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December 16, 1996


John N. McCormick
516 Aldrich Avenue S.
Minneapolis, MN 55419

Dear John:

     BMC Industries, Inc. considers the establishment and maintenance of a 
sound and vital management to be essential to protecting and enhancing the 
best interests of the Company and its stockholders.  In this connection, the 
Company recognizes that, as is the case with many publicly held corporations, 
the possibility of a Change in Control may arise and that such possibility, 
and the uncertainty and questions which it may raise among management, may 
result in the departure or distraction of management personnel to the 
detriment of the Company and its stockholders.

     Accordingly, the Board has determined that appropriate steps should be 
taken to minimize the risk that Company management will depart prior to a 
Change in Control, thereby leaving the Company without adequate management 
personnel during such a critical period, and to reinforce and encourage the 
continued attention and dedication of members of the Company's management to 
their assigned duties without distraction in circumstances arising from the 
possibility of a Change in Control.  In particular, the Board believes it 
important, should BMC Industries, Inc., or its stockholders receive a 
proposal for transfer of control, that you be able to continue your 
management responsibilities and assess and advise the Board whether such 
proposal would be in the best interests of BMC Industries, Inc. and its 
stockholders and to take other action regarding such proposal as the Board 
might determine to be appropriate, without being influenced by the 
uncertainties of your own personal situation.

     The Board recognizes that continuance of your position with the Company 
involves a substantial commitment to the Company in terms of your personal 
life and professional career and the possibility of foregoing present and 
future career opportunities, for which the Company receives substantial 
benefits. Therefore, to induce you to remain in the employ of the Company, 
this Agreement, which has been approved by the Board, sets forth the benefits 
which the Company agrees will be provided to you in the event your employment 
with the Company is terminated in connection with a Change in Control under 
the circumstances described below.

     1.   DEFINITIONS.  The following terms will have the meaning set forth 
below unless the context clearly requires otherwise.  Terms defined elsewhere 
in this Agreement will have the same meaning throughout this Agreement.

<PAGE>

     (a)  "AGREEMENT"  means this letter agreement as amended, extended or 
renewed from time to time in accordance with its terms.

     (b)  "BOARD" means the board of directors of the Parent Corporation duly 
qualified and acting at the time in question.

     (c)  "CAUSE" means:  (i) the willful and continued failure by you to 
perform substantially your duties with the Company after a demand for 
substantial performance is delivered to you by the President and Chief 
Executive Officer which specifically identifies the manner in which such 
person believes that you have not substantially performed your duties; or 
(ii) your conviction (including a plea of nolo contendere) of willfully 
engaging in illegal conduct constituting a felony or gross misdemeanor under 
federal or state law which is materially and demonstrably injurious to the 
Company.  For purposes of this definition, no act, or failure to act, on your 
part will be considered "willful" unless done, or omitted to be done, by you 
in bad faith and without reasonable belief that your action or omission was 
in, or not opposed to, the best interests of the Company.  Any act, or 
failure to act, based upon authority given pursuant to a resolution duly 
adopted by the Board (or a committee thereof) or based upon the advice of 
counsel for the Company will be conclusively presumed to be done, or omitted 
to be done, by you in good faith and in the best interests of the Company.  
It is also expressly understood that your attention to matters not directly 
related to the business of the Company will not provide a basis for 
termination for Cause so long as the Board did not expressly disapprove in 
writing of your engagement in such activities either before or within a 
reasonable period of time after the Board knew or could reasonably have known 
that you engaged in those activities.  Notwithstanding the foregoing, you 
will not be deemed to have been terminated for Cause unless and until there 
has been delivered to you a copy of a resolution duly adopted by the 
affirmative vote of not less than a majority of the entire membership of the 
Board at a meeting of the Board called and held for the purpose (after 
reasonable notice to you and an opportunity for you, together with your 
counsel, to be heard before the Board), finding that in the good faith 
opinion of the Board you were guilty of the conduct set forth above in 
clauses (i) or (ii) of this definition and specifying the particulars thereof 
in detail.

