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EXHIBIT 10.32   EMPLOYMENT AGREEMENT

THIS AGREEMENT (the Agreement) made effective as of the 15th day of
December, 2002 (the Effective Date) by and between ERIE INDEMNITY COMPANY, a
Pennsylvania corporation with its principal place of business at Erie,
Pennsylvania (the Company), and MICHAEL J. KRAHE (the Executive);

WITNESSETH:

WHEREAS, the Company has determined that it is in the best interests of
the Company and its shareholders to secure the continued employment of the
Executive on the terms and subject to the conditions set forth in this
Agreement; and

WHEREAS, the Executive desires and is willing to accept employment with
the Company on the terms and subject to the conditions set forth herein;

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

1.     Term. The Company hereby agrees to continue the employment of the
Executive and the Executive hereby agrees to continue to serve the Company
pursuant to the terms and conditions of this Agreement as Executive Vice
President of the Company, or in such other position with the Company of at
least commensurate responsibility and authority in all material respects, for a
term commencing on the Effective Date hereof and expiring on December 15, 2004,
unless earlier terminated pursuant to Section 5 hereof. Notwithstanding the
foregoing, the Executive shall serve in said office(s) at the pleasure of the
Companys Board of Directors (the Board of Directors) and the Executive may
be removed from said office(s) at any time with or without Cause, as
hereinafter defined, pursuant to Sections 5(b) or 5(d) hereof; provided that
any such removal shall be without prejudice to any contract rights the
Executive may have hereunder. Subject to Section 8(a)(6) and Section 8(b)
hereof, this Agreement shall expire by its terms on December 15, 2004.

2.     Duties and Responsibilities. The Executives duties hereunder shall be
those which shall be prescribed by the Companys Bylaws, as amended from time
to time, and by the Board of Directors or any committee thereof from time to
time and shall include such executive authority, duties, powers and
responsibilities as customarily attend the office as Executive Vice President
of a company comparable to the Company. The Executive shall discharge such
duties consistent with sound business practices and in accordance with law and
the Companys general employment policies, in each case, as in effect from time
to time, in all material respects and the Executive shall use best efforts to
promote the best interests of the Company. During the term of this Agreement,
the Executives position (including the Executives status and reporting
requirements), authority, duties, powers and responsibilities shall at all
times be at least commensurate in all material respects with the most
significant of those held, exercised or assigned to the Executive as of the
Effective Date. The Executive shall

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devote the Executives knowledge, skill
and all of the Executives professional time, attention and energies
(reasonable absences for vacations and illness excepted), to the business of
the Company in order to perform such assigned duties faithfully, competently
and diligently. It is understood and agreed between the parties that the
Executive may (i) engage in charitable and community activities, including
serving on boards of directors or trustees of and holding other leadership
positions in non-profit organizations unless the objectives and requirements of
such positions are determined by the Board of Directors to be inconsistent with
the performance of the Executives duties hereunder, and, (ii) manage personal
investments, so long as such activities do not interfere or conflict with the
Executives performance of responsibilities and obligations hereunder. It is
expressly agreed that any such activities engaged in by the Executive as of the
Effective Date shall not thereafter be deemed to interfere with the Executives
obligations and responsibilities hereunder. The Executive agrees that the
approval of the Board of Directors or a committee thereof shall be required
before the Executive first accepts a position as director of any for-profit
corporation after the date hereof.

3.     Compensation. During the term of this Agreement, the Executive shall
receive, for all services rendered to the Company hereunder, the following
(hereinafter referred to collectively as Compensation):



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)     Salary. The Executive shall be paid an annual base salary
at an annual rate at least equal to the annual rate being paid or
payable to the Executive by the Company in the month in which the
Effective Date occurs, with such increases thereafter as shall be
determined from time to time to be fair and reasonable by the Board
of Directors or by the Executive Compensation Committee of the
Board of Directors (the Committee) in its discretion after taking
into account, among other things, the authority, duties, powers and
responsibilities of the Executives position, the Executives
performance, the Companys performance, the compensation of persons
in comparable positions at the Company and at other comparable
companies, and the effect of inflation. The Executives annual
base salary shall not be reduced after any such increase. The
Executives annual base salary shall be payable in equal
installments in accordance with the Companys general salary
payment policies, but no less frequently than bi-weekly.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b)     Incentive Compensation. The Executive shall be eligible
for awards under the Companys incentive compensation plans, if
any, applicable to senior executive officers of the Company or to
key employees of the Company or its subsidiaries, including, but
not limited to, management incentive plans and stock option plans,
in accordance with and subject to the terms thereof (including any
provisions providing for changes in the level of or termination of
benefits thereunder), on a basis commensurate with the Executives
position and authorities, duties, powers and responsibilities.
|
| | (c)     Employee Benefit Plans. The Executive and the Executives
dependents, as that term may be defined under the applicable
employee benefit plan(s) of the Company, shall be included, to the
extent eligible thereunder and subject to the terms of the plans                                                                                                                                                                                                                                                                                                                                         

