Document:

exv10w10

 

EXHIBIT 10.10

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”) dated as of June 26, 2006 by and between Assisted
Living Concepts, Inc. a Nevada corporation with its principal place of business at 111 West
Michigan, Milwaukee, WI 53203, (the “Company”) and Wally Levonowich, Vice President and Controller
(the “Employee”).

WITNESSETH

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

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

1. Offer and Acceptance of Employment. The Company hereby agrees to employ the Employee as
the Vice President and Controller of the Company. The Employee accepts such employment and agrees
to perform the customary responsibilities of such position with the Company and/or certain of its
subsidiaries as may be assigned to him from time to time by the Company. The Employee will perform
such other duties as may from time to time be reasonably assigned to him by the Company, provided
such duties are comparable with the type of duties performed by persons of similar titles with the
Company, its subsidiaries or other affiliates.

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, subject to adjustment as hereinafter provided. Employee’s base salary shall be reviewed on
an annual basis and the Company shall increase such base salary, by an amount, if any, it
determines to be appropriate. Any such increase shall not reduce or limit any other obligation of
the Company hereunder. Employee’s annual base salary payable hereunder, as it may be increased from
time to time, less applicable withholding, and without reduction for any amounts deferred as
described below, is referred to herein as “Base Salary”. Employee’s Base Salary, as in effect from
time to time, may not be reduced by the Company without Employee’s consent, provided that the Base
Salary payable under this paragraph shall be reduced to the extent Employee elects to defer or
reduce 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 Base Salary not deferred in accordance with its customary periodic payroll practices.

     (b) Incentive Compensation. Subject to Board approval and based on the recommendation
of the Human Resources Committee, the 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.

     (c) Benefits, Perquisites 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. The Employee shall be entitled to the number of paid vacation days in
each anniversary year determined by the Company from time to time for similar positions. The
Employee shall also be entitled to all paid holidays given by the Company to employees with similar
positions.

          (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 Employee with a monthly automobile allowance in the
amount of $650. Additionally, the Employee will be 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. The 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 upon written notice to Employee specifying the
particulars of the action or inaction alleged to constitute “Good Cause” because of (i) Employee’s
commission of any felony (whether or not involving the Company or any of its subsidiaries),
including, without limitation, those involving moral turpitude which subjects, or if generally
known, would subject, the Company or any of its subsidiaries to public ridicule or embarrassment,
(ii) fraud or other willful misconduct by Employee in respect of his obligations under this
Agreement, (iii) refusal

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or continuing failure to attempt, without proper cause and, other than by reason of illness,
to follow the lawful directions of the senior officers or the Board of Directors of the Company,
(iv) willful violation of any material policy of the Company or material agreement with the
Company, or (v) or other conduct that may be detrimental to the best interests of the Company or
any affiliate thereof as determined by the Board.

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

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

     (d) Change in Location; Material Failure. The Employee’s employment shall terminate
upon:

          (i) the provision of written notice from the Company to the Employee that the Employee’s work
location in being shifted to a location more than 30 miles away from the Employee’s current work
location; or

          (ii) There is a material diminution of the Employee’s assigned duties and responsibilities
including any material diminution of the powers associated with such position;

          (iii) The Employee advises the Company, in writing, that the amendments to the conditions of
employment in (i) and/or (ii) above are not acceptable and that the Employer has not received such
change within thirty (30) days.

     (e) 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 the Employee’s employment is terminated under paragraph (a) or (b) of this Section 3,
the date specified in the Notice of Termination (which shall not be less than 7 days in case of
paragraph (a) and 60 days in case of paragraph (b) nor more than 180 days from the date such Notice
of Termination is given);

          (iii) in the case of an event described in paragraph (d) of this Section 3 the last day of the
month in which such event occurs; or

          (iv) Employee may terminate voluntarily and, in such event, the Employee’s Date of Termination
shall be the date which is two weeks after the date the Employee provides notice to the Company of
voluntary termination. It is understood and agreed that the Employee is required to provide the
Company with sixty (60) days notice of resignation.

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4. Payments upon Termination.

