SEC Filing | Erie Indemnity Company

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PROXY STATEMENT PURSUANT TO SECTION
14(A) OF THE SECURITIES EXCHANGE
ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to "240.14a-12

Erie Indemnity Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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[ERIE INDEMNITY LOGO]

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 2002

To the Holders of Class A Common Stock and
Class B Common Stock of ERIE INDEMNITY COMPANY:

The Annual Meeting of Shareholders of Erie Indemnity Company (the
"Company") will be held at 3:00 p.m., local time, on Tuesday, April 30, 2002, at
the Auditorium of the F. W. Hirt-Perry Square Building, 100 Erie Insurance Place
(Sixth and French Streets), Erie, Pennsylvania 16530 for the following purposes:

1. To elect 12 Directors of the Company to serve until the Company's 2003
Annual Meeting of Shareholders and until their successors are elected;

2. To approve the continuation of the Company's Long-Term Incentive Plan
for the purpose of maintaining its qualification under Section 162(m)
of the Internal Revenue Code of 1986;

3. To ratify the selection of Malin, Bergquist & Company, LLP as
independent public accountants for the Company for 2002; and

4. To transact such other business as may properly come before the Annual
Meeting and any adjournment, postponement or continuation thereof.

The Board of Directors has fixed the close of business on Friday, March 8,
2002 as the record date for the determination of the holders of Class B Common
Stock entitled to notice of and to vote at the Annual Meeting. Holders of Class
A Common Stock do not have the right to vote on any of the matters to be acted
upon at the Annual Meeting.

In the event that the Annual Meeting is adjourned, pursuant to Section
1756(b)(1) of the Pennsylvania Business Corporation Law of 1988 (the "BCL"),
those shareholders entitled to vote who attend a meeting of shareholders that
was previously adjourned for lack of a quorum shall constitute a quorum for the
purpose of electing directors even though the number of shareholders present at
such adjourned meeting constitutes less than a quorum as fixed in the Company's
Bylaws.

For purposes other than the election of directors, pursuant to Section
1756(b)(2) of the BCL, those shareholders entitled to vote who attend a meeting
of shareholders that was previously adjourned for one or more periods
aggregating at least 15 days because of an absence of a quorum, shall constitute
a quorum for acting upon any matter set forth in this notice even though the
number of shareholders present at such adjourned meeting constitute less than a
quorum as fixed in the Company's Bylaws.

[ERIE LETTERHEAD FOOTER OMITTED]

This Notice and Proxy Statement, together with a copy of the Company's
Annual Report for the year ended December 31, 2001, are being sent to all
holders of Class A Common Stock and Class B Common Stock. Holders of Class B
Common Stock will also receive a form of proxy in accordance with Securities and
Exchange Commission rules.

Holders of Class B Common Stock are requested to complete, sign and return
the enclosed form of proxy in the envelope provided, whether or not they expect
to attend the Annual Meeting in person.

By Order of the Board of Directors,

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

April 1, 2002
Erie, Pennsylvania

ERIE INDEMNITY COMPANY
100 Erie Insurance Place
Erie, Pennsylvania 16530

PROXY STATEMENT

This Proxy Statement, which is first being mailed to the holders of Class A
Common Stock and Class B Common Stock of Erie Indemnity Company (the "Company")
on or about April 1, 2002, is furnished in connection with the solicitation of
proxies by the Board of Directors of the Company from holders of Class B Common
Stock to be voted at the Annual Meeting of Shareholders to be held at 3:00 p.m.,
local time, on Tuesday, April 30, 2002 and at any adjournment, postponement or
continuation thereof (the "Annual Meeting") at the Auditorium of the F.W.
Hirt-Perry Square Building, 100 Erie Insurance Place (Sixth and French Streets),
Erie, Pennsylvania 16530. Holders of Class B Common Stock will also receive a
form of proxy in accordance with Securities and Exchange Commission ("SEC")
rules.

Shares of Class B Common Stock represented by proxies in the accompanying
form, if properly signed and returned, will be voted in accordance with the
specifications made thereon by the holders of Class B Common Stock. Any proxy
representing shares of Class B Common Stock not specifying to the contrary will
be voted for the election of the candidates for director named below who were
nominated by the Nominating Committee of the Company's Board of Directors, for
the approval of the continuation of the Company's Long-Term Incentive Plan (the
"LTIP") and for the ratification of the selection of Malin, Bergquist & Company,
LLP as independent public accountants for the Company for 2002. A holder of
Class B Common Stock who signs and returns a proxy in the accompanying form may
revoke it at any time before it is voted by giving written notice of revocation
to the Secretary of the Company, by furnishing a duly executed proxy bearing a
later date to the Secretary of the Company or by attending the Annual Meeting
and voting in person.

The cost of solicitation of proxies in the accompanying form will be borne
by the Company, including expenses in connection with preparing and mailing this
Proxy Statement. Such solicitation will be made by mail and may also be made on
behalf of the Company in person or by telephone by the Company's regular
officers and employees, none of whom will receive special compensation for such
services. The Company, upon request therefor, will also reimburse brokers,
nominees, fiduciaries and custodians or persons holding shares of Class B Common
Stock in their names or in the names of nominees for their reasonable expenses
in forwarding the Company's proxy material to beneficial owners.

Only holders of Class B Common Stock of record at the close of business on
March 8, 2002 are entitled to vote at the Annual Meeting. Each share of Class B
Common Stock is entitled to one vote. Except as may be otherwise provided in
Sections 1756(b)(1) and (2) of the Pennsylvania Business Corporation Law of 1988
(the "BCL") in the case of adjourned meetings, a majority of the outstanding
shares of Class B Common Stock will constitute a quorum at the Annual Meeting
for the election of directors, for approval of the continuation of the LTIP and
for ratification of the selection of independent public accountants. Cumulative
voting rights do not exist with respect to the election of directors. The 12
candidates for election as a director, including the persons Susan Hirt Hagen
("Mrs. Hagen") proposes to nominate at the Annual Meeting named under "Mrs.
Hagen's Proposed Director Candidates", who receive the largest number of votes
cast by the holders of Class B Common Stock in person or by proxy at the Annual
Meeting will be elected as directors. The approval of the continuation of the
LTIP and the ratification of the selection of Malin, Bergquist & Company, LLP as
the Company's independent public accountants for 2002 will require the
affirmative vote of a majority of the votes cast at the Annual Meeting by the
holders of Class B Common Stock. Shares of Class B Common Stock held by brokers
or nominees as to which voting instructions have not been received from the
beneficial owner or person otherwise

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entitled to vote and as to which the broker or nominee does not have
discretionary voting power, i.e., broker nonvotes, will be treated as not
present and not entitled to vote for nominees for election as directors or for
approval of the LTIP. Abstentions will be treated as the withholding of
authority to vote for nominees for election as directors or for approval of the
continuation of the LTIP. Abstentions from voting and broker nonvotes will have
no effect on the election of directors or the approval of the continuation of
the LTIP because they will not represent votes cast at the Annual Meeting.

As of the close of business on March 8, 2002, the Company had 63,813,523
outstanding shares of Class A Common Stock, which are not entitled to vote on
any of the matters to be acted upon at the Annual Meeting, and 3,070 shares of
Class B Common Stock, which have the exclusive right to vote on all matters to
be acted upon at the Annual Meeting.

The H.O. Hirt Trusts collectively own 2,340 shares of Class B Common Stock,
which, because such shares represent 76.22% of the outstanding shares of Class B
Common Stock, is sufficient to determine the outcome of any matter submitted to
a vote of the holders of the Class B Common Stock, assuming all of the shares
held by the H.O. Hirt Trusts are voted in the same manner. The trustees of the
H.O. Hirt Trusts as of the record date for the Annual Meeting are F. William
Hirt ("Mr. Hirt"), Mrs. Hagen and Bankers Trust Company of New York ("Bankers
Trust"). On March 3, 1999, Bankers Trust advised the Orphans' Court Division of
the Court of Common Pleas of Erie County, Pennsylvania (the "Court") of Bankers
Trust's resignation as the corporate co-trustee of the H. O. Hirt Trusts. As of
the date of this Proxy Statement, the Court is considering two candidates for
successor corporate co-trustee that have been formally proposed: First Union
National Bank, which was proposed by Mr. Hirt, and Sentinel Trust Company, which
was proposed by Mrs. Hagen. The Company does not know whom the Court will
appoint as successor corporate co-trustee or whether such appointment will be
effective before or after the Annual Meeting.

Under the provisions of the H.O. Hirt Trusts, the shares of Class B Common
Stock held by the H.O. Hirt Trusts are to be voted as directed by a majority of
trustees then in office. If at least a majority of the trustees then in office
of both of the H.O. Hirt Trusts vote for the election of the 12 candidates for
director named below, who have been nominated by the Nominating Committee of the
Company's Board of Directors, for approval of the continuation of the LTIP and
for ratification of the selection of Malin, Bergquist & Company, LLP as the
Company's independent public accountants for 2002, such candidates will be
elected as directors of the Company, the continuation of the LTIP will be
approved and the selection of Malin, Bergquist & Company, LLP as the Company's
independent public accountants for 2002 will be ratified, even if all shares of
Class B Common Stock other than those held by the H.O. Hirt Trusts are not voted
for such candidates, for such approval or for such ratification. The Company has
not been advised as of the date of this Proxy Statement, however, how the
trustees of the H.O. Hirt Trusts intend to vote at the Annual Meeting.

Reference is made to "Legal Proceedings" in this Proxy Statement for
further information regarding litigation involving the H.O. Hirt Trusts.

The Company, which is part of the Erie Insurance Group, is a Pennsylvania
business corporation formed in 1925 to serve as the attorney-in-fact for Erie
Insurance Exchange (the "Exchange"), a Pennsylvania-domiciled reciprocal
insurance exchange, whereby the subscribers exchange insurance contracts among
themselves for the purpose of providing indemnity among themselves from losses
through a common attorney-in-fact. Each subscriber gives a power of attorney to
the Company under which it represents each subscriber as its attorney-in-fact in
exchanging insurance contracts with other subscribers.

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The Company's principal business activity consists of management of the
Exchange. The Company receives management fees from the Exchange as compensation
for acting as attorney-in-fact for the Exchange, managing the business and
affairs of the Exchange and paying certain general operating expenses of the
Exchange. These management fees account for the majority of the Company's
consolidated revenues. The Company's principal executive offices are located at
100 Erie Insurance Place, Erie, Pennsylvania 16530.

The Company is also engaged in the property/casualty insurance business
through its wholly owned subsidiaries, Erie Insurance Company ("Erie Insurance
Co."), Erie Insurance Company of New York ("Erie NY") and Erie Insurance
Property & Casualty Company ("EI P&C") and through its management of Flagship
City Insurance Company ("Flagship"), a subsidiary of the Exchange. In addition,
the Company holds investments in both affiliated and unaffiliated entities,
including a 21.6% interest in the common stock ("EFL Common Stock") of Erie
Family Life Insurance Company ("EFL"), a life insurance company. The Exchange
has a 53.5% interest in the EFL Common Stock.

BENEFICIAL OWNERSHIP OF COMMON STOCK

The following table sets forth as of February 28, 2002 the amount of the
outstanding Class A Common Stock and Class B Common Stock of the Company and
shares of EFL Common Stock beneficially owned by (i) each person who is known by
the Company to own beneficially more than 5% of the Company's Class A Common
Stock or Class B Common Stock or EFL Common Stock, (ii) each current director
and candidate for director nominated by the Nominating Committee, (iii) each
current executive officer named in the Summary Compensation Table and (iv) all
current executive officers and directors of the Company as a group.

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Shares of Class A Percent of Shares of Class B Percent of Shares of EFL
Common Stock Outstanding Common Stock Outstanding Common Stock Percent of
Name of Individual Beneficially Class A Beneficially Class B Beneficially Outstanding EFL
or Identity of Group Owned(1)(2) Common Stock(3) Owned(1)(2) Common Stock(3) Owned(1)(2) Common Stock (3)
-------------------- ----------- --------------- ----------- --------------- ----------- ----------------

5% Holders:

Black Interests
Limited Partnership(4)
Erie, Pennsylvania 8,726,250 13.67% 390 12.70% -- --

Samuel P. Black &
Associates, Inc.(4)
Erie, Pennsylvania 24,000 -- -- -- 2,730(12) --

Samuel P. Black, III(4)
Erie, Pennsylvania 129,750 -- 20 -- 129,667(12) 1.4%

Hagen Family
Limited Partnership(5)(6)
Erie, Pennsylvania 10,092,900 15.82% 1 -- 154,182(13) 1.6%

Susan Hirt Hagen(5)(6)(7)
Erie, Pennsylvania 6,658,800 10.43% 12 -- 600(14) --

H.O. Hirt Trusts(5)(7)
Erie, Pennsylvania -- -- 2,340 76.22% -- --

Hirt Family Limited
Partnership(8)
Erie, Pennsylvania 11,830,000 18.54% -- -- 166,934(15) 1.8%

F. William Hirt(7)(8)
Erie, Pennsylvania 892,340 1.40% 20 -- 100(16) --

Virginia M. Kurytnak
Erie, Pennsylvania 239,369 -- 180 5.86% -- --

Erie Insurance Exchange
Erie, Pennsylvania -- -- -- -- 5,055,562 53.5%

Erie Indemnity Company
Erie, Pennsylvania -- -- -- -- 2,043,900 21.6%

Directors and Nominees
for Director (9):

J. Ralph Borneman, Jr 50,000 -- -- -- 1,536 --
Patricia Garrison-Corbin 100 -- -- -- -- --
Samuel P. Katz 500 -- -- -- -- --
Claude C. Lilly, III 500 -- -- -- -- --
Stephen A. Milne 21,271 -- -- -- 200 --
Henry N. Nassau 100 -- -- -- -- --
John M. Petersen(10) 2,190,037 3.12% 1 -- 92,141(17) --
Jan R. Van Gorder 124,667 -- 1 -- 75(18) --
Robert C. Wilburn 2,000 -- -- -- 500 --

Executive Officers (11):

John J. Brinling, Jr 15,075 -- -- -- 1,260(19) --
Philip A. Garcia 91,175 -- -- -- 1,275 --
Jeffrey A. Ludrof 2,244 -- -- -- -- --
All Directors, Nominees
for Director and
Executive Officers as
a Group (15 persons) 40,851,709 64.02% 2,785 90.72% 551,200 5.8%

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(1) Information furnished by the named persons.

