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                                                                    Exhibit 10.1
                         ASSISTED LIVING CONCEPTS, INC.
                             EMPLOYEE SEVERANCE PLAN


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                         ASSISTED LIVING CONCEPTS, INC.
                             EMPLOYEE SEVERANCE PLAN

         WHEREAS, Assisted Living Concepts, Inc., a corporation organized and
existing under the laws of the State of Nevada (the "Company"), recognizes that
one of the Company's most valuable assets and an undeniable contributor to the
success of the Company is its outstanding employees; and

         WHEREAS, the Company further recognizes that the loss of a significant
portion of its staff would seriously impact the service quality and ultimate
value of the Company; and

         WHEREAS, the Company has determined that it is advisable to establish a
severance benefit program to mitigate the possibility of a loss of certain
valuable personnel due to uncertainties faced in the prospect of the Merger of
the Company with Alpha Acquisition, Inc., a wholly-owned subsidiary of
Extendicare Health Services, Inc. ("Extendicare"), and to deal fairly with the
contributions of the Company's employees;

         NOW, THEREFORE, the Company adopts the Assisted Living Concepts, Inc.
Employee Severance Plan, effective November 4, 2004, the terms of which are as
follows:

                                    ARTICLE 1
                                   DEFINITIONS

         1.1 "BENEFITS" means the severance benefits that a Participant is
entitled to receive pursuant to Article 3 hereof.

         1.2 "BOARD" means the Board of Directors of the Company.

         1.3 "CAUSE" means the Company's good faith belief that the Participant
has (1) failed to substantially perform his or her job duties, (2) been
convicted of any felony or a misdemeanor involving dishonesty, fraud or breach
of trust, (iii) engaged in misconduct in the performance of his or her duties,
or (vi) disparaged or engaged in other conduct detrimental to the Company, any
of its affiliates or any of their respective management or employees.

         1.4 "CEO" means the Chief Executive Officer of the Company.

         1.5 "COBRA" means the United States Consolidated Omnibus Budget
Reconciliation Act of 1986, as amended from time to time.

         1.6 "CODE" means the Internal Revenue Code of 1986, as amended.

         1.7 "COMPANY" means Assisted Living Concepts, Inc. and its successors
(whether by Merger, consolidation, operation of law, sale of all or
substantially all of the Company's assets, or otherwise).

         1.8 "COMPARABLE POSITION" means, in the case of a Participant, a
position that does



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not involve a substantial adverse change in (i) the nature or scope of the
authorities and powers exercised, and duties and functions performed, by such
Participant in his or her position with the Company or (ii) Compensation at the
Effective Time.

         1.9 "COMPENSATION" means the Participant's wages from the Company as
defined in section 3401(a) of the Code for purposes of federal income tax
withholding, including elective contributions under a cafeteria plan described
in section 125 and elective contributions to a qualified cash or deferred
arrangement described in section 401(k) of the Code, and modified further by
excluding reimbursements or other expense allowances (including, but not limited
to, car allowances), fringe benefits (cash and noncash), moving expenses,
deferred compensation (other than elective contributions to the Company's
qualified cash or deferred arrangement described in section 401(k) of the Code),
welfare benefits as defined in ERISA, and any income therefrom, overtime pay,
and special performance or incentive compensation amounts (including, but not
limited to, bonuses and income from any equity-based compensation arrangements
such as stock options).

         1.10 "DISQUALIFYING EVENT" means a Participant's employment
relationship with the Company is terminated:

                  (a)      by the Company for Cause;

                  (b)      by such Participant for any reason other than as a
                           result of the occurrence of an event described in
                           Section 1.20(b) or (c); or

                  (c)      as a result of such Participant's death or a physical
                           or mental condition causing such Participant to be
                           unable to substantially perform his or her essential
                           duties with the Company (including, but not limited
                           to, such a condition entitling him or her to benefits
                           under any disability income policy or program of the
                           Company) with or without any reasonable accommodation
                           required by law.

         1.11 "EFFECTIVE DATE" means November 4, 2004.

         1.12 "EFFECTIVE TIME" means the effective time of the Merger as set
forth in a merger agreement related thereto.

         1.13 "EMPLOYMENT TERMINATION DATE" means the date on which the
employment relationship between the Participant and the Company is terminated.

         1.14 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.