     (a) Termination Due to Death or Voluntary Termination. Upon termination of the
Employee under Section 3(c) or in the event of Employee’s voluntary termination the Company shall
no later than the first day of the third month following the month in which the Date of Termination
occurs pay to the Employee or his estate (1) his full Base Salary and other accrued benefits earned
up to the Date of Termination and (2) if any bonus, under any bonus plan, shall be payable in
respect of the year in which the Employee’s Date of Termination occurs. 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 the Employee under this Agreement.

     (b) Termination for Cause. If the Employee’s employment shall be terminated under
Section 3(a), the Company shall no later than thirty (30) days following the month in which the
Date of Termination occurs pay the Employee his full Base Salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given. 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 the Employee under this Agreement.

     (c) Termination by the Company for Reasons other than for Cause, Death or Disability.

     In the event the Company terminates the Employee pursuant to paragraph (b) or (d) of Section
3, then:

          (i) the Company shall make a lump sum payment (less applicable deductions to include
withholdings for taxes) to the Employee as follows no later than thirty (30) days after the month
in which the Date of Termination occurs equal to the sum of the following:

               (A) Payment of any Base Salary owed to the Date of Termination which has not yet been paid.

               (B) Severance pay in the amount of one year of Base Salary at the rate in effect at the time
of the event described in Section 3(b) or (d) (whichever is applicable) plus $15,000.

               (C) A payment in lieu of bonus in an amount equivalent to 30% of Base Salary (as described in
clause (B) above) and, also, for the year in which termination occurs, a bonus shall be paid to the
Employee on a pro-rata basis for the portion of the year in which the Employee was employed, up to
the Date of Termination, on the assumption that 100% of the bonus payment would have been achieved.

               (D) The cash equivalent of 12 months of auto allowance.

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               (E) The amount that the Company would have credited as Company contributions over the 12 month
period of time beginning immediately after the Date of Termination to any of the deferred
compensation (including Executive Retirement) plans in which the Employee was a participant.

          (ii) 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.

          (iii) For
the 12 month period beginning with the Date of Termination, the Employee shall be treated
as if the Employee had continued to be employed for all purposes under insured welfare benefit
plans (other than plans providing medical benefits) sponsored or maintained by the Company on the
same participation terms as if still employed. Beginning with the Date of Termination, the
Employee shall be entitled to receive medical plan continuation coverage required under ERISA
(“COBRA Benefits”) subject to payment of full COBRA premiums by Employee.

          (iv) In order to receive the payments described in (c)(i) above, the Employee must (no later
than thirty (30) days following the month in which the Date of Termination occurs) execute (and not
revoke during the seven day revocation period), a release in form substantially similar to that
attached as Exhibit A hereto.

5. Section 280G Limitation on Compensation. In the event that the severance benefits
payable to the Employee under this Agreement or any other payments or benefits received or to be
received by the 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 selected by the Company’s independent
auditors and reasonably acceptable to the 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 the 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 the 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.

6. Employee’s Covenants.

     (a) Nondisclosure. At all times during and after Employee’s employment with the
Company, Employee shall keep confidential and shall not, except with Company’s express prior
written consent, or except in the proper course of his employment with Company, directly or
indirectly, communicate, disclose, divulge, publish, or otherwise express, to any Person, or use
for his own benefit or the benefit of any Person, any trade secrets, confidential or proprietary
knowledge or information, no

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matter when or how acquired concerning the conduct and details of Company’s business,
including without limitation, names of customers and suppliers, marketing methods, trade secrets,
policies, prospects and financial condition. For purposes of this Section 6, confidential
information shall not include any information which is now 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.

     (b) Non-Competition. 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, directly or indirectly, in any capacity, for the benefit of any
Person:

          (i) Solicit or hire any Person who is or during such period becomes a customer, supplier,
employee, salesman, agent or representative of Company, in any manner which interferes or might
interfere with such Person’s relationship with Company, or in an effort to obtain such Person as a
customer, supplier, employee, salesman, agent, or representative of any business in competition
with Company which conducts operations within 50 miles of the Employee’s present office.

