Restated Effective
January 1, 2009
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 (the “ Company ”), and its
subsidiaries and affiliates, including Erie Family Life Insurance
Company, and the Erie Insurance Exchange (collectively, the “
Erie Insurance Group ”) 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 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 the
shareholders of the Company.
1.2
Administration of the Plan .
The Plan shall be administered by the Executive Compensation and
Development Committee (the “ Committee ”) of the
Company’s Board of Directors (the “ Board
”) or other committee appointed by the Board, which shall be
comprised of not less than two members of the Board, each of whom
at the time of appointment to the Committee and at all times during
service as a member of the Committee shall be both (1) a
“non-employee director” as then defined under
Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the “ Exchange Act ”), or any successor
rule and (2) an “outside director” as then defined
in the regulations under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the “ Code ”), or any
successor provision. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to:
(i) select Participants after receiving the recommendations of
the management of the Company; (ii) determine the number of
Restricted Performance Shares, as described in Section 2
subject to each grant; (iii) determine the time or times when
grants are to be made or are to be effective, including the
Performance Period for each grant; (iv) determine the terms
and conditions, including the Performance Goals, 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 Committee shall be final and binding.
1.3
Eligibility and Participation . Participation in the Plan
shall be limited to officers (who may also be members of the Board)
and other salaried key employees of the Company and its
subsidiaries and affiliates as identified by the Committee to
participate in the Plan. Employees who are granted awards under the
Plan are referred to herein as “ Participants
”.
1.4
Shares Available . The aggregate net number of shares of
Class A (non-voting) Common Stock of the Company (the “
Common Stock ”) which may be paid and as to which
grants of Restricted Performance Shares may be made under the Plan
(counting all grants from the Plan’s effective date) is
1,000,000 shares, subject to adjustment and substitution as set
forth in Section 3. The Company or its agent shall repurchase
outstanding shares of Common Stock in order to satisfy the
Company’s obligation under the Plan to pay awards in shares
of Common Stock. If shares of Common Stock are forfeited to the
Company pursuant to the restrictions applicable to Restricted
Performance Shares or are withheld or delivered to the Company in
satisfaction of a tax withholding obligation, the shares so
forfeited, withheld or delivered shall again be available for
purposes of the Plan.
1.5
New Participants . Except as provided in this
Section 1.5, an employee who is not a Participant as of the
first day of a Performance Period shall not become a Participant
for that Performance Period. New employees of the Company or its
subsidiaries and affiliates hired during a Performance Period, and
employees promoted during the Performance Period who were not
eligible to participate in the Plan at the beginning of the
Performance Period,
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may, as
determined by the Committee in its sole discretion, become a
Participant during a Performance Period and participate in the Plan
for such Performance Period on a pro-rata basis (based on the
number of days in the Performance Period that such employee is an
employee who is deemed eligible to participate in the Plan);
provided, that if the new or promoted employee is a covered
employee (as such term is defined under Section 162(m) of the Code
or any successor section thereto and the regulations thereunder),
then the employee shall not be eligible to participate in the Plan
unless he or she becomes a Participant effective not later than
90 days after the beginning of the Performance
Period.
SECTION
2. RESTRICTED PERFORMANCE SHARES
2.1
Restricted Performance Shares . The Committee is authorized
to grant Restricted Performance Shares to Participants on the
following terms and conditions:
(i)
Right to Payment of Shares. Restricted Performance Shares
shall represent a right to receive shares of Common Stock based on
the achievement, or the level of achievement, during a specified
Performance Period of one or more Performance Goals established by
the Committee at the time of the award.
(ii)
Terms of Restricted Performance Shares. At the time
Restricted Performance Shares are granted, the Committee shall
cause to be set forth in the agreement covering such award or
otherwise in writing (1) the Performance Goals applicable to
the award, the weighting of such goals, and the Performance Period
during which the achievement of the Performance Goals shall be
measured, (2) the number of shares of Common Stock which may
be earned by the Participant based on the achievement, or the level
of achievement, of the Performance Goals or the formula by which
such amount shall be determined and (3) such other terms and
conditions applicable to the award as the Committee may, in its
discretion, determine to include therein. The terms so established
by the Committee shall be objective such that a third party having
knowledge of the relevant facts could determine whether or not any
Performance Goal has been achieved, or the extent of such
achievement, and the amount, if any, which has been earned by the
Participant based on such performance.
