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                                                                    EXHIBIT 10.9

                              EMPLOYMENT AGREEMENT

                  THIS AGREEMENT ("Agreement") is made and entered into this
30th day of July, 1997, by and between Timothy J. Buchanan, a resident of the
State of Kansas ("Employee"), and Alternative Living Services, Inc., a Delaware
corporation (the "Company").

                              W I T N E S S E T H:

                  WHEREAS, concurrent with the execution hereof, the Company,
Tango Merger Corporation, a Kansas corporation and a wholly owned subsidiary of
the Company ("Merger Sub"), and Sterling House Corporation, a Kansas corporation
("Twister"), have entered into that certain Agreement and Plan of Merger, dated
July 30, 1997 (the "Merger Agreement"), whereby Merger Sub will be merged with
and into Twister, with Twister as the surviving corporation (the "Surviving
Corporation"), and Twister shall become a wholly owned subsidiary of the Company
(the "Merger");

                  WHEREAS, the Employee has been an employee, officer,
director, and shareholder of Twister;

                  WHEREAS, after the Merger, the Surviving Corporation will
continue to carry on the business previously carried on by Twister;

                  WHEREAS, the Company desires to employ Employee as a senior
executive officer of the Company effective as of the Effective Time (as defined
in the Merger Agreement);

                  WHEREAS, the Company and Employee each desire to enter into
this Agreement, pursuant to which Employee will be employed by the Company on
the terms and conditions hereinafter set forth, and to make certain other
agreements;

                  NOW, THEREFORE, in consideration of the premises and of the
promises and agreements hereinafter set forth, the parties hereto, intending to
be legally bound, do hereby agree as follows:

SECTION 1.  Employment.

         Subject to the terms and conditions hereof, the Company hereby employs
Employee, and Employee hereby accepts such employment. Employee agrees that he
will faithfully perform his duties hereunder and will devote his full business
time to the business and affairs of the Company.





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SECTION 2.  Title; Location; Duties.

         2.1 Title. Employee shall serve as the President of the Company, and as
such, Employee will report directly to the Board of Directors of the Company.
Employee's duties as President are set forth in Section 2.3. At no time shall
Employee be requested to perform duties which are not commensurate with his
status as the President of the Company. The Company hereby agrees that, during
the term hereof, the Company will nominate Employee for election as a director
of the Company and Employee hereby consents to serve, without additional
compensation, when elected, as a director of the Company.

         2.2 Location. Employee's location of employment shall be at the
Surviving Corporation's principal executive offices in Wichita, Kansas;
provided, however, that Employee agrees to relocate his residence to Wisconsin
and that the location of his employment shall be at the Company's principal
executive offices in Brookfield, Wisconsin not later than the first anniversary
of the Closing Date (as defined in the Merger Agreement); provided, further,
that the Company may not transfer Employee to any other location without
Employee's prior written consent unless the transfer results from the relocation
of the Company's principal executive offices and the actual relocation thereto
of other executive officers of the Company holding positions and
responsibilities comparable to those of Employee.

         2.3 Duties. Employee, as President, jointly with the Company's Chief
Executive Officer (the "CEO"), shall have general responsibility for the
management of the business and strategic direction of the Company and its
subsidiaries, including the Surviving Corporation. Accordingly, the various
officers of the Company will report jointly to the CEO and Employee. Such
responsibilities to be performed jointly with the CEO shall include, but not be
limited to, the following: (i) supervising all of the day-to-day operations of
the Company; (ii) managing the Company's financial, capital-raising and
accounting functions, including interfacing and communicating with investment
banking firms, lenders, counsel, institutional investors and shareholders: (iii)
development of strategic health care initiatives, both domestically and
internationally, such as strategic alliances, acquisitions, joint ventures,
mergers, divestitures and third-party provider contracts; (iv) overseeing the
Company's merger and acquisition activities, both domestic and foreign, such as
the identification of acquisition candidates within the assisted living and
long-term care industries, the negotiation of acquisition opportunities and
directing the Company's merger and acquisition personnel in reviewing and
analyzing merger and acquisition opportunities; and (v) overseeing the Company's
development, both domestically and internationally, of new assisted living and
other long-term care




