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EXHIBIT 10.48 ERIE INDEMNITY COMPANYANNUAL INCENTIVE PLAN Section 1. Purpose. The purpose of the Annual Incentive Plan (the
Plan) of Erie Indemnity Company (the Company) is to advance the best interests
of the Erie Insurance Groupconsisting of the Company and its subsidiaries and affiliates,
including Erie Family Life Insurance Company, and the Erie Insurance Exchange (collectively, the
Erie Insurance Group)and thereby enhance shareholder value of the Company by providing
incentives in the form of annual cash bonus awards to certain management employees of the Company
and other Participating Entities upon the attainment of performance goals established in accordance
with the Plan. Section 2. Effective Date and Performance Periods. The effective date of the
Plan is March 2, 2004, provided that the Plan is approved by shareholders of the Company prior to
the payment of any awards hereunder. The Plan will remain in effect from year to year (each
calendar year shall be referred to herein as a Plan Year) until formally amended or
terminated in writing by the Companys Board of Directors (the Board). There shall be
one year performance periods (each, a Performance Period) under the Plan. A new
Performance Period shall commence on the first day of each Plan Year and end on December 31 of such
Plan Year. Section 3. Administration of the Plan. Section 3.01. General. The Plan shall be administered by the Executive
Compensation and Development Committee (the Committee) of the Board or other committee
appointed by the Board, which shall be comprised solely of two or more outside directors 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. The Committee shall interpret the Plan and
prescribe such rules, regulations and procedures in connection with the operations of the Plan as
it shall deem to be necessary and advisable for the administration of the Plan consistent with the
purposes of the Plan. The Committees determinations under the Plan need not be uniform and may be
made by it selectively among persons who receive, or are eligible to receive, awards under the
Plan, whether or not such persons are similarly situated. For each Plan Year, the Committee shall
(i) designate the Participants eligible to receive awards under the Plan, (ii) determine the
Company Performance Goals and the Company Incentive Targets for such Participants, (iii) determine
the Individual Performance Goals and Individual Incentive Targets for eligible Participants, and
(iv) make such other determinations as may be required or permitted by the Plan. Prior to payment
of any Company Incentive Award or Individual Incentive Award for any Plan Year, the Committee shall
certify that the Company Performance Goals and Individual Performance Goals (and other material
terms of any award) have been satisfied. For purposes of the required certification, approved
minutes of the meeting of the Committee at which the certification is made shall be sufficient to
satisfy the requirement of a written certification. 74




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Section 3.02. Section 162(m). Company Incentive Awards under this Plan are
intended to constitute qualified performance-based compensation under Section 162(m) of the Code
(or any successor section thereto) and the regulations thereunder with respect to Participants who
are or who are anticipated to be covered employees, as such term is defined in Section 162(m) of
the Code (or any successor section thereto) for any Plan Year (each, a Covered Employee) and the
Plan shall be administered and interpreted consistently with said Section 162(m) with respect to
awards to Covered Employees. Section 4. Eligibility, Termination, New Participants. Section 4.01. Eligibility. Any key employee of the Company or any
corporation, partnership or other organization of which the Company owns or controls, directly or
indirectly, not less than 50% of the total combined voting power of all classes of stock or other
equity interests (each, a Participating Entity) who the Committee determines, in its sole
discretion, has a significant affect on the operations and/or results of the Company shall be
eligible to participate in the Plan (each, a Participant); provided, that the Companys
Chief Executive Officer and the Executive Vice Presidents of the Company shall not be eligible to
receive Individual Incentive Awards. Participants in the Plan for any Plan Year shall be deemed
ineligible to participate in the Erie Insurance Group Employee Profit Sharing Bonus Plan (the
Profit Sharing Plan) for such Plan Year. No employee of the Company or any Participating
Entity shall have a right (a) to be selected to participate in the Plan for any Plan Year, or (b)
having once been selected for a Plan Year, to (i) be selected to participate again in the future or
(ii) continue as an employee of the Company or any Participating Entity. Section 4.02. Termination of Employment. If the active employment of a
Participant shall be terminated before the Payment Date of an award for any Plan Year for any
reason, such 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 if a Participant ceases to be an employee
of the Company or a Participating Entity prior to the Payment Date of an award for any Plan Year 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 in the Companys qualified pension
plan for employees), the Participant shall be entitled to payment of not less than a pro rata
portion of such award, based on the number of days such Participant was an employee during the
Performance Period; and provided, further, that a Participant who is terminated for cause (as
defined in such employees employment agreement with the Company or Participating Entity or, if no
such agreement exists, as defined by the Committee) shall not be entitled to receive payment of any
award for the Plan Year. Section 4.03. New Participants. Except as provided in this Section 4.03, 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 a Participating Entity
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, 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
for the 75




