**Exhibit 10.1**

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**EMPLOYMENT AGREEMENT**

 

This EMPLOYMENT AGREEMENT(“Agreement”) made effective as of September 16, 2002 by and betweenAlternative Resources Corporation, and its successors and assigns, (the“Company”) and Bill McLendon (the “Executive”).

 

In consideration of the mutualcovenants contained in this Agreement, the parties hereby agree as follows:

 

**SECTION I**

**EMPLOYMENT**

 

The Company agrees to employthe Executive, and the Executive agrees to be employed by the Company for thePeriod of Employment as provided in Section III A. below upon the terms andconditions provided in the Agreement.

 

**SECTION II**

**POSITION AND RESPONSIBILITIES**

 

During the Period ofEmployment, the Executive agrees to serve as Senior Vice President of theCompany in accordance with the By-laws and at the request of the ChiefExecutive Officer. He is to assume both the management responsibilitiesexpected of an officer holding such positions in accordance with the By-lawsand such other responsibilities consistent with such positions as may beassigned to the Executive from time to time by the CEO.

 

**SECTION III**

**TERMS AND DUTIES**

 

A.            Period of Employment

 

The term of Executive’semployment under this Agreement will commence as of the effective date hereof,and shall continue for an initial term of through August 31, 2004 and shallautomatically be extended year to year thereafter, subject, however, totermination at any time as provided in this Agreement (the “Period ofEmployment”).

 

B.            Duties

 

During the Period ofEmployment, the Executive shall devote all of his business time, attention andskill to the business and affairs of the Company and its subsidiaries and notengage in any other activities (whether or not for gain, profit or otherpecuniary advantage), except as provided below with the Company’s consent.  Executive shall perform faithfully theduties assigned to him hereunder to the best of his abilities and agrees tocarry out the duties of his position and offices in the best interests of theCompany.  Executive covenants, warrantsand represents that he shall:  (i)devote his full and best efforts to the fulfillment of his employmentobligation; (ii) exercise the highest ethical standards, the highest degree ofloyalty, and the highest standards of conduct in the performance of his duties;and (iii) do nothing which he knows or should know

 

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will harm or could harm thebusiness or reputation of the Company. Executive shall at all times abide by all policies and procedures of theCompany as in effect or amended from time to time in the sole discretion ofsuch entity, Executive may (i) participate in the affairs of any governmental,educational or other charitable institution, or engage in professional speakingand writing activities, so long as the Board of Directors of the Company doesnot determine, in good faith, that such activities unreasonably interfere withthe business of the Company or diminish the Executive’s obligations under theAgreement; or (ii) serve as a member of the board of directors of othercorporations, so long as the Board of Directors of the Company, specificallyapproves such service in its sole and absolute discretion, and in either case,the Executive shall be entitled to retain all fees, royalties and othercompensation derived from such activities in addition to the compensation andother benefits payable to him under the Agreement; and provided further, thatthe Executive may invest his personal or family funds in any form or manner hemay choose that will not require any services on his part in the operation ofor the affairs of the companies in which such investments are made.

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**SECTION IV**

**COMPENSATION AND BENEFITS**

 

A.            Base Salary

 

During the Period ofEmployment, the Company agrees to pay the Executive a base salary at the annualrate (“Base Salary”) of Two Hundred Thousand Dollars ($200,000). Such BaseSalary shall be payable according to the customary payroll practices of theCompany, but in no event less frequently than bi-weekly installments.  The Executive may be eligible for basesalary increases as indicated by performance and/or market justification,solely at the discretion of the Chief Executive Officer and as approved by theBoard of Directors.

 

B.            Annual Incentive Awards

 

Forthe 2002 calendar year, the Executive shall be eligible to earn incentivecompensation of up to 100% of his pro-rated Base Salary, based upon performancetargets to be determined by the Board. For subsequent years, the Executive shall be eligible to earn incentivecompensation of up to 100% of his Base Salary (pro-rated in the case of partialyears), based upon performance targets to be determined by the Board.

