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                                                                    EXHIBIT 10.7

                              EMPLOYMENT AGREEMENT

                  EMPLOYMENT AGREEMENT, dated as of January 1, 1999, by and
between Alternative Living Services, Inc., a Delaware corporation, with offices
at 450 N. Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005 (the
"Company"), and William F. Lasky, residing at 1213 East Goodrich Lane, Fox
Point, Wisconsin 53217 (the "Executive").

                  WHEREAS, the Executive currently serves as the Chief Executive
Officer of the Company, pursuant to an Employment Agreement, dated as of
December 14, 1993, and as amended thereafter (the "Prior Agreement"); and

                  WHEREAS, the Company wishes the Executive to continue to serve
in that position, and the Executive is willing to do so;

                  NOW THEREFORE, in consideration of the mutual promises and
agreements set forth below, the Company and the Executive agree as follows:

         1.       Term. The Company agrees to employ the Executive and the 
Executive agrees to serve, on the terms and conditions set forth herein, for a
period commencing as of January 1, 1999 and ending on December 31, 2001
("Original Term"), unless earlier terminated pursuant to the terms hereof;
provided, however, that this Agreement will automatically renew for an
additional year on January 1, 2002 and on each January 1 thereafter (such
extended period, the "Renewal Term") unless and until either party gives notice
to the other party that such party does not wish to renew this Agreement at
least ninety (90) days prior to the expiration of the then applicable Original
Term or Renewal Term. The period during which Executive is employed hereunder
(including any applicable Renewal Term) is hereinafter referred to as the
"Employment Period."

         2.       Duties and Services.

                  (a)    The Executive shall serve as the Chief Executive
Officer of the Company, and shall have the duties, responsibilities and
authority as may be from time to time assigned to him by the Board of Directors
of the Company (the "Board"). At no time shall the Executive be requested to
perform duties that are not commensurate with his status as the Company's Chief
Executive Officer; provided, however, that at the request of the Board, and
without additional consideration, the Executive shall serve as a director,
executive officer, trustee or agent for the Company and its affiliates so long
as he continues as Chief Executive Officer of the Company. The Executive shall
devote substantially all of his normal working time and efforts to the
performance of his duties under this Agreement; provided, however, that the
Executive may serve as a director or officer of any charitable, religious,
civic, educational, or trade organizations to the extent that such activities,
individually or in the aggregate, do not interfere with the performance of
Executive's duties and responsibilities under this Agreement.

                  (b)    During the Employment Period, the Company shall 
nominate the Executive for election to the Board each time he is eligible to
stand for election, and, if 

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elected, the Executive hereby consents to serve as a director without additional
compensation.

         3.       Compensation and Benefits.

                  (a)    Base Salary. As compensation for his services 
hereunder, the Company agrees to pay the Executive a base salary (the "Base
Salary") at the annual rate of four hundred thousand dollars ($400,000) per
calendar year, payable in accordance with the Company's regular payroll
practices. The Executive's Base Salary shall be subject to adjustment by the
Board or the Compensation Committee of the Board each calendar year, and may be
increased or decreased at any time (provided that such Base Salary may in no
event be less than $400,000 without the consent of Executive).
        
                  (b)    Incentive Bonus; Other Bonuses. In addition to his Base
Salary, for each year of the Employment Period, the Company may pay Executive,
in the discretion of the Board or the Compensation Committee of the Board, an
incentive bonus (the "Incentive Bonus") in an amount of up to fifty percent
(50%) of his Base Salary payable in accordance with the terms of an incentive
plan to be established by the Compensation Committee of the Board.

                  (c)    Other Benefit Plans and Fringe Benefits. The Executive
shall be eligible to participate (subject to any applicable waiting periods) in
all employee benefit plans (including, but not limited to, medical, long-term
disability and life insurance plans) maintained by the Company for the benefit
of senior executives of the Company during the Employment Period and to receive
all fringe benefits available generally to senior executives of the Company. The
Company shall be entitled, at its expense, to arrange for the purchase of "key
man" insurance on the Executive's life in an amount determined by the Board, and
the Executive shall reasonably cooperate with the Company in procuring such
insurance.

