996, all criteria for a normal retirement pension, early retirement pension or disability retirement pension under the terms of the Basic Plan, such Participant shall be treated as being 100 % vested under the above schedule; and (d) such Participant's termination of employment with all Employers is either: (i) also a termination from Executive Service; or (ii) a termination occurring within twelve months after the Participant transfers from, or otherwise leaves, Executive Service. 3.3 Effective for periods on and after January 1, 1996, any Covered Employee whose benefit under the Basic Plan is limited on account of restrictions imposed for any year by Sections 401(a)(17) and/or 415 of the Code shall become a Participant in this Supplemental Plan (if not already a Participant under Section 3.2) as of the later of the December 31 of the Plan Year in which his Basic Plan benefit is first so limited or January 1, 1996. Notwithstanding his status as a Participant or non-Participant under Section 3.2, a Covered Employee who satisfies the foregoing criteria of this Section 3.3 shall participate in the Restoration Benefit provisions of this Supplemental Plan. The Administrator shall be responsible for identifying those Covered Employees whose Basic Plan benefits are limited in accordance with the foregoing, the time at which such limitations may first apply to said Employees and the extent to which such limitations do apply. Notwithstanding the foregoing. a Participant (or his surviving spouse or Beneficiary) may become eligible for a Restoration Benefit only in the event that: (a) such Participant (or his surviving spouse or Beneficiary) is entitled to receive a benefit under the Basic Plan; 8 (b) payment of such Basic Plan benefit is restricted by the application of Section 401 (a)(l7) and/or Section 415 of the Code; and (c) such individual is not entitled to a Supplemental Retirement Income Benefit hereunder. SECTION 4 - AMOUNT OF SUPPLEMENTAL PLAN BENEFITS 4.1 The monthly Supplemental Retirement Income Benefit determined with respect to a Participant who satisfies the provisions of Section 3.2 hereof, and which is paid in accordance with Section 5, shall be the Actuarial Equivalent of the product of (i) the excess, if any, of (a) over (b) below, and (ii) the percentage determined under (c) below, where: (a) equals the monthly benefit which would have been payable to such Participant, or on his behalf, to his surviving spouse or other Beneficiary or Beneficiaries under the Basic Plan assuming for this purpose that the following modifications were a part of the Basic Plan: (i) "Compensation" shall be as defined in the Basic Plan provided that (A) all otherwise current compensation which is deferred at the Participant's election under any qualified or nonqualified deferred compensation plan or annuity arrangement shall be includable in "Compensation"; and (B) "Compensation" (as defined in accordance with the foregoing) shall be determined without regard to the annual limitation on compensation set forth in action 401(a)( 17) of the Code; (ii) "Final Average Earnings" shall be equal to 1/24th of the aggregate compensation received by the Participant during the twenty-four 9 consecutive calendar months as a Covered Employee which produces the greatest aggregate Compensation out of the one hundred twenty calendar month period ending on the earlier of the date on which the Participant retires or terminates employment with all Employers or the date on which the Participant is no longer considered a Covered Employee; (iii) the monthly benefit under the Basic Plan shall be equal to 60 % of Final Average Earnings, reduced proportionately if the Participant's years of Credited Service are less than 30 years or 25 years, whichever limitation applied to the Participant under the provisions of Section 6.1 of the Basic Plan as in effect on December 30, 1989; and (iv) the monthly benefit under the Basic Plan is accrued in the normal form of ten-year certain and life thereafter annuity. (b) equals the aggregate of monthly benefits payable to such Participant, or on his behalf, to his surviving spouse or other Beneficiary or Beneficiaries under the Basic Plan and under any other qualified or nonqualified (funded or unfunded) defined benefit retirement plan sponsored by an Employer; provided, however, that for purposes of this offset, such monthly benefits which are payable in a form other than that of a ten-year certain and life thereafter annuity shall be converted to a monthly benefit which is the Actuarial Equivalent of a ten-year certain and life thereafter annuity. (c) equals the Participant's vested percentage determined in accordance with Section 3.2(c) hereof. 10 4.2 The monthly Restoration Benefit determined with respect to a Participant who satisfies the provisions of Section 3.3 hereof, and which is paid in accordance with Section 5, shall be the Actuarial Equivalent of the excess, if any, of (a) over (b), where: (a) equals the monthly benefit which would have been payable under the form of a single life annuity to such Participant, or on his behalf, to his surviving spouse or other Beneficiary or Beneficiaries under the Basic Plan, if the provisions of the Basic Plan were administered without regard to the annual limitation on compensation set forth in Section 401(a)(17) of the Code and without regard to the limitations on benefits set forth in Sections 4l5(b) and (e) of the Code; and (b) equals the monthly benefit which is payable under the form of a single life annuity to such Participant, or on his behalf, to his surviving spouse or other beneficiary or Beneficiaries under the Basic Plan. The Restoration Benefits payable under the Supplemental Plan to, or on behalf of, Participant shall be computed in accordance with the foregoing and with the objective that the Participant, his surviving spouse or other Beneficiary or Beneficiaries, should receive under the Supplemental Plan and the Basic Plan, the total amount which would otherwise have been payable to that recipient solely under the Basic Plan, as of the date payment is made, had the provisions of Section 401(a)(17) and Section 415 of the Code not been applicable thereto: 4.3 Notwithstanding any provision of this Supplemental Plan to the contrary, the Supplemental Plan Benefits provided under Sections 4.1 and 4.2 shall be determined and coordinated by the Administrator so as to prevent any duplication of Supplemental Plan Benefits or duplication of benefits provided by any other plan or program sponsored by 11 an Employer which is intended to supplement the Basic Plan or any individual agreement between the Participant and an Employer providing for retirement benefits. For purposes of this Section 4.3, any benefits provided under individual deferred compensation contracts and annuities or the Erie Insurance Group Supplemental 401(k) Plan are not intended to supplement the Basic Plan. 4.4 Unless otherwise specifically provided in this Supplemental Plan, a Participant who retired or terminated employment under the provisions of the Supplemental Plan as in effect prior to December 31, 1995, and who is not thereafter rehired, shall continue to receive, or be eligible to receive, benefits under this Supplemental Plan in accordance with the provisions of the Supplemental Plan document as in effect prior to December 31, 1995. SECTION 5 - COMMENCEMENT AND FORM OF SUPPLEMENTAL PLAN BENEFITS Subject to the following provisions of this Section 5, the Supplemental Plan benefits hereunder shall become payable to a Participant, surviving spouse or Beneficiary as of the date upon which such Participant, spouse or Beneficiary first begins to receive retirement (or survivor) benefit payments under the Basic Plan and shall be subject to the same eligibility conditions and reductions for early commencement as are applied to the corresponding benefits under the Basic Plan. Such Supplemental Plan Benefits shall be payable in the form of payment under which Basic Plan benefits are made to such Participant, spouse or Beneficiary; provided however, that in the event a surviving spouse or Beneficiary is entitled to receive Supplemental Plan Benefits as a result of the death of a Participant, the Administrator may, in its discretion, pay such benefit in the form of a lump sum. 12 Each form of payment provided hereunder shall be the Actuarial Equivalent of the Participant's Supplemental Plan Benefits determined under the normal form of a ten-year certain and life thereafter annuity (Supplemental Retirement Income benefit) or a single life annuity (Restoration Benefit). SECTION 6 - AMENDMENT AND DISCONTINUANCE The Company expects to continue the Supplemental Plan indefinitely, but reserves the right to amend or discontinue the Supplemental Plan at any time, if, in its sole judgment, such amendment or discontinuance is necessary or desirable. Any such amendment or discontinuance shall be made pursuant to a resolution of the Board of Directors of the Company and shall be effective as of the date specified in such resolution. No amendment or discontinuance of the Supplemental Plan shall directly or indirectly deprive any Participant, surviving spouse or Beneficiary of all or any portion of the Supplemental Plan Benefits earned by the Participant as of the date of amendment or discontinuance (based upon the Participant's age, compensation and service as of the date of such amendment or discontinuance). In the event of a discontinuance of the Supplemental Plan, the Company (or any transferee, or successor entity of the Company) shall be obligated to pay benefits to Participants, surviving spouses and Beneficiaries at such time or times and in such forms as provided under the terms of the Supplemental Plan. SECTION 7 - MISCELLANEOUS 7.1 No Effect on Employment Rights. Nothing contained herein shall be construed as creating any contract of employment between any Employer or Affiliate and any Participant nor shall any provision hereof confer upon any Participant the right to be 13 retained in the service of any Employer or Affiliate nor limit the right of any Employer or Affiliate to discharge or otherwise deal with Participants without regard to the existence of the Supplemental Plan. 7.2 Plan Unfunded. Notwithstanding any provision herein to the contrary, this Supplemental Plan is intended to constitute an unfunded plan described in Section 201(2) of ERISA and the benefits offered hereunder shall constitute nothing more than an unfunded, unsecured promise by the Company to pay benefits determined hereunder which are accrued by Participants while such Participants are employed by the Company or other Employers Prior to commencement of Supplemental Plan Benefits to a Participant, surviving spouse or Beneficiary in accordance with the terms hereof, no provision shall be made with respect to segregating any assets of an Employer for payment of any benefits hereunder. To the extent any benefits provided under this Supplemental Plan are actually paid from a source other than the Company, neither the Company nor any other Employer shall have any further obligation therefor, but to the extent not so paid, such benefits shall remain the obligations of, and shall be paid by, the Company. No Participant, surviving spouse, Beneficiary or any other person shall have any interest in any particular assets of the Company or an Affiliate by reason of the right to receive a benefit under the Supplemental Plan and any such Participant, surviving spouse, Beneficiary or other person shall have only the rights of a general unsecured creditor of the Company with respect to any rights under the Supplemental Plan. Nothing contained in the Supplemental Plan shall constitute a guaranty by the Company, any Affiliate, or any other entity or person that the assets of the Company will be sufficient to pay any benefit 14 hereunder. All expenses and fees incurred in the administration of the Supplemental Plan shall be paid by the Employers. 7.3 Binding on Company, Participants and their Successors. The Supplemental Plan shall be binding upon and inure to the benefit of the Employers, their successors and assigns and Participants and their heirs, executors, administrators and legal representatives. In the event of the merger or consolidation of the Company with or into any other corporation, or in the event substantially all of the assets of the Company shall be transferred to another corporation, the successor corporation resulting from the merger or consolidation, or the transferee of such assets, as the case may be, shall, as a condition to the consummation of the merger, consolidation or transfer, assume the obligations of the Company hereunder and shall be substituted for the Company hereunder. 7.4 Spendthrift Provisions. The interest of a Participant or his Surviving spouse or Beneficiary under the Supplemental Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, either voluntarily or involuntarily, prior to actual receipt thereof by the payee; any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any such interest herein prior to such receipt shall be void. Supplemental Plan Benefits shall not be subject to garnishment, attachment or other legal or equitable process nor shall they be an asset in bankruptcy; provided, however, that no amount shall be payable from this Supplemental Plan to a Participant, or any person claiming by or through a Participant, unless and until any and all amounts representing debts or other obligations owed to any Employer by the Participant have been fully paid and satisfied. Neither the Company nor any Employer or 15 Affiliate shall be liable in any manner for or subject to the debts, contracts, liabilities, torts or engagements of any person entitled to any benefit under the Supplemental Plan. 7.5 Disclosure. Each Participant, upon his written request, shall receive a copy of the Supplemental Plan and the Administrator will make available for inspection by any Participant a copy of any written rules and regulations used by the Administrator in administering the Supplemental Plan. 7.6 State Law. The Supplemental Plan is established under and will be construed according to the laws of the Commonwealth of Pennsylvania to the extent that such laws are not preempted by the Employee Retirement Income Security Act of 1974, as amended, and regulations promulgated thereunder. 7.7 Incapacity of Recipient. In the event a Participant, surviving spouse or Beneficiary is declared incompetent and a guardian, conservator or other person legally charged with the care of his person or of his estate is appointed, any benefits under the Supplemental Plan to which such Participant, spouse or Beneficiary is entitled shall be paid to such guardian, conservator or other person legally charged with the care of his person or his estate. Except as provided hereinabove, when the Administrator, in its sole discretion, determines that a Participant, surviving spouse or Beneficiary is unable to manage his financial affairs, the Administrator may direct the Company to make distribution(s) to any one or more of the spouse, lineal ascendants or descendants or other closest living relatives of such Participant, spouse or Beneficiary who demonstrates to the satisfaction of the Administrator the propriety of making such distribution(s). Any payment so made shall be in complete discharge of any liability under the Supplemental Plan for such 16 payment. The Administrator shall not be required to see to the application of any such distribution made as provided above. 7.8 Unclaimed Benefit. Each Participant shall keep the Administrator informed of his current address. The Administrator shall not be obligated to search for the whereabouts of any person. If the location of a Participant is not made known to the Administrator within three years after the date on which any payment of the Participant's benefit hereunder may be made, payment may be made as though the Participant had died at the end of the three-year period. If, within one additional year after such three-year period has elapsed, or, within three years after the actual death of a Participant, whichever occurs first, the Administrator is unable to locate the spouse or any Beneficiary of the Participant, any Supplemental Plan Benefits held for a Participant, surviving spouse or Beneficiary shall be forfeited. 7.9 Elections, Applications, Notices. Every direction, revocation or notice authorized or required hereunder shall he deemed delivered to the Company or the Administrator as the case may be: (a) on the date it is personally delivered to the Administrator at the Company's executive offices at 100 Erie Insurance Place, Erie, Pennsylvania 16530 or (b) three business days after it is sent by registered or certified mail, postage prepaid, addressed to the Administrator at the offices indicated above, and shall be deemed delivered to a Participant, surviving spouse or Beneficiary: (a) on the date it is personally delivered to such individual, or (b) three business days after it is sent by registered or certified mail, postage prepaid, addressed to such individual at the last address shown for him on the Company's records. Any notice required hereunder may be waived by the person entitled thereto. 17 7.10 Counterparts. This Supplemental Plan may be executed in any number of counterparts, each of which shall be considered as an original, and no other counterparts need be produced. 7.11 Severability. In the event any provision of this Supplemental Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Supplemental Plan. This Supplemental Plan shall be construed and enforced as if such illegal or invalid provision had never been contained herein. 7.12 Headings. The headings of Sections of this Supplemental Plan are for convenience of reference only and shall have no substantive effect on the provisions of this Supplemental Plan. Executed at Erie, Pennsylvania this 20th day, of December, 1995, effective December 31, 1995. ERIE INDEMNITY COMPANY By: /s/ John M. Petersen ---------------------------------------- John M. Petersen Title: President and Chief Executive Officer ATTEST: /s/ J. R. Van Gorder - ------------------------------- J. R. Van Gorder Executive Vice President, Secretary and General Counsel 18 EX-10.3 6 j9708001exv10w3.txt REINSURANCE POOLING AGREEMENT EXHIBIT 10.3 - REINSURANCE POOLING AGREEMENT This Agreement is effective as of 12:01 a.m. on the 1st day of January, 1995, among the Erie Insurance Exchange, a Pennsylvania reciprocal interinsurance exchange (hereinafter referred to as the "Exchange"), the Erie Insurance Company, a Pennsylvania stock insurance company (hereinafter referred to as the "Company"), and Erie Insurance Company of New York, a New York stock insurance company (hereinafter referred to as "ERIE-New York"). This Agreement supersedes the Reinsurance Pooling Agreement between the Exchange and the Company, which was in effect from January 1, 1992 until the effective date of this Agreement. ARTICLE I - PREAMBLE The purpose of this Agreement is to pool, or share proportionately among the parties, the results of property and casualty insurance underwriting operations through reinsurance; to reduce administrative and executive expenses; and to produce for each party a broader distribution of risk by line of insurance. The Exchange, the Company, and ERIE-New York are affiliated and are under the same executive management. This Agreement is made to recognize that each company is a member of the same holding company system and a member of the Erie Insurance Group (hereinafter referred to as "The ERIE Group"), subject to group decisions and strategies designed primarily to promote the stability and success of The ERIE Group and that each company will accordingly share proportionately in the combined property and casualty insurance underwriting operations of The ERIE Group. ARTICLE II - AGREEMENT In consideration of the agreements and mutual promises contained herein, the parties hereto make the following Agreement effective as of 12:01 a.m., Eastern Standard Time, January 1, 1995. Such Agreement shall remain in effect until cancelled as provided in Article XI. ARTICLE III - DEFINITIONS For the purposes of this Agreement, the following terms shall have the meanings indicated below: (a) "Net Policy Liabilities" shall mean the gross direct liabilities with respect to insurance policies and reinsurance assumed less reinsurance ceded to reinsurers other than the parties to this Agreement. (b) "Respective Percentage Share" shall mean the participation percentage set forth next to the name of each company in Exhibit A, attached hereto and made a part hereof. (c) "Underwriting Expenses" shall mean all expenses incurred individually or collectively by the Exchange, Company, and ERIE-New York in the acquisition of insurance and reinsurance business, the issuance of insurance policies and contracts, and the rendering of services under the contracts, including premium taxes, licenses and fees, and such other underwriting expenses relating to insurance operations as may be mutually agreeable to the parties excluding federal and foreign income taxes, investment expenses and any other expenses not related to underwriting operations. 1 (d) "Dividends" to policyholders shall be treated as Underwriting Expenses. (e) "Net", as used herein shall mean net after giving effect to ceded reinsurance transactions with other insurers or reinsurers, if any, which inure to the benefit of the parties to this Agreement. (f) "Insurance Policies" shall include all insurance or reinsurance agreements, contracts, policies, certificates, binders, endorsements, or agreements of insurance or reinsurance issued or renewed by the Exchange, Company, or ERIE-New York for which they may become obligated. (g) "Loss Adjustment Expense" shall include both allocated loss adjustment expense and unallocated loss adjustment expense. (h) "Accounting Period" shall mean calendar quarter (i.e. March 31, June 30, September 30, and December 31 of each year). ARTICLE IV - LIABILITIES - BUSINESS CEDED The Company and ERIE-New York each individually agrees to cede and transfer to the Exchange and the Exchange agrees to assume and reinsure: (a) 100% of all Net Policy Liabilities under all Insurance Policies of the Company and ERIE-New York respectively, outstanding and in force at 12:01 a.m., Eastern Standard Time, January 1, 1995. (b) 100% of the Net Policy Liabilities, automatically from inception, under all Insurance Policies issued or assumed by the Company and ERIE-New York respectively, with effective dates on and after January 1, 1995, during the continuation of this Agreement. (c) 100% of the Net liability of the Company and ERIE-New York respectively, for unpaid losses (including both reported and unreported losses), unpaid loss adjustment expenses, underwriting expenses due and unpaid prior to January 1, 1995, and unpaid dividends to policyholders. ARTICLE V - PREMIUMS AND RESERVES - BUSINESS CEDED The Company and ERIE-New York each individually agrees to pay to the Exchange the following: (a) 100% of the unearned premium reserves of the Company and ERIE-New York respectively, carried for the Net Policy Liabilities assumed and reinsured by the Exchange under Article IV(a) hereof as shown on the records of the Company and ERIE-New York respectively, as of 12:01 a.m., Eastern Standard Time, January 1, 1995. (b) 100% of the premiums received by the Company and ERIE-New York respectively, for business ceded and transferred to the Exchange under Article IV(b) hereof less the costs of any reinsurance placed with reinsurers other than the Exchange. 2 (c) 100% of the reserves carried by the Company and ERIE-New York respectively, for losses (including both reported and unreported losses), loss adjustment expense, underwriting expenses (including dividends to policyholders) as shown on the records of the Company and ERIE-New York respectively, as of 12:01 a.m., Eastern Standard Time, January 1, 1995. ARTICLE VI - LIABILITIES RETROCEDED Following the assumption and reinsurance of the liabilities of the Company and ERIE-New York respectively, as set forth in Article IV hereof, the Exchange shall retrocede and transfer to the Company and ERIE-New York each company's individual Respective Percentage Share of the following: (a) 100% of all New Policy Liabilities under all Insurance Policies of the Exchange outstanding and in force at 12:01 a.m., Eastern Standard Time, January 1, 1995. (b) 100% of the Net Policy Liabilities, automatically from inception, under all Insurance Policies issued or assumed by the Exchange with effective dates on and after January 1, 1995, during the continuation of this Agreement. (c) 100% of the Net Policy Liability of the Exchange for unpaid losses (including both reported and unreported losses), unpaid loss adjustment expenses, underwriting expenses due and unpaid prior to January 1, 1995, and unpaid dividends to policyholders. ARTICLE VII - PREMIUMS AND RESERVES - BUSINESS RETROCEDED Following the payment of the premiums and reserves of the Company and ERIE-New York respectively, as set forth in Article V hereof, the Exchange shall retrocede and transfer to the Company and ERIE-New York each company's individual Respective Percentage Share of the following: (a) 100% of the Exchange's unearned premium reserves carried for its Net Policy Liabilities under all Insurance Policies of the Exchange outstanding and in force as of 12:01 a.m., Eastern Standard Time, January 1, 1995. (b) The Exchange's premiums received by the Exchange for its own account and all premiums received by the Exchange pursuant to Article V(b) hereof for business assumed from the Company and ERIE-New York respectively, under Article IV(b) hereof, less all Underwriting Expenses incurred by the Exchange in relation to such business and less all reinsurance placed with insurers and reinsurers other than the parties to this Agreement by the Exchange for its own account or for the joint account of the Exchange, Company and ERIE-New York. (c) 100% for the reserves carried by the Exchange for losses (including both reported and unreported losses), loss adjustment expense, underwriting expenses (including dividends to policyholders) as shown on the records of the Exchange as of 12:01 a.m., Eastern Standard Time, January 1, 1995. 3 ARTICLE VIII - AGENTS' BALANCES/OUTSTANDING ACCOUNTS The Company and ERIE-New York hereby agree to sell, transfer, assign and the Exchange hereby agrees to purchase all rights, title and interest of the Company and ERIE-New York in their agents' balances, uncollected premiums and all other accounts relating to underwriting operations, including underwriting pools and associations as they exist at 12:01 a.m., Eastern Standard Time, January 1, 1995, at statutory book value. The Exchange hereby agrees to sell, transfer and assign and the Company and ERIE-New York hereby agree to purchaser their Respective Percentage Shares of the total agents' balances, uncollected premiums and all other accounts relating to underwriting operations at statutory book value immediately after and including the transfers effected by the first sentence of this paragraph. Underwriting assets and related liabilities of the Exchange, the Company, and ERIE-New York arising after 12:01 a.m., Eastern Standard Time, January 1, 1995, shall be pro-rated according to the Respective Percentage Share of the companies. Notwithstanding anything to the contrary herein contained, the Company and ERIE-New York hereby agree for purposes of statutory financial statements, to assume their Respective Percentage Share of any amounts disallowed the Exchange on account of reinsurance effected with so-called unauthorized reinsurers and any amounts disallowed the Exchange for non-admitted agents' balances and uncollected premiums. ARTICLE IX - OBLIGATIONS The Exchange agrees to act on behalf of the Company and ERIE-New York to fulfill all the respective obligations of the Company and ERIE-New York under the Insurance Policies reinsured hereby and to adjust and pay all claims thereunder and to pay all Underwriting Expenses (including dividends to policyholders) on behalf of the Company and ERIE-New York, and the Company and ERIE-New York hereby agree to the Exchange acting on their behalf with respect to such matters. The adjustment of claims and claim payments for policies written by ERIE-New York will be made in accordance with guidelines established by the Board of Directors of ERIE-New York. It is the purpose and intent of this Agreement that all reinsurance hereunder shall be subject in all respects to the same rates, terms, conditions, interpretations, waivers, the exact proportion of premiums paid without deduction for brokerage, and to the same modifications, alterations and cancellations as the respective insurances of the companies to which such reinsurance relates, the true intent of this Agreement being that the reinsurer shall in every case to which this Agreement applies and in the Respective Percentage Share set forth herein follow the fortunes of the reinsured. This Agreement is solely between and for the benefit of the parties hereto and the acceptance of reinsurance hereunder shall not create any right or legal relation whatsoever between the primary insured and any party to this Agreement other than the company issuing the original insurance contract to such insured. ARTICLE X - ACCOUNTS AND SETTLEMENTS The Exchange, the Company, and ERIE-New York shall keep sufficient records for the express purpose of recording therein the amounts and other particulars of the reinsurance ceded and assumed between the parties hereto. Each party to this Agreement shall have the right to examine, 4 at the offices of the other parties at all reasonable times, all books and records of the other parties relating to any business which is the subject of this Agreement. This right shall survive termination of this Agreement and shall continue so long as any party has any rights or obligations under this Agreement. Copies of all Insurance Policies thereto which come within the scope of this Agreement shall be available to all companies which are parties to this Agreement. Each company which is a party hereto will make its financial data available to every company for the purpose of recording those inter-company transactions necessitated by this Agreement and shall provide such financial information in sufficient detail and in mutually acceptable form to prepare monthly financial and quarterly and annual filings with all applicable insurance departments and other regulatory authorities. The Exchange shall render to the Company and to ERIE-New York at such periods as are mutually agreed upon (but not less frequently than quarterly), a statement showing net premiums received, Underwriting Expenses (including dividends paid to policyholders), net losses and loss adjustment expenses paid during the accounting period. Reasonable approximations may be substituted when necessary, for interim accounting, but there shall be an annual adjustment to the exact amounts. The companies shall settle accounts between them by payment of such amounts as may be owing within 30 days after the end of the accounting period. Each quarter the Exchange shall render to the Company and to ERIE-New York a report of all accruals required to adjust cash transactions to the accounting basis required for accounting in accordance with generally accepted practices for preparation of the NAIC form of annual statement, and to adjust the expense allowance to the accrual basis. To the extent that transfers of non-cash assets may be required to effectuate the settlements herein provided, such transfers shall be made at fair market values as of the date such transfers are made. ARTICLE XI - TERMINATION This Agreement may be terminated by mutual agreement stating the terms and conditions therefore or by any party giving to the other parties not less than 90 days advance written notice stating when, as of the end of any calendar year such termination shall be effective. The Net Policy Liabilities previously ceded and transferred by the company and assumed and reinsured by the Exchange and that subsequently assumed and reinsured by the Company and by ERIE-New York under the Respective Percentage Share participation shall cease with respect to losses resulting from accidents or occurrences after the termination date of this Agreement. Upon termination of this Agreement, reinsurance and reserve settlement among the parties shall be made upon the same formula and conditions as those governing the inception of this Agreement, restoring to each party its Insurance Policies, related assets and reserves. ARTICLE XII - INSOLVENCY CLAUSE Each party hereby agrees that in the event of the insolvency of any party, this Agreement shall be so construed that the reinsurance due hereunder shall be payable directly to the insolvent party or its liquidator, receiver, or statutory successor by the reinsurer on the basis of the liability of the insolvent party under the contract or contracts reinsured without diminution because of the 5 insolvency. It is further agreed that the liquidator, the receiver, or the statutory successor of the insolvent party shall give written notice to the reinsurer of the pendency of a claim against the insolvent party on the policy reinsured within a reasonable time after such claim is filed in the solvency proceedings; that during the pendency of such claim the reinsurer may investigate such claim and interpose at their own expense in the proceeding where such claim is to be adjudicated any defense or defenses which they may deem available to the insolvent party or its liquidator, receiver, or statutory successor; that the expenses thus incurred by the reinsurer shall be chargeable subject to court approval against the insolvent party as part of the expense of liquidation to the extent of the proportionate benefit which may accrue to the insolvent party solely as a result of the defense undertaken by the reinsurer. It is further agreed and understood that as to all reinsurance made, ceded, renewed or otherwise becoming effective hereunder, the reinsurance shall be payable by the insurer directly to the insolvent party or to its liquidator, receiver or statutory successor. ARTICLE XIII - ARBITRATION As a condition precedent to any right of action hereunder, in the event of any difference of opinion hereafter arising with respect to this Agreement, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration before a panel of three arbitrators, all of whom shall be active or retired disinterested officers of property and casualty insurance companies, reinsurance companies or underwriters at Lloyd's, London. One arbitrator shall be chosen by each party to the dispute, and the third, an umpire, to be chosen by the other two arbitrators before they enter upon arbitration. In the event of any party refusing or neglecting to appoint an arbitrator within 90 days after the other party requests it to do so, or if the arbitrators fail to appoint an umpire within 60 days after they have accepted their appointments, such arbitrator or umpire, as the case may be, shall, upon the application of any party, be appointed by the American Arbitration Association and the arbitrators and the umpire shall thereupon proceed. The arbitrators shall consider this Agreement as an honorable engagement rather than merely as a legal obligation and they are relieved of all judicial formalities and may abstain from following the strict rules of law. The decision of the majority of the arbitrators shall be final and binding on all parties. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear the other expenses of the umpire and of the arbitration. Any such arbitration shall take place in Erie, Pennsylvania, or such other place as may be mutually agreed. ARTICLE XIV - ERRORS AND OMISSIONS The parties to this Agreement will use due diligence in promptly and accurately reporting all transactions under this Agreement. It is agreed, however, that any errors or omissions occurring through clerical error, accident or oversight, of any party to this Agreement shall not invalidate any of the provisions of this Agreement; and the party making such error agrees to correct it immediately upon discovery. ARTICLE XV - AMENDMENTS This Agreement may be altered or amended in any respect at any time and from time to time by mutual consent of the parties either by an endorsement or addendum executed by the parties hereto or by correspondence signed by a responsible officer of each party, and such endorsement or 6 addendum or correspondence shall be binding on the parties and be deemed to be an integral part of this Agreement. ARTICLE XVI - OTHER PROVISIONS 1. This Agreement shall not apply to the investment operations, liabilities for Federal and foreign income tax, or other operations unrelated to the insurance underwriting of the parties hereto. 2. In the event that the Company is not licensed in New York and/or the Exchange is not an accredited reinsurer in New York, the Exchange agrees to post a letter of credit collateralizing the business ceced to it by ERIE-New York. IN WITNESS WHEREOF, the parties hereto have affixed their signatures. ERIE INSURANCE EXCHANGE by Erie Indemnity Company Attorney-in-Fact By: /s/ J. M. Petersen ---------------------------------------- J. M. Petersen President and Chief Executive Officer ERIE INSURANCE COMPANY By: /s/ J. R. Van Gorder ---------------------------------------- J. R. Van Gorder Executive Vice President, Secretary and General Counsel ERIE-NEW YORK By: /s/ T. M. Sider ---------------------------------------- T. M. Sider Executive Vice President and Chief Financial Officer 7 ERIE INSURANCE GROUP REINSURANCE POOLING AGREEMENT EFFECTIVE January 1, 1995 EXHIBIT A

Participating Insurer Respective Percentage Share - --------------------- --------------------------- Erie Insurance Exchange 94.5% Erie Insurance Company 5.0% ERIE-New York 0.5%

8 EX-10.4 7 j9708001exv10w4.txt AGGREGATE EXCESS OF LOSS INSURANCE EXHIBIT 10.4 - ERIE INSURANCE COMPANY AND ERIE INSURANCE COMPANY OF NEW YORK ERIE, PENNSYLVANIA AGGREGATE EXCESS OF LOSS REINSURANCE CONTRACT This REINSURANCE CONTRACT is made between ERIE INSURANCE EXCHANGE, by and through its Attorney-in-Fact, ERIE INDEMNITY COMPANY, of Erie, Pennsylvania (hereafter called the "REINSURER"), and ERIE INSURANCE COMPANY and its wholly owned subsidiary ERIE INSURANCE COMPANY OF NEW YORK, both of Erie, Pennsylvania (herein referred to collectively (or individually as the context requires) as the "COMPANY"). In consideration of the agreements and mutual promises contained herein, the parties hereby agree that this Reinsurance Contract covers 95% of the Ultimate Net Loss for each Annual Period, as herein provided and specified, which may accrue to the COMPANY under all policies, contracts, and binders of insurance and reinsurance as respects coverages classified by the COMPANY as Property and Casualty as a result of any loss or losses thereunder occurring each Annual Period during the term of this Reinsurance Contract, subject to the following terms and conditions: ARTICLE 1 - Term This Reinsurance Contract shall commence on the first day of January, 1998, and shall remain in force thereafter until cancelled in accordance with Article 18. "Annual Period", as used herein, shall mean the period from January 1 to December 31, both days inclusive, of any calendar year. ARTICLE 2 - Retention and Limit No claim shall be made hereunder unless the COMPANY'S total Ultimate Net Losses, as herein defined, incurred during any Annual Period covered hereunder exceed an amount equal to 72.5% of the COMPANY'S Net Premiums, as herein defined, earned during that Annual Period of this Reinsurance Contract. The REINSURER shall then be liable for 95% of the amount of such excess up to, but not exceeding, an amount equal to 95% of 15% of the COMPANY'S Net Premium earned during that Annual Period. It is understood and agreed that losses equal to 5% of the Ultimate Net Loss in excess of the retentions hereunder, shall be retained net by the COMPANY for its own account. ARTICLE 3 - Definition of Ultimate Net Loss The term "Ultimate Net Loss" shall mean the liabilities incurred during any Annual Period by the COMPANY under insurance or reinsurance agreements, contracts, policies, certificates, binders, endorsements or agreements of insurance or reinsurance and shall include those liabilities of the COMPANY incurred during any Annual Period under that certain Reinsurance Pooling Agreement between Erie Insurance Exchange, Erie Insurance Company and Erie Insurance Company of New York effective January 1, 1995 ("Reinsurance Pooling Agreement") as it currently exists or may hereafter be amended, except that "Ultimate Net Loss" as used herein shall not include unallocated loss adjustment expenses incurred by the Company. Nothing in this Article shall be construed to mean that losses are not recoverable hereunder until the COMPANY'S Ultimate Net Loss has been ascertained. ARTICLE 4 - Definition of Net Premiums The term "Net Premiums" shall mean direct premiums, less return premiums, received by the COMPANY during any Annual Period under insurance or reinsurance agreements, contracts, policies, certificates, binders, endorsements, or agreements of insurance or reinsurance, and shall include the COMPANY'S respective share of the premiums received under the Reinsurance Pooling Agreement as it currently exists or may hereafter be amended, less premiums for all reinsurances inuring to the benefit of this Reinsurance Contract without deduction of dividends declared, paid, or credited to policyholders. ARTICLE 5 - Underwriting Warranty It is warranted by the COMPANY that it will not knowingly retain net liability in excess of the following respective amounts: Property coverages: $10,000,000 as respects any one risk. Casualty coverages: $5,000,000 as respects any one policy other than Workers' Compensation policies. It is understood that the COMPANY shall be the sole judge of what constitutes any one risk as respects property coverages and any one policy as respects casualty coverages. ARTICLE 6 - Net Retained Liability This Reinsurance Contract shall apply only to that portion of any insurance or reinsurance which the COMPANY retains net for its own account during any Annual Period, and in calculating the amount of any loss hereunder, and also in computing the amount in excess of which this Reinsurance 2 Contract attaches, only loss or losses in respect to that portion of any insurance or reinsurance which the COMPANY retains net for its own account shall be included. It is, however, understood and agreed that the amount of the REINSURER'S liability during any Annual Period hereunder in respect to any loss or losses shall not be increased by reason of the inability of the COMPANY to collect from any other reinsurers, whether specific or general, any amounts which may have become due from them, whether such inability arises from the insolvency of such other reinsurers or otherwise. ARTICLE 7 - Quota Share Reinsurance Unless otherwise specially agreed, it is understood that, in the event the COMPANY cedes reinsurance on a quota share or portfolio basis, the provisions of this Reinsurance Contract shall apply as if such reinsurance had not been effected. ARTICLE 8 - Notice of Loss In the event of a claim arising hereunder, notice shall be given to Erie Insurance Exchange, 100 Erie Insurance Place, Erie, Pennsylvania, 16530-0001, to the attention of the Managing Director of Reinsurance as soon as practicable. ARTICLE 9 - Loss Settlements All loss settlements made by the COMPANY, providing the same are within the terms of this Reinsurance Contract, shall be unconditionally binding upon the REINSURER, and amounts falling to the share of the REINSURER shall be payable by it upon reasonable evidence of the amount due or to be due being given by the COMPANY. Should the COMPANY'S Ultimate Net Losses incurred during any Annual Period covered hereunder exceed, at any time during that Annual Period, an amount equal to 72.5% of the Net Premiums earned through that period of time, it is understood and agreed that, at the option of the COMPANY, 95% of such excess and 95% of all such additional Ultimate Net Losses occurring thereafter will be paid by the REINSURER, subject to a limit of 95% of 15% of the Net Premiums earned as respects any losses occurring during that Annual Period. Any such payment shall be subject to adjustment in accordance with the provisions of Article 3 after the REINSURER'S ultimate liability hereunder has been determined. ARTICLE 10 - Governing Law; Jurisdiction Subject to "Article 15 - Arbitration", if the REINSURER fails to pay any amount claimed to be due hereunder, the REINSURER, at the request of the COMPANY, will submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this clause constitutes or should 3 be understood to constitute a waiver of the REINSURER'S rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. It is further agreed that service of process in such suit may be made upon the REINSURER, and that the reinsurer will abide by the final decision of such court or of any appellate court in the event of an appeal. Further, pursuant to any statute of any state, territory, or district of the United States which makes provision therefor, the REINSURER hereby designates the Superintendent, Commissioner, or Director of Insurance, or other officer specified for that purpose in the statute, or his successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit, or proceeding instituted by or on behalf of the COMPANY or any beneficiary hereunder arising out of this Reinsurance Contract, and hereby authorizes the said officer to mail such process, or a true copy thereof, to the COMPANY. ARTICLE 11 - Insolvency In the event of insolvency of the COMPANY, the reinsurance under this Reinsurance Contract shall be payable by the REINSURER to the COMPANY or to its liquidator, receiver, or statutory successor, on the basis of the liability of the COMPANY under the policy or policies reinsured without diminution because of the insolvency of the COMPANY. It is further agreed that the liquidator, or receiver, or statutory successor of the COMPANY, shall give written notice to the REINSURER of the pendency of any claim against the COMPANY on the policies reinsured within a reasonable time after such claim is filed in the insolvency proceeding, and that, during the pendency of such claim, the REINSURER may investigate such claim and interpose, at their own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses which they may deem available to the COMPANY or to its liquidator, or receiver, or statutory successor. The expense thus incurred by the REINSURER shall be chargeable, subject to court approval, against the COMPANY as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the COMPANY solely as a result of the defense undertaken by the REINSURER. ARTICLE 12 - Premium The premium for this reinsurance shall be 1.01% of the subject Net Premiums earned by the COMPANY during any Annual Period this Reinsurance Contract remains in force, and shall be subject to a minimum premium of $800,000 for each Annual Period. 4 The COMPANY shall pay to the REINSURER a deposit premium of $900,000 for each Annual Period which shall be payable in equal installments of $450,000 each on the first days of January and July during the period this Reinsurance Contract remains in force. Final adjustment of the premium for each Annual Period hereunder shall be made as soon as may be reasonably practicable after expiration of that Annual Period. ARTICLE 13 - Premium and Loss Payments Premiums shall be payable directly to the REINSURER and losses shall be paid directly to the COMPANY in United States currency. ARTICLE 14 - Access to Records The REINSURER, by its duly appointed representative, shall have the right, at any reasonable time, to examine all papers in the possession of the COMPANY referring business effected hereunder. ARTICLE 15 - Arbitration Except as provided in "Article 16 - Loss Commutation", should an irreconcilable difference of opinion arise between the COMPANY and the REINSURER as to the interpretation or payment under this Reinsurance Contract, it is hereby mutually agreed that, as a condition precedent to any right of action hereunder, such difference, upon the written request of either party, shall be submitted to arbitration, one arbitrator to be chosen by the COMPANY, one by the REINSURER, and an umpire to be chosen by the two arbitrators before they enter upon arbitration. In the event that either party should fail to choose an arbitrator within sixty days following a written request by the other party to enter upon arbitration, the requesting party may choose two arbitrators who shall in turn choose an umpire before entering upon arbitration. If the arbitrators have not chosen an umpire at the end of ten days following the last day of the selection of the two arbitrators, each of the arbitrators shall name three, of whom the other declines two, and the decision shall be made of the remaining two by drawing lots. The arbitrators and the umpire shall be active or retired disinterested officers of insurance or reinsurance companies or Underwriters at Lloyd's, London, not under the control of either party to this Reinsurance Contract. Each party shall present its case to the arbitrators within sixty days following the date of their appointment. The decision, in writing, of the arbitrators shall be final and binding upon both parties as to questions of fact, but failing to agree, they shall call in the umpire and the decision of the majority shall be final and binding as to questions of fact upon both parties. Judgment upon the award rendered may be entered in any court having jurisdiction. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other the expense of the umpire and of the arbitration. 5 In the event that the two arbitrators are chosen by one party, as above provided, the expense of the arbitrators, the umpire, and the arbitration shall be equally divided between the two parties. Any such arbitration shall take place at Erie, Pennsylvania, unless some other location is mutually agreed upon by the two parties in interest. ARTICLE 16 - Loss Commutation Sixty months after expiration of each Annual Period, the COMPANY and the REINSURER agree to commute any unpaid net losses recoverable applicable to that Annual Period. The COMPANY shall submit a statement of valuation of the net losses recoverable showing the elements considered reasonable to establish the net losses to be commuted. The COMPANY and the REINSURER shall agree upon the capitalized value of such losses and the REINSURER shall pay to the COMPANY the amount so determined. Payment by the REINSURER of the capitalized value of such losses shall constitute a complete and final release of the REINSURER'S liability in respect of such losses for that Annual Period. If the COMPANY and the REINSURER fail to agree on the capitalized value of such losses within sixty days of receipt of the statement of valuation, then any difference shall be settled by a panel of three Actuaries or Appraisers, one to be chosen by each party and the third by the two so chosen. If either party refuses or neglects to appoint an Actuary or Appraiser within sixty days after the request in writing that the difference be settled by a panel of three Actuaries or Appraisers, the other party may appoint two Actuaries or Appraisers. If the two Actuaries or Appraisers fail to agree on the selection of a third Actuary or Appraiser within thirty days of their appointment, then each of them shall name two, one of whom the other shall decline and the determination of the Actuary or Appraiser shall be made by drawing lots. All the Actuaries or Appraisers shall be regularly engaged in the valuation of claims subject to the provisions of this Article 16 - Commutation. None of the Actuaries or Appraisers shall be under the control of either party to this Reinsurance Contract nor shall they have any interest in the net losses being commuted other than that which is required to fulfill their obligations hereunder. Each party shall submit its case to its Actuary or Appraiser within thirty days of the appointment of the third Actuary or Appraiser. The decision in writing of any two Actuaries or Appraisers, when filed with the COMPANY and the REINSURER, shall be final and binding on both parties. The expense of the Actuaries or Appraisers and of the Commutation shall be equally divided between the COMPANY and the REINSURER. Said Commutation shall take place in Erie, Pennsylvania, unless some other place is mutually agreed upon by the COMPANY and the REINSURER. The term "capitalized value" as used herein shall mean the estimated value of all future payments hereunder, excluding any provision for incurred but not reported losses, reduced to present value at 6 an agreed upon rate of interest to be determined at the time of commutation or the prime rate, whichever is less. ARTICLE 17 - Extended Expiration Should this Reinsurance Contract terminate while a loss occurrence covered hereunder is in progress, it is understood and agreed that, subject to the other conditions of this Reinsurance Contract, the REINSURER shall be responsible for their proportion of the entire loss or damage caused by such occurrence. ARTICLE 18 - Termination Either party may terminate this Reinsurance Contract at any December 31, by giving the other party not less than 30 days prior written notice. ARTICLE 19 - Singular Contains the Plural In interpretation of this Reinsurance Contract, the singular includes the plural and the plural includes the singular, should the context so require to give full force and effect to the intent of the parties and the provisions hereunder. ARTICLE 20 - Notice of Default; Cure In the event of a default of any of the terms of this Reinsurance Contract, notice of the default shall be given and the party against which a default is alleged shall have fifteen days in which to cure such default, prior to any action being taken hereunder. ARTICLE 21 - Notices Notice to REINSURER shall be given at the following address or at any address specified in writing by REINSURER: Erie Insurance Exchange 100 Erie Insurance Place Erie, PA l6530 7 Notice to COMPANY shall be given at the following addresses or at any addresses specified in writing by COMPANY: Erie Insurance Exchange Erie Insurance Company of New York 100 Erie Insurance Place 175 Corporate Woods, Erie, PA l6530 Suite 100 Rochester, NY 14623 Notice is effective when given in writing, upon personal delivery, or sent postage pre-paid by regular mail, Federal Express or similar service, telex or telecopier to the address specified herein. ARTICLE 22 - Amendments This Reinsurance Contract may be altered or amended in any of its terms and conditions by the written mutual consent of the parties, and such amendment shall be considered as part of this Reinsurance Contract. 8 ARTICLE 23 - Binding Effect The provisions of this Reinsurance Contract shall be binding on both parties and their respective heirs, legal representatives, successors and assigns, binding any receivers, trustees or other fiduciaries appointed in any federal state insolvency proceeding or federal bankruptcy case. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives. In Erie, Pennsylvania, this 31st day of August, 1998. ATTEST: ERIE INSURANCE COMPANY /s/ Mark Torok /s/ Jan R. Van Gorder - ------------------------------- ---------------------------------- Mark Torok Jan R. Van Gorder ERIE INSURANCE COMPANY OF NEW YORK ATTEST: /s/ Mark Torok /s/ Philip A. Garcia - ------------------------------- ---------------------------------- Mark Torok Philip A. Garcia ERIE INSURANCE EXCHANGE, by ERIE ATTEST: INDEMNITY COMPANY, Attorney-in-Fact /s/ Maureen Sidelinger /s/ Michael S. Zavasky - ------------------------------- ---------------------------------- Maureen Sidelinger Michael S. Zavasky 9 EX-10.5 8 j9708001exv10w5.txt RETIREMENT PLAN FOR EMPLOYEES EXHIBIT 10.5 Erie Insurance Group RETIREMENT PLAN FOR EMPLOYEES As Amended and Restated Effective December 31, 2000 TABLE OF CONTENTS ARTICLE I - INTRODUCTION..................................................................................1 ARTICLE II - DEFINITIONS 2.1 "Accrued Pension"............................................................................2 2.2 "Actuary"....................................................................................2 2.3 "Administrator"..............................................................................2 2.4 "Affiliate"..................................................................................2 2.5 "Anniversary Date"...........................................................................2 2.6 "Annuity Starting Date"......................................................................2 2.7 "Beneficiary"................................................................................3 2.8 "Board of Directors" or "Board"..............................................................3 2.9 "Code".......................................................................................3 2.10 "Company"....................................................................................3 2.11 "Compensation"...............................................................................3 2.12 "Covered Employee"...........................................................................4 2.13 "Credited Service"...........................................................................4 2.14 "Date of Hire"...............................................................................4 2.15 "Date of Severance"..........................................................................4 2.16 "Earliest Retirement Age"....................................................................5 2.17 "Effective Date".............................................................................5 2.18 "Employee"...................................................................................5 2.19 "Employer(s)"................................................................................5 2.20 "ERISA"......................................................................................5 2.21 "Final Average Earnings".....................................................................5 2.22 "Highly Compensated".........................................................................5 2.23 "Hour of Service"............................................................................6 2.24 "Leased Employee"............................................................................7 2.25 "Maternity or Paternity Absence".............................................................7 2.26 "Normal Retirement Age"......................................................................8 2.27 "Normal Retirement Date".....................................................................8 2.28 "Participant"................................................................................8 2.29 "Period of Severance"........................................................................8 2.30 "Plan" or "Pension Plan".....................................................................8 2.31 "Plan Year"..................................................................................8 2.32 "Service"....................................................................................8 2.33 "Social Security Covered Compensation".......................................................9 2.34 "Test Compensation"..........................................................................9 2.35 "Top Paid Group".............................................................................9 2.36 "Total and Permanent Disability".............................................................10 2.37 "Trust Agreement"............................................................................10 i 2.38 "Trustee"............................................................................................10 2.39 "Trust Fund" or "Fund"...............................................................................10 ARTICLE III - ADMINISTRATION OF THE PLAN 3.1 Pension Administrator........................................................................11 3.2 Powers.......................................................................................11 3.3 Delegation of Duties.........................................................................13 3.4 Administrator as Named Fiduciary.............................................................13 3.5 Conclusiveness of Various Documents..........................................................13 3.6 Actions to be Uniform........................................................................14 3.7 Liability and Indemnification................................................................14 3.8 Claims Review Procedure......................................................................14 3.9 Waiver of Participation......................................................................16 ARTICLE IV - SERVICE PROVISIONS 4.1 Service......................................................................................17 4.2 Credited Service.............................................................................17 4.3 Loss and Reinstatement of Service............................................................17 4.4 Transfer to Other Employment.................................................................18 4.5 Transfer From Other Employment...............................................................18 ARTICLE V - ELIGIBILITY FOR PENSIONS 5.1 Normal Retirement............................................................................19 5.2 Early Retirement.............................................................................19 5.3 Disability Retirement........................................................................19 5.4 Vesting......................................................................................20 ARTICLE VI - AMOUNT OF PENSION 6.1 Normal Retirement Pension....................................................................21 6.2 Early Retirement Pension.....................................................................21 6.3 Disability Retirement Pension................................................................21 6.4 Deferred Pension Upon Termination of Service.................................................22 6.5 Increases in Pension for Certain Retired Participants........................................23 6.6 Offset of Accruals by Plan Distributions.....................................................23 6.7 Non-Duplication of Benefits..................................................................23 6.8 Special Provisions Pertaining to Section 401(a)(17) Employees................................24 ARTICLE VII - COMMENCEMENT AND DURATION OF PENSIONS 7.1 Normal and Early Retirement Pensions.........................................................25 7.2 Disability Retirement Pension................................................................25 7.3 Deferred Vested Pension......................................................................26 7.4 Reemployment of a Retired Participant........................................................26 7.5 Automatic Surviving Spouse's Pension.........................................................27 7.6 Requirement for Spouse Consent...............................................................30 7.7 Optional Forms of Pensions...................................................................30 7.8 Payment of Small Pension.....................................................................32 ii 7.9 Repayment of Cashout on Reemployment.........................................................33 7.10 Delay in Commencement of Pension Payments....................................................34 7.11 Direct Rollover of Eligible Rollover Distributions...........................................35 7.12 Change to Pension Payments in Connection with Qualifying Event...............................36 ARTICLE VIII - DEATH BENEFITS 8.1 Death Prior to Retirement or Severance.......................................................41 8.2 Death Prior to Commencement of Early or Disability Pensions..................................41 8.3 Death Prior to Commencement of Vested Pensions...............................................42 8.4 Effect of Valid 100% Joint and Survivor Election.............................................43 8.5 Death On or After Annuity Starting Date......................................................43 8.6 Death Benefit for Vested Participants Who Terminated After September 1, 1974 and Prior to August 23, 1984.........................................43 ARTICLE IX - TRUST FUND AND THE TRUSTEE 9.1 Trust Fund...................................................................................45 9.2 Irrevocability...............................................................................45 9.3 Contributions by the Company.................................................................45 9.4 Contributions by Participants................................................................46 9.5 Benefits Payable Only From Trust Fund........................................................47 9.6 Plan Expenses................................................................................47 ARTICLE X - BENEFIT LIMITATIONS 10.1 Maximum Limitation Under Section 415(b) of the Code..........................................48 10.2 Defined Benefit Plan and Defined Contribution Plan Combined Limitation..........................................................................51 ARTICLE XI - MISCELLANEOUS PROVISIONS 11.1 Plan Non-Contractual.........................................................................53 11.2 Non-Alienation of Retirement Rights or Benefits..............................................53 11.3 Payment of Pension to Others.................................................................54 11.4 Prohibition Against Reversion................................................................54 11.5 Merger, Transfer of Assets or Liabilities....................................................54 11.6 Actuarial Equivalence........................................................................55 11.7 Change of Vesting Schedule...................................................................55 11.8 Controlled Group.............................................................................56 11.9 Severability.................................................................................56 11.10 Employer Records.............................................................................56 11.11 Application of Plan Provisions...............................................................56 11.12 Missing Participants.........................................................................56 11.13 IRC 414(u) Compliance Provision..............................................................57 ARTICLE XII - AMENDMENT AND TERMINATION 12.1 Amendment and Termination of the Plan........................................................58 12.2 Administration of the Plan in Case of Termination............................................58 12.3 Internal Revenue Service Limitations.........................................................59 iii ARTICLE XIII - TOP-HEAVY PROVISIONS 13.1 General......................................................................................60 13.2 Definitions Relating to Top-Heavy Provisions.................................................60 13.3 Top-Heavy Plan Vesting Requirements..........................................................62 13.4 Top-Heavy Plan Minimum Benefit Requirements..................................................63 13.5 Required Adjustments.........................................................................64 13.6 Limited Application of this Article..........................................................65 ARTICLE XIV - JURISDICTION 14.1 Jurisdiction.................................................................................66 iv Erie Insurance Group RETIREMENT PLAN FOR EMPLOYEES Effective December 31, 1946 As Amended and Restated Effective December 31, 2000 ARTICLE I INTRODUCTION The Erie Insurance Group adopted a Retirement Plan, effective December 31, 1946. Such Plan, which has been heretofore amended from time to time by action of the Board of Directors in accordance with the provisions of the Plan, is herein amended and restated. This amendment and restatement of the Plan shall constitute an amendment, restatement and continuation of the Plan. This amendment and restatement is generally effective December 31, 2000. However, certain provisions of this amendment and restatement are effective as of some other date. The provisions of this amendment and restatement with stated effective dates prior to December 31, 2000 shall be deemed to amend the corresponding provisions, if any, of the Plan as in effect before this amendment and restatement and all amendments thereto as of such dates. Events occurring before the applicable effective date of any provision of this amendment and restatement shall be governed by the applicable provision of the Plan as in effect on the date of the event. The object of the Plan is to provide retirement pensions for eligible employees. 1 ARTICLE II DEFINITIONS For the purposes of this Retirement Plan for Employees, the following words and phrases shall have the following meanings unless a different meaning is clearly required by the context. Any terms herein used in the masculine shall be read and construed in the feminine where they would so apply, and any terms used in the singular shall be read and construed in the plural if again so applicable. 2.1 "Accrued Pension" shall mean a pension amount determined with respect to a Participant in accordance with Section 6.2(a) of the Plan using the date of determination for the date of early retirement. 2.2 "Actuary" shall mean the actuary or firm of actuaries chosen by, but independent of the Company, who is, or in the case of a firm one or more of whose members is, an enrolled actuary under the provisions of Section 3042 of the Employee Retirement Income Security Act of 1974. 2.3 "Administrator" shall mean the Pension Administrator appointed by the Board under the provisions of Article III of the Plan. 2.4 "Affiliate" means any other employer which, together with the Company, is a member of a controlled group of corporations or of a commonly controlled trade or business (as defined in Code Sections 414(b) and (c) and as modified, where appropriate, by Code Section 415(h)) or of an affiliated service group (as defined in Code Section 414(m)) or other organization described in Code Section 414(o). Each such Affiliate shall be treated as an Affiliate only during such period as it is or was an Affiliate as defined above. 2.5 "Anniversary Date" shall mean any December 31 occurring after the Effective Date. 2.6 "Annuity Starting Date" shall mean the first day of the first period for which an amount is received as an annuity (whether by reason of retirement or other termination of Service). A Participant whose benefit is suspended under any provision of the Plan shall be deemed not to have reached his Annuity Starting Date until such benefit again 2 becomes payable. The Annuity Starting Date for a benefit payable under Section 7.10 shall be the applicable date described therein. 2.7 "Beneficiary" shall mean any person who, by reason of a designation made by a Participant, is or will be entitled to receive any amount or benefit hereunder upon the death of such Participant. 2.8 "Board of Directors" or "Board" shall mean the Board of Directors of the Company. 2.9 "Code" shall mean the Internal Revenue Code of 1986, as amended. 2.10 "Company" shall mean Erie Indemnity Company, a corporation organized and existing under the laws of Pennsylvania. 2.11 "Compensation" for any period shall mean the aggregate amount of base salary received by a Covered Employee from the Employers during the period. For this purpose, "base salary" shall exclude overtime compensation, bonuses, and commissions, but shall include compensation excluded from W-2 income because of salary reduction agreements in connection with plans described in Section 125, 401(k), or, for periods on and after January 1, 2001, 132(f)(4) of the Code, or resulting from annuity or deferred compensation contracts. Effective for each Plan Year beginning on and after December 31, 1989, in no event shall the amount of Compensation taken into account under the Plan exceed the adjusted annual limitation permitted under Section 401(a)(17) of the Code for such Plan Year. Such adjusted annual limitation shall be, for each Plan Year beginning on and after December 31, 1989 and prior to December 31, 1994, $200,000 as adjusted for such year in the same manner as under Section 415(d) of the Code and, for each Plan Year beginning on and after December 31, 1994, $150,000 as adjusted for such year as provided under Section 401(a)(17)(B) of the Code. However, with respect to the determination of a retirement pension or Accrued Pension for the 1993 Plan Year, the adjusted annual limitation for the 1993 Plan Year will be assumed to apply to all prior years. For Plan Years beginning before January 1, 1997, in determining the Compensation of a Covered Employee for purposes of the foregoing annual limitation, the rules aggregating certain family members (as set forth in Section 2.22) shall apply, except that in applying such rules, the term "family" shall include only the spouse of the 3 Covered Employee and any lineal descendent of the Covered Employee who has not attained age 19 before the end of the calendar year. If, as a result of the family aggregation rules, the adjusted annual limitation is exceeded, then the limitation shall be prorated among the family members in proportion to each individual's Compensation as determined under this paragraph without regard to the adjusted annual limitation. 2.12 "Covered Employee" shall mean any Employee of an Employer, excluding: (a) any such Employee whose employment is governed by the terms of a collective bargaining agreement under which retirement benefits were the subject of good faith bargaining, (b) any such Employee who has voluntarily waived participation in the Plan, and (c) any such Employee who is compensated on an hourly basis. Notwithstanding any provision of the Plan to the contrary, an individual who an Employer determines to be a contract employee, independent contractor, leased employee (including a Leased Employee as defined hereunder), leased owner, leased manager, shared employee or person working under a similar classification shall not become a Covered Employee hereunder, regardless of whether any such individual is ultimately determined to be a common law employee, unless and until the Employer shall otherwise determine. 2.13 "Credited Service" shall mean a Participant's service determined in accordance with Article IV hereof for the purpose of calculating the amount of benefit earned under the Plan. 2.14 "Date of Hire" shall mean the date on which an Employee first commences employment or reemployment and works at least one Hour of Service for an Employer or an Affiliate. 2.15 "Date of Severance" shall mean the earliest to occur of the following dates: (a) date of retirement, (b) date of voluntary employment termination, (c) date of discharge by an Employer unless he is subsequently reemployed and given pay back to the date of discharge, (d) date of death, 4 (e) the first anniversary of a date of absence from active employment for any other reason; provided, however, that the second anniversary of a date of absence from active employment shall be used for an Employee who is absent by reason of a Maternity or Paternity Absence which commenced on or after December 31, 1985, or who is absent by reason of Total and Permanent Disability. An Employee shall not incur a Date of Severance while he is in the active service of the United States Armed Forces if his reemployment rights are protected by law. 2.16 "Earliest Retirement Age" shall mean the earliest date on which, under the Plan, the Participant could elect to receive retirement benefits in accordance with Section 5.1 or 5.2 hereof. 2.17 "Effective Date" shall mean December 31, 1946. 2.18 "Employee" shall mean any common-law employee of an Employer or an Affiliate; provided, however, that for purposes of Section 2.22; "Employee" shall include any self-employed individual performing services for an Employer or Affiliate who is treated as an employee under Section 401(c)(1) of the Code. 2.19 "Employer(s)" shall mean the Company, Erie Family Life Insurance Company, Erie Insurance Exchange, Erie Insurance Company, EI Holding Corp., EI Service Corp., Erie Insurance Company of New York, Erie Insurance Property & Casualty Company, Flagship City Insurance Company and any other Affiliate which may adopt this Plan. 2.20 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 2.21 "Final Average Earnings" shall mean 1/36th of the aggregate Compensation received during the thirty-six consecutive calendar months as a Covered Employee which produces the greatest aggregate Compensation out of the one hundred twenty calendar month period ending on the earlier of the date on which the Participant retires or terminates employment with the Employers or the date on which the Participant is no longer considered a Covered Employee. 2.22 "Highly Compensated" shall mean, for years beginning on and after January 1, 1997, any Employee who is a more than five percent (5%) owner of an Employer or both 5 earned $80,000 or more in Test Compensation from the Employer in the prior Plan Year (the "lookback year") and was member of the Top Paid Group for such year; provided, however, that such $80,000 figure shall be adjusted for cost of living at the same time and in the same manner as determined under Code Section 415(d). For years beginning before January 1, 1997, "Highly Compensated" shall mean any Employee who meets any of the following requirements in either the lookback year or the current Plan Year (the "determination year"): (a) is a more than five percent (5%) owner of an Employer; (b) earns $75,000 or more in Test Compensation; (c) earns $50,000 or more in Test Compensation and is member of the Top Paid Group; (d) is an officer of an Employer (as described in Section 416(i) of the Code) who earns Test Compensation of more than fifty percent (50%) of the amount in effect under Section 415(b)(1)(A) of the Code for such year; or (e) is a former Employee who was Highly Compensated upon separation from service prior to the determination year, performs no service for an Employer during the determination year or was Highly Compensated at any time after age 55. In addition, the Test Compensation paid to any family member (spouse, lineal ascendant or descendent and their spouses) of a more than five percent owner or of one of the top 10 Highly Compensated Employees on the basis of Test Compensation, shall be aggregated with the Test Compensation of such Employee for the purposes of this definition. Notwithstanding the foregoing, an Employee will not be Highly Compensated for the current year merely by compensation or officer status, unless he is in the top 100 Employees by Test Compensation. The amounts indicated in (b) and (c) above shall be adjusted for cost of living by the Secretary of the Treasury at the same time and in the same manner as under Code Section 415(d). To the extent permitted under regulations and other guidance promulgated by the Internal Revenue Service, the Company may elect to determine the status of Highly Compensated Employees on a basis other than that provided above. 2.23 "Hour of Service" shall include the following: (a) each hour for which an Employee is directly or indirectly paid or entitled to payment from an Employer or an Affiliate as an Employee for the performance of duties during an applicable computation period (these hours must be credited 6 to the Employee in the computation period during which the duties were performed and not when paid, if different); and (b) each hour for which back pay, irrespective of mitigation of damages, has been awarded or agreed to by an Employer or an Affiliate (these hours must be credited in the computation period or periods to which the award or agreement pertains rather than that in which the payment, award or agreement was made); and (c) each hour for which an Employee is directly or indirectly paid or entitled to payment from an Employer or an Affiliate for reasons, such as vacation, sickness or disability, other than for the performance of duties (these hours shall be calculated and credited pursuant to Section 2530.200b-2 of the Department of Labor regulations which are incorporated herein by reference). 2.24 "Leased Employee" shall mean any person (other than an Employee of an Employer) who pursuant to an agreement between the Employer and any other person ("leasing organization") has performed services for the Employer (or for the Employer and related persons determined in accordance with Section 414(n)(6) of the Code) on a substantially full-time basis for a period of at least one year and, for periods before January 1, 1997, such services are of a type historically performed by employees in the business field of the Employer or, for periods on and after January 1, 1997, such services are performed under primary direction or control by the recipient. Except as provided below, any person satisfying the foregoing criteria shall be treated as an Employee. Contributions or benefits provided a Leased Employee by the leasing organization which are attributable to services performed for the Employer shall be treated as provided by the Employer. Notwithstanding the foregoing, a Leased Employee shall not be considered an Employee of an Employer if: (i) such Leased Employee is covered by a money purchase pension plan providing: (1) a nonintegrated employer contribution rate of at least 10 percent of compensation, (2) immediate participation, and (3) full and immediate vesting; and (ii) Leased Employees do not constitute more than 20 percent of the Employer's non-Highly Compensated workforce. 2.25 "Maternity or Paternity Absence" shall mean an absence from work by an Employee for any period: (a) by reason of pregnancy of the Employee, 7 (b) by reason of the birth of a child of the Employee, (c) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (d) for purposes of caring for such child for a period immediately following such birth or placement. An absence will not be considered a "Maternity or Paternity Absence" unless the Employee provides the Administrator with such timely information as the Administrator may reasonably require to establish that the absence from work is for one of the four permitted reasons outlined above. Nothing in this Plan shall require an Employer to grant a paid leave of absence to any Employee. 2.26 "Normal Retirement Age" of a Participant shall be age 65. 2.27 "Normal Retirement Date" of a Participant shall be the first day of the month next following the month in which his sixty-fifth birthday occurs. 2.28 "Participant" shall mean any Covered Employee and any former Covered Employee who is entitled to, or who is receiving, a retirement benefit or deferred vested pension under the Plan. 2.29 "Period of Severance" shall mean the period of time between an Employee's Date of Severance and the date as of which he performs his first Hour of Service following reemployment. 2.30 "Plan" or "Pension Plan" shall mean this "Erie Insurance Group Retirement Plan for Employees" as herein set forth with all amendments, modifications and supplements hereafter made. 2.31 "Plan Year" shall mean any period of 12 consecutive calendar months next preceding an Anniversary Date of the Plan. 2.32 "Service" shall mean an Employee's service determined in accordance with Article IV hereof for the purposes of meeting the eligibility requirements for a benefit under the Plan. 8 2.33 "Social Security Covered Compensation" shall mean, for any Plan Year, the average (without indexing) of the Social Security taxable wage bases in effect for each calendar year during the 35-year period ending with the last day of the calendar year in which the Participant attains (or will attain) Social Security Retirement Age (as such term is defined in Section 10.1(a)(iv) hereof). In determining a Participant's Social Security Covered Compensation for a Plan Year, the Social Security taxable wage base for the current Plan Year and any subsequent Plan Year shall be assumed to be the same as in effect for the Plan Year for which the determination is being made. A Participant's Social Security Covered Compensation shall be automatically adjusted for each Plan Year in accordance with these provisions, up to and including the Plan Year in which the Participant attains Social Security Retirement Age. 2.34 "Test Compensation" shall mean, for any Plan Year, an Employee's compensation, reported under Sections 6041 and 6051 of the Code on Form W-2, as paid by the Company or other Employer for the calendar year ending with or within such Plan Year, including any amounts contributed pursuant to a salary reduction election on behalf of a Covered Employee to a plan described in Sections 125, 402(e)(3), 402(h)(1)(B), 403(b), 457(b) or, for periods on and after January 1, 2001, 132(f)(4) of the Code for the period in question. Test Compensation in any given year shall not exceed the adjusted annual limitation in effect for such year (as set forth in Section 2.11), provided that such limitation shall not be applied in determining the top 10 Highly Compensated Employees subject to family aggregation under the Plan (applicable to Plan Years beginning before January 1, 1997) and for purposes of determining the status of an Employee as a Highly Compensated Employee or Key Employee. To the extent permitted under regulations and other guidance promulgated by the Internal Revenue Service, the Company may elect to determine Test Compensation on a basis other than that provided above. 2.35 "Top Paid Group" means all active Employees who, as of a given year, are in the top twenty percent (20%) of the Company's work force on the basis of Test Compensation for such year, excluding the following: (a) employees who have not completed six (6) months of Service by the end of such year; (b) employees who work less than seventeen and one-half (17-1/2) hours per week for such year; (c) employees who normally do not work more than six (6) months in a year; 9 (d) employees under age twenty-one (21) at the end of such year; and (e) non-resident aliens who received no U.S. - source income for such year. For purposes of this Section, the Company's work force shall include individuals employed by an Affiliate. 2.36 "Total and Permanent Disability" shall mean permanent incapacity resulting in the Participant being unable to engage in any gainful employment or occupation by reason of any medically demonstrable physical or mental condition, excluding, however, (a) incapacity contracted, suffered or incurred while the Participant was engaged in or which resulted from having engaged in a felonious enterprise; and (b) incapacity contracted, suffered or incurred in the employment of other than an Employer, including self-employment. 2.37 "Trust Agreement" shall mean the trust agreement between the Company and a Trustee as provided in Section 9.1, together with all amendments, modifications and supplements, thereto. 2.38 "Trustee" shall mean the Trustee or Trustees designated under a Trust Agreement including any successor or successors. 2.39 "Trust Fund" or "Fund" shall mean the retirement plan trust fund established by the Company in accordance with Article IX. 10 ARTICLE III ADMINISTRATION OF THE PLAN 3.1 Pension Administrator The Plan shall be administered by a Pension Administrator (the "Administrator") who shall serve at the pleasure of the Board of Directors. Any individual serving as the Administrator may resign by delivering his written resignation to the Board. In the event of the death, resignation or removal of the Administrator, the Board shall fill the vacancy. In making the appointment, the Board shall not be limited to any particular group, and nothing herein contained shall be construed to prevent any Participant, director, officer, employee or shareholder of the Employers from serving as the Administrator. The Administrator will not be compensated from the Trust Fund for services performed in such capacity, but the Company or Fund will reimburse such individual for expenses reasonably incurred by him in such capacity. If the Board does not appoint any individuals to the Administrator, then the Company shall act as the Administrator. Appointment by the Board shall be evidenced by a certified copy of the resolution of the Board making such appointment, and copies of such certified resolution shall be delivered to the Trustee and to such other persons as may require such notice. 3.2 Powers The Administrator will have full power to administer the Plan in all of its details, subject, however, to the requirements of ERISA. This power shall include having the sole and absolute discretion to interpret and apply the provisions of the Plan to determine the rights and status hereunder of any individual, to decide disputes arising under the Plan, and to make any determinations and findings of fact with respect to benefits payable hereunder and the persons entitled thereto as may be required for any purpose under the Plan. Without limiting the generality of the above, the Administrator is granted the following authority which it shall discharge in its sole and absolute discretion in accordance with Plan provisions as interpreted by the Administrator: (a) To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan, including the modification of the claims procedure under Section 3.8 in accordance with any regulations issued under Section 503 of ERISA. (b) To interpret the Plan. 11 (c) To decide all questions concerning the Plan and the eligibility of any person to participate in the Plan, his period of participation and/or service under the Plan, his date of birth, his eligibility to accrue a benefit under the Plan and to receive a distribution from the Plan. (d) To compute the amount of benefits which will be payable to any Participant or other person in accordance with the provisions of the Plan, and to determine the identity of the person or persons to whom such benefits will be paid. (e) To authorize the payment of Plan benefits and to direct cessation of benefit payments. (f) To appoint one or more investment managers to manage the investment and reinvestment of the Fund and to enter into management contracts on behalf of the Company with respect to such appointments. Unless and until the Administrator appoints an investment manager with respect to all or a specific portion of the Fund, the Trustee shall have exclusive authority to manage and control all or such portion of the Fund. (g) To appoint, employ or engage such other agents, counsel accountants, consultants and actuaries as may be required to assist in administering the Plan. (h) To establish procedures to determine whether a domestic relations order is a qualified domestic relations order within the meaning of Section 414(p) of the Code, to determine under such procedures whether a domestic relations order is a qualified domestic relations order and whether a putative alternate payee otherwise qualifies for benefits hereunder, to inform the parties to the order as to the effect of the order, and to direct the Trustee to hold in escrow or pay any amounts so directed to be held or paid by the order. (i) To determine whether the Plan has incurred a partial termination. (j) To obtain from the Employers, Employees, Participants, spouses and Beneficiaries such information as shall be necessary for the proper administration of the Plan. (k) To perform all reporting and disclosure requirements imposed upon the Plan by ERISA, the Code or any other lawful authority. (l) To take such steps as it, in its discretion, considers necessary and/or appropriate to remedy any inequity under the Plan that results from incorrect information received or communicated or as the consequence of administrative error. (m) To correct any defect, reconcile any inconsistency or supply any omission under the Plan. (n) To delegate its powers and duties to others in accordance with Section 3.3. 12 (o) To exercise such other authority and responsibility as is specifically assigned to it under the terms of the Plan and to perform any other acts necessary to the performance of its powers and duties. The Administrator at its discretion may either request the Company or direct the Fund to pay for any or all services rendered by the Trustee and by persons appointed, employed or engaged under Section 3.2(f) or (g) or under the terms of the Trust Agreement. The Administrator's interpretations, decisions, computations and determinations under this Section 3.2 which are made in good faith will be final and conclusive upon the Employers, all Participants and all other persons concerned. Any action taken by the Administrator with respect to the rights or benefits of any person under the Plan shall be revocable by the Administrator as to payments or distributions not theretofore made, pursuant to such action, from the Trust Fund; and appropriate adjustments may be made in future payments or distributions to a Participant or Beneficiary to offset any excess payment or underpayment previously made to such Participant or Beneficiary from the Trust Fund. No ruling or decision of the Administrator in any one case shall create a basis for a retroactive adjustment in any other case prior to the date of written filing of each specific claim. 3.3 Delegation of Duties The Administrator may, from time to time, designate any individual to carry out any of the responsibilities of the Administrator other than the appointment of an investment manager(s). The individual so designated will have full authority or such limited authority as the Administrator may specify, to take such actions as are necessary or appropriate to carry out the responsibilities assigned by the Administrator. 3.4 Administrator as Named Fiduciary The Administrator will be a "named fiduciary" for purposes of section 402(a)(1) of ERISA with authority to control and manage the operation and administration of the Plan. 3.5 Conclusiveness of Various Documents The Administrator and the Company and its directors and officers will be entitled to rely upon all tables, valuations, certificates and reports furnished by any actuary, 13 accountant, counsel or other expert appointed, employed or engaged by the Administrator or the Company. 3.6 Actions to be Uniform Any discretionary actions to be taken under the Plan by the Administrator will be nondiscriminatory and uniform with respect to all persons similarly situated. 3.7 Liability and Indemnification To the full extent allowed by law, the Administrator shall not incur any liability to any Participant or Beneficiary, or to any other person, by reason of any act or failure to act on the part of the Administrator if such act or omission is not the result of the Administrator's gross negligence, willful misconduct or exercise of bad faith. To the full extent allowed by law, the Company agrees to indemnify the Administrator against all liability and expenses (including reasonable attorney's fees and other reasonable expenses) occasioned by any act or omission to act if such act or omission is not the result of the Administrator's gross negligence, willful misconduct or exercise of bad faith. Neither this Section 3.7 nor any other provision of this Plan shall be applied to invalidate, modify, or limit in any respect any contract, agreement, or arrangement for indemnifying or insuring the Administrator against, or otherwise limiting, such liability or expense, or for settlement of such liability, to the extent such contract, agreement, or arrangement is not precluded by the terms of Section 410 of ERISA. 3.8 Claims Review Procedure. The Administrator shall be responsible for the claims procedure under the Plan. An application for a retirement benefit or other benefit under the Plan shall be considered a claim for purposes of this Section 3.8. (a) Original Claim. In the event a claim of any Participant, Beneficiary, alternate payee, or other person (hereinafter referred to in this Section as the "Claimant") for a benefit is partially or completely denied, the Administrator shall give, within ninety (90) days after receipt of the claim (or if special circumstances, made known to the Claimant, require an extension of time for processing the claim, within one hundred eighty (180) days after receipt of the claim), written notice of such denial to the Claimant. Such notice shall set forth, in a manner calculated to be understood by the Claimant, the specific reason or reasons for the denial (with reference to pertinent Plan provisions upon which the denial is based); an 14 explanation of additional material or information, if any, necessary for the Claimant to perfect the claim; a statement of why the material or information is necessary; on and after January 1, 2002, a statement of the Claimant's right to bring a civil action under Section 502(a) of ERISA; and an explanation of the Plan's claims review procedure, including the time limits applicable to such procedure. If the notice of denial is not furnished within the required time period specified above, the claim shall be deemed to be denied and the Claimant shall be permitted to proceed to the review stage described in paragraph (b). (b) Review of Denied Claim. (i) A Claimant whose claim is partially or completely denied shall have the right to request a full and fair review of the denial by a written request delivered to the Administrator within sixty (60) days of receipt of the written notice of claim denial (or sixty (60) days after the date on which the claim is deemed denied under paragraph (a) above), or within such longer time as the Administrator, under uniform rules, determines. In such review, the Claimant or his duly authorized representative shall have the right to review, upon request and free of charge, all documents, records or other information relevant to the claim and to submit any written comments, documents, or records relating to the claim to the Administrator. (ii) The Administrator, within sixty (60) days after the request for review, or in special circumstances, such as where the Administrator in its sole discretion holds a hearing, within one hundred twenty (120) days of the request for review, will submit its decision in writing. Such decision shall take into account all comments, documents, records and other information properly submitted by the Claimant, whether or not such information was considered in the original claim determination. The decision on review will be binding on all parties, will be written in a manner calculated to be understood by the Claimant, will contain specific reasons for the decision and specific references to the pertinent Plan provisions upon which the decision is based, will indicate that the Claimant may review, upon request and free of charge, all documents, records or other information relevant to the claim and on and after January 1, 2002, will contain a statement of the Claimant's right to bring a civil action under Section 502(a) of ERISA. If 15 no decision is made within the time period specified above, the claim shall be deemed to be denied on review. (iii) If a Claimant fails to file a claim or request for review in the manner and in accordance with the time limitations specified herein, such claim or request for review shall be waived, and the Claimant shall thereafter be barred from again asserting such claim. (c) Determination by the Committee Conclusive. The Administrator's determination of factual matter relating to Participants, Beneficiaries and alternate payees including, without limitation, a Participant's Credited Service, Service and any other factual matters, shall be conclusive. The Administrator and the Company and its respective officers and directors shall be entitled to rely upon all tables, valuations, certificates and reports furnished by an actuary, any accountant for the Plan, the Trustee or any investment managers and upon opinions given by any legal counsel for the Plan insofar as such reliance is consistent with ERISA. The actuary, the Trustee and other service providers may act and rely upon all information reported to them by the Administrator and/or the Company and need not inquire into the accuracy thereof nor shall be charged with any notice to the contrary. 3.9 Waiver of Participation It is the purpose of this Plan to provide for the accrual of retirement benefits for all Covered Employees. Notwithstanding the foregoing, any Covered Employee may waive participation in this Plan by executing a Waiver of Participation on a form provided by the Administrator for such purpose. Any Waiver of Participation shall be effective for the Plan Year in which it is executed and shall be irrevocable. During any Plan Year for which a Waiver of Participation is in effect, no Service, Credited Service or Compensation shall be recognized under the Plan for the Covered Employee. 16 ARTICLE IV SERVICE PROVISIONS 4.1 Service Service shall be used to determine a Participant's vested rights under the Plan. An Employee shall receive Service for the period of time between his Date of Hire and his Date of Severance, provided that no Service shall be received for the period of continued absence between the first and second anniversary of the date of first absence from work by reason of a Maternity or Paternity Absence. Service shall be counted for full years only. Service shall include any prior periods of Service that are reinstated in accordance with Section 4.3 below. Service shall include any Period of Severance which has continued for less than one year. Notwithstanding the foregoing, Service (but not Credited Service) shall include periods of absence granted under The Family and Medical Leave Act of 1993, to the extent of the minimum service credit required by said Act. 4.2 Credited Service Credited Service shall be used to compute the amount of a Participant's benefit and to determine a Participant's eligibility for an early retirement and a disability retirement under the Plan. Credited Service shall be based on Service but shall not include (i) any period of Service in which a Participant is not a Covered Employee, and (ii) any Period of Severance; provided, however, that a Participant's Credited Service shall include that Credited Service accumulated during the period in which the Participant is eligible for a disability retirement pension (as determined under Sections 5.3, 6.3 and 7.2 hereof). Solely for purposes of computing the amount of a Participant's benefit under Section 6.1 and subject to the foregoing provisions of this Section, Credited Service shall include a year of credit for any fraction of a year of Service. 4.3 Loss and Reinstatement of Service In the event a Participant incurs a Date of Severance prior to his becoming eligible for a retirement benefit or deferred vested pension under the Plan, he shall be deemed to receive a distribution equal to the actuarial equivalent value of the entire vested pension earned through his Date of Severance. In such a case, the Participant shall lose his Service and Credited Service and his Accrued Pension shall be forfeited as of such date of deemed distribution. If subsequently reemployed as a Covered Employee, a 17 Participant shall, after again completing one year of Service, be considered a Plan Participant retroactively as of such date of reemployment and have his forfeited Service, Credited Service and Accrued Pension reinstated if his last Period of Severance is less than the greater of: (a) five years, or (b) the Participant's forfeited Service (including any periods of Service previously reinstated under the provisions of this Section 4.3 or its predecessor). 4.4 Transfer To Other Employment Upon the transfer of a Participant covered by the Plan to other employment with an Employer or Affiliate whereby he ceases to be a Covered Employee hereunder, his Accrued Pension based on his Credited Service and Final Average Earnings as of the transfer date shall be frozen and Credited Service shall cease to accrue for purposes of the Plan. In the event such Participant remains in the employment of an Employer until such time as, except for such transfer, he would have met the age, service and/or other eligibility requirements for any pension under the Plan, such frozen Accrued Pension shall become payable in accordance with the appropriate provisions of the Plan as in effect on the date of transfer. 4.5 Transfer From Other Employment Upon transfer or retransfer of an individual from other employment with an Employer or Affiliate such that the individual becomes a Covered Employee hereunder, his years of Service as otherwise computed under this Article IV will include the period of his employment with an Employer or Affiliate prior to such transfer or retransfer for the purpose of meeting the vesting requirements under this Plan; provided, however, that only years of Credited Service acquired while employed as a Covered Employee covered under this Plan shall be used to compute the amount of any pension under this Plan. 18 ARTICLE V ELIGIBILITY FOR PENSIONS 5.1 Normal Retirement A Participant whose employment with an Employer and all Affiliates is terminated when or after he attains Normal Retirement Age shall be eligible for a normal retirement pension in the amount as provided in Section 6.1 hereof. A Participant's right to his normal retirement pension shall be nonforfeitable upon the attainment of his Normal Retirement Age provided he is an Employee on such date. A Participant continuing in employment with an Employer after his Normal Retirement Date in a capacity such that he completes 40 or more Hours of Service per month will be provided with a notice incorporating the substance of the notification described in Section 2530.203-3(b)(4) of the Code of Federal Regulations. Such notice shall include a statement that the Participant's pension will be suspended and permanently withheld for months in which he completes 40 or more Hours of Service. Any benefit accrual earned by a Participant for any given Plan Year ending on or after the date on which the Participant attains Normal Retirement Age shall be reduced (but not below zero) by the amount of any actuarial adjustment which may be required in connection with a delay in payment of a Participant's normal retirement benefit or the suspension of benefits otherwise payable after the Participant attains Normal Retirement Age. 5.2 Early Retirement A Participant with 15 or more years of Credited Service whose employment with an Employer and all Affiliates is terminated when or after he reaches the age of 55 but prior to the attainment of age 65, shall be eligible for an early retirement pension in the amount as provided in Section 6.2 hereof. 5.3 Disability Retirement A Participant whose status as a Covered Employee is terminated due to his Total and Permanent Disability after 15 or more years of Credited Service and prior to the attainment of age 65, and who is eligible for and receiving disability benefits under the Erie Insurance Group Long Term Disability Plan shall be eligible for a disability retirement pension in an amount as provided in Section 6.3 hereof beginning at his Normal Retirement Date providing he remains Totally and Permanently Disabled up to his Normal Retirement Date. 19 5.4 Vesting A Participant with 5 years or more of Service and whose employment with an Employer and all Affiliates is terminated at a time when he is ineligible for any retirement pension under the Plan shall be eligible for a deferred vested pension as computed under Section 6.4. If a Participant is reemployed as a Covered Employee by an Employer after having qualified for a deferred vested pension in accordance with this Section 5.4, such Participant shall retain his right to receive such deferred vested pension and he shall be reinstated with the Service and Credited Service to which he was entitled at the time of his prior termination of employment. Any benefits to which the Participant may be entitled upon his subsequent retirement or termination of employment shall be reduced actuarially, as provided in Section 7.4, to reflect any deferred vested pension benefits paid prior to reemployment. 20 ARTICLE VI AMOUNT OF PENSIONS 6.1 Normal Retirement Pension Subject to the provisions of Section 7.1 and Article X, the monthly pension of a Participant who is eligible for a normal retirement pension under the provisions of Section 5.1 (as stated in the form of a life annuity) shall be one-twelfth (1/12) of the result obtained by multiplying the sum of (a) and (b) by (c), where: (a) equals 1.0% of the Participant's Final Average Earnings not in excess of Social Security Covered Compensation; (b) equals 1.5% of the Participant's Final Average Earnings in excess of Social Security Covered Compensation; and (c) equals the Participant's Credited Service not in excess of 30 years. In no event shall the overall permitted disparity limits of Section 1.401(l)-5 of the Income Tax Regulations be exceeded. 6.2 Early Retirement Pension Subject to the provisions of Section 7.1 and Article X, the monthly early retirement pension of a Participant eligible for an early retirement pension under the provisions of Section 5.2 shall be, at the option of the Participant, either (a) or (b) as set forth below: (a) A deferred pension, commencing as of the Participant's Normal Retirement Date, equal to the amount of pension, determined under Section 6.1, to which he is entitled based upon his Credited Service and Final Average Earnings as of his date of early retirement and the level of Social Security Covered Compensation in effect on such date. (b) An immediate pension, commencing as of the month following the month in which such Participant retires early, determined as provided in (a) above, but reduced by 1/4 of 1 percent for each complete calendar month up to 60 such months and by 3/8ths of 1 percent for each complete calendar month in excess of 60 months, by which his early retirement pension commencement date precedes his Normal Retirement Date. 6.3 Disability Retirement Pension Subject to the provisions of Section 7.2 and Article X, a Participant eligible for disability benefits under the provisions of Section 5.3 and under Title II of the Social Security Act shall receive a disability retirement pension beginning as of his Normal 21 Retirement Date. Such disability retirement pension shall be in an amount determined in accordance with Section 6.1 assuming that: (a) service and Credited Service are granted for each calendar year (and part thereof) during which he continues to be Totally and Permanently Disabled and to qualify for Social Security disability benefits, and (b) his Compensation during his last full calendar year before his termination due to disability continues unchanged from the calendar year including his date of disability to the calendar year including his Normal Retirement Date, and (c) his Social Security Covered Compensation is based on the level in effect at the time he becomes disabled. 6.4 Deferred Pension Upon Termination of Service Subject to the provisions of Section 7.3 and Article X, the monthly pension, commencing as of Normal Retirement Date, of a former Covered Employee whose employment with an Employer and Affiliates has terminated after he has become eligible for a deferred vested pension in accordance with Section 5.4, shall be equal to the pension such Participant would have been entitled to under Section 6.2(a) as of his termination of employment, multiplied by a vesting percentage determined in accordance with the table immediately below:

Years of Service Vesting Percentage - ---------------- ------------------ Less than 5 0% 5 or more 100%

