**Exhibit 10.1****EMPLOYMENT AGREEMENT**     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of March 28,2006, between **RTW, INC.,**a Minnesota corporation (the “Company”), and **Jeffrey B. Murphy**(“Employee”).     The Company and Employee are desirous of setting forth the terms and conditions of theemployment by the Company of Employee as its President and Chief Executive Officer.     In consideration of the mutual covenants and agreements herein contained and for other goodand valuable consideration, the receipt and sufficiency of which is hereby acknowledged, theparties intending to be legally bound do hereby agree as follows:     1. **Term**. The Company agrees to employ Employee and Employee agrees to serve theCompany for a term beginning on the date hereof and terminating on March 31, 2007 (the “ExpirationDate”) unless and until terminated in accordance with the terms of this Agreement (the “OriginalTerm”). Upon the expiration of the Original Term of this Agreement, and on each successiveanniversary thereafter, the term of employment under this Agreement will be extended for oneadditional year, unless at least 60 days prior to any such anniversary, either Employee or theCompany delivers to the other written notice of the notifying party’s desire not to extend the termof employment. Notice by the Company of its desire not to extend the term of employment asprovided in this Section will constitute Termination without Cause and entitle Employee to thebenefits of Section 9 below.     2. **Services to be Rendered by Employee**. Employee agrees to serve the Company as itsPresident and Chief Executive Officer and, in addition, at no additional compensation, serve as amember of the Board of Directors of RTW, Inc., and in such other directorships, Board committeememberships and offices of the Company and its subsidiaries to which Employee may from time to timebe elected or appointed by the Chairman of the Board and the shareholders. Employee will performsuch duties and exercise such powers as from time to time may be assigned to him consistent withhis position, knowledge and experience, either orally or in writing, by the Board of Directors ofthe Company and will carry out his duties under the ultimate general direction and control of theBoard of Directors. In his capacity as President and Chief Executive Officer, Employee willperform all reasonable acts customarily associated with such position, or necessary or desirable toprotect and advance the best interests of the Company, together with such other reasonable dutiesas may be determined and assigned to him by the Board of Directors. Employee will perform suchacts and carry out such duties, and will in all other respects serve the Company, faithfully and tothe best of his ability.
 

 
     3. **Time to be Devoted by Employee**. Employee agrees to devote substantially all of hisbusiness time, attention, efforts and abilities to the business of the Company and to use his bestefforts to promote the interests of the Company. Employee confirms that he has no businessinterests of any kind that will require a significant portion of his business time. Employee mayattend, however, to personal business and investments, engage in charitable activities andcommunity affairs, and serve on a reasonable number of corporate, educational and civic boards solong as those activities do not interfere with Employee’s duties under this Agreement, and in thecase of service on any other corporate boards, Employee obtains prior approval from the Board ofDirectors.     4. **Compensation Payable to Employee**. As compensation for all of Employee’s services(including services as director, Board committee member and officer of the Company and itssubsidiaries) during the term of employment hereunder, the Company will pay to Employee a basesalary at the rate of Three Hundred Fifty Thousand Dollars ($350,000) per annum (the “AnnualSalary”), payable in semi-monthly installments, which base salary will be pro-rated for any partialyears. The Compensation Committee will review the base salary annually in discussion with Employeeand make recommendations for approval to the Board of Directors. Employee will participate withother corporate officers in any incentive compensation plan as may be adopted by the Board ofDirectors from time to time.     5. **Expenses**. During the term of employment, the Company will reimburse Employee forreasonable travel and other expenses incurred in performing his duties according to Companypolicies then in effect. Payments to Employee under this paragraph will be made after the Employeepresents expense vouchers in such detail as the Company may from time to time reasonably require.     