Document:

EX-10.2

Exhibit 10.2

EXECUTIVE RETENTION AGREEMENT

This EXECUTIVE RETENTION AGREEMENT (the “Agreement”), made and entered into on the 25th day of
June 2008, is by and between ERIE INDEMNITY COMPANY, a Pennsylvania corporation with its principal
place of business in Erie, Pennsylvania (the “Company”) and PHILIP A. GARCIA, residing at 786
Stockbridge Drive, Erie, Pennsylvania 16505 (the “Executive”).

RECITALS:

WHEREAS, the Company is in the process of hiring a new President and Chief Executive Officer
(“President/CEO”); and

WHEREAS, the Executive is a key employee of the Company and currently holds the position of
Executive Vice President and Chief Financial Officer; and

WHEREAS, the Company deems it in its best interest to secure the continued services of the
Executive during the period of the Company’s search for a new President/CEO and then thereafter
during the new President/CEO’s transition into the Company; and

WHEREAS, the Company and the Executive are parties to an Amended and Restated Employment
Agreement made effective as of December 12, 2005 (the “Employment Agreement”) and an Amendment and
Payment Designation Agreement made effective as of December 31, 2007 (the “Payment Designation
Agreement”); and

WHEREAS, the Company and the Executive each agrees that it is in their respective best
interest to provide for Executive’s continued employment with the Company through at least the
initial transition period for the new President/CEO on the terms set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the
receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby,
the parties hereto agree as follows:

1. Effective Date; Payments Conditioned on Releases.

a. This Agreement shall become effective and enforceable upon but not before the expiration of
the revocation period described in Section 6(f) without the Executive’s revocation of this
Agreement (the “Effective Date”).

b. The consideration described in Section 4(a)(i), (iii), (viii), (ix) and (x) shall not be
payable unless and until: (i) this Agreement has become effective, and (ii) following, and within
30 days after the termination of Executive’s employment, the Executive (A) executes a second waiver
and release in a form provided by the Company the terms of which will be substantially similar to
those in Section 5 of this Agreement, except that the second waiver and release shall be effective
as of the date of the termination of Executive’s employment, and (B) a revocation period of at
least seven (7) days granted by the Company for the second waiver and release expires without the
Executive’s revocation of the waiver and release.

c. Provided that this Agreement takes effect as provided in Section 1(a), the consideration
described in Section 4(a)(xi) shall be payable as provided in such subsection.

2. Retention Agreement.

a. The Executive agrees to remain an employee of the Company in his current position of
Executive Vice President and Chief Financial Officer throughout the “Retention Period”, which shall
begin on the Effective Date of this Agreement and end on the earliest of:

i. his death or permanent total disability (as defined in the Company’s long term disability
policy or, in the absence of such a policy, by a medical doctor mutually acceptable to the
Executive or his legal representative and the Company), or

ii. thirty (30) days after the date on which the Company’s Annual Report on Form 10-K for the
fiscal year 2008 is filed by the Company with the U.S. Securities and Exchange Commission (“SEC”),
or

iii. the date of termination of Executive’s employment by the Company other than for “Cause”,
as that term is defined in Section 5(d) of the Employment Agreement (“Cause”), or

iv. the date of Executive’s termination of his employment with the Company for “Good Reason”,
as that term is defined in Section 5(e) of the Employment Agreement (“Good Reason”), or

v. April 30, 2009.

b. The Company retains the right to terminate the employment of the Executive with or without
Cause.

c. The Executive shall receive such salary, bonuses, incentive payments, employee benefits,
fringe benefits and perquisites while employed by the Company during the Retention Period as the
Company’s Board of Directors shall approve in its sole and absolute discretion; provided, however,
that such salary, bonuses, incentive payments, employee benefits, fringe benefits and perquisites
shall not be less than the Executive is entitled to under the Employment Agreement and Payment
Designation Agreement as such agreements were in effect immediately prior to the Effective Date of
this Agreement; and provided further, that if the Executive is employed by the Company through
December 31, 2008, or dies or becomes totally and permanently disabled while employed in 2008, he
shall be entitled to participate in the Company’s 2008 Annual Incentive Plan in accordance with its
terms as evidenced by his individual 2008 award agreement.

d. If the Executive complies with Section 2(a) of this Agreement, and subject to Section 1 and
Section 2(e) and 2(f) of this Agreement, the Executive shall be entitled at the end of the
Retention Period to the payments and other benefits set forth in Section 4(a) of this Agreement in
accordance with any terms and conditions set forth in Section 4(a).

e. If prior to the end of the Retention Period, the Executive shall voluntarily terminate his
employment with the Company for any reason other than for Good Reason, or if the Company terminates
the Executive’s employment for Cause, he shall not be entitled to the payments and other benefits
set forth in Section 4(a)(i), (iii), (viii), (ix) and (x) of this Agreement.

f. In addition, if the Executive shall be terminated by the Company for Cause prior to the end
of the Retention Period, he shall not be entitled to the benefits described in Section 4(a)(iv) and
shall be entitled to only fifty percent (50%) of the payment provided in Section 4(a)(xi).

3. Termination of the Employment Agreement and the Payment Designation Agreement;
Resignation as an Officer and Termination of Employment.

a. The Executive and the Company hereby mutually terminate, revoke and rescind the Employment
Agreement and the Payment Designation Agreement and all rights and obligations either party has or
may be entitled to under the Employment Agreement and the Payment Designation Agreement, in
accordance with Section 5(h) of the Employment Agreement.

b. The Executive and the Company agree further that the Executive’s status as an employee and
officer of the Company and as an officer and director of each of the Company’s subsidiaries and
related companies will terminate, and he will separate from service with the Company, effective as
of the last day of the Retention Period.

4. Payments and Other Benefits.

a. In consideration of the execution and performance of this Agreement by the Executive, and
subject to Sections 2(d), 2(e) and 2(f) and the remaining provisions of this Section 4, the
Executive will receive from the Company the following severance payments and benefits, which
include sums of money and benefits to which the Executive would not otherwise be entitled if the
Company and the Executive did not mutually agree to the termination of his Employment Agreement and
Payment Designation Agreement:

i. The Company shall pay to the Executive, in a lump sum cash payment on the first day of the
seventh (7th) month after the Executive’s termination of employment with the Company, the sum of
One Million Seven Hundred and Fifty Thousand Dollars ($1,750,000).

ii. The Company shall pay to the Executive, in a lump sum payment on December 12, 2008, or if
the Executive terminates employment with the Company (other than for Cause) before December 11,
2008, on the first day of the seventh (7th) month after the date of such termination, his Accrued
SERP Benefit and Additional SERP Benefits (as such terms are defined in Section 8(a)(5) of the
Employment Agreement and used in subparagraph 2(a) of the Payment Designation Agreement) as
required under subparagraph 2(a) of the Payment Designation Agreement, in full settlement of all of
the Executive’s rights with respect to the Accrued SERP Benefit, Additional SERP Benefits and
(except as provided in Section 4(a)(iii) of this Agreement) any other benefit under or related to
the Supplemental Executive Retirement Plan for Certain Members of the Erie Insurance Group
Retirement Plan for Employees (“SERP”) in which Executive may have had an expectancy. Such lump
sum payment shall be computed in the manner provided in subparagraph 2(a) of the Payment
Designation Agreement. If the Executive is terminated for Cause before December 11, 2008, his SERP
benefits, computed in the manner prescribed by the SERP without regard to Section 8(a)(5) of the
Employment Agreement and the foregoing provisions of this Section 4(a)(ii), shall be paid in the
form and at the time designated above.

iii. The Company shall pay to the Executive, in a lump sum payment on the first day of the
seventh (7th) month after the Executive’s termination of employment with the Company, the lump sum
value of the additional SERP benefits produced by crediting the Executive with three (3) additional
years of service as provided in Section 6(a)(4) of the Employment Agreement. This additional lump
sum will be based on the December 12, 2008 accrued benefit with recognition of three (3) years of
additional service (total service limited to thirty (30) years). The difference between this
benefit and the benefit determined without the additional three (3) years of service will be
converted to a lump sum amount using the age, interest rate and mortality table applicable as of
the first day of the seventh (7th) month after the Executive’s termination of employment
with the Company. The mortality table for payouts in 2009 will be the same as used for the
Company’s qualified pension plan per the Internal Revenue Service’s Revenue Ruling 2007-67.