(2) Under the rules of the SEC, a person is deemed to be the beneficial owner
of securities if the person has, or shares, "voting power" (which includes
the power to vote, or to direct the voting of, such securities) or
"investment power" (which includes the power to dispose, or to direct the
disposition, of such securities). Under these rules, more than one person
may be deemed to be the beneficial owner of the same securities. Securities
beneficially owned also include securities owned jointly, in whole or in
part, or individually by the person's spouse, minor children or other
relatives who share the same home. The information set forth in the above
table includes all shares of Class A Common Stock and Class B Common Stock
and all shares of EFL Common Stock over which the named individuals,
individually or together, share voting power or investment power, adjusted,
however, to eliminate the reporting of shares more than once in order not
to overstate the aggregate beneficial ownership of such persons and to
reflect shares as to which the named individuals disclaim beneficial
ownership. The table does not reflect shares of Class A Common Stock
issuable upon conversion of shares of Class B Common Stock, each of which
is currently convertible into 2,400 shares of Class A Common Stock.

(3) Less than 1% unless otherwise indicated.

(4) Mr. Black is President of Samuel P. Black & Associates, Inc. and the
managing general partner and a limited partner of Black Interests Limited
Partnership. Mr. Black has the right to vote the shares held by Samuel P.
Black & Associates Inc. and Black Interests Limited Partnership. Mr. Black
has sole voting power over 129,750 shares of Class A Common Stock and 10
shares of Class B Common Stock that he owns directly, and also has voting
power over 10 shares of Class B Common Stock owned by the Estate of Samuel
P. Black, Jr., of which Mr. Black is the Executor.

(5) Mrs. Hagen owns 300 shares of Class A Common Stock and 12 shares of Class B
Common Stock directly, 1,170 shares of Class B Common Stock indirectly as a
beneficiary of one of the H.O. Hirt Trusts described in footnote 7 below,
6,658,500 shares of Class A Common Stock indirectly through a personal
trust of which Mrs. Hagen is the sole trustee and 10,092,900 shares of
Class A Common Stock and one share of Class B Common Stock indirectly
through the Hagen Family Limited Partnership, of which Mrs. Hagen and her
husband, Thomas B. Hagen, are limited partners. As the general partner of
the Hagen Family Limited Partnership, Mr. Hagen has the sole right to vote
such shares. Under the rules of the SEC described in footnote (2), the
maximum number of shares of Class A Common Stock and Class B Common Stock
that Mrs. Hagen and Thomas B. Hagen together could be deemed to own
beneficially is 16,756,800 shares of Class A Common Stock, or 26.26% of the
outstanding shares of Class A Common Stock, and 1,186 shares of Class B
Common Stock, or 38.6% of the outstanding shares of Class B Common Stock.
Mr. and Mrs. Hagen together could also be deemed the beneficial owners of
an additional 2,846,400 shares of Class A Common Stock issuable upon the
conversion of the 1,186 shares of Class B Common Stock they together could
be deemed to own beneficially. If all 1,186 shares of Class B Common Stock
Mr. and Mrs. Hagen together could be deemed to own beneficially were
converted into Class A Common Stock, the maximum number of shares of Class
A Common Stock that Mr. and Mrs. Hagen together could be deemed to own
beneficially would be 19,603,200 shares of Class A Common Stock, or 29.41%
of the then outstanding shares of Class A Common Stock. Thomas B. Hagen
disclaims beneficial ownership of the shares of Class A Common Stock and
Class B Common Stock owned by Mrs. Hagen.

(6) Excludes 5,100 shares of Class A Common Stock and 3 shares of Class B
Common Stock owned by Thomas B. Hagen, Mrs. Hagen's husband. Mrs. Hagen
disclaims beneficial ownership of these shares.

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(7) There are two H.O. Hirt Trusts, one for the benefit of Mr. Hirt and one for
the benefit of Mrs. Hagen. Each of the H.O. Hirt Trusts is the record owner
of 1,170 shares of Class B Common Stock, or 38.11% of the outstanding
shares of Class B Common Stock. The trustees of the H.O. Hirt Trusts as of
the date of this Proxy Statement are Mr. Hirt, Mrs. Hagen and Bankers
Trust. Mr. Hirt and Mrs. Hagen, who are brother and sister, are each the
beneficial owner of 1,170 shares of Class B Common Stock held by the H.O.
Hirt Trust of which each is the beneficiary and, as Co-Trustees, along with
Bankers Trust, have shared voting power over the 2,340 shares of Class B
Common Stock held by the H.O. Hirt Trusts. See "Legal Proceedings."

(8) Mr. Hirt owns 892,340 shares of Class A Common Stock and 20 shares of Class
B Common Stock directly, 1,170 shares of Class B Common Stock indirectly as
a beneficiary of one of the H.O. Hirt Trusts described in footnote 7 above
and 11,830,000 shares of Class A Common Stock indirectly through the Hirt
Family Limited Partnership of which Mr. Hirt is the general and a limited
partner. As the general partner of the Hirt Family Limited Partnership, Mr.
Hirt has the sole right to vote such shares. Under the rules of the SEC
described in footnote (2), the maximum number of shares of Class A Common
Stock and Class B Common Stock that Mr. Hirt could be deemed to own
beneficially is 12,722,340 shares of Class A Common Stock, or 19.94% of the
outstanding shares of Class A Common Stock, and 1,190 shares of Class B
Common Stock, or 38.8% of the outstanding shares of Class B Common Stock.
Mr. Hirt could also be deemed the beneficial owner of an additional
2,856,000 shares of Class A Common Stock issuable upon the conversion of
the 1,190 shares of Class B Common Stock he is deemed to own beneficially.
If all 1,190 shares of Class B Common Stock Mr. Hirt could be deemed to own
beneficially were converted into Class A Common Stock, the maximum number
of shares of Class A Common Stock that Mr. Hirt could be deemed to own
beneficially would be 15,578,340 shares of Class A Common Stock, or 23.37%
of the then outstanding shares of Class A Common Stock.

(9) Excludes directors listed under "5% Owners."

(10) Mr. Petersen disclaims beneficial ownership of 120,000 shares of Class A
Common Stock owned by his wife, Gertrude E. Petersen, which have not been
included in the total listed herein. However, the total includes 200,000
shares held in the Petersen Family Limited Partnership of which Mr.
Petersen is the general partner and retains the right to vote such shares.

(11) Excludes executive officers listed under "Directors."

(12) Mr. Black is President of Samuel P. Black & Associates, Inc., which holds
of record 2,730 shares. The 129,667 shares include 1,000 shares held of
record by the Estate of Samuel P. Black, Jr., of which Mr. Black is the
Executor; 59,388 shares held by the Samuel P. Black, Jr. 1996 Charitable
Remainder Unitrust of which Mr. Black is a beneficiary and 60,000 shares
held by the Black Family Foundation of which Mr. Black is an officer. Mr.
Black directly owns 4,479 shares and two children of Mr. Black each own
2,400 shares.

(13) These shares are held by the Hagen Family Limited Partnership. Mrs. Hagen
and her husband, Thomas B. Hagen, are limited partners of the Hagen Family
Limited Partnership. As the general partner of the Hagen Family Limited
Partnership, Mr. Hagen has the sole right to vote such shares.

(14) Includes 300 shares owned directly by Mrs. Hagen and 300 shares held by
Thomas B. Hagen, Mrs. Hagen's husband. Mrs. Hagen disclaims beneficial
ownership of these shares held by Mr. Hagen.

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(15) These shares are held in a trust established by Mr. Hirt and are held by
the Hirt Family Limited Partnership. As the general partner of the Hirt
Family Limited Partnership, Mr. Hirt has the sole right to vote such
shares.

(16) Mr. Hirt owns 100 shares directly.

(17) Of this total, 30,000 shares are held by Mr. Petersen's wife, Gertrude E.
Petersen, as to which Mr. Petersen disclaims beneficial ownership.

(18) Of this total, 30 shares are held directly by Mr. Van Gorder and each of
his three sons owns 15 shares.

(19) Includes 630 shares held by Mr. Brinling, 315 shares held in an IRA for Mr.
Brinling and 315 shares held in an IRA for his wife.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires that the officers and directors of a corporation, such
as the Company, that has a class of equity securities registered under Section
12 of the Exchange Act, as well as persons who own 10% or more of a class of
equity securities of such a corporation, file reports of their ownership of such
securities, as well as monthly statements of changes in such ownership, with the
corporation and the SEC. Based upon written representations received by the
Company from its officers and directors and 10% or greater shareholders, and the
Company's review of the monthly statements of changes of ownership filed with
the Company by its officers and directors and 10% or greater shareholders during
2001, the Company believes that all such filings required during 2001 were made
on a timely basis.

PROPOSAL 1
ELECTION OF DIRECTORS

INTRODUCTION

The election of directors of the Company by the holders of its Class B
Common Stock is governed by provisions of the Pennsylvania Insurance Holding
Companies Act in addition to provisions of the BCL, the Pennsylvania
Associations Code and the Company's Bylaws. The following discussion summarizes
these statutory provisions and describes the process undertaken by the
Nominating Committee in connection with the nomination of candidates for
election as directors by the holders of Class B Common Stock at the Annual
Meeting.

BACKGROUND OF THE COMPANY'S NOMINATING COMMITTEE

Section 1405(c)(4) of the Pennsylvania Insurance Holding Companies Act,
which is applicable to the Company, provides that the board of directors of a
domestic insurer shall establish one or more committees comprised solely of
directors who are not officers or employees of the insurer or of any entity
controlling, controlled by or under common control with the insurer and who are
not beneficial owners of a controlling interest in the voting stock of the
insurer or any such entity, and that such committee or committees shall have
responsibility for recommending the selection of the insurer's independent
certified public accountants, reviewing the insurer's financial condition, the
scope and results of the insurer's independent audit and any internal audit,
nominating candidates for director for election by the

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shareholders, evaluating the performance of officers deemed to be principal
officers of the insurer and recommending to the board of directors the selection
and compensation of the principal officers.

Section 3.09 of the Company's Bylaws is consistent with this statutory
provision and provides that (i) the Company's Board of Directors shall appoint
annually a Nominating Committee that shall consist of not less than three
directors who are not officers or employees of the Company or of any entity
controlling, controlled by or under common control with the Company and who are
not beneficial owners of a controlling interest in the voting securities of the
Company and (ii) the Nominating Committee shall, prior to each annual meeting of
shareholders, determine and nominate candidates for the office of director of
the Company to be elected by the shareholders to serve terms as established by
the Bylaws and until their successors are elected.

In accordance with this Bylaw provision, on April 24, 2001, the Company's
Board of Directors designated a Nominating Committee consisting of John M.
Petersen, Chair, Samuel P. Black, III, J. Ralph Borneman, Jr., Patricia
Garrison-Corbin and Robert C. Wilburn. None of these persons is an officer or
employee of the Company or of any entity controlling, controlled by or under
common control with the Company or a beneficial owner of a controlling interest
in the voting stock of the Company or any such entity.

ESTABLISHMENT OF SHAREHOLDER NOMINATING PROCEDURES

On August 16, 1999, the Company's Board of Directors voted to amend the
Company's Bylaws by adding Section 2.07(a) to the Company's Bylaws for the
purpose of establishing a fair and reasonable procedure by which any holder of
Class A Common Stock or Class B Common Stock could propose to the Nominating
Committee one or more persons whom the shareholder believes would be an
appropriate candidate for nomination by the Nominating Committee for election as
a director by the holders of Class B Common Stock at a forthcoming meeting of
shareholders at which directors are to be elected. The Company believes such a
procedure is an important shareholder right, and that proposals from
shareholders assist the Nominating Committee in the exercise of its
responsibility to nominate candidates for election as directors by the holders
of Class B Common Stock. Section 2.07(a) of the Company's Bylaws establishes a
time period in which any such proposal must be submitted, and specifies the
information required to be submitted about any person so proposed in order that
the Nominating Committee has adequate time and information to review the
information submitted, interview the proposed candidate if the Nominating
Committee so desires and determine whether to nominate the person proposed as a
candidate for election as a director by the holders of Class B Common Stock.

Under Section 2.07(a) of the Company's Bylaws, the names of persons
proposed to the Nominating Committee and the requisite supporting information in
respect of directors to be elected by shareholders at the Annual Meeting were
required to be submitted not before November 29, 2001 and not later than
December 29, 2001.

Mrs. Hagen, by a letter to the Company dated December 28, 2001, proposed
the following eleven persons: Mrs. Hagen, Kenneth B. Frank, Patricia
Garrison-Corbin, Louis V. Imundo, Jr., Samuel P. Katz, Claude C. Lilly, III,
Henry N. Nassau, Richard J. Pinola, Denise Illig Robison, William H. Starbuck
and Richard L. Stover (collectively, the "Hagen Nominees"), for consideration by
the Nominating Committee for nomination as candidates for election as directors
by shareholders at the Annual Meeting. Of the Hagen Nominees, Ms.
Garrison-Corbin, Mrs. Hagen and Messrs. Katz, Lilly and Nassau are currently
directors of the Company and have been nominated for reelection by the
Nominating Committee. Mrs. Hagen's letter stated, however, that if at least
seven Hagen Nominees (including Mrs. Hagen) are not nominated by the Nominating
Committee when it announces its slate, Mrs. Hagen proposes to nominate directly
at the Annual Meeting all of those Hagen Nominees not nominated by the
Nominating

-8-

Committee for election as directors of the Company. Mrs. Hagen also
stated that, in the event that the size of the Board is increased beyond 12,
Mrs. Hagen proposes to nominate all Hagen Nominees that are not nominated by the
Nominating Committee and that Mrs. Hagen reserves the right to nominate
additional candidates at the Annual Meeting if the size of the Board is
increased above 16, the current maximum number of directors permitted by the
Company's Bylaws. See "Mrs. Hagen's Proposed Director Candidates."

Mr. Hirt, by a letter to the Company dated December 10, 2001, proposed
Cyrus R. Wellman for consideration by the Nominating Committee for nomination as
a candidate for election as director by shareholders at the Annual Meeting.

ACTIONS TAKEN BY THE NOMINATING COMMITTEE

The Nominating Committee met on March 13, 2002 for the purpose of
nominating candidates for election as directors by the holders of Class B Common
Stock at the Annual Meeting. The Nominating Committee recommended to the Board
of Directors that the size of the Company's Board of Directors remain at 12
persons and the Nominating Committee nominated 12 persons (Samuel P. Black, III,
J. Ralph Borneman, Jr., Patricia Garrison-Corbin, Mrs. Hagen, Mr. Hirt, Samuel
P. Katz, Claude C. Lilly, III, Stephen A. Milne, Henry N. Nassau, John M.
Petersen, Jan R. Van Gorder and Robert C. Wilburn), each of whom is currently a
director of the Company, as candidates for election as directors by the holders
of Class B Common Stock at the Annual Meeting.

On March 26, 2002, the Board of Directors accepted the Report of the
Nominating Committee and approved the nomination by the Nominating Committee of
the candidates for election as directors by the holders of Class B Common Stock
at the Annual Meeting set forth under "Candidates for Election."

