Document:

exv10w3

EXHIBIT 10.3

ASSISTED LIVING CONCEPTS, INC.

2009 TANDEM STOCK OPTION/STOCK APPRECIATION RIGHTS AWARD AGREEMENT

	 	 	 
	Employee:

	 	[EMPLOYEE NAME]
	 
	Number of Stock Options/SARs:

	 	[NUMBER OF OPTIONS/SARS]
	 
	Grant Date:

	 	February 22, 2009
	 
	Exercise Price:

	 	$3.07

     This Tandem Stock Option/Stock Appreciation Rights Award Agreement (the “Award Agreement”) is
entered into as of February 22, 2009, between Assisted Living Concepts, Inc. (“ALC”) and Employee.
In consideration of the mutual promises and covenants made in this Award Agreement and the mutual
benefits to be derived from this Award Agreement, ALC and the Employee agree as follows:

     THIS AWARD IS SUBJECT TO ALL TERMS AND CONDITIONS OF THE PLAN AND THIS AWARD AGREEMENT,
INCLUDING, WITHOUT LIMITATION, THE DISPUTE RESOLUTION PROVISIONS SET FORTH IN SECTION 17 OF THIS
AWARD AGREEMENT. BY SIGNING YOUR NAME BELOW, YOU WILL HAVE CONFIRMED YOUR ACCEPTANCE OF THE TERMS
AND CONDITIONS OF THIS AWARD AGREEMENT.

1. Definitions. Capitalized terms used in this Award Agreement that are not defined in
this Award Agreement have the meanings as used or defined in the Assisted Living Concepts, Inc.
2006 Omnibus Incentive Compensation Plan (the “Plan”). As used in this Award Agreement, the
following terms have the meanings set forth below:

     “Business Day” means a day that is not a Saturday, a Sunday or a day on which banking
institutions are legally permitted to be closed in the City of New York.

     “Committee” means the Compensation/Nominating/Governance Committee of the Board, or such other
committee of the Board as may be designated by the Board from time to time to administer the Plan.

     “Common Stock” means Class A common stock of ALC, par value $0.01 per share.

     “Determination Date” means the date during the first quarter of 2010, as determined by the
Committee, on which the Committee determines whether Performance Criteria with respect to the
Performance Period have been achieved.

     “Fair Market Value” means the mean between the high and low market prices per Share as
reported on the New York Stock Exchange (or other relevant exchange) on the applicable date or, in
the event there shall be no public market for the Shares on the

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applicable date, the fair market
value of the Shares as determined in good faith by the Committee.

     “Performance Period” means the period from January 1, 2009 through December 31, 2009.

     “Share” means a share of Common Stock.

2. Grant of Award. This Award Agreement sets forth the terms and conditions of an award
(the “Award”) under the Plan to the Employee as of the Grant Date of:

     a. Stock Options. The right and option (the “Stock Options”) to purchase up to
[NUMBER OF OPTIONS/SARS] Shares at the Exercise Price per Share. Each Stock Option is a
Nonqualified Stock Option. Unless earlier terminated pursuant to the terms of this Award
Agreement, the Stock Options shall expire on the fifth anniversary of the Grant Date.

     b. Stock Appreciation Rights. Each Stock Option includes a stock appreciation right
(“SAR”) at the price per Share equal to the Exercise Price. The SAR constitutes an unfunded and
unsecured promise of ALC to deliver (or cause to be delivered) to Employee a whole number of
Shares, cash or a combination of Shares and Cash at the time such SAR vests and is exercised, as
provided herein, equal in value to the excess, if any, of the Fair Market Value per Share over the
Exercise Price per Share of the SAR. Fractional shares will not be delivered and the number of
Shares to be delivered upon any exercise by you of SARs subject to this Award shall be rounded down
to the nearest whole Share. The Committee has sole discretion to deliver such value in Shares,
cash, or a combination of Shares and cash. Until such delivery, Employee has only the rights of a
general unsecured creditor and no rights as a stockholder of ALC. Unless earlier terminated
pursuant to the terms of this Award Agreement, the SARs shall expire on the fifth anniversary of
the Grant Date.

     c. Tandem Stock Option/Stock Appreciation Rights. An SAR with respect to a Share
shall vest, become exercisable, and terminate at the same times and under the same terms as the
Stock Option such Share is subject to. The exercise of a Stock Option with respect to any Share
shall cause the related SAR to automatically terminate and the exercise of an SAR with respect to
any Share shall cause the related Stock Option to automatically terminate. Only one Stock Option
or one SAR, and not both, may be exercised with respect to any Share that is subject to a Stock
Option under this Award Agreement. The tandem Stock Option and SAR rights with respect to a Share
are referred to in this Award Agreement as the “Stock Option/SAR.”

     d. Award Subject to Both Time- and Performance-Based Vesting. The Award is subject to
both time-based and performance-based vesting. Except as otherwise provided in any individual
employment agreement between you and ALC or any of its Affiliates (an “Employment Agreement”):

     (i) Time-Based Vesting. one fifth (1/5) of the Award (the “Time-Based Award”)
shall become exercisable as follows: one-third of the Shares covered thereby (rounded up to
the next whole Share) on February 22, 2010, an additional one-third of such Shares (rounded
up to the next whole Share) on February 22, 2011, and the remainder of such Shares on

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February 22, 2012, subject in each case to the prior termination of the Stock Option/SAR.

     (ii) Performance-Based Vesting. the vesting of your rights with respect to
four fifths (4/5) of the Award (the “Performance-Based Award”) is contingent on the
attainment of performance goals set forth on Exhibit A to this Award Agreement (the
“Performance Criteria”). Accordingly, unless otherwise provided in your Employment
Agreement, your rights with respect to the Performance-Based Award will not become vested
on the Determination Date unless the Committee determines that the Performance Criteria
with respect to the Performance Period have been attained. Furthermore, pursuant to
Section 6 and except as otherwise provided in your Employment Agreement, in order for any
of your rights with respect to the Performance-Based Award to become vested on the
Determination Date, you must be employed by ALC or an Affiliate on the Determination Date.
If, on the Determination Date, the Committee determines in its sole discretion that any of
your rights with respect to the Performance-Based Award remain unvested, your rights with
respect to such Stock Options/SARs shall immediately terminate, and you will be entitled to
no further payments or benefits with respect thereto. If the Committee determines that the
threshold level Performance Goal specified in Exhibit A has been attained for the
Performance Period, the Committee will then determine the whole number of Stock
Options/SARs that vest on the Determination Date, up to the maximum number listed on the
first page of this Award Agreement, using the formula set forth in Exhibit A. Unless
earlier terminated, any Stock Options/SARs included in the the Performance-Based Award that
the Committee determines to be vested as of the Determination Date shall become exercisable
as follows: one-third of the Shares covered thereby (rounded up to the next whole Share) on
February 22, 2010, an additional one-third of such Shares (rounded up to the next whole
Share) on February 22, 2011, and the remainder of such Shares on February 22, 2012, subject
in each case to the prior termination of the Stock Option/SAR.

     e. Exercisability Upon Death, Disability or Change of Control. Notwithstanding the
foregoing, the Stock Options/SARs, to the extent outstanding, shall become immediately vested and
fully exercisable upon (a) a Change of Control or (b) a Termination of Employment due to death or
Disability. For purposes of this Award Agreement, Disability means (1) “Disability” as defined in
your Employment Agreement, or (2) if there is no such employment or similar agreement or it does
not define “Disability,” permanent and total disability as determined under ALC’s long-term
disability plan applicable to Employee. For purposes of this Award Agreement, Termination of
Employment means the termination of Employee’s employment with, or performance of services for, ALC
and any of its Subsidiaries or Affiliates. A participant employed by, or performing services for,
a Subsidiary or an Affiliate shall also be deemed to incur a Termination of Employment if the
Subsidiary or Affiliate ceases to be such a Subsidiary or an Affiliate, as the case may be, and the
participant does not immediately thereafter become an employee of, or service-provider for, ALC or
another Subsidiary or Affiliate. Temporary absences from employment because of illness, vacation
or leave of absence and transfers among ALC and its Subsidiaries and Affiliates shall not be
considered Terminations of Employment.

