PLAN SUPPORT AGREEMENT

    This Plan Support Agreement ("Agreement"), dated as of September 28, 2001, is entered into by and among Assisted Living Concepts, Inc. ("ALC"), Carriage House Assisted Living, Inc. ("Carriage House, and together with ALC, the "Company"), the undersigned subsidiaries and affiliates of ALC (the "Non-Filing Subsidiaries") and the undersigned holders ("Consenting Holders") of the Company's $86,250,000, 6% Convertible Subordinated Debentures due 2002 (the "6% Notes") and $75,000,000, 5.625% Convertible Subordinated Debentures due 2003 (the "5.625% Notes," and collectively with the 6% Notes, the "Notes").

    WHEREAS, pursuant to an Indenture dated as of October 24, 1997 (the "6% Notes Indenture"), ALC issued the 6% Notes;

    WHEREAS, pursuant to an Indenture dated as of April 13, 1998 (the "5.625% Notes Indenture," and collectively with the "6% Notes Indenture," the "Indentures"), ALC issued the 6% Notes;

    WHEREAS each Consenting Holder is a direct holder of the Notes or is an investment manager or advisor for certain discretionary accounts that are holders or beneficial owners of the Notes, in either case in the principal amount set forth on the signature page hereto with respect to such Consenting Holder;

    WHEREAS, certain of the Consenting Holders have formed an ad hoc committee for the purpose of negotiating with the Company (the "Noteholders Committee") and have engaged Milbank, Tweed, Hadley & McCloy LLP ("Milbank") as legal counsel and Chanin Capital Partners ("Chanin") as financial advisors;

    WHEREAS, the Company and the Noteholders Committee have engaged in good faith negotiations with the objective of reaching an agreement with regard to a financial reorganization of the Company;

    WHEREAS, the Company and the Consenting Holders now desire to implement a financial restructuring of the Company on the terms set forth in this Agreement and in the Term Sheet ("Term Sheet") attached hereto as Schedule 1 (the "Financial Restructuring");

    WHEREAS, in order to implement the Financial Restructuring, the Company has determined: (i) to commence cases for the Company (collectively, the "Chapter 11 Cases") under chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the District of Delaware or another district acceptable to the Company and the Committee (the "Bankruptcy Court"); (ii) to prepare and file in the Chapter 11 Cases concurrently with their commencement a plan of reorganization (the "Plan") and accompanying disclosure statement (the "Disclosure Statement") for the purpose of implementing the Financial Restructuring in accordance with this Agreement and the Term Sheet; and (iii) to have the Disclosure Statement approved and Plan confirmed by the Bankruptcy Court in accordance with the timetable provided herein; and

    WHEREAS, ALC has (or, as of the date the Chapter 11 Cases are commenced (the "Petition Date") will have) obtained from T and F Properties, L.P., Health Care Properties, Inc., Transatlantic Capital LLC and Heller Healthcare Financial waivers with respect to any defaults that will exist as of the Petition Date under their contracts or leases with the Non-Filing Subsidiaries, or that will arise as a result of the commencement of the Chapter 11 Cases, and the Company represents and warrants that no other material defaults will arise under contracts or leases of the Non-Filing Subsidiaries as a result of the commencement of the Chapter 11 Cases;

    WHEREAS, as a result of having obtained said waivers or releases, the Non-Filing Subsidiaries will not commence chapter 11 cases;

    WHEREAS, each of the Consenting Holders is prepared to commit to vote its claims (as defined in the Bankruptcy Code) arising under the Notes held by such Consenting Holder (for each such Consenting Holder, the "Note Claims") and the amount of any other claim(s) against the Company that any Consenting Holder may hold, as of the Petition Date, in a capacity other than as a holder of Notes, to accept the Plan, subject to the terms and conditions of this Agreement and the Term Sheet;

    NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, the Non-Filing Subsidiaries and the Consenting Holders agree as follows:

    1.  Restriction on Transfer. Each Consenting Holder agrees that, so long as this Agreement has not been terminated in accordance with Paragraph 7 hereof, it will not sell, transfer or assign any of its Notes or Note Claims unless the transferee thereof agrees in writing to be bound by all the terms of this Agreement (the "Transferee Agreement"). The Consenting Holder shall deliver the Transferee Agreement to the Company within five business days after the sale, transfer or assignment, as appropriate, of any of its Notes or Note Claims. The provisions of this paragraph are for the benefit of the Company and each Consenting Holder. Any failure by LTC Healthcare, Inc., LTC Properties, Inc., or National Health Investors, Inc. to obtain and deliver to the Company a Transferee Agreement in connection with any transfer of Notes or Note Claims by such entity shall render such transfer null and void.

    2.  Preparation of Restructuring Documents. As set forth in the Term Sheet, the Company shall deliver to the Consenting Holders for their review and approval the Plan, the Disclosure Statement, any motions that the Company intends to file and have heard by the Bankruptcy Court within the first days following the commencement of the Chapter 11 Cases, the Bankruptcy Court orders to be prepared in connection therewith, and all other documents or agreements to be executed or implemented in connection therewith, or otherwise contemplated by, the Financial Restructuring, each of which documents and agreements shall be consistent in all material respects with this Agreement and the Term Sheet (collectively, the "Restructuring Documents"). The Company shall coordinate with the Consenting Holders in preparing the Restructuring Documents and shall afford Milbank a reasonable opportunity to review and comment upon the Restructuring Documents prior to their filing with the Bankruptcy Court (as further described in the Term Sheet). The Company and the Consenting Holders agree that (a) the negotiation of this Agreement and the attached Term Sheet, and (b) the delivery of any information by the Company to the Consenting Holders in connection with this Agreement and the attached Term Sheet are not intended by the Company to be a solicitation of the Consenting Holders' approval of any plan of reorganization within the meaning of Section 1125 of the Bankruptcy Code. The Company and the Consenting Holders further agree that this Agreement is not a financial accommodation contract that would be unenforceable under Section 365(c)(2) of the Bankruptcy Code, and each agrees not to take any contrary position in the Chapter 11 Cases.

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