          (ii) Establish, engage, own, manage, operate, join or control, or participate in the
establishment, ownership (other than as the owner of less than one percent of the stock of a
corporation whose shares are publicly traded), management, operation or control of, or be a
director, officer, employee, salesman, agent or representative of, or be a consultant to, any
Person in any business in competition with Company, if such Person has any office or facility at
any location within 50 miles of any location of the company over which the Employee has direct
responsibility or with 100 miles of the Employee’s current office, or act or conduct himself in any
manner which he would have reason to believe inimical or contrary to the best interests of Company.

     (c) Enforcement. Employee acknowledges that any breach by him 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. If
Company is obliged to resort to litigation to enforce any of the Covenants which has a fixed term,
then such term shall be extended for a period of time equal to the period during which a material
breach of such Covenant was occurring, beginning on the date of a final court order (without
further right of appeal) holding that such a material breach occurred, or, if later, the last day
of the original fixed term of such Covenant.

     (d) Consideration. Employee expressly acknowledges that the Covenants are a material
part of the consideration bargained for by Company and, without the

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agreement of Employee to be bound by the Covenants, Company would not have agreed to enter
into this Agreement.

     (e) 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) The 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 the Employee as
the result of employment by another employer after the Date of Termination, or otherwise. The
amounts payable to Employee under Section 5 hereof shall not be treated as damages but as severance
compensation to which Employee is entitled by reason of termination of his employment in the
circumstances contemplated by 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 the 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. 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) sent 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.

If to Company, to:

Assisted Living Concepts, Inc.

111 W. Michigan

Milwaukee, WI 53203

Attention: President and Chief Executive Officer

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Facsimile: (414) 908-8111

If to Employee, to:

Mr. Wally Levonowich

     (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.

     (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 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 heirs, executors, legal representatives, successors and permitted assigns. However, neither
party may assign, transfer, pledge, encumber, hypothecate or otherwise dispose of this Agreement or
any of its or his rights hereunder without prior written consent of the other party, and any such
attempted assignment, transfer, pledge, encumbrance, hypothecation or other disposition without
such consent shall be null and void without effect. Notwithstanding the foregoing, this Agreement
may be assigned by the Company to any of its subsidiaries or other affiliates and the Agreement
shall continue in full force and effect following the sale any such subsidiary or affiliate;
provided that the buyer of any such subsidiary or affiliate agrees to be bound by the terms hereof.

     (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.

     (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 Wisconsin
applicable to agreements made and to be performed entirely therein.

     (k) Settlement of Disputes. The Company and Employee agree that 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 or his 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) Notwithstanding anything herein to the contrary, if the severance payment(s) described
herein are considered deferred compensation subject to the provisions of Code Section 409A, then
this Agreement shall be deemed automatically amended to comply with the requirements thereof in a
manner that would cause the payments to comply with the provisions of Code Section 409A, including
but not limited to providing that the severance payment shall be made only upon the Executive’s
separation from service within the meaning of Code Section 409A and requiring that if the Executive
is a “specified employee” within the meaning of Code Section 409A, that

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any severance payment(s) due hereunder shall not be paid until six months following the date
of the Executive’s separation from service to the extent required by Code Section 409A.

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:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	/s/ Witness	 	 	 	By:	 	/s/ Mel Rhinelander	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Executive Assistant
	 	 
	 	Name:
	 	Mel Rhinelander	 	 
	 

	 	 	 	 	 	Title:
	 	President and Chief Executive

Officer	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	/s/ Witness	 	 	 	By:	 	/s/ Laurie Bebo	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Executive Assistant
	 	 	 	Name:
	 	Laurie Bebo	 	 
	 

	 	 	 	 	 	Title:
	 	President and Chief Operating

Officer	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	Witness:	 	 	 	EMPLOYEE:	 	 
	 
	 	/s/ Witness	 	 	 	 	 	/s/ Wally Levonowich	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Wally Levonowich	 	 

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Exhibit 10.11

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”) dated as of June 26, 2006 by and between Assisted
Living Concepts, Inc. a Nevada corporation with its principal place of business at 111 West
Michigan, Milwaukee, WI 53203, (the “Company”) and Rae Schweer, Vice President Sales and Marketing
(the “Employee”).