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     f. Suspension or Termination of Stock Options/SARs. If at any time (including after a
notice of exercise has been delivered) the Committee, including any administrator authorized
pursuant to Section 3(e) of the Plan (any such person, an “Authorized Officer”), reasonably
believes that Employee has committed an act of misconduct as described in this Section, the
Committee or Authorized Officer may suspend the Employee’s right to exercise any Stock Option/SAR
pending a determination of whether an act of misconduct has been committed. If the Committee or an
Authorized Officer determines Employee has committed an act of embezzlement, fraud, dishonesty,
nonpayment of any obligation owed to ALC, breach of fiduciary duty or deliberate disregard of ALC
rules resulting in loss, damage or injury to ALC, or if Employee makes an unauthorized disclosure
of any ALC trade secret or confidential information, engages in any conduct constituting unfair
competition, or induces a customer to breach a contract with ALC, neither Employee nor his or her
estate shall be entitled to exercise any Stock Option/SAR whatsoever. In addition, if Employee is
designated an “executive officer” by the Board and if the Committee determines that Employee
engaged in an act of embezzlement, fraud or breach of fiduciary duty during Employee’s employment
that contributed to an obligation to restate ALC’s financial statements (“Contributing
Misconduct”), Employee shall be required to repay ALC, in cash and upon demand, the Option Proceeds
(as defined below) resulting from the sale or other disposition (including to ALC) of Shares issued
or issuable upon exercise of a Stock Option or SAR if the sale or disposition was effected during
the twelve-month period following the first public issuance or filing with the Securities and
Exchange Commission of the financial statements required to be restated. The term “Option
Proceeds” means, with respect to any sale or other disposition (including to ALC) of Shares issued
or issuable upon exercise of a Stock Option or SAR, an amount determined appropriate by the
Committee to reflect the effect of the restatement on ALC’s stock price, up to the amount equal to
the number of Shares sold or disposed of multiplied by the difference between the market value per
Share at the time of such sale or disposition and the exercise price. The return of Option
Proceeds is in addition to and separate from any other relief available to ALC due to the executive
officer’s Contributing Misconduct. Any determination by the Committee with respect to the
foregoing shall be final, conclusive and binding on all interested parties.

3. The Plan. This Award is made pursuant to the Plan, all the terms of which are hereby
incorporated in this Award Agreement. In the event of any conflict between the terms of the Plan
and the terms of this Award Agreement, the terms of this Award Agreement shall govern;
provided, however, that, notwithstanding the foregoing, it is understood that the
provisions of Section 6(i)(vi)(D) of the Plan, including but not limited to the concept of
“negative discretion,” shall not be applicable to the Stock Options/SARs. In the event of any
conflict between the terms of this Award Agreement and the terms of any Employment Agreement, the
terms of your Employment Agreement will govern.

4. Exercise of the Stock Options.

     a. Stock Options as to which the Employee is vested, which have become exercisable, and which
have not terminated may be exercised by delivery to the Secretary

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of ALC of a written or electronic
notice, complying with the applicable procedures established by the Committee or ALC, stating the
number of whole Shares to be purchased pursuant to this Award Agreement and the date on which the
Employee wants to exercise the Stock Option and accompanied by payment of the full purchase price
of the Shares to be purchased.

     b. The full purchase price of the Stock Option (the Exercise Price multiplied by the number of
Stock Options exercised) shall be paid in cash, by wire transfer, or by certified check or bank
draft payable to the order of ALC, by exchange of Shares of unrestricted Common Stock of ALC
already owned by the Employee and having an aggregate Fair Market Value equal to the full purchase
price, or by any other procedure approved by the Committee, or by a combination of the foregoing.

     c. Employees who are not Executive Officers (as such term is defined the by Securities and
Exchange Commission) may also give notice and make payment through a brokerage firm pursuant to an
arrangement approved by ALC in advance.

5. Exercise of Stock Appreciation Rights. SARs as to which the Employee is vested, which
have become exercisable, and which have not terminated may be exercised by delivery to the
Secretary of ALC of a written or electronic notice, complying with the applicable procedures
established by the Committee or ALC, stating the whole number of SARs that are thereby exercised.
Upon exercise, ALC shall deliver to Employee or Employee’s legal representative, at the absolute
discretion of the Committee, either (i) the number of Shares (rounded down to the nearest whole
Share) (the “Number of Equivalent Shares”) equal to (x) (A) the excess, if any, of the Fair Market
Value per Share on the exercise date over the Exercise Price per Share of the SAR, multiplied by
(B) the number of SARs being exercised pursuant to such notice, divided by (y) the Fair Market
Value per Share on the exercise date, (ii) cash equal to the Fair Market Value per Share on the
exercise date multiplied by the Number of Equivalent Shares, or (iii) any combination of cash and
Shares with an aggregate value equal to the Fair Market Value per Share on the exercise date
multiplied by the Number of Equivalent Shares.

6. Expiration of Stock Options/SARs. Unless the Committee determines otherwise and except
as otherwise provided in Section 7 or in your Employment Agreement, unexercised Options/SARs expire
(i) automatically on the date of your Termination of Employment for Cause (as defined in your
Employment Agreement or, if your Employment Agreement does not contain a definition of Cause, as
determined according to Section 7(e) hereof) or (ii) 90 days after the effective date of your
Termination of Employment for any reason other than Cause; provided that any portion of the
Stock Options/SARs that is not vested as of such effective date ceases vesting and terminates
immediately; and provided further that all Options/SARs will automatically expire on the
fifth anniversary of this Award Agreement.

7. Termination of Employment.

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     a. If the Employee incurs a Termination of Employment due to Disability, the Stock
Options/SARs, to the extent outstanding at the time of such Termination of Employment, shall become
immediately vested and fully exercisable and may be exercised by the Employee at any time prior to
the first to occur of (i) one year after such Termination of Employment or (ii) the expiration date
of the Stock Options/SARs, and shall thereafter expire.

     b. If the Employee incurs a Termination of Employment due to death, the Stock Options/SARs, to
the extent outstanding at the time of such Termination of Employment, shall become immediately
vested and fully exercisable and may be exercised by the Employee’s estate or by a person who
acquired the right to exercise such Stock Options/SARs by bequest or inheritance or otherwise by
reason of the death of the Employee at any time prior to the first to occur of (i) one year after
such Termination of Employment or (ii) the expiration date of the Stock Options/SARs, and shall
thereafter expire.

     c. If the Employee incurs a Termination of Employment due to retirement at or after age 65,
the portion of the Stock Options/SARs, if any, which is exercisable at the time of such Termination
of Employment may be exercised at any time prior to the first to occur of (i) three years after
such Termination of Employment or (ii) the expiration date of the Stock Options/SARs, and shall
thereafter expire. Any portion of the Stock Options/SARs that is not exercisable at the time of
such Termination of Employment due to retirement at or after age 65 shall expire as of such
Termination of Employment.