iv. The Company shall pay to the appropriate taxing authorities on the Executive’s behalf a
Tax Gross-up with respect to payment of Executive’s SERP Benefits described in paragraph (ii) of
this Section 4(a). For the avoidance of doubt, the payment described in paragraph (iii) of this
Section 4(a) shall not be eligible for a Tax Gross-up. As used throughout this Agreement, the “Tax
Gross-up” with respect to a particular payment or benefit means (A) the taxes identified below that
are payable by the Executive by reason of such payment or benefit, computed by applying the highest
applicable marginal rate with respect to each such tax and (B) any such taxes incurred and due and
owing with respect to the amounts paid in (A) above:

	 	1.	 	Federal income tax applicable to the Executive
for the year of payment under section 1 of the Internal Revenue Code of
1986, as amended (the “Code”);

2. Pennsylvania state income tax;

3. Local earned income tax;

4. The employee portion of the Pennsylvania unemployment tax; and

5. The employee portion of FICA-HI taxes.

Any Tax Gross-up payable under this Agreement shall be paid during the year in which the related
payment or benefit is paid.

v. The Company shall pay to the Executive, in a lump sum cash payment in January of the year
following the year in which the Executive terminates employment with the Company, an amount equal
to the Executive’s account balance under the Deferred Compensation Plan of Erie Indemnity Company
(the “Deferred Compensation Plan”) as of December 31, 2004, plus earnings on that portion of the
Executive’s account through the date of payment, computed in accordance with the terms of the
Deferred Compensation Plan.

vi. The Company shall pay to the Executive, in a lump sum cash payment on the first day of the
seventh (7th) month after the Executive’s termination of employment with the Company, an amount
equal to the Executive’s account under the Deferred Compensation Plan attributable to accruals on
and after January 1, 2005, and earnings on that portion of the Executive’s account through the date
of payment, computed in accordance with the terms of the Deferred Compensation Plan.

vii. The Company shall issue to the Executive 1,185 shares of the Company’s Class A Common
Stock (less applicable deductions) in January 2009, which shares represent restricted shares
awarded to Executive under the Company’s 1997 Long Term Incentive Plan; provided, however, that if,
prior to January 1, 2009, the Executive voluntarily terminates employment for any reason other than
for Good Reason or the Company terminates Executive’s employment for Cause, the Executive’s rights
under the Company’s 1997 Long Term Incentive Plan shall be only such as are provided under the
terms of that plan.

viii. With respect to the Company’s 2004 Long Term Incentive Plan (“2004 LTIP”):

	 	(A)	 	If the Executive remains employed through the
Retention Period and the Retention Period ends before January 1, 2009:
(I) the performance period with respect to awards made to the Executive
for the 2006-2008, 2007-2009 and 2008-2010 performance periods shall
all be treated as ending on December 31, 2008; (II) the Company shall
measure Company performance for each such performance period against
the applicable performance standards and goals and shall determine the
number of the restricted performance shares earned by the Executive for
the performance period, based on such Company performance (the “earned
award”); and (III) the Company shall issue to the Executive shares of
the Company’s Class A Common Stock representing: (1) for the 2006-2008
performance period, 100 percent of the earned award, (2) for the
2007-2009 performance period, 2/3 of the earned award, and (3) for the
2008-2010 performance period 1/3 of the earned award (less, in each
case, applicable deductions).

The Company shall issue such shares in 2009 at the time awards for
the 2006-2008 performance period are paid to other 2004 LTIP
participants.

(B) If the Executive remains employed through December 31, 2008, or if he is
terminated prior to January 1, 2009 for other than Cause, or if he
voluntarily terminates his employment in 2008 for Good Reason, or if he dies
or becomes totally and permanently disabled in 2008 while employed by the
Company: (I) the performance period with respect to the award made to the
Executive for the 2006-2008 performance period shall end on December 31,
2008; (II) the Company shall measure Company performance against the
applicable performance standards and goals and shall determine the number of
the restricted performance shares earned by the Executive for that
performance period, based on such Company performance (the “earned award”);
and (III) the Company shall issue to the Executive shares of the Company’s
Class A Common Stock representing 100 percent of that earned award (less
applicable deductions) at the same time that awards for the 2006- 2008
performance period are paid to other 2004 LTIP participants.

(C) If the Executive remains employed through the Retention Period and the
Retention Period ends on or after January 1, 2009: (I) the performance
period with respect to awards made to the Executive for the 2007-2009,
2008-2010 and 2009-2011 performance periods shall all be treated as ending
on December 31, 2009; (II) the Company shall measure Company performance for
each such performance period against the applicable performance standards
and goals and shall determine the number of the restricted performance
            shares earned by the Executive for the performance period, based on such
Company performance (the “earned award”); and (III) the Company shall issue
to the Executive shares of the Company’s Class A Common Stock representing:
(1) for the 2007- 2009 performance period, 100 percent of the earned award,
(2) for the 2008-2010 performance period, 2/3 of the earned award, and (3)
for the 2009-2011 performance period, 1/3 of the earned award (less, in each
case, applicable deductions).

The Company shall issue such shares in 2010 at the time awards for
the 2007-2009 performance period are paid to other 2004 LTIP
participants.

(D) If, prior to the end of the Retention Period, the Executive voluntarily
terminates employment for any reason other than for Good Reason or the
Company terminates Executive’s employment for Cause, the Executive’s rights
under the 2004 LTIP shall be only such as are provided under the terms of
that plan.

(E) The Company’s determination of the number of shares to be issued under
clauses (A), (B) and (C) above shall be in accordance with the terms of the
2004 LTIP and consistent with the Company’s past practices, and shall be
final and binding on all interested parties.

ix. For each of the calendar years 2009, 2010 and 2011, the Company shall reimburse the
Executive for the annual premiums due and paid during such years (i.e., in 2009 for the 2009-2010
policy year, in 2010 for the 2010-2011 policy year, and in 2011 for the 2011-2012 policy year) on a
Northwestern Mutual Life Insurance Company policy on the Executive’s life (No. 14-515-647) within
thirty (30) days after receipt of reasonable substantiating documentation from the Executive, but
in any event not later than the end of the calendar year following the year in which such expense
was incurred. In addition, in each such year the Company shall pay to the appropriate taxing
authorities on the Executive’s behalf an amount equal to the Tax Gross-up (as defined in Section
4(a)(iv) of this Agreement ) with respect to such premium payments. If the Executive should die or
cancel or surrender such policy during the three (3) year period, no further payments by the
Company shall be required. The Company agrees to use its best efforts to have any restrictive
endorsements on these policies removed not later than December 31, 2009.

x. The Executive shall be entitled to continuing coverage for all purposes (including
eligibility, coverage, vesting and benefit accruals, as applicable), for a period of three (3)
years after the date of the termination of Executive’s employment hereunder, to the extent not
prohibited by law, for the Executive and the Executive’s eligible dependents under all of the Erie
Benefit Plans (as such term is defined in Section 3(c) of the Employment Agreement) in effect and
applicable to Executive and the Executive’s eligible dependents as of the date of termination. In
the event that the Executive and/or the Executive’s eligible dependents, because of the Executive’s
terminated status, cannot be covered or fully covered under any or all of the Erie Benefit Plans,
the Company shall continue to provide the Executive and/or the Executive’s eligible dependents with
the same level of such coverage in effect prior to termination, payable from the general assets of
the Company if necessary.

xi. In consideration for the Release required under Section 5 of this Agreement, the Company
shall pay to the Executive, in a lump sum cash payment within five (5) business days after the end
of the Retention Period, the sum of One Hundred Thousand Dollars ($100,000).

b. In the event of the Executive’s death before payment of the benefits described in Sections
4(a)(i) and (xi), the Company shall pay the benefits at the scheduled times to the Philip A. Garcia
Revocable Trust, dated October 27, 1995, Philip A. Garcia Trustee, and in the event of the
Executive’s death before payment of the benefit described in Section 4(a)(iii), the Company shall
pay the benefit at the scheduled time to the Executive’s surviving spouse, Diane Garcia.