Except as otherwise provided under Section 8.1, any Participant having less than five years of Service at the time of his death or other termination of employment with the Employers or an Affiliate shall have no vested rights under this Plan and neither he nor his spouse or Beneficiary shall be entitled to any benefits under this Plan. A former Covered Employee who is eligible for a deferred vested pension and who is credited with 15 or more years of Credited Service may elect (by written application) to commence his deferred vested pension in a reduced amount at any time between the ages of 55 and 65, in which case the monthly pension amount as determined above shall be reduced in accordance with the provisions of subsection (b) of Section 6.2 based on the number of months that his Annuity Starting Date precedes his Normal Retirement Date. 22 6.5 Increase in Pension for Certain Retired Participants (a) Notwithstanding the foregoing provisions of this Article VI and effective for Plan payments made on or after January 1, 1996, the monthly pension payable to a Qualified Pensioner (or to the Beneficiary of a Qualified Pensioner) shall be increased by the greater of five percent (5%) or twenty dollars ($20.00). For purposes of this subsection (a), a "Qualified Pensioner" means a Participant who retired under the normal retirement, early retirement, or disability retirement provisions of the Plan prior to January 1, 1994. (b) Notwithstanding the foregoing provisions of this Article VI and effective for Plan payments made on or after January 1, 1999, the monthly pension payable to a Qualified Pensioner (or to the Beneficiary of a Qualified Pensioner) shall be increased by the greater of four percent (4%) or fifteen dollars ($15.00). For purposes of this subsection (b), a "Qualified Pensioner" means a Participant who retired under the normal retirement, early retirement, or disability retirement provisions of the Plan and commenced Plan payment prior to January 1, 1997. 6.6 Offset of Accruals by Plan Distributions In the event distribution of benefits commence to an employed Participant pursuant to Section 7.10 or for any other reason after the employed Participant has attained his Normal Retirement Age, any increase in the Participant's monthly benefit which accrues in any Plan Year in which such distribution is made shall be reduced (but not below zero) by the Actuarial Equivalent of total Plan benefit distributions made to such Participant by the close of such Plan Year. 6.7 Non-Duplication of Benefits (a) There shall be no duplication of any retirement benefit or deferred vested pension benefit payable under this Plan, and any pension or retirement benefit payable under any other qualified defined benefit pension, retirement, or similar plan to which an Employer or predecessor Employer of the particular Participant has contributed, based upon the same period of service. Unless such other benefits are clearly intended to be in addition to benefits under this Plan, the Administrator shall make or cause to be made appropriate adjustments in the retirement benefit or deferred vested pension benefit payable under this Plan in respect to any Participant to carry out the provisions of this paragraph. 23 (b) No benefit shall be payable to any Participant under more than one Section of the Plan for the same period of time. No retirement benefit or deferred vested pension benefit shall be paid to any Participant while he is receiving benefits under a long-term disability benefit contract or plan to which an Employer or Affiliate has contributed. 6.8 Special Provisions Pertaining to Section 401(a)(17) Employees Unless otherwise provided under the Plan, the Accrued Pension of each Section 401(a)(17) Employee (as hereinafter defined) will be the greater of the Accrued Pension determined for such Employee under (a) or (b) below: (a) The Employee's Accrued Pension determined with respect to the benefit formula applicable for the Plan Year beginning on or after December 31, 1994, as applied to the Employee's total years of service taken into account under the Plan for the purpose of benefit accruals; or (b) The sum of: (i) the Employee's Accrued Pension as of the last day of the last Plan Year beginning before December 31, 1994, frozen in accordance with Section 1.401(a)(4)-13 of the Income Tax Regulations, and (ii) the Employee's Accrued Pension determined under the benefit formula applicable for the Plan Years beginning on and after December 31, 1994, as applied to the Employee's years of service credited for Plan Years beginning on and after December 31, 1994, for purposes of benefit accruals. A "Section 401(a)(17) Employee" means a Covered Employee whose current Accrued Pension as of a date on or after the first day of the first Plan Year beginning on or after December 31, 1994, is based on Compensation for a year beginning on or after December 31, 1994, that exceeded $150,000. 24 ARTICLE VII COMMENCEMENT AND DURATION OF PENSIONS 7.1 Normal and Early Retirement Pensions Any normal or early retirement pension shall be payable to a retired Participant who has applied therefor in accordance with the rules established by the Administrator, commencing as of the first day of the month next following the date as of which he retires (or, if later, commencing as of the first day of the month next following the date as of which such application was made), and shall be payable monthly for the remaining life of such retired Participant. The last payment to the retired Participant under this form shall be for the month in which the death of such retired Participant occurs. However, if the retired Participant duly accepted the Automatic Surviving Spouse's Pension as set forth in Section 7.5 or elected an optional form of pension in Section 7.7 and is receiving his retirement pension pursuant to such election, then any pension payments to him and his surviving spouse or Beneficiary shall be as set forth in Section 7.5 or 7.7, whichever applicable. 7.2 Disability Retirement Pension A disability retirement pension shall be payable to a disabled Participant who has applied therefor in accordance with the rules established by the Administrator, commencing as of the Participant's Normal Retirement Date (or, if later, commencing as of the first day of the month next following the date as of which such application was made), provided the Participant has remained continuously disabled (within the meaning of Section 5.3) up to his Normal Retirement Date. To ascertain whether a Participant retains his eligibility for a disability retirement pension up to his Normal Retirement Date, he may be required by the Administrator to submit to a medical examination at any time prior to age 65, but not more often than semi-annually. If it is determined by the Administrator that he is no longer totally and permanently disabled on the basis of such an examination, or that he has engaged or is engaging in gainful employment (except for purposes of rehabilitation approved by the Administrator), or that prior to age 65 he ceases to be eligible for disability benefits under the Social Security Act, then his eligibility for a disability retirement pension will end and, if reemployed, his Credited Service accumulated to that time shall be reinstated. If such retired Participant is not reemployed by an Employer upon the 25 termination of such disability, he shall be entitled to such pension as may be available to him under Article V based on his then current age and Credited Service. In the event a person eligible for a disability retirement pension refuses to submit to a medical examination as required by the Administrator, all his rights to a disability retirement pension hereunder shall cease until he submits to such examination. Any disability pension shall be payable monthly for the remaining life of such retired Participant. The last payment to the retired Participant under this form shall be for the month in which the death of such retired Participant occurs. However, if the Participant duly accepted the Automatic Surviving Spouse's Pension as set forth in Section 7.5 or elected an optional form of pension in Section 7.7 and is receiving his retirement pension pursuant to such election, then any pension payments to him and his surviving spouse or Beneficiary shall be as set forth in Section 7.5 or 7.7, whichever applicable. 7.3 Deferred Vested Pension A deferred vested pension shall be payable to a Participant who has met the criteria provided in Section 5.4, commencing as of the Participant's Normal Retirement Date (or, if later, commencing as of the first day of the month next following the month proper application is made therefor), or, if the Participant has at least 15 years of Credited Service as of his termination of employment, commencing as of the first day of any month between the ages of 55 and 65 in accordance with an eligible Participant's election to receive a reduced amount under the provisions of Section 6.4. A deferred vested pension shall be payable monthly for the remaining life of the Participant. The last payment to the Participant under this form shall be for the month in which the death of such Participant occurs. However, if the Participant duly elected the Automatic Surviving Spouse's Pension as set forth in Section 7.5 or elected an optional form of pension in Section 7.7 and is receiving his deferred vested pension pursuant to such election, then any pension payments to him and his surviving spouse or Beneficiary shall be as set forth in Section 7.5 or 7.7, whichever applicable. 7.4 Reemployment of a Retired Participant The pension payable to any Participant receiving retirement benefits or deferred vested pension benefits shall cease and be permanently withheld if and when such Participant is reemployed by an Employer; provided, however, that no pension shall be withheld by the Plan pursuant to this Section 7.4 for any month during which such reemployed 26 Participant has been employed in a classification which is not covered under the Plan or during which such Participant fails to complete 40 or more Hours of Service. In addition, no payment shall be withheld by the Plan pursuant to this Section 7.4 unless the Plan notifies the reemployed Participant by personal delivery or first class mail during the first calendar month in which the Plan withholds payments that his benefits are suspended. Such notification shall contain a description of the specific reasons why benefit payments are being suspended, a general description of the Plan provisions relating to the suspension of payments, a copy of such provisions, and a statement to the effect that applicable Department of Labor regulations may be found in Section 2530.203-3 of the Code of Federal Regulations. In addition, the suspension notification shall inform the reemployed Participant of the Company's procedure for affording a review of the suspension of benefits. The retirement or deferred vested pension shall resume with the month following subsequent retirement or termination of employment. Any retirement or deferred vested pension payable upon such subsequent retirement or termination shall be determined as provided in Article VI on the basis of the Participant's Credited Service at the time of his previous retirement or termination, plus his Credited Service as a Participant during his period of reemployment; provided, however, that such retirement or deferred vested pension shall be reduced by the actuarial equivalent of the retirement or deferred vested pension benefits, if any, that the Participant received prior to his reemployment. Notwithstanding the foregoing, in no event shall a Participant's retirement or deferred vested pension payable following his subsequent retirement or termination be less than that retirement or deferred vested pension payable to the Participant prior to his reemployment. In the determination of the Final Average Earnings of a Participant who is reemployed and who again becomes an active Participant, the thirty-six month period to be considered shall be the number of months in such period of reemployment prior to his subsequent date of retirement or termination, plus such number of months immediately prior to his earlier retirement or termination as shall total thirty-six months; provided that Final Average Earnings shall in no case be diminished as a result of such period of reemployment. 7.5 Automatic Surviving Spouse's Pension A married Participant who is eligible to commence payments pursuant to the normal, early or disability retirement provisions of the Plan or pursuant to the deferred vested pension provisions of the Plan and whose benefit may not be paid under the provisions 27 of Section 7.8 shall automatically be deemed to have elected, at the commencement dates otherwise specified herein, an immediate monthly pension during his lifetime with the provision that, following his death, a monthly survivor's pension equal to 50 percent of his reduced pension shall be payable to his surviving spouse during the further lifetime of the spouse (the "Automatic Surviving Spouse's Pension"). Such pension shall be actuarially equivalent to an immediate single life annuity. The automatic election provided in this Section 7.5 shall become effective as of the Participant's Annuity Starting Date; provided, however, that such automatic election shall become effective only after the Participant and his surviving spouse have been married for at least one year. Notwithstanding the foregoing, if the Participant and his designated spouse have not been married for at least one year as of the Participant's Annuity Starting Date, the Automatic Surviving Spouse's Pension hereunder shall nonetheless take effect, provided that, in the event the Participant and his designated spouse do not remain married for a period of at least one year the Plan shall treat the Participant as not having been married on the Annuity Starting Date with the result that no survivor pension shall be payable to the spouse (absent a Qualified Domestic Relations Order to the contrary) and no retroactive correction shall be made to the benefit payable to the Participant. An unmarried Participant who retires pursuant to the normal, early or disability retirement provisions of the Plan or pursuant to the deferred vested pension provisions of the Plan and whose benefit may not be paid under the provisions of Section 7.8 shall automatically be deemed to have elected a monthly pension payable for his lifetime. A Participant may prevent the automatic election provided in this Section 7.5 at any time within the "applicable election period" (as hereafter defined) by executing a specific written rejection of such an election on a form approved by the Administrator and filing it with the Administrator; provided that such rejection shall not take effect unless the Participant's spouse, if applicable, consents to such rejection in accordance with Section 7.6 of the Plan. Any election to revoke the Automatic Surviving Spouse's Pension and any spouse's consent thereto must specify the particular optional form of benefit elected by the Participant and, if applicable, must state the specific non-spouse Beneficiary or Beneficiaries (including any class of Beneficiaries or any contingent Beneficiaries) who may be entitled to any benefits upon the Participant's death. Any subsequent change in optional form of benefit or in a non-spouse Beneficiary selected 28 shall be valid only if accompanied by the written and witnessed consent of the Participant's spouse in the manner described in Section 7.6. During the period beginning no more than 90 days and ending no less than 30 days prior to the Participant's Annuity Starting Date, the Administrator shall furnish to the Participant a written general description of the automatic election provided in this Section 7.5. The general description shall include a written explanation of the Participant's and spouse's rights under the Automatic Surviving Spouse's Pension, including the availability and effect of the election to reject the Automatic Surviving Spouse's Pension. Such description shall also provide information as to the material features of the optional forms of benefit as well as a brief explanation of their relative values as compared to the Automatic Surviving Spouse's Pension. In addition, in the event the Participant's Annuity Starting Date is prior to his attainment of Normal Retirement Age, such description shall inform the Participant of his right to defer receipt of the Plan distribution. A Participant may make and revoke his written rejection of an Automatic Surviving Spouse's Option at any time and any number of times within the "applicable election period". The "applicable election period" shall commence 90 days prior to the Participant's Annuity Starting Date and shall end on the Participant's Annuity Starting Date. Notwithstanding the foregoing, effective on and after January 1, 1997, the written description identified in this paragraph may be provided after the Participant's Annuity Starting Date provided the Participant has at least 30 days following distribution of the written description to reject the Automatic Surviving Spouse's Pension and elect another form of payment permitted under the Plan. Distribution to the Participant may commence after seven days have elapsed from the date the Administrator provides the written description provided that the Participant has received information that clearly indicates his right to at least 30 days to consider the contents of the description, the Participant affirmatively elects distribution and any required spousal consent is satisfied. A Participant who retires pursuant to the normal, early or disability retirement provisions of the Plan or pursuant to the deferred vested pension provisions of the Plan and who is entitled, under such provisions, to a pension with a lump sum actuarial equivalent value not in excess of $5,000 (or for distributions prior to December 31, 2001 was not in excess of $3,500 at the time of that distribution or any prior distribution) shall receive his pension in accordance with Section 7.8 hereof. 29 7.6 Requirement for Spouse Consent Any election of a married Participant under Sections 7.5 and 7.7 (other than an election to revoke a rejection of the Automatic Surviving Spouse's Pension under Section 7.5) shall require the consent of the Participant's spouse unless it is established to the satisfaction of the Administrator that the consent required under this Section 7.6 may not be obtained: (i) because there is no spouse or because the spouse cannot be located, (ii) because the Participant is legally separated from the spouse, (iii) because the Participant has been abandoned by his spouse (within the meaning of local law) and such Participant has a court order to that effect, or (iv) because of such other circumstances as the Secretary of the Treasury may by regulations prescribe. Any consent by a spouse shall be in writing acknowledging the effect of such election or revocation and witnessed by a notary public or such Plan representatives as may be designated for this purpose by the Administrator. Any spouse's consent (or establishment that the spouse's consent may not be obtained) shall be effective only with respect to such spouse. 7.7 Optional Forms of Pensions In lieu of a benefit in the form of payment determined in Section 7.5, a Participant may, with the consent of his spouse as described in Section 7.6, elect an actuarially equivalent benefit described below. This election is effective as of a Participant's Annuity Starting Date. (a) Option A: 10-Year Certain and Life Option - A reduced monthly retirement income is payable to the Participant during his remaining lifetime, and upon his death prior to receiving payment for a period equivalent to 120 months, monthly payments of the same reduced amount will be made to his Beneficiary until the number of monthly payments made to the Beneficiary, when added to the number of monthly payments made to the Participant, is equivalent to 120 monthly payments. (b) Option B: 15-year Certain and Life Option - A reduced monthly retirement income is payable to the Participant during his remaining lifetime, and upon his death prior to receiving payment for a period equivalent to 180 months, monthly payments of the same reduced amount will be made to his Beneficiary until the number of monthly payments made to the Beneficiary, when added to the 30 number of monthly payments made to the Participant, is equivalent to 180 monthly payments. (c) Option C: 50% Joint and Survivor Option - a reduced monthly retirement income is payable to the Participant for his remaining lifetime, and upon his death, monthly income of 50% of such reduced monthly income previously paid to the Participant shall be paid to his Beneficiary for as long thereafter as that person shall live. (c) Option D: 100% Joint and Survivor Option - a reduced monthly retirement income is payable to the Participant for his remaining lifetime, and upon his death, monthly income of 100% of such reduced monthly income previously paid to the Participant shall be paid to his Beneficiary for as long thereafter as that person shall live. (e) Option E: Joint and Survivor Pop-Up Option - a reduced monthly retirement income is payable to the Participant for his remaining lifetime, and upon his death, monthly income of either 50% or 100% (as elected by the Participant) of such reduced monthly income previously paid to the Participant shall be paid to the Participant's spouse for as long thereafter as such spouse shall live; provided, however, that in the event the spouse of the Participant predeceases the Participant and such spouse's death occurs within 60 months of the Participant's Annuity Starting Date, the provisions of Section 7.12 shall apply. Notwithstanding any provision of the Plan to the contrary (i) the Joint and Survivor Pop-Up Option shall be available only with respect to a Participant who has retired under the normal retirement provisions of Section 5.1 or the early retirement provisions of Section 5.2, and (ii) actuarial equivalence of a benefit payable under the Joint and Survivor Pop-Up Option shall be determined under Section 11.6; provided, however, that in the event an annuity contract is purchased from an insurance company with respect to such benefit, actuarial equivalence shall thereafter be determined by reference to the specific annuity contract which will be purchased by the Plan to provide the monthly retirement income payable under this form of payment. Election of these options must be made during the applicable election period described in Section 7.5. Except to the extent otherwise provided under Section 8.4, if either the Participant or his Beneficiary dies after the election of an option is made but before the Annuity Starting Date such option will not become effective. If the Beneficiary shall die after commencement of the joint and survivor pension, but before the death of the retired Participant, the Participant shall continue to receive the reduced pension payable 31 in accordance with such option. An option may be cancelled by the Participant prior to the Annuity Starting Date. The effect of such cancellation shall be to reinstate the life annuity specified in Section 7.1, 7.2 or 7.3, whichever applicable, or, if the Participant is married, the Automatic Surviving Spouse's Pension under Section 7.5 (in which case any subsequent option election must satisfy the requirements of Section 7.5). Except to the extent expressly permitted under the Plan, no election regarding an optional form of payment may be made by a Participant following the Participant's Annuity Starting Date. If the Beneficiary designated by a Participant in connection with the election of an optional form of benefit is not the spouse of the Participant, then the election shall be effective only if the minimum distribution incidental benefit requirements of Section 1.401(a)(9)-2 of the Income Tax Regulations are satisfied with respect to such distribution. 7.8 Payment of Small Pension Notwithstanding any provision of the Plan to the contrary, if the actuarial equivalent present value of any retirement benefit, deferred vested pension or survivor benefit does not exceed $5,000 (or for distributions prior to December 31, 2001, did not exceed $3,500 at the time of distribution or any prior distribution), the pension shall be paid as soon as practicable in a lump sum equal to such present value. No lump sum payments shall be made if the actuarial equivalent present value of the benefit is in excess of these thresholds. For determinations made prior to December 31, 1995, the actuarial equivalent present value of a retirement benefit, deferred vested pension or survivor benefit for purposes of this Section 7.8 shall be calculated on the basis of the UP-1984 Table (reflecting a one-year setback for Participants and a two-year setback for Beneficiaries) and the interest rates which would be used (as of the beginning of the month in which the distribution occurs) by the Pension Benefit Guaranty Corporation in determining the present value of a lump sum distribution on plan termination. In no event shall such actuarial equivalent present value be less than that calculated using the same mortality table described above with a 6% interest rate. For determinations made on and after December 31, 1995, the actuarial equivalent present value of a retirement benefit, deferred vested pension or survivor benefit shall be calculated and paid on the basis of the "applicable mortality table" defined in Section 417(e)(3)(A)(ii)(I) of the Code and the annual interest rate on 30-year Treasury securities for the second calendar month preceding the month in which the distribution is payable; provided, however, that in the event the Alternative Present Value (as hereinafter defined) of the applicable benefit is a larger amount, such larger amount shall be paid (provided such Alternative 32 Present Value calculation does not exceed $5,000 or, for periods prior to December 31, 2001, $3,500). For purposes of this Section 7.8, the "Alternative Present Value" of a retirement benefit, deferred vested pension or survivor benefit shall be based on the Accrued Pension earned by the Participant at the earlier of his termination of employment, or December 30, 1995, determined by using the UP-1984 mortality table (reflecting a one-year setback for Participants and a two-year setback for Beneficiaries) and a 6% interest rate. The provisions of this Section 7.8 shall likewise apply to any Participant who terminates his employment with an Employer and all Affiliates prior to his completion of such period of Service as is required for a deferred vested pension under the Plan. In such case the terminated Participant shall be deemed to receive a lump sum distribution of the actuarial equivalent present value of his entire vested pension as of his date of termination of employment. Subject to Section 7.9 hereof, a Participant who receives a distribution (or deemed distribution) under this Section 7.8 shall lose his Credited Service (and Service, in the case of a deemed distribution) under the Plan, shall forfeit his nonvested Accrued Pension and shall no longer be considered a Participant hereunder after such date of distribution (or deemed distribution). 7.9 Repayment of Cashout on Reemployment Notwithstanding any provision of Section 7.8 to the contrary, in the event a Participant described in Section 7.8 receives a distribution described thereunder and is subsequently reemployed by an Employer as a Covered Employee, such Participant's Credited Service and Accrued Pension earned before his termination of employment shall be reinstated for all purposes of the Plan if the Participant repays to the Plan the full amount of his distribution with interest, compounded annually from the date of distribution to December 30, 1988 at the rate of five percent (5%) per annum and from December 31, 1988 to the date of repayment at the rate determined for each Plan Year within such period under Section 411(c)(2)(C) of the Internal Revenue Code. With respect to a former Participant who has been deemed to receive a distribution of his entire vested pension upon his termination of employment in accordance with the second paragraph of Section 7.8, such individual shall be deemed to have repaid such distribution, with interest, as of his date of rehire and such Participant's Service, Credited Service and Accrued Pension earned before his termination of employment shall be reinstated as of such date. For purposes of the foregoing, the period in which the Participant's repayment or deemed repayment must occur shall end on the earlier of 33 the fifth anniversary of the Participant's reemployment or the date on which the Participant's Period of Severance extends to five consecutive years. 7.10 Delay in Commencement of Pension Payments In no event shall payment of any pension under the provisions of this Article VII commence as of a date that is later than 60 days after the close of the Plan Year during which a Participant attains his Normal Retirement Date or, if later, terminates his employment with an Employer and Affiliates. Notwithstanding the foregoing, with respect to a Participant who attains age 70-1/2 before January 1, 1999 and any Participant who attains age 70-1/2 after January 1, 1999 but who has either terminated employment with an Employer and all Affiliates prior to attaining such age or is a 5% owner (for purposes of Section 416 of the Code), distribution of benefits to the Participant must commence no later than the April 1st of the calendar year following the calendar year in which the Participant attains age 70-1/2 unless the Participant had attained age 70-1/2 prior to January 1, 1988. With respect to an employed Participant who attains age 70-1/2 on or after January 1, 1999, distribution of benefits to the Participant (other than a 5% owner), must commence no later than the April 1st of the calendar year following the calendar year in which the Participant retires. In the case of a Participant who retires in a calendar year after the calendar year in which he attains 70-1/2 and who has not commenced payments as of the first day of such later calendar year, the Plan benefit accrued by the Participant shall be actuarially increased, to the extend required by regulations, to take into account the period (commencing on the April 1st of the calendar year following the calendar year in which the Participant attains 70-1/2 and ending on the date payment commences) during which the Participant did not receive any benefits under the Plan; provided, however, that such actuarial increase, to the extent permitted by regulations, shall reduce the benefit accrual otherwise occurring during such period. Notwithstanding any provision of the Plan to the contrary, all distributions under the Plan shall be made in accordance with regulations under Section 401(a)(9) of the Code (including Section 1.401(a)(9)-2 of the Income Tax Regulations). Furthermore, those provisions reflecting Section 401(a)(9) of the Code (as included here by reference if not specifically stated) shall override any provision hereof inconsistent with Section 401(a)(9). 34 7.11 Direct Rollover of Eligible Rollover Distributions. Notwithstanding any provision of the Plan to the contrary, a Distributee may elect, subject to provisions adopted by the Administrator which shall be consistent with income tax regulations, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover to such plan. The Administrator shall notify a Distributee of his right to elect a Direct Rollover. Such notice shall be provided to the Distributee not less than 30 days before the vested Accrued Pension maintained on behalf of the Distributee is distributed without the Distributee's affirmative election to make or not make a Direct Rollover. A Distributee's affirmative election to make or not make a Direct Rollover may be implemented by the Administrator less than 30 days after the Distributee receives such notice of his Direct Rollover rights, but only if the Administrator notifies the Distributee that he has the right to consider the decision of whether or not to elect a Direct Rollover for up to 30 days. A Distributee who is eligible for an automatic lump sum distribution under Section 7.8 and who has been given a timely notice and explanation of the election to have his Eligible Rollover Distribution paid to an Eligible Retirement Plan will be presumed to have elected to have his benefit paid directly to him if the Distributee fails to make the election within 31 days of being notified of his rights to make the election. For purposes of this Section: (a) The term "Distributee" shall mean a Covered Employee or former Covered Employee. In addition, such an individual's surviving spouse or such an individual's spouse or former spouse who is an alternate payee within the meaning of Section 414(p)(8) of the Code are Distributees with respect to the interest of the spouse or former spouse. (b) The term "Eligible Rollover Distribution" shall mean any distribution of all or any portion of the balance to the credit of the Distributee other than: any distribution that is one of a series of substantially equal periodic payments made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and his beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; for periods on and after January 1, 1999, that portion of a hardship withdrawal that is attributable to elective contributions within the meaning of Section 1.401(k)-1(g) of Income Tax Regulations; and the portion of any distribution that is not includible in gross income. (c) The term "Eligible Retirement Plan" shall mean an individual retirement account or annuity, as described in Code Sections 408(a) and 408(b), 35 respectively, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to a surviving spouse, an "Eligible Retirement Plan" is an individual retirement account or annuity. (d) The term "Direct Rollover" shall mean a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 7.12 Change to Pension Payments in Connection with Qualifying Event. (a) In the event an Eligible Retiree (as hereinafter defined) experiences a Qualifying Event (as hereinafter defined), the provisions of this Section 7.12 shall apply, provided that the Eligible Retiree furnishes the Administrator with reasonable notice of the Qualifying Event within 120 days of the Qualifying Event and provides such further information applicable hereunder as the Administrator may reasonably require. For purposes of this Section: (i) "Eligible Retiree" shall mean a Participant who has retired under the normal retirement provisions of Section 5.1 or the early retirement provisions of Section 5.2 and who, as of his Annuity Starting Date, was either: (A) legally married and commencing receipt of his retirement income in the form of an Automatic Surviving Spouse's Pension (as defined in Section 7.5), under the 100% Joint and Survivor Option (with his spouse as Beneficiary thereunder) or, on or after November 1, 1997, under the Joint and Survivor Pop-Up Option; or (B) unmarried and commencing receipt of his retirement income in the normal form of benefit provided under Section 7.1 (a life annuity). (ii) "Qualifying Event" shall mean an event described in (A), (B) or (C) below: 36 (A) The spouse of an Eligible Retiree who is receiving retirement income under the Joint and Survivor Pop-Up Option under Section 7.7(e) predeceases the Eligible Retiree and such spouse's death occurs within 60 months of the Eligible Retiree's Annuity Starting Date; (B) The marital status of an Eligible Retiree who is receiving retirement income under any of the forms of payment described in subparagraph (a)(i)(A) of this Section 7.12 changes on or after September 1, 1997 and within 120 months of his Annuity Starting Date due to the Eligible Retiree's divorce, marital dissolution, or legal separation; or (C) The marital status of an Eligible Retiree who is described under subparagraph (a)(i)(B) of this Section 7.12 changes on or after September 1, 1997 and within 120 months of his Annuity Starting Date due to the Eligible Retiree's marriage. (iii) "Qualifying Event Election Period" shall mean the 90-day period beginning on the date on which the Eligible Retiree timely notifies the Administrator of a Qualifying Event, as provided in Section 7.12(a) above. (iv) The determination of an Eligible Retiree's marital status and the determination of whether a divorce, marital dissolution or legal separation has occurred shall be made on the basis of applicable state law unless preempted by federal law. (b) Unless the Eligible Retiree timely makes an election under Section 7.12(c), in the event of the occurrence of a Qualifying Event described in subparagraphs (a)(ii)(A) or (a)(ii)(B) of this Section 7.12, and contingent upon the Eligible Retiree's timely notification to the Administrator, the retirement income payable to the affected Eligible Retiree shall revert to the normal form of benefit 37 provided under Section 7.1 (a life annuity) as of the first day of the month following the expiration of the Qualifying Event Election Period; provided, however, that: (i) the amount of such monthly life annuity shall be the actuarial equivalent of the Eligible Retiree's benefit, determined as of the time of calculation hereunder, under the form of payment in effect as of his Annuity Starting Date; provided, however, that such monthly amount shall not exceed the amount of the monthly life annuity which the Eligible Retiree was entitled to as of his Annuity Starting Date; and (ii) in the case of a Qualifying Event described in subparagraph (a)(ii)(B) of this Section 7.12, the spouse or ex-spouse of the Eligible Retiree, as part of the division of marital property (or other determination which is not subject to modification under state law), expressly waives all interest in the Eligible Retiree's pension under the Plan and such waiver is incorporated into a document which satisfies the formal requirements of a "Qualified Domestic Relations Order" as defined in Section 414(p) of the Code; and (iii) in the case of a Qualifying Event described in subparagraph (a)(ii)(B) of this Section 7.12, the spouse or ex-spouse of the Eligible Retiree shall secure such proof of insurability as the Administrator may require, in its discretion; and (iv) in the case of a Qualifying Event described in subparagraph (a)(ii)(C) of this Section 7.12, the Eligible Retiree shall secure such proof of insurability as the Administrator may require, in its discretion. (c) In the case of any Qualifying Event and contingent upon the Eligible Retiree's timely notification to the Administrator, the affected Eligible Retiree shall be permitted to elect, within the Qualifying Event Election Period, to receive his 38 future retirement income from the Plan in any form of payment offered under the Plan; provided, however, that: (i) payments under any elected form of payment shall commence as of the first day of the month next following the month in which the Eligible Retiree makes full and complete application to the Administrator in accordance with rules established by the Administrator (such commencement date referred to herein as the "Adjusted Commencement Date"); and (ii) payments under any elected form of payment shall be the actuarial equivalent of the Eligible Retiree's benefit, determined as of the time of calculation hereunder, under the form of payment in effect as of his Annuity Starting Date; provided, however, that such monthly amount shall not exceed the amount of the monthly benefit under the elected form of payment which the Eligible Retiree was entitled to as of his Annuity Starting Date; and (iii) In the case of a Qualifying Event described in subparagraph (a)(ii)(B) of this Section 7.12, the spouse or ex-spouse of the Eligible Retiree, as part of the division of marital property (or other determination which is not subject to modification under state law), expressly waives all interest in the Eligible Retiree's pension under the Plan and such waiver is incorporated into a document which satisfies the formal requirements of a "Qualified Domestic Relations Order" as defined in Section 414(p) of the Code; and (iv) In the case of a Qualifying Event described in subparagraph (a)(ii)(B) of this Section 7.12, the spouse or ex-spouse of the Eligible Retiree shall secure such proof of insurability as the Administrator may require, in its discretion; and 39 (v) In the case of a Qualifying Event described in subparagraph (a)(ii)(C) of this Section 7.12, the Eligible Retiree shall secure such proof of insurability as the Administrator may require, in its discretion; and (vi) The provisions of Sections 7.5 and 7.6 hereof shall apply with respect to any Eligible Retiree who is married as of the Adjusted Commencement Date and, for purposes of such Sections and Section 7.7, the Adjusted Commencement Date shall be deemed the Annuity Starting Date for the elected form of payment described in this Section 7.12(c); and (vii) In no event shall more than one election be made under this Section 7.12(c) by an Eligible Retiree with respect to any single Qualifying Event nor shall any Eligible Retiree be permitted to make more than two elections under this Section 7.12(c), irrespective of the number of Qualifying Events affecting such Eligible Retiree; and (viii) A Participant's status as an Eligible Retiree must be independently satisfied with respect to each Qualifying Event (substituting, where applicable, the Adjusted Commencement Date for the Annuity Starting Date under Section 7.12(a)(i)). 40 ARTICLE VIII DEATH BENEFITS 8.1 Death Prior to Retirement or Severance Upon the death of a Participant prior to his Date of Severance, his surviving spouse, if any, shall receive a monthly surviving spouse's benefit under the assumption that the Participant had retired the day prior to his death with an Accrued Pension under the Plan as determined in accordance with the provisions of subsection 6.2(a), and under the further assumption that the automatic election of a surviving spouse's benefit pursuant to subsection 7.5 was in effect at the time of death. Such surviving spouse benefit shall commence as of the first day of the month following the Participant's death, shall be unreduced for early commencement and shall be payable for the lifetime of the surviving spouse. For purposes of Sections 8.1, 8.2 and 8.3, the interest that is payable to the Participant's surviving spouse shall be distributed over a period not in excess of the life expectancy of such surviving spouse and shall commence no later than the December 31 of the calendar year in which the Participant would have attained age 65 (or the December 31 of the calendar year immediately following the calendar year of the Participant's death, if later). 8.2 Death Prior to Commencement of Early or Disability Pensions Upon the death of a Participant after his Date of Severance, and prior to his Annuity Starting Date and while the Participant is awaiting the commencement of payment of either: (1) an early retirement pension pursuant to subsection 6.2(a) above, or (2) a disability pension after attainment of age 55 but prior to the attainment of his Normal Retirement Date, his surviving spouse, if any, shall receive a monthly surviving spouse's benefit under the assumption that the Participant had retired the day prior to his death with an Accrued Pension under the Plan as determined in accordance with the provisions of subsection 6.2(a), and under the further assumption that the automatic election of a surviving spouse's benefit pursuant to subsection 7.5 was in effect at the time of death. Such surviving spouse's benefit shall commence as of the first day of the month following the Participant's death unless the surviving spouse elects a later commencement date. Such benefit shall be reduced for early commencement in accordance with the provisions of Section 6.2(b) and shall be payable for the lifetime of the surviving spouse. 41 Upon the death of a disabled Participant who is awaiting commencement of his pension at his Normal Retirement Date and who is under age 55 at the time of his death, his surviving spouse, if any, shall receive a monthly surviving spouse's benefit determined under the provisions of Section 8.1 assuming he died prior to his Date of Severance. If a Participant terminates employment when eligible for a disability retirement pension under Section 5.3 and at a time during which he is receiving long term disability benefits under the Erie Insurance Group Long Term Disability Plan, then service to date of death will be included for benefit purposes. 8.3 Death Prior to Commencement of Vested Pensions If a vested former Participant who has at least one Hour of Service on or after December 31, 1976, and who has been married for at least one year on his date of death, dies on or after August 23, 1984 but prior to his Annuity Starting Date, then his spouse shall be provided with a preretirement survivor annuity determined as follows: (a) in the case of a Participant who dies after the date on which the Participant attained his Earliest Retirement Age as though such Participant had retired on the day before the Participant's date of death, with an immediate benefit determined under the provisions of Section 6.2(a) and payable under the Automatic Surviving Spouse's Pension in Section 7.5 of the Plan, or (b) in the case of a Participant who dies on or before the date on which the Participant would have attained his Earliest Retirement Age, as though such Participant had: (i) separated from Service on the date of death, (ii) survived to his Earliest Retirement Age, (iii) retired with an immediate benefit determined under the provisions of Section 6.4 and payable under the Automatic Surviving Spouse's Option in Section 7.5 of the Plan at the Earliest Retirement Age, and (iv) died on the day after the day on which such Participant would have attained the Earliest Retirement Age. Under this Section 8.3, a monthly surviving spouse's benefit shall commence as of the first day of the month following the later of the month of the Participant's death or the month in which the Participant would have attained his Earliest Retirement Age under the Plan unless the surviving spouse elects a later commencement date (which shall not 42 be later than the December 31 of the calendar year in which the deceased Participant would have attained age 65). Such surviving spouse's benefit shall be reduced for early commencement in accordance with Section 6.2(b) and shall be payable thereafter for the remainder of the surviving spouse's lifetime. 8.4 Effect of Valid 100% Joint and Survivor Election Notwithstanding the foregoing, in the event a Participant described in Section 8.1, 8.2 or 8.3 above has made a valid election of Option D under Section 7.7 and names his spouse as Beneficiary thereunder, the amount of the Pre-Retirement Survivor Annuity shall be equal to the reduced monthly amount which otherwise would have been payable to the Participant as determined through application of the foregoing provisions of this Article VIII. 8.5 Death on or After Annuity Starting Date Upon the death of a Participant on or after his Annuity Starting Date, payments, if any, to a Beneficiary shall be made in accordance with the form of benefit in effect on the date of the Participant's death. If the Beneficiary of the deceased Participant is entitled to receive the remaining certain period payments from the 10-Year or 15-Year Certain and Life forms of payment, the Administrator shall instruct the Trustee to pay to such Beneficiary the actuarial equivalent value of the monthly payments to which the Beneficiary is entitled in a single sum. Actuarial equivalence for this purpose shall be determined under the assumptions set forth in Section 7.8. If the Beneficiary under such form of payment is the surviving spouse of the deceased Participant, then any amounts payable may be converted to an actuarially equivalent life annuity to such spouse provided the spouse requests payment in such form. Notwithstanding the foregoing, in all events the deceased Participant's remaining interest in the Plan shall be distributed at least as rapidly as under the form of distribution in operation as of the date of the Participant's death. 8.6 Death Benefit for Vested Participants Who Terminated After September 1, 1974 and Prior to August 23, 1984 Any vested former Participant who terminated after September 1, 1974 and prior to August 23, 1984 and whose benefits are not in pay status as of August 23, 1984 is to be provided with the right to elect to receive such benefits reduced and payable in the form of a qualified 50% joint and survivor annuity as defined by ERISA and the Internal 43 Revenue Code as in effect prior to August 23, 1984, including the right to revoke such coverage without spousal consent if such former Participant: (a) completed at least one Hour of Service under the Plan after September 1, 1974, and (b) survives to his Annuity Starting Date. 44 ARTICLE IX TRUST FUND AND THE TRUSTEE 9.1 Trust Fund Subject to the provisions of this Section 9.1, the Company shall execute a Trust Agreement with a Trustee (or Trustee) selected by the Company under the terms of which a Trust Fund will be established for the purpose of receiving and holding contributions made by the Company as well as interest and other income on investments of such funds, and for the purpose of paying the pensions and other benefits provided by the Plan and paying any expenses incident to the operation of the Plan or Trust Fund to the extent authorized by the Company. The Trustee is to manage and operate the Trust Fund and to receive, hold, invest and reinvest the funds of the Trust. The Company shall determine the form and terms of such Trust Agreement, may modify the Trust Agreement from time to time to accomplish the purpose of the Plan, may remove any Trustee and may select any successor trustee. Pensions under the Plan may alternatively be provided through the purchase of annuity contracts issued by an insurance company. In lieu of a Trust Agreement and Trust Fund, the Company may utilize a contract or contracts of insurance for the purpose of receiving and holding contributions made by the Company and for the purpose of paying pensions and other benefits provided by the Plan, and in such event the references hereunder to "Trust Agreement", "Trustee" and "Trust Fund" shall be deemed to be references to "Insurance Contract", "Insurance Carrier" and "Insured Fund" respectively. 9.2 Irrevocability The Trust Fund shall be used to pay pensions and other benefits as provided in the Plan and, as provided in Section 9.6, those reasonable expenses, taxes and fees incurred in the administration of the Plan and Trust Fund which are not paid directly by the Company. No part of the principal or income of the fund shall be used for or diverted to purposes other than those provided in the Plan and no part of the Trust Fund shall revert to the Company for the benefit of the Company, except as permitted under Sections 9.3, 11.4 and 12.2 hereof. 9.3 Contributions by the Company The Company will pay to the Trustee, subject to all the other provisions of the Plan, such amounts as its Board determines, authorizes and directs; provided that as a 45 minimum contribution, the Company intends to pay to the Trustee such amounts as may be necessary to meet the minimum funding standards established under the Employee Retirement Income Security Act of 1974. The Company also intends to pay all expenses incident to the operation of the Plan that are not paid directly from the Trust Fund. Any forfeitures arising from the severance of employment or death of a Participant, or for any other reason, shall be used to reduce the contributions of the Company under the Plan and shall not be applied to increase the pensions or benefits any Participant would otherwise receive under the Plan at any time prior to the termination of the Plan. Payments made to meet the minimum funding standards established under ERISA shall, to the maximum extent permitted by valid provisions of ERISA, be in complete discharge of the financial obligation of the Company under this Plan. The pension benefits of the Plan shall, subject to valid provisions of ERISA, be only such as can be provided by the assets of the Trust and there shall be no further liability or obligation on any Employer to make any further contributions to the Trust for any reason. Except as prescribed by valid provisions of ERISA, the Company does not guarantee continuity of payment of any benefits under the Plan. The Company does not, in any event, guarantee that its contributions or the Trust Fund will be sufficient to provide the benefits hereunder. All rights of Participants and Beneficiaries, and of any person claiming under any Participant or Beneficiary, shall be enforceable only against the Trust Fund, except as ERISA may otherwise provide. Notwithstanding any provisions of the Plan to the contrary, each contribution made by the Company shall be conditioned upon the deductibility of the contribution under Section 404 of the Code. If the deduction of all or part of the contribution is disallowed, the contribution shall, to the extent disallowed, be repaid to the Company within one year after the date of disallowance. A contribution also may be repaid to the Company, within one year after the date made, to the extent it exceeded the full funding limitation or otherwise was made in error because of a mistake in fact. Amounts returned under this Section 9.3 shall recognize any net losses attributable to the returned contribution but shall not include any net earnings thereon. 9.4 Contributions By Participants No Participant shall be required or allowed to make any contribution to the Trust Fund established under the Plan. 46 9.5 Benefits Payable Only From Trust Fund Payment of benefits under the Plan to Participants and Beneficiaries will be made only by the Trustee from the funds or securities held by the Trust and/or the annuity contract or contracts held by the Trust. Except as may be provided by law, no liability for the payment of benefits to Participants or their Beneficiaries hereunder shall be imposed upon the Company, any Employer or the officers or shareholders of the Company or any Employer, and there shall be no liability or obligation on the part of the Company or any Employer, to make any further contributions in the event of termination of the Plan. 9.6 Plan Expenses All reasonable expenses, taxes and fees of the Plan, the Administrator and the Trustee incurred in the administration of the Plan and Trust Fund shall be paid from the Trust Fund; provided, however, that the obligation of the Trust Fund to pay such expenses, taxes and fees shall cease to exist to the extent that the same are paid, at the discretion of the Company, by the Employers. 47 ARTICLE X BENEFIT LIMITATIONS 10.1 Maximum Limitation Under Section 415(b) of the Code Any provisions of the Plan to the contrary notwithstanding, benefits payable under the Plan shall be subject to the following limitations: (a) Maximum Annual Benefit: (i) Subject to the exception below, the Annual Benefit (as hereinafter defined) payable under this Plan for any limitation year beginning on or after January 1, 1995 shall not exceed the lesser of the Dollar Maximum of $120,000 or the Percentage Maximum of 100% of the Participant's average compensation for the period of three consecutive years during which the Participant had the greatest aggregate compensation from an Employer. Compensation, in determining a Participant's Percentage Maximum, shall include the total of all amounts paid to a Participant by an Employer during the limitation year which are defined as wages within the meaning of Section 3401(a) of the Code and, for years beginning on and after January 1, 1998, shall include amounts contributed pursuant to a salary reduction election on behalf of the Participant to a plan described in Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457(b) of the Code and, for periods on and after January 1, 2001, to a plan described in Section 132(f)(4) of the Code. Effective each January 1, the Dollar Maximum described above shall be automatically adjusted to the new dollar limitation for that calendar year as determined by the Secretary of the Treasury pursuant to Section 415(d) of the Code. To the extent permitted under Section 415 of the Code, such adjusted limitation shall be applied to the benefits payable to current retirees for that calendar year. (ii) For purposes of this Section, "Annual Benefit" means the benefit payable in the form of a straight-life annuity or a qualified joint and survivor pension, with no ancillary benefit, on an annualized basis. If a benefit is payable in any other form, the Annual Benefit limitation shall be applied by adjusting it to the equivalent of a straight-life annuity. Effective for limitation years beginning before January 1, 1995, such actuarially equivalent straight-life annuity shall be computed by using an interest rate equal to the greater of 5% or the Plan's interest rate and 48 mortality shall be determined by using the Plan's mortality table. For limitation years beginning on and after January 1, 1995, the actuarially equivalent straight-life annuity is equal to the greater of (i) the annuity benefit computed using the Plan's interest rate and mortality tables for adjusting forms of payment or (ii) the annuity benefit computed using an interest rate of 5% and the "applicable mortality table" under Code Section 417(e). In determining the actuarially equivalent straight-life annuity for a benefit form subject to Code Section 417(e)(3), the actuarial assumptions used shall be the "applicable interest rate" and the "applicable mortality table" under Code Section 417(e). For these purposes, the lookback month shall be the second month preceding the Plan Year that includes the Annuity Starting Date. (iii) For purposes of the maximum limitation of this Article, all qualified defined benefit plans (whether or not terminated) maintained by an Employer or any Affiliate shall be treated as a single plan. For purposes of applying the limitations of Section 415 of the Internal Revenue Code, the terms "Employer" and "Affiliate" shall be construed in light of Sections 414(b) and (c) of the Code, as modified by Code Section 415(h). (iv) If the Annual Benefit begins before a Participant's Social Security Retirement Age (as hereinafter defined), the Dollar Maximum (but not the Percentage Maximum) shall be actuarially reduced so that it is the actuarial equivalent of an Annual Benefit beginning at the Participant's Social Security Retirement Age: (A) If a Participant's Social Security Retirement Age is 65, the Dollar Maximum for benefits commencing on or after age 62 is determined by reducing the Dollar Maximum by 5/9 of one percent for each month by which benefits commence before the month in which the Participant attains age 65. (B) If a Participant's Social Security Retirement Age is greater than 65, the Dollar Maximum for benefits commencing on or after age 62 is determined by reducing the Dollar Maximum by 5/9 of one percent for each of the first 36 months and 5/12 of one percent for each of the additional months (up to 24 49 months) by which benefits commence before the month of the Participant's Social Security Retirement Age. For purposes of this Section, the term "Social Security Retirement Age" shall mean the age used as the retirement age of a Participant under Section 216(l) of the Social Security Act, except that such Section shall be applied without regard to the age increase factor and as if the early retirement age under Section 216(l)(2) of such Act were 62. (v) If the Annual Benefit begins before age 62, the Dollar Maximum (but not the Percentage Maximum) shall be reduced so that it is the actuarial equivalent of the Dollar Maximum beginning at age sixty-two (62). For purposes hereof, the age adjusted Dollar Maximum beginning prior to age 62 shall be determined as the lesser of (i) the actuarial equivalent annual benefit computed using the Plan's interest rate and mortality table for early retirement benefits or (ii) the actuarial equivalent annual benefit computed using an interest rate of 5% and the "applicable mortality table" under Section 417(e) of the Code. (vi) If the Annual Benefit begins after a Participant's Social Security Retirement Age, the Dollar Maximum (but not the Percentage Maximum) shall be increased so that it is the actuarial equivalent of an Annual Pension beginning at such age. For purposes hereof, the annual benefit beginning after Social Security Retirement Age shall be determined as the lesser of (i) the actuarial equivalent annual benefit computed using the Plan's interest rate and mortality table for the late retirement benefits or (ii) the actuarial equivalent annual benefit computed using an interest rate of 5% and the "applicable mortality table" under Section 417(e) of the Code. (vii) For purposes of adjusting the Annual Benefit under paragraphs (i), (ii), (iv), (v) and/or (vi), no adjustments shall be taken into account before the year for which such adjustment first takes effect. (viii) The foregoing Section 415(b)(2)(E) actuarial assumptions shall apply to all benefits under the Plan (including benefits accrued before and after the RPA `94 effective date which shall be the first limitation year beginning on or after January 1, 1995). 50 (b) Adjustment for Plan Participation If a Participant retires with less than 10 years of Plan participation, the Dollar Maximum (but not the Percentage Maximum) shall be reduced by multiplying such dollar limitation by a fraction, the numerator of which is the Participant's years of participation in the Plan and the denominator of which is 10. (c) Adjustment for Years of Service If a Participant has less than 10 years of Service, the maximum Annual Benefit payable to the Participant shall be reduced by multiplying such maximum Annual Benefit by a fraction, the numerator of which is the Participant's years of Service or part thereof, and the denominator of which is 10. (d) Exception Benefits (i) Subject to the limitations of paragraph (a), this Plan may pay an Annual Benefit to any retired Participant which shall exceed 100% of such Participant's average compensation, provided that the Annual Pension shall not be in excess of $10,000 for the current Plan Year and for all prior Plan Years, and provided that the Participant shall not be or have been at any time considered as an active participant in any defined contribution plan maintained by an Employer or an Affiliate. (ii) In no event shall the adjustments for participation or Service (pursuant to subsections (b) and (c), respectively) reduce the limitation provided in paragraphs (a)(i) or (d)(i) hereof, whichever is applicable, to an amount less than one-tenth (1/10) of the applicable limitation as determined without regard to such adjustments. (iii) To the extent provided by the Secretary of the Treasury or his delegate, the adjustment for Plan participation described in subsection (b) herein shall be applied separately with respect to each change in the benefit structure of the Plan. 10.2 Defined Benefit Plan and Defined Contribution Plan Combined Limitation (a) Effective for limitation years beginning before January 1, 2000, in any case in which a Participant is a participant in both a defined benefit plan and a defined contribution plan maintained by an Employer, benefits payable under this Plan and such other plans shall not cause the limitations prescribed in Internal Revenue Code Section 415(e) to be exceeded. Except as otherwise provided in Internal Revenue Code Section 415(e), the sum of the "defined benefit plan fraction" and the "defined contribution plan fraction" shall not exceed 1.0. 51 (b) For the purposes of this Section 10.2: (i) "defined benefit plan fraction" for any limitation year is a fraction (A) the numerator of which is the projected Annual Benefit of each Participant under the Plan (determined as of the close of such limitation year), and (B) the denominator of which is the lesser of: (1) the product of 1.25 multiplied by the Dollar Maximum set forth in Section 10.1(a)(i) for such year, or (2) the product of 1.4 multiplied by the Percentage Maximum set forth in Section 10.1(a)(i). (ii) "defined contribution plan fraction" for any limitation year is a fraction (A) the numerator of which is the sum of the annual additions under Section 415(c)(2) of the Code to the Participant's account or accounts as of the close of the limitation year, and (B) the denominator of which is the sum of the lesser of the following amounts determined for such year and for each prior year of Service with an Employer: (1) the product of 1.25 multiplied by the dollar limitation in effect under Section 415(c)(1)(A) of the Code for such year, or (2) the product of 1.4 multiplied by the amount which may be taken into account under Section 415(c)(1)(B) of the Code with respect to such Participant under such plan for such year. (c) For purposes of applying the limitations set forth in this Section 10.2, all qualified defined benefit plans (whether or not terminated) ever maintained by the Company or an Affiliate shall be treated as one defined benefit plan, and all qualified defined contribution plans (whether or not terminated) ever maintained by the Company or an Affiliate shall be treated as one defined contribution plan. (d) Notwithstanding any other provisions of this Plan, the rate of benefit accrual under this Plan will be reduced to a level necessary to prevent the limitations set forth in this Section 10.2 from being exceeded with respect to any Participant; provided, however, if any Participant's benefit accrual has been reduced as provided in this Section, such reduction shall be restored effective as of the first day of the first limitation year beginning on or after January 1, 2000. 52 ARTICLE XI MISCELLANEOUS PROVISIONS 11.1 Plan Non-Contractual No Participant or Beneficiary shall have any right or interest under the Plan unless and until he becomes entitled thereto as provided in the Plan. The adoption and maintenance of the Plan shall not be deemed to constitute a contract between an Employer and any Employee. Inclusion in the Plan will not affect an Employer's right to discharge or otherwise discipline Employees and membership in the Plan will not give any Employee the right to be retained in the service of an Employer nor any right or claim to a pension or other benefit unless such right is specifically granted under the terms of the Plan. 11.2 Non-Alienation of Retirement Rights or Benefits (a) Except as provided in Section 11.2(b) or 11.2(c), no benefit payable under the Plan shall be subject in any manner to anticipation, sale, transfer, assignment, pledge, encumbrance, security interest or charge, and any action by way of anticipating, alienating, selling, transferring, assigning, pledging, encumbering, charging or granting a security interest in the same shall be void and of no effect; nor shall any such benefit be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the person entitled to such benefit. (b) Section 11.2(a) shall not apply to the creation, assignment, or recognition of a right to any benefit payable pursuant to a qualified domestic relations order as defined in Section 414(p) of the Code. The Company shall establish reasonable procedures to determine the status of domestic relations orders and to administer distributions under such orders which are deemed to be qualified domestic relations orders. Such procedures shall be in writing and shall comply with the provisions of Section 414(p) of the Code. To the extent that, because of a qualified domestic relations order, more than one individual is to be treated as a surviving spouse, the total amount payable from the Plan as a result of the death of a Participant shall not exceed the amount that would be payable from the Plan if there were only one surviving spouse. (c) Notwithstanding the provisions of Section 11.2(a), the Plan may offset any portion of the Accrued Pension of a Participant or the Participant's Beneficiary against a claim of the Plan arising: 53 (i) as a result of the Participant's or Beneficiary's conviction of a crime involving the Plan; or (ii) with regard to the Participant's or Beneficiary's violation of ERISA's fiduciary provisions upon: (A) the entry of any civil judgment, consent order, or decree against the Participant or Beneficiary; or (B) the execution of any settlement agreement between the Participant or Beneficiary and the Department of Labor or Pension Benefit Guaranty Corporation. The provisions of this Section 11.2(c) shall apply only to orders, judgments, decrees and settlements issued or entered into after August 5, 1997, and which expressly provide for such offset. 11.3 Payment of Pension to Others In the event that the Administrator shall find that any Participant or Beneficiary to whom a pension is payable, is unable to care for his affairs because of illness, accident or incapacity, any payment due (unless prior claim therefor shall have been made by a duly qualified guardian or other legal representative) may, in the discretion of the Administrator, be paid to the spouse, parent, child, brother or sister of such Participant or Beneficiary or to any other person deemed by the Administrator to be maintaining or responsible for the maintenance of such Participant or Beneficiary. Any such payment shall be a payment for the account of the Participant or Beneficiary and shall be a complete discharge of any liability of the Plan and any Employer therefor. 11.4 Prohibition Against Reversion Except as provided in Section 9.2 hereof, in no event shall any funds held in the Trust Fund revert to the Company or be diverted to purposes other than the exclusive benefit of Participants or their Beneficiaries prior to the satisfaction of all liabilities under the Plan; provided, however, that in the event the Plan is terminated, if, after all plan liabilities are satisfied, there remains a balance in the Fund as a result of actuarial error, such balance shall be returned to the Company. 11.5 Merger, Transfer of Assets or Liabilities The Company may merge or consolidate the Plan with, transfer assets and liabilities of the Plan to, or receive a transfer of assets and liabilities from, any other plan without the 54 consent of any other Employer or other person, if such transfer is effected in accordance with applicable law and if such other plan meets the requirements of Code Sections 401(a) and 501(a), permits such transfer or the receipt of such transfer and, with respect to liabilities to be transferred from this Plan to such other plan, satisfies the requirements of Code Sections 411(d)(6) and 417. This Plan may not be merged or consolidated with any other plan, nor may any assets or liabilities of this Plan be transferred to any other plan, unless the terms of the merger, consolidation or transfer are such that each Participant in the Plan would, if the Plan were terminated immediately after such merger, consolidation or transfer, receive a pension having a value equal to or greater than the pension he would have been entitled to receive if this Plan had terminated immediately prior to the merger, consolidation or transfer. 11.6 Actuarial Equivalence Any determination of actuarial equivalence required by the provisions of this Plan, when not otherwise specified in the Plan, shall be made on the basis of the UP-1984 Table (reflecting a one year setback for Employees and a two year setback for Beneficiaries) with an annual interest rate of 6%. 11.7 Change of Vesting Schedule If the Plan's vesting schedule is amended or if the Plan is deemed amended by an automatic change to or from a Top-Heavy Plan vesting schedule (Section 13.3), each Participant with at least three years of Service with an Employer may elect, within a reasonable period after the adoption of the amendment or change, to have his nonforfeitable pension computed under the Plan without regard to such amendment or change. The period during which the election may be made shall commence at the date the amendment is adopted or deemed to be made and shall end on the latest of: (a) 60 days after the amendment is adopted; (b) 60 days after the amendment becomes effective; or (c) 60 days after the Participant is issued written notice of the amendment by the Company. Notwithstanding the foregoing provisions of this Section 11.7, the vested interest of any Participant on the date such amendment is effective shall not be less than his vested interest under the Plan as in effect immediately prior to the effective date of such change. 55 11.8 Controlled Group For purposes only of determining eligibility to participate in the Plan and eligibility for any pension (but not the amount thereof) under the Plan, all employment with an Employer or an Affiliate shall be deemed to be employment with an Employer in computing Hours of Service and Service. 11.9 Severability If any provision of this Plan is held to be invalid or unenforceable, such determination shall not affect the other provisions of this Plan. In such event, this Plan shall be construed and enforced as if such provision had not been included herein. 11.10 Employer Records The records of a Participant's Employer shall be presumed to be conclusive of the facts concerning his employment or non-employment, Service, Credited Service and Compensation unless shown beyond a reasonable doubt to be incorrect. 11.11 Application of Plan Provisions This Plan shall be binding on all Participants and their spouses and Beneficiaries and upon heirs, executors, administrators, successors, and assigns of all persons having an interest herein. The provisions of the Plan in no event shall be considered as giving any such person any legal or equitable right against the Company, an Employer or an Affiliate, any of its officers, employees, directors, or shareholders, or against the Trustee, except such rights as are specifically provided for in the Plan or hereafter created in accordance with the terms of the Plan. 11.12 Missing Participants. If a Participant who has left employment with the Company and Affiliates has failed to file an application for benefits within 120 days after attainment of his Normal Retirement Date, the Administrator shall treat the Participant's retirement benefit or vested Accrued Pension as forfeited; provided, however, that such Accrued Pension shall be reinstated retroactive to the commencement date set forth below upon the subsequent filing of a completed application with the Administrator and shall commence within ninety (90) days after such application is filed. For purposes of this Section 11.12, the commencement date shall be the later of: 56 (a) sixty (60) days after the close of the Plan Year during which the Participant attained his Normal Retirement Date; and (b) sixty (60) days after the close of the Plan Year during which the Participant terminated employment with the Hospital or Affiliate. 11.13 IRC 414(u) Compliance Provision Notwithstanding any provision of the Plan to the contrary and effective as of December 12, 1994, contributions, benefits and service credit with respect to qualified military service shall be provided in accordance with Section 414(u) of the Code. 57 ARTICLE XII AMENDMENT AND TERMINATION 12.1 Amendment and Termination of the Plan The Company hopes and expects to continue the Plan, but expressly reserves the right at any time and from time to time, without the consent of Participants, (a) to reduce or discontinue payments to the Plan; (b) to terminate the Plan; (c) to amend the Plan, retroactively or otherwise, in such manner as it may deem necessary or advisable in order to qualify the Plan and any trust established in conjunction therewith under the provisions of Sections 401(a) and 501(a) of the Code, or any similar Code provisions from time to time in effect; (d) to amend the Plan in any other respect, provided, however, that no such amendment shall forfeit or diminish the interest of any Participant in the Trust Fund to the extent that such interest has become vested in such Participant, except as may be permitted under the Code or ERISA. Any such amendment to or termination of this Plan shall be evidenced by an instrument executed on behalf of the Company by the President. Such instrument shall recite at which time the amendments contained therein shall become effective. Promptly after an amendment of this Plan shall have become effective, the Company shall cause a copy of such amendment to be filed with the Administrator and with the Trustee, and the Administrator shall take such steps as it may deem appropriate to reasonably communicate the amendment to Participants. 12.2 Administration of the Plan in Case of Termination Upon termination of the Plan, as determined by the Pension Benefit Guaranty Corporation, the assets of the Trust Fund shall be liquidated and distributed in accordance with Section 4044 of ERISA and applicable regulations issued thereunder. In the event of the termination of the Plan or a partial termination of the Plan, the rights of all affected Participants to Accrued Pensions determined as of the date of such termination or partial termination, to the extent funded, or as further adjusted by the Pension Benefit Guaranty Corporation as of such date, shall be nonforfeitable. Notwithstanding the foregoing, upon Plan termination, the benefit of any Highly Compensated Employee shall be limited to a benefit that is nondiscriminatory under Section 401(a)(4) of the Code. 58 Upon termination of the Plan, after the satisfaction of all liabilities of the Plan to its Participants, Beneficiaries and surviving spouses, the Company shall receive any remaining amount resulting from any variations between actual requirements and actuarially expected requirements. 12.3 Internal Revenue Service Limitations (a) Except in such cases where the circumstances described in subsection (b) apply, the annual payments under the Plan to any one (1) of the twenty-five (25) highest paid Highly Compensated Employees (and Highly Compensated former Employees), ranked by Test Compensation, shall not exceed the sum of: (i) those payments that would be made on behalf of such Employee under a single life annuity that is the Actuarial Equivalent of the sum of the Employee's Accrued Pension and the Employee's Other Benefits (as defined in subsection (c) below) under the Plan; and (ii) those payments the Employee is entitled to receive under a social security supplement. (b) The provisions of subsection (a) above shall not apply if: (i) after payment of all such benefits to an Employee described in subsection (a), the value of Plan assets equals or exceeds 110% of the value of current liabilities (as defined in Code Section 412(l)(7) under the Plan; (ii) the value of all such benefits to an Employee described in subsection (a) above is less than one percent of the value of current liabilities under the Plan prior to the payment of all such benefits to such Employee; or (iii) the value of all such benefits to an Employee described in subsection (a) does not exceed $5,000 or such other amount as may be prescribed under Section 411(a)(11)(A) of the Code as the maximum amount that may be paid out without the Participant's consent. (c) For purposes of this Section 12.3, "Other Benefits" shall include any loan in excess of the amounts set forth in Code Section 72(p)(2)(A), any periodic income, any withdrawal values payable to a living Employee and any death benefits not provided for by insurance on the Employee's life. "Other Benefits" for this purpose shall not include any social security supplements. 59 ARTICLE XIII TOP-HEAVY PROVISIONS 13.1 General Notwithstanding any provision of this Plan to the contrary, the provisions of this Article XIII shall apply with respect to any Plan Year provided the Plan is a Top-Heavy Plan (as defined in Section 13.2(c) below) for such Plan Year. 13.2 Definitions Relating to Top-Heavy Provisions For purposes of this Article XIII: (a) "Key Employee" means any Employee or former Employee (and the beneficiaries of such an Employee or former Employee) who, during the current Plan Year or any of the four preceding Plan Years, is: (i) an officer of an Employer having annual Test Compensation greater than 50 percent of the amount in effect under Section 415(b)(1)(A) of the Code for any such Plan Year; for purposes of this definition, no more than the lesser of (1) 50 Employees or (2) the greater of three Employees or 10% of the Employees shall be treated as officers; (ii) an owner (or considered an owner under Section 318 of the Code) of one of the ten largest interests in an Employer if such individual's annual Test Compensation exceeds the dollar limitation under Section 415(c)(1)(A) of the Code; (iii) a five percent (5%) owner (or considered an owner under Section 318 of the Code) who owns more than five percent (5%) of the outstanding stock of an Employer or who owns Employer stock possessing more than five percent (5%) of the total combined voting power of all stock of an Employer; (iv) a one percent (1%) owner (or considered an owner under Section 318 of the Code) who has annual Test Compensation from an Employer of $150,000 or more, and who owns more than one percent (1%) of the outstanding stock of an Employer or who owns Employer stock possessing more than one percent (1%) of the total combined voting power of all stock of an Employer. (b) "Determination Date" means, with respect to any Plan Year, the last day of the immediately preceding Plan Year. 60 (c) "Top-Heavy Plan" means a plan where, as of the Determination Date, the present value of the cumulative accrued benefits (including any part of any accrued benefit distributed in the five-year period ending on the Determination Date) under the Plan for Key Employees exceeds sixty percent (60%) of the present value of the cumulative accrued benefits (including any part of any accrued benefit distributed in the five-year period ending on the Determination Date) under the Plan for all Employees. (i) If this Plan is in a Required Aggregation Group, each Plan of an Employer required to be in such group will be a Top-Heavy Plan if such group is a Top-Heavy Group. (ii) If this Plan is in a Permissive Aggregation Group which is not a Top-Heavy Group, no Plan of an Employer in such group will be a Top-Heavy Plan. (d) "Required Aggregation Group" means: (i) each plan of an Employer in which a Key Employee is a participant, and (ii) each other plan of an Employer which enables a plan in which a Key Employee is a participant to meet the requirements of Internal Revenue Code Sections 401(a)(4) or 410. A terminated plan must be aggregated with other plans of an Employer if it was maintained within the five-year period ending on the Determination Date for the Plan Year in question and it would, but for the fact it terminated, be part of a required aggregation group for such Plan Year. (e) "Permissive Aggregation Group" means any plan of an Employer which is not part of the Required Aggregation Group, but is treated as if it were at the option of the Company, provided such group continues to meet the requirements of Internal Revenue Code Sections 401(a)(4) and 410. (f) "Top-Heavy Group" means any Required or Permissive Aggregation Group, if as of the Determination Date, the sum of the present value of cumulative accrued benefits for Key Employees under all defined benefit plans included in such Group and the aggregate of the accounts of Key Employees under all defined contribution plans included in such Group exceeds sixty percent (60%) of the similar sum determined for all Employees. (g) "Present Value of Accrued Benefits" shall be determined as of the most recent valuation date within a twelve-month period ending on the Determination Date, 61 but for the purposes of determining whether this Plan is a Top-Heavy Plan, shall not include: (i) any rollover contribution initiated by the Employee. (ii) any accrued benefit or account attributable to an Employee who is not a Key Employee, but who was a Key Employee in any prior Plan Year. To the extent that a Key Employee is deemed to be a Key Employee if he meets the definition of Key Employee within any of the four (4) preceding Plan Years, this provision shall apply following the end of such period of time. (iii) Any accrued benefit or account attributable to any individual who has not performed any services for an Employer at any time during the five-year period ending on the Determination Date. Solely for purposes of determining if the Plan is a Top Heavy Plan as described above, the Present Value of Accrued Benefits shall be determined by using the single accrual method which is used for all plans of the Company and of any Affiliate. If no such single method exists, benefits shall be determined as if they accrued not more rapidly than the lowest accrued rate permitted under Section 411(b)(1)(C) of the Code. (h) "Valuation Date" means December 31. (i) "Non-Key Employee" means any Employee who is not a Key Employee. 13.3 Top-Heavy Plan Vesting Requirements (a) For any Plan Year in which the Plan is a Top-Heavy Plan, the following vesting schedule will apply to benefits derived from Employer contributions. The nonforfeitable interest in a Participant's accrued benefit will be determined as follows:

Nonforfeitable Percentage of Years of Service Accrued Benefit ----------------- ---------------------------- 0 but less than 2 0% 2 but less than 3 20% 3 but less than 4 40% 4 but less than 5 60% 5 or more 100%

This Section 13.3 does not apply to any Participant who does not have an Hour of Service after the Plan becomes a Top-Heavy Plan. 62 (b) If the vesting schedule under the Plan shifts in or out of the above schedule due to determination of whether or not the Plan is a Top-Heavy Plan, such shift shall be an amendment to the vesting schedule and Section 11.7 shall apply. 13.4 Top-Heavy Plan Minimum Benefit Requirements (a) For any Plan Year in which the Plan is determined to be a Top-Heavy Plan, each Non-Key Employee Participant who has completed a year of service will accrue a minimum annual benefit (derived from Employer contributions and expressed as a life annuity beginning at Normal Retirement Age and determined without regard to any Social Security contribution or benefit). (b) Such accrual of a minimum annual benefit will be the lesser of: (i) Two percent (2%) of the Participant's highest average compensation for the five consecutive years during which the Participant had the greatest compensation from the Employer multiplied by the years of service as defined in (c) below, or (ii) Twenty percent (20%) times the Participant's highest average compensation for the five consecutive years during which the Participant had the greatest compensation from an Employer. (c) (i) For the purpose of the accrual of minimum annual benefit, year of service shall mean a year of Credited Service as defined in Article IV, but will exclude years when the Plan was not a Top-Heavy Plan for any Plan Year ending during such year of Credited Service, as well as years of Credited Service in a Plan Year beginning before December 31, 1984. Notwithstanding the above, each Non-Key Employee Participant who has completed 1,000 Hours of Service in a year in which the Plan is a Top-Heavy Plan shall be entitled to the minimum annual benefit regardless of the level of such Non-Key Employee's compensation. (ii) The compensation required to be taken into account for purposes of this Section 13.4 is the compensation described in Section 10.1(a)(i) of the Plan; provided, however, that compensation shall not exceed the adjusted annual limitation in effect for the given year (as set forth in Section 2.11) and compensation in years which end in a Plan Year beginning before December 31, 1984 and compensation in years after the close of the last Plan Year in which the Plan is a Top-Heavy Plan shall be disregarded. 63 (d) Notwithstanding any other provision of the Plan, an Employee shall be a Participant for the purposes of this Section 13.4, and a Participant shall be entitled to an accrual under this Section 13.4, even if he would not otherwise be entitled to receive an accrual or would have received a lesser accrual for the year because the Non-Key Employee Participant is not employed on a specified date. (e) If the annual retirement pension payable under the Plan to a Participant who has accrued a minimum annual benefit under this Article XIII commences at a date other than at Normal Retirement Age, such Participant shall receive at least an amount that is the actuarial equivalent of the minimum annual benefit commencing at Normal Retirement Age as provided under this Section 13.4 using a five percent (5%) interest rate assumption for such determination. If the annual retirement pension payable to a Participant who has accrued a minimum annual benefit under this Article XIII is in a form other than a single life annuity, such Participant shall receive an amount that is not less than the minimum annual benefit as otherwise provided in this Section 13.4 adjusted to be the actuarial equivalent of a single life annuity commencing at the same age using the provisions of Section 11.6 of the Plan for such determination. (f) In the case of Employees covered under both this Plan and any other plan maintained by an Employer, this Plan will provide the top heavy minimum benefit which shall be offset by the benefit, if any, provided under such other plans. 13.5 Required Adjustments In any year which begins before January 1, 2000 and in which the Plan is determined to be a Top-Heavy Plan, either (a) or (b) below must apply. (a) The defined benefit plan fraction of Section 10.2(b)(i) of the Plan and the defined contribution plan fraction of Section 10.2(b)(ii) of the Plan shall be applied by substituting 1.0 for 1.25, OR (b) (i) This paragraph may apply if this is determined to be a Top-Heavy Plan, but would not be a Top-Heavy Plan if ninety percent (90%) were substituted for sixty percent (60%) in Section 13.2(c) of this Plan, and (ii) The following modifications to Section 13.4, Minimum Benefit Requirements, are adopted: 64 In Section 13.4(b)(i): use 3% instead of 2%, and in Section 13.4(b)(ii): increase 20% by one percentage point for each year (up to 10) for which the Plan was considered under this Section 13.5. 13.6 Limited Application of this Article. The sole purpose of this Article is to comply with Section 416 of the Code and the terms of this Article shall be interpreted, applied, and if and to the extent necessary, shall be deemed modified so as to satisfy solely the minimum requirements of Section 416 of the Code and the regulations promulgated with respect thereto. 65 ARTICLE XIV JURISDICTION 14.1 Jurisdiction The provisions of the Plan shall be construed in accordance with ERISA, the Code, and, where not superseded by ERISA, the laws of the Commonwealth of Pennsylvania. Executed at Erie, Pennsylvania, this 10th day of December, 2001. ERIE INDEMNITY COMPANY By: /s/ Stephen A. Milne --------------------- President EX-10.6 9 j9708001exv10w6.txt DEFERRED COMPENSATION PLAN EXHIBIT 10.6 - DEFERRED COMPENSATION PLAN OF ERIE INDEMNITY COMPANY (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2001) ARTICLE ONE INTRODUCTION This Deferred Compensation Plan (the "Plan") is an unfunded, non-qualified, deferred compensation arrangement created for a select group of management and highly compensated employees of the Company and its Affiliates. The Plan has been amended from time to time and was last amended and restated effective January 1, 1997. Effective as of December 31, 2000, the Supplemental 401(k) Plan has been merged into the Plan. Deferred compensation credited on behalf of eligible employees under the Supplemental 401(k) Plan shall be credited under the Plan effective January 1, 2001 and shall be payable under the terms of the Plan as in effect on the date payments are to commence hereunder. This amendment and restatement of the Plan shall constitute an amendment, restatement and continuation of the Plan and the Supplemental 401(k) Plan. This amendment and restatement is generally effective as of January 1, 2001. However, certain provisions of this amendment and restatement are effective as of some other date. The provisions of this amendment and restatement with stated effective dates prior to January 1, 2001, shall be deemed to amend the corresponding provisions, if any, of the Plan or the Supplemental 401(k) Plan as in effect before this amendment and restatement and all amendments thereto as of such dates. Events occurring before the applicable effective date of any provision of this amendment and restatement shall be governed by the applicable provision of the Plan or the Supplemental 401(k) Plan as in effect on the date of the event. ARTICLE TWO DEFINITIONS The following words or phrases are defined terms whenever they appear in the Plan: 2.1 "Administrator" shall mean the person or committee, appointed by the Chief Executive Officer of the Company, who shall be responsible for the functions assigned to him under the Plan. 2.2 "Affiliate" shall mean a corporation or partnership in which more than 50% of the equity is owned directly or indirectly by the Company including, without limitation, the following: Erie Family Life Insurance Company, Erie Insurance Company, EI Holding Corp., EI Service Corp., Erie Insurance Company of New York, Erie Insurance Property & Casualty Company and Flagship City Insurance Company. 1 2.3 "Amendment Form" shall mean the Deferred Compensation Agreement Amendment Form described in Section 5.3. 2.4 "Board of Directors" shall mean the Board of Directors of the Erie Indemnity Company. 2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended. 2.6 "Committee" shall mean the Executive Compensation Committee of the Board of Directors or its successor as designated by the Board of Directors. 2.7 "Company" shall mean the Erie Indemnity Company, a Pennsylvania business corporation. 2.8 "Compensation" shall mean "Compensation" as defined under the Qualified Plan provided, however, that for purposes of the Plan, any limitation on recognized Compensation under Section 401(a)(17) of the Code shall be ignored. Except as otherwise specified by the Board of Directors, any change in the definition of Compensation under the Qualified Plan (other than a change related to Section 401(a)(17) of the Code) shall automatically be considered a change to the Plan, effective as of the effective date of change under the Qualified Plan, and the Plan shall thereafter be administered in accordance with such change. 2.9 "Deferred Compensation Account" shall mean the bookkeeping account described in Section 4.1. 2.10 "Election Form" shall mean the Deferred Compensation Plan Election Form described in Section 3.2 and/or such form described in Section 3.3. 2.11 "Participant" shall mean each employee of the Company or an Affiliate who participates in the Plan in accordance with the terms and conditions of the Plan. 2.12 "Plan" shall mean the Deferred Compensation Plan of Erie Indemnity Company, as the same incorporates, for periods on and after January 1, 2001, the Erie Insurance Group Supplemental 401(k) Plan, including any amendments hereto. 2.13 "Plan Year" shall mean the plan year applicable under the Qualified Plan. Any change in plan year under the Qualified Plan shall automatically be considered a change to the Plan, effective as of the effective date of change under the Qualified Plan. 2.14 "Qualified Plan" shall mean the Erie Insurance Group Employee Savings Plan, as amended. 2.15 "Supplemental Company Contribution" shall mean the contribution credit described in Section 4.3(b) and determined in reference to a formula set forth in the Qualified Plan. Except as otherwise specified by the Board of Directors, any change in the employer matching contribution formula under the Qualified Plan shall automatically be considered a change to the Plan, effective as of the effective date of change under the Qualified Plan, and the Plan shall thereafter be administered in accordance with such change. 2 2.16 "Supplemental Employee Contribution" shall mean the contribution credit described in Section 4.3(a) and determined in reference to a formula set forth in the Qualified Plan. Except as otherwise specified by the Board of Directors, any change in the elective contribution formula under the Qualified Plan shall automatically be considered a change to the Plan, effective as of the effective date of change under the Qualified Plan, and the Plan shall thereafter be administered in accordance with such change. 2.17 "Supplemental 401(k) Plan" shall mean the Erie Insurance Group Supplemental 401(k) Plan, as amended. Effective as of December 31, 2000, the Supplemental 401(k) Plan has been merged into, and continued under, the Plan. 2.18 "Valuation Date" shall mean the close of business as of each business day. ARTICLE THREE ELIGIBILITY AND PARTICIPATION 3.1 ELIGIBILITY The individuals who are eligible to participate in the Plan are those employees selected by the Committee. The Committee shall make its selection of employees eligible to participate at a meeting held at least 30 days before January 1 of the year next beginning or at such special meetings called for the purpose of determining the eligibility of new employees hired by the Company or its Affiliates. The Committee, in its sole discretion, shall determine to what extent an employee shall be eligible to participate under the provisions of Section 4.2 and/or Section 4.3 hereof. Except as otherwise provided by the Committee, an employee who has been selected by the Committee as eligible to participate under Section 4.2 and/or Section 4.3 of the Plan shall continue such eligibility from year to year of his employment with the Company or Affiliate, regardless of whether the employee elects to participate or not, unless the Committee, in its discretion, terminates all or part of that employee's eligibility. Acting in its sole discretion, the Committee may divide eligible employees into groups and specify different Plan features (such as maximum levels of participation) for each group. 3.2 PARTICIPATION UNDER DEFERRED COMPENSATION PROVISIONS An employee who is eligible under the provisions of Section 3.1 to participate under the provisions of Section 4.2 may elect to participate, alter the extent of his participation, or suspend or terminate his participation by delivering a properly completed and executed Election Form to the Administrator. This form shall specify: a) The amount of annual salary to be deferred and/or the amount of any bonus to be deferred; b) The Participant's investment designation in accordance with Section 4.5; 3 c) The method by which the amounts credited to his Deferred Compensation Account are to be paid; d) The date at which payment of the amounts credited to his Deferred Compensation Account is to occur (in the event of a lump sum distribution) or commence (in the event of a form of distribution other than a lump sum); and e) The beneficiary designated by the Participant to receive payment of the amounts credited to his Deferred Compensation Account in the event the Participant dies before distribution of the amounts credited to his Deferred Compensation Account is completed. The election under paragraph (a) shall be irrevocable with respect to the calendar year to which it applies. The election under paragraph (b) may be changed as provided in Section 4.5 and shall be subject to the provisions of Section 3.4. The elections under paragraphs (c) and (d) shall be irrevocable except as provided in Section 5.3 hereof and shall be subject to the provisions of Section 3.4. The election under paragraph (e) may be changed by the Participant at any time by delivering a new designation of beneficiary to the Administrator, on such form or forms as may be satisfactory to the Administrator. A designation of beneficiary shall be subject to the provisions of Section 3.4. A Participant's beneficiary designation shall be considered revoked in the event that the primary beneficiary and all contingent beneficiaries selected by a Participant die prior to the Participant. 3.3 PARTICIPATION UNDER SUPPLEMENTAL 401(k) PROVISIONS Effective January 1, 2001, an employee who is eligible under the provisions of Section 3.1 to participate under the provisions of Section 4.3 may elect to participate, alter the extent of his participation, or suspend or terminate his participation by delivering a properly completed and executed Election Form to the Administrator. This form shall specify: a) The amount of his future Compensation to be deferred; b) The Participant's investment designation in accordance with Section 4.5; c) The method by which amounts credited to his Deferred Compensation Account are to be paid; d) The date at which payment of the amounts credited to his Deferred Compensation Account is to occur (in the event of a lump sum distribution) or commence (in the event of a form of distribution other than a lump sum); and e) The beneficiary designated by the Participant to receive payment of the amounts credited to his Deferred Compensation Account in the event the Participant dies before distribution of the amounts credited to his Deferred Compensation Account is completed. 4 The election under paragraph (a) shall be irrevocable with respect to the calendar year to which it applies. The election under paragraph (b) may be changed as provided in Section 4.5 and shall be subject to the provisions of Section 3.4. The elections under paragraphs (c) and (d) shall be irrevocable except as provided in Section 5.3 hereof and shall be subject to the provisions of Section 3.4. The election under paragraph (e) may be changed by the Participant at any time by delivering a new designation of beneficiary to the Administrator, on such form or forms as may be satisfactory to the Administrator. A designation of beneficiary shall be subject to the provisions of Section 3.4. A Participant's beneficiary designation shall be considered revoked in the event that the primary beneficiary and all contingent beneficiaries selected by a Participant die prior to the Participant. 3.4 COORDINATION OF ELECTIONS Notwithstanding any provision of this Article Three to the contrary, an employee who is eligible to participate under the provisions of Sections 4.2 and 4.3 and who elects to participate under both Sections shall be required to coordinate and combine certain elections (stated below) into a single election that shall be applicable both to salary and/or bonuses deferred under Section 4.2 and Compensation deferred under Section 4.3. The elections that shall be coordinated into a single election under this Section 3.4 are: a) A Participant's investment designation described in Sections 3.2(b) and 3.3(b); b) A Participant's method of payment election described in Sections 3.2(c) and 3.3(c); c) A Participant's election regarding the time payment is made or commences, as described in Sections 3.2(d) and 3.3(d); and d) A Participant's beneficiary designation described in Sections 3.2(e) and 3.3(e). The effective date of this Section 3.4 with respect to any Participant shall be the effective date of the Participant's initial deferral under Section 4.2 or his initial deferral under Section 4.3, whichever is later. 3.5 EFFECTIVE DATE FOR PARTICIPATION The effective date for participation in the Plan by an employee who is eligible shall be the first day of the calendar year next beginning after the date the Administrator receives the employee's Election Form. The effective date for participation in the Plan by a newly hired employee who is eligible shall be the date that he begins active employment with the Company or an Affiliate as long as the Administrator has received the employee's Election Form prior to this date. The deferral of a Participant's salary under Section 4.2 and/or the deferral of a Participant's Compensation under Section 4.3 shall begin or end, as appropriate, as of the first day of the full pay period coincident with or next following the effective date of his participation as described in this paragraph. The deferral of any Participant bonus under Section 4.2 shall be effective as of the date such bonus would otherwise be payable to the Participant. 5 ARTICLE FOUR COMPENSATION DEFERRED 4.1 DEFERRED COMPENSATION ACCOUNT A deferred compensation account shall be established for each employee who becomes a Participant in the Plan. Effective January 1, 2001, the compensation each Participant elects to defer under Section 4.2 and/or any Supplemental Employee Contributions and Supplemental Company Contributions under Section 4.3 as well as hypothetical interest earned on such deferred compensation shall be maintained in this "Deferred Compensation Account." This Deferred Compensation Account shall be kept only for bookkeeping and accounting purposes and no Company funds shall be transferred or designated to this account. Effective as of December 31, 2000, the separate accounts maintained on behalf of a Participant under the Supplemental 401(k) Plan shall be merged into the Deferred Compensation Account hereunder. Any election made with respect to such separate accounts that is in effect as of December 31, 2000 shall be deemed to apply to the entire balance of the Participant's Deferred Compensation Account on or after January 1, 2001 unless the Participant has previously made a valid election applicable to the Deferred Compensation Account maintained on his behalf and such election remains in effect as of January 1, 2001. A Participant may choose to change or amend elections applicable to Deferred Compensation Accounts in the manner provided in Sections 4.5 and 5.3. 4.2 AMOUNT OF SALARY/BONUS DEFERRAL An employee who is eligible to participate under the provisions of this Section 4.2 may elect to defer receipt of up to 25% of his annual salary for services as an employee of the Company or an Affiliate. In addition to, or in lieu of, a deferral of annual salary, a Participant may elect to defer receipt of up to 100% of any bonus to be payable by the Company or an Affiliate. Such elections shall be made by the end of the calendar year which precedes the calendar year in which the deferral election is effective. Compensation deferred under this Section 4.2 shall be credited to the Participant's Deferred Compensation Account on the date such compensation would otherwise have been payable to the Participant. 4.3 AMOUNT OF SUPPLEMENTAL 401(k) CONTRIBUTIONS a) Effective January 1, 2001 an employee who is eligible to participate under the provisions of this Section 4.3 may elect to have Supplemental Employee Contributions made to the Plan on his behalf. An eligible employee shall elect to participate in the Plan within such time and in accordance with such means as are designated by the Administrator. The amount of Supplemental Employee Contribution credited hereunder with respect to a participating employee for any given year shall be determined by the Administrator, in its discretion, and shall be in reference to the amount by which the elective contributions made on behalf of such employee for such year under the Qualified Plan is limited by the application of Section 402(g) of the Code. 6 b) Effective January 1, 2001, in the event that the allocation of employer matching contributions under the Qualified Plan on behalf of a Participant is limited for any given Plan Year due to the limitation on elective contributions made on such Participant's behalf under the Qualified Plan under Section 402(g) of the Code, the amount by which such employer matching contributions are limited shall be determined by the Administrator, in its discretion, and such amount shall be credited under the Plan as a matching contribution on Supplemental Employee Contributions and shall be designated as Supplemental Company Contributions. c) Compensation deferred under this Section 4.3 shall be credited to the Participant's Deferred Compensation Account as of the date such compensation would otherwise have been treated as a contribution allocation under the Qualified Plan. 4.4 HYPOTHETICAL INTEREST Deferred compensation is assumed to earn interest and this hypothetical interest shall be credited as of each Valuation Date on the amount shown in each Participant's Deferred Compensation Account on such Valuation Date in accordance with the valuation procedure adopted by the Administrator. The hypothetical interest to be credited to each Participant shall be determined by the Administrator and computed in reference to the appreciation or depreciation experienced since the immediately preceding Valuation Date by the hypothetical investment funds which the Administrator may offer to Participants under Section 4.5. The crediting of hypothetical interest shall occur so long as there is a balance in the Participant's Deferred Compensation Account regardless of whether the Participant has terminated employment with the Company or Affiliates or has died. The Administrator may prescribe any reasonable method or procedure for the accounting of hypothetical interest. 4.5 PARTICIPANT INVESTMENT DESIGNATION a) A Participant (and any eligible employee first electing to participate in the Plan) shall designate on such form or forms as may be satisfactory to the Administrator, that portion of his compensation to be deferred under Sections 4.2 and 4.3 and, separately, that portion of any existing Deferred Compensation Account maintained on his behalf which shall be credited with hypothetical interest in reference to each of the hypothetical investment funds that may be offered by the Administrator, in the discretion of the Administrator. Such designations shall specify, in 1% increments, the percentages to be credited in reference to each of the hypothetical investment funds offered. Such designations shall remain in effect until the Participant submits a new designation within such time and in accordance with such means as is determined pursuant to a uniform policy adopted by the Administrator. Under such policy, the new designations shall be effective as of a given date specified by the Administrator. In the event a Participant fails to make an effective designation under this 7 Section 4.5(a), the Administrator, acting in its discretion, shall make such designation on behalf of the Participant. b) In accepting participation in the Plan, a Participant agrees on behalf of himself and his beneficiary(ies) to assume all risk in connection with any decrease in value of the hypothetical investment funds in reference to which hypothetical interest is credited to the Participant's Deferred Compensation Account. The Company, the Affiliates and the Administrator shall not be liable to any Participant or beneficiary for the under-performance of any hypothetical investment fund offered under the Plan. c) The Administrator may, in its discretion, offer additional hypothetical investment funds to Participants and may cease to offer any such fund at such time as it deems appropriate. In the event the Administrator decides to discontinue offering an investment fund under the Plan, those Participants on whose behalf hypothetical interest is then being credited on the basis of the discontinued hypothetical investment fund shall be required to designate, from such selection of funds as may be offered by the Administrator, a fund or funds as a replacement for the investment fund being discontinued. Such designation shall be made in accordance with Section 4.5(a) hereof. Hypothetical interest credited on behalf of any Participant who is affected by the discontinuation of a hypothetical investment fund but who fails to make the replacement designation provided in this Section 4.5(c) shall mirror, to the extent of the Participant's interest in such discontinued fund, such hypothetical investment fund or funds as the Administrator may choose in its discretion. d) Title to and beneficial ownership of any assets which the Company or any Affiliate may earmark to pay the contingent deferred compensation hereunder shall at all times remain in the Company or Affiliate. The Participant, his beneficiary(ies) and any heirs, successors and assigns shall not have any legal or equitable right, interest or control over or any property interest whatsoever in any specific assets of the Company or any Affiliate or related entity on account of having an interest under the Plan. Any and all of the Company's assets, and any life insurance policies, annuity contracts or the proceeds therefrom which may be acquired by the Company shall be, and remain, the general unpledged, unrestricted assets of the Company. In no event shall the Company or any Affiliate be required to purchase any specific shares or interest in any investment fund. 8 4.6 STATEMENTS Statements will be sent to each Participant as to the balance of his Deferred Compensation Account at least once each calendar year. ARTICLE FIVE PAYMENT OF DEFERRED COMPENSATION 5.1 PAYMENT Upon termination of employment with the Company and all Affiliates, the balance of the Participant's Deferred Compensation Account shall be paid to him according to the method and at the times selected by the Participant in his Election Form or, if applicable, in the most recent, properly executed and effective Amendment Form which the Participant has delivered to the Administrator prior to the Participant's termination of employment. 5.2 METHODS OF PAYMENT The Participant may elect any of the following methods of payment of his Deferred Compensation Account: a) A lump sum distribution; b) Payments in approximately equal annual installments for a period not to exceed 10 years; c) Payments in approximately equal monthly installments for a period not to exceed 10 years; and d) Payment of a dollar amount or percentage (as specified by the Participant) of the Participant's Deferred Compensation Account in the form of a single sum payment with the balance of such Account being paid under either the method described in Section 5.2(b) or the method described in Section 5.2(c). (Available for elections on and after November 16, 2000.) In the event the Participant dies before receiving the entire distribution owed to him, the balance in the Participant's Deferred Compensation Account on his date of death shall be paid as soon as practicable in a lump sum to the beneficiary designated by the Participant in the most recent, properly executed, beneficiary designation which the Participant has delivered to the Administrator prior to the Participant's death. If no beneficiary designation is in effect on the death of the Participant, the balance in the Participant's Deferred Compensation Account shall be paid to the estate of the Participant. 9 5.3 AMENDMENT TO PAYMENT ELECTION A Participant who is employed by the Company or an Affiliate may request to defer the date at which payment of his Deferred Compensation Account will occur (or commence) and may request a change in his elected method of payment by submitting an Amendment Form to the Administrator which indicates the period of additional deferral and/or the desired method of payment; provided, however: a) Such request of additional deferral or alternative method of payment shall be subject to the Administrator's power, to be exercised at Administrator's discretion, to direct that payment of the Participant's Deferred Compensation Account will occur or commence, or will be paid under a method, in accordance with the Participant's election(s) on a previously delivered Amendment Form or on the Participant's Election Form; and b) In no event shall any requested additional deferral or alternative method of payment become effective unless the Amendment Form evidencing such request is submitted to, and approved by, the Administrator at least twelve months prior to the date payment of the Deferred Compensation Account would otherwise have occurred or commenced under the Election Form or Amendment Form in effect on the date the Participant requests the additional deferral or alternative method of payment. 5.4 EMERGENCY CIRCUMSTANCES Notwithstanding any other provision of this Plan, if the Committee determines, after consideration of a Participant's application, that the Participant has a financial necessity of such a substantial nature that a current payment of compensation deferred under this Plan is warranted, the Committee may in its sole and absolute discretion direct that all or a portion of the Participant's Deferred Compensation Account balance be paid to him. The payment shall be made in the manner and at the times specified by the Committee for payment; provided, however, such payment shall not be in excess of that amount which is, in the discretion of the Committee, required to satisfy the financial necessity. ARTICLE SIX AMENDMENT AND DISCONTINUANCE The Company expects to continue the Plan indefinitely, but reserves the right to amend or discontinue the Plan at any time, if, in its sole judgment, such amendment or discontinuance is necessary or desirable. Any such amendment or discontinuance shall be made pursuant to a resolution of the Board of Directors and shall be effective as of the date specified in such resolution. Without a consent of the Participant, no amendment or discontinuance of the Plan shall adversely affect the balance of a Participant's Deferred Compensation Account at the time of amendment or discontinuance. In the event of a discontinuance of the Plan, the Company (or 10 any transferee, or successor entity of the Company) shall be obligated to pay Deferred Compensation Account balances to Participants and beneficiaries at such time or times and in such forms as provided under the terms of the Plan. ARTICLE SEVEN GENERAL PROVISIONS 7.1 NO EFFECT ON EMPLOYMENT RIGHTS Nothing contained herein shall be construed as creating any contract of employment between the Company or any Affiliate and any Participant nor shall any provision hereof confer upon any Participant the right to be retained in the service of the Company or any Affiliate nor limit the right of the Company or any Affiliate to discharge or otherwise deal with Participants without regard to the existence of the Plan. 7.2 GENERAL CONTRACTUAL OBLIGATION It is the intent of this Plan, and each Participant understands, that no trust has been created for his or her benefit and that no Participant has any interest in any asset of the Company, any Affiliate or any related entity. The Company's obligation to pay to the Participant the sums deferred together with any interest thereon is a general contract obligation. Nothing contained in the Plan shall constitute a guaranty by the Company, any Affiliate, or any other entity or person that the assets of the Company will be sufficient to pay these amounts. The status of the Participant is that of an unsecured creditor to the extent of the total amount of his compensation deferred plus hypothetical interest credited as above described. 7.3 BINDING ON COMPANY, PARTICIPANTS AND THEIR SUCCESSORS The Plan shall be binding upon and inure to the benefit of the Company and Affiliates, their successors and assigns and Participants and their heirs, executors, administrators and legal representatives. In the event of the merger or consolidation of the Company with or into any other corporation, or in the event substantially all of the assets of the Company shall be transferred to another corporation, the successor corporation resulting from the merger or consolidation, or the transferee of such assets, as the case may be, shall, as a condition to the consummation of the merger, consolidation or transfer, assume the obligations of the Company hereunder and shall be substituted for the Company hereunder. 7.4 SPENDTHRIFT PROVISIONS The interest of a Participant or his beneficiary under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, either voluntarily or involuntarily, prior to actual receipt thereof by the payee; any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any such interest herein prior to such receipt shall be void. Deferred Compensation Accounts hereunder shall not be subject to garnishment, attachment or other legal or equitable process nor shall they be an asset in bankruptcy; provided, however, that no amount shall be payable from this Plan to a Participant, 11 or any person claiming by or through a Participant, unless and until any and all amounts representing debts or other obligations owed to the Company or any Affiliate by the Participant have been fully paid and satisfied. Neither the Company nor any Affiliate shall be liable in any manner for or subject to the debts, contracts, liabilities, torts or engagements of any person who has a Deferred Compensation Account maintained on his behalf under the Plan. 7.5 DISCLOSURE Each Participant, upon his written request, shall receive a copy of the Plan and the Administrator will make available for inspection by any Participant a copy of any written rules and regulations used by the Administrator in administering the Plan. 7.6 GOVERNING LAW The Plan is established under and will be construed according to the laws of the Commonwealth of Pennsylvania to the extent that such laws are not preempted by the Employee Retirement Income Security Act of 1974, as amended, and regulations promulgated thereunder. 7.7 INCAPACITY OF RECIPIENT In the event a Participant or beneficiary is declared incompetent and a guardian, conservator or other person legally charged with the care of his person or of his estate is appointed, any Deferred Compensation Account under the Plan to which such Participant, or beneficiary is entitled shall be paid to such guardian, conservator or other person legally charged with the care of his person or his estate. Except as provided hereinabove, when the Administrator, in its sole discretion, determines that a Participant or beneficiary is unable to manage his financial affairs, the Administrator may direct the Company to make distribution(s) from the Deferred Compensation Account maintained on behalf of such Participant or beneficiary to any one or more of the spouse, lineal ascendants or descendants or other closest living relatives of such Participant or beneficiary who demonstrates to the satisfaction of the Administrator the propriety of making such distribution(s). Any payment so made shall be in complete discharge of any liability under the Plan for such payment. The Administrator shall not be required to see to the application of any such distribution made as provided above. 7.8 ELECTIONS, APPLICATIONS, NOTICES Every designation, election, revocation or notice authorized or required hereunder shall be deemed delivered to the Company or the Administrator as the case may be: (a) on the date it is personally delivered to the Administrator at the Company's executive offices at 100 Erie Insurance Place, Erie, Pennsylvania 16530 or (b) three business days after it is sent by registered or certified mail, postage prepaid, addressed to the Administrator at the offices indicated above. Every such item which is to be delivered to a person or entity designated by the Administrator to perform recordkeeping and other administrative services on behalf of the Plan shall be deemed delivered to such person or entity when it is actually received (either physically or through interactive electronic communication) by such person or entity. Every designation, election, revocation or notice authorized or required hereunder which is to be delivered to a Participant or beneficiary shall be deemed delivered to the Participant or beneficiary: (a) on the date it is 12 personally delivered to such individual, or (b) three business days after it is sent by registered or certified mail, postage prepaid, addressed to such individual at the last address shown for him on the Company's records. Any notice required hereunder may be waived by the person entitled thereto. 7.9 COUNTERPARTS This Plan may be executed in any number of counterparts, each of which shall be considered as an original, and no other counterparts need be produced. 7.10 SEVERABILITY In the event any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan. This Plan shall be construed and enforced as if such illegal or invalid provision had never been contained herein. 7.11 HEADINGS The headings of Sections of this Plan are for convenience of reference only and shall have no substantive effect on the provisions of this Plan. 7.12 CONSTRUCTION The masculine gender, where appearing in this Plan, shall be deemed to also include the feminine gender. The singular shall also include the plural, where appropriate. ARTICLE EIGHT ADMINISTRATION 8.1 GENERAL ADMINISTRATION The Administrator shall be charged with the administration of the Plan. The Administrator shall have all such powers as may be necessary to discharge its duties relative to the administration of the Plan, including by way of illustration and not limitation, discretionary authority to interpret and construe the Plan, to determine and decide all questions of fact, and all disputes arising under the Plan including, but not limited to, the eligibility of any employee to participate hereunder, the validity of any election as may be necessary or appropriate hereunder and the right of any Participant or beneficiary to receive payment of all or any portion of a Deferred Compensation Account maintained hereunder. The Administrator shall have all power necessary to adopt, alter and repeal such administrative rules, regulations and practices governing the operation of the Plan as it, in its sole discretion, may from time to time deem advisable. The Administrator shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Plan unless attributable to willful misconduct. The Administrator shall be entitled to conclusively rely upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Company with respect to the Plan. Any individual serving as Administrator shall not 13 participate in any action or determination regarding solely his own benefits payable hereunder. Except as provided in Section 8.3, decisions of the Administrator made in good faith shall be final, conclusive and binding upon all parties. 8.2 CLAIMS PROCEDURE Whenever the Administrator denies, in whole or in part, a claim for benefits filed by any person (hereinafter referred to as a "Claimant"), the Administrator shall transmit a written notice setting forth (i) the specific reasons for the denial of the claim, (ii) references to the specific provisions of the Plan on which the denial is based, (iii) a description of any additional needed material or information and why such material or information is necessary, and (iv) further steps which the Claimant can take in order to have his claim reviewed (including a statement that the Claimant or his duly authorized representative may review the Plan document and submit issues and comments regarding the claim to the Administrator). In addition, the written notice shall contain the date on which the notice was sent and a statement advising the Claimant that, within ninety (90) days of the date on which such notice is received, he may request a review of the Administrator's decision. 8.3 CLAIMS REVIEW Within ninety (90) days of the date on which the notice of denial of claim is received by the Claimant, the Claimant or his authorized representative may request that the claim denial be reviewed by filing with the Administrator a written request therefor, which request shall contain the following information: a) the date on which the notice of denial of claim was received by the Claimant; b) The date on which the Claimant's request was filed with the Administrator; provided, however, that the date on which the Claimant's request for review was in fact filed with the Administrator shall control in the event that the date of the actual filing is later than the date stated by the Claimant pursuant to this clause (b); c) the specific portions of the denial of his claim which the Claimant requests the Administrator to review; d) a statement by the Claimant setting forth the basis upon which he believes the Administrator should reverse its previous denial of his claim for benefits and accept his claim as made; e) whether the Claimant desires a hearing on the claim; and f) any written material (included as exhibits) which the Claimant desires the Administrator to examine in its consideration of his position as stated pursuant to clause (d). 14 If the Claimant has requested a hearing on the claim, such hearing shall be held within thirty (30) days after the date determined pursuant to clause (b) hereof. Within sixty (60) days of the date determined pursuant to clause (b) hereof (or, if special circumstances or the request for a hearing require an extension of time, within ninety (90) days of such date), the Administrator shall conduct a full and fair review of the decision denying the Claimant's claim for benefits and shall deliver its decision to the Claimant in writing. Such written decision shall set forth the specific reasons for the decision, including references to the specific provisions of this Plan which were relied upon. The decision will be final and binding on all persons concerned. ARTICLE NINE MERGER OF SUPPLEMENTAL 401(k) PLAN Effective as of December 31, 2000, the Supplemental 401(k) Plan shall be merged into and become a part of this Plan. Each Participant who had earned a benefit under the Supplemental 401(k) Plan as of such date of merger shall have his right to such benefit preserved under the Plan and, for periods on and after January 1, 2001, shall look solely to the terms of the Plan for purposes of determining his rights and responsibilities regarding such benefit. Executed at Erie, Pennsylvania this 22nd day of December, 2000, effective January 1, 2001. ERIE INSURANCE GROUP By: /s/ Stephen A. Milne ---------------------------- Title: President and CEO ------------------------- ATTEST: /s/ Douglas F. Ziegler - ------------------------------------ Douglas F. Ziegler Senior V.P., Treasurer and Chief Investment Officer 15 EX-10.7 10 j9708001exv10w7.txt EMPLOYEE SAVINGS PLAN EXHIBIT 10.7 - ERIE INSURANCE GROUP EMPLOYEE SAVINGS PLAN INTRODUCTION The Erie Indemnity Company (the "Company") adopted the Erie Insurance Group Employee Savings Plan (the "Plan") effective January 1, 1989. The Company has subsequently amended the Plan from time to time and was last amended and restated the Plan effective as of May 1, 1998. This amendment and restatement of the Plan shall constitute an amendment, restatement and continuation of the Plan. This amendment and restatement is generally effective as of January 1, 2001. However, certain provisions of this amendment and restatement are effective as of some other date. The provisions of this amendment and restatement with stated effective dates prior to January 1, 2001, shall be deemed to amend the corresponding provisions, if any, of the Plan as in effect before this amendment and restatement and all amendments thereto as of such dates. Events occurring before the applicable effective date of any provision of this amendment and restatement shall be governed by the applicable provision of the Plan as in effect on the date of the event. The purpose of the Plan is to provide a pre-tax long term savings vehicle for eligible employees and to provide participants with an opportunity to contribute toward additional retirement security according to the provisions of Section 401(k) of the Internal Revenue Code of 1986, as amended. i TABLE OF CONTENTS

INTRODUCTION Page ARTICLE ONE - DEFINITIONS 1.1 Administrator or Plan Administrator......................................1 1.2 Affiliate................................................................1 1.3 Board....................................................................1 1.4 Code.....................................................................1 1.5 Company..................................................................1 1.6 Compensation.............................................................1 1.7 Covered Employee.........................................................2 1.8 Effective Date...........................................................2 1.9 Employee.................................................................2 1.10 Employer.................................................................2 1.11 Employer Matching Contribution...........................................2 1.12 Erie Indemnity Stock.....................................................2 1.13 Erie Indemnity Stock Fund................................................2 1.14 ERISA....................................................................2 1.15 Highly Compensated.......................................................3 1.16 Hour of Service..........................................................3 1.17 Interactive Electronic Communication.....................................4 1.18 Leased Employee..........................................................4 1.19 Normal Retirement Date...................................................4 1.20 Notice...................................................................5 1.21 Participant..............................................................5 1.22 Plan.....................................................................5 1.23 Plan Year................................................................5 1.24 Qualified Domestic Relations Order or QDRO...............................5 1.25 Safe Harbor Matching Contribution........................................6 1.26 Spousal Consent..........................................................6 1.27 Tax Deferred Contribution................................................6 1.28 Test Compensation........................................................6 1.29 Top Paid Group...........................................................7 1.30 Total Account............................................................7 1.31 Trust Agreement..........................................................7 1.32 Trust Fund...............................................................8 1.33 Trustee..................................................................8 1.34 Valuation Date...........................................................8 1.35 Year of Eligibility Service..............................................8