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Plan Year, 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. Persons who become Participants after the first day of a Performance Period shall not be
eligible to participate in the Profit Sharing Plan from the date they become a Participant in the
Plan; however, such Participant shall be entitled to a pro rata portion of the benefit, if any, to
which they otherwise would be entitled under the Profit Sharing Plan for such Plan Year based on
the number of days in the year prior to the date they became Participant in the Plan. Section 5. Company Incentive Targets, Company Incentive Awards, Company
Performance Measures, Company Performance Goals. Section 5.01. Company Incentive Targets. Each Participant under the Plan
shall be assigned a Company Incentive Target, which shall be expressed as a percentage of the
Participants annual rate of base salary in effect on December 31 of the Plan Year for which the
Company Incentive Target is being assigned, and which shall establish the amount of cash
compensation payable to the Participant upon attaining, in whole or in part, or exceeding, the
Company Performance Goals for a Performance Period (the Company Incentive Target). The
Company Incentive Targets shall be determined and approved by the Committee not later than 90 days
after the commencement of each Performance Period. At the time the Company Incentive Target is
established, the Committee shall establish the maximum Company Incentive Award that may be paid for
the Performance Period to Participants who are Covered Employees. Section 5.02. Company Incentive Awards. Company incentive awards are the
actual cash amounts earned by Participants during a Performance Period for attaining, in whole or
in part, or exceeding the Company Performance Goals for such Performance Period (Company
Incentive Awards); provided, however, that for Participants who are Covered Employees (a) no
Company Incentive Award may exceed the Participants Company Incentive Target established for the
actual level of achievement attained, and (b) payment of any Company Incentive Award under the Plan
shall be contingent upon the achievement of the Company Performance Goals. Section 5.03. Company Performance Goals. (a) Company Performance Goals. For each Performance Period, the Committee shall
establish specific, written, objective performance goals (the Company Performance Goals)
for each Participant, which may be based upon one or more of the following performance measures and
expressed in either, or a combination of, absolute values or rates of change: (i) the operating
ratio of the property and casualty insurance operations of the Erie Insurance Group (ii) direct
written premiums of the 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 (Company Performance Measures). Company 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 76




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division, department, business unit or other portion thereof, a product line or products, or
any combination of the foregoing and/or upon a comparison of such performance with the performance
of a peer group or other measure selected or defined by the Committee at the time of assigning the
Company Incentive Target. For Participants that are Covered Employees, the Company Performance
Goals shall be established for any Performance Period not later than 90 days after the commencement
of the Performance Period. (b) Manner of Calculating Company Incentive Awards. When the Company Performance
Goals are established, the Committee shall also specify, in terms of an objective formula or
standard, the method for computing the amount of the Company Incentive Award if the Company
Performance Goal is attained, in whole or in part, or exceeded. If more than one Company
Performance Goal is established for any Performance Period, the Committee shall also specify the
weighting assigned to such Company Performance Goals. The Committee may, at the time the Company
Performance Goals are established, determine that unusual items or certain specified events or
occurrences, including changes in accounting standards or tax laws and the effects of
non-operational or extraordinary items as defined by generally accepted accounting principles,
shall be excluded from the calculation; provided that such determination does not cause the Company
Incentive Award for any Performance Period to fail to constitute qualified performance-based
compensation under Section 162(m) of the Code (or any successor section thereto) and the
regulations thereunder with respect to Participants who are Covered Employees. Section 5.04. Discretion. The Committee shall have no discretion to increase
any Company Incentive Target or Company Incentive Award that would otherwise be due upon attainment
of the Company Performance Goals, or otherwise modify any Company Performance Goals associated with
a Performance Period; provided, however, that solely with respect to Participants who are eligible
to receive Individual Incentive Awards under Section 6, the Committee may in its discretion reduce
or eliminate such Company Incentive Target or Company Incentive Award for a Performance Period. Section 5.05. Determination of Company Incentive Award. As promptly as
reasonably practicable following receipt of the information necessary for the calculation of any
Company Incentive Award, the Committee shall determine the amount of a Participants Company
Incentive Award for the Plan Year, if any, based on the level of attainment of the applicable
Company Performance Goals for the Performance Period in accordance with the terms of the award as
set forth in the Award Agreement and the other terms of the Plan. Such determination shall be
communicated to the Participant in writing. Prior to any payment of the Company Incentive Awards
hereunder, the Committee shall determine and certify in writing the extent to which the Company
Performance Goals and other material terms of the Plan and the applicable Award Agreement were
satisfied. Section 5.06. Maximum Company Incentive Awards. Notwithstanding any other
provision of this Plan, the maximum Company Incentive Award payable in cash to any one Participant
under the Plan with respect to any Performance Period shall be $3.0 million. 77