(iii)
Performance Goals. “Performance Goals” shall
mean one or more preestablished, objective measures of performance
during a specified “ Performance Period ”,
selected by the Committee in its discretion. Performance Goals may
be based upon one or more of the following objective performance
measures and expressed in either, or a combination of, absolute or
relative values: (i) adjusted combined ratio of property and
casualty insurance operations of Erie Insurance Group,
(ii) growth in direct written premiums of Erie Insurance
Group, (iii) the statutory or GAAP combined ratio, loss ratio,
expense ratio or dividend ratio of the property and casualty
insurance operations of the Erie Insurance Group, (iv) net income
(including net income before or after taxes and net income before
interest, taxes, depreciation and amortization), net income per
share and net income per share growth rate, (v) operating
revenue, net premiums written or net premiums earned,
(vi) operating expenses, cost of management operations or
underwriting expenses, (vii) cash flow, (viii) return on
capital, shareholders’ equity, assets or investments,
(ix) stock price, (x) market share or (xi) gross
margins. Performance measures may be based on the performance of
the Erie Insurance Group, the Company or a subsidiary or
subsidiaries or affiliate of the Company, a division, department,
business unit or other portion thereof, a product line or products,
or any combination the foregoing and/or upon a comparison of such
performance with the performance of a peer group of corporations or
other measure selected or defined by the Committee at the time of
making the award of Restricted Performance Shares. The Committee
may in its discretion also determine to use other objective
performance measures as Performance Goals.
(iv)
Committee Certification. Following completion of the
applicable Performance Period, and prior to any payment of shares
of Common Stock to the Participant for Restricted Performance
Shares, the Committee shall determine, in accordance with the terms
of the Restricted Performance Shares, and certify in writing
whether the applicable Performance Goal or Goals were achieved, or
the level of such achievement, and the number of shares, if any,
earned by the Participant based upon such performance. For this
purpose, approved minutes of the meeting of the Committee at which
certification is made shall be sufficient to satisfy the
requirement of a written certification.
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(v)
Maximum Individual Payments. The maximum number of shares of
Common Stock which may be earned under the Plan by any single
Participant during any one calendar year shall be limited to
250,000 shares. The limitation in the preceding sentence shall be
interpreted and applied in a manner consistent with
Section 162(m) of the Code.
(vi)
Termination of Employment.
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(a)
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Death, Disability or Normal or Early
Retirement. If a Participant ceases to be an
employee of the Company, its subsidiaries and affiliates prior to
the end of a Performance Period by reason of death, disability
(meaning total and permanent disability within the meaning of
Section 22(e)(3) of the Code) or Normal or Early Retirement
(as defined below), the Participant may receive all or such portion
of his or her award as may be determined by the Committee in its
sole discretion to have been earned by the Participant; provided
that the Participant shall not receive less than the total number
of shares of Common Stock earned pursuant to such Restricted
Performance Shares held by such Participant based upon performance
during the reduced Performance Period which is deemed to end, for
the purposes of paragraphs (iv), (vi), and (vii) of this
Section 2.1, on the last day of the calendar year in which
such termination of employment occurs. For the purposes of this
Plan, “Normal Retirement” means cessation of employment
upon or after attainment of age 65, and “Early
Retirement” means cessation of employment upon or after
attainment of age 55 and completion of 15 years of Credited Service
(as defined under the Erie Insurance Group Retirement Plan for
Employees).
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(b)
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Other Terminations.
If a Participant ceases
to be an employee of the Company, its subsidiaries and affiliates
prior to the end of a Performance Period for any reason other than
death, disability or Normal or Early Retirement as described in
subsection (a), above, the Participant may receive all or such
portion of his or her award as may be determined by the Committee
in its sole discretion; provided, that a Participant who is
terminated for cause (as defined in such employee’s
employment agreement with the Company or its subsidiary or
affiliate, if no such agreement exists, as defined by the
Committee) shall not be entitled to receive payment of any award
for any Performance Period.
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(vii)
Payment. The Company shall pay to the Participant the number
of shares of Common Stock earned pursuant to an award of Restricted
Performance Shares held by the Participant for a Performance Period
in the first calendar year beginning after the end of that
Performance Period, as promptly as reasonably practicable following
the Committee’s determination and certification as set forth
in Section 2.1(iv) (the “ Payment Date
”).
(viii)
Delayed Payment Date For Specified Employee. If, pursuant to
Section 2.1(vi)(a), the Performance Period for a
Participant’s award is reduced so that the Payment Date for
the Participant’s award would occur in a calendar year
earlier than the year in which it would have occurred had the
Performance Period not been reduced, then the Payment Date for the
award may not be earlier than the date that is six months after the
Participant’s separation from service (or, if earlier, the
Participant’s death). “Specified employee” means,
with respect to the relevant 12-month period beginning on an April
1 and during which the Company remains publicly traded, a
Participant who was a “key employee” within the meaning
of Section 416(i) of the Code, without re
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