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (including any provisions for changing the level of or termination
of benefits thereunder), in all plans, programs and policies which
provide benefits for Company employees and their dependents on a
basis commensurate with the Executives position and authorities,
duties, powers and responsibilities including, without limitation,
health care insurance, health and welfare plans, pension and
retirement plans, group life insurance plans, split dollar life
insurance plans, short and long-term disability plans, survivors
benefits, executive supplemental benefits, holidays and other
similar or comparable benefits made available to the Companys
employees and senior executive officers (hereinafter, such plans,
programs and policies shall be collectively referred to as the
Erie Benefit Plans). Such plans, programs and policies shall
include, but are not limited to, the Erie Insurance Group
Retirement Plan for Employees, the Erie Insurance Group Employee
Savings Plan, the Erie Insurance Group Deferred Compensation Plan,
the Erie Insurance Group Split Dollar Life Insurance Plan, the Erie
Insurance Group Supplemental Executive Retirement Plan, and the
Erie Insurance Group Health Protection, Prescription Drug, Dental
Assistance and Vision Care Plans.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (d)     Perquisites. The Executive shall be entitled to all
perquisites which the Company from time to time makes available to
senior executive officers of the Company. Such perquisites shall
include, but are not limited to, parking, club dues, tax
preparation assistance, and an annual physical examination.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (e)     Expenses and Working Facilities. The Executive is hereby
authorized to incur, and shall be reimbursed by the Company for,
any and all reasonable and necessary business related expenses,
including, but not limited to, expenses for business travel,
entertainment, gifts and similar matters, which expenses are
incurred by the Executive on behalf of the Company or any of its
subsidiaries, upon presentation of itemized accounts of such
expenses in accordance with Company policies. The Executive shall
be furnished during the term of this Agreement with offices and
other working facilities in the Companys principal executive
offices located in Erie, Pennsylvania (or other location of the
principal executive offices within the Erie metropolitan area) and
secretarial and other assistance suitable to the Executives
position and adequate for the performance of duties hereunder.
|
| | (f)     Performance Appraisal. The Executives performance may be
evaluated by the Board of Directors or the Committee from time to
time. The Executive shall be entitled to such additional
remuneration, including but not limited to annual bonuses based on
performance, as the Board of Directors or the Committee may, in its
discretion, determine from time to time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

4.     Absences. The Executive shall be entitled to vacations in accordance
with the Companys vacation policy in effect from time to time (but in no event
shall the Executive be entitled to fewer vacation days than under the Companys
vacation policy as in effect on the

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Effective Date) and to absences because of
illness or other incapacity, and shall also be entitled to such other absences,
whether for holiday, personal time, conventions, or for any other purpose, as
are granted to the Companys other senior executive officers or as are approved
by the Board of Directors or the Committee, which approval shall not be
unreasonably withheld.

5.     Termination. The Executives employment hereunder may be terminated
only as follows:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)     Expiration of Term of Office. Upon the expiration of the
term of the office(s) to which the Executive has been elected or
appointed as set forth in Section 1 hereof, the Board of Directors
may (i) determine that the Executive should not continue in such
office(s) or (ii) that the Executive should not be elected or
appointed to an office with duties, authorities, powers and
responsibilities that are at least commensurate with those of said
office(s), in either case, for reasons other than for Cause (if the
reasons for such noncontinuance, nonreelection or nonreappointment
constitute Cause, then Section 5(d) hereof will apply).
|
| | (b)     By the Company Without Cause. The Company may at any time
terminate the Executives employment hereunder without Cause only
by the affirmative vote of a majority of the entire Board of
Directors, and upon no less than thirty (30) days prior written
notice to the Executive.                                                                                                                                                                                                                                                                                                                                                                        
|
| | (c)     By the Executive Without Good Reason. The Executive may
at any time terminate employment hereunder for any reason upon no
less than thirty (30) days written notice to the Company. Section
5(e) shall apply to any termination of employment by the Executive
for Good Reason.                                                                                                                                                                                                                                                                                                                                                                          
|
| | (d)     By
the Company For Cause. The Company may terminate the
Executives employment hereunder for Cause. In such event, the
Company shall give to the Executive prompt written notice (in
addition to any notice which may be required by Section 5(d)(1)
hereof) specifying in reasonable detail the basis for such
termination. For purposes of this Agreement, Cause shall mean
any of the following conduct by the Executive:                                                                                                                                                                                                                           