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Section 6. Individual Incentive Targets, Individual Incentive Awards and
Individual Performance Goals. Section 6.01. Individual Incentive Targets. Each Participant under the Plan
who is eligible to receive Individual Incentive Awards under this Section 6 shall be assigned an
individual incentive target, which shall be expressed as a percentage of the Participants annual
rate of base salary in effect on December 31 of the Plan Year for which the Individual Incentive
Target is being assigned and which shall establish the amount of cash compensation payable to the
Participant upon attaining, in whole or in part, or exceeding, the Individual Performance Goals for
a Performance Period (an Individual Incentive Target). Section 6.02. Individual Incentive Awards. Individual incentive awards
(Individual Incentive Awards) are the actual cash amounts earned by eligible Participants
during a Performance Period for attaining, in whole or in part, or exceeding the Individual
Performance Goals for such Performance Period. Section 6.03. Individual Performance Goals. (a) Individual Performance Goals. For each Performance Period, the Committee shall
review and approve the individual performance goals for each eligible Participant as established
pursuant to the employee performance assessment program in effect from time to time and set forth
on the Participants individual performance assessment form for such Performance Period (the
Individual Performance Goals). (b) Calculation. When the Individual Performance Goals are established, the Committee
shall also specify the method for computing the amount of the Individual Incentive Award if the
Individual Performance Goal is attained, in whole or in part, or exceeded by the Participant. If
more than one Individual Performance Goal is established for any Performance Period, the Committee
shall also specify the weighting assigned to such Individual Performance Goals. The Committee may
determine that unusual circumstances or certain specified events or occurrences, shall be excluded
from the calculation. Section 6.04. Discretion. The Committee shall have no discretion to increase
any Individual Incentive Target or Individual Incentive Award that would otherwise be due upon
attainment of the Individual Performance Goals, or otherwise modify any Individual Performance
Goals associated with a Performance Period; provided, however, that the Committee may in its
discretion reduce or eliminate Individual Incentive Targets or Individual Incentive Awards for a
Performance Period. Section 6.05. Determination of Individual Incentive Award. As promptly as
reasonably practicable following receipt of the information necessary for the calculation of any
Individual Incentive Award, the Committee shall determine the amount of a Participants Individual
Incentive Award for the Plan Year, if any, based on the level of attainment of the applicable
Individual Performance Goals for the Performance Period in accordance with the terms of the award
as set forth in the Award Agreement and the other terms of the Plan. Such determination shall be
communicated to the Participant in writing. Prior to any payment of the Individual Incentive
Awards hereunder, the Committee shall determine and certify in writing the extent to which the
Individual Performance Goals and other material terms of the Plan were satisfied for each
Participant. 78




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Section 7. Payment to Participants. Section 7.01. Timing of Payment. Except as may be deferred pursuant to
Section 8.02, Company Incentive Awards and Individual Incentive Awards for a Performance Period
shall be paid to the Participant as promptly as reasonably practicable following the end of such
Performance Period and the Committees determination and certification of such awards (the Payment
Date). Section 7.02. Beneficiary Designation. A Participant may file a completed
designation of beneficiary form with the Committee or its delegate in the form prescribed. Such
designation may be made, revoked or changed by the Participant at any time before the earlier of
death or receipt of any unpaid Company Incentive Awards or Individual Incentive Awards, but such
designation of beneficiary will not be effective and supersede all prior designations until it is
received and acknowledged in writing by the Committee or its delegate. If the Committee has any
doubt as to the proper beneficiary to receive payments hereunder, the Committee shall have the
right to withhold such payments until the matter is finally adjudicated. However, any payment made
in good faith shall fully discharge the Committee, the Company, its subsidiaries, Participating
Entities and the Board from all further obligations with respect to that payment. Section 7.03. Form of Payment. Payment of Company Incentive Awards and
Individual Incentive Awards shall be made in cash. Section 7.04. Tax Withholding. All Company Incentive Awards and Individual
Incentive Awards shall be subject to Federal income, FICA, and other tax withholding as required by
applicable law. Section 8. Miscellaneous. Section 8.01. Non-alienation. Except as may be required by law, neither the
Participant nor any beneficiary shall have the right to, directly or indirectly, alienate, assign,
transfer, pledge, anticipate or encumber (except by reason of death) any amount that is or may be
payable hereunder, including in respect of any liability of a Participant or beneficiary for
alimony or other payments for the support of a spouse, former spouse, child or other dependent,
prior to actually being received by the Participant or beneficiary hereunder, nor shall the
Participants or beneficiarys rights to benefit payments under the Plan be subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of the Participant or beneficiary or to the debts, contracts, liabilities,
engagements, or torts of any Participant or beneficiary, or transfer by operation of law in the
event of bankruptcy or insolvency of the Participant or any beneficiary, or any legal process. Section 8.02. Deferral. Participants may elect to defer all or a portion (in
whole percentages) of their Company Incentive Award and Individual Incentive Award, in accordance
with the terms of a deferral agreement entered into between the Participant and the Company;
provided that such election to defer must be made prior to the commencement of the Plan Year to
which such Incentive Award relates. No amount in excess of the amount of the Company or Individual
Incentive Awards deferred shall be payable to the Participant for such deferral, except as may be
based upon either an actual or deemed reasonable rate of interest or on one or more actual or
deemed investment vehicles as made available from time to time by the Company elected by the
Participant, such that the amount payable will be based on the actual rate of return of a specific
investment (including any decrease as well as any increase in the value of an investment). 79