WITNESSETH

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

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

1. Offer and Acceptance of Employment. The Company hereby agrees to employ the Employee as
the Vice President Sales and Marketing of the Company. The Employee accepts such employment and
agrees to perform the customary responsibilities of such position with the Company and/or certain
of its subsidiaries as may be assigned to her from time to time by the Company. The Employee will
perform such other duties as may from time to time be reasonably
assigned to her by the Company,
provided such duties are comparable with the type of duties performed by persons of similar titles
with the Company, its subsidiaries or other affiliates.

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, subject to adjustment as hereinafter provided. Employee’s base salary shall be reviewed on
an annual basis and the Company shall increase such base salary, by an amount, if any, it
determines to be appropriate. Any such increase shall not reduce or limit any other obligation of
the Company hereunder. Employee’s annual base salary payable hereunder, as it may be increased from
time to time, less applicable withholding, and without reduction for any amounts deferred as
described below, is referred to herein as “Base Salary”. Employee’s Base Salary, as in effect from
time to time, may not be reduced by the Company without Employee’s consent, provided that the Base
Salary payable under this paragraph shall be reduced to the extent Employee elects to defer or
reduce 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
her Base Salary not deferred in accordance with its customary periodic payroll practices.

     (b) Incentive Compensation. Subject to Board approval and based on the recommendation
of the Human Resources Committee, the 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.

     (c) Benefits, Perquisites 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. The Employee shall be entitled to the number of paid vacation days in
each anniversary year determined by the Company from time to time for similar positions. The
Employee shall also be entitled to all paid holidays given by the Company to employees with similar
positions.

          (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 Employee with a monthly auto allowance in the amount
of $650. Additionally, the Employee will be 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. The 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 upon written notice to Employee specifying the
particulars of the action or inaction alleged to constitute “Good Cause” because of (i) Employee’s
commission of any felony (whether or not involving the Company or any of its subsidiaries),
including, without limitation, those involving moral turpitude which subjects, or if generally
known, would subject, the Company or any of its subsidiaries to public ridicule or embarrassment,
(ii) fraud or other willful misconduct by Employee in respect of
her obligations under this
Agreement, (iii) refusal

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or continuing failure to attempt, without proper cause and, other than by reason of illness,
to follow the lawful directions of the senior officers or the Board of Directors of the Company,
(iv) willful violation of any material policy of the Company or material agreement with the
Company, or (v) or other conduct that may be detrimental to the best interests of the Company or
any affiliate thereof as determined by the Board.

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

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

     (d) Change in Location; Material Failure. The Employee’s employment shall terminate
upon:

          (i) the provision of written notice from the Company to the Employee that the Employee’s work
location in being shifted to a location more than 30 miles away from the Employee’s current work
location; or

          (ii) There is a material diminution of the Employee’s assigned duties and responsibilities
including any material diminution of the powers associated with such position;

          (iii) The Employee advises the Company, in writing, that the amendments to the conditions of
employment in (i) and/or (ii) above are not acceptable and that the Employer has not received such
change within thirty (30) days.

     (e) 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 the Employee’s employment is terminated under paragraph (a) or (b) of this Section 3,
the date specified in the Notice of Termination (which shall not be less than 7 days in case of
paragraph (a) and 60 days in case of paragraph (b) nor more than 180 days from the date such Notice
of Termination is given);

          (iii) in the case of an event described in paragraph (d) of this Section 3 the last day of the
month in which such event occurs; or

          (iv) Employee may terminate voluntarily and, in such event, the Employee’s Date of Termination
shall be the date which is two weeks after the date the Employee provides notice to the Company of
voluntary termination. It is understood and agreed that the Employee is required to provide the
Company with sixty (60) days notice of resignation.

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4. Payments upon Termination.