| | (1) |  | The deliberate and
intentional breach of any material provision of
this Agreement, which breach Executive shall have
failed to cure within thirty (30) days after
Executives receipt of written notice from the
Company specifying the specific nature of the
Executives breach;
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | The deliberate and
intentional engaging by Executive in gross
misconduct that is materially and demonstrably
inimical to the best interests, monetary or
otherwise, of the Company; or                                                                                            

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| | (3) |  | Conviction of a felony or
conviction of any crime involving moral turpitude,
fraud or deceit.
| | --- |  | ---------------------------------------------------------------------------------------------

For purposes of this definition, no act, or failure to act, on the Executives
part shall be considered deliberate and intentional unless done, or omitted
to be done, by the Executive not in good faith and without reasonable belief
that such action or omission was in the best interest of the Company.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (e)     By the Executive for Good Reason. The Executive may
terminate employment hereunder for Good Reason upon providing
thirty (30) days written notice to the Company after the Executive
reasonably becomes aware of the circumstances giving rise to such
Good Reason. For purposes of this Agreement, Good Reason means
the following conduct of the Company, unless the Executive shall
have consented thereto in writing:



| | (1) |  | Material breach of any
material provision of this Agreement by the
Company, which breach shall not have been cured by
the Company within thirty (30) days after
Companys receipt from the Executive or the
Executives agent of written notice specifying in
reasonable detail the nature of the Companys
breach;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | The assignment to the
Executive of any duties inconsistent in any
material respect with the Executives position
(including any reduction of the Executives status
and reporting requirements), authority, duties,
powers or responsibilities with the Company as
contemplated by Section 2 of this Agreement, or
any other action by the Company, including the
removal of the Executive from or any failure to
reelect or reappoint the Executive to the
office(s) specified in Section 2 or a commensurate
office(s) (other than for Cause), which results in
a diminution of the Executives authority, duties,
position, responsibilities or status, excluding
for this purpose any isolated, insubstantial and
inadvertent action respecting the Executive not
taken in bad faith and which is remedied by the
Company within thirty (30) days after receipt of
written notice from the Executive to the Company;
|
| | (3) |  | The Companys relocation
of the Executive out of the Companys principal
executive offices or the relocation of the
Companys principal executive offices to a
location outside the Erie, Pennsylvania
metropolitan area, except for required short-term
travel on the Companys behalf to the extent
necessary for the Executive to carry out his
normal duties in the ordinary course of business;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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| | (4) |  | The failure of the
Company to obtain the assumption in writing of its
obligations to perform this Agreement by any
successor as provided in Section 14 hereof not
less than five days prior to a merger,
consolidation or sale as contemplated in Section
14; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (5) |  | A reduction in the
overall level of compensation of the Executive.
For purposes of this subsection 5, the following
shall not constitute a reduction in the overall
level of compensation of the Executive: (i)
changes in the cash/stock mix of compensation
payable to the Executive; (ii) a reduction in the
overall level of compensation of the Executive
resulting from the failure to achieve corporate,
business unit and/or individual performance goals
established for purposes of incentive compensation
for any year or other period; provided that the
aggregate short-term incentive opportunity, when
combined with the Executives base salary,
provides, in the aggregate, an opportunity for the
Executive to realize at least the same overall
level of compensation as was paid in the
immediately prior year or period at target
performance levels; and provided, further, that
such target performance levels are reasonable at
all times during the measurement period, taking
into account the fact that one of the purposes of
such compensation is to incent the Executive;
(iii) reductions in compensation resulting from
changes to any Erie Benefit Plan (provided that
such changes are generally applicable to all
participants in such Erie Benefit Plan); and (iv)
any combination of the foregoing.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (f)     Disability. In the event that the Executive shall be
unable to perform the Executives duties hereunder on a full time
basis for a period of one hundred-eighty (180) consecutive calendar
days by reason of incapacity due to illness, accident or other
physical or mental disability, then the Company may, at its
discretion, terminate the Executives employment hereunder if the
Executive, within ten (10) days after receipt of written notice of
termination (which notice may be given before or after the end of
the entire 180 day period), shall not have returned to the
performance of all of his duties hereunder on a full-time basis.
|
| | (g)     Death. The Executives employment under this Agreement
shall terminate upon the Executives death.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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| |                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (h)     Mutual Written Agreement. This Agreement and the
Executives employment hereunder may be terminated at any time by
the mutual written agreement of the Executive and the Company.