In the event of the Executive’s death before payment of a benefit described in any of the
other paragraphs of Section 4(a), the Company shall pay the benefit at the scheduled time to the
beneficiary or beneficiaries designated by the Executive from time-to-time in accordance with the
terms of the plan or arrangement to which the benefit relates; provided, however, that if the
Executive has not designated a beneficiary in accordance with the terms of the applicable plan or
arrangement, or if no designated beneficiary with respect to the plan or arrangement survives the
Executive, the Company shall pay the benefit to the executor or administrator of the Executive’s
estate.

c. All payments under this Section 4, whether or not in cash, shall be subject to applicable
deductions. For the purposes of this Agreement, “applicable deductions” shall include, but shall
not be limited to, any federal, state, or local taxes determined by the Company to be required to
be withheld from amounts paid to the Executive pursuant to this Agreement or otherwise due from the
Company, and any other amounts that the Company may be legally required to deduct from his
earnings.

d. Except as provided in Section 2(c) or elsewhere in this Agreement, the Executive agrees
that he is not entitled to any other compensation (including, but not limited to, salary, bonuses
or incentive payments), employee benefits, fringe benefits, perquisites or any other benefit of any
kind or description from the Company, or from or under any employee benefit plan or fringe benefit
plan sponsored by the Company or under the Employment Agreement or Payment Designation Agreement,
other than as described above and other than (i) his accrued benefits under the Erie Insurance
Group Retirement Plan for Employees and (ii) his accrued benefits under the Erie Insurance Group
Employee Savings Plan. The consideration paid by the Company to the Executive pursuant to this
Agreement shall be in compromise, settlement and full satisfaction of any and all Claims, as
defined in Section 5 of this Agreement, that the Executive has, or may have, against the Company or
other Releasees, as defined in Section 5 of this Agreement, arising out of the Executive’s
employment with the Company or its affiliates, the termination of such employment and any and all
matters related to the Executive’s employment and termination, or to his Employment Agreement or
Payment Designation Agreement.

5. Executive’s Waiver and Release. Effective as of the Effective Date, the
Executive, for himself, his heirs, successors and assigns and in consideration of the payments to
be made by the Company pursuant to Section 4(a)(xi) of this Agreement, does hereby forever
discharge and release the Company, and its corporate parents, subsidiaries, affiliated companies,
companies with common management, ownership or control, successors, assigns, insurers and
reinsurers, attorneys, and franchisees, and all of their officers, directors, shareholders,
employees, agents and representatives, in their official and individual capacities (collectively
referred to as “Releasees”), from any and all claims, demands, causes of action, damages, charges,
complaints, grievances, expenses, compensation and remedies which the Executive now has or may in
the future have on account of or arising out of any matter or thing which has happened, developed
or occurred before the Effective Date (collectively “Claims”), including, but not limited to, all
Claims arising from the Executive’s employment with the Company or any of its affiliated companies,
the termination of such employment, any and all relationships or dealings between the Executive and
the Company or any of the other Releasees, the termination of any such relationships and dealings,
and any and all other Claims the Executive may have against the Company or any of the other
Releasees, and the Executive hereby waives any and all such Claims including, all charges or
complaints that were or could have been filed with any court, tribunal or governmental agency, and
any and all Claims not previously alleged, including, but not limited to, any Claims under the
following: (a) Title VII of the Civil Rights Act of 1964, as amended; (b) the Age Discrimination in
Employment Act (ADEA), as amended; (c) the Federal Employee Retirement Income Security Act of 1974
(ERISA), as amended; (d) the Americans With Disabilities Act (ADA), as amended; (e) the
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), as amended; (f) Section 806 of the
Sarbanes-Oxley Act of 2002, as amended; (g) any and all statutes of similar nature or purpose under
Pennsylvania law, or the law of any other state, including, but not limited to, the Pennsylvania
Human Relations Act, as amended; and (h) any federal, state or local law, rule, regulation,
constitution, executive order or guideline of any description, including, but not limited to, those
laws described above, or any rule or principle of equity or common law, or any Claim of defamation,
conversion, interference with a contract or business relationship, or any other intentional or
unintentional tort, or any Claim of loss of consortium, or any Claim of harassment or retaliation,
or breach of contract or implied contract, or breach of covenant of good faith and fair dealing, or
any whistle-blower Claim. This release, discharge and waiver shall be hereinafter referred to as
the “Release.”

The Executive specifically understands and agrees that the termination of his employment does
not violate or disregard any oral or written promise or agreement, of any nature whatsoever,
express or implied. If any contract or agreement of employment exists concerning the employment of
the Executive by the Company or the terms and conditions of such employment or the termination of
such employment, whether oral or written, express or implied, that contract or agreement (including
the Employment Agreement and Payment Designation Agreement) is hereby terminated and is null and
void.

The Executive agrees that this Release may be enforced in federal, state or local court, and
before any federal, state or local administrative agency or body.

This Release does not prohibit the Executive from filing an administrative charge of alleged
employment discrimination, harassment or retaliation under Title VII of the Civil Rights Act of
1964, the Age Discrimination in Employment Act of 1967, the Americans With Disabilities Act or the
Equal Pay Act of 1963; however, the Executive represents that he has not to date filed or cause to
be filed any such administrative charge, and further agrees that he hereby waives any right to
monetary or other recovery should any federal, state or local administrative agency pursue any
Claim on his behalf and will immediately request in writing that the Claim or matter on his behalf
be withdrawn. Thus by signing this Agreement, the Executive waives any right he had to obtain a
recovery if an administrative agency pursues a Claim against the Company or any of the other
Releasees based on any action taken by the Company or any of the other Releasees up to the
Effective Date, and that he will have released the Company and the other Releasees of any and all
Claims, and the continuing effect of any and all Claims of any nature up to the Effective Date.
This Release does not affect any of the Executive’s vested rights under the Erie Insurance Group
Retirement Plan for Employees and the Erie Insurance Group Employee Savings Plan, nor, with respect
to any of the capacities in which the Executive served the Company or each of its subsidiaries and
related companies, or as a trustee of any employee benefit trusts or other trusts maintained or
sponsored by the Company or each of its subsidiaries and related companies, does it bar any claim
the Executive may have for indemnity in relation to any acts or omissions of the Executive or a
claim for coverage under any applicable insurances, or any claim relating to enforcement of this
Agreement.

6. Additional Terms.

a. Except as otherwise provided in Section 5 or this Section 6, the Executive agrees not to
commence or continue any action or proceeding in any federal, state or local court, concerning any
Claim waived or released in this Agreement.

b. The Executive represents that he has not filed or caused to be filed, and agrees that he
will not file or cause to be filed, any lawsuit of any kind arising out of or relating to his
employment with the Company, the terms and conditions of that employment, or the termination of his
employment.

c. Nothing contained in this Agreement prohibits the Executive from seeking a determination by
a court of competent jurisdiction that the Release is, in whole or in part, invalid under
applicable law. To the extent of such determination, the Executive may assert Claims or other
matters included in the Release, subject to final determination on appeal.

d. The Executive agrees that he has not sustained any disabling personal injury and/or
occupational disease which has resulted in a loss of wage earning capacity during his employment
with the Company, and that he has no personal injury and/or occupational disease which has been
contributed to, or aggravated or accelerated in a significant manner by his employment with the
Company.

e. The Executive represents and warrants that the Company has encouraged and advised the
Executive in writing, prior to signing this Agreement, to consult with an attorney of the
Executive’s choosing concerning all of the terms of this Agreement, and the Executive represents
and warrants that he has retained independent legal counsel to advise him concerning entering into
this Agreement and the terms hereof.

f. This Agreement may be revoked by the Executive within seven (7) days after the date this
Agreement is signed by the Executive, by giving notice of revocation to James J. Tanous, the
Executive Vice President, Secretary and General Counsel of the Company. This Agreement shall not
become effective or enforceable until the revocation period has expired with no revocation.

g. The Executive represents and warrants that the Company has given the Executive a reasonable
period of time, of at least twenty-one (21) days, for the Executive to consider all the terms of
this Agreement and for the purpose of consulting with an attorney if the Executive so chooses. A
copy of a draft of this Agreement was first given to the Executive on June 5, 2008. If this
Agreement has been executed by the Executive prior to the end of the twenty-one (21) day period,
the Executive represents that he has freely and willingly elected to do so.

h. This Agreement provides the Executive sums and benefits to which he is not otherwise
entitled as an employee of the Company.

i. Nothing contained in this Agreement is intended to be an admission of any fault,
wrongdoing, or liability on the part of any of the parties hereto, and nothing contained in this
Agreement may be deemed, construed, or treated in any respect as such an admission. The Company
specifically denies any fault, wrongdoing or liability toward the Executive. This Agreement was
reached by the parties as a mutual compromise of their respective positions, in order to avoid the
costs and inconvenience of litigation and for other reasons deemed good and sufficient by the
respective parties.

