Document:

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Exhibit 10.1

	 	 	 
	

	 	Sales Commission Plan

V.P., Global Sales

The following is the outline of your 2008 commission Plan. The plan is effective January 1, 2008.
For the purposes of this plan, the plan year is January 1, 2008 through December 31, 2008.

Objectives:

The following outlines the objectives for the V.P., Global Sales Commission Plan:

	 	•	 	Target a total cash compensation (base salary + commissions) of $325K annually
	 
	 	•	 	Incentive to drive cash system sales and utilization of IVUS and FM disposable products
in the U.S., JAPAN and APLAC and sales regions
	 
	 	•	 	Increase incentive to drive revenue beyond quota and achieve territory business
objectives with an “over plan” commission rate

Base Commission:

The plan contains a two-tiered commission rate structure, “at plan” and “over plan” allowing for
higher commission payout for performance above the established quotas. Your commission will be
calculated using the following commission guidelines:

	 	•	 	Capital Placements & Disposable Utilization “at plan” commission rate: Applies to the
Grand Total GAAP revenue up to plan (quota) as reported by Finance for each quarter for
the U.S., JAPAN and APLAC sales regions.

Over Plan Commission:

	 	•	 	Capital Placements & Disposable Utilization “over plan” commission rate: This rate is
applied to the Grand Total GAAP revenue reported by Finance that exceeds the annual
revenue quota. (See Over Plan Commission section below for revenue.)

As an incentive to drive additional sales, there is an additional “over plan” commission rate
applied to all revenue generated above your revenue quota. The over plan rate will be calculated
at the end of the plan year to all GAAP revenue reported by Finance that exceed the annual revenue
quota. The annual revenue quota will be the sum of H1’08 and H2’08 revenue plans. The payment of
any over plan commission is contingent upon the achievement of the business objectives for your
territories and subject to final approval by the Volcano Board of Directors. This additional
commission rate is also shown on your quota sheet.

If a new product line is added during the period of this time that constitutes a significant
revenue contributor and was not part of the final, board approved revenue plans for H1’08 or H2’08,
you will receive additional communication on the specific quota and associated commission rate(s).
The revenue produced for this new product line will not be factored into the above-referenced base
commission calculations or the “Over Plan” commission calculations.

See the enclosed Sales Targets H1’08 document to see your quotas and corresponding commission
rates.

Payment of Commissions:

Commissions calculated quarterly under this plan are earned and paid on the following basis:

Quarterly: 50% of calculated quarterly commissions, up to 100% of plan, will be paid within
30 days of end of quarter.

	 	 	 	 	 
	
	 	
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Annually: Remaining quarterly commissions for the plan year are calculated by applying the
at plan commission rate to the final eligible sales revenue, then subtract out all quarterly
commissions paid during the plan year. In addition, 100% of any “over plan” calculated commissions
are paid annually after approval by the Volcano Board of Directors.

Earned commissions are defined as the amount determined by applying your commission rate to the
Grand Total GAAP Revenue for U.S, JAPAN and APLAC sales regions as reported by Finance for the
applicable period.

If you cease employment for any reason, advances will immediately cease and any remaining
commissions will be paid after accounting for all allowances, rebates, credits and returns received
by the company at any time prior to final payment that have not been previously deducted, and will
be paid within 30 days of the end of the month in which the cessation of employment has occurred.
You must be employed for the entire quarter to qualify for that quarter’s earned commission, and
you must be employed for the entire year to qualify for that year’s commission.

Plan
Guidelines:

General

Business conditions and new product launches may necessitate modifications of this Plan. Such
modifications will be made at the sole discretion of the President and Chief Executive Officer.

Commissions are based on shipped and invoiced product net of any adjustments. Credits, discounts,
rebates or other pricing deviations from list price may reduce commissionable revenue.

Forfeiture
/ Exceptions

Forfeiture of payment under this Plan will result if the sales staff member fails to report a
conflict of interest or engages in dishonesty, falsification of financial information, or any
serious misconduct in connection with employment of Volcano Corporation.

Administration

The administration of this Plan is the responsibility of the V.P., Global Sales Compensation Team
comprised of the following:

President and Chief Executive Officer

Chief Financial Officer

V.P., Finance & Corporate Controller

V.P., Human Resources

Sales Analysis Manager

All questions and issues arising from or relating to this Plan, including the allocation or
authorization of allowances, rebates, credits and returns, will be resolved by the Volcano
Corporation V.P., Global Sales Compensation Team, at its sole discretion. This decision will be
final.