     (d)  "CHANGE IN CONTROL" means any of the following:  (i) the sale, 
lease, exchange, or other transfer of all or substantially all of the assets 
of the Parent Corporation, in one transaction or in a series of related 
transactions, to any Person; (ii) the approval by the stockholders of the 
Parent Corporation of any plan or proposal for the liquidation or dissolution 
of the Parent Corporation; (iii) any Person is or becomes the "beneficial 
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or 
indirectly, of fifty percent (50%) or more of the combined voting power of 
the Parent Corporation's outstanding securities ordinarily having the right 
to vote at elections of directors; (iv) individuals who constitute the Board 
on the date of this Agreement (the "Incumbent Board") cease for any reason to 
constitute at least a majority thereof, provided that any person becoming a 
director subsequent to the date of this Agreement whose election, or 
nomination for election, by the Parent Corporation's stockholders, was 
approved by a vote of at least a majority of the directors comprising the 
Incumbent Board (either by a specific vote or by approval of the proxy 
statement of the Parent Corporation in which such person is named as a 
nominee for director, without objection to such nomination) will, for 
purposes of this clause (iv), be deemed to be a member of the Incumbent 
Board; or (v) a change in control of a nature that is determined by 
independent legal counsel to the Company to be required to be reported 
(assuming such event has not been "previously reported") in response to Item 
1(a) of the Current Report on Form 8-K, as in effect on the date hereof, 
pursuant to section 13 or 15(d) of the Exchange Act, whether or not the 
Parent Corporation is then subject to such reporting requirement.

     (e)  "CODE" means the Internal Revenue Code of 1986, as amended.

     (f)  "COMPANY" means the Parent Corporation, any Subsidiary and any 
Successor.

<PAGE>

     (g)  "CONFIDENTIAL INFORMATION" means information which is proprietary 
to the Company or proprietary to others and entrusted to the Company, whether 
or not trade secrets.  It includes information relating to business plans and 
to business as conducted or anticipated to be conducted, and to past or 
current or anticipated products or services.  It also includes, without 
limitation, information concerning research, development, purchasing, 
accounting, marketing and selling.  All information which you have a 
reasonable basis to consider confidential is Confidential Information, 
whether or not originated by you and without regard to the manner in which 
you obtain access to that and any other proprietary information.

     (h)  "DATE OF TERMINATION" following a Change in Control (or prior to a 
Change in Control if your termination was either a condition of the Change in 
Control or was at the request or insistence of any Person (other than the 
Company) related to the Change in Control) means:  (i) if your employment is 
to be terminated by the Company for Cause or by you for Good Reason, the date 
specified in the Notice of Termination; (ii) if your employment is to be 
terminated by the Company for any reason other than Cause, Disability, death 
or Retirement, the date specified in the Notice of Termination, which in no 
event may be a date earlier than sixty (60) calendar days after the date on 
which a Notice of Termination is given, unless an earlier date has been 
expressly agreed to by you in writing either in advance of, or after, 
receiving such Notice of Termination; or (iii) if your employment is 
terminated by reason of death or Retirement, the date of death or Retirement, 
respectively.  In the case of termination by the Company of your employment 
for Cause, if you have not previously expressly agreed in writing to the 
termination, then within thirty (30) calendar days after receipt by you of 
the Notice of Termination with respect thereto, you may notify the Company 
that a dispute exists concerning the termination, in which event the Date of 
Termination will be the date set either by mutual written agreement of the 
parties or by the arbitrators in a proceeding as provided in Section 12 of 
this Agreement.  During the period beginning on the date you or the Company, 
as the case may be, receive Notice of Termination and ending on the Date of 
Termination, the Company will continue to pay you your full compensation and 
benefits and cause your continued participation in all Plans, in effect 
immediately prior to the time the Notice of Termination is given and until 
the dispute is resolved in accordance with Section 12 of this Agreement.