                  (d)    Automobile Allowance. The Executive shall be entitled
to receive an automobile allowance of six hundred dollars ($600) each month,
payable in cash without the need for the Executive to submit any documentation.

                  (e)    Stock Options. The Board of Directors of the Company or
the Compensation Committee thereof shall grant to the Executive options to
purchase shares of common stock of the Company ("Common Stock") pursuant to the
terms of the Amended and Restated 1995 Incentive Compensation Plan of the
Company, as amended from time to time (the "Plan"), which options (when taken
together with other options previously granted to Executive) shall be at least
equivalent in number of options granted to other senior executive officers of
the Company and shall otherwise be consistent with the vesting terms of the
options granted the Executive in 1998.

                  (f)    Expenses. The Executive shall be entitled to
reimbursement for all reasonable travel and other out-of-pocket expenses
incurred in the performance of his duties hereunder ("Reimbursable Expenses"),
upon submission and approval of written statements and bills in accordance with
the regular expense reimbursement policies and procedures of the Company.

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         4.       Termination.

                  (a)    For Death and Disability. The Executive's employment
hereunder shall terminate upon his death, and may be terminated by the Company
upon notice to Executive due to Disability. For purposes hereof, "Disability"
shall mean a physical or mental incapacity that renders the Executive unable to
fully discharge his duties hereunder (i) for a period of six (6) consecutive
months, or (ii) for shorter consecutive periods aggregating six months in any
period of twelve (12) consecutive months, or (iii) if, prior to the expiration
of either such six (6) month period, Executive's attending physician provides
the Company with a written prognosis that the illness, injury or other
incapacity that results in Executive's current disabled condition is reasonably
expected to prevent Executive from fully discharging 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.

                  (b)    For Cause or Without Cause. The Company may terminate
the Executive's employment hereunder at any time for Cause or without Cause. For
purposes of this Agreement, "Cause" shall mean: (A) Executive's conviction of,
or plea of guilty to, any act of fraud, misappropriation or embezzlement, or any
felony, (B) gross negligence, gross misconduct or dishonest activities by the
Executive in the discharge of his duties hereunder, or (C) the Executive's
willful and continuous failure to substantially perform his duties hereunder
(other than as a result of physical or mental illness) after written notice by
the Company to the Executive of his failure, specifying the particular act or
acts or failure to act that is the basis of such notice, and the Executive fails
to substantially correct such breach within fourteen (14) business days of his
receipt of such notice or (D) Executive's repeated engaging in conduct or
activities materially damaging to the Company, monetarily or otherwise (it being
understood, however, that neither conduct nor activities pursuant to Executive's
exercise of his good faith business judgment nor unintentional physical damage
to any property of the Company by Executive shall be a ground for such
determination by the Company). Prior to any termination hereunder, Executive
shall be given an opportunity to make a presentation to the Board at a meeting
of the Board. Following such meeting, the Board shall determine by a majority
vote whether to terminate Executive's services for "Cause" pursuant to this
Section and shall notify Executive in writing of its determination promptly,
specifying a date of termination in such notice.

                  (c)    For Good Reason. The Executive may terminate his
employment hereunder for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean and shall be deemed to exist if, without the prior written
consent or waiver of the Executive, (i) the Executive is assigned duties or
responsibilities by the Board that are inconsistent in any material respect with
the scope of the duties and responsibilities associated with his title as Chief
Executive Officer and, within ten (10) days following written notice by
Executive to the Board of Executive's objection to such duties or
responsibilities pursuant to this Section 4(c), the Board has not withdrawn such
assigned duties or responsibilities; (ii) the Executive's duties and
responsibilities as Chief Executive Officer are significantly reduced by the
Board and, within ten (10) days following written notice by the Executive to the
Board of Executive's objection to such reduction, the Board fails to reinstate
the Executive's duties and responsibilities so reduced; (iii) the Company's
failure to substantially perform