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facilities, including identifying and developing joint ventures and other
strategic alliances with development partners and others. The Company hereby
agrees to take, and to cause its Chairman of the Board and CEO to take, all
reasonable action in order to effectively implement the foregoing provisions of
this Section 2.3, including, but not limited to, the adopting of procedures and
policies to ensure the sharing of authority and responsibilities by the Employee
and the CEO, using best efforts to clearly communicate their shared authority
and responsibilities to the Company's employees, vendors, clients, advisors,
lenders and investors and otherwise ensuring that Employee is provided with
access to all members of management and all employees, commensurate with the
access provided to the CEO with respect to all policy and strategy decisions.

SECTION 3.  Term; Payments Upon Termination.

         3.1 Term. The employment of Employee hereunder shall commence on the
Closing Date (as such term is defined in the Merger Agreement) and shall
continue until the earlier of (a) the third anniversary of the Closing Date (the
"Original Term") or (b) the occurrence of any of the following events:

                  (i) the death or disability of Employee (disability meaning a
         physical illness or incapacity that prevents Employee totally and
         permanently from performing all of the substantial and material duties
         of his then current position of employment with the Company; provided,
         however, that a disability shall be considered to exist only if
         Employee is prevented for a period of three (3) consecutive months
         following the date such condition commenced and at the end of such
         three (3) month period he remained so prevented, or if, prior to the
         expiration of such three (3) month period, Employee's attending
         physician provides the Company with a written prognosis that the
         illness, injury or other incapacity that results in Employee's current
         disabled condition may be reasonably expected to prevent Employee from
         performing all of the substantial and material duties of his then
         current position of employment with the Company for a period of at
         least six (6) consecutive months;

             (ii) the mutual written agreement of the parties hereto terminate
         Employee's employment hereunder;

            (iii) the Company's termination of Employee's employment hereunder
         for "cause." For the purposes of this Agreement, "cause" for
         termination of Employee's employment shall exist only (x) if Employee
         is convicted of, or pleads guilty to, any act of fraud,
         misappropriation or embezzlement, or any felony, (y) if Employee has
         engaged in conduct or activities materially damaging to the Company,
         monetarily or otherwise




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         (it being understood, however, that neither conduct nor activities
         pursuant to Employee's exercise of his good faith business judgment nor
         unintentional physical damage to any property of the Company by
         Employee shall be a ground for such a determination by the Company) or
         (z) if Employee has willfully and continuously failed to substantially
         perform his duties hereunder (other than any such failure resulting
         from incapacity due to physical or mental illness), after a written
         demand for substantial performance is delivered to Employee that
         specifically identifies the manner in which the Company believes that
         Employee has not substantially performed those duties, and Employee has
         failed to resume substantial performance of such duties on a continuous
         basis within fourteen (14) days after receiving such demand.
         Termination for cause shall be made only upon the vote of not less than
         a majority of the directors then in office, after reasonable notice to
         Employee and an opportunity for Employee, together with counsel, to be
         heard before a duly called meeting of the Board; or

             (iv) the Employee's termination of his employment with the Company
         for "good reason" upon reasonable notice to the Company. For purposes
         of this Agreement, "good reason" shall exist if (x) the Company
         materially fails to comply with any of the provisions of this
         Agreement, other than isolated, insubstantial or inadvertent failures
         not occurring in bad faith and which are remedied by the Company
         promptly after receipt of notice thereof given by Employee, (y) the
         Company shall diminish Employee's title, duties, base salary or
         benefits, except, in the case of base salary or benefits, if such
         diminution is part of an overall diminution of base salary and benefits
         for all senior executive officers, or (z) any breach by the Company of
         its agreements set forth in Section 5.17 of the Merger Agreement.

                  The Original Term hereof, and any renewal term, shall be
automatically renewed for an additional one (1) year period unless either
Employee or the Company gives notice to the other party that it does not wish to
renew this Agreement at least ninety (90) days prior to the expiration of such
Original Term or renewal term, as the case may be.