ii ARTICLE TWO - PARTICIPATION 2.1 Participation............................................................9 2.2 Rehired Employees........................................................9 2.3 Employment Transfers.....................................................9 ARTICLE THREE - EMPLOYER CONTRIBUTIONS 3.1 Tax Deferred Contributions..............................................11 3.2 Dollar Limitation on Tax Deferred Contributions.........................11 3.3 Actual Deferral Percentage Limitation on Tax Deferred Contributions.....13 3.4 Treatment of Tax Deferred Contributions in Excess of Actual Deferred Percentage Limitation..........................................15 3.5 Coordination of Distributions of Excess Tax Deferred Contributions......17 3.6 Employer Matching Contributions.........................................17 3.7 Actual Contribution Percentage Limitation on Employer Matching Contributions........................................................17 3.8 Treatment of Employer Matching Contributions in Excess of Actual Contribution Percentage Limitation............................18 3.9 Combined Alternative Limitation on Tax Deferred Contributions and Employer Matching Contributions..................................20 3.10 Safe Harbor Matching Contributions......................................21 3.11 Source of Employer Contributions........................................22 3.12 Investment of Employer Contributions....................................22 3.13 Recovery of Contributions...............................................23 3.14 Other Provisions Relating to Employer Contributions.....................23 ARTICLE FOUR - ROLLOVER CONTRIBUTIONS 4.1 Rollover Contributions .................................................25 4.2 Vesting of Rollover Contributions ......................................25 ARTICLE FIVE - PARTICIPANT ACCOUNTS AND VALUATION OF FUNDS 5.1 Establishment of Participant Accounts ..................................26 5.2 Procedure as of Each Valuation Date ....................................26 5.3 Investment Elections ...................................................26 5.4 Erie Indemnity Stock Fund...............................................28 ARTICLE SIX - VESTING & DISTRIBUTIONS 6.1 Vesting ................................................................30 6.2 Distributions Upon Retirement, or Other Termination of Employment.......30 6.3 Payment of Amounts Distributed .........................................31 6.4 Direct Rollovers........................................................33 iii ARTICLE SEVEN - WITHDRAWALS 7.1 Withdrawals Generally ..................................................35 7.2 Hardship Withdrawal ....................................................35 7.3 Safe Harbor Distribution ...............................................36 7.4 Hardship Withdrawal Priority............................................36 7.5 Modifications to Hardship Withdrawal Standards..........................36 ARTICLE EIGHT - THE TRUST FUND 8.1 Trust Agreement ........................................................38 8.2 Appointment of Independent Accountants .................................38 8.3 Appointment of Investment Manager ......................................38 8.4 Investment Committee ...................................................38 8.5 Voting of Erie Indemnity Stock..........................................39 ARTICLE NINE - ADMINISTRATION OF THE PLAN 9.1 The Administrator ......................................................41 9.2 Powers of Administrator.................................................41 9.3 Delegation of Duties....................................................43 9.4 Conclusiveness of Various Documents.....................................43 9.5 Actions to be Uniform...................................................43 9.6 Liability and Indemnification...........................................43 ARTICLE TEN - CLAIMS PROCEDURE 10.1 Claim for Benefit ......................................................45 10.2 Review of Denial of Claim ..............................................45 10.3 Decision by Administrator ..............................................45 ARTICLE ELEVEN - MISCELLANEOUS 11.1 Non-Alienation of Benefits .............................................47 11.2 Risk to Participants and Source of Payments ............................48 11.3 Expenses ...............................................................48 11.4 Rights of Participants .................................................48 11.5 Statement of Accounts ..................................................48 11.6 Designation of Beneficiary .............................................49 11.7 Payment to Incompetents ................................................49 11.8 Authority to Determine Payee ...........................................50 11.9 Severability ...........................................................50 11.10 Employer Records........................................................50 11.11 Limitation on Contributions ............................................50 11.12 IRC 414(u) Compliance Provision.........................................52 ARTICLE TWELVE - AMENDMENT, TERMINATION OR MERGER OF THE PLAN 12.1 Right to Amend .........................................................53 12.2 Right to Terminate .....................................................53 12.3 Merger, Transfer of Assets or Liabilities...............................54 iv ARTICLE THIRTEEN - TOP HEAVY PROVISIONS 13.1 Top Heavy Provisions ...................................................55 13.2 Minimum Contribution ...................................................56 13.3 Plan Year in Which Plan is Top Heavy ...................................57 13.4 Plan Year in Which Plan Ceases to be Top Heavy .........................57 13.5 Limited Application of this Article.....................................57 ARTICLE FOURTEEN - LOANS 14.1 Availability of Loans ..................................................58 14.2 Terms and Conditions of Participant Loans ..............................58 14.3 Loan Accounts...........................................................60 v ARTICLE ONE DEFINITIONS As used in this Plan, the following terms shall have the following meanings unless a different meaning is clearly required by the context. Any terms herein used in the masculine shall be read and construed in the feminine where they would so apply, and any terms used in the singular shall be read and construed in the plural if again so applicable. 1.1 "Administrator" or "Plan Administrator" means the Administrator appointed by the Board in accordance with the provisions of Article Nine. 1.2 "Affiliate" means any other employer which, together with the Company, is a member of a controlled group of corporations or of a commonly controlled trade or business (as defined in Code Sections 414(b) and (c) and as modified, where appropriate, by Code Section 415(h)) or of an affiliated service group (as defined in Code Section 414(m)) or other organization described in Code Section 414(o). Each such Affiliate shall be treated as an Affiliate only during such period as it is or was an Affiliate as defined above. 1.3 "Board" means the Board of Directors of the Company. 1.4 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.5 "Company" means Erie Indemnity Company, a corporation organized and existing under the laws of Pennsylvania. 1.6 "Compensation" for any period means the aggregate amount of base salary or wages paid by an Employer to an Employee during the period. For this purpose, "base salary or wages" shall exclude overtime compensation, bonuses and commissions but shall be deemed to include any amounts contributed by the Employer pursuant to a salary reduction agreement and which is not includible in the gross income of the Participant under Code Sections 125 and 402(e)(3) for the Plan Year in question. Effective for each Plan Year, in no event shall the amount of Compensation taken into account under the Plan exceed the adjusted annual limitation permitted under Section 401(a)(17) of the Code for such Plan Year. Such adjusted annual limitation shall be, for each Plan Year beginning on and after January 1, 1989 and prior to January 1, 1994, $200,000 as adjusted for such year in the same manner as under Section 415(d) of the Code and, for each Plan Year beginning on and after January 1, 1994, $150,000 as adjusted for such year as provided under Section 401(a)(17)(B) of the Code. For years beginning before January 1, 1997, in determining the Compensation of a Covered Employee for purposes of the foregoing annual limitation, the rules aggregating certain family members (as set forth in Section 1.15) shall apply, except that in applying such rules, the term "family" shall include only the spouse of the Covered Employee and any lineal descendent of the Covered Employee who has not attained age 19 before the end of the calendar year. If, as a result of the family aggregation rules, the adjusted annual limitation is exceeded, then the limitation - 1 - shall be prorated among the family members in proportion to each individual's Compensation as determined under this paragraph without regard to the adjusted annual limitation. 1.7 "Covered Employee" shall mean any Employee of an Employer, excluding: (a) any such Employee whose employment is governed by the terms of a collective bargaining agreement under which retirement benefits were the subject of good faith bargaining; and (b) for periods prior to January 1, 2001, any such Employee who is compensated on an hourly basis. Notwithstanding any provision of the Plan to the contrary, any individual who an Employer determines to be a contract employee, independent contractor, leased employee (including a Leased Employee as defined hereunder), leased owner, leased manager, shared employee or person working under a similar classification shall not become a Covered Employee hereunder, regardless of whether any such individual is ultimately determined to be a common law employee, unless and until the Employer shall otherwise determine. An Employee shall be considered a Covered Employee only during such period in which the individual satisfies the requirements defined above. 1.8 "Effective Date" means January 1, 1989. 1.9 "Employee" shall mean any common-law employee of an Employer or an Affiliate; provided, however, that for purposes of Section 1.15 "Employee" shall include any self-employed individual performing services for an Employer or Affiliate who is treated as an employee under Section 401(c)(1) of the Code. 1.10 "Employer(s)" shall mean the Company, Erie Family Life Insurance Company, Erie Insurance Exchange, Erie Insurance Company, EI Holding Corp., EI Service Corp., Erie Insurance Company of New York, Erie Insurance Property & Casualty Company, Flagship City Insurance Company and any other Affiliate which may adopt this Plan. 1.11 "Employer Matching Contribution" means the Employer contribution made pursuant to Section 3.6. 1.12 "Erie Indemnity Stock" means the Class A common stock of the Company which is a qualifying employer security within the meaning of Section 407(d)(5) of ERISA. 1.13 "Erie Indemnity Stock Fund" means the investment fund described in Section 5.4. 1.14 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 1.15 "Highly Compensated" means, for periods beginning before January 1, 1997, any Employee who meets any of the following requirements in either the prior Plan Year (the "lookback year") or the current Plan Year (the "determination year"): - 2 - (a) is a more than five percent (5%) owner of an Employer; (b) earns $75,000 or more in Test Compensation; (c) earns $50,000 or more in Test Compensation and is a member of the Top Paid Group; (d) is an officer of an Employer (as described in Section 416(i) of the Code) who earns Test Compensation of more than fifty percent (50%) of the amount in effect under Section 415(b)(1)(A) of the Code for such year; or (e) is a former Employee who was Highly Compensated upon separation from service prior to the determination year, performs no service for an Employer during the determination year, or was Highly Compensated at any time after attaining age 55. In addition, the Test Compensation paid to any family member (spouse, lineal ascendant or descendant and their spouses) of an Employee or former Employee who is a more than five percent owner or is one of the top 10 Highly Compensated Employees on the basis of Test Compensation, shall be aggregated with the Test Compensation of such Employee for the purposes of this definition. Notwithstanding the foregoing, an Employee will not be Highly Compensated for the determination year merely by compensation or officer status unless he was in the top 100 Employees on the basis of Test Compensation. The amounts indicated in (b) and (c) above shall be adjusted for cost of living at the same time and in the same manner as determined under Code Section 415(d). For years beginning on and after January 1, 1997, "Highly Compensated" shall mean any Employee who is a more than five percent (5%) owner of an Employer or both earned $80,000 or more in Test Compensation from the Employer in the lookback year and was member of the Top Paid Group for such year; provided, however, that such $80,000 figure shall be adjusted for cost of living at the same time and in the same manner as determined under Code Section 415(d). To the extent permitted under regulations and other guidance promulgated by the Internal Revenue Service, the Company may elect to determine the status of Highly Compensated Employees on a basis other than that provided above. 1.16 "Hour of Service" shall include the following: (a) Each hour for which an Employee is directly or indirectly paid or entitled to payment from an Employer or an Affiliate as an Employee for the performance of duties during an applicable computation period (these hours must be credited to the Employee in the computation period during which the duties were performed and not when paid, if different); and (b) Each hour for which back pay, irrespective of mitigation of damages, has been awarded or agreed to by an Employer or an Affiliate (these hours must be credited in the computation period or periods to which the award or agreement pertains rather than that in which the payment, award or agreement was made); and - 3 - (c) Each hour for which an Employee is directly or indirectly paid or entitled to payment from an Employer or an Affiliate for reasons, such as vacation, sickness or disability, other than for the performance of duties (these hours shall be calculated and credited pursuant to Section 2530.200b-2 of the Department of Labor regulations which are incorporated herein by reference). 1.17 "Interactive Electronic Communication" means a communication between a Participant or beneficiary and the person or entity designated by the Administrator to perform recordkeeping and other administrative services on behalf of the Plan pursuant to a system maintained by such person or entity and communicated to each Participant and beneficiary whereby each such individual may make elections and exercise options as described herein with respect to all or a portion of his Total Account through the use of such system and a personal identification number. If a Participant or beneficiary (i) consents to participate in Interactive Electronic Communication procedures adopted by the Administrator and (ii) acknowledges that actions taken by him through the use of his personal identification number pursuant to the Interactive Electronic Communication procedure constitute his signature for purposes of initiating transactions such as investment option changes, and increases, decreases, and suspensions of Tax Deferred Contributions, the Participant or beneficiary, as the case may be, will be deemed to have given his written consent and authorization to any such action resulting from the use of the Interactive Electronic Communication system by the Participant or beneficiary. 1.18 "Leased Employee" means any person (other than an Employee of an Employer) who pursuant to an agreement between the Employer and any other person ("leasing organization") has performed services for the Employer (or for the Employer and related persons determined in accordance with Section 414(n)(6) of the Code) on a substantially full-time basis for a period of at least one year and, for periods before January 1, 1997, such services are of a type historically performed by employees in the business field of the Employer or, for periods on and after January 1, 1997, such services are performed under primary direction or control by the recipient. Except as provided below, any person satisfying the foregoing criteria shall be treated as an Employee. Contributions or benefits provided a Leased Employee by the leasing organization which are attributable to services performed for the Employer shall be treated as provided by the Employer. Notwithstanding the foregoing, a Leased Employee shall not be considered an Employee of an Employer if: (i) such Leased Employee is covered by a money purchase pension plan providing: (1) a nonintegrated employer contribution rate of at least 10 percent of compensation, (2) immediate participation, and (3) full and immediate vesting; and (ii) Leased Employees do not constitute more than 20 percent of the Employer's non-Highly Compensated workforce. 1.19 "Normal Retirement Date" means the first day of the month next following the month in which the Participant attains age 65 (his "Normal Retirement Age"). 1.20 "Notice" means, unless otherwise specifically provided herein, (i) written Notice on an appropriate form provided by the Administrator that is, in the discretion of the Administrator, properly completed and executed by the party giving such Notice and which is delivered by hand or by mail to the Administrator or to such party designated by the terms of the Plan or by the Administrator to receive the Notice, or (ii) Notice by Interactive Electronic Communication to - 4 - the person or entity designated by the Administrator to perform recordkeeping and other administrative services on behalf of the Plan. The form of Notice satisfactory in any given circumstance under the Plan shall be determined by the Administrator, in its discretion, and shall be applied uniformly to all Participants and beneficiaries. Notice to any party as provided herein shall be deemed to be given when it is actually received (either physically or by Interactive Electronic Communication, as the case may be) by the party to whom such Notice is given. 1.21 "Participant" means any Covered Employee who participates in the Plan as provided in Section 3.1 (an "active" Participant) or Section 4.1, and further, shall include any current or former Covered Employee who has suspended his Tax Deferred Contributions or has terminated or retired if such individual has a vested Total Account balance maintained on his behalf under the Plan. 1.22 "Plan" means this Erie Insurance Group Employee Savings Plan as herein set forth with all amendments, modifications and supplements hereafter made. 1.23 "Plan Year" means the calendar year. 1.24 "Qualified Domestic Relations Order" or "QDRO" means any judgment, decree or order (including approval of a property settlement agreement) which is made pursuant to a State Domestic Relations Law (including a community property law) and which: (a) relates to provision of child support, alimony payments, or marital property rights of a spouse, former spouse, child or other dependent of a Participant; (b) recognizes or creates an alternate payee's right to, or assigns to an alternate payee the right to receive all or a portion of the benefits payable with respect to a Participant under this Plan; and (c) clearly specifies: (i) name and last known address of the Participant and of each alternate payee; (ii) the amount, percentage, or manner in which such could be determined, of the Participant's benefits to be paid to such alternate payee by the Plan; (iii) the number of payments or time periods the QDRO covers; and (iv) each plan to which the QDRO applies. A QDRO cannot require the Plan to provide a type or form of benefit, or any option not otherwise provided by the Plan, nor can it require the Plan to provide increased benefits. A QDRO cannot require payment to an alternate payee by virtue of a previous QDRO. A written procedure will be established to determine the qualified status of domestic relations orders and to administer distributions thereunder. - 5 - 1.25 "Safe Harbor Matching Contribution" means the Employer contribution made pursuant to Section 3.10. 1.26 "Spousal Consent" means a written consent given by a Participant's legally-recognized spouse to a Participant's designation of a specified beneficiary or beneficiaries (including the designation of any class of beneficiaries or any contingent beneficiaries) under Section 11.6(a), the Participant's election of an immediate distribution under Section 6.2, or the Participant's request for a withdrawal (in excess of $3,500) or loan under Sections 7.2 and 14.2, respectively. Any Spousal Consent shall be effective only with respect to such spouse. Such consent shall be duly witnessed by a Plan representative or a notary public and shall acknowledge the effect on the spouse of the Participant's election. The Participant may revoke, without limitation, any such designation, election or request without the need for Spousal Consent at any time before the date as of which the Participant is to receive a distribution from the Plan or, if applicable, before the effective date of a withdrawal or loan. Any new designation, election or request by a Participant as provided above will require a new Spousal Consent. The requirement for Spousal Consent may be waived by the Administrator if it is established that there is no spouse, the spouse cannot be located, the Participant has a court order evidencing a legal separation from or abandonment by the spouse, or for such other circumstances as shall be prescribed by applicable law. 1.27 "Tax Deferred Contribution" means the Employer contribution made pursuant to Section 3.1. 1.28 "Test Compensation" means, for any Plan Year, an Employee's compensation, reported under Sections 6041 and 6051 of the Code on Form W-2, as paid by an Employer or an Affiliate for the calendar year ending with or within such Plan Year, including any amounts contributed pursuant to a salary reduction election on behalf of a Covered Employee to a plan described in Sections 125, 402(e)(3), 402(h)(1)(B) or 403(b) of the Code for the period in question. Test Compensation in any given year shall not exceed the adjusted annual limitation in effect for such year (as set forth in Section 1.6), provided that such limitation shall not be applied in determining the top 10 Highly Compensated Employees subject to family aggregation under the Plan (applicable to Plan Years beginning before January 1, 1997) and for purposes of determining the status of an Employee as a Highly Compensated Employee or Key Employee. To the extent permitted under regulations and other guidance promulgated by the Internal Revenue Service, the Company may elect to determine Test Compensation on a basis other than that provided above. Applicable to years beginning before January 1, 1998, Test Compensation for purposes of Section 11.11 shall exclude all amounts contributed pursuant to a salary reduction election on behalf of a Covered Employee. 1.29 "Top Paid Group" means all active Employees who, as of a given year, are in the top twenty percent (20%) of the Company's work force on the basis of Test Compensation for such year, excluding the following: (a) Employees who have not completed six months of service by the end of such year; (b) Employees who work less than 17-1/2 hours per week for such year; - 6 - (c) Employees who normally do not work more than six months in a year; (d) Employees under age 21 at the end of such year; and (e) non-resident aliens who received no U.S.-source income for such year. For purposes of this Section, the Company's work force shall include individuals employed by an Affiliate. 1.30 "Total Account" means the total amounts held under the Plan for a Participant, consisting of the following sub-accounts: (a) "Tax Deferred Account" the portion of the Participant's Total Account consisting of Tax Deferred Contributions made in accordance with Section 3.1, plus (minus) any investment earnings (losses) on such contributions and less any distributions or withdrawals made from this account in accordance with Articles Six and Seven, respectively. (b) "Employer Account" the portion of the Participant's Total Account consisting of Employer Matching Contributions made in accordance with Section 3.6, plus (minus) any investment earnings (losses) on such contributions and less any distributions or withdrawals made from this account in accordance with Articles Six and Seven, respectively. (c) "Rollover Account" the portion of the Participant's Total Account consisting of Rollover Contributions made in accordance with Section 4.1, plus (minus) any investment earnings (losses) on such contributions and less any distributions or withdrawals made from this account in accordance with Articles Six and Seven, respectively. (d) "Safe Harbor Matching Account" the portion of the Participant's Total Account consisting of Safe Harbor Matching Contributions made in accordance with Section 3.10, plus (minus) any investment earnings (losses) on such contributions and less any distributions made from this account in accordance with Article Six. 1.31 "Trust Agreement" means the Trust Agreement between the Company and a Trustee as provided in Section 8.1, together with all amendments, modifications and supplements hereafter made. 1.32 "Trust Fund" means the fund established under the terms of the Trust Agreement with the Trustee for the purpose of holding and investing the assets of the Plan. The Trust Fund shall consist of such investment funds or vehicles as the Administrator may, in its discretion, designate from time to time and may include such investments as may be selected by a Participant or beneficiary under a self-directed "open option" arrangement authorized by the Administrator. Nothing herein shall prohibit the Trust Fund from holding reasonable amounts in cash or cash equivalents in any fund or vehicle offered under the Plan. The portion of the Trust Fund to be - 7 - invested in the various funds or vehicles shall be determined by Participant investment elections made pursuant to Article Five. The Administrator may, in its discretion, offer additional investment funds or vehicles to all Participants and may cease to offer any investment fund or vehicle at such time as it deems appropriate. Except as otherwise indicated, the Trust Fund shall be deemed to include that portion of a Total Account which a Participant or beneficiary elects to invest in a group annuity contract provided by the Erie Family Life Insurance Company. 1.33 "Trustee" means the Trustee or Trustees acting as such under a Trust Agreement, including any successor or successors. 1.34 "Valuation Date" means, for periods prior to the Conversion Date, the last day of each calendar month and, for periods on and after the Conversion Date, the close of business as of each business day. 1.35 "Year of Eligibility Service" means an "Eligibility Computation Period" in which an Employee completes at least 1,000 Hours of Service. The "Eligibility Computation Period" with respect to an Employee shall mean the 12 consecutive month period that begins on the first day on which the Employee is credited with an Hour of Service in the employment of an Employer or Affiliate ("Employment Commencement Date") and ends on the first anniversary thereof, and each Plan Year thereafter beginning with the Plan Year that includes the first anniversary of the Employee's Employment Commencement Date. In the event an Employee completes 1,000 Hours of Service during the Eligibility Computation Period that begins on his Employment Commencement Date and completes 1,000 Hours of Service during the Eligibility Computation Period that begins on the January 1 that next follows his Employment Commencement Date, such Employee shall be credited with two Years of Eligibility Service. - 8 - ARTICLE TWO PARTICIPATION 2.1 Participation (a) Any Employee shall be eligible to participate in the Plan on the first day of a pay period, provided he is a Covered Employee and is actively employed by an Employer on such date and, provided further, that he makes proper application for participation within a reasonable time prior to the start of such pay period by completing and filing with the Administrator such forms as may be prescribed by the Administrator. (b) Notwithstanding the foregoing, effective January 1, 2001, any Covered Employee who is compensated on an hourly basis and who is classified by an Employer as other than a regular hourly employee shall be eligible to participate in the Plan on the January 1 or July 1 coincident with or next following such Employee's completion of each of the following requirements, provided he remains a Covered Employee as of such January 1 or July 1: (i) His attainment of age 21 years; and (ii) His completion of one Year of Eligibility Service. If the Employee is not a Covered Employee on the date he otherwise would have become eligible to participate in the Plan, such Employee shall automatically become eligible to participate in the Plan upon his return to employment as a Covered Employee. 2.2 Rehired Employees An Employee who had been an "active" Participant in the Plan, who terminates his employment and is subsequently re-employed may become eligible to participate in the Plan under Section 3.1 on the first day of any pay period following re-employment, provided he is a Covered Employee and is actively employed by an Employer on such date and, provided further, that he makes proper application for participation within a reasonable time prior to the start of such pay period by completing and filing with the Administrator such forms as may be prescribed by the Administrator. 2.3 Employment Transfers (a) Upon the transfer of a Covered Employee to other employment with an Employer or Affiliate whereby he ceases to be a Covered Employee hereunder, such individual's ability to have Tax Deferred Contributions made to the Plan on his behalf (and to receive Employer Matching Contributions) with respect to Compensation earned on and after this date of transfer shall cease and such Participant shall be considered an "inactive" Participant under the Plan. - 9 - (b) Upon the transfer of an individual from other employment with an Employer or Affiliate such that the individual becomes a Covered Employee hereunder, such individual shall be eligible to participate in the Plan as provided in Section 2.1 hereof. - 10 - ARTICLE THREE EMPLOYER CONTRIBUTIONS 3.1 Tax Deferred Contributions (a) Each Covered Employee who is eligible to participate in the Plan and who has elected to become a Participant (in accordance with Article Two) may, at the time of making application to become a Participant, elect to reduce his future Compensation on a fixed, whole percentage, from one percent (1%) to eight percent (8%) of that Compensation otherwise payable in future pay periods. Effective with respect to pay periods commencing on and after December 14, 2000, a Participant may elect to reduce his future Compensation by a stated percentage, from one percent (1%) to fifteen percent (15%) of that Compensation otherwise payable in future pay periods. Such election shall be made in accordance with procedures adopted by the Administrator and communicated to Participants. Subject to the limitations set forth in Sections 3.2, 3.3, 3.4, 3.9 and 11.11, the Participant's Compensation shall be reduced in accordance with the foregoing election and shall be designated as a Tax Deferred Contribution to the Plan. Tax Deferred Contributions shall be withheld by the Participant's Employer each pay period by regular payroll deduction in accordance with the Employer's payroll withholding procedures and shall be credited to the Participant's Tax Deferred Account as of the date the contributions are received by the Trustee or otherwise deposited in the Trust Fund. Such contributions shall be deposited in the Trust Fund as soon as such amounts can reasonably be segregated from the Employer's general assets. (b) Participant Tax Deferred Contributions constitute Employer contributions under the Plan and are intended to qualify as elective contributions under Section 401(k) of the Code. Tax Deferred Contributions may be made only with respect to an amount which the Participant could otherwise elect to receive in cash and which is not currently available to the Participant as of the date an election specified in this Section 3.1 is made. In the event a Participant has no Compensation for any payroll period, no Tax Deferred Contribution may be made for such period. Any Tax Deferred Contribution made on behalf of a Covered Employee in any given Plan Year that is taken into account for purposes of the actual deferral percentage limitation described in Section 3.3(b) shall be attributable to services performed by the Covered Employee in such Plan Year and shall relate to Compensation which would have been paid in such Plan Year or within two and one-half (2-1/2) months following such Plan Year but for the deferral election. 3.2 Dollar Limitation on Tax Deferred Contributions (a) Any provision of this Plan to the contrary notwithstanding, no Employer shall be permitted, during any calendar year, to make with respect to such calendar year, Tax Deferred Contributions on behalf of a Participant under the Plan (when combined with - 11 - the Participant's elective deferrals under any other plans, contracts, or arrangements) that will exceed the limitation in affect for such year under Section 402(g)(1) of the Code, as adjusted in accordance with Section 402(g)(5) of the Code. (b) In the event any amount of Tax Deferred Contributions for a calendar year exceeds the limitation applicable under this Section 3.2 for such calendar year, such excess amount (hereafter described for purposes of this Section, as "Excess Deferrals"), as adjusted for any income or loss allocable thereto in accordance with regulations, shall to the extent possible be distributed to such Participant, as provided in subparagraphs (i), (ii), (iii) and (iv) below: (i) At a date not later than the March 1st of the calendar year immediately following the calendar year to which such Excess Deferrals are attributable, any Participant to whom this Section 3.2 applies may notify, in writing, the Administrator by submitting a form as may be provided by the Administrator which shall specify the amount of the Participant's Excess Deferrals for the given calendar year and shall contain a certified statement by the Participant indicating that if such amount is not distributed, such Excess Deferrals will exceed the limit imposed on the Participant by Section 402(g) of the Code for the year in which the Tax Deferred Contribution occurred. Notwithstanding the foregoing and solely for the purpose of facilitating a distribution of Excess Deferrals as required by regulation, in the event a Participant has Excess Deferrals in a given year calculated by taking into account his Tax Deferred Contributions hereunder and his elective deferrals under any other plan, contract, or arrangement maintained by an Employer or Affiliate, the Participant will be deemed to have notified the Administrator in the manner provided in this subparagraph. (ii) At a date not later than the April 15 of the calendar year immediately following the calendar year to which such Excess Deferrals are attributable, the Plan may distribute to the Participant the amount of the Excess Deferrals allocated to the Plan as adjusted for any income or loss allocable to such excess. Any Excess Deferrals distributed pursuant to this subparagraph are to be included in the gross income of the Participant for the year to which such Excess Deferrals relate. Any income that is allocable to such Excess Deferrals (as determined in accordance with rules promulgated by the Secretary of the Treasury or his delegate) that is distributed pursuant to this subparagraph is to be included in the gross income of the Participant for the year in which such amount is distributed. In making a distribution as permitted under this Section, the Employer shall specifically designate the distribution as that consisting of Excess Deferrals within the meaning of Section 402(g)(1) of the Code. Any distribution of less than the entire amount of Excess Deferrals plus income or loss attributable to such deferral contributions shall be treated as a pro rata distribution of such excess deferral contributions and income/loss. - 12 - (iii) To the extent provided by the Secretary of the Treasury or his delegate, such Excess Deferrals distributed pursuant to this subparagraph are to be taken into account for purposes of applying the actual deferral percentage test specified in Section 3.3(b) (except if such excess is both prohibited under Section 401(a)(30) of the Code and is attributable to a non-Highly Compensated Employee), and for any other purpose of the Code which may be prescribed by the Secretary of the Treasury or his delegate. No corrective distribution under this Section shall be recognized for purposes of determining whether the minimum distribution requirements of Section 401(a)(9) of the Code are satisfied with respect to any Participant. (iv) Any distribution in accordance with this Section 3.2 shall be made without regard to any notice or consent otherwise required under Sections 411(a)(11) or 417 of the Code. 3.3 Actual Deferral Percentage Limitation on Tax Deferred Contributions (Plan Years beginning before January 1, 2001) (a) Any provision of Section 3.1(a) to the contrary notwithstanding and effective for Plan Years beginning before January 1, 2001, the Tax Deferred Contribution percentages under Section 3.1(a) shall be modified as provided in paragraph (d) if the requirements of paragraph (b) are not satisfied. (b) An actual deferral percentage shall be determined for each Covered Employee who is eligible to make Tax Deferred Contributions. Such percentage shall be equal to the total Tax Deferred Contribution (and, if elected by the Company, Employer Matching Contribution) made on the Covered Employee's behalf for the Plan Year divided by his Test Compensation in the Plan Year. With respect to Covered Employees who are eligible to make Tax Deferred Contributions but make no such contributions under this Plan, such actual deferral percentage shall be zero. Notwithstanding the foregoing, if for any Plan Year beginning before January 1, 1997, any eligible Highly Compensated Covered Employee is subject to the family aggregation rules of Section 414(q)(6) of the Code because he is either a five percent (5%) owner or one of the top 10 Highly Compensated Employees on the basis of Test Compensation, the actual deferral percentage of such Employee, as so aggregated for such year, shall be determined by combining the Tax Deferred Contributions and Test Compensation of all family members (as described in Section 1.15) eligible to participate in the Plan. The average of the actual deferral percentages for eligible Highly Compensated Covered Employees (High Average), when compared to the average of the actual deferral percentages for eligible non-Highly Compensated Covered Employees (Low Average), must meet one of the following requirements: - 13 - (i) The High Average is no greater than the Low Average times one and one-quarter (1-1/4); or (ii) The excess of the High Average over the Low Average is not greater than two (2) percentage points and the High Average is no greater than the Low Average times two (2). The provisions of this paragraph (b) shall be deemed to include the provisions of Section 401(k)(3) of the Code and Section 1.401(k)-1(b) of the Income Tax Regulations which are hereby incorporated by reference. (c) If two or more plans which include cash or deferred arrangements are considered as one plan for purposes of Section 410(b) of the Code, such arrangements included in such plans shall be treated as one arrangement for purposes of this Section 3.3 If any Highly Compensated Covered Employee is a participant under two or more cash or deferred arrangements maintained by an Employer or Affiliate, all such arrangements shall be treated as one cash or deferred arrangements for purposes of determining the actual deferral percentage of such Covered Employee. For purposes of this section, actual deferral percentages shall be calculated to the nearest one-hundredth of one percent. (d) To the extent Tax Deferred Contributions (and Employer Matching Contributions, if applicable) made with respect to Highly Compensated Covered Employees cause the High Average to fail to meet paragraph (b) above, such Tax Deferred Contributions (individually determined pursuant to Section 3.4(a) and as adjusted for earnings or loss thereon in accordance with regulations promulgated by the Secretary of the Treasury or his delegate) shall return to the Employer solely for the purpose of enabling the Employer to withhold any federal, state, or local taxes due on such amounts. Thereafter, the Employer shall treat all remaining amounts in accordance with the provisions of Sections 3.4(b) below. The Administrator may also, at any time, authorize a suspension or reduction of Tax Deferred Contributions made pursuant to Section 3.1 hereof in accordance with rules promulgated by the Administrator. These rules may include administrative provisions authorizing the suspension or reduction of Tax Deferred Contributions above a specified dollar amount or percentage of Compensation. (e) The extent to which Tax Deferred Contributions cause the High Average to fail to meet paragraph (b) above shall be determined by the Administrator in a reasonable and consistent manner. The Administrator shall not be liable to any Participant (or his beneficiary, if applicable) for any losses caused by inaccurately estimating the amount of any Participant's Tax Deferred Contributions in excess of the limitations established in Sections 3.2(a) and 3.3(b) and the earnings or losses attributable to such Tax Deferred Contributions. (f) In the event the Administrator determines that an amount to be deferred pursuant to the election provided in Section 3.1 would cause an Employer's contributions under this and/or any other tax-qualified retirement plan maintained by an Employer or Affiliate to exceed the applicable deduction limitations contained in Section 404 of the Code, or to - 14 - exceed the maximum annual addition determined in accordance with Section 11.11, the Administrator may treat such amount in accordance with the rules in paragraph (d) above. 3.4 Treatment of Tax Deferred Contributions in Excess of Actual Deferral Percentage Limitation (Plan Years beginning before January 1, 2001) (a) If the actual deferral percentage limitation of Section 3.3(b) is not satisfied with respect to any given Plan Year beginning before January 1, 1997, the amount of Tax Deferred Contributions that are in excess of such limitation and are attributable to a Highly Compensated Covered Employee shall be determined as follows: (i) the actual deferral percentage of the Highly Compensated Covered Employee with the highest actual deferral percentage is reduced to the extent necessary to: (A) cause such Employee's actual deferral percentage to equal that of the Highly Compensated Covered Employee with the next highest actual deferral percentage; or (B) enable the Plan to satisfy the actual deferral percentage limitation, if such reduction is less than that required by (A) above. (ii) The process described in (i) above shall be repeated until the Plan satisfies the actual deferral percentage limitation. (iii) Notwithstanding the foregoing, the determination of excess Tax Deferred Contributions with respect to a given Highly Compensated Covered Employee whose actual deferral percentage is determined under the family aggregation rules described in Section 3.3(b) hereof shall be accomplished by reducing the actual deferral percentage as required by the foregoing provisions of this paragraph (a) and by allocating the excess Tax Deferred Contributions derived thereby for the family group among the family members in proportion to the Tax Deferred Contributions of each family member that is combined to determine the actual deferral percentage for the family group. (b) If the actual deferral percentage limitation of Section 3.3(b) is not satisfied with respect to any given Plan Year beginning on or after January 1, 1997 and before January 1, 2001, the amount of Tax Deferred Contributions that are in excess of such limitation and are attributable to a Highly Compensated Covered Employee shall be determined by first computing the total dollar amount of Tax Deferred Contributions which must be reduced to satisfy the limitation and by allocating these amounts, in accordance with guidance promulgated by the Secretary of the Treasury or his delegate, to the Highly Compensated Covered Employees on behalf of whom the largest amounts of Tax Deferred Contributions have been made to the Plan for the given Plan Year. (c) Those Tax Deferred Contributions attributable to a Highly Compensated Covered Employee that are deemed in excess of the actual deferral percentage limitation for any - 15 - given Plan Year shall be distributed (along with any earnings or losses attributable thereto in accordance with regulations) no later than the last day of the Plan Year following the Plan Year to which such excess Tax Deferred Contributions relate. Any excess Tax Deferred Contribution that is in an amount greater than the de minimis amount prescribed by the Secretary of the Treasury or his delegate (and any income or loss attributable to such excess Tax Deferred Contribution) that is distributed pursuant to this paragraph by two and one-half (2-1/2) months following the Plan Year to which such excess amount relates shall be includible in the affected Covered Employee's gross income on the earliest date on which any Tax Deferred Contribution made on behalf of such Covered Employee during such Plan Year would have been received had the Employee declined to make the deferral election specified in Section 3.1(a) hereof. Any excess Tax Deferred Contributions (and any income or loss attributable thereto) so distributed more than two and one-half (2-1/2) months following the Plan Year to which such excess amounts relate and any de minimis excess Tax Deferred Contributions (and any income or loss attributable thereto) distributed prior to such date shall be includible in the affected Covered Employee's gross income in the year in which such amounts are distributed. (d) In making a distribution under this section, the Administrator shall specifically designate such distribution as a distribution consisting of Tax Deferred Contributions (and income or loss) in excess of that permitted by the actual deferral percentage limitation. Any distribution of less than the entire amount of excess Tax Deferred Contributions and income or loss attributable thereto (as such entire amount is determined after application of paragraph (a) or paragraph (b) of this Section 3.4, whichever applicable, and after application of Section 3.5, if applicable) shall be treated as a pro rata distribution of such excess contribution and income/loss. (e) Except as otherwise provided by the Secretary of the Treasury or his delegate, any Tax Deferred Contribution in excess of the actual deferral percentage limitation shall be taken into account for purposes of determining the Participant's annual additions limitation as provided in Section 11.11 herein, and shall be taken into account for purposes of Section 404 of the Code, notwithstanding the correction of such excess amounts by distribution. No corrective distribution under this section shall be recognized for purposes of determining whether the minimum distribution requirements of Section 401(a)(9) of the Code are satisfied with respect to any Participant. (f) Any distribution in accordance with this section shall be made without regard to any notice or consent otherwise required under Sections 411(a)(11) or 417 of the Code. - 16 - 3.5 Coordination of Distributions of Excess Tax Deferred Contributions (Plan Years beginning before January 1, 2001) In the event that a portion of the Tax Deferred Contributions made with respect to a Highly Compensated Covered Employee for any given Plan Year beginning before January 1, 2001 exceed the applicable limitations of both Section 3.2(a) and Section 3.3(b), such excess amounts subject to both limitations shall be coordinated as follows: (a) to the extent permitted, such excess amounts shall be distributed pursuant to Section 3.2(b) hereof; and (b) to the extent that any such excess amounts remain after application of paragraph (a) such excess amounts shall be distributed pursuant to Section 3.4(c) hereof. 3.6 Employer Matching Contributions Effective with respect to each given pay period beginning on and after January 1, 1997 and prior to December 14, 2000, the Employer shall contribute an amount to the Trust Fund equal to fifty percent (50%) of the Tax Deferred Contributions made with respect to each Participant during such payroll period which are not in excess of six percent (6%) of the Participant's Compensation during such payroll period. Such contributions shall be designated as Employer Matching Contributions. Employer Matching Contributions shall be credited to Participants' Employer Accounts as of the date they are received by the Trustee or otherwise deposited in the Trust Fund. 3.7 Actual Contribution Percentage Limitation on Employer Matching Contributions (Plan Years beginning before January 1, 2001) (a) Effective with respect to each Plan Year beginning before January 1, 2001, an actual contribution percentage shall be determined for each Covered Employee who is eligible to become a Participant. Such percentage shall be equal to his Employer Matching Contributions for the Plan Year, divided by his Test Compensation in the Plan Year. With respect to Covered Employees who are eligible to participate in the Plan but have no Tax Deferred Contributions made to the Plan on their behalf and therefore do not have any Employer Matching Contributions made to the Plan on their behalf under Section 3.6, such actual contribution percentage shall be zero. Notwithstanding the foregoing, if for any Plan Year beginning before January 1, 1997, an eligible Highly Compensated Covered Employee is subject to the family aggregation rules of Section 414(q)(6) of the Code because he is either a five percent (5%) owner or one of the top 10 Highly Compensated Employees on the basis of Test Compensation, the actual contribution percentage of such Employee, as so aggregated for such year, shall be determined by combining the Employer Matching Contributions and Test Compensation of all family members (as described in Section 1.15) eligible to participate in the Plan. (b) The average of the actual contribution percentages for eligible Highly Compensated Covered Employees (High Average), when compared to the average of the actual - 17 - contribution percentages for eligible non-Highly Compensated Covered Employees (Low Average) must meet one of the following requirements: (i) the High Average is no greater than the Low Average times one and one-quarter (1-1/4); or (ii) the excess of the High Average over the Low Average is not greater than two (2) percentage points and the High Average is no greater than the Low Average times two (2). The provisions of this paragraph (b) shall be deemed to include the provisions of Section 401(m)(2) of the Code and Section 1.401(m)-1(b) of the Income Tax Regulations which are hereby incorporated by reference. (c) If two or more plans to which Employer Matching Contributions are made are treated as one plan for purposes of Section 410(b) of the Code, such plans shall be treated as one plan for purposes of this Section 3.7. If any Highly Compensated Covered Employee is a participant in two or more plans of an Employer or Affiliate to which such contributions are made, all such contributions shall be aggregated for purposes of this section. For purposes of this section, actual contribution percentages shall be calculated to the nearest one-hundredth of one percent. (d) To the extent Employer Matching Contributions cause the High Average to fail to meet paragraph (b) above, the Administrator may include such amount of Tax Deferred Contributions (if not used to satisfy the requirements of Section 3.3(b)) as may be necessary to satisfy the requirements of paragraph (b). (e) The extent to which Employer Matching Contributions cause the High Average to fail to meet paragraph (b) above shall be determined by the Administrator in a reasonable and consistent manner. The Administrator shall not be liable to any Participant (or his beneficiary, if applicable) for any losses caused by inaccurately estimating the amount of any Employer Matching Contributions made on behalf of any Participant in excess of the limitation established in paragraph (b) above and the earnings or losses attributable to such Employer Matching Contributions. 3.8 Treatment of Employer Matching Contributions in Excess of Actual Contribution Percentage Limitation (Plan Years beginning before January 1, 2001) (a) If the actual contribution percentage limitation of Section 3.7(b) is not satisfied with respect to any given Plan Year beginning before January 1, 1997, the amount of Employer Matching Contributions (as such term includes any Tax Deferred Contribution that may be treated as an Employer Matching Contribution for purposes of Section 3.7(b) hereof) that are in excess of such limitation and are attributable to a Highly Compensated Covered Employee shall be determined as follows: - 18 - (i) the actual contribution percentage of the Highly Compensated Covered Employee with the highest actual contribution percentage is reduced to the extent necessary to: (A) cause such Employee's actual contribution percentage to equal that of the Highly Compensated Covered Employee with the next highest actual contribution percentage; or (B) enable the Plan to satisfy the actual contribution percentage limitation, if such reduction is less than that required by (A) above. (ii) The process described in (i) above shall be repeated until the Plan satisfies the actual contribution percentage limitation. (iii) Notwithstanding the foregoing, the determination of excess Employer Matching Contributions with respect to a given Highly Compensated Covered Employee whose actual contribution percentage is determined under the family aggregation rules described in Section 3.7(a) hereof shall be accomplished by reducing the actual contribution percentage as required by the foregoing provisions of this paragraph (a) and by allocating the excess Employer Matching Contributions derived thereby for the family group among the family members in proportion to the Employer Matching Contributions made on behalf of each family member that is combined to determine the actual contribution percentage of the family group. (b) If the actual contribution percentage limitation of Section 3.7(b) is not satisfied with respect to any given Plan Year beginning on or after January 1, 1997 and before January 1, 2001, the amount of Employer Matching Contributions (as such term includes any Tax Deferred Contribution that may be treated as an Employer Matching Contribution for purposes of Section 3.7(b) hereof) that are in excess of such limitation and are attributable to a Highly Compensated Covered Employee shall be determined by first computing the total dollar amount of Employer Matching Contributions which must be reduced to satisfy the limitation and by allocating these amounts, in accordance with guidance promulgated by the Secretary of the Treasury or his delegate, to the Highly Compensated Covered Employees on behalf of whom the largest amounts of Employer Matching Contributions have been made to the Plan for the given Plan Year. (c) Any Employer Matching Contributions attributable to a Highly Compensated Covered Employee that are deemed in excess of the actual contribution percentage limitation for a given Plan Year (through application of paragraph (a) or paragraph (b) above, whichever applicable) shall be distributed (along with any earnings or losses attributable thereto in accordance with regulations) no later than the last day of the Plan Year following the Plan Year to which such excess Employer Matching Contributions relate. Any such excess Employer Matching Contribution that is in an amount greater than the de minimis amount prescribed by the Secretary of the Treasury or his delegate (and any income or loss attributable to such excess Employer Matching Contribution) that is distributed pursuant to this paragraph by two and one-half (2-1/2) months following the Plan Year to which - 19 - such excess amounts relate shall be includible in the affected Covered Employee's gross income for his taxable year ending with or within the Plan Year for which the excess Employer Matching Contributions were made. Any excess Employer Matching Contributions (and any income or loss attributable thereto) so distributed more than two-and one-half (2-1/2) months following the Plan Year to which such excess amounts relate and any de minimis excess Employer Matching Contributions (and any income or loss attributable thereto) distributed prior to such date shall be includible in the affected Covered Employee's gross income in the taxable year in which such amounts are distributed. (d) In making a distribution under paragraph (c), the Administrator shall specifically designate such distribution as a distribution consisting of Employer Matching Contributions in excess of that permitted by the actual contribution percentage limitation, along with any income or loss attributable thereto. Any distribution of less than the entire amount of excess Employer Matching Contributions shall be treated as a pro rata distribution of such excess contribution and income/loss. (e) Except as otherwise provided by the Secretary of the Treasury or his delegate, any Employer Matching Contribution in excess of the actual contribution percentage limitation shall be taken into account for purposes of determining the Participant's annual additions limitation, as provided in Section 11.11 herein, and shall be taken into account for purposes of Section 404 of the Code, notwithstanding the correction of such excess amount by a distribution under this section. No corrective distribution under this section shall be recognized for purposes of determining whether the minimum distribution requirements of Section 401(a)(9) of the Code are satisfied with respect to any Participant. (f) Any distribution in accordance with this section shall be made without regard to any notice or consent otherwise required under Sections 411(a)(11) or 417 of the Code. 3.9 Combined Alternative Limitation on Tax Deferred Contributions and Employer Matching Contributions (Plan Years beginning before January 1, 2001) Any provisions of this Article Three to the contrary notwithstanding, if, for any Plan Year beginning before January 1, 2001, both the High Average specified in Section 3.3(b) (relating to actual deferral percentages) and the High Average specified in Section 3.7(b) (relating to actual contribution percentages) exceed the Low Average specified in such sections by more than twenty-five percent (25%), the Administrator shall apply the aggregate alternative limitation in accordance with Section 1.401(m)-2 of the Income Tax Regulations, the provisions of which are incorporated herein by reference. In the event such combined alternative limitation is not satisfied for any given Plan Year, the Company shall direct the Administrator to reduce the High Average of Section 3.3(b) and/or the High Average of Section 3.7(b) as permitted by Sections 3.4, 3.5 and 3.8 hereof to the extent necessary to satisfy the combined alternative limitation. For purposes of this Section 3.9, the High Average specified in Sections 3.3(b) and 3.7(b) shall - 20 - be determined after taking into account all corrective measures permitted under Sections 3.2, 3.4 and 3.8. 3.10 Safe Harbor Matching Contributions (a) Effective with respect to each given pay period beginning on and after December 14, 2000, the Employer shall contribute an amount to the Trust Fund equal to the sum of those amounts individually determined with respect to each Participant, as follows: (i) One hundred percent (100%) of the Tax Deferred Contributions made with respect to the Participant during such pay period which do not exceed three percent (3%) of the Participant's Compensation during such pay period; and (ii) Fifty percent (50%) of the Tax Deferred Contributions made with respect to the Participant during such pay period which exceed three percent (3%), but do not exceed five percent (5%), of the Participant's Compensation during such pay period. Such contributions shall be designated as Safe Harbor Matching Contributions and shall be 100% vested and nonforfeitable when made. The Employer shall make Safe Harbor Matching Contributions as soon as practicable following the end of the pay period to which they relate and such contributions shall be credited to Participants' Safe Harbor Matching Accounts as of the date they are received by the Trustee or otherwise deposited in the Trust Fund. (b) Effective with respect to each Plan Year in which the provisions of Section 3.10(a) are applicable, the Administrator shall provide Notice during the "Safe Harbor Notice Period" (as hereinafter defined) to each Covered Employee who is eligible to participate in the Plan during such Plan Year. Such Notice shall describe the following: (i) The formula used to determine the Safe Harbor Matching Contribution to be made on behalf of such Employee for such Plan Year; (ii) Any requirements that such Employee must satisfy to become entitled to receive such contributions; (iii) The type and amount of Compensation that may be deferred under the Plan as Tax Deferred Contributions; (iv) The procedures for making or changing an election to make Tax Deferred Contributions; and (v) The withdrawal and vesting provisions applicable to contributions under the Plan. For purposes hereof, the "Safe Harbor Notice Period" shall mean a period beginning 90 days before the first day of the applicable Plan Year and ending 30 days before the first - 21 - day of the applicable Plan Year; provided, however, with respect to a Covered Employee who becomes eligible to participate in the Plan during a given Plan Year in which the provisions of Section 3.10(a) are applicable, the "Safe Harbor Notice Period" shall begin 90 days before the day such Employee may first participate in the Plan and shall end on the day such Employee may first participate in the Plan. (c) For Plan Years beginning on and after January 1, 2001 in which the Safe Harbor Matching Contribution of Section 3.10(a) is made and the Notice requirement of Section 3.10(b) is satisfied, the Employer elects to treat the Plan as automatically satisfying the nondiscrimination in amount of employer contribution requirements of Section 401(a)(4) of the Code. Notwithstanding any provision of this Section 3.10 to the contrary, the Employer may suspend future Safe Harbor Matching Contributions at any time provided that the procedures for implementing such suspension are consistent with guidance promulgated by the Internal Revenue Service and, provided further, that for any Plan Year in which such suspension occurs, the provisions of Section 3.3, 3.4, 3.5, 3.7, 3.8 and 3.9 shall again become applicable to the extent then required by law. 3.11 Source of Employer Contributions (a) The Employer shall make all contributions to the Plan without regard to current or accumulated net profits. Notwithstanding the foregoing, for purposes of Sections 401(a)(27) and 401(k) of the Code, the Plan shall continue to be considered a profit sharing plan. All Employer contributions shall be made in cash. (b) Any provision of the Plan to the contrary notwithstanding, the total Employer contribution made with respect to any Plan Year, when added to any other contributions made by the Employer to a plan qualified under Section 401(a) of the Code, shall not exceed such amount which is deductible for such Plan Year pursuant to Sections 404(a)(3) or 404(a)(7) of the Code. In any event, all contributions for a Plan Year shall be paid within the regular or extended time for filing the Employer's federal income tax return for the fiscal year which includes the Plan Year end. 3.12 Investment of Employer Contributions The Employer contributions made on behalf of a Participant shall be invested by the Trustee in accordance with the Participant's election under Sections 5.3(a) and 5.4(a). - 22 - 3.13 Recovery of Contributions Except as provided in this Section 3.13, the assets of the Plan shall never inure to the benefit of an Employer or Affiliate and shall be held for the exclusive purpose of providing benefits under the Plan and defraying reasonable expenses of the Plan. However, no provision of this Plan shall: (a) Prohibit the return of a contribution to an Employer or a Participant within one year after payment if such contribution was made by a mistake of fact; (b) Prohibit the return of a contribution which was conditioned upon its deductibility under Section 404 of the Code (to the extent disallowed as a deduction); provided, however, in the case of the return of a contribution which was made as a result of a mistake of fact, the amount which shall be returned is the excess of the amount contributed over the amount which would have been contributed had the mistake of fact not occurred. Further, in the case of the return of a contribution which was conditioned upon deductibility, and in the case of a contribution made as the result of a mistake of fact, earnings attributable to the excess contribution may not be returned, but losses attributable thereto must reduce the amount to be returned. Further, in both such cases, if the withdrawal of the amount attributable to the mistaken or non-deductible contribution would cause the balance of the account of any Participant to be reduced to less than the balance which would have been in the account had the mistaken or non-deductible amount not been contributed, then the amount to be returned to the Employer will be limited so as to avoid such reduction. 3.14 Other Provisions Relating to Employer Contributions (a) A Participant may as of any time: (i) suspend the Tax Deferred Contributions made on his behalf; or (ii) increase or decrease the rate of Tax Deferred Contributions made on his behalf or have such contributions resumed after a period of suspension. Such suspension or change in rate shall be effective as of the first day of the pay period next following the date the Participant delivers Notice of the same to the Administrator, provided such Notice is delivered to the Administrator in such time as to allow the Administrator a reasonable period within which to act on the election contained therein. During any period of suspension, regardless of the length of its duration, the Participant's Account shall be maintained in accordance with the procedure set forth in Article Five. (b) In the event Employer Matching Contributions or Safe Harbor Matching Contributions have been made with respect to Tax Deferred Contributions that are subsequently determined to fail to meet the annual dollar limitation specified in Section 3.2(a) (and if such Excess Deferrals are distributed pursuant to Section 3.2(b)) or the actual deferral - 23 - percentage limitation of Section 3.3(b) (and if such excess Tax Deferred Contributions are distributed pursuant to Section 3.4), such Employer Matching Contributions or Safe Harbor Matching Contributions (and any income or loss attributable thereto determined in accordance with regulations) shall be forfeited and applied to reduce future Employer Matching Contributions or Safe Harbor Matching Contributions. - 24 - ARTICLE FOUR ROLLOVER CONTRIBUTIONS 4.1 Rollover Contributions (a) Under such rules and procedures as the Administrator may establish, any Covered Employee may make a cash contribution to this Plan of all or a portion of the amount received by the Covered Employee in the form of a lump sum distribution from a qualified trust within the meaning of Section 402(c)(8) of the Code or from a rollover account described in Section 408(d)(3) of the Code, or may make a direct rollover of all or a portion of an eligible rollover distribution within the meaning of Section 402(c)(4) of the Code. Such rollover contribution shall be allocated to a Rollover Account established on behalf of the Covered Employee. For purposes of this Section 4.1, the entire amount of cash to be accepted by this Plan as a rollover contribution must constitute all or a portion of an eligible rollover distribution (as defined in Section 6.4). Such contribution must not include after-tax amounts contributed by the Employee or regular IRA contributions and, with respect to rollovers of distributions from a qualified trust or rollover account, must be received by the Trustee on or before the 60th day after the day on which the Employee received the distribution. A rollover contribution may include funds which were contributed on the Participant's behalf under an arrangement described in Code Section 401(k). Before accepting any rollover contributions from a Covered Employee, the Administrator shall determine to its satisfaction that such contribution does not contain amounts from sources other than those provided in this Section 4.1. (b) In the event the Administrator has reasonably concluded that an amount may be accepted by the Plan as a rollover contribution under Section 4.1(a) but later determines that all or a portion of such amount is not an eligible rollover distribution (as defined in Section 6.4) from a qualified trust within the meaning of Section 402(c)(8) of the Code or from a rollover account described in Section 408(d)(3) of the Code, the Administrator shall cause such ineligible amount and related investment earnings to be distributed to the Covered Employee (or, if applicable, beneficiary) as soon as administratively feasible. 4.2 Vesting of Rollover Contributions Amounts contributed under Section 4.1 hereof shall at all times be 100% vested. - 25 - ARTICLE FIVE PARTICIPANT ACCOUNTS AND VALUATION OF FUNDS 5.1 Establishment of Participant Accounts (a) There shall be established and maintained for each Participant a Total Account consisting of the following accounts: (i) a Tax Deferred Account; (ii) an Employer Account; and (iii) for periods on and after January 1, 2001, a Safe Harbor Matching Account. Under the circumstances described in Article Four, a Participant may also have a Rollover Account maintained on his behalf. (b) Within each of the accounts listed in Section 5.1(a), separate records shall be kept of the portion, if any, of each account invested in each investment fund or vehicle then offered under the Plan. 5.2 Procedure as of Each Valuation Date As of each Valuation Date, each Participant's balance in his various accounts shall be adjusted in accordance with the valuation procedure adopted by the Administrator. 5.3 Investment Elections (a) When a Covered Employee submits his application to become a Participant, he shall give Notice regarding the investment of Tax Deferred Contributions and any Employer Matching Contributions or Safe Harbor Matching Contributions made on his behalf under the Plan. The Notice shall specify, in 1% increments from 0% to 100%: (i) the percentage of all future Tax Deferred Contributions to be invested in each investment option which is then made available for the investment of Tax Deferred Contributions; and (ii) the percentage of all future Employer Matching Contributions or, with respect to pay periods beginning on and after December 14, 2000, Safe Harbor Matching Contributions, to be invested in each investment option which is then made available for the investment of Employer Matching Contributions or, with respect to pay periods beginning on and after December 14, 2000, Safe Harbor Matching Contributions. - 26 - A Participant may change the investment elections made under this Section 5.3(a) at any time by giving Notice to the Administrator or its designee within such time and in accordance with such means as are designated by the Administrator and communicated to Participants and Covered Employees. Such Notice of change shall be subject to the procedural specifications set forth above (and, if applicable, subject to the limitations set forth in Section 5.4) and, except as may otherwise be provided in the Trust Agreement, shall be effective with respect to contributions received by the Trustee (or otherwise deposited into the Trust Fund) as of the Valuation Date on which the Notice is received or as of the next following Valuation Date, in accordance with procedures established by the Administrator, and communicated to Participants and Covered Employees. A Covered Employee making a rollover contribution shall give Notice regarding the investment of such contribution. Such Notice shall be delivered on or prior to the date the rollover contribution is effective and shall specify, in 1% increments from 0% to 100%, the percentage of the rollover contribution to be invested in each investment option which is then made available for the investment of rollover contributions. (b) Each Participant and beneficiary shall have the opportunity to change the manner in which the Total Account maintained on his behalf under the Plan is invested. Such opportunity shall be exercised by giving Notice to the Administrator or its designee within such time and in accordance with such means as are designated by the Administrator and communicated to Participants, Covered Employees and affected beneficiaries. Subject to any minimum dollar limitation which may be established by the Administrator from time-to-time, such Notice shall specify, in a whole dollar amount or in 1% increments from 0% to 100%, the dollar amount, or percentage, of the Total Account maintained on behalf of the Participant or beneficiary which is to be invested in each investment option then made available. Except as may otherwise be set forth in the Trust Agreement, such Notice shall be effective as of the Valuation Date on which the Notice is received by the Trustee or as of the next following Valuation Date, in accordance with procedures established by the Administrator and communicated to Participants, Covered Employees and affected beneficiaries. Notwithstanding any provision of this paragraph (b) to the contrary, (i) the election under this Section 5.3(b) shall be subject to any contractual limitations imposed on the direct transfer of assets between given investment funds, (ii) in no event shall any portion of the Total Account maintained on behalf of a Participant or beneficiary in the Erie Family Life Group Annuity Fund be transferred to any other investment fund and (iii) in no event shall any portion of the Total Account maintained on behalf of a Participant be transferred to the Erie Indemnity Stock Fund. (c) Any investment elections or changes in elections under this Section 5.3 may be limited or delayed by the Administrator or Trustee, if, in the judgment of such party, giving immediate effect to such elections would adversely affect the Total Account balances of a significant number of Participants. - 27 - (d) In the event a Participant's or beneficiary's investment election is incomplete, the Participant or beneficiary will be assumed to have chosen to invest in such default fund as is set forth in the Trust Agreement. (e) Any investment election under the foregoing provisions of this Section 5.3 shall remain in effect until changed by another election under this Section. (f) Each Participant, Covered Employee and beneficiary is solely responsible for the selection of his investment option. The Trustee, the Administrator, the Employer, and the directors, officers, supervisors and other employees of the Employer are not empowered to advise a Participant, Covered Employee or beneficiary as to the manner in which any portion of his Total Account shall be invested. The fact that an investment option is available under the Plan shall not be construed as a recommendation for investment in that investment option. 5.4 Erie Indemnity Stock Fund The provisions of this Section shall become applicable to the extent to which Participants' and beneficiaries' Employer Accounts and/or Safe Harbor Matching Accounts under the Plan are invested in the Erie Indemnity Stock Fund. (a) Effective for pay periods beginning on and after May 8, 1997, the Administrator shall make available under the Plan an investment fund which shall consist exclusively of Erie Indemnity Stock; provided, however, that in the discretion of the Trustee, within guidelines set by the Administrator, a portion of such fund may be held in short-term interest-bearing investments or cash pending purchase of Erie Indemnity Stock and to provide sufficient liquidity for exchanges out of the fund, withdrawals and loans. Such investment fund shall be referred to as the "Erie Indemnity Stock Fund". Except as otherwise provided in this Section 5.5, a Participant shall be permitted to invest all or a portion of the Employer Matching Contributions or, with respect to pay periods beginning on and after December 14, 2000, the Safe Harbor Matching Contributions, made on his behalf in the Erie Indemnity Stock Fund in accordance with the provisions of Section 5.3. A Participant shall not be permitted to invest any portion of the Tax Deferred Contributions made on his behalf in the Erie Indemnity Stock Fund nor shall any Participant or Covered Employee be permitted to invest any portion of a rollover contribution in the Erie Indemnity Stock Fund. No Participant, Covered Employee or beneficiary may transfer any portion of the Total Account maintained on his behalf to the Erie Indemnity Stock Fund. For purposes of implementing Participant investment elections under Section 5.3, or a Participant's or beneficiary's distribution election under Section 6.3, the Trustee may, in its discretion, purchase or sell Erie Indemnity Stock on the open market or by privately-negotiated transaction; provided however, that any such purchase or sale shall be made only in exchange for fair market value as determined by the Trustee and, provided further that, no commission shall be charged to or paid by the Plan with respect to any purchase or sale of Erie Indemnity Stock between the Plan and a party in interest (as defined in Section 3(14) of ERISA). Any distributions, dividends or - 28 - other income received by the Trustee with respect to the Erie Indemnity Stock Fund shall be reinvested by the Trustee in the Erie Indemnity Stock Fund. (b) The restrictions contained in this paragraph (b) shall apply to that portion of the Employer Accounts and/or Safe Harbor Matching Accounts maintained on behalf of Participants or beneficiaries which are invested in the Erie Indemnity Stock Fund and, if and to the extent necessary, any election made by a Participant or beneficiary under the Plan shall be deemed modified to be consistent with this paragraph (b). (i) Notwithstanding the provisions of Section 5.3, and Articles Seven and Fourteen: (A) No Participant or beneficiary shall, on the basis of material nonpublic information with respect to the Company or its affiliates, make an election permitted by that Section or those Articles if (1) such election would result in an exchange into or out of, loans from, withdrawals from, or an increase or decrease in the amount of contributions to the Erie Indemnity Stock Fund, and (2) the transaction resulting from such election is prohibited by Rule 10b-5. (B) No officer shall make an election permitted by that Section or those Articles if such election would result in a transaction involving the Erie Indemnity Stock Fund which is not an exempt transaction pursuant to Rule 16b-3. For purposes of this paragraph (b), the terms "Rule 10b-5" and Rule 16b-3" shall mean the rules, as amended, having those designations promulgated by the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, and the terms "affiliate" and "officer" shall have the meanings set forth in Rule 12b-2 and Rule 16a-1(f), respectively, both as so promulgated and amended. - 29 - ARTICLE SIX VESTING & DISTRIBUTIONS 6.1 Vesting A Participant shall be fully vested in all contributions made and investment earnings credited under the provisions of the Plan. 6.2 Distributions Upon Retirement or Other Termination of Employment (a) Subject to the provisions of (b) below, in the event of the termination of a Participant's employment with the Company and Affiliates for any reason, the Participant (or, if deceased, his designated beneficiary) shall receive the vested Total Account maintained on behalf of the Participant in accordance with Section 6.3 if, as of the date of determination, the balance of such vested Total Account is not in excess of $3,500.00. The Administrator or its designee shall make such determination on a periodic basis, not less frequent than annually. If, as of such date of determination, the vested Total Account maintained on behalf of a Participant exceeds $3,500.00, the Participant may elect, in such manner as provided by the Administrator, to either take or commence an immediate distribution of such vested Total Account (with Spousal Consent) in a form permitted under Section 6.3, or to defer receipt of the same until a later date, but not beyond the end of the calendar year in which he attains age 70-1/2. Such election by a Participant must be made in writing to the Administrator on a form or forms designated for such purpose. The failure of any terminating Participant to make an election with respect to a vested Total Account in excess of the $3,500 threshold shall be deemed an election by the Participant to defer receipt of such vested Total Account. A Participant who elects (or is deemed to have elected) to defer receipt of his vested Total Account may request a distribution of his vested Total Account in a form permitted under Section 6.3 at a subsequent date, subject to Spousal Consent. Pending distribution of his Total Account, such Participant shall be permitted to change the manner in which such Total Account is invested in accordance with Section 5.3(b). (b) The Administrator or its designee shall notify a Participant or beneficiary of his election right under Section 6.2(a) and, in the case of a Participant who may defer payment of the vested portion of his Total Account in accordance with Section 6.2(a), of his right to defer payment. Such notification shall be provided to the Participant or beneficiary not less than 30 days and not more than 90 days before payment is made; provided however, that a Participant or beneficiary may affirmatively elect to be paid the vested Total Account being maintained on his behalf (such election to include Spousal Consent, in the case of a Participant) within 30 days after the Participant or beneficiary received the notice described in this Section 6.2(b). (c) A Participant who returns to employment with the Employer on a full or part-time basis prior to distribution of his vested Total Account under paragraph (a) shall be deemed to have cancelled his distribution election as of his date of reemployment. - 30 - (d) All payments made pursuant to this Section 6.2 shall be based on the Participant's vested Total Account balance on the Valuation Date as of which payment is made. 6.3 Payment of Amounts Distributed (a) For periods before January 1, 2001 and except as otherwise provided in Section 6.3(c), all Plan distributions shall be paid in the form of a lump sum. Effective on and after January 1, 2001, distributions to a Participant or beneficiary may be paid in the form of: (i) a lump sum; (ii) monthly, quarterly or annual installments that will provide a fixed amount per pay period; or (iii) monthly, quarterly or annual installments that will provide substantially equal payments over a fixed period that is not in excess of the lesser of fifteen (15) years or the recipient's life expectancy, as determined by the Administrator as of the date the payments begin. A Participant or beneficiary who has elected payment in an installment form under Section 6.3(a)(ii) or (iii) may elect, at some future date, to have the balance of the vested Total Account maintained on his behalf paid in the form of a lump sum. Except as provided in the preceding sentence, a Participant or beneficiary may not change his elected form of distribution following the date Plan payments begin. A Participant who returns to employment with the Employer on a full or part-time basis following commencement of an installment form of distribution shall be deemed to have cancelled his distribution election as of his date of reemployment. In no event may distributions from the Plan be made in the form of an annuity. (b) The distributee shall elect to have that portion of his Employer Account and Safe Harbor Matching Account which is invested in the Erie Indemnity Stock Fund paid either (i) in whole units of Erie Indemnity Stock (with fractional units being distributed in cash) or (ii) in cash. The election of a Participant or beneficiary under this Section 6.3(b) shall be made in connection with the Participant's or beneficiary's distribution election(s) under Section 6.2. In the event distribution is made in the absence of a Participant's or beneficiary's distribution election, that portion of an Employer Account and Safe Harbor Matching Account which is invested in the Erie Indemnity Stock Fund at the time of distribution shall be paid in cash. (c) Distribution to a Participant must commence no later than the April 1st of the calendar year following the calendar year in which the Participant attains age 70-1/2. Notwithstanding the foregoing, effective January 1, 1999 with respect to any employed Participant who attains age 70-1/2 during or after the 1999 calendar year, distribution must commence no later than the April 1st of the calendar year following the calendar year in which the Participant retires; provided, however, that if the Participant is a five percent owner (for - 31 - purposes of Section 416 of the Code) during the calendar year in which he attains age 70-1/2 or in a later calendar year, distribution must commence to the Participant no later than the April 1st of the calendar year following the calendar year in which the Participant attains age 70-1/2 or the calendar year in which the Participant becomes a five percent owner, whichever date is later. For periods before January 1, 2001, a Participant who is required to commence payments under this Section 6.3(c), and who continues to work on either a full or part-time basis, may elect to receive his Total Account in the form of 10 annual installments instead of a lump sum distribution. In all cases, for purposes of calculating the amount of a required minimum distribution, life expectancy will be determined without regard to the permissive recalculation rule of Section 401(a)(9)(D) of the Code. Notwithstanding the foregoing, unless the Participant elects otherwise, distribution of benefits under Section 6.2 will begin no later than the 60th day after the latest of the close of the Plan Year in which: (i) the Participant attains age 65, (ii) occurs the fifth anniversary of the Plan Year in which the Participant commenced participation in the Plan, or (iii) the Participant terminated employment with the Company and Affiliates. (d) In the event the Participant dies after distribution of his interest has begun, but prior to distribution of his entire interest, the remaining portion of such interest shall be distributed in a method which is at least as rapid as the method being used at the date of the Participant's death. In the event the Participant dies prior to commencement of the distribution of his interest, the entire interest attributable to such Participant shall be distributed within five years after the date of his death, unless such interest is payable to a designated beneficiary (as defined in Code Section 401(a)(9)), commences no later than the December 31 of the calendar year following the calendar year of the Participant's death and is payable over a period which does not exceed the life expectancy of such designated beneficiary, as determined by the Administrator as of the date payments begin. Notwithstanding the foregoing, if the designated beneficiary of the Participant is the Participant's surviving spouse, the date distributions are required to begin shall be no earlier than the date that the Participant would have attained age 70-1/2 and, if the spouse dies before payments begin, subsequent distribution shall be made as if the spouse had been the Participant. (e) Any provision of the Plan to the contrary notwithstanding, all distributions shall be determined and made in accordance with the provisions of Section 401(a)(9) of the Code and the regulations promulgated thereunder including 1.401(a)(9)-2. Such provisions shall override any distribution provision of the Plan that is inconsistent with Code Section 401(a)(9). - 32 - 6.4 Direct Rollovers (a) Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Section, a distributee may elect, subject to provisions adopted by the Administrator which shall be consistent with income tax regulations, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. The Administrator shall notify a distributee of his right to elect a direct rollover; such notice shall be furnished to the distributee between 30 days and 90 days prior to the date as of which the distributee is to receive a distribution from the Plan, provided that the distributee may affirmatively elect a distribution or direct rollover to occur within 30 days after the furnishing of such notice. Subject to Section 6.2(a), a distributee who has been given a timely notice and explanation of the election to have his eligible rollover distribution paid to an eligible retirement plan, and who has failed to file an election with the Administrator within 30 days of the delivery of such notice and explanation shall be presumed to have elected to have his benefit paid directly to him as of the Valuation Date which is, or which next follows, the end of such 30-day period. (b) Definitions. (i) Eligible Rollover Distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of 10 years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9); for periods on and after January 1, 1999, that portion of a hardship withdrawal that is attributable to Tax Deferred Contributions; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (ii) Eligible Retirement Plan: An eligible retirement plan is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a), that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (iii) Distributee: A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code - 33 - Section 414(p), are distributees with regard to the interest of the spouse or former spouse. (iv) Direct Rollover: A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. - 34 - ARTICLE SEVEN WITHDRAWALS 7.1 Withdrawals Generally A Participant actively employed with the Company or an Affiliate (herein referred to in this Article as an "Eligible Applicant") may make written application to the Administrator for withdrawal of a portion of his account balance without terminating his employment, but only in such amounts and under such conditions as specified in this Article Seven. All such applications for a withdrawal made by an Eligible Applicant shall be approved or denied by the Administrator in accordance with a uniform, non-discriminatory policy and such action by the Administrator shall be final. 7.2 Hardship Withdrawal Upon proper written application of an Eligible Applicant in such form as the Administrator may specify, the Administrator may permit the Eligible Applicant withdraw in cash the portion of the balance of his Total Account representing his Rollover Account (if applicable), his Employer Account and his Tax Deferred Contributions without earnings thereon, provided that the reason for such withdrawal is to enable the Eligible Applicant to meet unusual or special situations in his financial affairs resulting in immediate and heavy financial needs of the Eligible Applicant and, provided further, that the Administrator must be satisfied that any withdrawal hereunder is not in excess of the amount necessary to meet the immediate and heavy financial need and is not available from other resources of the Eligible Applicant. The amount available for withdrawal shall be based on the balances of the applicable accounts (and the Tax Deferred Contributions made) on the Valuation Date as of which payment is made. In the event an Eligible Applicant is married at the time of application and the withdrawal request exceeds $3,500, the Administrator shall require Spousal Consent prior to approving the withdrawal application. Amounts required to meet the following items are deemed to be for immediate and heavy financial needs: (a) payments necessary to prevent the eviction of the Eligible Applicant from, or foreclosure of the mortgage on, his principal residence; (b) expenses for medical care described in Code Section 213(d) incurred by the Eligible Applicant, his spouse, or his dependents as defined in Code Section 152, or necessary for these persons to obtain medical care described in Section 213(d) of the Code; (c) costs directly related to the purchase of an Eligible Applicant's principal residence; or (d) payment of tuition, related educational fees and room and board expenses, for the next 12 months of post-secondary education for the Eligible Applicant, his spouse or his dependents. 7.3 Safe Harbor Distribution - 35 - A distribution shall be deemed necessary to satisfy an immediate and heavy financial need of a Eligible Applicant if all of the following requirements are satisfied: (a) the distribution is not in excess of the amount of the immediate and heavy financial need of the Eligible Applicant including any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from such distribution; (b) the Eligible Applicant has obtained all other forms of distribution and nontaxable loans currently available from all plans maintained by an Employer; (c) the Eligible Applicant shall be suspended from making Tax Deferred Contributions to the Plan until the first day of the pay period occurring 12 full months from the effective date of the withdrawal; and (d) the limitation specified in Section 3.2(a) shall be applied to the aggregated Tax Deferred Contributions made during the taxable years which include the first and last days of the suspension period and not separately to each such taxable year. 7.4 Hardship Withdrawal Priority (a) A withdrawal pursuant to this Article Seven shall be made from the Total Account maintained on behalf of an Eligible Applicant in the order of priority set forth in this Section 7.4. That portion of a Eligible Applicant's Total Account which is of a lower priority shall be withdrawn only after those portions of the Total Account which are of higher priority have been completely withdrawn: (i) Rollover Account; (ii) Employer Account; and (iii) Tax-Deferred Account (excluding earnings on Tax Deferred Contributions). In no event shall a hardship withdrawal be taken from the Safe Harbor Matching Account maintained on behalf of an Eligible Applicant. (b) Subsequent to the determination under paragraph (a), withdrawals shall be made out of those investment options in which the applicable account is invested according to the withdrawal hierarchy designated by the Administrator and communicated to Participants. 7.5 Modifications to Hardship Withdrawal Standards The Company shall have full discretionary authority to modify the provisions of Sections 7.2, 7.3 and 7.4 provided that any modifications shall be evidenced by a writing approved by the Plan Administrator, shall be consistently applied to all pending and future applications as of the date - 36 - of the modification and shall not operate so as to reduce or eliminate any benefit protected under Section 411(d)(6) of the Code that has accrued as of the date of modifications. - 37 - ARTICLE EIGHT THE TRUST FUND 8.1 Trust Agreement The Company has entered into a Trust Agreement for the purpose of holding assets of the Trust Fund other than assets attributable to amounts invested in a group annuity contract provided by the Erie Family Life Insurance Company. The Trust Agreement provides, among other things, that all funds received by the Trustee thereunder shall be held, administered, invested and distributed by the Trustee, and that no part of the corpus or income of the Trust Fund held by the Trustee shall be used for, or diverted to, purposes other than for the exclusive benefit of participants or their beneficiaries. The Company shall have the authority to remove such Trustee or any successor Trustee, and any Trustee or any successor Trustee may resign. Upon removal or resignation of a Trustee, the Company shall appoint a successor Trustee. The Company shall have authority to direct that there shall be more than one Trustee under the Trust Agreement and to determine the portion of the assets under the Trust Agreement to be held by each such Trustee. If such a direction is given, the Company shall designate the additional Trustee or Trustees, and each Trustee shall hold and invest and keep records with respect to the portion of such assets held by it. 8.2 Appointment of Independent Accountants The Company may select a firm of independent public accountants to examine and report on the financial position and the results of the operations of the Trust Fund created under the Plan, at such times as it deems proper and/or necessary. 8.3 Appointment of Investment Manager The Company may select an independent investment manager to invest the portion of the Trust Fund in each of the various funds. Such investment manager shall be either registered as an investment manager under the Investment Adviser's Act of 1940, a bank, a mutual fund or an insurance company, and as required by the Company, shall acknowledge in writing that he is a fiduciary with respect to the Plan. 8.4 Investment Committee The Company shall appoint three or more persons to serve as the Employee Savings Plan Investment Committee, to be referred to herein as the "Investment Committee". The Investment Committee shall perform such duties relating to the investment of the Trust Fund as the Company delegates to it and the duties specified in this Section 8.4. Any one or more of the members of the Investment Committee may be officers or directors of an Employer and need not be Participants entitled to benefits under the Plan. The Company in its sole discretion may remove or replace any member at any time with or without cause. A member may resign by delivering his written resignation to the Company, and such resignation shall become effective - 38 - upon its delivery or at any other date specified therein. If, at any time, there shall be a vacancy in the membership of the Investment Committee, the remaining member or members shall continue to act until such vacancy is filled by the Company. The Investment Committee shall hold meetings upon such notice, at such place or places and at such times as its members may from time to time determine. A simple majority of the members at the time in office shall constitute a quorum for the transaction of business. All action taken by the Investment Committee at any meeting shall be by vote of the simple majority of those present at such meeting, but the Investment Committee may act without a meeting by unanimous action of its members evidenced by a resolution or other written instrument signed by all members of the Investment Committee. The Investment Committee shall have the following responsibilities: (a) to recommend to the Company a Trustee and to recommend any changes in said Trustee; (b) to recommend to the Company the appointment of fund managers; (c) to allocate the duties and procedures for the Trustee and investment managers; (d) to establish a separate investment philosophy and goals for each of the fund managers; (e) to monitor the Trustee with respect to servicing the trust in a fiduciary capacity; and (f) to monitor the fund managers with respect to the investment philosophy, goals and rates of return. 8.5 Voting of Erie Indemnity Stock (a) Each Participant or beneficiary who has an Employer Account maintained under the Plan on his behalf with an investment in the Erie Indemnity Stock Fund shall have the powers and responsibilities set forth in this Section 8.5. (b) Prior to each meeting of the Class A shareholders of the Company during which a vote of Class A shares is to be taken, the Company shall cause to be sent to each person described in Section 8.5(a), a copy of the proxy solicitation material for such meeting, together with a form requesting confidential voting instructions for the voting of Erie Indemnity Stock held in the Erie Indemnity Stock Fund in proportion to the number of shares or units of the Erie Indemnity Stock Fund held by such a person's Employer Account. Upon receipt of such a person's instructions, the Trustee shall then vote in person, or by proxy, such Erie Indemnity Stock as so instructed. (c) Instructions received from the persons described in Section 8.5(a) by the Trustee regarding the voting of Erie Indemnity Stock held in the Erie Indemnity Stock Fund shall be held in strictest confidence and shall not be divulged to any other person, including directors, officers or employees of the Company, or any Affiliate, except as otherwise required by law. - 39 - (d) Except as otherwise set forth in the Trust Agreement, the Trustee shall vote Erie Indemnity Stock which represents those shares or units of the Erie Indemnity Stock Fund for which the Trustee does not receive affirmative direction from Participants and beneficiaries in the same proportion as the Trustee votes those shares of Erie Indemnity Stock held in the Erie Indemnity Stock Fund for which it has received voting instructions. - 40 - ARTICLE NINE ADMINISTRATION OF THE PLAN 9.1 The Administrator The Plan shall be administered by a Plan Administrator who shall serve at the pleasure of the Board. The Board has appointed the Company's Senior Vice President, Treasurer and Chief Investment Officer to serve as Administrator. The Administrator may resign by delivering his written resignation to the Board. In the event of the death, resignation or removal of the Administrator, the Board shall fill the vacancy. In making the appointment, the Board shall not be limited to any particular person or group, and nothing herein contained shall be construed to prevent any Participant, director, officer, employee or shareholder of the Employers from serving as the Administrator. The Administrator will not be compensated from the Trust Fund for services performed in such capacity, but the Company will reimburse such individual for expenses reasonably incurred by him in such capacity. The Administrator shall be the "named fiduciary" for purposes of ERISA; provided, however, that Participants and beneficiaries with Employer Accounts under the Plan shall be considered "named fiduciaries" solely to the extent of those fiduciary duties and responsibilities which are directly related to the exercise of voting rights with respect to Plan interests invested in the Erie Indemnity Stock Fund (and not to other aspects of Plan operation and/or administration). Appointment by the Board shall be evidenced by a certified copy of the resolution of the Board making such appointment, and copies of such certified resolution shall be delivered to the Trustee and to such other persons as may require such notice. 9.2 Powers of Administrator The Administrator will have full power to administer the Plan in all of its details, subject, however, to the requirements of ERISA. This power shall include having the sole and absolute discretion to interpret and apply the provisions of the Plan, to determine the rights and status hereunder of any individual, to decide disputes arising under the Plan, and to make any determinations and findings of fact with respect to benefits payable hereunder and the persons entitled thereto as may be required for any purpose under the Plan. Without limiting the generality of the above, the Administrator is hereby granted the following authority which it shall discharge in its sole and absolute discretion in accordance with Plan provisions as interpreted by the Administrator: (a) To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan, including the modification of the claims procedure under Article Ten in accordance with any regulations issued under Section 503 of ERISA. (b) To interpret the Plan. (c) To decide all questions concerning the Plan and the eligibility of any person to participate in the Plan, his period of participation and/or service under the Plan, his date of birth, the value of the Total Account, or any part thereof, maintained on behalf of the person and the - 41 - rights of any person to receive a distribution from the Plan and the amount of such distribution. (d) To compute the amount of Tax Deferred Contributions, Employer Matching Contributions and Safe Harbor Matching Contributions to be made on behalf of any Participant in accordance with the provisions of the Plan. (e) To authorize the payment of Plan benefits and to direct cessation of benefit payments. (f) To appoint, employ or engage such other agents, counsel, accountants, consultants and actuaries as may be required to assist in administering the Plan. (g) To establish procedures to determine whether a domestic relations order is a qualified domestic relations order within the meaning of Section 414(p) of the Code, to inform the parties to the order as to the effect of the order, and to direct the Trustee to hold in escrow or pay any amounts so directed to be held or paid by the order. (h) To obtain from the Employers, Employees, Participants, spouses and beneficiaries such information as shall be necessary for the proper administration of the Plan. (i) To perform all reporting and disclosure requirements imposed upon the Plan by ERISA, the Code or any other lawful authority. (j) To ensure that procedures are established which are sufficient to safeguard the confidentiality of information relating to the purchase, holding, and sale of Erie Indemnity Stock held in the Erie Indemnity Stock Fund and the exercise of shareholder rights with respect to Erie Indemnity Stock held in the Erie Indemnity Stock Fund and to ensure such procedures are being followed. (k) To appoint and remove an independent fiduciary for the purpose of carrying-out activities relating to any situations which the Administrator determines involves an unreasonable potential for undue Employer influence with regard to the direct or indirect exercise of shareholder rights with respect to Erie Indemnity Stock holdings in the Erie Indemnity Stock Fund. (l) To take such steps as it, in its discretion, considers necessary and/or appropriate to remedy an inequity under the Plan that results from incorrect information received or communicated or as the consequence of administrative error. (m) To correct any defect, reconcile any inconsistency or supply any omission under the Plan. (n) To delegate its powers and duties to others in accordance with Section 9.3. (o) To exercise such other authority and responsibility as is specifically assigned to it under the terms of the Plan and to perform any other acts necessary to the performance of its powers and duties. - 42 - The Administrator at its discretion may either request the Company or direct the Fund to pay for any or all services rendered by the Trustee, any investment manager, and by persons appointed, employed or engaged under Section 9.2(f) or under the terms of the Trust Agreement. The Administrator's interpretations, decisions, computations and determinations under this Section 9.2 which are made in good faith will be final and conclusive upon the Employers, all Participants and all other persons concerned. Any action taken by the Administrator with respect to the rights or benefits of any person under the Plan shall be revocable by the Administrator as to payments or distributions not theretofore made, pursuant to such action, from the Trust Fund; and appropriate adjustments may be made in future payments or distributions to a Participant or beneficiary to offset any excess payment or underpayment previously made to such Participant or beneficiary from the Trust Fund. No ruling or decision of the Administrator in any one case shall create a basis for a retroactive adjustment in any other case prior to the date of a written filing of each specific claim. 9.3 Delegation of Duties The Administrator may, from time to time, designate any person to carry out any of the responsibilities of the Administrator. The person so designated will have full authority, or such limited authority as the Administrator may specify, to take such actions as are necessary or appropriate to carry out the duties delegated by the Administrator. 9.4 Conclusiveness of Various Documents The Administrator and the Company and its directors and officers will be entitled to rely upon all tables, valuations, certificates and reports furnished by any actuary, accountant, counsel or other expert appointed, employed or engaged by the Administrator or the Company. 9.5 Actions to be Uniform Any discretionary actions to be taken under the Plan by the Administrator will be nondiscriminatory and uniform with respect to all persons similarly situated. 9.6 Liability and Indemnification To the full extent allowed by law, the Administrator shall not incur any liability to any Participant or beneficiary, or to any other person, by reason of any act or failure to act on the part of the Administrator if such act or omission is not the result of the Administrator's gross negligence, willful misconduct or exercise of bad faith. To the full extent allowed by law, the Company agrees to indemnify the Administrator against all liability and expenses (including reasonable attorney's fees and other reasonable expenses) occasioned by any act or omission to act if such act or omission is not the result of the Administrator's gross negligence, willful misconduct or exercise of bad faith. Neither this Section 9.6 nor any other provision of this Plan shall be applied to invalidate, modify, or limit in any respect any contract, agreement, or arrangement for indemnifying or insuring the Administrator against, or otherwise limiting, such - 43 - liability or expense, or for settlement of such liability, to the extent such contract, agreement, or arrangement is not precluded by the terms of Section 410 of ERISA. - 44 - ARTICLE TEN CLAIMS PROCEDURE 10.1 Claim for Benefit If a Participant or a beneficiary asserts a right to any benefit under the Plan which he has not received, he must file a claim for such benefit with the Administrator in such manner as provided hereunder. If the Administrator wholly or partially denies such claim, it shall provide written notice to the Participant or the beneficiary submitting the application within 90 days of the receipt by the Administrator of the application. The Administrator shall set forth in the notice: (a) the specific reasons for denial of the claim; (b) the specific reference to pertinent provisions of the Plan on which the denial is based; (c) a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary; and (d) further steps which the Participant or beneficiary may take in order to have his claim reviewed (including a statement that the claimant or his duly authorized representative may review Plan documents and submit issues and comments regarding the claim to the Administrator). 10.2 Review of Denial of Claim A Participant or beneficiary whose application for benefits is denied may request a full and fair review of the decision denying the claim within 90 days after receipt of the notice of the denial provided by the Administrator. The Participant or beneficiary may: (a) request a hearing by the Administrator upon written application to the Administrator; (b) review pertinent Plan documents in the possession of the Administrator; and (c) submit issues and comments in writing to the Administrator for review. If a hearing is requested by a Participant or beneficiary, such hearing shall be held within 30 days after the Administrator's receipt of the request for review. 10.3 Decision by Administrator A decision on review by the Administrator shall be made promptly and not later than 60 days after the receipt by the Administrator of a request for review, unless special circumstances (such as the need to hold a hearing) require an extension of time for processing, in which case the Participant or beneficiary will be notified of the extension and a decision shall be rendered as soon as possible, but not later than 120 days after the receipt of the request for review. The - 45 - decision shall be in writing and shall include specific reasons for the decision written in a manner calculated to be understood by the Participant or beneficiary, and specific references to the pertinent provisions of the Plan on which the decision is based. - 46 - ARTICLE ELEVEN MISCELLANEOUS 11.1 Non-Alienation of Benefits (a) Except as provided in Section 11.1(b) or 11.1(c), no benefit payable under the Plan shall be subject in any manner to anticipation, sale, transfer, assignment, pledge, encumbrance, security interest or charge, and any action by way of anticipating, alienating, selling, transferring, assigning, pledging, encumbering, charging or granting a security interest in the same shall be void and of no effect; nor shall any such benefit be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the person entitled to such benefit. (b) Section 11.1(a) shall not apply to the creation, assignment, or recognition of a right to any benefit payable pursuant to a Qualified Domestic Relations Order. The Company shall establish reasonable procedures to determine the status of domestic relations orders and to administer distributions under such orders which are deemed to be Qualified Domestic Relations Orders. Such procedures shall be in writing and shall comply with the provisions of Section 414(p) of the Code. To the extent that, because of a Qualified Domestic Relations Order, more than one individual is to be treated as a surviving spouse, the total amount payable from the Plan as a result of the death of a Participant shall not exceed the amount that would be payable from the Plan if there were only one surviving spouse. (c) Notwithstanding the provisions of Section 11.1(a), the Plan may offset any portion of the Total Account maintained on behalf of a Participant or beneficiary against a claim of the Plan arising: (i) as a result of the Participant's or beneficiary's conviction of a crime involving the Plan; or (ii) with regard to the Participant's or beneficiary's violation of ERISA's fiduciary provisions upon: (A) the entry of any civil judgment, consent order, or decree against the Participant or beneficiary; or (B) the execution of any settlement agreement between the Participant and the Department of Labor or Pension Benefit Guaranty Corporation. The provisions of this Section 11.1(c) shall apply only to orders, judgments, decrees and settlements issued or entered into after August 5, 1997, and which expressly provide for such offset. - 47 - 11.2 Risk to Participants and Source of Payments Each Participant assumes all risk in connection with any decrease in the value of any investment fund in the Trust Fund, and the Trust Fund shall be the sole source of any payments to be made to Participants or their beneficiaries under the Plan. 11.3 Expenses Subject to any restriction applicable under Section 5.4(a), brokerage fees, transfer taxes and other expenses incurred by the Trustee in connection with the purchase or sale of securities may be added to the cost of such securities or deducted from the proceeds thereof, as the case may be. Earnings credited to accounts invested in mutual funds shall be net of direct fund management expenses. Fees and other expenses associated with a self-directed "open option" arrangement shall be assessed directly against the Total Account maintained on behalf of the Participant or beneficiary participating in such arrangement. All other costs and expenses incurred in administering the Plan shall be paid by the Company or an Employer, unless the Company authorizes the payment of such expenses from the Trust Fund. 11.4 Rights of Participants No Participant or beneficiary shall have any right or interest under the Plan unless and until he becomes entitled thereto as provided in the Plan. The adoption and maintenance of the Plan shall not be deemed to constitute a contract between an Employer and any Employee or Participant. Inclusion in the Plan will not affect an Employer's right to discharge or otherwise discipline Employees and membership in the Plan will not give any Employee the right to be retained in the service of an Employer nor any right or claim to a benefit unless such right is specifically granted under the terms of the Plan. The Plan shall be binding on all Participants and their spouses and beneficiaries and upon heirs, executors, administrators, successors, and assigns of all persons having an interest herein. The provisions of the Plan in no event shall be considered as giving any such person any legal or equitable right against the Company, an Employer or an Affiliate, any of its officers, employees, directors, or shareholders, or against the Trustee, except such rights as are specifically provided for in the Plan or hereafter created in accordance with the terms of the Plan. 11.5 Statement of Accounts As soon as practicable after the last day of March, June, September and December, or such other time or times as the Administrator shall designate, the Company shall cause to be sent to each current or former Participant a written statement of his account. - 48 - 11.6 Designation of Beneficiary (a) Each Participant shall file with the Administrator, on such form as may be provided by the Administrator, a written designation of a beneficiary or beneficiaries who shall receive payment of the Participant's interest under the Plan in the event of his death. If the Participant is married, the Participant's beneficiary must be his spouse (in accordance with Code Section 401(a)(11)(B)(iii)) unless Spousal Consent requirements are satisfied. In the event the Participant shall die and there is no properly designated beneficiary then living, the interest of the Participant under the Plan shall be paid in a lump sum to his surviving spouse, or, if there is no surviving spouse, to his estate or other successor, all as the Administrator may determine. (b) A beneficiary entitled to a payment of all or a portion of a Participant's Total Account due to the death of the Participant may disclaim his interest therein subject to the following requirements. To be eligible to disclaim, a beneficiary must be a natural person, must not have received a distribution of all or any portion of said Total Account at the time such disclaimer is executed and delivered, and must have attained at least age twenty-one (21) years as of the date of the Participant's death. Any disclaimer must be in writing and must be executed personally by the beneficiary before a notary public. A disclaimer shall state that the beneficiary's entire interest is disclaimed or shall specify what portion thereof is disclaimed. To be effective, an original executed copy of the disclaimer must be both executed and actually delivered to the Administrator after the date of the Participant's death but not later than one hundred eighty (180) days after the date of the Participant's death. A disclaimer shall be irrevocable when delivered to the Administrator. A disclaimer shall be considered to be delivered to the Administrator only when actually received by the Administrator. The Administrator shall be the sole judge of the content, interpretation and validity of a purported disclaimer. Upon the filing of a valid disclaimer, the beneficiary shall be considered not to have survived the Participant as to the interest disclaimed. A disclaimer by a beneficiary shall not be considered to be a transfer of an interest or an assignment or alienation of benefits in violation of Section 11.1 hereof. No other form of attempted disclaimer shall be recognized by the Administrator. 11.7 Payment to Incompetents If any person entitled to receive any benefits hereunder is a minor, or is in the judgment of the Administrator, legally, physically, or mentally incapable of personally receiving and receipting for any distribution, the Administrator may instruct the Trustee to make distribution to such other person, persons or institutions who, in the judgment of the Administrator, are then maintaining or have custody of such distributee. As a condition to the issuance of such instruction for the distribution to such other person or institution, the Administrator may require such person or institution to exhibit or to secure an order, decree or judgment of a court of competent jurisdiction with respect to the incapacity of the person who would otherwise be entitled to receive the benefits. 11.8 Authority to Determine Payee - 49 - The determination of the Administrator as to the identity of the proper payee of any benefit under the Plan and the amount of such benefit properly payable shall be conclusive, and payment in accordance with such determination shall constitute a complete discharge of all obligations on account of such benefit. 11.9 Severability If any provision of this Plan is held to be invalid or unenforceable, such determination shall not affect the other provisions of this Plan. In such event, this Plan shall be construed and enforced as if such provision had not been included herein. 11.10 Employer Records The records of a Participant's Employer shall be presumed to be conclusive of the facts concerning his employment or non-employment, periods of service and Compensation unless shown beyond a reasonable doubt to be incorrect. 11.11 Limitation on Contributions (a) In no event shall the total annual additions on behalf of a Participant under this Plan and under any other defined contribution plan or plans maintained by the Employer with respect to any Limitation Year exceed the lesser of $30,000 (or such dollar figure, as increased in accordance with Section 415(d) of the Code for years up to and including the given Limitation Year) or 25% of the Test Compensation, paid to the Participant by an Employer within such Limitation Year. All amounts contributed to any defined contribution plan maintained by an Employer or an Affiliate (taking into account Section 415(h) of the Code) other than any rollover contribution and any salary reduction contribution to a simplified employee pension shall be aggregated with contributions made by an Employer under this Plan in computing any Employee's total annual additions limitation. For purposes hereof, the Limitation Year shall be the calendar year. For purposes of this section, "total annual additions" for any Limitation Year shall mean the sum of the following: (i) Employer contributions under this Plan and under any other defined contribution plan maintained by an Employer or Affiliate; (ii) Reallocated forfeitures under any defined contribution plan maintained by an Employer or Affiliate; (iii) After-tax contributions under any other defined contribution plan maintained by an Employer or Affiliate; and (iv) Amounts allocated to an individual medical account, as defined in Section 415(1)(2) of the Code, as part of a pension or annuity plan and amounts - 50 - derived from contributions paid or accrued which are attributable to post-retirement medical benefits described in Section 419A(d) of the Code, under a welfare benefit fund (as defined in Section 419(e) of the Code) maintained by an Employer or Affiliate. Loan repayments under Section 14.2 shall not be recognized as annual additions for purposes of this section. (b) In the event that a Participant's total annual additions for any Limitation Year exceed the limitations of Section 11.11(a) because of a reasonable error in estimating the Participant's Compensation, a reasonable error in determining the amount of Tax Deferred Contributions that a Participant may make within the limitations of paragraph (a) above or due to such other facts and circumstances as the Commissioner of Internal Revenue finds justifiable, his total annual additions shall be reduced in the following order until such limitations are met: (i) any after-tax employee contributions made in the Limitation Year by the Participant under any other plan maintained by an Employer or Affiliate shall be returned to the Participant in accordance with the provisions of such plan to the extent necessary to meet the above limitations; (ii) If further corrective adjustment is necessary, Tax Deferred Contributions made on the Participant's behalf in the Limitation Year that are in excess of five percent (5%) of the Participant's Compensation (six percent (6%) for Limitation Years beginning before January 1, 2001) shall be distributed to the Participant; (iii) If further corrective adjustment is necessary with respect to a Limitation Year beginning on or after January 1, 2001, the Tax Deferred Contributions made on the Participant's behalf in the Limitation Year that are not in excess of five percent (5%) of the Participant's Compensation and the Safe Harbor Matching Contributions made on the Participant's behalf in the Limitation Year shall be reduced proportionately to the extent necessary to meet the above limitations. (iv) If further corrective adjustment is necessary with respect to a Limitation Year beginning before January 1, 2001, the Tax Deferred Contributions made on the Participant's behalf in the Limitation Year that are not in excess of six percent (6%) of the Participant's Compensation and the Employer Matching Contributions made on the Participant's behalf in the Limitation Year shall be reduced proportionately to the extent necessary to meet the above limitations. Tax Deferred Contributions so reduced shall be distributed to the Participant. Employer Matching Contributions and Safe Harbor Matching Contributions so reduced shall be held unallocated in a suspense account and shall be applied to reduce the Employer Matching Contribution or Safe Harbor Matching Contribution with respect to all Participants for the subsequent Limitation Year. Any distribution under this paragraph - 51 - which includes Tax Deferred Contributions shall also include gains on such Tax Deferred Contributions. The Administrator may change the order of the reductions listed above in any manner which, in the judgment of the Administrator, is in the Participant's best interest. (c) If a Participant is also a participant in a defined benefit plan maintained by an Employer, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any Limitation Year beginning after December 31, 1982 and before January 1, 2000 shall not exceed 1.0. The defined benefit plan fraction for any Limitation Year is a fraction, the numerator of which is the projected annual benefit of the Participant under such Plan (determined as of the close of the year), and the denominator of which is the lesser of 1.25 times the dollar limit in Section 415(b)(1)(A) of the Code or 1.4 times 100% of the Participant's average Test Compensation over that period of consecutive calendar years (not more than three) during which his Test Compensation was the highest. The defined contribution plan fraction for any Limitation Year is a fraction the numerator of which is the sum of the annual additions on behalf of the Participant under this Plan and any other defined contribution plan or plans maintained by an Employer as of the close of the year and the denominator of which is the sum of 1.25 times the maximum dollar limit or 1.4 times the maximum percentage limit, whichever is smaller on a year-by-year basis, which could have been made under Section 415(c) of the Code for such year and for each prior year of service with the Employer, subject to any transition adjustments allowed by law and adopted by the Administrator. Any adjustment necessary to comply with the limitations of this Section 11.11(c) shall be made in the Participant's benefit payable under the defined benefit plan. The provisions of this paragraph (c) shall not apply with respect to Limitation Years beginning on and after January 1, 2000. (d) The sole purpose of this Section is to comply with Sections 415(c) and 415(e) of the Code and the terms of this Section shall be interpreted, applied, and if and to the extent necessary, shall be deemed modified so as to satisfy solely the minimum requirements of Sections 415(c) and 415(e) of the Code and the regulations promulgated with respect thereto. 11.12 IRC 414(u) Compliance Provision Notwithstanding any provision of the Plan to the contrary, contributions, benefits and service credit with respect to qualified military service shall be provided in accordance with Section 414(u) of the Code. - 52 - ARTICLE TWELVE AMENDMENT, TERMINATION OR MERGER OF THE PLAN 12.1 Right to Amend The Company reserves the right at any time or times to modify or amend the Plan by resolution of the Board setting forth such modification or amendment; provided, however, that no such modification or amendment shall be made which would: (a) increase the duties or liabilities of the Trustee without its written consent; or (b) divest a Participant of any portion of his Total Account hereunder that has accrued to him prior to the effective date of such amendment; or (c) cause or permit any portion of the Trust Fund to be converted to or become the property of the Company; or (d) cause any portion of the Trust Fund to be used for purposes other than the exclusive benefit of the Participants or their beneficiaries; unless such modification or amendment is necessary or appropriate to enable the Plan or Trust Fund to qualify under Section 401 of the Code, as amended from time to time, or to retain for the Plan or Trust Fund such qualified status. 12.2 Right to Terminate (a) Although it is the expectation of the Company that it will continue the Plan as a permanent retirement program for the benefit of the Employees eligible hereunder, the Company reserves the right at any time, by action of its Board, at its sole discretion, to terminate the Plan in whole or in part. There shall be no liability or obligation on the part of an Employer to make any further contributions to the Trust Fund in the event of the termination of the Plan. (b) Notwithstanding anything to the contrary contained herein, Trustee's fees and other expenses incident to the operation and management of the Plan incurred after the termination of the Plan may, at the discretion of the Company, be paid from assets of the Trust Fund that are not part of any Participant's Total Account. (c) In the event of the termination of the Plan in whole or in part or in the event of the complete discontinuance of Employer contributions under the Plan, each affected Participant's interest in the Trust Fund shall become 100% vested and shall be nonforfeitable. - 53 - 12.3 Merger, Transfer of Assets or Liabilities The Company may merge or consolidate the Plan with, transfer assets and liabilities of the Plan to, or receive a transfer of assets and liabilities from, any other plan without the consent of any other Employer or other person, if such transfer is effected in accordance with applicable law and if such other plan meets the requirements of Code Sections 401(a) and 501(a), permits such transfer or the receipt of such transfer and, with respect to liabilities to be transferred from this Plan to such other plan, satisfies the requirements of Code Sections 411(d)(6). This Plan may not be merged or consolidated with any other plan, nor may any assets or liabilities of this Plan be transferred to any other plan, unless the terms of the merger, consolidation or transfer are such that each Participant in the Plan would, if the Plan were terminated immediately after such merger, consolidation or transfer, receive a benefit equal to or greater than the benefit he would have been entitled to receive if this Plan had terminated immediately prior to the merger, consolidation or transfer. - 54 - ARTICLE THIRTEEN TOP HEAVY PROVISIONS 13.1 Top Heavy Provisions (a) The Plan shall be deemed to be a top heavy plan for a Plan Year if, as of a Determination Date, the aggregate value of the Total Accounts of Key Employee Participants exceeds 60% of the aggregate value of the Total Accounts of all Participants (excluding, for such determination, "unrelated" rollovers), or if the Plan is part of a required Aggregation Group which is top heavy. Such value shall be determined by using the single accrual method which is used for all plans of the Employers (including entities required to be aggregated with the Employer pursuant to Sections 414(b), (c), (m) and (o) of the Code) and by taking into account any distributions made during the five Plan Years ending on the Determination Date. If a Participant was not a Key Employee during the five Plan Years ending on the Determination Date, but such individual was a Key Employee during any previous Plan Year, the value of his Total Account shall not be taken into account. Further, if any Employee has not performed services for an Employer at any time during the five-year period ending on the Determination Date, the value of such Employee's Total Account shall be disregarded. In no event shall the Plan be considered top heavy if it is part of a required or permissive Aggregation Group which is not top heavy. (b) For purposes of this Section 13.1, the following terms shall have the meaning indicated: (i) Key Employee means any Employee who at any time during the Plan Year or any of the four preceding Plan Years is: (A) an officer of an Employer or an Affiliate. No more than 50 Employees (or, if lesser, the greater of three Employees or 10 percent of the Employees) shall be treated as officers. No Employee whose annual Test Compensation is less than 50% of the amount specified in Section 415(b)(1)(A) of the Code, adjusted for any automatic increases permitted by law or regulation, shall be treated as an officer; (B) one of the 10 Employees owning or considered as owning (within the meaning of Section 318 of the Code) the largest interest in an Employer, if such Employee's annual Test Compensation is greater than the amount specified in Section 415(c)(1)(A) of the Code, adjusted for any automatic increases permitted by law or regulation; (C) a more than five percent owner of an Employer; or (D) a more than one percent owner of an Employer having annual Test Compensation from an Employer of more than $150,000. - 55 - For the purpose of determining top 10 owners, five percent owners and one percent owners, neither the aggregation rules nor the rules of Sections 414(b), (c) and (m) shall apply. (ii) Non-Key Employee means an Employee who is not a Key Employee. (iii) Determination Date means the last day of the preceding Plan Year. (iv) Plan Year means any calendar year commencing on or after December 31, 1988. (v) A required Aggregation Group is each plan of an Employer which provides benefits to a Key Employee and each other plan of an Employer, if any, which is included with this Plan for purposes of meeting the requirements of Sections 401(a)(4) or 410 of the Code. A permissive Aggregation Group is this Plan and each other plan of an Employer which in total would continue to meet the requirements of Section 401(a)(4) and 410 of the Code with such other plan being taken into account. For purposes hereof, an Aggregation Group shall include a terminated plan if such Plan was maintained within the five-year period ending on the Determination Date for the Plan Year in question and it would, but for the fact if terminated, be part of a required Aggregation Group for such Plan Year. An Aggregation Group will be deemed to be a "top-heavy group" if the sum of (a) the present value of the cumulative accrued benefits for Key Employees under all defined benefit plans included in such group, and (b) the aggregate of the accounts of Key employees under all defined contribution plans included in such group, exceeds 60% of a similar sum determined for all Employees. (vi) "Employee" and "Key Employee" shall also include beneficiaries of such an Employee. Inherited benefits shall retain the character of the benefits of the Participant. 13.2 Minimum Contribution Notwithstanding the provisions of Article Three, for any Plan Year during which the Plan is deemed to be top heavy, the Employers shall make a minimum contribution on behalf of each Non-Key Employee Participant which shall be no less than three percent (3%) of the Test Compensation of the Non-Key Employee Participant; provided, however, that if the Employer contribution allocated on behalf of the Key Employee Participant for whom such allocation represents the highest percentage of Test Compensation for the given Plan Year of all Key Employee Participants is a lesser percentage, the minimum contribution shall be reduced to such lesser percentage. For purposes of this Section 13.2 all defined contribution plans that are included in an Aggregation Group shall be considered as one plan. In the case of Employees covered under both this Plan and any defined benefit plan maintained by an Employer or Affiliate, the defined benefit plan will provide the top heavy minimum benefit and will be offset by the benefit provided under this Plan. Non-Key Covered Employees who are eligible to participate in the Plan or who have become participants in the Plan but who subsequently fail to complete 1,000 Hours of Service by the end of the applicable Plan Year (and who have not - 56 - separated from service by the end of such Plan Year) shall receive an allocation of a minimum contribution. Except to the extent used for the purpose of determining the largest percentage of Test Compensation contributed by an Employer for a given year on behalf of a Key Employee Participant, Tax Deferred Contributions described in Section 3.1 and Employer Matching Contributions described in Section 3.6 shall not be considered Employer contributions under this Section 13.2. 13.3 Plan Year in Which Plan is Top Heavy In any Plan Year in which the Plan is top heavy, but not super top heavy, the factor of 1.25 in Section 11.11(c) shall be changed to 1.00 wherever it appears therein; provided, however, that such change shall not have the effect of reducing any benefit accrued under a defined benefit plan prior to the first day of the Plan Year in which this provision becomes applicable and, provided further, that this Section 13.3 shall not apply with respect to Limitation Years beginning on and after January 1, 2000. 13.4 Plan Year in Which Plan Ceases to be Top Heavy In any Plan Year that the Plan ceases to be top heavy, the above provisions shall no longer apply. 13.5 Limited Application of this Article The sole purpose of this Article is to comply with Section 416 of the Code and the terms of this Article shall be interpreted, applied and, if and to the extent necessary, shall be deemed modified so as to satisfy solely the minimum requirements of Section 416 of the Code and the regulations promulgated with respect thereto. - 57 - ARTICLE FOURTEEN LOANS 14.1 Availability of Loans Subject to the provisions of this Article Fourteen, Participants actively employed with the Company or an Affiliate (herein referred to in this Article as "Eligible Applicants") may apply for a loan from the Plan. All such applications for a loan made by an Eligible Applicant shall be approved or denied by the Administrator in accordance with a uniform, non-discriminatory policy and such action by the Administrator shall be final. All loans approved shall be effective as of the "loan effective date" (as hereinafter defined) provided the loan application was submitted to the Administrator within a reasonable time (as determined by the Administrator) prior to the loan effective date. All loans shall be made only in consideration of adequate security. For purposes hereof the term "loan effective date" shall mean the date, mutually agreed upon by the Participant and the Administrator, on which the loan shall be considered effective. The Administrator may establish rules governing the granting of loans, provided (i) that such rules are not inconsistent with the provisions of this Article Fourteen, (ii) that any such rules adopted by the Administrator shall be described in the documents supporting the loan transaction and (iii) that loans are made available to all Eligible Applicants on a reasonably equivalent basis and are not made available to Eligible Applicants who are Highly Compensated in an amount greater than the amount made available to other Eligible Applicants. 14.2 Terms and Conditions of Participant Loans (a) Amount of Loan. At the time the loan is made, the principal amount of the loan, when added to all other outstanding loans of the Participant from the Plan and any other qualified plan of an Employer and Affiliates, shall not exceed the lesser of: (i) $50,000, as reduced by the excess, if any, of the Eligible Applicant's highest outstanding loan balance from the Plan during the one-year period ending on the day before the date such new loan is secured over the outstanding balance of loans from the Plan on the date such loan is made; or (ii) one-half of the current value of the Total Account maintained on behalf of the Eligible Applicant under the Plan. The current value of a Total Account shall be determined as of the Valuation Date on which the Eligible Applicant initiates the loan process by providing Notice to the Administrator or its designee. No loan shall be made in an amount less than $1,000. Any loan amount shall be made in accordance with Section 14.3. (b) Application for Loan. The Eligible Applicant must give the Administrator adequate written notice, as determined by the Administrator, of the requested amount and desired - 58 - time for receiving a loan. In addition, if an Eligible Applicant is married at the time of application, the Administrator shall require Spousal Consent prior to approving the loan application. (c) Length of Loan. The Eligible Applicant and the Administrator shall arrange for the repayment of a Plan loan. The period of repayment shall not exceed five years from the date the loan is made. All repayment schedules (whether by payroll withholding or otherwise) shall commence as of the next administratively feasible pay period following the disbursement of the loan and shall provide for substantially level amortization of principal and interest. An Eligible Applicant on a leave of absence and an Eligible Applicant who terminates employment with the Company and Affiliates must make principal and interest payments in the amount and on such dates as otherwise due. In the event such payments are not made the maturity of the loan shall be accelerated and the outstanding principal amount of the loan, together with all accrued interest, shall be deemed immediately due and distributable at such date or dates as the Administrator deems reasonable and as may be specified by applicable law and regulation. Except as otherwise permitted in Income Tax Regulations, in no event shall the date of deemed distribution extend beyond the end of the calendar quarter next following the calendar quarter in which the payment was not made. (d) Prepayment. The Eligible Applicant shall be permitted to repay the loan in total as of any date prior to maturity without penalty. (e) Note. The loan shall be evidenced by a promissory note executed by the Eligible Applicant and delivered to the Administrator. The Eligible Applicant will agree to execute any other documents (e.g., payroll withholding forms) that may be necessary or appropriate to effect the loan. (f) Interest. All loans shall be considered investments of the Trust and interest shall be charged on the loan at the rate set by the Administrator as of the loan effective date. Such rate shall be based on the prime lending rate charged by a financial institution selected by the Administrator, plus 100 basis points. (g) Security. Subject to the extent required under regulations promulgated by the Secretary of Labor or his delegate, a Plan loan shall be secured by an assignment of the Eligible Applicant's right, title and interest in that portion of his Total Account under the Plan as shall adequately secure the loan, provided such security shall not exceed one-half of the current value of the Eligible Applicant's vested Total Account. The Administrator may also require such additional collateral as may be deemed necessary to adequately secure repayment of the loan. (h) Default. The Administrator shall take reasonable steps to secure repayment of any loan granted hereunder in accordance with its terms; however, when the Administrator declares a loan to an Eligible Applicant to be in default, the outstanding balance of the loan, together with unpaid, accrued interest, shall be deemed a lien against the Total Account maintained on behalf of the Eligible Applicant and no contributions or distributions of any - 59 - kind (other than distributions due to loan default) may thereafter be made by or on behalf of the Eligible Applicant to or from this Plan during the continuance of the default. The Administrator shall take such reasonable steps as it shall deem necessary or appropriate to eliminate the default before causing an offset distribution to be made with respect to the Eligible Applicant for the purpose of fully amortizing the loan outstanding; however, should the loan remain in default after these administrative procedures are taken, the Administrator will consider the entire amount of the loan outstanding (including all accrued interest to date) as a distribution as of the first date, on or following the administrative procedures, on which the Eligible Applicant has a distributable event and will process the Total Account of the Eligible Applicant accordingly. (j) Other Terms and Conditions. The Administrator shall fix such other terms and conditions of the loan as it deems necessary to comply with legal requirements, to maintain the qualification of the Plan and Trust Fund under Code Section 401(a), to exempt the loan transaction from the prohibited transaction rules of under Code Section 4975, or to prevent the treatment of the loan for tax purposes as a distribution to the Eligible Participant. The Administrator may fix other terms and conditions of the loan, not inconsistent with the provisions of this Article Fourteen. (k) No Prohibited Transactions. No loan shall be made unless such loan is exempt from the tax imposed on prohibited transactions by Code Section 4975 or would be exempt from such tax (if the Eligible Participant were a disqualified person as defined in Section 4975(e)(2) of the Code) by reason of Code Section 4975(d)(1). 10.3 Loan Accounts A loan made by the Plan to a Eligible Applicant in accordance with Sections 14.1 and 14.2 shall be from the Total Account maintained on behalf of such Eligible Applicant and from the investment funds in which such Total Account is invested in such order of priority as the Administrator, pursuant to a uniform and nondiscriminatory policy, shall direct. Payments of principal and interest on loans shall be paid over to the Trustee as soon as possible after each payroll deduction or other repayment and shall be credited to the Total Account of the Eligible Applicant as of the date the repayments are received by the Trustee. Loan repayments will be credited in such manner as determined by the Administrator to those accounts and those investment options which were accessed in connection with the granting of the loan to the Eligible Applicant. The Administrator shall have the authority to establish other reasonable rules, not inconsistent with the provisions of the Plan, governing the establishment and maintenance of loan accounts. - 60 - Executed at Erie, Pennsylvania, this 10th day of December, 2000. ERIE INDEMNITY COMPANY By: /s/ Stephen A. Milne ------------------------------- Title: President and CEO - 61 - EX-10.8 11 j9708001exv10w8.txt FIRST AMENDMENT TO EMPLOYEE SAVINGS PLAN EXHIBIT 10.8 - FIRST AMENDMENT TO ERIE INSURANCE GROUP EMPLOYEE SAVINGS PLAN (As Amended And Restated Effective as of January 1, 2001) WHEREAS, Erie Indemnity Company (the "Company") maintains the Erie Insurance Group Employee Savings Plan (the "Plan") under an amendment and restatement effective as of January 1, 2001; WHEREAS, the Plan provides that the Company may amend the Plan; and WHEREAS, the Company wishes to amend the Plan as hereinafter set forth. The purpose of this Amendment is to make changes in connection with recent legislative and regulatory changes affecting tax-qualified plans. The provisions of this Amendment shall be effective as of the dates stated herein. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as defined. NOW THEREFORE, the Company hereby amends the Plan as follows: 1. Effective January 1, 2002, the following provisions shall be added to the end of the first paragraph of Section 6.3(c) of the Plan: "With respect to distribution under the Plan made in calendar years beginning on or after January 1, 2002, the Plan will apply the minimum distribution requirements of Section 401(a)(9) of the Code in accordance with the regulations under Section 401(a)(9) that were proposed in January 2001, notwithstanding any provisions of the Plan to the contrary. This amendment will continue in effect until the end of the last calendar year beginning before the effective date of final regulations under Section 401(a)(9) of the Code or such other date specified in guidance published by the Internal Revenue Service." 2. Effective January 1, 2002, Sections 10.1, 10.2 and 10.3 of the Plan shall be deleted in their entirety and the following shall be inserted in lieu thereof: "10.1 Claims Review Procedure. The Administrator shall be responsible for the claims procedure under the Plan. An application for a distribution, withdrawal or loan under the Plan shall be considered a claim for purposes of this Article Ten. 1 10.2 Original Claim. In the event a claim of any Participant, beneficiary, alternate payee, or other person (hereinafter referred to in this Section as the "Claimant") for a benefit is partially or completely denied, the Administrator shall give, within ninety (90) days after receipt of the claim (or if special circumstances, made known to the Claimant, require an extension of time for processing the claim, within one hundred eighty (180) days after receipt of the claim), written notice of such denial to the Claimant. Such notice shall set forth, in a manner calculated to be understood by the Claimant, the specific reason or reasons for the denial (with reference to pertinent Plan provisions upon which the denial is based); an explanation of additional material or information, if any, necessary for the Claimant to perfect the claim; a statement of why the material or information is necessary; on and after January 1, 2002, a statement of the Claimant's right to bring a civil action under Section 502(a) of ERISA; and an explanation of the Plan's claims review procedure, including the time limits applicable to such procedure. If the notice of denial is not furnished within the required time period specified above, the claim shall be deemed to be denied and the Claimant shall be permitted to proceed to the review stage described in Section 10.3. 10.3 Review of Denied Claim. (a) A Claimant whose claim is partially or completely denied shall have the right to request a full and fair review of the denial by a written request delivered to the Administrator within sixty (60) days of receipt of the written notice of claim denial (or sixty (60) days after the date on which the claim is deemed denied under Section 10.2), or within such longer time as the Administrator, under uniform rules, determines. In such review, the Claimant or his duly authorized representative shall have the right to review, upon request and free of charge, all documents, records or other information relevant to the claim and to submit any written comments, documents, or records relating to the claim to the Administrator. (b) The Administrator, within sixty (60) days after the request for review, or in special circumstances, such as where the Administrator in its sole discretion holds a hearing, within one hundred twenty (120) days of the request for review, will submit its decision in writing. Such decision shall take into account all comments, documents, records and other information properly submitted by the Claimant, whether or not such information was considered in the original claim determination. The decision on review will be binding on all parties, will be written in a manner calculated to be understood by the Claimant, will contain specific reasons for the decision and specific references to the pertinent Plan provisions upon which the decision is based, will indicate 2 that the Claimant may review, upon request and free of charge, all documents, records or other information relevant to the claim and on and after January 1, 2002, will contain a statement of the Claimant's right to bring a civil action under Section 502(a) of ERISA. If no decision is made within the time period specified above, the claim shall be deemed to be denied on review. (c) If a Claimant fails to file a claim or request for review in the manner and in accordance with the time limitations specified herein, such claim or request for review shall be waived, and the Claimant shall thereafter be barred from again asserting such claim. 10.4 Determination by the Administrator Conclusive. The Administrator's determination of factual matters relating to Participants, beneficiaries and alternate payees shall be conclusive. The Administrator and the Company and its respective officers and directors shall be entitled to rely upon all tables, valuations, certificates and reports furnished by any accountant for the Plan, the Trustee or any investment managers and upon opinions given by any legal counsel for the Plan insofar as such reliance is consistent with ERISA. The Trustee and other service providers may act and rely upon all information reported to them by the Administrator and/or the Company and need not inquire into the accuracy thereof nor shall be charged with any notice to the contrary." 3. Effective January 1, 2001, a new section shall be added to Article Eleven of the Plan and such new section shall read as follows: "8.15 Provision for Community Renewal Tax Relief Act of 2000 For Plan Years and limitation years ending on and after January 1, 2001, the definition of "Test Compensation" shall include elective amounts that are not includable in the gross income of the Employee by reason of Section 132(f)(4) of the Code." 4. Effective January 1, 2002, Section 14.2(c) of the Plan shall be deleted in its entirety and the following shall be inserted in lieu thereof: "(c) Length of Loan. The Eligible Applicant and the Administrator shall arrange for the repayment of a Plan loan. The period of repayment shall not exceed five years from the date the loan is made. All repayment schedules (whether by payroll withholding or otherwise) shall commence as of the next administratively feasible pay period following the disbursement of the loan 3 and shall provide for substantially level amortization of principal and interest. An Eligible Applicant on a leave of absence shall be permitted to extend the term of the loan by the length of the absence; provided, however, that except with respect to a leave of absence on account of military service, the term of the loan, as extended, shall not exceed five years from the date the loan is made. An Eligible Applicant who terminates employment with the Company and Affiliates must make principal and interest payments in the amount and on such dates as otherwise due. In the event such payments are not made the maturity of the loan shall be accelerated and the outstanding principal amount of the loan, together with all accrued interest shall be deemed immediately due and distributable at such date or dates as the Administrator deems reasonable and as may be specified by applicable law and regulation. Except as otherwise permitted in Income Tax Regulations, in no event shall the date of deemed distribution extend beyond the end of the calendar quarter next following the calender quarter in which the payment was not made." Executed at Erie, Pennsylvania, this 10th day of December, 2001. ERIE INDEMNITY COMPANY By: /s/ Stephen A. Milne -------------------------------- Stephen A. Milne President and CEO 4 EX-10.9 12 j9708001exv10w9.txt 2001 ANNUAL INCENTIVE PLAN EXHIBIT 10.9 APPENDIX A 2001 ANNUAL INCENTIVE PLAN OF ERIE INDEMNITY COMPANY 1. PURPOSE. The purpose of the Annual Incentive Plan (the "Plan") of Erie Indemnity Company (the "Company") is to promote the best interests of the Erie Insurance Exchange while enhancing shareholder value of the Company and to promote the attainment of significant business objectives by the Company, its subsidiaries and affiliates by basing a portion of selected employees' compensation on the performance of such employee and the Company (as defined below). 2. DEFINITIONS. a. "AWARD AGREEMENT" means the agreement entered into between the Company and a Participant, setting forth the terms and conditions applicable to an award granted to the Participant under this Plan. b. "BASE SALARY" shall mean the annual base salary for a Participant at December 31, 2001. c. "COMBINED RATIO" means the sum of the loss ratio (including loss adjustment expenses), expense ratio and policyholder dividend ratio, as determined in accordance with statutory accounting principles and reported to A.M. Best Company for the combined property casualty operations of the Erie Insurance Exchange and affiliated property casualty companies (collectively "Erie"). For Erie, the Combined Ratio shall be adjusted to exclude the net revenues from the management operations of Erie Indemnity Company in the calculation of the underwriting expense ratio. d. "COMPANY" means Erie Indemnity Company and any corporation, partnership or other organization of which the Company owns or controls, directly or indirectly, not less than 50% of the total combined voting power of all classes of stock or other equity interests. For purposes of this Plan, the term "Company" shall include any successors thereto. e. "COMMITTEE" means the Executive Compensation Committee of the Board of Directors of the Company, or its functional successor, unless some other Board committee has been designated by the Board of Directors to administer the Plan. f. "PARTICIPANT" means any individual who has met the eligibility requirements set forth in Section 5 hereof and to whom a grant has been made and is outstanding under the Plan. 1 g. "PEER GROUP" means a group of companies selected by the Committee on an industry and line of business basis. h. "PERFORMANCE MEASURES" means the criteria upon which awards for 2001 will be based and, unless otherwise determined by the Committee shall be: (i) a combination of the difference between ERIE's average Combined Ratio for 1999, 2000 and 2001 and the Combined Ratio of the Peer Group for 1999, 2000 and 2001 and the difference between ERIE's growth in net written premiums in 2001 as compared to growth in net written premiums of the Peer Group in 2001 ("Financial Performance Measure"); and (ii) the Participant's individual performance assessment under the Company's existing performance assessment system ("Individual Performance Measure"). The Financial Performance Measure and the Individual Performance Measure are collectively referred to as (the "Performance Measures"). i. "TARGET AWARD" means: the specific percentage of a Participant's base salary as determined by the Committee. 3. ADMINISTRATION. The Plan shall be administered by the Committee. The Committee's determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan, whether or not such persons are similarly situated. Whenever the Plan refers to a determination being made by the Committee, it shall be deemed to mean a determination by the Committee in its sole discretion. Subject to the provisions of the Plan, the Committee shall be authorized to interpret the Plan, to make, amend and rescind such rules as it deems necessary for the proper administration of the Plan, to make all other determinations necessary or advisable for the administration of the Plan and to correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent the Committee deems desirable to carry the Plan into effect. Any action taken or determination made by the Committee shall be conclusive on all parties. 4. WEIGHTING OF PERFORMANCE MEASURES. The Target Award shall be weighted in a manner so that 75% of the Target Award shall be based upon the Financial Performance Measure and 25% of the Target Award shall be based upon the Individual Performance Measure. Satisfaction of either of the Performance Measures shall entitle a Participant to payment with respect to that portion of the award notwithstanding the fact that the other Performance Measure is not satisfied. 5. ELIGIBLE PERSONS. Any key employee of the Company who the Committee determines, in its sole discretion, has a significant effect on the operations of the Company shall be eligible to participate in the Plan. Any Participant in this Plan shall be deemed ineligible to participate in the Erie Insurance Group Employee Profit Sharing Bonus Plan. No employee shall have a right (a) to be selected under the Plan, or (b) having once been selected, to (i) be selected again or (ii) continue as an employee. 2 6. DETERMINATION OF AWARDS. The Committee shall determine the actual award to each Participant for the year, based upon the following formula: Participant Award = (.75 of Target Award x Financial Performance Percentage Earned) + (.25 of Target Award x Individual Performance Percentage Earned). The Financial Performance Percentage Earned and Individual Performance Percentage Earned shall be determined in accordance with Appendix I and Appendix II, respectively. For the Financial Performance Percentage Earned, the amount shall be mathematically interpolated between cells in the matrix based upon Erie's actual differences in Combined Ratio and Growth in New Written Premiums. The Individual Performance Percentage Earned shall be based on the performance assessment conducted during calendar year 2001. The total award payable to any Participant may range from zero (0) to one hundred and sixty (160) percent of the Participant's Target Award, depending upon whether, or the extent to which, the Performance Measures have been achieved. Notwithstanding anything in this Plan to the contrary, a Participant shall not be entitled to, and no amount shall be payable to, such Participant in the event that the Participant's Performance Points (as reflected in Appendix II) are below 109. All such determinations regarding the achievement of Performance Measures and the determination of actual awards will be made by the Committee. 7. DISTRIBUTION OF AWARDS. Awards under the Plan shall be paid in cash as soon as practicable after 2001 year-end audited financial statements for Erie have been prepared and Peer Group data is available. Estimates of awards may be paid earlier at the discretion of the Committee and final adjustments paid upon the availability of audited financial statements. 8. TERMINATION OF EMPLOYMENT. A Participant must be actively employed by the Company on the date his or her award is determined by the Committee ("the Payment Date") in order to be entitled to payment of any award. In the event active employment of a Participant shall be terminated before the Payment Date for any reason other than discharge for "Cause" (as defined in such employee's employment agreement with the Company or, if no such agreement exists, as defined by the Committee) or voluntary resignation, such Participant may receive such portion of his or her award as may be determined by the Committee. A Participant discharged for Cause shall not be entitled to receive any award for the year. A Participant who voluntarily resigns prior to the Payment Date shall not be entitled to receive any award unless otherwise determined by the Committee. 9. MISCELLANEOUS. a. NONASSIGNABILITY. No award will be assignable or transferable without the written consent of the Committee in its sole discretion, except by will or by the laws of descent and distribution. 3 b. WITHHOLDING TAXES. Whenever payments under the Plan are to be made, the Company will withhold therefrom an amount sufficient to satisfy any applicable governmental withholding tax requirements related thereto. c. AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors of the Company may at any time amend, suspend or discontinue the Plan, in whole or in part. The Committee may at any time alter or amend any or all Award Agreements under the Plan to the extent permitted by law. d. OTHER PAYMENTS OR AWARDS. Nothing contained in the Plan will be deemed in any way to limit or restrict the Company from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect. e. PAYMENTS TO OTHER PERSONS. If payments are legally required to be made to any person other than the person to whom any amount is available under the Plan, payments will be made accordingly. Any such payment will be a complete discharge of the liability of the Company under this Plan. f. LIMITS OF LIABILITY. 1. Any liability of the Company to any Participant with respect to an award shall be based solely upon contractual obligations created by the Plan and the Award Agreement. 2. Neither the Company, nor any member of its Board of Directors or of the Committee, nor any other person participating in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability to any party for any action taken or not taken in good faith under the Plan. g. RIGHTS OF EMPLOYEES. 1. Status as an employee eligible to receive an award under the Plan shall not be construed as a commitment that any award will be made under this Plan to such employee or to other such employees generally. 2. Nothing contained in this Plan or in any Award Agreement (or in any other documents related to this Plan or to any award or Award Agreement) shall confer upon any employee or Participant any right to continue in the employ or other service of the Company or constitute any contract or limit in any way the right of the Company to change such person's compensation or other benefits or to terminate the employment or other service of such person with or without cause. h. SECTION HEADINGS. The section headings contained herein are for the purposes of convenience only, and in the event of any conflict, the text of the Plan, rather than the section headings, will control. 4 i. INVALIDITY. If any term or provision contained herein will to any extent be invalid or unenforceable, such term or provision will be reformed so that it is valid, and such invalidity or unenforceability will not affect any other provision or part hereof. j. APPLICABLE LAW. The Plan, the Award Agreements and all actions taken hereunder or thereunder shall be governed by, and construed in accordance with, the laws of the Commonwealth of Pennsylvania without regard to the conflict of law principles thereof. k. EFFECTIVE DATE. The Plan shall be effective as of January 1, 2001. /s/ Robert C. Wilburn ----------------------------------------- Robert C. Wilburn, Chairman Executive Compensation Committee 5 EX-10.10 13 j9708001exv10w10.txt DEFERRED COMP. PLAN FOR OUTSIDE DIRECTORS EXHIBIT 10.10 - ERIE INDEMNITY COMPANY DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS (AS AMENDED AND RESTATED AS OF APRIL 30, 2002) ARTICLE ONE INTRODUCTION This Deferred Compensation Plan (the "Plan") is an unfunded, non-qualified, deferred compensation arrangement created for outside directors of Erie Indemnity Company. It is intended that the Plan will aid in retaining and attracting outside directors of exceptional ability by providing such directors with a vehicle for deferring director's compensation until retirement from the Board of Directors of Erie Indemnity Company. The Plan was effective as of May 1, 1997 and has been amended thereafter. This amendment and restatement of the Plan shall constitute an amendment, restatement and continuation of the Plan. This amendment and restatement is generally effective as of April 30, 2002. However, certain provisions of this amendment and restatement are effective as of some other date. The provisions of this amendment and restatement with stated effective dates prior to April 30, 2002, shall be deemed to amend the corresponding provisions, if any, of the Plan as in effect before this amendment and restatement and all amendments thereto as of such dates. Events occurring before the applicable effective date of any provision of this amendment and restatement shall be governed by the applicable provision of the Plan as in effect on the date of the event. ARTICLE TWO DEFINITIONS The following words or phrases are defined terms whenever they appear in the Plan: 2.1 "Administrator" shall mean the person or committee, appointed by the Board, who shall be responsible for the functions assigned to him under the Plan. 2.2 "Amendment Form" shall mean the Amendment Form described in Section 8.3. 2.3 "Annual Share Credit" shall mean the Share Credit addition determined under Section 7.2. 2.4 "Beneficiary" shall mean the individual(s) or trust(s) selected by a Participant to receive payment of amounts credited under the Plan in the event of the Participant's death, as evidenced by the most recent, properly completed and executed, Beneficiary designation which the Participant has delivered to the Administrator prior to the Participant's death. A Participant may make separate Beneficiary designations for those amounts credited to the Deferred Stock Account maintained on his behalf and to any Total Deferred Cash Account maintained on his behalf. A Participant may change his Beneficiary at any time by delivering a new designation of Beneficiary to the Administrator on such form or forms as may be satisfactory to the 1 Administrator. A new designation of Beneficiary shall be effective upon receipt by the Administrator of the completed designation. As of such effective date, the new designation shall divest any Beneficiary named in a prior designation in that interest indicated in the prior designation. If no Beneficiary designation is in effect on the death of the Participant, or if all designated Beneficiaries have predeceased the Participant, any payments to be made under the Plan on account of the Participant's death shall be paid to the estate of the Participant. 2.5 "Board" shall mean the Board of Directors of the Erie Indemnity Company. 2.6 "Board Compensation" shall mean the remuneration, expressed in terms of a cash amount, earned by a Director for service on the Board including, without limitation, a retainer, meeting fees and chairperson's fees. 2.7 "Board Tenure Year" shall mean the period which, in reference to any given calendar year, begins on the date of the Company's annual shareholder meeting held in such year and ends on the day before the Company's annual shareholder meeting held in the immediately following calendar year. 2.8 "Committee" shall mean the Executive Development and Compensation Committee of the Board or its successor, as designated by the Board. 2.9 "Common Stock" shall mean the Class A common stock of the Company. 2.10 "Company" shall mean the Erie Indemnity Company, a Pennsylvania business corporation. 2.11 "Deferred Compensation Account" shall mean the bookkeeping account described in Section 4.2. 2.12 "Deferred Stock Account" shall mean the bookkeeping account described in Article Seven. 2.13 "Director" shall mean a member of the Board. 2.14 "Dividend Equivalent Credit" shall mean the Share Credit addition determined under Section 7.3. 2.15 "Election Form" shall mean the Participation Election Form described in Section 3.2. 2.16 "Employee" shall mean a person engaged in performing services for the Company, its affiliates or subsidiaries, as an exempt or non-exempt full-time employee, as defined by the Company's Corporate Personnel Manual, as in existence at the time of determination, and not as an independent contractor. 2.17 "Hypothetical Interest" shall mean the gains and losses credited to a Participant's Deferred Compensation Account and/or Retirement Plan Transfer Account in accordance with Article Six. 2.18 "Outside Director" shall mean: 2 a) A Director who is not an Employee or officer of the Company, its affiliates or subsidiaries; and b) Solely for the purpose of applying those provisions of the Plan pertaining to the transfer of a Retirement Plan Transfer Credit and the maintenance of a Retirement Plan Transfer Account, "Outside Director" shall also include any individual who was a Director on May 1, 1997 but not an Outside Director (within the meaning of paragraph (a) above) as of such date. 2.19 "Participant" shall mean each Outside Director who participates in the Plan in accordance with the terms and conditions of the Plan. 2.20 "Plan" shall mean the Erie Indemnity Company Deferred Compensation Plan for Outside Directors, including any amendments hereto. 2.21 "Retirement Plan" shall mean the Erie Indemnity Company Retirement Plan for Outside Directors, effective as of January 1, 1991 and as amended thereafter. 2.22 "Retirement Plan Transfer Account" shall mean the bookkeeping account described in Section 5.3. 2.23 "Retirement Plan Transfer Credit" shall mean the contribution credit determined under Section 5.1. 2.24 "Retirement Plan Transfer Vesting Date" shall mean the date on which a Participant officially stops serving on the Board for reasons other than the Participant's death, provided such date follows the Participant's attainment of age 65 and completion of five Years of Board Service. 2.25 "Share Credit" shall mean the separate, identifiable units accumulated within a Participant's Deferred Stock Account attributable to Annual Share Credits and Dividend Equivalent Credits. 2.26 "Share Credit Allocation Date" shall mean, with respect to any Board Tenure Year, the business day next following the first day of such Board Tenure Year; provided, however, that in reference to any individual who becomes an Outside Director on any day other than the first day of a given Board Tenure year, the Share Credit Allocation Date relative to such year shall mean the business day next following the day on which the individual becomes an Outside Director. 2.27 "Total Deferred Cash Account" shall mean the sum of the amounts credited under any Deferred Compensation Account and any Retirement Plan Transfer Account maintained on behalf of a Participant. 2.28 "Valuation Date" shall mean the close of business as of each business day. 2.29 "Vested" shall mean, as of any given date, the portion of the Deferred Stock Account and/or the Total Deferred Cash Account maintained on behalf of a Participant which is then 100% vested and nonforfeitable, as determined under Sections 4.2, 5.3, and Article Seven hereof. 3 2.30 "Year of Board Service" shall mean each Board Tenure Year during which a Director has served on the Board, including, for Directors on the Board as of May 1, 1997, all Years of Board Service prior to the adoption of the Plan. ARTICLE THREE PARTICIPATION 3.1 ELIGIBILITY AND PARTICIPATION a) Effective as of May 1, 2002, all Outside Directors then in Board service shall participate in the Plan. Any individual who becomes an Outside Director after May 1, 2002 shall participate in the Plan as of the Share Credit Allocation Date next following the date as of which the individual becomes an Outside Director. As a condition of participation, each Outside Director shall deliver to the Administrator properly completed and executed elections as described in Section 3.2. b) Each Outside Director is eligible to participate in the Board Compensation deferral provisions of the Plan and may choose to defer Board Compensation in accordance with the provisions of Section 4.1. 3.2 PARTICIPATION ELECTION FORM An Outside Director shall deliver to the Administrator the following elections, to be made on such Election Form or Forms as the Administrator, in its discretion, shall prescribe: a) The method by which amounts credited to the Participant's Deferred Stock Account and, separately, any Total Deferred Cash Account is to be paid; b) The date, following the Participant's official termination of service on the Board, as of which payment of amounts credited to the Participant's Deferred Stock Account and, separately, any Total Deferred Cash Account is to occur (in the event of a lump sum distribution) or commence (in the event of distribution in installments); and c) The Beneficiary to whom payments of amounts credited to the Participant's Deferred Stock Account, and separately, any Total Deferred Cash Account will be made in the event of the Participant's death. In addition, an Outside Director on whose behalf a Total Deferred Cash Account is being maintained shall also be required to complete and deliver to the Administrator the investment designation described in Section 6.2. The elections under paragraphs (a) and (b) shall be irrevocable except as provided in Section 8.3 hereof. The election under paragraph (c) may be changed as provided in Section 2.4. 4 ARTICLE FOUR BOARD COMPENSATION DEFERRED 4.1 DEFERRED COMPENSATION ELECTION A Participant who is an Outside Director as described in Section 2.18(a) may elect to defer Board Compensation for a given calendar year by delivering a properly completed and executed Election Form to the Administrator by the end of the calendar year which precedes the given calendar year in which the election is to be effective. Such Election Form shall state, in 10% increments from 10% to 100%, the percentage of Board Compensation to be deferred. Such deferral election shall be irrevocable as of the January 1 of the calendar year to which the election applies. Such deferral election shall terminate as to all Board Compensation earned after such calendar year. 4.2 DEFERRED COMPENSATION ACCOUNT A Deferred Compensation Account shall be established for each Outside Director who properly completes and executes an Election Form on which he elects to defer Board Compensation. The Board Compensation which each Participant defers and Hypothetical Interest earned on such Board Compensation (as provided in Section 6.1) shall be credited to this Deferred Compensation Account. Board Compensation deferred under this Plan shall be credited to the Participant's Deferred Compensation Account as of the date such compensation would otherwise have been payable to the Participant. A Participant's Deferred Compensation Account shall be kept only for bookkeeping and accounting purposes and no Company funds shall be transferred or designated to this account. A Participant's interest in the Deferred Compensation Account maintained on his behalf shall be Vested at all times. ARTICLE FIVE TRANSFER OF RETIREMENT PLAN CREDIT 5.1 RETIREMENT PLAN TRANSFER ELECTION a) The Company has recorded a contribution credit under the Plan on behalf of each Outside Director who satisfied the criteria set forth in paragraph (b) of this Section 5.1. Such contribution credit is referred to herein as the Retirement Plan Transfer Credit, was recorded as of December 31, 1997 and, except as provided in Section 6.1(b), was equal to the amount individually determined under Section 5.2. b) An Outside Director was entitled to a Retirement Plan Transfer Credit if: 5 (i) The Outside Director was an Outside Director, as described in Section 2.18(a) or Section 2.18(b), on May 1, 1997; and (ii) During the period beginning June 17, 1997 and ending August 1, 1997, the Outside Director elected to have the Retirement Plan Transfer Credit recorded on his behalf under the Plan in lieu of any continuing interest under the Retirement Plan. 5.2 RETIREMENT PLAN TRANSFER CREDIT a) The Retirement Plan Transfer Credit with respect to an Outside Director who (i) satisfied the criteria set forth in Section 5.1 and (ii) was considered an "Eligible Director" under the terms of the Retirement Plan as in effect on May 1, 1997 was the actuarial present value (as defined in paragraph (c) below) of the retirement benefit accrued by the Outside Director under the Retirement Plan as of May 1, 1997. b) The Retirement Plan Transfer Credit with respect to an Outside Director who (i) satisfied the criteria set forth in Section 5.1 and (ii) was not considered an "Eligible Director" under the terms of the Retirement Plan as in effect on May 1, 1997 was the actuarial present value of the deemed retirement benefit (as hereinafter defined) of the Outside Director under the Retirement Plan as of May 1, 1997. For purposes hereof, the "deemed retirement benefit" shall mean the retirement benefit which the Outside Director would have accrued under the Retirement Plan as of May 1, 1997 had participation in such Retirement Plan not been limited to "Eligible Directors" as therein defined (such deemed retirement benefit being based on the Outside Director's "Years of Board Service" as of May 1, 1997, as defined in the Retirement Plan and determined on the basis of full years and calendar quarters of such service, and the retainer in effect as of May 1, 1997). c) For purposes of this Section 5.2, "actuarial present value" shall mean the single sum value of a retirement benefit (or deemed retirement benefit), determined as of May 1, 1997, by using the 1983 Group Annuity Mortality Table (50% male/50% female) and an interest rate of seven percent. 5.3 RETIREMENT PLAN TRANSFER ACCOUNT A Retirement Plan Transfer Account has been established for each Outside Director described in Section 5.1(b). The Retirement Plan Transfer Credit and Hypothetical Interest earned on such Retirement Plan Transfer Credit shall be recorded in this Retirement Plan Transfer Account. A Participant's Retirement Plan Transfer Account shall be kept only for bookkeeping and accounting purposes and no Company funds shall be transferred or designated to this account. Notwithstanding any provision of the Plan to the contrary, a Participant's interest in the Retirement Plan Transfer Account maintained on his behalf shall be forfeited in its entirety in the event the Participant's service as a Director is terminated for any reason (including death) prior to the Participant's attainment of his Retirement Plan Transfer Vesting Date. Upon attainment of his Retirement Plan Transfer Vesting Date, a Participant's interest in such Retirement Plan Transfer Account shall become Vested. 6 ARTICLE SIX CREDITS TO PARTICIPANT TOTAL DEFERRED CASH ACCOUNTS 6.1 HYPOTHETICAL INTEREST a) The Total Deferred Cash Account maintained on behalf of a Participant under the Plan will be credited with Hypothetical Interest. The Hypothetical Interest shall be credited as of each Valuation Date on the amount credited to the Participant's Total Deferred Cash Account on such Valuation Date in accordance with the valuation procedure adopted by the Administrator. The Hypothetical Interest to be credited to each Total Deferred Cash Account shall be determined by the Administrator and computed in reference to the appreciation or depreciation experienced since the immediately preceding Valuation Date by the hypothetical investment funds which the Administrator may offer to Participants under Section 6.2. For any given period, Hypothetical Interest may be a positive or a negative figure. The crediting of Hypothetical Interest shall occur so long as there is a balance in the Participant's Total Deferred Cash Account regardless of whether the Participant has terminated service with the Board or has died. The Administrator may prescribe any reasonable method or procedure for the accounting of Hypothetical Interest. b) Notwithstanding any provision of this Article Six to the contrary: (i) The Retirement Plan Transfer Credit, determined under Section 5.2 and recorded as of December 31, 1997 on behalf of an Outside Director described in Section 5.1(b), was increased with Hypothetical Interest for the period beginning on May 1, 1997 and ending on December 31, 1997; and (ii) For purposes of subparagraph (i) above, "Hypothetical Interest" was in reference to the interest, compounded on a daily basis, at the rate or rates in effect during the period beginning on May 1, 1997 and ending December 31, 1997, as declared by the Board of Directors of Erie Family Life Insurance Company on the Erie Family Life Insurance Company deposit administration group annuity contract held by the trustee of the Erie Insurance Group Employee Savings Plan. 6.2 PARTICIPANT INVESTMENT DESIGNATION a) A Participant (and any Outside Director first electing to participate in the Plan) may designate on such form or forms as may be satisfactory to the Administrator, that portion of his future deferred compensation and, separately, that portion of any existing Total Deferred Cash Account maintained on his behalf which shall be credited with Hypothetical Interest in reference to each of the hypothetical investment funds that may be offered by the Administrator, in the discretion of the Administrator. Such designations may specify, in 1% increments, the percentages to be credited in reference to each of the hypothetical investment funds offered. Such designations may remain in effect until the Participant submits a new designation within such time and in accordance with such means as is determined pursuant to a uniform policy adopted by the Administrator. Under such policy, new designations may be made as to (i) future deferred compensation 7 and/or (ii) any existing Total Deferred Cash Account, provided that separate designations as to the crediting of a Deferred Compensation Account and a Retirement Plan Transfer Account shall not be available. All new designations shall be effective as of a given date specified by the Administrator. In the event a Participant fails to make an effective designation under this Section 6.2(a), the Administrator, acting in its discretion, shall make such designation on behalf of the Participant. b) In accepting participation in the Plan, a Participant agrees on behalf of himself and his Beneficiary to assume all risk in connection with any decrease in value of the hypothetical investment funds in reference to which Hypothetical Interest is credited to the Participant's Total Deferred Cash Account. The Company and the Administrator shall not be liable to any Participant or Beneficiary for the under-performance of any hypothetical investment fund offered under the Plan. c) The Administrator may, in its discretion, offer additional hypothetical investment funds to Participants and may cease to offer any such fund at such time as it deems appropriate. In the event the Administrator decides to discontinue offering an investment fund under the Plan, those Participants on whose behalf Hypothetical Interest is then being credited on the basis of the discontinued hypothetical investment fund shall be required to designate, from such selection of hypothetical funds as may be offered by the Administrator, a hypothetical fund or funds as a replacement for the hypothetical investment fund being discontinued. Such designation shall be made in accordance with Section 6.2(a) hereof. Hypothetical Interest credited on behalf of any Participant who is affected by the discontinuation of a hypothetical investment fund but who fails to make the replacement designation provided in this Section 6.2(c) shall mirror, to the extent of the Participant's interest in such discontinued fund, such hypothetical investment fund or funds as the Administrator may choose in its discretion. d) Notwithstanding any provision of the Plan to the contrary, the eligibility of a Participant to make any designation under this Section 6.2 shall not be construed as to provide any Participant or any other person with a beneficial ownership interest in any Company assets. Title to and beneficial ownership of any assets which the Company may earmark to pay the contingent deferred compensation hereunder shall at all times remain in the Company. The Participant, his Beneficiary and any heirs, successors or assigns shall not have any legal or equitable right, interest or control over or any property interest whatsoever in any specific assets of the Company or any Affiliate on account of having an interest under the Plan. Any and all of the Company's assets, and any life insurance policies, annuity contracts or the proceeds therefrom which may be acquired by the Company shall be, and remain, the general unpledged, unrestricted assets of the Company. In no event shall the Company be required to purchase any specific shares or interest in any investment fund. 6.3 STATEMENTS Statements will be sent to each Participant as to the balance of his Total Deferred Cash Account at least once each calendar year. 8 ARTICLE SEVEN CREDITING OF DEFERRED STOCK 7.1 DEFERRED STOCK ACCOUNT A Deferred Stock Account shall be established for each Outside Director to which shall be credited the amounts described in Section 7.2 and 7.3. 7.2 ANNUAL SHARE CREDIT With respect to each Board Tenure Year during which the Director is an Outside Director, the Deferred Stock Account maintained on such Participant's behalf shall be credited with an Annual Share Credit, effective as of the Share Credit Allocation Date. For any given Board Tenure Year, the Annual Share Credit made to an Outside Director's Deferred Stock Account shall be equal to the quotient obtained by dividing the Outside Director's annual retainer for the given year by the closing price of Common Stock on the Share Credit Allocation Date. A Participant's interest in the Annual Share Credit attributable to any given Board Tenure Year shall vest in accordance with the following schedule:

VESTED PERCENTAGE IN DATE OF RETIREMENT OR THAT YEAR'S ANNUAL TERMINATION OF BOARD SERVICE SHARE CREDIT ---------------------------- ------------ Before last day of third full month of given Board Tenure Year 0% After last day of third full month of given Board Tenure Year but before last 25% day of sixth full month of given Board Tenure Year After last day of sixth full month of given Board Tenure Year but before last 50% day of ninth full month of given Board Tenure Year After last day of ninth full month of given Board Tenure Year but before the 75% earlier of (i) the twelfth full month of given Board Tenure Year or (ii) the date on which begins the immediately following Board Tenure Year. On or after the earlier of (i) the twelfth full month of given Board Tenure 100% Year or (ii) the date on which begins the immediately following Board Tenure Year.