     d. If the Employee incurs a voluntary Termination of Employment by the Employee (other than
retirement at or after age 65), the portion of the Stock Options/SARs, if any, which is exercisable
at the time of such Termination of Employment may be exercised at any time prior to the first to
occur of (i) 30 days after such Termination of Employment or (ii) the expiration date of the Stock
Options/SARs, and shall thereafter expire. Any portion of the Stock Option/SAR that is not
exercisable at the time of such Termination of Employment shall expire as of such Termination of
Employment.

     e. If the Employee incurs a Termination of Employment by ALC without Cause, the portion of the
Stock Options/SARs, if any, which is exercisable at the time of such Termination of Employment may
be exercised at any time prior to the first to occur of (i) 90 days after such Termination of
Employment or (ii) the expiration date of the Stock Option/SAR, and shall thereafter expire. Any
portion of the Stock Options/SARs that is not exercisable at the time of such Termination of
Employment shall expire as of such Termination of Employment. For purposes of this Award
Agreement, Cause means, unless otherwise provided by the Committee, (1) “Cause” as defined in any
Employment Agreement, or (2) if there is no such Employment Agreement or if it does not define
Cause: (A) conviction of Employee for committing a felony under federal law or the law of the state
in which such action occurred, (B) dishonesty in the course of fulfilling Employee’s employment
duties, (C) willful and deliberate failure on the part of Employee to perform his or her employment
duties in any material respect, or (D) prior to

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a Change in Control, such other events as shall be
determined by the Committee. The Committee shall, unless otherwise provided in any employment or
similar agreement between Employee and ALC, have the sole discretion to determine whether “Cause”
exists, and its determination shall be final.

8. Voting Rights; Dividend Equivalents. Prior to the date on which your rights with
respect to Options/SARs have become vested and you exercise such Options/SARs, you shall not be
entitled to exercise any voting rights with respect to such Options/SARs or any Shares with respect
thereto, and shall not be entitled to receive dividends or other distributions with respect
thereto.

9. Non-Transferability of Options/SARs. Unless otherwise provided by the Committee in its
discretion, Options/SARs may not be sold, assigned, alienated, transferred, pledged, attached or
otherwise encumbered except as provided in Section 9(a) of the Plan. Any purported sale,
assignment, alienation, transfer, pledge, attachment or other encumbrance of Options/SARs in
violation of the provisions of this Section 9 and Section 9(a) of the Plan shall be void.

10. Adjustment in the Event of Change in Stock. In the event of any change in corporate
capitalization (including, but not limited to, a change in the number of shares of Common Stock
outstanding), such as a stock split or a corporate transaction, such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock or property of ALC, any
reorganization (whether or not such reorganization comes within the definition of such term in
Section 368 of the Code), or any partial or complete liquidation of ALC, the number and kind of
shares subject to the Stock Option/SAR and/or the exercise price per share shall be adjusted by the
Board or Committee as the Board or Committee may determine to be appropriate in its sole
discretion; provided, however, that the number of shares subject to the Stock Options/SARs shall
always be a whole number. The determination of the Board or Committee regarding any adjustment
will be final and conclusive.

11. Payment of Transfer Taxes, Fees and Other Expenses. ALC agrees to pay any and all
original issue taxes and stock transfer taxes that may be imposed on the issuance of Shares
acquired pursuant to exercise of the Stock Options/SARs, together with any and all other fees and
expenses necessarily incurred by ALC in connection therewith.

12. Other Restrictions on Exercisability. The exercise of the Stock Options/SARs and the
delivery of share certificates upon such exercise shall be subject to the requirement that, if at
any time the Committee shall determine that (a) the listing, registration or qualification of the
shares of Common Stock subject or related thereto upon any securities exchange or under any state
or federal law or (b) the consent or approval of any government regulatory body is, in the case or
(a) or (b), necessary or desirable as a condition of, or in connection with, such exercise or the
delivery or purchase of shares pursuant thereto, then in any such event such exercise shall not be
effective unless such listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.

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13. Taxes and Withholdings. No later than the date of exercise of the Stock Options/SARs
granted hereunder, the Employee shall pay to ALC or make arrangements satisfactory to the Committee
regarding payment of any federal, state and local taxes, and any non-U.S. taxes applicable to the
Employee, of any kind required by law to be withheld upon the exercise of such Stock Options/SARs.
In the event that there is withholding tax liability in connection with the exercise of
Options/SARs, you may satisfy, in whole or in part, any withholding tax liability by having ALC
withhold from the number of Shares you would be entitled to receive pursuant to the exercise of the
Options/SARs, a number of Shares having a Fair Market Value equal to such withholding tax
liability. ALC shall, to the extent permitted or required by law, have the right to deduct from
any payment of any kind otherwise due to the Employee federal, state, local and applicable non-U.S.
taxes of any kind required by law to be withheld upon the exercise of such Stock Options/SARs.

14. Consents and Legends.

     a. Consents. Your rights in respect of the Options/SARs that are subject to this
Award are conditioned on the receipt to the full satisfaction of the Committee of any required
consents that the Committee may reasonably determine to be necessary or advisable (including,
without limitation, your consenting to ALC’s supplying to any third-party record keeper of the Plan
such personal information as ALC or the Committee deems advisable to administer the Plan).

     b. Legends. ALC may affix to certificates for Shares issued pursuant to this Award
Agreement any legend that ALC or the Committee determines to be necessary or advisable (including
to reflect any restrictions to which you may be subject under any applicable securities laws). ALC
may advise the transfer agent to place a stop order against any legended Shares.

15. Successors and Assigns of ALC. The terms and conditions of this Award Agreement shall
be binding upon and shall inure to the benefit of ALC and its successors and assigns.

16. Committee Discretion. Subject to the terms of your Employment Agreement, the Committee
shall have full and plenary discretion with respect to any actions to be taken or determinations to
be made in connection with this Award Agreement, and its determinations shall be final, binding and
conclusive.

17. Dispute Resolution.

     a. Jurisdiction and Venue. Notwithstanding any provision in your Employment
Agreement, you and ALC irrevocably submit to the exclusive jurisdiction of (i) the United States
District Court for the Eastern District of Wisconsin and (ii) the courts of the State of Wisconsin
for the purposes of any suit, action or other proceeding arising out of this Award Agreement or the
Plan. You and ALC agree to commence any such action, suit or proceeding either in the United
States District Court for the Eastern District of Wisconsin or, if such suit, action or other
proceeding may not be brought in

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such court for jurisdictional reasons, in the courts of the State
of Wisconsin. You and ALC further agree that service of any process, summons, notice or document
by U.S. registered mail to the other party’s address set forth below shall be effective service of
process for any action, suit or proceeding in Wisconsin with respect to any matters to which you
have submitted to jurisdiction in this Section 17(a). You and ALC irrevocably and unconditionally
waive any objection to the laying of venue of any action, suit or proceeding arising out of this
Award Agreement or the Plan in (A) the United States District Court for the Eastern District of
Wisconsin or (B) the courts of the State of Wisconsin, and hereby and thereby further irrevocably
and unconditionally waive and agree not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient forum.

     b. Waiver of Jury Trial. You and ALC hereby waive, to the fullest extent permitted by
applicable law, any right either of you may have to a trial by jury in respect to any litigation
directly or indirectly arising out of, under or in connection with this Award Agreement or the
Plan.

     c. Confidentiality. You hereby agree to keep confidential the existence of, and any
information concerning, a dispute described in this Section 17, except that you may disclose
information concerning such dispute to the court that is considering such dispute or to your legal
counsel or other advisors (provided that such counsel or other advisors agree not to disclose any
such information other than as necessary to the prosecution or defense of the dispute).