         3.2  Payments Upon Termination.

         (a) If during the Original Term hereof, or any renewal term, Employee's
employment is terminated (i) by the Company without "cause" or, (ii) by Employee
for "good reason," then the Company shall pay to Employee the Employee's Base
Salary at the rate in effect at the time notice of termination is given,
together with any applicable bonuses (without pro-ration as




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provided in Section 4.2) and rights and benefits the Employee may have under
employee benefits plans and programs of the Company in existence as of the date
of such termination, all for the period (the "Extended Period") equal to the
greater of (x) the balance of the Original Term or renewal term, as applicable,
or (y) the twelve (12) month period following the date of such termination.

         (b) If during the Original Term, or any renewal term, Employee's
employment is terminated as a result of the death or disability of Employee
(disability having the meaning set forth in Section 3.1(i) of this Agreement),
the Company shall continue to pay Employee (or his estate) his Base Salary at
the rate in effect on the date of death or the date disability is conclusively
determined, as applicable, together with any applicable bonuses (without
pro-ration as provided in Section 4.2) and rights and benefits the Employee may
have under employee benefits plans and programs of the Company in existence as
of the date of such termination, all for the twelve (12) month period following
the date of death or the date disability is conclusively determined, as
applicable.

         (c) If during the Original Term, or any renewal term, Employee's
employment is terminated (i) by the Company for "cause" or (ii) Employee for any
reason other than "good reason," then the Company shall pay Employee the Base
Salary (as hereinafter defined) through the effective date of termination at the
rate in effect at the time notice of termination is given, and the Company shall
have no further obligations to Employee under this Agreement subject to the
rights and benefits the Employee may have under employee benefits plans and
programs of the Company in existence as of the effective date of such
termination, if any, which shall be determined in accordance therewith.

         3.3 Payments Upon Change of Control. During the Original Term hereof,
or any renewal term, if there is a Change of Control (as hereinafter defined)
and any one of (i) the Employee's location of employment as set forth herein
changes, (ii) the Company takes any action which would entitle Employee to
terminate his employment for "good reason" pursuant to clauses (x) or (z) of the
definition thereof, or (iii) the Company shall diminish Employee's title,
duties, base salary or benefits (each of the events described in the foregoing
clauses (i), (ii) and (iii) being herein referred to as a "Triggering Event"),
then Employee may at his election, at any time within one year after any such
Triggering Event, terminate this Agreement (a "Voluntary Termination"), and
Employee shall be entitled to the following compensation, in addition to the
other compensation and bonuses provided for herein:





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                  (a) in lieu of any further salary payments to Employee for
         periods subsequent to the date of Voluntary Termination, the Company
         shall pay as severance payment to Employee, no later than the fifth day
         following the date of Voluntary Termination, a lump-sum severance
         payment to Employee equal to 300% of Employee's annual base salary rate
         in effect as of the date of Voluntary Termination or, if greater, such
         rate as may be in effect immediately prior to the Change of Control. In
         addition, Employee shall be paid an amount equal to 300% of his bonus
         for the calendar year immediately preceding the year in which such
         Voluntary Termination shall occur or, if greater, his bonus for the
         full calendar year preceding the year in which such Change of Control
         occurs; and

                  (b) the Company shall provide Employee with all employee
         benefits and programs of the Company which the Employee was entitled to
         receive or participate in immediately prior to the effective date of
         the Voluntary Termination for the thirty six (36) month period
         following the date of such Voluntary Termination.

         For the purposes of this Agreement, "Change of Control" shall mean the
occurrence of any of the following events:

                  (i) any "person" or "group" (as such terms are used under
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as Amended (the
"Exchange Act"), whether or not such Sections are applicable) is or becomes,
whether by means of any issuance or direct or indirect transfer of securities,
merger, consolidation, liquidation, dissolution or otherwise, the "beneficial
owner" (as that term is used under Rules 13d-3 and 13d-5 under the Exchange Act,
whether or not such rules are applicable, except that a "person" or "group"
shall be deemed to have "beneficial ownership" of all shares that he or it has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time or otherwise), directly or indirectly through one or
more intermediaries, of 35% or more of the total voting power represented by all
of the voting stock of the Company; or