7.3 DIVIDEND EQUIVALENT CREDIT For each quarterly period (i) with respect to which a dividend is paid on Common Stock, and (ii) in which there is a balance in the Deferred Stock Account maintained on behalf of a Participant as of the record date applicable to the dividend paid on Common Stock (regardless of 9 whether the Participant has terminated service with the Board or has died), a Participant's Deferred Stock Account shall be credited with a Dividend Equivalent Credit. The Dividend Equivalent Credit for any such quarterly period shall be credited as of the date on which the dividend is paid on Common Stock for such quarterly period. For any such applicable quarterly period, the Dividend Equivalent Credit made to a Participant's Deferred Stock Account shall be determined as follows: a) A dividend credit is determined, expressed in cash, equal to the product of: (i) The dividend payable by the Company on one share of Common Stock for such quarterly period; and (ii) The number of full, accumulated Share Credits credited to the Participant's Deferred Stock Account as of the Common Stock dividend record date applicable to such quarterly period. b) The dividend credit determined in paragraph (a) above will immediately be converted into a Share Credit by dividing such cash dividend credit by the closing price of Common Stock on the date on which the dividend is paid on Common Stock for such quarterly period. No Dividend Equivalent Credit will be made with respect to a partial Share Credit. A Participant's interest in the Share Credits attributable to Dividend Equivalent Credits shall be Vested at all times. 7.4 AGGREGATION OF PARTIAL SHARE CREDITS Effective as of each Share Credit Allocation Date and each Common Stock dividend record date with respect to which Dividend Equivalent Credits are made, any partial Share Credits then credited to a Participant's Deferred Stock Account shall be aggregated in such manner as the Administrator shall provide to constitute full Share Credits. 7.5 ADJUSTMENT TO SHARE CREDITS Share Credits maintained on behalf of a Participant hereunder shall be subject to appropriate adjustment by the Administrator in the event of changes in the outstanding Common Stock by reason of stock dividends, stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges, or other relevant changes in capitalization occurring after the date Share Credits are credited hereunder. 10 7.6 PURPOSE OF PARTICIPANT'S DEFERRED STOCK ACCOUNT A Participant's Deferred Stock Account shall be kept only for bookkeeping and accounting purposes and no Company funds shall be transferred or designated to this account. Statements will be sent to each Participant as to the balance of his Deferred Stock Account at least once each calendar year. ARTICLE EIGHT PAYMENT OF DEFERRED STOCK ACCOUNT AND TOTAL DEFERRED CASH ACCOUNT 8.1 PAYMENT Upon termination of service with the Board, the amounts represented by the balances credited to the Participant's Vested Deferred Stock Account and Vested Total Deferred Cash Account shall be paid to him by the Company according to the method and at the times selected by the Participant in his Election Form or, if applicable, in the most recent, properly executed and effective Amendment Form(s) which the Participant has delivered to the Administrator prior to the Participant's termination of Board service. A Participant may make independent elections under this Article Eight applicable to (i) the Vested Deferred Stock Account maintained on his behalf and (ii) the Vested Total Deferred Cash Account maintained on his behalf. 8.2 METHODS OF PAYMENT a) A Participant may elect one of the following methods of payment for the amounts represented by his Vested Deferred Stock Account: (i) A lump sum distribution; or (ii) Payments in approximately equal annual installments for a period not to exceed 10 years. Payments of the distributable amount represented by all or a portion of the balance in the Participant's Vested Deferred Stock Account will be made in shares of Common Stock equal to the number of full Share Credits comprising the distributable amount that are then credited to the Participant's Vested Deferred Stock Account, with fractional Share Credits comprising the distributable amount payable in cash. b) A Participant may elect any one of the following methods of payment for the amounts represented by his Vested Total Deferred Cash Account: (i) A lump sum distribution; (ii) Payment in approximately equal annual installments for a period not to exceed 10 years; or 11 (iii) Payment in approximately equal monthly installments for a period not to exceed 10 years. Payments of the distributable amount represented by all or a portion of the balance in the Participant's Vested Total Deferred Cash Account shall be made in cash. c) In the event the Participant dies before receiving the entire distribution to which he is entitled under the Plan, the provisions of Section 8.4 shall apply. 8.3 AMENDMENT TO PAYMENT ELECTION A Participant who is an active Director may request to defer the date at which payment of the amount represented by his Vested Deferred Stock Account and/or Vested Total Deferred Cash Account will occur (or commence) and may request a change in his elected method of payment by submitting a properly completed and executed Amendment Form to the Administrator which indicates the period of additional deferral and/or the desired method of payment; provided, however: a) Such request of additional deferral or alternative method of payment shall be subject to the Administrator's power, to be exercised at the Administrator's discretion, to direct that payment of the amount represented by the Participant's Vested Deferred Stock Account and/or Vested Total Deferred Cash Account will occur or commence, or will be paid under a method, in accordance with the Participant's election(s) on a previously delivered Amendment Form or on the Participant's Election Form; and b) In no event shall any requested additional deferral or alternative method of payment become effective unless the Amendment Form evidencing such request is submitted to, and approved by, the Administrator at least twelve months prior to the date payment of the amount represented by the Vested Deferred Stock Account and/or Vested Total Deferred Cash Account would otherwise have occurred or commenced under the Election Form or Amendment Form in effect on the date the Participant requests the additional deferral or alternative method of payment. A Participant may make separate requests under this Section 8.3 applicable to the Vested Deferred Stock Account maintained on his behalf and to any Total Deferred Cash Account maintained on his behalf. 8.4 PAYMENT UPON DEATH OF PARTICIPANT a) In the event of a Participant's death prior to his Retirement Plan Transfer Vesting Date, the amount represented by the Participant's Deferred Compensation Account and the amount represented by the Participant's Vested Deferred Stock Account shall be paid by the Company to the Participant's Beneficiary or Beneficiaries as soon as practicable in the form of a lump sum. Any amount represented by the balance credited to the Participant's 12 Retirement Plan Transfer Account shall be forfeited upon the Participant's death. b) In the event of a Participant's death on or after his Retirement Plan Transfer Vesting Date, the amount represented by the Participant's Vested Deferred Stock Account and the amount represented by the Participant's Vested Total Deferred Cash Account shall be paid by the Company to the Participant's Beneficiary or Beneficiaries as soon as practicable in the form of a lump sum. c) Payment of the distributable amount represented by the deceased Participant's Vested Deferred Stock Account will be made in shares of Common Stock equal to the number of full Share Credits credited to such account as of the payment date, with fractional Share Credits payable in cash. 8.5 EMERGENCY CIRCUMSTANCES Notwithstanding any other provision of this Plan, if the Committee determines, after consideration of a Participant's application, that the Participant has a financial necessity of such a substantial nature that a current payment of compensation deferred under this Plan is warranted, the Committee may in its sole and absolute discretion direct that all or a portion of the Participant's Deferred Compensation Account balance be paid to him. The payment shall be made in the manner and at the times specified by the Committee for payment; provided, however, such payment shall not be in excess of that amount which is, in the discretion of the Committee, required to satisfy the financial necessity. In making determinations under this Section 8.5, no member of the Committee shall vote with respect to any application made by the Committee member under this Section. ARTICLE NINE AMENDMENT AND DISCONTINUANCE The Company expects to continue the Plan indefinitely, but reserves the right to amend or discontinue the Plan at any time, if, in its sole judgment, such amendment or discontinuance is necessary or desirable. Any such amendment or discontinuance shall be made pursuant to a resolution of the Board and shall be effective as of the date specified in such resolution. Without a consent of the Participant, no amendment or discontinuance of the Plan shall adversely affect the balance of a Participant's Deferred Compensation Account, Deferred Stock Account or Retirement Plan Transfer Account at the time of amendment or discontinuance. In the event of a discontinuance of the Plan, the Company (or any transferee, or successor entity of the Company) shall be obligated to pay amounts represented by Vested Deferred Stock Account balances and Vested Total Deferred Cash Account balances to Participants and Beneficiaries at such time or times and in such forms as provided under the terms of the Plan. 13 ARTICLE TEN GENERAL PROVISIONS 10.1 GENERAL CONTRACTUAL OBLIGATION It is the intent of this Plan, and each Participant understands, that no trust has been created for his or her benefit in connection with this Plan and that eligibility and participation in this Plan does not grant any Participant any interest in any asset of the Company or any affiliated company. The Company's obligation to pay to the Participant the amounts credited hereunder is a general contract obligation and shall be satisfied solely from the general assets of the Company. Nothing contained in the Plan shall constitute a guaranty by the Company, any affiliated company, or any other entity or person that the assets of the Company will be sufficient to pay amounts determined in accordance with the Plan. The obligation of the Company under the Plan shall be merely that of an unfunded and unsecured promise of the Company to pay amounts in the future. Notwithstanding a Participant's entitlement to Vested amounts under the terms of the Plan, the status of the Participant is that of an unsecured general creditor to the extent of his entire interest under the Plan as herein described. 10.2 SPENDTHRIFT PROVISIONS The interest of a Participant or his Beneficiary under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, either voluntarily or involuntarily, prior to actual receipt thereof by the payee; any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any such interest herein prior to such receipt shall be void. Amounts credited hereunder shall not be subject to garnishment, attachment or other legal or equitable process nor shall they be an asset in bankruptcy; provided, however, that no amount shall be payable from this Plan to a Participant, or any person claiming by or through a Participant, unless and until any and all amounts representing debts or other obligations owed to the Company or any affiliated company by the Participant have been fully paid and satisfied. The Company shall not be liable in any manner for or subject to the debts, contracts, liabilities, torts or engagements of any person who has a Deferred Stock Account or a Total Deferred Cash Account maintained on his behalf under the Plan. 10.3 INCAPACITY OF RECIPIENT In the event a Participant or Beneficiary is declared incompetent and a guardian, conservator or other person legally charged with the care of his person or of his estate is appointed, any Vested Deferred Stock Account and any Vested Total Deferred Cash Account under the Plan to which such Participant, or Beneficiary is entitled shall be paid to such guardian, conservator or other person legally charged with the care of his person or his estate. Except as provided hereinabove, when the Administrator, in its sole discretion, determines that a Participant or Beneficiary is unable to manage his financial affairs, the Administrator may direct the Company to make distribution(s) from the Vested Deferred Stock Account and any Vested Total Deferred Cash Account maintained on behalf of such Participant or Beneficiary to any one or more of the spouse, lineal ascendants or descendants or other closest living relatives of such Participant or 14 Beneficiary who demonstrates to the satisfaction of the Administrator the propriety of making such distribution(s). Any payment so made shall be in complete discharge of any liability under the Plan for such payment. The Administrator shall not be required to see to the application of any such distribution made as provided above. 10.4 UNCLAIMED BENEFIT In the event that any amount determined to be payable to a Participant or Beneficiary hereunder remains unclaimed by such Participant or Beneficiary for a period of four years after the whereabouts or existence of such person was last known to the Administrator, the Administrator may direct that all rights of such person to such amounts be terminated absolutely, provided that if such Participant or Beneficiary subsequently appears and files a claim for payment in accordance with Article Ten, the liability under the Plan for such amounts shall be reinstated. 10.5 ELECTIONS, APPLICATIONS, NOTICES Every designation, election, revocation or notice authorized or required hereunder which is to be delivered to the Company or the Administrator shall be deemed delivered to the Company or the Administrator as the case may be: (a) on the date it is personally delivered to the Administrator at the Company's executive offices at 100 Erie Insurance Place, Erie, Pennsylvania 16530 or (b) three business days after it is sent by registered or certified mail, postage prepaid, addressed to the Administrator at the offices indicated above. Every such item which is to be delivered to a person or entity designated by the Administrator to perform recordkeeping and other administrative services on behalf of the Plan shall be deemed delivered to such person or entity when it is actually received (either physically or through interactive electronic communication) by such person or entity. Every designation, election, revocation or notice authorized or required hereunder which is to be delivered to a Participant or Beneficiary shall be deemed delivered to a Participant or Beneficiary: (a) on the date it is personally delivered to such individual (either physically or through interactive electronic communication), or (b) three business days after it is sent by registered or certified mail, postage prepaid, addressed to such individual at the last address shown for him on the Company's records. Any notice required hereunder may be waived by the person entitled thereto. 10.6 COUNTERPARTS This Plan may be executed in any number of counterparts, each of which shall be considered as an original, and no other counterparts need be produced. 10.7 SEVERABILITY In the event any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan. This Plan shall be construed and enforced as if such illegal or invalid provision had never been contained herein. 15 10.8 GOVERNING LAW The Plan is established under and will be construed according to the laws of the Commonwealth of Pennsylvania. 10.9 HEADINGS The headings of Sections of this Plan are for convenience of reference only and shall have no substantive effect on the provisions of this Plan. 10.10 CONSTRUCTION The masculine gender, where appearing in this Plan, shall be deemed to also include the feminine gender. The singular shall also include the plural, where appropriate. ARTICLE ELEVEN ADMINISTRATION 11.1 GENERAL ADMINISTRATION The Administrator shall be charged with the administration of the Plan. The Administrator shall have all such powers as may be necessary to discharge its duties relative to the administration of the Plan, including by way of illustration and not limitation, discretionary authority to interpret and construe the Plan, to determine and decide all questions of fact, and all disputes arising under the Plan including, but not limited to, the validity of any election or designation as may be necessary or appropriate hereunder and the right of any Participant or Beneficiary to receive payment of all or any portion of amounts represented by a Deferred Stock Account and/or a Total Deferred Cash Account maintained hereunder. The Administrator shall have all power necessary to adopt, alter and repeal such administrative rules, regulations and practices governing the operation of the Plan as it, in its sole discretion, may from time to time deem advisable. The Administrator shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Plan unless attributable to willful misconduct. The Administrator shall be entitled to conclusively rely upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Company with respect to the Plan. Any individual serving as Administrator shall not participate in any action or determination regarding solely his own benefits payable hereunder. Except as provided in Section 11.3, decisions of the Administrator made in good faith shall be final, conclusive and binding upon all parties. 11.2 CLAIMS PROCEDURE Payment to a Participant or Beneficiary of any amount determined under the Plan shall be made by the Company only after the Participant or Beneficiary has delivered a properly completed and executed claim to the Administrator on such form(s) and in such manner as provided by the Administrator. Whenever the Administrator denies, in whole or in part, a claim for benefits filed 16 by any person (hereinafter referred to as a "Claimant"), the Administrator shall transmit a written notice setting forth (i) the specific reasons for the denial of the claim, (ii) references to the specific provisions of the Plan on which the denial is based, (iii) a description of any additional needed material or information and why such material or information is necessary, and (iv) further steps which the Claimant can take in order to have his claim reviewed (including a statement that the Claimant or his duly authorized representative may review the Plan document and submit issues and comments regarding the claim to the Administrator). In addition, the written notice shall contain the date on which the notice was sent and a statement advising the Claimant that, within ninety (90) days of the date on which such notice is received, he may request a review of the Administrator's decision. 11.3 CLAIMS REVIEW Within ninety (90) days of the date on which the notice of denial of claim is received by the Claimant, the Claimant or his authorized representative may request that the claim denial be reviewed by filing with the Administrator a written request therefor, which request shall contain the following information: a) The date on which the notice of denial of claim was received by the Claimant; b) The date on which the Claimant's request was filed with the Administrator; provided, however, that the date on which the Claimant's request for review was in fact filed with the Administrator shall control in the event that the date of the actual filing is later than the date stated by the Claimant pursuant to this clause (b); c) The specific portions of the denial of his claim which the Claimant requests the Administrator to review; d) A statement by the Claimant setting forth the basis upon which he believes the Administrator should reverse its previous denial of his claim for benefits and accept his claim as made; e) Whether the Claimant desires a hearing on the claim; and f) Any written material (included as exhibits) which the Claimant desires the Administrator to examine in its consideration of his position as stated pursuant to clause (d). If the Claimant has requested a hearing on the claim, such hearing shall be held within thirty (30) days after the date determined pursuant to clause (b) hereof. Within sixty (60) days of the date determined pursuant to clause (b) hereof (or, if special circumstances or the request for a hearing require an extension of time, within ninety (90) days of such date), the Administrator shall conduct a full and fair review of the decision denying the Claimant's claim for benefits and shall deliver its decision to the Claimant in writing. Such written decision shall set forth the specific 17 reasons for the decision, including references to the specific provisions of this Plan which were relied upon. The decision will be final and binding on all persons concerned. Executed at Erie, Pennsylvania this 1st day of October, 2002, effective as of April 30, 2002. ERIE INDEMNITY COMPANY By: /s/ Jeffrey A. Ludrof ---------------------------- Jeffrey A. Ludrof Title: President & Chief Executive Officer ATTEST: /s/ Jan R. Van Gorder - ------------------------------------ Jan R. Van Gorder Secretary 18 EX-10.11 14 j9708001exv10w11.txt EMPLOYMENT AGREEMENT EXHIBIT 10.11 - EMPLOYMENT AGREEMENT THIS AGREEMENT (the "Agreement") made effective as of the 9th day of May, 2002 (the "Effective Date") by and between ERIE INDEMNITY COMPANY, a Pennsylvania corporation with its principal place of business at Erie, Pennsylvania (the "Company"), and JEFFREY A. LUDROF (the "Executive"); WITNESSETH: WHEREAS, the Company has determined that it is in the best interests of the Company and its shareholders to secure the continued employment of the Executive on the terms and subject to the conditions set forth in this Agreement; and WHEREAS, the Executive desires and is willing to accept employment with the Company on the terms and subject to the conditions set forth herein; NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Term. The Company hereby agrees to continue the employment of the Executive and the Executive hereby agrees to continue to serve the Company pursuant to the terms and conditions of this Agreement as President and CEO of the Company, or in such other position with the Company of at least commensurate responsibility and authority in all material respects, for a term of four years commencing on the Effective Date hereof and expiring on May 8, 2006, unless earlier terminated pursuant to Section 5 hereof. Notwithstanding the foregoing, the Executive shall serve in said office(s) at the pleasure of the Company's Board of Directors (the "Board of Directors") and the Executive may be removed from said office(s) at any time with or without Cause, as hereinafter defined, pursuant to Sections 5(b) or 5(d) hereof; provided that any such removal shall be without prejudice to any contract rights the Executive may have hereunder. Subject to Section 8(a)(6) and Section 8(b) hereof, this Agreement shall expire by its terms on May 8, 2006. 2. Duties and Responsibilities. The Executive's duties hereunder shall be those which shall be prescribed by the Company's Bylaws, as amended from time to time, and by the Board of Directors or any committee thereof from time to time and shall include such executive authority, duties, powers and responsibilities as customarily attend the office as President and CEO of a company comparable to the Company. The Executive shall discharge such duties consistent with sound business practices and in accordance with law and the Company's general employment policies, in each case, as in effect from time to time, in all material respects and the Executive shall use best efforts to promote the best interests of the Company. During the term of this Agreement, the Executive's position (including the Executive's status and reporting requirements), authority, duties, powers and responsibilities shall at all times be at least commensurate in all material respects with the most significant of those held, exercised or assigned to the Executive as of the Effective Date. The Executive shall devote the Executive's knowledge, skill and all of the Executive's professional time, attention and energies (reasonable absences for vacations and illness excepted), to the business of the Company in order to perform such assigned duties faithfully, competently and diligently. It is understood and agreed between the parties that the Executive may (i) engage in charitable and 1 community activities, including serving on boards of directors or trustees of and holding other leadership positions in non-profit organizations unless the objectives and requirements of such positions are determined by the Board of Directors to be inconsistent with the performance of the Executive's duties hereunder, and, (ii) manage personal investments, so long as such activities do not interfere or conflict with the Executive's performance of responsibilities and obligations hereunder. It is expressly agreed that any such activities engaged in by the Executive as of the Effective Date shall not thereafter be deemed to interfere with the Executive's obligations and responsibilities hereunder. The Executive agrees that the approval of the Board of Directors or a committee thereof shall be required before the Executive first accepts a position as director of any for-profit corporation after the date hereof. 3. Compensation. During the term of this Agreement, the Executive shall receive, for all services rendered to the Company hereunder, the following (hereinafter referred to collectively as "Compensation"): (a) Salary. The Executive shall be paid an annual base salary at an annual rate at least equal to the annual rate being paid or payable to the Executive by the Company in the month in which the Effective Date occurs, with such increases thereafter as shall be determined from time to time to be fair and reasonable by the Board of Directors or by the Executive Compensation Committee of the Board of Directors (the "Committee") in its discretion after taking into account, among other things, the authority, duties, powers and responsibilities of the Executive's position, the Executive's performance, the Company's performance, the compensation of persons in comparable positions at the Company and at other comparable companies, and the effect of inflation. The Executive's annual base salary shall not be reduced after any such increase. The Executive's annual base salary shall be payable in equal installments in accordance with the Company's general salary payment policies, but no less frequently than bi-weekly. (b) Incentive Compensation. The Executive shall be eligible for awards under the Company's incentive compensation plans, if any, applicable to senior executive officers of the Company or to key employees of the Company or its subsidiaries, including, but not limited to, management incentive plans and stock option plans, in accordance with and subject to the terms thereof (including any provisions providing for changes in the level of or termination of benefits thereunder), on a basis commensurate with the Executive's position and authorities, duties, powers and responsibilities. (c) Employee Benefit Plans. The Executive and the Executive's "dependents," as that term may be defined under the applicable employee benefit plan(s) of the Company, shall be included, to the extent eligible thereunder and subject to the terms of the plans (including any provisions for changing the level of or termination of benefits thereunder), in all plans, programs and policies which provide benefits for Company employees and their dependents on a basis commensurate with the Executive's position and authorities, duties, powers and 2 responsibilities including, without limitation, health care insurance, health and welfare plans, pension and retirement plans, group life insurance plans, split dollar life insurance plans, short and long-term disability plans, survivors' benefits, executive supplemental benefits, holidays and other similar or comparable benefits made available to the Company's employees and senior executive officers (hereinafter, such plans, programs and policies shall be collectively referred to as the "Erie Benefit Plans"). Such plans, programs and policies shall include, but are not limited to, the Erie Insurance Group Retirement Plan for Employees, the Erie Insurance Group Employee Savings Plan, the Erie Insurance Group Deferred Compensation Plan, the Erie Insurance Group Split Dollar Life Insurance Plan, the Erie Insurance Group Supplemental Executive Retirement Plan, and the Erie Insurance Group Health Protection, Prescription Drug, Dental Assistance and Vision Care Plans. (d) Perquisites. The Executive shall be entitled to all perquisites which the Company from time to time makes available to senior executive officers of the Company. Such perquisites shall include, but are not limited to, parking, club dues, tax preparation assistance, and an annual physical examination. (e) Expenses and Working Facilities. The Executive is hereby authorized to incur, and shall be reimbursed by the Company for, any and all reasonable and necessary business related expenses, including, but not limited to, expenses for business travel, entertainment, gifts and similar matters, which expenses are incurred by the Executive on behalf of the Company or any of its subsidiaries, upon presentation of itemized accounts of such expenses in accordance with Company policies. The Executive shall be furnished during the term of this Agreement with offices and other working facilities in the Company's principal executive offices located in Erie, Pennsylvania (or other location of the principal executive offices within the Erie metropolitan area) and secretarial and other assistance suitable to the Executive's position and adequate for the performance of duties hereunder. (f) Performance Appraisal. The Executive's performance may be evaluated by the Board of Directors or the Committee from time to time. The Executive shall be entitled to such additional remuneration, including but not limited to annual bonuses based on performance, as the Board of Directors or the Committee may, in its discretion, determine from time to time. 4. Absences. The Executive shall be entitled to vacations in accordance with the Company's vacation policy in effect from time to time (but in no event shall the Executive be entitled to fewer vacation days than under the Company's vacation policy as in effect on the Effective Date) and to absences because of illness or other incapacity, and shall also be entitled to such other absences, whether for holiday, personal time, conventions, or for any other purpose, as are granted to the Company's other senior executive officers or as are approved by the Board of Directors or the Committee, which approval shall not be unreasonably withheld. 3 5. Termination. The Executive's employment hereunder may be terminated only as follows: (a) Expiration of Term of Office. Upon the expiration of the term of the office(s) to which the Executive has been elected or appointed as set forth in Section 1 hereof, the Board of Directors may (i) determine that the Executive should not continue in such office(s) or (ii) that the Executive should not be elected or appointed to an office with duties, authorities, powers and responsibilities that are at least commensurate with those of said office(s), in either case, for reasons other than for Cause (if the reasons for such noncontinuance, nonreelection or nonreappointment constitute Cause, then Section 5(d) hereof will apply). (b) By the Company Without Cause. The Company may at any time terminate the Executive's employment hereunder without Cause only by the affirmative vote of a majority of the entire Board of Directors, and upon no less than thirty (30) days prior written notice to the Executive. (c) By the Executive Without Good Reason. The Executive may at any time terminate employment hereunder for any reason upon no less than thirty (30) days written notice to the Company. Section 5(e) shall apply to any termination of employment by the Executive for Good Reason. (d) By the Company For Cause. The Company may terminate the Executive's employment hereunder for Cause. In such event, the Company shall give to the Executive prompt written notice (in addition to any notice which may be required by Section 5(d)(1) hereof) specifying in reasonable detail the basis for such termination. For purposes of this Agreement, "Cause" shall mean any of the following conduct by the Executive: (1) The deliberate and intentional breach of any material provision of this Agreement, which breach Executive shall have failed to cure within thirty (30) days after Executive's receipt of written notice from the Company specifying the specific nature of the Executive's breach; (2) The deliberate and intentional engaging by Executive in gross misconduct that is materially and demonstrably inimical to the best interests, monetary or otherwise, of the Company; or (3) Conviction of a felony or conviction of any crime involving moral turpitude, fraud or deceit. For purposes of this definition, no act, or failure to act, on the Executive's part shall be considered "deliberate and intentional" unless done, or omitted to be done, by the Executive not 4 in good faith and without reasonable belief that such action or omission was in the best interest of the Company. (e) By the Executive for Good Reason. The Executive may terminate employment hereunder for Good Reason upon providing thirty (30) days written notice to the Company after the Executive reasonably becomes aware of the circumstances giving rise to such Good Reason. For purposes of this Agreement, "Good Reason" means the following conduct of the Company, unless the Executive shall have consented thereto in writing: (1) Material breach of any material provision of this Agreement by the Company, which breach shall not have been cured by the Company within thirty (30) days after Company's receipt from the Executive or the Executive's agent of written notice specifying in reasonable detail the nature of the Company's breach; (2) The assignment to the Executive of any duties inconsistent in any material respect with the Executive's position (including any reduction of the Executive's status and reporting requirements), authority, duties, powers or responsibilities with the Company as contemplated by Section 2 of this Agreement, or any other action by the Company, including the removal of the Executive from or any failure to reelect or reappoint the Executive to the office(s) specified in Section 2 or a commensurate office(s) (other than for Cause), which results in a diminution of the Executive's authority, duties, position, responsibilities or status, excluding for this purpose any isolated, insubstantial and inadvertent action respecting the Executive not taken in bad faith and which is remedied by the Company within thirty (30) days after receipt of written notice from the Executive to the Company; (3) The Company's relocation of the Executive out of the Company's principal executive offices or the relocation of the Company's principal executive offices to a location outside the Erie, Pennsylvania metropolitan area, except for required short-term travel on the Company's behalf to the extent necessary for the Executive to carry out his normal duties in the ordinary course of business; (4) The failure of the Company to obtain the assumption in writing of its obligations to perform this Agreement by any successor as provided in Section 14 hereof not less than 5 five days prior to a merger, consolidation or sale as contemplated in Section 14; or (5) A reduction in the overall level of compensation of the Executive. For purposes of this subsection 5, the following shall not constitute a reduction in the overall level of compensation of the Executive: (i) changes in the cash/stock mix of compensation payable to the Executive; (ii) a reduction in the overall level of compensation of the Executive resulting from the failure to achieve corporate, business unit and/or individual performance goals established for purposes of incentive compensation for any year or other period; provided that the aggregate short-term incentive opportunity, when combined with the Executive's base salary, provides, in the aggregate, an opportunity for the Executive to realize at least the same overall level of compensation as was paid in the immediately prior year or period at target performance levels; and provided, further, that such target performance levels are reasonable at all times during the measurement period, taking into account the fact that one of the purposes of such compensation is to incent the Executive; (iii) reductions in compensation resulting from changes to any Erie Benefit Plan (provided that such changes are generally applicable to all participants in such Erie Benefit Plan); and (iv) any combination of the foregoing. (f) Disability. In the event that the Executive shall be unable to perform the Executive's duties hereunder on a full time basis for a period of one hundred-eighty (180) consecutive calendar days by reason of incapacity due to illness, accident or other physical or mental disability, then the Company may, at its discretion, terminate the Executive's employment hereunder if the Executive, within ten (10) days after receipt of written notice of termination (which notice may be given before or after the end of the entire 180 day period), shall not have returned to the performance of all of his duties hereunder on a full-time basis. (g) Death. The Executive's employment under this Agreement shall terminate upon the Executive's death. (h) Mutual Written Agreement. This Agreement and the Executive's employment hereunder may be terminated at any time by the mutual written agreement of the Executive and the Company. 6. Compensation in the Event of Termination. In the event that the Executive's employment hereunder terminates prior to the expiration of this Agreement for any 6 reason provided in Section 5 hereof, the Company shall pay the Executive, compensation and provide the Executive and the Executive's eligible dependents with benefits as follows: (a) Executive's Nonreelection to Office; Termination By Company Without Cause; Termination By Executive for Good Reason. In the event that the Executive's employment hereunder is terminated: (i) because the Executive does not continue in office pursuant to Section 5(a) hereof; or (ii) by the Company without Cause pursuant to Section 5(b) hereof; or (iii) by the Executive for Good Reason pursuant to Section 5(e) hereof, then in any such event the Company shall pay or provide, as applicable, the following compensation and benefits to the Executive: (1) Three (3) times the following: (A) the highest annual base salary paid or payable to the Executive in the then current year or any one (1) of the three (3) calendar years preceding Executive's termination of employment hereunder; plus (B) an amount equal to the sum of the Executive's highest award(s) under the Company's Annual Incentive Plans for any one (1) of the three (3) calendar years preceding the date of the termination of Executive's employment hereunder (such total is referred to herein as "Covered Compensation"). Such payment to the Executive by the Company shall be paid in a lump sum unless the Executive elects, and so notifies the Company in writing prior to the termination of the Executive's employment hereunder, to receive such payment in three (3) equal annual installments. The lump sum or first payment, as the case may be, shall be paid within sixty (60) days after the date of the termination of the Executive's employment hereunder; (2) Any awards or other compensation to which the Executive is entitled under any of the Company's compensation plans or Erie Benefit Plans to the extent not covered in subsection (1) hereof; (3) Any award to which the Executive would be entitled under the Company's Long-Term Incentive Plan as in effect on December 16, 1997, calculated under the provision of that Plan as if the Executive ceases to be an Employee of the Company by reason of death, disability or normal retirement; (4) Continuing coverage for all purposes (including eligibility, coverage, vesting and benefit accruals, as applicable), for a period of three (3) years after the date of the termination of 7 Executive's employment hereunder, to the extent not prohibited by law, for the Executive and the Executive's eligible dependents under all of the Erie Benefit Plans in effect and applicable to Executive and the Executive's eligible dependents as of the date of termination. In the event that the Executive and/or the Executive's eligible dependents, because of the Executive's terminated status, cannot be covered or fully covered under any or all of the Erie Benefit Plans, the Company shall continue to provide the Executive and/or the Executive's eligible dependents with the same level of such coverage in effect prior to termination, payable from the general assets of the Company if necessary. Notwithstanding the foregoing, the Executive may elect (by giving written notice to the Company prior to the termination of employment hereunder), on a benefit by benefit basis, to receive in lieu of continuing coverage, cash in an amount equal to the present value (using a 6.5% discount rate over three years) of the projected cost to the Company of providing such benefit for such three year period. The aggregate amount of cash to which the Executive is entitled pursuant to the preceding sentence shall be payable by the Company to the Executive within sixty (60) days after the date of the termination of Executive's employment hereunder; and (5) For a period of three (3) years after the date of the termination of Executive's employment hereunder, such perquisites as are made available to the Executive as of the date of the termination of Executive's employment hereunder. The Executive's subsequent death, disability or attainment of age 65 or any other age shall in no way affect or limit the Company's obligations under this Section 6(a). (b) Termination By the Company for Cause. In the event that the Company shall terminate the Executive's employment hereunder for Cause pursuant to Section 5(d), this Agreement shall forthwith terminate and the obligations of the parties hereto shall be as set forth in Section 8 hereof. (c) Termination by the Executive Without Good Reason. In the event that the Executive shall terminate employment hereunder other than for Good Reason pursuant to Section 5(c), this Agreement shall forthwith terminate and the obligations of the parties hereto shall be as set forth in Section 8 hereof. (d) Disability. In the event that the Company elects to terminate the Executive's employment hereunder pursuant to Section 5(f), the Executive shall 8 continue to receive from the date of such termination through the expiration date of this Agreement, sixty percent (60%) of the then current annual base salary to which the Executive was entitled pursuant to Section 3(a) hereof immediately preceding such termination, in accordance with the payroll practices of the Company for senior executive officers, reduced, however, by the amount of any proceeds from Social Security and disability insurance policies provided by and at the expense of the Company. (e) Death. In the event of the death of the Executive during the term of this Agreement, the then current annual base salary to which the Executive was entitled pursuant to Section 3(a) hereof immediately preceding the Executive's death shall be paid, in twelve (12) equal monthly installments following the date of death, to the last beneficiary designated by the Executive under the Company's group life insurance policy maintained by the Company or such other written designation expressly provided to the Company for the purposes hereof or, failing either such designation, to the Executive's estate. (f) Mutual Written Consent. In the event that the Executive and the Company shall terminate the Executive's employment by mutual written agreement, the Company shall pay such compensation and provide such benefits, if any, as the parties may mutually agree upon in writing. The Executive shall not be required to mitigate the amount of any payment provided for in this Section 6 by seeking employment or otherwise, nor shall any amounts received from employment or otherwise by the Executive offset in any manner the obligations of the Company hereunder except as specifically provided in Section 6(d) hereof. 7. Certain Additional Payments by the Company. Notwithstanding anything in this Agreement to the contrary, in the event it is determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any successor provision, on excess parachute payments, as that term is used and defined in Sections 4999 and 280G of the Code, then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount equal to the then current rate of tax under said Section 4999 multiplied by the total of the amounts so paid or payable, including the Gross-Up Payment, which are deemed to be a part of an excess parachute payment. 8. Effect of Expiration of Agreement or Termination of Executive's Employment. Upon the expiration of this Agreement by its terms or the termination of the Executive's employment hereunder, neither the Company nor the Executive shall have any remaining duties or obligations hereunder except that: (a) The Company shall: (1) Pay the Executive's accrued salary and any other accrued benefits under Sections 3(a), (b), and (c) hereof; 9 (2) Reimburse the Executive for expenses already incurred in accordance with Section 3(e) hereof; (3) Pay or otherwise provide for any benefits, payments or continuation or conversion rights in accordance with the provisions of any Erie Benefit Plan of which the Executive or any of the Executive's dependents is or was a participant or as otherwise required by law; (4) Pay the Executive and the Executive's beneficiaries any compensation and/or provide the Executive or the Executive's eligible dependents any benefits, as the case may be, due pursuant to Section 6 or Section 7 hereof; and (5) Unless the employment of the Executive is terminated by the Company for Cause, pay the Executive or the Executive's beneficiaries the full amount or amounts accrued under the Supplemental Executive Retirement Plan of the Company (the "SERP") as in effect on the Effective Date (or as such benefits may be enhanced by subsequent amendments or supplements to such SERP), as though, solely for purposes of determining any otherwise applicable actuarial reduction factors, the event of the termination of Executive's employment hereunder or expiration of this Agreement occurred on the Executive's Normal Retirement Date as defined in such SERP. Accrued benefits under the SERP shall be fully vested and nonforfeitable upon such termination (including termination on account of the Executive's death) or expiration. Any reductions in SERP benefits that would otherwise apply pursuant to Section 10.1 of the Company's Retirement Plan for Employees (or pursuant to any successor provision of such plan or any successor plan) relating to Section 415(b) of the Code shall not be applicable for purposes hereof. No further approval by the Board of Directors or the Committee with respect to payments under the SERP in accordance with the preceding sentences shall be required. Unreduced payments may begin at age 55, but in no event would payments be made under this Section 8(a)(5) before the Executive reaches age fifty-five (55). The Company shall purchase for the Executive, naming the Executive and/or the Executive's designee the owner, a paid up annuity, from an insurer reasonably acceptable to the Executive but in any event having an A.M. Best rating of A+ or better (or other comparable rating), that will pay to the Executive an amount equal to the benefit to which the Executive would 10 otherwise be entitled under the SERP and payable at the times such SERP benefit would be payable in accordance with the provisions hereof. Upon the purchase and delivery to the Executive of such an annuity, the Executive shall release the Company from any further obligation under the SERP. The Company further agrees to pay the Executive immediately upon termination, a cash payment (the "Tax Gross-up") equal to the sum of the following: (i) all taxes (federal, state, local, and payroll taxes) incurred and due and owing by the Executive, arising from the cost of the annuity purchased by the Company to meet the requirements of this Section 8(a)(5), and (ii) any such taxes incurred and due and owing with respect to the amount paid in (i). (6) Continue to remain bound by the terms of Section 12 hereof. (b) The Executive shall remain bound by the terms of Sections 9 and 13 hereof for a period of thirty six (36) months after the expiration of the Agreement by its terms; provided, that the Executive shall not be bound by the terms of Section 9(b) after the termination of employment (other than a termination of the Executive by the Company for Cause) if such termination occurs after the expiration of this Agreement by its terms. 9. Covenants as to Confidential Information and Competitive Conduct. The Executive hereby acknowledges and agrees as follows: (i) this Section 9 is necessary for the protection of the legitimate business interests of the Company, (ii) the restrictions contained in this Section 9 with regard to geographical scope, length of term and types of restricted activities are reasonable; (iii) the Executive has received adequate and valuable new consideration for entering into this Agreement, and (iv) the Executive's expertise and capabilities are such that this obligation hereunder and the enforcement hereof by injunction or otherwise will not adversely affect the Executive's ability to earn a livelihood. (a) Confidentiality of Information and Nondisclosure. The Executive acknowledges and agrees that the Executive's employment by the Company under this Agreement necessarily involves knowledge of and access to confidential and proprietary information pertaining to the business of the Company and its subsidiaries. Accordingly, the Executive agrees that at all times during the term of this Agreement and at any time thereafter, the Executive will not, directly or indirectly, without the express written approval of the Company, unless directed by applicable legal authority (including any court of competent jurisdiction, governmental agency having supervisory authority over the business of the Company or the subsidiaries, or any legislative or administrative body having supervisory authority over the business of the Company or its subsidiaries) having jurisdiction over the Executive, disclose to or use, or knowingly permit to be so 11 disclosed or used, for the benefit of himself, any person, corporation or other entity other than the Company, (i) any information concerning any financial matters, customer relationships, competitive status, supplier matters, internal organizational matters, current or future plans, or other business affairs of or relating to the Company or its subsidiaries, (ii) any management, operational, trade, technical or other secrets or any other proprietary information or other data of the Company or its subsidiaries, or (iii) any other information related to the Company or its subsidiaries or which the Executive should reasonably believe will be damaging to the Company or its subsidiaries which has not been published and is not generally known outside of the Company. The Executive acknowledges that all of the foregoing constitutes confidential and proprietary information, which is the exclusive property of the Company. (b) Restrictive Covenant. During the term of, and for a period of one (1) year (the "Restrictive Period") after the termination of the Executive's employment hereunder for any reason (other than a termination of the Executive hereunder pursuant to Section 5(a), 5(b) or 5(e), hereof), the Executive shall not render, directly, or indirectly, services to any person, firm, corporation, association or other entity which conducts the same or similar business as the Company or its subsidiaries at the date of the Executive's termination of employment hereunder within the states in which the Company or any of its subsidiaries is then licensed and doing business at the date of the Executive's termination of employment hereunder without the prior written consent of the Board of Directors, which may be withheld in its discretion. In the event the Executive violates any of the provisions contained in this Section 9(b) hereof, the Restrictive Period shall be increased by the period of time from the commencement by the Executive of any violation until such violation has been cured to the satisfaction of the Company. The Executive further agrees that at no time during the Restrictive Period will the Executive attempt to directly or indirectly solicit or hire employees of Company or its subsidiaries or induce any of them to terminate their employment with the Company or any of the subsidiaries. Notwithstanding the foregoing, the performance by the Executive of rights and duties under an agency agreement with the Company shall not constitute a breach of this Section 9(b). (c) Company Remedies. The Executive acknowledges and agrees that any breach of this Section 9 will result in immediate and irreparable harm to the Company, and that the Company cannot be reasonably or adequately compensated by damages in an action at law. In the event of a breach by the Executive of the provisions of this Section 9, the Company shall be entitled, to the extent permitted by law, immediately to cease to pay or provide the Executive or the Executive's dependents any compensation or benefit being, or to be, paid or provided to the Executive pursuant to Section 3, Section 6 or Section 8 of this Agreement, and also to obtain immediate injunctive relief restraining the Executive from conduct in breach of the covenants contained in this Section 9. Nothing herein shall be construed as prohibiting the Company from pursuing any 12 other remedies available to it for such breach, including the recovery of damages from the Executive. 10. Resolution of Differences Over Breaches of Agreement. Except as otherwise provided herein, in the event of any controversy, dispute or claim arising out of, or relating to, this Agreement, or the breach thereof, or arising out of any other matter relating to the Executive's employment with the Company, the parties may seek recourse only for temporary or preliminary injunctive relief to the courts having jurisdiction thereof and if any relief other than injunctive relief is sought, the Company and the Executive agree that such underlying controversy, dispute or claim shall be settled by arbitration conducted in Erie, Pennsylvania in accordance with this Section 10 and the Commercial Arbitration Rules of the American Arbitration Association ("AAA"). The matter shall be heard and decided, and awards rendered by a panel of three (3) arbitrators (the "Arbitration Panel"). The Company and the Executive shall each select one arbitrator from the AAA National Panel of Commercial Arbitrators (the "Commercial Panel") and AAA shall select a third arbitrator from the Commercial Panel. The award rendered by the Arbitration Panel shall be final and binding as between the parties hereto and their heirs, executors, administrators, successors and assigns, and judgment on the award may be entered by any court having jurisdiction thereof. Except as provided in Section 11 hereof, each party shall bear sole responsibility for all expenses and costs incurred by such party in connection with the resolution of any controversy, dispute or claim in accordance with this Section 10. 11. Payment of Executive's Legal Fees. If the Executive is required to bring any action to enforce rights or to collect moneys due under this Agreement, the Company shall pay to the Executive the fees and expenses incurred by the Executive in bringing and pursuing such action if the Executive is successful, in whole or in part, on the merits or otherwise (including by way of a settlement involving a payment of money by the Company to the Executive), in such action. The Company shall pay such fees and expenses in advance of the final disposition of such action upon receipt of an undertaking from the Executive to repay to the Company such advances if the Executive is not ultimately successful, in whole or in part, on the merits or otherwise, in such action. 12. Severance Pay upon Termination of Employment after Expiration of the Agreement. Notwithstanding the expiration of this Agreement by its terms and notwithstanding the terms of any corporate severance policy then in effect and applicable to the Executive, if the employment of the Executive is terminated without Cause by the Company, by the Executive for Good Reason or upon the expiration of the term of the office(s) to which the Executive has been elected or appointed as set forth in Section 1 hereof (for reasons other than for Cause), in any case, within thirty-six (36) months after the expiration of this Agreement by its terms, then (i) the Company shall pay to the Executive severance compensation in an amount equal to two (2) times the Executive's Covered Compensation as determined on the date of such termination, and (ii) the Executive and the Executive's eligible dependents shall be entitled to continuing coverage under the Company's then-existing group health plans (including medical, dental, prescription drug and vision plans, if any) for a period of two (2) years after the date of the termination of the Executive's employment, to the extent not prohibited by law and subject to the terms of such plans including provisions as to deductibles and copayments and changes in levels of coverage 13 that are generally applicable to employees. The payment to the Executive by the Company pursuant to subsection (i) of the preceding sentence shall be paid in a lump sum unless the Executive elects, and so notifies the Company in writing prior to the Executive's termination of employment, to receive such payment in two (2) equal annual installments. The lump sum or first payment, as the case may be, shall be paid within thirty (30) days after the date of termination of the Executive's employment. 13. Release. The Executive hereby acknowledges and agrees that neither the Company nor any of its representatives or agents will be obligated to pay any compensation or benefit which the Executive has a right to be paid or provided to the Executive or the Executive's dependents pursuant to Section 6, Section 8 or Section 12 of this Agreement, unless the Executive, if requested by the Company in its sole discretion, executes a release in a form reasonably acceptable to the Company, which releases any and all claims the Executive has or may have against the Company or its subsidiaries, agents, officers, directors, successors or assigns. 14. Waiver. The waiver by a party hereto of any breach by the other party hereto of any provision of this Agreement shall not operate or be construed as a waiver of any other or subsequent breach by a party hereto. 15. Assignment. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company, and the Company shall be obligated to require any successor to expressly acknowledge and assume its obligations hereunder. This Agreement shall inure to the extent provided hereunder to the benefit of and be enforceable by the Executive or the Executive's legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. The Executive may not delegate any of the Executive's duties, responsibilities, obligations or positions hereunder to any person and any such purported delegation shall be void and of no force and effect. 16. Notices. Any notices required or permitted to be given under this Agreement shall be sufficient if in writing, and if personally delivered or when sent by first class certified or registered mail, postage prepaid, return receipt requested--in the case of the Executive, to his residence address as set forth below, and in the case of the Company, to the address of its principal place of business as set forth below, to the attention of the Chairman of the Board, or in case the Executive is the Chairman of the Board, to the Chairman of the Compensation Committee of the Board -- or to such other person or at such other address with respect to each party as such party shall notify the other in writing. 17. Construction of Agreement. (a) Governing Law. This Agreement shall be governed by and construed under the laws of the Commonwealth of Pennsylvania. (b) Severability. In the event that any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 14 (c) Headings. The descriptive headings of the several paragraphs of this Agreement are inserted for convenience of reference only and shall not constitute a part of this Agreement. 18. Entire Agreement. This Agreement contains the entire agreement of the parties concerning the Executive's employment and all promises, representations, understandings, arrangements and prior agreements on such subject are merged herein and superseded hereby, including the Employment Agreement effective November 20, 1995 which is expressly superseded hereby. The provisions of this Agreement may not be amended, modified, repealed, waived, extended or discharged except by an agreement in writing signed by the party against whom enforcement of any amendment, modification, repeal, waiver, extension or discharge is sought. No person acting other than pursuant to a resolution of the Board of Directors or the Committee shall have authority on behalf of the Company to agree to amend, modify, repeal, waive, extend or discharge any provision of this Agreement or anything in reference thereto or to exercise any of the Company's rights to terminate or to fail to extend this Agreement. 15 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its officers thereunto duly authorized, and the Executive has hereunto set his hand all as of the day and year first above written. ATTEST: ERIE INDEMNITY COMPANY /s/ J.R. Van Gorder /s/ F. William Hirt - --------------------------- ------------------------------- J.R. Van Gorder F. William Hirt Secretary Chairman of the Board WITNESS: /s/ Debra J. Miller /s/ Jeffrey A. Ludrof - --------------------------- ------------------------------- Debra J. Miller Jeffrey A. Ludrof 5700 Stoneridge Drive Fairview, PA 16415 16 EX-10.12 15 j9708001exv10w12.txt FORM OF ATTORNEY-IN-FACT PROVISION EXHIBIT 10.12 - FORM OF ATTORNEY-IN-FACT PROVISION OF INSURANCE POLICIES OF ERIE INSURANCE EXCHANGE The Subscriber ("you" or "your") agrees with the other Subscribers at ERIE INSURANCE EXCHANGE ("ERIE"), a Reciprocal/Inter-Insurance Exchange, and with their Attorney-in-Fact, the Erie Indemnity Company ("we" or "us"), a Pennsylvania corporation with its Home Office in Erie, Pennsylvania, to the following: 1) You agree to pay your policy premiums and to exchange with other ERIE Subscribers policies providing insurance for any insured loss as stated in those policies. 2) You appoint us as Attorney-in-Fact with the power to: a) exchange policies with other ERIE Subscribers; b) take any action necessary for the exchange of such policies; c) issue, change, non-renew or cancel policies; d) obtain reinsurance; e) collect premiums; f) invest and reinvest funds; g) receive notices and proofs of loss; h) appear for, compromise, prosecute, defend, adjust and settle losses and claims under your policies; i) accept service of process on behalf of ERIE as insurer; and j) manage and conduct the business and affairs of ERIE, its affiliates and subsidiaries. This power of attorney is limited to the purposes described in this Agreement. 3) You agree that as compensation for us a) becoming and acting as Attorney-in-Fact; b) managing the business and affairs of ERIE; and c) paying general administrative expenses, including sales commissions, salaries and employee benefits, taxes, rent, depreciation, supplies and data processing, we may retain up to 25% of all premiums written or assumed by ERIE. The rest of the premiums will be used for losses, loss adjustment expenses, investment expenses, damages, legal expenses, court costs, taxes, assessments, licenses, fees, any other governmental fines and charges, establishment of reserves and surplus, and reinsurance, and may be used for dividends and other purposes we decide are to the advantage of Subscribers. 4) You agree that this Agreement, including the power of attorney, shall have application to all insurance policies for which you apply at ERIE, including changes in any of your coverages. 5) You agree to sign and deliver to us all papers required to carry out this Agreement. 6) This Agreement, including the power of attorney, shall not be affected by your subsequent disability or incapacity. EX-99.1 16 j9708001exv99w1.txt CERTIFICATION OF JEFFREY A. LUDROF Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Erie Indemnity Company (the "Company") on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeffrey A. Ludrof, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Jeffrey A. Ludrof - -------------------------- Jeffrey A. Ludrof Chief Executive Officer November 6, 2002 EX-99.2 17 j9708001exv99w2.txt CERTIFICATION OF PHILIP A. GARCIA Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Erie Indemnity Company (the "Company") on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Philip A. Garcia, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Philip A. Garcia - ----------------------------- Philip A. Garcia Executive Vice President & Chief Financial Officer November 6, 2002 EX-99.3 18 j9708001exv99w3.txt FIRST AMENDMENT TO SECOND RESTATED AGREEMENT EXHIBIT 99.3 - FIRST AMENDMENT TO SECOND RESTATED AGREEMENT H.O. HIRT TRUST

Page ---- Article I Lifetime Trust 1 Article II Payment of Taxes, Debts, Legacies and Expenses After Settlor's Death 2 Article III Administration of Trust Estate 3 Article IV Powers of Trustees 8 Article V Successor Trustees 12 Article VI General Provisions 13 Article VII Certain Rules of Construction 15

FIRST AMENDMENT TO SECOND RESTATED AGREEMENT H. O. HIRT TRUST Dated the 22nd day of December, 1980. The Trust Agreement dated April 7, 1967, as restated by a Trust Agreement dated December 17, 1970 and amended thereafter, between HENRY ORTH HIRT, of Erie, Pennsylvania, as the Settlor, his children, FRANK WILLIAM HIRT and SUSAN RUTH HAGEN, as the individual Trustees and MELLON BANK, N.A., as the corporate Trustee and again restated by a Second Restated Agreement dated the 20th day of January, 1978 (and pursuant to the power to amend as contained in paragraph 7.03 of the said Second Restated Agreement) is hereby amended and restated again to read as set forth herein ("this Agreement"). The Settlor has heretofore transferred and delivered certain property to the Trustees, together with all his interest therein. The Trustees shall continue to hold said property, together with any additions thereto as hereinafter provided, as a Trust Estate, shall invest and reinvest the same and shall distribute the net income (hereinafter called "Income") and principal as set forth in the following provisions. Article I Lifetime Trust 1.01. During Settlor's lifetime: 1 (A) To pay to the Settlor the Income quarter-annually or to apply the same to his use as directed by him, (B) To pay over to Settlor free of trust any amount of principal which he may at any time request in writing, (C) To pay to Settlor or apply for his benefit any amounts of principal as Trustees in their discretion may from time to time deem advisable for the welfare and comfortable support of Settlor, (D) To make gifts from principal to individuals and organizations consistent with Settlor's previous pattern of gifts. Article II Payment of Certain Taxes, Debts, Legacies and Expenses After Settlor's Death 2.01. Upon the Settlor's death, the Trustees shall pay all estate, inheritance and other taxes in the nature thereof, together with any interest and penalties thereon, becoming payable because of the Settlor's death with respect to the property constituting his gross estate for death tax purposes, whether or not such property passes under this Agreement; PROVIDED, however, that no assets which are not subject to such taxes shall be used for this purpose and that the death taxes on future interests may be paid at such time or times as the Trustees in their sole discretion deem advisable. The 2 Trustees shall not seek contribution or reimbursement from anyone receiving or having a beneficial interest in any part of said gross estate. The Trustees shall also pay to the Settlor's personal representative or shall expend directly such sums as said personal representative shall certify as necessary to supplement the Settlor's probate estate in order to pay debts, funeral expenses, legacies and administration expenses; PROVIDED, however, that no assets shall be used for this purpose which are not otherwise included in the Settlor's gross taxable estate. Subject to such payments, the principal remaining at the Settlor's death and any accrued or undistributed Income shall be divided and held as is provided in Article III below. Article III Administration of Trust Estate 3.01. The Trust Estate shall be held and administered as hereinafter stated. (A) The Trustees shall divide the Trust Estate into two equal shares for the Settlor's children, FRANK WILLIAM HIRT and SUSAN RUTH HAGEN, and shall hold each share as a separate trust. (1) During the lifetime of each of the Settlor's children, the Trustees shall pay the Income from his or her trust quarter-annually to or for the benefit of said child, and if the corporate Trustee considers the Income to be insufficient, in view of other income of said child of which it has knowledge, to provide for the welfare and comfortable support of said child 3 and his or her family, including educational and funeral expenses, the corporate Trustee is authorized in its discretion to use such sums from the principal as it deems advisable therefor; PROVIDED, however, that no shares of Class B capital stock of ERIE INDEMNITY COMPANY may be used for this purpose. In addition, said child shall have the right to withdraw any or all of the principal, exclusive of shares of Class B capital stock of ERIE INDEMNITY COMPANY. Upon the death of said child, if the trust has not already terminated, the remaining principal, exclusive of any shares of Class B capital stock of ERIE INDEMNITY COMPANY, shall be transferred and delivered to or for the benefit of such one or more persons, corporations or other organizations, in such portions or amounts and subject to such trusts, terms and conditions as said child may appoint by specific reference to this power in his or her will. (2) Upon the death of each child, or upon the Settlor's death in the case of either child who is not then living, the shares of Class B capital stock of ERIE INDEMNITY COMPANY in said child's trust and any principal not appointed by said child as aforesaid, shall be held and distributed as follows: (a) During the lifetime of the surviving spouse of the deceased child, the Income shall be paid quarter-annually to said spouse, and if the Trustees consider the Income to be insufficient, in view of other income of said spouse and children of which they have knowledge, to provide for the welfare and comfortable support of said child's spouse and children, including educational and funeral expenses, the Trustees are authorized in 4 their discretion to use such sums from principal, exclusive of shares of Class B stock of ERIE INDEMNITY COMPANY, as they deem advisable therefor; PROVIDED, however, that a child of Settlor shall have the right and power exercisable by specific reference to this power in his or her Will, to direct that the trust shall not continue for the benefit of his or her surviving spouse, or shall continue for a shorter time than the life of said surviving spouse, and in the event of the exercise of said power the trust shall terminate as thus directed. (b) Upon the termination of said spouse's interest, the principal shall be divided into as many equal shares as said child has children then living and deceased children with issue then living, and each said share shall be held as a separate trust. The Settlor's son now has two living children, ELIZABETH ANN VORSHECK and LAUREL ANN HIRT, and his daughter also has two living children, SARAH ELIZABETH HAGEN and JONATHAN HIRT HAGEN. (i) Until the termination of the trust, as provided in subparagraph (ii) below, the Trustees shall pay the Income from each grandchild's trust quarter-annually to or for the benefit of said grandchild or, if he or she is deceased, to his or her issue living at the time of payment per stirpes, and if the corporate Trustee considers the Income to be insufficient, in view of other income of which it has knowledge, to provide for the welfare, comfortable support and education of said grandchild and his or her family, the corporate Trustee is authorized in its discretion to use such sums from principal, exclusive of shares of Class B capital stock of ERIE INDEMNITY COMPANY, as it deems advisable therefor; PROVIDED, however, that prior to said grandchild's 5 twenty-first (21st) birthday, the Trustees may pay to him or her or to the person having custody of him or her, without liability on the part of the Trustees to see to the application thereof, or may expend directly such sums from Income or principal as the corporate Trustee deems advisable for such purpose and shall add any excess Income to principal and invest it as such. The Trustees may pay any other minor's share of Income to his or her natural guardian or such other person as may have custody of him or her or to any adult as Custodian for him or her under the Pennsylvania Uniform Gifts to Minors Act or may deposit the same in an interest-bearing account in said minor's name in the banking department of the corporate Trustee or elsewhere. (ii) Each trust shall terminate upon the first to occur of (a) the sale or other disposition of all the shares of capital stock of ERIE INDEMNITY COMPANY held under this Agreement or (b) the expiration of a period of twenty-one (21) years following the death of the survivor of all the Settlor's descendants living at the Settlor's death. Upon such termination, the principal shall be transferred and delivered to the Settlor's respective grandchild or, if he or she is deceased, to his or her then living issue per stirpes. (iii) Should any grandchild become deceased without issue at any time prior to such termination, the then principal of his or her trust shall be added equally to the shares of the other children of his or her parent, the Settlor's child, who are either then living or deceased with issue then living. 6 (iv) Should all the issue of either of the Settlor's children die before the termination of the trusts, the then principal of said child's share shall be added to the other child's share and held as part thereof. (B) If any remainderman under the foregoing provisions is a minor and is entitled to a share in excess of the amount which may be paid to his or her natural guardian, such share shall be retained by the corporate Trustee in a separate trust until the eighteenth (18th) birthday of said remainderman, at which time the trust shall terminate and the principal shall be transferred and delivered to him or her free of trust. During such minority period, the Trustee shall pay to the person having custody of said remainderman, without liability on the part of the Trustee to see to the application thereof, or may expend directly so much of the Income and principal as it deems advisable for the welfare, comfortable support and education of said remainderman and shall add any excess Income to principal and invest it as such. In the event of the death of said remainderman during minority, the Trustee is authorized in its discretion to pay part or all of the funeral expenses, and the remaining principal shall be transferred and delivered to said remainderman's estate. (C) The interest of any beneficiary hereunder, including a remainderman, in Income or principal, shall not be subject to assignment, alienation, pledge, attachment or claims of creditors until after payment has actually been made by the Trustees as hereinbefore provided. (D) Upon the death of any Income beneficiary, any Income accrued or 7 received by the Trustees subsequent to the last Income payment date shall be paid to the person or persons for whose benefit the principal producing such Income is continued in trust or to whom such principal is distributed under the terms hereof. (E) Corporate distributions received in shares of the distributing corporation shall be allocated to principal, regardless of the number of shares and however described or designated by the distributing corporation. Article IV Powers of Trustees 4.01. The Trustees hereunder shall have the following powers, in addition to and not in limitation of those granted by law: to accept assets in kind from the Settlor, his estate or elsewhere, to purchase assets from the estate and to retain such assets in kind; to sell assets and to invest and reinvest the proceeds and any other cash in any kind of property, real or personal, or part interest therein, without being restricted to investments which are listed as legal for trust funds; to pledge, exchange or mortgage real or personal property and to lease the same for terms exceeding five (5) years; to give options for sales, leases and exchanges; to borrow money; to compromise claims, to vote shares of corporate stock, in person or by proxy, in favor of or against management proposals, except that they shall vote any bank or bank holding company stock only as directed by an individual Trustee or, if there is none, by a competent adult Income beneficiary of the trust in which said shares are held; in the sole discretion of the corporate Trustee, to 8 carry securities in the name of a nominee; to make division or distribution hereunder either in cash or in kind; and to allot different kinds of or interests in property to different shares. The Trustees are specifically authorized to accept in kind and to retain any shares of MELLON NATIONAL CORPORATION stock, with no duty on the part of the corporate Trustee to review the same for investment purposes. 4.02. As among the Trustees, the corporate Trustee shall perform all ministerial and administrative duties, including the keeping of books and records, acting as custodian of the trust property and preparing all necessary tax returns. Each individual Trustee named herein but not including any Successor Trustee may delegate from time to time to his or her spouse, to any person eligible to be a successor individual trustee, or to the corporate Trustee, by an instrument in writing, (which instrument shall remain in effect as long as the individual Trustee shall remain in office unless sooner revoked or until expiring according to its terms) any and all of his or her rights, powers and duties hereunder and may also retain such agents as he or she deems advisable in the performance of his or her duties. 4.03. Notwithstanding the foregoing paragraphs 4.01 and 4.02 and any other provision of this Agreement, the following shall apply while any shares of capital stock of ERIE INDEMNITY COMPANY are held hereunder: (A) At least one of the individual Trustees shall always be a member of the Board of Directors of said Company. 9 (B) The Settlor hereby declares that the purpose of this Trust is to create and preserve unified ownership and control of ERIE INDEMNITY COMPANY as a means of preserving the existence of ERIE INSURANCE EXCHANGE and ERIE INDEMNITY COMPANY as viable entities capable of furnishing insurance to subscribers at the Exchange and employment to loyal employees of the Exchange and the Company. The Settlor further declares that in his experience in the insurance business over half a century, including the Great Depression of the 1930's, World War II, the Korean and Viet Nam wars and several recessions, he has never lost sight of the fact that ERIE INSURANCE EXCHANGE, as a reciprocal insurer, was organized and exists primarily for the benefit of its subscribers or policyholders and that therefore the interests of the people who put their trust in the Exchange for the protection of their personal and business affairs must come first. However, when the Exchange is healthy, its managing attorney-in-fact, ERIE INDEMNITY COMPANY, will necessarily be prosperous and healthy, to the benefit of the stockholders of the latter. The Settlor therefore urges that the Trustees familiarize themselves with the nature of reciprocal insurers in general and the ERIE INSURANCE EXCHANGE in particular; that in the discharge of their trust duties they concentrate, in cooperation with the Board of Directors of ERIE INDEMNITY COMPANY and the individual whom the Board designates from time to time as "Manager" of the Exchange and Company, to keep ERIE INSURANCE EXCHANGE in the best of health; and that only when the task proves impossible shall they consider what then appears to them to be a logical change to prevent deterioration and possible disaster to the interests of all concerned. 10 (C) The Trustees will therefore maintain and preserve ownership of all shares of class B capital stock of ERIE INDEMNITY COMPANY unless and until they shall determine, subject to the specific provisions of paragraph 4.04, that the sale, exchange in a corporate combination or reorganization, or other disposition by the Trust of such ownership will best serve said purpose, in which event they are authorized to sell, exchange in a corporate combination or reorganization, or otherwise dispose of the ownership of all, but not less than all, of said shares, for whatever consideration and upon whatever terms they may determine. In the exercise of their unlimited discretion and in making any determination or decision relative to the ultimate purpose stated herein, the Trustees shall be entitled to assume that whatever best serves to preserve the existence of the Exchange and the Company also serves the best interest of any and all beneficiaries and recipients entitled at any time to receive distribution of any Income or principal hereunder. 4.04. In the absence of anything herein contained to the contrary, all powers pertaining to the administration of the trust shall be exercised only by a majority of the Trustees in office; PROVIDED, however, that in the exercise of the power and authority to sell, exchange in a corporate combination or reorganization, or otherwise dispose of shares of ERIE INDEMNITY COMPANY granted in paragraph 4.03 and referred to in paragraph 4.01, or in the taking of any action to terminate the trust or to distribute any part of the corpus to either individual Trustee as a beneficiary other than pursuant to withdrawal as stated in paragraph 3.01(A)(1), the affirmative vote of the corporate Trustee shall be required, and the affirmative or negative vote of either or 11 both of the individual Trustees, although constituting a majority, shall not be sufficient to authorize any such action. 4.05. The corporate Trustee shall be entitled to receive annual compensation for its services hereunder in accordance with its schedule in effect when the services are performed, but not in excess of such compensation as would be approved by a court of competent jurisdiction. During the Settlor's lifetime, such compensation shall be charged wholly against income, unless the Settlor directs otherwise in writing. For any services performed by it in connection with the Settlor's estate, which services are normally performed by the personal representative, the corporate Trustee shall be entitled to such additional compensation as may be fair and reasonable under the circumstances, not to exceed seventy-five (75%) percent of the additional compensation to which it would be entitled as Executor if the assets of this Trust Estate were to be superimposed upon the testamentary estate of the Settlor. The corporate Trustee is authorized in its discretion to sell securities to the extent necessary to pay any portion of such compensation which is chargeable against principal. The individual Trustees shall also be entitled to reasonable compensation for their services hereunder. Article V Successor Trustees 5.01. Upon the occurrence of any vacancy in the office of individual Trustee due to death, incapacity, removal, resignation or any other cause, a Successor Trustee shall be elected by a majority vote of the remaining Trustees 12 and the Board of Directors of Erie Indemnity Company, with each remaining Trustee and said Board of Directors each having one vote, provided that after such election, as required by paragraph 4.03(1), at least one Trustee shall be a member of said Board of Directors. If no successor is thus elected within thirty (30) days after occurrence of the vacancy, the remaining Trustees and said Board shall petition the Common Pleas Court of Erie County, Pennsylvania, to fill said vacancy by appointment from a list of not fewer than three (3) persons furnished with said petition; and the President Judge of the Orphans Court Division of said Common Pleas Court is hereby empowered to fill said vacancy. 5.02. The corporate Trustee may resign at any time during the Settlor's lifetime by written notice to him. After the Settlor's death, the corporate Trustee may resign at any time, without stating cause, by petitioning a court of competent jurisdiction in Erie County to designate and appoint a successor corporate Trustee. In case of the merger or consolidation of the corporate Trustee, the resulting company shall become successor corporate Trustee hereunder without notice to any party. Article VI General Provision 6.01. The Settlor or others may add hereto, by Will, inter vivos transfer or beneficiary designation, cash or such property in kind as is acceptable to the corporate Trustee. 6.02. The Settlor reserves the right to terminate this Agreement, 13 in whole or in part, by written notice delivered to the Trustees during the Settlor's lifetime. 6.03. The Settlor reserves the right to amend this Agreement at any time by a proper instrument in writing, executed by the Settlor, delivered to the Trustees during the Settlor's lifetime and accepted by the Trustees. 6.04. The Settlor may delegate to F. WILLIAM HIRT and SUSAN RUTH HAGEN jointly or to the survivor of them, the right to terminate this Agreement as reserved in paragraph 6.02 above and the right to amend this Agreement as reserved in paragraph 6.03 above, only by a Special Power of Attorney in writing, duly executed and acknowledged by the Settlor before an officer empowered by law to take acknowledgments, and specifically referring to said rights and said portions of this Agreement. 6.05. If the Settlor designates the Trustees as beneficiaries of the proceeds of any policies of insurance on his life, the duty and responsibility for the payment of premiums and other charges on such policies during the Settlor's lifetime shall rest solely upon him, unless he shall expressly direct the Trustees in writing to pay the same from Income or principal; otherwise, the only duty of the Trustees shall be the safekeeping of such policies as are deposited with them, and the Trustees shall be under no duty to notify the Settlor that any such premium or other charge is due and payable. All options, rights, privileges and benefits exercisable by or accruing to the Settlor during his lifetime by the terms of the policies shall be for his sole 14 benefit and shall not be subject to this trust; the Settlor agrees, however, not to exercise any options whereby the proceeds would be payable to the Trustees other than in one sum. Upon the written request of the Settlor, the Trustees shall execute and deliver such consents and instruments as may be requisite to enable the Settlor to exercise or avail himself of any option, right, privilege or benefit granted by any of the policies. Upon the Settlor's death, or at such later time as may be specified in the policies, the net proceeds of any policies then payable to the Trustees hereunder shall be collected by the Trustees; the receipt of the Trustees for such proceeds shall release the insurance companies from liability on the policies, and the insurance companies shall be under no duty to see to the application of such proceeds. The Trustees may take all steps necessary in their opinion to enforce payment of said policies and shall be entitled to indemnify themselves out of any property held hereunder against all expenses incurred in taking such action. Article VII Certain Rules of Construction 7.01. As used in this Agreement, the singular may include the plural and the plural the singular, and the use of any gender shall be applicable to all genders. 7.02. This Agreement has been delivered to and accepted by the corporate Trustee in the Commonwealth of Pennsylvania and shall be governed in all respects by the laws of said Commonwealth. 15 IN WITNESS WHEREOF, the parties hereto have set their hands and seals the day and year aforesaid. /s/ Stephen E. Jones /s/ Henry Orth Hirt (SEAL) - ------------------------------------ ------------------------------ Witness Henry Orth Hirt /s/ Stephen E. Jones /s/ Frank William Hirt (SEAL) - ------------------------------------ ------------------------------- Witness Frank William Hirt /s/ Stephen E. Jones /s/ Susan Ruth Hagen (SEAL) - ------------------------------------ ------------------------------- Witness Susan Ruth Hagen (SEAL) ATTEST MELLON BANK, N.A. /s/ Trust Officer By: /s/ Nancy Wilfer - ------------------------------------ ---------------------------------- Trust Officer Asst. Vice-President 16 -----END PRIVACY-ENHANCED MESSAGE-----

EX-3.II

                                                                   EXHIBIT 3(ii)

                          AMENDMENT AND RESTATEMENT OF
                                     BYLAWS

                                    -- of --

                             ERIE INDEMNITY COMPANY
                                September 9, 2002


                                    ARTICLE I

                                     Offices

      Section 1.01. Principal Office. The principal office of Erie Indemnity
Company, a Pennsylvania business corporation, shall be located in the City of
Erie, Pennsylvania.

                                   ARTICLE II

                            Meetings of Shareholders

      Section 2.01. Annual Meeting. The Annual Meeting of Shareholders shall be
held each year, at a day and time fixed by the Board of Directors. At the Annual
Meeting, the Shareholders then entitled to vote shall elect Directors and shall
transact such other business as may properly be brought before the meeting. In
elections for Directors, voting need not be by ballot, except upon demand made
by a Shareholder entitled to vote at the election and before the voting begins.

      Section 2.02. Special Meetings.

      (a) Call of Special Meetings. Special meetings of the Shareholders may be
called at any time by:

            (1)   the Chairman of the Board,

            (2)   the Chief Executive Officer,

            (3)   the Board of Directors,

            (4)   the Chairman of the Executive Committee, or

            (5)   Shareholders entitled to cast at least twenty percent (20%) of
                  the votes that all Shareholders are entitled to cast at the
                  particular meeting.



                                       1

      (b) Fixing of Time for Meeting. At any time, upon written request of any
person who has called a special meeting, it shall be the duty of the Secretary
to fix the day and time of the meeting, which shall be held not more than 60
days after the receipt of the request. If the Secretary neglects or refuses to
fix the day and time of the meeting, the person or persons calling the meeting
may do so.

      Section 2.03. Place of Meeting. The place of meeting for any Annual or
Special Meeting of Shareholders of the corporation shall be at the principal
office of the corporation, unless another place is designated by the Board of
Directors in the notice of the meeting.

      Section 2.04. Notice of Meeting.

      (a) General Rule. Written notice of every meeting of the Shareholders
stating the place, day and time of the meeting shall be given by, or at the
direction of, the Secretary to each Shareholder of record entitled to vote at
the meeting at least:

            (1) ten days prior to the day named for a meeting called to consider
      a fundamental transaction under 15 Pa.C.S. Chapter 19; or

            (2) five days prior to the day named for the meeting in any other
      case.

If the Secretary neglects or refuses to give notice of a meeting, the person or
persons calling the meeting may do so. In the case of a Special Meeting of
Shareholders, the notice shall specify the general nature of the business to be
transacted.

      (b) Manner of Giving Notice. Whenever written notice is required to be
given to any Shareholder, it may be given either personally or by sending a copy
thereof by first class or express mail, postage prepaid, or by telegram (with
messenger service specified), telex or TWX (with answerback received) or courier
service, charges, prepaid, or by telecopier, to the address (or to the telex,
TWX, telecopier or telephone number) of the Shareholder appearing on the books
of the corporation. If the notice is sent by mail, telegraph or courier service,
it shall be deemed to have been given to the person entitled thereto when
deposited in the United States mail or with a telegraph office or courier
service for delivery to that person or, in the case of telex or TWX, when
dispatched or, in the case of telecopier, when received.

      (c) Adjourned Shareholder Meetings. When a meeting of Shareholders is
adjourned, it shall not be necessary to give any notice of the adjourned meeting
or of the business to be transacted at an adjourned meeting, other than by
announcement at the meeting at which the adjournment is taken, unless the Board
fixes a new record date for the adjourned meeting.

      (d) Notice of Action by Shareholders on Bylaws. In the case of a meeting
of Shareholders that has as one of its purposes action on the bylaws, written
notice shall be given to each Shareholder that the purpose, or one of the
purposes, of the meeting is to consider the

                                       2

adoption, amendment or repeal of the bylaws. There shall be included in, or
enclosed with, the notice a copy of the proposed amendment or a summary of the
changes to be effected thereby.

      Section 2.05. Quorum.

      (a) General Rule. A meeting of Shareholders of the corporation duly called
shall not be organized for the transaction of business unless a quorum is
present. The presence, in person or by proxy, of Shareholders entitled to cast
at least a majority of the votes that all Shareholders are entitled to cast on a
particular matter to be acted upon at the meeting shall constitute a quorum for
the purposes of consideration and action on the matter. Shares of the
corporation owned, directly or indirectly, by it and controlled, directly or
indirectly, by the Board of Directors of this corporation, as such, shall not be
counted in determining the total number of outstanding shares for quorum
purposes at any given time.

      (b) Withdrawal of a Quorum. The Shareholders present at a duly organized
meeting can continue to do business until adjournment, notwithstanding the
withdrawal of enough Shareholders to leave less than a quorum.

      (c) Adjournment for Lack of Quorum. If a meeting cannot be organized
because a quorum has not attended, those present may, except as provided in the
Business Corporation Law, adjourn the meeting to such time and place as they may
determine.

      (d) Adjournments Generally. Any meeting at which Directors are to be
elected shall be adjourned only from day to day, or for such longer periods not
exceeding 15 days each as the Shareholders present and entitled to vote shall
direct, until the Directors have been elected. Any other regular or special
meeting may be adjourned for such period as the Shareholders present and
entitled to vote shall direct.

      Section 2.06. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the Shareholders or of a class of
Shareholders may be taken without a meeting if, prior or subsequent to the
action, a consent or consents thereto by all of the Shareholders who would be
entitled to vote at a meeting for such purpose shall be filed in writing with
the Secretary of the corporation.

      Section 2.07. Shareholder Proposals.

      (a) Shareholder Proposals Relating to Candidates for Election as
Directors.

            (1) A Shareholder, whether or not entitled to vote in the election
of Directors, may propose to the Nominating Committee of the Board of Directors
one or more persons who the Shareholder believes would be appropriate candidates
for election by Shareholders as a Director at any meeting of Shareholders at
which Directors are to be elected. Such proposal shall be made by notice in
writing, delivered in person or by first class United States mail postage
prepaid or by reputable overnight delivery service, to the Nominating Committee
of the Board of Directors of the corporation to the attention of the Secretary
of the corporation at the

                                       3

principal office of the corporation, within the time limits specified herein and
otherwise in accordance with this Section 2.07(a).

            (2) In the case of an annual meeting of Shareholders, any such
written proposal by a Shareholder must be received by the Nominating Committee
not less than 90 calendar days nor more than 120 calendar days before the first
anniversary of the date on which the corporation first mailed its proxy
statement to Shareholders for the annual meeting of Shareholders in the
immediately preceding year; provided, however, that in the case of an annual
meeting of Shareholders that is called for a date which is not within 30
calendar days before or after the first anniversary date of the annual meeting
of Shareholders in the immediately preceding year, any such written proposal by
a Shareholder must be received by the Nominating Committee within five business
days after the earlier of the date the corporation shall have mailed notice to
its Shareholders that an annual meeting of Shareholders will be held, issued a
press release, filed a periodic report with the Securities and Exchange
Commission (the "SEC"), or otherwise publicly disseminated notice that an annual
meeting of Shareholders will be held.

            (3) In the case of a special meeting of Shareholders, any such
written proposal by a Shareholder must be received by the Nominating Committee
within five business days after the earlier of the date that the corporation
shall have mailed notice to its Shareholders that a special meeting of
Shareholders will be held, issued a press release, filed a periodic report with
the SEC, or otherwise publicly disseminated notice that a special meeting of
Shareholders will be held.

            (4) Such written proposal by a Shareholder shall set forth (A) the
name and address of the Shareholder who has made the proposal, (B) the name,
age, business address and, if known, residence address of each person so
proposed, (C) the principal occupation or employment for the past five years of
each person so proposed, (D) the number of shares of capital stock of the
corporation beneficially owned within the meaning of SEC Rule 13d-1 by each
person so proposed and the earliest date of acquisition of any such capital
stock, (E) a description of any arrangement or understanding between each person
so proposed and the proposing Shareholder with respect to such person's
proposal, election as a Director, and actions to be proposed or taken by such
person if elected as a Director, (F) the written consent of each person so
proposed to serve as a Director if nominated and elected as a Director and (G)
such other information regarding each such person as would be required under the
proxy solicitation rules of the SEC if proxies were to be solicited for the
election as a Director of each person so proposed.

            (5) If a written proposal by a Shareholder submitted to the
Nominating Committee fails, in the reasonable judgment of the Nominating
Committee, to contain the information specified in clause (4) hereof or is
otherwise deficient, the Chairperson of the Nominating Committee shall, as
promptly as is practicable under the circumstances, provide written notice to
the Shareholder of such failure or deficiency in the written proposal by a
Shareholder and such Shareholder shall have five business days from receipt of
such notice to submit a revised proposal that corrects such failure or
deficiency in all material respects.



                                       4

      (b)   Shareholder Proposals Relating to Matters Other Than Candidates for
            Election as Directors.

            (1) A Shareholder of the corporation may bring a matter (other than
a proposal to the Nominating Committee of a candidate for election as a Director
which is covered by subsection (a) of this Section 2.07) before a meeting of
Shareholders only if (A) such matter is a proper matter for Shareholder action
and such Shareholder shall have provided notice in writing, delivered in person
or by first class United States mail postage prepaid or by reputable overnight
delivery service, to the Secretary of the corporation at the principal office of
the corporation, within the time limits specified herein or (B) the Shareholder
complies with the provisions of Rule 14a-8 under the Securities Exchange Act of
1934 (as amended) relating to inclusion of Shareholder proposals in the
corporation's proxy statement.

            (2) In the case of an annual meeting of Shareholders, any such
written notice of presentation of a matter by a Shareholder must be received by
the Secretary of the corporation not less than 90 calendar days nor more than
120 days before the first anniversary of the date on which the corporation first
mailed its proxy statement to Shareholders for the annual meeting of
Shareholders in the immediately preceding year; provided, however, that in the
case of an annual meeting of Shareholders that is called for a date which is not
within 30 calendar days before or after the first anniversary date of the annual
meeting of Shareholders in the immediately preceding year, any such written
notice of presentation by a Shareholder of a matter must be received by the
Secretary of the corporation within five business days after the earlier of the
date the corporation shall have mailed notice to its Shareholders that an annual
meeting of Shareholders will be held, issued a press release, filed a periodic
report with the SEC, or otherwise publicly disseminated that an annual meeting
of Shareholders will be held.

            (3) In the case of a special meeting of Shareholders, any such
written notice of presentation of a matter by a Shareholder must be received by
the Secretary of the corporation within five business days after the earlier of
the date the corporation shall have mailed notice to its Shareholders that a
special meeting of Shareholders will be held, issued a press release, filed a
periodic report with the SEC, or otherwise publicly disseminated notice that a
special meeting of Shareholders will be held.

            (4) Such written notice of presentation of a matter by a Shareholder
shall set forth information regarding such matter equivalent to the information
regarding such matter that would be required under the proxy solicitation rules
of the SEC if proxies were solicited for Shareholder consideration of such
matter at a meeting of Shareholders.

            (5) If a written notice of presentation of a matter submitted by a
Shareholder to the Board of Directors fails, in the reasonable judgment of the
Board of Directors, to contain the information specified in clause (iv) hereof
or is otherwise deficient, the Chairperson of the Board of Directors shall, as
promptly as is practicable under the circumstances, provide written notice to
the Shareholder who submitted the written notice of presentation of a matter of
such failure or deficiency in the written notice of presentation of a matter and
such Shareholder shall

                                       5

have five business days from receipt of such notice to submit a revised written
notice of presentation of a matter that corrects such failure or deficiency in
all material respects.

            (6) Only matters submitted in accordance with the foregoing
provisions of this Section 2.07(b) shall be eligible for presentation at such
meeting of Shareholders, and any matter not submitted to the Board of Directors
in accordance with such provisions shall not be considered or acted upon at such
meeting of Shareholders.

      Section 2.08. Waiver of Notice. Whenever any written notice is required to
be given to any Shareholder, a waiver thereof in writing signed by the
Shareholder entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of the notice. Attendance of a
person at any meeting shall constitute a waiver of notice of the meeting except
where a person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
was not lawfully called or convened.

      Section 2.09. Voting and Other Action by Proxy.

      (a) General Rule.

            (1) Every Shareholder entitled to vote at a meeting of Shareholders
or to express consent or dissent to corporate action in writing without a
meeting may authorize another person to act for the Shareholder by proxy.

            (2) The presence of, or vote or other action at a meeting of
Shareholders, or the expression of consent or dissent to corporate action in
writing, by a proxy of a Shareholder shall constitute the presence of, or vote
or action by, or written consent or dissent of the Shareholder.

            (3) Where two or more proxies of a Shareholder are present, the
corporation shall, unless otherwise expressly provided in the proxy, accept as
the vote of all shares represented thereby the vote cast by a majority of them
and, if a majority of the proxies cannot agree whether the shares represented
shall be voted or upon the manner of voting the shares, the voting of the shares
shall be divided equally among those persons.

      (b) Minimum Requirements. Every proxy shall be executed in writing by the
Shareholder or by the duly authorized attorney-in-fact of the Shareholder and
filed with the Secretary of the corporation. A proxy, unless coupled with an
interest, shall be revocable at will, notwithstanding any other agreement or any
provision in the proxy to the contrary, but the revocation of a proxy shall not
be effective until written notice thereof has been given to the Secretary of the
corporation. An unrevoked proxy shall not be valid after three years from the
date of its execution unless a longer time is expressly provided therein. A
proxy shall not be revoked by the death or incapacity of the maker unless,
before the vote is counted or the authority is exercised written notice of the
death or incapacity is given to the Secretary of the corporation.



                                       6

      (c) Expenses. Unless otherwise restricted in the articles, the corporation
shall pay the reasonable expenses of solicitation of votes, proxies or consents
of Shareholders by or on behalf of the Board of Directors or its nominees for
election to the Board, including solicitation by professional proxy solicitors
and otherwise.

      Section 2.10. Voting by Fiduciaries and Pledgees. Shares of the
corporation standing in the name of a trustee or other fiduciary and shares held
by an assignee for the benefit of creditors or by a receiver may be voted by the
trustee, fiduciary, assignee or receiver. A shareholder whose shares are pledged
shall be entitled to vote the shares until the shares have been transferred into
the name of the pledgee, or a nominee of the pledgee, but nothing in this
section shall affect the validity of a proxy given to a pledgee or nominee.

      Section 2.11. Voting by Joint Holders of Shares.

      (a) General Rule. Where shares of the corporation are held jointly or as
tenants in common by two or more persons, as fiduciaries or otherwise:

            (1) if only one or more of such persons is present in person or by
      proxy, all of the shares standing in the names of such persons shall be
      deemed to be represented for the purpose of determining a quorum and the
      corporation shall accept as the vote of all the shares the vote cast by a
      joint owner or a majority of them; and

            (2) if the persons are equally divided upon whether the shares held
      by them shall be voted or upon the manner of voting the shares, the voting
      of the shares shall be divided equally among the persons without prejudice
      to the rights of the joint owners or the beneficial owners thereof among
      themselves.

      (b)   Exception. If there has been filed with the Secretary of the
            corporation a copy, certified by an attorney-at-law to be correct,
            of the relevant portions of the agreement under which the shares are
            held or the instrument by which the trust or estate was created or
            the order of court appointing them or of an order of court directing
            the voting of the shares, the persons specified as having such
            voting power in the document latest in date of operative effect so
            filed, and only those persons, shall be entitled to vote the shares
            but only in accordance therewith.

      Section 2.12. Voting by Corporations.

      (a) Voting by Corporate Shareholders. Any corporation that is a
Shareholder of this corporation may vote by any of its officers or agents, or by
proxy appointed by any officer or agent, unless some other person, by resolution
of the Board of Directors of the other corporation or a provision of its
articles or bylaws, a copy of which resolution or provision certified to be
correct by one of its officers has been filed with the Secretary of this
corporation, is appointed its general or special proxy in which case that person
shall be entitled to vote the shares.



                                       7

      (b) Controlled Shares. Shares of this corporation owned, directly or
indirectly, by it and controlled, directly or indirectly, by the Board of
Directors of this corporation, as such, shall not be voted at any meeting and
shall not be counted in determining the total number of outstanding shares for
voting purposes at any given time.

      Section 2.13. Determination of Shareholders of Record.

      (a) Fixing Record Date. The Board of Directors may fix a time prior to the
date of any meeting of Shareholders as a record date for the determination of
the Shareholders entitled to notice, or to vote at, the meeting, which time,
except in the case of an adjourned meeting, shall be not more than 90 days prior
to the date of the meeting of Shareholders. Only Shareholders of record on the
date fixed shall be so entitled notwithstanding any transfer of shares on the
books of the corporation after any record date fixed as provided in this
subsection. The Board of Directors may similarly fix a record date for the
determination of Shareholders of record for any other purpose. When a
determination of Shareholders of record has been made as provided in this
section for purposes of a meeting, the determination shall apply to any
adjournment thereof unless the Board fixes a new record date for the adjourned
meeting.

      (b) Determination When a Record Date is not Fixed. If a record date is not
fixed:

            (1) The record date for determining Shareholders entitled to notice
      of or to vote at a meeting of Shareholders shall be at the close of
      business on the day next preceding the day on which notice is given or, if
      notice is waived, at the close of business on the day immediately
      preceding the day on which the meeting is held.

            (2) The record date for determining Shareholders entitled to express
      consent or dissent to corporate action in writing without a meeting, when
      prior action by the Board of Directors is not necessary, shall be the
      close of business on the day on which the first written consent or dissent
      is filed with the Secretary of the corporation.

            (3) The record date for determining Shareholders for any other
      purpose shall be at the close of business on the day on which the Board of
      Directors adopts the resolution relating thereto.

      Section 2.14. Voting Lists.

      (a) General Rule. The officer or agent having charge of the transfer books
for shares of the corporation shall make a complete list of the Shareholders
entitled to vote at any meeting of Shareholders, arranged in alphabetical order,
with the address of and the number of shares held by each. The list shall be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any Shareholder during the whole time of the meeting for
the purposes thereof.

      (b) Effect of List. Failure to comply with the requirements of this
section shall not affect the validity of any action taken at a meeting prior to
a demand at the meeting by any

                                       8

Shareholder entitled to vote thereat to examine the list. The original share
register or transfer book, or a duplicate thereof kept in this Commonwealth,
shall be prima facie evidence as to who are the Shareholders entitled to examine
the list or share register or transfer book or to vote at any meeting of
Shareholders.

      Section 2.15. Judges of Election.

      (a) Appointment. In advance of any meeting of Shareholders of the
corporation, the Board of Directors may appoint Judges of Election, who need not
be Shareholders, to act at the meeting or any adjournment thereof. If Judges of
Election are not so appointed, the presiding officer of the meeting may, and on
the request of any Shareholder shall, appoint Judges of Election at the meeting.
The number of Judges shall be one or three. A person who is a candidate for
office to be filled at the meeting shall not act as a Judge.

      (b) Vacancies. In case any person appointed as a Judge fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Board of Directors in advance of the convening of the meeting or at the meeting
by the presiding officer thereof.

      (c) Duties. The Judges of Election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity and effect of proxies,
receive votes or ballots, hear and determine all challenges and questions in any
way arising in connection with the right to vote, count and tabulate all votes,
determine the result and do such acts as may be proper to conduct the election
or vote with fairness to all Shareholders. The Judges of Election shall perform
their duties impartially, in good faith, to the best of their ability and as
expeditiously as is practical. If there are three Judges of Election, the
decision, act or certificate of a majority shall be effective in all respects as
the decision, act or certificate of all.

      (d) Report. On request of the presiding officer of the meeting, or of any
Shareholder, the Judges shall make a report in writing of any challenge or
question or matter determined by them, and execute a certificate of any fact
found by them. Any report or certificate made by them shall be prima facie
evidence of the facts stated therein.

                                   ARTICLE III

                                    Directors

      Section 3.01. General Powers. All powers vested by law in the corporation
shall be exercised by or under the authority of, and the business and affairs of
the corporation shall be managed under the direction of, the Board of Directors.

      Section 3.02. Number, Tenure and Qualifications. The Board of Directors
shall consist of not less than seven (7), nor more than sixteen (16), Directors
(the exact number to be fixed from time to time by resolution of the Board), the
majority of whom shall be citizens and

                                       9

residents of the United States, each of whom shall be at least eighteen (18)
years of age, elected at the Annual Meeting of Shareholders, to serve until the
ensuing Annual Meeting and until a successor is elected and qualified or until
his or her earlier death, resignation or removal. Not less than one-third of the
Directors shall be persons who are not officers or employees of the corporation
or of any entity controlling, controlled by, or under common control with the
corporation and who are not beneficial owners of a controlling interest in the
voting securities of the corporation. "Control," "controlling," "controlled by"
and "under common control with" as used herein, shall be given those meanings
prescribed by Section 1201 of Pennsylvania Act 178 of 1992 (40 P.S.
Section 991.1401). No person who is seventy (70) years of age or older shall be
elected a Director unless already a Director in office and qualifying under one
or more of the following exceptions if such person is: (a) seventy-five (75)
years of age or older on the date of the 1990 Annual Meeting; or (b) under
seventy-five (75) years of age on the date of the 1990 Annual Meeting, provided
however, that such person cannot continue to serve beyond the end of the term in
which becoming seventy-five (75) years of age; or (c) seventy (70) years of age
or older and serving as a Trustee of the H. O. Hirt Trust, so long as the Trust
holds the majority Class B, or equivalent, voting shares of the corporation; or
(d) seventy (70) years of age or older and serving, or previously served, in at
least one of the two highest full-time executive positions of the corporation
for a period of at least one (1) year.

      Section 3.03. Meetings. The Annual Meeting of the Board of Directors shall
be held immediately after the Annual Meeting of Shareholders for the purpose of
organization and the election of officers, and notice thereof shall be given in
the same manner as hereinbefore provided in the case of the Annual Meeting of
Shareholders. The Board of Directors shall provide, by resolution, for the
holding of at least four (4) regular meetings including the annual meeting on
specified days or dates without notice. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board or by
the President, or by at least three (3) Directors. Written notice of every
special meeting of Directors stating the place, day and time of the meeting
shall be given not less than five (5) days before the meeting, either personally
or by first class or express mail or by telegraph, telex or TWX (with answerback
received) or courier services, charges prepaid, or by telecopier. If the notice
is sent by mail, telegraph or courier service, it shall be deemed to have been
given to the person entitled thereto when deposited in the United States mail or
with a telegraph office or courier service for delivery to that person or, in
the case of telex or TWX, when dispatched or, in the case of telecopier, when
received.

      Section 3.04. Waiver of Notice. Whenever any written notice is required to
be given to any Director, a waiver thereof in writing signed by the Director
entitled to the notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of the notice. Attendance of a person at any
meeting shall constitute a waiver of notice of the meeting except where a person
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting was not lawfully
called or convened.

      Section 3.05. Quorum. A majority of the Directors in office of the
corporation shall be necessary to constitute a quorum for the transaction of
business; provided, however, that a

                                       10

quorum shall consist of at least five (5) Directors if the Board consists of
only seven (7) Directors. At least one Director who is not an officer or
employee of the corporation or of any entity controlling, controlled by or under
common control with the corporation and who is not a beneficial owner of a
controlling interest in the voting securities of the corporation must be present
for a quorum of Directors. The acts of a majority of the directors present and
voting at a meeting at which a quorum is present shall be the acts of the Board
of Directors.

      Section 3.06. Limiting Liability of Directors.

A. A Director of the corporation shall stand in a fiduciary relation to the
corporation and shall perform his duties as a Director, including his duties as
a member of any committee of the Board of Directors upon which he may serve, in
good faith, in a manner he reasonably believes to be in the best interest of the
corporation, and with such care, including reasonable inquiry, skill and
diligence, as a person of ordinary prudence would use under similar
circumstances. In performing his duties, a Director shall be entitled to rely in
good faith on information, opinions, reports or statements, including financial
statements and other financial data, in each case prepared or presented by any
of the following:

      (1)   One or more officers or employees of the corporation whom the
            Director reasonably believes to be reliable and competent in the
            matters present, or

      (2)   Counsel, public accountants or other persons as to matters which the
            Director reasonably believes to be within the professional or expert
            competence of such persons, or

      (3)   A committee of the Board of Directors upon which he does not serve,
            duly designated in accordance with law, as to matters within its
            designated authority, which committee the Director reasonably
            believes to merit confidence.

A Director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause his reliance to be
unwarranted.

B. In discharging the duties of their respective positions, the Board of
Directors, committees of the Board of Directors and individual Directors, may,
in considering the best interest of the corporation, consider the effects of any
action upon employees, upon suppliers and customers of the corporation and upon
communities in which offices or other establishments of the corporation are
located, and all other pertinent factors. The consideration of these factors
shall not constitute a violation of subsection A of this section.

C. Absent breach of fiduciary duty, lack of good faith or self-dealing, any
action taken as a Director or any failure to take any action as a Director shall
be presumed to be in the best interests of the corporation.

D. Section 1715 of 15 Pa.C.S. shall not be applicable to the corporation. (Added
4/27/91.)



                                       11

E. A Director of the corporation shall not be personally liable for monetary
damages as such for any action taken, or any failure to take any action, unless:

      (1)   The Director has breached or failed to perform his duties of his
            office under subsections A through C of this section, and

      (2)   The breach or failure to perform constitutes self-dealing, willful
            misconduct or recklessness.

F. The provisions of subsection E of this section shall not apply to:

      (1)   The responsibility or liability of a Director pursuant to any
            criminal statute, or

      (2)   The liability of a Director for the payment of taxes pursuant to
            local, state or federal law.

      Section 3.07. Executive Committee.

      (a) General Rule. There shall be an Executive Committee which, except as
provided in subsection (b), shall have and exercise all power and authority of
the Board of Directors between meetings of the Board. The Executive Committee
shall consist of not fewer than three (3) regular members including the Chief
Executive Officer of the corporation who shall be Chairman of the Executive
Committee, unless another member shall be designated by resolution of the Board.
All of the regular members shall be designated by resolution of the Board. Not
less than one-third of the committee must be Directors who are not officers or
employees of the corporation or of any entity controlling, controlled by, or
under common control with the corporation and who are not beneficial owners of a
controlling interest in the voting securities of the corporation. The Executive
Committee shall meet at any time and place designated and at least six hours
oral or written notice given by or on behalf of the Chairman of the Executive
Committee, and shall report promptly to the entire Board of Directors the
substance of any action taken by the Executive Committee, which action may be
changed by the Board without prejudice to intervening rights.

      (b) Limitation on Authority. The Executive Committee shall not have any
power or authority as to the following:

            (1) The submission to Shareholders of any action requiring approval
      of Shareholders under the Business Corporation Law.

            (2) The creation or filling of vacancies in the Board of Directors.

            (3) The adoption, amendment or repeal of these bylaws.

            (4) The amendment or repeal of any resolution of the Board that by
      its terms is amendable or repealable only by the Board.



                                       12

            (5) Action on matters committed by a resolution of the Board of
      Directors to another committee of the Board.

      Section 3.08. Audit Committee and Audit.

      (a) Appointment. The Board of Directors shall appoint annually an Audit
Committee which shall consist of not less than three (3) Directors who are not
officers or employees of the corporation or of any entity controlling,
controlled by, or under common control with the corporation and who are not
beneficial owners of a controlling interest in the voting securities of the
corporation. The Audit Committee shall determine the nature and extent of the
audit of the records and of the verification and certification of the accounts
of the corporation. The Audit Committee, in its capacity as a committee of the
Board, shall be directly responsible for the appointment, compensation, and
oversight of the work of any registered public accounting firm employed by the
Company (including resolution of disagreements between management and the
auditor regarding financial reporting) for the purpose of preparing or issuing
an audit report or related work, and each such registered public accounting firm
shall report directly to the Audit Committee. (Amended 9/9/02)

      (b) Audit. The Audit Committee shall present the audit in full to the
Board of Directors at a meeting of the Board which shall be held at least two
weeks prior to the next Annual Meeting of Shareholders. The audit of the
corporation need not be mailed to Shareholders, but it shall be available for
inspection by any Shareholders at the office of the corporation during usual
business hours and at the Annual Meeting.

      Section 3.09. Nominating Committee. The Board of Directors shall appoint
annually a Nominating Committee which shall consist of not less than three (3)
Directors who are not officers or employees of the corporation or of any entity
controlling, controlled by, or under common control with the corporation and who
are not beneficial owners of a controlling interest in the voting securities of
the corporation. The Nominating Committee shall, prior to the Annual Meeting,
determine and nominate candidates for the office of Directors of the corporation
to be elected by the shareholders to serve terms as established by the bylaws
and until their successors are appointed.

      Section 3.10. Executive Compensation Committee. The Board of Directors
shall appoint annually an Executive Compensation committee which shall consist
of not less than three (3) Directors who are not officers or employees of the
corporation or of any entity controlling, controlled by, or under common control
with the corporation and who are not beneficial owners of a controlling interest
in the voting securities of the corporation. The Executive Compensation
Committee shall be responsible for evaluating the performance of the principal
officers of the corporation and recommending to the Board of Directors the
selection and compensation of the principal officers. The Executive Compensation
Committee shall also be responsible for the drafting of reports, disclosures,
evaluations and other documents relating to executive compensation for filing
with State and Federal regulatory authorities.



                                       13

      Section 3.11. Alternate Committee Members. The Board of Directors may
designate one or more Directors as alternate members of any committee who may
replace any absent or disqualified member at any meeting of the committee or for
the purpose of any written action by the committee. In the absence or
disqualification of a member and alternate member or members of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
Director to act at the meeting in the place of the absent or disqualified
member.

      Section 3.12. Other Committees. The Board of Directors may designate from
time to time any other committees as the Board may deem necessary and
appropriate. The Board may set the number of members of any such committee and
may appoint such members. Not less than one-third of any committee created
hereunder must be Directors who are not officers or employees of the corporation
or of any entity controlling, controlled by, or under common control with the
corporation and who are not beneficial owners of a controlling interest in the
voting securities of the corporation.

      Section 3.13. Informal Action by Directors. Any action required or
permitted to be taken at a meeting of the Directors may be taken without a
meeting if, prior or subsequent to the action, a consent or consents thereto by
all of the Directors in office is filed with the Secretary of the corporation.
Any action without a meeting of the Board shall be limited to those situations
where time is of the essence and not in lieu of a regularly scheduled meeting.

      Section 3.14. Vacancies. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of Directors, may be filled
by a majority vote of the remaining members of the Board though less than a
quorum, or by a sole remaining Director, and each person so selected shall be a
director to serve for the balance of the unexpired term, and until a successor
has been selected and qualified or until his or her earlier death, resignation
or removal.

      Section 3.15. Removal of Directors.

      (a) Removal by the Shareholders. The entire Board of Directors, or any
class of the Board, or any individual Director may be removed from office
without assigning any cause by the vote of Shareholders, or of the holders of a
class or series of shares, entitled to elect Directors, or the class of
Directors. In case the Board or a class of the Board or any one or more
Directors are so removed, new Directors may be elected at the same meeting. The
Board of Directors may be removed at any time with or without cause by the
unanimous vote or consent of Shareholders entitled to vote thereon.

      (b) Removal by the Board. The Board of Directors may declare vacant the
office of a Director who has been judicially declared of unsound mind or who has
been convicted of an offense punishable by imprisonment for a term of more than
one year or if, within 60 days after notice of his or her selection, the
Director does not accept the office either in writing or by attending a meeting
of the Board of Directors.



                                       14

      Section 3.16. Compensation. The Board of Directors has the responsibility
and authority to determine the compensation of directors and officers elected by
the Board of Directors in connection with their service to the corporation and a
Director may be a salaried officer of the corporation, who shall not receive any
additional compensation as a Director. The acceptance of gifts of significant
value from persons associated with the corporation may impair the ability of the
Board of Directors to establish appropriate levels of compensation and
incentives for directors and officers elected by the Board of Directors that the
Board considers appropriate. For these reasons, a director or an officer elected
by the Board of Directors may not accept, or arrange for any member of his or
her immediate family to receive, gifts or gratuities of other than nominal or
insignificant value from any of the following persons or members of their
immediate families: a director or officer elected by the Board of Directors, an
employee of the corporation, or any person elected by the Board of Directors who
is known to be a beneficial owner of more than 5 percent of the outstanding
capital stock of any class of the corporation. If a gift or gratuity of more
than nominal or insignificant value is received from any such persons, the gift
or gratuity must be returned and the Board of Directors notified. Gifts or
gratuities from any person to any member of the immediate family of such person
are not prohibited by this bylaw.

                                   ARTICLE IV

                                    Officers

      Section 4.01. Number. The officers of the corporation shall be a Chairman
of the Board, a President, a Secretary, a Treasurer, and as many Executive Vice
Presidents, and Senior Vice Presidents as from time to time may be determined by
the Board of Directors. The President, Secretary and Treasurer may not be the
same person. The Treasurer must be a natural person. There shall also be as many
Vice Presidents and Assistant Officers as from time to time may be determined by
the Chief Executive Officer. Other officers, including the office of Vice
Chairman of the Board, as from time to time may be determined may be added by
resolution of the Board of Directors.

      Section 4.02. Election, Appointment and Term of Office. The Board of
Directors shall elect annually at their first meeting following the Annual
Meeting of Shareholders, the following officers to serve until the next Annual
Meeting of Directors and until their successors are duly elected and qualified
or until their earlier death, resignation or removal:

            (1) the three highest paid officers of the corporation,

            (2) the Chairman of the Board and the President if they are not
      among the three highest paid officers, and

            (3) such other officers as the Board of Directors from time to time
      may designate by resolution.



                                       15

All officers not required to be elected by the Board or not designated by the
Board to be elected by the Board shall be appointed by the Chief Executive
Officer to serve at his or her pleasure.

      Section 4.03. Standard of Care. An officer of the corporation shall
perform his or her duties as an officer in good faith, in a manner he or she
reasonably believes to be in the best interests of the corporation and with such
care, including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances. A person who so performs his or
her duties shall not be liable by reason of having been an officer of this
corporation.

      Section 4.04. Duties and Responsibilities. Officers of the corporation
shall have the duties and responsibilities assigned to them in their respective
position descriptions approved by the Chief Executive Officer in addition to the
following duties and responsibilities of the various offices:

      (a) Chairman of the Board. The Chairman of the Board shall be the Chief
Executive Officer of the corporation unless otherwise provided by resolution of
the Board of Directors and shall have general supervision of the business,
affairs and property of the corporation and over its several officers. The
Chairman of the Board shall preside at all meetings of the Shareholders and of
the Board of Directors, and shall perform such other duties as from time to time
may be assigned by the Board of Directors. The Chairman of the Board shall be
ex-officio member of all committees, if any, but shall have no vote on the Audit
Committee and the Executive Compensation Committee.

      (b) President. The President, in the absence of the Chairman of the Board,
or a Vice Chairman of the Board, if any, shall preside at all meetings of the
Shareholders and the Board of Directors. The President shall have and exercise
all the powers and authority of the Chairman of the Board when the Chairman and
a Vice Chairman, if any, are absent or unable to act during a vacancy in the
office of the Chairman of the Board. The President shall also have such other
duties and responsibilities as from time to time may be assigned by the Chief
Executive Officer or the Board of Directors.

      (c) Secretary. The Secretary, or an Assistant Secretary, shall be present
at all meetings of the Board of Directors and of the Shareholders, and the
Secretary shall keep a record of all proceedings of the Board and its committees
and the Shareholders. The Secretary shall notify the Shareholders and members of
the Board of all regular and special meetings, have charge of the corporate seal
and of the books and records of the corporation pertaining to actions of the
Board or the Shareholders, and shall have such other duties and authority as
prescribed by the Pennsylvania Business Corporation Law and any other applicable
law. The Secretary shall also perform such duties as are customary and incident
to the office of the Secretary and shall have such other duties as from time to
time may be assigned by the Chief Executive Officer or the Board of Directors.

      (d) Treasurer. The Treasurer shall have the care and custody of all funds
and securities of the corporation, depositing the same in the name of the
corporation with such bank

                                       16

or banks as the Board of Directors may select. The Treasurer shall also perform
such duties as are customary and incident to the office of Treasurer and shall
have such other duties as from time to time may be assigned by the Chief
Executive Officer or the Board of Directors.

      (e) Executive Vice Presidents. An Executive Vice President shall, in the
absence of the President, perform all the duties of the President. If there is
more than one Executive Vice President, the Chief Executive Officer may
designate one of them to be senior. Executive Vice Presidents shall also have
such other duties and responsibilities as from time to time may be assigned by
the Chief Executive Officer or the Board of Directors.

      (f) Senior Vice Presidents, Vice Presidents, Assistant Vice Presidents and
Other Officers. Senior Vice Presidents, Vice Presidents and Assistant Vice
Presidents and other officers shall perform such duties as from time to time may
be assigned by the Chief Executive Officer. The duties and responsibilities of
the Vice Chairman of the Board shall be assigned by resolution of the Board of
Directors.

      Section 4.05. Compensation. The compensation of officers elected by the
Board of Directors shall be fixed by the Board of Directors subject to change
from time to time as the Board may determine; and the compensation of officers,
assistant officers, and agents appointed by the Chief Executive Officer shall be
fixed by the Chief Executive Officer subject to change from time to time as the
Chief Executive Officer shall determine.

                                    ARTICLE V

                      Share Certificates and Their Transfer

      Section 5.01. Share Certificates.

      (a) Form. Certificates for shares of the corporation shall be in such form
as approved by the Board of Directors, and shall state that the corporation is
incorporated under the laws of Pennsylvania, the name of the person to whom
issued, and the number and class of shares and the designation of the series (if
any) that the certificate represents. The share register or transfer books and
blank share certificates shall be kept by the Secretary or by any transfer agent
or registrar designated by the Board of Directors for that purpose.

      (b) Issuance. The share certificates of the corporation shall be numbered,
dated, and registered in the share register on transfer books of the corporation
as they are issued. They shall be signed by the Chairman of the Board or the
President and by the Secretary or the Treasurer, and shall bear the corporate
seal, which may be a facsimile, engraved or printed; but where such certificate
is signed by a transfer agent or a registrar the signature of any corporate
officer upon such certificate may be a facsimile, engraved or printed. In case
any officer who has signed, or whose facsimile signature has been placed upon,
any share certificate shall have ceased to be such officer because of death,
resignation or otherwise, before the certificate is issued, it may be issued
with the same effect as if the officer had not ceased to be such at the date of
its issue. The

                                       17

provisions of this Section 5.01 shall be subject to any inconsistent or contrary
agreement at the time between the corporation and any transfer agent or
registrar.

      Section 5.02. Transfer of Shares. Transfer of shares of the corporation
shall be made on the books of the corporation by the registered holder thereof
or by his attorney thereunto authorized by a power of attorney, duly executed
and filed with the Secretary of the corporation and upon surrender for
cancellation of the certificate or certificates for such shares. No transfer
shall be made inconsistent with the provisions of the Uniform Commercial Code,
13 Pa.C.S.Sections8101 et. seq., and its amendments and supplements.

      Section 5.03. Record Holder of Shares. The corporation shall be entitled
to treat the person in whose name any share or shares of the corporation stand
on the books of the corporation as the absolute owner thereof, and shall not be
bound to recognize any equitable or other claim to, or interest in, such share
or shares on the part of any other person.

      Section 5.04. Lost, Destroyed or Mutilated Certificates. The holder of any
shares of the corporation shall immediately notify the corporation of any loss,
destruction or mutilation of the certificate therefore, and the Secretary may,
in his discretion, cause a new certificate or certificates to be issued to such
holder, in case of mutilation of the certificate, upon the surrender of the
mutilated certificate or, in case of loss or destruction of the certificate,
upon satisfactory proof of such loss or destruction and, if the Secretary shall
so determine, the deposit of a bond in such form and in such sum, and with such
surety or sureties, as he may direct.

                                   ARTICLE VI

                                Corporate Actions

      Section 6.01. Voting Securities of Other Corporations. Securities held by
the corporation in any other corporation shall be voted in person or by proxy by
the Chief Executive Officer or any other person duly authorized by the Chief
Executive Officer.

                                   ARTICLE VII

               Indemnification of Directors, Officers & Employees

      Section 7.01. (The provisions of this Section were adopted by the
Shareholders on April 28, 1987.)

The Company shall indemnify any Director, officer or employee, who was or is a
party to, or is threatened to be made a party to or who is called as a witness
in connection with any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, including
an action by or in the right of the corporation by reason of the fact that he is
or was a Director, officer or employee of the corporation, or is or was serving
at the request of the corporation as a Director, officer or employee of another
corporation, partnership, joint

                                       18

venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding unless the act or
failure to act giving rise to the claim for indemnification is determined by a
court to have constituted willful misconduct or recklessness.

The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any bylaw, agreement, contract, vote of Shareholders, vote of disinterested
Directors or pursuant to the direction, howsoever embodied, of any court of
competent jurisdiction or otherwise, both as to action in his official capacity
and as to action on another capacity while holding such office. It is the policy
of the corporation that indemnification of, and advancement of expenses to,
Directors, officers and employees of the corporation shall be made to the
fullest extent permitted by law. To this end, the provisions of this Article VII
shall be deemed to have been amended for the benefit of Directors, officers and
employees of the corporation effective immediately upon any modification of the
Business Corporation Law of the Commonwealth of Pennsylvania (the "BCL") or the
Directors' Liability Act of the Commonwealth of Pennsylvania (the "DLA") which
expands or enlarges the power or obligation of corporations organized under the
BCL or subject to the DLA to indemnify, or advance expenses to, Directors,
officers and employees of the corporation.

The corporation shall pay expenses incurred by an officer, Director or other
employee, in defending a civil or criminal action, suit or proceeding in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation.

The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a Director, officer or
employee and shall inure to the benefit of the heirs, executors and
administrators of such person.

The corporation shall have the authority to create a fund of any nature, which
may, but need not be, under the control of a trustee, or otherwise secure or
insure in any manner, its indemnification obligations, whether arising under
these Bylaws or otherwise. This authority shall include, without limitation, the
authority to (i) deposit funds in trust or in escrow, (ii) establish any form of
self-insurance, (iii) secure its indemnity obligation by grant of a security
interest, mortgage or other lien on the assets of the corporation, or (iv)
establish a letter of credit, guaranty or surety arrangement for the benefit of
such persons in connection with the anticipated indemnification or advancement
of expenses contemplated by this Article VII. The provision of this Article VII
shall not be deemed to preclude the indemnification of, or advancement of
expenses to, any person who is not specified in Section 7.01 of this Article
VII, but whom the corporation has the power or obligation to indemnify, or to
advance expenses for, under the provisions of the BCL or the DLA or otherwise.
The authority granted by this section shall be exercised by the Board of
Directors of the corporation.



                                       19

      Section 7.02. Proceedings Initiated by Indemnified Persons.
Notwithstanding any other provision of this Article VII, the corporation shall
not indemnify any person under this Article VII for any liability incurred in an
action, suit or proceeding initiated (which shall not be deemed to include
counterclaims or affirmative defenses) or participated in as an intervenor or
amicus curiae by the person seeking indemnification unless such initiation of or
participation in the action, suit or proceeding is authorized, either before or
after its commencement, by the affirmative vote of a majority of the Directors
in office. This section does not apply to successfully prosecuting or defending
the rights of any person to indemnification granted by or pursuant to this
Article VII.

                                  ARTICLE VIII

                                   Amendments

      Section 8.01. Amendments. These bylaws may be altered, amended or repealed
and new bylaws adopted, either (i) by vote of the Shareholders at any duly
organized annual or special meeting of Shareholders, or (ii) with respect to
those matters that are not by statute committed expressly to the Shareholders
and regardless of whether the Shareholders have previously adopted or approved
the bylaw being amended or repealed, by vote of a majority of the Board of
Directors of the corporation in office at any regular or special meeting of
Directors. Any change in these bylaws shall take effect when adopted unless
otherwise provided in the resolution affecting the change.

I hereby certify that the foregoing Bylaws were adopted at the 46th Annual
Meeting of Shareholders of the ERIE INDEMNITY COMPANY held on the 27th day of
April 1971, and were amended at the following meetings: the 52nd Annual Meeting
of Shareholders, April 26, 1977; the Special Shareholders Meeting, August 21,
1979; the 233rd Board of Directors Meeting, November 13, 1979; the 242nd Board
of Directors Meeting, March 4, 1981; the 248th Board of Directors Meeting,
August 24, 1982; the 62nd Annual Meeting of Shareholders, April 28, 1987; the
280th Board of Directors Meeting, April 24, 1990; by unanimous consent
resolution adopted by the Board of Directors on April 27, 1991; the 288th Board
of Directors Meeting, December 19, 1991; the 297th Board of Directors Meeting,
September 27, 1993; the 299th Board of Directors Meeting, March 1, 1994; the
313th Board of Directors Meeting, September 17, 1996; the 320th Board of
Directors Meeting, March 11, 1998; the 325th Board of Directors Meeting, March
9, 1999; the 327th Board of Directors Meeting, June 15, 1999; the Special Board
of Directors Meeting, August 16, 1999; and the 343rd Board of Directors Meeting,
September 9, 2002.

                                                /s/ J.R. Van Gorder
                                                --------------------------------
                                                   J. R. Van Gorder, Secretary
                                                   September 9, 2002



                                       20

EX-10.1

                        EXHIBIT 10.1 - SERVICE AGREEMENT
                              Amended And Restated

      This SERVICE AGREEMENT made and entered into by and between ERIE INSURANCE
COMPANY, a Pennsylvania stock insurance company (hereinafter referred to as the
"Company") and ERIE INDEMNITY COMPANY, a Pennsylvania stock corporation
(hereinafter referred to as "Erie Indemnity"), both of which are headquartered
in Erie, Pennsylvania.

                                   WITNESSETH:

WHEREAS, the Company is a wholly owned subsidiary of Erie Indemnity; and

WHEREAS, Erie Indemnity has served as the attorney-in-fact for the Erie
Insurance Exchange, a Pennsylvania reciprocal inter-insurance exchange
(hereinafter the "Exchange"), since the Exchange's inception in April, 1925; and

WHEREAS, Erie Indemnity provides the Exchange with all management services
pursuant to a Subscriber's Agreement with power of attorney executed by each
Subscriber at the Exchange, and it is intended hereby that Erie Indemnity shall
provide the same management services to the Company in like kind and quality as
Erie Indemnity provides to the Exchange; and

WHEREAS, the parties intend to amend and restate the Service Agreement in effect
between them since 1989.

NOW THEREFORE, in consideration of the mutual covenants contained herein and
intending to be legally bound thereby, the parties agree as follows:

                         Article I: MANAGEMENT SERVICES

A.    Erie Indemnity will provide all necessary and appropriate management
      services to the Company, including but not limited to the following
      services: issuing, changing, nonrenewing or cancelling policies; obtaining
      reinsurance; collecting premiums, receiving notices and proofs of loss;
      appearing for, compromising, prosecuting, defending, adjusting and
      settling losses and claims under the policies; accepting service of
      process on behalf of the Company; and generally managing and conducting
      the business and affairs of the Company.

B.    All the underwriting, claims, and investment services provided to the
      Company will be based upon the written criteria, standards and guidelines
      of the Company. The Company will have the ultimate and final authority
      over decisions and policies, including but not be limited to the
      acceptance, rejection or canceling of risks, the payment or non-payment of
      claims, and the purchase and sale of securities.

C.    Notwithstanding any other provisions of this Agreement, it is understood
      that the business and affairs of the Company shall be managed by its Board
      of Directors, and, to


                                      -1-



      the extent delegated by such board, by its appropriately designated
      officers. The Board of Directors and officers of Erie Indemnity shall not
      have any management prerogatives with respect to the business affairs and
      operations of the Company.

                           Article II: MANAGEMENT FEE

In consideration of Erie Indemnity's management services, the Company will pay
Erie Indemnity a management fee, which fee shall be on a cost basis. The Company
will pay such management fee on a monthly basis no later than thirty days after
the end of the month in which the costs were incurred.

                           Article III: REIMBURSEMENT

In addition to paying Erie Indemnity the management fee in ARTICLE II, the
Company will also fully reimburse Erie Indemnity on an actual cost basis for all
investment expenses incurred by Erie Indemnity on behalf of the Company. The
allocation method for shared expenses (facilities, equipment, personnel,
computers, etc.) shall be consistent with the provisions of New York Regulation
30 (11 NYCRR 105,109).

The Company will make such reimbursement to Erie Indemnity on a monthly basis no
later than 30 days after Erie Indemnity notifies the Company of such incurred
investment expenses.

                     Article IV: RECORDS AND RIGHT TO AUDIT

Erie Indemnity shall keep sufficient records for the express purpose of
recording therein the nature and details of the management services and
financial transactions performed for the Company pursuant to this Agreement. All
books and records kept by Erie Indemnity that pertain to the management services
and investment services performed by Erie Indemnity shall be owned by Erie
Indemnity, but such books and records shall be maintained in a fiduciary
capacity for the Company. The Company shall have the right to examine and audit,
at the offices of Erie Indemnity at all reasonable times, all books and records
of Erie Indemnity relating to any business which is the subject of this
Agreement. This right shall survive termination of this Agreement and shall
continue so long as either party has any rights or obligations under this
Agreement.

                             Article V: ARBITRATION

As a condition precedent to any right of action hereunder, in the event of any
difference of opinion hereafter arising with respect to this Agreement, it is
hereby mutually agreed that such dispute or difference of opinion shall be
submitted to arbitration before a panel of three arbitrators, all of whom shall
be active or retired disinterested officers of property and casualty insurance
companies. One arbitrator shall be chosen by Erie Indemnity, one shall be chosen
by the Company, and the third, an umpire, to be chosen by the other two
arbitrators before they enter upon arbitration. In the event of any party
refusing or neglecting to appoint an arbitrator within 90 days after the other
party requests it to do so, or if the arbitrators fail to appoint an umpire
within 60 days after they have accepted their appointments, such arbitrator or
umpire, as the case may be, shall, upon the application of any party, be
appointed by The American


                                      -2-




Arbitration Association and the arbitrators and the umpire shall thereupon
proceed. The arbitrators shall consider this Agreement as an honorable
engagement rather than merely as a legal obligation and they are relieved of all
judicial formalities and may abstain from following the strict rules of law. The
decision of the majority of the arbitrators shall be final and binding on all
parties. Each party shall bear the expense of its own arbitrator and shall
jointly and equally bear the other expenses of the umpire and of the
arbitration. Any such arbitration shall take place in Erie, Pennsylvania, or
such other place as may be mutually agreed.

                   Article VI: EFFECTIVE DATE AND TERMINATION

This Agreement shall be effective as of January 1, 1992. The Agreement shall
continue in full effect until it is amended or terminated by either party.
Termination will take place 30 days after either party delivers a written notice
to terminate to the other party.

                           Article VII: MISCELLANEOUS

This Agreement shall be governed by and construed in accordance with the laws of
the Commonwealth of Pennsylvania.

If any term, provision, covenant or condition of this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remainder of the provisions shall continue in full force and effect and shall in
no way be affected, impaired or invalidated.

IN WITNESS WHEREOF the parties hereto have amended the Service Agreement between
the parties in effect since January 1, 1989 and caused this Service Agreement to
supersede it.

ERIE INSURANCE COMPANY


By       /s/ J.M. Petersen
  -----------------------------------------------------
         J.M. Petersen
         President, Treasurer & Chief Financial Officer


By       /s/ T.M. Sider
  -----------------------------------------------------
         T.M. Sider
         Senior Vice President & Controller


                                      -3-




ERIE INDEMNITY COMPANY


By       /s/ T.B. Hagen
  ---------------------------------------------------------------------
         T.B. Hagen
         Chairman of the Board & Chief Executive Officer


By       /s/ J.R. Van Gorder
  ---------------------------------------------------------------------
         J.R. Van Gorder
         Executive Vice President, Secretary & General Counsel





                                      -4-

EX-10.2

                                  EXHIBIT 10.2

             SUPPLEMENTAL RETIREMENT PLAN FOR CERTAIN MEMBERS OF THE

               ERIE INSURANCE GROUP RETIREMENT PLAN FOR EMPLOYEES

                 (Amended and Restated as of December 31, 1995)

      The following are the provisions of the SUPPLEMENTAL RETIREMENT PLAN FOR
CERTAIN MEMBERS OF THE ERIE INSURANCE GROUP RETIREMENT PLAN FOR EMPLOYEES
(hereinafter referred to as the "Supplemental Plan") which was established
effective as of December 31, 1986 by the ERIE INDEMNITY COMPANY (hereinafter
referred to as the "Company") to provide for the payment of certain pension and
pension-related benefits to certain employees of the Company and affiliated
companies who are Participants under the ERIE INSURANCE GROUP RETIREMENT PLAN
FOR EMPLOYEES (hereinafter referred to as the "Basic Plan"). The Company intends
and desires by its adoption of the original Supplemental Plan and by its
adoption of the amendments reflected herein, to recognize the value to the
Company and affiliated companies of the past and present services of employees
covered by the Supplemental Plan, to encourage their continued service to the
Company and affiliated companies and to be able to attract and retain superior
management personnel by making more adequate provision for their future
retirement security than the Basic Plan provides.