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any material term or provision 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
Executive), after written notice by the Executive to the Company of such
failure, specifying the particular act or acts or failure to act that is the
basis of such notice, and the Company fails to substantially correct such breach
within ten (10) days of its receipt of such notice, (iv) the Executive's office
location is relocated to one that is more than fifty (50) miles from the
location at which he was based immediately prior to the relocation, (v) the
Company fails to obtain the full assumption of this Agreement by a successor
corporation, or (vi) the Executive is not nominated to the Board.

         5.       Compensation upon Termination.

                  (a)    For Cause. In the event of termination for Cause, the
Executive shall be entitled to receive, in lieu of any other payments or
benefits, (i) any accrued but unpaid Base Salary, (ii) any amounts due but
unpaid for any prior completed fiscal year, including any Incentive Bonus
actually awarded for such year, and (iii) any unpaid travel and other
out-of-pocket expenses previously and reasonably incurred in the performance of
his duties hereunder ("Reimbursable Expenses"). Any such Base Salary and/or
Reimbursable Expenses shall be promptly paid in a lump sum in cash; any
Incentive Bonus due shall be paid at the same time and in the same manner as
Incentive Bonuses are paid to other executives of the Company for such fiscal
year.

                  (b)    For Death or Disability. If the Executive's employment
hereunder terminates due to death or Disability, in lieu of any payments
hereunder, he shall be entitled to (A) any accrued but unpaid Base Salary earned
through the date of death or Disability, (B) his Base Salary, at the rate in
effect on the date of death or Disability (the date of termination of
employment), as applicable, for twelve (12) months following such date, payable
to the Executive, or his beneficiary or estate, as applicable, (C) any amounts
due but unpaid with respect to any prior completed fiscal year, including any
Incentive Bonus actually awarded for such year, (D) in the case of termination
due to Disability, continue to participate, for twelve (12) months following his
date of Disability, in all employee benefit plans maintained by the Company in
which he was a participant (or shall receive from the Company the economic
equivalent of such coverage in cash). Executive agrees to cooperate with the
Company in securing life and disability insurance coverage to fund, or partially
fund, the Company's obligations under this Section 5(b).

                  (c)    Without Cause or for Good Reason. If the Executive is
terminated by the Company without Cause (which shall include a non-renewal of
this Agreement pursuant to a notice of non-renewal by the Company pursuant to
Section 1 hereof) or the Executive terminates for Good Reason, in lieu of any
other payments or benefits, the Executive shall be entitled to receive, (i) the
sum of one and one-half (1-1/2) times his Base Salary plus one and one-half
(1-1/2) times the Incentive Bonus paid or payable with respect to the
immediately preceding fiscal year, which sum shall be paid over the 18 calendar
month period commencing after the date of his termination of employment (the
"Extended Period") in the same manner as it was paid prior to the Executive's
termination, (ii) continuation, at the 

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Company's expense, of the Executive's coverage in any group health plan (which
may be provided by payment of COBRA continuation coverage premiums), life
insurance, long-term disability and other benefit plans or programs, to the
extent permissible under the terms of such plans or law, at the level in effect
on the Executive's date of termination until the end of the Extended Period (or
the economic equivalent of such coverage paid in cash), provided that the last
day of the Extended Period shall be treated as the date of the Executive's
termination of employment solely for the purpose of determining the rights of
the Executive (and his eligible dependents, if any) to the continuation coverage
provided under Section 4980B of the Internal Revenue Code of 1986, as amended
(the "Code"), (iii) all outstanding options previously granted to the Executive
under the Plan that are not vested at the date of termination shall vest and be
exercisable for a period of one year, and (iv) the provisions of Section 8 shall
not apply; provided, however, such payments and benefits pursuant to this
Section 5(c) shall not be due and payable by the Company to Executive if
Executive (i) shall violate the provisions of clauses (i), (ii) or (iii) of
Section 8(b) hereof or (ii) during the Extended Period shall engage in or render
any services to or be employed by any Competing Business (hereinafter defined)
in the Area (hereinafter defined) 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.