 

C.            Options

 

The Company shall grant to the Executive thefollowing options and warrants:

 

1) An option to purchase 150,000 shares ofcommon stock of the Company with an exercise price equal to fair market valueper share on the date granted (“FMV Options”). Vesting shall occur in four equal annual installments on the first,second, third and fourth anniversaries of the date hereof, so long as Executiveremains employed by the Company on the vesting dates.

 

2) A warrant from Wynnchurch Capital topurchase 150,000 shares of common stock of the Company with a $.73 strikeprice. Vesting shall occur under a two-part vesting schedule:

 

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i)              infour equal annual installments on the first, second, third and fourthanniversaries of the date hereof, so long as Executive remains employed by theCompany on the vesting dates; and

 

ii)            a performance vesting component requires that the warrant can be exercised onlyif the Company stock price achieves the following thresholds:

 

•1st 50,000 warrant shares - $.75/share average trading price over 30 dayperiod;

•2nd 50,000 warrant shares - $1.50/share average trading price over 30 dayperiod;

•3rd 50,000 warrant shares - $2.50/share average trading price over 30 dayperiod

 

Notwithstanding the foregoing:

(i)            if the Period of Employment ends because the Company endsthe automatic extension thereof under Section III A. of this Agreement; (ii)the Company terminates the employment of the Executive Without Cause as definedin Section VIII; (iii) the Executive’s employment hereunder terminates becauseof his death or disability (as defined in Section VI); or (iv) there is achange in control of the Company, such options and warrants shall become fullyvested and exercisable and shall remain exercisable for the remainder of theirterms as specified in those options.

 

(ii)           For purposes of this Agreement, a “ change in control” ofthe Company shall be deemed to occur at the effective time of (i) a merger orconsolidation of the Company with one or more other corporations as a result ofwhich the holders of the outstanding voting stock of the Company immediatelyprior to such merger or consolidation (other than the surviving or resultingcorporation or any affiliate thereof) hold less than 50% of the voting stock ofthe surviving or resulting corporation, or (ii) a transfer of more than 50% (invalue) of the assets of the Company other than to a transferee in which theCompany owns at least 50% of the voting stock immediately prior to theconsummation of such transaction.** **Solelyfor the purposes of this definition, the Wynnchurch Capital entities shallalways be deemed to hold the shares into or for which any convertiblesecurities and warrants held by them are convertible or exercisable, and suchshares shall be deemed outstanding,

 

D.            Additional Benefits

 

Executive shall be entitled toreceive a paid vacation of four (4) weeks during each twelve (12) month periodduring the Period of Employment, which may be used in accordance with Companypolicy.  The Executive will also beentitled to participate in all group hospitalization, health, dental care, lifeor other insurance, tax qualified pension, savings, thrift and profit sharingplans, 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 the Company.  This Agreement is otherwise in lieu ofentitlement to any other generally available benefits, perquisites or mattersof compensation.

 

During the Period ofEmployment, the Company shall pay Executive’s private life insurance premiums(not to exceed $1,440 per annum) and his private disability insurance premiums(not

 

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to exceed $4,650 perannum).  The Company may pay thosepremiums in installments, if permitted by the terms of the policies.

 

**SECTION V**

**BUSINESS EXPENSES**

 

The Company will reimburse the Executivefor all reasonable travel and other expenses incurred by the Executive inconnection with the performance of his duties and responsibilities under thisAgreement.  Executive must support allexpenditures with customary receipts and expense reports subject to review bythe Company’s Chief Financial Officer or Chief Executive Officer.

 

**SECTION VI**

**DISABILITY**

 

A.            Payments

 

Executive’s employmenthereunder may be terminated by the Company if (i) Executive becomes physicallyor mentally incapacitated, (ii) is unable for a period of one hundred eighty(180) consecutive days to perform his material duties and responsibilities and(iii) a determination is made regarding Executive’s continued incapacity by aphysician appointed by the Company (such continued incapacity is hereinafterreferred to as “disability”).  Upon anysuch termination for disability, Executive shall be entitled to receive (i) hisBase Salary pro-rated through the date that he becomes eligible for long termdisability; (ii) any earned annual incentive award, prorated through the dateon which the Executive is first determined to be disabled, payable when suchaward would normally be determined to be earned and payable and (iii) hisaccrued benefits under the terms of the plans and policies of the Company inwhich he participates.

