EXHIBIT 10.1 - SERVICE AGREEMENT
Amended And Restated
This SERVICE AGREEMENT made and entered into by and between ERIE INSURANCE
COMPANY, a Pennsylvania stock insurance company (hereinafter referred to as the
"Company") and ERIE INDEMNITY COMPANY, a Pennsylvania stock corporation
(hereinafter referred to as "Erie Indemnity"), both of which are headquartered
in Erie, Pennsylvania.
WITNESSETH:
WHEREAS, the Company is a wholly owned subsidiary of Erie Indemnity; and
WHEREAS, Erie Indemnity has served as the attorney-in-fact for the Erie
Insurance Exchange, a Pennsylvania reciprocal inter-insurance exchange
(hereinafter the "Exchange"), since the Exchange's inception in April, 1925; and
WHEREAS, Erie Indemnity provides the Exchange with all management services
pursuant to a Subscriber's Agreement with power of attorney executed by each
Subscriber at the Exchange, and it is intended hereby that Erie Indemnity shall
provide the same management services to the Company in like kind and quality as
Erie Indemnity provides to the Exchange; and
WHEREAS, the parties intend to amend and restate the Service Agreement in effect
between them since 1989.
NOW THEREFORE, in consideration of the mutual covenants contained herein and
intending to be legally bound thereby, the parties agree as follows:
Article I: MANAGEMENT SERVICES
A. Erie Indemnity will provide all necessary and appropriate management
services to the Company, including but not limited to the following
services: issuing, changing, nonrenewing or cancelling policies; obtaining
reinsurance; collecting premiums, receiving notices and proofs of loss;
appearing for, compromising, prosecuting, defending, adjusting and
settling losses and claims under the policies; accepting service of
process on behalf of the Company; and generally managing and conducting
the business and affairs of the Company.
B. All the underwriting, claims, and investment services provided to the
Company will be based upon the written criteria, standards and guidelines
of the Company. The Company will have the ultimate and final authority
over decisions and policies, including but not be limited to the
acceptance, rejection or canceling of risks, the payment or non-payment of
claims, and the purchase and sale of securities.
C. Notwithstanding any other provisions of this Agreement, it is understood
that the business and affairs of the Company shall be managed by its Board
of Directors, and, to
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the extent delegated by such board, by its appropriately designated
officers. The Board of Directors and officers of Erie Indemnity shall not
have any management prerogatives with respect to the business affairs and
operations of the Company.
Article II: MANAGEMENT FEE
In consideration of Erie Indemnity's management services, the Company will pay
Erie Indemnity a management fee, which fee shall be on a cost basis. The Company
will pay such management fee on a monthly basis no later than thirty days after
the end of the month in which the costs were incurred.
Article III: REIMBURSEMENT
In addition to paying Erie Indemnity the management fee in ARTICLE II, the
Company will also fully reimburse Erie Indemnity on an actual cost basis for all
investment expenses incurred by Erie Indemnity on behalf of the Company. The
allocation method for shared expenses (facilities, equipment, personnel,
computers, etc.) shall be consistent with the provisions of New York Regulation
30 (11 NYCRR 105,109).
The Company will make such reimbursement to Erie Indemnity on a monthly basis no
later than 30 days after Erie Indemnity notifies the Company of such incurred
investment expenses.
Article IV: RECORDS AND RIGHT TO AUDIT
Erie Indemnity shall keep sufficient records for the express purpose of
recording therein the nature and details of the management services and
financial transactions performed for the Company pursuant to this Agreement. All
books and records kept by Erie Indemnity that pertain to the management services
and investment services performed by Erie Indemnity shall be owned by Erie
Indemnity, but such books and records shall be maintained in a fiduciary
capacity for the Company. The Company shall have the right to examine and audit,
at the offices of Erie Indemnity at all reasonable times, all books and records
of Erie Indemnity relating to any business which is the subject of this
Agreement. This right shall survive termination of this Agreement and shall
continue so long as either party has any rights or obligations under this
Agreement.
Article V: ARBITRATION
As a condition precedent to any right of action hereunder, in the event of any
difference of opinion hereafter arising with respect to this Agreement, it is
hereby mutually agreed that such dispute or difference of opinion shall be
submitted to arbitration before a panel of three arbitrators, all of whom shall
be active or retired disinterested officers of property and casualty insurance
companies. One arbitrator shall be chosen by Erie Indemnity, one shall be chosen
by the Company, and the third, an umpire, to be chosen by the other two
arbitrators before they enter upon arbitration. In the event of any party
refusing or neglecting to appoint an arbitrator within 90 days after the other
party requests it to do so, or if the arbitrators fail to appoint an umpire
within 60 days after they have accepted their appointments, such arbitrator or
umpire, as the case may be, shall, upon the application of any party, be
appointed by The American
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Arbitration Association and the arbitrators and the umpire shall thereupon
proceed. The arbitrators shall consider this Agreement as an honorable
engagement rather than merely as a legal obligation and they are relieved of all
judicial formalities and may abstain from following the strict rules of law. The
decision of the majority of the arbitrators shall be final and binding on all
parties. Each party shall bear the expense of its own arbitrator and shall
jointly and equally bear the other expenses of the umpire and of the
arbitration. Any such arbitration shall take place in Erie, Pennsylvania, or
such other place as may be mutually agreed.
Article VI: EFFECTIVE DATE AND TERMINATION
This Agreement shall be effective as of January 1, 1992. The Agreement shall
continue in full effect until it is amended or terminated by either party.
Termination will take place 30 days after either party delivers a written notice
to terminate to the other party.
Article VII: MISCELLANEOUS
This Agreement shall be governed by and construed in accordance with the laws of
the Commonwealth of Pennsylvania.
If any term, provision, covenant or condition of this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remainder of the provisions shall continue in full force and effect and shall in
no way be affected, impaired or invalidated.
IN WITNESS WHEREOF the parties hereto have amended the Service Agreement between
the parties in effect since January 1, 1989 and caused this Service Agreement to
supersede it.
ERIE INSURANCE COMPANY
By /s/ J.M. Petersen
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J.M. Petersen
President, Treasurer & Chief Financial Officer
By /s/ T.M. Sider
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T.M. Sider
Senior Vice President & Controller
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ERIE INDEMNITY COMPANY
By /s/ T.B. Hagen
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T.B. Hagen
Chairman of the Board & Chief Executive Officer
By /s/ J.R. Van Gorder
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J.R. Van Gorder
Executive Vice President, Secretary & General Counsel
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