Exhibit 10.1

 

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

This amended and restated agreement is effective as of the 1st day of August,
2005

 

BETWEEN:

 

Alderwoods Group Canada Inc.

 

(the “Company”)

 

-And-

 

John S. Lacey

 

(the “Chairman”)

 

WHEREAS:

 

The Company is a wholly-owned subsidiary of Alderwoods Group, Inc., a Delaware
corporation (“AGI”), the holding entity for a corporate group engaged in the
operation of funeral homes, insurance and cemeteries in Canada and the United
States;

 

Alderwoods Group Services Inc. and the Chairman entered into an Employment
Agreement dated January 2, 2002 and an Amended and Restated Employment Agreement
dated May 1, 2003 (the “Prior Agreements”);

 

Alderwoods Group Services Inc. amalgamated with Alderwoods Group Canada Inc.
(“AGCI”) on December 29,2002; and

 

The Company and the Chairman wish to enter into a new agreement which will
supersede the Prior Agreements and will provide the Chairman with an incentive
to act as Chairman of the Company.

 

IN CONSIDERATION of the mutual covenants contained herein, the parties agree as
follows:

 

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Definitions

 

1.                                       “CHANGE IN CONTROL” MEANS ANY ONE OF
THE FOLLOWING EVENTS THAT OCCURS DURING THE TERM OF THIS AGREEMENT:

 

A)                                      THE ACQUISITION BY ANY INDIVIDUAL,
ENTITY OR GROUP (A “PERSON”) OF BENEFICIAL OWNERSHIP OF 30% OR MORE OF THE
COMBINED VOTING POWER OF THE THEN OUTSTANDING VOTING STOCK (AS DEFINED BELOW) OF
AGI; PROVIDED, HOWEVER, THAT THE FOLLOWING ACQUISITIONS WILL NOT CONSTITUTE A
CHANGE IN CONTROL: (1) ANY ISSUANCE OF VOTING STOCK OF AGI DIRECTLY FROM AGI
THAT IS APPROVED BY THE INCUMBENT BOARD (AS DEFINED BELOW), (2) ANY ACQUISITION
BY AGI OF VOTING STOCK OF AGI, (3) ANY ACQUISITION OF VOTING STOCK OF AGI BY ANY
EMPLOYEE BENEFIT PLAN (OR RELATED TRUST) SPONSORED OR MAINTAINED BY AGI OR ANY
SUBSIDIARY OF AGI, OR (4) ANY ACQUISITION OF VOTING STOCK OF AGI BY ANY PERSON
PURSUANT TO A BUSINESS COMBINATION (AS DEFINED BELOW) THAT WOULD NOT CONSTITUTE
A CHANGE IN CONTROL;

 

B)                                     THE CONSUMMATION OF A REORGANIZATION,
AMALGAMATION, MERGER OR CONSOLIDATION, A SALE OR OTHER DISPOSITION OF ALL OR
SUBSTANTIALLY ALL OF THE ASSETS OF AGI, OR ANY OTHER TRANSACTION (EACH, A
“BUSINESS COMBINATION”) IN WHICH ALL OR SUBSTANTIALLY ALL OF THE INDIVIDUALS AND
ENTITIES WHO WERE THE BENEFICIAL OWNERS OF VOTING STOCK OF AGI IMMEDIATELY PRIOR
TO SUCH BUSINESS COMBINATION BENEFICIALLY OWN, DIRECTLY OR INDIRECTLY,
IMMEDIATELY FOLLOWING SUCH BUSINESS COMBINATION LESS THAN 40% OF THE COMBINED
VOTING POWER OF THE THEN OUTSTANDING SHARES OF VOTING STOCK OF THE ENTITY
RESULTING FROM SUCH BUSINESS COMBINATION;

 

C)                                      INDIVIDUALS WHO, AS OF THE EFFECTIVE
DATE OF THIS AGREEMENT CONSTITUTE THE BOARD OF DIRECTORS OF AGI (THE “INCUMBENT
BOARD”) CEASE FOR ANY REASON TO CONSTITUTE AT LEAST A MAJORITY OF THE BOARD;
PROVIDED, HOWEVER, THAT ANY INDIVIDUAL BECOMING A DIRECTOR SUBSEQUENT TO SUCH
EFFECTIVE DATE WHOSE ELECTION, OR NOMINATION FOR ELECTION BY AGI’S STOCKHOLDERS,
WAS APPROVED BY A VOTE OF AT LEAST TWO-THIRDS OF THE DIRECTORS THEN COMPRISING
THE INCUMBENT BOARD (EITHER BY A SPECIFIC VOTE OR BY APPROVAL OF THE PROXY
STATEMENT OF AGI IN WHICH SUCH PERSON IS NAMED AS A NOMINEE FOR DIRECTOR,
WITHOUT OBJECTION TO SUCH NOMINATION) WILL BE DEEMED TO HAVE BEEN A MEMBER OF
THE INCUMBENT BOARD, BUT EXCLUDING, FOR THIS PURPOSE, ANY SUCH INDIVIDUAL WHOSE
INITIAL ASSUMPTION OF OFFICE OCCURS AS A RESULT OF AN ACTUAL OR THREATENED
ELECTION CONTEST WITH RESPECT TO THE ELECTION OR REMOVAL OF DIRECTORS OR OTHER
ACTUAL OR THREATENED SOLICITATION OF PROXIES OR CONSENTS BY OR ON BEHALF OF A
PERSON OTHER THAN THE BOARD; OR

 

D)                                     THE APPROVAL BY THE STOCKHOLDERS OF AGI
OF A COMPLETE LIQUIDATION OR DISSOLUTION OF AGI, EXCEPT PURSUANT TO A BUSINESS
COMBINATION THAT WOULD NOT CONSTITUTE A CHANGE IN CONTROL.

 

2.                                       “JUST CAUSE” MEANS WILLFUL MISCONDUCT
OR WILLFUL NEGLECT OF DUTY BY THE CHAIRMAN, INCLUDING, BUT NOT LIMITED TO,
INTENTIONAL WRONGFUL DISCLOSURE OF CONFIDENTIAL OR PROPRIETARY INFORMATION OF
THE COMPANY OR AGI OR ANY OF ITS SUBSIDIARIES; INTENTIONAL WRONGFUL ENGAGEMENT
IN ANY COMPETITIVE ACTIVITY PROHIBITED BY PARAGRAPHS 25, 26 AND 27; AND THE
INTENTIONAL MATERIAL BREACH OF ANY PROVISION OF THIS AGREEMENT.

 

3.                                       “STATED GOOD REASON” MEANS THE
OCCURRENCE OF ONE OR MORE OF THE FOLLOWING EVENTS (REGARDLESS OF WHETHER ANY
OTHER REASON, OTHER THAN JUST CAUSE, EXISTS FOR THE TERMINATION OF CHAIRMAN’S
EMPLOYMENT):

 

A)                                      THE GEOGRAPHIC RELOCATION BY MORE THAN
25 MILES OF THE CHAIRMAN’S PRINCIPAL WORK LOCATION;

 

B)                                     ANY MATERIAL REDUCTION IN THE CHAIRMAN’S
JOB DUTIES OR RESPONSIBILITIES;

 

C)                                      ANY MATERIAL REDUCTION IN THE CHAIRMAN’S
LEVEL OF COMPENSATION OR BENEFITS;

 

D)                                     ANY ADVERSE CHANGE TO THE CHAIRMAN’S
TITLE OR FUNCTION;

 

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E)                                      ANY CHANGE IN THE ORGANIZATIONAL
REPORTING RELATIONSHIP BETWEEN THE CHAIRMAN AND THE BOARD OF DIRECTORS;

 

F)                                        HARASSMENT BY AGI OR THE COMPANY; OR

 

G)                                     ANY CIRCUMSTANCE IN WHICH THE CHAIRMAN
WAS INDUCED BY THE ACTIONS OF THE COMPANY OR AGI TO TERMINATE HIS EMPLOYMENT
OTHER THAN ON A PURELY VOLUNTARY BASIS.

 

4.                                       “SERVICES” HAS THE MEANING SET FORTH IN
THE MANAGEMENT SERVICES AGREEMENTS BY AND BETWEEN THE COMPANY AND AGI AND THE
COMPANY AND CERTAIN SUBSIDIARIES OF AGI.

 

5.                                       “TERMINATION WITHOUT JUST CAUSE”
INCLUDES, BUT IS NOT LIMITED TO, ANY UNILATERAL CHANGE IN THE MATERIAL TERMS AND
CONDITIONS OF THE CHAIRMAN’S EMPLOYMENT.

 

6.                                       “VOTING STOCK” MEANS SECURITIES
ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS.

