**EXHIBIT10.1**

** **

**EMPLOYMENTAGREEMENT**

 

This EMPLOYMENTAGREEMENT (“Agreement”) made effective as of July 1, 2002 by and betweenAlternative Resources Corporation, and its successors and assigns, (the“Company”) and George W. Watts (the “Executive”).

 

In considerationof the mutual covenants contained in this Agreement, the parties hereby agreeas follows:

 

**SECTIONI**

**EMPLOYMENT**

 

The Company agreesto employ the Executive, and the Executive agrees to be employed by the Companyfor the Period of Employment as provided in Section III A. below upon the termsand conditions provided in the Agreement.

 

**SECTIONII**

**POSITIONAND RESPONSIBILITIES**

 

During the Periodof Employment, the Executive agrees to serve as President and Chief ExecutiveOfficer of  the Company in accordancewith the By-laws and at the request of the Company’s Board of Directors, as adirector of the Company and  as adirector and officer of such subsidiaries of the Company as the Company’s Boardmay designate, to be the principal Company officer responsible to implementBoard decisions, rules directives and procedures, and to assume both themanagement responsibilities expected of an officer holding such positions inaccordance with the By-laws and such other responsibilities consistent withsuch positions as may be assigned to the Executive from time to time by theCompany’s Board of Directors; provided that in all cases Executive shall besubject to the direction , control, rules and procedures imposed by the Boardof Directors.  Executive acknowledgesthat in exercise of the Board’s right of direction and control, the Board maydesignate any committee of directors or any single director, acting on behalfof the whole Board, to communicate with Executive between meetings of theBoard.

 

**SECTIONIII**

**TERMSAND DUTIES**

 

A.            Period of Employment

 

The term ofExecutive’s employment under this Agreement will commence as of the effectivedate hereof, and shall continue for an initial term of through June 30, 2004and continue

 

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year to yearthereafter,  subject, however, totermination at any time as provided in this Agreement (the “Period ofEmployment”).

 

B.            Duties

 

## During the Period of Employment, the Executive shall devote all of hisbusiness time, attention and skill to the business and affairs of the Companyand its subsidiaries and not engage in any other activities (whether or not forgain, profit or other pecuniary advantage), except as provided below with theCompany’s consent..  Executive shallperform faithfully the duties assigned to him hereunder to the best of his  abilities and agrees to carry out the dutiesof his position and offices in the best interests of the Company.  Executive covenants, warrants and representsthat he shall:  (i) devote his full andbest efforts to the fulfillment of his employment obligation; (ii) exercise thehighest ethical standards, the highest degree of loyalty, and the higheststandards of conduct in the performance of his duties; and (iii) donothing  which he knows or should knowwill harm or could harm the business or reputation of the Company.  Executive shall at all times abide by allpolicies and procedures of the Company as in effect or amended from time totime in the sole discretion of such entity, Executive may (i) participate inthe affairs of any governmental, educational or other charitable institution,or engage in professional speaking and writing activities, so long as the Boardof Directors of the Company does not determine, in good faith, that suchactivities unreasonably interfere with the business of the Company or diminishthe Executive’s obligations under the Agreement; or (ii) serve as a member ofthe board of directors of other corporations, so long as the Board of Directorsof the Company, specifically approves such service in its sole and absolutediscretion, and in either case, the Executive shall be entitled to retain allfees, royalties and other compensation derived from such activities in additionto the compensation and other benefits payable to him under the Agreement; andprovided further, that the Executive may invest his personal or family funds inany form or manner he may choose that will not require any services on his partin the operation of or the affairs of the companies in which such investmentsare made.

 

**SECTIONIV**

**COMPENSATIONAND BENEFITS**

 

A.            Base Salary

 

During the Periodof Employment, the Company agrees to pay the Executive a base salary at theannual rate (“Base Salary”) of Two Hundred Seventy- Five Thousand Dollars($275,000). Such Base Salary shall be payable according to the customarypayroll practices of the Company, but in no event less frequently thanbi-weekly installments.

 

B.            Annual Incentive Awards

 

For the 2002calendar year, the Executive shall be eligible to earn incentive compensationof up to 100% of his pro-rated Base Salary, based upon performance targets tobe determined by

 

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the Board.  For subsequent years, the Executive shall beeligible to earn incentive compensation of up to 100% of his  Base Salary (pro-rated in the case ofpartial years), based upon performance targets to be determined by the Board.