6.     Compensation in the Event of Termination. In the event that the
Executives employment hereunder terminates prior to the expiration of this
Agreement for any reason provided in Section 5 hereof, the Company shall pay
the Executive, compensation and provide the Executive and the Executives
eligible dependents with benefits as follows:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)     Executives Nonreelection to Office; Termination By
Company Without Cause; Termination By Executive for Good Reason.
In the event that the Executives employment hereunder is
terminated: (i) because the Executive does not continue in office
pursuant to Section 5(a) hereof; or (ii) by the Company without
Cause pursuant to Section 5(b) hereof; or (iii) by the Executive
for Good Reason pursuant to Section 5(e) hereof, then in any such
event the Company shall pay or provide, as applicable, the
following compensation and benefits to the Executive:



| | (1) |  | Three (3) times the
following: (A) the highest annual base salary
paid or payable to the Executive in the then
current year or any one (1) of the three (3)
calendar years preceding Executives termination
of employment hereunder; plus (B) an amount equal
to the sum of the Executives highest award(s)
under the Companys Annual Incentive Plans for any
one (1) of the three (3) calendar years preceding
the date of the termination of Executives
employment hereunder (such total is referred to
herein as Covered Compensation). Such payment
to the Executive by the Company shall be paid in a
lump sum unless the Executive elects, and so
notifies the Company in writing prior to the
termination of the Executives employment
hereunder, to receive such payment in three (3)
equal annual installments. The lump sum or first
payment, as the case may be, shall be paid within
sixty (60) days after the date of the termination
of the Executives employment hereunder;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Any awards or other
compensation to which the Executive is entitled
under any of the Companys compensation plans or
Erie Benefit Plans to the extent not covered in
subsection (1) hereof;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | (3) |  | Any award to which the
Executive would be entitled under the Companys
Long-Term Incentive Plan as in effect on December
16, 1997, calculated under the provision of that
Plan as if the Executive ceases to be an Employee
of the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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| |     |  | Company by reason of death, disability or
normal retirement;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (4) |  | 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 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. Notwithstanding the foregoing, the
Executive may elect (by giving written notice to
the Company prior to the termination of employment
hereunder), on a benefit by benefit basis, to
receive in lieu of continuing coverage, cash in an
amount equal to the present value (using a 6.5%
discount rate over three years) of the projected
cost to the Company of providing such benefit for
such three year period. The aggregate amount of
cash to which the Executive is entitled pursuant
to the preceding sentence shall be payable by the
Company to the Executive within sixty (60) days
after the date of the termination of Executives
employment hereunder; and
|
| | (5) |  | For a period of three (3)
years after the date of the termination of
Executives employment hereunder, such perquisites
as are made available to the Executive as of the
date of the termination of Executives employment
hereunder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

The Executives subsequent death, disability or attainment of age 65 or any
other age shall in no way affect or limit the Companys obligations under this
Section 6(a).



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b)     Termination By the Company for Cause. In the event that
the Company shall terminate the Executives employment hereunder
for Cause pursuant to Section 5(d), this Agreement shall forthwith
terminate and the obligations of the parties hereto shall be as set
forth in Section 8 hereof.