     (a) Termination Due to Death or Voluntary Termination. Upon termination of the
Employee under Section 3(c) or in the event of Employee’s voluntary termination the Company shall
no later than the first day of the third month following the month in which the Date of Termination
occurs pay to the Employee or his estate (1) her full Base Salary and other accrued benefits earned
up to the Date of Termination and (2) if any bonus, under any bonus plan, shall be payable in
respect of the year in which the Employee’s Date of Termination occurs. 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 the Employee under this Agreement.

     (b) Termination for Cause. If the Employee’s employment shall be terminated under
Section 3(a), the Company shall no later than thirty (30) days following the month in which the
Date of Termination occurs pay the Employee her full Base Salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given. 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 the Employee under this Agreement.

     (c) Termination by the Company for Reasons other than for Cause, Death or Disability.

     In the event the Company terminates the Employee pursuant to paragraph (b) or (d) of Section
3, then:

          (i) the Company shall make a lump sum payment (less applicable deductions to include
withholdings for taxes) to the Employee as follows no later than thirty (30) days after the month
in which the Date of Termination occurs equal to the sum of the following:

               (A) Payment of any Base Salary owed to the Date of Termination which has not yet been paid.

               (B) Severance pay in the amount of one year of Base Salary at the rate in effect at the time
of the event described in Section 3(b) or (d) (whichever is applicable) plus $15,000.

               (C) A payment in lieu of bonus in an amount equivalent to 30% of Base Salary (as described in
clause (B) above) and, also, for the year in which termination occurs, a bonus shall be paid to the
Employee on a pro-rata basis for the portion of the year in which the Employee was employed, up to
the Date of Termination, on the assumption that 100% of the bonus payment would have been achieved.

               (D) The
cash equivalent of 12 months of auto allowance.

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               (E) The amount that the Company would have credited as Company contributions over the 12 month
period of time beginning immediately after the Date of Termination to any of the deferred
compensation (including Executive Retirement) plans in which the Employee was a participant.

          (ii) 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.

          (iii) For
the 12 month period beginning with the Date of Termination, the Employee shall be treated
as if the Employee had continued to be employed for all purposes under insured welfare benefit
plans (other than plans providing medical benefits) sponsored or maintained by the Company on the
same participation terms as if still employed. Beginning with the Date of Termination, the
Employee shall be entitled to receive medical plan continuation coverage required under ERISA
(“COBRA Benefits”) subject to payment of full COBRA premiums by Employee.

          (iv) In order to receive the payments described in (c)(i) above, the Employee must (no later
than thirty (30) days following the month in which the Date of Termination occurs) execute (and not
revoke during the seven day revocation period), a release in form substantially similar to that
attached as Exhibit A hereto.

5. Section 280G Limitation on Compensation. In the event that the severance benefits
payable to the Employee under this Agreement or any other payments or benefits received or to be
received by the 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 selected by the Company’s independent
auditors and reasonably acceptable to the 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 the 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 the 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.

6. Employee’s Covenants.

     (a) Nondisclosure. At all times during and after Employee’s employment with the
Company, Employee shall keep confidential and shall not, except with Company’s express prior
written consent, or except in the proper course of her employment with Company, directly or
indirectly, communicate, disclose, divulge, publish, or otherwise express, to any Person, or use
for her own benefit or the benefit of any Person, any trade secrets, confidential or proprietary
knowledge or information, no

- 5 -

 

matter when or how acquired concerning the conduct and details of Company’s business,
including without limitation, names of customers and suppliers, marketing methods, trade secrets,
policies, prospects and financial condition. For purposes of this Section 6, confidential
information shall not include any information which is now 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.

     (b) Non-Competition. 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, directly or indirectly, in any capacity, for the benefit of any
Person:

          (i) Solicit or hire any Person who is or during such period becomes a customer, supplier,
employee, salesman, agent or representative of Company, in any manner which interferes or might
interfere with such Person’s relationship with Company, or in an effort to obtain such Person as a
customer, supplier, employee, salesman, agent, or representative of any business in competition
with Company which conducts operations within 50 miles of the Employee’s present office.