7. Non-Disparagement. The Executive shall not disparage the Company or other
Releasees, or its officers, directors or employees in any way orally or in writing, and the
directors and executive and senior officers of the Company shall likewise not disparage the
Executive.

8. Covenants as to Confidential Information and Competitive Conduct. The Executive
hereby acknowledges and agrees as follows: (a) this Section 8 is necessary for the protection of
the legitimate business interests of the Company, (b) the restrictions contained in this Section 8
with regard to geographical scope, length of term and types of restricted activities are
reasonable; (c) the Executive has received adequate and valuable consideration for entering into
this Agreement, and (d) the Executive’s expertise and capabilities are such that his obligations
hereunder and the enforcement hereof by injunction or otherwise will not adversely affect the
Executive’s ability to earn a livelihood.

a. Confidentiality of Information and Nondisclosure. The Executive agrees that the
Executive will not, directly or indirectly, without the express written approval of the Company,
unless directed by applicable legal authority (including any court of competent jurisdiction,
governmental agency having supervisory authority over the business of the Company or its
subsidiaries, or any legislative or administrative body having supervisory authority over the
business of the Company or its subsidiaries) having jurisdiction over the Executive, disclose to or
use, or knowingly permit to be so disclosed or used, for the benefit of himself, any person,
corporation or other entity other than the Company, (i) any non-public information concerning any
financial, accounting and tax matters, customer relationships, competitive status, supplier
matters, internal organizational matters, current or future plans, or other business affairs of or
relating to the Company, its subsidiaries or affiliated or related parties, (ii) any proprietary
management, operational, trade, technical or other secrets or any other proprietary information or
other data of the Company, its subsidiaries or affiliated or related parties, or (iii) any other
information related to the Company, its subsidiaries or affiliated or related parties, or which the
Executive should reasonably believe will be damaging to the Company, its subsidiaries or affiliated
or related parties, which has not been published and is not generally known outside of the Company.
The Executive acknowledges that all of the foregoing constitutes confidential and proprietary
information, which is the exclusive property of the Company.

b. Restrictive Covenant. For a period of one hundred and twenty (120) days beginning
on the date of the Executive’s termination of employment (the “Restrictive Period”), the Executive
shall not render, directly, or indirectly, services to any person, firm, corporation, association,
or other entity which conducts the same or similar business as the Company or its subsidiaries at
the date of the Executive’s termination of employment hereunder within the states and territory in
which the Company or its subsidiaries is or are then licensed and doing business at the date of the
Executive’s termination of employment hereunder without the prior written consent of the Company’s
President/CEO, which may not be unreasonably withheld. In the event the Executive violates any of
the provisions contained in this Section 8 hereof, the Restrictive Period shall be increased by the
period of time from the commencement by the Executive of any violation until such violation has
been cured to the satisfaction of the Company. The Executive further agrees that at no time during
the Restrictive Period will the Executive attempt to directly or indirectly solicit or hire
employees of the Company or its subsidiaries or induce any of them to terminate their employment
with the Company or its subsidiaries.

c. Company Remedies. The Executive acknowledges and agrees that any breach of this
Section 8 will result in immediate and irreparable harm to the Company, and that the Company cannot
be reasonably or adequately compensated by damages in an action at law. In the event of a breach
by the Executive of the provisions of this Section 8, the Company shall be entitled, to the extent
permitted by law, immediately to cease to pay or provide the Executive or the Executive’s
dependents any compensation or benefit being, or to be, paid or provided to the Executive pursuant
to this Agreement, and also to obtain immediate injunctive relief restraining the Executive from
conduct in breach of the covenants contained in this Section 8. Nothing herein shall be construed
as prohibiting the Company from pursuing any other remedies available to it for such breach,
including the recovery of damages from the Executive.

9. Breach of Agreement. The Executive agrees that if he violates any of the terms of
this Agreement, the Company may pursue whatever rights it has under this Agreement, whether in law
or in equity, without affecting the validity and enforceability of the Release or the second waiver
and release contemplated by Section 1(b) of this Agreement. If the Executive is required to bring
any action to enforce rights or to collect moneys due under this Agreement, the Company shall pay
to the Executive the fees and expenses incurred by the Executive in bringing and pursuing such
action provided that the Executive is successful, in whole or in part, on the merits or otherwise
(including by way of a settlement involving the payment of money by the Company to the Executive),
in such action. The Company shall pay such fees and expenses in advance of the final disposition
of such action. The Executive agrees to repay to the Company such advances if the Executive is not
ultimately successful, in whole or in part, on the merits or otherwise, in such action. The
Company shall make such payments within thirty (30) days after receipt of reasonable substantiating
documentation from the Executive but in no event later than the end of the calendar year following
the year in which such fees and expenses were incurred.

10. Company Property, Records, Files and Equipment. The Executive will return all
Company property, records, files, or any other Company owned equipment in his possession within ten
(10) days after the date of Executive’s termination of employment with the Company.

11. Confidentiality of Agreement. The Executive agrees that (except pursuant to
judicial legal process or any legal action to enforce this Agreement), the Executive shall keep
confidential the terms of this Agreement, and all performance hereunder, and shall not disclose
this information henceforth to anyone other than the United States Internal Revenue Service; state
or local tax authorities; or the Executive’s family, attorneys and tax advisors, who also shall be
bound by this confidentiality obligation. The foregoing shall not prohibit or restrict such
disclosure as is required by law or may be necessary for the prosecution of claims relating to the
performance or enforcement of this Agreement or prohibit or restrict the Executive (or the
Executive’s counsel) from responding to any inquiry about the agreements represented in this
Agreement or the underlying facts and circumstances of those agreements by the Securities and
Exchange Commission, the NASDAQ Stock Market or any other self-regulatory organization. Prior to
responding to any such inquiry, the Executive agrees to provide the Company with as much notice as
possible that he has been requested or compelled to make disclosures and use the Executive’s (or
the Executive’s counsel) best efforts to ensure that if any disclosure occurs, it does so in a
manner designed to maintain the confidentiality of this Agreement to the fullest extent possible.

12. Ongoing Cooperation. During the period from the date hereof through the end of
the twelfth (12th) month after the Executive’s termination of employment, the Executive
agrees to use his best efforts to assist, advise and cooperate with the Company if the Company so
requests on issues that arose or were in any way developing during his employment with the Company,
subject to Executive’s availability given his employment obligations, if any, at that time. The
Executive shall furnish such assistance, advice or cooperation to the Company as the Company shall
reasonably request and as is within the Executive’s reasonable capability. Such assistance, advice
and cooperation may include, but shall not be limited to, the preparation for, or the conduct of,
any litigation, investigation or proceeding involving matters or events which occurred during the
Executive’s employment by the Company as to which the Executive’s knowledge or testimony may be
important to the Company. In connection with the preparation for, or the conduct of such
litigation, investigation or proceeding as described in the preceding sentence, the Executive shall
promptly provide the Company with any records or other materials in his possession that the Company
shall request in connection with the defense or prosecution of such litigation, investigation or
proceeding. If and to the extent that the Company requests that the Executive attend a meeting,
deposition or trial at any time prior to the end of the twelfth (12th) month after the
date of the Executive’s termination of employment, the Company shall compensate Executive for his
time at the rate of $750 per day or portion thereof during which Executive complies with such
request. The Company shall also pay or reimburse the Executive for his travel expenses reasonably
incurred in the course of providing such cooperation. The Company shall make such payment or
reimbursement within thirty (30) days of receipt of reasonable substantiating documentation from
the Executive but in no event later than the end of the calendar year following the year in which
such expenses were incurred.