                  (ii) directly or indirectly, a transfer, sale, lease or other
disposition of all or substantially all of the assets of the Company and its
subsidiaries taken as a whole to any "person" or "group" (as such terms are used
un Sections 13(d) and 14(d) of the Exchange Act, whether or not such sections
are applicable), excluding any disposition to or among the Company and/or one or
more of its subsidiaries; or

                  (iii) any "person" or "group" (as such terms are used under
Sections 13(d) and 14(d) of the Exchange Act, whether or




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not such sections are applicable) otherwise obtains the right or power (through
any arrangement, contract, proxy or other means) to elect or designate a
majority of the members of the Board of Directors then in office, without regard
to whether such right or power is exercised or invoked and without taking into
account the necessity of a special or annual stockholders meeting or the taking
of other procedural actions to exercise or invoke such right or power.

         Section 3.4. If pursuant to Section 3.2 or 3.3, Employee is entitled to
receive benefits under employee benefit plans subsequent to his termination of
employment and such benefits or programs cannot be made available following
termination of Employee in circumstances in which Employee is entitled thereto
hereunder, the Company shall pay Employee an amount in cash sufficient to enable
Employee to purchase such benefits or programs on his own behalf. Employee shall
retain all grants and awards issued to him under the Company's stock incentive
plans during any period subsequent to termination of Employee's employment and
during which Employee is entitled to receive salary or benefits pursuant to
Section 3.2 or Section 3.3.

SECTION 4.  Compensation.

         4.1 Base Salary. For the first twelve (12) months of the term of his
employment hereunder, Employee shall be paid a salary at the annual rate of Two
Hundred Sixty Five Thousand Dollars ($265,000), payable in equal installments in
accordance with the payroll payment practices from time to time adopted by the
Company, subject to required payroll withholding provisions. Thereafter, the
salary to be paid to the Employee shall be determined in the discretion of the
Board of Directors; provided, however, that in no event after the first twelve
(12) months of the term of his employment hereunder shall Employee's annual rate
of salary be less than Two Hundred Sixty Five Thousand Dollars ($265,000). (The
annual salary to be paid to Employee under this Agreement is hereinafter
referred to as the "Base Salary".)

         4.2 Incentive Bonuses. As additional compensation hereunder, the
Company may, in the discretion of the Board of Directors, pay Employee an annual
bonus (the "Annual Bonus") for each fiscal year during the term of Employee's
employment hereunder. Subject to Section 3.2 hereof, if Employee's employment
hereunder is terminated pursuant to the terms of this Agreement prior to the end
of a calendar year, his Annual Bonus with respect to that year shall be prorated
for such portion of that year as he was employed by the Company. The Employee
shall be eligible to receive an Annual Bonus of up to 35% of the Base Salary
payable if the Company's earnings before interest, taxes and depreciation are
within 10% of such earnings targeted in the applicable annual business plan as
approved by the Board of




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Directors. Any such discretionary or pro rated bonus shall be due and payable
upon the submission and verification of the Company's annual financial
statements for the applicable bonus period.

         4.3 Stock Options. The Board of Directors of the Company shall grant to
Employee options to purchase shares of common stock of the Company pursuant to
the terms of the 1995 Incentive Compensation Plan of the Company, which options
shall (i) be granted at such times as the Board of Directors of the Company
shall grant options to other senior executive officers of the Company, (ii) be
equivalent in amount and exercise price to options granted to other senior
executive officers of the Company, and (iii) vest and become exercisable at the
same rates and times as options granted to other senior executive officers of
the Company.

         4.4. Insurance.

                  (a) Life and Other Insurance. The Company shall provide to
Employee such term life and group travel, accident, accidental death and
dismemberment insurance and long and short term disability insurance, or their
equivalents, as is provided from time to time for other senior executives of the
Company. The Company shall be entitled, at its sole option and expense, to
arrange for and keep in effect, during the term of Employee's employment
hereunder, so long as he is insurable, key man insurance on Employee in an
amount determined by the Board of Directors, such policy or policies to name the
Company or its designee as the beneficiary. Employee shall reasonably cooperate
with the Company in procuring such key man insurance as the Company shall elect
to purchase. In addition, the Company shall maintain Employee's split dollar and
deferred compensation life insurance policies maintained by Twister immediately
prior to the consummation of the Merger.