     (i)  "DISABILITY" means a disability as defined in the Company's 
long-term disability plan as in effect immediately prior to the Change in 
Control or, in the absence of such a plan, means permanent and total 
disability as defined in section 22(e)(3) of the Code.

     (j)  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as 
amended.

     (k)  "GOOD REASON" means:

          (i)  an adverse change in your status or position(s) as an executive
     of the Company as in effect immediately prior to the Change in Control,
     including, without limitation, any adverse change in you status or
     position(s) as a result of a material diminution in your duties or
     responsibilities (other than, if applicable, any such change directly
     attributable to the fact that the Company is no longer publicly owned) or
     the assignment to you of any duties or responsibilities which, in your
     reasonable judgement, are inconsistent with such status of position(s), or
     any removal of you from or any failure to reappoint or reelect you to such
     position(s) (except in connection with the termination of your employment
     for Cause, Disability or Retirement or as a result of your death or by you
     other than for Good Reason);

          (ii) a reduction by the Company in your rate of total compensation
     (including, without limitation, salary and bonuses), or an adverse change
     in the form of timing of the payment thereof, as in effect immediately
     prior to the Change in Control;

<PAGE>

          (iii) the failure by the Company to continue in effect any Plan in
     which you (and/or your family or dependents) are participating at any time
     during the ninety (90)-calendar-day period immediately preceding the Change
     in Control (or Plans providing you (and/or your family or dependents) with
     at least substantially similar benefits) other than as a result of the
     normal expiration of any such Plan in accordance with its terms as in
     effect immediately prior to the ninety (90)-calendar-day period immediately
     preceding the time of the Change in Control, or the taking of any action,
     or the failure to act, by the Company which would adversely affect your
     (and/or your family's or dependent's) continued participation in any of
     such Plans on at least as favorable a basis to you (and/or your family or
     dependents) as is the case on the date of the Change in Control or which
     would materially reduce your (and/or your family's or dependent's) benefits
     in the future under any of such Plans or deprive you (and/or your family or
     dependents) of any material benefit enjoyed by you (and/or your family or
     dependents) at the time of the Change in Control;

          (iv) the Company's requiring you to be based anywhere other than where
     your office is located immediately prior to the Change in Control, except
     for required travel on the Company's business, and then only to the extent
     substantially consistent with the business travel obligations which you
     undertook on behalf of the Company during the ninety (90)-calendar-day
     period immediately preceding the Change in Control (without regard to
     travel related to or in anticipation of the Change in Control);
     
          (v)  the failure by the Company to obtain from any Successor the
     assent to this Agreement contemplated by Section 5 of this Agreement;

          (vi) any purported termination by the Company of your employment which
     is not properly effected pursuant to a Notice of Termination and pursuant
     to any other requirements of this Agreement, and for purposes of this
     Agreement, no such purported termination will be effective; or

          (vii) any refusal by the Company to continue to allow you to
     attend to matters or engage in activities not directly related to the
     business of the Company which, at any time prior to the Change in Control,
     you were not expressly prohibited in writing by the Board from attending to
     or engaging in.

     Notwithstanding anything in the foregoing to the contrary, your 
termination of employment with the Company for any reason other than death, 
Disability or Retirement within the thirty (30) day period beginning on the 
one hundred eighty first (181st) calendar day following a Change in Control 
and ending on the two hundred tenth (210th) calendar day following a Change 
in Control will be conclusively deemed to be for Good Reason.

     (l)  "MONTHLY BASE COMPENSATION" means your monthly base cash salary 
from the Company attributable to services rendered as an employee of the 
Company at the rate in effect immediately prior to the Change in Control, 
determined without regard to the amount of contributions made by the Company 
with respect to you under any qualified cash or deferred arrangement or 
cafeteria plan that is not then includable in your income by operation of 
section 402(a)(8) or section 125 of the Code and without regard to amounts 
deferred, whether voluntarily or involuntarily and whether vested or 
nonvested, pursuant to any Plan.