CANDIDATES FOR ELECTION

The Company's Bylaws provide that the Board of Directors shall consist of
not less than 7, nor more than 16, directors, with the exact number to be fixed
from time to time by resolution of the Board of Directors. The Board of
Directors has, by resolution, set the number of directors to be elected at the
Annual Meeting at 12.

Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the election of the nominees named below, all of whom are
currently Directors of the Company, and each of whom was nominated for election
as a director by the Nominating Committee of the Board of Directors. If a
nominee becomes unavailable for any reason, it is intended that the proxies will
be voted for a substitute nominee selected by the Nominating Committee of the
Board of Directors. The Board of Directors has no reason to believe the nominees
named will be unable to serve if elected. Any vacancy occurring on the Board of
Directors for any reason may be filled by a majority vote of the directors then
remaining in office until the next succeeding annual meeting of the Company's
shareholders.

The names of the candidates for director nominated by the Nominating
Committee, together with certain information regarding them, are as follows:

-9-

Director
Age Principal Occupation of the
as of for Past Five Years and Company
Name 4/1/02 Positions with Erie Insurance Group Since
- ---------------------------------- ------ -------------------------------------------------------- --------

Samuel P. Black, III 60 President, Treasurer and Secretary, Samuel P. Black & 1997
(1)(3)(4)(5) Associates, Inc., insurance agency; Director, the
Company, Erie Insurance Co., EFL, Flagship and EI P&C.

J. Ralph Borneman, Jr. CIC 63 President and Chief Executive Officer, Body-Borneman 1992
(3)(4) Associates, Inc., insurance agency; President,
Body-Borneman, Ltd. and Body-Borneman, Inc., insurance
agencies; Director, the Company, EFL, Erie Insurance
Co., Erie NY and National Penn Bancshares.

Patricia Garrison- 54 Founder, President and Chief Executive Officer of P.G. 2000
Corbin (2)(4)(6C) Corbin & Company, Inc., financial advisory and
investment management services for municipalities,
since 1986; Director, the Company, Erie Insurance Co.,
EFL and P.G. Corbin Asset Management, Inc.

Susan Hirt Hagen 66 Managing Partner, Hagen, Herr & Peppin, Group 1980
(1)(5C) Relations Consultants, from 1990 to 1999; Co-Trustee
of H.O. Hirt Trusts; Director, the Company, EFL and
Erie Insurance Co. since 1980.

F. William Hirt, CPCU 76 Chairman of the Board of the Company, EFL, Erie 1965
(1C)(5) Insurance Co., EI P&C and Flagship since September
1993; Chairman of the Board of Erie NY since April
1994; Chairman of the Executive Committee of the
Company and EFL since November 1990; Interim President
and Chief Executive Officer of the Company, EFL, Erie
Insurance Co., EI P&C, Flagship and Erie NY from
January 1, 1996 to February 12, 1996; Chairman of the
Board, Chief Executive Officer and Chairman of the
Executive Committee of the Company, EFL and Erie
Insurance Co. for more than five years prior thereto;
Co-Trustee of the H.O. Hirt Trusts; Director, the
Company, EFL, Erie Insurance Co., Erie NY, EI P&C and
Flagship.

-10-

Samuel P. Katz 52 Chief Executive Officer, Greater Philadelphia First, a 2000
(2)(3) business leadership civic organization, July 2000 to
present; Founder, President, EnterSport Capital
Advisors, Inc., a private investment and consulting
firm, September 1997 to present; Managing Partner,
Wynnefield Capital Advisors, Inc., a fund manager of a
private equity venture fund, September 1997 to
present; Partner, Stafford Capital Partners, L.P.,
investment partnership and developer, 1994 to 1997;
Co-Chief Executive Officer, Public Financial
Management, Inc., a municipal finance advisor, 1976 to
1994; Director, the Company, Erie Insurance Co. and
EFL.

Claude C. Lilly, III, Ph.D., 55 Dean, Belk College of Business Administration, 2000
CPCU, CLU University of North Carolina Charlotte, July 1998 to
(2) present; James H. Harris Chair of Risk Management and
Insurance, Belk College of Business Administration,
University of North Carolina Charlotte, August 1997 to
present; Chief Executive Officer, Quinstone, Inc.,
manufacturing, August 1995 to January 1996; Professor
of Risk Management, Florida State University 1981 to
August 1997; Director, the Company, Erie Insurance Co.
and EFL.

Stephen A. Milne, CIC 53 Retired since January 2002; President and Chief 1996
(1)(6) Executive Officer of the Company, EFL and Erie
Insurance Co. from February 1996 to January 2002 and
President and Chief Executive Officer of Flagship, EI
P&C and Erie NY from March 1996 to January 2002;
Executive Vice President Insurance Operations of the
Company, Erie Insurance Co., Flagship, EI P&C and Erie
NY from January 11, 1994 to February 12, 1996; Owner,
Bennett-Damascus Insurance Agency, March 1991 to
December 31, 1993; Senior Vice President-Agency
Division, the Company, EFL and Erie Insurance Co. 1988
to 1991; Director, the Company, Erie Insurance Co.,
EFL, Flagship, EI P&C and Erie NY.

-11-

Henry N. Nassau, Esq. 47 Managing Director, General Counsel and Secretary, 2000
(1)(6) Internet Capital Group, Inc., internet holding
company, May 1999 to present; Partner and Chairman of
the Business Department, Dechert, attorneys, September
1987 to May 1999; Director, CourtLink, Inc., Bliley
Technologies, Inc., Albert Abela Corporation, Higher
Mountain, Inc., PaperExchange, Inc., the Company, Erie
Insurance Co. and EFL.

John M. Petersen 73 Retired; President and Chief Executive Officer of the 1979
(1)(4C) Company, EFL, Erie Insurance Co., Flagship and EI P&C
1993 to 1995 and Erie NY 1994 to 1995; President,
Treasurer and Chief Financial Officer of the Company,
Erie Insurance Co. and EFL from November 1990 and of
Flagship and EI P&C from 1992 and 1993, respectively,
to September 1993; President, Treasurer and Chief
Financial Officer of EFL and Executive Vice President,
Treasurer and Chief Financial Officer of the Company
and Erie Insurance Co. for more than five years prior
thereto; Director, the Company, EFL, Erie Insurance
Co., Flagship, EI P&C, Erie NY and Spectrum Control.

Jan R. Van Gorder, Esq. 54 Acting President and Chief Executive Officer of the 1990
(1) Company, EFL, Erie Insurance Co., Flagship, Erie NY
and EI P&C since January 2002; Senior Executive Vice
President, Secretary and General Counsel of the
Company, EFL and Erie Insurance Co. since 1990, and of
Flagship and EI P&C since 1992 and 1993, respectively
and of Erie NY since April 1994; Senior Vice
President, Secretary and General Counsel of the
Company, EFL and Erie Insurance Co. for more than five
years prior thereto; Director, the Company, EFL, Erie
Insurance Co., Flagship, EI P&C and Erie NY.

-12-

Robert C. Wilburn 58 President and Chief Executive Officer, Gettysburg 1999
(2C)(3C)(4) National Battlefield Museum Foundation since 2000;
Distinguished Service Professor, Carnegie Mellon
University since 1999; President and Chief Executive
Officer, Colonial Williamsburg Foundation from 1992 to
1999; President, Carnegie Institute Library of
Pittsburgh from 1984 to 1992; Director, the Company,
Erie Insurance Co. and EFL.

- ----------

(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Executive Compensation and Development Committee.
(4) Member of the Nominating Committee.
(5) Member of the Charitable Giving Committee.
(6) Member of the Investment Committee.
C Designates Committee Chairperson.

The Board of Directors met five times in 2001. The standing committees of
the Company's Board of Directors are the Executive Committee, the Audit
Committee, the Executive Compensation and Development Committee, the Nominating
Committee, the Charitable Giving Committee and the Investment Committee.

The Executive Committee, which did not meet during 2001, has the authority,
subject to certain limitations, to exercise the power of the Board of Directors
between regular meetings.

The Audit Committee, which met five times in 2001, has responsibility,
consistent with Section 1405(c)(4) of the Pennsylvania Insurance Holding
Companies Act and the Company's Bylaws, for recommending to the Board of
Directors the selection of independent public accountants, reviewing the scope
and results of the audit and reviewing the adequacy of the Company's accounting,
financial, internal and operating controls.

The Executive Compensation and Development Committee, which met four times
in 2001, has responsibility, consistent with Section 1405(c)(4) of the
Pennsylvania Insurance Holding Companies Act and the Company's Bylaws, for
recommending to the Board of Directors, at least annually, the compensation of
the three highest paid officers of the Company and such other officers as the
Board of Directors may designate, recommending all forms of direct compensation,
including any incentive programs, that would be appropriate for management and
employees of the Company and such other responsibilities as the Board of
Directors may designate. See "Executive Compensation -- Compensation Committee
Interlocks and Insider Participation."

The Nominating Committee, which met four times in 2001, has responsibility
consistent with Section 1405(c)(4) of the Pennsylvania Insurance Holding
Companies Act and the Company's Bylaws, for conducting searches for and the
nomination of a slate of candidates to stand for election to the Board of

-13-

Directors at the Company's annual meetings of shareholders and to nominate
candidates to fill vacancies on the Board of Directors between annual meetings
of shareholders. See also "Legal Proceedings."

The Charitable Giving Committee, which met four times in 2001, has
responsibility for recommending to the Chief Executive Officer charitable gifts
by the Company within a budgetary limit established by the Board of Directors.

The Investment Committee, which met twice in 2001, has responsibility to
assist the Company's Board of Directors in its general oversight of the
investments of the Company.

In November 1999, Mr. Milne advised the Board of Directors that he had been
diagnosed with amyotrophic lateral sclerosis and that he would continue to serve
as the Company's Chief Executive Officer as long as he believed it appropriate
to do so and to be consistent with the Company's best interests. At its
September 2001 meeting, the Company's Board of Directors, at Mr. Milne's
recommendation, appointed a CEO Selection Committee for the purpose of
recommending a candidate to succeed Mr. Milne as President and Chief Executive
Officer of the Company. Mr. Petersen serves as the Chairperson of the CEO
Selection Committee, the other members of which are Mrs. Hagen and Messrs.
Black, Borneman, Hirt and Katz. Mr. Milne serves as an ex-officio member of the
CEO Selection Committee. In November 2001, the CEO Selection Committee retained
Korn/Ferry International to assist in the identification and selection of a
successor to Mr. Milne. On January 18, 2002, Mr. Milne retired and Mr. Van
Gorder was appointed Acting Chief Executive Officer. As of March 18, 2002, the
CEO Selection Committee was interviewing candidates to become the Company's
President and Chief Executive Officer, and had not made any recommendations to
the Board of Directors.

All directors hold office until their respective successors are elected or
until their earlier death, resignation or removal. Officers serve at the
discretion of the Board of Directors. There are no family relationships between
any directors or executive officers of the Company, except that Mr. Hirt,
Chairman of the Board, Chairman of the Executive Committee and a director, is
the brother of Mrs. Hagen, a director.

During 2001, each director attended more than 75% of the number of meetings
of the Board of Directors and the standing committees of the Board of Directors
of which such director was a member.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE 12 CANDIDATES FOR DIRECTOR
---
NOMINATED BY THE NOMINATING COMMITTEE.

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid by the Company during
the fiscal years ended December 31, 2001, 2000 and 1999 to the Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company during 2001 for services rendered in all capacities to
the Company, EFL, the Exchange and their subsidiaries and affiliates who
allocate total compensation costs among themselves according to various
formulas. The Company's share of total compensation expense in 2001 was 71.59%.
Dollar amounts indicated are pre-individual income taxes.

-14-

SUMMARY COMPENSATION TABLE

Long-Term Compensation
--------------------------
Awards Payouts
Annual Compensation ------------- --------
-------------------------------------------------- Restricted LTIP All Other
Name and Other Annual Stock Payments Compensation
Principal Position Year Salary($) Bonus($)(1) Compensation ($)(2) Awards($)(3) ($)(4) ($)(5)
------------------ ---- --------- ----------- ------------------- ------------ ------ ------

Milne, Stephen A.(6) 2001 741,103 592,204 14,247 411,881 308,160(7) 79,555(6)
President and Chief 2000 677,606 627,417 5,913 162,971 73,476 74,145
Executive Officer 1999 633,600 495,201 2,595 0 0 64,649

Van Gorder, Jan R.(6) 2001 384,211 250,193 6,020 122,591 122,692(7) 32,564
Senior Executive 2000 359,167 268,681 4,120 97,002 43,726 28,046
Vice President, 1999 335,482 150,653 2,614 0 0 26,492
Secretary and
General Counsel

Ludrof, Jeffrey A. 2001 309,463 202,971 2,534 65,125 63,042(7) 19,023
Executive Vice 2000 273,985 203,145 1,362 48,173 21,715 18,265
President 1999 216,432 95,769 76 0 0 13,063
Insurance Operations

Garcia, Philip A. 2001 280,457 184,102 3,397 76,441 66,777(7) 18,148
Executive Vice President 2000 262,177 198,593 1,813 45,222 20,398 14,809
and Chief Financial 1999 244,720 119,302 763 0 0 13,475
Officer

Brinling, Jr., John J. 2001 260,408 147,452 2,688 81,830 82,350(7) 30,040
Executive Vice President 2000 248,530 160,129 2,246 64,807 30,780 29,375
1999 238,168 101,575 2,454 0 0 24,875

- ------------

(1) The amounts indicated in the "Bonus" column above represent amounts earned
by the named executives during 2001 under the Company's Annual Incentive
Plan. The purpose of the Annual Incentive Plan is to promote the best
interests of the Exchange while enhancing shareholder value of the Company
by basing a portion of selected employees' compensation on the performance
of such employee and the Company. Performance measures are established by
the Executive Compensation Committee based on the attainment of individual
performance goals and the Company's financial goals compared to a selected
peer group. The amounts indicated include reimbursement for minor
perquisites in the amounts of $11,339, $8,693, $9,749 and $8,594 in 2001,
$10,696, $9,253, $10,274 and $14,771 in 2000 and $10,192, $7,985, $16,794
and $3,804 in 1999 for Messrs. Van Gorder, Ludrof, Garcia and Brinling,
respectively. In addition, the amounts for Mr. Milne include reimbursement
for minor perquisites in the amounts of $13,403 and $16,708 in 2001 and
2000.

(2) Amounts indicated in the "Other Annual Compensation" column include the
taxable value of group life insurance policies in excess of $50,000 and the
associated tax reimbursement for the named executive officers. Amounts also
include dividends paid on shares under the LTIP.