                  (b) Medical Insurance. During the term of Employee's
employment hereunder, the Company shall, at its expense, provide or arrange for
and keep in effect, hospitalization, major medical and similar medical and
health insurance for Employee and his family, as is provided from time to time
for other senior executives of the Company.

         4.5 Vacation. Employee shall be entitled to four (4) weeks' paid
vacation during each year of his employment hereunder.

         4.6 Retirement Benefits. During the term of his employment hereunder,
Employee shall have the same rights as other senior executive officers of the
Company to participate in all profit-sharing, pension and other retirement plans
as are now, or as may




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hereafter be, established by the Company; provided, however, that for so long as
any Twister employee benefit plans are maintained in effect in accordance with
Section 5.6 of the Merger Agreement, Employee shall have the option to continue
to participate in such plans.

         4.7 Out-of-Pocket Expenses. The Company shall reimburse Employee for
all reasonable out-of-pocket expenses incurred by Employee in connection with
the performance of his duties hereunder upon presentation of appropriate
vouchers therefor.

         4.8 Automobile Expense Allowance. During the term of Employee's
employment hereunder, the Company shall pay to Employee an automobile allowance
of $600 per month.

         4.9 Moving and Relocation Expenses. In addition to the salary and
benefits set forth in this Section 4, the Company shall provide to Employee the
following benefits in connection with his moving and relocating to Wisconsin:

                  (i) Employee agrees to use reasonable efforts to sell his
         residence located at 816 Terradyne, Andover, Kansas (the "Residence")
         prior to the date he relocates to Wisconsin, which relocation shall
         occur no later than the first anniversary of the date hereof. The
         Company agrees to reimburse Employee for his reasonable out-of-pocket
         expenses incurred in connection with his efforts to sell the Residence,
         including, but not limited to, real estate broker's commissions. If
         Employee is unable to sell the Residence prior to the date he relocates
         to Wisconsin, then the Company shall purchase the Residence for a
         purchase price determined as follows: each of Employee and the Company
         shall obtain an appraisal of the value of the Residence from licensed
         real estate appraisers selected by each of them; if such appraisals do
         not vary by more than $10,000, the purchase price to be paid shall be
         the average of the two appraisals; if such appraisals vary by more than
         $10,000, then the two appraisers shall jointly appoint a third
         appraiser, whose appraisal shall be final and binding on the Company
         and Employee. The Company shall bear the cost of the appraisals and all
         other costs and expenses related to such purchase and sale of the
         Residence from Employee;

             (ii) until such time as Employee shall have completely relocated to
         Wisconsin, the Company shall (A) provide Employee a two (2) bedroom
         furnished apartment (at a monthly rental rate not to exceed $1,500),
         and (B) reimburse Employee for all reasonable costs and expenses in
         commuting from Wichita, Kansas to Brookfield, Wisconsin.





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            (iii) the Company shall pay on behalf of Employee or reimburse
         Employee, at Employee's option, for the actual costs paid to third
         parties relating to Employee's relocation from Kansas to Wisconsin,
         including, but not limited to, (a) reasonable moving company expenses
         and insurance, and (b) reasonable travel expenses for Employee and his
         spouse from Kansas to Wisconsin in order to enable Employee and his
         spouse to locate a suitable residence in Wisconsin.

SECTION 5.  Restrictive Covenants.

         (a) Employee acknowledges that the covenants herein are necessary to
protect the goodwill and other value of the Company and in view of the unique
and essential nature of the services Employee is to perform hereunder, the
irreparable injury that would befall the Company should Employee breach such
covenants.

         (b) Employee further acknowledges that his services hereunder are of a
special, unique and extraordinary character and that his position with the
Company places him in a position of confidence and trust with the customers and
employees of the Company and allows him access to Confidential Information (as
hereinafter defined).

         (c) Employee further acknowledges that the type and periods of
restrictions imposed by the covenants in this Section 5 are fair and reasonable
and that such restrictions will not prevent Employee from earning a livelihood.