                  (d) Compensation upon Voluntary Termination. If Executive
shall voluntarily resign for other than "Good Reason" (which shall include a
non-renewal of this Agreement pursuant to a notice of non-renewal by the
Executive pursuant to Section 1 hereof), he shall be entitled only to any
accrued but unpaid Base Salary, any Incentive Bonus due and payable for any
prior completed fiscal year and Reimbursable Expenses, through the date of such
resignation or termination, payable in a lump sum in cash as promptly following
such termination.

         6.       Resignation of Offices and Directorships. Effective upon the
termination of the Executive's employment by the Company, the Executive shall be
deemed to have resigned as an officer, director, trustee and agent, if
applicable, of the Company and its affiliates and shall execute any documents
required by the Company to evidence the same; provided, however, notwithstanding
the foregoing, Executive shall defer any resignation contemplated hereby for a
period of up to 180 days following his termination of employment if requested by
the Company in order to facilitate any notices, filings, approvals or other
procedures necessary or appropriate in connection with Executive's resignation
or the appointment of his successor.

         7.       Return of Company Property. Upon termination of employment
hereunder or otherwise, Executive shall immediately return all property, which
belongs to the Company.

         8.       Restrictive Covenants.

                  (a)    The Executive 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

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nature of the services the Executive is to perform hereunder, and the
irreparable injury that would befall the Company should the Executive breach
such covenants. The Executive further acknowledges that (i) 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), (ii) the type and periods of restrictions
imposed by the covenants in this Section are fair and reasonable and that such
restrictions will not prevent the Executive from earning a livelihood, (iii) 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; (iv) the Company
conducts its business activity in and throughout the Area (as hereinafter
defined); and (v) Competing Businesses (as hereinafter defined) are engaged in
businesses like and similar to the business of the Company.

                  (b)    Having acknowledged the foregoing, the Executive 
covenants and agrees with the Company that, while he is in the Company's employ
and for a period of eighteen (18) months following his date of termination, he
will not, directly or indirectly:

                  (i)    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 the
         Executive or of which the Executive became aware by reason of his
         employment with or ownership in the Company;

                  (ii)   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 attempt to solicit or
         divert or 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 the Executive's employment
         hereunder and with whom the Executive had contact during the term of
         his employment;

                  (iii)  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)   for any reason except for (a) termination by the
         Company without Cause, (b) termination by Executive for "Good Reason"
         or (c) expiration of the Term without renewal pursuant to Section 1
         hereof by virtue of notice of non-renewal given by the Company to the
         Executive pursuant to such Section, 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 publicity-owned corporation whose shares are traded on
         a national securities exchange or in the NASDAQ National Market
         System).

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                  (c)    The Executive 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 from the Board,
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, the Executive shall
be permitted to retain any personal memorabilia belonging to him, notes taken by
him as a member of the Board, or any committee thereof, and any other such
materials which the Executive deems to be of value to him in the event the same
may be needed by the Executive in connection with the defense of any lawsuit,
action or proceeding brought against him for any reason whatsoever.

                  (d)    For purposes of this Agreement, (i) "Area" means a one
hundred (100) mile radius of (1) the Company's principal executive offices or
(2) any assisted care facility owned, managed or operated by the Company at the
time Executive's employment hereunder is terminated; (ii) "Competing Business"
means the business of developing, owning, acquiring or operating (1) living
facilities or specialty assisted care facilities for the treatment of
individuals suffering from Alzheimer's disease and (2) ancillary businesses
substantially similar to those ancillary businesses developed, owned, acquired
or operated by the Company or its subsidiaries during the term of this Agreement
provided that either the projected gross revenues or the projected earnings
before interest, taxes, depreciation and amortization ("EBITDA") of such
ancillary business during the twelve (12) calendar months following the date of
such determination is expected to constitute at least 5% of the consolidated
revenues or EBITDA, respectively, of the Company and its subsidiaries taken as a
whole during such period; and (iii) "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 the
Executive or of which the Executive became or becomes aware as a consequence of
or though 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.