         1.15 "IMMEDIATE GEOGRAPHIC AREA" means the area within a 40-mile radius
of the location where a Participant is employed immediately prior to the
Effective Time.

         1.16 "MERGER" means the consummation of the Merger of the Company with
Alpha



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Acquisition, Inc., a wholly-owned subsidiary of Extendicare Health Services,
Inc.

         1.17 "PARTICIPANT" means a person (i) who is employed by the Company on
the Effective Date, (ii) who is designated by the CEO as a Participant under
this Plan and (iii) which designation has been approved by the Plan
Administrator.

         1.18 "PLAN" means the Assisted Living Concepts, Inc. Employee Severance
Plan, as set forth herein, as amended from time to time.

         1.19 "PLAN ADMINISTRATOR" means the Compensation Committee of the
Board; provided, however, that such Committee may designate any person to
administer this Plan in accordance with the provisions of Article 6.

         1.20 "QUALIFYING EVENT" means the occurrence of any of the following:

                  (a) a Participant's employment relationship with the Company
         is terminated by the Company without Cause;

                  (b) a Participant's position with the Company immediately
         prior to the Effective Time is (i) eliminated or (ii) materially
         changed to the extent that it is not a Comparable Position; or

                  (c) the permanent location of a Participant's place of
         employment with the Company is changed to a location that is not in the
         Immediate Geographic Area.

         1.21 "RELEASE AGREEMENT" means an agreement substantially in the form
attached hereto as Exhibit A.

         1.22 "WARN ACT" means the United States Worker Adjustment and
Retraining Notification Act of 1988, as amended from time to time.

                                    ARTICLE 2
                                   ELIGIBILITY

         A Participant who satisfies all of the following requirements, at any
time after the Effective Time and prior to twelve (12) months after the
Effective Time, shall be entitled to the Benefits described in Article 3 hereof:

                  (a) a Qualifying Event has occurred with respect to such
         Participant;

                  (b) a Disqualifying Event has not occurred with respect to
         such Participant; and

                  (c) such Participant has executed a Release Agreement, which
         has become irrevocable.



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                                    ARTICLE 3
                                    BENEFITS

                  (a) The Company shall pay to a Participant who has satisfied
         the requirements of Article 2 hereof such Participant's Benefits as
         approved by the Compensation Committee of the Board and as agreed to by
         he president of Extendicare on or before the Effective Date.

                  (b) Each Participant (and his or her qualified beneficiaries)
         who is entitled to elect, and timely elects, continuation of health
         coverage under COBRA shall not be required to pay COBRA premiums in
         excess of the premiums or contributions paid by similarly situated
         active employees of the Company for the period during which such
         Participant is entitled to severance.

                  (c) This Plan replaces and supercedes any other severance
         plan, policy or arrangement or stay bonus agreement or arrangement,
         whether written or oral, with respect to the Participants covered
         hereby.

                  (d) The Benefits described in this Plan shall be in addition
         to, and not in lieu of, the following payment(s) to which a Participant
         is entitled on his or her Employment Termination Date pursuant to
         statute or written Company policy: (i) WARN Act payments, (ii) accrued
         but unpaid vacation, paid time off, salary, wages or bonus, (iii) COBRA
         benefits, and (iv) conversion rights under any group insurance
         contract. All other compensation and benefits, including, but not
         limited to, unemployment compensation, is waived in the Release
         Agreement.

                                    ARTICLE 4
                              TIME OF PLAN PAYMENTS

         The Company shall pay Benefits, in accordance with Article 3 hereof, to
a Participant who has satisfied the requirements of Article 2 hereof, within
fourteen (14) days after satisfaction of all such requirements.

                                    ARTICLE 5
                              UNFUNDED ARRANGEMENT

         All Benefits will be paid, as needed, from the general assets of the
Company or its successor. It is intended that this Plan shall be unfunded for
tax purposes.

         This Plan is only a general corporate commitment, and each Participant
must rely upon the general credit of the Company for the fulfillment of its
obligations hereunder. Under all circumstances, the rights of Participants to
any asset held by the Company will be no greater than the rights expressed in
this Plan. Nothing contained in this Plan shall constitute a guarantee by the
Company that the assets of the Company will be sufficient to pay any Benefits
under this Plan or would place the Participant in a secured position ahead of
general creditors of the Company. The Participants are only unsecured creditors
of the Company with respect to any




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Benefits, and this Plan constitutes a mere promise by the Company to make
Benefit payments in the future under certain circumstances. No specific assets
of the Company have been or shall be set aside, or shall in any way be
transferred to a trust or shall be pledged in any way for the performance of the
Company's obligations under this Plan which would remove such assets from being
subject to the general creditors of the Company.