      This document is intended to constitute a complete restatement of the
Supplemental Plan and is effective December 31. 1995.


                SECTION 1 - INCORPORATION OF THE QUALIFIED PLAN

1.1   The Basic Plan with any amendments thereto in effect as of December 31,
      1995, shall be attached hereto as Exhibit I and is hereby incorporated by
      reference into and shall be a part of this Supplemental Plan as fully as
      if set forth herein verbatim. Any amendment


                                       1

      made to the Basic Plan shall also be incorporated by reference into, and
      form a part of this Supplemental Plan effective as of the effective date
      of such amendment. The Basic Plan, whenever referred to in this
      Supplemental Plan, shall mean the Basic Plan existing as of the date the
      relevant determination is being made under this Supplemental Plan. To the
      extent the provisions of the Basic Plan, as applicable to the Supplemental
      Plan Benefits of Participants hereunder and all persons claiming by or
      through such Participants, are inconsistent with the provisions of this
      Supplemental Plan, the provisions of this Supplemental Plan shall govern.
      Notwithstanding any provision of this Supplemental Plan to the contrary,
      in no event shall the Supplemental Plan Benefits accrued and payable
      hereunder be paid from the Trust Fund under the Basic Plan or have any
      effect whatsoever upon the Basic Plan or the payment of benefits from the
      Trust Fund under the Basic Plan. Words and phrases with initial capital
      letters which are used in the Basic Plan and in this Supplemental Plan
      shall have the meanings assigned to them under the provisions of the Basic
      Plan unless otherwise specified herein or as otherwise qualified by the
      context in which the term is used in this Supplemental Plan.

1.2   Without limiting the generality of Section 1.1, the following terms shall
      be given the meanings described in this Section 1.2:

      (a)   "Actuarial Equivalent" shall mean a benefit of equivalent value to
            the benefit otherwise described as determined on the basis of the
            actuarial assumptions specified under the Basic Plan as of the date
            of determination.

      (b)   "Administrator" shall mean the Pension Administrator named by the
            Board of Directors of the Company under the Basic Plan.


                                       2

      (c)   "Basic Plan" shall mean the Erie Insurance Group Retirement Plan for
            Employees, as in effect as of the date the relevant determination is
            being made under this Supplemental Plan.

      (d)   "Executive Service" shall mean employment with an Employer as both a
            Covered Employee and a Senior Vice President or higher-ranking
            executive.

      (e)   "Participant" shall mean a Covered Employee who has become a
            Participant in accordance with Section 3. Participant shall also
            include a former Covered Employee who had met the foregoing criteria
            as an Employee and who is, at the time of determination, receiving a
            benefit (or entitled to receive a benefit) payable from the Company
            pursuant to the terms of this Supplemental Plan.

      (f)   "Restoration Benefit" shall mean the benefit provided under Section
            42.

      (g)   "Supplemental Plan" shall mean this Supplemental Retirement Plan for
            Certain Members of the Erie Insurance Group Retirement Plan for
            Employees, including any amendments hereto.

      (h)   "Supplemental Plan Benefits" shall mean, to the extend applicable to
            any given Participant, the Restoration Benefit and the Supplemental
            Retirement Income Benefit.

      (i)   "Supplemental Retirement Income Benefit" shall mean the benefit
            provided under Section 4 I.

      (j)   "Years of Executive Service" shall mean each consecutive
            twelve-month period during which a Covered Employee has been
            employed in Executive Service, including leaves of absence.


                                       3

1.3   Any terms used in this Supplemental Plan in the masculine shall be read
      and construed in the feminine where they would so apply, and any terms
      used in the singular shall be read and construed in the plural if so
      applicable.

                           SECTION 2 - ADMINISTRATION

2.1   The Administrator shall be charged with the administration of the
      Supplemental Plan. The Administrator shall have all such powers as may be
      necessary to discharge its duties relative to the administration of the
      Supplemental Plan, including by way of illustration and not limitation,
      discretionary authority to interpret and construe the Supplemental Plan,
      to determine and decide all questions of fact, and all disputes arising
      under the Supplemental Plan including, but not limited to, the eligibility
      of any employee to participate hereunder, the validity of any election as
      may be necessary or appropriate hereunder and the right of any
      Participant, surviving spouse or Beneficiary to benefits payable
      hereunder. The Administrator shall have all power necessary to adopt,
      alter and repeal such administrative rules, regulations and practices
      governing the operation of the Supplemental Plan as it, in its sole
      discretion, may from time to time deem advisable. The Administrator shall
      not be liable to any person for any action taken or omitted in connection
      with the interpretation and administration of the Supplemental Plan unless
      attributable to willful misconduct. The Administrator shall be entitled to
      conclusively rely upon all tables, valuations, certificates, opinions and
      reports furnished by any actuary, accountant, controller, counsel or other
      person employed or engaged by the Company with respect to the Supplemental
      Plan. Any individual serving as Administrator shall not participate in any
      action or determination regarding solely his own benefits payable
      hereunder. Except as provided in Section 2.3, decisions of the
      Administrator made in good faith shall be final, conclusive and binding
      upon all parties.


                                       4

2.2   Whenever the Administrator denies, in whole or in part, a claim for
      benefits filed by any person (hereinafter referred to as a "Claimant"),
      the Administrator shall transmit a written notice setting forth (i) the
      specific reasons for the denial of the claim, (ii) references to the
      specific provisions of the Supplemental Plan on which the denial is based,
      (iii) a description of any additional needed material or information and
      why such material or information is necessary, and (iv) further steps
      which the Claimant can take in order to have his claim reviewed (including
      a statement that the Claimant or his duly authorized representative may
      review the Supplemental Plan document and submit issues and comments
      regarding the claim to the Administrator). In addition, the written notice
      shall contain the date on which the notice was sent and a statement
      advising the Claimant that within ninety (90) days of the date on which
      such notice is received, he may request a review of the Administrator's
      decision.

2.3   Within ninety (90) days of the date on which the notice of denial of claim
      is received by the Claimant, the Claimant or his authorized representative
      may request that the claim denial be reviewed by filing with the
      Administrator a written request therefor, which request shall contain the
      following information:

      (a)   the date on which the notice of denial of claim was received by the
            Claimant;

      (b)   the date on which the Claimant's request was filed with the
            Administrator; provided, however, that the date on which the
            Claimant's request for review was fact filed with the Administrator
            shall control in the event that the date of the actual filing is
            later than the date stated by the Claimant pursuant to this clause
            b);


                                       5

      (c)   the specific portions of the denial of his claim which the Claimant
            requests the Administrator to review;

      (d)   a statement by the Claimant setting forth the basis upon which he
            believes the Administrator should reverse its previous denial of his
            claim for benefits and accept his claim as made;

      (e)   whether the Claimant desires a hearing on the claim; and

      (f)   any written material (included as exhibits) which the Claimant
            desires the Administrator to examine in its consideration of his
            position as stated pursuant to clause (d).

      If the Claimant has requested a hearing on the claim, such hearing shall
be held within thirty (30) days after the date determined pursuant to clause (b)
hereof. Within sixty (60) days of the date determined pursuant to clause (b)
hereof (or, if special circumstances or the request for a hearing require an
extension of time, within ninety (90) days of such date), the Administrator
shall conduct a full and fair review of the decision denying the Claimant's
claim for benefits and shall deliver its decision to the Claimant in writing.
Such written decision shall set forth the specific reasons for the decision,
including references to the specific provisions of this Supplemental Plan which
were relied upon. The decision will be final and binding on all persons
concerned.

                   SECTION 3 - ELIGIBILITY AND PARTICIPATION

3.1   A Covered Employee may participate in the Supplemental Plan only as
      provided under Sections 3.2 and 3.3 and only if such Covered Employee may
      be considered management or highly compensated.

3.2   Any Covered Employee who was considered an eligible Employee under the
      Supplemental Plan as of December 30, 1995 and any former Covered Employee
      who is


                                       6

      receiving a benefit (or entitled to receive a benefit) from the
      Supplemental Plan shall be considered Participants as of December 31,
      1995. Effective on and after December 31, 1995, any Covered Employee who
      enters Executive Service shall become a Participant in this Supplemental
      Plan (if not already a Participant under Section 3.3) as of the January 1
      of the calendar year next following the calendar year in which the
      Employee enters Executive Service. A Covered Employee who satisfies the
      foregoing criteria of this Section 3.2 shall participate in the
      Supplemental Retirement Income Benefit provisions of this Supplemental
      Plan. The Administrator shall be responsible for identifying those Covered
      Employees who satisfy the criteria of this Section 3.2 and the time at
      which such criteria are satisfied. Notwithstanding the foregoing, a
      Participant (or his surviving spouse or Beneficiary) may become eligible
      for a Supplemental Retirement Income Benefit only in the event that:

      (a)   such Participant is vested under the Basic Plan:

      (b)   such Participant (or his surviving spouse or Beneficiary) is
            entitled to receive a benefit under the Basic Plan.

      (c)   prior to his termination of employment with all Employers. such
            Participant has become vested in the Supplemental Retirement Income
            Benefit pursuant to the following schedule:



      Years of Executive Service                        Vested Percentage
      --------------------------                        -----------------
                                                     
               Less than 1                                        0%
               1 but less than 2                                 20%
               2 but less than 3                                 40%
               3 but less than 4                                 60%
               4 but less than 5                                 80%
               5 or more                                        100%


            provided, however, that in the event a Participant has satisfied,
            prior to January 1,


                                       7

            1996, all criteria for a normal retirement pension, early retirement
            pension or disability retirement pension under the terms of the
            Basic Plan, such Participant shall be treated as being 100 % vested
            under the above schedule; and

      (d)   such Participant's termination of employment with all Employers is
            either:

            (i)   also a termination from Executive Service; or

            (ii)  a termination occurring within twelve months after the
                  Participant transfers from, or otherwise leaves, Executive
                  Service.

3.3   Effective for periods on and after January 1, 1996, any Covered Employee
      whose benefit under the Basic Plan is limited on account of restrictions
      imposed for any year by Sections 401(a)(17) and/or 415 of the Code shall
      become a Participant in this Supplemental Plan (if not already a
      Participant under Section 3.2) as of the later of the December 31 of the
      Plan Year in which his Basic Plan benefit is first so limited or January
      1, 1996. Notwithstanding his status as a Participant or non-Participant
      under Section 3.2, a Covered Employee who satisfies the foregoing criteria
      of this Section 3.3 shall participate in the Restoration Benefit
      provisions of this Supplemental Plan. The Administrator shall be
      responsible for identifying those Covered Employees whose Basic Plan
      benefits are limited in accordance with the foregoing, the time at which
      such limitations may first apply to said Employees and the extent to which
      such limitations do apply. Notwithstanding the foregoing. a Participant
      (or his surviving spouse or Beneficiary) may become eligible for a
      Restoration Benefit only in the event that:

      (a)   such Participant (or his surviving spouse or Beneficiary) is
            entitled to receive a benefit under the Basic Plan;


                                       8

      (b)   payment of such Basic Plan benefit is restricted by the application
            of Section 401 (a)(l7) and/or Section 415 of the Code; and

      (c)   such individual is not entitled to a Supplemental Retirement Income
            Benefit hereunder.

                SECTION 4 - AMOUNT OF SUPPLEMENTAL PLAN BENEFITS

4.1   The monthly Supplemental Retirement Income Benefit determined with respect
      to a Participant who satisfies the provisions of Section 3.2 hereof, and
      which is paid in accordance with Section 5, shall be the Actuarial
      Equivalent of the product of (i) the excess, if any, of (a) over (b)
      below, and (ii) the percentage determined under (c) below, where:

      (a)   equals the monthly benefit which would have been payable to such
            Participant, or on his behalf, to his surviving spouse or other
            Beneficiary or Beneficiaries under the Basic Plan assuming for this
            purpose that the following modifications were a part of the Basic
            Plan:

            (i)   "Compensation" shall be as defined in the Basic Plan provided
                  that

                  (A)   all otherwise current compensation which is deferred at
                        the Participant's election under any qualified or
                        nonqualified deferred compensation plan or annuity
                        arrangement shall be includable in "Compensation"; and

                  (B)   "Compensation" (as defined in accordance with the
                        foregoing) shall be determined without regard to the
                        annual limitation on compensation set forth in action
                        401(a)( 17) of the Code;

            (ii)  "Final Average Earnings" shall be equal to 1/24th of the
                  aggregate compensation received by the Participant during the
                  twenty-four


                                       9

                  consecutive calendar months as a Covered Employee which
                  produces the greatest aggregate Compensation out of the one
                  hundred twenty calendar month period ending on the earlier of
                  the date on which the Participant retires or terminates
                  employment with all Employers or the date on which the
                  Participant is no longer considered a Covered Employee;

            (iii) the monthly benefit under the Basic Plan shall be equal to 60
                  % of Final Average Earnings, reduced proportionately if the
                  Participant's years of Credited Service are less than 30 years
                  or 25 years, whichever limitation applied to the Participant
                  under the provisions of Section 6.1 of the Basic Plan as in
                  effect on December 30, 1989; and

            (iv)  the monthly benefit under the Basic Plan is accrued in the
                  normal form of ten-year certain and life thereafter annuity.

      (b)   equals the aggregate of monthly benefits payable to such
            Participant, or on his behalf, to his surviving spouse or other
            Beneficiary or Beneficiaries under the Basic Plan and under any
            other qualified or nonqualified (funded or unfunded) defined benefit
            retirement plan sponsored by an Employer; provided, however, that
            for purposes of this offset, such monthly benefits which are payable
            in a form other than that of a ten-year certain and life thereafter
            annuity shall be converted to a monthly benefit which is the
            Actuarial Equivalent of a ten-year certain and life thereafter
            annuity.

      (c)   equals the Participant's vested percentage determined in accordance
            with Section 3.2(c) hereof.


                                       10

4.2   The monthly Restoration Benefit determined with respect to a Participant
      who satisfies the provisions of Section 3.3 hereof, and which is paid in
      accordance with Section 5, shall be the Actuarial Equivalent of the
      excess, if any, of (a) over (b), where:

      (a)   equals the monthly benefit which would have been payable under the
            form of a single life annuity to such Participant, or on his behalf,
            to his surviving spouse or other Beneficiary or Beneficiaries under
            the Basic Plan, if the provisions of the Basic Plan were
            administered without regard to the annual limitation on compensation
            set forth in Section 401(a)(17) of the Code and without regard to
            the limitations on benefits set forth in Sections 4l5(b) and (e) of
            the Code; and

      (b)   equals the monthly benefit which is payable under the form of a
            single life annuity to such Participant, or on his behalf, to his
            surviving spouse or other beneficiary or Beneficiaries under the
            Basic Plan.

      The Restoration Benefits payable under the Supplemental Plan to, or on
      behalf of, Participant shall be computed in accordance with the foregoing
      and with the objective that the Participant, his surviving spouse or other
      Beneficiary or Beneficiaries, should receive under the Supplemental Plan
      and the Basic Plan, the total amount which would otherwise have been
      payable to that recipient solely under the Basic Plan, as of the date
      payment is made, had the provisions of Section 401(a)(17) and Section 415
      of the Code not been applicable thereto:

4.3   Notwithstanding any provision of this Supplemental Plan to the contrary,
      the Supplemental Plan Benefits provided under Sections 4.1 and 4.2 shall
      be determined and coordinated by the Administrator so as to prevent any
      duplication of Supplemental Plan Benefits or duplication of benefits
      provided by any other plan or program sponsored by


                                       11

      an Employer which is intended to supplement the Basic Plan or any
      individual agreement between the Participant and an Employer providing for
      retirement benefits. For purposes of this Section 4.3, any benefits
      provided under individual deferred compensation contracts and annuities or
      the Erie Insurance Group Supplemental 401(k) Plan are not intended to
      supplement the Basic Plan.

4.4   Unless otherwise specifically provided in this Supplemental Plan, a
      Participant who retired or terminated employment under the provisions of
      the Supplemental Plan as in effect prior to December 31, 1995, and who is
      not thereafter rehired, shall continue to receive, or be eligible to
      receive, benefits under this Supplemental Plan in accordance with the
      provisions of the Supplemental Plan document as in effect prior to
      December 31, 1995.

                      SECTION 5 - COMMENCEMENT AND FORM OF

                           SUPPLEMENTAL PLAN BENEFITS

      Subject to the following provisions of this Section 5, the Supplemental
      Plan benefits hereunder shall become payable to a Participant, surviving
      spouse or Beneficiary as of the date upon which such Participant, spouse
      or Beneficiary first begins to receive retirement (or survivor) benefit
      payments under the Basic Plan and shall be subject to the same eligibility
      conditions and reductions for early commencement as are applied to the
      corresponding benefits under the Basic Plan. Such Supplemental Plan
      Benefits shall be payable in the form of payment under which Basic Plan
      benefits are made to such Participant, spouse or Beneficiary; provided
      however, that in the event a surviving spouse or Beneficiary is entitled
      to receive Supplemental Plan Benefits as a result of the death of a
      Participant, the Administrator may, in its discretion, pay such benefit in
      the form of a lump sum.


                                       12

      Each form of payment provided hereunder shall be the Actuarial Equivalent
      of the Participant's Supplemental Plan Benefits determined under the
      normal form of a ten-year certain and life thereafter annuity
      (Supplemental Retirement Income benefit) or a single life annuity
      (Restoration Benefit).

                    SECTION 6 - AMENDMENT AND DISCONTINUANCE

      The Company expects to continue the Supplemental Plan indefinitely, but
      reserves the right to amend or discontinue the Supplemental Plan at any
      time, if, in its sole judgment, such amendment or discontinuance is
      necessary or desirable. Any such amendment or discontinuance shall be made
      pursuant to a resolution of the Board of Directors of the Company and
      shall be effective as of the date specified in such resolution. No
      amendment or discontinuance of the Supplemental Plan shall directly or
      indirectly deprive any Participant, surviving spouse or Beneficiary of all
      or any portion of the Supplemental Plan Benefits earned by the Participant
      as of the date of amendment or discontinuance (based upon the
      Participant's age, compensation and service as of the date of such
      amendment or discontinuance). In the event of a discontinuance of the
      Supplemental Plan, the Company (or any transferee, or successor entity of
      the Company) shall be obligated to pay benefits to Participants, surviving
      spouses and Beneficiaries at such time or times and in such forms as
      provided under the terms of the Supplemental Plan.

                           SECTION 7 - MISCELLANEOUS

7.1   No Effect on Employment Rights. Nothing contained herein shall be
      construed as creating any contract of employment between any Employer or
      Affiliate and any Participant nor shall any provision hereof confer upon
      any Participant the right to be


                                       13

      retained in the service of any Employer or Affiliate nor limit the right
      of any Employer or Affiliate to discharge or otherwise deal with
      Participants without regard to the existence of the Supplemental Plan.

7.2   Plan Unfunded. Notwithstanding any provision herein to the contrary, this
      Supplemental Plan is intended to constitute an unfunded plan described in
      Section 201(2) of ERISA and the benefits offered hereunder shall
      constitute nothing more than an unfunded, unsecured promise by the Company
      to pay benefits determined hereunder which are accrued by Participants
      while such Participants are employed by the Company or other Employers
      Prior to commencement of Supplemental Plan Benefits to a Participant,
      surviving spouse or Beneficiary in accordance with the terms hereof, no
      provision shall be made with respect to segregating any assets of an
      Employer for payment of any benefits hereunder. To the extent any benefits
      provided under this Supplemental Plan are actually paid from a source
      other than the Company, neither the Company nor any other Employer shall
      have any further obligation therefor, but to the extent not so paid, such
      benefits shall remain the obligations of, and shall be paid by, the
      Company. No Participant, surviving spouse, Beneficiary or any other person
      shall have any interest in any particular assets of the Company or an
      Affiliate by reason of the right to receive a benefit under the
      Supplemental Plan and any such Participant, surviving spouse, Beneficiary
      or other person shall have only the rights of a general unsecured creditor
      of the Company with respect to any rights under the Supplemental Plan.
      Nothing contained in the Supplemental Plan shall constitute a guaranty by
      the Company, any Affiliate, or any other entity or person that the assets
      of the Company will be sufficient to pay any benefit


                                       14

      hereunder. All expenses and fees incurred in the administration of the
      Supplemental Plan shall be paid by the Employers.

7.3   Binding on Company, Participants and their Successors. The Supplemental
      Plan shall be binding upon and inure to the benefit of the Employers,
      their successors and assigns and Participants and their heirs, executors,
      administrators and legal representatives. In the event of the merger or
      consolidation of the Company with or into any other corporation, or in the
      event substantially all of the assets of the Company shall be transferred
      to another corporation, the successor corporation resulting from the
      merger or consolidation, or the transferee of such assets, as the case may
      be, shall, as a condition to the consummation of the merger, consolidation
      or transfer, assume the obligations of the Company hereunder and shall be
      substituted for the Company hereunder.

7.4   Spendthrift Provisions. The interest of a Participant or his Surviving
      spouse or Beneficiary under the Supplemental Plan shall not be subject in
      any manner to anticipation, alienation, sale, transfer, assignment,
      pledge, encumbrance, or charge, either voluntarily or involuntarily, prior
      to actual receipt thereof by the payee; any attempt so to anticipate,
      alienate, sell, transfer, assign, pledge, encumber or charge any such
      interest herein prior to such receipt shall be void. Supplemental Plan
      Benefits shall not be subject to garnishment, attachment or other legal or
      equitable process nor shall they be an asset in bankruptcy; provided,
      however, that no amount shall be payable from this Supplemental Plan to a
      Participant, or any person claiming by or through a Participant, unless
      and until any and all amounts representing debts or other obligations owed
      to any Employer by the Participant have been fully paid and satisfied.
      Neither the Company nor any Employer or


                                       15

      Affiliate shall be liable in any manner for or subject to the debts,
      contracts, liabilities, torts or engagements of any person entitled to any
      benefit under the Supplemental Plan.

7.5   Disclosure. Each Participant, upon his written request, shall receive a
      copy of the Supplemental Plan and the Administrator will make available
      for inspection by any Participant a copy of any written rules and
      regulations used by the Administrator in administering the Supplemental
      Plan.

7.6   State Law. The Supplemental Plan is established under and will be
      construed according to the laws of the Commonwealth of Pennsylvania to the
      extent that such laws are not preempted by the Employee Retirement Income
      Security Act of 1974, as amended, and regulations promulgated thereunder.

7.7   Incapacity of Recipient. In the event a Participant, surviving spouse or
      Beneficiary is declared incompetent and a guardian, conservator or other
      person legally charged with the care of his person or of his estate is
      appointed, any benefits under the Supplemental Plan to which such
      Participant, spouse or Beneficiary is entitled shall be paid to such
      guardian, conservator or other person legally charged with the care of his
      person or his estate. Except as provided hereinabove, when the
      Administrator, in its sole discretion, determines that a Participant,
      surviving spouse or Beneficiary is unable to manage his financial affairs,
      the Administrator may direct the Company to make distribution(s) to any
      one or more of the spouse, lineal ascendants or descendants or other
      closest living relatives of such Participant, spouse or Beneficiary who
      demonstrates to the satisfaction of the Administrator the propriety of
      making such distribution(s). Any payment so made shall be in complete
      discharge of any liability under the Supplemental Plan for such


                                       16

      payment. The Administrator shall not be required to see to the application
      of any such distribution made as provided above.

7.8   Unclaimed Benefit. Each Participant shall keep the Administrator informed
      of his current address. The Administrator shall not be obligated to search
      for the whereabouts of any person. If the location of a Participant is not
      made known to the Administrator within three years after the date on which
      any payment of the Participant's benefit hereunder may be made, payment
      may be made as though the Participant had died at the end of the
      three-year period. If, within one additional year after such three-year
      period has elapsed, or, within three years after the actual death of a
      Participant, whichever occurs first, the Administrator is unable to locate
      the spouse or any Beneficiary of the Participant, any Supplemental Plan
      Benefits held for a Participant, surviving spouse or Beneficiary shall be
      forfeited.

7.9   Elections, Applications, Notices. Every direction, revocation or notice
      authorized or required hereunder shall he deemed delivered to the Company
      or the Administrator as the case may be: (a) on the date it is personally
      delivered to the Administrator at the Company's executive offices at 100
      Erie Insurance Place, Erie, Pennsylvania 16530 or (b) three business days
      after it is sent by registered or certified mail, postage prepaid,
      addressed to the Administrator at the offices indicated above, and shall
      be deemed delivered to a Participant, surviving spouse or Beneficiary: (a)
      on the date it is personally delivered to such individual, or (b) three
      business days after it is sent by registered or certified mail, postage
      prepaid, addressed to such individual at the last address shown for him on
      the Company's records. Any notice required hereunder may be waived by the
      person entitled thereto.


                                       17

7.10  Counterparts. This Supplemental Plan may be executed in any number of
      counterparts, each of which shall be considered as an original, and no
      other counterparts need be produced.

7.11  Severability. In the event any provision of this Supplemental Plan shall
      be held illegal or invalid for any reason, such illegality or invalidity
      shall not affect the remaining provisions of the Supplemental Plan. This
      Supplemental Plan shall be construed and enforced as if such illegal or
      invalid provision had never been contained herein.

7.12  Headings. The headings of Sections of this Supplemental Plan are for
      convenience of reference only and shall have no substantive effect on the
      provisions of this Supplemental Plan.

Executed at Erie, Pennsylvania this 20th day, of December, 1995, effective
December 31, 1995.

                                   ERIE INDEMNITY COMPANY
                                   By: /s/ John M. Petersen
                                      ----------------------------------------
                                      John M. Petersen

                                   Title:  President and Chief Executive Officer

ATTEST:

/s/ J. R. Van Gorder
- -------------------------------
J. R. Van Gorder
Executive Vice President,
  Secretary and General Counsel


                                       18

EX-10.3

                  EXHIBIT 10.3 - REINSURANCE POOLING AGREEMENT

This Agreement is effective as of 12:01 a.m. on the 1st day of January, 1995,
among the Erie Insurance Exchange, a Pennsylvania reciprocal interinsurance
exchange (hereinafter referred to as the "Exchange"), the Erie Insurance
Company, a Pennsylvania stock insurance company (hereinafter referred to as the
"Company"), and Erie Insurance Company of New York, a New York stock insurance
company (hereinafter referred to as "ERIE-New York"). This Agreement supersedes
the Reinsurance Pooling Agreement between the Exchange and the Company, which
was in effect from January 1, 1992 until the effective date of this Agreement.

                              ARTICLE I - PREAMBLE

The purpose of this Agreement is to pool, or share proportionately among the
parties, the results of property and casualty insurance underwriting operations
through reinsurance; to reduce administrative and executive expenses; and to
produce for each party a broader distribution of risk by line of insurance. The
Exchange, the Company, and ERIE-New York are affiliated and are under the same
executive management. This Agreement is made to recognize that each company is a
member of the same holding company system and a member of the Erie Insurance
Group (hereinafter referred to as "The ERIE Group"), subject to group decisions
and strategies designed primarily to promote the stability and success of The
ERIE Group and that each company will accordingly share proportionately in the
combined property and casualty insurance underwriting operations of The ERIE
Group.

                             ARTICLE II - AGREEMENT

In consideration of the agreements and mutual promises contained herein, the
parties hereto make the following Agreement effective as of 12:01 a.m., Eastern
Standard Time, January 1, 1995. Such Agreement shall remain in effect until
cancelled as provided in Article XI.

                           ARTICLE III - DEFINITIONS

For the purposes of this Agreement, the following terms shall have the meanings
indicated below:

      (a) "Net Policy Liabilities" shall mean the gross direct liabilities with
respect to insurance policies and reinsurance assumed less reinsurance ceded to
reinsurers other than the parties to this Agreement.

      (b) "Respective Percentage Share" shall mean the participation percentage
set forth next to the name of each company in Exhibit A, attached hereto and
made a part hereof.

      (c) "Underwriting Expenses" shall mean all expenses incurred individually
or collectively by the Exchange, Company, and ERIE-New York in the acquisition
of insurance and reinsurance business, the issuance of insurance policies and
contracts, and the rendering of services under the contracts, including premium
taxes, licenses and fees, and such other underwriting expenses relating to
insurance operations as may be mutually agreeable to the parties excluding
federal and foreign income taxes, investment expenses and any other expenses not
related to underwriting operations.


                                       1

      (d) "Dividends" to policyholders shall be treated as Underwriting
Expenses.

      (e) "Net", as used herein shall mean net after giving effect to ceded
reinsurance transactions with other insurers or reinsurers, if any, which inure
to the benefit of the parties to this Agreement.

      (f) "Insurance Policies" shall include all insurance or reinsurance
agreements, contracts, policies, certificates, binders, endorsements, or
agreements of insurance or reinsurance issued or renewed by the Exchange,
Company, or ERIE-New York for which they may become obligated.

      (g) "Loss Adjustment Expense" shall include both allocated loss adjustment
expense and unallocated loss adjustment expense.

      (h) "Accounting Period" shall mean calendar quarter (i.e. March 31, June
30, September 30, and December 31 of each year).

                   ARTICLE IV - LIABILITIES - BUSINESS CEDED

The Company and ERIE-New York each individually agrees to cede and transfer to
the Exchange and the Exchange agrees to assume and reinsure:

      (a) 100% of all Net Policy Liabilities under all Insurance Policies of the
Company and ERIE-New York respectively, outstanding and in force at 12:01 a.m.,
Eastern Standard Time, January 1, 1995.

      (b) 100% of the Net Policy Liabilities, automatically from inception,
under all Insurance Policies issued or assumed by the Company and ERIE-New York
respectively, with effective dates on and after January 1, 1995, during the
continuation of this Agreement.

      (c) 100% of the Net liability of the Company and ERIE-New York
respectively, for unpaid losses (including both reported and unreported losses),
unpaid loss adjustment expenses, underwriting expenses due and unpaid prior to
January 1, 1995, and unpaid dividends to policyholders.

               ARTICLE V - PREMIUMS AND RESERVES - BUSINESS CEDED

The Company and ERIE-New York each individually agrees to pay to the Exchange
the following:

      (a) 100% of the unearned premium reserves of the Company and ERIE-New York
respectively, carried for the Net Policy Liabilities assumed and reinsured by
the Exchange under Article IV(a) hereof as shown on the records of the Company
and ERIE-New York respectively, as of 12:01 a.m., Eastern Standard Time, January
1, 1995.

      (b) 100% of the premiums received by the Company and ERIE-New York
respectively, for business ceded and transferred to the Exchange under Article
IV(b) hereof less the costs of any reinsurance placed with reinsurers other than
the Exchange.


                                       2

      (c) 100% of the reserves carried by the Company and ERIE-New York
respectively, for losses (including both reported and unreported losses), loss
adjustment expense, underwriting expenses (including dividends to policyholders)
as shown on the records of the Company and ERIE-New York respectively, as of
12:01 a.m., Eastern Standard Time, January 1, 1995.

                      ARTICLE VI - LIABILITIES RETROCEDED

Following the assumption and reinsurance of the liabilities of the Company and
ERIE-New York respectively, as set forth in Article IV hereof, the Exchange
shall retrocede and transfer to the Company and ERIE-New York each company's
individual Respective Percentage Share of the following:

      (a) 100% of all New Policy Liabilities under all Insurance Policies of the
Exchange outstanding and in force at 12:01 a.m., Eastern Standard Time, January
1, 1995.

      (b) 100% of the Net Policy Liabilities, automatically from inception,
under all Insurance Policies issued or assumed by the Exchange with effective
dates on and after January 1, 1995, during the continuation of this Agreement.

      (c) 100% of the Net Policy Liability of the Exchange for unpaid losses
(including both reported and unreported losses), unpaid loss adjustment
expenses, underwriting expenses due and unpaid prior to January 1, 1995, and
unpaid dividends to policyholders.

           ARTICLE VII - PREMIUMS AND RESERVES - BUSINESS RETROCEDED

Following the payment of the premiums and reserves of the Company and ERIE-New
York respectively, as set forth in Article V hereof, the Exchange shall
retrocede and transfer to the Company and ERIE-New York each company's
individual Respective Percentage Share of the following:

      (a) 100% of the Exchange's unearned premium reserves carried for its Net
Policy Liabilities under all Insurance Policies of the Exchange outstanding and
in force as of 12:01 a.m., Eastern Standard Time, January 1, 1995.

      (b) The Exchange's premiums received by the Exchange for its own account
and all premiums received by the Exchange pursuant to Article V(b) hereof for
business assumed from the Company and ERIE-New York respectively, under Article
IV(b) hereof, less all Underwriting Expenses incurred by the Exchange in
relation to such business and less all reinsurance placed with insurers and
reinsurers other than the parties to this Agreement by the Exchange for its own
account or for the joint account of the Exchange, Company and ERIE-New York.

      (c) 100% for the reserves carried by the Exchange for losses (including
both reported and unreported losses), loss adjustment expense, underwriting
expenses (including dividends to policyholders) as shown on the records of the
Exchange as of 12:01 a.m., Eastern Standard Time, January 1, 1995.


                                       3

              ARTICLE VIII - AGENTS' BALANCES/OUTSTANDING ACCOUNTS

The Company and ERIE-New York hereby agree to sell, transfer, assign and the
Exchange hereby agrees to purchase all rights, title and interest of the Company
and ERIE-New York in their agents' balances, uncollected premiums and all other
accounts relating to underwriting operations, including underwriting pools and
associations as they exist at 12:01 a.m., Eastern Standard Time, January 1,
1995, at statutory book value. The Exchange hereby agrees to sell, transfer and
assign and the Company and ERIE-New York hereby agree to purchaser their
Respective Percentage Shares of the total agents' balances, uncollected premiums
and all other accounts relating to underwriting operations at statutory book
value immediately after and including the transfers effected by the first
sentence of this paragraph.

Underwriting assets and related liabilities of the Exchange, the Company, and
ERIE-New York arising after 12:01 a.m., Eastern Standard Time, January 1, 1995,
shall be pro-rated according to the Respective Percentage Share of the
companies.

Notwithstanding anything to the contrary herein contained, the Company and
ERIE-New York hereby agree for purposes of statutory financial statements, to
assume their Respective Percentage Share of any amounts disallowed the Exchange
on account of reinsurance effected with so-called unauthorized reinsurers and
any amounts disallowed the Exchange for non-admitted agents' balances and
uncollected premiums.

                            ARTICLE IX - OBLIGATIONS

The Exchange agrees to act on behalf of the Company and ERIE-New York to fulfill
all the respective obligations of the Company and ERIE-New York under the
Insurance Policies reinsured hereby and to adjust and pay all claims thereunder
and to pay all Underwriting Expenses (including dividends to policyholders) on
behalf of the Company and ERIE-New York, and the Company and ERIE-New York
hereby agree to the Exchange acting on their behalf with respect to such
matters. The adjustment of claims and claim payments for policies written by
ERIE-New York will be made in accordance with guidelines established by the
Board of Directors of ERIE-New York. It is the purpose and intent of this
Agreement that all reinsurance hereunder shall be subject in all respects to the
same rates, terms, conditions, interpretations, waivers, the exact proportion of
premiums paid without deduction for brokerage, and to the same modifications,
alterations and cancellations as the respective insurances of the companies to
which such reinsurance relates, the true intent of this Agreement being that the
reinsurer shall in every case to which this Agreement applies and in the
Respective Percentage Share set forth herein follow the fortunes of the
reinsured. This Agreement is solely between and for the benefit of the parties
hereto and the acceptance of reinsurance hereunder shall not create any right or
legal relation whatsoever between the primary insured and any party to this
Agreement other than the company issuing the original insurance contract to such
insured.

                      ARTICLE X - ACCOUNTS AND SETTLEMENTS

The Exchange, the Company, and ERIE-New York shall keep sufficient records for
the express purpose of recording therein the amounts and other particulars of
the reinsurance ceded and assumed between the parties hereto. Each party to this
Agreement shall have the right to examine,


                                       4

at the offices of the other parties at all reasonable times, all books and
records of the other parties relating to any business which is the subject of
this Agreement. This right shall survive termination of this Agreement and shall
continue so long as any party has any rights or obligations under this
Agreement.

Copies of all Insurance Policies thereto which come within the scope of this
Agreement shall be available to all companies which are parties to this
Agreement. Each company which is a party hereto will make its financial data
available to every company for the purpose of recording those inter-company
transactions necessitated by this Agreement and shall provide such financial
information in sufficient detail and in mutually acceptable form to prepare
monthly financial and quarterly and annual filings with all applicable insurance
departments and other regulatory authorities.

The Exchange shall render to the Company and to ERIE-New York at such periods as
are mutually agreed upon (but not less frequently than quarterly), a statement
showing net premiums received, Underwriting Expenses (including dividends paid
to policyholders), net losses and loss adjustment expenses paid during the
accounting period. Reasonable approximations may be substituted when necessary,
for interim accounting, but there shall be an annual adjustment to the exact
amounts. The companies shall settle accounts between them by payment of such
amounts as may be owing within 30 days after the end of the accounting period.

Each quarter the Exchange shall render to the Company and to ERIE-New York a
report of all accruals required to adjust cash transactions to the accounting
basis required for accounting in accordance with generally accepted practices
for preparation of the NAIC form of annual statement, and to adjust the expense
allowance to the accrual basis.

To the extent that transfers of non-cash assets may be required to effectuate
the settlements herein provided, such transfers shall be made at fair market
values as of the date such transfers are made.

                            ARTICLE XI - TERMINATION

This Agreement may be terminated by mutual agreement stating the terms and
conditions therefore or by any party giving to the other parties not less than
90 days advance written notice stating when, as of the end of any calendar year
such termination shall be effective. The Net Policy Liabilities previously ceded
and transferred by the company and assumed and reinsured by the Exchange and
that subsequently assumed and reinsured by the Company and by ERIE-New York
under the Respective Percentage Share participation shall cease with respect to
losses resulting from accidents or occurrences after the termination date of
this Agreement. Upon termination of this Agreement, reinsurance and reserve
settlement among the parties shall be made upon the same formula and conditions
as those governing the inception of this Agreement, restoring to each party its
Insurance Policies, related assets and reserves.

                        ARTICLE XII - INSOLVENCY CLAUSE

Each party hereby agrees that in the event of the insolvency of any party, this
Agreement shall be so construed that the reinsurance due hereunder shall be
payable directly to the insolvent party or its liquidator, receiver, or
statutory successor by the reinsurer on the basis of the liability of the
insolvent party under the contract or contracts reinsured without diminution
because of the


                                       5


insolvency. It is further agreed that the liquidator, the receiver, or the
statutory successor of the insolvent party shall give written notice to the
reinsurer of the pendency of a claim against the insolvent party on the policy
reinsured within a reasonable time after such claim is filed in the solvency
proceedings; that during the pendency of such claim the reinsurer may
investigate such claim and interpose at their own expense in the proceeding
where such claim is to be adjudicated any defense or defenses which they may
deem available to the insolvent party or its liquidator, receiver, or statutory
successor; that the expenses thus incurred by the reinsurer shall be chargeable
subject to court approval against the insolvent party as part of the expense of
liquidation to the extent of the proportionate benefit which may accrue to the
insolvent party solely as a result of the defense undertaken by the reinsurer.

It is further agreed and understood that as to all reinsurance made, ceded,
renewed or otherwise becoming effective hereunder, the reinsurance shall be
payable by the insurer directly to the insolvent party or to its liquidator,
receiver or statutory successor.

                           ARTICLE XIII - ARBITRATION

As a condition precedent to any right of action hereunder, in the event of any
difference of opinion hereafter arising with respect to this Agreement, it is
hereby mutually agreed that such dispute or difference of opinion shall be
submitted to arbitration before a panel of three arbitrators, all of whom shall
be active or retired disinterested officers of property and casualty insurance
companies, reinsurance companies or underwriters at Lloyd's, London. One
arbitrator shall be chosen by each party to the dispute, and the third, an
umpire, to be chosen by the other two arbitrators before they enter upon
arbitration. In the event of any party refusing or neglecting to appoint an
arbitrator within 90 days after the other party requests it to do so, or if the
arbitrators fail to appoint an umpire within 60 days after they have accepted
their appointments, such arbitrator or umpire, as the case may be, shall, upon
the application of any party, be appointed by the American Arbitration
Association and the arbitrators and the umpire shall thereupon proceed. The
arbitrators shall consider this Agreement as an honorable engagement rather than
merely as a legal obligation and they are relieved of all judicial formalities
and may abstain from following the strict rules of law. The decision of the
majority of the arbitrators shall be final and binding on all parties. Each
party shall bear the expense of its own arbitrator and shall jointly and equally
bear the other expenses of the umpire and of the arbitration. Any such
arbitration shall take place in Erie, Pennsylvania, or such other place as may
be mutually agreed.

                       ARTICLE XIV - ERRORS AND OMISSIONS

The parties to this Agreement will use due diligence in promptly and accurately
reporting all transactions under this Agreement. It is agreed, however, that any
errors or omissions occurring through clerical error, accident or oversight, of
any party to this Agreement shall not invalidate any of the provisions of this
Agreement; and the party making such error agrees to correct it immediately upon
discovery.

                            ARTICLE XV - AMENDMENTS

This Agreement may be altered or amended in any respect at any time and from
time to time by mutual consent of the parties either by an endorsement or
addendum executed by the parties hereto or by correspondence signed by a
responsible officer of each party, and such endorsement or


                                       6

addendum or correspondence shall be binding on the parties and be deemed to be
an integral part of this Agreement.

                         ARTICLE XVI - OTHER PROVISIONS

1.     This Agreement shall not apply to the investment operations, liabilities
for Federal and foreign income tax, or other operations unrelated to the
insurance underwriting of the parties hereto.

2.     In the event that the Company is not licensed in New York and/or the
Exchange is not an accredited reinsurer in New York, the Exchange agrees to post
a letter of credit collateralizing the business ceced to it by ERIE-New York.

IN WITNESS WHEREOF, the parties hereto have affixed their signatures.

                                     ERIE INSURANCE EXCHANGE
                                     by Erie Indemnity Company
                                     Attorney-in-Fact

                                     By:      /s/ J. M. Petersen
                                        ----------------------------------------
                                              J. M. Petersen
                                              President and
                                              Chief Executive Officer


                                     ERIE INSURANCE COMPANY


                                     By:      /s/ J. R. Van Gorder
                                        ----------------------------------------
                                              J. R. Van Gorder
                                              Executive Vice President,
                                              Secretary and General Counsel


                                     ERIE-NEW YORK


                                     By:      /s/ T. M. Sider
                                        ----------------------------------------
                                              T. M. Sider
                                              Executive Vice President and
                                              Chief Financial Officer


                                       7

                              ERIE INSURANCE GROUP

                          REINSURANCE POOLING AGREEMENT

                            EFFECTIVE January 1, 1995

                                    EXHIBIT A



Participating Insurer                       Respective Percentage Share
- ---------------------                       ---------------------------
                                         
Erie Insurance Exchange                          94.5%
Erie Insurance Company                            5.0%
ERIE-New York                                     0.5%



                                       8

EX-10.4

                    EXHIBIT 10.4 - ERIE INSURANCE COMPANY AND
                       ERIE INSURANCE COMPANY OF NEW YORK
                               ERIE, PENNSYLVANIA

                 AGGREGATE EXCESS OF LOSS REINSURANCE CONTRACT

This REINSURANCE CONTRACT is made between ERIE INSURANCE EXCHANGE, by and
through its Attorney-in-Fact, ERIE INDEMNITY COMPANY, of Erie, Pennsylvania
(hereafter called the "REINSURER"), and ERIE INSURANCE COMPANY and its wholly
owned subsidiary ERIE INSURANCE COMPANY OF NEW YORK, both of Erie, Pennsylvania
(herein referred to collectively (or individually as the context requires) as
the "COMPANY").

In consideration of the agreements and mutual promises contained herein, the
parties hereby agree that this Reinsurance Contract covers 95% of the Ultimate
Net Loss for each Annual Period, as herein provided and specified, which may
accrue to the COMPANY under all policies, contracts, and binders of insurance
and reinsurance as respects coverages classified by the COMPANY as Property and
Casualty as a result of any loss or losses thereunder occurring each Annual
Period during the term of this Reinsurance Contract, subject to the following
terms and conditions:

ARTICLE 1 - Term

This Reinsurance Contract shall commence on the first day of January, 1998, and
shall remain in force thereafter until cancelled in accordance with Article 18.

"Annual Period", as used herein, shall mean the period from January 1 to
December 31, both days inclusive, of any calendar year.

ARTICLE 2 - Retention and Limit

No claim shall be made hereunder unless the COMPANY'S total Ultimate Net Losses,
as herein defined, incurred during any Annual Period covered hereunder exceed an
amount equal to 72.5% of the COMPANY'S Net Premiums, as herein defined, earned
during that Annual Period of this Reinsurance Contract. The REINSURER shall then
be liable for 95% of the amount of such excess up to, but not exceeding, an
amount equal to 95% of 15% of the COMPANY'S Net Premium earned during that
Annual Period.

It is understood and agreed that losses equal to 5% of the Ultimate Net Loss in
excess of the retentions hereunder, shall be retained net by the COMPANY for its
own account.

ARTICLE 3 - Definition of Ultimate Net Loss

The term "Ultimate Net Loss" shall mean the liabilities incurred during any
Annual Period by the COMPANY under insurance or reinsurance agreements,
contracts, policies, certificates, binders, endorsements or agreements of
insurance or reinsurance and shall include those liabilities of the COMPANY
incurred during any Annual Period under that certain Reinsurance Pooling
Agreement between Erie Insurance Exchange, Erie Insurance Company and Erie
Insurance Company of New York effective January 1, 1995 ("Reinsurance Pooling
Agreement") as it currently exists or may hereafter be amended, except that
"Ultimate Net Loss" as used herein shall not include unallocated loss adjustment
expenses incurred by the Company.

Nothing in this Article shall be construed to mean that losses are not
recoverable hereunder until the COMPANY'S Ultimate Net Loss has been
ascertained.

ARTICLE 4 - Definition of Net Premiums

The term "Net Premiums" shall mean direct premiums, less return premiums,
received by the COMPANY during any Annual Period under insurance or reinsurance
agreements, contracts, policies, certificates, binders, endorsements, or
agreements of insurance or reinsurance, and shall include the COMPANY'S
respective share of the premiums received under the Reinsurance Pooling
Agreement as it currently exists or may hereafter be amended, less premiums for
all reinsurances inuring to the benefit of this Reinsurance Contract without
deduction of dividends declared, paid, or credited to policyholders.

ARTICLE 5 - Underwriting Warranty

It is warranted by the COMPANY that it will not knowingly retain net liability
in excess of the following respective amounts:

                              
Property coverages:              $10,000,000 as respects any one risk.

Casualty coverages:              $5,000,000 as respects any one policy other than Workers'
                                 Compensation policies.



It is understood that the COMPANY shall be the sole judge of what constitutes
any one risk as respects property coverages and any one policy as respects
casualty coverages.

ARTICLE 6 - Net Retained Liability

This Reinsurance Contract shall apply only to that portion of any insurance or
reinsurance which the COMPANY retains net for its own account during any Annual
Period, and in calculating the amount of any loss hereunder, and also in
computing the amount in excess of which this Reinsurance


                                       2

Contract attaches, only loss or losses in respect to that portion of any
insurance or reinsurance which the COMPANY retains net for its own account shall
be included. It is, however, understood and agreed that the amount of the
REINSURER'S liability during any Annual Period hereunder in respect to any loss
or losses shall not be increased by reason of the inability of the COMPANY to
collect from any other reinsurers, whether specific or general, any amounts
which may have become due from them, whether such inability arises from the
insolvency of such other reinsurers or otherwise.

ARTICLE 7 - Quota Share Reinsurance

Unless otherwise specially agreed, it is understood that, in the event the
COMPANY cedes reinsurance on a quota share or portfolio basis, the provisions of
this Reinsurance Contract shall apply as if such reinsurance had not been
effected.

ARTICLE 8 - Notice of Loss

In the event of a claim arising hereunder, notice shall be given to Erie
Insurance Exchange, 100 Erie Insurance Place, Erie, Pennsylvania, 16530-0001, to
the attention of the Managing Director of Reinsurance as soon as practicable.

ARTICLE 9 - Loss Settlements

All loss settlements made by the COMPANY, providing the same are within the
terms of this Reinsurance Contract, shall be unconditionally binding upon the
REINSURER, and amounts falling to the share of the REINSURER shall be payable by
it upon reasonable evidence of the amount due or to be due being given by the
COMPANY.

Should the COMPANY'S Ultimate Net Losses incurred during any Annual Period
covered hereunder exceed, at any time during that Annual Period, an amount equal
to 72.5% of the Net Premiums earned through that period of time, it is
understood and agreed that, at the option of the COMPANY, 95% of such excess and
95% of all such additional Ultimate Net Losses occurring thereafter will be paid
by the REINSURER, subject to a limit of 95% of 15% of the Net Premiums earned as
respects any losses occurring during that Annual Period. Any such payment shall
be subject to adjustment in accordance with the provisions of Article 3 after
the REINSURER'S ultimate liability hereunder has been determined.

ARTICLE 10 - Governing Law; Jurisdiction

Subject to "Article 15 - Arbitration", if the REINSURER fails to pay any amount
claimed to be due hereunder, the REINSURER, at the request of the COMPANY, will
submit to the jurisdiction of a court of competent jurisdiction within the
United States. Nothing in this clause constitutes or should


                                       3

be understood to constitute a waiver of the REINSURER'S rights to commence an
action in any court of competent jurisdiction in the United States, to remove an
action to a United States District Court, or to seek a transfer of a case to
another court as permitted by the laws of the United States or of any state in
the United States.

It is further agreed that service of process in such suit may be made upon the
REINSURER, and that the reinsurer will abide by the final decision of such court
or of any appellate court in the event of an appeal.

Further, pursuant to any statute of any state, territory, or district of the
United States which makes provision therefor, the REINSURER hereby designates
the Superintendent, Commissioner, or Director of Insurance, or other officer
specified for that purpose in the statute, or his successor or successors in
office, as its true and lawful attorney upon whom may be served any lawful
process in any action, suit, or proceeding instituted by or on behalf of the
COMPANY or any beneficiary hereunder arising out of this Reinsurance Contract,
and hereby authorizes the said officer to mail such process, or a true copy
thereof, to the COMPANY.

ARTICLE 11 - Insolvency

In the event of insolvency of the COMPANY, the reinsurance under this
Reinsurance Contract shall be payable by the REINSURER to the COMPANY or to its
liquidator, receiver, or statutory successor, on the basis of the liability of
the COMPANY under the policy or policies reinsured without diminution because of
the insolvency of the COMPANY.

It is further agreed that the liquidator, or receiver, or statutory successor of
the COMPANY, shall give written notice to the REINSURER of the pendency of any
claim against the COMPANY on the policies reinsured within a reasonable time
after such claim is filed in the insolvency proceeding, and that, during the
pendency of such claim, the REINSURER may investigate such claim and interpose,
at their own expense, in the proceeding where such claim is to be adjudicated,
any defense or defenses which they may deem available to the COMPANY or to its
liquidator, or receiver, or statutory successor. The expense thus incurred by
the REINSURER shall be chargeable, subject to court approval, against the
COMPANY as part of the expense of liquidation to the extent of a proportionate
share of the benefit which may accrue to the COMPANY solely as a result of the
defense undertaken by the REINSURER.

ARTICLE 12 - Premium

The premium for this reinsurance shall be 1.01% of the subject Net Premiums
earned by the COMPANY during any Annual Period this Reinsurance Contract remains
in force, and shall be subject to a minimum premium of $800,000 for each Annual
Period.


                                       4

The COMPANY shall pay to the REINSURER a deposit premium of $900,000 for each
Annual Period which shall be payable in equal installments of $450,000 each on
the first days of January and July during the period this Reinsurance Contract
remains in force. Final adjustment of the premium for each Annual Period
hereunder shall be made as soon as may be reasonably practicable after
expiration of that Annual Period.

ARTICLE 13 - Premium and Loss Payments

Premiums shall be payable directly to the REINSURER and losses shall be paid
directly to the COMPANY in United States currency.

ARTICLE 14 - Access to Records

The REINSURER, by its duly appointed representative, shall have the right, at
any reasonable time, to examine all papers in the possession of the COMPANY
referring business effected hereunder.

ARTICLE 15 - Arbitration

Except as provided in "Article 16 - Loss Commutation", should an irreconcilable
difference of opinion arise between the COMPANY and the REINSURER as to the
interpretation or payment under this Reinsurance Contract, it is hereby mutually
agreed that, as a condition precedent to any right of action hereunder, such
difference, upon the written request of either party, shall be submitted to
arbitration, one arbitrator to be chosen by the COMPANY, one by the REINSURER,
and an umpire to be chosen by the two arbitrators before they enter upon
arbitration.

In the event that either party should fail to choose an arbitrator within sixty
days following a written request by the other party to enter upon arbitration,
the requesting party may choose two arbitrators who shall in turn choose an
umpire before entering upon arbitration. If the arbitrators have not chosen an
umpire at the end of ten days following the last day of the selection of the two
arbitrators, each of the arbitrators shall name three, of whom the other
declines two, and the decision shall be made of the remaining two by drawing
lots. The arbitrators and the umpire shall be active or retired disinterested
officers of insurance or reinsurance companies or Underwriters at Lloyd's,
London, not under the control of either party to this Reinsurance Contract. Each
party shall present its case to the arbitrators within sixty days following the
date of their appointment.

The decision, in writing, of the arbitrators shall be final and binding upon
both parties as to questions of fact, but failing to agree, they shall call in
the umpire and the decision of the majority shall be final and binding as to
questions of fact upon both parties. Judgment upon the award rendered may be
entered in any court having jurisdiction. Each party shall bear the expense of
its own arbitrator and shall jointly and equally bear with the other the expense
of the umpire and of the arbitration.


                                       5

In the event that the two arbitrators are chosen by one party, as above
provided, the expense of the arbitrators, the umpire, and the arbitration shall
be equally divided between the two parties.

Any such arbitration shall take place at Erie, Pennsylvania, unless some other
location is mutually agreed upon by the two parties in interest.

ARTICLE 16 - Loss Commutation

Sixty months after expiration of each Annual Period, the COMPANY and the
REINSURER agree to commute any unpaid net losses recoverable applicable to that
Annual Period.

The COMPANY shall submit a statement of valuation of the net losses recoverable
showing the elements considered reasonable to establish the net losses to be
commuted. The COMPANY and the REINSURER shall agree upon the capitalized value
of such losses and the REINSURER shall pay to the COMPANY the amount so
determined. Payment by the REINSURER of the capitalized value of such losses
shall constitute a complete and final release of the REINSURER'S liability in
respect of such losses for that Annual Period.

If the COMPANY and the REINSURER fail to agree on the capitalized value of such
losses within sixty days of receipt of the statement of valuation, then any
difference shall be settled by a panel of three Actuaries or Appraisers, one to
be chosen by each party and the third by the two so chosen. If either party
refuses or neglects to appoint an Actuary or Appraiser within sixty days after
the request in writing that the difference be settled by a panel of three
Actuaries or Appraisers, the other party may appoint two Actuaries or
Appraisers. If the two Actuaries or Appraisers fail to agree on the selection of
a third Actuary or Appraiser within thirty days of their appointment, then each
of them shall name two, one of whom the other shall decline and the
determination of the Actuary or Appraiser shall be made by drawing lots. All the
Actuaries or Appraisers shall be regularly engaged in the valuation of claims
subject to the provisions of this Article 16 - Commutation. None of the
Actuaries or Appraisers shall be under the control of either party to this
Reinsurance Contract nor shall they have any interest in the net losses being
commuted other than that which is required to fulfill their obligations
hereunder.

Each party shall submit its case to its Actuary or Appraiser within thirty days
of the appointment of the third Actuary or Appraiser. The decision in writing of
any two Actuaries or Appraisers, when filed with the COMPANY and the REINSURER,
shall be final and binding on both parties. The expense of the Actuaries or
Appraisers and of the Commutation shall be equally divided between the COMPANY
and the REINSURER. Said Commutation shall take place in Erie, Pennsylvania,
unless some other place is mutually agreed upon by the COMPANY and the
REINSURER. The term "capitalized value" as used herein shall mean the estimated
value of all future payments hereunder, excluding any provision for incurred but
not reported losses, reduced to present value at


                                       6

an agreed upon rate of interest to be determined at the time of commutation or
the prime rate, whichever is less.

ARTICLE 17 - Extended Expiration

Should this Reinsurance Contract terminate while a loss occurrence covered
hereunder is in progress, it is understood and agreed that, subject to the other
conditions of this Reinsurance Contract, the REINSURER shall be responsible for
their proportion of the entire loss or damage caused by such occurrence.

ARTICLE 18 - Termination

Either party may terminate this Reinsurance Contract at any December 31, by
giving the other party not less than 30 days prior written notice.

ARTICLE 19 - Singular Contains the Plural

In interpretation of this Reinsurance Contract, the singular includes the plural
and the plural includes the singular, should the context so require to give full
force and effect to the intent of the parties and the provisions hereunder.

ARTICLE 20 - Notice of Default; Cure

In the event of a default of any of the terms of this Reinsurance Contract,
notice of the default shall be given and the party against which a default is
alleged shall have fifteen days in which to cure such default, prior to any
action being taken hereunder.

ARTICLE 21 - Notices

Notice to REINSURER shall be given at the following address or at any address
specified in writing by REINSURER:

                                        Erie Insurance Exchange
                                        100 Erie Insurance Place
                                        Erie, PA  l6530


                                       7

Notice to COMPANY shall be given at the following addresses or at any addresses
specified in writing by COMPANY:

                                   
     Erie Insurance Exchange          Erie Insurance Company of New York
     100 Erie Insurance Place         175 Corporate Woods,
     Erie, PA  l6530                  Suite 100
                                      Rochester, NY 14623



Notice is effective when given in writing, upon personal delivery, or sent
postage pre-paid by regular mail, Federal Express or similar service, telex or
telecopier to the address specified herein.

ARTICLE 22 - Amendments

This Reinsurance Contract may be altered or amended in any of its terms and
conditions by the written mutual consent of the parties, and such amendment
shall be considered as part of this Reinsurance Contract.


                                       8

ARTICLE 23 - Binding Effect

The provisions of this Reinsurance Contract shall be binding on both parties and
their respective heirs, legal representatives, successors and assigns, binding
any receivers, trustees or other fiduciaries appointed in any federal state
insolvency proceeding or federal bankruptcy case.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives.

In Erie, Pennsylvania, this 31st day of August, 1998.

ATTEST:                                    ERIE INSURANCE COMPANY

/s/ Mark Torok                             /s/ Jan R. Van Gorder
- -------------------------------            ----------------------------------
Mark Torok                                 Jan R. Van Gorder


                                           ERIE INSURANCE COMPANY OF NEW YORK
ATTEST:

/s/ Mark Torok                             /s/ Philip A. Garcia
- -------------------------------            ----------------------------------
Mark Torok                                 Philip A. Garcia


                                           ERIE INSURANCE EXCHANGE, by ERIE
ATTEST:                                    INDEMNITY COMPANY, Attorney-in-Fact

/s/ Maureen Sidelinger                     /s/ Michael S. Zavasky
- -------------------------------            ----------------------------------
Maureen Sidelinger                         Michael S. Zavasky



                                       9

EX-10.5

                                  EXHIBIT 10.5

                              Erie Insurance Group

                          RETIREMENT PLAN FOR EMPLOYEES

               As Amended and Restated Effective December 31, 2000

                                TABLE OF CONTENTS

                                                                                                       
ARTICLE I - INTRODUCTION..................................................................................1
ARTICLE II - DEFINITIONS
       2.1   "Accrued Pension"............................................................................2
       2.2   "Actuary"....................................................................................2
       2.3   "Administrator"..............................................................................2
       2.4   "Affiliate"..................................................................................2
       2.5   "Anniversary Date"...........................................................................2
       2.6   "Annuity Starting Date"......................................................................2
       2.7   "Beneficiary"................................................................................3
       2.8   "Board of Directors" or "Board"..............................................................3
       2.9   "Code".......................................................................................3
       2.10  "Company"....................................................................................3
       2.11  "Compensation"...............................................................................3
       2.12  "Covered Employee"...........................................................................4
       2.13  "Credited Service"...........................................................................4
       2.14  "Date of Hire"...............................................................................4
       2.15  "Date of Severance"..........................................................................4
       2.16  "Earliest Retirement Age"....................................................................5
       2.17  "Effective Date".............................................................................5
       2.18  "Employee"...................................................................................5
       2.19  "Employer(s)"................................................................................5
       2.20  "ERISA"......................................................................................5
       2.21  "Final Average Earnings".....................................................................5
       2.22  "Highly Compensated".........................................................................5
       2.23  "Hour of Service"............................................................................6
       2.24  "Leased Employee"............................................................................7
       2.25  "Maternity or Paternity Absence".............................................................7
       2.26  "Normal Retirement Age"......................................................................8
       2.27  "Normal Retirement Date".....................................................................8
       2.28  "Participant"................................................................................8
       2.29  "Period of Severance"........................................................................8
       2.30  "Plan" or "Pension Plan".....................................................................8
       2.31  "Plan Year"..................................................................................8
       2.32  "Service"....................................................................................8
       2.33  "Social Security Covered Compensation".......................................................9
       2.34  "Test Compensation"..........................................................................9
       2.35  "Top Paid Group".............................................................................9
       2.36  "Total and Permanent Disability".............................................................10
       2.37  "Trust Agreement"............................................................................10





                                        i

                                                                                                       
2.38 "Trustee"............................................................................................10
2.39 "Trust Fund" or "Fund"...............................................................................10

ARTICLE III - ADMINISTRATION OF THE PLAN
       3.1   Pension Administrator........................................................................11
       3.2   Powers.......................................................................................11
       3.3   Delegation of Duties.........................................................................13
       3.4   Administrator as Named Fiduciary.............................................................13
       3.5   Conclusiveness of Various Documents..........................................................13
       3.6   Actions to be Uniform........................................................................14
       3.7   Liability and Indemnification................................................................14
       3.8   Claims Review Procedure......................................................................14
       3.9   Waiver of Participation......................................................................16

ARTICLE IV - SERVICE PROVISIONS
       4.1   Service......................................................................................17
       4.2   Credited Service.............................................................................17
       4.3   Loss and Reinstatement of Service............................................................17
       4.4   Transfer to Other Employment.................................................................18
       4.5   Transfer From Other Employment...............................................................18

ARTICLE V - ELIGIBILITY FOR PENSIONS
       5.1   Normal Retirement............................................................................19
       5.2   Early Retirement.............................................................................19
       5.3   Disability Retirement........................................................................19
       5.4   Vesting......................................................................................20

ARTICLE VI - AMOUNT OF PENSION
       6.1   Normal Retirement Pension....................................................................21
       6.2   Early Retirement Pension.....................................................................21
       6.3   Disability Retirement Pension................................................................21
       6.4   Deferred Pension Upon Termination of Service.................................................22
       6.5   Increases in Pension for Certain Retired Participants........................................23
       6.6   Offset of Accruals by Plan Distributions.....................................................23
       6.7   Non-Duplication of Benefits..................................................................23
       6.8   Special Provisions Pertaining to Section 401(a)(17) Employees................................24

ARTICLE VII - COMMENCEMENT AND DURATION OF PENSIONS
       7.1   Normal and Early Retirement Pensions.........................................................25
       7.2   Disability Retirement Pension................................................................25
       7.3   Deferred Vested Pension......................................................................26
       7.4   Reemployment of a Retired Participant........................................................26
       7.5   Automatic Surviving Spouse's Pension.........................................................27
       7.6   Requirement for Spouse Consent...............................................................30
       7.7   Optional Forms of Pensions...................................................................30
       7.8   Payment of Small Pension.....................................................................32





                                       ii

                                                                                                       
       7.9   Repayment of Cashout on Reemployment.........................................................33
       7.10  Delay in Commencement of Pension Payments....................................................34
       7.11  Direct Rollover of Eligible Rollover Distributions...........................................35
       7.12  Change to Pension Payments in Connection with Qualifying Event...............................36

ARTICLE VIII - DEATH BENEFITS
       8.1   Death Prior to Retirement or Severance.......................................................41
       8.2   Death Prior to Commencement of Early or Disability Pensions..................................41
       8.3   Death Prior to Commencement of Vested Pensions...............................................42
       8.4   Effect of Valid 100% Joint and Survivor Election.............................................43
       8.5   Death On or After Annuity Starting Date......................................................43
       8.6   Death Benefit for Vested Participants Who Terminated
             After September 1, 1974 and Prior to August 23, 1984.........................................43

ARTICLE IX - TRUST FUND AND THE TRUSTEE
       9.1   Trust Fund...................................................................................45
       9.2   Irrevocability...............................................................................45
       9.3   Contributions by the Company.................................................................45
       9.4   Contributions by Participants................................................................46
       9.5   Benefits Payable Only From Trust Fund........................................................47
       9.6   Plan Expenses................................................................................47

ARTICLE X - BENEFIT LIMITATIONS
       10.1  Maximum Limitation Under Section 415(b) of the Code..........................................48
       10.2  Defined Benefit Plan and Defined Contribution Plan
             Combined Limitation..........................................................................51

ARTICLE XI - MISCELLANEOUS PROVISIONS
       11.1  Plan Non-Contractual.........................................................................53
       11.2  Non-Alienation of Retirement Rights or Benefits..............................................53
       11.3  Payment of Pension to Others.................................................................54
       11.4  Prohibition Against Reversion................................................................54
       11.5  Merger, Transfer of Assets or Liabilities....................................................54
       11.6  Actuarial Equivalence........................................................................55
       11.7  Change of Vesting Schedule...................................................................55
       11.8  Controlled Group.............................................................................56
       11.9  Severability.................................................................................56
       11.10 Employer Records.............................................................................56
       11.11 Application of Plan Provisions...............................................................56
       11.12 Missing Participants.........................................................................56
       11.13 IRC 414(u) Compliance Provision..............................................................57

ARTICLE XII - AMENDMENT AND TERMINATION
       12.1  Amendment and Termination of the Plan........................................................58
       12.2  Administration of the Plan in Case of Termination............................................58
       12.3  Internal Revenue Service Limitations.........................................................59




                                       iii

                                                                                                       
ARTICLE XIII - TOP-HEAVY PROVISIONS
       13.1  General......................................................................................60
       13.2  Definitions Relating to Top-Heavy Provisions.................................................60
       13.3  Top-Heavy Plan Vesting Requirements..........................................................62
       13.4  Top-Heavy Plan Minimum Benefit Requirements..................................................63
       13.5  Required Adjustments.........................................................................64
       13.6  Limited Application of this Article..........................................................65

ARTICLE XIV - JURISDICTION
       14.1  Jurisdiction.................................................................................66





                                       iv

                              Erie Insurance Group

                          RETIREMENT PLAN FOR EMPLOYEES
                           Effective December 31, 1946

               As Amended and Restated Effective December 31, 2000

                                    ARTICLE I

                                  INTRODUCTION

      The Erie Insurance Group adopted a Retirement Plan, effective December 31,
1946. Such Plan, which has been heretofore amended from time to time by action
of the Board of Directors in accordance with the provisions of the Plan, is
herein amended and restated.

This amendment and restatement of the Plan shall constitute an amendment,
restatement and continuation of the Plan. This amendment and restatement is
generally effective December 31, 2000. However, certain provisions of this
amendment and restatement are effective as of some other date. The provisions of
this amendment and restatement with stated effective dates prior to December 31,
2000 shall be deemed to amend the corresponding provisions, if any, of the Plan
as in effect before this amendment and restatement and all amendments thereto as
of such dates. Events occurring before the applicable effective date of any
provision of this amendment and restatement shall be governed by the applicable
provision of the Plan as in effect on the date of the event. The object of the
Plan is to provide retirement pensions for eligible employees.



                                       1

                                   ARTICLE II

                                   DEFINITIONS

For the purposes of this Retirement Plan for Employees, the following words and
phrases shall have the following meanings unless a different meaning is clearly
required by the context. Any terms herein used in the masculine shall be read
and construed in the feminine where they would so apply, and any terms used in
the singular shall be read and construed in the plural if again so applicable.

2.1   "Accrued Pension" shall mean a pension amount determined with respect to a
      Participant in accordance with Section 6.2(a) of the Plan using the date
      of determination for the date of early retirement.

2.2   "Actuary" shall mean the actuary or firm of actuaries chosen by, but
      independent of the Company, who is, or in the case of a firm one or more
      of whose members is, an enrolled actuary under the provisions of Section
      3042 of the Employee Retirement Income Security Act of 1974.

2.3   "Administrator" shall mean the Pension Administrator appointed by the
      Board under the provisions of Article III of the Plan.

2.4   "Affiliate" means any other employer which, together with the Company, is
      a member of a controlled group of corporations or of a commonly controlled
      trade or business (as defined in Code Sections 414(b) and (c) and as
      modified, where appropriate, by Code Section 415(h)) or of an affiliated
      service group (as defined in Code Section 414(m)) or other organization
      described in Code Section 414(o). Each such Affiliate shall be treated as
      an Affiliate only during such period as it is or was an Affiliate as
      defined above.

2.5   "Anniversary Date" shall mean any December 31 occurring after the
      Effective Date.

2.6   "Annuity Starting Date" shall mean the first day of the first period for
      which an amount is received as an annuity (whether by reason of retirement
      or other termination of Service). A Participant whose benefit is suspended
      under any provision of the Plan shall be deemed not to have reached his
      Annuity Starting Date until such benefit again

                                       2

      becomes payable. The Annuity Starting Date for a benefit payable under
      Section 7.10 shall be the applicable date described therein.

2.7   "Beneficiary" shall mean any person who, by reason of a designation made
      by a Participant, is or will be entitled to receive any amount or benefit
      hereunder upon the death of such Participant.

2.8   "Board of Directors" or "Board" shall mean the Board of Directors of the
      Company.

2.9   "Code" shall mean the Internal Revenue Code of 1986, as amended.

2.10  "Company" shall mean Erie Indemnity Company, a corporation organized and
      existing under the laws of Pennsylvania.

2.11  "Compensation" for any period shall mean the aggregate amount of base
      salary received by a Covered Employee from the Employers during the
      period. For this purpose, "base salary" shall exclude overtime
      compensation, bonuses, and commissions, but shall include compensation
      excluded from W-2 income because of salary reduction agreements in
      connection with plans described in Section 125, 401(k), or, for periods on
      and after January 1, 2001, 132(f)(4) of the Code, or resulting from
      annuity or deferred compensation contracts. Effective for each Plan Year
      beginning on and after December 31, 1989, in no event shall the amount of
      Compensation taken into account under the Plan exceed the adjusted annual
      limitation permitted under Section 401(a)(17) of the Code for such Plan
      Year. Such adjusted annual limitation shall be, for each Plan Year
      beginning on and after December 31, 1989 and prior to December 31, 1994,
      $200,000 as adjusted for such year in the same manner as under Section
      415(d) of the Code and, for each Plan Year beginning on and after December
      31, 1994, $150,000 as adjusted for such year as provided under Section
      401(a)(17)(B) of the Code. However, with respect to the determination of a
      retirement pension or Accrued Pension for the 1993 Plan Year, the adjusted
      annual limitation for the 1993 Plan Year will be assumed to apply to all
      prior years.

      For Plan Years beginning before January 1, 1997, in determining the
      Compensation of a Covered Employee for purposes of the foregoing annual
      limitation, the rules aggregating certain family members (as set forth in
      Section 2.22) shall apply, except that in applying such rules, the term
      "family" shall include only the spouse of the

                                       3

      Covered Employee and any lineal descendent of the Covered Employee who has
      not attained age 19 before the end of the calendar year. If, as a result
      of the family aggregation rules, the adjusted annual limitation is
      exceeded, then the limitation shall be prorated among the family members
      in proportion to each individual's Compensation as determined under this
      paragraph without regard to the adjusted annual limitation.

2.12  "Covered Employee" shall mean any Employee of an Employer, excluding:

      (a)   any such Employee whose employment is governed by the terms of a
            collective bargaining agreement under which retirement benefits were
            the subject of good faith bargaining,

      (b)   any such Employee who has voluntarily waived participation in the
            Plan, and

      (c)   any such Employee who is compensated on an hourly basis.

      Notwithstanding any provision of the Plan to the contrary, an individual
      who an Employer determines to be a contract employee, independent
      contractor, leased employee (including a Leased Employee as defined
      hereunder), leased owner, leased manager, shared employee or person
      working under a similar classification shall not become a Covered Employee
      hereunder, regardless of whether any such individual is ultimately
      determined to be a common law employee, unless and until the Employer
      shall otherwise determine.

2.13  "Credited Service" shall mean a Participant's service determined in
      accordance with Article IV hereof for the purpose of calculating the
      amount of benefit earned under the Plan.

2.14  "Date of Hire" shall mean the date on which an Employee first commences
      employment or reemployment and works at least one Hour of Service for an
      Employer or an Affiliate.

2.15  "Date of Severance" shall mean the earliest to occur of the following
      dates:

      (a)   date of retirement,

      (b)   date of voluntary employment termination,

      (c)   date of discharge by an Employer unless he is subsequently
            reemployed and given pay back to the date of discharge,

      (d)   date of death,


                                       4

      (e)   the first anniversary of a date of absence from active employment
            for any other reason; provided, however, that the second anniversary
            of a date of absence from active employment shall be used for an
            Employee who is absent by reason of a Maternity or Paternity Absence
            which commenced on or after December 31, 1985, or who is absent by
            reason of Total and Permanent Disability.

      An Employee shall not incur a Date of Severance while he is in the active
      service of the United States Armed Forces if his reemployment rights are
      protected by law.

2.16  "Earliest Retirement Age" shall mean the earliest date on which, under the
      Plan, the Participant could elect to receive retirement benefits in
      accordance with Section 5.1 or 5.2 hereof.

2.17  "Effective Date" shall mean December 31, 1946.

2.18  "Employee" shall mean any common-law employee of an Employer or an
      Affiliate; provided, however, that for purposes of Section 2.22;
      "Employee" shall include any self-employed individual performing services
      for an Employer or Affiliate who is treated as an employee under Section
      401(c)(1) of the Code.

2.19  "Employer(s)" shall mean the Company, Erie Family Life Insurance Company,
      Erie Insurance Exchange, Erie Insurance Company, EI Holding Corp., EI
      Service Corp., Erie Insurance Company of New York, Erie Insurance Property
      & Casualty Company, Flagship City Insurance Company and any other
      Affiliate which may adopt this Plan.

2.20  "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
      amended.

2.21  "Final Average Earnings" shall mean 1/36th of the aggregate Compensation
      received during the thirty-six consecutive calendar months as a Covered
      Employee which produces the greatest aggregate Compensation out of the one
      hundred twenty calendar month period ending on the earlier of the date on
      which the Participant retires or terminates employment with the Employers
      or the date on which the Participant is no longer considered a Covered
      Employee.

2.22  "Highly Compensated" shall mean, for years beginning on and after January
      1, 1997, any Employee who is a more than five percent (5%) owner of an
      Employer or both

                                       5

      earned $80,000 or more in Test Compensation from the Employer in the prior
      Plan Year (the "lookback year") and was member of the Top Paid Group for
      such year; provided, however, that such $80,000 figure shall be adjusted
      for cost of living at the same time and in the same manner as determined
      under Code Section 415(d). For years beginning before January 1, 1997,
      "Highly Compensated" shall mean any Employee who meets any of the
      following requirements in either the lookback year or the current Plan
      Year (the "determination year"):

      (a)   is a more than five percent (5%) owner of an Employer;

      (b)   earns $75,000 or more in Test Compensation;

      (c)   earns $50,000 or more in Test Compensation and is member of the Top
            Paid Group;

      (d)   is an officer of an Employer (as described in Section 416(i) of the
            Code) who earns Test Compensation of more than fifty percent (50%)
            of the amount in effect under Section 415(b)(1)(A) of the Code for
            such year; or

      (e)   is a former Employee who was Highly Compensated upon separation from
            service prior to the determination year, performs no service for an
            Employer during the determination year or was Highly Compensated at
            any time after age 55.

      In addition, the Test Compensation paid to any family member (spouse,
      lineal ascendant or descendent and their spouses) of a more than five
      percent owner or of one of the top 10 Highly Compensated Employees on the
      basis of Test Compensation, shall be aggregated with the Test Compensation
      of such Employee for the purposes of this definition. Notwithstanding the
      foregoing, an Employee will not be Highly Compensated for the current year
      merely by compensation or officer status, unless he is in the top 100
      Employees by Test Compensation. The amounts indicated in (b) and (c) above
      shall be adjusted for cost of living by the Secretary of the Treasury at
      the same time and in the same manner as under Code Section 415(d). To the
      extent permitted under regulations and other guidance promulgated by the
      Internal Revenue Service, the Company may elect to determine the status of
      Highly Compensated Employees on a basis other than that provided above.

2.23  "Hour of Service" shall include the following:

      (a)   each hour for which an Employee is directly or indirectly paid or
            entitled to payment from an Employer or an Affiliate as an Employee
            for the performance of duties during an applicable computation
            period (these hours must be credited

                                       6

            to the Employee in the computation period during which the duties
            were performed and not when paid, if different); and

      (b)   each hour for which back pay, irrespective of mitigation of damages,
            has been awarded or agreed to by an Employer or an Affiliate (these
            hours must be credited in the computation period or periods to which
            the award or agreement pertains rather than that in which the
            payment, award or agreement was made); and

      (c)   each hour for which an Employee is directly or indirectly paid or
            entitled to payment from an Employer or an Affiliate for reasons,
            such as vacation, sickness or disability, other than for the
            performance of duties (these hours shall be calculated and credited
            pursuant to Section 2530.200b-2 of the Department of Labor
            regulations which are incorporated herein by reference).

2.24  "Leased Employee" shall mean any person (other than an Employee of an
      Employer) who pursuant to an agreement between the Employer and any other
      person ("leasing organization") has performed services for the Employer
      (or for the Employer and related persons determined in accordance with
      Section 414(n)(6) of the Code) on a substantially full-time basis for a
      period of at least one year and, for periods before January 1, 1997, such
      services are of a type historically performed by employees in the business
      field of the Employer or, for periods on and after January 1, 1997, such
      services are performed under primary direction or control by the
      recipient. Except as provided below, any person satisfying the foregoing
      criteria shall be treated as an Employee. Contributions or benefits
      provided a Leased Employee by the leasing organization which are
      attributable to services performed for the Employer shall be treated as
      provided by the Employer.

      Notwithstanding the foregoing, a Leased Employee shall not be considered
      an Employee of an Employer if: (i) such Leased Employee is covered by a
      money purchase pension plan providing: (1) a nonintegrated employer
      contribution rate of at least 10 percent of compensation, (2) immediate
      participation, and (3) full and immediate vesting; and (ii) Leased
      Employees do not constitute more than 20 percent of the Employer's
      non-Highly Compensated workforce.

2.25  "Maternity or Paternity Absence" shall mean an absence from work by an
      Employee for any period:

      (a)   by reason of pregnancy of the Employee,


                                       7

      (b)   by reason of the birth of a child of the Employee,

      (c)   by reason of the placement of a child with the Employee in
            connection with the adoption of such child by such Employee, or

      (d)   for purposes of caring for such child for a period immediately
            following such birth or placement.

      An absence will not be considered a "Maternity or Paternity Absence"
      unless the Employee provides the Administrator with such timely
      information as the Administrator may reasonably require to establish that
      the absence from work is for one of the four permitted reasons outlined
      above. Nothing in this Plan shall require an Employer to grant a paid
      leave of absence to any Employee.

2.26  "Normal Retirement Age" of a Participant shall be age 65.

2.27  "Normal Retirement Date" of a Participant shall be the first day of the
      month next following the month in which his sixty-fifth birthday occurs.

2.28  "Participant" shall mean any Covered Employee and any former Covered
      Employee who is entitled to, or who is receiving, a retirement benefit or
      deferred vested pension under the Plan.

2.29  "Period of Severance" shall mean the period of time between an Employee's
      Date of Severance and the date as of which he performs his first Hour of
      Service following reemployment.

2.30  "Plan" or "Pension Plan" shall mean this "Erie Insurance Group Retirement
      Plan for Employees" as herein set forth with all amendments, modifications
      and supplements hereafter made.

2.31  "Plan Year" shall mean any period of 12 consecutive calendar months next
      preceding an Anniversary Date of the Plan.

2.32  "Service" shall mean an Employee's service determined in accordance with
      Article IV hereof for the purposes of meeting the eligibility requirements
      for a benefit under the Plan.


                                       8

2.33  "Social Security Covered Compensation" shall mean, for any Plan Year, the
      average (without indexing) of the Social Security taxable wage bases in
      effect for each calendar year during the 35-year period ending with the
      last day of the calendar year in which the Participant attains (or will
      attain) Social Security Retirement Age (as such term is defined in Section
      10.1(a)(iv) hereof). In determining a Participant's Social Security
      Covered Compensation for a Plan Year, the Social Security taxable wage
      base for the current Plan Year and any subsequent Plan Year shall be
      assumed to be the same as in effect for the Plan Year for which the
      determination is being made. A Participant's Social Security Covered
      Compensation shall be automatically adjusted for each Plan Year in
      accordance with these provisions, up to and including the Plan Year in
      which the Participant attains Social Security Retirement Age.

2.34  "Test Compensation" shall mean, for any Plan Year, an Employee's
      compensation, reported under Sections 6041 and 6051 of the Code on Form
      W-2, as paid by the Company or other Employer for the calendar year ending
      with or within such Plan Year, including any amounts contributed pursuant
      to a salary reduction election on behalf of a Covered Employee to a plan
      described in Sections 125, 402(e)(3), 402(h)(1)(B), 403(b), 457(b) or, for
      periods on and after January 1, 2001, 132(f)(4) of the Code for the period
      in question. Test Compensation in any given year shall not exceed the
      adjusted annual limitation in effect for such year (as set forth in
      Section 2.11), provided that such limitation shall not be applied in
      determining the top 10 Highly Compensated Employees subject to family
      aggregation under the Plan (applicable to Plan Years beginning before
      January 1, 1997) and for purposes of determining the status of an Employee
      as a Highly Compensated Employee or Key Employee. To the extent permitted
      under regulations and other guidance promulgated by the Internal Revenue
      Service, the Company may elect to determine Test Compensation on a basis
      other than that provided above.

2.35  "Top Paid Group" means all active Employees who, as of a given year, are
      in the top twenty percent (20%) of the Company's work force on the basis
      of Test Compensation for such year, excluding the following:

      (a)   employees who have not completed six (6) months of Service by the
            end of such year;

      (b)   employees who work less than seventeen and one-half (17-1/2) hours
            per week for such year;

      (c)   employees who normally do not work more than six (6) months in a
            year;


                                       9

      (d)   employees under age twenty-one (21) at the end of such year; and

      (e)   non-resident aliens who received no U.S. - source income for such
            year.

      For purposes of this Section, the Company's work force shall include
      individuals employed by an Affiliate.

2.36  "Total and Permanent Disability" shall mean permanent incapacity resulting
      in the Participant being unable to engage in any gainful employment or
      occupation by reason of any medically demonstrable physical or mental
      condition, excluding, however, (a) incapacity contracted, suffered or
      incurred while the Participant was engaged in or which resulted from
      having engaged in a felonious enterprise; and (b) incapacity contracted,
      suffered or incurred in the employment of other than an Employer,
      including self-employment.

2.37  "Trust Agreement" shall mean the trust agreement between the Company and a
      Trustee as provided in Section 9.1, together with all amendments,
      modifications and supplements, thereto.

2.38  "Trustee" shall mean the Trustee or Trustees designated under a Trust
      Agreement including any successor or successors.

2.39  "Trust Fund" or "Fund" shall mean the retirement plan trust fund
      established by the Company in accordance with Article IX.


                                       10

                                   ARTICLE III

                           ADMINISTRATION OF THE PLAN

3.1   Pension Administrator

      The Plan shall be administered by a Pension Administrator (the
      "Administrator") who shall serve at the pleasure of the Board of
      Directors. Any individual serving as the Administrator may resign by
      delivering his written resignation to the Board. In the event of the
      death, resignation or removal of the Administrator, the Board shall fill
      the vacancy. In making the appointment, the Board shall not be limited to
      any particular group, and nothing herein contained shall be construed to
      prevent any Participant, director, officer, employee or shareholder of the
      Employers from serving as the Administrator. The Administrator will not be
      compensated from the Trust Fund for services performed in such capacity,
      but the Company or Fund will reimburse such individual for expenses
      reasonably incurred by him in such capacity. If the Board does not appoint
      any individuals to the Administrator, then the Company shall act as the
      Administrator.

      Appointment by the Board shall be evidenced by a certified copy of the
      resolution of the Board making such appointment, and copies of such
      certified resolution shall be delivered to the Trustee and to such other
      persons as may require such notice.

3.2   Powers

      The Administrator will have full power to administer the Plan in all of
      its details, subject, however, to the requirements of ERISA. This power
      shall include having the sole and absolute discretion to interpret and
      apply the provisions of the Plan to determine the rights and status
      hereunder of any individual, to decide disputes arising under the Plan,
      and to make any determinations and findings of fact with respect to
      benefits payable hereunder and the persons entitled thereto as may be
      required for any purpose under the Plan. Without limiting the generality
      of the above, the Administrator is granted the following authority which
      it shall discharge in its sole and absolute discretion in accordance with
      Plan provisions as interpreted by the Administrator:

      (a)   To make and enforce such rules and regulations as it deems necessary
            or proper for the efficient administration of the Plan, including
            the modification of the claims procedure under Section 3.8 in
            accordance with any regulations issued under Section 503 of ERISA.

      (b)   To interpret the Plan.


                                       11

      (c)   To decide all questions concerning the Plan and the eligibility of
            any person to participate in the Plan, his period of participation
            and/or service under the Plan, his date of birth, his eligibility to
            accrue a benefit under the Plan and to receive a distribution from
            the Plan.

      (d)   To compute the amount of benefits which will be payable to any
            Participant or other person in accordance with the provisions of the
            Plan, and to determine the identity of the person or persons to whom
            such benefits will be paid.

      (e)   To authorize the payment of Plan benefits and to direct cessation of
            benefit payments.

      (f)   To appoint one or more investment managers to manage the investment
            and reinvestment of the Fund and to enter into management contracts
            on behalf of the Company with respect to such appointments. Unless
            and until the Administrator appoints an investment manager with
            respect to all or a specific portion of the Fund, the Trustee shall
            have exclusive authority to manage and control all or such portion
            of the Fund.

      (g)   To appoint, employ or engage such other agents, counsel accountants,
            consultants and actuaries as may be required to assist in
            administering the Plan.

      (h)   To establish procedures to determine whether a domestic relations
            order is a qualified domestic relations order within the meaning of
            Section 414(p) of the Code, to determine under such procedures
            whether a domestic relations order is a qualified domestic relations
            order and whether a putative alternate payee otherwise qualifies for
            benefits hereunder, to inform the parties to the order as to the
            effect of the order, and to direct the Trustee to hold in escrow or
            pay any amounts so directed to be held or paid by the order.

      (i)   To determine whether the Plan has incurred a partial termination.

      (j)   To obtain from the Employers, Employees, Participants, spouses and
            Beneficiaries such information as shall be necessary for the proper
            administration of the Plan.

      (k)   To perform all reporting and disclosure requirements imposed upon
            the Plan by ERISA, the Code or any other lawful authority.

      (l)   To take such steps as it, in its discretion, considers necessary
            and/or appropriate to remedy any inequity under the Plan that
            results from incorrect information received or communicated or as
            the consequence of administrative error.

      (m)   To correct any defect, reconcile any inconsistency or supply any
            omission under the Plan.

      (n)   To delegate its powers and duties to others in accordance with
            Section 3.3.


                                       12

      (o)   To exercise such other authority and responsibility as is
            specifically assigned to it under the terms of the Plan and to
            perform any other acts necessary to the performance of its powers
            and duties.

      The Administrator at its discretion may either request the Company or
      direct the Fund to pay for any or all services rendered by the Trustee and
      by persons appointed, employed or engaged under Section 3.2(f) or (g) or
      under the terms of the Trust Agreement.

      The Administrator's interpretations, decisions, computations and
      determinations under this Section 3.2 which are made in good faith will be
      final and conclusive upon the Employers, all Participants and all other
      persons concerned. Any action taken by the Administrator with respect to
      the rights or benefits of any person under the Plan shall be revocable by
      the Administrator as to payments or distributions not theretofore made,
      pursuant to such action, from the Trust Fund; and appropriate adjustments
      may be made in future payments or distributions to a Participant or
      Beneficiary to offset any excess payment or underpayment previously made
      to such Participant or Beneficiary from the Trust Fund. No ruling or
      decision of the Administrator in any one case shall create a basis for a
      retroactive adjustment in any other case prior to the date of written
      filing of each specific claim.

3.3   Delegation of Duties

      The Administrator may, from time to time, designate any individual to
      carry out any of the responsibilities of the Administrator other than the
      appointment of an investment manager(s). The individual so designated will
      have full authority or such limited authority as the Administrator may
      specify, to take such actions as are necessary or appropriate to carry out
      the responsibilities assigned by the Administrator.

3.4   Administrator as Named Fiduciary

      The Administrator will be a "named fiduciary" for purposes of section
      402(a)(1) of ERISA with authority to control and manage the operation and
      administration of the Plan.

3.5   Conclusiveness of Various Documents

      The Administrator and the Company and its directors and officers will be
      entitled to rely upon all tables, valuations, certificates and reports
      furnished by any actuary,

                                       13

      accountant, counsel or other expert appointed, employed or engaged by the
      Administrator or the Company.

3.6   Actions to be Uniform

      Any discretionary actions to be taken under the Plan by the Administrator
      will be nondiscriminatory and uniform with respect to all persons
      similarly situated.

3.7   Liability and Indemnification

      To the full extent allowed by law, the Administrator shall not incur any
      liability to any Participant or Beneficiary, or to any other person, by
      reason of any act or failure to act on the part of the Administrator if
      such act or omission is not the result of the Administrator's gross
      negligence, willful misconduct or exercise of bad faith. To the full
      extent allowed by law, the Company agrees to indemnify the Administrator
      against all liability and expenses (including reasonable attorney's fees
      and other reasonable expenses) occasioned by any act or omission to act if
      such act or omission is not the result of the Administrator's gross
      negligence, willful misconduct or exercise of bad faith. Neither this
      Section 3.7 nor any other provision of this Plan shall be applied to
      invalidate, modify, or limit in any respect any contract, agreement, or
      arrangement for indemnifying or insuring the Administrator against, or
      otherwise limiting, such liability or expense, or for settlement of such
      liability, to the extent such contract, agreement, or arrangement is not
      precluded by the terms of Section 410 of ERISA.

3.8   Claims Review Procedure.

      The Administrator shall be responsible for the claims procedure under the
      Plan. An application for a retirement benefit or other benefit under the
      Plan shall be considered a claim for purposes of this Section 3.8.

      (a)   Original Claim. In the event a claim of any Participant,
            Beneficiary, alternate payee, or other person (hereinafter referred
            to in this Section as the "Claimant") for a benefit is partially or
            completely denied, the Administrator shall give, within ninety (90)
            days after receipt of the claim (or if special circumstances, made
            known to the Claimant, require an extension of time for processing
            the claim, within one hundred eighty (180) days after receipt of the
            claim), written notice of such denial to the Claimant. Such notice
            shall set forth, in a manner calculated to be understood by the
            Claimant, the specific reason or reasons for the denial (with
            reference to pertinent Plan provisions upon which the denial is
            based); an

                                       14

            explanation of additional material or information, if any, necessary
            for the Claimant to perfect the claim; a statement of why the
            material or information is necessary; on and after January 1, 2002,
            a statement of the Claimant's right to bring a civil action under
            Section 502(a) of ERISA; and an explanation of the Plan's claims
            review procedure, including the time limits applicable to such
            procedure. If the notice of denial is not furnished within the
            required time period specified above, the claim shall be deemed to
            be denied and the Claimant shall be permitted to proceed to the
            review stage described in paragraph (b).

      (b)   Review of Denied Claim.

            (i)   A Claimant whose claim is partially or completely denied shall
                  have the right to request a full and fair review of the denial
                  by a written request delivered to the Administrator within
                  sixty (60) days of receipt of the written notice of claim
                  denial (or sixty (60) days after the date on which the claim
                  is deemed denied under paragraph (a) above), or within such
                  longer time as the Administrator, under uniform rules,
                  determines. In such review, the Claimant or his duly
                  authorized representative shall have the right to review, upon
                  request and free of charge, all documents, records or other
                  information relevant to the claim and to submit any written
                  comments, documents, or records relating to the claim to the
                  Administrator.

            (ii)  The Administrator, within sixty (60) days after the request
                  for review, or in special circumstances, such as where the
                  Administrator in its sole discretion holds a hearing, within
                  one hundred twenty (120) days of the request for review, will
                  submit its decision in writing. Such decision shall take into
                  account all comments, documents, records and other information
                  properly submitted by the Claimant, whether or not such
                  information was considered in the original claim
                  determination. The decision on review will be binding on all
                  parties, will be written in a manner calculated to be
                  understood by the Claimant, will contain specific reasons for
                  the decision and specific references to the pertinent Plan
                  provisions upon which the decision is based, will indicate
                  that the Claimant may review, upon request and free of charge,
                  all documents, records or other information relevant to the
                  claim and on and after January 1, 2002, will contain a
                  statement of the Claimant's right to bring a civil action
                  under Section 502(a) of ERISA. If

                                       15

                  no decision is made within the time period specified above,
                  the claim shall be deemed to be denied on review.

            (iii) If a Claimant fails to file a claim or request for review in
                  the manner and in accordance with the time limitations
                  specified herein, such claim or request for review shall be
                  waived, and the Claimant shall thereafter be barred from again
                  asserting such claim.

      (c)   Determination by the Committee Conclusive. The Administrator's
            determination of factual matter relating to Participants,
            Beneficiaries and alternate payees including, without limitation, a
            Participant's Credited Service, Service and any other factual
            matters, shall be conclusive. The Administrator and the Company and
            its respective officers and directors shall be entitled to rely upon
            all tables, valuations, certificates and reports furnished by an
            actuary, any accountant for the Plan, the Trustee or any investment
            managers and upon opinions given by any legal counsel for the Plan
            insofar as such reliance is consistent with ERISA. The actuary, the
            Trustee and other service providers may act and rely upon all
            information reported to them by the Administrator and/or the Company
            and need not inquire into the accuracy thereof nor shall be charged
            with any notice to the contrary.

3.9   Waiver of Participation

      It is the purpose of this Plan to provide for the accrual of retirement
      benefits for all Covered Employees. Notwithstanding the foregoing, any
      Covered Employee may waive participation in this Plan by executing a
      Waiver of Participation on a form provided by the Administrator for such
      purpose. Any Waiver of Participation shall be effective for the Plan Year
      in which it is executed and shall be irrevocable. During any Plan Year for
      which a Waiver of Participation is in effect, no Service, Credited Service
      or Compensation shall be recognized under the Plan for the Covered
      Employee.


                                       16

                                   ARTICLE IV

                               SERVICE PROVISIONS

4.1   Service

      Service shall be used to determine a Participant's vested rights under the
      Plan. An Employee shall receive Service for the period of time between his
      Date of Hire and his Date of Severance, provided that no Service shall be
      received for the period of continued absence between the first and second
      anniversary of the date of first absence from work by reason of a
      Maternity or Paternity Absence. Service shall be counted for full years
      only. Service shall include any prior periods of Service that are
      reinstated in accordance with Section 4.3 below. Service shall include any
      Period of Severance which has continued for less than one year.

      Notwithstanding the foregoing, Service (but not Credited Service) shall
      include periods of absence granted under The Family and Medical Leave Act
      of 1993, to the extent of the minimum service credit required by said Act.

4.2   Credited Service

      Credited Service shall be used to compute the amount of a Participant's
      benefit and to determine a Participant's eligibility for an early
      retirement and a disability retirement under the Plan. Credited Service
      shall be based on Service but shall not include (i) any period of Service
      in which a Participant is not a Covered Employee, and (ii) any Period of
      Severance; provided, however, that a Participant's Credited Service shall
      include that Credited Service accumulated during the period in which the
      Participant is eligible for a disability retirement pension (as determined
      under Sections 5.3, 6.3 and 7.2 hereof). Solely for purposes of computing
      the amount of a Participant's benefit under Section 6.1 and subject to the
      foregoing provisions of this Section, Credited Service shall include a
      year of credit for any fraction of a year of Service.

4.3   Loss and Reinstatement of Service

      In the event a Participant incurs a Date of Severance prior to his
      becoming eligible for a retirement benefit or deferred vested pension
      under the Plan, he shall be deemed to receive a distribution equal to the
      actuarial equivalent value of the entire vested pension earned through his
      Date of Severance. In such a case, the Participant shall lose his Service
      and Credited Service and his Accrued Pension shall be forfeited as of such
      date of deemed distribution. If subsequently reemployed as a Covered
      Employee, a

                                       17

      Participant shall, after again completing one year of Service, be
      considered a Plan Participant retroactively as of such date of
      reemployment and have his forfeited Service, Credited Service and Accrued
      Pension reinstated if his last Period of Severance is less than the
      greater of:

      (a)   five years, or

      (b)   the Participant's forfeited Service (including any periods of
            Service previously reinstated under the provisions of this Section
            4.3 or its predecessor).

4.4   Transfer To Other Employment

      Upon the transfer of a Participant covered by the Plan to other employment
      with an Employer or Affiliate whereby he ceases to be a Covered Employee
      hereunder, his Accrued Pension based on his Credited Service and Final
      Average Earnings as of the transfer date shall be frozen and Credited
      Service shall cease to accrue for purposes of the Plan. In the event such
      Participant remains in the employment of an Employer until such time as,
      except for such transfer, he would have met the age, service and/or other
      eligibility requirements for any pension under the Plan, such frozen
      Accrued Pension shall become payable in accordance with the appropriate
      provisions of the Plan as in effect on the date of transfer.

4.5   Transfer From Other Employment

      Upon transfer or retransfer of an individual from other employment with an
      Employer or Affiliate such that the individual becomes a Covered Employee
      hereunder, his years of Service as otherwise computed under this Article
      IV will include the period of his employment with an Employer or Affiliate
      prior to such transfer or retransfer for the purpose of meeting the
      vesting requirements under this Plan; provided, however, that only years
      of Credited Service acquired while employed as a Covered Employee covered
      under this Plan shall be used to compute the amount of any pension under
      this Plan.


                                       18

                                    ARTICLE V

                            ELIGIBILITY FOR PENSIONS

5.1   Normal Retirement

      A Participant whose employment with an Employer and all Affiliates is
      terminated when or after he attains Normal Retirement Age shall be
      eligible for a normal retirement pension in the amount as provided in
      Section 6.1 hereof. A Participant's right to his normal retirement pension
      shall be nonforfeitable upon the attainment of his Normal Retirement Age
      provided he is an Employee on such date. A Participant continuing in
      employment with an Employer after his Normal Retirement Date in a capacity
      such that he completes 40 or more Hours of Service per month will be
      provided with a notice incorporating the substance of the notification
      described in Section 2530.203-3(b)(4) of the Code of Federal Regulations.
      Such notice shall include a statement that the Participant's pension will
      be suspended and permanently withheld for months in which he completes 40
      or more Hours of Service. Any benefit accrual earned by a Participant for
      any given Plan Year ending on or after the date on which the Participant
      attains Normal Retirement Age shall be reduced (but not below zero) by the
      amount of any actuarial adjustment which may be required in connection
      with a delay in payment of a Participant's normal retirement benefit or
      the suspension of benefits otherwise payable after the Participant attains
      Normal Retirement Age.

5.2   Early Retirement

      A Participant with 15 or more years of Credited Service whose employment
      with an Employer and all Affiliates is terminated when or after he reaches
      the age of 55 but prior to the attainment of age 65, shall be eligible for
      an early retirement pension in the amount as provided in Section 6.2
      hereof.

5.3   Disability Retirement

      A Participant whose status as a Covered Employee is terminated due to his
      Total and Permanent Disability after 15 or more years of Credited Service
      and prior to the attainment of age 65, and who is eligible for and
      receiving disability benefits under the Erie Insurance Group Long Term
      Disability Plan shall be eligible for a disability retirement pension in
      an amount as provided in Section 6.3 hereof beginning at his Normal
      Retirement Date providing he remains Totally and Permanently Disabled up
      to his Normal Retirement Date.


                                       19

5.4   Vesting

      A Participant with 5 years or more of Service and whose employment with an
      Employer and all Affiliates is terminated at a time when he is ineligible
      for any retirement pension under the Plan shall be eligible for a deferred
      vested pension as computed under Section 6.4.

      If a Participant is reemployed as a Covered Employee by an Employer after
      having qualified for a deferred vested pension in accordance with this
      Section 5.4, such Participant shall retain his right to receive such
      deferred vested pension and he shall be reinstated with the Service and
      Credited Service to which he was entitled at the time of his prior
      termination of employment. Any benefits to which the Participant may be
      entitled upon his subsequent retirement or termination of employment shall
      be reduced actuarially, as provided in Section 7.4, to reflect any
      deferred vested pension benefits paid prior to reemployment.



                                       20

                                   ARTICLE VI

                               AMOUNT OF PENSIONS

6.1   Normal Retirement Pension

      Subject to the provisions of Section 7.1 and Article X, the monthly
      pension of a Participant who is eligible for a normal retirement pension
      under the provisions of Section 5.1 (as stated in the form of a life
      annuity) shall be one-twelfth (1/12) of the result obtained by multiplying
      the sum of (a) and (b) by (c), where:

      (a)   equals 1.0% of the Participant's Final Average Earnings not in
            excess of Social Security Covered Compensation;

      (b)   equals 1.5% of the Participant's Final Average Earnings in excess of
            Social Security Covered Compensation; and

      (c)   equals the Participant's Credited Service not in excess of 30 years.

      In no event shall the overall permitted disparity limits of Section
      1.401(l)-5 of the Income Tax Regulations be exceeded.

6.2   Early Retirement Pension

      Subject to the provisions of Section 7.1 and Article X, the monthly early
      retirement pension of a Participant eligible for an early retirement
      pension under the provisions of Section 5.2 shall be, at the option of the
      Participant, either (a) or (b) as set forth below:


      (a)   A deferred pension, commencing as of the Participant's Normal
            Retirement Date, equal to the amount of pension, determined under
            Section 6.1, to which he is entitled based upon his Credited Service
            and Final Average Earnings as of his date of early retirement and
            the level of Social Security Covered Compensation in effect on such
            date.

      (b)   An immediate pension, commencing as of the month following the month
            in which such Participant retires early, determined as provided in
            (a) above, but reduced by 1/4 of 1 percent for each complete
            calendar month up to 60 such months and by 3/8ths of 1 percent for
            each complete calendar month in excess of 60 months, by which his
            early retirement pension commencement date precedes his Normal
            Retirement Date.

6.3   Disability Retirement Pension

      Subject to the provisions of Section 7.2 and Article X, a Participant
      eligible for disability benefits under the provisions of Section 5.3 and
      under Title II of the Social Security Act shall receive a disability
      retirement pension beginning as of his Normal

                                       21

      Retirement Date. Such disability retirement pension shall be in an amount
      determined in accordance with Section 6.1 assuming that:

      (a)   service and Credited Service are granted for each calendar year (and
            part thereof) during which he continues to be Totally and
            Permanently Disabled and to qualify for Social Security disability
            benefits, and

      (b)   his Compensation during his last full calendar year before his
            termination due to disability continues unchanged from the calendar
            year including his date of disability to the calendar year including
            his Normal Retirement Date, and

      (c)   his Social Security Covered Compensation is based on the level in
            effect at the time he becomes disabled.

6.4   Deferred Pension Upon Termination of Service

      Subject to the provisions of Section 7.3 and Article X, the monthly
      pension, commencing as of Normal Retirement Date, of a former Covered
      Employee whose employment with an Employer and Affiliates has terminated
      after he has become eligible for a deferred vested pension in accordance
      with Section 5.4, shall be equal to the pension such Participant would
      have been entitled to under Section 6.2(a) as of his termination of
      employment, multiplied by a vesting percentage determined in accordance
      with the table immediately below:



Years of Service                   Vesting Percentage
- ----------------                   ------------------
                                
Less than 5                                    0%
5 or more                                    100%


      Except as otherwise provided under Section 8.1, any Participant having
      less than five years of Service at the time of his death or other
      termination of employment with the Employers or an Affiliate shall have no
      vested rights under this Plan and neither he nor his spouse or Beneficiary
      shall be entitled to any benefits under this Plan.

      A former Covered Employee who is eligible for a deferred vested pension
      and who is credited with 15 or more years of Credited Service may elect
      (by written application) to commence his deferred vested pension in a
      reduced amount at any time between the ages of 55 and 65, in which case
      the monthly pension amount as determined above shall be reduced in
      accordance with the provisions of subsection (b) of Section 6.2 based on
      the number of months that his Annuity Starting Date precedes his Normal
      Retirement Date.


                                       22

6.5   Increase in Pension for Certain Retired Participants

      (a)   Notwithstanding the foregoing provisions of this Article VI and
            effective for Plan payments made on or after January 1, 1996, the
            monthly pension payable to a Qualified Pensioner (or to the
            Beneficiary of a Qualified Pensioner) shall be increased by the
            greater of five percent (5%) or twenty dollars ($20.00). For
            purposes of this subsection (a), a "Qualified Pensioner" means a
            Participant who retired under the normal retirement, early
            retirement, or disability retirement provisions of the Plan prior to
            January 1, 1994.

      (b)   Notwithstanding the foregoing provisions of this Article VI and
            effective for Plan payments made on or after January 1, 1999, the
            monthly pension payable to a Qualified Pensioner (or to the
            Beneficiary of a Qualified Pensioner) shall be increased by the
            greater of four percent (4%) or fifteen dollars ($15.00). For
            purposes of this subsection (b), a "Qualified Pensioner" means a
            Participant who retired under the normal retirement, early
            retirement, or disability retirement provisions of the Plan and
            commenced Plan payment prior to January 1, 1997.

6.6   Offset of Accruals by Plan Distributions

      In the event distribution of benefits commence to an employed Participant
      pursuant to Section 7.10 or for any other reason after the employed
      Participant has attained his Normal Retirement Age, any increase in the
      Participant's monthly benefit which accrues in any Plan Year in which such
      distribution is made shall be reduced (but not below zero) by the
      Actuarial Equivalent of total Plan benefit distributions made to such
      Participant by the close of such Plan Year.

6.7   Non-Duplication of Benefits

      (a)   There shall be no duplication of any retirement benefit or deferred
            vested pension benefit payable under this Plan, and any pension or
            retirement benefit payable under any other qualified defined benefit
            pension, retirement, or similar plan to which an Employer or
            predecessor Employer of the particular Participant has contributed,
            based upon the same period of service. Unless such other benefits
            are clearly intended to be in addition to benefits under this Plan,
            the Administrator shall make or cause to be made appropriate
            adjustments in the retirement benefit or deferred vested pension
            benefit payable under this Plan in respect to any Participant to
            carry out the provisions of this paragraph.


                                       23

      (b)   No benefit shall be payable to any Participant under more than one
            Section of the Plan for the same period of time. No retirement
            benefit or deferred vested pension benefit shall be paid to any
            Participant while he is receiving benefits under a long-term
            disability benefit contract or plan to which an Employer or
            Affiliate has contributed.

6.8   Special Provisions Pertaining to Section 401(a)(17) Employees

      Unless otherwise provided under the Plan, the Accrued Pension of each
      Section 401(a)(17) Employee (as hereinafter defined) will be the greater
      of the Accrued Pension determined for such Employee under (a) or (b)
      below:

      (a)   The Employee's Accrued Pension determined with respect to the
            benefit formula applicable for the Plan Year beginning on or after
            December 31, 1994, as applied to the Employee's total years of
            service taken into account under the Plan for the purpose of benefit
            accruals; or

      (b)   The sum of: (i) the Employee's Accrued Pension as of the last day of
            the last Plan Year beginning before December 31, 1994, frozen in
            accordance with Section 1.401(a)(4)-13 of the Income Tax
            Regulations, and (ii) the Employee's Accrued Pension determined
            under the benefit formula applicable for the Plan Years beginning on
            and after December 31, 1994, as applied to the Employee's years of
            service credited for Plan Years beginning on and after December 31,
            1994, for purposes of benefit accruals.

      A "Section 401(a)(17) Employee" means a Covered Employee whose current
      Accrued Pension as of a date on or after the first day of the first Plan
      Year beginning on or after December 31, 1994, is based on Compensation for
      a year beginning on or after December 31, 1994, that exceeded $150,000.


                                       24

                                   ARTICLE VII

                      COMMENCEMENT AND DURATION OF PENSIONS

7.1   Normal and Early Retirement Pensions

      Any normal or early retirement pension shall be payable to a retired
      Participant who has applied therefor in accordance with the rules
      established by the Administrator, commencing as of the first day of the
      month next following the date as of which he retires (or, if later,
      commencing as of the first day of the month next following the date as of
      which such application was made), and shall be payable monthly for the
      remaining life of such retired Participant. The last payment to the
      retired Participant under this form shall be for the month in which the
      death of such retired Participant occurs. However, if the retired
      Participant duly accepted the Automatic Surviving Spouse's Pension as set
      forth in Section 7.5 or elected an optional form of pension in Section 7.7
      and is receiving his retirement pension pursuant to such election, then
      any pension payments to him and his surviving spouse or Beneficiary shall
      be as set forth in Section 7.5 or 7.7, whichever applicable.

7.2   Disability Retirement Pension

      A disability retirement pension shall be payable to a disabled Participant
      who has applied therefor in accordance with the rules established by the
      Administrator, commencing as of the Participant's Normal Retirement Date
      (or, if later, commencing as of the first day of the month next following
      the date as of which such application was made), provided the Participant
      has remained continuously disabled (within the meaning of Section 5.3) up
      to his Normal Retirement Date.

      To ascertain whether a Participant retains his eligibility for a
      disability retirement pension up to his Normal Retirement Date, he may be
      required by the Administrator to submit to a medical examination at any
      time prior to age 65, but not more often than semi-annually. If it is
      determined by the Administrator that he is no longer totally and
      permanently disabled on the basis of such an examination, or that he has
      engaged or is engaging in gainful employment (except for purposes of
      rehabilitation approved by the Administrator), or that prior to age 65 he
      ceases to be eligible for disability benefits under the Social Security
      Act, then his eligibility for a disability retirement pension will end
      and, if reemployed, his Credited Service accumulated to that time shall be
      reinstated. If such retired Participant is not reemployed by an Employer
      upon the

                                       25

      termination of such disability, he shall be entitled to such pension as
      may be available to him under Article V based on his then current age and
      Credited Service.

      In the event a person eligible for a disability retirement pension refuses
      to submit to a medical examination as required by the Administrator, all
      his rights to a disability retirement pension hereunder shall cease until
      he submits to such examination.

      Any disability pension shall be payable monthly for the remaining life of
      such retired Participant. The last payment to the retired Participant
      under this form shall be for the month in which the death of such retired
      Participant occurs. However, if the Participant duly accepted the
      Automatic Surviving Spouse's Pension as set forth in Section 7.5 or
      elected an optional form of pension in Section 7.7 and is receiving his
      retirement pension pursuant to such election, then any pension payments to
      him and his surviving spouse or Beneficiary shall be as set forth in
      Section 7.5 or 7.7, whichever applicable.

7.3   Deferred Vested Pension

      A deferred vested pension shall be payable to a Participant who has met
      the criteria provided in Section 5.4, commencing as of the Participant's
      Normal Retirement Date (or, if later, commencing as of the first day of
      the month next following the month proper application is made therefor),
      or, if the Participant has at least 15 years of Credited Service as of his
      termination of employment, commencing as of the first day of any month
      between the ages of 55 and 65 in accordance with an eligible Participant's
      election to receive a reduced amount under the provisions of Section 6.4.
      A deferred vested pension shall be payable monthly for the remaining life
      of the Participant. The last payment to the Participant under this form
      shall be for the month in which the death of such Participant occurs.
      However, if the Participant duly elected the Automatic Surviving Spouse's
      Pension as set forth in Section 7.5 or elected an optional form of pension
      in Section 7.7 and is receiving his deferred vested pension pursuant to
      such election, then any pension payments to him and his surviving spouse
      or Beneficiary shall be as set forth in Section 7.5 or 7.7, whichever
      applicable.

7.4   Reemployment of a Retired Participant

      The pension payable to any Participant receiving retirement benefits or
      deferred vested pension benefits shall cease and be permanently withheld
      if and when such Participant is reemployed by an Employer; provided,
      however, that no pension shall be withheld by the Plan pursuant to this
      Section 7.4 for any month during which such reemployed

                                       26

      Participant has been employed in a classification which is not covered
      under the Plan or during which such Participant fails to complete 40 or
      more Hours of Service. In addition, no payment shall be withheld by the
      Plan pursuant to this Section 7.4 unless the Plan notifies the reemployed
      Participant by personal delivery or first class mail during the first
      calendar month in which the Plan withholds payments that his benefits are
      suspended. Such notification shall contain a description of the specific
      reasons why benefit payments are being suspended, a general description of
      the Plan provisions relating to the suspension of payments, a copy of such
      provisions, and a statement to the effect that applicable Department of
      Labor regulations may be found in Section 2530.203-3 of the Code of
      Federal Regulations. In addition, the suspension notification shall inform
      the reemployed Participant of the Company's procedure for affording a
      review of the suspension of benefits.

      The retirement or deferred vested pension shall resume with the month
      following subsequent retirement or termination of employment. Any
      retirement or deferred vested pension payable upon such subsequent
      retirement or termination shall be determined as provided in Article VI on
      the basis of the Participant's Credited Service at the time of his
      previous retirement or termination, plus his Credited Service as a
      Participant during his period of reemployment; provided, however, that
      such retirement or deferred vested pension shall be reduced by the
      actuarial equivalent of the retirement or deferred vested pension
      benefits, if any, that the Participant received prior to his reemployment.
      Notwithstanding the foregoing, in no event shall a Participant's
      retirement or deferred vested pension payable following his subsequent
      retirement or termination be less than that retirement or deferred vested
      pension payable to the Participant prior to his reemployment. In the
      determination of the Final Average Earnings of a Participant who is
      reemployed and who again becomes an active Participant, the thirty-six
      month period to be considered shall be the number of months in such period
      of reemployment prior to his subsequent date of retirement or termination,
      plus such number of months immediately prior to his earlier retirement or
      termination as shall total thirty-six months; provided that Final Average
      Earnings shall in no case be diminished as a result of such period of
      reemployment.

7.5   Automatic Surviving Spouse's Pension

      A married Participant who is eligible to commence payments pursuant to the
      normal, early or disability retirement provisions of the Plan or pursuant
      to the deferred vested pension provisions of the Plan and whose benefit
      may not be paid under the provisions

                                       27

      of Section 7.8 shall automatically be deemed to have elected, at the
      commencement dates otherwise specified herein, an immediate monthly
      pension during his lifetime with the provision that, following his death,
      a monthly survivor's pension equal to 50 percent of his reduced pension
      shall be payable to his surviving spouse during the further lifetime of
      the spouse (the "Automatic Surviving Spouse's Pension"). Such pension
      shall be actuarially equivalent to an immediate single life annuity. The
      automatic election provided in this Section 7.5 shall become effective as
      of the Participant's Annuity Starting Date; provided, however, that such
      automatic election shall become effective only after the Participant and
      his surviving spouse have been married for at least one year.

      Notwithstanding the foregoing, if the Participant and his designated
      spouse have not been married for at least one year as of the Participant's
      Annuity Starting Date, the Automatic Surviving Spouse's Pension hereunder
      shall nonetheless take effect, provided that, in the event the Participant
      and his designated spouse do not remain married for a period of at least
      one year the Plan shall treat the Participant as not having been married
      on the Annuity Starting Date with the result that no survivor pension
      shall be payable to the spouse (absent a Qualified Domestic Relations
      Order to the contrary) and no retroactive correction shall be made to the
      benefit payable to the Participant.