 

B.            Assistance to the Company

 

During the period the Executiveis receiving payments of either regular compensation, severance or disabilityinsurance benefits described in this Agreement and as long as he is physicallyand mentally able to do so, the Executive will furnish information andassistance to the Company and from time to time will make himself available tothe Company with respect to areas and matters in which he was involved duringhis employment with the Company.

 

**SECTION VII**

**DEATH**

 

In the eventof the 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 annual incentive award, prorated through the date ofdeath and payable when such award would normally be determined to be earned andpayable and (ii) Executive’s designated beneficiary or estate, as the case maybe, shall be entitled to his accrued benefits, under the terms of the plans andpolicies of the Company in which he participates.

 

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**SECTION VIII**

**EFFECT OF TERMINATION OF EMPLOYMENT**

 

A.            Termination Without Cause or for Good Reason

 

The Company shall have theright to terminate Executive’s employment at any time Without Cause, uponwritten notice.  Executive shall havethe 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 a general release in favor of the Company andits officers, directors employees, agent and attorneys, and conditional uponboth expiration of all statutory revocation periods without revocation andcontinued compliance with the post-termination obligations of this Agreement,Company will pay to the Executive severance at the then current annual rate ofBase Salary for a period of  twelvemonths, payable in accordance with normal payroll practices.  Earned but unpaid Base Salary will be paid ina lump sum at the time of such termination. The Company also will pay the Executive a prorated portion of any earnedannual incentive award for the year in which the termination occurred, payableat the time such award would normally be determined earned and payable.  Executive shall be entitled to continue hiscurrent group health plan coverage, at the same cost (subject to generallyimposed increases), in accordance with his current group health plan electionsand the Company shall continue to pay Executive’s private life insurance andprivate disability insurance premiums as specified in Section IV for the termof severance payments

 

B.            Termination With Cause

 

The Company shall have theright to terminate Executive’s employment With Cause upon written notice. Ifthe Company terminates Executive With Cause, Executive shall be entitled toreceive solely his Base Salary prorated through the date of Executive’stermination, and his accrued benefits (excluding incentive award) under theterms of the plans, policies and procedures of the Company.

 

C.            Resignation

 

Executive shall have the rightto voluntarily resign his employment without Good Reason at any time (includingby reason of retirement) upon two weeks’ prior notice to the Company.  If Executive voluntarily terminates hisemployment with the Company other than for Good Reason (which is governed byParagraph A. of this Section) at any time, Executive shall be entitled toreceive solely his Base Salary prorated through the date of Executive’svoluntary termination, and his accrued benefits under the terms of the plans,policies and procedures of the Company (other than incentive awards).

 

D.            Definitions

 

For this Agreement, thefollowing terms have the following meanings:

 

(1)           Termination “With Cause” means termination of theExecutive’s employment by the Company’s Board of Directors acting in good faithby written notice by the Company to the

 

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Executive specifying the eventrelied upon for such termination, due to (i) breach of Executive’s obligationto utilize his best efforts in performance of his duties or any other materialterm of this Agreement which is not cured (but only if the circumstances wouldpermit a cure) to the Board’s satisfaction within ten business days (or suchshorter period as circumstances reasonably require) following written noticespecifying the breach and the cure required (ii) the Executive’s breach of hisfiduciary duties to the Company or his gross negligence or willful misconduct,including, but not limited to, conviction for a felony or perpetration of acommon law fraud, or  (iii) failure tofollow specific directions and orders of the Board of Directors pertaining tothe Executive’s duties under this agreement.