     (m)  "NOTICE OF TERMINATION" means a written notice which indicates the 
specific termination provision in this Agreement pursuant to which the notice 
is given.  Any purported termination by the Company or by you following a 
Change in Control (or prior to a Change in Control if your termination was 
either a condition of the Change in Control or was at the request or 

<PAGE>

insistence of any Person (other than the Company) related to the Change in 
Control) must be communicated by written Notice of Termination.

     (n)  "PARENT CORPORATION" means BMC Industries, Inc. and any Successor.

     (o)  "PERSON" means and includes any individual, corporation, 
partnership, group, association or other "person," as such term is used in 
section 14(d) of the Exchange Act, other than the Parent Corporation, a 
wholly-owned subsidiary of the Parent Corporation or any employee benefit 
plan(s) sponsored by the Parent Corporation or a wholly-owned subsidiary of 
the Parent Corporation.

     (p)  "PLAN" means any compensation plan (such as a stock option, 
restricted stock plan or other equity-based plan), or any employee benefit 
plan (such as a thrift, pension, profit sharing, medical, dental, disability, 
accident, life insurance, relocation, salary continuation, expense 
reimbursements, vacation, fringe benefits, office and support staff plan or 
policy) or any other plan, program, policy or agreement of the Company 
intended to benefit employees (and/or their families or dependents) 
generally, management employees (and/or their families or dependents) as a 
group or you (and/or your family or dependents) in particular.

     (q)  "RETIREMENT" means termination of your employment with the Company 
on or after the day on which you attain the age of sixty-five (65).

     (r)  "SUBSIDIARY" means any corporation at least a majority of whose 
securities having ordinary voting power for the election of directors is at 
the time owned by the Company and/or one (1) or more Subsidiaries or any 
operating division of the Company.

     (s)  "SUCCESSOR" means any Person that succeeds to, or has the practical 
ability to control (either immediately or with the passage of time), the 
Parent Corporation's business directly, by merger, consolidation or other 
form of business combination, or indirectly, by purchase of the Parent 
Corporation's voting securities, all or substantially all of its assets or 
otherwise.

     2.   BENEFITS UPON A CHANGE IN CONTROL TERMINATION.  If your employment 
with the Company is terminated for any reason other than death, Cause, 
Disability or Retirement, or if you terminate your employment with the 
Company for Good Reason either:  (a) within the two hundred ten (210) 
calendar-day-period immediately following a Change in Control; or (b) prior 
to a Change in Control if your termination was either a condition of the 
Change in Control or was at the request or insistence of a Person (other than 
the Company) related to the Change in Control, then:

          (i)  PERIODIC CASH PAYMENTS.  On or before the fifth calendar day of
     each of the twelve (12) calendar months following the month during which
     the Date of Termination occurs, the Company will make a cash payment to you
     in an amount equal to your Monthly Base Compensation.  If you die or attain
     age sixty-five (65) before the end of this twelve (12) month period, such
     payments will end as of and including the month during which you die or
     attain age sixty-five (65).  If you obtain employment at any time during
     such twelve (12) month period, any "base salary" that you receive during
     any given month within such period as a result of such employment will be
     offset against the Company's corresponding monthly payment obligation under
     this clause (i).  You have no obligation, however, to mitigate damages by
     seeking or accepting alternative employment during such twelve (12) month
     period.  For purposes of applying the foregoing, the  term "base salary" is
     defined as cash compensation paid at intervals no less frequent than
     monthly which is not incentive based and is not paid in lieu of benefits.