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| |                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c)     Termination by the Executive Without Good Reason. In the
event that the Executive shall terminate employment hereunder other
than for Good Reason pursuant to Section 5(c), this Agreement shall
forthwith terminate and the obligations of the parties hereto shall
be as set forth in Section 8 hereof.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (d)     Disability. In the event that the Company elects to
terminate the Executives employment hereunder pursuant to Section
5(f), the Executive shall continue to receive from the date of such
termination through the expiration date of this Agreement, sixty
percent (60%) of the then current annual base salary to which the
Executive was entitled pursuant to Section 3(a) hereof immediately
preceding such termination, in accordance with the payroll
practices of the Company for senior executive officers, reduced,
however, by the amount of any proceeds from Social Security and
disability insurance policies provided by and at the expense of the
Company.
|
| | (e)     Death. In the event of the death of the Executive during
the term of this Agreement, the then current annual base salary to
which the Executive was entitled pursuant to Section 3(a) hereof
immediately preceding the Executives death shall be paid, in
twelve (12) equal monthly installments following the date of death,
to the last beneficiary designated by the Executive under the
Companys group life insurance policy maintained by the Company or
such other written designation expressly provided to the Company
for the purposes hereof or, failing either such designation, to the
Executives estate.                                                 
|
| | (f)     Mutual Written Consent. In the event that the Executive
and the Company shall terminate the Executives employment by
mutual written agreement, the Company shall pay such compensation
and provide such benefits, if any, as the parties may mutually
agree upon in writing.                                                                                                                                                                                                                                                                                                                                                                                            

The Executive shall not be required to mitigate the amount of any payment
provided for in this Section 6 by seeking employment or otherwise, nor shall
any amounts received from employment or otherwise by the Executive offset in
any manner the obligations of the Company hereunder except as specifically
provided in Section 6(d) hereof.

7.     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 (a Payment), is subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (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 the 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.

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8.     Effect of Expiration of Agreement or Termination of Executives
Employment. Upon the expiration of this Agreement by its terms or the
termination of the Executives employment hereunder, neither the Company nor
the Executive shall have any remaining duties or obligations hereunder except
that:



| |                           
| | --------------------------
| | (a)     The Company shall:



| | (1) |  | Pay the Executives
accrued salary and any other accrued benefits
under Sections 3(a), (b), and (c) hereof;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Reimburse the Executive
for expenses already incurred in accordance with
Section 3(e) hereof;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (3) |  | Pay or otherwise provide
for any benefits, payments or continuation or
conversion rights in accordance with the
provisions of any Erie Benefit Plan of which the
Executive or any of the Executives dependents is
or was a participant or as otherwise required by
law;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | (4) |  | Pay the Executive and the
Executives beneficiaries any compensation and/or
provide the Executive or the Executives eligible
dependents any benefits, as the case may be, due
pursuant to Section 6 or Section 7 hereof; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (5) |  | Unless the employment of
the Executive is terminated by the Company for
Cause, pay the Executive or the Executives
beneficiaries the full amount or amounts accrued
under the Supplemental Executive Retirement Plan
of the Company (the SERP) as in effect on the
Effective Date (or as such benefits may be
enhanced by subsequent amendments or supplements
to such SERP), as though, solely for purposes of
determining any otherwise applicable actuarial
reduction factors, the event of the termination of
Executives employment hereunder or expiration of
this Agreement occurred on the Executives Normal
Retirement Date as defined in such SERP. Accrued
benefits under the SERP shall be fully vested and
nonforfeitable upon such termination (including
termination on account of the Executives death)
or expiration. Any reductions in SERP benefits
that would otherwise apply pursuant to Section
10.1 of the Companys Retirement Plan for
Employees (or pursuant to any successor provision
of such plan or any successor plan) relating to
Section 415(b) of the Code shall not be applicable
for purposes hereof. No further approval by the
Board of Directors or the Committee with respect
to payments under the SERP in accordance with the
preceding sentences shall be required. Unreduced
payments