 

C.            Options

 

The Company willtake all actions necessary to grant to Executive stock options to purchase500,000 shares of common stock of the Company with an exercise price equal tofair market value per share on the date hereof (“FMV Options”) and 500,000shares of common stock of the Company with an exercise price of $2.50 pershare(“$2.50 Options”), the FMV Options and the $2.50 Options each vesting, solong as Executive remains employed by the Company on the vesting dates, in fourequal annual installments on the first, second, third and fourth annualanniversaries of the date hereof.

 

Notwithstandingthe foregoing:

 

(i)            if Executive is terminated WithoutCause or resigns for Good Reason prior to July 1, 2003, no options shall vest,and they shall terminate.  If Executiveis terminated Without Cause or resigns for Good Reason on or after July 1, 2003but prior to July 1, 2004, 50% of the FMV Options and 50% of the $2.50 Options(in each case less the number of such options already vested) shall becomefully vested and exercisable for the designated post-termination periodspecified in those options; and

 

(ii)           if there is a change in control ofthe Company, all of the FMV Options and all of the $2.50 Options shall becomefully vested and shall remain exercisable both during employment and, ifExecutive is terminated or resigns on or after the change in control, for thedesignated post-termination period specified in those options.  For purposes of this Agreement, a “change incontrol” of the Company shall be deemed to occur at the effective time of (i) amerger or consolidation of the Company with one or more other corporations as aresult of which the holders of the outstanding voting stock of the Companyimmediately prior to such merger or consolidation (other than the surviving orresulting corporation or any affiliate thereof) hold less than 50% of thevoting stock of the surviving or resulting corporation, or (ii) a transfer ofmore than 50% (in value) of the assets of the Company other than to atransferee in which the Company owns at least 50% of the voting stockimmediately prior to the consummation of such transaction.** **Solely for the purposes of this definition, the WynnchurchCapital entities shall always be deemed to hold the shares into or for whichany convertible securities and warrants held by them are convertible orexercisable, and such shares shall be deemed outstanding,

 

D.            Additional Benefits

 

Executive shall beentitled to receive a paid vacation of four (4) weeks during each twelve (12)month period during the Period of Employment, which may be used in accordancewith

 

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Company policy.  The Executive will also be entitled toparticipate in all group hospitalization, health, dental care, life or otherinsurance, tax qualified pension, savings, thrift and profit sharing plans,sick leave plans, travel or accident insurance and short and long termdisability insurance plans or programs for which salaried executive employeesgenerally are eligible under any existing or future plan or program establishedby the Company.  Nothing in thisAgreement will preclude the Company from amending or terminating any of theplans or programs applicable to salaried executive employees of theCompany.  This Agreement is otherwise inlieu of entitlement to any other generally available benefits, perquisites ofmatters of compensation.

 

During the Periodof Employment, the Company shall pay Executive’s private life insurancepremiums (not to exceed $1,1440 per annum) and his private disability insurancepremiums (not to exceed $4,653.45 per annum). The Company may pay those premiums in installments, if permitted by theterms of the policies.

 

**SECTIONV**

**BUSINESSEXPENSES**

 

The Company willreimburse the Executive for all reasonable travel and other expenses incurredby the Executive in connection with the performance of his duties andresponsibilities under this Agreement. Executive must support all expenditures with customary receipts andexpense reports subject to review by the Company’s Chief Financial Officer.

 

**SECTIONVI**

**DISABILITY**

 

A.            Payments

 

Executive’semployment hereunder may be terminated by the Company if (i) Executive becomesphysically or mentally incapacitated, (ii) is unable for a period of onehundred eighty (180) consecutive days to perform his material duties andresponsibilities and (iii) a determination is made regarding Executive’scontinued incapacity by a physician appointed by the Company (such continuedincapacity is hereinafter referred to as “disability”).  Upon any such termination for disability,Executive shall be entitled to receive (i) his Base Salary pro-rated throughthe date that he becomes eligible for long term disability; (ii) any earnedannual incentive award, prorated through the date on which the Executive isfirst determined to be disabled, payable when such award would normally bedetermined to be earned and payable and (iii) his accrued benefits under theterms of the plans and policies of the Company in which he participates.

 

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B.            Assistance to the Company

 

During the periodthe Executive is receiving payments of either regular compensation, severanceor disability insurance benefits described in this Agreement and as long as heis physically and mentally able to do so, the Executive will furnishinformation and assistance to the Company and from time to time will make himselfavailable to the Company with respect to areas and matters in which he wasinvolved during his employment with the Company.