18. Notice. All notices, requests, demands and other communications required or permitted
to be given under the terms of this Award Agreement shall be in writing and shall be deemed to have
been duly given when delivered by hand or overnight courier or three Business Days after they have
been mailed by U.S. registered mail, return receipt requested, postage prepaid, addressed to the
other party as set forth below:

	 	 	 	 	 
	 

	 	If to ALC:
	 	Assisted Living Concepts, Inc.
	 

	 	 	 	W140 N8981 Lilly Road
	 

	 	 	 	Menomonee Falls, WI 53051
	 

	 	 	 	Attention: Corporate Secretary
	 
	 	 	 	 
	 

	 	If to Employee:
	 	Address contained in payroll records

     The parties may change the address to which notices under this Award Agreement shall be sent
by providing written notice to the other in the manner specified above.

19. Headings. Headings are given to the Sections and subsections of this Award Agreement
solely as a convenience to facilitate reference. Such headings shall not be

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 deemed in any way
material or relevant to the construction or interpretation of this Award Agreement or any provision
thereof.

20. Amendment of this Award Agreement. The Committee may waive any conditions or rights
under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Award Agreement
prospectively or retroactively; provided, however, that any such waiver, amendment,
alteration, suspension, discontinuance, cancellation or termination that would materially and
adversely impair your rights under this Award Agreement shall not to that extent be effective
without your consent (it being understood, notwithstanding the foregoing proviso, that this Award
Agreement and the Options/SARs shall be subject to the provisions of Section 7(c) of the Plan).

21. Counterparts. This Award Agreement may be signed in counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.

     IN WITNESS WHEREOF, the parties have duly executed this Award Agreement as of the date first
written above.

	 	 	 	 	 	 	 	 	 
	ASSISTED LIVING CONCEPTS, INC.	 	 	 	EMPLOYEE	 	 
	 
	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 

	 	 
	Title:

	 	 	 	 	 	[EMPLOYEE NAME]	 	 
	 

	 	 

	 	 	 	 	 	 

21exv10w4

EXHIBIT 10.4

ASSISTED LIVING CONCEPTS, INC.

EXECUTIVE RETIREMENT PROGRAM

EFFECTIVE JANUARY 1, 2005, AS AMENDED AND RESTATED DECEMBER 16, 2008

ARTICLE I

INTRODUCTION

     This document replaces the Extendicare Health Services, Inc. Executive Retirement Program as
amended and restated effective January 1, 2005 with respect to employees of Assisted Living
Concepts, Inc. No benefits shall be payable to Assisted Living Concepts, Inc. employees under the
terms of the Extendicare Health Services, Inc. Executive Retirement Program, as amended and
restated effective January 1, 2005, but, instead, the benefits previously provided by that Program
are provided for herein. This document applies only to amounts earned or first vested after
calendar year 2004. Separately, Assisted Living Concepts, Inc. has adopted a document to replace
the document which it had jointly maintained with Extendicare Health Services, Inc. with respect to
amounts earned and vested prior to 2005. That replacement document is referred to herein as the
“Frozen Plan”. No further amounts shall be earned and vested under the Frozen Plan. All amounts
credited under the Frozen Plan prior to January 1, 2005 which were not yet vested as of January 1,
2005 and all contributions to the Plan for periods on or after January 1, 2005 shall be governed by
the terms and provisions of this document. Nothing in this document shall apply to amounts earned
and vested prior to 2005 and past and future interest earnings thereon. This document is intended
to comply with the provisions of Section 409A of the Internal Revenue Code and shall be interpreted
accordingly. If any provision or term of this document would be prohibited by or inconsistent with
the requirements of Section 409A of the Code, then such provision or term shall be deemed to be
reformed to comply with Section 409A of the Code.

ARTICLE II

DEFINITIONS

     The following definitions shall be applicable throughout the Plan:

     2.1 “Account” means the account credited from time to time with bookkeeping amounts
equal to contributions on behalf of the Participant pursuant to Section 3.2 and earnings credited
on such amounts in accordance with Article IV. The Account shall also hold those contributions
(and earnings thereon) which had been credited to the account of the Participant under the Frozen
Plan prior to 2005 which were not vested prior to 2005.

     2.2 “Administrator” means the committee designated by the Corporation’s Board of
Directors under Plan Section 7.1, which shall be responsible for administering and interpreting the
Plan.

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     2.3 “Base Salary” means the base salary paid to a Participant by the Corporation in a
specified period prior to elective deferrals under any deferred compensation plan or agreement
between the Participant and the Corporation and exclusive of bonuses, fringe benefits, imputed
income, or any other form of extra compensation.

     2.4 “Beneficiary” means the person, persons, or entity designated by the Participant
to receive any benefits payable under the Plan on or after the Participant’s death. Each
Participant shall be permitted to name, change or revoke the Participant’s designation of a
Beneficiary in writing on a form and in the manner prescribed by the Corporation; provided,
however, that the designation on file with the Corporation at the time of the Participant’s death
shall be controlling. Should a Participant fail to make a valid Beneficiary designation or leave
no named Beneficiary surviving, any benefits due shall be paid to such Participant’s spouse, if
living; or if not living, then any benefits due shall be paid to such Participant’s estate.

     2.5 “Code” means the Internal Revenue Code of 1986, including any subsequent
amendments.

     2.6 “Corporation” means Assisted Living Concepts, Inc., and each of its affiliates
which has adopted the Plan or may adopt the Plan; provided, however, that for purposes of the power
to amend or terminate the Plan or take any other action under or with respect to the Plan, except
for the payment of benefits, the term “Corporation” shall refer only to Assisted Living Concepts,
Inc.

     2.7 “Effective Date” means January 1, 2005.

     2.8 “ERISA” means the Employee Retirement Income Security Act of 1974, including any
subsequent amendments.

     2.9 “Participant” means a key management or highly compensated employee designated as
eligible to participate in the Plan for a Plan Year under Section 3.1 (who shall be known as
“Active Participants” for such Plan Year) and any person who previously participated in the Plan
and is entitled to benefits.

     2.10 “Plan” means the Assisted Living Concepts, Inc. Executive Retirement Program, as
set forth herein, and as may be amended from time to time.

     2.11 “Plan Year” means the calendar year.

     2.12 “Separation from Service”

     (a) In General. The Participant shall have a Separation from Service with the
Corporation if the Participant dies, retires, or otherwise has a termination of employment
with the Corporation. However, for purposes of this Section 2.12, the employment
relationship is treated as continuing intact while the individual is on military leave,
sick leave, or other bona fide leave of absence if the period of such leave does not exceed
six months, or if longer, so long as the individual retains a right to reemployment with
the Corporation under an applicable statute or by contract. For purposes of this paragraph
(a) of this Section 2.12, a leave of absence constitutes a bona fide leave of absence only
if there is a reasonable expectation that the Participant will return to perform services
for the Corporation. If the period of leave exceeds six months and the individual does not
retain a right to reemployment under an applicable statute or by contract, the employment

23

 

relationship is deemed to terminate on the first date immediately following such six-month
period. Notwithstanding the foregoing, where a leave of absence is due to any medically
determinable physical or mental impairment that can be expected to result in death or can
be expected to last for a continuous period of not less than six months, where such
impairment causes the Participant to be unable to perform the duties of his or her position
of employment or any substantially similar position of employment, a 29-month period of
absence may be substituted for such six-month period.