(3) The "Restricted Stock Awards" column represents LTIP benefits expressed in
dollar amounts using the closing price of the stock as of the end of the
respective year ($29.81 at December 31, 2000 and $38.49 at December 31,
2001) that remain restricted at the end of the year. The number of shares
awarded for Messrs. Milne, Van Gorder, Ludrof, Garcia and Brinling,
respectively, were: 5,467, 3,254, 1,616, 1,517 and 2,174 for 2000 and
10,701, 3,185, 1,692, 1,986 and 2,126 for 2001. See

-15

"Long-Term Incentive Plan" for a detailed description of the LTIP. LTIP
dividends earned in the current year are reported in "Other Annual
Compensation" when paid or in "All Other Compensation" when deferred.

(4) The "LTIP Payments" column represents LTIP benefits that became
unrestricted at the end of the year. The shares for 2000 were distributed
in January 2001 and the shares for 2001 were distributed in January 2002.
All of such shares were valued using the actual share price at the time of
distribution. The number of shares distributed after withholding for income
taxes for Messrs. Milne, Van Gorder, Ludrof, Garcia and Brinling,
respectively, were: 1,507, 897, 445, 506 and 346 for 2000 and 4,539, 2,180,
928, 1,186 and 685 for 2001. Mr. Brinling deferred the distribution of 543
shares in 2000 (valued using the share price as of December 31, 2000) and
1,075 shares in 2001 (valued using the share price as of December 31,
2001).

(5) Amounts shown in the "All Other Compensation" column include matching
contributions made by the Company pursuant to the Employee Savings Plan,
premiums paid by the Company on behalf of the named individuals on the
split dollar life insurance policies, expenses for spousal travel and
deferred dividends and related earnings. Contributions made to the Employee
Savings Plan amounted to $29,644, $15,368, $12,378, $11,218 and $10,416 for
2001, $20,143, $10,736, $8,214, $7,831 and $7,456 for 2000 and $14,308,
$9,084, $6,365, $6,461 and $7,145 for 1999, on behalf of Messrs. Milne, Van
Gorder, Ludrof, Garcia and Brinling, respectively. Premiums paid for split
dollar life insurance policies for Messrs. Milne, Van Gorder, Ludrof,
Garcia and Brinling, respectively, were: $49,911, $17,196, $6,645, $6,930
and $17,538 during 2001, $50,132, $17,310, $6,674, $6,978 and $17,634
during 2000 and $50,341, $17,408, $6,698, $7,014 and $17,730 during 1999.
The Company is entitled to recover the premiums from any proceeds paid on
such split dollar life insurance policies and has retained a collateral
interest in each policy to the extent of the premiums paid with respect to
such policies. Expenses for spousal travel were $3,870, $3,337 and $3,377
for Messrs. Milne, Ludrof and Brinling, respectively, in 2000. Mr. Brinling
also had deferred dividends of $1,967 and $881 and interest on deferred
dividends of $119 and $27 in 2001 and 2000, respectively.

(6) Mr. Milne served as President and Chief Executive Officer from February
1996 until his retirement in January 2002. Upon his retirement, Mr. Milne
received a retirement performance award, the amount of which is not
included under "All Other Compensation" in the above table but is described
under "Retirement Performance Award for Mr. Milne."

(7) Amounts shown in the Restricted Stock Awards column are paid in three
annual installments beginning with the year in which the award is made.
Accordingly, amounts shown in the LTIP Payments column include payments of
stock from the awards made in 2001 and 2000.

AGREEMENTS WITH EXECUTIVE OFFICERS

The Company has employment agreements with the following of its senior
executive officers: Jan R. Van Gorder, Senior Executive Vice President,
Secretary and General Counsel and currently Acting President and Chief Executive
Officer; Jeffrey A. Ludrof, Executive Vice President of Insurance Operations;
Philip A. Garcia, Executive Vice President and Chief Financial Officer and John
J. Brinling, Jr., Executive Vice President of EFL. The employment agreements
have the following principal terms:

(a) A two-year term expiring December 15, 2003, unless the agreement is
theretofore terminated in accordance with its terms, with or without cause, or
due to the disability or death of the officer or notice of nonrenewal is given
by the Company or the executive 30 days before any anniversary date;

-16-

(b) A minimum annual base salary at least equal to the executive's annual
base salary at the time the agreement was executed, subject to periodic review
to reflect the executive's performance and responsibilities, competitive
compensation levels and the impact of inflation;

(d) The establishment of the terms and conditions upon which the
executive's employment may be terminated by the Company and the compensation of
the executive in such circumstances. The agreements provide generally, among
other things, that if the employment of an executive is terminated without Cause
(as defined in the agreement) by the Company or by the executive for Good Reason
(as defined in the agreement) then the executive shall be entitled to receive:
(i) an amount equal to the sum of three times the executive's highest annual
base salary during the preceding three years plus an amount equal to three times
the total of the executive's highest award during the preceding three years
under the Company's Annual Incentive Plan; (ii) any award or other compensation
to which the executive is entitled under the LTIP; (iii) continuing
participation in any employee benefit plans for a period of three years
following termination to the extent the executive and his or her dependents were
eligible to participate in such programs immediately prior to the executive's
termination and (iv) immediate vesting and nonforfeitability of accrued benefits
under the Company's Supplemental Retirement Plan for Certain Members of the Erie
Insurance Group Retirement Plan for Employees (the "SERP");

(e) Provisions relating to confidentiality and nondisclosure following an
executive's termination; and

(f) An agreement by the executive not to compete with the Company for a
period of one year following his or her termination, unless such termination was
without Cause.

RETIREMENT PERFORMANCE AWARD FOR MR. MILNE

Mr. Milne was employed by the Company as its President and Chief Executive
Officer pursuant to an employment agreement with terms substantially similar to
those described above under "Agreements with Executive Officers", except that
Mr. Milne's employment agreement extended until December 15, 2004.

During Mr. Milne's six-year tenure as Chief Executive Officer, the
Company's net operating income increased at an annual compound rate of growth in
excess of 8% per year, operating income per share increased at nearly 9% per
year, total assets increased at an annual compound growth rate of 11.2%,
retained earnings grew at 18.1%, book value per share increased in excess of 17%
and dividends paid increased annually by 13%. Further, total return on the
Company's Class A Common Stock increased by nearly 13% annually during Mr.
Milne's tenure.

At a meeting held on December 11, 2001, following the unanimous
recommendation of the Executive Compensation and Development Committee, the
Board of Directors approved certain benefits to be paid to Mr. Milne as a
retirement performance award (the "Retirement Award") upon his retirement as
President and Chief Executive Officer of the Company in addition to the
retirement benefits he would have received under his employment agreement
assuming a normal retirement date. The components of the Retirement Award are as
follows:

(a) Payment in cash of an amount equal to two times the sum of (i) Mr.
Milne's 2002 base salary and (ii) the amount payable to him under the
Company's Annual Incentive Plan for 2001, in addition to the three
times such sum provided under his employment agreement.

-17-

(b) Continuation until age 65 of the Company's health, dental and vision
insurance coverage for Mr. Milne and his spouse, and continuation of
the Company's life insurance programs regarding the life of Mr. Milne
for the remainder of Mr. Milne's life.

(c) Treatment of Mr. Milne's benefits under the LTIP as if Mr. Milne's
termination of employment was due to a disability. As a result, all
vesting periods ended on the date of Mr. Milne's retirement, all open
performance periods will end on December 31, 2002 and all phantom
share units will be valued based on the shortened performance period
and be paid to Mr. Milne in unrestricted shares of Class A Common
Stock.

(d) Credit for 30 years of service for purposes of the SERP benefit
formula, and changes of the normal form of payment from 10-year
Certain and Continuous to 100% Joint and Survivor and with Mr. Milne's
wife to receive a monthly SERP benefit under such 100% Joint and
Survivor option for the remainder of her life.

Mr. Milne retired on January 18, 2002. Upon his retirement, Mr. Milne
received the benefits specified in his employment agreement in the amount of
$8,300,000 and the Retirement Award in the amount of $9,841,030.

STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

The Company does not have a stock option plan, nor has it ever granted any
stock option or stock appreciation right to any of the persons named in the
Summary Compensation Table.

LONG-TERM INCENTIVE PLAN

The LTIP is designed to enhance the growth and profitability of the Company
by providing the incentive of long-term rewards to key employees who are capable
of having a significant impact on the performance of the Company; to attract and
retain employees of outstanding competence and ability and to further align the
interests of such employees with those of the shareholders of the Company. The
LTIP was approved by shareholders in 1997 as a performance-based plan under the
Internal Revenue Code of 1986, as amended (the "Code"), and its continuation is
being submitted for shareholder approval at the Annual Meeting as required by
the Code. Each of the named executives has been granted awards of phantom share
units under the LTIP based upon a target award calculated as a percentage of the
executive's base salary. The total value of any phantom share units is
determined at the end of the performance period based upon the growth in the
Company's retained earnings. Each executive is then entitled to receive
restricted shares of Class A Common Stock equal to the dollar value of the
phantom share units at the end of the performance period. The vesting period for
the restricted shares of Class A Common Stock issued to each executive is three
years after the end of the performance period. If an executive ceases to be an
employee prior to the end of the performance period, the executive forfeits all
phantom share units awarded. If an executive ceases to be an employee prior to
the end of the vesting period, the executive forfeits all unvested restricted
shares previously granted. The following table sets forth target awards granted
to the Company's five highest paid executive officers in 2001, all current
executive officers as a group and all employees other than the executive
officers as a group (i) for the three-year performance period of 2001 to 2003;
(ii) for the three-year performance period of 2000 through 2002 and (iii) for
the three-year performance period of 1999 through 2001.

-18-

LONG-TERM INCENTIVE PLAN
AWARDS IN LAST FISCAL YEAR

Number Performance
of Shares, or Other
Units Period Until
or Other Maturation Estimated Future Payouts Under
Name Rights (#) or Payout Non-Stock Price Based Plans
- --------------------------- ----------- ------------- ---------------------------------------------
Phantom
Share Units Threshold Target($) Maximum
----------- --------- --------- -------

Milne, Stephen A.(2) 78,531 1999-2001 0 420,000 (1)
96,634 2000-2002 0 513,600 (1)
88,569 2001-2003 0 549,552 (1)

Van Gorder, Jan R. 33,014 1999-2001 0 176,568 (1)
35,215 2000-2002 0 187,162 (1)
32,276 2001-2003 0 200,263 (1)

Ludrof, Jeffrey A. 23,278 1999-2001 0 124,498 (1)
25,705 2000-2002 0 136,620 (1)
24,881 2001-2003 0 154,381 (1)

Garcia, Philip A. 23,653 1999-2001 0 126,500 (1)
25,705 2000-2002 0 136,620 (1)
23,560 2001-2003 0 146,183 (1)

Brinling, John J., Jr. 23,371 1999-2001 0 124,992 (1)
24,928 2000-2002 0 132,492 (1)
22,207 2001-2003 0 137,792 (1)

Executive Officer Group 181,847 1999-2001 0 972,558 (1)
208,187 2000-2002 0 1,106,494 (1)
191,493 2001-2003 0 1,188,171 (1)

Non-Executive Officer 81,924 1999-2001 0 438,141 (1)
Employee Group 104,293 2000-2002 0 554,306 (1)
104,547 2001-2003 0 648,696 (1)

- -----------

(1) An executive's target award is established by the LTIP Administrator. The
actual value of an executive's phantom share units at the end of a
performance period may be more or less than the executive's target amount.
However, the value of an executive's phantom share units may not exceed
$500,000 at the end of a performance period.

(2) See "Retirement Performance Award for Mr. Milne" for information regarding
Mr. Milne's LTIP awards.

-19-

PENSION PLAN

The following table sets forth the estimated total annual benefits payable
upon retirement at age 65 under the Erie Insurance Group Retirement Plan for
Employees and the SERP (collectively, the "Retirement Plans").

PENSION PLAN TABLE

Years of Service
--------------------------------------------------------------------------------
Remuneration 15 20 25 30
------------ -------------- -------------- -------------- --------------

$150,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000
200,000 60,000 80,000 100,000 120,000
250,000 75,000 100,000 125,000 150,000
300,000 90,000 120,000 150,000 180,000
350,000 105,000 140,000 175,000 210,000
400,000 120,000 160,000 200,000 240,000
450,000 135,000 180,000 225,000 270,000
500,000 150,000 200,000 250,000 300,000
550,000 165,000 220,000 275,000 330,000
600,000 180,000 240,000 300,000 360,000
650,000 195,000 260,000 325,000 390,000
700,000 210,000 280,000 350,000 420,000
750,000 225,000 300,000 375,000 450,000
800,000 240,000 320,000 400,000 480,000

The compensation covered by the Retirement Plans is the base salary
reported in the Summary Compensation Table.

Under the Retirement Plans, credited years of service is capped at 30
years. Credited years of service for each of the individuals named in the
Summary Compensation Table is as follows: Stephen A. Milne -- 30 years (see
"Retirement Performance Award for Mr. Milne"), Jan R. Van Gorder -- 21 years,
Jeffrey A. Ludrof -- 21 years, Philip A. Garcia -- 21 years and John J.
Brinling, Jr. -- 30 years.

The benefits under the Retirement Plans are computed on the basis of
straight-life annuity amounts and a life annuity with a ten-year certain
benefit. The benefits listed in the Pension Plan Table are not subject to
deduction for Social Security or other offset amounts. The information in the
foregoing table does not reflect certain limitations imposed by the Code. The
Code prohibits the inclusion of earnings in excess of $200,000 per year
(adjusted periodically for cost of living increases) in the average earnings
used to calculate benefits. The Code also limits the maximum annual pension
(currently $160,000, but adjusted periodically for cost of living increases)
that can be paid to each eligible employee. A SERP for senior management is in
effect that provides benefits in excess of the earnings limitations imposed by
the Code similar to those provided to all other full-time employees as if the
Code limitations were not in effect. Those benefits are incorporated into the
Pension Plan Table.

DIRECTOR COMPENSATION

The annual retainer for the Company's directors is $25,000, plus $1,500 for
each meeting attended and $1,500 for each committee meeting attended plus an
additional $2,000 per year for each committee chairperson. In addition, all
directors are reimbursed for their expenses incurred in attending meetings.

-20-

Officers of the Company who serve as directors are not compensated for
attendance at meetings of the Board of Directors and its committees. See also
"Certain Transactions."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Executive Compensation and Development Committee (the "Compensation
Committee") of the Company presently consists of Robert C. Wilburn, Chair,
Samuel P. Black, III, J. Ralph Borneman, Jr. and Samuel P. Katz. No member of
the Compensation Committee is a former or current officer or employee of the
Company, the Exchange, EFL or any of their respective subsidiaries or
affiliates.(1) Furthermore, no executive officer of the Company serves as a
member of a compensation committee of another entity, one of whose executive
officers serves on the Compensation Committee, or as a director of the Company,
nor does any executive officer of the Company serve as a director of another
entity, one of whose executive officers serves on the Compensation Committee.