                  (e)    The Executive acknowledges that irreparable loss and
injury would result to the Company upon the breach of any of the covenants in
this Section and that damages arising out of such breach would be difficult to
ascertain. The Executive hereby agrees that, in addition to all other remedies
provided at low or in 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 the Executive of any covenant contained in this Section. The parties
hereto agree that all references to the Company in this Section shall include,
unless the context otherwise requires, all subsidiaries and affiliates of the
Company.

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         9.       Change of Control

                  (a)    If, on or before the second anniversary of a Change in
Control, (1) the Executive's employment hereunder is terminated by the Company
(or any successor to the Company employing Executive pursuant to this Agreement)
for any reason other than for Cause (which shall include a non-renewal of this
Agreement pursuant to a notice of non-renewal by the Company pursuant to Section
1 hereof), or (2) Executive terminates his employment for Good Reason, then (i)
Section 8 shall not be applicable to the Executive from and after his date of
termination, (ii) the Company shall pay the Executive, in lieu of any other
payments or benefits (other than the benefit afforded by Section 5(c)(iii)
hereof, which shall be operative), an amount equal to (A) the sum of three times
his Base Salary in effect immediately prior to such Change in Control (the
"Prior Base Salary") and three times the amount of his Incentive Bonus paid or
payable with respect to the immediately preceding fiscal year, plus (B) any
accrued but unpaid salary or benefit due and owing as of the date of termination
(including without limitation the value of any Section 9 Options or Alternative
Benefit then due and owing pursuant to Section 9(b) hereof), which amount shall
be payable in a single lump sum in cash within thirty (30) days following the
date of Executive's termination, and (iii) Executive, at the Company's expense,
shall continue to be a participant in any group health plan (which may be
provided by payment of COBRA continuation coverage premiums), and/or life
insurance, long-term disability, or other employee benefit plans maintained by
the Company (or shall receive from the Company the economic equivalent of such
coverage in cash) (at the level in effect on the Executive's date of
termination) for a period of thirty-six months following his date of
termination.

         A Change in Control shall mean the happening of any of the following:

                  (i)    Any "person," as such term is used in Section 13(d) and
         14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
         (other than the Company or any subsidiary of the Company, or any
         trustee or other fiduciary holding securities under an employee benefit
         plan of the Company or any subsidiary) becomes the "beneficial owner"
         (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly
         or indirectly, of securities of the Company representing forty percent
         (40%) or more of the combined voting power of the Company's then
         outstanding securities; provided, however, the provisions of this
         subparagraph (i) shall not apply (and hence no Change of Control shall
         be deemed to arise pursuant to this subparagraph (i)) if the Company
         shall be a constituent corporation in a triangular merger if the voting
         stock of the Company immediately prior to such merger is converted into
         the voting stock of the parent company of the other constituent
         corporation in such merger so long as no "person" or "group" (as such
         terms are used under Section 13(d) and 14 (d) of the Exchange Act,
         whether or not such sections are applicable) is upon the consummation
         of such merger 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 share 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 

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         indirectly through one or more intermediaries, of forty percent (40%)
         or more of the total voting power represented by all of the voting
         stock of such parent company;

                  (ii)   Individuals who at the beginning of then applicable
         Original Term or Renewal Term are members of the Board, together with
         any new director (other than a director designated by a person who has
         entered into an agreement with the Company to effect a transaction
         described in clause (i), (iii) or (iv) hereof) whose election by the
         Board or nomination by the Board for election by the Company's
         shareholders was approved by a vote of at least two-thirds (2/3) of the
         directors then still in office who either were directors at the
         beginning of such period or whose election or nomination for election
         was previously so approved, shall cease for any reason to constitute at
         least a majority of the members of the Board;