<PAGE>

          (ii) LIMITATION ON PAYMENTS AND BENEFITS.  Notwithstanding anything in
     this Agreement to the contrary, if any of the payments to be made in
     connection with this Agreement, together with any other payments or
     benefits which you have the right to receive from the Company or any
     corporation which is a member of an "affiliated group" (as defined in
     section 1504(a) of the Code without regard to section 1504(b) of the Code)
     of which the Company is a member, constitute an "excess parachute payment"
     (as defined in section 280G(b) of the Code), the payments to be made in
     connection with this Agreement shall be reduced to the extent necessary to
     prevent any portion of such payments or benefits from becoming subject to
     the excise tax imposed under section 4999 of the Code; provided, that such
     reduction shall be made only if the aggregate amount of the payments after
     such reduction exceeds the difference between (A) the amount of such
     payments absent such reduction minus (B) the aggregate amount of the excise
     tax imposed under section 4999 of the Code attributable to any such excess
     parachute payments arising in connection with such Change in Control.  The
     determination as to whether any such decrease in the payments to be made in
     connection with this Agreement is necessary must be made in good faith by
     legal counsel or a certified public accountant selected by you and
     reasonably acceptable to the Company, and such determination will be
     conclusive and binding upon you and the Company.  In the event that a
     reduction is necessary, you will have the right to designate the particular
     payments or benefits that are to be reduced or eliminated so that no
     portion of the payments or benefits to be made or provided to you in
     connection with this Agreement will be excess parachute payments subject to
     the excise tax under Code section 4999.  The Company will pay or reimburse
     you on demand for the reasonable fees, costs and expenses of the counsel or
     accountant selected to make the determinations under this clause (ii).

For purposes of this Section 2, your employment with the Company will be 
deemed to have been terminated on the date on which the Company or you, as 
the case may be, receives Notice of Termination notwithstanding that your 
Date of Termination occurs following the expiration of the two hundred ten 
(210) calendar-day-period referenced in clause (a).

     3.   INDEMNIFICATION.  Following a Change in Control, the Company will 
indemnify and advance expenses to you to the full extent permitted by law and 
the Company's articles of incorporation and bylaws for damages, costs and 
expenses (including, without limitation, judgements, fines, penalties, 
settlements and reasonable fees and expenses of your counsel) incurred in 
connection with all matters, events and transactions relating to your service 
to or status with the Company and any other corporation, employee benefit 
plan or other entity with whom you served at the request of the Company.

     4.   CONFIDENTIALITY.  You will not use, other than in connection with 
your employment with the Company, or disclose any Confidential Information to 
any person not employed by the Company or not authorized by the Company to 
receive such Confidential Information, without the prior written consent of 
the Company; and you will use reasonable and prudent care to safeguard and 
protect and prevent the unauthorized disclosure of Confidential Information.  
Nothing in this Agreement will prevent you from using, disclosing or 
authorizing the disclosure of any Confidential Information:  (a) which is or 
hereafter becomes part of the public domain or otherwise becomes generally 
available to the public through no fault of yours; (b) to the extent and upon 
the terms and conditions that the Company may have previously made the 
Confidential Information available to certain persons; or (c) to the extent 
that you are required to disclose such Confidential Information by law or 
judicial or administrative process.

     5.   SUCCESSORS.  The Company will seek to have any Successor, by 
agreement in form and substance satisfactory to you, assent to the 
fulfillment by the Company of the Company's obligations under this Agreement. 
Failure of the Company to obtain such assent at least three (3)

<PAGE>

business days prior to the time a Person becomes a Successor (or where the 
Company does not have at least three (3) business days' advance notice that a 
Person may become a Successor, within one (1) business day after having 
notice that such Person may become or has become a Successor) will constitute 
Good Reason for termination by you of your employment.