This Plan, or any part of this Plan, does not constitute a contract of employment with or a
guarantee of payment of commission with the sales staff member. The Volcano Corporation V.P.,
Global Sales Compensation Team may, at its sole discretion, at any time, terminate or modify, in
whole or in part, provisions of this Plan, with or without notice, or the consent of the sales
staff member.

If you have further questions regarding this Plan, please contact a representative of the V.P.,
Global Sales Compensation Team.

	 	 	 	 	 
	
	 	
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EXHIBIT 10.1

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”), effective as of April 15, 2008, is by and
between Assisted Living Concepts, Inc. a Nevada corporation with its principal place of business at
W140 N8981 Lilly Road, Menomonee Falls, WI 53051, (the “Company”) and Laurie Bebo (the
“Employee”).

WITNESSETH

     WHEREAS, the parties in July 2006 entered into an Employment Agreement (“2006 Agreement”);

     WHEREAS, the Company desires to continue to employ Employee as an employee of the Company or
its subsidiaries, and Employee desires to provide services to the Company or its subsidiaries, all
upon the terms and conditions hereinafter set forth; and

     WHEREAS, the parties wishing to change the terms and conditions of Employee’s employment with
the Company hereby agree to enter into this Agreement which shall supersede the 2006 Agreement
effective April 15, 2008.

     NOW, THEREFORE, in consideration of the promises and mutual agreements hereinafter set forth,
and intending to be legally bound hereby, as well as other good and valuable consideration
(including but not limited to continued employment and the receipt of the bonus identified herein),
the sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Offer and Acceptance of Employment. The Company hereby agrees to continue to employ
Employee as the President and Chief Executive Officer. Employee accepts such employment and agrees
to perform the customary responsibilities of the President and Chief Executive Officer with the
Company and/or certain of its subsidiaries as may be reasonably assigned to him/her from time to
time by the Company in its discretion. Employee will perform such other duties as may from time to
time be reasonably assigned to him/her by the Company in its discretion.

2. Compensation and Benefits.

     (a) Base Salary. As long as Employee remains an employee of Company, Employee will be
paid a base salary, less applicable withholding, which shall continue at the rate currently in
effect, until adjusted by the Company. Any adjustment shall not reduce or limit any other
obligation of the Company hereunder. Employee’s annual base salary payable hereunder, as it may be
adjusted from time to time and without reduction for any amounts deferred as described below, is
referred to herein as “Base Salary”. Payment of Employee’s Base Salary, as in effect from time to
time, may be deferred to the extent Employee elects to defer such salary under the terms of any
deferred

 

 

compensation plan or other employee benefit arrangement maintained or established by the
Company. The Company shall pay Employee the portion of his/her Base Salary not deferred in
accordance with its customary periodic payroll practices.

     (b) Incentive Compensation. On April 15, 2008, Employee shall receive a discretionary
bonus in the amount of $160,000, provided Employee signs this Agreement. Employee acknowledges that
this bonus is discretionary and that Employee is not entitled to it unless Employee signs this
Agreement. In addition, subject to approval of the Compensation/Nomination/Governance Committee of
the Board of Directors, Employee may be eligible to participate in stock option, incentive
compensation and other plans, which reward performance, at a level consistent with Employee’s then
assigned position(s) with the Company or certain of its subsidiaries and other affiliates and the
Company’s then current policies and practices. Any stock or options issued or purchased by Employee
pursuant to a Stockholder or Option Agreement between Employee and the Company prior to or after
the date of this Agreement shall be subject to the applicable Stockholder or Option Agreement.

     (c) Benefits and Expenses.

                    (i) Benefits. Employee shall be eligible to participate in (1) each welfare benefit
plan sponsored or maintained by the Company, including, without limitation, each life, optional
life, hospitalization, medical, dental, vision, health, accident or disability insurance,
individual disability/long term care plan, or similar plan or program of the Company, and (2) each
deferred compensation (including Executive Retirement) or savings plan sponsored or maintained by
the Company, in each case, whether now existing or established hereafter, to the extent that
Employee is eligible to participate in any such plan under Company policies and practices and
consistent with the generally applicable provisions thereof. With respect to benefits payable to
Employee, Employee’s service credited for purposes of determining Employee’s benefits and vesting
shall be determined in accordance with the terms of the applicable plan or program. Nothing in this
Section 2(c), in and of itself, shall be construed to limit the ability of the Company to amend or
terminate any particular plan, program or arrangement.