REPORT OF THE EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE OF THE COMPANY

Consistent with Section 1405(c)(4) of the Pennsylvania Insurance Holding
Companies Act and the Company's Bylaws, the Compensation Committee is charged
with the duty of recommending to the Board of Directors the compensation of the
three highest paid officers of the Company and such other officers as are
determined by the Board of Directors; recommending to the Board of Directors all
forms of bonus compensation, including incentive programs, that would be
appropriate for the Company and to undertake such other responsibilities as may
be delegated to the Compensation Committee by the Board of Directors. The Board
of Directors has authorized the Compensation Committee to consider the
compensation of the four highest paid officers, including the Chief Executive
Officer. The purpose of the Compensation Committee is to determine the level and
composition of compensation that is sufficient to attract and retain top quality
executives for the Company.

The objectives of the Company's executive compensation practices are to:
(1) attract, reward and retain key executive talent and (2) to motivate
executive officers to perform to the best of their abilities and to achieve
short-term and long-term corporate objectives that will contribute to the
overall goal of enhancing shareholder value and policyholder security. To that
end, compensation comparisons are made to benchmark positions at other insurers
in terms of compensation levels and composition of the total compensation mix.

Under Section 162(m) of the Code, the Company is not allowed a federal
income tax deduction for compensation, under certain circumstances, paid to
certain executive officers to the extent that such compensation exceeds $1
million per officer in any fiscal year. No officer of the Company has received
compensation in excess of $1 million in any fiscal year to date with the
exception of Stephen A. Milne, President and Chief Executive Officer of the
Company, in 1999, 2000 and 2001. The Compensation

- --------
(1) J. Ralph Borneman, Jr. is the President and a principal shareholder of
Body-Borneman Associates, Inc., Body-Borneman, Inc. and Body-Borneman, Ltd. and
Samuel P. Black, III is the President and a principal shareholder of Samuel P.
Black & Associates, Inc., each of which is an independent insurance agency
representing a number of insurers, including the insurance subsidiaries of the
Company, EFL and the Exchange and its insurance subsidiary and which receive
commissions in the ordinary course of business from such insurance companies.
Under the provisions of Section 162(m) of the Code relating to qualified plans,
Messrs. Black and Borneman are not deemed independent for purposes of approving
performance-based incentive plans. Messrs. Black and Borneman have excused
themselves from voting on such plans as members of the Compensation Committee.

-21-

Committee may consider adopting policies with respect to this limitation on
deductibility when appropriate.

The Compensation Committee reviewed the salary ranges and base salaries of
the four highest paid executives, including the Chief Executive Officer, in
2001. The Compensation Committee has position descriptions for the four highest
paid executives of the Company, including the Chief Executive Officer, that
define the responsibilities and duties of each position. The position
descriptions also delineate the functional areas of accountability and the
qualifications and skills required to perform such responsibilities and duties.
The Compensation Committee then reviewed the salary ranges for the Chief
Executive Officer and the other three highest paid executives, comparing the
ranges to third party data compiled for similar positions with other property
and casualty insurers. In reviewing the salary ranges for the four highest paid
executives, including the Chief Executive Officer, the Compensation Committee
referenced Sibson's Management Compensation Survey published annually by Sibson
& Company, Inc., which summarized compensation data for more than 100 insurance
companies. The data is reported by position, company asset size and premium
volume. The unique aspects of each position, its duties and responsibilities,
the effect on the performance of the Company, the number of employees supervised
directly and other criteria are also considered in setting the base salaries.
The Compensation Committee also consulted data obtained from Towers Perrin, a
nationally recognized consulting firm with specific expertise in the insurance
industry, to make recommendations regarding executive compensation.

The level of compensation for each executive reflects his or her skills,
experience and job performance. Normally, base salary will not be less than the
minimum for the salary range established for each position. Executives with a
broader range of skills, experience and consistently high performance with the
Company may receive compensation above the midpoint for the established salary
range.

Compensation for the Chief Executive Officer consists primarily of salary,
annual incentive and long-term incentive payments and minor perquisites that
amount to less than 10% of the Chief Executive Officer's salary and bonus. The
Board of Directors approved adoption of an annual incentive plan and a long-term
incentive plan for senior executives of the Company as recommended by the
Executive Committee at its meeting of March 11, 1997 (the "Annual Incentive
Plan" and the "Long-Term Incentive Plan," respectively).

The purpose of the Annual Incentive Plan is to promote the best interests
of the Exchange while enhancing shareholder value of the Company and to promote
the attainment of significant business objectives for the Company, its
subsidiaries and affiliates by basing a portion of the executives' compensation
on the attainment of both premium growth and underwriting profitability goals.
The annual incentive awards are paid in cash. Annual Incentive Plan target award
levels, expressed as a percentage of base salary, are established annually by
the Compensation Committee. Payments under the Annual Incentive Plan are based
on a combination of individual executive performance and the Company's
performance.

The Long-Term Incentive Plan, which was approved by shareholders on April
29, 1997, for purposes of qualifying the plan as a performance-based plan under
Section 162(m) of the Code, and the continuation of which is being submitted for
shareholder approval at the Annual Meeting as required by the Code, is designed
to maximize returns to shareholders by linking executive compensation to the
overall profitability of the Company. Target award amounts, expressed as a
percentage of base salary, are determined by comparisons to peer companies and
approved by the Compensation Committee.

Performance factors applicable to the Company, such as property and
casualty insurance loss ratios, investment portfolio returns and overall Company
profitability, as well as other factors are considered in evaluating the Chief
Executive Officer's performance. Such performance factors were

-22-

considered in approving Mr. Milne's 2001 compensation. These factors over the
term of Mr. Milne's service as Chief Executive Officer were the major factors
considered in the Compensation Committee's unanimous recommendation of the
Retirement Award for Mr. Milne upon his retirement. Compensation of the next
three most highly compensated individuals is determined by the Compensation
Committee and is based upon the factors and processes enumerated, i.e., a
determination of a salary range based upon market data and evaluation of the
executive with respect to the executive's job description and his or her
position within the salary range.

Compensation of the next highest paid executives (other than the Chief
Executive Officer and the next three highest paid executives) was based upon the
Company's established standard compensation policies and was not determined by
the Compensation Committee.

Erie Indemnity Company Executive Compensation and Development Committee:

Robert C. Wilburn, Chair
Samuel P. Black, III
J. Ralph Borneman, Jr.
Samuel P. Katz

March 5, 2002

-23-

COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN ON THE CLASS A COMMON STOCK
WITH CERTAIN AVERAGES

The following graph depicts the cumulative total shareholder return for the
periods indicated for the Class A Common Stock compared to the Standard & Poor's
500 Stock Index and the Standard & Poor's Property-Casualty Insurance Index.

[CUMULATIVE TOTAL SHAREHOLDER RETURN COMPARISON(1) CHART OMITTED]

PLOT POINTS FOR ABOVE CHART:
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----

Erie Indemnity Company $ 100 $ 96 $ 103 $ 109 $ 102 $ 132
Standard & Poor's 500 Stock Index 100 133 170 205 187 166
Standard & Poor's Property-
Casualty Insurance Index 100 145 136 101 158 145

- ----------

(1) Assumes $100.00 invested at the close of trading on the last trading day
preceding the first day of the fifth preceding fiscal year in the Class A
Common Stock, Standard & Poor's Property-Casualty Insurance Index and
Standard & Poor's 500 Stock Index. Cumulative total shareholder return
assumes the reinvestment of dividends.

CERTAIN TRANSACTIONS

Directors Borneman and Black are officers and principal shareholders of
insurance agencies that receive insurance commissions in the ordinary course of
business from the insurance companies managed by the Company in accordance with
the companies' standard commission schedules and agents' contracts. Such
payments made in 2001 to the agencies for commissions written on insurance
policies from the Erie Insurance Group of property and casualty insurers and EFL
amounted to $3,761,503 and $517,923 for the Borneman and the Black insurance
agencies, respectively.

In 1998, director Borneman, in his capacity as an insurance agent and based
on competitive bids, placed a worker's compensation insurance policy covering
employees of the Company with Fireman's Fund Insurance Company. The Company has
renewed the policy each year since. The premium for this

-24-

policy for 2001-2002 was approximately $800,000. Although Mr. Borneman received
no compensation in connection with the placement of that policy in 1998, he
received a commission of $4,500 in each of 1999, 2000 and 2001. The policy was
placed with another insurance carrier as of January 1, 2002, and Mr. Borneman
will not receive any commission from the placement of this policy.

John M. Petersen, a director and former President and Chief Executive
Officer, and previous Chief Investment Officer of the Erie Insurance Group of
Companies, who retired as an executive officer of the Company on December 31,
1995, entered into a consulting arrangement with the Company effective January
2, 1996. Under the terms of the arrangement, which is terminable upon 30 days
notice by either party, the Company engaged Mr. Petersen as a consultant to
furnish the Company and its pension trust, the Exchange and EFL with investment
services with respect to their investments in common stocks. As compensation for
services rendered by Mr. Petersen, a fee of .15 of 1 percent, on an annualized
basis, of the total fair market value of the common stocks under management, is
paid to Mr. Petersen. The Company also pays for all necessary and reasonable
expenses related to Mr. Petersen's consulting services performed under this
arrangement. The compensation paid to Mr. Petersen under this arrangement in
2001 by the Exchange, the Company, the pension trust and EFL was $4,584,610,
$117,956, $135,723 and $93,632, respectively.

The common stock portfolio of the Exchange under the direction of Mr.
Petersen outperformed the Standard & Poor's 500 Stock Index, a standard index
used by many managers of equity investments, by $462.6 million during the six
years ended December 31, 2001 and the period January 1, 2002 to February 28,
2002. Likewise, the common stock portfolio of the Company, the pension trust and
EFL (combined) outperformed the Standard & Poor's 500 Index by $2.8 million over
the same period. The Exchange common stock portfolio returned an annualized
14.55%, the Company, the pension trust and EFL (combined) common stock
portfolios returned an annualized 11.91% and the Standard & Poor's 500 Stock
Index returned 11.67%.

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS RELATING TO THE APPOINTMENT OF A SUCCESSOR CORPORATE
CO-TRUSTEE TO BANKERS TRUST

On March 3, 1999, Bankers Trust filed with the Court a Petition to Accept
Resignation of Trustee (the "Bankers Trust Petition"), by which Bankers Trust
requested that the Court accept its resignation as corporate co-trustee of the
H.O. Hirt Trusts.

On May 7, 1999, the Court conducted a hearing on the Bankers Trust
Petition, at which time the Court issued an Order accepting the resignation of
Bankers Trust upon the appointment by the Court of a successor corporate
co-trustee.

On December 15, 1999 and on January 27, 2000, the Court conducted hearings
on the selection of a successor corporate co-trustee, including the presentation
of testimony by two successor co-trustee candidates.

On February 23, 2000, the Court entered an Order directing Mr. Hirt and
Mrs. Hagen to finalize certain matters relating to a so-called "funding plan"
for the payment of the fees and costs of the successor corporate co-trustee and
to make application to the Internal Revenue Service for a private letter ruling
on the tax treatment of the finalized "funding plan." Under its Order of
February 23, 2000, the Court indicated that upon the receipt of the private
letter ruling from the Internal Revenue Service, the Court would then select the
successor corporate co-trustee from the two candidates.

-25-

On March 6, 2000, the Company filed a motion for reconsideration and/or
clarification of the Court's February 23, 2000 Order. The motion requested that
the Court (i) reconsider its schedule for designating a successor corporate
co-trustee due to the March 3, 1999 resignation and make that designation
presently and (ii) reconsider and/or clarify the Court's prohibition on the
Company's involvement in a finalized funding plan for payment of the corporate
co-trustees' fees because several of the proposed funding alternatives could
only be implemented through actions to be undertaken by the Company. On March 8,
2000, Mr. Hirt also filed a motion for reconsideration. On March 15, 2000, the
Court denied the Company's and Mr. Hirt's motions.

On January 30, 2001, the Court conducted a further hearing on the matter of
the selection of a successor corporate co-trustee.

On September 10, 2001, a Joint Petition for Construction of the H.O. Hirt
Trusts was filed by Mr. Hirt, Mrs. Hagen and Bankers Trust. The Joint
Construction Petition sought, among other things, relief from the Court in the
form of an Order of the Court under which the trustees of the H.O. Hirt Trusts
would, under certain circumstances, be permitted to sell shares owned by the
H.O. Hirt Trusts in order to fund the fees and expenses of the corporate
co-trustee.

On October 16, 2001, Laurel Hirt, Mr. Hirt's daughter and a contingent
beneficiary of the H.O. Hirt Trusts, filed an Answer and Objection to the Joint
Construction Petition. On December 3, 2001, Mr. Hirt and Mrs. Hagen filed
responses to Laurel Hirt's Answer and Objection.

On January 25, 2002, the Court conducted a hearing on the matter of the
Joint Construction Petition. On January 28, 2002, the Court entered its Order
indicating that it was deferring any decision on the Joint Construction Petition
until April 1, 2002 so as to permit the parties to attempt to mediate the issues
raised by the Joint Construction Petition. The Court further indicated in its
January 28, 2002 Order that if the parties were not able to mediate those
issues, the Court would enter a ruling on the Joint Construction Petition within
30 days after April 1, 2002.

LITIGATION REGARDING NOMINATIONS OF CANDIDATES FOR ELECTION AS DIRECTORS BY THE
HOLDERS OF CLASS B COMMON STOCK

On March 9, 2000, Mrs. Hagen commenced litigation in the Court in which she
sought relief in the form of an order that (i) the Nominating Committee of the
Company's Board of Directors does not have the exclusive right to nominate
candidates for election as directors of the Company by shareholders, (ii) any
holder of Class B Common Stock may nominate directly candidates for election as
directors of the Company by shareholders and vote on those nominees and (iii)
Mrs. Hagen has the right to submit nominees to a vote of Class B shareholders at
annual meetings. Mrs. Hagen's Preliminary Injunction Motion sought a preliminary
injunction enjoining the Company from taking any action to prevent, delay or
otherwise hinder Mrs. Hagen from submitting nominees to a vote of Class B
shareholders at the 2000 Annual Meeting. Bankers Trust joined in Mrs. Hagen's
Motion for Preliminary Injunction. On March 30, 2000, the Company filed its
response to Mrs. Hagen's Motion for Preliminary Injunction, in which Mr. Hirt
joined.