 

**SECTIONVII**

**DEATH**

 

In the event ofthe death of the Executive during the Period of Employment, (i) Executive’sestate shall be entitled to receive his Base Salary, pro-rated through the dateof death  plus any earned annualincentive award, prorated through the date of death and payable when such awardwould normally be determined to be earned and payable and (ii) Executive’s designatedbeneficiary or estate, as the case may be, shall be entitled to his accruedbenefits, under the terms of the plans and policies of the Company in which heparticipates.

 

**SECTIONVIII**

**EFFECTOF TERMINATION OF EMPLOYMENT**

 

A.            Termination WithoutCause or for Good Reason

 

The Company shallhave the right to terminate Executive’s employment at any time Without Cause,upon written notice.  Executive shallhave the right to terminate his employment for Good Reason upon written notice.  If the Company terminates Executive’semployment Without Cause or the Executive terminates such employment for GoodReason,  then upon execution of aresignation as director of the Company , execution of a general release infavor of the Company and its officers, directors employees, agent and attorneys, and conditional upon both expiration of all statutory revocation periodswithout revocation and continued compliance with the post-terminationobligations of this Agreement, Company will pay to the Executive severance at thethen current annual rate of Base Salary for a period of  twelve months, payable in accordance withnormal payroll practices.  Earned butunpaid Base Salary will be paid in a lump sum at the time of suchtermination.  The Company also will paythe Executive a prorated portion of any earned annual incentive award for theyear in which the termination occurred, payable at the time such award wouldnormally be determined earned and payable. Executive shall be entitled to continue his current group health plancoverage, at the same cost (subject to generally imposed increases), inaccordance with his current group health plan elections for the term ofseverance payments

 

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B.            Termination WithCause

 

The Company shallhave the right to terminate Executive’s employment With Cause upon writtennotice. If the Company terminates Executive With Cause, Executive shall delivera resignation as director of the Company and shall be entitled to receivesolely his Base Salary prorated through the date of Executive’s termination,and his accrued benefits (excluding incentive award) under the terms of theplans, policies and procedures of the Company.

 

C.            Resignation

 

Executive shallhave the right to voluntarily resign his employment without Good Reason  at any time (including by reason ofretirement) upon two weeks’ prior notice to the Company so long as he delivers,upon request of the Company, a resignation as a Company’s director.  If Executive voluntarily terminates his employmentwith the Company other than for Good Reason (which is governed by Paragraph A.of this Section) at any time, Executive shall be entitled to receive solely hisBase Salary prorated through the date of Executive’s voluntary termination, andhis accrued benefits under the terms of the plans, policies and procedures ofthe Company (other than incentive awards).

 

D.            Definitions

 

For thisAgreement, the following terms have the following meanings:

 

(1)           Termination “With Cause” meanstermination of the Executive’s employment by the Company’s Board of Directorsacting in good faith by written notice by the Company to the Executivespecifying the event relied upon for such termination, due to (i) breach ofExecutive’s obligation to utilize his best efforts in performance of his dutiesor any other material term of this Agreement which is not cured (but only ifthe circumstances would permit a cure) to the Board’s satisfaction within tenbusiness days (or such shorter period as circumstances reasonably require)following written notice specifying the breach and the cure required (ii) theExecutive’s breach of his fiduciary duties to the Company or his grossnegligence or willful misconduct, including, but not limited to, conviction fora felony or perpetration of a common law fraud, or  (iii) failure to follow specific directions and orders of theBoard of Directors.

 

(2)           Termination “Without Cause” meanstermination by the Company of the Executive’s employment other than due todeath, disability, or termination With Cause.

 

(3)           Termination for “Good Reason” meanstermination of the Executive’s employment by the Executive within twelve (12)months after (i) the Company fails to elect or maintain the Executive as ChiefExecutive Officer (ii) the Executive’s duties, responsibilities or authorityunder this Agreement are materially reduced or diminished other than pursuantto the

 

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Board’s exercise of itsabsolute rights of direction and control (iv) the compensation received by theExecutive is reduced in the aggregate (other than as a result of adjustmentsapplied uniformly to all executive employees), and such reduction is notremedied within thirty (30) days of the Executive’s notice to the Companythereof, (v) the Company violates any other material terms of the Agreementwhich is not cured within 30 days following written notice to the Companyspecifying the violation and the required cure, or (vii) there is aliquidation, dissolution, consolidation or merger of the Company or transfer ofall or a significant portion of its assets unless a successor or successors (bymerger, consolidation or otherwise) to which all or a significant portion ofits business and assets have been transferred shall have assumed all duties andobligations of the Company under this Agreement.

