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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. __ )
ERIE INDEMNITY COMPANY
(Name of Issuer)
Class B Common Stock
(Title of Class of Securities)
29530P-201
(CUSIP Number)
SUSAN HIRT HAGEN
c/o ROGER W. RICHARDS
RICHARDS & ASSOCIATES
100 STATE STREET, SUITE 440
ERIE, PENNSYLVANIA 16507-1456
(814) 455-0370
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
With a copy to:
LAWRENCE LEDERMAN
MILBANK, TWEED, HADLEY & McCLOY LLP
1 CHASE MANHATTAN PLAZA
NEW YORK, NY 10005
December 10, 1999
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of this Schedule
13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g),
check the following box |_|.
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SCHEDULE 13D
CUSIP NO.: 29530P-201
(1) NAME OF REPORTING PERSON: Susan Hirt Hagen
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |X|
(3) SEC USE ONLY
(4) SOURCE OF FUNDS: Not Applicable
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) |_|
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: United States
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
(7) SOLE VOTING POWER: 12
(8) SHARED VOTING POWER: 1,170
(9) SOLE DISPOSITIVE POWER: 12
(10) SHARED DISPOSITIVE POWER: 1,170
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 1,182
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES |X|
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 38.5%
(14) TYPE OF REPORTING PERSON: IN
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ITEM 1. SECURITY AND ISSUER.
The class of equity securities to which this Statement on
Schedule 13D relates is the Class B Common Stock, no par value (the "Class B
Common Stock"), of Erie Indemnity Company, a Pennsylvania corporation (the
"Company"), with its principal executive offices located at 100 Erie Insurance
Place, Erie, Pennsylvania 16530. The Class B Common Stock is the only class of
securities of the Company entitled to vote in the election of directors and on
the other matters on which shareholders of the Company are entitled to vote.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed by Susan Hirt Hagen ("Mrs.
Hagen"). Mrs. Hagen is a co-trustee of the H.O. Hirt Trusts, and her business
address is 100 State Street, Suite 440, Erie, Pennsylvania 16507-1456.
During the last five years, Mrs. Hagen has not been (a)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (b) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, Federal or
State securities laws or finding any violation with respect to such laws.
Mrs. Hagen is a citizen of the United States of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Not applicable.
ITEM 4. PURPOSE OF TRANSACTION.
Mrs. Hagen, who is a director of the Company, is the direct
beneficial owner of 12 shares of the Class B Common Stock and the beneficiary of
one of the two trusts under a trust agreement created by her father, Henry Orth
Hirt, co-founder of the Company (the "Trusts"). The Trusts beneficially own
2,340 shares of Class B Common Stock, representing 76.22% of the Class B Common
Stock: Mrs. Hagen is the beneficiary of one of the Trusts which holds 1,170
shares, or 38.1%, of the Class B Common Stock; and her brother, F. William Hirt,
Chairman of the Board of Directors of the Company (the "Board"), is the
beneficiary of the other Trust which holds 1,170 shares, or 38.1%, of the Class
B Common Stock. The Trusts act through their co-trustees, Bankers Trust Company
of New York (the corporate co-trustee), Mrs. Hagen and her brother F. William
Hirt (the individual co-trustees). Generally, the concurrence of any two of the
co-trustees is required for the Trusts to take actions with respect to the
shares of Class B Common Stock held by the Trusts. As co-trustee of the Trusts,
Mrs. Hagen shares sole voting power, along with Bankers Trust Company of New
York ("Bankers Trust") and F. William Hirt, over all the Class B Common Stock
beneficially owned by the Trusts.