6. **Benefits**. Employee’s benefits will be the same as provided for any other executiveofficer except that the Company will additionally provide Employee with a $2.0 million term lifeinsurance policy for the benefit of his wife and family. The policy will be of reasonable cost asdetermined by the Board of Directors and the cost will be included in Employee’s W-2 at year endfor tax purposes. Further, the Company will, at the Company’s expense, maintain directors andofficers’ liability insurance coverage during the term of this Agreement with minimum limits of$5,000,000, unless the cost thereof is not economically feasible as determined by the Board ofDirectors.     7. **Stock Option(s)**.          7.1. Grant. In addition to options granted in conjunction with the Company’s 2005Incentive Program, the Company hereby further grants Employee ten-year stock options to purchase upto 10,000 shares of the Company’s Common Stock (the “Option(s)”). The per share price to be paidby Employee upon exercise of the Option(s) is the closing price of the Company’s Common Stock, as
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reported by NASDAQ, on the date this agreement is executed. The Option(s) will be incentivestock options to the extent allowed by the Internal Revenue Code. The Compensation Committee willconsider similar future grants as part of its duty in reviewing Employee’s annual compensation.          7.2. Vesting. The Option(s) will become exercisable in three (3) installments of theCompany’s Common Stock (“Option Installment”) as follows: (i) the first Option Installmentrepresenting 3,334 shares is immediately exercisable as of the date this agreement is executed, and(ii) two additional Option Installments of 3,333 shares will vest on each of the following twoanniversary dates of this Agreement, if the Employee is still employed by the Company on suchdates.          7.3. Exercise Period. The Option(s) will become void and expire as to all unexercisedOption shares ten years from the effective date of this Agreement.          7.4. Additional Terms. The remaining terms of the Option(s) are as set forth in theOption Agreement(s) dated this date.     8. **Termination****.**          8.1. General. This Agreement and Employee’s employment may be terminated as set forthin Section 8.2. In the event of termination of employment for any of the following reasons,Employee must resign as a director and officer of the Company and any of its subsidiaries at orprior to the effective Date of Termination.          8.2. Events of Termination. The Agreement may be terminated as follows: (i) By Employee, upon 60 days prior written noticeto the Company;  (ii) By Employee for Good Reason (as defined inSection 8.4 (iii) of this Agreement) upon 60 days prior written noticeto the Company;  (iii) By the Company for Cause (as defined in thisAgreement), immediately upon written notice to Employee;  (iv) By the Company for any reason (without cause)and at any time, upon 60 days prior written notice to Employee; or  (v) By the Company at any time in the event ofEmployee’s Disability (as defined in this Agreement.)          8.3. Death. This Agreement will automatically terminate upon Employee’s death.          8.4. Definitions. For purposes of this Agreement, the following terms have themeanings set forth below:
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 (i) Disability. “Disability” means thatif, in the reasonable judgment of the Board of Directors, theEmployee’s incapacity due to physical or mental illness, or otherwise,keeps him from performing satisfactorily all of his duties hereunder ona substantially full-time basis for a period of three months during theterm of this Agreement.  (ii) Cause. The Company will have “Cause”to terminate Employee’s employment hereunder upon Employee’s: (A) refusal or neglect to perform anddischarge his duties and responsibilities hereunder;  (B) gross misconduct that isinjurious to the Company;  (C) fraud, embezzlement or other actof dishonesty of Employee with respect to the Company;  (D) conviction of, or plea of guiltyor nolo contendere entered by Employee to, a felony or crimeinvolving moral turpitude or which conviction or plea is likelyto have a material adverse effect upon the Company or uponExecutive’s ability to perform his duties hereunder;  (E) willful or prolonged absence fromwork by Employee (other than by reason of disability due tophysical or mental illness); or  (F) willful commission of acts ormaking of false statements by Employee that reflect adversely,in material respects, upon the Company or its business,customers or other employees. (iii) Good Reason. “Good Reason” means theCompany, without express written consent, (A) materially reduces Employee’sprincipal duties, responsibilities, or authority as Presidentand Chief Executive Officer, includingrequiringEmployee to report to any person or body other than the Board ofDirectors of the Company;  (B) reduces Employee’s annual basecompensation as described in Section 4; or  (C) materially breaches thisAgreement.