13. Certain Additional Payments by the Company. Notwithstanding anything in this
Agreement to the contrary, in the event it is determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement, or otherwise, is subject to the excise tax
imposed by Section 4999 of the Code, or any successor provision, on excess parachute payments, as
that term is used and defined in Sections 4999 and 280G of the Code, then the Executive shall be
entitled to receive an additional payment (a “Gross-Up Payment”) in an amount equal to then current
rate of tax under said Section 4999 multiplied by the total of the amounts so paid or payable,
including the Gross-Up Payment, which are deemed to be a part of an excess parachute payment. Any
Gross-Up Payment shall be made no later than December 31 of the calendar year following the year in
which the Executive remits to the Internal Revenue Service the excise tax to which the Gross-Up
Payment relates.

14. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania applicable to contracts executed in and to be
performed in that commonwealth without regard to its conflicts of laws provisions. Each of the
parties hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of
the courts of the Commonwealth of Pennsylvania located in the County of Erie, Pennsylvania, and of
the United States for the Western District of Pennsylvania for any litigation arising out of or
relating to this Agreement or the transactions contemplated hereby. Each of the parties hereby
irrevocably and unconditionally acknowledges that service of any process, summons, notice or
document by United States registered mail to the respective addresses set forth herein shall be
effective service of process for any litigation brought against a party in any such court. Any
legal action relating to this Agreement shall be brought in the courts of the Commonwealth of
Pennsylvania located in the County of Erie, Pennsylvania, and of the United States for the Western
District of Pennsylvania and the parties irrevocably and unconditionally waive and will not plead
or claim in any such court that venue is improper or that such litigation has been brought in an
inconvenient forum.

15. Waiver. The waiver by a party hereto of any breach by the other party hereto of
any provision of this Agreement shall not operate or be construed as a waiver of any other or
subsequent breach by a party hereto.

16. Assignment. This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Company, and the Company shall be obligated to require any successor
to expressly acknowledge and assume its obligations hereunder. This Agreement shall inure to the
extent provided hereunder to the benefit of and be enforceable by the Executive or the Executive’s
legal representatives, executors, administrators, successors, heirs, distributees, devisees and
legatees. The Executive may not delegate any of the Executive’s duties, responsibilities,
obligations or positions hereunder to any person and any such purported delegation shall be void
and of no force and effect.

17. Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.

18. Notices. Any notices required or permitted to be given under this Agreement shall
be sufficient if in writing, and if personally delivered or when sent by first class certified or
registered mail, postage prepaid, return receipt requested — in the case of the Executive, to his
principal residence address, and in the case of the Company, to the address of its principal place
of business as set forth above, to the attention of the Executive Vice President, Secretary and
General Counsel of the Company.

19. Defined Terms.

a. Any compensation or benefit provided hereunder, the payment date of which is determined
with reference to Executive’s termination of employment, shall not be paid until the applicable
period has elapsed after the Executive’s “separation from service”, within the meaning of Section
409A of the Internal Revenue Code and the Treasury regulations thereunder.

b. Any other terms not specifically defined herein have the meanings set forth in the
Employment Agreement.

20. Entire Agreement. This Agreement constitutes the entire agreement of the parties
relating to the subject matter hereof, and supersedes any obligations of the Company and the other
Releasees under any previous agreements or arrangements (including the Employment Agreement and the
Payment Designation Agreement), except as otherwise provided in this Agreement. The provisions of
this Agreement may not be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of any amendment, modification,
repeal, waiver, extension or discharge is sought. This Agreement may be executed in one or more
counterparts (including by facsimile signature), all of which shall be considered one and the same
instrument, and shall be fully executed when one or more counterparts have been signed by and
delivered to each party.

21. Headings. The descriptive headings used herein are used for convenience of
reference only and shall not constitute a part of this Agreement.

THE EXECUTIVE HEREBY EXPRESSLY WARRANTS AND REPRESENTS THAT, BEFORE ENTERING INTO THIS
AGREEMENT, HE HAS RECEIVED A REASONABLE PERIOD OF TIME WITHIN WHICH TO CONSIDER ALL OF THE
PROVISIONS CONTAINED IN THIS AGREEMENT, THAT HE HAS FULLY READ, INFORMED HIMSELF OF AND UNDERSTANDS
ALL THE TERMS, CONTENTS, CONDITIONS AND EFFECTS OF ALL PROVISIONS OF THIS AGREEMENT, AND THAT HE
CONSIDERS ALL SUCH PROVISIONS TO BE SATISFACTORY.

THE EXECUTIVE FURTHER EXPRESSLY WARRANTS AND REPRESENTS THAT NO PROMISE OR REPRESENTATION OF
ANY KIND HAS BEEN MADE, EXCEPT THOSE EXPRESSLY STATED IN THIS AGREEMENT.

THE EXECUTIVE FURTHER EXPRESSLY WARRANTS AND REPRESENTS THAT HE ENTERS INTO THIS AGREEMENT
KNOWINGLY AND VOLUNTARILY.

[Signature page follows]

1

IN WITNESS WHEREOF, the Executive and the Company, by its duly authorized representative, have
signed this Agreement as of the date set forth above.

	 	 	 
	WITNESS:

	 	THE EXECUTIVE:
	/s/ Sheila M. Hirsch

	 	/s/ Philip A. Garcia

PHILIP A. GARCIA
	
 
	 	THE COMPANY:
	ATTEST:

	 	ERIE INDEMNITY COMPANY
	/s/ James J. Tanous

James J. Tanous, Secretary

	 	

By: /s/ John J. Brinling, Jr.

John J. Brinling, Jr., President and CEO

2ex10-1.htm

    
      Exhibit
10.1

       

       

       

      AGREEMENT

       

      This
AGREEMENT (this "Agreement"), dated as of June 25, 2008, is made by and between
ESL Investments, Inc., a Delaware corporation (together with its affiliates,
"ESL"), and AutoZone, Inc., a Nevada corporation (the "Company"). Each of ESL
and the Company is a "Party" and are collectively, the "Parties."

       

      WHEREAS,
as of June 24, 2008, ESL owned, and had the right to vote, that number of shares
of common stock, par value $0.01 per share, of the Company (the "Common Stock"),
set forth on Schedule
A to this Agreement (the "Initial Shares"), which represented in the
aggregate, based on the 63,303,490 shares of Common Stock outstanding as of June
24, 2008, approximately 36.2% of the voting power of the Common Stock;
and

       

      WHEREAS,
ESL and the Company desire to enter into this Agreement in order to set forth
certain understandings and agreements regarding the voting by ESL of any shares
of Common Stock that it may own from time to time in excess of agreed
thresholds, protections for non-ESL stockholders in certain transactions
involving the Company or ESL, as well as certain other matters.

       

      NOW
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, the Parties agree as follows:

       

      ARTICLE
I

      

      DEFINITIONS

       

      Section
1.1     Definitions.
For the purposes of this Agreement the following definitions shall
apply:

       

      "Additional
Share Percentage" means, (i) if the Record Date ESL Percentage is less than or
equal to the Specified Percentage, a percentage equal to zero (0) or (ii) if the
Record Date ESL Percentage is greater than the Specified Percentage, a
percentage equal to (x) the Record Date ESL Percentage minus (y) the
Specified Percentage.

       

      "Additional
Shares" means a number equal to the product of (i) the Record Date Outstanding
Shares multiplied by (ii)
the Additional Share Percentage.

       

      An
"affiliate" of ESL means any person or entity that directly, or indirectly
through one of more intermediaries, controls, or is controlled by, or is under
common control with, ESL. For the avoidance of doubt, the Company and its
subsidiaries shall not be deemed to be affiliates of ESL.

       

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      "Aggregate
ESL Percentage" means as of any date the sum of (a) the lesser of (x) the
quotient of (i) the Subject Shares divided by (ii) the
Outstanding Shares or (y) 40%, plus (b) the quotient
of (aa) the Subject Shares minus the Initial
Shares divided
by (bb) the Outstanding Shares.

       

      "Outstanding
Shares" means the number of shares of Common Stock outstanding.

       

      "Record
Date ESL Percentage" means the quotient of (i) the Subject Shares divided by (ii) the
Record Date Outstanding Shares.

       

      "Record
Date Outstanding Shares" means the number of shares of Common Stock outstanding
as of the record date for purposes of the stockholder vote (including by written
consent) regarding which the Additional Shares are being
calculated.

       

      "Specified
Percentage" means 40% at all times until the conclusion of the 2009 Annual
Meeting and 37.5% at all times thereafter.