 

Entire Agreement

 

7.                                       THE CHAIRMAN AND THE COMPANY AGREE THAT
THIS AGREEMENT REPRESENTS THE ENTIRE EMPLOYMENT AGREEMENT BETWEEN THE PARTIES
AND THAT ANY AND ALL PRIOR AGREEMENTS, WRITTEN OR VERBAL, EXPRESS OR IMPLIED
(INCLUDING, WITHOUT LIMITATION, THE PRIOR AGREEMENTS), BETWEEN THE PARTIES
RELATING TO OR IN ANY WAY CONNECTED WITH THE EMPLOYMENT OF THE CHAIRMAN BY THE
COMPANY OR ANY RELATED, ASSOCIATED, AFFILIATED, PREDECESSOR OR PARENT
CORPORATIONS ARE DECLARED NULL AND VOID AND ARE SUPERSEDED BY THE TERMS OF THIS
AGREEMENT AND BY THE TERMS OF THE 2003-2005 EXECUTIVE STRATEGIC INCENTIVE PLAN
OF ALDERWOODS GROUP CANADA, INC. AND THE 2005-2007 EXECUTIVE STRATEGIC INCENTIVE
PLAN OF ALDERWOODS GROUP CANADA INC. THERE ARE NO REPRESENTATIONS, WARRANTIES,
FORMS, CONDITIONS, UNDERTAKINGS, OR COLLATERAL AGREEMENTS, EXPRESS, IMPLIED OR
STATUTORY BETWEEN THE PARTIES OTHER THAN AS EXPRESSLY SET FORTH IN THIS
AGREEMENT.  NO WAIVER OR MODIFICATION OF THIS AGREEMENT SHALL BE VALID UNLESS IN
WRITING AND DULY EXECUTED BY BOTH THE COMPANY AND THE CHAIRMAN.

 

Employment

 

8.                                       THE COMPANY AGREES TO EMPLOY THE
CHAIRMAN, AND THE CHAIRMAN AGREES TO BE EMPLOYED BY THE COMPANY FOR A FIXED TERM
BEGINNING ON THE DATE HEREOF AND ENDING ON THE EARLIER OF DECEMBER 31, 2007,
UNLESS EXTENDED BY MUTUAL AGREEMENT, OR THE EFFECTIVE DATE OF THE TERMINATION OF
THE CHAIRMAN’S EMPLOYMENT WITH THE COMPANY (SUCH PERIOD OF TIME REFERRED TO
HEREIN AS THE “INITIAL TERM OF EMPLOYMENT”).  THE COMPANY WILL CONTINUE TO
EMPLOY THE CHAIRMAN, AND THE CHAIRMAN AGREES TO BE EMPLOYED BY THE COMPANY
FOLLOWING THE INITIAL TERM OF EMPLOYMENT FOR AN ADDITIONAL TERM BEGINNING ON
JANUARY 1, 2008 AND ENDING ON THE EARLIER OF JULY 31, 2008, UNLESS EXTENDED BY
MUTUAL AGREEMENT, OR THE EFFECTIVE DATE OF THE TERMINATION OF THE CHAIRMAN’S
EMPLOYMENT WITH THE COMPANY (SUCH PERIOD OF TIME REFERRED TO HEREIN AS THE
“NOTICE PERIOD”).  THE INITIAL TERM OF EMPLOYMENT AND THE NOTICE PERIOD ARE
COLLECTIVELY REFERRED TO HEREIN AS “THE TERM OF THIS AGREEMENT.”

 

9.                                       THE CHAIRMAN AGREES THAT HE WILL AT ALL
TIMES FAITHFULLY, INDUSTRIOUSLY, AND TO THE BEST OF HIS SKILL, ABILITY, AND
TALENTS, PERFORM ALL OF THE DUTIES REQUIRED OF HIS POSITION IN A MANNER WHICH IS
IN THE BEST INTERESTS OF THE COMPANY AND IN ACCORDANCE WITH THE COMPANY’S
OBJECTIVES.  THE CHAIRMAN ACKNOWLEDGES AND AGREES THAT THE DUTIES REQUIRED OF
HIS POSITION INCLUDE, WITHOUT LIMITATION, THE PROVISION OF SERVICES ON BEHALF
OF, AND FOR THE ACCOUNT OF, THE COMPANY.

 

Base Compensation

 

10.

 

A)                                      THE CHAIRMAN WILL RECEIVE A BASE SALARY
AS FOLLOWS:

 

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I)                                         COMMENCING FROM THE DATE OF THIS
AGREEMENT AND FOR THE REMAINDER OF CALENDAR YEAR 2005, $305,000 U.S. PER ANNUM;

 

II)                                      FOR CALENDAR YEAR 2006, $425,000 U.S.
PER ANNUM;

 

III)                                   FOR CALENDAR YEAR 2007, $450,000 U.S. PER
ANNUM; AND

 

IV)                                  DURING THE NOTICE PERIOD, $450,000 U.S. PER
ANNUM.

 

B)                                     THE CHAIRMAN’S BASE SALARY IS PAYABLE IN
ACCORDANCE WITH THE COMPANY’S CUSTOMARY PAYROLL PRACTICES AND IS SUBJECT TO
DEDUCTIONS REQUIRED BY APPLICABLE LAW.

 

C)                                      THE COMPANY SHALL REIMBURSE THE CHAIRMAN
FOR ALL REASONABLE EXPENSES INCURRED BY THE CHAIRMAN DURING THE TERM OF THIS
AGREEMENT IN THE COURSE OF THE CHAIRMAN PERFORMING HIS DUTIES UNDER THIS
AGREEMENT.  THESE REIMBURSEMENTS SHALL BE CONSISTENT WITH THE COMPANY’S POLICIES
IN EFFECT FROM TIME TO TIME WITH RESPECT TO TRAVEL, ENTERTAINMENT AND OTHER
REIMBURSABLE BUSINESS EXPENSES, SUBJECT TO THE COMPANY’S REQUIREMENTS APPLICABLE
GENERALLY WITH RESPECT TO REPORTING AND DOCUMENTATION OF SUCH EXPENSES.

 

Short Term Incentive Plan - Annual Bonus

 

11.           DURING 2005, THE CHAIRMAN WILL BE ENTITLED TO PARTICIPATE IN A
SHORT TERM INCENTIVE PLAN AS ADOPTED BY THE COMPANY FROM TIME TO TIME, SUBJECT
TO A MAXIMUM OF 100% OF THE CHAIRMAN’S ANNUAL BASE SALARY, LESS DEDUCTIONS
REQUIRED BY APPLICABLE LAW.  THE BONUS PAYABLE UNDER SUCH PLAN WILL BE PAID IN
FULL WITHIN 75 DAYS AFTER THE END OF EACH YEAR.  WITH THE EXCEPTION OF THE BONUS
THAT BECOMES PAYABLE UNDER PARAGRAPHS 17, 18 OR 19, THE CHAIRMAN’S ENTITLEMENT
TO A BONUS UNDER THE SHORT TERM INCENTIVE PLAN WILL BE BASED ON THE FINANCIAL
PERFORMANCE OF AGI AS DETERMINED UNDER THE TERMS OF SUCH INCENTIVE PLAN.  THE
CHAIRMAN WILL NOT BE ELIGIBLE TO PARTICIPATE IN THE SHORT TERM INCENTIVE PLAN
DURING CALENDAR YEARS 2006 AND 2007 OR DURING THE NOTICE PERIOD.

 

12.           THE SHORT TERM INCENTIVE PLAN BONUS IS SUBJECT TO THE FOLLOWING
CONDITIONS AND EXCEPTIONS:

 

A)                                      IN ORDER TO QUALIFY FOR AND RECEIVE THE
ANNUAL BONUS DURING 2005, THE CHAIRMAN MUST BE EMPLOYED BY THE COMPANY OR ITS
SUCCESSOR AT THE TIME THE BONUS IS PAID UNLESS THE CHAIRMAN IS TERMINATED
WITHOUT JUST CAUSE OR THE CHAIRMAN RESIGNS IN COMPLIANCE WITH PARAGRAPHS 18 OR
19.

 

B)                                     IF THE CHAIRMAN’S EMPLOYMENT IS
TERMINATED WITHOUT JUST CAUSE OR THE CHAIRMAN RESIGNS IN COMPLIANCE WITH
PARAGRAPHS 18 OR 19 AFTER THE END OF 2005 BUT BEFORE THE BONUS AMOUNT IS PAID,
THE CHAIRMAN SHALL RECEIVE THE BONUS FOR THAT COMPLETED YEAR CALCULATED IN
ACCORDANCE WITH TERMS OF THE SHORT TERM INCENTIVE PLAN.  THE PAYMENT SHALL BE
MADE BY THE COMPANY WITHIN SEVEN DAYS OF THE TERMINATION OR RESIGNATION AND WILL
BE SUBJECT TO DEDUCTIONS REQUIRED BY APPLICABLE LAW.  IF THE BONUS AMOUNT HAS
NOT BEEN DETERMINED WITHIN SEVEN DAYS OF THE TERMINATION OR RESIGNATION IT WILL
BE PAID IN FULL WITHIN 75 DAYS OF THE SUBJECT YEAR END.