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Henry Orth Hirt created the Trusts expressly to preserve the
unified ownership and control of the Company. In accordance with her father's
intent, Mrs. Hagen is dedicated to preserving the Trusts' control of the Company
and maintaining the Company's unique corporate culture for the benefit of the
Trusts, its beneficiaries and the Company's shareholders, policyholders, agents
and employees. To her disappointment, however, it has become increasingly
evident that the current Board has lost the recognition that it serves as a
steward for the rights of others and is not acting in the long-term interests of
the Company, its shareholders and its many constituencies. Instead, the Board
has demonstrated an alarming lack of judgment and a belief that it is not
accountable to the shareholders who elect them to office. It has embarked on a
strategy to abrogate the rights of voting shareholders, making it impossible for
the trustees to discharge their fundamental obligation to generations of
beneficiaries of preserving unified ownership and control of the Company.
The Board's hostile attitude to the interests of the Company's
shareholders is demonstrated by its actions during this last year. On January
26, 1999, Bankers Trust replaced Mellon Bank as corporate co-trustee of the
Trusts. Soon after its appointment, and on behalf of the Trusts as majority
shareholder, Bankers Trust asked the Board to postpone the 1999 Annual Meeting
for a minimal period of 30 days so it could meet with and educate itself about
the nominees for the Board. The Board denied this reasonable request. At the
same time, the Board refused to make the nominees available to Bankers Trust for
individual interviews, and the Chairman of the Board claimed through counsel
that such individual interviews were neither necessary nor appropriate, despite
the fact that the Trusts are the single largest voting shareholder of the
Company with 76% of the voting stock.
Further, in a continuing attempt to disenfranchise the
shareholders, the Board maintains that candidates for election to the Board can
only be nominated by the Nominating Committee of the Board - to the exclusion of
the Trusts and all other voting shareholders. When Bankers Trust sought a court
determination that this view was in opposition to the Company's bylaws and
Pennsylvania law, the Board asked the court to dismiss the case. Acting in a
manner clearly intended to perpetuate its control of the Company and to preempt
the litigation that would conclusively resolve whether Pennsylvania law allows
shareholders to nominate candidates to the Board, the Board amended the
Company's bylaws in June, 1999 to make the Nominating Committee the exclusive
source of nominations for the Board.
In response, Bankers Trust and Mrs. Hagen caused the Trusts to
call a Special Meeting of the shareholders of the Company to repeal this
amendment. In violation of the Company's bylaws and Pennsylvania corporate law,
the Board authorized the Secretary of the Company to refuse to honor this call
for a Special Meeting. Proper requests for shareholder lists of the Company also
were refused. Although the Board under pressure from the Trusts has since
repealed this amendment in part, the Board still asserts that the Nominating
Committee is the exclusive source of nominations to the Board. The Erie County
Orphans Court in which this issue was litigated held that the matter was not
ready for adjudication at the time.
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Finally, on Monday, September 13, 1999, with only one business
day's notice to the directors and Bankers Trust by the Nominating Committee, the
Board appointed three new directors. As a result, Bankers Trust and Mrs. Hagen
were unable to consult with the Board in connection with these appointments or
to interview the new directors. By claiming that the Nominating Committee has
the sole right to nominate directors, and by appointing new directors without
giving the co-trustees an opportunity to participate, the Board has clearly
demonstrated that it considers itself to be a self-perpetuating,
self-referential body not accountable to shareholders. A Board which considers
itself elected until mandatory retirement age and not subject to ordinary
principles of corporate democracy is unacceptable. Because the Board's conduct
constitutes a frontal assault on the foundation of the Trusts that she is duty
bound to defend, Mrs. Hagen is obligated to seek the replacement of this Board
with one that is not opposed to the fundamental rights of the voting
shareholders.
This recent conduct is not the only example of inappropriate
behavior by the Board. Beginning in 1992, F. William Hirt made regular gifts of
Company stock (worth approximately $1 million when made, and having a current
market value of nearly $2 million) to senior officers and directors of the
Company. In Mrs. Hagen's view, these secret gifts were violative of Company
policy, created a disturbing appearance of impropriety and called into
serious question the judgment and ethics of the participants. The gifts were
discontinued after discovery by Mrs. Hagen accompanied by her demand for the
resignation of certain directors. Although a special committee of directors
appointed by the Board to investigate this extraordinary conduct by its fellow
Board members concluded that no violations of law, Company policy or fiduciary
duty had occurred, Mrs. Hagen remains convinced that the gifts were simply
wrong. In fact, despite the conclusions of the Board's own special committee,
the Board contemporaneously adopted new bylaws prohibiting directors and
officers of the Company from accepting gifts of more than an insignificant value
from any person associated with the Company. Under the existing bylaws, the
gifts would not only be prohibited, but would have to be returned.