 

(2)           Termination “Without Cause” means termination by theCompany of the Executive’s employment other than due to death, disability, ortermination 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 SeniorVice President (ii) the Executive’s duties, responsibilities or authority underthis Agreement are materially reduced or diminished other than pursuant to theBoard’s exercise of its absolute rights of direction and control (iv) thecompensation received by the Executive is reduced in the aggregate (other thanas a result of adjustments applied uniformly to all executive employees), andsuch reduction is not remedied within thirty (30) days of the Executive’snotice to the Company thereof, (v) the Company violates any other materialterms of the Agreement which is not cured within 30 days following writtennotice to the Company specifying the violation and the required cure, or (vii)there is a liquidation, dissolution, or change of control of the Company.

 

**SECTION IX**

**OTHER DUTIES OF THE EXECUTIVE DURING ANDAFTER THE PERIOD OF EMPLOYMENT**

 

A.            Cooperation During and After Employment

 

The Executive will, withreasonable notice during or after the Period of Employment, furnish informationas may be in his possession and cooperate with the Company as may reasonably berequested in connection with any claims or legal actions in which the Companyis or may become a party.  During anyseverance period, Executive agrees to be reasonably available to assist intransition.

 

B.            Confidential Information

 

The Executive recognizes andacknowledges that all information pertaining to the affairs, business, clients,customers or other relationships of the Company, as hereinafter defined, isconfidential and is a unique and valuable asset of the Company.  Access to and knowledge of this informationare essential to the performance of the Executive’s duties under thisAgreement.  The Executive will notduring the Period of Employment or after, except to the extent reasonablynecessary in performance of the duties under this Agreement, give to anyperson, firm, association, corporation or governmental agency any informationconcerning the affairs,

 

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business, clients, customers orother relationships 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.

 

C.            Certain Restricted Activities

 

During the Period of Employmentand for a one (1) year period thereafter, the Executive will not use his statuswith the Company to obtain goods or services from another organization otherthan in the ordinary course of business. During the Period of Employment and for a one (1) year period followingtermination of the Period of Employment: the Executive will not make any statements or perform any acts intendedto advance the interest of any existing or prospective competitors of theCompany or its subsidiaries in any way that will injure the interest of theCompany or its subsidiaries; the Executive, without prior express writtenapproval by the Board of Directors of the Company, will not directly orindirectly own or hold any proprietary interest in or be employed by or receivecompensation from any party engaged in the same or any similar business in thesame geographic areas the Company or its subsidiaries do business; and theExecutive, without express prior written approval from the Board of Directors,will not solicit any members of the then current customers, clients orsuppliers of the Company or its subsidiaries or discuss with any employee ofthe Company or its subsidiaries information or operation of any businessintended 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 orsolicit, other than by means of a general solicitation to the public such as anewspaper advertisement, or encourage any such employee to leave the employ ofthe Company or its subsidiaries.

 

D.            Remedies

 

The Executive acknowledges thathis breach or threatened or attempted breach of any provision of Section IXwould cause irreparable harm to the Company not compensable in monetary damagesand that the Company shall be entitled, in addition to all other applicableremedies, to a temporary and permanent injunction and a decree for specificperformance of the terms of Section IX without being required to prove damagesor 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

 

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court or arbitration panel maymodify, rewrite or interpret such restrictions to include as much of theirnature and scope as will render them enforceable.

 

**SECTION X**

**INDEMNIFICATION, LITIGATION**

 

The Company will indemnify theExecutive to the fullest extent permitted by the laws of the state ofincorporation in effect at that time, or certificate of incorporation andby-laws of the Company whichever affords the greater protection to theExecutive. The Company will use its best efforts to obtain and maintain customarydirectors and officer liability insurance, covering Executive. The foregoingindemnification shall continue to apply following termination of the Period ofEmployment for actions or omissions during the Period of Employment.

 

**SECTION XI**

**WITHHOLDING TAXES**

 

The Company may directly orindirectly withhold from any payments under this Agreement all federal, state,city or other taxes that shall be required pursuant to any law or governmentalregulation.

 

**SECTION XII**

**EFFECT OF PRIOR AGREEMENTS**

 

This Agreement contains theentire understanding between the Company and the Executive with respect to thesubject matter and supersedes any prior employment, or consultingagreements  or letters of understandingbetween the Company, its predecessors and its affiliates, and the Executive.