     (b) Termination of Employment. Whether a termination of employment has
occurred is determined based on whether the facts and circumstances indicate that the
Corporation and Participant reasonably anticipated that no further services would be
performed after a certain date or that the level of bona fide services the Participant
would perform after such date (whether as an employee or as an independent contractor)
would permanently decrease to no more than 20 percent of the average level of bona fide
services performed (whether as an employee or an independent contractor) over the
immediately preceding 36-month period (or, the full period of services to the Corporation
if the Participant has been providing services to the Corporation less than 36 months).
Facts and circumstances to be considered in making this determination include, but are not
limited to, whether the Participant continues to be treated as an employee for other
purposes (such as continuation of salary and participation in employee benefit programs),
whether similarly situated service providers have been treated consistently, and whether
the Participant is permitted, and realistically available, to perform services for other
service recipients in the same line of business. The Participant is presumed to have
Separated from Service where the level of bona fide services performed decreases to a level
equal to 20 percent or less of the average level of services performed by the employee
during the immediately preceding 36-month period. The Participant will be presumed not to
have Separated from Service where the level of bona fide services performed continues at a
level that is 50 percent or more of the average level of service performed by the
Participant during the immediately preceding 36-month period. No presumption applies to a
decrease in the level of bona fide services performed to a level that is more than 20
percent and less than 50 percent of the average level of bona fide services performed
during the immediately preceding 36-month period. The presumption is rebuttable by
demonstrating that the Corporation and the Participant reasonably anticipated that as of a
certain date the level of bona fide services would be reduced permanently to a level less
than or equal to 20 percent of the average level of bona fide services provided during the
immediately preceding 36-month period or the full period of services to the Corporation if
the Participant has been providing services to the Corporation less than 36 months (or that
the level of bona fide services would not be so reduced). For example, the Participant may
demonstrate that the Corporation and the Participant reasonably anticipated that the
Participant would cease providing services, but that, after the original cessation of
services, business circumstances such as termination of the Participant’s replacement
caused the Participant to return to employment. Although the Participant’s return to
employment may cause the Participant to be presumed to have continued in employment because
the Participant is providing services at a rate equal to the rate at which the Participant
was providing services before the termination of employment, the facts and circumstances in
this case would demonstrate that at the time the Participant originally ceased to provide
services, the Corporation reasonably anticipated that the Participant would not provide
services in the future. For purposes of this paragraph (b), for periods during which the
Participant is on a paid bona fide leave of absence (as defined in paragraph (a) of this
Section 2.12) and has not otherwise terminated employment pursuant to paragraph (a) of this
Section 2.12, the Participant is

24

 

treated as providing bona fide services at a level equal to the level of services that the
Participant would have been required to perform to receive the compensation paid with
respect to such leave of absence. Periods during which the Participant is on an unpaid bona
fide leave of absence (as defined in paragraph (a) of this Section 2.12) and has not
otherwise terminated employment pursuant to paragraph (a) of this Section 2.12, are
disregarded for purposes of this paragraph (b) of this Section 2.12 (including for purposes
of determining the applicable 36-month (or shorter) period).

     (c) Asset Purchase Transactions. Where as part of a sale or other disposition
of assets by the Corporation as seller to an unrelated service recipient (buyer), a
Participant of the Corporation would otherwise experience a Separation from Service with
the Corporation, the Corporation and the buyer may retain the discretion to specify, and
may specify, whether a Participant providing services to the Corporation immediately before
the asset purchase transaction and providing services to the buyer after and in connection
with the asset purchase transaction has experienced a Separation from Service, provided
that the asset purchase transaction results from bona fide, arm’s length negotiations, all
service providers providing services to the Corporation immediately before the asset
purchase transaction and providing services to the buyer after and in connection with the
asset purchase transaction are treated consistently (regardless of position at the
Corporation) for purposes of applying the provisions of any nonqualified deferred
compensation plan, and such treatment is specified in writing no later than the closing
date of the asset purchase transaction. For purposes of this paragraph (c), references to
a sale or other disposition of assets, or an asset purchase transaction, refer only to a
transfer of substantial assets, such as a plant or division or substantially all the assets
of a trade or business.

     (d) Dual Status. If a Participant provides services both as an employee of
the Corporation and as an independent contractor of the Corporation, the Participant must
separate from service both as an employee and as an independent contractor to be treated as
having Separated from Service. If a Participant ceases providing services as an
independent contractor and begins providing services as an employee, or ceases providing
services as an employee and begins providing services as an independent contractor, the
Participant will not be considered to have a Separation from Service until the Participant
has ceased providing services in both capacities. Notwithstanding the foregoing, if a
Participant provides services both as an employee of the Corporation and a member of the
board of directors of the Corporation, the services provided as a director are not taken
into account in determining whether the Participant has a Separation from Service as an
employee for purposes of this Plan unless this Plan is aggregated with any plan in which
the Participant participates as a director under IRS Regulation Section 1.409A-1(c)(2)(ii).

     2.13 “Unforeseeable Emergency” means a severe financial hardship to a Participant
resulting from an illness or accident of the Participant or the Participant’s spouse, beneficiary
or dependent (as defined in Section 152(a) of the Code without regard to Section 151 (b)(1), (b)(2)
and (d)(1)(B)), loss of the Participant’s property due to casualty (including the need to rebuild a
home following damage to a home not otherwise covered by insurance, for example, as a result of a
natural disaster), or other similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant. For example, the imminent foreclosure of
or eviction from the Participant’s primary residence may constitute an Unforeseeable Emergency. In
addition, the need to pay for medical expenses, including non-refundable deductibles, as well

25

 

as for the costs of prescription drug medication, may constitute an Unforeseeable Emergency.
Finally, the need to pay for funeral expenses of a spouse, beneficiary or a dependent (as defined
in Code section 152(a) without regard to Section 151 (b)(1), (b)(2) and (d)(1)(B)) may also
constitute an Unforeseeable Emergency. Except as otherwise provided above, the purchase of a home
and the payment of college tuition are not Unforeseeable Emergencies. Whether a Participant is
faced with an Unforeseeable Emergency is to be determined based on the relevant facts and
circumstances of each case.

ARTICLE III

PARTICIPATION AND CONTRIBUTIONS

     3.1 Determination of Participants. Within a reasonable period of time prior to the
beginning of a Plan Year or at any time during a Plan Year, the Administrator will designate
employees who will be eligible to become Active Participants in the Plan for that Plan Year (or the
remainder of such Plan Year). An employee designated as an Active Participant for a Plan Year
shall remain an Active Participant until the employee’s Separation from Service or the
Administrator or the Board of Directors of the Corporation takes action to terminate such
employee’s participation effective on the first day of any Plan Year subsequent to the date of such
action by the Administrator or the Board.

     3.2 Amount of Contributions. For each month, beginning with the month in which falls
the Participant’s effective date of participation, the Corporation shall make a contribution to the
Account of the Participant equal to 10% of the Participant’s Base Salary for that month. The
contribution for a month shall be credited to the Participant’s Account as of the last day of the
month for which it is made. No contributions will be made for a Participant for the calendar month
in which occurs the date of his Separation from Service with the Corporation or in any subsequent
calendar month.

     3.3 Contributions Are Hypothetical. The contributions under this Plan are
hypothetical contributions only.

ARTICLE IV

ACCOUNTS; EARNINGS

     4.1 Credits to Accounts. Bookkeeping amounts equal to the amounts contributed by the
Corporation pursuant to Section 3.2 shall be credited to such Participant’s Account at the time
specified in Section 3.2.

     4.2 Valuation of Account.

     (a) The Participant’s Account shall be credited or charged with deemed earnings or
losses as if it were invested in accordance with paragraph (b) below.

     (b) (i) The investment funds available hereunder for the deemed investment of the
Account shall be such funds as the Administrator shall from time to time determine.
However, in no event shall the Corporation be required to make any investment in any such
fund and, to the extent such investments are made, such

26

 

investments shall remain an asset of the Corporation subject to the claims of its general
creditors.