The present Board opposes any attempt by the co-trustees of
the Trusts to examine or question the Board's actions, and effectively prevents
the co-trustees from performing their fiduciary duty to protect the interests of
the Trusts and to act in accordance with the intent of the Company's founder.
Mrs. Hagen further believes that the Board has lost sight of the Company's
history and its unique and highly successful business philosophy and is not
focused on, and is not operating the Company in accordance with, the long-term
interest of the Company's shareholders. She is convinced that all of this will
result over time in the erosion of the Company's singular corporate culture,
business philosophy and financial performance. The Board's opinion of itself is
no substitute for shareholder oversight.
Based on the foregoing, Mrs. Hagen has determined that she has
no alternative but to propose to the shareholders of the Company an alternative
slate of directors for election at the 2000 Annual Meeting (which Mrs. Hagen has
been advised has been proposed by
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management consistent with past practice for April 25, 2000), who would be
committed to ordinary principles of corporate democracy and who would constitute
a majority of the Board. Due to severely restrictive bylaws recently enacted by
the current Board, Mrs. Hagen is compelled to present her slate to the Board no
later than December 31, 1999. Mrs. Hagen's slate will allow the shareholders of
the Company the opportunity to elect a Board that will protect the unique
corporate culture of the Company, be accountable and responsive to the Company's
shareholders and implement a program to protect the long-term interests of the
Company, its shareholders and its many other constituencies. Mrs. Hagen believes
that the actions she is taking are consistent with the past actions and concerns
of Bankers Trust as corporate trustee. While Mrs. Hagen intends, whenever
possible, to act in concert with the corporate trustee, she is committed to
presenting an alternative slate of directors for election at the 2000 Annual
Meeting.
Mrs. Hagen will present alternative proposals depending upon
the degree of cooperation received from the Board. The first alternative will be
to present the Nominating Committee with the names of individuals, constituting
in number a simple majority of the Board, whom Mrs. Hagen would like the
Nominating Committee to consider for nomination for election to the Board at the
2000 Annual Meeting (the "Hagen Nominees"). The Hagen Nominees will be highly
qualified individuals of intellect, experience and integrity and will be
selected on the basis of their commitment to act in the best interests of the
Company, its shareholders and the Erie community. The Hagen Nominees will not
include any relative of Mrs. Hagen. Each Hagen Nominee will agree to be included
in the Nominating Committee's slate or any other slate only so long as all the
Hagen Nominees are included in such slate, and only so long as the Hagen
Nominees would constitute a majority of the Board. The Nominating Committee may,
in addition to nominating the Hagen Nominees, choose to nominate a number of the
current members of the Board, including F. William Hirt.
If the Nominating Committee does not include the Hagen
Nominees in its slate, Mrs. Hagen will, as a second alternative, propose at the
2000 Annual Meeting, that the Hagen Nominees stand for election in opposition to
the Nominating Committee's slate. The shareholders of the Company may then elect
the Hagen Nominees as a majority of the Board, and also elect a number of the
current members of the Board, including F. William Hirt, if such members are
willing to serve.
Mrs. Hagen will strongly challenge any attempt by the Board to
refuse to consider her nominees or to exclude her from nominating the Hagen
Nominees at the 2000 Annual Meeting. Mrs. Hagen believes that the most
fundamental issue of corporate governance is the right of the shareholders to
prevent a Board from perpetuating itself by only allowing the nomination and
election of directors selected by a Nominating Committee of the current Board.
Consequently, if necessary, Mrs. Hagen will pursue in court the right of a
shareholder to nominate and elect a slate of directors other than those
nominated by the current Board, acting in concert with the corporate trustee
where appropriate.