 

C)                                      IF, BEFORE THE END OF 2005, THE
CHAIRMAN’S EMPLOYMENT IS TERMINATED BY THE COMPANY OR ITS SUCCESSOR WITHOUT JUST
CAUSE OR THE CHAIRMAN RESIGNS IN COMPLIANCE WITH PARAGRAPHS 18 OR 19, THE BONUS
WHICH THE CHAIRMAN WILL BE ENTITLED TO RECEIVE UNDER PARAGRAPHS 17, 18 OR 19 FOR
THAT YEAR WILL BE EQUAL TO THE BONUS THAT WOULD HAVE BEEN PAID FOR THE FULL YEAR
BASED UPON A BONUS LEVEL EQUAL TO 100% OF THE CHAIRMAN’S BASE SALARY WITHOUT
REGARD TO THE FINANCIAL PERFORMANCE OF AGI, BUT WILL BE PRORATED ON THE BASIS OF
THE NUMBER OF DAYS IN THE YEAR UP TO AND INCLUDING THE DATE OF TERMINATION.

 

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Stock Options

 

13.                                 IN 2005, THE CHAIRMAN WILL RECEIVE A GRANT
OF STOCK OPTIONS COVERING 75,000 SHARES OF AGI COMMON STOCK.  NO FURTHER GRANTS
OF STOCK OPTIONS WILL BE MADE TO THE CHAIRMAN DURING THE TERM OF THIS AGREEMENT,
UNLESS OTHERWISE DETERMINED BY THE BOARD OF DIRECTORS OF AGI IN ITS SOLE
DISCRETION.

 

Nothing in this Agreement shall have any effect with respect to any stock option
agreement or agreements made prior to the effective date of this Agreement.

 

Executive Strategic Incentive Plans

 

14.           THE CHAIRMAN SHALL CONTINUE TO PARTICIPATE IN THE 2003-2005
EXECUTIVE STRATEGIC INCENTIVE PLAN OF ALDERWOODS GROUP CANADA INC. (THE
“2003-2005 PLAN”), A COPY OF WHICH HAS BEEN PROVIDED TO THE CHAIRMAN.  PURSUANT
TO ACTION BY AGI’S BOARD OF DIRECTORS, THE CHAIRMAN’S PORTION OF THE MAXIMUM
AWARD POOL RELATING TO THE NET DEBT REDUCTION GOALS UNDER THE 2003-2005 PLAN
WILL BE PAID TO THE CHAIRMAN BY AGCI ON AUGUST 1, 2005.  THE CHAIRMAN SHALL BE
ELIGIBLE TO PARTICIPATE IN THE 2005-2007 EXECUTIVE STRATEGIC INCENTIVE PLAN OF
ALDERWOODS GROUP CANADA, INC., A COPY OF WHICH SHALL BE PROVIDED TO THE
CHAIRMAN.

 

Benefits

 

15.                                 DURING THE TERM OF THIS AGREEMENT, THE
CHAIRMAN WILL BE ELIGIBLE TO PARTICIPATE IN THE FOLLOWING BENEFIT PLANS:

 

A)                                      GROUP BENEFITS

 

The Chairman will participate in the Company’s Group Benefit Plan and any other
group perquisites all as in effect from time to time.

 

B)                                     VEHICLE ALLOWANCE

 

The Chairman will be entitled to a vehicle allowance of $1,000.00 U.S. per month
plus auto insurance and operating expense coverage for the term of this
Agreement.

 

C)                                      CLUB MEMBERSHIP

 

The Chairman will be entitled to the amount of $2,500.00 U.S. per year for club
memberships as directed by the Chairman.

 

Stock Ownership Requirement

 

16.                                 FROM AND AFTER AUGUST 10, 2005 AND UNTIL
APRIL 10, 2006 (THE “SUBSEQUENT PURCHASE DATE”) THE CHAIRMAN WILL HOLD 100,000
SHARES OF COMMON STOCK OF AGI.  FROM AND AFTER THE SUBSEQUENT PURCHASE DATE AND
AT ALL TIMES DURING THE REMAINING TERM OF THIS AGREEMENT, THE CHAIRMAN WILL HOLD
A TOTAL OF 200,000 SHARES OF COMMON STOCK OF AGI.  SUCH COMMON STOCK MAY BE
STOCK ACQUIRED BY THE CHAIRMAN AND OWNED BY HIM OUTRIGHT OR STOCK ACQUIRED AND
HELD THROUGH AGI’S EMPLOYEE STOCK PURCHASE PLAN.  IN CONNECTION WITH SUCH STOCK
OWNERSHIP REQUIREMENT, THE CHAIRMAN AGREES THAT ON OR PRIOR TO AUGUST 10, 2005,
HE WILL ACQUIRE 100,000 SHARES OF COMMON STOCK OF AGI WITH THE PROCEEDS RECEIVED
UNDER THE 2003-2005 PLAN, PURSUANT TO PARAGRAPH 14 ABOVE.  IN ADDITION, IN
CONNECTION WITH SUCH STOCK OWNERSHIP REQUIREMENT, THE CHAIRMAN AGREES THAT HE
WILL ACQUIRE AN ADDITIONAL 100,000 SHARES OF COMMON STOCK OF AGI NO LATER THAN
THE SUBSEQUENT PURCHASE DATE.

 

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Termination of Employment

 

17.           THE PARTIES AGREE THAT THE CHAIRMAN’S EMPLOYMENT UNDER THIS
AGREEMENT MAY BE TERMINATED AS FOLLOWS:

 

A)                                      BY THE COMPANY, IN WRITING, WITHOUT
NOTICE OF TERMINATION OR PAY IN LIEU THEREOF, FOR JUST CAUSE;

 

B)                                     BY THE COMPANY, IN WRITING, NOT FOLLOWING
A CHANGE IN CONTROL AS SET FORTH IN PARAGRAPH 18 BELOW, AT ITS SOLE DISCRETION
AND FOR ANY REASON OTHER THAN JUST CAUSE UPON PAYMENT TO THE CHAIRMAN IN A LUMP
SUM, WITHIN SEVEN DAYS OF SUCH TERMINATION, OF AN AMOUNT EQUAL TO THE SUM OF
SUB-PARAGRAPHS (I) TO (V) BELOW:

 

I)                                         24 MONTHS’ BASE SALARY;

 

II)                                      THE REPLACEMENT VALUE OF ALL CHAIRMAN’S
BENEFIT COVERAGE, INCLUDING CONTRIBUTIONS TO THE REGISTERED RETIREMENT SAVINGS
PLAN, FOLLOWING THE DATE OF THE CHAIRMAN’S TERMINATION (SUCH BENEFIT COVERAGE
AND CONTRIBUTIONS BEING CALCULATED OVER 24 MONTHS FOLLOWING RESIGNATION OR
TERMINATION);

 

III)                                   THE AMOUNT OF ANY UNPAID SHORT TERM
INCENTIVE BONUS EARNED BY THE CHAIRMAN DURING CALENDAR YEAR 2005 UP TO AND
INCLUDING THE DATE OF TERMINATION CALCULATED IN ACCORDANCE WITH PARAGRAPH 12. 
SUCH BONUS SHALL BE PAYABLE REGARDLESS OF THE FINANCIAL PERFORMANCE OF THE
COMPANY;

 

IV)                                  THE AMOUNT OF ANY UNPAID SALARY OR VACATION
EARNED BY THE CHAIRMAN UP TO AND INCLUDING THE DATE OF TERMINATION;

 

V)                                     A LUMP SUM RETIRING ALLOWANCE EQUAL TO
THE GREATER OF (A) $500,000 U.S. AND (B) 15% OF THE SUM OF (I) HIS CURRENT
ANNUAL SALARY PLUS (II) THE AVERAGE OF HIS ANNUAL SHORT TERM INCENTIVE PLAN
PAYMENTS OVER THE PRECEDING 36 MONTHS, FOR EACH YEAR OF HIS TOTAL SERVICE WITH
THE COMPANY AND WITH THE LOEWEN GROUP INC., TO A MAXIMUM OF 50% OF THE SAID SUM;
AND

 

VI)                                  IN ADDITION, THE CHAIRMAN SHALL BE ALLOWED
TO EXERCISE ALL STOCK OPTIONS OR SHARE APPRECIATION RIGHTS, WHETHER VESTED OR
NOT, GRANTED TO THE CHAIRMAN INCLUDING SHARES WITH RESPECT TO WHICH SUCH OPTIONS
WOULD NOT OTHERWISE BE EXERCISABLE ON SUCH TERMINATION.