     (ii) On the date credited to the Participant’s Account, contributions shall be
deemed to be invested in one or more of the investment funds designated by the
Participant for such deemed investment. Once made, the Participant’s investment
designation shall continue in effect for all future contributions until changed by
the Participant. Any such change may be prospectively elected by the Participant
at the times established by the Administrator, which shall be no less frequently
than quarterly, and shall be effective only for contributions, credited from and
after its effective date.

     (iii) A Participant may prospectively elect to reallocate his Account balance
among the investment funds at the times established by the Administrator, which
shall be no less frequently than quarterly.

     (iv) The valuation of the funds held in the Account shall be accomplished in
the same manner as though the deemed investment in such funds had actually been
made and are valued at their fair market value price on valuation dates hereunder.

     (v) A Participant’s Account shall be valued as of December 31 each year and at
such other times established by the Administrator, which shall be no less
frequently than quarterly.

     (vi) All elections and designations under this section shall be made in
accordance with procedures prescribed by the Administrator. The Administrator may
prescribe uniform percentages for such elections and designations.

     (vii) The earnings (or losses) provided for in this Section 4.2 shall continue
to accrue on the balance remaining in the Account during any period of installment
payments.

     (c) The Corporation shall provide annual reports to each Participant showing (a) the
value of the Account as of the most recent December 31st, (b) the amount of
deferral made by the Participant for the Plan Year ending on such date and (c) the amount
of any investment gain or loss and the costs of administration credited or debited to the
Participant’s Account.

     4.3 Bookkeeping Accounts Only. Each Participant’s Account shall be utilized solely as
a device for the measurement and determination of the amounts to be paid to such Participant under
the Plan. Participant Accounts shall be bookkeeping accounts only and no Participant or
Beneficiary shall have any proprietary rights in any assets held by the Corporation, whether or not
held for the purpose of funding the Corporation’s obligation under this Plan. This Plan
constitutes the mere promise of the Corporation to make benefit payments in the future and the
right of any Participant or Beneficiary to receive benefits under this Plan shall be an unsecured
claim against the general assets of the Corporation. Notwithstanding the foregoing, the
Corporation may choose to finance some or all of its obligations hereunder via a trust intended to
be a grantor trust.

27

 

ARTICLE V

VESTING

     5.1 In General. A Participant’s vested interest in his Account shall be the
percentage of his Account based on his completed years of continuous employment with the group
consisting of the Corporation and its affiliates from the date he first became employed with that
group determined as follows:

	 	 	 	 	 
	Completed Years Of Continuous Employment:	 	Vested Percentage:
	Less than 2 years
	 	 	0	%
	At least 2 years, but less than 3
	 	 	20	%
	At least 3 years, but less than 4
	 	 	40	%
	At least 4 years, but less than 5
	 	 	70	%
	5 or more years
	 	 	100	%

     5.2 Death or Disability. Notwithstanding Section 5.1 above, the Participant shall be
fully vested in his Account if the Participant’s Separation from Service is by reason of death or
disability. For this purpose, the Participant shall be considered to be disabled if the
Administrator finds the Participant, on the basis of a written medical opinion, furnished by a
licensed physician appointed by the Administrator, to be incapable of engaging in the Participant’s
regular occupation with the Corporation at the location where the Participant last worked, and
that, to a reasonable medical probability, such incapacity will continue to exist during the
remainder of the Participant’s life.

ARTICLE VI

MANNER AND TIMING OF DISTRIBUTION

     6.1 Payment of Benefits.

     (a) After a Participant’s Separation from Service for any reason (including
retirement, death, disability or other termination), the Participant’s vested interest in
his Account will be determined and paid to the Participant (or in the event of the
Participant’s death, to the Participant’s Beneficiary). Payment shall be made in one of
the following forms as specified in the Participant’s payment election pursuant to Section
6.2:

     (i) A single sum distribution of the vested balance of the Account on the
first day of the seventh month following the Participant’s Separation from Service;
or

     (ii) The total value of the vested balance of the Account shall be paid in
five (5) annual installments with the first of such installments to be paid on the
first day of the seventh month following the Participant’s Separation from Service.
The amount of each installment shall be the Participant’s vested Account balance
as determined on the day prior to distribution multiplied by a fraction of which
the numerator is one and the denominator is the number of

28

 

payments remaining to be made to the Participant (including the payment being made
currently).

     (iii) The total value of the vested balance of the Account shall be paid in
ten (10) annual installments with the first of such installments to be paid on the
first day of the seventh month following the Participant’s Separation from Service.
The amount of each installment shall be the Participant’s vested Account balance
as determined on the day prior to distribution multiplied by a fraction of which
the numerator is one and the denominator is the number of payments remaining to be
made to the Participant (including the payment being made currently).

     (iv) The total value of the vested balance of the Account shall be paid in
twenty (20) annual installments with the first of such installments to be paid on
the first day of the seventh month following the Participant’s Separation from
Service. The amount of each installment shall be the Participant’s vested Account
balance as determined on the day prior to distribution multiplied by a fraction of
which the numerator is one and the denominator is the number of payments remaining
to be made to the Participant (including the payment being made currently).

In the case of the installment payments, subsequent installments shall be made on an
anniversary of the first installment.

     (b) Notwithstanding paragraph (a) above, in the case of a Participant whose Separation
from Service was due to death, payment shall commence under the applicable payment option
on the first day of the first month following the Participant’s Separation from Service
rather than on the first day of the seventh month following the Participant’s Separation
from Service.

     6.2 Payment Election. An individual who first becomes an Active Participant at the
beginning of a Plan Year shall, prior to his date of participation, complete a payment election
form specifying the form of payment applicable to such Participant’s Account under the Plan.
Absent an actual election by such Participant by the effective date of participation, the
Participant shall be deemed to have elected payment in the single sum payment form. An individual
who first becomes an Active Participant other than on the first day of a Plan Year shall, no later
than 30 days after the effective date of participation, complete a payment election form specifying
the form of payment applicable to such Participant’s Account. In the event such a Participant does
not make an actual election within such 30 day period, payment will be made in the single sum
payment form; provided, however, that if such Participant is already a Participant in any other
nonqualified plan or plans sponsored by the Corporation of the account balance type, the most
recent payment election with respect to any one of those plans shall be the payment election form
deemed elected under this Plan regardless of whether the individual elects a different payment
election form during that initial 30 day period. A Participant may change the form of payment by
completing and filing a new payment election form with the Corporation, and the payment election
form on file with the Corporation as of the date of the Participant’s Separation from Service shall
be controlling. Notwithstanding the foregoing, a payment election form changing the Participant’s
form of payment shall not be effective if the Participant has a Separation from Service within
twelve months after the date on which the election change is filed with the Corporation. Any
change in payment method must have the effect of delaying the commencement of payments to a date
which is at least five (5) years following the initially

29

 

scheduled commencement date of payment previously in effect. For purposes of compliance with
Section 409A of the Internal Revenue Code, a series of five year installment payments, ten year
installment payments and twenty year installment payments are each designated as a single payment
rather than a right to a series of separate payments; therefore, a Participant who has elected (or
is deemed to have elected) any option under Section 6.1 may substitute any of the other options for
the option originally elected as long as the foregoing one-year and five year rules are satisfied.
The five year delay rule does not apply if the revised payment method applies only upon the
Participant’s death.