 

**SECTIONIX**

**OTHERDUTIES OF THE EXECUTIVE DURING**

**ANDAFTER THE PERIOD OF EMPLOYMENT**

 

A.            Cooperation During and AfterEmployment

 

The Executivewill, with reasonable notice during or after the Period of Employment, furnishinformation as may be in his possession and cooperate with the Company as mayreasonably be requested in connection with any claims or legal actions in whichthe Company is or may become a party. During any severance period, Executive agrees to be reasonably availableto assist in transition.

 

B.            Confidential Information

 

The Executiverecognizes and acknowledges that all information pertaining to the affairs,business, clients, customers or other relationships of the Company, as hereinafterdefined, is confidential and is a unique and valuable asset of theCompany.  Access to and knowledge ofthis information are essential to the performance of the Executive’s dutiesunder this Agreement.  The Executivewill not during the Period of Employment or after, except to the extentreasonably necessary in performance of the duties under this Agreement, give toany person, firm, association, corporation or governmental agency anyinformation concerning the affairs, business, clients, customers or otherrelationships of the Company, except as required by law.  The Executive will not make use of this typeof information for his own purposes or for the benefit of any person ororganization other than the Company. The Executive will also use his best efforts to prevent the disclosureof this information by others.  Allrecords, memoranda, etc., relating to the business of the Company, whether madeby the Executive or otherwise coming into his possession, are confidential andwill remain the property of the Company.

 

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C.            Certain Restricted Activities

 

During the Periodof Employment and for a one (1) year period thereafter, the Executive will notuse his status with the Company to obtain goods or services from anotherorganization other than in the ordinary course of business.  During the Period of Employment and for aone (1) year period following termination of the Period of Employment:  the Executive will not make any statementsor perform any acts intended to advance the interest of any existing orprospective competitors of the Company or its subsidiaries in any way that willinjure the interest of the Company or its subsidiaries; the Executive, withoutprior express written approval by the Board of Directors of the Company, willnot directly or indirectly own or hold any proprietary interest in or beemployed by or receive compensation from any party engaged in the same or anysimilar business in the same geographic areas the Company or its subsidiariesdo business; and the Executive, without express prior written approval from theBoard of Directors, will not solicit any members of the then current customers,clients or suppliers of the Company or its subsidiaries or discuss with anyemployee of the Company or its subsidiaries information or operation of anybusiness intended to compete with the Company or its subsidiaries.  For the purposes of the Agreement,proprietary interest means legal or equitable ownership, whether through stockholdings or otherwise, of a debt or equity interest (including options,warrants, rights and convertible interest) in a business firm or entity, orownership of more than 2% of any class of equity interest in a publicly-heldcompany.  The Executive acknowledgesthat the covenants contained herein are reasonable as to geographic andtemporal scope.  For a twelve (12) monthperiod after termination of the Period of Employment for any reason, theExecutive will not hire any employee of the Company or its subsidiaries or solicit,other than by means of a general solicitation to the public such as a newspaperadvertisement, or encourage any such employee to leave the employ of theCompany or its subsidiaries.

 

D.            Remedies

 

The Executiveacknowledges that his breach or threatened or attempted breach of any provisionof Section IX would cause irreparable harm to the Company not compensable inmonetary damages and that the Company shall be entitled, in addition to allother applicable remedies, to a temporary and permanent injunction and a decreefor specific performance of the terms of Section IX without being required toprove damages or furnish any bond or other security.  The Executive hereby acknowledges the necessity of protection againstthe competition of, and certain other possible adverse actions by, theExecutive and that the nature and scope of such protection has been carefullyconsidered by the parties.  The periodprovided and the area covered are expressly represented and agreed to be fair,reasonable and necessary.  If, however,any court or arbitrator determines that the restrictions described herein arenot reasonable, the court or arbitration panel may modify, rewrite or interpretsuch restrictions to include as much of their nature and scope as will renderthem enforceable.

 

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**SECTIONX**

**INDEMNIFICATION,LITIGATION**

 

In addition tosuch bylaw provisions as may from time to time be in effect, the Company willexecute with Executive the current form of Indemnification Agreement granted todirectors.  The foregoingindemnification shall continue to apply following termination of the Period ofEmployment for actions or omissions during the Period of Employment.

 

**SECTIONXI**

**WITHHOLDINGTAXES**

 

The Company maydirectly or indirectly withhold from any payments under this Agreement allfederal, state, city or other taxes that shall be required pursuant to any lawor governmental regulation.

 

**SECTIONXII**

**EFFECTOF PRIOR AGREEMENTS**

 

This Agreementcontains the entire understanding between the Company and the Executive withrespect to the subject matter and supersedes any prior employment, orconsulting agreements  or letters ofunderstanding between the Company, its predecessors and its affiliates, and theExecutive.