 

PAYMENTS IDENTIFIED IN THE SUB-PARAGRAPHS ABOVE WILL BE SUBJECT TO DEDUCTIONS
REQUIRED BY APPLICABLE LAW;

 

C)                                      BY THE COMPANY FOR ANY REASON OTHER THAN
JUST CAUSE OR BY THE CHAIRMAN FOR STATED GOOD REASON OR PURSUANT TO A VOLUNTARY
RESIGNATION AS SET FORTH IN PARAGRAPH 19 BELOW FOLLOWING A CHANGE IN CONTROL,
BOTH IN COMPLIANCE WITH PARAGRAPH 18 OR PARAGRAPH 19, AS THE CASE MAY BE; OR

 

D)                                     BY THE CHAIRMAN, FOR ANY REASON, UPON
THIRTY (30) DAYS ADVANCE WRITTEN NOTICE TO THE COMPANY OR UPON EXPIRATION OF THE
NOTICE PERIOD, IN WHICH CASE THE COMPANY WILL HAVE NO FURTHER OBLIGATION TO THE
CHAIRMAN UNDER THIS AGREEMENT OR OTHERWISE EXCEPT TO PAY THE CHAIRMAN THE UNPAID
PORTION, IF ANY, OF THE CHAIRMAN’S BASE SALARY PAYABLE FOR THE PERIOD THROUGH
THE DATE OF TERMINATION OF THE CHAIRMAN’S EMPLOYMENT AND A LUMP SUM RETIRING
ALLOWANCE EQUAL TO THE GREATER OF (A) $500,000 U.S. AND (B) 15% OF THE SUM OF
(I) HIS CURRENT ANNUAL SALARY PLUS (II) THE AVERAGE OF HIS ANNUAL SHORT TERM
INCENTIVE PLAN PAYMENTS OVER THE PRECEDING 36 MONTHS, FOR EACH YEAR OF HIS TOTAL
SERVICE WITH THE COMPANY AND WITH THE LOEWEN GROUP INC., TO A MAXIMUM OF 50% OF
THE SAID SUM.

 

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Change in Control

 

18.           IF A CHANGE IN CONTROL OCCURS AND, WITHIN TWO YEARS OF THE
EFFECTIVE DATE OF THE CHANGE IN CONTROL, THE COMPANY, IN WRITING, TERMINATES THE
CHAIRMAN WITHOUT JUST CAUSE OR THE CHAIRMAN SUBMITS A WRITTEN RESIGNATION FOR
STATED GOOD REASON TO THE BOARD OF DIRECTORS OF THE COMPANY, THE COMPANY SHALL,
WITHIN SEVEN DAYS OF THE DATE OF RESIGNATION OR TERMINATION, PAY TO THE CHAIRMAN
IN A LUMP SUM EQUAL TO THE SUM OF SUB-PARAGRAPHS (I) TO (V) BELOW:

 

I)              24 MONTHS’ BASE SALARY;

 

II)             THE REPLACEMENT VALUE OF ALL CHAIRMAN’S BENEFIT COVERAGE,
INCLUDING CONTRIBUTIONS TO THE REGISTERED RETIREMENT SAVINGS PLAN, FOLLOWING THE
DATE OF THE CHAIRMAN’S TERMINATION (SUCH BENEFIT COVERAGE AND CONTRIBUTIONS
BEING CALCULATED OVER 24 MONTHS FOLLOWING RESIGNATION OR TERMINATION);

 

III)            THE AMOUNT OF ANY UNPAID BONUS EARNED BY THE CHAIRMAN DURING
CALENDAR YEAR 2005 UP TO AND INCLUDING THE DATE OF TERMINATION CALCULATED IN
ACCORDANCE WITH PARAGRAPH 12.  SUCH BONUS WILL BE PAYABLE REGARDLESS OF THE
FINANCIAL PERFORMANCE OF THE COMPANY;

 

IV)                                  THE AMOUNT OF ANY UNPAID SALARY OR VACATION
EARNED BY THE CHAIRMAN UP TO AND INCLUDING THE DATE OF RESIGNATION OR
TERMINATION;

 

V)                                     A LUMP SUM RETIRING ALLOWANCE EQUAL TO
THE GREATER OF (A) $500,000 U.S. AND (B) 15% OF THE SUM OF (I) HIS CURRENT
ANNUAL SALARY PLUS (II) THE AVERAGE OF HIS ANNUAL SHORT TERM INCENTIVE PLAN
PAYMENTS OVER THE PRECEDING 36 MONTHS, FOR EACH YEAR OF HIS TOTAL SERVICE WITH
THE COMPANY AND WITH THE LOEWEN GROUP INC., TO A MAXIMUM OF 50% OF THE SAID SUM;
AND

 

VI)                                  IN ADDITION, THE CHAIRMAN SHALL BE ALLOWED
TO EXERCISE ALL STOCK OPTIONS OR SHARE APPRECIATION RIGHTS, WHETHER VESTED OR
NOT, GRANTED TO THE CHAIRMAN INCLUDING SHARES WITH RESPECT TO WHICH SUCH OPTIONS
WOULD NOT OTHERWISE BE EXERCISABLE ON SUCH RESIGNATION OR TERMINATION.

 

PAYMENTS IDENTIFIED IN THE SUB-PARAGRAPHS ABOVE WILL BE SUBJECT TO DEDUCTIONS
REQUIRED BY APPLICABLE LAW.

 

Voluntary Resignation Due to Change in Control

 

19.           IN THE EVENT THAT AN AGREEMENT IS REACHED WHICH WOULD RESULT IN A
CHANGE IN CONTROL, BUT THE CHANGE IN CONTROL HAS NOT YET OCCURRED, THE CHAIRMAN
CAN, FOR ANY REASON, SUBMIT HIS RESIGNATION IN WRITING TO THE COMPANY PRIOR TO
THE EFFECTIVE DATE OF THE CHANGE IN CONTROL.  ANY SUCH RESIGNATION WILL BE
EFFECTIVE AS OF THE DATE OF THE CHANGE IN CONTROL, AND THE CHAIRMAN SHALL
CONTINUE TO WORK FOR THE COMPANY UP UNTIL THAT DATE.  FURTHER, IF THE CHAIRMAN
RESIGNS IN THESE CIRCUMSTANCES AND CONTINUES TO WORK FOR THE COMPANY UNTIL THE
EFFECTIVE DATE OF THE CHANGE IN CONTROL, THEN ON THE EFFECTIVE DATE OF THE
CHANGE IN CONTROL THE COMPANY SHALL PAY TO THE CHAIRMAN A LUMP SUM AMOUNT EQUAL
TO THE PAYMENTS PRESCRIBED UNDER PARAGRAPH 18(I) - (V).  IN THE EVENT THAT THE
CHANGE IN CONTROL DOES NOT OCCUR, THE CHAIRMAN SHALL NOT BE ENTITLED TO THE
PAYMENTS PRESCRIBED UNDER PARAGRAPH 18(I) - (V), AND THE RESIGNATION SHALL BE
DEEMED TO NOT HAVE BEEN TENDERED.

 

20.           IMMEDIATELY PRIOR TO THE EFFECTIVE DATE OF A CHANGE IN CONTROL,
THE CHAIRMAN SHALL BE ALLOWED TO EXERCISE ALL STOCK OPTIONS OR SHARE
APPRECIATION RIGHTS, WHETHER VESTED OR NOT, GRANTED TO THE CHAIRMAN INCLUDING
SHARES WITH RESPECT TO WHICH SUCH OPTIONS WOULD NOT OTHERWISE BE EXERCISABLE. 
THE CHAIRMAN SHALL BE ENTITLED TO RECEIVE ALL DIVIDENDS DECLARED AND PAID BY AGI
UPON A CHANGE IN CONTROL ON THE SHARES RECEIVED BY THE CHAIRMAN FOLLOWING THE
EXERCISE OF THE CHAIRMAN’S STOCK OPTIONS OR SHARE APPRECIATION RIGHTS.