     6.3 Financial Hardship. A partial or total distribution of the Participant’s Account
shall be made prior to Separation from Service upon the Participant’s request and a demonstration
by the Participant of severe financial hardship as a result of an Unforeseeable Emergency. Such
distribution shall be made in a single sum as soon as administratively practicable following the
Administrator’s determination that the foregoing requirements have been met. In any case, a
distribution due to Unforeseeable Emergency may not be made to the extent that such emergency is or
may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation
of the Participant’s assets, to the extent the liquidation of such assets would not cause severe
financial hardship, or by cessation of deferrals elected by the Participant under any other
nonqualified deferred compensation plan sponsored by the Corporation of the account balance type.
Distributions because of an Unforeseeable Emergency must be limited to the amount reasonably
necessary to satisfy the emergency need (which may include amounts necessary to pay any Federal,
state, or local income taxes or penalties reasonably anticipated to result from the distribution).
Determinations of amounts reasonably necessary to satisfy the emergency need must take into account
any additional compensation that is available because of cancellation of a deferral election under
any deferred compensation plan sponsored by the Corporation. The payment may be made from any
arrangement in which the Participant participates that provides for payment upon an Unforeseeable
Emergency, provided that the arrangement under which the payment was made must be designated at the
time of payment.

     6.4 Delayed Distribution.

     (a) A payment otherwise required to be made pursuant to the provisions of this Article
VI shall be delayed if the Corporation reasonably anticipates that the Corporation’s
deduction with respect to such payment would be limited or eliminated by application of
Code Section 162(m); provided, however that such payment shall be made on the earliest date
on which the Corporation anticipates that the deduction of the payment of the amount will
not be limited or eliminated by application of Code Section 162(m). In any event, such
payment shall be made no later than the last day of the calendar year in which occurs the
six month anniversary of the date on which the Participant has a Separation from Service.

     (b) A payment otherwise required under this Article VI shall be delayed if the
Corporation reasonably determines that the making of the payment will jeopardize the
ability of the Corporation to continue as a going concern; provided, however, that payments
shall be made on the earliest date on which the Corporation reasonably determines that the
making of the payment will not jeopardize the ability of the Corporation to continue as a
going concern.

     (c) A payment otherwise required under this Article VI shall be delayed if the
Corporation reasonably anticipates that the making of the payment will violate federal
securities laws or other applicable law; provided, however, that payments shall

30

 

nevertheless be made on the earliest date on which the Corporation reasonably anticipates
that the making of the payment will not cause such violation. (The making of a payment
that would cause inclusion in gross income or the applicability of any penalty provision or
other provision of the Code is not treated as a violation of applicable law.)

     (d) A payment otherwise required under this Article VI shall be delayed upon such
other events and conditions as the Internal Revenue Service may prescribe in generally
applicable guidance published in the Internal Revenue Bulletin.

     6.5 Inclusion in Income Under Section 409A. Notwithstanding any other provision of
this Article VI, in the event this Plan fails to satisfy the requirements of Code Section 409A and
regulations thereunder with respect to any Participant, there shall be distributed to such
Participant as promptly as possible after the Administrator becomes aware of such fact of
noncompliance such portion of the Participant’s Account balance hereunder as is included in income
as a result of the failure to comply, but no more.

     6.6 Domestic Relations Order. Notwithstanding any other provision of this Article VI,
payments shall be made from an account of a Participant in this Plan to such individual or
individuals (other than the Participant) and at such times as are necessary to comply with a
domestic relations order (as defined in Code Section 414(p)(1)(B)).

     6.7 De Minimis Amounts. Notwithstanding any other provision this Article VI, a
Participant’s entire Account balance under this Plan and all other nonqualified deferred
compensation plans of the account balance type shall automatically be distributed to the
Participant on or before the later of December 31 of the calendar year in which occurs the
Participant’s Separation from Service or the 15th day of the third month following the
Participant’s Separation from Service if the total amount in such Account balance at the time of
distribution, when aggregated with all other amounts payable to the Participant under all
arrangements benefiting the Participant described in Section 1.409A-1(c) or any successor thereto,
do not exceed the amount described in Code Section 402(g)(1)(B). The foregoing lump sum payment
shall be made automatically and any other distribution elections otherwise applicable with respect
to the individual in the absence of this provision shall not apply.

ARTICLE VII

ADMINISTRATION

     7.1 Administrator. The Plan shall be administered by the Administrator, which shall
be a committee designated or created by the Corporation’s Board of Directors for this purpose. The
Administrator shall have all authority that may be appropriate for administering the Plan,
including the authority to adopt rules and regulations for the conduct of its affairs and for
implementing, amending and carrying out the Plan, interpreting the provisions of the Plan and
determining a Participant’s entitlement to benefits hereunder. The Administrator shall be entitled
to rely upon the Corporation’s records as to information pertinent to calculations or
determinations made pursuant to the Plan.

     The Administrator may also delegate any of its clerical or other administrative duties to one
or more officers or employees of the Corporation, who may assist the Administrator in the
performance of any of its functions hereunder. In the event of such delegation, a reference to the
Administrator shall be deemed to refer to such officer(s) or employee(s).

31

 

     7.2 Authority of Administrator. The Administrator shall have full and complete
discretionary authority to determine eligibility for benefits under the Plan, to construe the terms
of the Plan and to decide any matter presented through the claims procedure. Any final
determination by the Administrator shall be binding on all parties and afforded the maximum
deference allowed by law. If challenged in court, such determination shall not be subject to
de novo review and shall not be overturned unless proven to be arbitrary and capricious
based upon the evidence considered by the Administrator at the time of such determination.

     7.3 Administrator Actions. The Administrator may authorize one or more of its members
to execute on its behalf instructions or directions to any interested party, and any such
interested party may rely upon the information contained therein. The members may also act at a
meeting or by unanimous written consent. A majority of the members shall constitute a quorum for
the transaction of business and shall have full power to act hereunder. All decisions shall be
made by vote of the majority present at any meeting at which a quorum is present, except for
actions in writing without a meeting, which must be unanimous.

     7.4 Conflict of Interest. Any person who is on the committee which has been
designated by the Corporation’s Board of Directors as the Administrator who is covered under the
Plan may not vote or decide upon any matter relating solely to himself or vote in any case in which
his individual right to any benefit under the Plan is particularly involved. Decisions shall be
made by remaining members. Any such person shall not become an Active Participant the Plan unless
and until designated as a member by the Corporation’s Board of Directors. Further, any such person
shall not be removed from active participation in the Plan except pursuant to action taken by the
Board of Directors.

     7.5 Minor or Incompetent Payees. If a person to whom a benefit is payable is a minor
or is otherwise incompetent by reason of a physical or mental disability, the Corporation may cause
the payments due to such person to be made to another person for the first person’s benefit without
any responsibility to see to the application of such payment. Such payments shall operate as a
complete discharge of the obligations to such person under the Plan.

     7.6 No Liability. Except as otherwise provided by law, neither the Administrator, nor
any member thereof, nor any director, officer or employee of the Corporation involved in the
administration of the Plan shall be liable for any error of judgment, action or failure to act
hereunder or for any good faith exercise of discretion, excepting only liability for gross
negligence or willful misconduct. The Corporation shall hold harmless and defend any individual in
the employment of the Corporation and any director of the Corporation against any claim, action or
liability asserted against him in connection with any action or failure to act regarding the Plan,
except as and to the extent that any such liability may be based upon the individual’s own gross
negligence or willful misconduct. This indemnification shall not duplicate but may supplement any
coverage available under any applicable insurance.

     7.7 Plan Expenses. All costs and expenses incurred in connection with the
administration and operation of the Plan shall be borne by the Corporation and/or any trust
established by the Corporation to assist it in meeting its obligations under the Plan.