         (d) Employee further acknowledges that (i) the Company is engaged in
the business of developing, owning, acquiring and operating assisted living
facilities and specialty care facilities for the treatment of individuals
suffering from Alzheimer's disease; (ii) the Company conducts its business
activity in and throughout the Area (as hereinafter defined); and (iii)
Competing Businesses (as hereinafter defined) are engaged in businesses like and
similar to the business of the Company.

         (e) Having acknowledged the foregoing, Employee covenants and agrees
with the Company that he will not, directly or indirectly:

                  (i) while he is in the Company's employ and through the period
         ending eighteen (18) months after the termination of his employment for
         any reason whatsoever (whether voluntarily or involuntarily), disclose
         or use for his own benefit, or the benefit of any other person, except
         as may be necessary in the performance of his duties hereunder, any
         Confidential Information disclosed to Employee or of which




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         Employee became aware by reason of his employment with or
         ownership in the Company;

             (ii) while he is in the Company's employ and through the period
         ending eighteen (18) months after the termination of his employment for
         any reason whatsoever (whether voluntarily or involuntarily), solicit
         or divert or appropriate to any Competing Business, directly or
         indirectly, on his own behalf or in the service of or on behalf of any
         Competing Business, or to solicit or divert or tempt appropriate to any
         such Competing Business, within the Area, any person or entity who was
         a customer of the Company at any time during the last twelve (12)
         months of Employee's employment hereunder and with whom Employee had
         contact during the term of his employment;

            (iii) while he is in the Company's employ and through the period
         ending eighteen (18) months after the termination of his employment for
         any reason whatsoever (whether voluntarily or involuntarily), employ or
         attempt to employ or assist anyone else in employing in any Competing
         Business in the Area any managerial or key employee of the Company
         (whether or not such employment is full time or is pursuant to a
         written contract with the Company); and

             (iv) while he is in the Company's employ and through the period
         ending eighteen (18) months after the termination of his employment for
         any reason whatsoever (whether voluntarily or involuntarily) except for
         termination by the Company without cause, engage in or render any
         services to or be employed by any Competing Business in the Area in the
         capacity of officer, managerial or executive employee, director,
         consultant or shareholder (other than as the owner of less than five
         (5%) percent of the shares of a publicly-owned corporation whose shares
         are traded on a national securities exchange or in the NASDAQ National
         Market System).

         (f) Employee agrees that upon the termination of his employment for any
reason whatsoever (whether voluntarily or involuntarily) he will not take with
him or retain without written authorization, and he will promptly deliver to the
Company, originals and all copies of all papers, files or other documents
containing any Confidential Information and all other property belonging to the
Company and in his possession or under his control. Notwithstanding the
immediately preceding sentence, Employee shall be permitted to retain his
personal memorabilia belonging to him, notes taken by him as a member of the
Board of Directors, or any committee thereof, and any other such materials which
Employee deems to be of value to him in the event the same may be needed by
Employee in connection with the defense of any




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lawsuit, action or proceeding brought against him for any reason whatsoever.

         (g) For purposes of this Section 5, the term (a) "Area" means a one
hundred (100) mile radius of (i) the city hall of Milwaukee, Wisconsin and
Madison, Wisconsin, or (ii) any assisted care facility owned, managed or
operated by the Company at the time Employee's employment hereunder is
terminated; (b) "Competing Business" means the business of developing, owning,
acquiring or operating living facilities or specialty assisted care facilities
for the treatment of individuals suffering from Alzheimer's disease; and (c)
"Confidential Information" means any and all data and information relating to
the business of the Company (whether or not constituting a trade secret) that
is, has been or will be disclosed to Employee or of which Employee became or
becomes aware as a consequence of or through his relationship with the Company
and that has value to the Company and is not generally known by its competitors.
Confidential Information shall not include any data or information that has been
voluntarily disclosed to the public by the Company (except where such public
disclosure has been made without authorization by the Company), or that has been
independently developed and disclosed by others, or that otherwise enters the
public domain through lawful means. Confidential Information includes, but is
not limited to, information relating to the Company's financial affairs,
processes, services, customers, employees or employees' compensation, research,
development, purchasing, accounting or marketing.