                    (ii) Vacation. Employee shall be entitled to the number of paid vacation days in each
anniversary year and paid holidays as determined by the Company’s policies in place from time to
time.

                    (iii) Business Expenses. The Company shall pay or reimburse Employee for all
reasonable expenses incurred or paid by Employee in the performance of Employee’s duties hereunder,
upon presentation of expense statements or vouchers and such other information as the Company may
reasonably require and in accordance with the then generally applicable policies and practices of
the Company.

                    (iv) Auto. The Company shall provide the Employee with a leased Company vehicle with
terms that are similar to those that the Employee enjoys as of the date of this Agreement, to
include auto insurance. Additionally, the Employee will be

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 reimbursed for miles driven on Company business at the applicable reimbursement rate that is
set from time to time by the Company.

3. Employment Termination. Employee’s employment under this Agreement may be terminated as
follows:

     (a) Good Cause.  For purposes hereof, a termination by the Company for “Good Cause”
shall mean termination by action of the Company because of (i) Employee’s material and willful
theft or misuse of the Company’s property or time; materially and willfully falsifying any document
or making any false or misleading statements relating to Employee’s employment with the Company;
commission, conviction of or the entry of a plea of nolo contendere by Employee of any felony
(whether or not involving the Company or any of its subsidiaries), including, without limitation,
those involving dishonesty or moral turpitude; commission, conviction of or the entry of a plea of
nolo contendere by Employee of any misdemeanor (whether or not involving the Company or any of its
subsidiaries), involving dishonesty, moral turpitude, or affecting performance of the job; or
breach by Employee of his/her obligations under this Agreement, as reasonably determined by the
Board in its discretion, (ii) fraud, dishonesty, misconduct or embezzlement on the part of Employee
as reasonably determined by the Board in its discretion, (iii) refusal or continuing failure to
attempt, other than by reason of disability as defined below, to follow the lawful directions of
the senior officers or the Board of Directors of the Company as reasonably determined by the Board
in its discretion, (iv) willful violation of any material policy of the Company or material
agreement with the Company as reasonably determined by the Board in its discretion, (v) breach of,
negligence with respect to, or the failure or refusal by Employee to perform and discharge his/her
duties, responsibilities or obligations under this Agreement or as defined by the Company as
reasonably determined by the Board in its discretion, that is not corrected within 30 days
following written notice thereof to Employee by the Company as reasonably determined by the Board
in its discretion, (vi) discriminatory or harassing behavior, whether or not illegal under State,
federal or local law, which the Board in its discretion reasonably determines violates Company
policy, or (vii) other conduct that may be materially detrimental to the best interests of the
Company or any affiliate thereof  as reasonably determined by the Board in its discretion. 

     (b) Without Cause. Notwithstanding anything to the contrary contained in this
Agreement, the Company may, at any time, terminate Employee’s employment hereunder without Cause.

     (c) Death. If Employee dies, his/her employment shall terminate as of the date of
death.

     (d) Disability. In the event of the “permanent disability” (as defined below) of
Employee, the Company shall have the right in accordance with applicable law to terminate
Employee’s employment hereunder. For purposes of this Section, “permanent disability” means any
disability as defined under the Company’s applicable long-term disability insurance policy or, if
no such policy is available, the inability of Employee,

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due to a physical or mental impairment, for ninety days (whether or not consecutive) during
any period of three hundred sixty-five days to perform the duties and functions of his/her job with
or without reasonable accommodation. A determination of disability shall be reasonably determined
by the Company’s Board of Directors in its discretion and Employee shall cooperate with the efforts
to make such determination. Any such determination shall be conclusive and binding on the parties.
Any determination of “disability” under this provision is not intended to alter any benefits
Employee may be entitled to receive under any long-term disability insurance policy carried by
Employee, which shall be governed solely by the terms of any such policy. In lieu of termination,
the Company may transfer Employee to another position, and elect to terminate this Agreement, even
though Employee’s employment is not terminated. In that case, Employee shall not be entitled to
receive any severance as provided herein.