                                    ARTICLE 6
                                 ADMINISTRATION

         The Plan Administrator shall have the full power and authority to
administer this Plan, carry out its terms and conditions and effectuate its
purposes. The Plan Administrator shall be the "named fiduciary," as such term is
defined in ERISA, of this Plan, with responsibility for administration of this
Plan.

          The Plan Administrator shall serve without compensation for its
services as such. However, all reasonable expenses of the Plan Administrator
shall be paid or reimbursed by the Company upon proper documentation. The Plan
Administrator shall be indemnified by the Company against personal liability for
actions taken in good faith in the discharge of duties as the Plan
Administrator.

         The Plan Administrator shall keep all individual and group records
relating to participants and former participants and all other records necessary
for the proper operation of this Plan. Such records shall be made available to
the Company and to each Participant for examination during business hours except
that a Participant shall examine only such records as pertain exclusively to the
examining Participant and to this Plan. The Plan Administrator shall prepare and
shall file as required by law or regulation all reports, forms, documents and
other items required by ERISA, and every other relevant statute, each as
amended, and all regulations thereunder (except that the Company, as payor of
the Benefits, shall prepare and distribute to the proper recipients all forms
relating to withholding of income or wage taxes, Social Security taxes, and
other amounts which may be similarly reportable).

         The Plan Administrator is authorized to make the rules for
administering this Plan, to construe its provisions, to correct its defects, and
to supply any omissions or reconcile any inconsistencies which may appear in
this Plan, to determine all questions of eligibility and entitlement to benefits
and resolve all controversies. The actions of the Plan Administrator in these
matters, when performed in good faith and in his sole judgment, shall be final
as to all parties.

         The Plan Administrator has full and absolute discretion in the exercise
of the Plan Administrator's authority under this Plan, including, without
limitation, the authority to determine any person's right to benefits under this
Plan and the correct amount and form of any Benefits. Any action taken or ruling
or decision made by the Plan Administrator in the exercise of any of the Plan
Administrator's powers and authorities under this Plan, shall be final and
conclusive as to all parties. No final action, ruling, or decision of the Plan
Administrator may be set aside unless it is held to have been arbitrary and
capricious.



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                                    ARTICLE 7
                            AMENDMENT AND TERMINATION

         Prior to the Effective Time, the Company shall have the right to amend
or terminate this Plan, in whole or in part, for any reason. This Plan may not
be terminated or amended on or after the Effective Time in any manner that would
negatively affect a Participant's rights under this Plan without the consent of
all the Participants or, in the alternative, the Participants whose Benefits are
affected by such termination or amendment. Notwithstanding the foregoing, this
Plan will terminate on the earlier of twelve (12) months after the Effective
Time or the date on which the Company determines that the Merger will not take
place; provided, however, that such termination shall not affect Benefits
accrued by a participant prior to such termination.

                                    ARTICLE 8
                                CLAIM PROCEDURES

         The Company will advise each Participant of any Benefits to which the
Participant is entitled under this Plan. If any person believes that the Company
has failed to advise him or her of any Benefit to which he or she is entitled,
then he or she may file a written claim with the Plan Administrator. The Plan
Administrator shall review such claim and respond thereto within a reasonable
time after receiving the claim. The Plan Administrator shall provide to every
claimant who is denied a claim for benefits written notice setting forth in a
manner calculated to be understood by the claimant:

                  (a) the specific reason or reasons for the denial;

                  (b) specific reference to pertinent Plan provisions on which
         the denial is based;

                  (c) a description of any additional material or information
         necessary for the claimant to perfect the claim and an explanation of
         why such material or information is necessary; and

                  (d) an explanation of the Plan claims review procedures.