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Section 8.03. Amendment or Termination of this Plan. The Board shall have
the right to amend or terminate the Plan at any time, provided that any termination shall
automatically end the outstanding Performance Period and calculations shall be made with respect to
achievement of the Company and Individual Performance Goals for such Performance Periods for the
purpose of determining whether any partial Company or Individual Incentive Awards may be payable
under the Plan; provided, further, that in the event any partial Company or Individual Incentive
Awards are payable, such amounts shall be paid as soon as practicable following termination of the
Plan in the form and subject to any restrictions determined by the Committee in its sole
discretion. No employee or Participant shall have any vested right to payment of any Company or
Individual Incentive Award hereunder prior to its payment. The Company shall notify affected
employees in writing of any amendment or termination of the Plan. Section 8.04. Award Agreements. Company Incentive Awards and Individual
Incentive Awards shall be evidenced by a written agreement entered into between the Company or a
Participating Entity and the Participant, setting forth such award granted to the Participant under
this Plan (each, an Award Agreement). Section 8.05. Limits of Liability. Any liability of the Company to any
Participant with respect to an award shall be based solely upon contractual obligations created by
the Plan and the Award Agreement. Neither the Company, nor any member of its Board or of the
Committee, nor any other person participating in any determination of any question under the Plan,
or in the interpretation, administration or application of the Plan, shall have any liability to
any party for any action taken or not taken in good faith under the Plan. Section 8.06. No Employment Rights. Neither the adoption of the Plan nor any
provision of the Plan shall be construed as a contract of employment between the Company or a
subsidiary or Participating Entity and any employee or Participant, or as a guarantee or right of
any employee or Participant to future or continued employment with the Company or a subsidiary or
Participating Entity, or as a limitation on the right of the Company or a subsidiary or
Participating Entity to discharge any of its employees. Specifically, designation as a Participant
does not create any rights, and no rights are created under the Plan, with respect to continued or
future employment or conditions of employment. Section 8.07. Illegal or Invalid Provision. In case any provision of the
Plan shall be held illegal or invalid for any reason, such illegal or invalid provision shall not
affect the remaining parts of the Plan, but the Plan shall be construed and enforced without regard
to such provisions. Section 8.08. Unsecured Creditor. The Plan constitutes a mere promise by the
Company to make benefit payments in the future. The Companys obligations under the Plan shall be
unfunded and unsecured promises to pay. The Company shall not be obligated under any circumstance
to fund its financial obligations under the Plan. It may, in its discretion, set aside funds in a
trust or other vehicle, subject to the claims of its creditors, in order to assist it in meeting
its obligations under the Plan, if such arrangement will not cause the Plan to be considered a
funded deferred compensation plan. To the extent that any Participant or beneficiary or other
person acquires a right to receive payments under the Plan, such right shall be no greater than the
right of a general 80




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unsecured creditor of the Company and each Participant and beneficiary shall at all times have
the status of a general unsecured creditor of the Company. Section 8.09. Construction. The provisions of the Plan shall be construed,
administered and governed by the laws of the Commonwealth of Pennsylvania, including its statute of
limitations provisions, but without reference to conflicts of law principles. Titles of Sections
of the Plan are for convenience of reference only and are not to be taken into account when
construing and interpreting the provisions of the Plan. Capitalized terms shall have the meanings
ascribed to them herein unless the context expressly otherwise requires. 81