     (e) Upon Good Reason. Employee shall have “Good Reason” to terminate this Agreement:

          (i) if Employee is located in the corporate office and within 30 days of receiving written
notice from the Company that Employee’s work location is being shifted to a location more than 50
miles away from Employee’s current work location, Employee provides in writing an objection to such
relocation and of Employee’s intention to treat such requirement as “Good Reason” and the Company
does not within 30 days of such notice rescind such requirement, (This clause does not apply to
employees working out of satellite offices or a home. If Employee works out of a satellite offices
or a home his/her location may be changed and such change shall not be “Good Reason” under this
Agreement.); or

          (ii) if Employee provides in writing within 30 days of receiving written notice from the
Company that the Company intends to reduce his/her Base Salary then in effect so that following
such reduction his/her Base Salary is 95% or less of the highest Base Salary payable to Employee
hereunder, notice of Employee’s intention to treat such diminution as “Good Reason”, and the
Company does not within 30 days of such notice rescind such diminution.

     (f) Voluntary Termination. Employee may voluntarily resign upon providing the Company
with sixty (60) days notice of resignation. Upon receipt of such notice, the Company may inform
Employee that it is not requiring such notice.

     (g) Date of Termination. “Date of Termination” shall mean whichever of the following
is applicable:

          (i) if Employee’s employment is terminated under paragraph (c) of this Section 3, the date of
death;

          (ii) if Employee’s employment is terminated under paragraph (a) or (b) of this Section 3, the
date specified in the Notice of Termination;

          (iii) if Employee is terminated for the reasons specified in paragraph (d), the date Employee
is deemed by the Company to be disabled as defined herein;

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          (iv) in the case of an event described in paragraph (e) of this Section 3, the end of the
30-day cure period, if the Company has not so cured; or

          (v) in the event Employee voluntarily terminates employment as described in paragraph (f) of
this Section 3, Employee’s Date of Termination shall either be the date which is 60 days after the
date Employee provides notice to the Company of voluntary termination, or if such notice is not
required by the Company, the date the Company provides notice that the 60-day notice is not
required.

4. Payments upon Termination.

     (a) Termination Due to Death, Disability, or Voluntary Termination. Upon termination
of Employee under Section 3(c), 3(d), or (f), the Company shall pay to Employee or his/her estate
Employee’s salary and other accrued benefits earned up to the Date of Termination. Employee shall
also be entitled to all vested deferred compensation (including Executive Retirement) of any kind
at such times and in such amounts provided under the terms of applicable deferred compensation
arrangements. The Company shall have no further obligations to Employee under this Agreement.

     (b) Termination for Cause. If Employee’s employment shall be terminated under Section
3(a), Employee shall receive salary and benefits accrued through the Date of Termination. Employee
shall also be entitled to all vested deferred compensation (including Executive Retirement) of any
kind at such times and in such amounts provided under the terms of applicable deferred compensation
arrangements. The Company shall have no further obligations to Employee under this Agreement.

     (c) Termination Without Cause or for Good Reason.

     In the event Employee’s employment terminates pursuant to paragraph (b) or (e) of Section 3,
then:

               (i) the Company shall pay to employee any Base Salary owed to the Date of Termination which
has not yet been paid (less applicable deductions to include withholdings for taxes).

               (ii) the Company shall also pay to Employee (less applicable deductions, including
withholdings for taxes) the following subject to Section 6(d):

                    (A) Two (2) years of Base Salary at the rate in effect at the Date of Termination as defined
for Sections 3(g)(ii) or (iv) (whichever is applicable). The total amount shall be apportioned to
the 24 months following the Date of Termination. Thus, if Employee is entitled to $816,000 under
this subsection, $34,000 shall be paid to Employee each of the next twenty-four months.

                    (B) An amount equal to 225% of Employee’s Base Salary in effect at the Date of Termination as
defined for Sections 3(g)(ii) or  (iv) (whichever is applicable).  The total amount shall be
apportioned to the 24 months following the Date

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of Termination.  Thus, if Employee is entitled to $918,000 under this subsection, $38,250
shall be paid to Employee each of the next twenty-four months

                    (C) If Employee is receiving a car allowance at the Date of Termination, the cash equivalent
of 24 months of the car allowance in the amount provided at the Date of Termination which shall be
apportioned to the 24 months following the Date of Termination. Thus, if Employee is entitled to
$28,800 under this subsection, $1200 shall be paid to Employee each of the next twenty-four months.