 

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Certain Additional Payments by the Company

 

21.           THE CHAIRMAN’S ENTITLEMENTS, IF ANY, ON TERMINATION OF EMPLOYMENT,
VOLUNTARY RESIGNATION, CHANGE IN CONTROL, RETIREMENT, TOTAL DISABILITY OR DEATH
UNDER THE 2003-2005 EXECUTIVE STRATEGIC INCENTIVE PLAN OF ALDERWOODS GROUP
CANADA INC. OR THE 2005-2007 EXECUTIVE STRATEGIC PLAN OF ALDERWOODS GROUP CANADA
INC. (THE “PLANS”) SHALL BE DETERMINED SOLELY IN ACCORDANCE WITH THE TERMS OF
THE PLANS AS IN EFFECT FROM TIME TO TIME.

 

22.           IN THE EVENT THAT IT IS DETERMINED (AS HEREINAFTER PROVIDED) THAT
ANY PAYMENT (OTHER THAN THE GROSS-UP PAYMENTS PROVIDED FOR IN THIS PARAGRAPH 22
AND ANNEX A) OR DISTRIBUTION BY THE COMPANY, AGI OR ANY OF ITS AFFILIATES TO OR
FOR THE BENEFIT OF THE CHAIRMAN, WHETHER PAID OR PAYABLE OR DISTRIBUTED OR
DISTRIBUTABLE PURSUANT TO THE TERMS OF THIS AGREEMENT OR OTHERWISE PURSUANT TO
OR BY REASON OF ANY OTHER AGREEMENT, POLICY, PLAN, PROGRAM OR ARRANGEMENT,
INCLUDING, WITHOUT LIMITATION, THE LAPSE OR TERMINATION OF ANY RESTRICTION ON
THE VESTING OR EXERCISABILITY OF ANY BENEFIT UNDER ANY OF THE FOREGOING (A
“PAYMENT”), WOULD BE SUBJECT TO THE EXCISE TAX IMPOSED BY SECTION 4999 OF THE
UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (OR ANY
SUCCESSOR PROVISION THERETO), BY REASON OF BEING CONSIDERED “CONTINGENT ON A
CHANGE IN OWNERSHIP OR CONTROL,” WITHIN THE MEANING OF SECTION 280G OF THE CODE
(OR ANY SUCCESSOR PROVISION THERETO) OR TO ANY SIMILAR TAX IMPOSED BY U.S. STATE
OR LOCAL LAW, OR ANY INTEREST OR PENALTIES WITH RESPECT TO SUCH TAX (SUCH TAX OR
TAXES, TOGETHER WITH ANY SUCH INTEREST AND PENALTIES, BEING HEREAFTER
COLLECTIVELY REFERRED TO AS THE “EXCISE TAX”), THEN THE CHAIRMAN WILL BE
ENTITLED TO RECEIVE AN ADDITIONAL PAYMENT OR PAYMENTS (COLLECTIVELY, A “GROSS-UP
PAYMENT”).  THE GROSS-UP PAYMENT WILL BE IN AN AMOUNT SUCH THAT, AFTER PAYMENT
BY THE CHAIRMAN OF ALL U.S. TAXES (INCLUDING ANY INTEREST OR PENALTIES IMPOSED
WITH RESPECT TO SUCH TAXES), INCLUDING ANY EXCISE TAX IMPOSED UPON THE GROSS-UP
PAYMENT, THE CHAIRMAN RETAINS AN AMOUNT OF THE GROSS-UP PAYMENT EQUAL TO THE
EXCISE TAX IMPOSED UPON THE PAYMENT.  FOR PURPOSES OF DETERMINING THE AMOUNT OF
THE GROSS-UP PAYMENT, THE CHAIRMAN WILL BE CONSIDERED TO PAY ANY APPLICABLE U.S.
FEDERAL, STATE AND LOCAL INCOME TAXES AT THE HIGHEST RATE APPLICABLE TO THE
CHAIRMAN IN EFFECT IN THE YEAR IN WHICH THE GROSS-UP PAYMENT WILL BE MADE, NET
OF THE MAXIMUM REDUCTION IN U.S. FEDERAL INCOME TAX THAT COULD BE OBTAINED FROM
DEDUCTION OF SUCH STATE AND LOCAL TAXES.

 

23.           THE OBLIGATIONS SET FORTH IN PARAGRAPH 22 WILL BE SUBJECT TO THE
PROCEDURAL PROVISIONS DESCRIBED IN ANNEX A.

 

Confidential Information; Competitive Activity

 

24.

 

A)                                      THE CHAIRMAN AGREES THAT HE WILL NOT,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY, DURING THE TERM OF THIS
AGREEMENT OR AT ANY TIME THEREAFTER, DISCLOSE TO ANY PERSON NOT EMPLOYED BY THE
COMPANY, OR USE IN CONNECTION WITH ENGAGING IN COMPETITION WITH THE COMPANY, ANY
CONFIDENTIAL OR PROPRIETARY INFORMATION OF THE COMPANY.  FOR PURPOSES OF THIS
AGREEMENT, THE TERM “CONFIDENTIAL OR PROPRIETARY INFORMATION” INCLUDES ALL
INFORMATION OF ANY NATURE AND IN ANY FORM THAT IS OWNED BY THE COMPANY AND THAT
IS NOT PUBLICLY AVAILABLE (OTHER THAN BY CHAIRMAN’S BREACH OF THIS PARAGRAPH 24)
OR GENERALLY KNOWN TO PERSONS ENGAGED IN BUSINESSES SIMILAR OR RELATED TO THOSE
OF THE COMPANY.  CONFIDENTIAL OR PROPRIETARY INFORMATION WILL INCLUDE, WITHOUT
LIMITATION, THE COMPANY’S FINANCIAL MATTERS, CUSTOMERS, EMPLOYEES, INDUSTRY
CONTRACTS, STRATEGIC BUSINESS PLANS, PRODUCT DEVELOPMENT (OR OTHER PROPRIETARY
PRODUCT DATA), MARKETING PLANS, AND ALL OTHER SECRETS AND ALL OTHER INFORMATION
OF A CONFIDENTIAL OR PROPRIETARY NATURE.  THE FOREGOING OBLIGATIONS IMPOSED BY
THIS PARAGRAPH 24 WILL NOT APPLY (I) DURING THE TERM OF THIS AGREEMENT, IN THE
COURSE OF THE BUSINESS OF AND FOR THE BENEFIT OF THE COMPANY, (II) IF SUCH
CONFIDENTIAL OR PROPRIETARY INFORMATION HAS BECOME, THROUGH NO FAULT OF THE
CHAIRMAN, GENERALLY KNOWN TO THE PUBLIC OR (III) IF THE CHAIRMAN IS REQUIRED BY
LAW TO MAKE DISCLOSURE (AFTER GIVING THE COMPANY NOTICE AND AN OPPORTUNITY TO
CONTEST SUCH REQUIREMENT).

 

B)                                     THE CHAIRMAN AGREES THAT, UPON
TERMINATION OF THIS AGREEMENT FOR ANY REASON, THE CHAIRMAN WILL RETURN TO THE
COMPANY, IN GOOD CONDITION, ALL PROPERTY OF THE COMPANY IN HIS POSSESSION OR
UNDER HIS CONTROL.

 

8

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25.           IN ADDITION, SUBJECT TO THE TERMS OF PARAGRAPH 26, DURING THE TERM
OF THIS AGREEMENT AND FOR A PERIOD OF 12 MONTHS THEREAFTER, THE CHAIRMAN WILL
NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY, WHICH CONSENT WILL NOT BE
UNREASONABLY WITHHELD:

 

A)                                      ENGAGE IN ANY COMPETITIVE ACTIVITY.  FOR
PURPOSES OF THIS AGREEMENT, “COMPETITIVE ACTIVITY” MEANS THE CHAIRMAN’S
PARTICIPATION IN THE MANAGEMENT OF ANY BUSINESS ENTERPRISE IF SUCH ENTERPRISE
ENGAGES IN SUBSTANTIAL AND DIRECT COMPETITION WITH THE COMPANY AND SUCH
ENTERPRISE’S SALES OF ANY PRODUCT OR SERVICE COMPETITIVE WITH ANY PRODUCT OR
SERVICE OF THE COMPANY AMOUNTED TO 10% OR MORE OF SUCH ENTERPRISE’S NET SALES
FOR ITS MOST RECENTLY COMPLETED FISCAL YEAR AND IF THE COMPANY’S NET SALES OF
SAID PRODUCT OR SERVICE AMOUNTED TO 10% OR MORE OF THE COMPANY’S NET SALES FOR
ITS MOST RECENTLY COMPLETED FISCAL YEAR.  “COMPETITIVE ACTIVITY” WILL NOT
INCLUDE (I) THE MERE OWNERSHIP OF SECURITIES IN ANY SUCH ENTERPRISE AND THE
EXERCISE OF RIGHTS APPURTENANT THERETO OR (II) PARTICIPATION IN THE MANAGEMENT
OF ANY SUCH ENTERPRISE OTHER THAN IN CONNECTION WITH THE COMPETITIVE OPERATIONS
OF SUCH ENTERPRISE.