     7.8 Claims Procedure.

     (a) If the Participant or the Participant’s Beneficiary (hereinafter referred to as a
“Claimant”) is denied all or a portion of an expected benefit under the Plan for any
reason, he or she may file a claim with the Administrator or its designee. The

32

 

Administrator or its designee shall notify the Claimant within 60 days of allowance or
denial of the claim, unless the Claimant receives written notice prior to the end of the
sixty (60) day period stating that special circumstances require an extension of the time
for decision and specifying the expected date of decision. The notice of the such decision
shall be in writing, sent by mail to the Claimant’s last known address, and if a denial of
the claim, must contain the following information:

     (i) the specific reasons for the denial;

     (ii) specific reference to pertinent provisions of the Plan on which the
denial is based; and

     (iii) if applicable, a description of any additional information or material
necessary to perfect the claim, an explanation of why such information or material
is necessary, and an explanation of the claims review procedure.

     (iv) a description of the Plan’s claims review procedure, including a
statement of the Claimant’s right to bring a civil action under Section 502 of
ERISA if the Claimant’s claim is denied upon review.

     (b) A Claimant is entitled to request a review of any denial of his claim. The
request for review must be submitted in writing to the Administrator within 60 days after
receipt of the notice of the denial. The timely filing of such a request is necessary to
preserve any legal recourse which may be available to the Claimant and, absent the
submission of request for review within the 60-day period, the claim will be deemed to be
conclusively denied. Upon submission of a written request for review, the Claimant or his
representative shall be entitled to review all pertinent documents, and to submit issues
and comments in writing for consideration by the Administrator.

The Administrator shall fully and fairly review the matter and shall consider all
information submitted in the review request, without regard to whether or not such
information was submitted or considered in the initial claim determination. The
Administrator shall promptly respond to the Claimant, in writing, of its decision within 60
days after receipt of the review request. However, due to special circumstances, if no
response has been provided within the first 60 days, and notice of the need for additional
time has been furnished within such period, the review and response may be made within the
following 60 days. The Administrator’s decision shall include specific reasons for the
decision, including references to the particular Plan provisions upon which the decision is
based, notification that the Claimant can receive or review copies of all documents,
records and information relevant to the claim, and information as to the Claimant’s right
to file suit under Section 502(a) of ERISA.

     (c) If a determination of disability for purposes of Section 5.2, 6.1(b) or 6.2
becomes necessary and if such determination is considered to be with respect to a claim for
benefits based on disability for purposes of 29 CFR Section 2560.503-1, then the
Administrator shall adopt and administer a special procedure for considering such
disability claims meeting the requirements of 29 CFR Section 2560.503-1 for disability
benefit claims.

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ARTICLE VIII

MISCELLANEOUS

     8.1 Amendment or Termination. The Corporation (through its Board of Directors or
authorized officers or employees) reserves the right to alter or amend the Plan, or any part
thereof, in such manner as it may determine, at any time and for any reason. Further, the Board of
Directors of the Corporation reserves the right to terminate the Plan, at any time and for any
reason. Notwithstanding the foregoing, in no event shall any amendment or termination deprive any
Participant or Beneficiary of any amounts credited to him under this Plan as of the date of such
amendment or termination; provided, however, that the Corporation may prospectively change the
deemed investment funds available hereunder or discontinue the crediting of earnings and losses
and, further, the Corporation may make any amendment it deems necessary or desirable for purposes
of compliance with the requirements of Code Section 409A and regulations thereunder.

     If the Plan is amended to freeze benefit accruals, no additional contributions shall be
credited to any Participant Account hereunder. Following such a freeze of benefit accruals,
Participants’ Accounts shall be paid at such time and in such form as provided under Article VI of
the Plan. If the Corporation terminates the Plan and if the termination is of the type described
in regulations issued by the Internal Revenue Service pursuant to Code Section 409A, then the
Corporation shall distribute the then existing Account balances of Participants and beneficiaries
in a lump sum within the time period specified in such regulations and, following such
distribution, there shall be no further obligation to any Participant or beneficiary under this
Plan. However, if the termination is not of the type described in such regulations, then following
Plan termination Participants’ Accounts shall be paid at such time and in such form as provided
under Article VI of the plan.

     8.2 Applicable Law. This Plan shall be governed by the laws of the State of
Wisconsin, except to the extent preempted by the provisions of ERISA or other applicable federal
law.

     8.3 Relationship to Other Programs. Participation in the Plan shall not affect a
Participant’s rights to participate in and receive benefits under any other plans of the
Corporation, nor shall it affect the Participant’s rights under any other agreement entered into
with the Corporation, unless expressly provided otherwise by such plan or agreement. Any amount
credited under or paid pursuant to this Plan shall not be treated as wages, salary or any other
type of compensation or otherwise taken into account in the determination of the Participant’s
benefits under any other plans of the Corporation, unless expressly provided otherwise by such
plan.

     8.4 Non-Assignability. No Participant or Beneficiary shall have any right to commute,
sell, assign, pledge, convey, or otherwise transfer any rights or claims to receive benefits
hereunder, nor shall such rights or claims be subject to garnishment, attachment, execution or levy
of any kind except to the extent otherwise required by law.

     8.5 Status of Plan Under ERISA. The Plan is intended to be an unfunded plan
maintained by the Corporation primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees, as described in Section 201(2), Section
301(a)(3), Section 401(a)(1) and Section 4021(b)(6) of ERISA.

     8.6 Withholding. The Corporation shall comply with all applicable tax and
governmental withholding requirements. To the extent required by law, the Corporation shall

34

 

withhold any taxes required to be withheld by the federal or any state or local government from
payments made hereunder or from any other amounts paid to a Participant by the Corporation. If
FICA taxes must be withheld in connection with amounts credited hereunder before payments are
otherwise due hereunder and if there are no other wages from which to withhold them, the
Corporation shall pay such FICA taxes generated by such payment (and taxes under Code Section 3401
triggered thereby and additional taxes under Section 3401 attributable to pyramiding of Section
3401 wages and taxes) but no more and the Participant’s Account hereunder shall be reduced by an
amount equal to the payments made by the Corporation.

     8.7 Limited Liability. In no event will the Corporation’s liability to pay benefits
to a Participant or his Beneficiary under Article VI ever exceed the Participant’s vested interest
in his Account under the Plan.

     8.8 No Right to Continued Employment. Neither participation in this Plan, nor the
payment of any benefit hereunder, shall be construed as giving to a Participant any right to be
retained in the service of the Corporation, or limiting in any way the right of the Corporation to
terminate the Participant’s service at any time. Nor does participation in this Plan guarantee the
Participant the right to be continued in service in any particular position or at any particular
rate of compensation.

     8.9 Special Distribution Election Rules for 2005-2008. Notwithstanding the usual
rules regarding distribution elections, on or before December 31, 2008, a Participant may make an
election as to distribution of his Account from among the choices described at Section 6.1 hereof
without complying with the rules described in Section 6.2 hereof as long as the effect of the
election made in any year is not to accelerate payments into that year or to defer payments which
would otherwise have been made in that year to a subsequent year. In order to subsequently change
any such special election after December 31, 2008, the requirements of Section 6.2 hereof must be
satisfied. (This election will not apply to distribution of the Participant’s accounts holding
amounts earned and vested prior to January 1, 2005, if any, (and earnings credited thereon) since
such accounts are not governed by this document but are governed by the Frozen Plan.)

     8.10 Cessation of Affiliation. Each Corporation sponsors the Plan as to its own
employees and not with respect to the employees of any other Corporation which sponsors the Plan.
If a Corporation which sponsors the Plan ceases to be affiliated with the other Corporations which
sponsor the Plan, then that Corporation shall continue to maintain the Plan with respect to its own
employees, shall adopt replacement documents which are substantively identical to this document by
which to continue its obligations which had been created hereunder and, thereafter, its obligations
to its employees shall be governed by such successor document and this document shall cease to
apply to that Corporation and its employees.

35

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