                    (D) The amount that the Company would have credited as Company contributions based upon
Employee’s level of participation at the Date of Termination over the twenty-four (24) month period
of time beginning immediately after the Date of Termination to any of the deferred compensation
(including Executive Retirement) plans in which Employee was a participant. The total amount shall
be apportioned to the 24 months following the Date of Termination. Thus, if Employee is entitled
to $96,000 under this subsection, $4,000 shall be paid to employee each of the next twenty-four
months.

     Employee will begin to receive the payments referenced above on the first normal payroll date
beginning 15 calendar days after the Release he/she is required to sign as described under
paragraph (c)(v) of this Section 4 becomes effective and continuing thereafter on normal payroll
dates for twelve months following the Date of Termination.

          (iii) Employee shall also be entitled to all vested deferred compensation (including Executive
Retirement) of any kind at such times and in such amounts provided under the terms of applicable
deferred compensation plans.

          (iv) Beginning with the Date of Termination, Employee shall be entitled to receive medical
plan continuation coverage required under ERISA (“COBRA Benefits”) subject to payment of full COBRA
premiums by Employee. If Employee is eligible for and timely elects to receive COBRA Benefits, the
Company shall reimburse Employee for the cost of Employee’s COBRA Benefits for a period of eighteen
(18) months; provided that the Company’s obligation to reimburse Employee’s COBRA premiums shall be
subject to Section 6(d) and will cease immediately in the event Employee becomes eligible for group
health insurance offered by another employer during the eighteen (18) month period. If Employee
does not become eligible for group health insurance offered by another employer during the eighteen
(18) month period COBRA is available, the Company will negotiate with its medical plan to attempt
to allow Employee to continue to obtain insurance through it for the six month period after the
18-month COBRA period ends and reimburse Employee for the cost of the additional coverage. If
Company is unable to negotiate such additional coverage, it shall pay Employee the amount it paid
for COBRA Benefits while they were available for the six-month period following the end of COBRA
Benefits.

          (v) In order to receive the payments described in paragraphs (c)(ii) and (iv) of this Section
4, Employee must (no later than thirty (30) days following the Employee’s receipt of the release)
execute and not revoke a release (“the Release”) in

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such form and substance as shall be reasonably requested by the Company, including but not
limited to including a general release of claims, a non-disparagement clause, a confidentiality
provision, an acknowledgment regarding conduct on behalf of the Company, and a no re-hire
provision. In addition, payments pursuant to paragraphs (c)(ii) and (iv) of this Section 4 shall
only continue for so long as Employee has not violated any terms of this Agreement, including but
not limited to those contained in Section 6, and/or brought any action regarding the enforceability
of the Covenants contained in Section 6. However, in no event, shall Employee receive less than
$30,000 in the aggregate pursuant to Section 4(c)(ii) and (iv) as consideration for the Release
referenced in this paragraph (v).

          (vi) It is intended that (A) each payment or installment of payments provided under this
Section 4 is a separate “payment” for purposes of Code Section 409A and (B) that the payments
satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A,
including those provided under Treasury Regulations 1.409A-1(b)(4) (regarding short-term
deferrals), 1.409A-1(b)(9)(iii) (regarding the two-times, two year exception), and
1.409A-1(b)(9)(v) (regarding reimbursements and other separation pay). Notwithstanding anything to
the contrary in this Agreement, if the Company determines that on the Date of Termination that
Employee is a “specified employee” (as such term is defined under Treasury Regulation
1.409A-1(i)(1)) of the Company and that any payments to be provided to Employee are or may become
subject to the additional tax under Code Section 409A(a)(1)(B) or any other taxes or penalties
imposed under Code Section 409A (“Section 409A Taxes”), then such payments shall be delayed until
the date that is six (6) months after the Date of Termination. Any delayed payments shall be made
in a lump sum on the first day of the seventh month following the Date of Termination, or such
earlier date that, as determined by the Company, is sufficient to avoid the imposition of any
Section 409A Taxes on Employee.

5. Section 280G Limitation on Compensation. In the event that the severance benefits
payable to Employee under this Agreement or any other payments or benefits received or to be
received by Employee from the Company (whether payable pursuant to the terms of this Agreement, any
other plan, agreement or arrangement with the Company) or any corporation (“Affiliate”) affiliated
with the Company within the meaning of Section 1504 of the Internal Revenue Code of 1986, as
amended (the “Code”), in the opinion of tax counsel from a nationally recognized public accounting
firm selected by the Company and reasonably acceptable to Employee, constitute “parachute
payments” within the meaning of Section 280G(b)(2) of the Code, and the present value of such
“parachute payments” equals or exceeds three times Employee’s “base amount” within the meaning of
Section 280G(b)(3) of the Code, such severance benefits shall be reduced to an amount the present
value of which (when combined with the present value of any other payments or benefits otherwise
received or to be received by Employee from the Company (or an Affiliate) that are deemed
“parachute payments”) is equal to 2.99 times the “base amount,” notwithstanding any other provision
to the contrary in this Agreement.