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   The occurrence of an event described in this subparagraph 8.4(iii)will not constitute Good Reason unless, within 60 days thereofEmployee provides the Company written notice stating that an event ofGood Reason has occurred and describing that event, and the Companydoes not correct the same, if the same is correctable, within 30days.  (iv) Date of Termination. The term “Date ofTermination” means the earlier of: (A) the Expiration Date, or  (B) if Employee’s employment isterminated by his death, the date of his death, or  (C) if Employee’s employment isterminated for any other reason, the date on which notice oftermination is given either to Employee by the Company or to theCompany by Employee unless another date is specified in theNotice of Termination.     9. **Consequences of Termination****.**          9.1. Termination for Cause; Voluntary Resignation without Good Reason. If employmentis terminated by the Company for Cause or by Employee without Good Reason, then Employee will bepaid (i) his base salary to the date of termination and (ii) the unpaid portion of any bonus orincentive amount earned for the fiscal year ending prior to the termination of employment thatEmployee is entitled to receive under the terms of the annual incentive plan. Employee will not beentitled to receive any base salary or fringe benefits for any period after the date oftermination, except for the right to receive benefits that have become vested under any benefitplan or to which Employee is entitled as a matter of law.          9.2. Termination without Cause; Resignation for Good Reason. If the Companyterminates employment without Cause or does not extend the term of employment, or if Employeeresigns employment for Good Reason, then: (i) For a period of nine months after the effectivedate of the termination of employment; (A) The Company will continue to payEmployee’s then current base salary in accordance with theCompany’s normal payroll practice; and
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 (B) Employee will be entitled tocontinued participation in the health care coverage and lifeinsurance benefit plans of the Company, as in effect on the dateof termination. The Company will continue to pay its share ofthe health care and life insurance premiums for this coverage,and Employee will pay his share of the cost associated with thatcoverage as if he were still actively employed by the Company.If Employee cannot be covered under any of the Company’s groupplans or policies, the Company will reimburse Employee for hisfull cost of obtaining comparable alternative or individualcoverage elsewhere, less any contribution that Employee wouldhave been required to make under the Company’s group plans orpolicies. If, during the aforesaid nine-month period, Employeeis employed by a third party and becomes eligible for any healthcare coverage provided by that third party, the Company willnot, thereafter, be obligated to provide Employee with theinsurance benefits described in this clause (B). This nine-month coverage will run concurrently with COBRA and thereafterEmployee will be responsible for the full cost of any suchcoverage for which he may be entitled by law. (ii) The Company will pay the unpaid portion of anybonus or incentive amount earned by Employee for the fiscal year endingprior to the termination of employment that Employee is entitled toreceive under the terms of the applicable incentive plan as well as anypro-rata bonus or incentive amount through the date of termination.Any pro rata bonus or other incentive amount due pursuant to thisparagraph 9.2 (ii) will be due on the date the payments are made toother employees of the Company.  (iii) The Company will pay Employee $25,000 forout-placement and job search services.          9.3. Termination in the Event of Death or Disability. If employment terminates due toEmployee’s Death or if the Company terminates employment due to a Disability, then: (i) The Company will continue to pay base salary toEmployee’s estate or to Employee for the remainder of the month inwhich the death occurs or in
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   which employment is terminated due to Disability, together with theunpaid portion of any bonus or incentive amount earned by Employeefor the fiscal year ending prior to the termination of employmentwhich he is entitled to receive under the terms of the applicableincentive plan as well as any pro-rata bonus or incentive amountthrough the date of termination; and in the event of termination dueto Disability, Employee will continue to receive, during that month,all of the fringe benefits then being paid or provided to him; and  (ii) Employee will be entitled to receive allDisability and other benefits, such as continued health coverage orlife insurance proceeds, provided in accordance with the terms andcondition of the health care coverage, life insurance, disability, orother employee benefit plans of the Company and applicable law.     10. **Confidentiality**. Employee agrees while in the employ of the Company (otherwisethan in the performance of his duties hereunder) and thereafter not to, directly or indirectly,make use of, or divulge to any person, firm, corporation, entity or business organization, and touse his best efforts to prevent the publication or disclosure of, any confidential or proprietaryinformation concerning the business, accounts or finances of, or any of the methods of doingbusiness used by, the Company or its affiliates or of the dealings, transactions or affairs of theCompany or its affiliates or any of their respective customers that have or may have come to hisknowledge during his employment by the Company.     11. **Notices**. All notices under this Agreement must be in writing and will beeffective either (i) when delivered in person at the address set forth below, or(ii) three business days after deposit in a sealed envelope in the United States Mail,postage prepaid, by registered or certified mail, return receipt requested, addressed to therecipient as set forth below, whichever is earlier.     All notices to the Company must be sent to:     RTW, Inc.  8500 Normandale Lake Boulevard  Minneapolis, MN 55437  Attn: Chairman of the Board
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     All notices to Employee must be sent to:     Mr. Jeffrey B. Murphy  327 Jesse James Lane  Mahtomedi, MN 55115          These addresses may be changed by notice given in accordance with this Section 11.     12. **Miscellaneous**. This Agreement may not be changed nor may any provision hereof bewaived, except by an instrument in writing duly signed by the party to be charged. This Agreementwill be interpreted, governed and controlled by the internal laws of the State of Minnesota,without reference to principles of conflict of law. This Agreement will terminate in the event ofthe liquidation and winding up of the business of the Company but will continue in effect in theevent of the merger or sale of the Company into or to another entity or the transfer ofsubstantially all of the assets of the Company to another entity. The provisions of Section 10hereof will survive any termination of this Agreement. This agreement replaces in its entiretyEmployee’s employment agreement dated as of March 12, 2004.***[Remainder of page intentionally left blank.]***
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          IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first abovewritten.         **COMPANY:**   **EMPLOYEE:**           **RTW, Inc.**               By: /s/ John O. Goodwyne   /s/ Jeffrey B. Murphy             John O. Goodwyne                       Jeffrey B. Murphy    Chairman of the Board                       President and CEO  
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