If the Board does not permit Mrs. Hagen to nominate the Hagen
Nominees at the 2000 Annual Meeting, Mrs. Hagen will, as a third alternative,
present a shareholder proposal for consideration by the shareholders at the 2000
Annual Meeting, as permitted by the Company's
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bylaws, to remove all directors (other than Mrs. Hagen) immediately following
their election at the 2000 Annual Meeting. If the shareholders vote in favor of
such proposal, Mrs. Hagen, as the sole remaining director, will then appoint the
Hagen Nominees to the Board and, if they are willing, a number of the current
members of the Board, including F. William Hirt.
The election of the Hagen Nominees would provide management
with the support necessary to focus the Company on the long-term interests of
its shareholders and other constituencies. Upon the election of the Hagen
Nominees, the Board will conduct a thorough review of every aspect of the
Company's operations, financial condition and performance. Mrs. Hagen and the
Hagen Nominees will be committed to keeping the corporate headquarters of the
Company, and its employees, in Erie.
Except as described above in this Item, Mrs. Hagen has no
present plans or proposals that relate to or would result in any of the actions
enumerated in paragraphs (a) to (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Mrs. Hagen is a trustee of the Trusts and, in such
capacity, shares voting and investment power over all 2,340 shares of Class B
Common Stock beneficially owned by the Trusts. Mrs. Hagen is also the
beneficiary of one of the Trusts which holds 1,170 shares, or 38.1%, of the
Class B Common Stock for her benefit. Mrs. Hagen is the direct beneficial owner
of 12 shares, or .4%, of the Class B Common Stock. These holdings do not include
1 share of Class B Common Stock owned by the Hagen Family Limited Partnership of
which Mrs. Hagen is a limited partner without voting or dispositive power over
the share and 3 shares of Class B Common Stock owned by her husband, Thomas B.
Hagen. Mrs. Hagen disclaims beneficial ownership of the shares owned by Thomas
B. Hagen. In addition, Mrs. Hagen and the Hagen family are the beneficial owners
of 16,756,800 shares of the Class A Common Stock, no par value (the "Class A
Common Stock"), of the Company, constituting 25% of the outstanding shares of
the Class A Common Stock.
(b) Number of shares of Class B Common Stock as to which such
person has:
(i) sole power to vote or to direct the vote:
Mrs. Hagen has the sole right to vote or to
direct the vote of the 12 shares of Class B
Common Stock she holds directly.
(ii) shared power to vote or direct the vote:
The co-trustees (Mrs. Hagen, Bankers Trust,
and F. William Hirt) have the right to vote
the 2,340 shares of Class B Common Stock
held of record by the Trusts.
(iii) sole power to dispose or to direct the
disposition of:
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Mrs. Hagen has the sole power to dispose or
direct the disposition of 12 shares of Class
B Common Stock.
(iv) shared power to dispose or to direct the
disposition of:
The co-trustees (Mrs. Hagen, Bankers Trust,
and F. William Hirt) have the shared power
to dispose or to direct the disposition of
2,340 shares of Class B Common Stock.
(c) Mrs. Hagen has not effected any transaction in the
Class B Common Stock, or in the Class A Common Stock,
during the past 60 days.
(d) No person other than the co-trustees (Mrs. Hagen,
Bankers Trust, and F. William Hirt) have the right to
receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the
shares of the Class B Common Stock in the Trusts.
(e) Not Applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
The First Amendment to the Second Restated Trust Agreement,
dated December 22, 1980, for the H.O. Hirt Trust (the "Trust Agreement"). Any
discussion of the Trust Agreement contained herein in response to an applicable
Item is qualified in its entirety by reference to the Trust Agreement, which is
on file with the Securities and Exchange Commission as an Exhibit to a Schedule
13-D filed by Bankers Trust.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Not applicable.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
/s/ Susan Hirt Hagen
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Susan Hirt Hagen
December 10, 1999
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