On April 24, 2000, the Court issued its April 24th Ruling, granting the
requested preliminary injunction, and thus allowing the nomination by holders of
Class B Common Stock directly of candidates for director in addition to those
nominated by the Nominating Committee. On April 5, 2001, a Stipulation among
Mrs. Hagen, Bankers Trust and the Company was filed with the Court whereby these
three parties agreed to accept the April 24th Ruling as a final adjudication of
this matter. The Stipulation is not binding on any other parties other than the
signatories to the Stipulation.

-26-

MRS. HAGEN'S PROPOSED DIRECTOR CANDIDATES

In a letter dated December 28, 2001, Mrs. Hagen submitted to the Company a
notice of two proposals relating to the nomination of candidates for director at
the Annual Meeting. Mrs. Hagen's letter identified her proposals as follows:

"(1) I propose the following persons (the "Hagen Nominees") for
consideration by the Nominating Committee of the Company for election to the
Board of Directors of the Company (the "Board") at the Annual Meeting:

Kenneth B. Frank
* Patricia Garrison-Corbin
* Susan Hirt Hagen
Louis V. Imundo, Jr., Ph.D.
* Samuel P. Katz
* Claude C. Lilly, III, Ph.D.; CLU, CPCU
* Henry N. Nassau, Esq.
Richard J. Pinola, CPA
Hon. Denise Illig Robison
William H. Starbuck
Richard L. Stover
- ----------------------
* Current Directors

I believe the Hagen Nominees are appropriate candidates for election at the
Annual Meeting.

"(2) If at least seven Hagen Nominees (including me) are not selected by
the Nominating Committee when it announces its slate, this Notice also
constitutes my proposal to nominate all of the Hagen Nominees for election as
directors at the Annual Meeting. In such event, I will appear at the Annual
Meeting to nominate the Hagen Nominees for election to the Board. In the event
that the size of the Board is increased beyond 12, I will nominate all the Hagen
Nominees for election as directors at the Annual Meeting. In addition, I reserve
the right to nominate additional candidates at the Annual Meeting if the size of
the Board is increased above 16, the current maximum number permitted by the
Company's Bylaws."

PROPOSAL 2
APPROVAL OF CONTINUATION OF LONG-TERM INCENTIVE PLAN

In 1997, the Board of Directors and the Class B shareholders of the Company
approved the LTIP. The purposes of the LTIP are to (i) enhance the growth and
profitability of the Company by providing the incentive of long-term rewards to
key employees who are capable of having a significant impact on the performance
of the Company; (ii) to attract and retain employees of outstanding competence
and ability and (iii) to further align the interests of such employees with
those of shareholders of the Company.

Since the Executive Compensation and Development Committee of the Board of
Directors has the authority to determine or change the targets under the LTIP
under a prior general approval of the types of performance goals to be used,
regulations promulgated under Section 162(m) of the Code require that the
material terms under which the remuneration is to be paid, including the
performance goals, be disclosed to, and reapproved by, the Company's
shareholders not later than the first shareholders'

-27-

meeting that occurs in the fifth year following the year in which the
shareholders previously approved the performance goals.

SUMMARY OF THE LTIP

The following summary of the LTIP is qualified in its entirety by reference
to the complete text of the LTIP, a copy of which is attached as Exhibit A to
this Proxy Statement.

TERM. The effective date of the LTIP was January 1, 1997. The LTIP does not
have a fixed expiration date.

ADMINISTRATION. The LTIP is administered by the Executive Compensation and
Development Committee of the Company's Board of Directors or, in certain events,
by the full Board or a committee of the Board comprised solely of outside
directors (the "LTIP Administrator"). The LTIP Administrator has sole and
complete authority to make awards under the LTIP, to determine the terms and
conditions of such awards and to interpret and make all other determinations
affecting the LTIP.

PARTICIPATION AND AWARD ESTIMATES. Participation in the LTIP is limited to
officers and other salaried key employees of the Company and its majority-owned
subsidiaries who are selected from time to time by the LTIP Administrator. A
total of approximately 15 employees are eligible for selection by the LTIP
Administrator to participate in the LTIP. Participation in the LTIP does not
preclude participation in any other employee benefit plans of the Company and
does not create any rights to continued employment with the Company. Because the
grant of awards under the LTIP is at the discretion of the LTIP Administrator,
it is not possible to indicate at this time which persons may receive future
awards under the LTIP or the amount of such awards.

OPERATION OF THE LTIP

Phantom Share Units. The LTIP provides for the grant, in the discretion of
-------------------
the LTIP Administrator after receiving the recommendations of chief executive
officer of the Company, of Phantom Share Units to participants in the LTIP. In
connection with any such grant, the LTIP Administrator will establish a
performance period, which must commence at the beginning of the fiscal year in
which performance objectives are established and may not be less than three
consecutive years, and performance objectives for such performance period.
Within 90 days after the end of the performance period, the LTIP Administrator
will determine the total dollar value of the Phantom Share Units held by each
participant for such performance period based on the extent to which the related
performance objectives have been achieved. Each participant will then be
entitled to receive that number of shares of restricted Class A Common Stock
equal to the value of the Phantom Share Units held by such participant, based on
the average fair market value, as defined, of the Class A Common Stock during
the 30 days following the end of the performance period.

In the event of the death, disability or retirement (as defined under the
Company's retirement plan) of a participant prior to the end of a performance
period, the number of Phantom Share Units held by such participant will be
determined as of the end of the fiscal year in which such event occurs. If a
participant ceases to be an employee of the Company prior to the end of a
performance period for any other reason, the participant will forfeit all
outstanding Phantom Share Units previously granted under the LTIP.

Restricted Class A Common Stock. The restricted Class A Common Stock, if
-------------------------------
any, granted to a participant at the end of a performance period will vest over
a period of not more than three years. The vesting period applicable to any such
shares will be established by the LTIP Administrator at the time of

-28-

grant of the related Phantom Share Units. Until such shares vest, the
certificates representing such shares will be held by the Company for the
account of the participant and the participant will have all the rights of a
shareholder, including the right to receive dividends, except that (i) the
participant will not be entitled to receive a certificate representing such
shares, (ii) the shares may not be transferred, sold, assigned, pledged or
otherwise encumbered and (iii) all of such shares shall be forfeited unless,
with certain exceptions, the participant remains in the continuous employment of
the Company for the entire vesting period. If the participant is employed by the
Company at the end of the vesting period, the participant will be entitled to
receive certificates for the Class A Common Stock credited to his or her account
under the LTIP free and clear of all restrictions.

In the event of the death or disability of a participant after the end of
the performance period but prior to the end of a vesting period applicable to
any restricted Class A Common Stock, the participant, or the participant's
estate, will be entitled to receive the shares of Class A Common Stock in the
participant's account without restrictions. If a participant retires during such
period (i.e., voluntarily terminates employment after age 55 with at least five
years of service), the participant will not forfeit such shares, but the other
restrictions on such shares will still apply for the remainder of the applicable
vesting period. Finally, if a participant ceases to be an employee of the
Company for any other reason during such period, the participant will forfeit
the Class A Common Stock to which the participant would otherwise be entitled.

In any case, the LTIP Administrator may, in its sole discretion, permit a
participant to retain the Phantom Share Units or restricted Class A Common Stock
that would otherwise be forfeited under the terms of the LTIP.

In order to avoid dilution, the Company intends to satisfy its obligations
under the LTIP by purchasing shares of Class A Common Stock in the open market.
If such purchases are not practicable because such stock is not readily
available in the marketplace or such purchase would artificially affect the
market price of the Class A Common Stock, then the Company may issue deferred
stock units in lieu of restricted Class A Common Stock and may pay cash in lieu
of the issuance of Class A Common Stock at the expiration of the applicable
vesting period.

Performance Objectives and Section 162(m). The performance objectives
-----------------------------------------
established by the LTIP Administrator for any performance period must based upon
one or more of the following performance measures for the Company as a whole,
for the business unit of the Company in which a participant is involved or a
combination thereof: (i) retained earnings per share plus dividends, (ii)
earnings or earnings per share, (iii) assets or return on assets, (iv)
shareholders' equity or return on shareholders' equity, (v) revenues, (vi)
costs, (vii) gross profit margin, (viii) investment earnings, (ix) loss ratio,
(x) combined ratio or (xi) any other measure determined by the LTIP
Administrator to be in the best interests of the Company.

Section 162(m) of the Code provides, in general, that compensation in
excess of $1 million per year paid to the chief executive officer and the four
other most highly compensated officers of a public company is not deductible to
the corporation; however, certain performance-based compensation may be excluded
from this deductibility limitation if, among other things, (i) the compensation
is paid solely on account of the attainment of one or more performance goals,
(ii) the performance goals are established by a compensation committee
consisting solely of two or more outside directors, (iii) the material terms
under which the compensation is to be paid, including the performance goals, are
disclosed to and approved by the shareholders prior to payment and (iv) prior to
payment, the compensation committee must certify that the performance goals were
in fact satisfied. Approval of the continuation of the LTIP at the Annual
Meeting by the holders of Class B Common Stock of the Company will constitute
approval of the LTIP, including approval of the performance objectives, for
purposes of Section 162(m). It is the

-29-

current intention of the LTIP Administrator to ensure that all otherwise tax
deductible compensation payable under the LTIP be excludable from the limitation
on deductibility imposed by Section 162(m); however, the LTIP Administrator
retains the ability to make awards under the LTIP that are not eligible for
exclusion from Section 162(m) in the event that it determines that the making of
such awards is in the best interests of the Company.

Maximum Annual Award. The Company has established that the maximum value of
--------------------
Phantom Share Units that may be earned by any participant under the LTIP in any
year may not exceed $500,000.

Adjustments. With certain exceptions, the LTIP Administrator may, in its
-----------
discretion, at any time adjust the performance objectives applicable to any
Phantom Share Units, adjust the manner in which such performance objectives are
measured, shorten the performance period or shorten the vesting period with
respect to any restricted Class A Common Stock if it determines that conditions
so warrant. Further, the number of Phantom Share Units and shares of restricted
Class A Common Stock will be appropriately adjusted by the LTIP Administrator
for stock dividends, stock splits, recapitalizations, mergers and other changes
in the capitalization of the Company.

AMENDMENT AND TERMINATION OF THE LTIP. The Board of Directors of the
Company may modify, amend or terminate the LTIP at any time except that no
modification, amendment or termination may adversely affect the rights of a
participant under an award previously made without such participant's consent.

FEDERAL INCOME TAX CONSEQUENCES. Unless a participant elects to recognize
income at the time of the grant of restricted Class A Common Stock, there are no
federal income tax consequences to a participant or to the Company upon the
grant of Phantom Share Units or upon the issuance of restricted Class A Common
Stock. In either event, a participant recognizes income for federal income tax
purposes in an amount equal to the fair market value of the shares received
(determined as of the date on which the shares become transferable or not
subject to a substantial risk of forfeiture, whichever occurs first) and the
Company is entitled to a deduction in a like amount. The LTIP Administrator may,
in its sole discretion, permit a participant to defer the receipt of all or a
portion of the Class A Common Stock payable upon lapse of applicable
restrictions. Further, the LTIP Administrator may, in its sole discretion,
permit a participant to defer the receipt of all or a portion of the Class A
Common Stock payable upon lapse of applicable restrictions. Further, the LTIP
Administrator may permit a participant to satisfy any income tax withholding
obligation of the Company with respect to any award under the LTIP by
withholding a portion of the shares of Class A Common Stock otherwise payable to
the participant or by delivering previously owned shares of Class A Common
Stock.

The following table sets forth target awards granted to the Company's five
highest paid executive officers in 2001, all current executive officers as a
group and all employees other than executive officers as a group for the
three-year performance period commencing 2002.

-30-

NEW PLAN BENEFITS

Long-Term Incentive Plan

Number of
Name and Position Dollar Value (1)($) Phantom Share Units
- ---------------------------------------------------- ------------------- -------------------

Milne, Stephen A., President and 755,634 100,323
Chief Executive Officer(2)

Van Gorder, Jan R., Senior Executive 233,762 31,036
Vice President, Secretary and
General Counsel

Ludrof, Jeffrey A., Executive Vice 222,027 29,478
President Insurance Operations

Garcia, Philip A., Executive Vice 184,835 24,543
President and Chief Financial Officer

Brinling, John J., Jr., Executive Vice 157,835 20,955
President

Executive Officer Group 1,554,113 206,335

Non-Executive Officer Employee Group 885,642 117,584

- -------------

(1) Dollar value represents the target award granted. An executive's target
award is established by the LTIP Administrator. The actual value of an
executive's phantom share units at the end of a performance period may be
more or less than the executive's target award. However, the value of an
executive's phantom share units may not exceed $500,000 at the end of a
performance period.

(2) Mr. Milne served as President and Chief Executive Officer until his
retirement in January 2002. See "Retirement Performance Award for Mr.
Milne" for information regarding Mr. Milne's LTIP awards.

In addition to the awards set forth in the above table, a table setting
forth target awards granted to the Company's five highest paid executive
officers, all current executive officers as a group and all employees other than
the executive officers as a group for the three-year performance periods
commencing 1999, 2000 and 2001 is set forth under "Long-Term Incentive Plan." In
addition, the Summary Compensation Table sets forth the dollar value of
restricted stock awards and the dollar value of awards that became unrestricted
under the LTIP for 2000 and 2001. Such information for 2002 and ensuing years
cannot yet be determined.

Because executive officers of the Company (one of whom is a member of the
Board of Directors) are eligible to receive awards under the LTIP, each of them
has a personal interest in the proposal to continue the LTIP.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE CONTINUATION
---
OF THE LTIP.

-31-

PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS

Unless instructed to the contrary, it is intended that votes will be cast
pursuant to the proxies for the ratification of the selection of Malin,
Bergquist & Company, LLP as the Company's independent public accountants for
2002. The Company has been advised by Malin, Bergquist & Company, LLP that none
of its members has any financial interest in the Company.

A representative of Malin, Bergquist & Company, LLP will attend the Annual
Meeting, will have the opportunity to make a statement, if he or she desires to
do so, and will be available to respond to any appropriate questions presented
by shareholders at the Annual Meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
---
SELECTION OF MALIN, BERGQUIST & COMPANY, LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR 2002.

REPORT OF THE AUDIT COMMITTEE OF THE COMPANY

The Audit Committee is comprised of four directors, all of whom are
independent as independence is defined in Rule 4200(a)(15) of the of the Nasdaq
Marketplace Rules and all of whom satisfy the financial literacy requirements
thereof. On March 5, 2002, the Board of Directors adopted an amended written
charter for the Audit Committee, which is included as Exhibit B to this Proxy
Statement.

The Audit Committee, which met five times during 2001, has responsibility,
consistent with Section 1405(c)(4) of the Pennsylvania Insurance Holding
Companies Act and the Company's Bylaws, for recommending to the Board of
Directors the selection of independent auditors, reviewing the scope and results
of the audit and reviewing the adequacy of the Company's accounting, financial,
internal and operating controls.