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6. Employee’s Covenants.

     (a) Non-disclosure. Employee hereby acknowledges all Confidential Information (as
defined below) which Employee receives while employed by the Company shall be considered the
exclusive proprietary property of the Company. The Company will, as part of the employment of
Employee, make available Confidential Information as defined below, provided that Employee agrees
that during the course of his/her employment with the Company and for two (2) years after the
termination of employment, for whatever reason, he/she shall keep confidential and shall not,
except with Company’s express prior written consent, or except in the proper course of his/her
employment with Company, directly or indirectly, in whole or in part, for any reason or purpose
whatsoever, communicate, disclose, divulge, publish, or otherwise express, to any person or entity,
or use such information, for his/her own benefit or the benefit of any person or entity, any trade
secrets or Confidential Information, no matter when or how acquired concerning the conduct and
details of Company’s business. As used herein, the term “Confidential Information” refers to all
information which derives independent economic value from not being generally known outside the
Company and belongs to, is used by or is in the possession of the Company, including without
limitation, names of customers and suppliers, marketing methods, trade secrets, policies, prospects
and financial condition, customer lists, customer needs and preferences, costs and expenses,
financing, supply sources, sales and marketing plans, and strategic plans, as well as technical and
scientific specifications, plans and formulas, which are developed for use in Company’s business.
Confidential Information shall not include any information which is known by or readily available
to the general public or which becomes known by or readily available to the general public other
than as a result of any improper act or omission of Employee. The restrictions set forth in this
paragraph are in addition to and not in lieu of any obligations of Employee provided by law with
respect to Company’s Confidential Information, including any obligations Employee may owe under
Wis. Stat. § 134.90, the Nevada Trade Secrets Act (NRS 600A.010 et. seq.) or similar
statutes.

     (b) Non-Competition. It is recognized that in order to protect the Company’s
Confidential Information, as defined above, and the Company’s valuable relationships with
customers, vendors, employees and others, that a limited covenant restricting competition within
the Company’s niche market following any termination of employment is necessary. Consequently, for
a period of two (2) years following termination of Employee’s employment with the Company for any
reason, Employee shall not, except with Company’s express prior written consent:

          (i) Solicit any employee, salesman, agent, or representative of the Company that Employee
supervised and/or had contact with on behalf of the Company or about whom Employee gained
confidential information, in the one year prior to termination of Employee’s employment with the
Company, in any manner which interferes or might interfere with such person’s relationship with
Company. This provision is not intended and shall not be construed to foreclose or burden the
employment of any such employee who pursues or accepts such employment without any solicitation
prohibited by this provision.

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          (ii) Work for (or consult to) any competitor of the Company, including one in which the
Employee has an ownership interest, in any management capacity or in any other capacity in which
Employee’s knowledge of Company’s customer relationships and other Confidential Information would
be a value to the Employee in competing against the Company, and in which management capacity or
other such capacity the Employee has duties or responsibilities, including management oversight,
with respect to or involving any assisted living facility located in any portion of the Territory,
defined below. “Territory” shall mean anywhere that is within 20 miles of any assisted living
facility operated by the Company. Employee acknowledges that the Confidential Information which
Employee has had access to, and will continue to have access to, would be of value to Employee in
competing against or assisting a competitor in competing against any assisted living facility
operated by the Company. Employee acknowledges, therefore, that the geographic scope of this
restriction is reasonably necessary to protect the Company’s legitimate business interest in
protecting against Employee using the Company’s Confidential Information to compete against the
Company or assist a competitor in competing against the Company.  

     (c) Surrender of Property. Employee hereby agrees that upon termination of Employee’s
employment, for whatever reason and whether voluntary or involuntary, Employee will immediately
surrender to the Company all property and other things of value in Employee’s possession, or in the
possession of any person or entity under Employee’s control relating directly or indirectly to the
business of the Company.