          (ii) Establish, engage, own, manage, operate, join or control, or participate in the
establishment, ownership (other than as the owner of less than one percent of the stock of a
corporation whose shares are publicly traded), management, operation or control of, or be a
director, officer, employee, salesman, agent or representative of, or be a consultant to, any
Person in any business in competition with Company, if such Person has any office or facility at
any location within 50 miles of any location of the company over which the Employee has direct
responsibility or within 100 miles of the Employee’s current
office, or act or conduct herself in
any manner which she would have reason to believe inimical or contrary to the best interests of
Company.

     (c) Enforcement.
Employee acknowledges that any breach by 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. If
Company is obliged to resort to litigation to enforce any of the Covenants which has a fixed term,
then such term shall be extended for a period of time equal to the period during which a material
breach of such Covenant was occurring, beginning on the date of a final court order (without
further right of appeal) holding that such a material breach occurred, or, if later, the last day
of the original fixed term of such Covenant.

     (d) Consideration. Employee expressly acknowledges that the Covenants are a material
part of the consideration bargained for by Company and, without the

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agreement of Employee to be bound by the Covenants, Company would not have agreed to enter
into this Agreement.

     (e) 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) The 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 the Employee as
the result of employment by another employer after the Date of Termination, or otherwise. The
amounts payable to Employee under Section 5 hereof shall not be treated as damages but as severance
compensation to which Employee is entitled by reason of termination
of her employment in the
circumstances contemplated by 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 the 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. 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) sent 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.

If to Company, to:

Assisted Living Concepts, Inc.

111 W. Michigan

Milwaukee, WI 53203

Attention: President and Chief Executive Officer

- 7 -

 

Facsimile: (414) 908-8111

If to Employee, to:

Ms. Rae Schweer

     (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.

     (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 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
her heirs, executors, legal representatives, successors and permitted assigns. However, neither
party may assign, transfer, pledge, encumber, hypothecate or otherwise dispose of this Agreement or
any of its or her rights hereunder without prior written consent of the other party, and any such
attempted assignment, transfer, pledge, encumbrance, hypothecation or other disposition without
such consent shall be null and void without effect. Notwithstanding the foregoing, this Agreement
may be assigned by the Company to any of its subsidiaries or other affiliates and the Agreement
shall continue in full force and effect following the sale any such subsidiary or affiliate;
provided that the buyer of any such subsidiary or affiliate agrees to be bound by the terms hereof.

     (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.

     (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.

- 8 -

 

     (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 Wisconsin
applicable to agreements made and to be performed entirely therein.

     (k) Settlement of Disputes. The Company and Employee agree that 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 or her 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) Notwithstanding anything herein to the contrary, if the severance payment(s) described
herein are considered deferred compensation subject to the provisions of Code Section 409A, then
this Agreement shall be deemed automatically amended to comply with the requirements thereof in a
manner that would cause the payments to comply with the provisions of Code Section 409A, including
but not limited to providing that the severance payment shall be made only upon the Executive’s
separation from service within the meaning of Code Section 409A and requiring that if the Executive
is a “specified employee” within the meaning of Code Section 409A, that

- 9 -

 

any severance payment(s) due hereunder shall not be paid until six months following the date
of the Executive’s separation from service to the extent required by Code Section 409A.

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:	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Witness

			 	By:	 	/s/ Mel Rhinelander	 	 
	

	 	 
	 	 	 	

	 	 
	Executive Assistant

	 	 	 	Name:
	 	Mel Rhinelander	 	 
	 

	 	 	 	Title:
	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 
	/s/
Witness

	 	 	 	By:	 	/s/ Laurie Bebo	 	 
	 

	 	 
	 	 	 	 

	 	 
	Executive Assistant

	 	 	 	Name:
	 	Laurie Bebo	 	 
	 

	 	 	 	Title:
	 	President and Chief Operating Officer	 	 
	 
	 	 	 	 	 	 	 	 
	Witness:	 	 	 	EMPLOYEE:	 	 
	/s/
Witness
	 	 	 	/s/ Rae Schweer	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Rae Schweer	 	 

- 10 -

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