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                                                                   EXHIBIT 10.21

                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT


This amended and restated agreement made as of the 2nd day of January, 2002



BETWEEN:

                         ALDERWOODS GROUP SERVICES INC.

                                                                 (the "Company")

                                      -And-

                                  JOHN S. LACEY

                                                                (the "Chairman")

WHEREAS:

     On June 1, 1999, Alderwoods Group, Inc., a Delaware corporation (formerly
     known as Loewen Group International, Inc.) ("AGI"), its parent corporation,
     The Loewen Group, Inc., a British Columbia corporation ("TLGI"), and
     certain of their subsidiaries commenced reorganization cases by filing a
     voluntary petition for relief under chapter 11 of the United States
     Bankruptcy Code;

     On June 1, 1999, a predecessor of the Company and certain of its affiliates
     filed for protection under the Companies' Creditors Arrangement Act in
     Canada;

     On December 5, 2001, the United States Bankruptcy Court for the District of
     Delaware entered an order confirming the Fourth Amended Joint Plan of
     Reorganization of Loewen Group International, Inc., its Parent Corporation
     and Certain of Their Debtor Subsidiaries, as modified (the "Plan of
     Reorganization") and on December 7, 2001, the Ontario Superior Court of
     Justice entered an order confirming and giving recognition to such U.S.
     order in Canada;

     The Company is a wholly-owned subsidiary of AGI and AGI is the holding
     entity for a corporate group engaged in the operation of funeral homes,
     insurance and cemeteries in Canada, the United States and England;

     TLGI and the Chairman previously entered into (1) a short-term agreement
     (on October 21, 1999) providing for the services of the Chairman; and (2)
     an Employment Agreement (on November 1, 2000) (the "Prior Agreements"); 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 following emergence from
     bankruptcy protection.

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

DEFINITIONS


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1.   "Change in Control" means any one of the following events that occurs
     during the term of this Agreement other than pursuant to a plan of
     reorganization submitted by AGI and confirmed by the U.S. Bankruptcy Court:

     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 the Plan of
          Reorganization confirmed by the U.S. Bankruptcy Court, 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 paragraph 22; and the intentional material breach of any
     provision of this Agreement.

3.   "STATED GOOD REASON" means the occurrence, other than pursuant to a plan of
     reorganization confirmed by the U.S. Bankruptcy Court, 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, excluding, however, the relocation of the
          Company's principal executive offices in connection with a plan of
          reorganization confirmed by the U.S. Bankruptcy Court;

     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; 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,
     dated as of January 2, 2002, 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.

     a)   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, 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. 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.

     b)   The Chairman acknowledges and agrees that, as of the Employment Date
          (as defined below), the Key Employee Retention Program will terminate
          and be of no further force or effect with respect to the Chairman.

EMPLOYMENT

8.   The Company and the Chairman agree that the Chairman shall commence
     employment with the Company on the effective date of the Company's Plan of
     Reorganization (the "Employment Date"), such employment to be for a fixed
     term ending August 1, 2004. As used in this Agreement, the phrase "term of
     this Agreement" means the period beginning on the Employment Date and
     ending on the earlier of August 1, 2004, or the effective date of the
     termination of Chairman's employment.

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.

COMPENSATION

10.

     a)   Commencing from the Employment Date, the Chairman will receive a base
          salary of $500,000 U.S. per annum which amount of such shall be
          subject to review and improvement on a periodic basis in accordance
          with Company practice, but in no event shall such amount be reduced.
          The



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          Chairman's base salary is payable in accordance with the Company's
          customary payroll practices and is subject to deductions required by
          applicable law.

     b)   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.  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 90 days after the end of each year. With the exception of the bonus
     that becomes payable under paragraphs 15, 16 or 17, 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.

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, 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 16 or 17. If the
          Chairman's employment is terminated without Just Cause or the Chairman
          resigns in compliance with paragraphs 16 or 17 after the end of the
          year 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 90 days of the subject year
          end.

     b)   If, before the end of a year, the Chairman's employment is terminated
          by the Company or its successor without Just Cause or the Chairman
          resigns in compliance with paragraphs 16 or 17, the bonus which the
          Chairman will be entitled to receive under paragraphs 15, 16 or 17 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.

STOCK OPTION PLAN

13.  The Chairman is eligible for participation in AGI's equity incentive plan
     or plans. Following the Employment Date, the Chairman will be entitled to
     receive an initial grant of stock options under AGI's equity incentive plan
     exercisable to purchase 495,000 shares of common stock. The options granted
     pursuant to the immediately preceding sentence will become exercisable in
     cumulative installments to the extent of (1) 25% of the shares on the date
     the options are granted; (2) 25% of the shares on November 1, 2002; and (3)
     50% of the shares on November 1, 2003; provided that the Chairman will not
     be entitled to exercise any options until the offering and sale of the
     shares have been registered under the U.S. Securities Act of 1933. Further
     grants of stock options shall be as determined by the Board of Directors of
     AGI.

BENEFITS

14. The Chairman will be eligible to participate in the following benefit plans:



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     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)   FINANCIAL PLANNING

          The Chairman will be entitled to the amount of $10,000.00. U.S. per
          year for the purposes of obtaining financial and retirement planning
          services, expenses and advice for the term of this Agreement, as
          directed by the Chairman.

     d)   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.