       

      "Subject
Shares" means the number of shares of Common Stock owned by ESL.

       

      "2008
Annual Meeting" means the first annual meeting of stockholders of the Company
held following the conclusion of the Company's fiscal year ending on August 30,
2008, at which the Company's Board of Directors are elected.

       

      "2009
Annual Meeting" means the first annual meeting of stockholders of the Company,
finally adjourned following the conclusion of the Company's fiscal year ending
on August 29, 2009 (i.e., its "2009
fiscal year"), at which the Company's Board of Directors are elected, provided
that the 2008 Annual Meeting shall have already occurred.

       

      "Unaffiliated
Shares" means all Outstanding Shares that are not Subject Shares.

       

       

      ARTICLE
II

       

      VOTING
AGREEMENT

       

      Section
2.1     Voting
Agreement.

       

      (a)         ESL
shall, at each meeting of the stockholders of the Company, whether an annual
meeting or a special meeting, however called, and at each adjournment or
postponement of any such meeting (a "Stockholders' Meeting"), and in all other
circumstances upon which a vote, consent or other approval (including, without
limitation, by written consent) is sought by or from the stockholders of the
Company (any such vote, consent or approval, a "Stockholders' Consent"), appear
at such Stockholders' Meeting or otherwise cause all Subject Shares to be
counted as present for the purpose of establishing a quorum.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (b)         Subject
to the provisions of Section 7.2(b), ESL shall, at each Stockholders' Meeting
and in connection with the execution of each Stockholders' Consent, vote all
Additional Shares on all matters proposed in the same proportion as Unaffiliated
Shares are actually voted (it being understood that, in connection with any
action by written consent, shares not consenting shall be treated as shares
voted against such action).

       

      Section
2.2     Irrevocable
Proxy.

       

      (a)         Subject
to the provisions of Section 7.2(b), as security for ESL's obligations under
Section 2.1 of this Agreement, ESL hereby irrevocably constitutes and appoints
the Company (acting through the CEO, CFO, General Counsel or such other persons
so designated by the Board of Directors of the Company (the "Board") from time
to time) as its attorney and proxy in accordance with the Nevada Revised
Statutes, with full power of substitution and re-substitution, to cause the
Additional Shares to be counted as present at any Stockholders' Meeting, to vote
the Additional Shares at any Stockholders' Meeting, and to execute any
Stockholders' Consent in respect of the Additional Shares as and to the extent
provided in Section 2.1(b) of this Agreement. The powers granted in this
Section 2.2 shall also entitle the Company to give instructions to any nominee
through whom ESL may hold Shares. ESL shall from time to time provide the
Company with any nominee information that the Company may require to exercise
its rights hereunder. ESL hereby revokes all other proxies and powers of
attorney with respect to the Subject Shares that it may have previously
appointed or granted and represents that any proxies previously given in respect
of the Subject Shares, if any, are revocable.

       

      (b)         Upon
the failure of ESL to comply with its obligations under Section 2.1(a) of this
Agreement, ESL hereby irrevocably constitutes and appoints the Company (acting
through the CEO, CFO, General Counsel or such other persons so designated by the
Board from time to time) as its attorney and proxy in accordance with the Nevada
Revised Statutes, with full power of substitution and re-substitution, to cause
the Subject Shares (excluding the Additional Shares) to be counted as present at
any Stockholders' Meeting as and to the extent provided in Section 2.1(a) of
this Agreement, but such shares (i.e., the Subject Shares
excluding the Additional Shares) may not otherwise be voted by the
Company.

       

      (c)         ESL
hereby affirms that the irrevocable proxy set forth in this Section 2.2 is given
to induce the Company to perform the obligations set forth in Article III of
this Agreement and to secure the performance of the duties of ESL under this
Agreement. ESL hereby further affirms that the irrevocable proxy is coupled with
an interest and, except as set forth in this Section 2.2 or in Section 8.1 of
this Agreement, is intended to be irrevocable in accordance with the provisions
of Section 78.355 of the Nevada Revised Statutes. If for any reason the
proxy granted herein is not irrevocable, then ESL agrees to vote the Additional
Shares in accordance with Section 2.1(b) of this Agreement. The Parties
agree that the foregoing is a voting agreement created under Section 78.365 of
the Nevada Revised Statutes.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      (d)         This
irrevocable proxy shall be effective for each Stockholders' Meeting or
Stockholders' Consent so designated by the Company (unless and to the extent
that ESL has complied with its obligations under Section 2.1 of this Agreement
or the provisions of Section 2.1(b) are suspended, in either case, for such
meeting or action taken by written consent) and shall automatically terminate on
the Termination Date (as defined in Section 8.1 below). Prior to the
Termination Date, this irrevocable proxy shall not be terminated by any act of
ESL or by operation of law, whether by the dissolution or entrance into
bankruptcy or foreclosure of ESL or by the occurrence of any other event or
events, it being understood that actions taken by the Company hereunder prior to
the Termination Date shall be and remain valid as if such dissolution,
entry into bankruptcy or foreclosure or other event or events had not occurred,
regardless of whether or not the Company has received notice of the
same.

       

       

      ARTICLE
III

       

      ADDITION
OF DIRECTORS

      TO THE BOARD OF DIRECTORS OF
THE COMPANY

       

      Section
3.1     New
Directors.
In accordance with the provisions of this Article III, the Company shall take
appropriate actions, once nominees are identified satisfying the requirements of
Section 3.2, to add three (3) new members to the Board (the "New Directors"). It
is the intent of the parties that such additions shall occur as promptly as
practicable, but in no case later than the Company's 2008 Annual Meeting of
Stockholders.

       

      Section
3.2    Selection of New
Directors.

       

      (a)         An
independent search agency has been engaged to identify a nominee for one
(1) of the New Director positions (the "Specified Director") pursuant to
criteria previously determined by the Nominating and Corporate Governance
Committee and all of the directors shall be permitted to propose persons as
suggested candidates for the Specified Director to such independent search
agency. A candidate identified shall be considered by the Nominating
and Corporate Governance Committee in accordance with its regular policies and
procedures, which shall include, without limitation, consideration of such
candidate's background, competencies and experience.  A candidate
shall be recommended by the Nominating and Corporate Governance Committee as a
nominee for election by the Board as the Specified Director only if he or she is
(a) deemed to be "independent" pursuant to the Company's corporate governance
principles and the rules and regulations of the New York Stock Exchange and (b)
reasonably acceptable to both ESL and a majority of the members of the
Nominating and Corporate Governance Committee. Only a nominee who is
recommended by the Nominating and Corporate Governance Committee shall be
presented to the Board as a potential nominee for election as the Specified
Director.

       

      (b)         Two
(2) New Directors (the "Non-Specified Directors") shall be appointed from
nominees identified by ESL, including persons suggested by other directors to
ESL who are reasonably acceptable to ESL (any such person, a
"Candidate"). Each Candidate identified shall be considered by the
Nominating and Corporate Governance Committee in 

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      accordance
with its regular policies and procedures, which shall include, without
limitation, consideration of such Candidate's background, competencies,
experience and affiliation with ESL (if any). Only candidates which are
reasonably acceptable to both ESL and a majority of the members of the
Nominating and Corporate Governance Committee may be recommended by the
Nominating and Corporate Governance Committee for election to the Board. Either
or both of the two Candidates may, at ESL's discretion, be an officer of
ESL and its affiliated investment entities. Each candidate shall qualify as
"independent" pursuant to the Company's corporate governance principles and the
rules and regulations of the New York Stock Exchange. The Company will use its
reasonable best efforts to have the Nominating and Corporate Governance
Committee  promptly recommend Candidates for election to the Board once
candidates are identified satisfying the requirements above.

       

       

      (c)         Subject
to the nomination of directors in accordance with the provisions of Section
3.2(a) and 3.2(b), the Company's Board of Directors shall promptly take all
action required to cause the Specified Director and Non-Specified Directors to
be so elected.