     6.   FEES AND EXPENSES.  The Company, upon demand, will pay or reimburse 
you for all reasonable legal fees, court costs, experts' fees and related 
costs and expenses incurred by you in connection with any actual, threatened 
or contemplated litigation or legal, administrative, arbitration or other 
proceeding relating to this Agreement to which you are or reasonably expect 
to become a party, whether or not initiated by you, including, without 
limitation: (a) all such fees and expenses, if any, incurred in contesting or 
disputing any such termination; or (b) your seeking to obtain or enforce any 
right or benefit provided by this Agreement; provided, however, you will be 
required to repay (without interest) any such amounts to the Company to the 
extent that a court issues a final and non-appealable order setting forth the 
determination that the position taken by you was frivolous or advanced by you 
in bad faith.

     7.   BINDING AGREEMENT.  This Agreement inures to the benefit of, and is 
enforceable by, you, your personal and legal representatives, executors, 
administrators, successors, heirs, distributees, devisees and legatees.  If 
you die after you become entitled to, but before you receive, any amounts 
payable to you under this Agreement, all such amounts, unless otherwise 
provided in this Agreement, will be paid in accordance with the terms of this 
Agreement to your devisee, legatee or other designee or, it there be no such 
designee, to your estate.

     8.   NO MITIGATION.  Except as expressly provided in clause (i) of 
Section 2 of this Agreement, you will not be required to mitigate the amount 
of any payments the Company becomes obligated to make to you in connection 
with this Agreement by seeking other employment or otherwise and the payments 
to be made to you in connection with this Agreement may not be reduced, 
offset or subject to recovery by the Company by any payments or benefits you 
may receive from other employment or otherwise.

     9.   NO SETOFF.  Except as provided in Section 10 of this Agreement, the 
Company will have no right to setoff payments owed to you under this 
Agreement against amounts owed or claimed to be owed by you to the Company 
under this Agreement or otherwise.

     10.  TAXES.  All payments to be made to you in connection with this 
Agreement will be subject to required withholding of federal, state and local 
income, excise and employment-related taxes which withholding shall be 
consistent with the determination described in clause (ii) of Section 2 of 
this Agreement.

     11.  NOTICES.  For the purpose of this Agreement, notices and all other 
communications provided for in, or required under, this Agreement must be in 
writing and will be deemed to have been duly given when personally delivered 
or when mailed by United States registered or certified mail, return receipt 
requested, postage prepaid and addressed to each party's respective address 
set forth on the first page of this Agreement (provided that all notices to 
the Company must be directed to the attention of the President and Chief 
Executive Officer), or to such other address as either party may have 
furnished to the other in writing in accordance with these provisions, except 
that notice of change of address will be effective only upon receipt.

     12.  DISPUTES.  Any dispute, controversy or claim for damages arising 
under or in connection with the Agreement shall be settled exclusively by 
arbitration in Minneapolis, Minnesota by three (3) arbitrators in accordance 
with the rules of the American Arbitration Association then in effect.  
Judgement may by entered on the arbitrators' award in any court having 
jurisdiction.  The 

<PAGE>

Company will be entitled to seek an injunction or restraining order in a 
court of competent jurisdiction (within or without the State of Minnesota) to 
enforce the provisions of Section 4 of this Agreement.

     13.  JURISDICTION.  Except as specifically provided otherwise in the 
Agreement, the parties agree that any action or proceeding arising under or 
in connection with this Agreement must be brought in a court of competent 
jurisdiction in the State of Minnesota, and hereby consent to the exclusive 
jurisdiction of said courts for this purpose and agree not to assert that 
such courts are an inconvenient forum.

     14.  RELATED AGREEMENTS.  To the extent that any provision of any other 
Plan or agreement between the Company and you limits, qualifies or is 
inconsistent with any provision of this Agreement, then for purposes of this 
Agreement, while such other Plan or agreement remains in force, the provision 
of this Agreement will control and such provision of such other Plan or 
agreement will be deemed to have been superseded, and to be of no force or 
effect, as if such other agreement had been formally amended to the extent 
necessary to accomplish such purpose.  Nothing in this Agreement prevents or 
limits your continuing or future participation in any Plan provided by the 
Company and for which you may qualify, and nothing in this Agreement limits 
or otherwise affects the rights you may have under any Plans or other 
agreements with the Company. Amounts which are vested benefits or which you 
are otherwise entitled to receive under any Plan or other agreement with the 
Company at or subsequent to the Date of Termination will be payable in 
accordance with such Plan or other agreement.