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| |     |  | may begin at age 55, but in no event
would payments be made under this Section 8(a)(5)
before the Executive reaches age fifty-five (55).
The Company shall purchase for the Executive,
naming the Executive and/or the Executives
designee the owner, a paid up annuity, from an
insurer reasonably acceptable to the Executive but
in any event having an A.M. Best rating of A+ or
better (or other comparable rating), that will pay
to the Executive an amount equal to the benefit to
which the Executive would otherwise be entitled
under the SERP and payable at the times such SERP
benefit would be payable in accordance with the
provisions hereof. Upon the purchase and delivery
to the Executive of such an annuity, the Executive
shall release the Company from any further
obligation under the SERP. The Company further
agrees to pay the Executive immediately upon
termination, a cash payment (the Tax Gross-up)
equal to the sum of the following: (i) all taxes
(federal, state, local, and payroll taxes)
incurred and due and owing by the Executive,
arising from the cost of the annuity purchased by
the Company to meet the requirements of this
Section 8(a)(5), and (ii) any such taxes incurred
and due and owing with respect to the amount paid
in (i).
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (6) |  | Continue to remain bound
by the terms of Section 12 hereof.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b)     The Executive shall remain bound by the terms of Sections
9 and 13 hereof for a period of thirty six (36) months after the
expiration of the Agreement by its terms; provided, that the
Executive shall not be bound by the terms of Section 9(b) after the
termination of employment (other than a termination of the
Executive by the Company for Cause) if such termination occurs
after the expiration of this Agreement by its terms.

9.     Covenants as to Confidential Information and Competitive Conduct. The
Executive hereby acknowledges and agrees as follows: (i) this Section 9 is
necessary for the protection of the legitimate business interests of the
Company, (ii) the restrictions contained in this Section 9 with regard to
geographical scope, length of term and types of restricted activities are
reasonable; (iii) the Executive has received adequate and valuable new
consideration for entering into this Agreement, and (iv) the Executives
expertise and capabilities are such that this obligation hereunder and the
enforcement hereof by injunction or otherwise will not adversely affect the
Executives ability to earn a livelihood.

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)     Confidentiality of Information and Nondisclosure. The
Executive acknowledges and agrees that the Executives employment
by the Company under this Agreement necessarily involves knowledge
of and access to confidential and proprietary information
pertaining to the business of the Company and its subsidiaries.
Accordingly, the Executive agrees that at all times during the term
of this Agreement and at any time thereafter, 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
the 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 information concerning any financial
matters, customer relationships, competitive status, supplier
matters, internal organizational matters, current or future plans,
or other business affairs of or relating to the Company or its
subsidiaries, (ii) any management, operational, trade, technical or
other secrets or any other proprietary information or other data of
the Company or its subsidiaries, or (iii) any other information
related to the Company or its subsidiaries or which the Executive
should reasonably believe will be damaging to the Company or its
subsidiaries 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. During the term of, and for a
period of one (1) year (the Restrictive Period) after the
termination of the Executives employment hereunder for any reason
(other than a termination of the Executive hereunder pursuant to
Section 5(a), 5(b) or 5(e), hereof), 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 in which the Company or any of its subsidiaries is then
licensed and doing business at the date of the Executives
termination of employment hereunder without the prior written
consent of the Board of Directors, which may be withheld in its
discretion. In the event the Executive violates any of the
provisions contained in this Section 9(b) 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 Company or its subsidiaries or induce any of them to
terminate their employment with the Company or any of the
subsidiaries. Notwithstanding the foregoing, the performance by
the Executive of rights and duties under an agency agreement with
the Company shall not constitute a breach of this Section 9(b).

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c)     Company Remedies. The Executive acknowledges and agrees
that any breach of this Section 9 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 9, 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
Section 3, Section 6 or Section 8 of this Agreement, and also to
obtain immediate injunctive relief restraining the Executive from
conduct in breach of the covenants contained in this Section 9.
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.

10.     Resolution of Differences Over Breaches of Agreement. Except as
otherwise provided herein, in the event of any controversy, dispute or claim
arising out of, or relating to, this Agreement, or the breach thereof, or
arising out of any other matter relating to the Executives employment with the
Company, the parties may seek recourse only for temporary or preliminary
injunctive relief to the courts having jurisdiction thereof and if any relief
other than injunctive relief is sought, the Company and the Executive agree
that such underlying controversy, dispute or claim shall be settled by
arbitration conducted in Erie, Pennsylvania in accordance with this Section 10
and the Commercial Arbitration Rules of the American Arbitration Association
(AAA). The matter shall be heard and decided, and awards rendered by a panel
of three (3) arbitrators (the Arbitration Panel). The Company and the
Executive shall each select one arbitrator from the AAA National Panel of
Commercial Arbitrators (the Commercial Panel) and AAA shall select a third
arbitrator from the Commercial Panel. The award rendered by the Arbitration
Panel shall be final and binding as between the parties hereto and their heirs,
executors, administrators, successors and assigns, and judgment on the award
may be entered by any court having jurisdiction thereof. Except as provided in
Section 11 hereof, each party shall bear sole responsibility for all expenses
and costs incurred by such party in connection with the resolution of any
controversy, dispute or claim in accordance with this Section 10.

