EMPLOYMENT AGREEMENT

 

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                                                                    Exhibit 10.9

 

                              EMPLOYMENT AGREEMENT

 

 

This agreement made as of the 2nd day of January, 2004

 

 

 

BETWEEN:

 

                          ALDERWOODS GROUP CANADA INC.

 

                                                                 (the "Company")

 

                                      -And-

 

                                ROSS S. CARADONNA

 

                                                               (the "Executive")

 

 

WHEREAS:

 

         The Company is a wholly-owned subsidiary of Alderwoods Group, Inc.

         ("AGI"), a Delaware corporation that is the holding entity for a

         corporate group engaged in the operation of funeral homes, insurance

         and cemeteries in Canada and the United States; and

 

         Alderwoods Group Services Inc. and the Executive entered into an

         Employment Agreement (the "Prior Agreement") as of September 16, 2002;

         and

 

         Alderwoods Group Services Inc. amalgamated with Alderwoods Group

         Canada Inc. ("AGCI") on December 29, 2002; and

 

         The Company and the Executive wish to enter into a written Employment

         Agreement which will provide the Executive with an incentive to

         continue in his position as Executive Vice President, Chief Information

         Officer of the Company.

 

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

follows:

 

DEFINITIONS

 

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;

 

 

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     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.   "CONSTRUCTIVE DISCHARGE" means the termination of the Executive's

     employment by the Executive following 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 Executive's employment):

 

     a)   the geographic relocation of the Executive's place of employment by

          the Company by more than 50 miles from Toronto, Ontario;

 

     b)   any material reduction by the Company in the Executive's job duties or

          responsibilities;

 

     c)   any material reduction by the Company in the Executive's level of

          compensation or benefits;

 

     d)   any adverse change by the Company or AGI to the Executive's title or

          function;

 

     e)   harassment by a representative or affiliate of the Company; or

 

     f)   any circumstance in which the Executive was induced by the actions of

          the Company to terminate his employment other than on a purely

          voluntary basis.

 

3.   "JUST CAUSE" means willful misconduct or willful neglect of duty by the

     Executive, 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 21; and the intentional material breach of

     any provision of this Agreement.

 

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 Executive's

     employment.

 

6.   "VOTING STOCK" means securities entitled to vote generally in the election

     of directors.

 

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ENTIRE AGREEMENT

 

7.   The Executive and the Company agree that this Agreement represents the

     entire 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 Executive 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 Executive.

 

EMPLOYMENT

 

8.   The Company agrees to employ the Executive, and the Executive agrees to be

     employed by the Company, in the position of Executive Vice President, Chief

     Information Officer. The Executive also agrees that, as part of the

     Executive's duties, the Executive shall occupy and perform the office of

     Executive Vice President, Chief Information Officer of AGI, on behalf of

     the Company, for the term of this Agreement. As used in this Agreement, the

     phrase "term of this Agreement" means the period beginning January 2, 2004

     and ending on the earlier of January 2, 2007, or the effective date of the

     termination of Executive's employment. Notwithstanding anything to the

     contrary in this Agreement, paragraph 16(b) shall survive and remain in

     effect following the term of this Agreement.

 

9.   The Executive 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, and will

     devote his full working time and attention to these duties. The Executive

     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)   In consideration for the Executive's continued performance of his

          duties as Executive Vice President, Chief Information Officer, the

          Executive will receive a base salary of $208,000 U.S. per annum. The

          amount of such salary 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 Executive'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 Executive for all reasonable expenses

          incurred by the Executive during the term of this Agreement in the

          course of the Executive 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 Executive will be entitled to participate in a short term incentive

     plan as adopted by the Company from time to time in a manner commensurate

     with his position and level of responsibility with the Company. The bonus

     payable under such plan will be paid in full within 90 days after the end

     of each year.

 

12.  The short term incentive plan bonus is subject to the following conditions

     and exceptions:

 

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     a)   In order to qualify for and receive the annual bonus, the Executive

          must be employed by the Company or its successor at the time the bonus

          is paid unless the Executive is terminated (1) without Just Cause or

          (2) by reason of Constructive Discharge in compliance with paragraph

          17. If the Executive's employment is terminated without Just Cause or

          by reason of Constructive Discharge after the end of the year but

          before the bonus amount is paid, the Executive 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 and will be subject to deductions

          required by applicable law. If the bonus amount has not been

          determined within seven days of the termination it will be paid in

          full within 90 days of the subject year-end.

 

     b)   If, before the end of a year, the Executive's employment is terminated

          by the Company or its successor without Just Cause, the bonus which

          the Executive will be entitled to receive under paragraph 16 for that

          year will be equal to the Executive's pro rata portion of the bonus

          for the year of termination (for the number of days elapsed in the

          current year), based on the achievement of the applicable performance

          criteria through the date of termination.

 

STOCK OPTION PLAN

 

13.  The Executive is eligible for participation in AGI's equity incentive plan

     or plans. Stock options will be granted to the Executive as determined by

     the Board of Directors of AGI. 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.

 

2003-2005 EXECUTIVE STRATEGIC PLAN INCENTIVE

 

14.  The Executive shall participate in the 2003-2005 Executive Strategic

     Incentive Plan of Alderwoods Group Canada Inc., a copy of which shall be

     provided to the Executive.

 

BENEFITS

 

15.  The Executive will be eligible to participate in the following benefit

     plans:

 

          a.   GROUP BENEFITS. The Executive 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 Executive will be entitled to a vehicle

               allowance of $600.00 per month plus operating expenses with no

               allowance for auto insurance coverage.

 

          c.   CLUB MEMBERSHIP. The Executive will be entitled to the amount of

               $1,000.00 per year for club memberships as directed by the

               Executive.

 

          d.   EXECUTIVE MEDICAL. The Executive will be entitled to participate

               in the Company's Annual Medical Program.

 

          e.   OTHER BENEFITS. The Executive will be entitled to participate in

               the Company's Health Services Spending Account Program.

 

TERMINATION OF EMPLOYMENT

 

16.  The parties agree that the Executive's employment under this Agreement may

     be terminated as follows:

 

          a.   by the Company, without notice of termination or pay in lieu

               thereof, for Just Cause;

 

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          b.   by the Company, not following a Change in Control as set forth in

               paragraph 17 below, at its sole discretion and for any reason

               other than Just Cause upon payment to the Executive in a lump

               sum, within seven days of such termination, of an amount equal

               to:

 

                    i.   24 months' base salary;

 

                    ii.  The amount of any unpaid bonus earned by the Executive

                         up to and including the date of termination calculated

                         in accordance with paragraph 12(b); and

 

                    iii. The amount of any unpaid salary or vacation earned by

                         the Executive up to and including the date of

                         termination.

 

               Payments identified in sub paragraphs (i) - (iii) will be subject

               to deductions required by applicable law;

 

          c.   by the Company for any reason other than Just Cause or by reason

               of Constructive Discharge, following a Change in Control, both in

               compliance with paragraph 17 below; or

 

          d.   by the Executive, 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 Executive under this Agreement or

               otherwise except to pay the Executive the unpaid portion, if any,

               of the Executive's base salary payable for the period through the

               date of termination of the Executive's employment.

 

CHANGE IN CONTROL

 

17.  If a Change in Control occurs and, within two years of the effective date

     of the Change in Control, the Executive's employment is terminated by the

     Company without Just Cause or by reason of Constructive Discharge, the

     Company shall, within seven days of the date of termination, pay to the

     Executive in a lump sum the following payments:

 

               i.   24 months' base salary;

 

               ii.  The replacement value of all Executive's benefit coverage

                    including contributions to the Registered Retirement Savings