 

B)                                     ON BEHALF OF THE CHAIRMAN OR ON BEHALF OF
ANY PERSON, FIRM OR COMPANY, DIRECTLY OR INDIRECTLY, ATTEMPT TO INFLUENCE,
PERSUADE OR INDUCE, OR ASSIST ANY OTHER PERSON IN SO PERSUADING OR INDUCING, ANY
EMPLOYEE OF THE COMPANY OR ANY OF ITS SUBSIDIARIES TO GIVE UP, OR TO NOT
COMMENCE, EMPLOYMENT OR A BUSINESS RELATIONSHIP WITH THE COMPANY OR ANY OF ITS
SUBSIDIARIES.

 

26.           DURING THE TERM OF THIS AGREEMENT AND FOR A PERIOD OF 24 MONTHS
THEREAFTER, THE CHAIRMAN WILL NOT WITHOUT THE PRIOR WRITTEN CONSENT OF THE
COMPANY, DIRECTLY OR INDIRECTLY, ACCEPT EMPLOYMENT FROM, ACT AS A CONSULTANT TO
OR OTHERWISE ADVISE WITH RESPECT TO ANY COMPANY THAT IS DESIGNATED IN WRITING TO
THE CHAIRMAN BY THE BOARD OF DIRECTORS OF AGI AS A MAJOR COMPETITOR OF THE
COMPANY.

 

27.

 

A)                                      THE CHAIRMAN AND THE COMPANY AGREE THAT
THE COVENANTS CONTAINED IN PARAGRAPHS 24, 25 AND 26 ARE REASONABLE UNDER THE
CIRCUMSTANCES, AND FURTHER AGREE THAT IF IN THE OPINION OF ANY COURT OF
COMPETENT JURISDICTION ANY SUCH COVENANT IS NOT REASONABLE IN ANY RESPECT, SUCH
COURT WILL HAVE THE RIGHT, POWER AND AUTHORITY TO EXCISE OR MODIFY ANY PROVISION
OR PROVISIONS OF SUCH COVENANTS AS TO THE COURT WILL APPEAR NOT REASONABLE AND
TO ENFORCE THE REMAINDER OF THE COVENANTS AS SO AMENDED.  THE CHAIRMAN
ACKNOWLEDGES AND AGREES THAT THE REMEDY AT LAW AVAILABLE TO THE COMPANY FOR
BREACH OF ANY OF HIS OBLIGATIONS UNDER PARAGRAPHS 24, 25 AND 26 WOULD BE
INADEQUATE AND THAT DAMAGES FLOWING FROM SUCH A BREACH MAY NOT READILY BE
SUSCEPTIBLE TO BEING MEASURED IN MONETARY TERMS.  ACCORDINGLY, THE CHAIRMAN
ACKNOWLEDGES, CONSENTS AND AGREES THAT, IN ADDITION TO ANY OTHER RIGHTS OR
REMEDIES THAT THE COMPANY MAY HAVE AT LAW, IN EQUITY OR UNDER THIS AGREEMENT,
UPON ADEQUATE PROOF OF HIS VIOLATION OF ANY SUCH PROVISION OF THIS AGREEMENT,
THE COMPANY WILL BE ENTITLED TO IMMEDIATE INJUNCTIVE RELIEF AND MAY OBTAIN A
TEMPORARY ORDER RESTRAINING ANY THREATENED OR FURTHER BREACH, WITHOUT THE
NECESSITY OF PROOF OF ACTUAL DAMAGE.

 

B)                                     DURING THE TERM OF THIS AGREEMENT, THE
CHAIRMAN WILL NOT SERVE AS EMPLOYEE OF, NOR BUSINESS CONSULTANT TO, ANY OTHER
COMPANY OR BUSINESS WITHOUT THE PRIOR EXPRESS APPROVAL OF A MAJORITY OF THE
INDEPENDENT DIRECTORS OF AGI.  THE DIRECTORSHIPS CURRENTLY HELD BY THE CHAIRMAN
ARE AS LISTED ON ANNEX B TO THIS AGREEMENT.  THE CHAIRMAN WILL NOT ACCEPT ANY
ADDITIONAL DIRECTORSHIPS WITHOUT THE PRIOR EXPRESS APPROVAL OF A MAJORITY OF THE
INDEPENDENT DIRECTORS OF AGI.  THE PROVISIONS OF THIS PARAGRAPH 27(B) ARE IN
ADDITION TO, AND IN NO WAY DEROGATE FROM, ANY AND ALL OTHER PROVISIONS OF THIS
AGREEMENT.

 

28.                                 FOR PURPOSES OF PARAGRAPHS 24, 25, 26 AND
27, THE TERM “COMPANY” WILL ALSO INCLUDE AGI AND ANY SUBSIDIARY OF AGI.

 

9

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General

 

29.           THE PARTIES CONFIRM THAT THE PROVISIONS OF THIS AGREEMENT ARE FAIR
AND REASONABLE AND THAT THE TOTAL COMPENSATION AND BENEFITS PAYABLE UNDER
PARAGRAPHS 17, 18, 19 OR 21 ARE REASONABLE ESTIMATES OF THE DAMAGES WHICH WOULD
BE SUFFERED BY THE CHAIRMAN.  ANY AMOUNT PAID UNDER PARAGRAPHS 17, 18 OR 19
SHALL BE IN FULL SATISFACTION OF ALL CLAIMS WHATSOEVER RELATING TO THE
CHAIRMAN’S EMPLOYMENT OR FOR THE TERMINATION OF THE CHAIRMAN’S EMPLOYMENT,
INCLUDING CLAIMS FOR SALARY, BONUS, BENEFITS, VACATION PAY, TERMINATION PAY
AND/OR SEVERANCE PAY PURSUANT TO THE ONTARIO EMPLOYMENT STANDARDS ACT, AS
AMENDED, INCLUDING SECTIONS 57 AND 58 THEREOF.

 

30.           ANY PAYMENT MADE TO THE CHAIRMAN UNDER PARAGRAPHS 17, 18, 19 OR 21
OF THIS AGREEMENT SHALL BE PAID TO THE CHAIRMAN BY THE COMPANY REGARDLESS OF ANY
OFFER OF ALTERNATE EMPLOYMENT MADE TO THE CHAIRMAN BY THE COMPANY OR BY ANY
OTHER PROSPECTIVE EMPLOYER, WHETHER ACCEPTED BY THE CHAIRMAN OR NOT.  THE
CHAIRMAN WILL NOT BE REQUIRED TO MITIGATE ANY DAMAGES ARISING FROM THIS
AGREEMENT AND ANY AMOUNTS AND BENEFITS TO BE PROVIDED TO THE CHAIRMAN HEREUNDER
SHALL NOT BE REDUCED OR SET OFF AGAINST ANY AMOUNTS EARNED BY THE CHAIRMAN FROM
ALTERNATE EMPLOYMENT, INCLUDING SELF-EMPLOYMENT, OR BY OTHER MEANS.

 

31.           ANY PAYMENT OTHER THAN FOR BASE SALARY WHILE EMPLOYED BY THE
COMPANY MADE TO THE CHAIRMAN UNDER THIS AGREEMENT SHALL BE MADE BY WAY OF A LUMP
SUM PAYMENT OR, AT THE CHAIRMAN’S OPTION, IN SUCH OTHER MANNER AS HE MAY DIRECT,
LESS DEDUCTIONS REQUIRED BY APPLICABLE LAW.

 

32.           WHERE THE CONTEXT REQUIRES, THE SINGULAR SHALL INCLUDE THE PLURAL
AND THE PLURAL SHALL INCLUDE THE SINGULAR. MASCULINE PRONOUNS SHALL BE DEEMED TO
BE READ AS FEMININE PRONOUNS AND VICE VERSA. WORDS IMPORTING PERSONS SHALL
INCLUDE INDIVIDUALS, PARTNERSHIPS, ASSOCIATIONS, TRUSTS, UNINCORPORATED
ORGANIZATIONS AND CORPORATIONS AND VICE VERSA.

 

33.           THE DIVISION OF THIS AGREEMENT INTO PARAGRAPHS AND THE INSERTION
OF HEADINGS ARE FOR THE CONVENIENCE OF REFERENCE ONLY AND SHALL NOT AFFECT THE
CONSTRUCTION OR INTERPRETATION OF THIS AGREEMENT.  THE TERMS “THIS AGREEMENT,”
“HEREOF,” “HEREUNDER” AND SIMILAR EXPRESSIONS REFER TO THIS AGREEMENT ONLY AND
NOT TO ANY PARTICULAR PARAGRAPH AND INCLUDE ANY AGREEMENT OR INSTRUMENT
SUPPLEMENTAL OR ANCILLARY TO THE AGREEMENT.  REFERENCES HEREIN TO PARAGRAPHS ARE
TO PARAGRAPHS OF THIS AGREEMENT UNLESS SOMETHING IN THE SUBJECT MATTER OR
CONTEXT IS INCONSISTENT THEREWITH.