TERMINATION OF EMPLOYMENT

15.  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 16 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:

          i)   24 months' base salary;

          ii)  the replacement value of all Chairman's benefit coverage,
               including the full vesting of all stock options granted to the
               Chairman, exercised or not, and all monies due from the
               Registered Retirement Savings Plan, following the date of the
               Chairman's termination (such benefit coverage being calculated
               over 24 months following resignation or termination);

          iii) the amount of any unpaid bonus earned by the Chairman 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; and

          iv)  the amount of any unpaid salary or vacation earned by the
               Chairman up to and including the date of termination.

               Payments identified in sub-paragraphs (i) - (iv) 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 17 below following a Change in Control, both in
          compliance with paragraph 16 or paragraph 17, as the case may be; or

     d)   by the Chairman, for any reason, upon thirty (30) days advance written
          notice to the Company in which case the Company will have no further
          obligation to the Chairman under this Agreement or



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          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.

CHANGE IN CONTROL

16.  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 the following payments:

          i)   24 months' base salary;

          ii)  the replacement value of all Chairman's benefit coverage,
               including the full vesting of all stock options granted to the
               Chairman, exercised or not, and all monies due from the
               Registered Retirement Savings Plan, following the date of the
               Chairman's termination termination (such benefit coverage being
               calculated over 24 months following resignation or termination);

          iii) the amount of any unpaid bonus earned by the Chairman 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; and

          iv)  the amount of any unpaid salary or vacation earned by the
               Chairman up to and including the date of resignation or
               termination.

          Payments identified in sub-paragraphs (i) - (iv) will be subject to
          deductions required by applicable law.

VOLUNTARY RESIGNATION DUE TO CHANGE IN CONTROL

17.  In the event that an agreement is reached which would result in a Change of
     Control, but the Change of 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
     16(i) -(iv). In the event that the Change in Control does not occur, the
     Chairman shall not be entitled to the payments prescribed under paragraph
     16(i) - (iv), and the resignation shall be deemed to not have been
     tendered.

18.  Immediately prior to the effective date of a Change in Control, the Company
     shall allow the Chairman 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 the Company upon a Change of Control on the shares
     received by the Chairman following the exercise of the Chairman's stock
     options or share appreciation rights.

CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY

19.  In the event that it is determined (as hereinafter provided) that any
     payment (other than the Gross-Up Payments provided for in this paragraph 19
     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,



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     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.

20.  The obligations set forth in paragraph 19 will be subject to the procedural
     provisions described in Annex A.

CONFIDENTIAL INFORMATION; COMPETITIVE ACTIVITY

21.

     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 21) 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 21 will
          not apply (i) during the Term, 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.

22.  In addition, 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% 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% 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)



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          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.

23.

     a)   The Chairman and the Company agree that the covenants contained in
          paragraphs 21 and 22 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
          this paragraph 23 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
          Chairman or employee of, nor consultant to, any other company or
          business without the prior express approval of a majority of the
          independent Directors of the Company. The provisions of this paragraph
          23(b) are in addition to, and in no way derogate from, any and all
          other provisions of this Agreement.

24.  For purposes of paragraphs 21, 22 and 23, the term "Company" will also
     include AGI and any subsidiary of AGI.

GENERAL

25.  The parties confirm that the provisions of this Agreement are fair and
     reasonable and that the total compensation and benefits payable under
     paragraphs 15, 16 or 17 are reasonable estimates of the damages which would
     be suffered by the Chairman. Any amount paid under paragraphs 15, 16 or 17
     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.

26.  Any payment made to the Chairman under paragraphs 15, 16 or 17 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.

27.  Any payment other than for base salary 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.

28.  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



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     persons shall include individuals, partnerships, associations, trusts,
     unincorporated organizations and corporations and vice versa.

29.  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.

30.  All dollar amounts identified in this contract are in U.S. currency.

31.  The parties' respective rights and obligations under paragraphs 19, 20, 21,
     22, 23, 35 and 36 will survive any termination or expiration of this
     Agreement or the termination of the Chairman's employment for any reason
     whatsoever.

GOVERNING LAWS

32.  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

33.  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.

CONTINUITY

34.

     a)   This Agreement shall be binding upon and enure 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



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35.  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.

36.  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

37.  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
     18 Concorde Place, P.H. #7
     Don Mills, Ontario N3C 3T9

     TO THE COMPANY:

     Alderwoods Group Services Inc.
     11th Floor
     2225 Sheppard Avenue East
     Toronto. Ontario M2J 5B5

     Attention:  Senior Vice-President, Legal & Asset Management

     WITH A COPY TO:

     Alderwoods Group, Inc.
     311 Elm Street
     Suite 1000, First Floor
     Cincinnati, OH 45202

     Attention:  Senior Vice-President, Legal & Asset Management

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

ADDITIONAL

38.  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.



                                       10
<PAGE>

39.  Nothing herein expressed or implied is intended or shall be construed to
     confer upon or give to any person, other than (1) the parties to this
     Agreement, (2) any permitted assignees of the Company and the Chairman, and
     (3) AGI, as contemplated by paragraphs 7(b), 9, 13, 21, 22, 23 and 24, any
     rights or remedies under or by reason of this Agreement and AGI shall be a
     third party beneficiary of this Agreement.




                                       11
<PAGE>


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 SERVICES INC.



                             Per: /s/ Paul A. Houston
                                  --------------------------------
                                  Paul A. Houston
                                  President and Chief Executive Officer


Witness:

/s/ Bradley D. Stam               /s/ John S. Lacey
-----------------------           --------------------------------
                                  John S. Lacey




                                       12
<PAGE>

                                     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 19 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.

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<PAGE>

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

<PAGE>

     extent thereof, the amount of Gross-Up Payment required to be paid by the
     Company to the Chairman pursuant to paragraph 19 of this Agreement and this
     Annex A.























                                      A-3