                  (iii)  The shareholders of the Company approve a merger or
         consolidation of the Company with any other corporation, other than (x)
         a merger or consolidation which would result in the voting securities
         of the Company outstanding immediately prior thereto continuing to
         represent (either by remaining outstanding or by being converted into
         voting securities of the surviving entity or, in the case of a
         triangular merger, by being converted into voting securities of the
         parent company of the other constituent corporation) more than forty
         percent (40%) of the combined voting power of the voting securities of
         the Company, such surviving entity or parent company outstanding
         immediately after such merger or consolidation or (y) a merger or
         consolidation effected to implement a recapitalization of the Company
         (or similar transaction) in which no "person" (as defined above in
         clause (i)) acquires more than forty percent (40%) of the combined
         voting power of the Company's then outstanding securities; or

                  (iv)   The shareholders of the Company approve a plan of
         complete liquidation of the Company or an agreement for the sale or
         disposition by the Company of all or substantially all of the Company's
         assets or any transaction having a similar effect.

                  (b)    Effective upon any Change in Control (unless otherwise
agreed to by the Company and Executive):

                  (i)    The Company and Executive shall negotiate in good faith
         with respect to an increase to the Base Salary then in effect if such
         an adjustment is necessary to bring the overall compensation package
         payable to Executive following such Change in Control (taking into
         account the scope of operations of the Company following such Change in
         Control) in line with overall compensation packages payable to chief
         executive officers of comparable companies within the Company's
         business segment. If within sixty (60) days following such Change in
         Control the Company and the Executive shall be unable to agree upon the
         appropriateness of an increase in Base Salary as contemplated by this
         Section 9(b)(i) or the amount of such increase, then the determination
         with respect thereto shall be made by the Compensation Committee of 

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         the Board of Directors of the Company as constituted immediately prior
         to such Change in Control;

                  (ii)   Provided that either (A) the Company or any successor
         to the Company (the "Surviving Corporation") shall continue to have
         shares of their respective common stock publicly traded on any national
         stock exchange or NASDAQ following such Change in Control or (B) in the
         event that upon such Change in Control the Company (or its successor by
         merger) shall become a wholly-owned, first-tier subsidiary of any other
         corporation (the "Parent") that has shares of common stock publicly
         traded on any national stock exchange or NASDAQ at the time of such
         Change in Control (as a result of a triangular merger or otherwise),
         then, in the event that clause (A) of Section 9(b)(ii) shall be
         applicable, the Surviving Corporation shall have an obligation to
         grant, or, in the event that clause (B) of Section 9(b)(ii) shall be
         applicable, the Surviving Corporation shall have an obligation to cause
         its Parent to grant, stock options to Executive from time to time
         during the remaining Employment Period after such Change in Control in
         such amounts, upon such terms and with such frequency as are consistent
         with stock option grants to Executive during the three year period
         prior to such Change in Control ("Section 9 Options"); and


                  (iii)  In the event that neither clause (A) nor (B) of Section
         9(b)(ii) shall be applicable and the Surviving Corporation elects not
         to grant, or to cause its Parent to grant, Section 9 Options, then the
         Executive shall not be entitled to be granted Section 9 Options but the
         Executive shall be entitled to receive a compensation benefit from the
         Surviving Corporation that is substantially equivalent in value to the
         Section 9 Options (the "Alternative Benefit"), which Alternative
         Benefit shall be "earned" or vested on terms that are equivalent to the
         vesting provisions of stock options granted to Executive during the
         three year period prior to such Change in Control.

                  (c)    Anything in this Agreement to the contrary
notwithstanding, in the event that the Company's independent public accountants
determine that any payment by the Company to or for the benefit of Executive,
whether paid or payable pursuant to the terms of this Agreement or otherwise,
would not be deductible by the Company for federal income tax purposes because
of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
then the amount payable to or for the benefit of Executive shall be reduced (but
not below zero) to an amount that maximizes the amount payable to Executive
without causing any portion of the payment to be non-deductible by the Company
because of Section 280G of the Code.