         (h) Employee acknowledges that irreparable loss and injury would result
to the Company upon the breach of any of the covenants contained in this Section
5 and that damages arising out of such breach would be difficult to ascertain.
Employee hereby agrees that, in addition to all other remedies provided at law
or at equity, the Company may petition and obtain from a court of law or equity
both temporary and permanent injunctive relief to prevent a breach by Employee
of any covenant contained in this Section 5. The parties hereto agree that all
references to the Company in this Section 5 shall include, unless the context
otherwise requires, all subsidiaries and affiliates of the Company.

SECTION 6.  Miscellaneous.

         6.1 Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon Employee, his executor, administrator, heirs, personal
representatives and assigns, and upon the Company and its successors and
assigns; provided, however, that the obligations and duties of Employee may not
be assigned or delegated.




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         6.2 Governing Law. This Agreement shall be deemed to be made in, and in
all respects shall be interpreted, construed and governed by and in accordance
with, the laws of the State of Wisconsin, without giving effect to principles of
conflicts of laws.

         6.3 Invalid Provisions. The parties hereto agree that the agreements,
provisions and covenants contained in this Agreement (including, without
limitation, the agreements, provisions and covenants contained in Section 5
hereof) are severable and divisible, that none of such agreements, provisions or
covenants depends upon any other provision, agreement or covenant for its
enforceability, and that each such agreement, provision and covenant constitutes
an enforceable obligation between the Company and Employee. Consequently, the
parties hereto agree that neither the invalidity nor the unenforceability of any
agreement, provision or covenant of this Agreement shall affect the other
agreements, provisions or covenants hereof, and this Agreement shall remain in
full force and effect and be construed in all respects as if such invalid or
unenforceable agreement, provision or covenant were omitted.

         6.4 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

         6.5 Notices. All communications provided for hereunder shall be in
writing and shall be deemed to be given when delivered in person or deposited in
the United States mail, first class, registered mail, return receipt requested,
with proper postage prepaid, and

                  (a)      If to Employee, addressed to:

                           Timothy J. Buchanan
                           816 Terradyne
                           Andover, Kansas 67002

                  (b)      If to the Company, addressed to:

                           Alternative Living Services, Inc.
                           450 N. Sunnyslope Road
                           Suite 300
                           Brookfield, Wisconsin 53005
                           Attn:  Chief Executive Officer

                           with a copy to:

                           Rogers & Hardin LLP
                           2700 Cain Tower, Peachtree Center




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                           229 Peachtree Street, N.E.
                           Atlanta, Georgia 30303
                           Attn: Alan C. Leet, Esq.

or at such other place or places or to such other person or persons as shall be
designated in writing by the parties hereto in the manner provided above for
notices.

         6.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

         6.7 Waiver. The waiver by either party hereto of a breach of any
provision, agreement or covenant of this Agreement by the other party hereto
shall not operate or be construed as a waiver of any prior or subsequent breach
of the same or any other provision, agreement or covenant by such other party
hereto.

         6.8 Entire Agreement. This Agreement is intended by the parties hereto
to be the final expression of their agreement and is the complete and exclusive
statement thereof notwithstanding any representation or statements to the
contrary heretofore made. This Agreement may be modified only by written
instrument signed by each of the parties hereto.

         6.9 Effectiveness. This Agreement shall become effective at the
Effective Time of the Merger; provided, however, that this Agreement shall
become null and void upon any termination of the Merger Agreement.




                                       14

<PAGE>   15



                  IN WITNESS WHEREOF, the Employee has duly executed, and the
Company has caused this Agreement to be duly executed by its duly authorized
officers, and the parties have caused this Agreement to be delivered, all as of
the day and year first written above.



                                            ALTERATIVE LIVING SERVICES, INC.



                                            By:      /S/ WILLIAM F. LASKY
                                                 -------------------------------
                                            Its:     President and CEO
                                                 -------------------------------


                                            EMPLOYEE:


                                               /S/ TIMOTHY J. BUcHANAN
                                            ------------------------------------
                                            Timothy J. Buchanan