       

       

      ARTICLE
IV

       

      REPRESENTATIONS AND
WARRANTIES OF ESL

       

      ESL
hereby represents and warrants to the Company as follows:

       

      Section
4.1    Authority for this
Agreement.
ESL has all necessary power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by ESL and the consummation by ESL of the
transactions contemplated hereby (i) will not violate the charter, bylaws or any
other organizational documents of ESL, (ii) will not violate any order, writ,
injunction, decree, statute, rule, regulation or law applicable to ESL or by
which any of the Subject Shares are bound, (iii) will not violate or constitute
a breach or default under any agreement by which ESL or the Subject Shares may
be bound, and (iv) have been duly and validly authorized, and no other
proceedings on the part of ESL are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by ESL and, assuming it has been duly and
validly authorized, executed and delivered by the Company, constitutes a legal,
valid and binding agreement of ESL, enforceable against ESL in accordance with
its terms. There is no beneficiary or holder of a voting trust certificate or
other interest of any trust of which ESL is a trustee, or any party to any other
agreement or arrangement, whose consent is required for the execution and
delivery of this Agreement or the consummation by ESL of the transactions
contemplated hereby.

       

      Section
4.2    Ownership of
Shares.
As of the date of this Agreement, except as disclosed on Schedule A to this
Agreement, ESL is the sole record and beneficial owner of the number of Initial
Shares set forth on Schedule A to this
Agreement, free and clear of all pledges, liens, proxies, claims, charges,
security interests, preemptive rights, voting trusts, voting agreements,
options, rights of first offer or refusal and any other encumbrances or
arrangements 

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      whatsoever
with respect to the ownership, transfer or other voting of the Initial Shares
other than the encumbrances created by this Agreement and any restrictions on
transfer under applicable federal and state securities laws (collectively,
"Liens"). Except as disclosed on Schedule A to this Agreement, as of the date of
this Agreement, there are no outstanding options, warrants or rights to purchase
or acquire, or agreements or arrangements relating to the voting of, any Subject
Shares and ESL has the sole authority to direct the voting of the Subject Shares
in accordance with the provisions of this Agreement and the sole power of
disposition with respect to the Subject Shares, with no restrictions, subject to
applicable federal and state securities laws on his rights of disposition
pertaining thereto (other than Liens or restrictions created by this Agreement).
Except as disclosed on Schedule A to this
Agreement, as of the date of this Agreement, ESL does not own beneficially or of
record any equity securities of the Company.

       

       

      ARTICLE
V

       

      REPRESENTATIONS AND
WARRANTIES OF THE COMPANY

       

      The
Company hereby represents and warrants to ESL as follows:

       

      Section
5.1    Authority for this
Agreement.
The Company has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby (i) will not violate any
order, writ, injunction, decree, statute, rule, regulation or law applicable to
the Company, (ii) will not violate or constitute a breach or default under any
agreement by which the Company may be bound, and (iii) have been duly and
validly authorized, and no other proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and, assuming it has been duly and validly authorized,
executed and delivered by ESL, constitutes a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its
terms.

       

      ARTICLE
VI

       

      COVENANTS OF
ESL

       

      Section
6.1    No Inconsistent
Agreements.
ESL hereby covenants and agrees that (a) it has not entered into and shall not
enter into any agreement which would restrict, limit or interfere with the
performance of its obligations hereunder and (b) it shall not knowingly take any
action that would reasonably be expected to make any of its representations or
warranties contained herein untrue or incorrect or have the effect of preventing
or disabling it from performing its obligations hereunder.

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      Section
6.2    Restrictions on Certain
Transfers and Proxies.

       

      (a)         Other
than pursuant to the terms of this Agreement, without the prior written consent
of the Company or as otherwise provided in this Agreement, ESL shall not
directly or indirectly grant any proxy or enter into any voting trust or other
agreement or arrangement with respect to the voting of any Additional
Shares.

       

      (b)         Without
the prior written consent of the Company, ESL shall not, directly or indirectly,
grant any proxy (other than the proxy granted to the Company pursuant to Section
2.2 of this Agreement and, if applicable, a proxy granted to any other person (a
"Third Party Proxy") which conforms to the requirements of the immediately
succeeding sentence of this Section 6.2(b)) or enter into any voting trust or
other agreement or arrangement with respect to the voting of any Subject Shares
(excluding the Additional Shares). Notwithstanding the immediately
preceding sentence, ESL may grant a Third Party Proxy with respect to the voting
of any Subject Shares (excluding the Additional Shares) so long as such Third
Party Proxy shall in all cases be (i) immediately and fully revocable by ESL at
any time without prior notice to the holder of such proxy and (ii) subordinate
and subject to the rights of the Company under this Agreement.

       

       

      Section
6.3    Future Sales and/or
Transactions
Involving an Acquisition of the Company.

       

      (a)           ESL
shall not dispose or agree to dispose of any shares of Common Stock pursuant to
any agreement, arrangement or understanding (whether or not in writing),
including by way of merger or other business combination, at a price above the
market price per share prevailing at the time of such agreement, arrangement or
understanding, without taking appropriate steps to ensure that the purchaser of
such shares simultaneously provides all other holders of Common Stock with an
opportunity to dispose of a number of shares (representing, for each Company
stockholder, the same proportion of owned shares of Common Stock as ESL proposes
to dispose of) in such transaction on the same terms and conditions, including
price per share, as ESL. It is understood that (i) sales in the open market
shall be deemed to be at prevailing market prices and (ii) (a) the transfer of
Shares of Common Stock from one ESL affiliate subject to this Agreement to
another, (b) distributions by ESL to its shareholders or limited partners, and
(c) sales to the Company or third parties approved by at least two directors
representing a majority of the independent, disinterested directors unaffiliated
with ESL, shall not constitute a disposition subject to this Section
6.3(a).

       

      (b)           ESL
shall not pursue, either directly or indirectly, including as part of a group, a
transaction resulting in the acquisition of all or substantially all of the
shares of Common Stock not owned by ESL or by such group (including, for
example, in a leveraged recap in which "stub equity" is left in the hands of
some or all of the non-ESL stockholders) unless the following procedures and
requirements are followed and satisfied. The Board shall establish a
committee of independent, disinterested directors unaffiliated with ESL (the
"Special Committee") to review and evaluate any transaction (other than any such
transaction in which ESL would be treated on the same basis as all other Company
stockholders) proposed by ESL or in which ESL intends to participate, with full
authority to negotiate and recommend the terms of 

       

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      such
a transaction on behalf of the Company and the non-ESL stockholders. ESL
will proceed only with a transaction recommended by the Special Committee,
unless the acquisition is structured as a "non-coercive" tender
offer, followed by a merger at the same price if the offer is
successful, not subject to the test of "entire fairness" in accordance with
applicable Delaware case law (e.g., the decisions
involving Silconix and Pure Resources), assuming, for these purposes, that the
Company had been incorporated under the laws of the State of Delaware and was
subject to Delaware law.

       

       

      (c)           The
provisions of this Section 6.3 may be enforced by any directors
constituting a majority of the independent, disinterested directors unaffiliated
with ESL or, in the absence of any such persons sitting on the Board, through a
derivative action.

       

      Section
6.4    Information Regarding Common
Stock.
If ESL increases or decreases the number of Subject Shares it owns at any time
prior to the Termination Date, ESL shall give prompt notice to the Company of
such increase or decrease (which notice may be satisfied by a filing of a Form 4
with the Securities and Exchange Commission on a timely basis). If requested by
ESL, the Company shall promptly provide ESL with the number of Outstanding
Shares.

       

       

      ARTICLE
VII

       

      COVENANTS OF THE
COMPANY

       

      Section
7.1    Restrictions on Certain
Company Actions.
Other than pursuant to the terms of this Agreement, without the prior written
consent of ESL, the Company shall not take any action, including the adoption of
a stockholder rights plan, that would prevent ESL from exercising voting rights
or acquiring additional shares of Common Stock, except to the extent that such
action is required by applicable law (including the implementation of blackout
periods that apply equally to the Company and all affiliates of the
Company).

       

       

      Section
7.2    Target Adjusted Debt/EBITDAR Ratio.

       

      (a)           The
Company shall use its commercially reasonable efforts to achieve, no later than
February 14, 2009, the last day of the Company's second quarter of the
Company's 2009 fiscal year, an adjusted debt/EBITDAR ratio of at least
2.5:1.  For purposes of this section 7.2, adjusted debt/EBITDAR ratio
shall be calculated in a manner consistent with the calculation of such ratio in
the Company's quarterly earnings release.