         10.      Arbitration. Any and all disputes or controversies arising out
of or relating to this Agreement, shall be resolved by arbitration at the office
of the American Arbitration Association nearest to the Company's executive
offices at such time before a panel of three arbitrators under the then existing
rules and regulations of the American Arbitration Association. The parties agree
that in any such arbitration, the arbitrators shall not have the power to reform
or modify this Agreement in any way and to that extent their powers are so

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limited. The determination of the arbitrators shall be final and binding on the
parties hereto and judgment on it may be entered in any court of competent
jurisdiction. Except as required by law or as determined to be appropriate
disclosure by the Company under applicable securities laws or stock exchange
regulations, neither the Company nor Executives shall issue any press release or
make any statement which is reasonably foreseeable to become public with respect
to any arbitration or dispute between the parties without receiving the prior
written consent of the other party to the content of such press release or
statement. The Company and the Executive shall share the cost of the arbitration
proceeding equally.

         11.      Miscellaneous.

                  (a)    Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the Executive, his executor, administrator,
heirs, personal representatives and assigns, and upon the company and its
successors and assigns; provided that the obligations and duties of the
Executive may not be assigned or delegated.

                  (b)    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.

                  (c)    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 8 hereof) are several 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 the Executive.
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.

                  (d)    Assignment. Except as otherwise provided in this
Section, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, representatives, successors and
assigns. This Agreement shall not be assignable by the Executive, and shall be
assignable by the Company only to any corporation or other entity resulting from
the reorganization, merger or consolidation of the Company with any other
corporation or entity or any corporation or entity to or with which the
Company's business or substantially all of its business or assets may be sold,
exchanged or transferred, and it must be so assigned by the Company to, and
accepted as binding upon it by, such other corporation or entity in connection
with any such reorganization, merger, consolidation, sale, exchange or transfer
(the provisions of this sentence also being applicable to the successive such
transaction).

                                      -11-
<PAGE>   12

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

                  (f)    No Mitigation; No Offset. In the event of the
Executive's termination of employment, he shall be under no obligation to seek
other employment and there shall be no offset against any amounts due to the
Executive hereunder on account of any remuneration the Executive may obtain from
any subsequent employment. Any amounts due the Executive hereunder are in the
nature of liquidated damages, and not in the nature of a penalty.

                  (g)    Legal Fees. Each party hereto shall be responsible for
its legal fees incurred in connection wherewith; provided, however, that the
Company shall reimburse the Executive for legal fees and expenses incurred by
Executive in connection with the preparation of this Agreement in an amount not
to exceed $25,000.00.

                  (h)    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

                         If to the Executive, addressed to:

                         William F. Lasky
                         1213 East Goodrich Lane
                         Fox Point, Wisconsin 53217

                         If to the Company, addressed to:

                         Alternative Living Services, Inc.
                         450 N. Sunnyslope Road
                         Suite 300
                         Brookfield, Wisconsin 53005
                         Attn:    Corporate Secretary and Chairman of the 
                                  Compensation Committee of the Board of 
                                  Directors

                         with a copy to:

                         Rogers & Hardin LLP
                         2700 International Tower, Peachtree Center
                         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.

                                      -12-
<PAGE>   13
                  (i)    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.

                  (j)    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 price or subsequent
breach of the same or any other provision, agreement or covenant by such other
party hereto.

                  (k)    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.

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

                                            ALTERNATIVE LIVING SERVICES, INC.


                                            By:      /s/Thomas E. Komula
                                               ---------------------------------
                                            Its:     Senior Vice President
                                               ---------------------------------

                                            EXECUTIVE:


                                                     /s/ William F. Lasky
                                            ------------------------------------
                                            WILLIAM F. LASKY


                                     -13-