 

**SECTION XIII**

**MODIFICATION**

 

This Agreement may not bemodified 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 with waiver.  A waiver shall operate only as to thespecific term or condition waived and will not constitute a waiver for thefuture or act on anything other than that which is specifically waived.

 

**SECTION XIV**

**GOVERNING LAW; ARBITRATION**

 

This Agreement and itsvalidity, interpretation, performance and enforcement shall be governed by thelaws of the State of Illinois, without giving effect to the choice of lawprovisions thereof.

 

Inthe event there should be any controversy or dispute arising with respect to thisEmployment Agreement between the Executive and the Company, the parties agreeproperly and in good faith to attempt to settle such dispute amicably.  In the event that the parties are unable todo so, any

 

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suchcontroversy or dispute shall be settled by arbitration held in Chicago,Illinois in accordance with the rules of the American Arbitration Associationfor the resolution of Employment Disputes then in effect, except as otherwiseprovided herein.  Any and all awardsrendered by the arbitration shall be final and binding upon the parties.  In no event may an arbitrator allow anyparty to join claims of any other employee in a single arbitration proceedingwithout both parties’ written consent. Executive and the Company agree that, without regard to the amount atstake, all claims submitted to arbitration shall be decided by a singlearbitrator.  Executive and the Companyfurther acknowledge and agree that any dispute or claim arising under the Age Discriminationin Employment Act, Title VII of the Civil Rights Act of 1964 as amended by theCivil Rights Act of 1991, the Americans With Disabilities Act, the EmployeeRetirement Income Security Act of 1974, Illinois Human Rights Act, the CookCounty and Chicago Human Rights Ordinances, and any other federal, state orlocal statute or ordinance, rule and/or regulation, public policy or tort law(regardless of whether statutory or common law origin), shall be subject to,and must be resolved by, arbitration as provided in this Section.   Judgment may be entered on the arbitrator’saward in any court of competent jurisdiction.

 

**SECTION XV**

**NOTICES**

 

All notices, requests, consentsand other communications hereunder shall be in writing and shall be deemed tohave been made when delivered or mailed first-class postage prepaid byregistered mail, return receipt requested, or when delivered if by hand,overnight delivery services or confirmed facsimile transmission, to thefollowing:

 

(a)           If to the Company, at:

 

**Alternative Resources Corporation**

**600 Hart Road, Suite 300,**

**Barrington, Illinois  60010**

 

# **Attention: Chairman**

 

or at such other address as mayhave been furnished to the Executive by the Company in writing, or

 

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

 

**SECTION XVI**

**BINDING AGREEMENT**

 

This Agreement shall be bindingon the parties’ successors, heirs and assigns.

 

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**SECTION XVII**

**MISCELLANEOUS**

 

A.            Multiple Counterparts

 

This Agreementmay be executed simultaneously in multiple counterparts each of the same forceand effect.

 

B.            Severability

 

If any phrase, clause orprovision of this Agreement is declared invalid or unenforceable by anarbitrator or court of competent jurisdiction, such phrase, clause or provisionshall be deemed severed from this Agreement, but will not affect any otherprovisions of this Agreement, which shall otherwise remain in full force andeffect.  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 and subheadings ofthis Agreement are inserted for convenience of reference only and are not to beconsidered in construction of the provisions hereof.

 

D.            Construction

 

The Company and the Executiveacknowledge that this Agreement was the result of arm’s-length negotiationsbetween sophisticated parties each represented by legal counsel.  Each and every provision of this Agreementshall be construed as though both parties participated equally in the draftingof same, and any rule of construction that a document shall be construedagainst the drafting party shall not be applicable to this Agreement.

 

E.             Survivorship

 

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

 

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

 
| **COMPANY**                       |          |
|-----------------------------------|---------------|
|                              |          |
| ALTERNATIVE RESOURCES CORPORATION |          |
|                              |          |
| By:                               |          |   |   |
| George Watts, CEO                 |          |
|                              |          |
| **EXECUTIVE**                     |          |
|                              |          |
|                              |          |   |   |
| By:                               | Bill McLendon |   |   |

 

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