11.     Payment of Executives Legal Fees. 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 if the Executive
is successful, in whole or in part, on the merits or otherwise (including by
way of a settlement involving a 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 upon receipt of an undertaking
from the Executive 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.

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12.     Severance Pay upon Termination of Employment after Expiration of the
Agreement. Notwithstanding the expiration of this Agreement by its terms and
notwithstanding the terms of any corporate severance policy then in effect and
applicable to the Executive, if the employment of the Executive is terminated
without Cause by the Company, by the Executive for Good Reason or upon the
expiration of the term of the office(s) to which the Executive has been elected
or appointed as set forth in Section 1 hereof (for reasons other than for
Cause), in any case, within thirty-six (36) months after the expiration of this
Agreement by its terms, then (i) the Company shall pay to the Executive
severance compensation in an amount equal to two (2) times the Executives
Covered Compensation as determined on the date of such termination, and (ii)
the Executive and the Executives eligible dependents shall be entitled to
continuing coverage under the Companys then-existing group health plans
(including medical, dental, prescription drug and vision plans, if any) for a
period of two (2) years after the date of the termination of the Executives
employment, to the extent not prohibited by law and subject to the terms of
such plans including provisions as to deductibles and copayments and changes in
levels of coverage that are generally applicable to employees. The payment to
the Executive by the Company pursuant to subsection (i) of the preceding
sentence shall be paid in a lump sum unless the Executive elects, and so
notifies the Company in writing prior to the Executives termination of
employment, to receive such payment in two (2) equal annual installments. The
lump sum or first payment, as the case may be, shall be paid within thirty (30)
days after the date of termination of the Executives employment.

13.     Release. The Executive hereby acknowledges and agrees that neither
the Company nor any of its representatives or agents will be obligated to pay
any compensation or benefit which the Executive has a right to be paid or
provided to the Executive or the Executives dependents pursuant to Section 6,
Section 8 or Section 12 of this Agreement, unless the Executive, if requested
by the Company in its sole discretion, executes a release in a form reasonably
acceptable to the Company, which releases any and all claims the Executive has
or may have against the Company or its subsidiaries, agents, officers,
directors, successors or assigns.

14.     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.

15.     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.

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16.     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 residence address as
set forth below, and in the case of the Company, to the address of its
principal place of business as set forth below, to the attention of the
Chairman of the Board, or in case the Executive is the Chairman of the Board,
to the Chairman of the Compensation Committee of the Board  or to such other
person or at such other address with respect to each party as such party shall
notify the other in writing.

17.     Construction of Agreement.



| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | (a)     Governing Law. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Pennsylvania.



| |                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b)     Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid, illegal
or unenforceable, the validity, legality or enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.



| |                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c)     Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience of
reference only and shall not constitute a part of this Agreement.

18.     Entire Agreement. This Agreement contains the entire agreement of the
parties concerning the Executives employment and all promises,
representations, understandings, arrangements and prior agreements on such
subject are merged herein and superseded hereby. 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. No person acting other than pursuant to a resolution of
the Board of Directors or the Committee shall have authority on behalf of the
Company to agree to amend, modify, repeal, waive, extend or discharge any
provision of this Agreement or anything in reference thereto or to exercise any
of the Companys rights to terminate or to fail to extend this Agreement.

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
officers thereunto duly authorized, and the Executive has hereunto set his hand
all as of the day and year first above written.



|         |                                                             |                        |     |     |                                                                           
|-------- | ----------------------------------------------------------- | ---------------------- | --- | --- | --------------------------------------------------------------------------
|ATTEST:  |                                                             | ERIE INDEMNITY COMPANY
|/s/      | Jan R. Van Gorder
Jan R. Van Gorder
Secretary               |                        | By: | /s/ | F. William Hirt
F. William Hirt
Chairman of the Board                     
|        
|WITNESS: |                                                             |                       
|/s/      | Martina R. Gonzales
Martina R. Gonzales
Executive Secretary |                        |     | /s/ | Michael J. Krahe (SEAL)
Michael J. Krahe
4516 Cedarwood Ct.
Erie, PA 16505

71