      An unmarried Participant who retires pursuant to the normal, early or
      disability retirement provisions of the Plan or pursuant to the deferred
      vested pension provisions of the Plan and whose benefit may not be paid
      under the provisions of Section 7.8 shall automatically be deemed to have
      elected a monthly pension payable for his lifetime.

      A Participant may prevent the automatic election provided in this Section
      7.5 at any time within the "applicable election period" (as hereafter
      defined) by executing a specific written rejection of such an election on
      a form approved by the Administrator and filing it with the Administrator;
      provided that such rejection shall not take effect unless the
      Participant's spouse, if applicable, consents to such rejection in
      accordance with Section 7.6 of the Plan. Any election to revoke the
      Automatic Surviving Spouse's Pension and any spouse's consent thereto must
      specify the particular optional form of benefit elected by the Participant
      and, if applicable, must state the specific non-spouse Beneficiary or
      Beneficiaries (including any class of Beneficiaries or any contingent
      Beneficiaries) who may be entitled to any benefits upon the Participant's
      death. Any subsequent change in optional form of benefit or in a
      non-spouse Beneficiary selected

                                       28

      shall be valid only if accompanied by the written and witnessed consent of
      the Participant's spouse in the manner described in Section 7.6.

      During the period beginning no more than 90 days and ending no less than
      30 days prior to the Participant's Annuity Starting Date, the
      Administrator shall furnish to the Participant a written general
      description of the automatic election provided in this Section 7.5. The
      general description shall include a written explanation of the
      Participant's and spouse's rights under the Automatic Surviving Spouse's
      Pension, including the availability and effect of the election to reject
      the Automatic Surviving Spouse's Pension. Such description shall also
      provide information as to the material features of the optional forms of
      benefit as well as a brief explanation of their relative values as
      compared to the Automatic Surviving Spouse's Pension. In addition, in the
      event the Participant's Annuity Starting Date is prior to his attainment
      of Normal Retirement Age, such description shall inform the Participant of
      his right to defer receipt of the Plan distribution. A Participant may
      make and revoke his written rejection of an Automatic Surviving Spouse's
      Option at any time and any number of times within the "applicable election
      period". The "applicable election period" shall commence 90 days prior to
      the Participant's Annuity Starting Date and shall end on the Participant's
      Annuity Starting Date. Notwithstanding the foregoing, effective on and
      after January 1, 1997, the written description identified in this
      paragraph may be provided after the Participant's Annuity Starting Date
      provided the Participant has at least 30 days following distribution of
      the written description to reject the Automatic Surviving Spouse's Pension
      and elect another form of payment permitted under the Plan. Distribution
      to the Participant may commence after seven days have elapsed from the
      date the Administrator provides the written description provided that the
      Participant has received information that clearly indicates his right to
      at least 30 days to consider the contents of the description, the
      Participant affirmatively elects distribution and any required spousal
      consent is satisfied.

      A Participant who retires pursuant to the normal, early or disability
      retirement provisions of the Plan or pursuant to the deferred vested
      pension provisions of the Plan and who is entitled, under such provisions,
      to a pension with a lump sum actuarial equivalent value not in excess of
      $5,000 (or for distributions prior to December 31, 2001 was not in excess
      of $3,500 at the time of that distribution or any prior distribution)
      shall receive his pension in accordance with Section 7.8 hereof.


                                       29

7.6   Requirement for Spouse Consent

      Any election of a married Participant under Sections 7.5 and 7.7 (other
      than an election to revoke a rejection of the Automatic Surviving Spouse's
      Pension under Section 7.5) shall require the consent of the Participant's
      spouse unless it is established to the satisfaction of the Administrator
      that the consent required under this Section 7.6 may not be obtained:

            (i)   because there is no spouse or because the spouse cannot be
                  located,

            (ii)  because the Participant is legally separated from the spouse,

            (iii) because the Participant has been abandoned by his spouse
                  (within the meaning of local law) and such Participant has a
                  court order to that effect, or

            (iv)  because of such other circumstances as the Secretary of the
                  Treasury may by regulations prescribe.

      Any consent by a spouse shall be in writing acknowledging the effect of
      such election or revocation and witnessed by a notary public or such Plan
      representatives as may be designated for this purpose by the
      Administrator. Any spouse's consent (or establishment that the spouse's
      consent may not be obtained) shall be effective only with respect to such
      spouse.

7.7   Optional Forms of Pensions

      In lieu of a benefit in the form of payment determined in Section 7.5, a
      Participant may, with the consent of his spouse as described in Section
      7.6, elect an actuarially equivalent benefit described below. This
      election is effective as of a Participant's Annuity Starting Date.

      (a)   Option A: 10-Year Certain and Life Option - A reduced monthly
            retirement income is payable to the Participant during his remaining
            lifetime, and upon his death prior to receiving payment for a period
            equivalent to 120 months, monthly payments of the same reduced
            amount will be made to his Beneficiary until the number of monthly
            payments made to the Beneficiary, when added to the number of
            monthly payments made to the Participant, is equivalent to 120
            monthly payments.

      (b)   Option B: 15-year Certain and Life Option - A reduced monthly
            retirement income is payable to the Participant during his remaining
            lifetime, and upon his death prior to receiving payment for a period
            equivalent to 180 months, monthly payments of the same reduced
            amount will be made to his Beneficiary until the number of monthly
            payments made to the Beneficiary, when added to the

                                       30

            number of monthly payments made to the Participant, is equivalent to
            180 monthly payments.

      (c)   Option C: 50% Joint and Survivor Option - a reduced monthly
            retirement income is payable to the Participant for his remaining
            lifetime, and upon his death, monthly income of 50% of such reduced
            monthly income previously paid to the Participant shall be paid to
            his Beneficiary for as long thereafter as that person shall live.

      (c)   Option D: 100% Joint and Survivor Option - a reduced monthly
            retirement income is payable to the Participant for his remaining
            lifetime, and upon his death, monthly income of 100% of such reduced
            monthly income previously paid to the Participant shall be paid to
            his Beneficiary for as long thereafter as that person shall live.

      (e)   Option E: Joint and Survivor Pop-Up Option - a reduced monthly
            retirement income is payable to the Participant for his remaining
            lifetime, and upon his death, monthly income of either 50% or 100%
            (as elected by the Participant) of such reduced monthly income
            previously paid to the Participant shall be paid to the
            Participant's spouse for as long thereafter as such spouse shall
            live; provided, however, that in the event the spouse of the
            Participant predeceases the Participant and such spouse's death
            occurs within 60 months of the Participant's Annuity Starting Date,
            the provisions of Section 7.12 shall apply. Notwithstanding any
            provision of the Plan to the contrary (i) the Joint and Survivor
            Pop-Up Option shall be available only with respect to a Participant
            who has retired under the normal retirement provisions of Section
            5.1 or the early retirement provisions of Section 5.2, and (ii)
            actuarial equivalence of a benefit payable under the Joint and
            Survivor Pop-Up Option shall be determined under Section 11.6;
            provided, however, that in the event an annuity contract is
            purchased from an insurance company with respect to such benefit,
            actuarial equivalence shall thereafter be determined by reference to
            the specific annuity contract which will be purchased by the Plan to
            provide the monthly retirement income payable under this form of
            payment.

      Election of these options must be made during the applicable election
      period described in Section 7.5. Except to the extent otherwise provided
      under Section 8.4, if either the Participant or his Beneficiary dies after
      the election of an option is made but before the Annuity Starting Date
      such option will not become effective. If the Beneficiary shall die after
      commencement of the joint and survivor pension, but before the death of
      the retired Participant, the Participant shall continue to receive the
      reduced pension payable

                                       31

      in accordance with such option. An option may be cancelled by the
      Participant prior to the Annuity Starting Date. The effect of such
      cancellation shall be to reinstate the life annuity specified in Section
      7.1, 7.2 or 7.3, whichever applicable, or, if the Participant is married,
      the Automatic Surviving Spouse's Pension under Section 7.5 (in which case
      any subsequent option election must satisfy the requirements of Section
      7.5). Except to the extent expressly permitted under the Plan, no election
      regarding an optional form of payment may be made by a Participant
      following the Participant's Annuity Starting Date. If the Beneficiary
      designated by a Participant in connection with the election of an optional
      form of benefit is not the spouse of the Participant, then the election
      shall be effective only if the minimum distribution incidental benefit
      requirements of Section 1.401(a)(9)-2 of the Income Tax Regulations are
      satisfied with respect to such distribution.

7.8   Payment of Small Pension

      Notwithstanding any provision of the Plan to the contrary, if the
      actuarial equivalent present value of any retirement benefit, deferred
      vested pension or survivor benefit does not exceed $5,000 (or for
      distributions prior to December 31, 2001, did not exceed $3,500 at the
      time of distribution or any prior distribution), the pension shall be paid
      as soon as practicable in a lump sum equal to such present value. No lump
      sum payments shall be made if the actuarial equivalent present value of
      the benefit is in excess of these thresholds. For determinations made
      prior to December 31, 1995, the actuarial equivalent present value of a
      retirement benefit, deferred vested pension or survivor benefit for
      purposes of this Section 7.8 shall be calculated on the basis of the
      UP-1984 Table (reflecting a one-year setback for Participants and a
      two-year setback for Beneficiaries) and the interest rates which would be
      used (as of the beginning of the month in which the distribution occurs)
      by the Pension Benefit Guaranty Corporation in determining the present
      value of a lump sum distribution on plan termination. In no event shall
      such actuarial equivalent present value be less than that calculated using
      the same mortality table described above with a 6% interest rate. For
      determinations made on and after December 31, 1995, the actuarial
      equivalent present value of a retirement benefit, deferred vested pension
      or survivor benefit shall be calculated and paid on the basis of the
      "applicable mortality table" defined in Section 417(e)(3)(A)(ii)(I) of the
      Code and the annual interest rate on 30-year Treasury securities for the
      second calendar month preceding the month in which the distribution is
      payable; provided, however, that in the event the Alternative Present
      Value (as hereinafter defined) of the applicable benefit is a larger
      amount, such larger amount shall be paid (provided such Alternative

                                       32

      Present Value calculation does not exceed $5,000 or, for periods prior to
      December 31, 2001, $3,500). For purposes of this Section 7.8, the
      "Alternative Present Value" of a retirement benefit, deferred vested
      pension or survivor benefit shall be based on the Accrued Pension earned
      by the Participant at the earlier of his termination of employment, or
      December 30, 1995, determined by using the UP-1984 mortality table
      (reflecting a one-year setback for Participants and a two-year setback for
      Beneficiaries) and a 6% interest rate.

      The provisions of this Section 7.8 shall likewise apply to any Participant
      who terminates his employment with an Employer and all Affiliates prior to
      his completion of such period of Service as is required for a deferred
      vested pension under the Plan. In such case the terminated Participant
      shall be deemed to receive a lump sum distribution of the actuarial
      equivalent present value of his entire vested pension as of his date of
      termination of employment. Subject to Section 7.9 hereof, a Participant
      who receives a distribution (or deemed distribution) under this Section
      7.8 shall lose his Credited Service (and Service, in the case of a deemed
      distribution) under the Plan, shall forfeit his nonvested Accrued Pension
      and shall no longer be considered a Participant hereunder after such date
      of distribution (or deemed distribution).

7.9   Repayment of Cashout on Reemployment

      Notwithstanding any provision of Section 7.8 to the contrary, in the event
      a Participant described in Section 7.8 receives a distribution described
      thereunder and is subsequently reemployed by an Employer as a Covered
      Employee, such Participant's Credited Service and Accrued Pension earned
      before his termination of employment shall be reinstated for all purposes
      of the Plan if the Participant repays to the Plan the full amount of his
      distribution with interest, compounded annually from the date of
      distribution to December 30, 1988 at the rate of five percent (5%) per
      annum and from December 31, 1988 to the date of repayment at the rate
      determined for each Plan Year within such period under Section
      411(c)(2)(C) of the Internal Revenue Code. With respect to a former
      Participant who has been deemed to receive a distribution of his entire
      vested pension upon his termination of employment in accordance with the
      second paragraph of Section 7.8, such individual shall be deemed to have
      repaid such distribution, with interest, as of his date of rehire and such
      Participant's Service, Credited Service and Accrued Pension earned before
      his termination of employment shall be reinstated as of such date. For
      purposes of the foregoing, the period in which the Participant's repayment
      or deemed repayment must occur shall end on the earlier of

                                       33

      the fifth anniversary of the Participant's reemployment or the date on
      which the Participant's Period of Severance extends to five consecutive
      years.

7.10  Delay in Commencement of Pension Payments

      In no event shall payment of any pension under the provisions of this
      Article VII commence as of a date that is later than 60 days after the
      close of the Plan Year during which a Participant attains his Normal
      Retirement Date or, if later, terminates his employment with an Employer
      and Affiliates.

      Notwithstanding the foregoing, with respect to a Participant who attains
      age 70-1/2 before January 1, 1999 and any Participant who attains age
      70-1/2 after January 1, 1999 but who has either terminated employment with
      an Employer and all Affiliates prior to attaining such age or is a 5%
      owner (for purposes of Section 416 of the Code), distribution of benefits
      to the Participant must commence no later than the April 1st of the
      calendar year following the calendar year in which the Participant attains
      age 70-1/2 unless the Participant had attained age 70-1/2 prior to January
      1, 1988. With respect to an employed Participant who attains age 70-1/2 on
      or after January 1, 1999, distribution of benefits to the Participant
      (other than a 5% owner), must commence no later than the April 1st of the
      calendar year following the calendar year in which the Participant
      retires. In the case of a Participant who retires in a calendar year after
      the calendar year in which he attains 70-1/2 and who has not commenced
      payments as of the first day of such later calendar year, the Plan benefit
      accrued by the Participant shall be actuarially increased, to the extend
      required by regulations, to take into account the period (commencing on
      the April 1st of the calendar year following the calendar year in which
      the Participant attains 70-1/2 and ending on the date payment commences)
      during which the Participant did not receive any benefits under the Plan;
      provided, however, that such actuarial increase, to the extent permitted
      by regulations, shall reduce the benefit accrual otherwise occurring
      during such period.

      Notwithstanding any provision of the Plan to the contrary, all
      distributions under the Plan shall be made in accordance with regulations
      under Section 401(a)(9) of the Code (including Section 1.401(a)(9)-2 of
      the Income Tax Regulations). Furthermore, those provisions reflecting
      Section 401(a)(9) of the Code (as included here by reference if not
      specifically stated) shall override any provision hereof inconsistent with
      Section 401(a)(9).


                                       34

7.11  Direct Rollover of Eligible Rollover Distributions.

      Notwithstanding any provision of the Plan to the contrary, a Distributee
      may elect, subject to provisions adopted by the Administrator which shall
      be consistent with income tax regulations, to have any portion of an
      Eligible Rollover Distribution paid directly to an Eligible Retirement
      Plan specified by the Distributee in a Direct Rollover to such plan. The
      Administrator shall notify a Distributee of his right to elect a Direct
      Rollover. Such notice shall be provided to the Distributee not less than
      30 days before the vested Accrued Pension maintained on behalf of the
      Distributee is distributed without the Distributee's affirmative election
      to make or not make a Direct Rollover. A Distributee's affirmative
      election to make or not make a Direct Rollover may be implemented by the
      Administrator less than 30 days after the Distributee receives such notice
      of his Direct Rollover rights, but only if the Administrator notifies the
      Distributee that he has the right to consider the decision of whether or
      not to elect a Direct Rollover for up to 30 days. A Distributee who is
      eligible for an automatic lump sum distribution under Section 7.8 and who
      has been given a timely notice and explanation of the election to have his
      Eligible Rollover Distribution paid to an Eligible Retirement Plan will be
      presumed to have elected to have his benefit paid directly to him if the
      Distributee fails to make the election within 31 days of being notified of
      his rights to make the election. For purposes of this Section:

      (a)   The term "Distributee" shall mean a Covered Employee or former
            Covered Employee. In addition, such an individual's surviving spouse
            or such an individual's spouse or former spouse who is an alternate
            payee within the meaning of Section 414(p)(8) of the Code are
            Distributees with respect to the interest of the spouse or former
            spouse.

      (b)   The term "Eligible Rollover Distribution" shall mean any
            distribution of all or any portion of the balance to the credit of
            the Distributee other than: any distribution that is one of a series
            of substantially equal periodic payments made for the life (or life
            expectancy) of the Distributee or the joint lives (or joint life
            expectancies) of the Distributee and his beneficiary, or for a
            specified period of ten years or more; any distribution to the
            extent such distribution is required under Section 401(a)(9) of the
            Code; for periods on and after January 1, 1999, that portion of a
            hardship withdrawal that is attributable to elective contributions
            within the meaning of Section 1.401(k)-1(g) of Income Tax
            Regulations; and the portion of any distribution that is not
            includible in gross income.

      (c)   The term "Eligible Retirement Plan" shall mean an individual
            retirement account or annuity, as described in Code Sections 408(a)
            and 408(b),

                                       35

            respectively, an annuity plan described in Section 403(a) of the
            Code, or a qualified trust described in Section 401(a) of the Code
            that accepts the Distributee's Eligible Rollover Distribution.
            However, in the case of an Eligible Rollover Distribution to a
            surviving spouse, an "Eligible Retirement Plan" is an individual
            retirement account or annuity.

      (d)   The term "Direct Rollover" shall mean a payment by the Plan to the
            Eligible Retirement Plan specified by the Distributee.

7.12  Change to Pension Payments in Connection with Qualifying Event.

      (a)   In the event an Eligible Retiree (as hereinafter defined)
            experiences a Qualifying Event (as hereinafter defined), the
            provisions of this Section 7.12 shall apply, provided that the
            Eligible Retiree furnishes the Administrator with reasonable notice
            of the Qualifying Event within 120 days of the Qualifying Event and
            provides such further information applicable hereunder as the
            Administrator may reasonably require. For purposes of this Section:

            (i)   "Eligible Retiree" shall mean a Participant who has retired
                  under the normal retirement provisions of Section 5.1 or the
                  early retirement provisions of Section 5.2 and who, as of his
                  Annuity Starting Date, was either:

                  (A)   legally married and commencing receipt of his retirement
                        income in the form of an Automatic Surviving Spouse's
                        Pension (as defined in Section 7.5), under the 100%
                        Joint and Survivor Option (with his spouse as
                        Beneficiary thereunder) or, on or after November 1,
                        1997, under the Joint and Survivor Pop-Up Option; or

                  (B)   unmarried and commencing receipt of his retirement
                        income in the normal form of benefit provided under
                        Section 7.1 (a life annuity).

            (ii)  "Qualifying Event" shall mean an event described in (A), (B)
                  or (C) below:


                                       36

                  (A)   The spouse of an Eligible Retiree who is receiving
                        retirement income under the Joint and Survivor Pop-Up
                        Option under Section 7.7(e) predeceases the Eligible
                        Retiree and such spouse's death occurs within 60 months
                        of the Eligible Retiree's Annuity Starting Date;

                  (B)   The marital status of an Eligible Retiree who is
                        receiving retirement income under any of the forms of
                        payment described in subparagraph (a)(i)(A) of this
                        Section 7.12 changes on or after September 1, 1997 and
                        within 120 months of his Annuity Starting Date due to
                        the Eligible Retiree's divorce, marital dissolution, or
                        legal separation; or

                  (C)   The marital status of an Eligible Retiree who is
                        described under subparagraph (a)(i)(B) of this Section
                        7.12 changes on or after September 1, 1997 and within
                        120 months of his Annuity Starting Date due to the
                        Eligible Retiree's marriage.

            (iii) "Qualifying Event Election Period" shall mean the 90-day
                  period beginning on the date on which the Eligible Retiree
                  timely notifies the Administrator of a Qualifying Event, as
                  provided in Section 7.12(a) above.

            (iv)  The determination of an Eligible Retiree's marital status and
                  the determination of whether a divorce, marital dissolution or
                  legal separation has occurred shall be made on the basis of
                  applicable state law unless preempted by federal law.

      (b)   Unless the Eligible Retiree timely makes an election under Section
            7.12(c), in the event of the occurrence of a Qualifying Event
            described in subparagraphs (a)(ii)(A) or (a)(ii)(B) of this Section
            7.12, and contingent upon the Eligible Retiree's timely notification
            to the Administrator, the retirement income payable to the affected
            Eligible Retiree shall revert to the normal form of benefit

                                       37

            provided under Section 7.1 (a life annuity) as of the first day of
            the month following the expiration of the Qualifying Event Election
            Period; provided, however, that:

            (i)   the amount of such monthly life annuity shall be the actuarial
                  equivalent of the Eligible Retiree's benefit, determined as of
                  the time of calculation hereunder, under the form of payment
                  in effect as of his Annuity Starting Date; provided, however,
                  that such monthly amount shall not exceed the amount of the
                  monthly life annuity which the Eligible Retiree was entitled
                  to as of his Annuity Starting Date; and

            (ii)  in the case of a Qualifying Event described in subparagraph
                  (a)(ii)(B) of this Section 7.12, the spouse or ex-spouse of
                  the Eligible Retiree, as part of the division of marital
                  property (or other determination which is not subject to
                  modification under state law), expressly waives all interest
                  in the Eligible Retiree's pension under the Plan and such
                  waiver is incorporated into a document which satisfies the
                  formal requirements of a "Qualified Domestic Relations Order"
                  as defined in Section 414(p) of the Code; and

            (iii) in the case of a Qualifying Event described in subparagraph
                  (a)(ii)(B) of this Section 7.12, the spouse or ex-spouse of
                  the Eligible Retiree shall secure such proof of insurability
                  as the Administrator may require, in its discretion; and

            (iv)  in the case of a Qualifying Event described in subparagraph
                  (a)(ii)(C) of this Section 7.12, the Eligible Retiree shall
                  secure such proof of insurability as the Administrator may
                  require, in its discretion.

      (c)   In the case of any Qualifying Event and contingent upon the Eligible
            Retiree's timely notification to the Administrator, the affected
            Eligible Retiree shall be permitted to elect, within the Qualifying
            Event Election Period, to receive his

                                       38

            future retirement income from the Plan in any form of payment
            offered under the Plan; provided, however, that:

            (i)   payments under any elected form of payment shall commence as
                  of the first day of the month next following the month in
                  which the Eligible Retiree makes full and complete application
                  to the Administrator in accordance with rules established by
                  the Administrator (such commencement date referred to herein
                  as the "Adjusted Commencement Date"); and

            (ii)  payments under any elected form of payment shall be the
                  actuarial equivalent of the Eligible Retiree's benefit,
                  determined as of the time of calculation hereunder, under the
                  form of payment in effect as of his Annuity Starting Date;
                  provided, however, that such monthly amount shall not exceed
                  the amount of the monthly benefit under the elected form of
                  payment which the Eligible Retiree was entitled to as of his
                  Annuity Starting Date; and

            (iii) In the case of a Qualifying Event described in subparagraph
                  (a)(ii)(B) of this Section 7.12, the spouse or ex-spouse of
                  the Eligible Retiree, as part of the division of marital
                  property (or other determination which is not subject to
                  modification under state law), expressly waives all interest
                  in the Eligible Retiree's pension under the Plan and such
                  waiver is incorporated into a document which satisfies the
                  formal requirements of a "Qualified Domestic Relations Order"
                  as defined in Section 414(p) of the Code; and

            (iv)  In the case of a Qualifying Event described in subparagraph
                  (a)(ii)(B) of this Section 7.12, the spouse or ex-spouse of
                  the Eligible Retiree shall secure such proof of insurability
                  as the Administrator may require, in its discretion; and


                                       39

            (v)   In the case of a Qualifying Event described in subparagraph
                  (a)(ii)(C) of this Section 7.12, the Eligible Retiree shall
                  secure such proof of insurability as the Administrator may
                  require, in its discretion; and

            (vi)  The provisions of Sections 7.5 and 7.6 hereof shall apply with
                  respect to any Eligible Retiree who is married as of the
                  Adjusted Commencement Date and, for purposes of such Sections
                  and Section 7.7, the Adjusted Commencement Date shall be
                  deemed the Annuity Starting Date for the elected form of
                  payment described in this Section 7.12(c); and

            (vii) In no event shall more than one election be made under this
                  Section 7.12(c) by an Eligible Retiree with respect to any
                  single Qualifying Event nor shall any Eligible Retiree be
                  permitted to make more than two elections under this Section
                  7.12(c), irrespective of the number of Qualifying Events
                  affecting such Eligible Retiree; and

            (viii) A Participant's status as an Eligible Retiree must be
                  independently satisfied with respect to each Qualifying Event
                  (substituting, where applicable, the Adjusted Commencement
                  Date for the Annuity Starting Date under Section 7.12(a)(i)).


                                       40

                                  ARTICLE VIII

                                 DEATH BENEFITS

8.1   Death Prior to Retirement or Severance

      Upon the death of a Participant prior to his Date of Severance, his
      surviving spouse, if any, shall receive a monthly surviving spouse's
      benefit under the assumption that the Participant had retired the day
      prior to his death with an Accrued Pension under the Plan as determined in
      accordance with the provisions of subsection 6.2(a), and under the further
      assumption that the automatic election of a surviving spouse's benefit
      pursuant to subsection 7.5 was in effect at the time of death. Such
      surviving spouse benefit shall commence as of the first day of the month
      following the Participant's death, shall be unreduced for early
      commencement and shall be payable for the lifetime of the surviving
      spouse.

      For purposes of Sections 8.1, 8.2 and 8.3, the interest that is payable to
      the Participant's surviving spouse shall be distributed over a period not
      in excess of the life expectancy of such surviving spouse and shall
      commence no later than the December 31 of the calendar year in which the
      Participant would have attained age 65 (or the December 31 of the calendar
      year immediately following the calendar year of the Participant's death,
      if later).

8.2   Death Prior to Commencement of Early or Disability Pensions Upon the death
      of a Participant after his Date of Severance, and prior to his Annuity
      Starting Date and while the Participant is awaiting the commencement of
      payment of either: (1) an early retirement pension pursuant to subsection
      6.2(a) above, or (2) a disability pension after attainment of age 55 but
      prior to the attainment of his Normal Retirement Date, his surviving
      spouse, if any, shall receive a monthly surviving spouse's benefit under
      the assumption that the Participant had retired the day prior to his death
      with an Accrued Pension under the Plan as determined in accordance with
      the provisions of subsection 6.2(a), and under the further assumption that
      the automatic election of a surviving spouse's benefit pursuant to
      subsection 7.5 was in effect at the time of death. Such surviving spouse's
      benefit shall commence as of the first day of the month following the
      Participant's death unless the surviving spouse elects a later
      commencement date. Such benefit shall be reduced for early commencement in
      accordance with the provisions of Section 6.2(b) and shall be payable for
      the lifetime of the surviving spouse.


                                       41

      Upon the death of a disabled Participant who is awaiting commencement of
      his pension at his Normal Retirement Date and who is under age 55 at the
      time of his death, his surviving spouse, if any, shall receive a monthly
      surviving spouse's benefit determined under the provisions of Section 8.1
      assuming he died prior to his Date of Severance.

      If a Participant terminates employment when eligible for a disability
      retirement pension under Section 5.3 and at a time during which he is
      receiving long term disability benefits under the Erie Insurance Group
      Long Term Disability Plan, then service to date of death will be included
      for benefit purposes.

8.3   Death Prior to Commencement of Vested Pensions

      If a vested former Participant who has at least one Hour of Service on or
      after December 31, 1976, and who has been married for at least one year on
      his date of death, dies on or after August 23, 1984 but prior to his
      Annuity Starting Date, then his spouse shall be provided with a
      preretirement survivor annuity determined as follows:

      (a)   in the case of a Participant who dies after the date on which the
            Participant attained his Earliest Retirement Age as though such
            Participant had retired on the day before the Participant's date of
            death, with an immediate benefit determined under the provisions of
            Section 6.2(a) and payable under the Automatic Surviving Spouse's
            Pension in Section 7.5 of the Plan, or

      (b)   in the case of a Participant who dies on or before the date on which
            the Participant would have attained his Earliest Retirement Age, as
            though such Participant had:

            (i)   separated from Service on the date of death,

            (ii)  survived to his Earliest Retirement Age,

            (iii) retired with an immediate benefit determined under the
                  provisions of Section 6.4 and payable under the Automatic
                  Surviving Spouse's Option in Section 7.5 of the Plan at the
                  Earliest Retirement Age, and

            (iv)  died on the day after the day on which such Participant would
                  have attained the Earliest Retirement Age.

      Under this Section 8.3, a monthly surviving spouse's benefit shall
      commence as of the first day of the month following the later of the month
      of the Participant's death or the month in which the Participant would
      have attained his Earliest Retirement Age under the Plan unless the
      surviving spouse elects a later commencement date (which shall not

                                       42

      be later than the December 31 of the calendar year in which the deceased
      Participant would have attained age 65). Such surviving spouse's benefit
      shall be reduced for early commencement in accordance with Section 6.2(b)
      and shall be payable thereafter for the remainder of the surviving
      spouse's lifetime.

8.4   Effect of Valid 100% Joint and Survivor Election

      Notwithstanding the foregoing, in the event a Participant described in
      Section 8.1, 8.2 or 8.3 above has made a valid election of Option D under
      Section 7.7 and names his spouse as Beneficiary thereunder, the amount of
      the Pre-Retirement Survivor Annuity shall be equal to the reduced monthly
      amount which otherwise would have been payable to the Participant as
      determined through application of the foregoing provisions of this Article
      VIII.

8.5   Death on or After Annuity Starting Date

      Upon the death of a Participant on or after his Annuity Starting Date,
      payments, if any, to a Beneficiary shall be made in accordance with the
      form of benefit in effect on the date of the Participant's death. If the
      Beneficiary of the deceased Participant is entitled to receive the
      remaining certain period payments from the 10-Year or 15-Year Certain and
      Life forms of payment, the Administrator shall instruct the Trustee to pay
      to such Beneficiary the actuarial equivalent value of the monthly payments
      to which the Beneficiary is entitled in a single sum. Actuarial
      equivalence for this purpose shall be determined under the assumptions set
      forth in Section 7.8. If the Beneficiary under such form of payment is the
      surviving spouse of the deceased Participant, then any amounts payable may
      be converted to an actuarially equivalent life annuity to such spouse
      provided the spouse requests payment in such form. Notwithstanding the
      foregoing, in all events the deceased Participant's remaining interest in
      the Plan shall be distributed at least as rapidly as under the form of
      distribution in operation as of the date of the Participant's death.

8.6   Death Benefit for Vested Participants Who Terminated After September 1,
      1974 and Prior to August 23, 1984

      Any vested former Participant who terminated after September 1, 1974 and
      prior to August 23, 1984 and whose benefits are not in pay status as of
      August 23, 1984 is to be provided with the right to elect to receive such
      benefits reduced and payable in the form of a qualified 50% joint and
      survivor annuity as defined by ERISA and the Internal

                                       43

      Revenue Code as in effect prior to August 23, 1984, including the right to
      revoke such coverage without spousal consent if such former Participant:

      (a)   completed at least one Hour of Service under the Plan after
            September 1, 1974, and

      (b)   survives to his Annuity Starting Date.



                                       44

                                   ARTICLE IX

                           TRUST FUND AND THE TRUSTEE

9.1   Trust Fund

      Subject to the provisions of this Section 9.1, the Company shall execute a
      Trust Agreement with a Trustee (or Trustee) selected by the Company under
      the terms of which a Trust Fund will be established for the purpose of
      receiving and holding contributions made by the Company as well as
      interest and other income on investments of such funds, and for the
      purpose of paying the pensions and other benefits provided by the Plan and
      paying any expenses incident to the operation of the Plan or Trust Fund to
      the extent authorized by the Company. The Trustee is to manage and operate
      the Trust Fund and to receive, hold, invest and reinvest the funds of the
      Trust.

      The Company shall determine the form and terms of such Trust Agreement,
      may modify the Trust Agreement from time to time to accomplish the purpose
      of the Plan, may remove any Trustee and may select any successor trustee.
      Pensions under the Plan may alternatively be provided through the purchase
      of annuity contracts issued by an insurance company. In lieu of a Trust
      Agreement and Trust Fund, the Company may utilize a contract or contracts
      of insurance for the purpose of receiving and holding contributions made
      by the Company and for the purpose of paying pensions and other benefits
      provided by the Plan, and in such event the references hereunder to "Trust
      Agreement", "Trustee" and "Trust Fund" shall be deemed to be references to
      "Insurance Contract", "Insurance Carrier" and "Insured Fund" respectively.

9.2   Irrevocability

      The Trust Fund shall be used to pay pensions and other benefits as
      provided in the Plan and, as provided in Section 9.6, those reasonable
      expenses, taxes and fees incurred in the administration of the Plan and
      Trust Fund which are not paid directly by the Company. No part of the
      principal or income of the fund shall be used for or diverted to purposes
      other than those provided in the Plan and no part of the Trust Fund shall
      revert to the Company for the benefit of the Company, except as permitted
      under Sections 9.3, 11.4 and 12.2 hereof.

9.3   Contributions by the Company

      The Company will pay to the Trustee, subject to all the other provisions
      of the Plan, such amounts as its Board determines, authorizes and directs;
      provided that as a

                                       45

      minimum contribution, the Company intends to pay to the Trustee such
      amounts as may be necessary to meet the minimum funding standards
      established under the Employee Retirement Income Security Act of 1974. The
      Company also intends to pay all expenses incident to the operation of the
      Plan that are not paid directly from the Trust Fund. Any forfeitures
      arising from the severance of employment or death of a Participant, or for
      any other reason, shall be used to reduce the contributions of the Company
      under the Plan and shall not be applied to increase the pensions or
      benefits any Participant would otherwise receive under the Plan at any
      time prior to the termination of the Plan.

      Payments made to meet the minimum funding standards established under
      ERISA shall, to the maximum extent permitted by valid provisions of ERISA,
      be in complete discharge of the financial obligation of the Company under
      this Plan. The pension benefits of the Plan shall, subject to valid
      provisions of ERISA, be only such as can be provided by the assets of the
      Trust and there shall be no further liability or obligation on any
      Employer to make any further contributions to the Trust for any reason.
      Except as prescribed by valid provisions of ERISA, the Company does not
      guarantee continuity of payment of any benefits under the Plan. The
      Company does not, in any event, guarantee that its contributions or the
      Trust Fund will be sufficient to provide the benefits hereunder. All
      rights of Participants and Beneficiaries, and of any person claiming under
      any Participant or Beneficiary, shall be enforceable only against the
      Trust Fund, except as ERISA may otherwise provide.

      Notwithstanding any provisions of the Plan to the contrary, each
      contribution made by the Company shall be conditioned upon the
      deductibility of the contribution under Section 404 of the Code. If the
      deduction of all or part of the contribution is disallowed, the
      contribution shall, to the extent disallowed, be repaid to the Company
      within one year after the date of disallowance. A contribution also may be
      repaid to the Company, within one year after the date made, to the extent
      it exceeded the full funding limitation or otherwise was made in error
      because of a mistake in fact. Amounts returned under this Section 9.3
      shall recognize any net losses attributable to the returned contribution
      but shall not include any net earnings thereon.

9.4   Contributions By Participants

      No Participant shall be required or allowed to make any contribution to
      the Trust Fund established under the Plan.


                                       46

9.5   Benefits Payable Only From Trust Fund

      Payment of benefits under the Plan to Participants and Beneficiaries will
      be made only by the Trustee from the funds or securities held by the Trust
      and/or the annuity contract or contracts held by the Trust. Except as may
      be provided by law, no liability for the payment of benefits to
      Participants or their Beneficiaries hereunder shall be imposed upon the
      Company, any Employer or the officers or shareholders of the Company or
      any Employer, and there shall be no liability or obligation on the part of
      the Company or any Employer, to make any further contributions in the
      event of termination of the Plan.

9.6   Plan Expenses

      All reasonable expenses, taxes and fees of the Plan, the Administrator and
      the Trustee incurred in the administration of the Plan and Trust Fund
      shall be paid from the Trust Fund; provided, however, that the obligation
      of the Trust Fund to pay such expenses, taxes and fees shall cease to
      exist to the extent that the same are paid, at the discretion of the
      Company, by the Employers.



                                       47

                                    ARTICLE X

                               BENEFIT LIMITATIONS

10.1  Maximum Limitation Under Section 415(b) of the Code

      Any provisions of the Plan to the contrary notwithstanding, benefits
      payable under the Plan shall be subject to the following limitations:

      (a)   Maximum Annual Benefit:

            (i)   Subject to the exception below, the Annual Benefit (as
                  hereinafter defined) payable under this Plan for any
                  limitation year beginning on or after January 1, 1995 shall
                  not exceed the lesser of the Dollar Maximum of $120,000 or the
                  Percentage Maximum of 100% of the Participant's average
                  compensation for the period of three consecutive years during
                  which the Participant had the greatest aggregate compensation
                  from an Employer. Compensation, in determining a Participant's
                  Percentage Maximum, shall include the total of all amounts
                  paid to a Participant by an Employer during the limitation
                  year which are defined as wages within the meaning of Section
                  3401(a) of the Code and, for years beginning on and after
                  January 1, 1998, shall include amounts contributed pursuant to
                  a salary reduction election on behalf of the Participant to a
                  plan described in Sections 125, 402(e)(3), 402(h)(1)(B),
                  403(b) or 457(b) of the Code and, for periods on and after
                  January 1, 2001, to a plan described in Section 132(f)(4) of
                  the Code. Effective each January 1, the Dollar Maximum
                  described above shall be automatically adjusted to the new
                  dollar limitation for that calendar year as determined by the
                  Secretary of the Treasury pursuant to Section 415(d) of the
                  Code. To the extent permitted under Section 415 of the Code,
                  such adjusted limitation shall be applied to the benefits
                  payable to current retirees for that calendar year.

            (ii)  For purposes of this Section, "Annual Benefit" means the
                  benefit payable in the form of a straight-life annuity or a
                  qualified joint and survivor pension, with no ancillary
                  benefit, on an annualized basis. If a benefit is payable in
                  any other form, the Annual Benefit limitation shall be applied
                  by adjusting it to the equivalent of a straight-life annuity.
                  Effective for limitation years beginning before January 1,
                  1995, such actuarially equivalent straight-life annuity shall
                  be computed by using an interest rate equal to the greater of
                  5% or the Plan's interest rate and

                                       48

                  mortality shall be determined by using the Plan's mortality
                  table. For limitation years beginning on and after January 1,
                  1995, the actuarially equivalent straight-life annuity is
                  equal to the greater of (i) the annuity benefit computed using
                  the Plan's interest rate and mortality tables for adjusting
                  forms of payment or (ii) the annuity benefit computed using an
                  interest rate of 5% and the "applicable mortality table" under
                  Code Section 417(e). In determining the actuarially equivalent
                  straight-life annuity for a benefit form subject to Code
                  Section 417(e)(3), the actuarial assumptions used shall be the
                  "applicable interest rate" and the "applicable mortality
                  table" under Code Section 417(e). For these purposes, the
                  lookback month shall be the second month preceding the Plan
                  Year that includes the Annuity Starting Date.

            (iii) For purposes of the maximum limitation of this Article, all
                  qualified defined benefit plans (whether or not terminated)
                  maintained by an Employer or any Affiliate shall be treated as
                  a single plan. For purposes of applying the limitations of
                  Section 415 of the Internal Revenue Code, the terms "Employer"
                  and "Affiliate" shall be construed in light of Sections 414(b)
                  and (c) of the Code, as modified by Code Section 415(h).

            (iv)  If the Annual Benefit begins before a Participant's Social
                  Security Retirement Age (as hereinafter defined), the Dollar
                  Maximum (but not the Percentage Maximum) shall be actuarially
                  reduced so that it is the actuarial equivalent of an Annual
                  Benefit beginning at the Participant's Social Security
                  Retirement Age:

                  (A)   If a Participant's Social Security Retirement Age is 65,
                        the Dollar Maximum for benefits commencing on or after
                        age 62 is determined by reducing the Dollar Maximum by
                        5/9 of one percent for each month by which benefits
                        commence before the month in which the Participant
                        attains age 65.

                  (B)   If a Participant's Social Security Retirement Age is
                        greater than 65, the Dollar Maximum for benefits
                        commencing on or after age 62 is determined by reducing
                        the Dollar Maximum by 5/9 of one percent for each of the
                        first 36 months and 5/12 of one percent for each of the
                        additional months (up to 24

                                       49

                        months) by which benefits commence before the month of
                        the Participant's Social Security Retirement Age.

                  For purposes of this Section, the term "Social Security
                  Retirement Age" shall mean the age used as the retirement age
                  of a Participant under Section 216(l) of the Social Security
                  Act, except that such Section shall be applied without regard
                  to the age increase factor and as if the early retirement age
                  under Section 216(l)(2) of such Act were 62.

            (v)   If the Annual Benefit begins before age 62, the Dollar Maximum
                  (but not the Percentage Maximum) shall be reduced so that it
                  is the actuarial equivalent of the Dollar Maximum beginning at
                  age sixty-two (62). For purposes hereof, the age adjusted
                  Dollar Maximum beginning prior to age 62 shall be determined
                  as the lesser of (i) the actuarial equivalent annual benefit
                  computed using the Plan's interest rate and mortality table
                  for early retirement benefits or (ii) the actuarial equivalent
                  annual benefit computed using an interest rate of 5% and the
                  "applicable mortality table" under Section 417(e) of the Code.

            (vi)  If the Annual Benefit begins after a Participant's Social
                  Security Retirement Age, the Dollar Maximum (but not the
                  Percentage Maximum) shall be increased so that it is the
                  actuarial equivalent of an Annual Pension beginning at such
                  age. For purposes hereof, the annual benefit beginning after
                  Social Security Retirement Age shall be determined as the
                  lesser of (i) the actuarial equivalent annual benefit computed
                  using the Plan's interest rate and mortality table for the
                  late retirement benefits or (ii) the actuarial equivalent
                  annual benefit computed using an interest rate of 5% and the
                  "applicable mortality table" under Section 417(e) of the Code.

            (vii) For purposes of adjusting the Annual Benefit under paragraphs
                  (i), (ii), (iv), (v) and/or (vi), no adjustments shall be
                  taken into account before the year for which such adjustment
                  first takes effect.

            (viii) The foregoing Section 415(b)(2)(E) actuarial assumptions
                  shall apply to all benefits under the Plan (including benefits
                  accrued before and after the RPA `94 effective date which
                  shall be the first limitation year beginning on or after
                  January 1, 1995).


                                       50

      (b)   Adjustment for Plan Participation

            If a Participant retires with less than 10 years of Plan
            participation, the Dollar Maximum (but not the Percentage Maximum)
            shall be reduced by multiplying such dollar limitation by a
            fraction, the numerator of which is the Participant's years of
            participation in the Plan and the denominator of which is 10.

      (c)   Adjustment for Years of Service

            If a Participant has less than 10 years of Service, the maximum
            Annual Benefit payable to the Participant shall be reduced by
            multiplying such maximum Annual Benefit by a fraction, the numerator
            of which is the Participant's years of Service or part thereof, and
            the denominator of which is 10.

      (d)   Exception Benefits

            (i)   Subject to the limitations of paragraph (a), this Plan may pay
                  an Annual Benefit to any retired Participant which shall
                  exceed 100% of such Participant's average compensation,
                  provided that the Annual Pension shall not be in excess of
                  $10,000 for the current Plan Year and for all prior Plan
                  Years, and provided that the Participant shall not be or have
                  been at any time considered as an active participant in any
                  defined contribution plan maintained by an Employer or an
                  Affiliate.

            (ii)  In no event shall the adjustments for participation or Service
                  (pursuant to subsections (b) and (c), respectively) reduce the
                  limitation provided in paragraphs (a)(i) or (d)(i) hereof,
                  whichever is applicable, to an amount less than one-tenth
                  (1/10) of the applicable limitation as determined without
                  regard to such adjustments.

            (iii) To the extent provided by the Secretary of the Treasury or his
                  delegate, the adjustment for Plan participation described in
                  subsection (b) herein shall be applied separately with respect
                  to each change in the benefit structure of the Plan.

10.2  Defined Benefit Plan and Defined Contribution Plan Combined Limitation

      (a)   Effective for limitation years beginning before January 1, 2000, in
            any case in which a Participant is a participant in both a defined
            benefit plan and a defined contribution plan maintained by an
            Employer, benefits payable under this Plan and such other plans
            shall not cause the limitations prescribed in Internal Revenue Code
            Section 415(e) to be exceeded. Except as otherwise provided in
            Internal Revenue Code Section 415(e), the sum of the "defined
            benefit plan fraction" and the "defined contribution plan fraction"
            shall not exceed 1.0.


                                       51

      (b)   For the purposes of this Section 10.2:

            (i)   "defined benefit plan fraction" for any limitation year is a
                  fraction

                  (A)   the numerator of which is the projected Annual Benefit
                        of each Participant under the Plan (determined as of the
                        close of such limitation year), and

                  (B)   the denominator of which is the lesser of:

                        (1)   the product of 1.25 multiplied by the Dollar
                              Maximum set forth in Section 10.1(a)(i) for such
                              year, or

                        (2)   the product of 1.4 multiplied by the Percentage
                              Maximum set forth in Section 10.1(a)(i).

            (ii)  "defined contribution plan fraction" for any limitation year
                  is a fraction

                  (A)   the numerator of which is the sum of the annual
                        additions under Section 415(c)(2) of the Code to the
                        Participant's account or accounts as of the close of the
                        limitation year, and

                  (B)   the denominator of which is the sum of the lesser of the
                        following amounts determined for such year and for each
                        prior year of Service with an Employer:

                        (1)   the product of 1.25 multiplied by the dollar
                              limitation in effect under Section 415(c)(1)(A) of
                              the Code for such year, or

                        (2)   the product of 1.4 multiplied by the amount which
                              may be taken into account under Section
                              415(c)(1)(B) of the Code with respect to such
                              Participant under such plan for such year.

      (c)   For purposes of applying the limitations set forth in this Section
            10.2, all qualified defined benefit plans (whether or not
            terminated) ever maintained by the Company or an Affiliate shall be
            treated as one defined benefit plan, and all qualified defined
            contribution plans (whether or not terminated) ever maintained by
            the Company or an Affiliate shall be treated as one defined
            contribution plan.

      (d)   Notwithstanding any other provisions of this Plan, the rate of
            benefit accrual under this Plan will be reduced to a level necessary
            to prevent the limitations set forth in this Section 10.2 from being
            exceeded with respect to any Participant; provided, however, if any
            Participant's benefit accrual has been reduced as provided in this
            Section, such reduction shall be restored effective as of the first
            day of the first limitation year beginning on or after January 1,
            2000.


                                       52

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

11.1  Plan Non-Contractual

No Participant or Beneficiary shall have any right or interest under the Plan
unless and until he becomes entitled thereto as provided in the Plan. The
adoption and maintenance of the Plan shall not be deemed to constitute a
contract between an Employer and any Employee. Inclusion in the Plan will not
affect an Employer's right to discharge or otherwise discipline Employees and
membership in the Plan will not give any Employee the right to be retained in
the service of an Employer nor any right or claim to a pension or other benefit
unless such right is specifically granted under the terms of the Plan.

11.2  Non-Alienation of Retirement Rights or Benefits

      (a)   Except as provided in Section 11.2(b) or 11.2(c), no benefit payable
            under the Plan shall be subject in any manner to anticipation, sale,
            transfer, assignment, pledge, encumbrance, security interest or
            charge, and any action by way of anticipating, alienating, selling,
            transferring, assigning, pledging, encumbering, charging or granting
            a security interest in the same shall be void and of no effect; nor
            shall any such benefit be in any manner liable for or subject to the
            debts, contracts, liabilities, engagements or torts of the person
            entitled to such benefit.

      (b)   Section 11.2(a) shall not apply to the creation, assignment, or
            recognition of a right to any benefit payable pursuant to a
            qualified domestic relations order as defined in Section 414(p) of
            the Code. The Company shall establish reasonable procedures to
            determine the status of domestic relations orders and to administer
            distributions under such orders which are deemed to be qualified
            domestic relations orders. Such procedures shall be in writing and
            shall comply with the provisions of Section 414(p) of the Code. To
            the extent that, because of a qualified domestic relations order,
            more than one individual is to be treated as a surviving spouse, the
            total amount payable from the Plan as a result of the death of a
            Participant shall not exceed the amount that would be payable from
            the Plan if there were only one surviving spouse.

      (c)   Notwithstanding the provisions of Section 11.2(a), the Plan may
            offset any portion of the Accrued Pension of a Participant or the
            Participant's Beneficiary against a claim of the Plan arising:


                                       53

            (i)   as a result of the Participant's or Beneficiary's conviction
                  of a crime involving the Plan; or

            (ii)  with regard to the Participant's or Beneficiary's violation of
                  ERISA's fiduciary provisions upon:

                  (A)   the entry of any civil judgment, consent order, or
                        decree against the Participant or Beneficiary; or

                  (B)   the execution of any settlement agreement between the
                        Participant or Beneficiary and the Department of Labor
                        or Pension Benefit Guaranty Corporation.

      The provisions of this Section 11.2(c) shall apply only to orders,
      judgments, decrees and settlements issued or entered into after August 5,
      1997, and which expressly provide for such offset.

11.3  Payment of Pension to Others

      In the event that the Administrator shall find that any Participant or
      Beneficiary to whom a pension is payable, is unable to care for his
      affairs because of illness, accident or incapacity, any payment due
      (unless prior claim therefor shall have been made by a duly qualified
      guardian or other legal representative) may, in the discretion of the
      Administrator, be paid to the spouse, parent, child, brother or sister of
      such Participant or Beneficiary or to any other person deemed by the
      Administrator to be maintaining or responsible for the maintenance of such
      Participant or Beneficiary. Any such payment shall be a payment for the
      account of the Participant or Beneficiary and shall be a complete
      discharge of any liability of the Plan and any Employer therefor.

11.4  Prohibition Against Reversion

      Except as provided in Section 9.2 hereof, in no event shall any funds held
      in the Trust Fund revert to the Company or be diverted to purposes other
      than the exclusive benefit of Participants or their Beneficiaries prior to
      the satisfaction of all liabilities under the Plan; provided, however,
      that in the event the Plan is terminated, if, after all plan liabilities
      are satisfied, there remains a balance in the Fund as a result of
      actuarial error, such balance shall be returned to the Company.

11.5  Merger, Transfer of Assets or Liabilities

      The Company may merge or consolidate the Plan with, transfer assets and
      liabilities of the Plan to, or receive a transfer of assets and
      liabilities from, any other plan without the

                                       54

      consent of any other Employer or other person, if such transfer is
      effected in accordance with applicable law and if such other plan meets
      the requirements of Code Sections 401(a) and 501(a), permits such transfer
      or the receipt of such transfer and, with respect to liabilities to be
      transferred from this Plan to such other plan, satisfies the requirements
      of Code Sections 411(d)(6) and 417. This Plan may not be merged or
      consolidated with any other plan, nor may any assets or liabilities of
      this Plan be transferred to any other plan, unless the terms of the
      merger, consolidation or transfer are such that each Participant in the
      Plan would, if the Plan were terminated immediately after such merger,
      consolidation or transfer, receive a pension having a value equal to or
      greater than the pension he would have been entitled to receive if this
      Plan had terminated immediately prior to the merger, consolidation or
      transfer.

11.6  Actuarial Equivalence

      Any determination of actuarial equivalence required by the provisions of
      this Plan, when not otherwise specified in the Plan, shall be made on the
      basis of the UP-1984 Table (reflecting a one year setback for Employees
      and a two year setback for Beneficiaries) with an annual interest rate of
      6%.

11.7  Change of Vesting Schedule

      If the Plan's vesting schedule is amended or if the Plan is deemed amended
      by an automatic change to or from a Top-Heavy Plan vesting schedule
      (Section 13.3), each Participant with at least three years of Service with
      an Employer may elect, within a reasonable period after the adoption of
      the amendment or change, to have his nonforfeitable pension computed under
      the Plan without regard to such amendment or change.

      The period during which the election may be made shall commence at the
      date the amendment is adopted or deemed to be made and shall end on the
      latest of:

      (a)   60 days after the amendment is adopted;

      (b)   60 days after the amendment becomes effective; or

      (c)   60 days after the Participant is issued written notice of the
            amendment by the Company.

      Notwithstanding the foregoing provisions of this Section 11.7, the vested
      interest of any Participant on the date such amendment is effective shall
      not be less than his vested interest under the Plan as in effect
      immediately prior to the effective date of such change.


                                       55

11.8  Controlled Group

      For purposes only of determining eligibility to participate in the Plan
      and eligibility for any pension (but not the amount thereof) under the
      Plan, all employment with an Employer or an Affiliate shall be deemed to
      be employment with an Employer in computing Hours of Service and Service.

11.9  Severability

      If any provision of this Plan is held to be invalid or unenforceable, such
      determination shall not affect the other provisions of this Plan. In such
      event, this Plan shall be construed and enforced as if such provision had
      not been included herein.

11.10 Employer Records

      The records of a Participant's Employer shall be presumed to be conclusive
      of the facts concerning his employment or non-employment, Service,
      Credited Service and Compensation unless shown beyond a reasonable doubt
      to be incorrect.

11.11 Application of Plan Provisions

      This Plan shall be binding on all Participants and their spouses and
      Beneficiaries and upon heirs, executors, administrators, successors, and
      assigns of all persons having an interest herein. The provisions of the
      Plan in no event shall be considered as giving any such person any legal
      or equitable right against the Company, an Employer or an Affiliate, any
      of its officers, employees, directors, or shareholders, or against the
      Trustee, except such rights as are specifically provided for in the Plan
      or hereafter created in accordance with the terms of the Plan.

11.12 Missing Participants.

      If a Participant who has left employment with the Company and Affiliates
      has failed to file an application for benefits within 120 days after
      attainment of his Normal Retirement Date, the Administrator shall treat
      the Participant's retirement benefit or vested Accrued Pension as
      forfeited; provided, however, that such Accrued Pension shall be
      reinstated retroactive to the commencement date set forth below upon the
      subsequent filing of a completed application with the Administrator and
      shall commence within ninety (90) days after such application is filed.
      For purposes of this Section 11.12, the commencement date shall be the
      later of:


                                       56

      (a)   sixty (60) days after the close of the Plan Year during which the
            Participant attained his Normal Retirement Date; and

      (b)   sixty (60) days after the close of the Plan Year during which the
            Participant terminated employment with the Hospital or Affiliate.

11.13 IRC 414(u) Compliance Provision

      Notwithstanding any provision of the Plan to the contrary and effective as
      of December 12, 1994, contributions, benefits and service credit with
      respect to qualified military service shall be provided in accordance with
      Section 414(u) of the Code.


                                       57

                                   ARTICLE XII

                            AMENDMENT AND TERMINATION

12.1  Amendment and Termination of the Plan

      The Company hopes and expects to continue the Plan, but expressly reserves
      the right at any time and from time to time, without the consent of
      Participants,

      (a)   to reduce or discontinue payments to the Plan;

      (b)   to terminate the Plan;

      (c)   to amend the Plan, retroactively or otherwise, in such manner as it
            may deem necessary or advisable in order to qualify the Plan and any
            trust established in conjunction therewith under the provisions of
            Sections 401(a) and 501(a) of the Code, or any similar Code
            provisions from time to time in effect;

      (d)   to amend the Plan in any other respect, provided, however, that no
            such amendment shall forfeit or diminish the interest of any
            Participant in the Trust Fund to the extent that such interest has
            become vested in such Participant, except as may be permitted under
            the Code or ERISA.

      Any such amendment to or termination of this Plan shall be evidenced by an
      instrument executed on behalf of the Company by the President. Such
      instrument shall recite at which time the amendments contained therein
      shall become effective.

      Promptly after an amendment of this Plan shall have become effective, the
      Company shall cause a copy of such amendment to be filed with the
      Administrator and with the Trustee, and the Administrator shall take such
      steps as it may deem appropriate to reasonably communicate the amendment
      to Participants.

12.2  Administration of the Plan in Case of Termination

      Upon termination of the Plan, as determined by the Pension Benefit
      Guaranty Corporation, the assets of the Trust Fund shall be liquidated and
      distributed in accordance with Section 4044 of ERISA and applicable
      regulations issued thereunder. In the event of the termination of the Plan
      or a partial termination of the Plan, the rights of all affected
      Participants to Accrued Pensions determined as of the date of such
      termination or partial termination, to the extent funded, or as further
      adjusted by the Pension Benefit Guaranty Corporation as of such date,
      shall be nonforfeitable. Notwithstanding the foregoing, upon Plan
      termination, the benefit of any Highly Compensated Employee shall be
      limited to a benefit that is nondiscriminatory under Section 401(a)(4) of
      the Code.


                                       58

      Upon termination of the Plan, after the satisfaction of all liabilities of
      the Plan to its Participants, Beneficiaries and surviving spouses, the
      Company shall receive any remaining amount resulting from any variations
      between actual requirements and actuarially expected requirements.

12.3  Internal Revenue Service Limitations

      (a)   Except in such cases where the circumstances described in subsection
            (b) apply, the annual payments under the Plan to any one (1) of the
            twenty-five (25) highest paid Highly Compensated Employees (and
            Highly Compensated former Employees), ranked by Test Compensation,
            shall not exceed the sum of:

            (i)   those payments that would be made on behalf of such Employee
                  under a single life annuity that is the Actuarial Equivalent
                  of the sum of the Employee's Accrued Pension and the
                  Employee's Other Benefits (as defined in subsection (c) below)
                  under the Plan; and

            (ii)  those payments the Employee is entitled to receive under a
                  social security supplement.

      (b)   The provisions of subsection (a) above shall not apply if:

            (i)   after payment of all such benefits to an Employee described in
                  subsection (a), the value of Plan assets equals or exceeds
                  110% of the value of current liabilities (as defined in Code
                  Section 412(l)(7) under the Plan;

            (ii)  the value of all such benefits to an Employee described in
                  subsection (a) above is less than one percent of the value of
                  current liabilities under the Plan prior to the payment of all
                  such benefits to such Employee; or

            (iii) the value of all such benefits to an Employee described in
                  subsection (a) does not exceed $5,000 or such other amount as
                  may be prescribed under Section 411(a)(11)(A) of the Code as
                  the maximum amount that may be paid out without the
                  Participant's consent.

      (c)   For purposes of this Section 12.3, "Other Benefits" shall include
            any loan in excess of the amounts set forth in Code Section
            72(p)(2)(A), any periodic income, any withdrawal values payable to a
            living Employee and any death benefits not provided for by insurance
            on the Employee's life. "Other Benefits" for this purpose shall not
            include any social security supplements.


                                       59

                                  ARTICLE XIII

                              TOP-HEAVY PROVISIONS

13.1  General

      Notwithstanding any provision of this Plan to the contrary, the provisions
      of this Article XIII shall apply with respect to any Plan Year provided
      the Plan is a Top-Heavy Plan (as defined in Section 13.2(c) below) for
      such Plan Year.

13.2  Definitions Relating to Top-Heavy Provisions

      For purposes of this Article XIII:

      (a)   "Key Employee" means any Employee or former Employee (and the
            beneficiaries of such an Employee or former Employee) who, during
            the current Plan Year or any of the four preceding Plan Years, is:

            (i)   an officer of an Employer having annual Test Compensation
                  greater than 50 percent of the amount in effect under Section
                  415(b)(1)(A) of the Code for any such Plan Year; for purposes
                  of this definition, no more than the lesser of (1) 50
                  Employees or (2) the greater of three Employees or 10% of the
                  Employees shall be treated as officers;

            (ii)  an owner (or considered an owner under Section 318 of the
                  Code) of one of the ten largest interests in an Employer if
                  such individual's annual Test Compensation exceeds the dollar
                  limitation under Section 415(c)(1)(A) of the Code;

            (iii) a five percent (5%) owner (or considered an owner under
                  Section 318 of the Code) who owns more than five percent (5%)
                  of the outstanding stock of an Employer or who owns Employer
                  stock possessing more than five percent (5%) of the total
                  combined voting power of all stock of an Employer;

            (iv)  a one percent (1%) owner (or considered an owner under Section
                  318 of the Code) who has annual Test Compensation from an
                  Employer of $150,000 or more, and who owns more than one
                  percent (1%) of the outstanding stock of an Employer or who
                  owns Employer stock possessing more than one percent (1%) of
                  the total combined voting power of all stock of an Employer.

      (b)   "Determination Date" means, with respect to any Plan Year, the last
            day of the immediately preceding Plan Year.


                                       60

      (c)   "Top-Heavy Plan" means a plan where, as of the Determination Date,
            the present value of the cumulative accrued benefits (including any
            part of any accrued benefit distributed in the five-year period
            ending on the Determination Date) under the Plan for Key Employees
            exceeds sixty percent (60%) of the present value of the cumulative
            accrued benefits (including any part of any accrued benefit
            distributed in the five-year period ending on the Determination
            Date) under the Plan for all Employees.

            (i)   If this Plan is in a Required Aggregation Group, each Plan of
                  an Employer required to be in such group will be a Top-Heavy
                  Plan if such group is a Top-Heavy Group.

            (ii)  If this Plan is in a Permissive Aggregation Group which is not
                  a Top-Heavy Group, no Plan of an Employer in such group will
                  be a Top-Heavy Plan.

      (d)   "Required Aggregation Group" means:

            (i)   each plan of an Employer in which a Key Employee is a
                  participant, and

            (ii)  each other plan of an Employer which enables a plan in which a
                  Key Employee is a participant to meet the requirements of
                  Internal Revenue Code Sections 401(a)(4) or 410. A terminated
                  plan must be aggregated with other plans of an Employer if it
                  was maintained within the five-year period ending on the
                  Determination Date for the Plan Year in question and it would,
                  but for the fact it terminated, be part of a required
                  aggregation group for such Plan Year.

      (e)   "Permissive Aggregation Group" means any plan of an Employer which
            is not part of the Required Aggregation Group, but is treated as if
            it were at the option of the Company, provided such group continues
            to meet the requirements of Internal Revenue Code Sections 401(a)(4)
            and 410.

      (f)   "Top-Heavy Group" means any Required or Permissive Aggregation
            Group, if as of the Determination Date, the sum of the present value
            of cumulative accrued benefits for Key Employees under all defined
            benefit plans included in such Group and the aggregate of the
            accounts of Key Employees under all defined contribution plans
            included in such Group exceeds sixty percent (60%) of the similar
            sum determined for all Employees.

      (g)   "Present Value of Accrued Benefits" shall be determined as of the
            most recent valuation date within a twelve-month period ending on
            the Determination Date,

                                       61

            but for the purposes of determining whether this Plan is a Top-Heavy
            Plan, shall not include:

            (i)   any rollover contribution initiated by the Employee.

            (ii)  any accrued benefit or account attributable to an Employee who
                  is not a Key Employee, but who was a Key Employee in any prior
                  Plan Year. To the extent that a Key Employee is deemed to be a
                  Key Employee if he meets the definition of Key Employee within
                  any of the four (4) preceding Plan Years, this provision shall
                  apply following the end of such period of time.

            (iii) Any accrued benefit or account attributable to any individual
                  who has not performed any services for an Employer at any time
                  during the five-year period ending on the Determination Date.

            Solely for purposes of determining if the Plan is a Top Heavy Plan
            as described above, the Present Value of Accrued Benefits shall be
            determined by using the single accrual method which is used for all
            plans of the Company and of any Affiliate. If no such single method
            exists, benefits shall be determined as if they accrued not more
            rapidly than the lowest accrued rate permitted under Section
            411(b)(1)(C) of the Code.

      (h)   "Valuation Date" means December 31.

      (i)   "Non-Key Employee" means any Employee who is not a Key Employee.

13.3  Top-Heavy Plan Vesting Requirements

      (a)   For any Plan Year in which the Plan is a Top-Heavy Plan, the
            following vesting schedule will apply to benefits derived from
            Employer contributions. The nonforfeitable interest in a
            Participant's accrued benefit will be determined as follows:



                                             Nonforfeitable Percentage of
           Years of Service                        Accrued Benefit
           -----------------                 ----------------------------
                                          
           0 but less than 2                              0%
           2 but less than 3                             20%
           3 but less than 4                             40%
           4 but less than 5                             60%
               5 or more                                 100%


            This Section 13.3 does not apply to any Participant who does not
            have an Hour of Service after the Plan becomes a Top-Heavy Plan.


                                       62

      (b)   If the vesting schedule under the Plan shifts in or out of the above
            schedule due to determination of whether or not the Plan is a
            Top-Heavy Plan, such shift shall be an amendment to the vesting
            schedule and Section 11.7 shall apply.

13.4  Top-Heavy Plan Minimum Benefit Requirements

      (a)   For any Plan Year in which the Plan is determined to be a Top-Heavy
            Plan, each Non-Key Employee Participant who has completed a year of
            service will accrue a minimum annual benefit (derived from Employer
            contributions and expressed as a life annuity beginning at Normal
            Retirement Age and determined without regard to any Social Security
            contribution or benefit).

      (b)   Such accrual of a minimum annual benefit will be the lesser of:

            (i)   Two percent (2%) of the Participant's highest average
                  compensation for the five consecutive years during which the
                  Participant had the greatest compensation from the Employer
                  multiplied by the years of service as defined in (c) below, or

            (ii)  Twenty percent (20%) times the Participant's highest average
                  compensation for the five consecutive years during which the
                  Participant had the greatest compensation from an Employer.

      (c)   (i)   For the purpose of the accrual of minimum annual benefit, year
                  of service shall mean a year of Credited Service as defined in
                  Article IV, but will exclude years when the Plan was not a
                  Top-Heavy Plan for any Plan Year ending during such year of
                  Credited Service, as well as years of Credited Service in a
                  Plan Year beginning before December 31, 1984. Notwithstanding
                  the above, each Non-Key Employee Participant who has completed
                  1,000 Hours of Service in a year in which the Plan is a
                  Top-Heavy Plan shall be entitled to the minimum annual benefit
                  regardless of the level of such Non-Key Employee's
                  compensation.

            (ii)  The compensation required to be taken into account for
                  purposes of this Section 13.4 is the compensation described in
                  Section 10.1(a)(i) of the Plan; provided, however, that
                  compensation shall not exceed the adjusted annual limitation
                  in effect for the given year (as set forth in Section 2.11)
                  and compensation in years which end in a Plan Year beginning
                  before December 31, 1984 and compensation in years after the
                  close of the last Plan Year in which the Plan is a Top-Heavy
                  Plan shall be disregarded.


                                       63

      (d)   Notwithstanding any other provision of the Plan, an Employee shall
            be a Participant for the purposes of this Section 13.4, and a
            Participant shall be entitled to an accrual under this Section 13.4,
            even if he would not otherwise be entitled to receive an accrual or
            would have received a lesser accrual for the year because the
            Non-Key Employee Participant is not employed on a specified date.

      (e)   If the annual retirement pension payable under the Plan to a
            Participant who has accrued a minimum annual benefit under this
            Article XIII commences at a date other than at Normal Retirement
            Age, such Participant shall receive at least an amount that is the
            actuarial equivalent of the minimum annual benefit commencing at
            Normal Retirement Age as provided under this Section 13.4 using a
            five percent (5%) interest rate assumption for such determination.
            If the annual retirement pension payable to a Participant who has
            accrued a minimum annual benefit under this Article XIII is in a
            form other than a single life annuity, such Participant shall
            receive an amount that is not less than the minimum annual benefit
            as otherwise provided in this Section 13.4 adjusted to be the
            actuarial equivalent of a single life annuity commencing at the same
            age using the provisions of Section 11.6 of the Plan for such
            determination.

      (f)   In the case of Employees covered under both this Plan and any other
            plan maintained by an Employer, this Plan will provide the top heavy
            minimum benefit which shall be offset by the benefit, if any,
            provided under such other plans.

13.5  Required Adjustments

      In any year which begins before January 1, 2000 and in which the Plan is
      determined to be a Top-Heavy Plan, either (a) or (b) below must apply.

      (a)   The defined benefit plan fraction of Section 10.2(b)(i) of the Plan
            and the defined contribution plan fraction of Section 10.2(b)(ii) of
            the Plan shall be applied by substituting 1.0 for 1.25, OR

      (b)   (i)   This paragraph may apply if this is determined to be a
                  Top-Heavy Plan, but would not be a Top-Heavy Plan if ninety
                  percent (90%) were substituted for sixty percent (60%) in
                  Section 13.2(c) of this Plan, and

            (ii)  The following modifications to Section 13.4, Minimum Benefit
                  Requirements, are adopted:


                                       64

                  In Section 13.4(b)(i): use 3% instead of 2%, and in Section
                  13.4(b)(ii): increase 20% by one percentage point for each
                  year (up to 10) for which the Plan was considered under this
                  Section 13.5.

13.6  Limited Application of this Article.

      The sole purpose of this Article is to comply with Section 416 of the Code
      and the terms of this Article shall be interpreted, applied, and if and to
      the extent necessary, shall be deemed modified so as to satisfy solely the
      minimum requirements of Section 416 of the Code and the regulations
      promulgated with respect thereto.


                                       65

                                   ARTICLE XIV

                                  JURISDICTION

14.1  Jurisdiction

      The provisions of the Plan shall be construed in accordance with ERISA,
      the Code, and, where not superseded by ERISA, the laws of the Commonwealth
      of Pennsylvania.

Executed at Erie, Pennsylvania, this 10th day of December, 2001.



                                                   ERIE INDEMNITY COMPANY



                                                   By: /s/ Stephen A. Milne
                                                       ---------------------
                                                           President

EX-10.6

                    EXHIBIT 10.6 - DEFERRED COMPENSATION PLAN
                            OF ERIE INDEMNITY COMPANY
               (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2001)

                                   ARTICLE ONE

                                  INTRODUCTION

This Deferred Compensation Plan (the "Plan") is an unfunded, non-qualified,
deferred compensation arrangement created for a select group of management and
highly compensated employees of the Company and its Affiliates.

The Plan has been amended from time to time and was last amended and restated
effective January 1, 1997.

Effective as of December 31, 2000, the Supplemental 401(k) Plan has been merged
into the Plan. Deferred compensation credited on behalf of eligible employees
under the Supplemental 401(k) Plan shall be credited under the Plan effective
January 1, 2001 and shall be payable under the terms of the Plan as in effect on
the date payments are to commence hereunder.

This amendment and restatement of the Plan shall constitute an amendment,
restatement and continuation of the Plan and the Supplemental 401(k) Plan. This
amendment and restatement is generally effective as of January 1, 2001. However,
certain provisions of this amendment and restatement are effective as of some
other date. The provisions of this amendment and restatement with stated
effective dates prior to January 1, 2001, shall be deemed to amend the
corresponding provisions, if any, of the Plan or the Supplemental 401(k) Plan as
in effect before this amendment and restatement and all amendments thereto as of
such dates. Events occurring before the applicable effective date of any
provision of this amendment and restatement shall be governed by the applicable
provision of the Plan or the Supplemental 401(k) Plan as in effect on the date
of the event.

                                   ARTICLE TWO

                                   DEFINITIONS

The following words or phrases are defined terms whenever they appear in the
Plan:

2.1 "Administrator" shall mean the person or committee, appointed by the Chief
Executive Officer of the Company, who shall be responsible for the functions
assigned to him under the Plan.

2.2 "Affiliate" shall mean a corporation or partnership in which more than 50%
of the equity is owned directly or indirectly by the Company including, without
limitation, the following: Erie Family Life Insurance Company, Erie Insurance
Company, EI Holding Corp., EI Service Corp., Erie Insurance Company of New York,
Erie Insurance Property & Casualty Company and Flagship City Insurance Company.


                                       1

2.3 "Amendment Form" shall mean the Deferred Compensation Agreement Amendment
Form described in Section 5.3.

2.4 "Board of Directors" shall mean the Board of Directors of the Erie Indemnity
Company.

2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.

2.6 "Committee" shall mean the Executive Compensation Committee of the Board of
Directors or its successor as designated by the Board of Directors.

2.7 "Company" shall mean the Erie Indemnity Company, a Pennsylvania business
corporation.

2.8 "Compensation" shall mean "Compensation" as defined under the Qualified Plan
provided, however, that for purposes of the Plan, any limitation on recognized
Compensation under Section 401(a)(17) of the Code shall be ignored. Except as
otherwise specified by the Board of Directors, any change in the definition of
Compensation under the Qualified Plan (other than a change related to Section
401(a)(17) of the Code) shall automatically be considered a change to the Plan,
effective as of the effective date of change under the Qualified Plan, and the
Plan shall thereafter be administered in accordance with such change.

2.9 "Deferred Compensation Account" shall mean the bookkeeping account described
in Section 4.1.

2.10 "Election Form" shall mean the Deferred Compensation Plan Election Form
described in Section 3.2 and/or such form described in Section 3.3.

2.11 "Participant" shall mean each employee of the Company or an Affiliate who
participates in the Plan in accordance with the terms and conditions of the
Plan.

2.12 "Plan" shall mean the Deferred Compensation Plan of Erie Indemnity Company,
as the same incorporates, for periods on and after January 1, 2001, the Erie
Insurance Group Supplemental 401(k) Plan, including any amendments hereto.

2.13 "Plan Year" shall mean the plan year applicable under the Qualified Plan.
Any change in plan year under the Qualified Plan shall automatically be
considered a change to the Plan, effective as of the effective date of change
under the Qualified Plan.

2.14 "Qualified Plan" shall mean the Erie Insurance Group Employee Savings Plan,
as amended.

2.15 "Supplemental Company Contribution" shall mean the contribution credit
described in Section 4.3(b) and determined in reference to a formula set forth
in the Qualified Plan. Except as otherwise specified by the Board of Directors,
any change in the employer matching contribution formula under the Qualified
Plan shall automatically be considered a change to the Plan, effective as of the
effective date of change under the Qualified Plan, and the Plan shall thereafter
be administered in accordance with such change.



                                       2

2.16 "Supplemental Employee Contribution" shall mean the contribution credit
described in Section 4.3(a) and determined in reference to a formula set forth
in the Qualified Plan. Except as otherwise specified by the Board of Directors,
any change in the elective contribution formula under the Qualified Plan shall
automatically be considered a change to the Plan, effective as of the effective
date of change under the Qualified Plan, and the Plan shall thereafter be
administered in accordance with such change.

2.17 "Supplemental 401(k) Plan" shall mean the Erie Insurance Group Supplemental
401(k) Plan, as amended. Effective as of December 31, 2000, the Supplemental
401(k) Plan has been merged into, and continued under, the Plan.

2.18 "Valuation Date" shall mean the close of business as of each business day.

                                  ARTICLE THREE

                          ELIGIBILITY AND PARTICIPATION

3.1 ELIGIBILITY

The individuals who are eligible to participate in the Plan are those employees
selected by the Committee. The Committee shall make its selection of employees
eligible to participate at a meeting held at least 30 days before January 1 of
the year next beginning or at such special meetings called for the purpose of
determining the eligibility of new employees hired by the Company or its
Affiliates.

The Committee, in its sole discretion, shall determine to what extent an
employee shall be eligible to participate under the provisions of Section 4.2
and/or Section 4.3 hereof. Except as otherwise provided by the Committee, an
employee who has been selected by the Committee as eligible to participate under
Section 4.2 and/or Section 4.3 of the Plan shall continue such eligibility from
year to year of his employment with the Company or Affiliate, regardless of
whether the employee elects to participate or not, unless the Committee, in its
discretion, terminates all or part of that employee's eligibility. Acting in its
sole discretion, the Committee may divide eligible employees into groups and
specify different Plan features (such as maximum levels of participation) for
each group.

3.2 PARTICIPATION UNDER DEFERRED COMPENSATION PROVISIONS

An employee who is eligible under the provisions of Section 3.1 to participate
under the provisions of Section 4.2 may elect to participate, alter the extent
of his participation, or suspend or terminate his participation by delivering a
properly completed and executed Election Form to the Administrator. This form
shall specify:

      a) The amount of annual salary to be deferred and/or the amount of any
         bonus to be deferred;

      b) The Participant's investment designation in accordance with Section
         4.5;



                                       3

      c) The method by which the amounts credited to his Deferred Compensation
         Account are to be paid;

      d) The date at which payment of the amounts credited to his Deferred
         Compensation Account is to occur (in the event of a lump sum
         distribution) or commence (in the event of a form of distribution other
         than a lump sum); and

      e) The beneficiary designated by the Participant to receive payment of the
         amounts credited to his Deferred Compensation Account in the event the
         Participant dies before distribution of the amounts credited to his
         Deferred Compensation Account is completed.

The election under paragraph (a) shall be irrevocable with respect to the
calendar year to which it applies. The election under paragraph (b) may be
changed as provided in Section 4.5 and shall be subject to the provisions of
Section 3.4. The elections under paragraphs (c) and (d) shall be irrevocable
except as provided in Section 5.3 hereof and shall be subject to the provisions
of Section 3.4. The election under paragraph (e) may be changed by the
Participant at any time by delivering a new designation of beneficiary to the
Administrator, on such form or forms as may be satisfactory to the
Administrator. A designation of beneficiary shall be subject to the provisions
of Section 3.4. A Participant's beneficiary designation shall be considered
revoked in the event that the primary beneficiary and all contingent
beneficiaries selected by a Participant die prior to the Participant.

3.3 PARTICIPATION UNDER SUPPLEMENTAL 401(k) PROVISIONS

Effective January 1, 2001, an employee who is eligible under the provisions of
Section 3.1 to participate under the provisions of Section 4.3 may elect to
participate, alter the extent of his participation, or suspend or terminate his
participation by delivering a properly completed and executed Election Form to
the Administrator. This form shall specify:

      a) The amount of his future Compensation to be deferred;

      b) The Participant's investment designation in accordance with Section
         4.5;

      c) The method by which amounts credited to his Deferred Compensation
         Account are to be paid;

      d) The date at which payment of the amounts credited to his Deferred
         Compensation Account is to occur (in the event of a lump sum
         distribution) or commence (in the event of a form of distribution other
         than a lump sum); and

      e) The beneficiary designated by the Participant to receive payment of the
         amounts credited to his Deferred Compensation Account in the event the
         Participant dies before distribution of the amounts credited to his
         Deferred Compensation Account is completed.



                                       4

The election under paragraph (a) shall be irrevocable with respect to the
calendar year to which it applies. The election under paragraph (b) may be
changed as provided in Section 4.5 and shall be subject to the provisions of
Section 3.4. The elections under paragraphs (c) and (d) shall be irrevocable
except as provided in Section 5.3 hereof and shall be subject to the provisions
of Section 3.4. The election under paragraph (e) may be changed by the
Participant at any time by delivering a new designation of beneficiary to the
Administrator, on such form or forms as may be satisfactory to the
Administrator. A designation of beneficiary shall be subject to the provisions
of Section 3.4. A Participant's beneficiary designation shall be considered
revoked in the event that the primary beneficiary and all contingent
beneficiaries selected by a Participant die prior to the Participant.

3.4 COORDINATION OF ELECTIONS

Notwithstanding any provision of this Article Three to the contrary, an employee
who is eligible to participate under the provisions of Sections 4.2 and 4.3 and
who elects to participate under both Sections shall be required to coordinate
and combine certain elections (stated below) into a single election that shall
be applicable both to salary and/or bonuses deferred under Section 4.2 and
Compensation deferred under Section 4.3. The elections that shall be coordinated
into a single election under this Section 3.4 are:

      a) A Participant's investment designation described in Sections 3.2(b) and
         3.3(b);

      b) A Participant's method of payment election described in Sections 3.2(c)
         and 3.3(c);

      c) A Participant's election regarding the time payment is made or
         commences, as described in Sections 3.2(d) and 3.3(d); and

      d) A Participant's beneficiary designation described in Sections 3.2(e)
         and 3.3(e).

The effective date of this Section 3.4 with respect to any Participant shall be
the effective date of the Participant's initial deferral under Section 4.2 or
his initial deferral under Section 4.3, whichever is later.

3.5 EFFECTIVE DATE FOR PARTICIPATION

The effective date for participation in the Plan by an employee who is eligible
shall be the first day of the calendar year next beginning after the date the
Administrator receives the employee's Election Form. The effective date for
participation in the Plan by a newly hired employee who is eligible shall be the
date that he begins active employment with the Company or an Affiliate as long
as the Administrator has received the employee's Election Form prior to this
date. The deferral of a Participant's salary under Section 4.2 and/or the
deferral of a Participant's Compensation under Section 4.3 shall begin or end,
as appropriate, as of the first day of the full pay period coincident with or
next following the effective date of his participation as described in this
paragraph. The deferral of any Participant bonus under Section 4.2 shall be
effective as of the date such bonus would otherwise be payable to the
Participant.


                                       5

                                  ARTICLE FOUR

                              COMPENSATION DEFERRED

4.1 DEFERRED COMPENSATION ACCOUNT

A deferred compensation account shall be established for each employee who
becomes a Participant in the Plan. Effective January 1, 2001, the compensation
each Participant elects to defer under Section 4.2 and/or any Supplemental
Employee Contributions and Supplemental Company Contributions under Section 4.3
as well as hypothetical interest earned on such deferred compensation shall be
maintained in this "Deferred Compensation Account." This Deferred Compensation
Account shall be kept only for bookkeeping and accounting purposes and no
Company funds shall be transferred or designated to this account.

Effective as of December 31, 2000, the separate accounts maintained on behalf of
a Participant under the Supplemental 401(k) Plan shall be merged into the
Deferred Compensation Account hereunder. Any election made with respect to such
separate accounts that is in effect as of December 31, 2000 shall be deemed to
apply to the entire balance of the Participant's Deferred Compensation Account
on or after January 1, 2001 unless the Participant has previously made a valid
election applicable to the Deferred Compensation Account maintained on his
behalf and such election remains in effect as of January 1, 2001. A Participant
may choose to change or amend elections applicable to Deferred Compensation
Accounts in the manner provided in Sections 4.5 and 5.3.

4.2 AMOUNT OF SALARY/BONUS DEFERRAL

An employee who is eligible to participate under the provisions of this Section
4.2 may elect to defer receipt of up to 25% of his annual salary for services as
an employee of the Company or an Affiliate. In addition to, or in lieu of, a
deferral of annual salary, a Participant may elect to defer receipt of up to
100% of any bonus to be payable by the Company or an Affiliate. Such elections
shall be made by the end of the calendar year which precedes the calendar year
in which the deferral election is effective. Compensation deferred under this
Section 4.2 shall be credited to the Participant's Deferred Compensation Account
on the date such compensation would otherwise have been payable to the
Participant.

4.3 AMOUNT OF SUPPLEMENTAL 401(k) CONTRIBUTIONS

      a) Effective January 1, 2001 an employee who is eligible to participate
         under the provisions of this Section 4.3 may elect to have Supplemental
         Employee Contributions made to the Plan on his behalf. An eligible
         employee shall elect to participate in the Plan within such time and in
         accordance with such means as are designated by the Administrator. The
         amount of Supplemental Employee Contribution credited hereunder with
         respect to a participating employee for any given year shall be
         determined by the Administrator, in its discretion, and shall be in
         reference to the amount by which the elective contributions made on
         behalf of such employee for such year under the Qualified Plan is
         limited by the application of Section 402(g) of the Code.



                                       6

      b) Effective January 1, 2001, in the event that the allocation of employer
         matching contributions under the Qualified Plan on behalf of a
         Participant is limited for any given Plan Year due to the limitation on
         elective contributions made on such Participant's behalf under the
         Qualified Plan under Section 402(g) of the Code, the amount by which
         such employer matching contributions are limited shall be determined by
         the Administrator, in its discretion, and such amount shall be credited
         under the Plan as a matching contribution on Supplemental Employee
         Contributions and shall be designated as Supplemental Company
         Contributions.

      c) Compensation deferred under this Section 4.3 shall be credited to the
         Participant's Deferred Compensation Account as of the date such
         compensation would otherwise have been treated as a contribution
         allocation under the Qualified Plan.

4.4 HYPOTHETICAL INTEREST

Deferred compensation is assumed to earn interest and this hypothetical interest
shall be credited as of each Valuation Date on the amount shown in each
Participant's Deferred Compensation Account on such Valuation Date in accordance
with the valuation procedure adopted by the Administrator. The hypothetical
interest to be credited to each Participant shall be determined by the
Administrator and computed in reference to the appreciation or depreciation
experienced since the immediately preceding Valuation Date by the hypothetical
investment funds which the Administrator may offer to Participants under Section
4.5.

The crediting of hypothetical interest shall occur so long as there is a balance
in the Participant's Deferred Compensation Account regardless of whether the
Participant has terminated employment with the Company or Affiliates or has
died. The Administrator may prescribe any reasonable method or procedure for the
accounting of hypothetical interest.

4.5 PARTICIPANT INVESTMENT DESIGNATION

      a) A Participant (and any eligible employee first electing to participate
         in the Plan) shall designate on such form or forms as may be
         satisfactory to the Administrator, that portion of his compensation to
         be deferred under Sections 4.2 and 4.3 and, separately, that portion of
         any existing Deferred Compensation Account maintained on his behalf
         which shall be credited with hypothetical interest in reference to each
         of the hypothetical investment funds that may be offered by the
         Administrator, in the discretion of the Administrator. Such
         designations shall specify, in 1% increments, the percentages to be
         credited in reference to each of the hypothetical investment funds
         offered. Such designations shall remain in effect until the Participant
         submits a new designation within such time and in accordance with such
         means as is determined pursuant to a uniform policy adopted by the
         Administrator. Under such policy, the new designations shall be
         effective as of a given date specified by the Administrator. In the
         event a Participant fails to make an effective designation under this


                                       7

         Section 4.5(a), the Administrator, acting in its discretion, shall make
         such designation on behalf of the Participant.

      b) In accepting participation in the Plan, a Participant agrees on behalf
         of himself and his beneficiary(ies) to assume all risk in connection
         with any decrease in value of the hypothetical investment funds in
         reference to which hypothetical interest is credited to the
         Participant's Deferred Compensation Account. The Company, the
         Affiliates and the Administrator shall not be liable to any Participant
         or beneficiary for the under-performance of any hypothetical investment
         fund offered under the Plan.

      c) The Administrator may, in its discretion, offer additional hypothetical
         investment funds to Participants and may cease to offer any such fund
         at such time as it deems appropriate. In the event the Administrator
         decides to discontinue offering an investment fund under the Plan,
         those Participants on whose behalf hypothetical interest is then being
         credited on the basis of the discontinued hypothetical investment fund
         shall be required to designate, from such selection of funds as may be
         offered by the Administrator, a fund or funds as a replacement for the
         investment fund being discontinued. Such designation shall be made in
         accordance with Section 4.5(a) hereof. Hypothetical interest credited
         on behalf of any Participant who is affected by the discontinuation of
         a hypothetical investment fund but who fails to make the replacement
         designation provided in this Section 4.5(c) shall mirror, to the extent
         of the Participant's interest in such discontinued fund, such
         hypothetical investment fund or funds as the Administrator may choose
         in its discretion.

      d) Title to and beneficial ownership of any assets which the Company or
         any Affiliate may earmark to pay the contingent deferred compensation
         hereunder shall at all times remain in the Company or Affiliate. The
         Participant, his beneficiary(ies) and any heirs, successors and assigns
         shall not have any legal or equitable right, interest or control over
         or any property interest whatsoever in any specific assets of the
         Company or any Affiliate or related entity on account of having an
         interest under the Plan. Any and all of the Company's assets, and any
         life insurance policies, annuity contracts or the proceeds therefrom
         which may be acquired by the Company shall be, and remain, the general
         unpledged, unrestricted assets of the Company. In no event shall the
         Company or any Affiliate be required to purchase any specific shares or
         interest in any investment fund.


                                       8

4.6 STATEMENTS

Statements will be sent to each Participant as to the balance of his Deferred
Compensation Account at least once each calendar year.

                                  ARTICLE FIVE

                        PAYMENT OF DEFERRED COMPENSATION

5.1 PAYMENT

Upon termination of employment with the Company and all Affiliates, the balance
of the Participant's Deferred Compensation Account shall be paid to him
according to the method and at the times selected by the Participant in his
Election Form or, if applicable, in the most recent, properly executed and
effective Amendment Form which the Participant has delivered to the
Administrator prior to the Participant's termination of employment.

5.2 METHODS OF PAYMENT

The Participant may elect any of the following methods of payment of his
Deferred Compensation Account:

      a) A lump sum distribution;

      b) Payments in approximately equal annual installments for a period not to
         exceed 10 years;

      c) Payments in approximately equal monthly installments for a period not
         to exceed 10 years; and

      d) Payment of a dollar amount or percentage (as specified by the
         Participant) of the Participant's Deferred Compensation Account in the
         form of a single sum payment with the balance of such Account being
         paid under either the method described in Section 5.2(b) or the method
         described in Section 5.2(c). (Available for elections on and after
         November 16, 2000.)

In the event the Participant dies before receiving the entire distribution owed
to him, the balance in the Participant's Deferred Compensation Account on his
date of death shall be paid as soon as practicable in a lump sum to the
beneficiary designated by the Participant in the most recent, properly executed,
beneficiary designation which the Participant has delivered to the Administrator
prior to the Participant's death. If no beneficiary designation is in effect on
the death of the Participant, the balance in the Participant's Deferred
Compensation Account shall be paid to the estate of the Participant.


                                       9

5.3 AMENDMENT TO PAYMENT ELECTION

A Participant who is employed by the Company or an Affiliate may request to
defer the date at which payment of his Deferred Compensation Account will occur
(or commence) and may request a change in his elected method of payment by
submitting an Amendment Form to the Administrator which indicates the period of
additional deferral and/or the desired method of payment; provided, however:

      a) Such request of additional deferral or alternative method of payment
         shall be subject to the Administrator's power, to be exercised at
         Administrator's discretion, to direct that payment of the Participant's
         Deferred Compensation Account will occur or commence, or will be paid
         under a method, in accordance with the Participant's election(s) on a
         previously delivered Amendment Form or on the Participant's Election
         Form; and

      b) In no event shall any requested additional deferral or alternative
         method of payment become effective unless the Amendment Form evidencing
         such request is submitted to, and approved by, the Administrator at
         least twelve months prior to the date payment of the Deferred
         Compensation Account would otherwise have occurred or commenced under
         the Election Form or Amendment Form in effect on the date the
         Participant requests the additional deferral or alternative method of
         payment.

5.4 EMERGENCY CIRCUMSTANCES

Notwithstanding any other provision of this Plan, if the Committee determines,
after consideration of a Participant's application, that the Participant has a
financial necessity of such a substantial nature that a current payment of
compensation deferred under this Plan is warranted, the Committee may in its
sole and absolute discretion direct that all or a portion of the Participant's
Deferred Compensation Account balance be paid to him. The payment shall be made
in the manner and at the times specified by the Committee for payment; provided,
however, such payment shall not be in excess of that amount which is, in the
discretion of the Committee, required to satisfy the financial necessity.

                                   ARTICLE SIX

                          AMENDMENT AND DISCONTINUANCE

The Company expects to continue the Plan indefinitely, but reserves the right to
amend or discontinue the Plan at any time, if, in its sole judgment, such
amendment or discontinuance is necessary or desirable. Any such amendment or
discontinuance shall be made pursuant to a resolution of the Board of Directors
and shall be effective as of the date specified in such resolution. Without a
consent of the Participant, no amendment or discontinuance of the Plan shall
adversely affect the balance of a Participant's Deferred Compensation Account at
the time of amendment or discontinuance. In the event of a discontinuance of the
Plan, the Company (or


                                       10

any transferee, or successor entity of the Company) shall be obligated to pay
Deferred Compensation Account balances to Participants and beneficiaries at such
time or times and in such forms as provided under the terms of the Plan.

                                  ARTICLE SEVEN

                               GENERAL PROVISIONS

7.1 NO EFFECT ON EMPLOYMENT RIGHTS

Nothing contained herein shall be construed as creating any contract of
employment between the Company or any Affiliate and any Participant nor shall
any provision hereof confer upon any Participant the right to be retained in the
service of the Company or any Affiliate nor limit the right of the Company or
any Affiliate to discharge or otherwise deal with Participants without regard to
the existence of the Plan.

7.2 GENERAL CONTRACTUAL OBLIGATION

It is the intent of this Plan, and each Participant understands, that no trust
has been created for his or her benefit and that no Participant has any interest
in any asset of the Company, any Affiliate or any related entity. The Company's
obligation to pay to the Participant the sums deferred together with any
interest thereon is a general contract obligation. Nothing contained in the Plan
shall constitute a guaranty by the Company, any Affiliate, or any other entity
or person that the assets of the Company will be sufficient to pay these
amounts. The status of the Participant is that of an unsecured creditor to the
extent of the total amount of his compensation deferred plus hypothetical
interest credited as above described.

7.3 BINDING ON COMPANY, PARTICIPANTS AND THEIR SUCCESSORS

The Plan shall be binding upon and inure to the benefit of the Company and
Affiliates, their successors and assigns and Participants and their heirs,
executors, administrators and legal representatives. In the event of the merger
or consolidation of the Company with or into any other corporation, or in the
event substantially all of the assets of the Company shall be transferred to
another corporation, the successor corporation resulting from the merger or
consolidation, or the transferee of such assets, as the case may be, shall, as a
condition to the consummation of the merger, consolidation or transfer, assume
the obligations of the Company hereunder and shall be substituted for the
Company hereunder.

7.4 SPENDTHRIFT PROVISIONS

The interest of a Participant or his beneficiary under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, or charge, either voluntarily or involuntarily, prior to
actual receipt thereof by the payee; any attempt so to anticipate, alienate,
sell, transfer, assign, pledge, encumber or charge any such interest herein
prior to such receipt shall be void. Deferred Compensation Accounts hereunder
shall not be subject to garnishment, attachment or other legal or equitable
process nor shall they be an asset in bankruptcy; provided, however, that no
amount shall be payable from this Plan to a Participant,


                                       11

or any person claiming by or through a Participant, unless and until any and all
amounts representing debts or other obligations owed to the Company or any
Affiliate by the Participant have been fully paid and satisfied. Neither the
Company nor any Affiliate shall be liable in any manner for or subject to the
debts, contracts, liabilities, torts or engagements of any person who has a
Deferred Compensation Account maintained on his behalf under the Plan.

7.5 DISCLOSURE

Each Participant, upon his written request, shall receive a copy of the Plan and
the Administrator will make available for inspection by any Participant a copy
of any written rules and regulations used by the Administrator in administering
the Plan.

7.6 GOVERNING LAW

The Plan is established under and will be construed according to the laws of the
Commonwealth of Pennsylvania to the extent that such laws are not preempted by
the Employee Retirement Income Security Act of 1974, as amended, and regulations
promulgated thereunder.

7.7 INCAPACITY OF RECIPIENT

In the event a Participant or beneficiary is declared incompetent and a
guardian, conservator or other person legally charged with the care of his
person or of his estate is appointed, any Deferred Compensation Account under
the Plan to which such Participant, or beneficiary is entitled shall be paid to
such guardian, conservator or other person legally charged with the care of his
person or his estate. Except as provided hereinabove, when the Administrator, in
its sole discretion, determines that a Participant or beneficiary is unable to
manage his financial affairs, the Administrator may direct the Company to make
distribution(s) from the Deferred Compensation Account maintained on behalf of
such Participant or beneficiary to any one or more of the spouse, lineal
ascendants or descendants or other closest living relatives of such Participant
or beneficiary who demonstrates to the satisfaction of the Administrator the
propriety of making such distribution(s). Any payment so made shall be in
complete discharge of any liability under the Plan for such payment. The
Administrator shall not be required to see to the application of any such
distribution made as provided above.

7.8 ELECTIONS, APPLICATIONS, NOTICES

Every designation, election, revocation or notice authorized or required
hereunder shall be deemed delivered to the Company or the Administrator as the
case may be: (a) on the date it is personally delivered to the Administrator at
the Company's executive offices at 100 Erie Insurance Place, Erie, Pennsylvania
16530 or (b) three business days after it is sent by registered or certified
mail, postage prepaid, addressed to the Administrator at the offices indicated
above. Every such item which is to be delivered to a person or entity designated
by the Administrator to perform recordkeeping and other administrative services
on behalf of the Plan shall be deemed delivered to such person or entity when it
is actually received (either physically or through interactive electronic
communication) by such person or entity. Every designation, election, revocation
or notice authorized or required hereunder which is to be delivered to a
Participant or beneficiary shall be deemed delivered to the Participant or
beneficiary: (a) on the date it is


                                       12

personally delivered to such individual, or (b) three business days after it is
sent by registered or certified mail, postage prepaid, addressed to such
individual at the last address shown for him on the Company's records. Any
notice required hereunder may be waived by the person entitled thereto.

7.9 COUNTERPARTS

This Plan may be executed in any number of counterparts, each of which shall be
considered as an original, and no other counterparts need be produced.

7.10 SEVERABILITY

In the event any provision of this Plan shall be held illegal or invalid for any
reason, such illegality or invalidity shall not affect the remaining provisions
of the Plan. This Plan shall be construed and enforced as if such illegal or
invalid provision had never been contained herein.

7.11 HEADINGS

The headings of Sections of this Plan are for convenience of reference only and
shall have no substantive effect on the provisions of this Plan.

7.12 CONSTRUCTION

The masculine gender, where appearing in this Plan, shall be deemed to also
include the feminine gender. The singular shall also include the plural, where
appropriate.

                                  ARTICLE EIGHT

                                 ADMINISTRATION

8.1 GENERAL ADMINISTRATION

The Administrator shall be charged with the administration of the Plan. The
Administrator shall have all such powers as may be necessary to discharge its
duties relative to the administration of the Plan, including by way of
illustration and not limitation, discretionary authority to interpret and
construe the Plan, to determine and decide all questions of fact, and all
disputes arising under the Plan including, but not limited to, the eligibility
of any employee to participate hereunder, the validity of any election as may be
necessary or appropriate hereunder and the right of any Participant or
beneficiary to receive payment of all or any portion of a Deferred Compensation
Account maintained hereunder. The Administrator shall have all power necessary
to adopt, alter and repeal such administrative rules, regulations and practices
governing the operation of the Plan as it, in its sole discretion, may from time
to time deem advisable. The Administrator shall not be liable to any person for
any action taken or omitted in connection with the interpretation and
administration of the Plan unless attributable to willful misconduct. The
Administrator shall be entitled to conclusively rely upon all tables,
valuations, certificates, opinions and reports furnished by any actuary,
accountant, controller, counsel or other person employed or engaged by the
Company with respect to the Plan. Any individual serving as Administrator shall
not


                                       13

participate in any action or determination regarding solely his own benefits
payable hereunder. Except as provided in Section 8.3, decisions of the
Administrator made in good faith shall be final, conclusive and binding upon all
parties.

8.2 CLAIMS PROCEDURE

Whenever the Administrator denies, in whole or in part, a claim for benefits
filed by any person (hereinafter referred to as a "Claimant"), the Administrator
shall transmit a written notice setting forth (i) the specific reasons for the
denial of the claim, (ii) references to the specific provisions of the Plan on
which the denial is based, (iii) a description of any additional needed material
or information and why such material or information is necessary, and (iv)
further steps which the Claimant can take in order to have his claim reviewed
(including a statement that the Claimant or his duly authorized representative
may review the Plan document and submit issues and comments regarding the claim
to the Administrator). In addition, the written notice shall contain the date on
which the notice was sent and a statement advising the Claimant that, within
ninety (90) days of the date on which such notice is received, he may request a
review of the Administrator's decision.

8.3 CLAIMS REVIEW

Within ninety (90) days of the date on which the notice of denial of claim is
received by the Claimant, the Claimant or his authorized representative may
request that the claim denial be reviewed by filing with the Administrator a
written request therefor, which request shall contain the following information:

      a) the date on which the notice of denial of claim was received by the
         Claimant;

      b) The date on which the Claimant's request was filed with the
         Administrator; provided, however, that the date on which the Claimant's
         request for review was in fact filed with the Administrator shall
         control in the event that the date of the actual filing is later than
         the date stated by the Claimant pursuant to this clause (b);

      c) the specific portions of the denial of his claim which the Claimant
         requests the Administrator to review;

      d) a statement by the Claimant setting forth the basis upon which he
         believes the Administrator should reverse its previous denial of his
         claim for benefits and accept his claim as made;

      e) whether the Claimant desires a hearing on the claim; and

      f) any written material (included as exhibits) which the Claimant desires
         the Administrator to examine in its consideration of his position as
         stated pursuant to clause (d).



                                       14

If the Claimant has requested a hearing on the claim, such hearing shall be held
within thirty (30) days after the date determined pursuant to clause (b) hereof.
Within sixty (60) days of the date determined pursuant to clause (b) hereof (or,
if special circumstances or the request for a hearing require an extension of
time, within ninety (90) days of such date), the Administrator shall conduct a
full and fair review of the decision denying the Claimant's claim for benefits
and shall deliver its decision to the Claimant in writing. Such written decision
shall set forth the specific reasons for the decision, including references to
the specific provisions of this Plan which were relied upon. The decision will
be final and binding on all persons concerned.

                                  ARTICLE NINE

                       MERGER OF SUPPLEMENTAL 401(k) PLAN

Effective as of December 31, 2000, the Supplemental 401(k) Plan shall be merged
into and become a part of this Plan. Each Participant who had earned a benefit
under the Supplemental 401(k) Plan as of such date of merger shall have his
right to such benefit preserved under the Plan and, for periods on and after
January 1, 2001, shall look solely to the terms of the Plan for purposes of
determining his rights and responsibilities regarding such benefit.

Executed at Erie, Pennsylvania this 22nd day of December, 2000, effective
January 1, 2001.


                                               ERIE INSURANCE GROUP



                                               By: /s/ Stephen A. Milne
                                                  ----------------------------

                                               Title: President and CEO
                                                     -------------------------
ATTEST:

/s/ Douglas F. Ziegler
- ------------------------------------
Douglas F. Ziegler
Senior V.P., Treasurer and
   Chief Investment Officer


                                       15

EX-10.7

                      EXHIBIT 10.7 - ERIE INSURANCE GROUP
                             EMPLOYEE SAVINGS PLAN

                                  INTRODUCTION

The Erie Indemnity Company (the "Company") adopted the Erie Insurance Group
Employee Savings Plan (the "Plan") effective January 1, 1989. The Company has
subsequently amended the Plan from time to time and was last amended and
restated the Plan effective as of May 1, 1998.

This amendment and restatement of the Plan shall constitute an amendment,
restatement and continuation of the Plan. This amendment and restatement is
generally effective as of January 1, 2001. However, certain provisions of this
amendment and restatement are effective as of some other date. The provisions of
this amendment and restatement with stated effective dates prior to January 1,
2001, shall be deemed to amend the corresponding provisions, if any, of the Plan
as in effect before this amendment and restatement and all amendments thereto as
of such dates. Events occurring before the applicable effective date of any
provision of this amendment and restatement shall be governed by the applicable
provision of the Plan as in effect on the date of the event.

The purpose of the Plan is to provide a pre-tax long term savings vehicle for
eligible employees and to provide participants with an opportunity to contribute
toward additional retirement security according to the provisions of Section
401(k) of the Internal Revenue Code of 1986, as amended.


                                       i

                                TABLE OF CONTENTS



INTRODUCTION                                                                    Page
                                                                             

ARTICLE ONE - DEFINITIONS
    1.1   Administrator or Plan Administrator......................................1
    1.2   Affiliate................................................................1
    1.3   Board....................................................................1
    1.4   Code.....................................................................1
    1.5   Company..................................................................1
    1.6   Compensation.............................................................1
    1.7   Covered Employee.........................................................2
    1.8   Effective Date...........................................................2
    1.9   Employee.................................................................2
    1.10  Employer.................................................................2
    1.11  Employer Matching Contribution...........................................2
    1.12  Erie Indemnity Stock.....................................................2
    1.13  Erie Indemnity Stock Fund................................................2
    1.14  ERISA....................................................................2
    1.15  Highly Compensated.......................................................3
    1.16  Hour of Service..........................................................3
    1.17  Interactive Electronic Communication.....................................4
    1.18  Leased Employee..........................................................4
    1.19  Normal Retirement Date...................................................4
    1.20  Notice...................................................................5
    1.21  Participant..............................................................5
    1.22  Plan.....................................................................5
    1.23  Plan Year................................................................5
    1.24  Qualified Domestic Relations Order or QDRO...............................5
    1.25  Safe Harbor Matching Contribution........................................6
    1.26  Spousal Consent..........................................................6
    1.27  Tax Deferred Contribution................................................6
    1.28  Test Compensation........................................................6
    1.29  Top Paid Group...........................................................7
    1.30  Total Account............................................................7
    1.31  Trust Agreement..........................................................7
    1.32  Trust Fund...............................................................8
    1.33  Trustee..................................................................8
    1.34  Valuation Date...........................................................8
    1.35  Year of Eligibility Service..............................................8



                                       ii


                                                                             
ARTICLE TWO - PARTICIPATION
    2.1   Participation............................................................9
    2.2   Rehired Employees........................................................9
    2.3   Employment Transfers.....................................................9

ARTICLE THREE - EMPLOYER CONTRIBUTIONS
    3.1   Tax Deferred Contributions..............................................11
    3.2   Dollar Limitation on Tax Deferred Contributions.........................11
    3.3   Actual Deferral Percentage Limitation on Tax Deferred Contributions.....13
    3.4   Treatment of Tax Deferred Contributions in Excess of Actual
          Deferred Percentage Limitation..........................................15
    3.5   Coordination of Distributions of Excess Tax Deferred Contributions......17
    3.6   Employer Matching Contributions.........................................17
    3.7   Actual Contribution Percentage Limitation on Employer Matching
             Contributions........................................................17
    3.8   Treatment of Employer Matching Contributions in Excess of
             Actual Contribution Percentage Limitation............................18
    3.9   Combined Alternative Limitation on Tax Deferred Contributions
             and Employer Matching Contributions..................................20
    3.10  Safe Harbor Matching Contributions......................................21
    3.11  Source of Employer Contributions........................................22
    3.12  Investment of Employer Contributions....................................22
    3.13  Recovery of Contributions...............................................23
    3.14  Other Provisions Relating to Employer Contributions.....................23

ARTICLE FOUR - ROLLOVER CONTRIBUTIONS
    4.1   Rollover Contributions .................................................25
    4.2   Vesting of Rollover Contributions ......................................25

ARTICLE FIVE - PARTICIPANT ACCOUNTS AND VALUATION OF FUNDS
    5.1   Establishment of Participant Accounts ..................................26
    5.2   Procedure as of Each Valuation Date ....................................26
    5.3   Investment Elections ...................................................26
    5.4   Erie Indemnity Stock Fund...............................................28

ARTICLE SIX - VESTING & DISTRIBUTIONS
    6.1   Vesting ................................................................30
    6.2   Distributions Upon Retirement, or Other Termination of Employment.......30
    6.3   Payment of Amounts Distributed .........................................31
    6.4   Direct Rollovers........................................................33




                                      iii

                                                                             
ARTICLE SEVEN - WITHDRAWALS
    7.1   Withdrawals Generally ..................................................35
    7.2   Hardship Withdrawal ....................................................35
    7.3   Safe Harbor Distribution ...............................................36
    7.4   Hardship Withdrawal Priority............................................36
    7.5   Modifications to Hardship Withdrawal Standards..........................36

ARTICLE EIGHT - THE TRUST FUND
    8.1   Trust Agreement ........................................................38
    8.2   Appointment of Independent Accountants .................................38
    8.3   Appointment of Investment Manager ......................................38
    8.4   Investment Committee ...................................................38
    8.5   Voting of Erie Indemnity Stock..........................................39

ARTICLE NINE - ADMINISTRATION OF THE PLAN
    9.1   The Administrator ......................................................41
    9.2   Powers of Administrator.................................................41
    9.3   Delegation of Duties....................................................43
    9.4   Conclusiveness of Various Documents.....................................43
    9.5   Actions to be Uniform...................................................43
    9.6   Liability and Indemnification...........................................43

ARTICLE TEN - CLAIMS PROCEDURE
    10.1  Claim for Benefit ......................................................45
    10.2  Review of Denial of Claim ..............................................45
    10.3  Decision by Administrator ..............................................45

ARTICLE ELEVEN - MISCELLANEOUS
    11.1  Non-Alienation of Benefits .............................................47
    11.2  Risk to Participants and Source of Payments ............................48
    11.3  Expenses ...............................................................48
    11.4  Rights of Participants .................................................48
    11.5  Statement of Accounts ..................................................48
    11.6  Designation of Beneficiary .............................................49
    11.7  Payment to Incompetents ................................................49
    11.8  Authority to Determine Payee ...........................................50
    11.9  Severability ...........................................................50
    11.10 Employer Records........................................................50
    11.11 Limitation on Contributions ............................................50
    11.12 IRC 414(u) Compliance Provision.........................................52

ARTICLE TWELVE - AMENDMENT, TERMINATION OR MERGER OF THE PLAN
    12.1  Right to Amend .........................................................53
    12.2  Right to Terminate .....................................................53
    12.3  Merger, Transfer of Assets or Liabilities...............................54




                                       iv

                                                                             
ARTICLE THIRTEEN - TOP HEAVY PROVISIONS
    13.1  Top Heavy Provisions ...................................................55
    13.2  Minimum Contribution ...................................................56
    13.3  Plan Year in Which Plan is Top Heavy ...................................57
    13.4  Plan Year in Which Plan Ceases to be Top Heavy .........................57
    13.5  Limited Application of this Article.....................................57

ARTICLE FOURTEEN - LOANS
    14.1  Availability of Loans ..................................................58
    14.2  Terms and Conditions of Participant Loans ..............................58
    14.3  Loan Accounts...........................................................60




                                       v

                                   ARTICLE ONE

                                   DEFINITIONS

As used in this Plan, the following terms shall have the following meanings
unless a different meaning is clearly required by the context. Any terms herein
used in the masculine shall be read and construed in the feminine where they
would so apply, and any terms used in the singular shall be read and construed
in the plural if again so applicable.

1.1   "Administrator" or "Plan Administrator" means the Administrator appointed
      by the Board in accordance with the provisions of Article Nine.

1.2   "Affiliate" means any other employer which, together with the Company, is
      a member of a controlled group of corporations or of a commonly controlled
      trade or business (as defined in Code Sections 414(b) and (c) and as
      modified, where appropriate, by Code Section 415(h)) or of an affiliated
      service group (as defined in Code Section 414(m)) or other organization
      described in Code Section 414(o). Each such Affiliate shall be treated as
      an Affiliate only during such period as it is or was an Affiliate as
      defined above.

1.3   "Board" means the Board of Directors of the Company.

1.4   "Code" means the Internal Revenue Code of 1986, as amended from time to
      time.

1.5   "Company" means Erie Indemnity Company, a corporation organized and
      existing under the laws of Pennsylvania.

1.6   "Compensation" for any period means the aggregate amount of base salary or
      wages paid by an Employer to an Employee during the period. For this
      purpose, "base salary or wages" shall exclude overtime compensation,
      bonuses and commissions but shall be deemed to include any amounts
      contributed by the Employer pursuant to a salary reduction agreement and
      which is not includible in the gross income of the Participant under Code
      Sections 125 and 402(e)(3) for the Plan Year in question. Effective for
      each Plan Year, in no event shall the amount of Compensation taken into
      account under the Plan exceed the adjusted annual limitation permitted
      under Section 401(a)(17) of the Code for such Plan Year. Such adjusted
      annual limitation shall be, for each Plan Year beginning on and after
      January 1, 1989 and prior to January 1, 1994, $200,000 as adjusted for
      such year in the same manner as under Section 415(d) of the Code and, for
      each Plan Year beginning on and after January 1, 1994, $150,000 as
      adjusted for such year as provided under Section 401(a)(17)(B) of the
      Code.

      For years beginning before January 1, 1997, in determining the
      Compensation of a Covered Employee for purposes of the foregoing annual
      limitation, the rules aggregating certain family members (as set forth in
      Section 1.15) shall apply, except that in applying such rules, the term
      "family" shall include only the spouse of the Covered Employee and any
      lineal descendent of the Covered Employee who has not attained age 19
      before the end of the calendar year. If, as a result of the family
      aggregation rules, the adjusted annual limitation is exceeded, then the
      limitation


                                     - 1 -

      shall be prorated among the family members in proportion to each
      individual's Compensation as determined under this paragraph without
      regard to the adjusted annual limitation.

1.7   "Covered Employee" shall mean any Employee of an Employer, excluding:

      (a)   any such Employee whose employment is governed by the terms of a
            collective bargaining agreement under which retirement benefits were
            the subject of good faith bargaining; and

      (b)   for periods prior to January 1, 2001, any such Employee who is
            compensated on an hourly basis.

      Notwithstanding any provision of the Plan to the contrary, any individual
      who an Employer determines to be a contract employee, independent
      contractor, leased employee (including a Leased Employee as defined
      hereunder), leased owner, leased manager, shared employee or person
      working under a similar classification shall not become a Covered Employee
      hereunder, regardless of whether any such individual is ultimately
      determined to be a common law employee, unless and until the Employer
      shall otherwise determine. An Employee shall be considered a Covered
      Employee only during such period in which the individual satisfies the
      requirements defined above.

1.8   "Effective Date" means January 1, 1989.

1.9   "Employee" shall mean any common-law employee of an Employer or an
      Affiliate; provided, however, that for purposes of Section 1.15 "Employee"
      shall include any self-employed individual performing services for an
      Employer or Affiliate who is treated as an employee under Section
      401(c)(1) of the Code.

1.10  "Employer(s)" shall mean the Company, Erie Family Life Insurance Company,
      Erie Insurance Exchange, Erie Insurance Company, EI Holding Corp., EI
      Service Corp., Erie Insurance Company of New York, Erie Insurance Property
      & Casualty Company, Flagship City Insurance Company and any other
      Affiliate which may adopt this Plan.

1.11  "Employer Matching Contribution" means the Employer contribution made
      pursuant to Section 3.6.

1.12  "Erie Indemnity Stock" means the Class A common stock of the Company which
      is a qualifying employer security within the meaning of Section 407(d)(5)
      of ERISA.

1.13  "Erie Indemnity Stock Fund" means the investment fund described in Section
      5.4.

1.14  "ERISA" means the Employee Retirement Income Security Act of 1974, as
      amended.

1.15  "Highly Compensated" means, for periods beginning before January 1, 1997,
      any Employee who meets any of the following requirements in either the
      prior Plan Year (the "lookback year") or the current Plan Year (the
      "determination year"):



                                     - 2 -

      (a)   is a more than five percent (5%) owner of an Employer;

      (b)   earns $75,000 or more in Test Compensation;

      (c)   earns $50,000 or more in Test Compensation and is a member of the
            Top Paid Group;

      (d)   is an officer of an Employer (as described in Section 416(i) of the
            Code) who earns Test Compensation of more than fifty percent (50%)
            of the amount in effect under Section 415(b)(1)(A) of the Code for
            such year; or

      (e)   is a former Employee who was Highly Compensated upon separation from
            service prior to the determination year, performs no service for an
            Employer during the determination year, or was Highly Compensated at
            any time after attaining age 55.

      In addition, the Test Compensation paid to any family member (spouse,
      lineal ascendant or descendant and their spouses) of an Employee or former
      Employee who is a more than five percent owner or is one of the top 10
      Highly Compensated Employees on the basis of Test Compensation, shall be
      aggregated with the Test Compensation of such Employee for the purposes of
      this definition. Notwithstanding the foregoing, an Employee will not be
      Highly Compensated for the determination year merely by compensation or
      officer status unless he was in the top 100 Employees on the basis of Test
      Compensation. The amounts indicated in (b) and (c) above shall be adjusted
      for cost of living at the same time and in the same manner as determined
      under Code Section 415(d). For years beginning on and after January 1,
      1997, "Highly Compensated" shall mean any Employee who is a more than five
      percent (5%) owner of an Employer or both earned $80,000 or more in Test
      Compensation from the Employer in the lookback year and was member of the
      Top Paid Group for such year; provided, however, that such $80,000 figure
      shall be adjusted for cost of living at the same time and in the same
      manner as determined under Code Section 415(d). To the extent permitted
      under regulations and other guidance promulgated by the Internal Revenue
      Service, the Company may elect to determine the status of Highly
      Compensated Employees on a basis other than that provided above.