         Within sixty (60) days of receipt by a claimant of a notice denying a
claim under the preceding paragraph, the claimant or his or her duly authorized
representative may request in writing a full and fair review of the claim by the
Plan Administrator. The Plan Administrator may extend the 60-day period where
the nature of the Benefit involved or other attendant circumstances make such
extension appropriate. In connection with such review, the claimant or his or
her duly authorized representative may review pertinent documents and may submit
issues and comments in writing. The Plan Administrator shall make a decision
promptly, and not later than sixty (60) days after the Plan's receipt of a
request for review, unless special circumstances (such as the need to hold a
hearing) require an extension of time for processing, in which case a decision
shall be rendered as soon as possible, but not later than one hundred twenty
(120) days after receipt of a request for review. The decision on review shall
be in writing and shall include specific reasons for the decision, written in a
manner calculated to be understood by the



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claimant, and specific references to the pertinent Plan provisions on which the
decision is based.

                                    ARTICLE 9
                                  MISCELLANEOUS

         9.1 TAX WITHHOLDING. The Company will calculate the deductions from the
amount of the Benefit paid under this Plan for any taxes required to be withheld
by federal, state or local government and shall cause them to be withheld.

         9.2 PLAN NOT AN EMPLOYMENT CONTRACT. The adoption and maintenance of
this Plan is not a contract between the Company and its employees which gives
any employee the right to be retained in its employment. Likewise, it is not
intended to interfere with the rights of the Company to discharge any employee
at will and at any time and for any reason or no reason at all or to interfere
with the employee's right to terminate his employment at any time.

         9.3 ALIENATION PROHIBITED. No benefits hereunder shall be subject to
anticipation or assignment by a Participant, to attachment by, interference
with, or control of, any creditor of a Participant, or to being taken or reached
by any legal or equitable process in satisfaction of any debt or liability of a
Participant prior to its actual receipt by the Participant. Any attempted
conveyance, transfer, assignment, mortgage, pledge, or encumbrance of the
benefits hereunder prior to payment thereof shall be void.

         9.4 GENDER AND NUMBER. If the context requires it, words of one gender
when used in this Plan shall include the other genders, and words used in the
singular or plural shall include the other.

         9.5 SEVERABILITY. Each provision of this Agreement may be severed. If
any provision is determined to be invalid or unenforceable, that determination
shall not affect the validity or enforceability of any other provision.

         9.6 BINDING EFFECT. This Agreement shall be binding upon any successor
of the Company (whether by Merger, consolidation, operation of law, sale of all
or substantially all of the Company's assets or otherwise).

         9.7 GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas and, to the
extent applicable, by the laws of the United States.

                                           [SIGNATURE PAGE FOLLOWS]



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         IN WITNESS WHEREOF, the Company has caused a Plan to be executed by its
duly authorized officer effective the 4th day of November, 2004.

                                       ASSISTED LIVING CONCEPTS, INC.



                                       By:      /s/ Steven Vick
                                          --------------------------------------
                                       Name:    Steven Vick
                                       Title:   President and CEO


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                                    EXHIBIT A
                            Form of Release Agreement

         This Release Agreement ("Agreement") is entered into by and between
___________________________ (hereafter "Employee") and Assisted Living Concepts,
Inc. (hereafter "Employer"). In consideration of Employee's participation in the
Assisted Living Concepts, Inc. Employee Severance Plan (the "Plan"), Employee
hereby knowingly and voluntarily executes this Agreement.

         Upon execution of this Agreement and the acceptance of benefits under
the Plan, Employee knowingly and voluntarily waives recovery on, covenants not
to sue and fully and forever releases and discharges Employer, its parents,
affiliates and subsidiaries, including all predecessors and successors, assigns,
administrators, executors, officers, directors, trustees, shareholders,
employees, agents, insurers and attorneys, past and present (hereinafter
collectively, the "Company"), from any and all claims, demands, contracts,
causes of action, obligations, damages, and liabilities, of any kind or nature,
known or unknown, arising out of Employee's employment with the Company or the
termination thereof ("Release"). This Release shall include, but not be limited
to, any claims for relief or causes of action under federal, state or local
statute, ordinance or regulation. This Release also includes, but is not limited
to, claims of employment, benefits, wages and/or compensation of any form, or
discrimination Employee may have, if any, pursuant to the Age Discrimination in
Employment Act of 1967 (28 U.S.C. par. 621 et seq.), Title VII of the Civil
Rights Act of 1964 (42 U.S.C. par. 2000 et seq.), the Civil Rights Act of 1866
and 1871 (42 U.S.C. par. 1981 and 1983), the Americans with Disabilities Act (42
U.S.C. Section 206 et seq.), the Rehabilitation Act of 1973 (29 U.S.C. Section
791 et seq.), the Equal Pay Act of 1963 (29 U.S.C. Section 206 et seq.), and the
Employee Retirement Income Security Act of 1974 as amended. This Release
includes, but is not limited to, any claim of retaliatory discharge under any
law, including those mentioned above.