 

34.           ALL DOLLAR AMOUNTS IDENTIFIED IN THIS CONTRACT ARE IN U.S.
CURRENCY.

 

35.           THE PARTIES’ RESPECTIVE RIGHTS AND OBLIGATIONS UNDER PARAGRAPHS
17, 18, 19, 21, 22, 23, 24, 25, 26, 27, 29, 30, 39 AND 40 WILL SURVIVE ANY
TERMINATION OR EXPIRATION OF THIS AGREEMENT OR THE TERMINATION OF THE CHAIRMAN’S
EMPLOYMENT FOR ANY REASON WHATSOEVER.

 

Governing Laws

 

36.           THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE PROVINCE OF
ONTARIO WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
EACH PARTY TO THIS AGREEMENT HEREBY CONSENTS AND SUBMITS HIMSELF OR ITSELF TO
THE JURISDICTION OF THE COURTS OF THE PROVINCE OF ONTARIO FOR THE PURPOSES OF
ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT.

 

Severability

 

37.           ALL TERMS AND COVENANTS CONTAINED IN THIS AGREEMENT ARE SEVERABLE
AND IN THE EVENT THAT ANY OF THEM IS HELD TO BE INVALID BY ANY COMPETENT COURT
IN THE PROVINCE OF ONTARIO, THE INVALID PROVISION SHALL BE DELETED AND THE
BALANCE OF THIS AGREEMENT SHALL BE INTERPRETED AS IF SUCH INVALID CLAUSE OR
COVENANT WERE NOT CONTAINED HEREIN.

 

10

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Continuity

 

38.

 

A)                                      THIS AGREEMENT SHALL BE BINDING UPON AND
INURE TO THE BENEFIT OF (I) THE CHAIRMAN AND HIS HEIRS, EXECUTORS,
ADMINISTRATORS AND LEGAL REPRESENTATIVES AND (II) THE COMPANY, ITS RELATED
CORPORATIONS, AFFILIATES, AND ASSOCIATES, AND ANY OTHER ENTITY OR ORGANIZATION
WHICH SHALL SUCCEED TO SUBSTANTIALLY ALL OR ANY DISTINCT PORTION OF THE
BUSINESS, DIVISIONS OR PROPERTY OF THE COMPANY OR ITS RELATED CORPORATIONS,
AFFILIATES, AND ASSOCIATES, WHETHER BY MEANS OF AMALGAMATION, MERGER,
CONSOLIDATION, ACQUISITION, AND/OR SALE OF ALL OR PART OF THE SHARES OR ASSETS
OF THE COMPANY OR OTHERWISE, INCLUDING BY OPERATION OF LAW OR BY SUCCESSION TO
THE BUSINESS OF AGI PURSUANT TO A PLAN OF REORGANIZATION APPROVED BY THE U.S.
BANKRUPTCY COURT.  IN ADDITION, THE COMPANY WILL REQUIRE ANY SUCH SUCCESSOR
EXPRESSLY TO ASSUME AND AGREE, BY WRITTEN AGREEMENT, TO PERFORM THIS AGREEMENT
IN THE SAME MANNER AND TO THE SAME EXTENT THE COMPANY WOULD BE REQUIRED TO
PERFORM IF NO SUCH SUCCESSION HAD TAKEN PLACE.

 

B)                                     IF THE CHAIRMAN SHOULD DIE WHILE ANY
AMOUNT WOULD STILL BE PAYABLE TO THE CHAIRMAN HEREUNDER IF THE CHAIRMAN HAD
CONTINUED TO LIVE, ALL SUCH AMOUNTS, UNLESS OTHERWISE PROVIDED HEREIN, SHALL BE
PAID IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT TO THE DEVISEE, LEGATEE OR
OTHER DESIGNEE OF THE CHAIRMAN OR, IF THERE IS NO SUCH DESIGNEE, TO THE ESTATE
OF THE CHAIRMAN.

 

Legal Advice

 

39.                                 THE CHAIRMAN ACKNOWLEDGES THAT HE HAS
OBTAINED OR HAS HAD AN OPPORTUNITY TO OBTAIN INDEPENDENT LEGAL ADVICE IN
CONNECTION WITH THIS AGREEMENT, AND FURTHER ACKNOWLEDGES THAT HE HAS READ,
UNDERSTANDS, AND AGREES TO BE BOUND BY ALL OF THE TERMS AND CONDITIONS CONTAINED
HEREIN.

 

40.                                 THE COMPANY AGREES TO REIMBURSE THE CHAIRMAN
FOR ALL REASONABLE LEGAL EXPENSES INCURRED IN CONNECTION WITH ANY DISPUTE
INVOLVING THE CHAIRMAN, THE COMPANY, ITS RELATED CORPORATIONS, AFFILIATES,
SUCCESSORS, OR ASSIGNS, OR ANY OTHER THIRD PARTY, AS BETWEEN ANY OF THEM,
ARISING FROM THE VALIDITY, INTERPRETATION, OR ENFORCEMENT OF THIS AGREEMENT OR
ANY OF ITS TERMS, INCLUDING ALL REASONABLE LEGAL EXPENSES INCURRED BY THE
CHAIRMAN IN RESPECT OF ANY ACTION OR ACTIONS COMMENCED BY THE CHAIRMAN TO
OBTAIN, ENFORCE, OR RETAIN ANY RIGHT, BENEFIT OR PAYMENT PROVIDED FOR IN THIS
AGREEMENT REGARDLESS OF WHETHER SUCH EXPENSES ARE INCURRED DURING THE TERM OF
THIS AGREEMENT OR AFTER; PROVIDED THAT, IN REGARD TO SUCH MATTERS, THE CHAIRMAN
HAS NOT ACTED IN BAD FAITH OR WITH NO COLORABLE CLAIM OF SUCCESS.  HOWEVER, THE
COMPANY SHALL NOT BE REQUIRED TO REIMBURSE THE CHAIRMAN FOR ANY LEGAL COSTS OR
EXPENSES IN RELATION TO ANY ACTION COMMENCED BY THE COMPANY TO ENFORCE THE
CONFIDENTIALITY AND NON-COMPETITION PROVISIONS HEREOF AND IN RESPECT OF WHICH IN
A COURT OF COMPETENT JURISDICTION THE COMPANY IS THE PREVAILING PARTY FOR EITHER
PRELIMINARY OR FINAL REMEDY.

 

Notice

 

41.                                 ANY DEMAND, NOTICE OR OTHER COMMUNICATION TO
BE GIVEN IN CONNECTION WITH THIS AGREEMENT SHALL BE GIVEN IN WRITING BY PERSONAL
DELIVERY, BY REGISTERED MAIL OR BY ELECTRONIC MEANS OF COMMUNICATION ADDRESSED
TO THE RECIPIENT AS FOLLOWS:

 

To the Chairman:

 

John S. Lacey

7071 Bayview Avenue

Suite 507

Thornhill, Ontario L3T 7Y8

 

11

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To the Company:

 

Alderwoods Group Canada Inc.

259 Yorkland Road

Toronto. Ontario M2J 5B2

 

Attention:  Senior Vice-President, Legal & Compliance

 

With a copy to:

 

Alderwoods Group, Inc.

311 Elm Street

Suite 1000, First Floor

Cincinnati, OH 45202

 

Attention:  Senior Vice-President, Legal & Compliance

 

or such other address, individual or electronic communication as may be
designated by notice given by either party to the other.

 

Additional

 

42.           THE FAILURE OF A PARTY TO INSIST UPON STRICT ADHERENCE TO ANY TERM
OF THIS AGREEMENT ON ANY OCCASION SHALL NOT BE CONSIDERED A WAIVER OF SUCH
PARTY’S RIGHTS OR DEPRIVE SUCH PARTY OF THE RIGHT THEREAFTER TO INSIST UPON
STRICT ADHERENCE TO THAT TERM OR ANY OTHER TERM OF THIS AGREEMENT.

 

43.           NOTHING HEREIN EXPRESSED OR IMPLIED IS INTENDED OR SHALL BE
CONSTRUED TO CONFER UPON OR GIVE TO ANY PERSON, OTHER THAN (A) THE PARTIES TO
THIS AGREEMENT, (B) ANY PERMITTED ASSIGNEES OF THE COMPANY AND THE CHAIRMAN, AND
(C) AGI, AS CONTEMPLATED BY PARAGRAPHS 11, 13, 16, 24, 25, 26, 27 AND 28, ANY
RIGHTS OR REMEDIES UNDER OR BY REASON OF THIS AGREEMENT AND AGI SHALL BE A THIRD
PARTY BENEFICIARY OF THIS AGREEMENT.