1.16  "Hour of Service" shall include the following:

      (a)   Each hour for which an Employee is directly or indirectly paid or
            entitled to payment from an Employer or an Affiliate as an Employee
            for the performance of duties during an applicable computation
            period (these hours must be credited to the Employee in the
            computation period during which the duties were performed and not
            when paid, if different); and

      (b)   Each hour for which back pay, irrespective of mitigation of damages,
            has been awarded or agreed to by an Employer or an Affiliate (these
            hours must be credited in the computation period or periods to which
            the award or agreement pertains rather than that in which the
            payment, award or agreement was made); and



                                     - 3 -

      (c)   Each hour for which an Employee is directly or indirectly paid or
            entitled to payment from an Employer or an Affiliate for reasons,
            such as vacation, sickness or disability, other than for the
            performance of duties (these hours shall be calculated and credited
            pursuant to Section 2530.200b-2 of the Department of Labor
            regulations which are incorporated herein by reference).

1.17  "Interactive Electronic Communication" means a communication between a
      Participant or beneficiary and the person or entity designated by the
      Administrator to perform recordkeeping and other administrative services
      on behalf of the Plan pursuant to a system maintained by such person or
      entity and communicated to each Participant and beneficiary whereby each
      such individual may make elections and exercise options as described
      herein with respect to all or a portion of his Total Account through the
      use of such system and a personal identification number. If a Participant
      or beneficiary (i) consents to participate in Interactive Electronic
      Communication procedures adopted by the Administrator and (ii)
      acknowledges that actions taken by him through the use of his personal
      identification number pursuant to the Interactive Electronic Communication
      procedure constitute his signature for purposes of initiating transactions
      such as investment option changes, and increases, decreases, and
      suspensions of Tax Deferred Contributions, the Participant or beneficiary,
      as the case may be, will be deemed to have given his written consent and
      authorization to any such action resulting from the use of the Interactive
      Electronic Communication system by the Participant or beneficiary.

1.18  "Leased Employee" means any person (other than an Employee of an Employer)
      who pursuant to an agreement between the Employer and any other person
      ("leasing organization") has performed services for the Employer (or for
      the Employer and related persons determined in accordance with Section
      414(n)(6) of the Code) on a substantially full-time basis for a period of
      at least one year and, for periods before January 1, 1997, such services
      are of a type historically performed by employees in the business field of
      the Employer or, for periods on and after January 1, 1997, such services
      are performed under primary direction or control by the recipient. Except
      as provided below, any person satisfying the foregoing criteria shall be
      treated as an Employee. Contributions or benefits provided a Leased
      Employee by the leasing organization which are attributable to services
      performed for the Employer shall be treated as provided by the Employer.

      Notwithstanding the foregoing, a Leased Employee shall not be considered
      an Employee of an Employer if: (i) such Leased Employee is covered by a
      money purchase pension plan providing: (1) a nonintegrated employer
      contribution rate of at least 10 percent of compensation, (2) immediate
      participation, and (3) full and immediate vesting; and (ii) Leased
      Employees do not constitute more than 20 percent of the Employer's
      non-Highly Compensated workforce.

1.19  "Normal Retirement Date" means the first day of the month next following
      the month in which the Participant attains age 65 (his "Normal Retirement
      Age").

1.20  "Notice" means, unless otherwise specifically provided herein, (i) written
      Notice on an appropriate form provided by the Administrator that is, in
      the discretion of the Administrator, properly completed and executed by
      the party giving such Notice and which is delivered by hand or by mail to
      the Administrator or to such party designated by the terms of the Plan or
      by the Administrator to receive the Notice, or (ii) Notice by Interactive
      Electronic Communication to


                                     - 4 -

      the person or entity designated by the Administrator to perform
      recordkeeping and other administrative services on behalf of the Plan. The
      form of Notice satisfactory in any given circumstance under the Plan shall
      be determined by the Administrator, in its discretion, and shall be
      applied uniformly to all Participants and beneficiaries. Notice to any
      party as provided herein shall be deemed to be given when it is actually
      received (either physically or by Interactive Electronic Communication, as
      the case may be) by the party to whom such Notice is given.

1.21  "Participant" means any Covered Employee who participates in the Plan as
      provided in Section 3.1 (an "active" Participant) or Section 4.1, and
      further, shall include any current or former Covered Employee who has
      suspended his Tax Deferred Contributions or has terminated or retired if
      such individual has a vested Total Account balance maintained on his
      behalf under the Plan.

1.22  "Plan" means this Erie Insurance Group Employee Savings Plan as herein set
      forth with all amendments, modifications and supplements hereafter made.

1.23  "Plan Year" means the calendar year.

1.24  "Qualified Domestic Relations Order" or "QDRO" means any judgment, decree
      or order (including approval of a property settlement agreement) which is
      made pursuant to a State Domestic Relations Law (including a community
      property law) and which:

      (a)   relates to provision of child support, alimony payments, or marital
            property rights of a spouse, former spouse, child or other dependent
            of a Participant;

      (b)   recognizes or creates an alternate payee's right to, or assigns to
            an alternate payee the right to receive all or a portion of the
            benefits payable with respect to a Participant under this Plan; and

      (c)   clearly specifies:

            (i)   name and last known address of the Participant and of each
                  alternate payee;

            (ii)  the amount, percentage, or manner in which such could be
                  determined, of the Participant's benefits to be paid to such
                  alternate payee by the Plan;

            (iii) the number of payments or time periods the QDRO covers; and

            (iv)  each plan to which the QDRO applies.

      A QDRO cannot require the Plan to provide a type or form of benefit, or
      any option not otherwise provided by the Plan, nor can it require the Plan
      to provide increased benefits. A QDRO cannot require payment to an
      alternate payee by virtue of a previous QDRO.

      A written procedure will be established to determine the qualified status
      of domestic relations orders and to administer distributions thereunder.



                                     - 5 -

1.25  "Safe Harbor Matching Contribution" means the Employer contribution made
      pursuant to Section 3.10.

1.26  "Spousal Consent" means a written consent given by a Participant's
      legally-recognized spouse to a Participant's designation of a specified
      beneficiary or beneficiaries (including the designation of any class of
      beneficiaries or any contingent beneficiaries) under Section 11.6(a), the
      Participant's election of an immediate distribution under Section 6.2, or
      the Participant's request for a withdrawal (in excess of $3,500) or loan
      under Sections 7.2 and 14.2, respectively. Any Spousal Consent shall be
      effective only with respect to such spouse. Such consent shall be duly
      witnessed by a Plan representative or a notary public and shall
      acknowledge the effect on the spouse of the Participant's election. The
      Participant may revoke, without limitation, any such designation, election
      or request without the need for Spousal Consent at any time before the
      date as of which the Participant is to receive a distribution from the
      Plan or, if applicable, before the effective date of a withdrawal or loan.
      Any new designation, election or request by a Participant as provided
      above will require a new Spousal Consent. The requirement for Spousal
      Consent may be waived by the Administrator if it is established that there
      is no spouse, the spouse cannot be located, the Participant has a court
      order evidencing a legal separation from or abandonment by the spouse, or
      for such other circumstances as shall be prescribed by applicable law.

1.27  "Tax Deferred Contribution" means the Employer contribution made pursuant
      to Section 3.1.

1.28  "Test Compensation" means, for any Plan Year, an Employee's compensation,
      reported under Sections 6041 and 6051 of the Code on Form W-2, as paid by
      an Employer or an Affiliate for the calendar year ending with or within
      such Plan Year, including any amounts contributed pursuant to a salary
      reduction election on behalf of a Covered Employee to a plan described in
      Sections 125, 402(e)(3), 402(h)(1)(B) or 403(b) of the Code for the period
      in question. Test Compensation in any given year shall not exceed the
      adjusted annual limitation in effect for such year (as set forth in
      Section 1.6), provided that such limitation shall not be applied in
      determining the top 10 Highly Compensated Employees subject to family
      aggregation under the Plan (applicable to Plan Years beginning before
      January 1, 1997) and for purposes of determining the status of an Employee
      as a Highly Compensated Employee or Key Employee. To the extent permitted
      under regulations and other guidance promulgated by the Internal Revenue
      Service, the Company may elect to determine Test Compensation on a basis
      other than that provided above.

      Applicable to years beginning before January 1, 1998, Test Compensation
      for purposes of Section 11.11 shall exclude all amounts contributed
      pursuant to a salary reduction election on behalf of a Covered Employee.

1.29  "Top Paid Group" means all active Employees who, as of a given year, are
      in the top twenty percent (20%) of the Company's work force on the basis
      of Test Compensation for such year, excluding the following:

      (a)   Employees who have not completed six months of service by the end of
            such year;

      (b)   Employees who work less than 17-1/2 hours per week for such year;



                                     - 6 -

      (c)   Employees who normally do not work more than six months in a year;

      (d)   Employees under age 21 at the end of such year; and

      (e)   non-resident aliens who received no U.S.-source income for such
            year.

      For purposes of this Section, the Company's work force shall include
      individuals employed by an Affiliate.

1.30  "Total Account" means the total amounts held under the Plan for a
      Participant, consisting of the following sub-accounts:

      (a)   "Tax Deferred Account" the portion of the Participant's Total
            Account consisting of Tax Deferred Contributions made in accordance
            with Section 3.1, plus (minus) any investment earnings (losses) on
            such contributions and less any distributions or withdrawals made
            from this account in accordance with Articles Six and Seven,
            respectively.

      (b)   "Employer Account" the portion of the Participant's Total Account
            consisting of Employer Matching Contributions made in accordance
            with Section 3.6, plus (minus) any investment earnings (losses) on
            such contributions and less any distributions or withdrawals made
            from this account in accordance with Articles Six and Seven,
            respectively.

      (c)   "Rollover Account" the portion of the Participant's Total Account
            consisting of Rollover Contributions made in accordance with Section
            4.1, plus (minus) any investment earnings (losses) on such
            contributions and less any distributions or withdrawals made from
            this account in accordance with Articles Six and Seven,
            respectively.

      (d)   "Safe Harbor Matching Account" the portion of the Participant's
            Total Account consisting of Safe Harbor Matching Contributions made
            in accordance with Section 3.10, plus (minus) any investment
            earnings (losses) on such contributions and less any distributions
            made from this account in accordance with Article Six.

1.31  "Trust Agreement" means the Trust Agreement between the Company and a
      Trustee as provided in Section 8.1, together with all amendments,
      modifications and supplements hereafter made.

1.32  "Trust Fund" means the fund established under the terms of the Trust
      Agreement with the Trustee for the purpose of holding and investing the
      assets of the Plan. The Trust Fund shall consist of such investment funds
      or vehicles as the Administrator may, in its discretion, designate from
      time to time and may include such investments as may be selected by a
      Participant or beneficiary under a self-directed "open option" arrangement
      authorized by the Administrator.

      Nothing herein shall prohibit the Trust Fund from holding reasonable
      amounts in cash or cash equivalents in any fund or vehicle offered under
      the Plan. The portion of the Trust Fund to be


                                     - 7 -

      invested in the various funds or vehicles shall be determined by
      Participant investment elections made pursuant to Article Five. The
      Administrator may, in its discretion, offer additional investment funds or
      vehicles to all Participants and may cease to offer any investment fund or
      vehicle at such time as it deems appropriate.

      Except as otherwise indicated, the Trust Fund shall be deemed to include
      that portion of a Total Account which a Participant or beneficiary elects
      to invest in a group annuity contract provided by the Erie Family Life
      Insurance Company.

1.33  "Trustee" means the Trustee or Trustees acting as such under a Trust
      Agreement, including any successor or successors.

1.34  "Valuation Date" means, for periods prior to the Conversion Date, the last
      day of each calendar month and, for periods on and after the Conversion
      Date, the close of business as of each business day.

1.35  "Year of Eligibility Service" means an "Eligibility Computation Period" in
      which an Employee completes at least 1,000 Hours of Service.

      The "Eligibility Computation Period" with respect to an Employee shall
      mean the 12 consecutive month period that begins on the first day on which
      the Employee is credited with an Hour of Service in the employment of an
      Employer or Affiliate ("Employment Commencement Date") and ends on the
      first anniversary thereof, and each Plan Year thereafter beginning with
      the Plan Year that includes the first anniversary of the Employee's
      Employment Commencement Date. In the event an Employee completes 1,000
      Hours of Service during the Eligibility Computation Period that begins on
      his Employment Commencement Date and completes 1,000 Hours of Service
      during the Eligibility Computation Period that begins on the January 1
      that next follows his Employment Commencement Date, such Employee shall be
      credited with two Years of Eligibility Service.





                                     - 8 -

                                   ARTICLE TWO

                                  PARTICIPATION

2.1   Participation

      (a)   Any Employee shall be eligible to participate in the Plan on the
            first day of a pay period, provided he is a Covered Employee and is
            actively employed by an Employer on such date and, provided further,
            that he makes proper application for participation within a
            reasonable time prior to the start of such pay period by completing
            and filing with the Administrator such forms as may be prescribed by
            the Administrator.

      (b)   Notwithstanding the foregoing, effective January 1, 2001, any
            Covered Employee who is compensated on an hourly basis and who is
            classified by an Employer as other than a regular hourly employee
            shall be eligible to participate in the Plan on the January 1 or
            July 1 coincident with or next following such Employee's completion
            of each of the following requirements, provided he remains a Covered
            Employee as of such January 1 or July 1:

            (i)   His attainment of age 21 years; and

            (ii)  His completion of one Year of Eligibility Service.

            If the Employee is not a Covered Employee on the date he otherwise
            would have become eligible to participate in the Plan, such Employee
            shall automatically become eligible to participate in the Plan upon
            his return to employment as a Covered Employee.

2.2   Rehired Employees

      An Employee who had been an "active" Participant in the Plan, who
      terminates his employment and is subsequently re-employed may become
      eligible to participate in the Plan under Section 3.1 on the first day of
      any pay period following re-employment, provided he is a Covered Employee
      and is actively employed by an Employer on such date and, provided
      further, that he makes proper application for participation within a
      reasonable time prior to the start of such pay period by completing and
      filing with the Administrator such forms as may be prescribed by the
      Administrator.

2.3   Employment Transfers

      (a)   Upon the transfer of a Covered Employee to other employment with an
            Employer or Affiliate whereby he ceases to be a Covered Employee
            hereunder, such individual's ability to have Tax Deferred
            Contributions made to the Plan on his behalf (and to receive
            Employer Matching Contributions) with respect to Compensation earned
            on and after this date of transfer shall cease and such Participant
            shall be considered an "inactive" Participant under the Plan.



                                     - 9 -

      (b)   Upon the transfer of an individual from other employment with an
            Employer or Affiliate such that the individual becomes a Covered
            Employee hereunder, such individual shall be eligible to participate
            in the Plan as provided in Section 2.1 hereof.








                                     - 10 -

                                  ARTICLE THREE

                             EMPLOYER CONTRIBUTIONS

3.1   Tax Deferred Contributions

      (a)   Each Covered Employee who is eligible to participate in the Plan and
            who has elected to become a Participant (in accordance with Article
            Two) may, at the time of making application to become a Participant,
            elect to reduce his future Compensation on a fixed, whole
            percentage, from one percent (1%) to eight percent (8%) of that
            Compensation otherwise payable in future pay periods. Effective with
            respect to pay periods commencing on and after December 14, 2000, a
            Participant may elect to reduce his future Compensation by a stated
            percentage, from one percent (1%) to fifteen percent (15%) of that
            Compensation otherwise payable in future pay periods. Such election
            shall be made in accordance with procedures adopted by the
            Administrator and communicated to Participants.

            Subject to the limitations set forth in Sections 3.2, 3.3, 3.4, 3.9
            and 11.11, the Participant's Compensation shall be reduced in
            accordance with the foregoing election and shall be designated as a
            Tax Deferred Contribution to the Plan. Tax Deferred Contributions
            shall be withheld by the Participant's Employer each pay period by
            regular payroll deduction in accordance with the Employer's payroll
            withholding procedures and shall be credited to the Participant's
            Tax Deferred Account as of the date the contributions are received
            by the Trustee or otherwise deposited in the Trust Fund. Such
            contributions shall be deposited in the Trust Fund as soon as such
            amounts can reasonably be segregated from the Employer's general
            assets.

      (b)   Participant Tax Deferred Contributions constitute Employer
            contributions under the Plan and are intended to qualify as elective
            contributions under Section 401(k) of the Code. Tax Deferred
            Contributions may be made only with respect to an amount which the
            Participant could otherwise elect to receive in cash and which is
            not currently available to the Participant as of the date an
            election specified in this Section 3.1 is made. In the event a
            Participant has no Compensation for any payroll period, no Tax
            Deferred Contribution may be made for such period. Any Tax Deferred
            Contribution made on behalf of a Covered Employee in any given Plan
            Year that is taken into account for purposes of the actual deferral
            percentage limitation described in Section 3.3(b) shall be
            attributable to services performed by the Covered Employee in such
            Plan Year and shall relate to Compensation which would have been
            paid in such Plan Year or within two and one-half (2-1/2) months
            following such Plan Year but for the deferral election.

3.2   Dollar Limitation on Tax Deferred Contributions

      (a)   Any provision of this Plan to the contrary notwithstanding, no
            Employer shall be permitted, during any calendar year, to make with
            respect to such calendar year, Tax Deferred Contributions on behalf
            of a Participant under the Plan (when combined with


                                     - 11 -

            the Participant's elective deferrals under any other plans,
            contracts, or arrangements) that will exceed the limitation in
            affect for such year under Section 402(g)(1) of the Code, as
            adjusted in accordance with Section 402(g)(5) of the Code.

      (b)   In the event any amount of Tax Deferred Contributions for a calendar
            year exceeds the limitation applicable under this Section 3.2 for
            such calendar year, such excess amount (hereafter described for
            purposes of this Section, as "Excess Deferrals"), as adjusted for
            any income or loss allocable thereto in accordance with regulations,
            shall to the extent possible be distributed to such Participant, as
            provided in subparagraphs (i), (ii), (iii) and (iv) below:

            (i)   At a date not later than the March 1st of the calendar year
                  immediately following the calendar year to which such Excess
                  Deferrals are attributable, any Participant to whom this
                  Section 3.2 applies may notify, in writing, the Administrator
                  by submitting a form as may be provided by the Administrator
                  which shall specify the amount of the Participant's Excess
                  Deferrals for the given calendar year and shall contain a
                  certified statement by the Participant indicating that if such
                  amount is not distributed, such Excess Deferrals will exceed
                  the limit imposed on the Participant by Section 402(g) of the
                  Code for the year in which the Tax Deferred Contribution
                  occurred.

                  Notwithstanding the foregoing and solely for the purpose of
                  facilitating a distribution of Excess Deferrals as required by
                  regulation, in the event a Participant has Excess Deferrals in
                  a given year calculated by taking into account his Tax
                  Deferred Contributions hereunder and his elective deferrals
                  under any other plan, contract, or arrangement maintained by
                  an Employer or Affiliate, the Participant will be deemed to
                  have notified the Administrator in the manner provided in this
                  subparagraph.

            (ii)  At a date not later than the April 15 of the calendar year
                  immediately following the calendar year to which such Excess
                  Deferrals are attributable, the Plan may distribute to the
                  Participant the amount of the Excess Deferrals allocated to
                  the Plan as adjusted for any income or loss allocable to such
                  excess. Any Excess Deferrals distributed pursuant to this
                  subparagraph are to be included in the gross income of the
                  Participant for the year to which such Excess Deferrals
                  relate. Any income that is allocable to such Excess Deferrals
                  (as determined in accordance with rules promulgated by the
                  Secretary of the Treasury or his delegate) that is distributed
                  pursuant to this subparagraph is to be included in the gross
                  income of the Participant for the year in which such amount is
                  distributed. In making a distribution as permitted under this
                  Section, the Employer shall specifically designate the
                  distribution as that consisting of Excess Deferrals within the
                  meaning of Section 402(g)(1) of the Code. Any distribution of
                  less than the entire amount of Excess Deferrals plus income or
                  loss attributable to such deferral contributions shall be
                  treated as a pro rata distribution of such excess deferral
                  contributions and income/loss.



                                     - 12 -

            (iii) To the extent provided by the Secretary of the Treasury or his
                  delegate, such Excess Deferrals distributed pursuant to this
                  subparagraph are to be taken into account for purposes of
                  applying the actual deferral percentage test specified in
                  Section 3.3(b) (except if such excess is both prohibited under
                  Section 401(a)(30) of the Code and is attributable to a
                  non-Highly Compensated Employee), and for any other purpose of
                  the Code which may be prescribed by the Secretary of the
                  Treasury or his delegate. No corrective distribution under
                  this Section shall be recognized for purposes of determining
                  whether the minimum distribution requirements of Section
                  401(a)(9) of the Code are satisfied with respect to any
                  Participant.

            (iv)  Any distribution in accordance with this Section 3.2 shall be
                  made without regard to any notice or consent otherwise
                  required under Sections 411(a)(11) or 417 of the Code.

3.3   Actual Deferral Percentage Limitation on Tax Deferred Contributions (Plan
      Years beginning before January 1, 2001)

      (a)   Any provision of Section 3.1(a) to the contrary notwithstanding and
            effective for Plan Years beginning before January 1, 2001, the Tax
            Deferred Contribution percentages under Section 3.1(a) shall be
            modified as provided in paragraph (d) if the requirements of
            paragraph (b) are not satisfied.

      (b)   An actual deferral percentage shall be determined for each Covered
            Employee who is eligible to make Tax Deferred Contributions. Such
            percentage shall be equal to the total Tax Deferred Contribution
            (and, if elected by the Company, Employer Matching Contribution)
            made on the Covered Employee's behalf for the Plan Year divided by
            his Test Compensation in the Plan Year. With respect to Covered
            Employees who are eligible to make Tax Deferred Contributions but
            make no such contributions under this Plan, such actual deferral
            percentage shall be zero.

            Notwithstanding the foregoing, if for any Plan Year beginning before
            January 1, 1997, any eligible Highly Compensated Covered Employee is
            subject to the family aggregation rules of Section 414(q)(6) of the
            Code because he is either a five percent (5%) owner or one of the
            top 10 Highly Compensated Employees on the basis of Test
            Compensation, the actual deferral percentage of such Employee, as so
            aggregated for such year, shall be determined by combining the Tax
            Deferred Contributions and Test Compensation of all family members
            (as described in Section 1.15) eligible to participate in the Plan.

            The average of the actual deferral percentages for eligible Highly
            Compensated Covered Employees (High Average), when compared to the
            average of the actual deferral percentages for eligible non-Highly
            Compensated Covered Employees (Low Average), must meet one of the
            following requirements:



                                     - 13 -

            (i)   The High Average is no greater than the Low Average times one
                  and one-quarter (1-1/4); or

            (ii)  The excess of the High Average over the Low Average is not
                  greater than two (2) percentage points and the High Average is
                  no greater than the Low Average times two (2).

            The provisions of this paragraph (b) shall be deemed to include the
            provisions of Section 401(k)(3) of the Code and Section
            1.401(k)-1(b) of the Income Tax Regulations which are hereby
            incorporated by reference.

      (c)   If two or more plans which include cash or deferred arrangements are
            considered as one plan for purposes of Section 410(b) of the Code,
            such arrangements included in such plans shall be treated as one
            arrangement for purposes of this Section 3.3 If any Highly
            Compensated Covered Employee is a participant under two or more cash
            or deferred arrangements maintained by an Employer or Affiliate, all
            such arrangements shall be treated as one cash or deferred
            arrangements for purposes of determining the actual deferral
            percentage of such Covered Employee. For purposes of this section,
            actual deferral percentages shall be calculated to the nearest
            one-hundredth of one percent.

      (d)   To the extent Tax Deferred Contributions (and Employer Matching
            Contributions, if applicable) made with respect to Highly
            Compensated Covered Employees cause the High Average to fail to meet
            paragraph (b) above, such Tax Deferred Contributions (individually
            determined pursuant to Section 3.4(a) and as adjusted for earnings
            or loss thereon in accordance with regulations promulgated by the
            Secretary of the Treasury or his delegate) shall return to the
            Employer solely for the purpose of enabling the Employer to withhold
            any federal, state, or local taxes due on such amounts. Thereafter,
            the Employer shall treat all remaining amounts in accordance with
            the provisions of Sections 3.4(b) below. The Administrator may also,
            at any time, authorize a suspension or reduction of Tax Deferred
            Contributions made pursuant to Section 3.1 hereof in accordance with
            rules promulgated by the Administrator. These rules may include
            administrative provisions authorizing the suspension or reduction of
            Tax Deferred Contributions above a specified dollar amount or
            percentage of Compensation.

      (e)   The extent to which Tax Deferred Contributions cause the High
            Average to fail to meet paragraph (b) above shall be determined by
            the Administrator in a reasonable and consistent manner. The
            Administrator shall not be liable to any Participant (or his
            beneficiary, if applicable) for any losses caused by inaccurately
            estimating the amount of any Participant's Tax Deferred
            Contributions in excess of the limitations established in Sections
            3.2(a) and 3.3(b) and the earnings or losses attributable to such
            Tax Deferred Contributions.

      (f)   In the event the Administrator determines that an amount to be
            deferred pursuant to the election provided in Section 3.1 would
            cause an Employer's contributions under this and/or any other
            tax-qualified retirement plan maintained by an Employer or Affiliate
            to exceed the applicable deduction limitations contained in Section
            404 of the Code, or to


                                     - 14 -

            exceed the maximum annual addition determined in accordance with
            Section 11.11, the Administrator may treat such amount in accordance
            with the rules in paragraph (d) above.

3.4   Treatment of Tax Deferred Contributions in Excess of Actual Deferral
      Percentage Limitation (Plan Years beginning before January 1, 2001)

      (a)   If the actual deferral percentage limitation of Section 3.3(b) is
            not satisfied with respect to any given Plan Year beginning before
            January 1, 1997, the amount of Tax Deferred Contributions that are
            in excess of such limitation and are attributable to a Highly
            Compensated Covered Employee shall be determined as follows:

            (i)   the actual deferral percentage of the Highly Compensated
                  Covered Employee with the highest actual deferral percentage
                  is reduced to the extent necessary to:

                  (A)   cause such Employee's actual deferral percentage to
                        equal that of the Highly Compensated Covered Employee
                        with the next highest actual deferral percentage; or

                  (B)   enable the Plan to satisfy the actual deferral
                        percentage limitation, if such reduction is less than
                        that required by (A) above.

            (ii)  The process described in (i) above shall be repeated until the
                  Plan satisfies the actual deferral percentage limitation.

            (iii) Notwithstanding the foregoing, the determination of excess Tax
                  Deferred Contributions with respect to a given Highly
                  Compensated Covered Employee whose actual deferral percentage
                  is determined under the family aggregation rules described in
                  Section 3.3(b) hereof shall be accomplished by reducing the
                  actual deferral percentage as required by the foregoing
                  provisions of this paragraph (a) and by allocating the excess
                  Tax Deferred Contributions derived thereby for the family
                  group among the family members in proportion to the Tax
                  Deferred Contributions of each family member that is combined
                  to determine the actual deferral percentage for the family
                  group.

      (b)   If the actual deferral percentage limitation of Section 3.3(b) is
            not satisfied with respect to any given Plan Year beginning on or
            after January 1, 1997 and before January 1, 2001, the amount of Tax
            Deferred Contributions that are in excess of such limitation and are
            attributable to a Highly Compensated Covered Employee shall be
            determined by first computing the total dollar amount of Tax
            Deferred Contributions which must be reduced to satisfy the
            limitation and by allocating these amounts, in accordance with
            guidance promulgated by the Secretary of the Treasury or his
            delegate, to the Highly Compensated Covered Employees on behalf of
            whom the largest amounts of Tax Deferred Contributions have been
            made to the Plan for the given Plan Year.

      (c)   Those Tax Deferred Contributions attributable to a Highly
            Compensated Covered Employee that are deemed in excess of the actual
            deferral percentage limitation for any


                                     - 15 -

            given Plan Year shall be distributed (along with any earnings or
            losses attributable thereto in accordance with regulations) no later
            than the last day of the Plan Year following the Plan Year to which
            such excess Tax Deferred Contributions relate. Any excess Tax
            Deferred Contribution that is in an amount greater than the de
            minimis amount prescribed by the Secretary of the Treasury or his
            delegate (and any income or loss attributable to such excess Tax
            Deferred Contribution) that is distributed pursuant to this
            paragraph by two and one-half (2-1/2) months following the Plan Year
            to which such excess amount relates shall be includible in the
            affected Covered Employee's gross income on the earliest date on
            which any Tax Deferred Contribution made on behalf of such Covered
            Employee during such Plan Year would have been received had the
            Employee declined to make the deferral election specified in Section
            3.1(a) hereof. Any excess Tax Deferred Contributions (and any income
            or loss attributable thereto) so distributed more than two and
            one-half (2-1/2) months following the Plan Year to which such excess
            amounts relate and any de minimis excess Tax Deferred Contributions
            (and any income or loss attributable thereto) distributed prior to
            such date shall be includible in the affected Covered Employee's
            gross income in the year in which such amounts are distributed.

      (d)   In making a distribution under this section, the Administrator shall
            specifically designate such distribution as a distribution
            consisting of Tax Deferred Contributions (and income or loss) in
            excess of that permitted by the actual deferral percentage
            limitation. Any distribution of less than the entire amount of
            excess Tax Deferred Contributions and income or loss attributable
            thereto (as such entire amount is determined after application of
            paragraph (a) or paragraph (b) of this Section 3.4, whichever
            applicable, and after application of Section 3.5, if applicable)
            shall be treated as a pro rata distribution of such excess
            contribution and income/loss.

      (e)   Except as otherwise provided by the Secretary of the Treasury or his
            delegate, any Tax Deferred Contribution in excess of the actual
            deferral percentage limitation shall be taken into account for
            purposes of determining the Participant's annual additions
            limitation as provided in Section 11.11 herein, and shall be taken
            into account for purposes of Section 404 of the Code,
            notwithstanding the correction of such excess amounts by
            distribution. No corrective distribution under this section shall be
            recognized for purposes of determining whether the minimum
            distribution requirements of Section 401(a)(9) of the Code are
            satisfied with respect to any Participant.

      (f)   Any distribution in accordance with this section shall be made
            without regard to any notice or consent otherwise required under
            Sections 411(a)(11) or 417 of the Code.


                                     - 16 -

3.5   Coordination of Distributions of Excess Tax Deferred Contributions (Plan
      Years beginning before January 1, 2001)

      In the event that a portion of the Tax Deferred Contributions made with
      respect to a Highly Compensated Covered Employee for any given Plan Year
      beginning before January 1, 2001 exceed the applicable limitations of both
      Section 3.2(a) and Section 3.3(b), such excess amounts subject to both
      limitations shall be coordinated as follows:

      (a)   to the extent permitted, such excess amounts shall be distributed
            pursuant to Section 3.2(b) hereof; and

      (b)   to the extent that any such excess amounts remain after application
            of paragraph (a) such excess amounts shall be distributed pursuant
            to Section 3.4(c) hereof.

3.6   Employer Matching Contributions

      Effective with respect to each given pay period beginning on and after
      January 1, 1997 and prior to December 14, 2000, the Employer shall
      contribute an amount to the Trust Fund equal to fifty percent (50%) of the
      Tax Deferred Contributions made with respect to each Participant during
      such payroll period which are not in excess of six percent (6%) of the
      Participant's Compensation during such payroll period. Such contributions
      shall be designated as Employer Matching Contributions. Employer Matching
      Contributions shall be credited to Participants' Employer Accounts as of
      the date they are received by the Trustee or otherwise deposited in the
      Trust Fund.

3.7   Actual Contribution Percentage Limitation on Employer Matching
      Contributions (Plan Years beginning before January 1, 2001)

      (a)   Effective with respect to each Plan Year beginning before January 1,
            2001, an actual contribution percentage shall be determined for each
            Covered Employee who is eligible to become a Participant. Such
            percentage shall be equal to his Employer Matching Contributions for
            the Plan Year, divided by his Test Compensation in the Plan Year.
            With respect to Covered Employees who are eligible to participate in
            the Plan but have no Tax Deferred Contributions made to the Plan on
            their behalf and therefore do not have any Employer Matching
            Contributions made to the Plan on their behalf under Section 3.6,
            such actual contribution percentage shall be zero.

            Notwithstanding the foregoing, if for any Plan Year beginning before
            January 1, 1997, an eligible Highly Compensated Covered Employee is
            subject to the family aggregation rules of Section 414(q)(6) of the
            Code because he is either a five percent (5%) owner or one of the
            top 10 Highly Compensated Employees on the basis of Test
            Compensation, the actual contribution percentage of such Employee,
            as so aggregated for such year, shall be determined by combining the
            Employer Matching Contributions and Test Compensation of all family
            members (as described in Section 1.15) eligible to participate in
            the Plan.

      (b)   The average of the actual contribution percentages for eligible
            Highly Compensated Covered Employees (High Average), when compared
            to the average of the actual


                                     - 17 -

            contribution percentages for eligible non-Highly Compensated Covered
            Employees (Low Average) must meet one of the following requirements:

            (i)   the High Average is no greater than the Low Average times one
                  and one-quarter (1-1/4); or

            (ii)  the excess of the High Average over the Low Average is not
                  greater than two (2) percentage points and the High Average is
                  no greater than the Low Average times two (2).

            The provisions of this paragraph (b) shall be deemed to include the
            provisions of Section 401(m)(2) of the Code and Section
            1.401(m)-1(b) of the Income Tax Regulations which are hereby
            incorporated by reference.

      (c)   If two or more plans to which Employer Matching Contributions are
            made are treated as one plan for purposes of Section 410(b) of the
            Code, such plans shall be treated as one plan for purposes of this
            Section 3.7. If any Highly Compensated Covered Employee is a
            participant in two or more plans of an Employer or Affiliate to
            which such contributions are made, all such contributions shall be
            aggregated for purposes of this section. For purposes of this
            section, actual contribution percentages shall be calculated to the
            nearest one-hundredth of one percent.

      (d)   To the extent Employer Matching Contributions cause the High Average
            to fail to meet paragraph (b) above, the Administrator may include
            such amount of Tax Deferred Contributions (if not used to satisfy
            the requirements of Section 3.3(b)) as may be necessary to satisfy
            the requirements of paragraph (b).

      (e)   The extent to which Employer Matching Contributions cause the High
            Average to fail to meet paragraph (b) above shall be determined by
            the Administrator in a reasonable and consistent manner. The
            Administrator shall not be liable to any Participant (or his
            beneficiary, if applicable) for any losses caused by inaccurately
            estimating the amount of any Employer Matching Contributions made on
            behalf of any Participant in excess of the limitation established in
            paragraph (b) above and the earnings or losses attributable to such
            Employer Matching Contributions.

3.8   Treatment of Employer Matching Contributions in Excess of Actual
      Contribution Percentage Limitation (Plan Years beginning before January 1,
      2001)

      (a)   If the actual contribution percentage limitation of Section 3.7(b)
            is not satisfied with respect to any given Plan Year beginning
            before January 1, 1997, the amount of Employer Matching
            Contributions (as such term includes any Tax Deferred Contribution
            that may be treated as an Employer Matching Contribution for
            purposes of Section 3.7(b) hereof) that are in excess of such
            limitation and are attributable to a Highly Compensated Covered
            Employee shall be determined as follows:



                                     - 18 -

            (i)   the actual contribution percentage of the Highly Compensated
                  Covered Employee with the highest actual contribution
                  percentage is reduced to the extent necessary to:

                  (A)   cause such Employee's actual contribution percentage to
                        equal that of the Highly Compensated Covered Employee
                        with the next highest actual contribution percentage; or

                  (B)   enable the Plan to satisfy the actual contribution
                        percentage limitation, if such reduction is less than
                        that required by (A) above.

            (ii)  The process described in (i) above shall be repeated until the
                  Plan satisfies the actual contribution percentage limitation.

            (iii) Notwithstanding the foregoing, the determination of excess
                  Employer Matching Contributions with respect to a given Highly
                  Compensated Covered Employee whose actual contribution
                  percentage is determined under the family aggregation rules
                  described in Section 3.7(a) hereof shall be accomplished by
                  reducing the actual contribution percentage as required by the
                  foregoing provisions of this paragraph (a) and by allocating
                  the excess Employer Matching Contributions derived thereby for
                  the family group among the family members in proportion to the
                  Employer Matching Contributions made on behalf of each family
                  member that is combined to determine the actual contribution
                  percentage of the family group.

      (b)   If the actual contribution percentage limitation of Section 3.7(b)
            is not satisfied with respect to any given Plan Year beginning on or
            after January 1, 1997 and before January 1, 2001, the amount of
            Employer Matching Contributions (as such term includes any Tax
            Deferred Contribution that may be treated as an Employer Matching
            Contribution for purposes of Section 3.7(b) hereof) that are in
            excess of such limitation and are attributable to a Highly
            Compensated Covered Employee shall be determined by first computing
            the total dollar amount of Employer Matching Contributions which
            must be reduced to satisfy the limitation and by allocating these
            amounts, in accordance with guidance promulgated by the Secretary of
            the Treasury or his delegate, to the Highly Compensated Covered
            Employees on behalf of whom the largest amounts of Employer Matching
            Contributions have been made to the Plan for the given Plan Year.

      (c)   Any Employer Matching Contributions attributable to a Highly
            Compensated Covered Employee that are deemed in excess of the actual
            contribution percentage limitation for a given Plan Year (through
            application of paragraph (a) or paragraph (b) above, whichever
            applicable) shall be distributed (along with any earnings or losses
            attributable thereto in accordance with regulations) no later than
            the last day of the Plan Year following the Plan Year to which such
            excess Employer Matching Contributions relate. Any such excess
            Employer Matching Contribution that is in an amount greater than the
            de minimis amount prescribed by the Secretary of the Treasury or his
            delegate (and any income or loss attributable to such excess
            Employer Matching Contribution) that is distributed pursuant to this
            paragraph by two and one-half (2-1/2) months following the Plan Year
            to which

                                     - 19 -

            such excess amounts relate shall be includible in the affected
            Covered Employee's gross income for his taxable year ending with or
            within the Plan Year for which the excess Employer Matching
            Contributions were made. Any excess Employer Matching Contributions
            (and any income or loss attributable thereto) so distributed more
            than two-and one-half (2-1/2) months following the Plan Year to
            which such excess amounts relate and any de minimis excess Employer
            Matching Contributions (and any income or loss attributable thereto)
            distributed prior to such date shall be includible in the affected
            Covered Employee's gross income in the taxable year in which such
            amounts are distributed.

      (d)   In making a distribution under paragraph (c), the Administrator
            shall specifically designate such distribution as a distribution
            consisting of Employer Matching Contributions in excess of that
            permitted by the actual contribution percentage limitation, along
            with any income or loss attributable thereto. Any distribution of
            less than the entire amount of excess Employer Matching
            Contributions shall be treated as a pro rata distribution of such
            excess contribution and income/loss.

      (e)   Except as otherwise provided by the Secretary of the Treasury or his
            delegate, any Employer Matching Contribution in excess of the actual
            contribution percentage limitation shall be taken into account for
            purposes of determining the Participant's annual additions
            limitation, as provided in Section 11.11 herein, and shall be taken
            into account for purposes of Section 404 of the Code,
            notwithstanding the correction of such excess amount by a
            distribution under this section. No corrective distribution under
            this section shall be recognized for purposes of determining whether
            the minimum distribution requirements of Section 401(a)(9) of the
            Code are satisfied with respect to any Participant.

      (f)   Any distribution in accordance with this section shall be made
            without regard to any notice or consent otherwise required under
            Sections 411(a)(11) or 417 of the Code.

3.9   Combined Alternative Limitation on Tax Deferred Contributions and Employer
      Matching Contributions (Plan Years beginning before January 1, 2001)

      Any provisions of this Article Three to the contrary notwithstanding, if,
      for any Plan Year beginning before January 1, 2001, both the High Average
      specified in Section 3.3(b) (relating to actual deferral percentages) and
      the High Average specified in Section 3.7(b) (relating to actual
      contribution percentages) exceed the Low Average specified in such
      sections by more than twenty-five percent (25%), the Administrator shall
      apply the aggregate alternative limitation in accordance with Section
      1.401(m)-2 of the Income Tax Regulations, the provisions of which are
      incorporated herein by reference. In the event such combined alternative
      limitation is not satisfied for any given Plan Year, the Company shall
      direct the Administrator to reduce the High Average of Section 3.3(b)
      and/or the High Average of Section 3.7(b) as permitted by Sections 3.4,
      3.5 and 3.8 hereof to the extent necessary to satisfy the combined
      alternative limitation.

      For purposes of this Section 3.9, the High Average specified in Sections
      3.3(b) and 3.7(b) shall


                                     - 20 -

      be determined after taking into account all corrective measures permitted
      under Sections 3.2, 3.4 and 3.8.

3.10  Safe Harbor Matching Contributions

      (a)   Effective with respect to each given pay period beginning on and
            after December 14, 2000, the Employer shall contribute an amount to
            the Trust Fund equal to the sum of those amounts individually
            determined with respect to each Participant, as follows:

            (i)   One hundred percent (100%) of the Tax Deferred Contributions
                  made with respect to the Participant during such pay period
                  which do not exceed three percent (3%) of the Participant's
                  Compensation during such pay period; and

            (ii)  Fifty percent (50%) of the Tax Deferred Contributions made
                  with respect to the Participant during such pay period which
                  exceed three percent (3%), but do not exceed five percent
                  (5%), of the Participant's Compensation during such pay
                  period.

            Such contributions shall be designated as Safe Harbor Matching
            Contributions and shall be 100% vested and nonforfeitable when made.
            The Employer shall make Safe Harbor Matching Contributions as soon
            as practicable following the end of the pay period to which they
            relate and such contributions shall be credited to Participants'
            Safe Harbor Matching Accounts as of the date they are received by
            the Trustee or otherwise deposited in the Trust Fund.

      (b)   Effective with respect to each Plan Year in which the provisions of
            Section 3.10(a) are applicable, the Administrator shall provide
            Notice during the "Safe Harbor Notice Period" (as hereinafter
            defined) to each Covered Employee who is eligible to participate in
            the Plan during such Plan Year. Such Notice shall describe the
            following:

            (i)   The formula used to determine the Safe Harbor Matching
                  Contribution to be made on behalf of such Employee for such
                  Plan Year;

            (ii)  Any requirements that such Employee must satisfy to become
                  entitled to receive such contributions;

            (iii) The type and amount of Compensation that may be deferred under
                  the Plan as Tax Deferred Contributions;

            (iv)  The procedures for making or changing an election to make Tax
                  Deferred Contributions; and

            (v)   The withdrawal and vesting provisions applicable to
                  contributions under the Plan.

            For purposes hereof, the "Safe Harbor Notice Period" shall mean a
            period beginning 90 days before the first day of the applicable Plan
            Year and ending 30 days before the first

                                     - 21 -

            day of the applicable Plan Year; provided, however, with respect to
            a Covered Employee who becomes eligible to participate in the Plan
            during a given Plan Year in which the provisions of Section 3.10(a)
            are applicable, the "Safe Harbor Notice Period" shall begin 90 days
            before the day such Employee may first participate in the Plan and
            shall end on the day such Employee may first participate in the
            Plan.

      (c)   For Plan Years beginning on and after January 1, 2001 in which the
            Safe Harbor Matching Contribution of Section 3.10(a) is made and the
            Notice requirement of Section 3.10(b) is satisfied, the Employer
            elects to treat the Plan as automatically satisfying the
            nondiscrimination in amount of employer contribution requirements of
            Section 401(a)(4) of the Code. Notwithstanding any provision of this
            Section 3.10 to the contrary, the Employer may suspend future Safe
            Harbor Matching Contributions at any time provided that the
            procedures for implementing such suspension are consistent with
            guidance promulgated by the Internal Revenue Service and, provided
            further, that for any Plan Year in which such suspension occurs, the
            provisions of Section 3.3, 3.4, 3.5, 3.7, 3.8 and 3.9 shall again
            become applicable to the extent then required by law.

3.11  Source of Employer Contributions

      (a)   The Employer shall make all contributions to the Plan without regard
            to current or accumulated net profits. Notwithstanding the
            foregoing, for purposes of Sections 401(a)(27) and 401(k) of the
            Code, the Plan shall continue to be considered a profit sharing
            plan. All Employer contributions shall be made in cash.

      (b)   Any provision of the Plan to the contrary notwithstanding, the total
            Employer contribution made with respect to any Plan Year, when added
            to any other contributions made by the Employer to a plan qualified
            under Section 401(a) of the Code, shall not exceed such amount which
            is deductible for such Plan Year pursuant to Sections 404(a)(3) or
            404(a)(7) of the Code. In any event, all contributions for a Plan
            Year shall be paid within the regular or extended time for filing
            the Employer's federal income tax return for the fiscal year which
            includes the Plan Year end.

3.12  Investment of Employer Contributions

      The Employer contributions made on behalf of a Participant shall be
      invested by the Trustee in accordance with the Participant's election
      under Sections 5.3(a) and 5.4(a).


                                     - 22 -

3.13  Recovery of Contributions

      Except as provided in this Section 3.13, the assets of the Plan shall
      never inure to the benefit of an Employer or Affiliate and shall be held
      for the exclusive purpose of providing benefits under the Plan and
      defraying reasonable expenses of the Plan. However, no provision of this
      Plan shall:

      (a)   Prohibit the return of a contribution to an Employer or a
            Participant within one year after payment if such contribution was
            made by a mistake of fact;

      (b)   Prohibit the return of a contribution which was conditioned upon its
            deductibility under Section 404 of the Code (to the extent
            disallowed as a deduction);

      provided, however, in the case of the return of a contribution which was
      made as a result of a mistake of fact, the amount which shall be returned
      is the excess of the amount contributed over the amount which would have
      been contributed had the mistake of fact not occurred. Further, in the
      case of the return of a contribution which was conditioned upon
      deductibility, and in the case of a contribution made as the result of a
      mistake of fact, earnings attributable to the excess contribution may not
      be returned, but losses attributable thereto must reduce the amount to be
      returned. Further, in both such cases, if the withdrawal of the amount
      attributable to the mistaken or non-deductible contribution would cause
      the balance of the account of any Participant to be reduced to less than
      the balance which would have been in the account had the mistaken or
      non-deductible amount not been contributed, then the amount to be returned
      to the Employer will be limited so as to avoid such reduction.

3.14  Other Provisions Relating to Employer Contributions

      (a)   A Participant may as of any time:

            (i)   suspend the Tax Deferred Contributions made on his behalf; or

            (ii)  increase or decrease the rate of Tax Deferred Contributions
                  made on his behalf or have such contributions resumed after a
                  period of suspension.

            Such suspension or change in rate shall be effective as of the first
            day of the pay period next following the date the Participant
            delivers Notice of the same to the Administrator, provided such
            Notice is delivered to the Administrator in such time as to allow
            the Administrator a reasonable period within which to act on the
            election contained therein.

            During any period of suspension, regardless of the length of its
            duration, the Participant's Account shall be maintained in
            accordance with the procedure set forth in Article Five.

      (b)   In the event Employer Matching Contributions or Safe Harbor Matching
            Contributions have been made with respect to Tax Deferred
            Contributions that are subsequently determined to fail to meet the
            annual dollar limitation specified in Section 3.2(a) (and if such
            Excess Deferrals are distributed pursuant to Section 3.2(b)) or the
            actual deferral


                                     - 23 -

            percentage limitation of Section 3.3(b) (and if such excess Tax
            Deferred Contributions are distributed pursuant to Section 3.4),
            such Employer Matching Contributions or Safe Harbor Matching
            Contributions (and any income or loss attributable thereto
            determined in accordance with regulations) shall be forfeited and
            applied to reduce future Employer Matching Contributions or Safe
            Harbor Matching Contributions.








                                     - 24 -

                                  ARTICLE FOUR

                             ROLLOVER CONTRIBUTIONS

4.1   Rollover Contributions

      (a)   Under such rules and procedures as the Administrator may establish,
            any Covered Employee may make a cash contribution to this Plan of
            all or a portion of the amount received by the Covered Employee in
            the form of a lump sum distribution from a qualified trust within
            the meaning of Section 402(c)(8) of the Code or from a rollover
            account described in Section 408(d)(3) of the Code, or may make a
            direct rollover of all or a portion of an eligible rollover
            distribution within the meaning of Section 402(c)(4) of the Code.
            Such rollover contribution shall be allocated to a Rollover Account
            established on behalf of the Covered Employee. For purposes of this
            Section 4.1, the entire amount of cash to be accepted by this Plan
            as a rollover contribution must constitute all or a portion of an
            eligible rollover distribution (as defined in Section 6.4). Such
            contribution must not include after-tax amounts contributed by the
            Employee or regular IRA contributions and, with respect to rollovers
            of distributions from a qualified trust or rollover account, must be
            received by the Trustee on or before the 60th day after the day on
            which the Employee received the distribution. A rollover
            contribution may include funds which were contributed on the
            Participant's behalf under an arrangement described in Code Section
            401(k). Before accepting any rollover contributions from a Covered
            Employee, the Administrator shall determine to its satisfaction that
            such contribution does not contain amounts from sources other than
            those provided in this Section 4.1.

      (b)   In the event the Administrator has reasonably concluded that an
            amount may be accepted by the Plan as a rollover contribution under
            Section 4.1(a) but later determines that all or a portion of such
            amount is not an eligible rollover distribution (as defined in
            Section 6.4) from a qualified trust within the meaning of Section
            402(c)(8) of the Code or from a rollover account described in
            Section 408(d)(3) of the Code, the Administrator shall cause such
            ineligible amount and related investment earnings to be distributed
            to the Covered Employee (or, if applicable, beneficiary) as soon as
            administratively feasible.

4.2   Vesting of Rollover Contributions

      Amounts contributed under Section 4.1 hereof shall at all times be 100%
      vested.


                                     - 25 -

                                  ARTICLE FIVE

                   PARTICIPANT ACCOUNTS AND VALUATION OF FUNDS

5.1   Establishment of Participant Accounts

      (a)   There shall be established and maintained for each Participant a
            Total Account consisting of the following accounts:

            (i)   a Tax Deferred Account;

            (ii)  an Employer Account; and

            (iii) for periods on and after January 1, 2001, a Safe Harbor
                  Matching Account.

            Under the circumstances described in Article Four, a Participant may
            also have a Rollover Account maintained on his behalf.

      (b)   Within each of the accounts listed in Section 5.1(a), separate
            records shall be kept of the portion, if any, of each account
            invested in each investment fund or vehicle then offered under the
            Plan.

5.2   Procedure as of Each Valuation Date

      As of each Valuation Date, each Participant's balance in his various
      accounts shall be adjusted in accordance with the valuation procedure
      adopted by the Administrator.

5.3   Investment Elections

      (a)   When a Covered Employee submits his application to become a
            Participant, he shall give Notice regarding the investment of Tax
            Deferred Contributions and any Employer Matching Contributions or
            Safe Harbor Matching Contributions made on his behalf under the
            Plan. The Notice shall specify, in 1% increments from 0% to 100%:

            (i)   the percentage of all future Tax Deferred Contributions to be
                  invested in each investment option which is then made
                  available for the investment of Tax Deferred Contributions;
                  and

            (ii)  the percentage of all future Employer Matching Contributions
                  or, with respect to pay periods beginning on and after
                  December 14, 2000, Safe Harbor Matching Contributions, to be
                  invested in each investment option which is then made
                  available for the investment of Employer Matching
                  Contributions or, with respect to pay periods beginning on and
                  after December 14, 2000, Safe Harbor Matching Contributions.



                                     - 26 -

            A Participant may change the investment elections made under this
            Section 5.3(a) at any time by giving Notice to the Administrator or
            its designee within such time and in accordance with such means as
            are designated by the Administrator and communicated to Participants
            and Covered Employees. Such Notice of change shall be subject to the
            procedural specifications set forth above (and, if applicable,
            subject to the limitations set forth in Section 5.4) and, except as
            may otherwise be provided in the Trust Agreement, shall be effective
            with respect to contributions received by the Trustee (or otherwise
            deposited into the Trust Fund) as of the Valuation Date on which the
            Notice is received or as of the next following Valuation Date, in
            accordance with procedures established by the Administrator, and
            communicated to Participants and Covered Employees.

            A Covered Employee making a rollover contribution shall give Notice
            regarding the investment of such contribution. Such Notice shall be
            delivered on or prior to the date the rollover contribution is
            effective and shall specify, in 1% increments from 0% to 100%, the
            percentage of the rollover contribution to be invested in each
            investment option which is then made available for the investment of
            rollover contributions.

      (b)   Each Participant and beneficiary shall have the opportunity to
            change the manner in which the Total Account maintained on his
            behalf under the Plan is invested. Such opportunity shall be
            exercised by giving Notice to the Administrator or its designee
            within such time and in accordance with such means as are designated
            by the Administrator and communicated to Participants, Covered
            Employees and affected beneficiaries. Subject to any minimum dollar
            limitation which may be established by the Administrator from
            time-to-time, such Notice shall specify, in a whole dollar amount or
            in 1% increments from 0% to 100%, the dollar amount, or percentage,
            of the Total Account maintained on behalf of the Participant or
            beneficiary which is to be invested in each investment option then
            made available. Except as may otherwise be set forth in the Trust
            Agreement, such Notice shall be effective as of the Valuation Date
            on which the Notice is received by the Trustee or as of the next
            following Valuation Date, in accordance with procedures established
            by the Administrator and communicated to Participants, Covered
            Employees and affected beneficiaries. Notwithstanding any provision
            of this paragraph (b) to the contrary, (i) the election under this
            Section 5.3(b) shall be subject to any contractual limitations
            imposed on the direct transfer of assets between given investment
            funds, (ii) in no event shall any portion of the Total Account
            maintained on behalf of a Participant or beneficiary in the Erie
            Family Life Group Annuity Fund be transferred to any other
            investment fund and (iii) in no event shall any portion of the Total
            Account maintained on behalf of a Participant be transferred to the
            Erie Indemnity Stock Fund.

      (c)   Any investment elections or changes in elections under this Section
            5.3 may be limited or delayed by the Administrator or Trustee, if,
            in the judgment of such party, giving immediate effect to such
            elections would adversely affect the Total Account balances of a
            significant number of Participants.



                                     - 27 -

      (d)   In the event a Participant's or beneficiary's investment election is
            incomplete, the Participant or beneficiary will be assumed to have
            chosen to invest in such default fund as is set forth in the Trust
            Agreement.

      (e)   Any investment election under the foregoing provisions of this
            Section 5.3 shall remain in effect until changed by another election
            under this Section.

      (f)   Each Participant, Covered Employee and beneficiary is solely
            responsible for the selection of his investment option. The Trustee,
            the Administrator, the Employer, and the directors, officers,
            supervisors and other employees of the Employer are not empowered to
            advise a Participant, Covered Employee or beneficiary as to the
            manner in which any portion of his Total Account shall be invested.
            The fact that an investment option is available under the Plan shall
            not be construed as a recommendation for investment in that
            investment option.

5.4   Erie Indemnity Stock Fund

      The provisions of this Section shall become applicable to the extent to
      which Participants' and beneficiaries' Employer Accounts and/or Safe
      Harbor Matching Accounts under the Plan are invested in the Erie Indemnity
      Stock Fund.

      (a)   Effective for pay periods beginning on and after May 8, 1997, the
            Administrator shall make available under the Plan an investment fund
            which shall consist exclusively of Erie Indemnity Stock; provided,
            however, that in the discretion of the Trustee, within guidelines
            set by the Administrator, a portion of such fund may be held in
            short-term interest-bearing investments or cash pending purchase of
            Erie Indemnity Stock and to provide sufficient liquidity for
            exchanges out of the fund, withdrawals and loans. Such investment
            fund shall be referred to as the "Erie Indemnity Stock Fund". Except
            as otherwise provided in this Section 5.5, a Participant shall be
            permitted to invest all or a portion of the Employer Matching
            Contributions or, with respect to pay periods beginning on and after
            December 14, 2000, the Safe Harbor Matching Contributions, made on
            his behalf in the Erie Indemnity Stock Fund in accordance with the
            provisions of Section 5.3. A Participant shall not be permitted to
            invest any portion of the Tax Deferred Contributions made on his
            behalf in the Erie Indemnity Stock Fund nor shall any Participant or
            Covered Employee be permitted to invest any portion of a rollover
            contribution in the Erie Indemnity Stock Fund. No Participant,
            Covered Employee or beneficiary may transfer any portion of the
            Total Account maintained on his behalf to the Erie Indemnity Stock
            Fund. For purposes of implementing Participant investment elections
            under Section 5.3, or a Participant's or beneficiary's distribution
            election under Section 6.3, the Trustee may, in its discretion,
            purchase or sell Erie Indemnity Stock on the open market or by
            privately-negotiated transaction; provided however, that any such
            purchase or sale shall be made only in exchange for fair market
            value as determined by the Trustee and, provided further that, no
            commission shall be charged to or paid by the Plan with respect to
            any purchase or sale of Erie Indemnity Stock between the Plan and a
            party in interest (as defined in Section 3(14) of ERISA). Any
            distributions, dividends or


                                     - 28 -

            other income received by the Trustee with respect to the Erie
            Indemnity Stock Fund shall be reinvested by the Trustee in the Erie
            Indemnity Stock Fund.

      (b)   The restrictions contained in this paragraph (b) shall apply to that
            portion of the Employer Accounts and/or Safe Harbor Matching
            Accounts maintained on behalf of Participants or beneficiaries which
            are invested in the Erie Indemnity Stock Fund and, if and to the
            extent necessary, any election made by a Participant or beneficiary
            under the Plan shall be deemed modified to be consistent with this
            paragraph (b).

            (i)   Notwithstanding the provisions of Section 5.3, and Articles
                  Seven and Fourteen:

                  (A)   No Participant or beneficiary shall, on the basis of
                        material nonpublic information with respect to the
                        Company or its affiliates, make an election permitted by
                        that Section or those Articles if (1) such election
                        would result in an exchange into or out of, loans from,
                        withdrawals from, or an increase or decrease in the
                        amount of contributions to the Erie Indemnity Stock
                        Fund, and (2) the transaction resulting from such
                        election is prohibited by Rule 10b-5.

                  (B)   No officer shall make an election permitted by that
                        Section or those Articles if such election would result
                        in a transaction involving the Erie Indemnity Stock Fund
                        which is not an exempt transaction pursuant to Rule
                        16b-3.

            For purposes of this paragraph (b), the terms "Rule 10b-5" and Rule
            16b-3" shall mean the rules, as amended, having those designations
            promulgated by the United States Securities and Exchange Commission
            pursuant to the Securities Exchange Act of 1934, as amended, and the
            terms "affiliate" and "officer" shall have the meanings set forth in
            Rule 12b-2 and Rule 16a-1(f), respectively, both as so promulgated
            and amended.






                                     - 29 -

                                   ARTICLE SIX

                             VESTING & DISTRIBUTIONS

6.1   Vesting

      A Participant shall be fully vested in all contributions made and
      investment earnings credited under the provisions of the Plan.

6.2   Distributions Upon Retirement or Other Termination of Employment

      (a)   Subject to the provisions of (b) below, in the event of the
            termination of a Participant's employment with the Company and
            Affiliates for any reason, the Participant (or, if deceased, his
            designated beneficiary) shall receive the vested Total Account
            maintained on behalf of the Participant in accordance with Section
            6.3 if, as of the date of determination, the balance of such vested
            Total Account is not in excess of $3,500.00. The Administrator or
            its designee shall make such determination on a periodic basis, not
            less frequent than annually. If, as of such date of determination,
            the vested Total Account maintained on behalf of a Participant
            exceeds $3,500.00, the Participant may elect, in such manner as
            provided by the Administrator, to either take or commence an
            immediate distribution of such vested Total Account (with Spousal
            Consent) in a form permitted under Section 6.3, or to defer receipt
            of the same until a later date, but not beyond the end of the
            calendar year in which he attains age 70-1/2. Such election by a
            Participant must be made in writing to the Administrator on a form
            or forms designated for such purpose. The failure of any terminating
            Participant to make an election with respect to a vested Total
            Account in excess of the $3,500 threshold shall be deemed an
            election by the Participant to defer receipt of such vested Total
            Account. A Participant who elects (or is deemed to have elected) to
            defer receipt of his vested Total Account may request a distribution
            of his vested Total Account in a form permitted under Section 6.3 at
            a subsequent date, subject to Spousal Consent. Pending distribution
            of his Total Account, such Participant shall be permitted to change
            the manner in which such Total Account is invested in accordance
            with Section 5.3(b).

      (b)   The Administrator or its designee shall notify a Participant or
            beneficiary of his election right under Section 6.2(a) and, in the
            case of a Participant who may defer payment of the vested portion of
            his Total Account in accordance with Section 6.2(a), of his right to
            defer payment. Such notification shall be provided to the
            Participant or beneficiary not less than 30 days and not more than
            90 days before payment is made; provided however, that a Participant
            or beneficiary may affirmatively elect to be paid the vested Total
            Account being maintained on his behalf (such election to include
            Spousal Consent, in the case of a Participant) within 30 days after
            the Participant or beneficiary received the notice described in this
            Section 6.2(b).

      (c)   A Participant who returns to employment with the Employer on a full
            or part-time basis prior to distribution of his vested Total Account
            under paragraph (a) shall be deemed to have cancelled his
            distribution election as of his date of reemployment.



                                     - 30 -

      (d)   All payments made pursuant to this Section 6.2 shall be based on the
            Participant's vested Total Account balance on the Valuation Date as
            of which payment is made.

6.3   Payment of Amounts Distributed

      (a)   For periods before January 1, 2001 and except as otherwise provided
            in Section 6.3(c), all Plan distributions shall be paid in the form
            of a lump sum. Effective on and after January 1, 2001, distributions
            to a Participant or beneficiary may be paid in the form of:

            (i)   a lump sum;

            (ii)  monthly, quarterly or annual installments that will provide a
                  fixed amount per pay period; or

            (iii) monthly, quarterly or annual installments that will provide
                  substantially equal payments over a fixed period that is not
                  in excess of the lesser of fifteen (15) years or the
                  recipient's life expectancy, as determined by the
                  Administrator as of the date the payments begin.

            A Participant or beneficiary who has elected payment in an
            installment form under Section 6.3(a)(ii) or (iii) may elect, at
            some future date, to have the balance of the vested Total Account
            maintained on his behalf paid in the form of a lump sum. Except as
            provided in the preceding sentence, a Participant or beneficiary may
            not change his elected form of distribution following the date Plan
            payments begin. A Participant who returns to employment with the
            Employer on a full or part-time basis following commencement of an
            installment form of distribution shall be deemed to have cancelled
            his distribution election as of his date of reemployment. In no
            event may distributions from the Plan be made in the form of an
            annuity.

      (b)   The distributee shall elect to have that portion of his Employer
            Account and Safe Harbor Matching Account which is invested in the
            Erie Indemnity Stock Fund paid either (i) in whole units of Erie
            Indemnity Stock (with fractional units being distributed in cash) or
            (ii) in cash. The election of a Participant or beneficiary under
            this Section 6.3(b) shall be made in connection with the
            Participant's or beneficiary's distribution election(s) under
            Section 6.2. In the event distribution is made in the absence of a
            Participant's or beneficiary's distribution election, that portion
            of an Employer Account and Safe Harbor Matching Account which is
            invested in the Erie Indemnity Stock Fund at the time of
            distribution shall be paid in cash.

      (c)   Distribution to a Participant must commence no later than the April
            1st of the calendar year following the calendar year in which the
            Participant attains age 70-1/2. Notwithstanding the foregoing,
            effective January 1, 1999 with respect to any employed Participant
            who attains age 70-1/2 during or after the 1999 calendar year,
            distribution must commence no later than the April 1st of the
            calendar year following the calendar year in which the Participant
            retires; provided, however, that if the Participant is a five
            percent owner (for


                                     - 31 -

            purposes of Section 416 of the Code) during the calendar year in
            which he attains age 70-1/2 or in a later calendar year,
            distribution must commence to the Participant no later than the
            April 1st of the calendar year following the calendar year in which
            the Participant attains age 70-1/2 or the calendar year in which the
            Participant becomes a five percent owner, whichever date is later.
            For periods before January 1, 2001, a Participant who is required to
            commence payments under this Section 6.3(c), and who continues to
            work on either a full or part-time basis, may elect to receive his
            Total Account in the form of 10 annual installments instead of a
            lump sum distribution. In all cases, for purposes of calculating the
            amount of a required minimum distribution, life expectancy will be
            determined without regard to the permissive recalculation rule of
            Section 401(a)(9)(D) of the Code.

            Notwithstanding the foregoing, unless the Participant elects
            otherwise, distribution of benefits under Section 6.2 will begin no
            later than the 60th day after the latest of the close of the Plan
            Year in which:

            (i)   the Participant attains age 65,

            (ii)  occurs the fifth anniversary of the Plan Year in which the
                  Participant commenced participation in the Plan, or

            (iii) the Participant terminated employment with the Company and
                  Affiliates.

      (d)   In the event the Participant dies after distribution of his interest
            has begun, but prior to distribution of his entire interest, the
            remaining portion of such interest shall be distributed in a method
            which is at least as rapid as the method being used at the date of
            the Participant's death. In the event the Participant dies prior to
            commencement of the distribution of his interest, the entire
            interest attributable to such Participant shall be distributed
            within five years after the date of his death, unless such interest
            is payable to a designated beneficiary (as defined in Code Section
            401(a)(9)), commences no later than the December 31 of the calendar
            year following the calendar year of the Participant's death and is
            payable over a period which does not exceed the life expectancy of
            such designated beneficiary, as determined by the Administrator as
            of the date payments begin.

            Notwithstanding the foregoing, if the designated beneficiary of the
            Participant is the Participant's surviving spouse, the date
            distributions are required to begin shall be no earlier than the
            date that the Participant would have attained age 70-1/2 and, if the
            spouse dies before payments begin, subsequent distribution shall be
            made as if the spouse had been the Participant.

      (e)   Any provision of the Plan to the contrary notwithstanding, all
            distributions shall be determined and made in accordance with the
            provisions of Section 401(a)(9) of the Code and the regulations
            promulgated thereunder including 1.401(a)(9)-2. Such provisions
            shall override any distribution provision of the Plan that is
            inconsistent with Code Section 401(a)(9).



                                     - 32 -

6.4   Direct Rollovers

      (a)   Notwithstanding any provision of the Plan to the contrary that would
            otherwise limit a distributee's election under this Section, a
            distributee may elect, subject to provisions adopted by the
            Administrator which shall be consistent with income tax regulations,
            to have any portion of an eligible rollover distribution paid
            directly to an eligible retirement plan specified by the distributee
            in a direct rollover. The Administrator shall notify a distributee
            of his right to elect a direct rollover; such notice shall be
            furnished to the distributee between 30 days and 90 days prior to
            the date as of which the distributee is to receive a distribution
            from the Plan, provided that the distributee may affirmatively elect
            a distribution or direct rollover to occur within 30 days after the
            furnishing of such notice. Subject to Section 6.2(a), a distributee
            who has been given a timely notice and explanation of the election
            to have his eligible rollover distribution paid to an eligible
            retirement plan, and who has failed to file an election with the
            Administrator within 30 days of the delivery of such notice and
            explanation shall be presumed to have elected to have his benefit
            paid directly to him as of the Valuation Date which is, or which
            next follows, the end of such 30-day period.

      (b)   Definitions.

            (i)   Eligible Rollover Distribution: An eligible rollover
                  distribution is any distribution of all or any portion of the
                  balance to the credit of the distributee, except that an
                  eligible rollover distribution does not include any
                  distribution that is one of a series of substantially equal
                  periodic payments (not less frequently than annually) made for
                  the life (or life expectancy) of the distributee or the joint
                  lives (or joint life expectancies) of the distributee and the
                  distributee's designated beneficiary, or for a specified
                  period of 10 years or more; any distribution to the extent
                  such distribution is required under Code Section 401(a)(9);
                  for periods on and after January 1, 1999, that portion of a
                  hardship withdrawal that is attributable to Tax Deferred
                  Contributions; and the portion of any distribution that is not
                  includible in gross income (determined without regard to the
                  exclusion for net unrealized appreciation with respect to
                  employer securities).

            (ii)  Eligible Retirement Plan: An eligible retirement plan is an
                  individual retirement account described in Code Section
                  408(a), an individual retirement annuity described in Code
                  Section 408(b), an annuity plan described in Code Section
                  403(a), or a qualified trust described in Code Section 401(a),
                  that accepts the distributee's eligible rollover distribution.
                  However, in the case of an eligible rollover distribution to
                  the surviving spouse, an eligible retirement plan is an
                  individual retirement account or individual retirement
                  annuity.

            (iii) Distributee: A distributee includes an Employee or former
                  Employee. In addition, the Employee's or former Employee's
                  surviving spouse and the Employee's or former Employee's
                  spouse or former spouse who is the alternate payee under a
                  qualified domestic relations order, as defined in Code


                                     - 33 -

                  Section 414(p), are distributees with regard to the interest
                  of the spouse or former spouse.

            (iv)  Direct Rollover: A direct rollover is a payment by the Plan to
                  the eligible retirement plan specified by the distributee.









                                     - 34 -

                                  ARTICLE SEVEN

                                   WITHDRAWALS

7.1   Withdrawals Generally

      A Participant actively employed with the Company or an Affiliate (herein
      referred to in this Article as an "Eligible Applicant") may make written
      application to the Administrator for withdrawal of a portion of his
      account balance without terminating his employment, but only in such
      amounts and under such conditions as specified in this Article Seven. All
      such applications for a withdrawal made by an Eligible Applicant shall be
      approved or denied by the Administrator in accordance with a uniform,
      non-discriminatory policy and such action by the Administrator shall be
      final.

7.2   Hardship Withdrawal

      Upon proper written application of an Eligible Applicant in such form as
      the Administrator may specify, the Administrator may permit the Eligible
      Applicant withdraw in cash the portion of the balance of his Total Account
      representing his Rollover Account (if applicable), his Employer Account
      and his Tax Deferred Contributions without earnings thereon, provided that
      the reason for such withdrawal is to enable the Eligible Applicant to meet
      unusual or special situations in his financial affairs resulting in
      immediate and heavy financial needs of the Eligible Applicant and,
      provided further, that the Administrator must be satisfied that any
      withdrawal hereunder is not in excess of the amount necessary to meet the
      immediate and heavy financial need and is not available from other
      resources of the Eligible Applicant. The amount available for withdrawal
      shall be based on the balances of the applicable accounts (and the Tax
      Deferred Contributions made) on the Valuation Date as of which payment is
      made. In the event an Eligible Applicant is married at the time of
      application and the withdrawal request exceeds $3,500, the Administrator
      shall require Spousal Consent prior to approving the withdrawal
      application. Amounts required to meet the following items are deemed to be
      for immediate and heavy financial needs:

      (a)   payments necessary to prevent the eviction of the Eligible Applicant
            from, or foreclosure of the mortgage on, his principal residence;

      (b)   expenses for medical care described in Code Section 213(d) incurred
            by the Eligible Applicant, his spouse, or his dependents as defined
            in Code Section 152, or necessary for these persons to obtain
            medical care described in Section 213(d) of the Code;

      (c)   costs directly related to the purchase of an Eligible Applicant's
            principal residence; or

      (d)   payment of tuition, related educational fees and room and board
            expenses, for the next 12 months of post-secondary education for the
            Eligible Applicant, his spouse or his dependents.

7.3   Safe Harbor Distribution



                                     - 35 -

      A distribution shall be deemed necessary to satisfy an immediate and heavy
      financial need of a Eligible Applicant if all of the following
      requirements are satisfied:

      (a)   the distribution is not in excess of the amount of the immediate and
            heavy financial need of the Eligible Applicant including any amounts
            necessary to pay any federal, state or local income taxes or
            penalties reasonably anticipated to result from such distribution;

      (b)   the Eligible Applicant has obtained all other forms of distribution
            and nontaxable loans currently available from all plans maintained
            by an Employer;

      (c)   the Eligible Applicant shall be suspended from making Tax Deferred
            Contributions to the Plan until the first day of the pay period
            occurring 12 full months from the effective date of the withdrawal;
            and

      (d)   the limitation specified in Section 3.2(a) shall be applied to the
            aggregated Tax Deferred Contributions made during the taxable years
            which include the first and last days of the suspension period and
            not separately to each such taxable year.

7.4   Hardship Withdrawal Priority

      (a)   A withdrawal pursuant to this Article Seven shall be made from the
            Total Account maintained on behalf of an Eligible Applicant in the
            order of priority set forth in this Section 7.4. That portion of a
            Eligible Applicant's Total Account which is of a lower priority
            shall be withdrawn only after those portions of the Total Account
            which are of higher priority have been completely withdrawn:

            (i)   Rollover Account;

            (ii)  Employer Account; and

            (iii) Tax-Deferred Account (excluding earnings on Tax Deferred
                  Contributions).

            In no event shall a hardship withdrawal be taken from the Safe
            Harbor Matching Account maintained on behalf of an Eligible
            Applicant.

      (b)   Subsequent to the determination under paragraph (a), withdrawals
            shall be made out of those investment options in which the
            applicable account is invested according to the withdrawal hierarchy
            designated by the Administrator and communicated to Participants.

7.5   Modifications to Hardship Withdrawal Standards

      The Company shall have full discretionary authority to modify the
      provisions of Sections 7.2, 7.3 and 7.4 provided that any modifications
      shall be evidenced by a writing approved by the Plan Administrator, shall
      be consistently applied to all pending and future applications as of the
      date


                                     - 36 -

      of the modification and shall not operate so as to reduce or eliminate any
      benefit protected under Section 411(d)(6) of the Code that has accrued as
      of the date of modifications.





                                     - 37 -

                                  ARTICLE EIGHT

                                 THE TRUST FUND

8.1   Trust Agreement

      The Company has entered into a Trust Agreement for the purpose of holding
      assets of the Trust Fund other than assets attributable to amounts
      invested in a group annuity contract provided by the Erie Family Life
      Insurance Company. The Trust Agreement provides, among other things, that
      all funds received by the Trustee thereunder shall be held, administered,
      invested and distributed by the Trustee, and that no part of the corpus or
      income of the Trust Fund held by the Trustee shall be used for, or
      diverted to, purposes other than for the exclusive benefit of participants
      or their beneficiaries. The Company shall have the authority to remove
      such Trustee or any successor Trustee, and any Trustee or any successor
      Trustee may resign. Upon removal or resignation of a Trustee, the Company
      shall appoint a successor Trustee.

      The Company shall have authority to direct that there shall be more than
      one Trustee under the Trust Agreement and to determine the portion of the
      assets under the Trust Agreement to be held by each such Trustee. If such
      a direction is given, the Company shall designate the additional Trustee
      or Trustees, and each Trustee shall hold and invest and keep records with
      respect to the portion of such assets held by it.

8.2   Appointment of Independent Accountants

      The Company may select a firm of independent public accountants to examine
      and report on the financial position and the results of the operations of
      the Trust Fund created under the Plan, at such times as it deems proper
      and/or necessary.

8.3   Appointment of Investment Manager

      The Company may select an independent investment manager to invest the
      portion of the Trust Fund in each of the various funds. Such investment
      manager shall be either registered as an investment manager under the
      Investment Adviser's Act of 1940, a bank, a mutual fund or an insurance
      company, and as required by the Company, shall acknowledge in writing that
      he is a fiduciary with respect to the Plan.

8.4   Investment Committee

      The Company shall appoint three or more persons to serve as the Employee
      Savings Plan Investment Committee, to be referred to herein as the
      "Investment Committee". The Investment Committee shall perform such duties
      relating to the investment of the Trust Fund as the Company delegates to
      it and the duties specified in this Section 8.4. Any one or more of the
      members of the Investment Committee may be officers or directors of an
      Employer and need not be Participants entitled to benefits under the Plan.
      The Company in its sole discretion may remove or replace any member at any
      time with or without cause. A member may resign by delivering his written
      resignation to the Company, and such resignation shall become effective


                                     - 38 -

      upon its delivery or at any other date specified therein. If, at any time,
      there shall be a vacancy in the membership of the Investment Committee,
      the remaining member or members shall continue to act until such vacancy
      is filled by the Company. The Investment Committee shall hold meetings
      upon such notice, at such place or places and at such times as its members
      may from time to time determine. A simple majority of the members at the
      time in office shall constitute a quorum for the transaction of business.
      All action taken by the Investment Committee at any meeting shall be by
      vote of the simple majority of those present at such meeting, but the
      Investment Committee may act without a meeting by unanimous action of its
      members evidenced by a resolution or other written instrument signed by
      all members of the Investment Committee.

      The Investment Committee shall have the following responsibilities:

      (a)   to recommend to the Company a Trustee and to recommend any changes
            in said Trustee;

      (b)   to recommend to the Company the appointment of fund managers;

      (c)   to allocate the duties and procedures for the Trustee and investment
            managers;

      (d)   to establish a separate investment philosophy and goals for each of
            the fund managers;

      (e)   to monitor the Trustee with respect to servicing the trust in a
            fiduciary capacity; and

      (f)   to monitor the fund managers with respect to the investment
            philosophy, goals and rates of return.

8.5   Voting of Erie Indemnity Stock

      (a)   Each Participant or beneficiary who has an Employer Account
            maintained under the Plan on his behalf with an investment in the
            Erie Indemnity Stock Fund shall have the powers and responsibilities
            set forth in this Section 8.5.

      (b)   Prior to each meeting of the Class A shareholders of the Company
            during which a vote of Class A shares is to be taken, the Company
            shall cause to be sent to each person described in Section 8.5(a), a
            copy of the proxy solicitation material for such meeting, together
            with a form requesting confidential voting instructions for the
            voting of Erie Indemnity Stock held in the Erie Indemnity Stock Fund
            in proportion to the number of shares or units of the Erie Indemnity
            Stock Fund held by such a person's Employer Account. Upon receipt of
            such a person's instructions, the Trustee shall then vote in person,
            or by proxy, such Erie Indemnity Stock as so instructed.

      (c)   Instructions received from the persons described in Section 8.5(a)
            by the Trustee regarding the voting of Erie Indemnity Stock held in
            the Erie Indemnity Stock Fund shall be held in strictest confidence
            and shall not be divulged to any other person, including directors,
            officers or employees of the Company, or any Affiliate, except as
            otherwise required by law.



                                     - 39 -

      (d)   Except as otherwise set forth in the Trust Agreement, the Trustee
            shall vote Erie Indemnity Stock which represents those shares or
            units of the Erie Indemnity Stock Fund for which the Trustee does
            not receive affirmative direction from Participants and
            beneficiaries in the same proportion as the Trustee votes those
            shares of Erie Indemnity Stock held in the Erie Indemnity Stock Fund
            for which it has received voting instructions.









                                     - 40 -

                                  ARTICLE NINE

                           ADMINISTRATION OF THE PLAN

9.1   The Administrator

      The Plan shall be administered by a Plan Administrator who shall serve at
      the pleasure of the Board. The Board has appointed the Company's Senior
      Vice President, Treasurer and Chief Investment Officer to serve as
      Administrator. The Administrator may resign by delivering his written
      resignation to the Board. In the event of the death, resignation or
      removal of the Administrator, the Board shall fill the vacancy. In making
      the appointment, the Board shall not be limited to any particular person
      or group, and nothing herein contained shall be construed to prevent any
      Participant, director, officer, employee or shareholder of the Employers
      from serving as the Administrator. The Administrator will not be
      compensated from the Trust Fund for services performed in such capacity,
      but the Company will reimburse such individual for expenses reasonably
      incurred by him in such capacity. The Administrator shall be the "named
      fiduciary" for purposes of ERISA; provided, however, that Participants and
      beneficiaries with Employer Accounts under the Plan shall be considered
      "named fiduciaries" solely to the extent of those fiduciary duties and
      responsibilities which are directly related to the exercise of voting
      rights with respect to Plan interests invested in the Erie Indemnity Stock
      Fund (and not to other aspects of Plan operation and/or administration).

      Appointment by the Board shall be evidenced by a certified copy of the
      resolution of the Board making such appointment, and copies of such
      certified resolution shall be delivered to the Trustee and to such other
      persons as may require such notice.

9.2   Powers of Administrator

      The Administrator will have full power to administer the Plan in all of
      its details, subject, however, to the requirements of ERISA. This power
      shall include having the sole and absolute discretion to interpret and
      apply the provisions of the Plan, to determine the rights and status
      hereunder of any individual, to decide disputes arising under the Plan,
      and to make any determinations and findings of fact with respect to
      benefits payable hereunder and the persons entitled thereto as may be
      required for any purpose under the Plan. Without limiting the generality
      of the above, the Administrator is hereby granted the following authority
      which it shall discharge in its sole and absolute discretion in accordance
      with Plan provisions as interpreted by the Administrator:

      (a)   To make and enforce such rules and regulations as it deems necessary
            or proper for the efficient administration of the Plan, including
            the modification of the claims procedure under Article Ten in
            accordance with any regulations issued under Section 503 of ERISA.

      (b)   To interpret the Plan.

      (c)   To decide all questions concerning the Plan and the eligibility of
            any person to participate in the Plan, his period of participation
            and/or service under the Plan, his date of birth, the value of the
            Total Account, or any part thereof, maintained on behalf of the
            person and the


                                     - 41 -

            rights of any person to receive a distribution from the Plan and the
            amount of such distribution.

      (d)   To compute the amount of Tax Deferred Contributions, Employer
            Matching Contributions and Safe Harbor Matching Contributions to be
            made on behalf of any Participant in accordance with the provisions
            of the Plan.

      (e)   To authorize the payment of Plan benefits and to direct cessation of
            benefit payments.

      (f)   To appoint, employ or engage such other agents, counsel,
            accountants, consultants and actuaries as may be required to assist
            in administering the Plan.

      (g)   To establish procedures to determine whether a domestic relations
            order is a qualified domestic relations order within the meaning of
            Section 414(p) of the Code, to inform the parties to the order as to
            the effect of the order, and to direct the Trustee to hold in escrow
            or pay any amounts so directed to be held or paid by the order.

      (h)   To obtain from the Employers, Employees, Participants, spouses and
            beneficiaries such information as shall be necessary for the proper
            administration of the Plan.

      (i)   To perform all reporting and disclosure requirements imposed upon
            the Plan by ERISA, the Code or any other lawful authority.

      (j)   To ensure that procedures are established which are sufficient to
            safeguard the confidentiality of information relating to the
            purchase, holding, and sale of Erie Indemnity Stock held in the Erie
            Indemnity Stock Fund and the exercise of shareholder rights with
            respect to Erie Indemnity Stock held in the Erie Indemnity Stock
            Fund and to ensure such procedures are being followed.

      (k)   To appoint and remove an independent fiduciary for the purpose of
            carrying-out activities relating to any situations which the
            Administrator determines involves an unreasonable potential for
            undue Employer influence with regard to the direct or indirect
            exercise of shareholder rights with respect to Erie Indemnity Stock
            holdings in the Erie Indemnity Stock Fund.

      (l)   To take such steps as it, in its discretion, considers necessary
            and/or appropriate to remedy an inequity under the Plan that results
            from incorrect information received or communicated or as the
            consequence of administrative error.

      (m)   To correct any defect, reconcile any inconsistency or supply any
            omission under the Plan.

      (n)   To delegate its powers and duties to others in accordance with
            Section 9.3.

      (o)   To exercise such other authority and responsibility as is
            specifically assigned to it under the terms of the Plan and to
            perform any other acts necessary to the performance of its powers
            and duties.



                                     - 42 -

      The Administrator at its discretion may either request the Company or
      direct the Fund to pay for any or all services rendered by the Trustee,
      any investment manager, and by persons appointed, employed or engaged
      under Section 9.2(f) or under the terms of the Trust Agreement.

      The Administrator's interpretations, decisions, computations and
      determinations under this Section 9.2 which are made in good faith will be
      final and conclusive upon the Employers, all Participants and all other
      persons concerned. Any action taken by the Administrator with respect to
      the rights or benefits of any person under the Plan shall be revocable by
      the Administrator as to payments or distributions not theretofore made,
      pursuant to such action, from the Trust Fund; and appropriate adjustments
      may be made in future payments or distributions to a Participant or
      beneficiary to offset any excess payment or underpayment previously made
      to such Participant or beneficiary from the Trust Fund. No ruling or
      decision of the Administrator in any one case shall create a basis for a
      retroactive adjustment in any other case prior to the date of a written
      filing of each specific claim.

9.3   Delegation of Duties

      The Administrator may, from time to time, designate any person to carry
      out any of the responsibilities of the Administrator. The person so
      designated will have full authority, or such limited authority as the
      Administrator may specify, to take such actions as are necessary or
      appropriate to carry out the duties delegated by the Administrator.

9.4   Conclusiveness of Various Documents

      The Administrator and the Company and its directors and officers will be
      entitled to rely upon all tables, valuations, certificates and reports
      furnished by any actuary, accountant, counsel or other expert appointed,
      employed or engaged by the Administrator or the Company.

9.5   Actions to be Uniform

      Any discretionary actions to be taken under the Plan by the Administrator
      will be nondiscriminatory and uniform with respect to all persons
      similarly situated.

9.6   Liability and Indemnification

      To the full extent allowed by law, the Administrator shall not incur any
      liability to any Participant or beneficiary, or to any other person, by
      reason of any act or failure to act on the part of the Administrator if
      such act or omission is not the result of the Administrator's gross
      negligence, willful misconduct or exercise of bad faith. To the full
      extent allowed by law, the Company agrees to indemnify the Administrator
      against all liability and expenses (including reasonable attorney's fees
      and other reasonable expenses) occasioned by any act or omission to act if
      such act or omission is not the result of the Administrator's gross
      negligence, willful misconduct or exercise of bad faith. Neither this
      Section 9.6 nor any other provision of this Plan shall be applied to
      invalidate, modify, or limit in any respect any contract, agreement, or
      arrangement for indemnifying or insuring the Administrator against, or
      otherwise limiting, such


                                     - 43 -

      liability or expense, or for settlement of such liability, to the extent
      such contract, agreement, or arrangement is not precluded by the terms of
      Section 410 of ERISA.







                                     - 44 -

                                   ARTICLE TEN

                                CLAIMS PROCEDURE

10.1  Claim for Benefit

      If a Participant or a beneficiary asserts a right to any benefit under the
      Plan which he has not received, he must file a claim for such benefit with
      the Administrator in such manner as provided hereunder. If the
      Administrator wholly or partially denies such claim, it shall provide
      written notice to the Participant or the beneficiary submitting the
      application within 90 days of the receipt by the Administrator of the
      application. The Administrator shall set forth in the notice:

      (a)   the specific reasons for denial of the claim;

      (b)   the specific reference to pertinent provisions of the Plan on which
            the denial is based;

      (c)   a description of any additional material or information necessary to
            perfect the claim and an explanation of why such material or
            information is necessary; and

      (d)   further steps which the Participant or beneficiary may take in order
            to have his claim reviewed (including a statement that the claimant
            or his duly authorized representative may review Plan documents and
            submit issues and comments regarding the claim to the
            Administrator).

10.2  Review of Denial of Claim

      A Participant or beneficiary whose application for benefits is denied may
      request a full and fair review of the decision denying the claim within 90
      days after receipt of the notice of the denial provided by the
      Administrator. The Participant or beneficiary may:

      (a)   request a hearing by the Administrator upon written application to
            the Administrator;

      (b)   review pertinent Plan documents in the possession of the
            Administrator; and

      (c)   submit issues and comments in writing to the Administrator for
            review.

      If a hearing is requested by a Participant or beneficiary, such hearing
      shall be held within 30 days after the Administrator's receipt of the
      request for review.

10.3  Decision by Administrator

      A decision on review by the Administrator shall be made promptly and not
      later than 60 days after the receipt by the Administrator of a request for
      review, unless special circumstances (such as the need to hold a hearing)
      require an extension of time for processing, in which case the Participant
      or beneficiary will be notified of the extension and a decision shall be
      rendered as soon as possible, but not later than 120 days after the
      receipt of the request for review. The


                                     - 45 -

      decision shall be in writing and shall include specific reasons for the
      decision written in a manner calculated to be understood by the
      Participant or beneficiary, and specific references to the pertinent
      provisions of the Plan on which the decision is based.







                                     - 46 -

                                 ARTICLE ELEVEN

                                  MISCELLANEOUS

11.1  Non-Alienation of Benefits

      (a)   Except as provided in Section 11.1(b) or 11.1(c), no benefit payable
            under the Plan shall be subject in any manner to anticipation, sale,
            transfer, assignment, pledge, encumbrance, security interest or
            charge, and any action by way of anticipating, alienating, selling,
            transferring, assigning, pledging, encumbering, charging or granting
            a security interest in the same shall be void and of no effect; nor
            shall any such benefit be in any manner liable for or subject to the
            debts, contracts, liabilities, engagements or torts of the person
            entitled to such benefit.

      (b)   Section 11.1(a) shall not apply to the creation, assignment, or
            recognition of a right to any benefit payable pursuant to a
            Qualified Domestic Relations Order. The Company shall establish
            reasonable procedures to determine the status of domestic relations
            orders and to administer distributions under such orders which are
            deemed to be Qualified Domestic Relations Orders. Such procedures
            shall be in writing and shall comply with the provisions of Section
            414(p) of the Code. To the extent that, because of a Qualified
            Domestic Relations Order, more than one individual is to be treated
            as a surviving spouse, the total amount payable from the Plan as a
            result of the death of a Participant shall not exceed the amount
            that would be payable from the Plan if there were only one surviving
            spouse.

      (c)   Notwithstanding the provisions of Section 11.1(a), the Plan may
            offset any portion of the Total Account maintained on behalf of a
            Participant or beneficiary against a claim of the Plan arising:

            (i)   as a result of the Participant's or beneficiary's conviction
                  of a crime involving the Plan; or

            (ii)  with regard to the Participant's or beneficiary's violation of
                  ERISA's fiduciary provisions upon:

                  (A)   the entry of any civil judgment, consent order, or
                        decree against the Participant or beneficiary; or

                  (B)   the execution of any settlement agreement between the
                        Participant and the Department of Labor or Pension
                        Benefit Guaranty Corporation.

            The provisions of this Section 11.1(c) shall apply only to orders,
            judgments, decrees and settlements issued or entered into after
            August 5, 1997, and which expressly provide for such offset.



                                     - 47 -

11.2  Risk to Participants and Source of Payments

      Each Participant assumes all risk in connection with any decrease in the
      value of any investment fund in the Trust Fund, and the Trust Fund shall
      be the sole source of any payments to be made to Participants or their
      beneficiaries under the Plan.

11.3  Expenses

      Subject to any restriction applicable under Section 5.4(a), brokerage
      fees, transfer taxes and other expenses incurred by the Trustee in
      connection with the purchase or sale of securities may be added to the
      cost of such securities or deducted from the proceeds thereof, as the case
      may be. Earnings credited to accounts invested in mutual funds shall be
      net of direct fund management expenses. Fees and other expenses associated
      with a self-directed "open option" arrangement shall be assessed directly
      against the Total Account maintained on behalf of the Participant or
      beneficiary participating in such arrangement.

      All other costs and expenses incurred in administering the Plan shall be
      paid by the Company or an Employer, unless the Company authorizes the
      payment of such expenses from the Trust Fund.

11.4  Rights of Participants

      No Participant or beneficiary shall have any right or interest under the
      Plan unless and until he becomes entitled thereto as provided in the Plan.
      The adoption and maintenance of the Plan shall not be deemed to constitute
      a contract between an Employer and any Employee or Participant. Inclusion
      in the Plan will not affect an Employer's right to discharge or otherwise
      discipline Employees and membership in the Plan will not give any Employee
      the right to be retained in the service of an Employer nor any right or
      claim to a benefit unless such right is specifically granted under the
      terms of the Plan.

      The Plan shall be binding on all Participants and their spouses and
      beneficiaries and upon heirs, executors, administrators, successors, and
      assigns of all persons having an interest herein. The provisions of the
      Plan in no event shall be considered as giving any such person any legal
      or equitable right against the Company, an Employer or an Affiliate, any
      of its officers, employees, directors, or shareholders, or against the
      Trustee, except such rights as are specifically provided for in the Plan
      or hereafter created in accordance with the terms of the Plan.

11.5  Statement of Accounts

      As soon as practicable after the last day of March, June, September and
      December, or such other time or times as the Administrator shall
      designate, the Company shall cause to be sent to each current or former
      Participant a written statement of his account.


                                     - 48 -

11.6  Designation of Beneficiary

      (a)   Each Participant shall file with the Administrator, on such form as
            may be provided by the Administrator, a written designation of a
            beneficiary or beneficiaries who shall receive payment of the
            Participant's interest under the Plan in the event of his death. If
            the Participant is married, the Participant's beneficiary must be
            his spouse (in accordance with Code Section 401(a)(11)(B)(iii))
            unless Spousal Consent requirements are satisfied. In the event the
            Participant shall die and there is no properly designated
            beneficiary then living, the interest of the Participant under the
            Plan shall be paid in a lump sum to his surviving spouse, or, if
            there is no surviving spouse, to his estate or other successor, all
            as the Administrator may determine.

      (b)   A beneficiary entitled to a payment of all or a portion of a
            Participant's Total Account due to the death of the Participant may
            disclaim his interest therein subject to the following requirements.
            To be eligible to disclaim, a beneficiary must be a natural person,
            must not have received a distribution of all or any portion of said
            Total Account at the time such disclaimer is executed and delivered,
            and must have attained at least age twenty-one (21) years as of the
            date of the Participant's death. Any disclaimer must be in writing
            and must be executed personally by the beneficiary before a notary
            public. A disclaimer shall state that the beneficiary's entire
            interest is disclaimed or shall specify what portion thereof is
            disclaimed. To be effective, an original executed copy of the
            disclaimer must be both executed and actually delivered to the
            Administrator after the date of the Participant's death but not
            later than one hundred eighty (180) days after the date of the
            Participant's death. A disclaimer shall be irrevocable when
            delivered to the Administrator. A disclaimer shall be considered to
            be delivered to the Administrator only when actually received by the
            Administrator. The Administrator shall be the sole judge of the
            content, interpretation and validity of a purported disclaimer. Upon
            the filing of a valid disclaimer, the beneficiary shall be
            considered not to have survived the Participant as to the interest
            disclaimed. A disclaimer by a beneficiary shall not be considered to
            be a transfer of an interest or an assignment or alienation of
            benefits in violation of Section 11.1 hereof. No other form of
            attempted disclaimer shall be recognized by the Administrator.

11.7  Payment to Incompetents

      If any person entitled to receive any benefits hereunder is a minor, or is
      in the judgment of the Administrator, legally, physically, or mentally
      incapable of personally receiving and receipting for any distribution, the
      Administrator may instruct the Trustee to make distribution to such other
      person, persons or institutions who, in the judgment of the Administrator,
      are then maintaining or have custody of such distributee. As a condition
      to the issuance of such instruction for the distribution to such other
      person or institution, the Administrator may require such person or
      institution to exhibit or to secure an order, decree or judgment of a
      court of competent jurisdiction with respect to the incapacity of the
      person who would otherwise be entitled to receive the benefits.

11.8  Authority to Determine Payee



                                     - 49 -

      The determination of the Administrator as to the identity of the proper
      payee of any benefit under the Plan and the amount of such benefit
      properly payable shall be conclusive, and payment in accordance with such
      determination shall constitute a complete discharge of all obligations on
      account of such benefit.

11.9  Severability

      If any provision of this Plan is held to be invalid or unenforceable, such
      determination shall not affect the other provisions of this Plan. In such
      event, this Plan shall be construed and enforced as if such provision had
      not been included herein.

11.10 Employer Records

      The records of a Participant's Employer shall be presumed to be conclusive
      of the facts concerning his employment or non-employment, periods of
      service and Compensation unless shown beyond a reasonable doubt to be
      incorrect.

11.11 Limitation on Contributions

      (a)   In no event shall the total annual additions on behalf of a
            Participant under this Plan and under any other defined contribution
            plan or plans maintained by the Employer with respect to any
            Limitation Year exceed the lesser of $30,000 (or such dollar figure,
            as increased in accordance with Section 415(d) of the Code for years
            up to and including the given Limitation Year) or 25% of the Test
            Compensation, paid to the Participant by an Employer within such
            Limitation Year. All amounts contributed to any defined contribution
            plan maintained by an Employer or an Affiliate (taking into account
            Section 415(h) of the Code) other than any rollover contribution and
            any salary reduction contribution to a simplified employee pension
            shall be aggregated with contributions made by an Employer under
            this Plan in computing any Employee's total annual additions
            limitation. For purposes hereof, the Limitation Year shall be the
            calendar year.

            For purposes of this section, "total annual additions" for any
            Limitation Year shall mean the sum of the following:

            (i)   Employer contributions under this Plan and under any other
                  defined contribution plan maintained by an Employer or
                  Affiliate;

            (ii)  Reallocated forfeitures under any defined contribution plan
                  maintained by an Employer or Affiliate;

            (iii) After-tax contributions under any other defined contribution
                  plan maintained by an Employer or Affiliate; and

            (iv)  Amounts allocated to an individual medical account, as defined
                  in Section 415(1)(2) of the Code, as part of a pension or
                  annuity plan and amounts


                                     - 50 -

            derived from contributions paid or accrued which are attributable to
            post-retirement medical benefits described in Section 419A(d) of the
            Code, under a welfare benefit fund (as defined in Section 419(e) of
            the Code) maintained by an Employer or Affiliate.

            Loan repayments under Section 14.2 shall not be recognized as annual
            additions for purposes of this section.

      (b)   In the event that a Participant's total annual additions for any
            Limitation Year exceed the limitations of Section 11.11(a) because
            of a reasonable error in estimating the Participant's Compensation,
            a reasonable error in determining the amount of Tax Deferred
            Contributions that a Participant may make within the limitations of
            paragraph (a) above or due to such other facts and circumstances as
            the Commissioner of Internal Revenue finds justifiable, his total
            annual additions shall be reduced in the following order until such
            limitations are met:

            (i)   any after-tax employee contributions made in the Limitation
                  Year by the Participant under any other plan maintained by an
                  Employer or Affiliate shall be returned to the Participant in
                  accordance with the provisions of such plan to the extent
                  necessary to meet the above limitations;

            (ii)  If further corrective adjustment is necessary, Tax Deferred
                  Contributions made on the Participant's behalf in the
                  Limitation Year that are in excess of five percent (5%) of the
                  Participant's Compensation (six percent (6%) for Limitation
                  Years beginning before January 1, 2001) shall be distributed
                  to the Participant;

            (iii) If further corrective adjustment is necessary with respect to
                  a Limitation Year beginning on or after January 1, 2001, the
                  Tax Deferred Contributions made on the Participant's behalf in
                  the Limitation Year that are not in excess of five percent
                  (5%) of the Participant's Compensation and the Safe Harbor
                  Matching Contributions made on the Participant's behalf in the
                  Limitation Year shall be reduced proportionately to the extent
                  necessary to meet the above limitations.

            (iv)  If further corrective adjustment is necessary with respect to
                  a Limitation Year beginning before January 1, 2001, the Tax
                  Deferred Contributions made on the Participant's behalf in the
                  Limitation Year that are not in excess of six percent (6%) of
                  the Participant's Compensation and the Employer Matching
                  Contributions made on the Participant's behalf in the
                  Limitation Year shall be reduced proportionately to the extent
                  necessary to meet the above limitations.

            Tax Deferred Contributions so reduced shall be distributed to the
            Participant. Employer Matching Contributions and Safe Harbor
            Matching Contributions so reduced shall be held unallocated in a
            suspense account and shall be applied to reduce the Employer
            Matching Contribution or Safe Harbor Matching Contribution with
            respect to all Participants for the subsequent Limitation Year. Any
            distribution under this paragraph


                                     - 51 -

            which includes Tax Deferred Contributions shall also include gains
            on such Tax Deferred Contributions.

            The Administrator may change the order of the reductions listed
            above in any manner which, in the judgment of the Administrator, is
            in the Participant's best interest.

      (c)   If a Participant is also a participant in a defined benefit plan
            maintained by an Employer, the sum of the defined benefit plan
            fraction and the defined contribution plan fraction for any
            Limitation Year beginning after December 31, 1982 and before January
            1, 2000 shall not exceed 1.0. The defined benefit plan fraction for
            any Limitation Year is a fraction, the numerator of which is the
            projected annual benefit of the Participant under such Plan
            (determined as of the close of the year), and the denominator of
            which is the lesser of 1.25 times the dollar limit in Section
            415(b)(1)(A) of the Code or 1.4 times 100% of the Participant's
            average Test Compensation over that period of consecutive calendar
            years (not more than three) during which his Test Compensation was
            the highest. The defined contribution plan fraction for any
            Limitation Year is a fraction the numerator of which is the sum of
            the annual additions on behalf of the Participant under this Plan
            and any other defined contribution plan or plans maintained by an
            Employer as of the close of the year and the denominator of which is
            the sum of 1.25 times the maximum dollar limit or 1.4 times the
            maximum percentage limit, whichever is smaller on a year-by-year
            basis, which could have been made under Section 415(c) of the Code
            for such year and for each prior year of service with the Employer,
            subject to any transition adjustments allowed by law and adopted by
            the Administrator. Any adjustment necessary to comply with the
            limitations of this Section 11.11(c) shall be made in the
            Participant's benefit payable under the defined benefit plan. The
            provisions of this paragraph (c) shall not apply with respect to
            Limitation Years beginning on and after January 1, 2000.

      (d)   The sole purpose of this Section is to comply with Sections 415(c)
            and 415(e) of the Code and the terms of this Section shall be
            interpreted, applied, and if and to the extent necessary, shall be
            deemed modified so as to satisfy solely the minimum requirements of
            Sections 415(c) and 415(e) of the Code and the regulations
            promulgated with respect thereto.

11.12 IRC 414(u) Compliance Provision

      Notwithstanding any provision of the Plan to the contrary, contributions,
      benefits and service credit with respect to qualified military service
      shall be provided in accordance with Section 414(u) of the Code.



                                     - 52 -

                                 ARTICLE TWELVE

                  AMENDMENT, TERMINATION OR MERGER OF THE PLAN

12.1  Right to Amend

      The Company reserves the right at any time or times to modify or amend the
      Plan by resolution of the Board setting forth such modification or
      amendment; provided, however, that no such modification or amendment shall
      be made which would:

      (a)   increase the duties or liabilities of the Trustee without its
            written consent; or

      (b)   divest a Participant of any portion of his Total Account hereunder
            that has accrued to him prior to the effective date of such
            amendment; or

      (c)   cause or permit any portion of the Trust Fund to be converted to or
            become the property of the Company; or

      (d)   cause any portion of the Trust Fund to be used for purposes other
            than the exclusive benefit of the Participants or their
            beneficiaries;

      unless such modification or amendment is necessary or appropriate to
      enable the Plan or Trust Fund to qualify under Section 401 of the Code, as
      amended from time to time, or to retain for the Plan or Trust Fund such
      qualified status.

12.2  Right to Terminate

      (a)   Although it is the expectation of the Company that it will continue
            the Plan as a permanent retirement program for the benefit of the
            Employees eligible hereunder, the Company reserves the right at any
            time, by action of its Board, at its sole discretion, to terminate
            the Plan in whole or in part. There shall be no liability or
            obligation on the part of an Employer to make any further
            contributions to the Trust Fund in the event of the termination of
            the Plan.

      (b)   Notwithstanding anything to the contrary contained herein, Trustee's
            fees and other expenses incident to the operation and management of
            the Plan incurred after the termination of the Plan may, at the
            discretion of the Company, be paid from assets of the Trust Fund
            that are not part of any Participant's Total Account.

      (c)   In the event of the termination of the Plan in whole or in part or
            in the event of the complete discontinuance of Employer
            contributions under the Plan, each affected Participant's interest
            in the Trust Fund shall become 100% vested and shall be
            nonforfeitable.



                                     - 53 -

12.3  Merger, Transfer of Assets or Liabilities

      The Company may merge or consolidate the Plan with, transfer assets and
      liabilities of the Plan to, or receive a transfer of assets and
      liabilities from, any other plan without the consent of any other Employer
      or other person, if such transfer is effected in accordance with
      applicable law and if such other plan meets the requirements of Code
      Sections 401(a) and 501(a), permits such transfer or the receipt of such
      transfer and, with respect to liabilities to be transferred from this Plan
      to such other plan, satisfies the requirements of Code Sections 411(d)(6).
      This Plan may not be merged or consolidated with any other plan, nor may
      any assets or liabilities of this Plan be transferred to any other plan,
      unless the terms of the merger, consolidation or transfer are such that
      each Participant in the Plan would, if the Plan were terminated
      immediately after such merger, consolidation or transfer, receive a
      benefit equal to or greater than the benefit he would have been entitled
      to receive if this Plan had terminated immediately prior to the merger,
      consolidation or transfer.





                                     - 54 -

                                ARTICLE THIRTEEN

                              TOP HEAVY PROVISIONS

13.1  Top Heavy Provisions

      (a)   The Plan shall be deemed to be a top heavy plan for a Plan Year if,
            as of a Determination Date, the aggregate value of the Total
            Accounts of Key Employee Participants exceeds 60% of the aggregate
            value of the Total Accounts of all Participants (excluding, for such
            determination, "unrelated" rollovers), or if the Plan is part of a
            required Aggregation Group which is top heavy. Such value shall be
            determined by using the single accrual method which is used for all
            plans of the Employers (including entities required to be aggregated
            with the Employer pursuant to Sections 414(b), (c), (m) and (o) of
            the Code) and by taking into account any distributions made during
            the five Plan Years ending on the Determination Date. If a
            Participant was not a Key Employee during the five Plan Years ending
            on the Determination Date, but such individual was a Key Employee
            during any previous Plan Year, the value of his Total Account shall
            not be taken into account. Further, if any Employee has not
            performed services for an Employer at any time during the five-year
            period ending on the Determination Date, the value of such
            Employee's Total Account shall be disregarded. In no event shall the
            Plan be considered top heavy if it is part of a required or
            permissive Aggregation Group which is not top heavy.

      (b)   For purposes of this Section 13.1, the following terms shall have
            the meaning indicated:

            (i)   Key Employee means any Employee who at any time during the
                  Plan Year or any of the four preceding Plan Years is:

                  (A)   an officer of an Employer or an Affiliate. No more than
                        50 Employees (or, if lesser, the greater of three
                        Employees or 10 percent of the Employees) shall be
                        treated as officers. No Employee whose annual Test
                        Compensation is less than 50% of the amount specified in
                        Section 415(b)(1)(A) of the Code, adjusted for any
                        automatic increases permitted by law or regulation,
                        shall be treated as an officer;

                  (B)   one of the 10 Employees owning or considered as owning
                        (within the meaning of Section 318 of the Code) the
                        largest interest in an Employer, if such Employee's
                        annual Test Compensation is greater than the amount
                        specified in Section 415(c)(1)(A) of the Code, adjusted
                        for any automatic increases permitted by law or
                        regulation;

                  (C)   a more than five percent owner of an Employer; or

                  (D)   a more than one percent owner of an Employer having
                        annual Test Compensation from an Employer of more than
                        $150,000.



                                     - 55 -

                  For the purpose of determining top 10 owners, five percent
                  owners and one percent owners, neither the aggregation rules
                  nor the rules of Sections 414(b), (c) and (m) shall apply.

            (ii)  Non-Key Employee means an Employee who is not a Key Employee.

            (iii) Determination Date means the last day of the preceding Plan
                  Year.

            (iv)  Plan Year means any calendar year commencing on or after
                  December 31, 1988.

            (v)   A required Aggregation Group is each plan of an Employer which
                  provides benefits to a Key Employee and each other plan of an
                  Employer, if any, which is included with this Plan for
                  purposes of meeting the requirements of Sections 401(a)(4) or
                  410 of the Code. A permissive Aggregation Group is this Plan
                  and each other plan of an Employer which in total would
                  continue to meet the requirements of Section 401(a)(4) and 410
                  of the Code with such other plan being taken into account. For
                  purposes hereof, an Aggregation Group shall include a
                  terminated plan if such Plan was maintained within the
                  five-year period ending on the Determination Date for the Plan
                  Year in question and it would, but for the fact if terminated,
                  be part of a required Aggregation Group for such Plan Year. An
                  Aggregation Group will be deemed to be a "top-heavy group" if
                  the sum of (a) the present value of the cumulative accrued
                  benefits for Key Employees under all defined benefit plans
                  included in such group, and (b) the aggregate of the accounts
                  of Key employees under all defined contribution plans included
                  in such group, exceeds 60% of a similar sum determined for all
                  Employees.

            (vi)  "Employee" and "Key Employee" shall also include beneficiaries
                  of such an Employee. Inherited benefits shall retain the
                  character of the benefits of the Participant.

13.2  Minimum Contribution

      Notwithstanding the provisions of Article Three, for any Plan Year during
      which the Plan is deemed to be top heavy, the Employers shall make a
      minimum contribution on behalf of each Non-Key Employee Participant which
      shall be no less than three percent (3%) of the Test Compensation of the
      Non-Key Employee Participant; provided, however, that if the Employer
      contribution allocated on behalf of the Key Employee Participant for whom
      such allocation represents the highest percentage of Test Compensation for
      the given Plan Year of all Key Employee Participants is a lesser
      percentage, the minimum contribution shall be reduced to such lesser
      percentage. For purposes of this Section 13.2 all defined contribution
      plans that are included in an Aggregation Group shall be considered as one
      plan. In the case of Employees covered under both this Plan and any
      defined benefit plan maintained by an Employer or Affiliate, the defined
      benefit plan will provide the top heavy minimum benefit and will be offset
      by the benefit provided under this Plan. Non-Key Covered Employees who are
      eligible to participate in the Plan or who have become participants in the
      Plan but who subsequently fail to complete 1,000 Hours of Service by the
      end of the applicable Plan Year (and who have not


                                     - 56 -

      separated from service by the end of such Plan Year) shall receive an
      allocation of a minimum contribution.

      Except to the extent used for the purpose of determining the largest
      percentage of Test Compensation contributed by an Employer for a given
      year on behalf of a Key Employee Participant, Tax Deferred Contributions
      described in Section 3.1 and Employer Matching Contributions described in
      Section 3.6 shall not be considered Employer contributions under this
      Section 13.2.

13.3  Plan Year in Which Plan is Top Heavy

      In any Plan Year in which the Plan is top heavy, but not super top heavy,
      the factor of 1.25 in Section 11.11(c) shall be changed to 1.00 wherever
      it appears therein; provided, however, that such change shall not have the
      effect of reducing any benefit accrued under a defined benefit plan prior
      to the first day of the Plan Year in which this provision becomes
      applicable and, provided further, that this Section 13.3 shall not apply
      with respect to Limitation Years beginning on and after January 1, 2000.

13.4  Plan Year in Which Plan Ceases to be Top Heavy

      In any Plan Year that the Plan ceases to be top heavy, the above
      provisions shall no longer apply.

13.5  Limited Application of this Article

      The sole purpose of this Article is to comply with Section 416 of the Code
      and the terms of this Article shall be interpreted, applied and, if and to
      the extent necessary, shall be deemed modified so as to satisfy solely the
      minimum requirements of Section 416 of the Code and the regulations
      promulgated with respect thereto.




                                     - 57 -

                                ARTICLE FOURTEEN

                                      LOANS

14.1  Availability of Loans

      Subject to the provisions of this Article Fourteen, Participants actively
      employed with the Company or an Affiliate (herein referred to in this
      Article as "Eligible Applicants") may apply for a loan from the Plan. All
      such applications for a loan made by an Eligible Applicant shall be
      approved or denied by the Administrator in accordance with a uniform,
      non-discriminatory policy and such action by the Administrator shall be
      final. All loans approved shall be effective as of the "loan effective
      date" (as hereinafter defined) provided the loan application was submitted
      to the Administrator within a reasonable time (as determined by the
      Administrator) prior to the loan effective date. All loans shall be made
      only in consideration of adequate security. For purposes hereof the term
      "loan effective date" shall mean the date, mutually agreed upon by the
      Participant and the Administrator, on which the loan shall be considered
      effective.

      The Administrator may establish rules governing the granting of loans,
      provided (i) that such rules are not inconsistent with the provisions of
      this Article Fourteen, (ii) that any such rules adopted by the
      Administrator shall be described in the documents supporting the loan
      transaction and (iii) that loans are made available to all Eligible
      Applicants on a reasonably equivalent basis and are not made available to
      Eligible Applicants who are Highly Compensated in an amount greater than
      the amount made available to other Eligible Applicants.

14.2  Terms and Conditions of Participant Loans

      (a)   Amount of Loan. At the time the loan is made, the principal amount
            of the loan, when added to all other outstanding loans of the
            Participant from the Plan and any other qualified plan of an
            Employer and Affiliates, shall not exceed the lesser of:

            (i)   $50,000, as reduced by the excess, if any, of the Eligible
                  Applicant's highest outstanding loan balance from the Plan
                  during the one-year period ending on the day before the date
                  such new loan is secured over the outstanding balance of loans
                  from the Plan on the date such loan is made; or

            (ii)  one-half of the current value of the Total Account maintained
                  on behalf of the Eligible Applicant under the Plan.

            The current value of a Total Account shall be determined as of the
            Valuation Date on which the Eligible Applicant initiates the loan
            process by providing Notice to the Administrator or its designee. No
            loan shall be made in an amount less than $1,000. Any loan amount
            shall be made in accordance with Section 14.3.

      (b)   Application for Loan. The Eligible Applicant must give the
            Administrator adequate written notice, as determined by the
            Administrator, of the requested amount and desired


                                     - 58 -

            time for receiving a loan. In addition, if an Eligible Applicant is
            married at the time of application, the Administrator shall require
            Spousal Consent prior to approving the loan application.

      (c)   Length of Loan. The Eligible Applicant and the Administrator shall
            arrange for the repayment of a Plan loan. The period of repayment
            shall not exceed five years from the date the loan is made. All
            repayment schedules (whether by payroll withholding or otherwise)
            shall commence as of the next administratively feasible pay period
            following the disbursement of the loan and shall provide for
            substantially level amortization of principal and interest. An
            Eligible Applicant on a leave of absence and an Eligible Applicant
            who terminates employment with the Company and Affiliates must make
            principal and interest payments in the amount and on such dates as
            otherwise due. In the event such payments are not made the maturity
            of the loan shall be accelerated and the outstanding principal
            amount of the loan, together with all accrued interest, shall be
            deemed immediately due and distributable at such date or dates as
            the Administrator deems reasonable and as may be specified by
            applicable law and regulation. Except as otherwise permitted in
            Income Tax Regulations, in no event shall the date of deemed
            distribution extend beyond the end of the calendar quarter next
            following the calendar quarter in which the payment was not made.

      (d)   Prepayment. The Eligible Applicant shall be permitted to repay the
            loan in total as of any date prior to maturity without penalty.

      (e)   Note. The loan shall be evidenced by a promissory note executed by
            the Eligible Applicant and delivered to the Administrator. The
            Eligible Applicant will agree to execute any other documents (e.g.,
            payroll withholding forms) that may be necessary or appropriate to
            effect the loan.

      (f)   Interest. All loans shall be considered investments of the Trust and
            interest shall be charged on the loan at the rate set by the
            Administrator as of the loan effective date. Such rate shall be
            based on the prime lending rate charged by a financial institution
            selected by the Administrator, plus 100 basis points.

      (g)   Security. Subject to the extent required under regulations
            promulgated by the Secretary of Labor or his delegate, a Plan loan
            shall be secured by an assignment of the Eligible Applicant's right,
            title and interest in that portion of his Total Account under the
            Plan as shall adequately secure the loan, provided such security
            shall not exceed one-half of the current value of the Eligible
            Applicant's vested Total Account. The Administrator may also require
            such additional collateral as may be deemed necessary to adequately
            secure repayment of the loan.