The Audit Committee reviews the Company's financial reporting process on
behalf of the Board of Directors. In fulfilling its responsibilities, the Audit
Committee reviewed and discussed the Company's audited consolidated financial
statements for the year ended December 31, 2001 with management.

The Audit Committee discussed with the independent auditors the matters
required to be discussed by Statement of Auditing Standards No. 61,
Communication with Audit Committees, as amended. In addition, the Audit
Committee received and reviewed the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and has discussed with the
independent auditors matters relating to their independence.

The Audit Committee reviewed and discussed with the independent auditors
the following fees for services, none of which were deemed to be for consulting
services, rendered for the 2001 fiscal year and has determined that the
provision of non-audit services is compatible with the auditors' independence:

-32-

Erie Indemnity Erie Insurance Other
Company and Exchange and Affiliated
Subsidiaries Subsidiary Entities
-------------- -------------- ----------
Audit Fees $69,200 $72,000 $71,525
Financial Information Systems
Design and Implementation 0 0 0
All Other Fees 15,323 12,779 1,963

Based upon the discussions and reviews referred to above, the Audit
Committee recommended to the Board of Directors that the Company's audited
consolidated financial statements be included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001 and be filed with the Securities
and Exchange Commission.

Erie Indemnity Company Audit Committee:

Robert C. Wilburn, Chairman
Patricia Garrison-Corbin
Samuel P. Katz
Claude C. Lilly III

March 5, 2002

ANNUAL REPORT

A copy of the Company's Annual Report for 2001 is being mailed to all
holders of Class A Common Stock and Class B Common Stock with this Proxy
Statement.

SHAREHOLDER PROPOSALS

Any shareholder who, in accordance with and subject to the provisions of
Rule 14a-8 of the proxy rules of the SEC, wishes to submit a proposal for
inclusion in the Company's proxy statement for its 2003 Annual Meeting of
Shareholders must deliver such proposal in writing to the Company's Secretary at
the Company's principal executive offices at 100 Erie Insurance Place, Erie,
Pennsylvania 16530, not later than December 2, 2002.

Pursuant to Section 2.07 of the Company's Bylaws, if a shareholder desires
to present at the 2003 Annual Meeting of Shareholders (i) a proposal to the
Nominating Committee relating to candidates for consideration and decision as to
their nomination for election as directors by shareholders or (ii) a proposal
relating to other than nominations for and election of directors, otherwise than
pursuant to Rule 14a-8 of the proxy rules of the SEC, such shareholder must
comply with the provisions for shareholder proposals set forth in Section 2.07
of the Company's Bylaws, including the delivery of such proposal in writing to
the Company's Secretary, 100 Erie Insurance Place, Erie, Pennsylvania 16530, no
earlier than December 2, 2002 and no later than January 1, 2003 as follows:

-33-

Section 2.07 Shareholders 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 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 5 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 5
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,
(D) the number of shares of capital stock of the corporation beneficially owned
within the meaning of SEC Rule 13d-3 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 5 business days from receipt of such notice to submit a
revised written proposal that corrects such failure or deficiency in all
material respects.

-34-

(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
by shareholders 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 5 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 5 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 (4) 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 have 5 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 of 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.

-35-

OTHER MATTERS

The Board of Directors does not know of any matter to be presented for
consideration at the Annual Meeting other than the matters described in the
Notice of Annual Meeting and in this Proxy Statement under the caption "Mrs.
Hagen's Proposed Director Candidates," but if any matters are properly
presented, execution of the proxy enclosed herewith shall confer discretionary
authority upon the persons named to vote on any other matter presented at the
Annual Meeting unless prohibited by applicable provisions of the Exchange Act.

By Order of the Board of Directors,

Jan R. Van Gorder,
Senior Executive Vice President,
Secretary and General Counsel

April 1, 2002
Erie, Pennsylvania

-36-

EXHIBIT A
---------

ERIE INDEMNITY COMPANY
LONG-TERM INCENTIVE PLAN

1. GENERAL
-------

1.1 Purpose.
-------

The purposes of the Long-Term Incentive Plan (the "Plan") are: (a) to
enhance the growth and profitability of Erie Indemnity Company, a
Pennsylvania business corporation ("Erie"), and its subsidiaries and
affiliates by providing the incentive of long-term rewards to key employees
who are capable of having a significant impact on the performance of Erie
and its subsidiaries and affiliates; (b) to attract and retain employees of
outstanding competence and ability and (c) to further align the interests
of such employees with those of shareholders of Erie.

1.2 Definitions.
-----------

For the purpose of the Plan, the following terms shall have the meanings
indicated:

(a) "Board of Directors" or "Board" shall mean the Board of Directors of
Erie.

(b) "Code" shall mean the Internal Revenue Code of 1986, as amended,
including any successor law thereto.

(c) "Company" shall mean Erie and any corporation, partnership, or other
organization of which Erie, directly or indirectly, owns or controls
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 terms
"Erie" and "Company" shall include any successor thereto.

(d) "Common Stock" shall mean the Class A (non-voting) Common Stock of
Erie and a "share of Common Stock" shall mean one share of Common
Stock.

(e) "Disability" shall mean total and permanent disability within the
meaning of Section 22(e)(3) of the Code.

(f) "Fair Market Value" of shares of Common Stock on any given date(s)
shall be: (a) the daily average of the high and low sales prices on
the Nasdaq National Market System of such shares on the date(s) in
question, or, if the shares of Common Stock shall not have been traded
on any such date(s), the closing price on the Nasdaq National Market
System on the first day prior thereto on which the shares of Common
Stock were so traded; or (b) if the shares of Common Stock are not
traded on the Nasdaq National Market System, such other amount as may
be determined by the Plan Administrator by any fair and reasonable
means.

(g) "Participant" shall mean any key employee who has met the eligibility
requirements set forth in Section 1.4 hereof and to whom a grant has
been made and is outstanding under the Plan.

(h) "Performance Period" shall mean, in relation to Phantom Share Units,
any period, for which performance objectives have been established
pursuant to Article 2.

A-1

(i) "Phantom Share Unit" shall mean a right granted to a Participant
pursuant to Article 2.

(j) "Plan Administrator" shall mean: (i) the Executive Compensation
Committee of the Board of Directors (the "Committee"), or its
functional successor, unless some other Board committee has been
designated by the Board of Directors to administer the Plan or any
portion of the Plan; or (ii) in the event that the Committee is not
comprised of two or more "Non-Employee Directors" within the meaning
of Rule 16b-3(a)(3) promulgated under Section 16 of the Securities
Exchange Act of 1934, then the Plan Administrator shall, with respect
to officers and directors subject to Section 16, be the Board.

(k) "Restricted Share" shall mean a share of Common Stock granted to a
Participant pursuant to Article 3, subject to the restrictions set
forth in Section 3.1 hereof.

(l) "Retirement" shall mean the cessation of employment with the Company
after reaching age 55 and having completed at least 5 years of
service.

(m) "Vesting Period" shall mean in relation to Restricted Shares
receivable in payment for Phantom Share Units, the period of time
during which such shares are subject to restrictions on
transferability and may be forfeited if the Participant's employment
is terminated during such period.

1.3 Administration.
--------------

The Plan shall be administered by the Plan Administrator and the Plan
Administrator shall act in accordance with the procedures established under
Erie's Articles of Incorporation, Bylaws and under any resolution of the
Board. Subject to the provisions of the Plan, the Plan Administrator shall
have sole and complete authority to: (i) subject to Section 1.4 hereof,
select Participants after receiving the recommendations of the management
of the Company; (ii) determine the number of Phantom Share Units or
Restricted Shares subject to each grant; (iii) determine the time or times
when grants are to be made or are to be effective; (iv) determine the terms
and conditions, including the performance objectives, subject to which
grants may be made; (v) extend the term of any grant; (vi) prescribe the
form or forms of the instruments evidencing any grants made hereunder,
provided that such forms are consistent with the Plan; (vii) adopt, amend,
and rescind such rules and regulations as, in its opinion, may be advisable
for the administration of the Plan; (viii) construe and interpret the Plan
and all rules, regulations, and instruments utilized thereunder; and (ix)
make all determinations deemed advisable or necessary for the
administration of the Plan. All determinations by the Plan Administrator
shall be final and binding.

1.4 Eligibility and Participation.
-----------------------------

Participation in the Plan shall be limited to officers (who may also be
members of the Board of Directors) and other salaried key employees of the
Company as identified by the Plan Administrator to participate in the Plan.

2. PROVISIONS APPLICABLE TO PHANTOM SHARE UNITS
--------------------------------------------

2.1 Performance Periods.
-------------------

The Plan Administrator shall establish Performance Periods applicable to
Phantom Share Units. Each such Performance Period shall commence with the
beginning of a fiscal year in which

A-2

performance objectives are established and have a duration of not less than
three consecutive fiscal years.

2.2 Performance Objectives.
----------------------

The Plan Administrator shall establish one or more performance objectives
for each Performance Period, provided that such performance objectives
shall be established prior to the grant of any Phantom Share Units with
respect to such period. Performance objectives shall be based on one or
more of the following measures: (i) retained earnings per share plus
dividends, (ii) earnings or earnings per share, (iii) assets or return on
assets, (iv) shareholders' equity or return on shareholders' equity, (v)
revenues, (vi) costs, (vii) gross profit margin, (viii) investment
earnings, (ix) loss ratio, (x) combined ratio, or (xi) any other measure
determined by the Plan Administrator to be in the best interests of the
Company. The Plan Administrator may, in its discretion, establish
performance objectives for the Company as a whole or for only the business
unit of the Company in which a given Participant is involved, or a
combination thereof.

2.3 Grants of Phantom Share Units.
-----------------------------

The Plan Administrator may select employees to become Participants (subject
to the provisions of Section 1.4 hereof) and grant Phantom Share Units to
such Participants at any time prior to or during the first fiscal year of a
Performance Period. Before making grants, the Plan Administrator shall
receive the recommendations of the Chief Executive Officer of the Company,
which will take into account such factors as level of responsibility,
current and past performance, and performance potential. Each grant to a
Participant shall be evidenced by a written instrument stating the number
of Phantom Share Units granted, the target value of each Phantom Share
Unit, the Performance Period, the performance objective or objectives, the
Vesting Periods and restrictions applicable to Restricted Shares receivable
in payment for Phantom Share Units and any other terms, conditions and
rights with respect to such grant.

2.4 Adjustment With Respect to Phantom Share Units.
----------------------------------------------

Any other provision of the Plan to the contrary notwithstanding, the Plan
Administrator may at any time adjust performance objectives (up or down),
adjust the way performance objectives are measured, or shorten any
Performance Period, if it is determined that conditions, including, but not
limited to, changes in the economy, changes in competitive conditions,
changes in laws or governmental regulations, changes in generally accepted
accounting principles, changes in the Company's accounting policies,
acquisitions or dispositions, stock redemptions, reductions or increases in
the management fee rate payable to Erie by Erie Insurance Exchange,
reductions to shareholders' equity due to reductions or increases in net
unrealized gains on available-for-sale securities or the occurrence of
other events impacting the performance objectives, so warrant; provided,
however, that the Plan Administrator may not make any such adjustment that
would increase the economic benefit to any "covered employee" as defined in
Section 162(m) of the Code.

2.5. Maximum Annual Award.
--------------------

The maximum value of Phantom Share Units that may be earned by any
Participant in any year shall not exceed $500,000.

2.6 Payment for Phantom Share Units.
-------------------------------

Within 90 days after the end of any Performance Period, the Plan
Administrator shall determine the total dollar value of Phantom Share Units
held by each Participant for such Performance

A-3

Period. Payment for Phantom Share Units shall be in the form of Restricted
Shares and shall be subject to the terms and conditions of Section 3
hereof. Such Common Stock shall be purchased in the open market, provided
however, that if the Common Stock of the Company is not readily available
in the marketplace, or purchase of the Common Stock for Restricted Shares
would artificially affect the price of the Common Stock, in the sole
discretion of the Plan Administrator, Restricted Shares shall be payable in
deferred stock units equal in value to the number of shares of Common Stock
that would have been paid to the Participant had the Common Stock been
available in the marketplace. The number of Restricted Shares (or stock
unit equivalents) granted shall be equal to the actual total value of the
Phantom Share Units at the end of the Performance Period divided by the
average price of the Fair Market Value of the Common Stock for the month
following the end of the Performance Period, rounded up to the nearest
whole share.

2.7 Termination of Employment.
-------------------------

(a) Prior to the end of a Performance Period:

(i) Death, Disability or Normal Retirement: If a Participant ceases
--------------------------------------
to be an employee of the Company prior to the end of a
Performance Period by reason of death, Disability or Normal
Retirement (as defined in the Company's qualified Retirement Plan
for Employees), the Performance Period for outstanding Phantom
Share Units shall be deemed to end as of the end of the fiscal
year in which such event occurred. The total dollar value of
Phantom Share Units held by such Participant shall be based upon
performance during the reduced Performance Period and will be
paid in the form of shares of Common Stock in the manner provided
for by Section 2.6. Any shares of Common Stock payable pursuant
to this Section 2.7 shall be free of any restrictions or risk of
forfeiture under the Plan and shall be registered in the name of
the Participant or the Participant's beneficiary or estate, as
the case may be, as soon as practicable after the end of the
applicable Performance Period.

(ii) Other Terminations: If a Participant ceases to be an employee
------------------
prior to the end of a Performance Period for any reason other
than death, Disability or Normal Retirement, the Participant
shall immediately forfeit all Phantom Share Units previously
granted under the Plan. The Plan Administrator may, however, in
its sole discretion, permit a Participant to retain all or a
portion of the Participant's Phantom Share Units if it finds that
the circumstances in the particular case so warrant.

(b) After the end of a Performance Period, but prior to the end of a
Vesting Period:

(i) Death or Disability: If a Participant ceases to be an employee of
-------------------
the Company by reason of death or Disability, the Vesting Period
shall be deemed to have ended and shares of Common Stock held by
the Company with respect to Restricted Shares earned by such
Participant shall be paid as soon as practicable in the manner
set forth in Section 3.4 hereof.

(ii) Retirement: The Retirement of a Participant shall not constitute
----------
a termination of employment for purposes of this Section 2.7(b),
and such Participant shall not forfeit any Common Stock held by
the Company with respect to Restricted Shares earned by such
Participant.