         Employee expressly acknowledges that:

(a)      he or she entered into this release knowingly and voluntarily, without
         any duress or coercion;

(b)      he or she has read and understands this release in its entirety;

(c)      he or she has been advised orally and is hereby advised in writing to
         consult with an attorney with respect to this release BEFORE signing
         it;

(d)      he or she has not been forced to sign this Agreement by any employee or
         agent of the Company;

(e)      he or she has forty-five (45) calendar days after receipt of the
         Agreement to consider its terms before signing it; and

(f)      he or she has seven (7) calendar days from the date of signing this
         Agreement to terminate and revoke this Agreement, in which case this
         Agreement shall be unenforceable, null and void. Employee may revoke
         this Agreement during those seven (7) days by providing




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         written Notice of Revocation to the Company and stating, "I hereby
         revoke my acceptance of our Agreement." The Notice of Revocation must
         be personally delivered to or mailed to _____________. This Agreement
         shall not become effective or enforceable until the seven-day
         revocation period has expired.

         To the extent that Employee has signed this Agreement less than
forty-five (45) calendar days after receipt of the Agreement, Employee
acknowledges that he or she hereby waives any additional time that Employee has
to consider to terms of the Agreement and that Employee was not coerced into
signing the Agreement prior to the end of such 45-day period. Employee does NOT,
however, waive the seven (7) day revocation period mention in (f) above.

         The following information regarding the Agreement is being provided to
you:

         Item 1:  The class, unit, or group of individuals being offered the
                  Agreement include the following:

                           Employees of the __________________ Department.


         Item 2:  The eligibility factors for the Agreement are as follows:

                           Satisfactory performance until your date of
                           separation and signing and not revoking the
                           Agreement.

         Item 3:  The time limits for the Agreement are as follows:

                           The Agreement is available for consideration and
                           signing for a period of not less than forty-five (45)
                           days after the date the Agreement is delivered to
                           Employee.

                           Written revocations of the Agreement must be
                           delivered to the Company representative in the manner
                           stated in this Agreement no later than seven (7) days
                           after signing the Agreement to be considered valid.

         Item 4:   The job titles and ages of all individuals eligible or
                   selected for the Agreement are as follows:

                           [Job Title]               [Age]

         Item 5:   The ages of all individuals in the same job classification
                   or organizational unit who are not eligible or selected for
                   the program are as follows:

                           [Job Title]               [Age]


         Employee expressly agrees that upon termination of employment, he/she
will never attempt to assert a right to reinstatement with the Company and
expressly releases and discharges the Company from any obligation to employ him
or her in any capacity.



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         Employee has fully reviewed the terms of this Agreement, acknowledges
that he or she understands the terms of this Agreement and states that he or she
is entering into this Agreement knowingly, voluntarily and in full settlement of
all claims that he or she may have as a result of his or her employment with or
separation of employment from the Company.

         This Agreement shall be binding upon the Employee and the Company and
each of their representatives, agents and assigns, and as to Employee, his or
her spouse, heirs, legatees, administrators and personal representatives.

         Subject to the terms of the Plan, this Agreement constitutes the
exclusive and complete agreement between the parties hereto relating to the
subject matter hereof. No amendment of this Agreement shall be binding unless in
writing and signed by the parties.

         The provisions of this Agreement are severable. If any provision or the
scope of any provision is found to be unenforceable by a court of competent
jurisdiction, the other provisions or the affected provisions as reduced in
scope shall remain fully valid and enforceable.

         This Agreement shall be governed by the laws of the State of Texas
(excluding choice of law principles) to the extent such law is not preempted by
federal law.

         IN WITNESS WHEREOF, the undersigned acknowledge that they have executed
this instrument as their free and voluntary act, for the uses and purposes set
forth herein on the dates set forth below.

Accepted:

EMPLOYER                            EMPLOYEE


By:_______________________________  By:___________________________________
      Authorized Representative

Date: ____________________________  Date:_________________________________



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