     (d) Enforcement. Employee acknowledges that any breach by him/her of any of the
covenants and agreements of this Section 6 (“Covenants”) will result in irreparable injury to
Company for which money damages could not adequately compensate Company, and therefore, in the
event of any such breach, Company shall be entitled, in addition to all other rights and remedies
which Company may have at law or in equity, to have an injunction issued by any competent court
enjoining and restraining Employee and/or all other Persons involved therein from continuing such
breach. The existence of any claim or cause of action which Employee or any such other Person may
have against Company shall not constitute a defense or bar to the enforcement of any of the
Covenants. In addition, if Employee brings an action asserting the Covenants are unenforceable,
the Company may in its discretion immediately cease paying any amounts still owing under this
Agreement. In the event that it is found that the Covenants at issue are enforceable, or they are
modified so that they are enforceable, Employee shall receive within 45 days of a final decision to
that effect, including exhaustion of any available appeals, the amount which he/she would have
received hereunder if no action had been brought. If the Covenants at issue are found
unenforceable, Employee shall not be entitled to any amounts still owed under this Agreement as of
the date the Employee brought the action asserting the Covenants were unenforceable. Employee,
however, shall retain any amounts already paid under the Agreement as consideration for the Release
referenced in Section 4(c)(v) and, in the event that the total amount of money received prior to
commencement of the action is less than $30,000, the Company shall pay to Employee within 45 days
of a final decision that the Covenants are unenforceable, including exhaustion of any available
appeals, the difference between $30,000 and the amount already paid under the Agreement, less
applicable deductions to include

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withholdings for taxes, as consideration for the Release of claims referenced in Section
4(c)(v).

     (e) Consideration. Employee expressly acknowledges that the Covenants are a material
part of the consideration bargained for by Company and, without the agreement of Employee to be
bound by the Covenants, Company would not have agreed to enter into this Agreement.

     (f) Scope. If any portion of any Covenant or its application is construed to be
invalid, illegal or unenforceable, then the other portions and their application shall not be
affected thereby and shall be enforceable without regard thereto. If any of the Covenants is
determined to be unenforceable because of its scope, duration, geographical area or similar factor,
then the court making such determination shall have the power to reduce or limit such scope,
duration, area or other factor, and such Covenant shall then be enforceable in its reduced or
limited form.

7. No Obligation to Mitigate Damages; No Effect on Other Contractual Rights.

     (a) Except as provided in Section 4(c)(iv), Employee shall not be required to mitigate damages
or the amount of any payment provided for under this Agreement by seeking other employment or
otherwise, nor shall the amount of payment provided for under this Agreement be reduced by any
compensation earned by Employee as the result of employment by another employer after the Date of
Termination, or otherwise, except to the extent such employment violates Article 6(a) or 6(b) of
this Agreement.

     (b) The provisions of this Agreement, and any payment provided for hereunder, shall not reduce
any amounts otherwise payable, or in any way diminish Employee’s existing rights, or rights which
would accrue solely as a result of the passage of time, under any benefit plan, employment
agreement or other contract, plan or arrangement.

8. Withholding Taxes.

     Company may withhold from any amounts payable under this Agreement such federal, state, local
and foreign taxes as may be required to be withheld pursuant to any applicable law or regulation.

9. Miscellaneous.

     (a) Notices. All notices, requests, demands, consents or other communications
required or permitted to be given under this Agreement shall be in writing and shall be deemed to
have been duly given if and when (i) delivered personally, (ii) five (5) days after being mailed by
first class certified mail, return receipt requested, postage prepaid, or (iii) delivered by a
nationally recognized express courier service, postage or delivery changes prepaid, with receipt,
or (iv) delivered by telecopy (with receipt, and with original delivered in accordance with any of
(i), (ii) or (iii) above) to the parties at their respective addresses stated below or to such
other addresses of which the parties may give notice in accordance with this Section.

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If to Company, to:

Assisted Living Concepts, Inc.

W140 N8981 Lilly Road

Menomonee Falls, WI 53051

Attention: President and Chief Executive Officer

Facsimile: (262) 251-7627

If to Employee, to:

Address contained in payroll records

     (b) Entire Understanding. This Agreement sets forth the entire understanding between
the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous,
written, oral, expressed or implied, communications, agreements and understandings with respect to
the subject matter hereof, with the exception of existing deferred compensation (including
Executive Retirement) plans, benefits plans and incentive plans and Stockholder and Options
Agreements.