A-4

(iii) Other Terminations: If a Participant ceases to be an employee
------------------
prior to the end of a Vesting Period for any reason other than
death, Disability or Normal Retirement, the Participant shall
immediately forfeit all unvested Restricted Shares previously
granted with respect to such Vesting Period in accordance with
the provisions of Section 3.2(c) hereof, unless the Plan
Administrator, in its sole discretion, finds that the
circumstances in the particular case so warrant and allows a
Participant whose employment has so terminated to retain any or
all of the Restricted Shares granted to such Participant.

3. PROVISIONS APPLICABLE TO RESTRICTED SHARES
------------------------------------------

3.1 Vesting Periods.
---------------

At the time a Phantom Share Unit award is made, the Plan Administrator
shall establish a Vesting Period applicable to Restricted Stock which shall
not be more than three years. The Plan Administrator may provide for the
lapse of all or a portion of such Vesting Period in installments and may
accelerate or waive such Vesting Period, in whole or in part, based on such
factors as the Plan Administrator may determine.

3.2 Rights and Restrictions Governing Restricted Shares.
---------------------------------------------------

At the time of payment in Restricted Shares, subject to the receipt by the
Company of any applicable consideration for such Restricted Shares, one or
more certificates representing the appropriate number of shares of Common
Stock granted to a Participant shall be registered either in the
Participant's name or for the Participant's benefit either individually or
collectively with others, but shall be held by the Company for the account
of the Participant. The Participant shall have all rights of a holder as to
such shares of Common Stock, including the right to receive dividends,
subject to the following restrictions: (a) the Participant shall not be
entitled to delivery of certificates representing such shares of Common
Stock and any other such securities until the expiration of the applicable
Vesting Period; (b) none of the Restricted Shares may be sold, transferred,
assigned, pledged, or otherwise encumbered or disposed of during the
applicable Vesting Period; and (c) all of the Restricted Shares shall be
forfeited and all rights of the Participant to such Restricted Shares shall
terminate without further obligation on the part of the Company unless the
Participant remains in the continuous employment of the Company for the
entire Vesting Period or portion thereof in relation to which such
Restricted Shares were granted, except as otherwise allowed by Section 2.7
hereof. At the time of payment in Restricted Shares, if the Common Stock of
the Company is not readily available in the marketplace, or purchase of the
Common stock would artificially affect the price of the Common Stock, in
the sole discretion of the Plan Administrator, then in that event, the
Company shall have the option to pay to the Participant in cash the Fair
Market Value of the Restricted Shares on such payment date.

3.3 Adjustment with Respect to Restricted Shares.
--------------------------------------------

Any other provisions of the Plan to the contrary notwithstanding, the Plan
Administrator may at any time shorten any Vesting Period, if it determines
that conditions, including but not limited to, changes in the economy,
changes in competitive conditions, changes in laws or governmental
regulations, changes in generally accepted accounting principles, changes
in the Company's accounting policies, acquisitions or dispositions, or the
occurrence of other unusual, unforeseen, or extraordinary events, so
warrant.

A-5

3.4 Payment of Restricted Shares.
----------------------------

In the event that a Participant is still employed by the Company at the end
of the Vesting Period or portion thereof, all applicable restrictions shall
lapse as to Restricted Shares granted in relation to such Vesting Period,
and one or more stock certificates for the appropriate number of shares of
Common Stock, free of restrictions, shall be delivered to the Participant
or such shares shall be credited to a brokerage account if the Participant
so directs.

3.5 Deferral of Payment.
-------------------

The Plan Administrator may, in its sole discretion, offer a Participant the
right, by execution of a written agreement, to defer the receipt of all or
any portion of the payment, if any, for Restricted Shares. If such an
election to defer is made, the Common Stock receivable in payment for
Restricted Shares shall be deferred as stock units equal in number to the
number of shares of Common Stock that would have been paid to the
Participant. Such stock units shall represent only a contractual right and
shall not give the Participant any interest, right, or title to any Common
Stock during the deferral period. The cash receivable in payment for
fractional shares receivable for Restricted Shares shall be deferred as
cash units. Deferred cash units may be credited annually with an
appreciation factor specified in the deferred compensation agreement, which
will include dividend equivalents. At the end of the deferral period,
deferred stock units and cash units shall be paid in Common Stock, except
that any payment attributable to fractional shares shall be paid in cash.
All other terms and conditions of deferred payments shall be as contained
in a written deferred compensation agreement.

4. MISCELLANEOUS
-------------

4.1 Designation of Beneficiary.
--------------------------

A Participant may designate, in a writing delivered to the Company before
the Participant's death, a person or persons to receive, in the event of
the Participant's death, any rights to which the Participant would be
entitled under the Plan. A Participant may also designate an alternate
beneficiary to receive payments if the primary beneficiary does not survive
the Participant. A Participant may designate more than one person as the
Participant's beneficiary or alternate beneficiary, in which case such
persons would receive payments as joint tenants with a right of
survivorship. A beneficiary designation may be changed or revoked by a
Participant at any time by filing a written statement of such change or
revocation with the Company. If a Participant fails to designate a
beneficiary, then the Participant's estate shall be deemed to be the
Participant's beneficiary.

4.2 Employment Rights.
-----------------

Neither the Plan nor any action taken hereunder shall be construed as
giving any employee of the Company the right to become a Participant, and a
grant under the Plan shall not be construed as giving any Participant any
right to be retained in the employ of the Company.

4.3 Nontransferability.
------------------

A Participant's rights under the Plan, including the right to any amounts
or shares payable, may not be assigned, pledged, or otherwise transferred
except, in the event of a Participant's death, to the Participant's
designated beneficiary or, in the absence of such a designation, by will or
the laws of descent and distribution.

A-6

4.4 Withholding.
-----------

The Company shall have the right, before any payment is made or a
certificate for any shares is delivered or any shares are credited to any
brokerage account, to deduct or withhold from any payment under the Plan
any federal, state, local or other taxes, including transfer taxes,
required by law to be withheld or to require the Participant or the
Participant's beneficiary or estate, as the case may be, to pay any amount,
or the balance of any amount, required to be withheld.

If and to the extent withholding of any federal, state or local tax is
required in connection with the lapse of restrictions with respect to
Restricted Shares earned pursuant to Phantom Share Units, the Participant
may elect to pay such amount in cash or: (i) have the Company hold back
from the shares to be delivered, stock having a value calculated to satisfy
such withholding obligations; (ii) deliver previously-owned shares of
Common Stock held by the Participant having a value equal to the tax
withholding obligation provided that the previously owned shares have been
held for at least six months; or (iii) utilize a combination of the
foregoing procedures.

4.5 Relationship to Other Benefits.
------------------------------

No payment under the Plan shall be taken into account in determining any
benefits under any retirement, group insurance, or other employee benefit
plan of the Company. The Plan shall not preclude the shareholders of Erie,
the Board of Directors or any committee thereof, or the Company from
authorizing or approving other employee benefit plans or forms or incentive
compensation, nor shall it limit or prevent the continued operation of
other incentive compensation plans or other employee benefit plans of the
Company or the participation in any such plans by Participants in the Plan.

4.6 No Trust or Fund Created.
------------------------

Neither the Plan nor any grant made hereunder shall create or be construed
to create a trust or separate fund of any kind or a fiduciary relationship
between the Company and a Participant or any other person. To the extent
that any person acquires a right to receive payments from the Company
pursuant to a grant under the Plan, such right shall be no greater than the
right of any unsecured general creditor of the Company.

4.7 Expenses.
--------

The expenses of administering the Plan shall be borne by the Company.

4.8 Indemnification.
---------------

Service on the Committee shall constitute service as a member of the Board
of Directors so that members of the Committee shall be entitled to
indemnification and reimbursement as directors of the Company pursuant to
its Articles of Incorporation, ByLaws, or resolutions of its Board of
Directors or shareholders.

4.9 Tax Litigation.
--------------

The Company shall have the right to contest, at its expense, any tax ruling
or decision, administrative or judicial, on any issue that is related to
the Plan and that the Company believes to be important to Participants in
the Plan and to conduct any such contest or any litigation arising
therefrom to a final decision.

A-7

4.10 Antidilution.
------------

Phantom Share Units and Restricted Shares shall be subject to appropriate
adjustment by the Plan Administrator as to the number and price of shares
of Common Stock or other considerations subject to such grants in the event
of changes in the outstanding shares by reason of stock dividends, stock
splits, recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges, or other relevant changes in capitalization
occurring after the date of grant.

5. AMENDMENT AND TERMINATION
-------------------------

The Board of Directors may modify, amend, or terminate the Plan at any time
except that no modification, amendment, or termination of the Plan shall
adversely affect the rights of a Participant under a grant previously made
to a Participant without the consent of such Participant.

6. INTERPRETATION
--------------

6.1 Governmental and Other Regulations.
----------------------------------

The Plan and any grant hereunder shall be subject to all applicable federal
and state laws, rules, and regulations and to such approvals by any
regulatory or governmental agency that may, in the opinion of the counsel
for the Company, be required.

6.2 Governing Law.
-------------

The Plan shall be construed and its provisions enforced and administered in
accordance with the laws of the Commonwealth of Pennsylvania applicable to
contracts entered into and performed entirely in such Commonwealth.

7. EFFECTIVE DATE AND SHAREHOLDER APPROVAL
---------------------------------------

The Plan shall be effective as of January 1, 1997.

A-8

EXHIBIT B
---------

ERIE INDEMNITY COMPANY
AUDIT COMMITTEE CHARTER

I. AUDIT COMMITTEE PURPOSE

The Audit Committee shall be appointed by the Board of Directors of Erie
Indemnity Company (hereafter "the Company") to assist the Board in overseeing
(1) the integrity of the financial statements of the Company provided to
shareholders and others; (2) the compliance by the Company with financial
accounting and legal and regulatory requirements; (3) the independence and
performance of the Company's internal and independent auditors; and (4) the
systems of control over financial reporting. In this context, the Company shall
also include Erie Insurance Exchange, and its affiliated companies, for which
Erie Indemnity Company is the attorney-in-fact.

II. AUDIT COMMITTEE APPOINTMENT, COMPOSITION, AND MEETING PROTOCOL

The members of the Audit Committee shall be appointed by the Board, and shall
meet independence and experience requirements of the applicable federal
securities law, the Pennsylvania Insurance Holding Companies Act, and the
Marketplace Rules of the Nasdaq Stock Market (hereafter "Nasdaq").

The Audit Committee shall be comprised of at least three directors, the exact
number to be determined by the Board, each of whom shall be independent
directors as required by applicable statutory requirements and each member of
the Audit Committee shall be free from any relationship that would interfere
with the exercise of his or her independent judgment.

All members of the Audit Committee shall be able to read and understand the
financial statements, including the Company's balance sheet, income statements,
and cash flow statements, or become able to do so within a reasonable period of
time after his or her appointment to the Audit Committee. At least one member of
the Audit Committee shall have current or past employment experience in finance
or accounting, requisite professional certification in accounting, or any other
comparable experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer, chief
financial officer, or other senior officer with financial oversight
responsibilities.

The Audit Committee Chair shall be designated by the Board.

The Audit Committee shall meet at least four times annually or more frequently
as necessary and appropriate. A quorum of committee members shall be present at
any meeting at which final action or approval is to be taken or made. A quorum
shall be present if a majority of committee members are present in person or by
other means and in the case of an Audit Committee of three or four members, by
the attendance, in person or otherwise, of two or more committee members. An
agenda for each meeting shall be prepared in advance of each meeting and may be
developed in consultation with management, other committee members, and/or the
independent auditors.

III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES

The Audit Committee shall have the following responsibilities and duties:

B-1

1. Review and reassess the adequacy of this Charter at least annually and
recommend any proposed changes to the Board for approval.

2. Review the annual audited financial statements prior to filing or
distribution. The review should include discussions with management and the
independent auditors of any significant issues regarding accounting principles,
practices and judgments.

3. Consider the integrity of the Company's financial reporting processes and
controls in consultation with management, the independent auditors and the
internal auditors. Discuss significant financial risk exposures and the steps
management has taken to monitor, control, and report such exposures and to
identify any payments or procedures that might be deemed illegal or improper.
Review significant findings presented by the independent auditors and the
internal audit department together with management's responses.

4. Review with management and the independent auditors, the Company's
quarterly financial statements prior to the public release of earnings and the
filing or distribution of the quarterly financial statements. The review shall
encompass discussion of any significant issues arising during the independent
auditors' limited review procedures.

5. Review and discuss any significant changes to the Company's accounting
principles and any items required to be communicated by the independent auditors
in accordance with the American Institute of Certified Public Accountants
Statements of Auditing Standards.

6. Select, evaluate, and, if appropriate, replace the independent auditor. The
independent auditors are ultimately accountable to the Board of Directors and
the Audit Committee, as representatives of shareholders.

7. Approve the fees and other significant compensation to be paid to the
independent auditors, including any other significant management consulting
engagements to be performed by the independent auditing firm that is outside of
the audit engagement letter.

8. Review and discuss with the independent auditors annually all significant
relationships they have with the Company that could impair the auditors'
independence.

9. Review the independent auditors' audit plan and engagement letter to
determine if it is sufficiently detailed and covers any significant areas of
concern the Audit Committee may have. This review should include the scope,
staffing, locations, reliance upon management and internal audit and general
audit approach.

10. Review and discuss the fourth quarter and year-end earnings with the
independent auditors prior to the public release of the year-end results.

11. Review and consider the independent auditors' judgment regarding the
quality and appropriateness of the Company's accounting principles as applied in
its financial reporting.

12. Discuss with the independent and internal auditors whether there are any
reportable instances of internal control weaknesses.

13. Review with management the appointment, performance and replacement of the
senior internal audit executive.

B-2

14. Review with the Company's General Counsel on at least an annual basis, i.)
any legal matters that could have a significant impact on the Company's
financial statements, ii.) the Company's compliance with applicable laws and
regulations, and iii.) inquiries received from regulators or governmental
agencies.

15. Prepare annually a report to shareholders, to be included in the Company's
annual proxy statement, as required by the SEC. The report should include a
statement that the Audit Committee has reviewed and discussed the audited
financial statements with management; discussed with the independent auditors
the matters required to be discussed by Statements of Auditing Standards;
reviewed the written disclosure from the independent auditors regarding their
independence; and make a recommendation to the Board of Directors about the
inclusion of the audited financial statements in the Company's Form 10-K Report
to be filed with the SEC.

16. File and attach the Audit Committee Charter as an appendix to the proxy
statement at least once every three years.

17. Obtain from the independent auditor, assurance that Section 10A of the
Securities Exchange Act of 1934, as amended (relating to the disclosure of
illegal acts), has not been implicated.

18. Prepare and maintain minutes of its meetings.

19. Periodically report to the Board of Directors on significant results of its
activities.

20. Perform such other duties and activities consistent with the intent and
spirit of this charter, the Company's Bylaws, and governing law, as the Audit
Committee deems necessary or appropriate.

B-3