 

**SECTIONXIII**

**MODIFICATION**

 

This Agreement maynot be modified or amended except in writing signed by the parties.  No term or condition of this Agreement willbe deemed to have been waived, except in writing by the party charged withwaiver.  A waiver shall operate only asto the specific term or condition waived and will not constitute a waiver forthe future or act on anything other than that which is specifically waived.

 

**SECTIONXIV**

**GOVERNINGLAW; ARBITRATION**

 

This Agreement andits validity, interpretation, performance and enforcement shall be governed bythe laws of the State of Illinois, without giving effect to the choice of lawprovisions thereof.

 

### In the event there should be any controversy or dispute arising withrespect to this Employment Agreement between the Executive and the Company, theparties agree properly and in good faith to attempt to settle such disputeamicably.  In the event that the partiesare unable to do so, any such controversy or dispute shall be settled byarbitration held in Chicago, Illinois in accordance with the rules of theAmerican Arbitration Association for the resolution of Employment Disputes thenin effect, except as otherwise provided herein.  Any and all awards rendered by the arbitration shall be final and

###  

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### binding upon theparties.  In no event may an arbitratorallow any party to join claims of any other employee in a single arbitrationproceeding without both parties’ written consent.  Executive and the Company agree that, without regard to theamount at stake, all claims submitted to arbitration shall be decided by asingle arbitrator.  Executive and theCompany further acknowledge and agree that any dispute or claim arising underthe Age Discrimination in Employment Act, Title VII of the Civil Rights Act of1964 as amended by the Civil Rights Act of 1991, the Americans WithDisabilities Act, the Employee Retirement Income Security Act of 1974, IllinoisHuman Rights Act, the Cook County and Chicago Human Rights Ordinances, and anyother federal, state or local statute or ordinance, rule and/or regulation,public policy or tort law (regardless of whether statutory or common laworigin), shall be subject to, and must be resolved by, arbitration as providedin this Section.   Judgment may beentered on the arbitrator’s award in any court of competent jurisdiction.

 

**SECTIONXV**

**NOTICES**

 

All notices,requests, consents and other communications hereunder shall be in writing andshall be deemed to have been made when delivered or mailed first-class postageprepaid by registered mail, return receipt requested, or when delivered if byhand, overnight delivery services or confirmed facsimile transmission, to thefollowing:

 

(a)           If to the Company, at:

 

AlternativeResources Corporation

**600 Hart Road, Suite 300, Barrington,**

**Illinois  60010**

** **

 

Attention:Chairman

 

or at such other addressas may have been furnished to the Executive by the Company in writing, or

 

(b)           If to the Executive, atthe address he has furnished to the Company in writing.

 

**SECTIONXVI**

**BINDINGAGREEMENT**

 

This Agreementshall be binding on the parties’ successors, heirs and assigns.

 

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**SECTIONXVII**

**MISCELLANEOUS**

 

A.            Multiple Counterparts

 

This Agreement maybe executed simultaneously in multiple counterparts each of the same force andeffect.

 

B.            Severability

 

If any phrase,clause or provision of this Agreement is declared invalid or unenforceable byan arbitrator or court of competent jurisdiction, such phrase, clause orprovision shall be deemed severed from this Agreement, but will not affect anyother provisions of this Agreement, which shall otherwise remain in full forceand effect.  In addition, there will beautomatically substituted herein for such severed phrase, clause or provision aphrase, clause or provision as similar as possible which is valid andenforceable.

 

C.            Headings

 

The headings andsubheadings of this Agreement are inserted for convenience of reference onlyand are not to be considered in construction of the provisions hereof.

 

D.            Construction

 

The Company andthe Executive acknowledge that this Agreement was the result of arm’s-lengthnegotiations between sophisticated parties each represented by legalcounsel.  Each and every provision ofthis Agreement shall be construed as though both parties participated equallyin the drafting of same, and any rule of construction that a document shall beconstrued against the drafting party shall not be applicable to this Agreement.

 

E.             Survivorship

 

The provisions ofSections IV-XVII shall survive the termination or expiration of this Agreement.

 

IN WITNESSWHEREOF, the undersigned have executed this Agreement as of the date firstabove written.

 
|   | **COMPANY**                        |
|--------|------------------------------------|
|   |                               |
|   | ALTERNATIVE RESOURCES  CORPORATION |
|   |                               |
|   | By:                                |   |
|   |                               |
|   | **EXECUTIVE**                      |
|   |                               |
|   |                               |
|   | George Watts                       |

 

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