       

      (b)           If
the Company shall not have achieved the targeted adjusted debt/EBITDAR ratio
referenced in Section 7.2(a) by the end of the second quarter of the Company's
2009 fiscal year, the provisions of Section 2.1(b) shall be suspended until such
time as the targeted adjusted debt/EBITDAR ratio is achieved.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      ARTICLE
VIII

       

      MISCELLANEOUS

       

      Section
8.1    Termination.
This Agreement and all of its provisions shall terminate upon the Termination
Date; provided that
Sections 8.3, 8.4, 8.5, 8.7, 8.8, 8.9, 8.10, 8.13 and, in the case of clause (b)
below, 6.3 of this Agreement shall survive any termination of this Agreement.
For purposes of this Agreement, "Termination Date" means the earliest of (a) the
date upon which the Subject Shares shall, in the aggregate, constitute less than
25% of the Outstanding Shares, (b) the date upon which the Aggregate ESL
Percentage shall exceed 50% and (c) the date upon which the Parties (which, in
the case of the Company, shall have been authorized by at least two directors
representing a majority of the independent and disinterested members of the
Board unaffiliated with ESL) mutually agree in writing that this Agreement and
all of its provisions shall no longer be in effect. Nothing in this Section 8.1
shall be deemed to release any Party from any liability for any breach by such
Party of their representations and warranties or any other terms and provisions
of this Agreement.

       

      Section
8.2    No Ownership
Interest.
Except as expressly set forth in this Agreement, including, without limitation,
in Section 2.2 of this Agreement, nothing contained in this Agreement shall be
deemed to vest in the Company any direct or indirect ownership, or incidence of
ownership, of or with respect to any Subject Shares. All rights, ownership and
economic benefits of and relating to any Subject Shares shall remain and belong
to ESL, and the Company shall not have any authority to exercise any power or
authority to manage, direct, superintend, restrict, regulate, govern or
administer any of the policies or operations of ESL or exercise any power or
authority to direct ESL in the voting of any of the Subject Shares, except as
otherwise expressly provided in this Agreement, including, without limitation,
in Section 2.2 of this Agreement.

       

      Section
8.3    Notices.
All notices, requests, claims, demands and other communications hereunder shall
be given (and shall be deemed to have been duly received if given) by hand
delivery in writing or by facsimile transmission with confirmation of receipt or
by a nationally recognized overnight courier service, as follows:

       

      If
to the Company:

      

      AutoZone,
Inc.

      123
South Front Street

      Memphis,
TN 38103-3607

      Attn:
Harry L. Goldsmith

      Fax:
901-495-8316

      

      With
a copy to:

      

      Skadden,
Arps, Slate, Meagher & Flom LLP

      4
Times Square

      New
York, New York 10036

      Attn:
Peter Allan Atkins

      David
J. Friedman

      Fax:
212-735-2000

      

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      If
to ESL:

      

      ESL
Investments, Inc.

      200
Greenwich Avenue

      Greenwich,
CT 06830

      Attn:
Chief Financial Officer

      Fax:
203-621-3244

      

      Wth
a copy to:

      

      Wachtell,
Lipton, Rosen & Katz

      51
West 52nd Street

      New
York, NY 10019

      Attn:
David A. Katz

      Fax:
212-403-2000

      

      Section
8.4    Validity.
Whenever possible, each provision or portion of any provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law but if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction such invalidity, illegality or
unenforceability shall not affect any other provision or portion of any
provision in such jurisdiction, and this Agreement shall be reformed, construed
and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained
herein.

       

      Section
8.5    Entire Agreement;
Assignment.
This Agreement constitutes the entire agreement between the Parties with respect
to the subject matter of this Agreement and supersedes all other prior
agreements and understandings, both written and oral, between the Parties with
respect to the subject matter of this Agreement. The Agreement shall not be
assigned by any Party by operation of law or otherwise without the prior written
consent of the other Party.

       

      Section
8.6    Adjustments.
If at any time during the period between the date of this Agreement and the
Termination Date, any change in the outstanding shares of capital stock of the
Company shall occur by reason of any reclassification, recapitalization, stock
split or combination, exchange or readjustment of shares, or any stock dividend
on such capital stock with a record date during such period, the number of
shares of Common Stock shall be appropriately adjusted to provide ESL and the
Company with same results contemplated by this Agreement as of the date it was
executed.

       

      Section
8.7    Amendment.
This Agreement may not be amended except by an instrument in writing signed by
the Company (which, in the case of the Company, shall have been authorized by at
least two directors representing a majority of the independent and disinterested
members of the Board unaffiliated with ESL).

       

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      Section
8.8    Parties in
Interest.
This Agreement shall be binding upon and inure solely to the benefit the
Parties, and nothing in this Agreement, express or implied, is intended to
confer upon any other person or entity any rights or remedies of any nature
whatsoever under or by reason of this Agreement.

       

      Section
8.9    Governing
Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Nevada (without giving effect to choice of law
principles).

       

      Section
8.10  Enforcement of the
Agreement;
Jurisdiction; Venue.
The Parties agree that irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached and that money damages would be both
incalculable and an insufficient remedy for any such non-performance or other
breach. It is accordingly agreed that each Party shall be entitled to seek an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the courts of the
State of Nevada, this being in addition to any other remedy to which it is
entitled at law or in equity. Each Party agrees that it will not allege or
assert that money damages are an adequate or sufficient remedy for a breach of
this Agreement as a defense or objection to the request or granting of
injunctive and / or other equitable relief therefor. The Parties further agree
that neither Party shall be required to obtain, furnish or post any bond or
similar instrument or other security in connection with or as a condition to
obtaining any remedy referred to in this Section 8.10, and each Party
irrevocably waives any right it may have to require the obtaining, furnishing or
posting of any such bond or similar instrument or other security. In addition,
each Party (a) consents to submit itself to the personal jurisdiction of any
such court in the event any dispute arises out of this Agreement or any
transaction contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, (c) agrees that it will not bring any action relating
to this Agreement or any transaction contemplated by this Agreement in any court
other than a court in the State of Nevada and (d) waives any right to trial by
jury with respect to any action related to or arising out of this Agreement or
any transaction contemplated by this Agreement. Each Party irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in the courts of the State of Nevada and shall irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.

       

      Section
8.11  Descriptive
Headings.
The descriptive headings herein are inserted for convenience of reference only
and are not intended to be part of or to affect the meaning or interpretation of
this Agreement.

       

      Section
8.12  Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed to
be an original, but all of which, taken together, shall constitute one and the
same agreement.

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      Section
8.13  Further
Assurances.
From time to time, at the request of the other Party and without further
consideration, each Party agrees to take such reasonable further action as may
reasonably be necessary or desirable to consummate and make effective the
transactions contemplated by this Agreement.

       

       

      [signature
page follows]

       

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      IN
WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed on
the date first written above.

       

      

      
        	 
      	
                AUTOZONE,
      INC.

              
	 	 
	 
      	
                By:

              	 /s/
      William C. Rhodes, III	 
      
	 
      	 
      	
                Name:
      William C. Rhodes, III

              
	 
      	 
      	
                Title: Chairman,
      President and
      CEO

              
	 	 	 
	 
      	
                By:

              	 /s/
      Harry L. Goldsmith	 
      
	 
      	 
      	
                Name:
      Harry L. Goldsmith

              
	 
      	 
      	
                Title:
      EVP, General Counsel and Secretary

              
	 
      	 
      
	 	 
	 
      	
                ESL
      INVESTMENTS, INC. (on behalf of itself and its
  affiliates)

              
	 	 
	 
      	
                By:

              	 /s/
      Adrian John Maizey	 
      
	 
      	 
      	
                Name:
      Adrian John Maizey

              
	 
      	 
      	
                Title:
      Chief Financial Officer

              

      

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
A

       

       

      SHARES OF COMMON STOCK OWNED
BY ESL

       

      

       

      Shares
of Common Stock Held by ESL as of June 24, 2008: 22,928,783

       

       

      Options
to Purchase Shares of Common Stock Held of Record by ESL as of June 24, 2008:
0

       

       

      Total
Shares of Common Stock Owned by ESL as of June 24, 2008: 22,928,783

       

       

      Shares
of Common Stock Held by ESL and Pledged as of June 24, 2008: 0

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       A-1

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