     15.  NO EMPLOYMENT OR SERVICE CONTRACT.  Nothing in this Agreement is 
intended to provide you with any right to continue in the employ of the 
Company for any period of specific duration or interfere with or otherwise 
restrict in any way your rights or the rights of the Company, which rights 
are hereby expressly reserved by each, to terminate your employment at any 
time for any reason or no reason whatsoever, with or without cause.

     16.  CHANGE OF SUBSIDIARY STATUS.  In the event that, prior to a Change 
in Control:  (a) a Subsidiary is sold, merged, transferred or in any other 
manner or for any other reason ceases to be a Subsidiary; (b) your primary 
employment duties are with the Subsidiary at the time of the occurrence of 
such event; and (c) you do not, in conjunction therewith, transfer employment 
directly to the Company or another Subsidiary, then this Agreement will 
become null and void.

     17.  SURVIVAL.  The respective obligations of, and benefits afforded to, 
the Company and you which by their express terms or clear intent survive 
termination of your employment with the Company or termination of this 
Agreement, as the case may be, including, without limitation, the provisions 
of Sections 2, 3, 4, 5, 6, 9, 10, 11 and 12 of this Agreement, will survive 
termination of your employment with the Company or termination of this 
Agreement, as the case may be, and will remain in full force and effect 
according to their terms.

     18.  MISCELLANEOUS.  No provision of this Agreement may be modified, 
waived or discharged unless such modification, waiver or discharge is agreed 
to in a writing signed by you and the President and Chief Executive Officer.  
No waiver by any party to this Agreement at any time of any breach by another 
party to this Agreement of, or of compliance with, any condition or provision 
of this Agreement to be performed by such party will be deemed a waiver of 
similar or dissimilar provisions or conditions at the same or at any prior or 
subsequent time.  No agreements or representations, oral or otherwise, 
express or implied, with respect to the subject matter to this Agreement have 
been made by any party which are not expressly set forth in this Agreement.  
This Agreement and the legal relations among the parties as to all matters, 
including, without limitation, matters of validity, interpretation, 
construction, performance and remedies, will be governed by and 

<PAGE>

construed exclusively in accordance with the internal laws of the State of 
Minnesota (without regard to the conflict of laws provisions of the State of 
Minnesota or of any other jurisdiction), except to the extent that the 
provisions of the corporate law of Minnesota may apply to the internal 
affairs of the Company.  Headings are for purposes of convenience only and do 
not constitute a part of this Agreement.  The parties to this Agreement agree 
to perform, or cause to be performed, such further acts and deeds and to 
execute and deliver, or cause to be executed and delivered, such additional 
or supplemental documents or instruments as may be reasonably required by the 
other party to carry into effect the intent and purpose of this Agreement.  
The invalidity or unenforceability of all or any part of any provision of 
this Agreement will not affect the validity or enforceability of the 
remainder of such provision or of any other provision of this Agreement, 
which will remain in full force and effect.  This Agreement may be executed 
in several counterparts, each of which will be deemed to be an original, but 
all of which together will constitute one and the same instrument.

     If this letter correctly sets forth our agreement on the subject matter 
discussed above, kindly sign and return to the Company the enclosed copy of 
this letter which will then constitute our agreement on this subject.

Sincerely,




By:   /s/ Paul B. Burke        
      ---------------------------
      Paul B. Burke      
      Chairman, President & CEO     



Agreed to this 20th day of
   December, 1996.


    /s/ John N. McCormick      
   -------------------------------
   John N. McCormick