 

12

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IN WITNESS WHEREOF the Chairman has executed and the Company has caused its duly
authorized representative to execute this Agreement as of the date set forth on
the first page of this Agreement.

 

 

 

ALDERWOODS GROUP CANADA INC.

 

 

 

 

 

 

 

By:

/s/ Ellen Neeman

 

 

 

Ellen Neeman

 

 

Senior Vice-President, Legal & Compliance

 

 

 

 

ALDERWOODS GROUP, INC.

 

 

 

 

 

 

 

By:

/s/ A. G. Eames

 

 

 

A. G. Eames

 

 

Director

 

 

 

Witness:

 

 

 

 

 

/s/ Azalea Angeles

 

/s/ John S. Lacey

 

 

John S. Lacey

 

13

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ANNEX A

 

Excise Tax Gross-Up Procedural Provisions

 

1.                                       Subject to the provisions of paragraph
5 of this Annex, all determinations required to be made under paragraph 22 of
this Agreement and this Annex A, including whether an Excise Tax is payable by
the Chairman and the amount of such Excise Tax and whether a Gross-Up Payment is
required to be paid by the Company to the Chairman and the amount of such
Gross-Up Payment, if any, will be made by a U.S. nationally recognized
accounting firm (the “National Firm”) selected by the Chairman in his sole
discretion. The Chairman will direct the National Firm to submit its
determination and detailed supporting calculations to both the Company and the
Chairman within 30 calendar days after the date of his termination of
employment, if applicable, and any such other time or times as may be requested
by the Company or the Chairman. If the National Firm determines that any Excise
Tax is payable by the Chairman, the Company will pay the required Gross-Up
Payment to the Chairman within five business days after receipt of such
determination and calculations with respect to any Payment to the Chairman. If
the National Firm determines that no Excise Tax is payable by the Chairman with
respect to any material benefit or amount (or portion thereof), it will, at the
same time as it makes such determination, furnish the Company and the Chairman
with an opinion that the Chairman has substantial authority not to report any
Excise Tax on his U. S. federal, state or local income or other tax return with
respect to such benefit or amount. As a result of the uncertainty in the
application of Section 4999 of the Code and the possibility of similar
uncertainty regarding applicable U. S. state or local tax law at the time of any
determination by the National Firm hereunder, it is possible that Gross-Up
Payments that will not have been made by the Company should have been made (an
“Underpayment”), consistent with the calculations required to be made hereunder.
In the event that the Company exhausts or fails to pursue its remedies pursuant
to paragraph 5 of this Annex and the Chairman thereafter is required to make a
payment of any Excise Tax, the Chairman will direct the National Firm to
determine the amount of the Underpayment that has occurred and to submit its
determination and detailed supporting calculations to both the Company and the
Chairman as promptly as possible. Any such Underpayment will be promptly paid by
the Company to, or for the benefit of, the Chairman within five business days
after receipt of such determination and calculations.

 

2.                                       The Company and the Chairman will each
provide the National Firm access to and copies of any books, records and
documents in the possession of the Company or the Chairman, as the case may be,
reasonably requested by the National Firm, and otherwise cooperate with the
National Firm in connection with the preparation and issuance of the
determinations and calculations contemplated by paragraph 1 of this Annex. Any
determination by the National Firm as to the amount of the Gross-Up Payment will
be binding upon the Company and the Chairman.

 

3.                                       The U.S. federal, state and local
income or other tax returns filed by the Chairman will be prepared and filed on
a consistent basis with the determination of the National Firm with respect to
the Excise Tax payable by the Chairman. The Chairman will report and make proper
payment of the amount of any Excise Tax, and at the request of the Company,
provide to the Company true and correct copies (with any amendments) of his
federal income tax return as filed with the U.S. Internal Revenue Service and
corresponding state and local tax returns, if relevant, as filed with the
applicable taxing authority, and such other documents reasonably requested by
the Company, evidencing such payment. If prior to the filing of the Chairman’s
federal income tax return, or corresponding state or local tax return, if
relevant, the National Firm determines that the amount of the Gross-Up Payment
should be reduced, the Chairman will within five business days pay to the
Company the amount of such reduction.

 

4.                                       The fees and expenses of the National
Firm for its services in connection with the determinations and calculations
contemplated by paragraph 1 of this Annex will be borne by the Company. If such
fees and expenses are initially paid by the Chairman, the Company will reimburse
the Chairman the full amount of such fees and expenses within five business days
after receipt from the Chairman of a statement therefor and reasonable evidence
of his payment thereof.

 

A-1

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5.                                       The Chairman will notify the Company in
writing of any claim by the U.S. Internal Revenue Service or any other U.S.
taxing authority that, if successful, would require the payment by the Company
of a Gross-Up Payment. Such notification will be given as promptly as
practicable but no later than 10 business days after the Chairman actually
receives notice of such claim and the Chairman will further apprise the Company
of the nature of such claim and the date on which such claim is requested to be
paid (in each case, to the extent known by the Chairman). The Chairman will not
pay such claim prior to the expiration of the 30-calendar-day period following
the date on which he gives such notice to the Company or, if earlier, the date
that any payment of amount with respect to such claim is due. If the Company
notifies the Chairman in writing prior to the expiration of such period that it
desires to contest such claim, the Chairman will:

 

(A)                              PROVIDE THE COMPANY WITH ANY WRITTEN RECORDS OR
DOCUMENTS IN HIS POSSESSION RELATING TO SUCH CLAIM REASONABLY REQUESTED BY THE
COMPANY;

 

(B)                                TAKE SUCH ACTION IN CONNECTION WITH
CONTESTING SUCH CLAIM AS THE COMPANY REASONABLY REQUESTS IN WRITING FROM TIME TO
TIME, INCLUDING WITHOUT LIMITATION ACCEPTING LEGAL REPRESENTATION WITH RESPECT
TO SUCH CLAIM BY AN ATTORNEY COMPETENT IN RESPECT OF THE SUBJECT MATTER AND
REASONABLY SELECTED BY THE COMPANY;

 

(C)                                COOPERATE WITH THE COMPANY IN GOOD FAITH IN
ORDER EFFECTIVELY TO CONTEST SUCH CLAIM; AND

 

(D)                               PERMIT THE COMPANY TO PARTICIPATE IN ANY
PROCEEDINGS RELATING TO SUCH CLAIM;

 

provided, however, that the Company will bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and will indemnify and hold harmless the Chairman, on an after-tax
basis, for and against any Excise Tax or income or other tax, including interest
and penalties with respect thereto, imposed as a result of such representation
and payment of costs and expenses. Without limiting the foregoing provisions of
this paragraph 5, the Company will control all proceedings taken in connection
with the contest of any claim contemplated by this paragraph 5 and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
(provided, however, that the Chairman may participate therein at his own cost
and expense) and may, at its option, either direct the Chairman to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and
the Chairman agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company determines; provided, however, that if the
Company directs the Chairman to pay the tax claimed and sue for a refund, the
Company will advance the amount of such payment to the Chairman on an
interest-free basis and will indemnify and hold the Chairman harmless, on an
after-tax basis, from any Excise Tax or income or other tax, including interest
or penalties with respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Chairman with respect
to which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company’s control of any such contested claim
will be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Chairman will be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.

 

6.                                       If, after the receipt by the Chairman
of an amount advanced by the Company pursuant to paragraph 5 of this Annex, the
Chairman receives any refund with respect to such claim, the Chairman will
(subject to the Company’s complying with the requirements of such paragraph 5)
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after any taxes applicable thereto). If, after
the receipt by the Chairman of an amount advanced by the Company pursuant to
paragraph 5 of this Annex, a determination is made that the Chairman is not
entitled to any refund with respect to such claim and the Company does not
notify the Chairman in writing of its intent to contest such denial or refund
prior to the expiration of 30 calendar days after such determination, then such
advance will be forgiven and will not be required to be repaid and the amount of
any such advance will offset, to the

 

A-2

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extent thereof, the amount of Gross-Up Payment required to be paid by the
Company to the Chairman pursuant to paragraph 22 of this Agreement and this
Annex A.

 

A-3

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ANNEX B

 

Current Directorships

 

Cancer Care Ontario

 

Canadian Tire Corporation

 

Doncaster Consolidated

 

Telus Corporation

 

Tricap Restructuring Fund [Western Forest Products]

 

Canadian Imperial Bank of Commerce

 

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