     (c) Modification. This Agreement shall not be amended, modified, supplemented or
terminated except in writing signed by both parties.

     (d) Termination of Prior Severance Agreements. All prior severance and/or employment
agreements between Employee and Company and/or any of its affiliates (and any of their
predecessors) are hereby terminated as of the date hereof as fully performed on both sides.

     (e) Assignability and Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon the Company and its successors and permitted assigns and upon Employee and
his/her heirs, executors, legal representatives, successors and permitted assigns. Employee may
not assign, transfer, pledge, encumber, hypothecate or otherwise dispose of this Agreement or any
of his or her rights hereunder without prior written consent of the Company, and any such attempted
assignment, transfer, pledge, encumbrance, hypothecation or other disposition without such consent
shall be null and void without effect.

     (f) Severability. If any provision of this Agreement is construed to be invalid,
illegal or unenforceable, then the remaining provisions hereof shall not be affected thereby and
shall be enforceable without regard thereto, except to the extent indicated herein.

     (g) Counterparts. This Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original hereof, and it shall not be necessary
in making proof of this Agreement to produce or account for more than one counterpart hereof.

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     (h) Section Headings. Section and subsection headings in this Agreement are inserted
for convenience of reference only, and shall neither constitute a part of this Agreement nor affect
its construction, interpretation, meaning or effect.

     (i) References. All words used in this Agreement shall be construed to be of such
number and gender as the context requires or permits.

     (j) Controlling Law. This Agreement is made under, and shall be governed by,
construed and enforced in accordance with, the substantive laws of the State of Nevada applicable
to agreements made and to be performed entirely therein.

     (k) Settlement of Disputes. The Company and Employee agree that, except as set forth
specifically in Section 6(d), any claim, dispute or controversy arising under or in connection with
this Agreement, or otherwise in connection with Employee’s employment by the Company (including,
without limitation, any such claim, dispute or controversy arising under any federal, state or
local statute, regulation or ordinance or any of the Company’s employee benefit plans, policies or
programs) shall be resolved solely and exclusively by binding arbitration. The arbitration shall be
held in Milwaukee County, Wisconsin (or at such other location as shall be mutually agreed by the
parties). The arbitration shall be conducted in accordance with the Expedited Employment
Arbitration Rules (the “Rules”) of the American Arbitration Association (the “AAA”) in effect at
the time of the arbitration, except that the arbitrator shall be selected by alternatively striking
from a list of five arbitrators supplied by the AAA. All fees and expenses of the arbitration,
including a transcript if either requests, shall be borne equally by the parties. Each party will
pay for the fees and expenses of its own attorneys, experts, witnesses, and preparation and
presentation of proofs and post-hearing briefs (unless the party prevails on a claim for which
attorney’s fees are recoverable under the Rules). Any action to enforce or vacate the arbitrator’s
award shall be governed by the Federal Arbitration Act, if applicable, and otherwise by applicable
state law.

     (l) Indulgences, Etc. Neither the failure nor delay on the part of either party to
exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall the single or partial exercise of any right, remedy, power or privilege preclude
any other or further exercise of the same or any other right, remedy, power or privilege, nor shall
any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as
a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver
shall be effective unless it is in writing and is signed by the party asserted to have granted such
waiver.

     (m) 409A.

          (i) In order to facilitate compliance with Section 409A of the Internal Revenue Code, the
Company and Employee agree that they shall neither accelerate nor defer or otherwise change the
payment date for any payment subject to Section 409A, except as may otherwise be permitted under
Code Section 409A of the Internal Revenue Code and regulations thereunder as confirmed by written
opinion of counsel satisfactory to both parties.

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     (ii) Whether and when a termination of employment has occurred will be determined in a manner
consistent with the requirements described in regulations under Internal Revenue Code Section 409A.
Termination of Employee’s employment by the Company on the one hand or by Employee on the other
hand (other than by death of Employee) shall be communicated by a written notice of termination to
the other. That notice shall indicate the specific termination provision in this agreement relied
upon and, to the extent applicable, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provisions so indicated and the
termination date.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first
above mentioned, under seal, intending to be legally bound hereby.

	 	 	 	 	 	 	 
	Attest:	 	COMPANY:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	Executive Assistant

	 	Name:
	 	 Melvin A. Rhinelander	 	 
	 

	 	Title:
	 	Vice Chairman of the Board	 	 
	 
	 	 	 	 	 	 
	Witness:	 	EMPLOYEE:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 

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