      (h)   Default. The Administrator shall take reasonable steps to secure
            repayment of any loan granted hereunder in accordance with its
            terms; however, when the Administrator declares a loan to an
            Eligible Applicant to be in default, the outstanding balance of the
            loan, together with unpaid, accrued interest, shall be deemed a lien
            against the Total Account maintained on behalf of the Eligible
            Applicant and no contributions or distributions of any


                                     - 59 -

            kind (other than distributions due to loan default) may thereafter
            be made by or on behalf of the Eligible Applicant to or from this
            Plan during the continuance of the default. The Administrator shall
            take such reasonable steps as it shall deem necessary or appropriate
            to eliminate the default before causing an offset distribution to be
            made with respect to the Eligible Applicant for the purpose of fully
            amortizing the loan outstanding; however, should the loan remain in
            default after these administrative procedures are taken, the
            Administrator will consider the entire amount of the loan
            outstanding (including all accrued interest to date) as a
            distribution as of the first date, on or following the
            administrative procedures, on which the Eligible Applicant has a
            distributable event and will process the Total Account of the
            Eligible Applicant accordingly.

      (j)   Other Terms and Conditions. The Administrator shall fix such other
            terms and conditions of the loan as it deems necessary to comply
            with legal requirements, to maintain the qualification of the Plan
            and Trust Fund under Code Section 401(a), to exempt the loan
            transaction from the prohibited transaction rules of under Code
            Section 4975, or to prevent the treatment of the loan for tax
            purposes as a distribution to the Eligible Participant. The
            Administrator may fix other terms and conditions of the loan, not
            inconsistent with the provisions of this Article Fourteen.

      (k)   No Prohibited Transactions. No loan shall be made unless such loan
            is exempt from the tax imposed on prohibited transactions by Code
            Section 4975 or would be exempt from such tax (if the Eligible
            Participant were a disqualified person as defined in Section
            4975(e)(2) of the Code) by reason of Code Section 4975(d)(1).

10.3  Loan Accounts

      A loan made by the Plan to a Eligible Applicant in accordance with
      Sections 14.1 and 14.2 shall be from the Total Account maintained on
      behalf of such Eligible Applicant and from the investment funds in which
      such Total Account is invested in such order of priority as the
      Administrator, pursuant to a uniform and nondiscriminatory policy, shall
      direct. Payments of principal and interest on loans shall be paid over to
      the Trustee as soon as possible after each payroll deduction or other
      repayment and shall be credited to the Total Account of the Eligible
      Applicant as of the date the repayments are received by the Trustee. Loan
      repayments will be credited in such manner as determined by the
      Administrator to those accounts and those investment options which were
      accessed in connection with the granting of the loan to the Eligible
      Applicant. The Administrator shall have the authority to establish other
      reasonable rules, not inconsistent with the provisions of the Plan,
      governing the establishment and maintenance of loan accounts.



                                     - 60 -


Executed at Erie, Pennsylvania, this 10th day of December, 2000.



                                           ERIE INDEMNITY COMPANY



                                           By: /s/ Stephen A. Milne
                                              -------------------------------
                                               Title: President and CEO








                                     - 61 -

EX-10.8

                        EXHIBIT 10.8 - FIRST AMENDMENT TO
                   ERIE INSURANCE GROUP EMPLOYEE SAVINGS PLAN

            (As Amended And Restated Effective as of January 1, 2001)


WHEREAS, Erie Indemnity Company (the "Company") maintains the Erie Insurance
Group Employee Savings Plan (the "Plan") under an amendment and restatement
effective as of January 1, 2001;

WHEREAS, the Plan provides that the Company may amend the Plan; and

WHEREAS, the Company wishes to amend the Plan as hereinafter set forth. The
purpose of this Amendment is to make changes in connection with recent
legislative and regulatory changes affecting tax-qualified plans. The provisions
of this Amendment shall be effective as of the dates stated herein. Words and
phrases used herein with initial capital letters which are defined in the Plan
are used herein as defined.

NOW THEREFORE, the Company hereby amends the Plan as follows:

1.    Effective January 1, 2002, the following provisions shall be added to the
      end of the first paragraph of Section 6.3(c) of the Plan:

      "With respect to distribution under the Plan made in calendar years
      beginning on or after January 1, 2002, the Plan will apply the minimum
      distribution requirements of Section 401(a)(9) of the Code in accordance
      with the regulations under Section 401(a)(9) that were proposed in January
      2001, notwithstanding any provisions of the Plan to the contrary. This
      amendment will continue in effect until the end of the last calendar year
      beginning before the effective date of final regulations under Section
      401(a)(9) of the Code or such other date specified in guidance published
      by the Internal Revenue Service."

2.    Effective January 1, 2002, Sections 10.1, 10.2 and 10.3 of the Plan shall
      be deleted in their entirety and the following shall be inserted in lieu
      thereof:

      "10.1 Claims Review Procedure.

            The Administrator shall be responsible for the claims procedure
            under the Plan. An application for a distribution, withdrawal or
            loan under the Plan shall be considered a claim for purposes of this
            Article Ten.


                                       1

      10.2  Original Claim.

            In the event a claim of any Participant, beneficiary, alternate
            payee, or other person (hereinafter referred to in this Section as
            the "Claimant") for a benefit is partially or completely denied, the
            Administrator shall give, within ninety (90) days after receipt of
            the claim (or if special circumstances, made known to the Claimant,
            require an extension of time for processing the claim, within one
            hundred eighty (180) days after receipt of the claim), written
            notice of such denial to the Claimant. Such notice shall set forth,
            in a manner calculated to be understood by the Claimant, the
            specific reason or reasons for the denial (with reference to
            pertinent Plan provisions upon which the denial is based); an
            explanation of additional material or information, if any, necessary
            for the Claimant to perfect the claim; a statement of why the
            material or information is necessary; on and after January 1, 2002,
            a statement of the Claimant's right to bring a civil action under
            Section 502(a) of ERISA; and an explanation of the Plan's claims
            review procedure, including the time limits applicable to such
            procedure. If the notice of denial is not furnished within the
            required time period specified above, the claim shall be deemed to
            be denied and the Claimant shall be permitted to proceed to the
            review stage described in Section 10.3.

      10.3  Review of Denied Claim.

            (a)   A Claimant whose claim is partially or completely denied shall
                  have the right to request a full and fair review of the denial
                  by a written request delivered to the Administrator within
                  sixty (60) days of receipt of the written notice of claim
                  denial (or sixty (60) days after the date on which the claim
                  is deemed denied under Section 10.2), or within such longer
                  time as the Administrator, under uniform rules, determines. In
                  such review, the Claimant or his duly authorized
                  representative shall have the right to review, upon request
                  and free of charge, all documents, records or other
                  information relevant to the claim and to submit any written
                  comments, documents, or records relating to the claim to the
                  Administrator.

            (b)   The Administrator, within sixty (60) days after the request
                  for review, or in special circumstances, such as where the
                  Administrator in its sole discretion holds a hearing, within
                  one hundred twenty (120) days of the request for review, will
                  submit its decision in writing. Such decision shall take into
                  account all comments, documents, records and other information
                  properly submitted by the Claimant, whether or not such
                  information was considered in the original claim
                  determination. The decision on review will be binding on all
                  parties, will be written in a manner calculated to be
                  understood by the Claimant, will contain specific reasons for
                  the decision and specific references to the pertinent Plan
                  provisions upon which the decision is based, will indicate


                                       2

                  that the Claimant may review, upon request and free of charge,
                  all documents, records or other information relevant to the
                  claim and on and after January 1, 2002, will contain a
                  statement of the Claimant's right to bring a civil action
                  under Section 502(a) of ERISA. If no decision is made within
                  the time period specified above, the claim shall be deemed to
                  be denied on review.

            (c)   If a Claimant fails to file a claim or request for review in
                  the manner and in accordance with the time limitations
                  specified herein, such claim or request for review shall be
                  waived, and the Claimant shall thereafter be barred from again
                  asserting such claim.

      10.4  Determination by the Administrator Conclusive.

            The Administrator's determination of factual matters relating to
            Participants, beneficiaries and alternate payees shall be
            conclusive. The Administrator and the Company and its respective
            officers and directors shall be entitled to rely upon all tables,
            valuations, certificates and reports furnished by any accountant for
            the Plan, the Trustee or any investment managers and upon opinions
            given by any legal counsel for the Plan insofar as such reliance is
            consistent with ERISA. The Trustee and other service providers may
            act and rely upon all information reported to them by the
            Administrator and/or the Company and need not inquire into the
            accuracy thereof nor shall be charged with any notice to the
            contrary."

3.    Effective January 1, 2001, a new section shall be added to Article Eleven
      of the Plan and such new section shall read as follows:

      "8.15 Provision for Community Renewal Tax Relief Act of 2000

            For Plan Years and limitation years ending on and after January 1,
            2001, the definition of "Test Compensation" shall include elective
            amounts that are not includable in the gross income of the Employee
            by reason of Section 132(f)(4) of the Code."

4.    Effective January 1, 2002, Section 14.2(c) of the Plan shall be deleted in
      its entirety and the following shall be inserted in lieu thereof:

            "(c)  Length of Loan. The Eligible Applicant and the Administrator
                  shall arrange for the repayment of a Plan loan. The period of
                  repayment shall not exceed five years from the date the loan
                  is made. All repayment schedules (whether by payroll
                  withholding or otherwise) shall commence as of the next
                  administratively feasible pay period following the
                  disbursement of the loan


                                       3

                  and shall provide for substantially level amortization of
                  principal and interest.

                  An Eligible Applicant on a leave of absence shall be permitted
                  to extend the term of the loan by the length of the absence;
                  provided, however, that except with respect to a leave of
                  absence on account of military service, the term of the loan,
                  as extended, shall not exceed five years from the date the
                  loan is made. An Eligible Applicant who terminates employment
                  with the Company and Affiliates must make principal and
                  interest payments in the amount and on such dates as otherwise
                  due. In the event such payments are not made the maturity of
                  the loan shall be accelerated and the outstanding principal
                  amount of the loan, together with all accrued interest shall
                  be deemed immediately due and distributable at such date or
                  dates as the Administrator deems reasonable and as may be
                  specified by applicable law and regulation. Except as
                  otherwise permitted in Income Tax Regulations, in no event
                  shall the date of deemed distribution extend beyond the end of
                  the calendar quarter next following the calender quarter in
                  which the payment was not made."

Executed at Erie, Pennsylvania, this 10th day of December, 2001.


                                             ERIE INDEMNITY COMPANY



                                             By: /s/ Stephen A. Milne
                                                --------------------------------
                                                Stephen A. Milne
                                                President and CEO


                                       4

EX-10.9

EXHIBIT 10.9

                                   APPENDIX A

                           2001 ANNUAL INCENTIVE PLAN
                                       OF
                             ERIE INDEMNITY COMPANY

1. PURPOSE. The purpose of the Annual Incentive Plan (the "Plan") of Erie
Indemnity Company (the "Company") is to promote the best interests of the Erie
Insurance Exchange while enhancing shareholder value of the Company and to
promote the attainment of significant business objectives by the Company, its
subsidiaries and affiliates by basing a portion of selected employees'
compensation on the performance of such employee and the Company (as defined
below).

2. DEFINITIONS.

      a. "AWARD AGREEMENT" means the agreement entered into between the Company
and a Participant, setting forth the terms and conditions applicable to an award
granted to the Participant under this Plan.

      b. "BASE SALARY" shall mean the annual base salary for a Participant at
December 31, 2001.

      c. "COMBINED RATIO" means the sum of the loss ratio (including loss
adjustment expenses), expense ratio and policyholder dividend ratio, as
determined in accordance with statutory accounting principles and reported to
A.M. Best Company for the combined property casualty operations of the Erie
Insurance Exchange and affiliated property casualty companies (collectively
"Erie"). For Erie, the Combined Ratio shall be adjusted to exclude the net
revenues from the management operations of Erie Indemnity Company in the
calculation of the underwriting expense ratio.

      d. "COMPANY" means Erie Indemnity Company and any corporation, partnership
or other organization of which the Company owns or controls, directly or
indirectly, not less than 50% of the total combined voting power of all classes
of stock or other equity interests. For purposes of this Plan, the term
"Company" shall include any successors thereto.

      e. "COMMITTEE" means the Executive Compensation Committee of the Board of
Directors of the Company, or its functional successor, unless some other Board
committee has been designated by the Board of Directors to administer the Plan.

      f. "PARTICIPANT" means any individual who has met the eligibility
requirements set forth in Section 5 hereof and to whom a grant has been made and
is outstanding under the Plan.


                                       1

      g. "PEER GROUP" means a group of companies selected by the Committee on an
industry and line of business basis.

      h. "PERFORMANCE MEASURES" means the criteria upon which awards for 2001
will be based and, unless otherwise determined by the Committee shall be: (i) a
combination of the difference between ERIE's average Combined Ratio for 1999,
2000 and 2001 and the Combined Ratio of the Peer Group for 1999, 2000 and 2001
and the difference between ERIE's growth in net written premiums in 2001 as
compared to growth in net written premiums of the Peer Group in 2001 ("Financial
Performance Measure"); and (ii) the Participant's individual performance
assessment under the Company's existing performance assessment system
("Individual Performance Measure"). The Financial Performance Measure and the
Individual Performance Measure are collectively referred to as (the "Performance
Measures").

      i. "TARGET AWARD" means:

            the specific percentage of a Participant's base salary as determined
            by the Committee.

3. ADMINISTRATION. The Plan shall be administered by the Committee.

      The Committee's determinations under the Plan need not be uniform and may
be made by it selectively among persons who receive, or are eligible to receive,
awards under the Plan, whether or not such persons are similarly situated.
Whenever the Plan refers to a determination being made by the Committee, it
shall be deemed to mean a determination by the Committee in its sole discretion.

      Subject to the provisions of the Plan, the Committee shall be authorized
to interpret the Plan, to make, amend and rescind such rules as it deems
necessary for the proper administration of the Plan, to make all other
determinations necessary or advisable for the administration of the Plan and to
correct any defect or supply any omission or reconcile any inconsistency in the
Plan in the manner and to the extent the Committee deems desirable to carry the
Plan into effect. Any action taken or determination made by the Committee shall
be conclusive on all parties.

4. WEIGHTING OF PERFORMANCE MEASURES. The Target Award shall be weighted in a
manner so that 75% of the Target Award shall be based upon the Financial
Performance Measure and 25% of the Target Award shall be based upon the
Individual Performance Measure. Satisfaction of either of the Performance
Measures shall entitle a Participant to payment with respect to that portion of
the award notwithstanding the fact that the other Performance Measure is not
satisfied.

5. ELIGIBLE PERSONS. Any key employee of the Company who the Committee
determines, in its sole discretion, has a significant effect on the operations
of the Company shall be eligible to participate in the Plan. Any Participant in
this Plan shall be deemed ineligible to participate in the Erie Insurance Group
Employee Profit Sharing Bonus Plan. No employee shall have a right (a) to be
selected under the Plan, or (b) having once been selected, to (i) be selected
again or (ii) continue as an employee.


                                       2

6. DETERMINATION OF AWARDS. The Committee shall determine the actual award to
each Participant for the year, based upon the following formula:

Participant Award = (.75 of Target Award x Financial Performance Percentage
Earned) + (.25 of Target Award x Individual Performance Percentage Earned).

      The Financial Performance Percentage Earned and Individual Performance
Percentage Earned shall be determined in accordance with Appendix I and Appendix
II, respectively. For the Financial Performance Percentage Earned, the amount
shall be mathematically interpolated between cells in the matrix based upon
Erie's actual differences in Combined Ratio and Growth in New Written Premiums.
The Individual Performance Percentage Earned shall be based on the performance
assessment conducted during calendar year 2001.

      The total award payable to any Participant may range from zero (0) to one
hundred and sixty (160) percent of the Participant's Target Award, depending
upon whether, or the extent to which, the Performance Measures have been
achieved. Notwithstanding anything in this Plan to the contrary, a Participant
shall not be entitled to, and no amount shall be payable to, such Participant in
the event that the Participant's Performance Points (as reflected in Appendix
II) are below 109. All such determinations regarding the achievement of
Performance Measures and the determination of actual awards will be made by the
Committee.

7. DISTRIBUTION OF AWARDS. Awards under the Plan shall be paid in cash as soon
as practicable after 2001 year-end audited financial statements for Erie have
been prepared and Peer Group data is available. Estimates of awards may be paid
earlier at the discretion of the Committee and final adjustments paid upon the
availability of audited financial statements.

8. TERMINATION OF EMPLOYMENT. A Participant must be actively employed by the
Company on the date his or her award is determined by the Committee ("the
Payment Date") in order to be entitled to payment of any award. In the event
active employment of a Participant shall be terminated before the Payment Date
for any reason other than discharge for "Cause" (as defined in such employee's
employment agreement with the Company or, if no such agreement exists, as
defined by the Committee) or voluntary resignation, such Participant may receive
such portion of his or her award as may be determined by the Committee. A
Participant discharged for Cause shall not be entitled to receive any award for
the year. A Participant who voluntarily resigns prior to the Payment Date shall
not be entitled to receive any award unless otherwise determined by the
Committee.

9. MISCELLANEOUS.

      a. NONASSIGNABILITY. No award will be assignable or transferable without
the written consent of the Committee in its sole discretion, except by will or
by the laws of descent and distribution.


                                       3

      b. WITHHOLDING TAXES. Whenever payments under the Plan are to be made, the
Company will withhold therefrom an amount sufficient to satisfy any applicable
governmental withholding tax requirements related thereto.

      c. AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors of the
Company may at any time amend, suspend or discontinue the Plan, in whole or in
part. The Committee may at any time alter or amend any or all Award Agreements
under the Plan to the extent permitted by law.

      d. OTHER PAYMENTS OR AWARDS. Nothing contained in the Plan will be deemed
in any way to limit or restrict the Company from making any award or payment to
any person under any other plan, arrangement or understanding, whether now
existing or hereafter in effect.

      e. PAYMENTS TO OTHER PERSONS. If payments are legally required to be made
to any person other than the person to whom any amount is available under the
Plan, payments will be made accordingly. Any such payment will be a complete
discharge of the liability of the Company under this Plan.

      f. LIMITS OF LIABILITY.

            1. Any liability of the Company to any Participant with respect to
an award shall be based solely upon contractual obligations created by the Plan
and the Award Agreement.

            2. Neither the Company, nor any member of its Board of Directors or
of the Committee, nor any other person participating in any determination of any
question under the Plan, or in the interpretation, administration or application
of the Plan, shall have any liability to any party for any action taken or not
taken in good faith under the Plan.

      g. RIGHTS OF EMPLOYEES.

            1. Status as an employee eligible to receive an award under the Plan
shall not be construed as a commitment that any award will be made under this
Plan to such employee or to other such employees generally.

            2. Nothing contained in this Plan or in any Award Agreement (or in
any other documents related to this Plan or to any award or Award Agreement)
shall confer upon any employee or Participant any right to continue in the
employ or other service of the Company or constitute any contract or limit in
any way the right of the Company to change such person's compensation or other
benefits or to terminate the employment or other service of such person with or
without cause.

      h. SECTION HEADINGS. The section headings contained herein are for the
purposes of convenience only, and in the event of any conflict, the text of the
Plan, rather than the section headings, will control.


                                       4

      i. INVALIDITY. If any term or provision contained herein will to any
extent be invalid or unenforceable, such term or provision will be reformed so
that it is valid, and such invalidity or unenforceability will not affect any
other provision or part hereof.

      j. APPLICABLE LAW. The Plan, the Award Agreements and all actions taken
hereunder or thereunder shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Pennsylvania without regard to the conflict of
law principles thereof.

      k. EFFECTIVE DATE. The Plan shall be effective as of January 1, 2001.


                                             /s/ Robert C. Wilburn
                                       -----------------------------------------
                                             Robert C. Wilburn, Chairman
                                             Executive Compensation Committee


                                       5

EX-10.10

                     EXHIBIT 10.10 - ERIE INDEMNITY COMPANY
                           DEFERRED COMPENSATION PLAN
                              FOR OUTSIDE DIRECTORS

                 (AS AMENDED AND RESTATED AS OF APRIL 30, 2002)

                                   ARTICLE ONE

                                  INTRODUCTION

This Deferred Compensation Plan (the "Plan") is an unfunded, non-qualified,
deferred compensation arrangement created for outside directors of Erie
Indemnity Company. It is intended that the Plan will aid in retaining and
attracting outside directors of exceptional ability by providing such directors
with a vehicle for deferring director's compensation until retirement from the
Board of Directors of Erie Indemnity Company.

The Plan was effective as of May 1, 1997 and has been amended thereafter. This
amendment and restatement of the Plan shall constitute an amendment, restatement
and continuation of the Plan. This amendment and restatement is generally
effective as of April 30, 2002. However, certain provisions of this amendment
and restatement are effective as of some other date. The provisions of this
amendment and restatement with stated effective dates prior to April 30, 2002,
shall be deemed to amend the corresponding provisions, if any, of the Plan as in
effect before this amendment and restatement and all amendments thereto as of
such dates. Events occurring before the applicable effective date of any
provision of this amendment and restatement shall be governed by the applicable
provision of the Plan as in effect on the date of the event.

                                   ARTICLE TWO

                                   DEFINITIONS

The following words or phrases are defined terms whenever they appear in the
Plan:

2.1 "Administrator" shall mean the person or committee, appointed by the Board,
who shall be responsible for the functions assigned to him under the Plan.

2.2 "Amendment Form" shall mean the Amendment Form described in Section 8.3.

2.3 "Annual Share Credit" shall mean the Share Credit addition determined under
Section 7.2.

2.4 "Beneficiary" shall mean the individual(s) or trust(s) selected by a
Participant to receive payment of amounts credited under the Plan in the event
of the Participant's death, as evidenced by the most recent, properly completed
and executed, Beneficiary designation which the Participant has delivered to the
Administrator prior to the Participant's death. A Participant may make separate
Beneficiary designations for those amounts credited to the Deferred Stock
Account maintained on his behalf and to any Total Deferred Cash Account
maintained on his behalf. A Participant may change his Beneficiary at any time
by delivering a new designation of Beneficiary to the Administrator on such form
or forms as may be satisfactory to the


                                       1

Administrator. A new designation of Beneficiary shall be effective upon receipt
by the Administrator of the completed designation. As of such effective date,
the new designation shall divest any Beneficiary named in a prior designation in
that interest indicated in the prior designation. If no Beneficiary designation
is in effect on the death of the Participant, or if all designated Beneficiaries
have predeceased the Participant, any payments to be made under the Plan on
account of the Participant's death shall be paid to the estate of the
Participant.

2.5 "Board" shall mean the Board of Directors of the Erie Indemnity Company.

2.6 "Board Compensation" shall mean the remuneration, expressed in terms of a
cash amount, earned by a Director for service on the Board including, without
limitation, a retainer, meeting fees and chairperson's fees.

2.7 "Board Tenure Year" shall mean the period which, in reference to any given
calendar year, begins on the date of the Company's annual shareholder meeting
held in such year and ends on the day before the Company's annual shareholder
meeting held in the immediately following calendar year.

2.8 "Committee" shall mean the Executive Development and Compensation Committee
of the Board or its successor, as designated by the Board.

2.9 "Common Stock" shall mean the Class A common stock of the Company.

2.10 "Company" shall mean the Erie Indemnity Company, a Pennsylvania business
corporation.

2.11 "Deferred Compensation Account" shall mean the bookkeeping account
described in Section 4.2.

2.12 "Deferred Stock Account" shall mean the bookkeeping account described in
Article Seven.

2.13 "Director" shall mean a member of the Board.

2.14 "Dividend Equivalent Credit" shall mean the Share Credit addition
determined under Section 7.3.

2.15 "Election Form" shall mean the Participation Election Form described in
Section 3.2.

2.16 "Employee" shall mean a person engaged in performing services for the
Company, its affiliates or subsidiaries, as an exempt or non-exempt full-time
employee, as defined by the Company's Corporate Personnel Manual, as in
existence at the time of determination, and not as an independent contractor.

2.17 "Hypothetical Interest" shall mean the gains and losses credited to a
Participant's Deferred Compensation Account and/or Retirement Plan Transfer
Account in accordance with Article Six.

2.18 "Outside Director" shall mean:


                                       2

      a)  A Director who is not an Employee or officer of the Company, its
          affiliates or subsidiaries; and

      b)  Solely for the purpose of applying those provisions of the Plan
          pertaining to the transfer of a Retirement Plan Transfer Credit and
          the maintenance of a Retirement Plan Transfer Account, "Outside
          Director" shall also include any individual who was a Director on
          May 1, 1997 but not an Outside Director (within the meaning of
          paragraph (a) above) as of such date.

2.19 "Participant" shall mean each Outside Director who participates in the Plan
in accordance with the terms and conditions of the Plan.

2.20 "Plan" shall mean the Erie Indemnity Company Deferred Compensation Plan for
Outside Directors, including any amendments hereto.

2.21 "Retirement Plan" shall mean the Erie Indemnity Company Retirement Plan for
Outside Directors, effective as of January 1, 1991 and as amended thereafter.

2.22 "Retirement Plan Transfer Account" shall mean the bookkeeping account
described in Section 5.3.

2.23 "Retirement Plan Transfer Credit" shall mean the contribution credit
determined under Section 5.1.

2.24 "Retirement Plan Transfer Vesting Date" shall mean the date on which a
Participant officially stops serving on the Board for reasons other than the
Participant's death, provided such date follows the Participant's attainment of
age 65 and completion of five Years of Board Service.

2.25 "Share Credit" shall mean the separate, identifiable units accumulated
within a Participant's Deferred Stock Account attributable to Annual Share
Credits and Dividend Equivalent Credits.

2.26 "Share Credit Allocation Date" shall mean, with respect to any Board Tenure
Year, the business day next following the first day of such Board Tenure Year;
provided, however, that in reference to any individual who becomes an Outside
Director on any day other than the first day of a given Board Tenure year, the
Share Credit Allocation Date relative to such year shall mean the business day
next following the day on which the individual becomes an Outside Director.

2.27 "Total Deferred Cash Account" shall mean the sum of the amounts credited
under any Deferred Compensation Account and any Retirement Plan Transfer Account
maintained on behalf of a Participant.

2.28 "Valuation Date" shall mean the close of business as of each business day.

2.29 "Vested" shall mean, as of any given date, the portion of the Deferred
Stock Account and/or the Total Deferred Cash Account maintained on behalf of a
Participant which is then 100% vested and nonforfeitable, as determined under
Sections 4.2, 5.3, and Article Seven hereof.


                                       3

2.30 "Year of Board Service" shall mean each Board Tenure Year during which a
Director has served on the Board, including, for Directors on the Board as of
May 1, 1997, all Years of Board Service prior to the adoption of the Plan.

                                  ARTICLE THREE

                                  PARTICIPATION

3.1  ELIGIBILITY AND PARTICIPATION

     a)  Effective as of May 1, 2002, all Outside Directors then in Board
         service shall participate in the Plan. Any individual who becomes an
         Outside Director after May 1, 2002 shall participate in the Plan as of
         the Share Credit Allocation Date next following the date as of which
         the individual becomes an Outside Director. As a condition of
         participation, each Outside Director shall deliver to the Administrator
         properly completed and executed elections as described in Section 3.2.

     b)  Each Outside Director is eligible to participate in the Board
         Compensation deferral provisions of the Plan and may choose to defer
         Board Compensation in accordance with the provisions of Section 4.1.

3.2  PARTICIPATION ELECTION FORM

An Outside Director shall deliver to the Administrator the following elections,
to be made on such Election Form or Forms as the Administrator, in its
discretion, shall prescribe:

     a)  The method by which amounts credited to the Participant's Deferred
         Stock Account and, separately, any Total Deferred Cash Account is to
         be paid;

     b)  The date, following the Participant's official termination of service
         on the Board, as of which payment of amounts credited to the
         Participant's Deferred Stock Account and, separately, any Total
         Deferred Cash Account is to occur (in the event of a lump sum
         distribution) or commence (in the event of distribution in
         installments); and

     c)  The Beneficiary to whom payments of amounts credited to the
         Participant's Deferred Stock Account, and separately, any Total
         Deferred Cash Account will be made in the event of the Participant's
         death.

In addition, an Outside Director on whose behalf a Total Deferred Cash Account
is being maintained shall also be required to complete and deliver to the
Administrator the investment designation described in Section 6.2.

The elections under paragraphs (a) and (b) shall be irrevocable except as
provided in Section 8.3 hereof. The election under paragraph (c) may be changed
as provided in Section 2.4.


                                       4

                                  ARTICLE FOUR

                           BOARD COMPENSATION DEFERRED

4.1  DEFERRED COMPENSATION ELECTION

A Participant who is an Outside Director as described in Section 2.18(a) may
elect to defer Board Compensation for a given calendar year by delivering a
properly completed and executed Election Form to the Administrator by the end of
the calendar year which precedes the given calendar year in which the election
is to be effective. Such Election Form shall state, in 10% increments from 10%
to 100%, the percentage of Board Compensation to be deferred. Such deferral
election shall be irrevocable as of the January 1 of the calendar year to which
the election applies. Such deferral election shall terminate as to all Board
Compensation earned after such calendar year.

4.2  DEFERRED COMPENSATION ACCOUNT

A Deferred Compensation Account shall be established for each Outside Director
who properly completes and executes an Election Form on which he elects to defer
Board Compensation. The Board Compensation which each Participant defers and
Hypothetical Interest earned on such Board Compensation (as provided in Section
6.1) shall be credited to this Deferred Compensation Account. Board Compensation
deferred under this Plan shall be credited to the Participant's Deferred
Compensation Account as of the date such compensation would otherwise have been
payable to the Participant. A Participant's Deferred Compensation Account shall
be kept only for bookkeeping and accounting purposes and no Company funds shall
be transferred or designated to this account. A Participant's interest in the
Deferred Compensation Account maintained on his behalf shall be Vested at all
times.

                                  ARTICLE FIVE

                       TRANSFER OF RETIREMENT PLAN CREDIT

5.1  RETIREMENT PLAN TRANSFER ELECTION

     a)  The Company has recorded a contribution credit under the Plan on
         behalf of each Outside Director who satisfied the criteria set forth
         in paragraph (b) of this Section 5.1. Such contribution credit is
         referred to herein as the Retirement Plan Transfer Credit, was
         recorded as of December 31, 1997 and, except as provided in Section
         6.1(b), was equal to the amount individually determined under Section
         5.2.

     b)  An Outside Director was entitled to a Retirement Plan Transfer Credit
         if:


                                       5

     (i)  The Outside Director was an Outside Director, as described in Section
          2.18(a) or Section 2.18(b), on May 1, 1997; and

     (ii) During the period beginning June 17, 1997 and ending August 1, 1997,
          the Outside Director elected to have the Retirement Plan Transfer
          Credit recorded on his behalf under the Plan in lieu of any continuing
          interest under the Retirement Plan.

5.2  RETIREMENT PLAN TRANSFER CREDIT

     a)   The Retirement Plan Transfer Credit with respect to an Outside
          Director who (i) satisfied the criteria set forth in Section 5.1 and
          (ii) was considered an "Eligible Director" under the terms of the
          Retirement Plan as in effect on May 1, 1997 was the actuarial present
          value (as defined in paragraph (c) below) of the retirement benefit
          accrued by the Outside Director under the Retirement Plan as of May 1,
          1997.

     b)   The Retirement Plan Transfer Credit with respect to an Outside
          Director who (i) satisfied the criteria set forth in Section 5.1 and
          (ii) was not considered an "Eligible Director" under the terms of the
          Retirement Plan as in effect on May 1, 1997 was the actuarial present
          value of the deemed retirement benefit (as hereinafter defined) of the
          Outside Director under the Retirement Plan as of May 1, 1997. For
          purposes hereof, the "deemed retirement benefit" shall mean the
          retirement benefit which the Outside Director would have accrued under
          the Retirement Plan as of May 1, 1997 had participation in such
          Retirement Plan not been limited to "Eligible Directors" as therein
          defined (such deemed retirement benefit being based on the Outside
          Director's "Years of Board Service" as of May 1, 1997, as defined in
          the Retirement Plan and determined on the basis of full years and
          calendar quarters of such service, and the retainer in effect as of
          May 1, 1997).

     c)   For purposes of this Section 5.2, "actuarial present value" shall mean
          the single sum value of a retirement benefit (or deemed retirement
          benefit), determined as of May 1, 1997, by using the 1983 Group
          Annuity Mortality Table (50% male/50% female) and an interest rate of
          seven percent.

5.3  RETIREMENT PLAN TRANSFER ACCOUNT

A Retirement Plan Transfer Account has been established for each Outside
Director described in Section 5.1(b). The Retirement Plan Transfer Credit and
Hypothetical Interest earned on such Retirement Plan Transfer Credit shall be
recorded in this Retirement Plan Transfer Account. A Participant's Retirement
Plan Transfer Account shall be kept only for bookkeeping and accounting purposes
and no Company funds shall be transferred or designated to this account.
Notwithstanding any provision of the Plan to the contrary, a Participant's
interest in the Retirement Plan Transfer Account maintained on his behalf shall
be forfeited in its entirety in the event the Participant's service as a
Director is terminated for any reason (including death) prior to the
Participant's attainment of his Retirement Plan Transfer Vesting Date. Upon
attainment of his Retirement Plan Transfer Vesting Date, a Participant's
interest in such Retirement Plan Transfer Account shall become Vested.


                                       6

                                   ARTICLE SIX

               CREDITS TO PARTICIPANT TOTAL DEFERRED CASH ACCOUNTS

6.1  HYPOTHETICAL INTEREST

     a)  The Total Deferred Cash Account maintained on behalf of a Participant
         under the Plan will be credited with Hypothetical Interest. The
         Hypothetical Interest shall be credited as of each Valuation Date on
         the amount credited to the Participant's Total Deferred Cash Account on
         such Valuation Date in accordance with the valuation procedure adopted
         by the Administrator. The Hypothetical Interest to be credited to each
         Total Deferred Cash Account shall be determined by the Administrator
         and computed in reference to the appreciation or depreciation
         experienced since the immediately preceding Valuation Date by the
         hypothetical investment funds which the Administrator may offer to
         Participants under Section 6.2. For any given period, Hypothetical
         Interest may be a positive or a negative figure. The crediting of
         Hypothetical Interest shall occur so long as there is a balance in the
         Participant's Total Deferred Cash Account regardless of whether the
         Participant has terminated service with the Board or has died. The
         Administrator may prescribe any reasonable method or procedure for the
         accounting of Hypothetical Interest.

     b)  Notwithstanding any provision of this Article Six to the contrary:

         (i)  The Retirement Plan Transfer Credit, determined under Section 5.2
              and recorded as of December 31, 1997 on behalf of an Outside
              Director described in Section 5.1(b), was increased with
              Hypothetical Interest for the period beginning on May 1, 1997 and
              ending on December 31, 1997; and

         (ii) For purposes of subparagraph (i) above, "Hypothetical Interest"
              was in reference to the interest, compounded on a daily basis, at
              the rate or rates in effect during the period beginning on May 1,
              1997 and ending December 31, 1997, as declared by the Board of
              Directors of Erie Family Life Insurance Company on the Erie Family
              Life Insurance Company deposit administration group annuity
              contract held by the trustee of the Erie Insurance Group Employee
              Savings Plan.

6.2  PARTICIPANT INVESTMENT DESIGNATION

     a)  A Participant (and any Outside Director first electing to participate
         in the Plan) may designate on such form or forms as may be
         satisfactory to the Administrator, that portion of his future deferred
         compensation and, separately, that portion of any existing Total
         Deferred Cash Account maintained on his behalf which shall be credited
         with Hypothetical Interest in reference to each of the hypothetical
         investment funds that may be offered by the Administrator, in the
         discretion of the Administrator. Such designations may specify, in 1%
         increments, the percentages to be credited in reference to each of the
         hypothetical investment funds offered. Such designations may remain in
         effect until the Participant submits a new designation within such
         time and in accordance with such means as is determined pursuant to a
         uniform policy adopted by the Administrator. Under such policy, new
         designations may be made as to (i) future deferred compensation



                                       7

         and/or (ii) any existing Total Deferred Cash Account, provided that
         separate designations as to the crediting of a Deferred Compensation
         Account and a Retirement Plan Transfer Account shall not be available.
         All new designations shall be effective as of a given date specified
         by the Administrator. In the event a Participant fails to make an
         effective designation under this Section 6.2(a), the Administrator,
         acting in its discretion, shall make such designation on behalf of the
         Participant.

     b)  In accepting participation in the Plan, a Participant agrees on behalf
         of himself and his Beneficiary to assume all risk in connection with
         any decrease in value of the hypothetical investment funds in
         reference to which Hypothetical Interest is credited to the
         Participant's Total Deferred Cash Account. The Company and the
         Administrator shall not be liable to any Participant or Beneficiary
         for the under-performance of any hypothetical investment fund offered
         under the Plan.

     c)  The Administrator may, in its discretion, offer additional
         hypothetical investment funds to Participants and may cease to offer
         any such fund at such time as it deems appropriate. In the event the
         Administrator decides to discontinue offering an investment fund under
         the Plan, those Participants on whose behalf Hypothetical Interest is
         then being credited on the basis of the discontinued hypothetical
         investment fund shall be required to designate, from such selection of
         hypothetical funds as may be offered by the Administrator, a
         hypothetical fund or funds as a replacement for the hypothetical
         investment fund being discontinued. Such designation shall be made in
         accordance with Section 6.2(a) hereof. Hypothetical Interest credited
         on behalf of any Participant who is affected by the discontinuation of
         a hypothetical investment fund but who fails to make the replacement
         designation provided in this Section 6.2(c) shall mirror, to the
         extent of the Participant's interest in such discontinued fund, such
         hypothetical investment fund or funds as the Administrator may choose
         in its discretion.

     d)  Notwithstanding any provision of the Plan to the contrary, the
         eligibility of a Participant to make any designation under this
         Section 6.2 shall not be construed as to provide any Participant or
         any other person with a beneficial ownership interest in any Company
         assets. Title to and beneficial ownership of any assets which the
         Company may earmark to pay the contingent deferred compensation
         hereunder shall at all times remain in the Company. The Participant,
         his Beneficiary and any heirs, successors or assigns shall not have
         any legal or equitable right, interest or control over or any property
         interest whatsoever in any specific assets of the Company or any
         Affiliate on account of having an interest under the Plan. Any and all
         of the Company's assets, and any life insurance policies, annuity
         contracts or the proceeds therefrom which may be acquired by the
         Company shall be, and remain, the general unpledged, unrestricted
         assets of the Company. In no event shall the Company be required to
         purchase any specific shares or interest in any investment fund.

6.3 STATEMENTS

Statements will be sent to each Participant as to the balance of his Total
Deferred Cash Account at least once each calendar year.


                                       8

                                  ARTICLE SEVEN

                           CREDITING OF DEFERRED STOCK

7.1 DEFERRED STOCK ACCOUNT

A Deferred Stock Account shall be established for each Outside Director to which
shall be credited the amounts described in Section 7.2 and 7.3.

7.2 ANNUAL SHARE CREDIT

With respect to each Board Tenure Year during which the Director is an Outside
Director, the Deferred Stock Account maintained on such Participant's behalf
shall be credited with an Annual Share Credit, effective as of the Share Credit
Allocation Date. For any given Board Tenure Year, the Annual Share Credit made
to an Outside Director's Deferred Stock Account shall be equal to the quotient
obtained by dividing the Outside Director's annual retainer for the given year
by the closing price of Common Stock on the Share Credit Allocation Date. A
Participant's interest in the Annual Share Credit attributable to any given
Board Tenure Year shall vest in accordance with the following schedule:




                                                                                           VESTED PERCENTAGE IN
                                 DATE OF RETIREMENT OR                                      THAT YEAR'S ANNUAL
                              TERMINATION OF BOARD SERVICE                                      SHARE CREDIT
                              ----------------------------                                      ------------
                                                                                        
    Before last day of third full month of given Board Tenure Year                                   0%

    After last day of third full month of given Board Tenure Year but before last                   25%
    day of sixth full month of given Board Tenure Year

    After last day of sixth full month of given Board Tenure Year but before last                   50%
    day of ninth full month of given Board Tenure Year

    After last day of ninth full month of given Board Tenure Year but before the                    75%
    earlier of (i) the twelfth full month of given Board Tenure Year or (ii) the
    date on which begins the immediately following Board Tenure Year.

    On or after the earlier of (i) the twelfth full month of given Board Tenure                    100%
    Year or (ii) the date on which begins the immediately following Board Tenure
    Year.


7.3 DIVIDEND EQUIVALENT CREDIT

For each quarterly period (i) with respect to which a dividend is paid on Common
Stock, and (ii) in which there is a balance in the Deferred Stock Account
maintained on behalf of a Participant as of the record date applicable to the
dividend paid on Common Stock (regardless of


                                       9

whether the Participant has terminated service with the Board or has died), a
Participant's Deferred Stock Account shall be credited with a Dividend
Equivalent Credit. The Dividend Equivalent Credit for any such quarterly period
shall be credited as of the date on which the dividend is paid on Common Stock
for such quarterly period. For any such applicable quarterly period, the
Dividend Equivalent Credit made to a Participant's Deferred Stock Account shall
be determined as follows:

     a)  A dividend credit is determined, expressed in cash, equal to the
         product of:

         (i)  The dividend payable by the Company on one share of Common Stock
              for such quarterly period; and

         (ii) The number of full, accumulated Share Credits credited to the
              Participant's Deferred Stock Account as of the Common Stock
              dividend record date applicable to such quarterly period.

     b)  The dividend credit determined in paragraph (a) above will immediately
         be converted into a Share Credit by dividing such cash dividend credit
         by the closing price of Common Stock on the date on which the dividend
         is paid on Common Stock for such quarterly period.

No Dividend Equivalent Credit will be made with respect to a partial Share
Credit.

A Participant's interest in the Share Credits attributable to Dividend
Equivalent Credits shall be Vested at all times.

7.4 AGGREGATION OF PARTIAL SHARE CREDITS

Effective as of each Share Credit Allocation Date and each Common Stock dividend
record date with respect to which Dividend Equivalent Credits are made, any
partial Share Credits then credited to a Participant's Deferred Stock Account
shall be aggregated in such manner as the Administrator shall provide to
constitute full Share Credits.

7.5 ADJUSTMENT TO SHARE CREDITS

Share Credits maintained on behalf of a Participant hereunder shall be subject
to appropriate adjustment by the Administrator in the event of changes in the
outstanding Common Stock by reason of stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the date
Share Credits are credited hereunder.


                                       10

7.6 PURPOSE OF PARTICIPANT'S DEFERRED STOCK ACCOUNT

A Participant's Deferred Stock Account shall be kept only for bookkeeping and
accounting purposes and no Company funds shall be transferred or designated to
this account. Statements will be sent to each Participant as to the balance of
his Deferred Stock Account at least once each calendar year.

                                  ARTICLE EIGHT

                      PAYMENT OF DEFERRED STOCK ACCOUNT AND
                           TOTAL DEFERRED CASH ACCOUNT

8.1  PAYMENT

Upon termination of service with the Board, the amounts represented by the
balances credited to the Participant's Vested Deferred Stock Account and Vested
Total Deferred Cash Account shall be paid to him by the Company according to the
method and at the times selected by the Participant in his Election Form or, if
applicable, in the most recent, properly executed and effective Amendment
Form(s) which the Participant has delivered to the Administrator prior to the
Participant's termination of Board service. A Participant may make independent
elections under this Article Eight applicable to (i) the Vested Deferred Stock
Account maintained on his behalf and (ii) the Vested Total Deferred Cash Account
maintained on his behalf.

8.2  METHODS OF PAYMENT

     a)  A Participant may elect one of the following methods of payment for the
         amounts represented by his Vested Deferred Stock Account:

         (i)  A lump sum distribution; or

         (ii) Payments in approximately equal annual installments for a period
              not to exceed 10 years.

         Payments of the distributable amount represented by all or a portion of
         the balance in the Participant's Vested Deferred Stock Account will be
         made in shares of Common Stock equal to the number of full Share
         Credits comprising the distributable amount that are then credited to
         the Participant's Vested Deferred Stock Account, with fractional Share
         Credits comprising the distributable amount payable in cash.

     b)  A Participant may elect any one of the following methods of payment for
         the amounts represented by his Vested Total Deferred Cash Account:

         (i)  A lump sum distribution;

         (ii) Payment in approximately equal annual installments for a period
              not to exceed 10 years; or


                                       11

         (iii) Payment in approximately equal monthly installments for a period
               not to exceed 10 years.

         Payments of the distributable amount represented by all or a portion of
         the balance in the Participant's Vested Total Deferred Cash Account
         shall be made in cash.

     c)  In the event the Participant dies before receiving the entire
         distribution to which he is entitled under the Plan, the provisions of
         Section 8.4 shall apply.

8.3  AMENDMENT TO PAYMENT ELECTION

A Participant who is an active Director may request to defer the date at which
payment of the amount represented by his Vested Deferred Stock Account and/or
Vested Total Deferred Cash Account will occur (or commence) and may request a
change in his elected method of payment by submitting a properly completed and
executed Amendment Form to the Administrator which indicates the period of
additional deferral and/or the desired method of payment; provided, however:

     a)  Such request of additional deferral or alternative method of payment
         shall be subject to the Administrator's power, to be exercised at the
         Administrator's discretion, to direct that payment of the amount
         represented by the Participant's Vested Deferred Stock Account and/or
         Vested Total Deferred Cash Account will occur or commence, or will be
         paid under a method, in accordance with the Participant's election(s)
         on a previously delivered Amendment Form or on the Participant's
         Election Form; and

     b)  In no event shall any requested additional deferral or alternative
         method of payment become effective unless the Amendment Form
         evidencing such request is submitted to, and approved by, the
         Administrator at least twelve months prior to the date payment of the
         amount represented by the Vested Deferred Stock Account and/or Vested
         Total Deferred Cash Account would otherwise have occurred or commenced
         under the Election Form or Amendment Form in effect on the date the
         Participant requests the additional deferral or alternative method of
         payment.

     A Participant may make separate requests under this Section 8.3 applicable
     to the Vested Deferred Stock Account maintained on his behalf and to any
     Total Deferred Cash Account maintained on his behalf.

8.4  PAYMENT UPON DEATH OF PARTICIPANT

     a)  In the event of a Participant's death prior to his Retirement Plan
         Transfer Vesting Date, the amount represented by the Participant's
         Deferred Compensation Account and the amount represented by the
         Participant's Vested Deferred Stock Account shall be paid by the
         Company to the Participant's Beneficiary or Beneficiaries as soon as
         practicable in the form of a lump sum. Any amount represented by the
         balance credited to the Participant's



                                       12

         Retirement Plan Transfer Account shall be forfeited upon the
         Participant's death.

     b)  In the event of a Participant's death on or after his Retirement Plan
         Transfer Vesting Date, the amount represented by the Participant's
         Vested Deferred Stock Account and the amount represented by the
         Participant's Vested Total Deferred Cash Account shall be paid by the
         Company to the Participant's Beneficiary or Beneficiaries as soon as
         practicable in the form of a lump sum.

     c)  Payment of the distributable amount represented by the deceased
         Participant's Vested Deferred Stock Account will be made in shares of
         Common Stock equal to the number of full Share Credits credited to
         such account as of the payment date, with fractional Share Credits
         payable in cash.

8.5  EMERGENCY CIRCUMSTANCES

Notwithstanding any other provision of this Plan, if the Committee determines,
after consideration of a Participant's application, that the Participant has a
financial necessity of such a substantial nature that a current payment of
compensation deferred under this Plan is warranted, the Committee may in its
sole and absolute discretion direct that all or a portion of the Participant's
Deferred Compensation Account balance be paid to him. The payment shall be made
in the manner and at the times specified by the Committee for payment; provided,
however, such payment shall not be in excess of that amount which is, in the
discretion of the Committee, required to satisfy the financial necessity. In
making determinations under this Section 8.5, no member of the Committee shall
vote with respect to any application made by the Committee member under this
Section.

                                  ARTICLE NINE

                          AMENDMENT AND DISCONTINUANCE

The Company expects to continue the Plan indefinitely, but reserves the right to
amend or discontinue the Plan at any time, if, in its sole judgment, such
amendment or discontinuance is necessary or desirable. Any such amendment or
discontinuance shall be made pursuant to a resolution of the Board and shall be
effective as of the date specified in such resolution. Without a consent of the
Participant, no amendment or discontinuance of the Plan shall adversely affect
the balance of a Participant's Deferred Compensation Account, Deferred Stock
Account or Retirement Plan Transfer Account at the time of amendment or
discontinuance. In the event of a discontinuance of the Plan, the Company (or
any transferee, or successor entity of the Company) shall be obligated to pay
amounts represented by Vested Deferred Stock Account balances and Vested Total
Deferred Cash Account balances to Participants and Beneficiaries at such time or
times and in such forms as provided under the terms of the Plan.


                                       13

                                   ARTICLE TEN

                               GENERAL PROVISIONS

10.1  GENERAL CONTRACTUAL OBLIGATION

It is the intent of this Plan, and each Participant understands, that no trust
has been created for his or her benefit in connection with this Plan and that
eligibility and participation in this Plan does not grant any Participant any
interest in any asset of the Company or any affiliated company. The Company's
obligation to pay to the Participant the amounts credited hereunder is a general
contract obligation and shall be satisfied solely from the general assets of the
Company. Nothing contained in the Plan shall constitute a guaranty by the
Company, any affiliated company, or any other entity or person that the assets
of the Company will be sufficient to pay amounts determined in accordance with
the Plan. The obligation of the Company under the Plan shall be merely that of
an unfunded and unsecured promise of the Company to pay amounts in the future.
Notwithstanding a Participant's entitlement to Vested amounts under the terms of
the Plan, the status of the Participant is that of an unsecured general creditor
to the extent of his entire interest under the Plan as herein described.

10.2  SPENDTHRIFT PROVISIONS

The interest of a Participant or his Beneficiary under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, or charge, either voluntarily or involuntarily, prior to
actual receipt thereof by the payee; any attempt so to anticipate, alienate,
sell, transfer, assign, pledge, encumber or charge any such interest herein
prior to such receipt shall be void. Amounts credited hereunder shall not be
subject to garnishment, attachment or other legal or equitable process nor shall
they be an asset in bankruptcy; provided, however, that no amount shall be
payable from this Plan to a Participant, or any person claiming by or through a
Participant, unless and until any and all amounts representing debts or other
obligations owed to the Company or any affiliated company by the Participant
have been fully paid and satisfied. The Company shall not be liable in any
manner for or subject to the debts, contracts, liabilities, torts or engagements
of any person who has a Deferred Stock Account or a Total Deferred Cash Account
maintained on his behalf under the Plan.

10.3  INCAPACITY OF RECIPIENT

In the event a Participant or Beneficiary is declared incompetent and a
guardian, conservator or other person legally charged with the care of his
person or of his estate is appointed, any Vested Deferred Stock Account and any
Vested Total Deferred Cash Account under the Plan to which such Participant, or
Beneficiary is entitled shall be paid to such guardian, conservator or other
person legally charged with the care of his person or his estate. Except as
provided hereinabove, when the Administrator, in its sole discretion, determines
that a Participant or Beneficiary is unable to manage his financial affairs, the
Administrator may direct the Company to make distribution(s) from the Vested
Deferred Stock Account and any Vested Total Deferred Cash Account maintained on
behalf of such Participant or Beneficiary to any one or more of the spouse,
lineal ascendants or descendants or other closest living relatives of such
Participant or



                                       14

Beneficiary who demonstrates to the satisfaction of the Administrator the
propriety of making such distribution(s). Any payment so made shall be in
complete discharge of any liability under the Plan for such payment. The
Administrator shall not be required to see to the application of any such
distribution made as provided above.

10.4  UNCLAIMED BENEFIT

In the event that any amount determined to be payable to a Participant or
Beneficiary hereunder remains unclaimed by such Participant or Beneficiary for a
period of four years after the whereabouts or existence of such person was last
known to the Administrator, the Administrator may direct that all rights of such
person to such amounts be terminated absolutely, provided that if such
Participant or Beneficiary subsequently appears and files a claim for payment in
accordance with Article Ten, the liability under the Plan for such amounts shall
be reinstated.

10.5  ELECTIONS, APPLICATIONS, NOTICES

Every designation, election, revocation or notice authorized or required
hereunder which is to be delivered to the Company or the Administrator shall be
deemed delivered to the Company or the Administrator as the case may be: (a) on
the date it is personally delivered to the Administrator at the Company's
executive offices at 100 Erie Insurance Place, Erie, Pennsylvania 16530 or (b)
three business days after it is sent by registered or certified mail, postage
prepaid, addressed to the Administrator at the offices indicated above. Every
such item which is to be delivered to a person or entity designated by the
Administrator to perform recordkeeping and other administrative services on
behalf of the Plan shall be deemed delivered to such person or entity when it is
actually received (either physically or through interactive electronic
communication) by such person or entity. Every designation, election, revocation
or notice authorized or required hereunder which is to be delivered to a
Participant or Beneficiary shall be deemed delivered to a Participant or
Beneficiary: (a) on the date it is personally delivered to such individual
(either physically or through interactive electronic communication), or (b)
three business days after it is sent by registered or certified mail, postage
prepaid, addressed to such individual at the last address shown for him on the
Company's records. Any notice required hereunder may be waived by the person
entitled thereto.

10.6  COUNTERPARTS

This Plan may be executed in any number of counterparts, each of which shall be
considered as an original, and no other counterparts need be produced.

10.7  SEVERABILITY

In the event any provision of this Plan shall be held illegal or invalid for any
reason, such illegality or invalidity shall not affect the remaining provisions
of the Plan. This Plan shall be construed and enforced as if such illegal or
invalid provision had never been contained herein.


                                       15

10.8  GOVERNING LAW

The Plan is established under and will be construed according to the laws of the
Commonwealth of Pennsylvania.

10.9  HEADINGS

The headings of Sections of this Plan are for convenience of reference only and
shall have no substantive effect on the provisions of this Plan.

10.10  CONSTRUCTION

The masculine gender, where appearing in this Plan, shall be deemed to also
include the feminine gender. The singular shall also include the plural, where
appropriate.

                                 ARTICLE ELEVEN

                                 ADMINISTRATION

11.1  GENERAL ADMINISTRATION

The Administrator shall be charged with the administration of the Plan. The
Administrator shall have all such powers as may be necessary to discharge its
duties relative to the administration of the Plan, including by way of
illustration and not limitation, discretionary authority to interpret and
construe the Plan, to determine and decide all questions of fact, and all
disputes arising under the Plan including, but not limited to, the validity of
any election or designation as may be necessary or appropriate hereunder and the
right of any Participant or Beneficiary to receive payment of all or any portion
of amounts represented by a Deferred Stock Account and/or a Total Deferred Cash
Account maintained hereunder. The Administrator shall have all power necessary
to adopt, alter and repeal such administrative rules, regulations and practices
governing the operation of the Plan as it, in its sole discretion, may from time
to time deem advisable. The Administrator shall not be liable to any person for
any action taken or omitted in connection with the interpretation and
administration of the Plan unless attributable to willful misconduct. The
Administrator shall be entitled to conclusively rely upon all tables,
valuations, certificates, opinions and reports furnished by any actuary,
accountant, controller, counsel or other person employed or engaged by the
Company with respect to the Plan. Any individual serving as Administrator shall
not participate in any action or determination regarding solely his own benefits
payable hereunder. Except as provided in Section 11.3, decisions of the
Administrator made in good faith shall be final, conclusive and binding upon all
parties.

11.2  CLAIMS PROCEDURE

Payment to a Participant or Beneficiary of any amount determined under the Plan
shall be made by the Company only after the Participant or Beneficiary has
delivered a properly completed and executed claim to the Administrator on such
form(s) and in such manner as provided by the Administrator. Whenever the
Administrator denies, in whole or in part, a claim for benefits filed


                                       16

by any person (hereinafter referred to as a "Claimant"), the Administrator shall
transmit a written notice setting forth (i) the specific reasons for the denial
of the claim, (ii) references to the specific provisions of the Plan on which
the denial is based, (iii) a description of any additional needed material or
information and why such material or information is necessary, and (iv) further
steps which the Claimant can take in order to have his claim reviewed (including
a statement that the Claimant or his duly authorized representative may review
the Plan document and submit issues and comments regarding the claim to the
Administrator). In addition, the written notice shall contain the date on which
the notice was sent and a statement advising the Claimant that, within ninety
(90) days of the date on which such notice is received, he may request a review
of the Administrator's decision.

11.3  CLAIMS REVIEW

Within ninety (90) days of the date on which the notice of denial of claim is
received by the Claimant, the Claimant or his authorized representative may
request that the claim denial be reviewed by filing with the Administrator a
written request therefor, which request shall contain the following information:

     a)  The date on which the notice of denial of claim was received by the
         Claimant;

     b)  The date on which the Claimant's request was filed with the
         Administrator; provided, however, that the date on which the
         Claimant's request for review was in fact filed with the Administrator
         shall control in the event that the date of the actual filing is later
         than the date stated by the Claimant pursuant to this clause (b);

     c)  The specific portions of the denial of his claim which the Claimant
         requests the Administrator to review;

     d)  A statement by the Claimant setting forth the basis upon which he
         believes the Administrator should reverse its previous denial of his
         claim for benefits and accept his claim as made;

     e)  Whether the Claimant desires a hearing on the claim; and

     f)  Any written material (included as exhibits) which the Claimant desires
         the Administrator to examine in its consideration of his position as
         stated pursuant to clause (d).

If the Claimant has requested a hearing on the claim, such hearing shall be held
within thirty (30) days after the date determined pursuant to clause (b) hereof.
Within sixty (60) days of the date determined pursuant to clause (b) hereof (or,
if special circumstances or the request for a hearing require an extension of
time, within ninety (90) days of such date), the Administrator shall conduct a
full and fair review of the decision denying the Claimant's claim for benefits
and shall deliver its decision to the Claimant in writing. Such written decision
shall set forth the specific



                                       17

reasons for the decision, including references to the specific provisions of
this Plan which were relied upon. The decision will be final and binding on all
persons concerned.

Executed at Erie, Pennsylvania this 1st day of October, 2002, effective as
of April 30, 2002.

                                             ERIE INDEMNITY COMPANY



                                             By: /s/ Jeffrey A. Ludrof
                                                ----------------------------
                                                Jeffrey A. Ludrof

                                             Title: President & Chief
                                                    Executive Officer

ATTEST:

/s/ Jan R. Van Gorder
- ------------------------------------
Jan R. Van Gorder
Secretary

                                       18

EX-10.11

                      EXHIBIT 10.11 - EMPLOYMENT AGREEMENT

     THIS AGREEMENT (the "Agreement") made effective as of the 9th day of May,
2002 (the "Effective Date") by and between ERIE INDEMNITY COMPANY, a
Pennsylvania corporation with its principal place of business at Erie,
Pennsylvania (the "Company"), and JEFFREY A. LUDROF (the "Executive");

                                   WITNESSETH:

      WHEREAS, the Company has determined that it is in the best interests of
the Company and its shareholders to secure the continued employment of the
Executive on the terms and subject to the conditions set forth in this
Agreement; and

      WHEREAS, the Executive desires and is willing to accept employment with
the Company on the terms and subject to the conditions set forth herein;

      NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:

      1. Term. The Company hereby agrees to continue the employment of the
Executive and the Executive hereby agrees to continue to serve the Company
pursuant to the terms and conditions of this Agreement as President and CEO of
the Company, or in such other position with the Company of at least commensurate
responsibility and authority in all material respects, for a term of four years
commencing on the Effective Date hereof and expiring on May 8, 2006, unless
earlier terminated pursuant to Section 5 hereof. Notwithstanding the foregoing,
the Executive shall serve in said office(s) at the pleasure of the Company's
Board of Directors (the "Board of Directors") and the Executive may be removed
from said office(s) at any time with or without Cause, as hereinafter defined,
pursuant to Sections 5(b) or 5(d) hereof; provided that any such removal shall
be without prejudice to any contract rights the Executive may have hereunder.
Subject to Section 8(a)(6) and Section 8(b) hereof, this Agreement shall expire
by its terms on May 8, 2006.

      2. Duties and Responsibilities. The Executive's duties hereunder shall be
those which shall be prescribed by the Company's Bylaws, as amended from time to
time, and by the Board of Directors or any committee thereof from time to time
and shall include such executive authority, duties, powers and responsibilities
as customarily attend the office as President and CEO of a company comparable to
the Company. The Executive shall discharge such duties consistent with sound
business practices and in accordance with law and the Company's general
employment policies, in each case, as in effect from time to time, in all
material respects and the Executive shall use best efforts to promote the best
interests of the Company. During the term of this Agreement, the Executive's
position (including the Executive's status and reporting requirements),
authority, duties, powers and responsibilities shall at all times be at least
commensurate in all material respects with the most significant of those held,
exercised or assigned to the Executive as of the Effective Date. The Executive
shall devote the Executive's knowledge, skill and all of the Executive's
professional time, attention and energies (reasonable absences for vacations and
illness excepted), to the business of the Company in order to perform such
assigned duties faithfully, competently and diligently. It is understood and
agreed between the parties that the Executive may (i) engage in charitable and


                                       1

community activities, including serving on boards of directors or trustees of
and holding other leadership positions in non-profit organizations unless the
objectives and requirements of such positions are determined by the Board of
Directors to be inconsistent with the performance of the Executive's duties
hereunder, and, (ii) manage personal investments, so long as such activities do
not interfere or conflict with the Executive's performance of responsibilities
and obligations hereunder. It is expressly agreed that any such activities
engaged in by the Executive as of the Effective Date shall not thereafter be
deemed to interfere with the Executive's obligations and responsibilities
hereunder. The Executive agrees that the approval of the Board of Directors or a
committee thereof shall be required before the Executive first accepts a
position as director of any for-profit corporation after the date hereof.

      3. Compensation. During the term of this Agreement, the Executive shall
receive, for all services rendered to the Company hereunder, the following
(hereinafter referred to collectively as "Compensation"):

         (a) Salary. The Executive shall be paid an annual base salary at an
      annual rate at least equal to the annual rate being paid or payable to the
      Executive by the Company in the month in which the Effective Date occurs,
      with such increases thereafter as shall be determined from time to time to
      be fair and reasonable by the Board of Directors or by the Executive
      Compensation Committee of the Board of Directors (the "Committee") in its
      discretion after taking into account, among other things, the authority,
      duties, powers and responsibilities of the Executive's position, the
      Executive's performance, the Company's performance, the compensation of
      persons in comparable positions at the Company and at other comparable
      companies, and the effect of inflation. The Executive's annual base salary
      shall not be reduced after any such increase. The Executive's annual base
      salary shall be payable in equal installments in accordance with the
      Company's general salary payment policies, but no less frequently than
      bi-weekly.

         (b) Incentive Compensation. The Executive shall be eligible for awards
      under the Company's incentive compensation plans, if any, applicable to
      senior executive officers of the Company or to key employees of the
      Company or its subsidiaries, including, but not limited to, management
      incentive plans and stock option plans, in accordance with and subject to
      the terms thereof (including any provisions providing for changes in the
      level of or termination of benefits thereunder), on a basis commensurate
      with the Executive's position and authorities, duties, powers and
      responsibilities.

         (c) Employee Benefit Plans. The Executive and the Executive's
      "dependents," as that term may be defined under the applicable employee
      benefit plan(s) of the Company, shall be included, to the extent eligible
      thereunder and subject to the terms of the plans (including any provisions
      for changing the level of or termination of benefits thereunder), in all
      plans, programs and policies which provide benefits for Company employees
      and their dependents on a basis commensurate with the Executive's position
      and authorities, duties, powers and


                                       2

      responsibilities including, without limitation, health care insurance,
      health and welfare plans, pension and retirement plans, group life
      insurance plans, split dollar life insurance plans, short and long-term
      disability plans, survivors' benefits, executive supplemental benefits,
      holidays and other similar or comparable benefits made available to the
      Company's employees and senior executive officers (hereinafter, such
      plans, programs and policies shall be collectively referred to as the
      "Erie Benefit Plans"). Such plans, programs and policies shall include,
      but are not limited to, the Erie Insurance Group Retirement Plan for
      Employees, the Erie Insurance Group Employee Savings Plan, the Erie
      Insurance Group Deferred Compensation Plan, the Erie Insurance Group Split
      Dollar Life Insurance Plan, the Erie Insurance Group Supplemental
      Executive Retirement Plan, and the Erie Insurance Group Health Protection,
      Prescription Drug, Dental Assistance and Vision Care Plans.

         (d) Perquisites. The Executive shall be entitled to all perquisites
      which the Company from time to time makes available to senior executive
      officers of the Company. Such perquisites shall include, but are not
      limited to, parking, club dues, tax preparation assistance, and an annual
      physical examination.

         (e) Expenses and Working Facilities. The Executive is hereby authorized
      to incur, and shall be reimbursed by the Company for, any and all
      reasonable and necessary business related expenses, including, but not
      limited to, expenses for business travel, entertainment, gifts and similar
      matters, which expenses are incurred by the Executive on behalf of the
      Company or any of its subsidiaries, upon presentation of itemized accounts
      of such expenses in accordance with Company policies. The Executive shall
      be furnished during the term of this Agreement with offices and other
      working facilities in the Company's principal executive offices located in
      Erie, Pennsylvania (or other location of the principal executive offices
      within the Erie metropolitan area) and secretarial and other assistance
      suitable to the Executive's position and adequate for the performance of
      duties hereunder.

         (f) Performance Appraisal. The Executive's performance may be evaluated
      by the Board of Directors or the Committee from time to time. The
      Executive shall be entitled to such additional remuneration, including but
      not limited to annual bonuses based on performance, as the Board of
      Directors or the Committee may, in its discretion, determine from time to
      time.

      4. Absences. The Executive shall be entitled to vacations in accordance
with the Company's vacation policy in effect from time to time (but in no event
shall the Executive be entitled to fewer vacation days than under the Company's
vacation policy as in effect on the Effective Date) and to absences because of
illness or other incapacity, and shall also be entitled to such other absences,
whether for holiday, personal time, conventions, or for any other purpose, as
are granted to the Company's other senior executive officers or as are approved
by the Board of Directors or the Committee, which approval shall not be
unreasonably withheld.


                                       3

      5. Termination. The Executive's employment hereunder may be terminated
only as follows:

      (a) Expiration of Term of Office. Upon the expiration of the term of the
   office(s) to which the Executive has been elected or appointed as set forth
   in Section 1 hereof, the Board of Directors may (i) determine that the
   Executive should not continue in such office(s) or (ii) that the Executive
   should not be elected or appointed to an office with duties, authorities,
   powers and responsibilities that are at least commensurate with those of said
   office(s), in either case, for reasons other than for Cause (if the reasons
   for such noncontinuance, nonreelection or nonreappointment constitute Cause,
   then Section 5(d) hereof will apply).

      (b) By the Company Without Cause. The Company may at any time terminate
   the Executive's employment hereunder without Cause only by the affirmative
   vote of a majority of the entire Board of Directors, and upon no less than
   thirty (30) days prior written notice to the Executive.

      (c) By the Executive Without Good Reason. The Executive may at any time
   terminate employment hereunder for any reason upon no less than thirty (30)
   days written notice to the Company. Section 5(e) shall apply to any
   termination of employment by the Executive for Good Reason.

      (d) By the Company For Cause. The Company may terminate the Executive's
   employment hereunder for Cause. In such event, the Company shall give to the
   Executive prompt written notice (in addition to any notice which may be
   required by Section 5(d)(1) hereof) specifying in reasonable detail the basis
   for such termination. For purposes of this Agreement, "Cause" shall mean any
   of the following conduct by the Executive:

         (1) The deliberate and intentional breach of any material provision of
            this Agreement, which breach Executive shall have failed to cure
            within thirty (30) days after Executive's receipt of written notice
            from the Company specifying the specific nature of the Executive's
            breach;

         (2) The deliberate and intentional engaging by Executive in gross
            misconduct that is materially and demonstrably inimical to the best
            interests, monetary or otherwise, of the Company; or

         (3) Conviction of a felony or conviction of any crime involving moral
            turpitude, fraud or deceit.

For purposes of this definition, no act, or failure to act, on the Executive's
part shall be considered "deliberate and intentional" unless done, or omitted to
be done, by the Executive not



                                       4

in good faith and without reasonable belief that such action or omission was in
the best interest of the Company.

      (e) By the Executive for Good Reason. The Executive may terminate
   employment hereunder for Good Reason upon providing thirty (30) days written
   notice to the Company after the Executive reasonably becomes aware of the
   circumstances giving rise to such Good Reason. For purposes of this
   Agreement, "Good Reason" means the following conduct of the Company, unless
   the Executive shall have consented thereto in writing:

            (1)   Material breach of any material provision of this Agreement by
                  the Company, which breach shall not have been cured by the
                  Company within thirty (30) days after Company's receipt from
                  the Executive or the Executive's agent of written notice
                  specifying in reasonable detail the nature of the Company's
                  breach;

            (2)   The assignment to the Executive of any duties inconsistent in
                  any material respect with the Executive's position (including
                  any reduction of the Executive's status and reporting
                  requirements), authority, duties, powers or responsibilities
                  with the Company as contemplated by Section 2 of this
                  Agreement, or any other action by the Company, including the
                  removal of the Executive from or any failure to reelect or
                  reappoint the Executive to the office(s) specified in Section
                  2 or a commensurate office(s) (other than for Cause), which
                  results in a diminution of the Executive's authority, duties,
                  position, responsibilities or status, excluding for this
                  purpose any isolated, insubstantial and inadvertent action
                  respecting the Executive not taken in bad faith and which is
                  remedied by the Company within thirty (30) days after receipt
                  of written notice from the Executive to the Company;

            (3)   The Company's relocation of the Executive out of the Company's
                  principal executive offices or the relocation of the Company's
                  principal executive offices to a location outside the Erie,
                  Pennsylvania metropolitan area, except for required short-term
                  travel on the Company's behalf to the extent necessary for the
                  Executive to carry out his normal duties in the ordinary
                  course of business;

            (4)   The failure of the Company to obtain the assumption in writing
                  of its obligations to perform this Agreement by any successor
                  as provided in Section 14 hereof not less than



                                       5

                  five days prior to a merger, consolidation or sale as
                  contemplated in Section 14; or


            (5)   A reduction in the overall level of compensation of the
                  Executive. For purposes of this subsection 5, the following
                  shall not constitute a reduction in the overall level of
                  compensation of the Executive: (i) changes in the cash/stock
                  mix of compensation payable to the Executive; (ii) a reduction
                  in the overall level of compensation of the Executive
                  resulting from the failure to achieve corporate, business unit
                  and/or individual performance goals established for purposes
                  of incentive compensation for any year or other period;
                  provided that the aggregate short-term incentive opportunity,
                  when combined with the Executive's base salary, provides, in
                  the aggregate, an opportunity for the Executive to realize at
                  least the same overall level of compensation as was paid in
                  the immediately prior year or period at target performance
                  levels; and provided, further, that such target performance
                  levels are reasonable at all times during the measurement
                  period, taking into account the fact that one of the purposes
                  of such compensation is to incent the Executive; (iii)
                  reductions in compensation resulting from changes to any Erie
                  Benefit Plan (provided that such changes are generally
                  applicable to all participants in such Erie Benefit Plan); and
                  (iv) any combination of the foregoing.

            (f) Disability. In the event that the Executive shall be unable to
      perform the Executive's duties hereunder on a full time basis for a period
      of one hundred-eighty (180) consecutive calendar days by reason of
      incapacity due to illness, accident or other physical or mental
      disability, then the Company may, at its discretion, terminate the
      Executive's employment hereunder if the Executive, within ten (10) days
      after receipt of written notice of termination (which notice may be given
      before or after the end of the entire 180 day period), shall not have
      returned to the performance of all of his duties hereunder on a full-time
      basis.

            (g) Death. The Executive's employment under this Agreement shall
      terminate upon the Executive's death.

            (h) Mutual Written Agreement. This Agreement and the Executive's
      employment hereunder may be terminated at any time by the mutual written
      agreement of the Executive and the Company.

      6. Compensation in the Event of Termination. In the event that the
Executive's employment hereunder terminates prior to the expiration of this
Agreement for any


                                       6

reason provided in Section 5 hereof, the Company shall pay the
Executive, compensation and provide the Executive and the Executive's eligible
dependents with benefits as follows:

            (a) Executive's Nonreelection to Office; Termination By Company
      Without Cause; Termination By Executive for Good Reason. In the event that
      the Executive's employment hereunder is terminated: (i) because the
      Executive does not continue in office pursuant to Section 5(a) hereof; or
      (ii) by the Company without Cause pursuant to Section 5(b) hereof; or
      (iii) by the Executive for Good Reason pursuant to Section 5(e) hereof,
      then in any such event the Company shall pay or provide, as applicable,
      the following compensation and benefits to the Executive:

                  (1)   Three (3) times the following: (A) the highest annual
                        base salary paid or payable to the Executive in the then
                        current year or any one (1) of the three (3) calendar
                        years preceding Executive's termination of employment
                        hereunder; plus (B) an amount equal to the sum of the
                        Executive's highest award(s) under the Company's Annual
                        Incentive Plans for any one (1) of the three (3)
                        calendar years preceding the date of the termination of
                        Executive's employment hereunder (such total is referred
                        to herein as "Covered Compensation"). Such payment to
                        the Executive by the Company shall be paid in a lump sum
                        unless the Executive elects, and so notifies the Company
                        in writing prior to the termination of the Executive's
                        employment hereunder, to receive such payment in three
                        (3) equal annual installments. The lump sum or first
                        payment, as the case may be, shall be paid within sixty
                        (60) days after the date of the termination of the
                        Executive's employment hereunder;

                  (2)   Any awards or other compensation to which the Executive
                        is entitled under any of the Company's compensation
                        plans or Erie Benefit Plans to the extent not covered in
                        subsection (1) hereof;

                  (3)   Any award to which the Executive would be entitled under
                        the Company's Long-Term Incentive Plan as in effect on
                        December 16, 1997, calculated under the provision of
                        that Plan as if the Executive ceases to be an Employee
                        of the Company by reason of death, disability or normal
                        retirement;

                  (4)   Continuing coverage for all purposes (including
                        eligibility, coverage, vesting and benefit accruals, as
                        applicable), for a period of three (3) years after the
                        date of the termination of



                                       7


                        Executive's employment hereunder, to the extent not
                        prohibited by law, for the Executive and the Executive's
                        eligible dependents under all of the Erie Benefit Plans
                        in effect and applicable to Executive and the
                        Executive's eligible dependents as of the date of
                        termination. In the event that the Executive and/or the
                        Executive's eligible dependents, because of the
                        Executive's terminated status, cannot be covered or
                        fully covered under any or all of the Erie Benefit
                        Plans, the Company shall continue to provide the
                        Executive and/or the Executive's eligible dependents
                        with the same level of such coverage in effect prior to
                        termination, payable from the general assets of the
                        Company if necessary. Notwithstanding the foregoing, the
                        Executive may elect (by giving written notice to the
                        Company prior to the termination of employment
                        hereunder), on a benefit by benefit basis, to receive in
                        lieu of continuing coverage, cash in an amount equal to
                        the present value (using a 6.5% discount rate over three
                        years) of the projected cost to the Company of providing
                        such benefit for such three year period. The aggregate
                        amount of cash to which the Executive is entitled
                        pursuant to the preceding sentence shall be payable by
                        the Company to the Executive within sixty (60) days
                        after the date of the termination of Executive's
                        employment hereunder; and

                  (5)   For a period of three (3) years after the date of the
                        termination of Executive's employment hereunder, such
                        perquisites as are made available to the Executive as of
                        the date of the termination of Executive's employment
                        hereunder.

The Executive's subsequent death, disability or attainment of age 65 or any
other age shall in no way affect or limit the Company's obligations under this
Section 6(a).

            (b) Termination By the Company for Cause. In the event that the
      Company shall terminate the Executive's employment hereunder for Cause
      pursuant to Section 5(d), this Agreement shall forthwith terminate and the
      obligations of the parties hereto shall be as set forth in Section 8
      hereof.

            (c) Termination by the Executive Without Good Reason. In the event
      that the Executive shall terminate employment hereunder other than for
      Good Reason pursuant to Section 5(c), this Agreement shall forthwith
      terminate and the obligations of the parties hereto shall be as set forth
      in Section 8 hereof.

            (d) Disability. In the event that the Company elects to terminate
      the Executive's employment hereunder pursuant to Section 5(f), the
      Executive shall



                                       8

      continue to receive from the date of such termination through the
      expiration date of this Agreement, sixty percent (60%) of the then current
      annual base salary to which the Executive was entitled pursuant to Section
      3(a) hereof immediately preceding such termination, in accordance with the
      payroll practices of the Company for senior executive officers, reduced,
      however, by the amount of any proceeds from Social Security and disability
      insurance policies provided by and at the expense of the Company.

            (e) Death. In the event of the death of the Executive during the
      term of this Agreement, the then current annual base salary to which the
      Executive was entitled pursuant to Section 3(a) hereof immediately
      preceding the Executive's death shall be paid, in twelve (12) equal
      monthly installments following the date of death, to the last beneficiary
      designated by the Executive under the Company's group life insurance
      policy maintained by the Company or such other written designation
      expressly provided to the Company for the purposes hereof or, failing
      either such designation, to the Executive's estate.

            (f) Mutual Written Consent. In the event that the Executive and the
      Company shall terminate the Executive's employment by mutual written
      agreement, the Company shall pay such compensation and provide such
      benefits, if any, as the parties may mutually agree upon in writing.

The Executive shall not be required to mitigate the amount of any payment
provided for in this Section 6 by seeking employment or otherwise, nor shall any
amounts received from employment or otherwise by the Executive offset in any
manner the obligations of the Company hereunder except as specifically provided
in Section 6(d) hereof.

      7. Certain Additional Payments by the Company. Notwithstanding anything in
this Agreement to the contrary, in the event it is determined that any payment
or distribution by the Company to or for the benefit of the Executive, whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), is subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any successor provision, on excess parachute payments, as that term is used and
defined in Sections 4999 and 280G of the Code, then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
equal to the then current rate of tax under said Section 4999 multiplied by the
total of the amounts so paid or payable, including the Gross-Up Payment, which
are deemed to be a part of an excess parachute payment.

      8. Effect of Expiration of Agreement or Termination of Executive's
Employment. Upon the expiration of this Agreement by its terms or the
termination of the Executive's employment hereunder, neither the Company nor the
Executive shall have any remaining duties or obligations hereunder except that:

            (a) The Company shall:

                  (1)   Pay the Executive's accrued salary and any other accrued
                        benefits under Sections 3(a), (b), and (c) hereof;


                                       9

                  (2)   Reimburse the Executive for expenses already incurred in
                        accordance with Section 3(e) hereof;

                  (3)   Pay or otherwise provide for any benefits, payments or
                        continuation or conversion rights in accordance with the
                        provisions of any Erie Benefit Plan of which the
                        Executive or any of the Executive's dependents is or was
                        a participant or as otherwise required by law;

                  (4)   Pay the Executive and the Executive's beneficiaries any
                        compensation and/or provide the Executive or the
                        Executive's eligible dependents any benefits, as the
                        case may be, due pursuant to Section 6 or Section 7
                        hereof; and

                  (5)   Unless the employment of the Executive is terminated by
                        the Company for Cause, pay the Executive or the
                        Executive's beneficiaries the full amount or amounts
                        accrued under the Supplemental Executive Retirement Plan
                        of the Company (the "SERP") as in effect on the
                        Effective Date (or as such benefits may be enhanced by
                        subsequent amendments or supplements to such SERP), as
                        though, solely for purposes of determining any otherwise
                        applicable actuarial reduction factors, the event of the
                        termination of Executive's employment hereunder or
                        expiration of this Agreement occurred on the Executive's
                        Normal Retirement Date as defined in such SERP. Accrued
                        benefits under the SERP shall be fully vested and
                        nonforfeitable upon such termination (including
                        termination on account of the Executive's death) or
                        expiration. Any reductions in SERP benefits that would
                        otherwise apply pursuant to Section 10.1 of the
                        Company's Retirement Plan for Employees (or pursuant to
                        any successor provision of such plan or any successor
                        plan) relating to Section 415(b) of the Code shall not
                        be applicable for purposes hereof. No further approval
                        by the Board of Directors or the Committee with respect
                        to payments under the SERP in accordance with the
                        preceding sentences shall be required. Unreduced
                        payments may begin at age 55, but in no event would
                        payments be made under this Section 8(a)(5) before the
                        Executive reaches age fifty-five (55). The Company shall
                        purchase for the Executive, naming the Executive and/or
                        the Executive's designee the owner, a paid up annuity,
                        from an insurer reasonably acceptable to the Executive
                        but in any event having an A.M. Best rating of A+ or
                        better (or other comparable rating), that will pay to
                        the Executive an amount equal to the benefit to which
                        the Executive would



                                       10

                        otherwise be entitled under the SERP and payable at the
                        times such SERP benefit would be payable in accordance
                        with the provisions hereof. Upon the purchase and
                        delivery to the Executive of such an annuity, the
                        Executive shall release the Company from any further
                        obligation under the SERP. The Company further agrees to
                        pay the Executive immediately upon termination, a cash
                        payment (the "Tax Gross-up") equal to the sum of the
                        following: (i) all taxes (federal, state, local, and
                        payroll taxes) incurred and due and owing by the
                        Executive, arising from the cost of the annuity
                        purchased by the Company to meet the requirements of
                        this Section 8(a)(5), and (ii) any such taxes incurred
                        and due and owing with respect to the amount paid in
                        (i).

                  (6)   Continue to remain bound by the terms of Section 12
                        hereof.

            (b) The Executive shall remain bound by the terms of Sections 9 and
      13 hereof for a period of thirty six (36) months after the expiration of
      the Agreement by its terms; provided, that the Executive shall not be
      bound by the terms of Section 9(b) after the termination of employment
      (other than a termination of the Executive by the Company for Cause) if
      such termination occurs after the expiration of this Agreement by its
      terms.

      9. Covenants as to Confidential Information and Competitive Conduct. The
Executive hereby acknowledges and agrees as follows: (i) this Section 9 is
necessary for the protection of the legitimate business interests of the
Company, (ii) the restrictions contained in this Section 9 with regard to
geographical scope, length of term and types of restricted activities are
reasonable; (iii) the Executive has received adequate and valuable new
consideration for entering into this Agreement, and (iv) the Executive's
expertise and capabilities are such that this obligation hereunder and the
enforcement hereof by injunction or otherwise will not adversely affect the
Executive's ability to earn a livelihood.

            (a) Confidentiality of Information and Nondisclosure. The Executive
      acknowledges and agrees that the Executive's employment by the Company
      under this Agreement necessarily involves knowledge of and access to
      confidential and proprietary information pertaining to the business of the
      Company and its subsidiaries. Accordingly, the Executive agrees that at
      all times during the term of this Agreement and at any time thereafter,
      the Executive will not, directly or indirectly, without the express
      written approval of the Company, unless directed by applicable legal
      authority (including any court of competent jurisdiction, governmental
      agency having supervisory authority over the business of the Company or
      the subsidiaries, or any legislative or administrative body having
      supervisory authority over the business of the Company or its
      subsidiaries) having jurisdiction over the Executive, disclose to or use,
      or knowingly permit to be so


                                       11

      disclosed or used, for the benefit of himself, any person, corporation or
      other entity other than the Company, (i) any information concerning any
      financial matters, customer relationships, competitive status, supplier
      matters, internal organizational matters, current or future plans, or
      other business affairs of or relating to the Company or its subsidiaries,
      (ii) any management, operational, trade, technical or other secrets or any
      other proprietary information or other data of the Company or its
      subsidiaries, or (iii) any other information related to the Company or its
      subsidiaries or which the Executive should reasonably believe will be
      damaging to the Company or its subsidiaries which has not been published
      and is not generally known outside of the Company. The Executive
      acknowledges that all of the foregoing constitutes confidential and
      proprietary information, which is the exclusive property of the Company.

            (b) Restrictive Covenant. During the term of, and for a period of
      one (1) year (the "Restrictive Period") after the termination of the
      Executive's employment hereunder for any reason (other than a termination
      of the Executive hereunder pursuant to Section 5(a), 5(b) or 5(e),
      hereof), the Executive shall not render, directly, or indirectly, services
      to any person, firm, corporation, association or other entity which
      conducts the same or similar business as the Company or its subsidiaries
      at the date of the Executive's termination of employment hereunder within
      the states in which the Company or any of its subsidiaries is then
      licensed and doing business at the date of the Executive's termination of
      employment hereunder without the prior written consent of the Board of
      Directors, which may be withheld in its discretion. In the event the
      Executive violates any of the provisions contained in this Section 9(b)
      hereof, the Restrictive Period shall be increased by the period of time
      from the commencement by the Executive of any violation until such
      violation has been cured to the satisfaction of the Company. The Executive
      further agrees that at no time during the Restrictive Period will the
      Executive attempt to directly or indirectly solicit or hire employees of
      Company or its subsidiaries or induce any of them to terminate their
      employment with the Company or any of the subsidiaries. Notwithstanding
      the foregoing, the performance by the Executive of rights and duties under
      an agency agreement with the Company shall not constitute a breach of this
      Section 9(b).

            (c) Company Remedies. The Executive acknowledges and agrees that any
      breach of this Section 9 will result in immediate and irreparable harm to
      the Company, and that the Company cannot be reasonably or adequately
      compensated by damages in an action at law. In the event of a breach by
      the Executive of the provisions of this Section 9, the Company shall be
      entitled, to the extent permitted by law, immediately to cease to pay or
      provide the Executive or the Executive's dependents any compensation or
      benefit being, or to be, paid or provided to the Executive pursuant to
      Section 3, Section 6 or Section 8 of this Agreement, and also to obtain
      immediate injunctive relief restraining the Executive from conduct in
      breach of the covenants contained in this Section 9. Nothing herein shall
      be construed as prohibiting the Company from pursuing any


                                       12

      other remedies available to it for such breach, including the recovery of
      damages from the Executive.

      10. Resolution of Differences Over Breaches of Agreement. Except as
otherwise provided herein, in the event of any controversy, dispute or claim
arising out of, or relating to, this Agreement, or the breach thereof, or
arising out of any other matter relating to the Executive's employment with the
Company, the parties may seek recourse only for temporary or preliminary
injunctive relief to the courts having jurisdiction thereof and if any relief
other than injunctive relief is sought, the Company and the Executive agree that
such underlying controversy, dispute or claim shall be settled by arbitration
conducted in Erie, Pennsylvania in accordance with this Section 10 and the
Commercial Arbitration Rules of the American Arbitration Association ("AAA").
The matter shall be heard and decided, and awards rendered by a panel of three
(3) arbitrators (the "Arbitration Panel"). The Company and the Executive shall
each select one arbitrator from the AAA National Panel of Commercial Arbitrators
(the "Commercial Panel") and AAA shall select a third arbitrator from the
Commercial Panel. The award rendered by the Arbitration Panel shall be final and
binding as between the parties hereto and their heirs, executors,
administrators, successors and assigns, and judgment on the award may be entered
by any court having jurisdiction thereof. Except as provided in Section 11
hereof, each party shall bear sole responsibility for all expenses and costs
incurred by such party in connection with the resolution of any controversy,
dispute or claim in accordance with this Section 10.

      11. Payment of Executive's Legal Fees. If the Executive is required to
bring any action to enforce rights or to collect moneys due under this
Agreement, the Company shall pay to the Executive the fees and expenses incurred
by the Executive in bringing and pursuing such action if the Executive is
successful, in whole or in part, on the merits or otherwise (including by way of
a settlement involving a payment of money by the Company to the Executive), in
such action. The Company shall pay such fees and expenses in advance of the
final disposition of such action upon receipt of an undertaking from the
Executive to repay to the Company such advances if the Executive is not
ultimately successful, in whole or in part, on the merits or otherwise, in such
action.

      12. Severance Pay upon Termination of Employment after Expiration of the
Agreement. Notwithstanding the expiration of this Agreement by its terms and
notwithstanding the terms of any corporate severance policy then in effect and
applicable to the Executive, if the employment of the Executive is terminated
without Cause by the Company, by the Executive for Good Reason or upon the
expiration of the term of the office(s) to which the Executive has been elected
or appointed as set forth in Section 1 hereof (for reasons other than for
Cause), in any case, within thirty-six (36) months after the expiration of this
Agreement by its terms, then (i) the Company shall pay to the Executive
severance compensation in an amount equal to two (2) times the Executive's
Covered Compensation as determined on the date of such termination, and (ii) the
Executive and the Executive's eligible dependents shall be entitled to
continuing coverage under the Company's then-existing group health plans
(including medical, dental, prescription drug and vision plans, if any) for a
period of two (2) years after the date of the termination of the Executive's
employment, to the extent not prohibited by law and subject to the terms of such
plans including provisions as to deductibles and copayments and changes in
levels of coverage


                                       13

that are generally applicable to employees. The payment to the Executive by the
Company pursuant to subsection (i) of the preceding sentence shall be paid in a
lump sum unless the Executive elects, and so notifies the Company in writing
prior to the Executive's termination of employment, to receive such payment in
two (2) equal annual installments. The lump sum or first payment, as the case
may be, shall be paid within thirty (30) days after the date of termination of
the Executive's employment.

      13. Release. The Executive hereby acknowledges and agrees that neither the
Company nor any of its representatives or agents will be obligated to pay any
compensation or benefit which the Executive has a right to be paid or provided
to the Executive or the Executive's dependents pursuant to Section 6, Section 8
or Section 12 of this Agreement, unless the Executive, if requested by the
Company in its sole discretion, executes a release in a form reasonably
acceptable to the Company, which releases any and all claims the Executive has
or may have against the Company or its subsidiaries, agents, officers,
directors, successors or assigns.

      14. Waiver. The waiver by a party hereto of any breach by the other party
hereto of any provision of this Agreement shall not operate or be construed as a
waiver of any other or subsequent breach by a party hereto.

      15. Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company, and the Company shall be
obligated to require any successor to expressly acknowledge and assume its
obligations hereunder. This Agreement shall inure to the extent provided
hereunder to the benefit of and be enforceable by the Executive or the
Executive's legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. The Executive may not delegate any of the
Executive's duties, responsibilities, obligations or positions hereunder to any
person and any such purported delegation shall be void and of no force and
effect.

      16. Notices. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing, and if personally delivered or when
sent by first class certified or registered mail, postage prepaid, return
receipt requested--in the case of the Executive, to his residence address as set
forth below, and in the case of the Company, to the address of its principal
place of business as set forth below, to the attention of the Chairman of the
Board, or in case the Executive is the Chairman of the Board, to the Chairman of
the Compensation Committee of the Board -- or to such other person or at such
other address with respect to each party as such party shall notify the other in
writing.

      17. Construction of Agreement.

            (a) Governing Law. This Agreement shall be governed by and construed
      under the laws of the Commonwealth of Pennsylvania.

            (b) Severability. In the event that any one or more of the
      provisions of this Agreement shall be held to be invalid, illegal or
      unenforceable, the validity, legality or enforceability of the remaining
      provisions shall not in any way be affected or impaired thereby.


                                       14

            (c) Headings. The descriptive headings of the several paragraphs of
      this Agreement are inserted for convenience of reference only and shall
      not constitute a part of this Agreement.

      18. Entire Agreement. This Agreement contains the entire agreement of the
parties concerning the Executive's employment and all promises, representations,
understandings, arrangements and prior agreements on such subject are merged
herein and superseded hereby, including the Employment Agreement effective
November 20, 1995 which is expressly superseded hereby. The provisions of this
Agreement may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom enforcement
of any amendment, modification, repeal, waiver, extension or discharge is
sought. No person acting other than pursuant to a resolution of the Board of
Directors or the Committee shall have authority on behalf of the Company to
agree to amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto or to exercise any of the Company's
rights to terminate or to fail to extend this Agreement.



                                       15

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
officers thereunto duly authorized, and the Executive has hereunto set his hand
all as of the day and year first above written.

ATTEST:                                 ERIE INDEMNITY COMPANY


/s/ J.R. Van Gorder                     /s/ F. William Hirt
- ---------------------------             -------------------------------
J.R. Van Gorder                         F. William Hirt
Secretary                               Chairman of the Board


WITNESS:


/s/ Debra J. Miller                     /s/ Jeffrey A. Ludrof
- ---------------------------             -------------------------------
Debra J. Miller                         Jeffrey A. Ludrof
                                        5700 Stoneridge Drive
                                        Fairview, PA  16415





                                       16

EX-10.12

   EXHIBIT 10.12 - FORM OF ATTORNEY-IN-FACT PROVISION OF INSURANCE POLICIES OF
                             ERIE INSURANCE EXCHANGE


The Subscriber ("you" or "your") agrees with the other Subscribers at ERIE
INSURANCE EXCHANGE ("ERIE"), a Reciprocal/Inter-Insurance Exchange, and with
their Attorney-in-Fact, the Erie Indemnity Company ("we" or "us"), a
Pennsylvania corporation with its Home Office in Erie, Pennsylvania, to the
following:

      1)    You agree to pay your policy premiums and to exchange with other
            ERIE Subscribers policies providing insurance for any insured loss
            as stated in those policies.

      2)    You appoint us as Attorney-in-Fact with the power to: a) exchange
            policies with other ERIE Subscribers; b) take any action necessary
            for the exchange of such policies; c) issue, change, non-renew or
            cancel policies; d) obtain reinsurance; e) collect premiums; f)
            invest and reinvest funds; g) receive notices and proofs of loss; h)
            appear for, compromise, prosecute, defend, adjust and settle losses
            and claims under your policies; i) accept service of process on
            behalf of ERIE as insurer; and j) manage and conduct the business
            and affairs of ERIE, its affiliates and subsidiaries. This power of
            attorney is limited to the purposes described in this Agreement.

      3)    You agree that as compensation for us a) becoming and acting as
            Attorney-in-Fact; b) managing the business and affairs of ERIE; and
            c) paying general administrative expenses, including sales
            commissions, salaries and employee benefits, taxes, rent,
            depreciation, supplies and data processing, we may retain up to 25%
            of all premiums written or assumed by ERIE. The rest of the premiums
            will be used for losses, loss adjustment expenses, investment
            expenses, damages, legal expenses, court costs, taxes, assessments,
            licenses, fees, any other governmental fines and charges,
            establishment of reserves and surplus, and reinsurance, and may be
            used for dividends and other purposes we decide are to the advantage
            of Subscribers.

      4)    You agree that this Agreement, including the power of attorney,
            shall have application to all insurance policies for which you apply
            at ERIE, including changes in any of your coverages.

      5)    You agree to sign and deliver to us all papers required to carry out
            this Agreement.

      6)    This Agreement, including the power of attorney, shall not be
            affected by your subsequent disability or incapacity.

EX-99.1

Exhibit 99.1

                           CERTIFICATION PURSUANT TO
                            18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Erie Indemnity Company (the
"Company") on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Jeffrey A. Ludrof, Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of that:

      (1)   The Report fully complies with the requirements of section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

      (2)   The information contained in the Report fairly presents, in all
            material respects, the financial condition and result of operations
            of the Company.

/s/ Jeffrey A. Ludrof
- --------------------------
Jeffrey A. Ludrof
Chief Executive Officer

November 6, 2002

EX-99.2

Exhibit 99.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Erie Indemnity Company (the
"Company") on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Philip A. Garcia, Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of that:

      (1)   The Report fully complies with the requirements of section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

      (2)   The information contained in the Report fairly presents, in all
            material respects, the financial condition and result of operations
            of the Company.

/s/ Philip A. Garcia
- -----------------------------
Philip A. Garcia
Executive Vice President & Chief Financial Officer

November 6, 2002

EX-99.3

               EXHIBIT 99.3 - FIRST AMENDMENT TO SECOND RESTATED AGREEMENT

                                     H.O. HIRT TRUST




                                                                           Page
                                                                           ----
                                                                        
Article I               Lifetime Trust                                       1

Article II              Payment of Taxes, Debts, Legacies and
                             Expenses After Settlor's Death                  2

Article III             Administration of Trust Estate                       3

Article IV              Powers of Trustees                                   8

Article V               Successor Trustees                                  12

Article VI              General Provisions                                  13

Article VII             Certain Rules of Construction                       15


                  FIRST AMENDMENT TO SECOND RESTATED AGREEMENT

                                H. O. HIRT TRUST

      Dated the 22nd day of December, 1980.

      The Trust Agreement dated April 7, 1967, as restated by a Trust Agreement
dated December 17, 1970 and amended thereafter, between HENRY ORTH HIRT, of
Erie, Pennsylvania, as the Settlor, his children, FRANK WILLIAM HIRT and SUSAN
RUTH HAGEN, as the individual Trustees and MELLON BANK, N.A., as the corporate
Trustee and again restated by a Second Restated Agreement dated the 20th day of
January, 1978 (and pursuant to the power to amend as contained in paragraph 7.03
of the said Second Restated Agreement) is hereby amended and restated again to
read as set forth herein ("this Agreement").

      The Settlor has heretofore transferred and delivered certain property to
the Trustees, together with all his interest therein. The Trustees shall
continue to hold said property, together with any additions thereto as
hereinafter provided, as a Trust Estate, shall invest and reinvest the same and
shall distribute the net income (hereinafter called "Income") and principal as
set forth in the following provisions.

                                   Article I

                                 Lifetime Trust

            1.01. During Settlor's lifetime:


                                       1

            (A) To pay to the Settlor the Income quarter-annually or to apply
the same to his use as directed by him,

            (B) To pay over to Settlor free of trust any amount of principal
which he may at any time request in writing,

            (C) To pay to Settlor or apply for his benefit any amounts of
principal as Trustees in their discretion may from time to time deem advisable
for the welfare and comfortable support of Settlor,

            (D) To make gifts from principal to individuals and organizations
consistent with Settlor's previous pattern of gifts.

                                   Article II

                  Payment of Certain Taxes, Debts, Legacies and
                         Expenses After Settlor's Death

            2.01. Upon the Settlor's death, the Trustees shall pay all estate,
inheritance and other taxes in the nature thereof, together with any interest
and penalties thereon, becoming payable because of the Settlor's death with
respect to the property constituting his gross estate for death tax purposes,
whether or not such property passes under this Agreement; PROVIDED, however,
that no assets which are not subject to such taxes shall be used for this
purpose and that the death taxes on future interests may be paid at such time or
times as the Trustees in their sole discretion deem advisable. The


                                       2

Trustees shall not seek contribution or reimbursement from anyone receiving or
having a beneficial interest in any part of said gross estate. The Trustees
shall also pay to the Settlor's personal representative or shall expend directly
such sums as said personal representative shall certify as necessary to
supplement the Settlor's probate estate in order to pay debts, funeral expenses,
legacies and administration expenses; PROVIDED, however, that no assets shall be
used for this purpose which are not otherwise included in the Settlor's gross
taxable estate. Subject to such payments, the principal remaining at the
Settlor's death and any accrued or undistributed Income shall be divided and
held as is provided in Article III below.

                                  Article III

                         Administration of Trust Estate

            3.01. The Trust Estate shall be held and administered as hereinafter
stated.

            (A) The Trustees shall divide the Trust Estate into two equal shares
for the Settlor's children, FRANK WILLIAM HIRT and SUSAN RUTH HAGEN, and shall
hold each share as a separate trust.

                  (1) During the lifetime of each of the Settlor's children, the
Trustees shall pay the Income from his or her trust quarter-annually to or for
the benefit of said child, and if the corporate Trustee considers the Income to
be insufficient, in view of other income of said child of which it has
knowledge, to provide for the welfare and comfortable support of said child


                                       3

and his or her family, including educational and funeral expenses, the corporate
Trustee is authorized in its discretion to use such sums from the principal as
it deems advisable therefor; PROVIDED, however, that no shares of Class B
capital stock of ERIE INDEMNITY COMPANY may be used for this purpose. In
addition, said child shall have the right to withdraw any or all of the
principal, exclusive of shares of Class B capital stock of ERIE INDEMNITY
COMPANY. Upon the death of said child, if the trust has not already terminated,
the remaining principal, exclusive of any shares of Class B capital stock of
ERIE INDEMNITY COMPANY, shall be transferred and delivered to or for the benefit
of such one or more persons, corporations or other organizations, in such
portions or amounts and subject to such trusts, terms and conditions as said
child may appoint by specific reference to this power in his or her will.

            (2) Upon the death of each child, or upon the Settlor's death in the
case of either child who is not then living, the shares of Class B capital stock
of ERIE INDEMNITY COMPANY in said child's trust and any principal not appointed
by said child as aforesaid, shall be held and distributed as follows:

                        (a) During the lifetime of the surviving spouse of the
deceased child, the Income shall be paid quarter-annually to said spouse, and if
the Trustees consider the Income to be insufficient, in view of other income of
said spouse and children of which they have knowledge, to provide for the
welfare and comfortable support of said child's spouse and children, including
educational and funeral expenses, the Trustees are authorized in


                                       4

their discretion to use such sums from principal, exclusive of shares of Class B
stock of ERIE INDEMNITY COMPANY, as they deem advisable therefor; PROVIDED,
however, that a child of Settlor shall have the right and power exercisable by
specific reference to this power in his or her Will, to direct that the trust
shall not continue for the benefit of his or her surviving spouse, or shall
continue for a shorter time than the life of said surviving spouse, and in the
event of the exercise of said power the trust shall terminate as thus directed.

                        (b) Upon the termination of said spouse's interest, the
principal shall be divided into as many equal shares as said child has children
then living and deceased children with issue then living, and each said share
shall be held as a separate trust. The Settlor's son now has two living
children, ELIZABETH ANN VORSHECK and LAUREL ANN HIRT, and his daughter also has
two living children, SARAH ELIZABETH HAGEN and JONATHAN HIRT HAGEN.

                              (i) Until the termination of the trust, as
provided in subparagraph (ii) below, the Trustees shall pay the Income from each
grandchild's trust quarter-annually to or for the benefit of said grandchild or,
if he or she is deceased, to his or her issue living at the time of payment per
stirpes, and if the corporate Trustee considers the Income to be insufficient,
in view of other income of which it has knowledge, to provide for the welfare,
comfortable support and education of said grandchild and his or her family, the
corporate Trustee is authorized in its discretion to use such sums from
principal, exclusive of shares of Class B capital stock of ERIE INDEMNITY
COMPANY, as it deems advisable therefor; PROVIDED, however, that prior to said
grandchild's


                                       5

twenty-first (21st) birthday, the Trustees may pay to him or her or to the
person having custody of him or her, without liability on the part of the
Trustees to see to the application thereof, or may expend directly such sums
from Income or principal as the corporate Trustee deems advisable for such
purpose and shall add any excess Income to principal and invest it as such. The
Trustees may pay any other minor's share of Income to his or her natural
guardian or such other person as may have custody of him or her or to any adult
as Custodian for him or her under the Pennsylvania Uniform Gifts to Minors Act
or may deposit the same in an interest-bearing account in said minor's name in
the banking department of the corporate Trustee or elsewhere.

                              (ii) Each trust shall terminate upon the first to
occur of (a) the sale or other disposition of all the shares of capital stock of
ERIE INDEMNITY COMPANY held under this Agreement or (b) the expiration of a
period of twenty-one (21) years following the death of the survivor of all the
Settlor's descendants living at the Settlor's death. Upon such termination, the
principal shall be transferred and delivered to the Settlor's respective
grandchild or, if he or she is deceased, to his or her then living issue per
stirpes.

                              (iii) Should any grandchild become deceased
without issue at any time prior to such termination, the then principal of his
or her trust shall be added equally to the shares of the other children of his
or her parent, the Settlor's child, who are either then living or deceased with
issue then living.


                                       6

                              (iv) Should all the issue of either of the
Settlor's children die before the termination of the trusts, the then principal
of said child's share shall be added to the other child's share and held as part
thereof.

            (B) If any remainderman under the foregoing provisions is a minor
and is entitled to a share in excess of the amount which may be paid to his or
her natural guardian, such share shall be retained by the corporate Trustee in a
separate trust until the eighteenth (18th) birthday of said remainderman, at
which time the trust shall terminate and the principal shall be transferred and
delivered to him or her free of trust. During such minority period, the Trustee
shall pay to the person having custody of said remainderman, without liability
on the part of the Trustee to see to the application thereof, or may expend
directly so much of the Income and principal as it deems advisable for the
welfare, comfortable support and education of said remainderman and shall add
any excess Income to principal and invest it as such. In the event of the death
of said remainderman during minority, the Trustee is authorized in its
discretion to pay part or all of the funeral expenses, and the remaining
principal shall be transferred and delivered to said remainderman's estate.

            (C) The interest of any beneficiary hereunder, including a
remainderman, in Income or principal, shall not be subject to assignment,
alienation, pledge, attachment or claims of creditors until after payment has
actually been made by the Trustees as hereinbefore provided.

            (D) Upon the death of any Income beneficiary, any Income accrued or


                                       7

received by the Trustees subsequent to the last Income payment date shall be
paid to the person or persons for whose benefit the principal producing such
Income is continued in trust or to whom such principal is distributed under the
terms hereof.

            (E) Corporate distributions received in shares of the distributing
corporation shall be allocated to principal, regardless of the number of shares
and however described or designated by the distributing corporation.

                                   Article IV

                               Powers of Trustees

            4.01. The Trustees hereunder shall have the following powers, in
addition to and not in limitation of those granted by law: to accept assets in
kind from the Settlor, his estate or elsewhere, to purchase assets from the
estate and to retain such assets in kind; to sell assets and to invest and
reinvest the proceeds and any other cash in any kind of property, real or
personal, or part interest therein, without being restricted to investments
which are listed as legal for trust funds; to pledge, exchange or mortgage real
or personal property and to lease the same for terms exceeding five (5) years;
to give options for sales, leases and exchanges; to borrow money; to compromise
claims, to vote shares of corporate stock, in person or by proxy, in favor of or
against management proposals, except that they shall vote any bank or bank
holding company stock only as directed by an individual Trustee or, if there is
none, by a competent adult Income beneficiary of the trust in which said shares
are held; in the sole discretion of the corporate Trustee, to


                                       8

carry securities in the name of a nominee; to make division or distribution
hereunder either in cash or in kind; and to allot different kinds of or
interests in property to different shares. The Trustees are specifically
authorized to accept in kind and to retain any shares of MELLON NATIONAL
CORPORATION stock, with no duty on the part of the corporate Trustee to review
the same for investment purposes.

            4.02. As among the Trustees, the corporate Trustee shall perform all
ministerial and administrative duties, including the keeping of books and
records, acting as custodian of the trust property and preparing all necessary
tax returns. Each individual Trustee named herein but not including any
Successor Trustee may delegate from time to time to his or her spouse, to any
person eligible to be a successor individual trustee, or to the corporate
Trustee, by an instrument in writing, (which instrument shall remain in effect
as long as the individual Trustee shall remain in office unless sooner revoked
or until expiring according to its terms) any and all of his or her rights,
powers and duties hereunder and may also retain such agents as he or she deems
advisable in the performance of his or her duties.

            4.03. Notwithstanding the foregoing paragraphs 4.01 and 4.02 and any
other provision of this Agreement, the following shall apply while any shares of
capital stock of ERIE INDEMNITY COMPANY are held hereunder:

            (A) At least one of the individual Trustees shall always be a member
of the Board of Directors of said Company.


                                       9

            (B) The Settlor hereby declares that the purpose of this Trust is to
create and preserve unified ownership and control of ERIE INDEMNITY COMPANY as a
means of preserving the existence of ERIE INSURANCE EXCHANGE and ERIE INDEMNITY
COMPANY as viable entities capable of furnishing insurance to subscribers at the
Exchange and employment to loyal employees of the Exchange and the Company. The
Settlor further declares that in his experience in the insurance business over
half a century, including the Great Depression of the 1930's, World War II, the
Korean and Viet Nam wars and several recessions, he has never lost sight of the
fact that ERIE INSURANCE EXCHANGE, as a reciprocal insurer, was organized and
exists primarily for the benefit of its subscribers or policyholders and that
therefore the interests of the people who put their trust in the Exchange for
the protection of their personal and business affairs must come first. However,
when the Exchange is healthy, its managing attorney-in-fact, ERIE INDEMNITY
COMPANY, will necessarily be prosperous and healthy, to the benefit of the
stockholders of the latter. The Settlor therefore urges that the Trustees
familiarize themselves with the nature of reciprocal insurers in general and the
ERIE INSURANCE EXCHANGE in particular; that in the discharge of their trust
duties they concentrate, in cooperation with the Board of Directors of ERIE
INDEMNITY COMPANY and the individual whom the Board designates from time to time
as "Manager" of the Exchange and Company, to keep ERIE INSURANCE EXCHANGE in the
best of health; and that only when the task proves impossible shall they
consider what then appears to them to be a logical change to prevent
deterioration and possible disaster to the interests of all concerned.


                                       10

            (C) The Trustees will therefore maintain and preserve ownership of
all shares of class B capital stock of ERIE INDEMNITY COMPANY unless and until
they shall determine, subject to the specific provisions of paragraph 4.04, that
the sale, exchange in a corporate combination or reorganization, or other
disposition by the Trust of such ownership will best serve said purpose, in
which event they are authorized to sell, exchange in a corporate combination or
reorganization, or otherwise dispose of the ownership of all, but not less than
all, of said shares, for whatever consideration and upon whatever terms they may
determine. In the exercise of their unlimited discretion and in making any
determination or decision relative to the ultimate purpose stated herein, the
Trustees shall be entitled to assume that whatever best serves to preserve the
existence of the Exchange and the Company also serves the best interest of any
and all beneficiaries and recipients entitled at any time to receive
distribution of any Income or principal hereunder.

            4.04. In the absence of anything herein contained to the contrary,
all powers pertaining to the administration of the trust shall be exercised only
by a majority of the Trustees in office; PROVIDED, however, that in the exercise
of the power and authority to sell, exchange in a corporate combination or
reorganization, or otherwise dispose of shares of ERIE INDEMNITY COMPANY granted
in paragraph 4.03 and referred to in paragraph 4.01, or in the taking of any
action to terminate the trust or to distribute any part of the corpus to either
individual Trustee as a beneficiary other than pursuant to withdrawal as stated
in paragraph 3.01(A)(1), the affirmative vote of the corporate Trustee shall be
required, and the affirmative or negative vote of either or


                                       11

both of the individual Trustees, although constituting a majority, shall not be
sufficient to authorize any such action.

            4.05. The corporate Trustee shall be entitled to receive annual
compensation for its services hereunder in accordance with its schedule in
effect when the services are performed, but not in excess of such compensation
as would be approved by a court of competent jurisdiction. During the Settlor's
lifetime, such compensation shall be charged wholly against income, unless the
Settlor directs otherwise in writing. For any services performed by it in
connection with the Settlor's estate, which services are normally performed by
the personal representative, the corporate Trustee shall be entitled to such
additional compensation as may be fair and reasonable under the circumstances,
not to exceed seventy-five (75%) percent of the additional compensation to which
it would be entitled as Executor if the assets of this Trust Estate were to be
superimposed upon the testamentary estate of the Settlor. The corporate Trustee
is authorized in its discretion to sell securities to the extent necessary to
pay any portion of such compensation which is chargeable against principal. The
individual Trustees shall also be entitled to reasonable compensation for their
services hereunder.

                                   Article V

                               Successor Trustees

            5.01. Upon the occurrence of any vacancy in the office of individual
Trustee due to death, incapacity, removal, resignation or any other cause, a
Successor Trustee shall be elected by a majority vote of the remaining Trustees


                                       12

and the Board of Directors of Erie Indemnity Company, with each remaining
Trustee and said Board of Directors each having one vote, provided that after
such election, as required by paragraph 4.03(1), at least one Trustee shall be a
member of said Board of Directors. If no successor is thus elected within thirty
(30) days after occurrence of the vacancy, the remaining Trustees and said Board
shall petition the Common Pleas Court of Erie County, Pennsylvania, to fill said
vacancy by appointment from a list of not fewer than three (3) persons furnished
with said petition; and the President Judge of the Orphans Court Division of
said Common Pleas Court is hereby empowered to fill said vacancy.

            5.02. The corporate Trustee may resign at any time during the
Settlor's lifetime by written notice to him. After the Settlor's death, the
corporate Trustee may resign at any time, without stating cause, by petitioning
a court of competent jurisdiction in Erie County to designate and appoint a
successor corporate Trustee. In case of the merger or consolidation of the
corporate Trustee, the resulting company shall become successor corporate
Trustee hereunder without notice to any party.

                                   Article VI

                                General Provision

            6.01. The Settlor or others may add hereto, by Will, inter vivos
transfer or beneficiary designation, cash or such property in kind as is
acceptable to the corporate Trustee.

            6.02. The Settlor reserves the right to terminate this Agreement,


                                       13

in whole or in part, by written notice delivered to the Trustees during the
Settlor's lifetime.

            6.03. The Settlor reserves the right to amend this Agreement at any
time by a proper instrument in writing, executed by the Settlor, delivered to
the Trustees during the Settlor's lifetime and accepted by the Trustees.

            6.04. The Settlor may delegate to F. WILLIAM HIRT and SUSAN RUTH
HAGEN jointly or to the survivor of them, the right to terminate this Agreement
as reserved in paragraph 6.02 above and the right to amend this Agreement as
reserved in paragraph 6.03 above, only by a Special Power of Attorney in
writing, duly executed and acknowledged by the Settlor before an officer
empowered by law to take acknowledgments, and specifically referring to said
rights and said portions of this Agreement.

            6.05. If the Settlor designates the Trustees as beneficiaries of the
proceeds of any policies of insurance on his life, the duty and responsibility
for the payment of premiums and other charges on such policies during the
Settlor's lifetime shall rest solely upon him, unless he shall expressly direct
the Trustees in writing to pay the same from Income or principal; otherwise, the
only duty of the Trustees shall be the safekeeping of such policies as are
deposited with them, and the Trustees shall be under no duty to notify the
Settlor that any such premium or other charge is due and payable. All options,
rights, privileges and benefits exercisable by or accruing to the Settlor during
his lifetime by the terms of the policies shall be for his sole


                                       14

benefit and shall not be subject to this trust; the Settlor agrees, however, not
to exercise any options whereby the proceeds would be payable to the Trustees
other than in one sum. Upon the written request of the Settlor, the Trustees
shall execute and deliver such consents and instruments as may be requisite to
enable the Settlor to exercise or avail himself of any option, right, privilege
or benefit granted by any of the policies. Upon the Settlor's death, or at such
later time as may be specified in the policies, the net proceeds of any policies
then payable to the Trustees hereunder shall be collected by the Trustees; the
receipt of the Trustees for such proceeds shall release the insurance companies
from liability on the policies, and the insurance companies shall be under no
duty to see to the application of such proceeds. The Trustees may take all steps
necessary in their opinion to enforce payment of said policies and shall be
entitled to indemnify themselves out of any property held hereunder against all
expenses incurred in taking such action.

                                  Article VII

                          Certain Rules of Construction

            7.01. As used in this Agreement, the singular may include the plural
and the plural the singular, and the use of any gender shall be applicable to
all genders.

            7.02. This Agreement has been delivered to and accepted by the
corporate Trustee in the Commonwealth of Pennsylvania and shall be governed in
all respects by the laws of said Commonwealth.


                                       15

      IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
day and year aforesaid.


/s/ Stephen E. Jones                     /s/ Henry Orth Hirt            (SEAL)
- ------------------------------------     ------------------------------
            Witness                            Henry Orth Hirt

/s/ Stephen E. Jones                     /s/ Frank William Hirt         (SEAL)
- ------------------------------------     -------------------------------
            Witness                            Frank William Hirt

/s/ Stephen E. Jones                     /s/  Susan Ruth Hagen          (SEAL)
- ------------------------------------     -------------------------------
            Witness                            Susan Ruth Hagen


(SEAL)

ATTEST                                   MELLON BANK, N.A.

/s/ Trust Officer                        By: /s/ Nancy Wilfer
- ------------------------------------         ----------------------------------
            Trust Officer                      Asst. Vice-President



                                       16