<PAGE>

                   [LETTERHEAD]


November 24, 1997



Mr. Carl B. Lehmann
2626 Hillsden Drive
Salt Lake City, UT 84117

Dear Mr. Lehmann:

We write to set forth our agreement with respect to your employment as the
President and Chief Executive Officer of RTW, Inc. (the "Company"),
commencing January 15, 1998 (the "Employment Date").  Upon execution of this
letter by the parties hereto, this letter shall be effective and shall bind
the Company from and after the date hereof, but shall be operative only upon
your actual commencement of employment with the Company.  Prior to the date
your employment commences under this letter, you agree to provide consulting
services to the Company in accordance with the terms set forth on the
consulting agreement attached hereto as Exhibit 1 (the "Consulting
Agreement").

1.   EMPLOYMENT.  The Company hereby agrees to employ you, and you agree to
be employed by the Company, during the term stated in Section 6, and on the
terms and conditions hereinafter set forth.  You will serve as the President
and Chief Executive Officer of the Company and its insurance subsidiary,
American Compensation Insurance Company, and, in addition, at no additional
compensation, be elected as a member of the Board of Directors, and in such
other directorships, Board committee memberships and offices of the Company
and its subsidiaries to which you may from time to time be elected or
appointed by the Chairman of the Board.  You agree to serve the Company
faithfully and, to the best of your ability, to promote the Company's
interest, and to devote your full working time, energy and skill to the
Company's business.  You may attend to personal business and investments,
engage in charitable activities and community affairs, and serve on a
reasonable number of corporate, educational and civic boards, including
Westminister College,  so long as those activities do not interfere with your
duties under this Agreement and provided that service on any corporate boards
shall be subject to prior approval by the Board of Directors.

     You will assume all of the duties and responsibilities as President and
Chief Executive Officer immediately upon the Employment Date. You will have
such authority, powers, functions, duties, and responsibilities as are
normally accorded chief executive officers.  You will discharge your duties
at all times in accordance with any and all policies established by the Board
of Directors and will report to, and be subject to the direction of, the
Board of Directors. You will assume all the duties and responsibilities as a
director effective upon your election to the Board of Directors.

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November 24, 1997
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2.   BASE SALARY.

     As partial compensation for all of your services (including services as
director, Board committee member or officer of the Company and its
subsidiaries) during your term of employment hereunder, you will receive a
base salary at the rate of Four Hundred Thousand Dollars ($400,000) per
annum, payable in semi-monthly installments, which base salary will be
prorated for any partial years. Such base salary shall be reviewed annually
for increase at the discretion of the Board.

3.   BONUS; STOCK OPTIONS.

     (a)  As additional compensation for your services, you shall be eligible
to earn bonus compensation for each fiscal year of the Company commencing
with the fiscal year ending December 31, 1998 during your term of employment
hereunder, based on a "target bonus" of $400,000 per annum and otherwise in
accordance with the criteria considered in an incentive compensation plan to
be mutually agreed to in advance of each such fiscal year by you and the
Company's Board of Directors.

     (b)  Pursuant to the Consulting Agreement, you received ten-year,
non-qualified stock options to purchase 500,000 shares of the Company's
Common Stock (the "NQSOs").  After your Employment Date but prior to February
1, 1998, you may request that the Company grant to you up to the maximum
number of incentive stock options ("ISO's") that may be issued to you (to
become exercisable during the period beginning on the Employment Date and
ending on the day after the third anniversary of your initial election to the
Board) under the Company's Amended 1994 Stock Plan and applicable law,
provided that a like number of NQSO's shall be surrendered by you for
cancellation.  Such ISOs shall be exercisable at the same times and during
the same periods as the NQSOs and otherwise shall have substantially
identical provisions to the NQSOs, except to the extent contrary to
applicable law.

     (c)  You shall be eligible to receive additional stock options annually,
at the discretion of the Board.

     (d)  The Company will maintain in effect, throughout the periods that
the stock options described in this Section 3 remain exercisable, a
registration statement on Form S-8 or other appropriate form, registering
the shares of its Common Stock issuable pursuant to such options under the
Securities Act of 1933, as amended.  If requested by you, the Company shall
prepare, file and maintain in effect any resale prospectuses under such
registration statement as may be required to permit you to resell your option
shares without restriction.

4.   FRINGE BENEFITS.

     (a)       You will be eligible to participate in any and all Company
          sponsored insurance (including medical, dental, life and disability
          insurance), retirement, and other fringe benefit programs that it
          maintains for its executive officers, subject to and on a basis
          consistent with the terms of each such plan or program.  A summary
          of the benefits

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November 24, 1997
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          currently in effect is set forth on the attached Exhibit 2.  In
          addition, the Company will, at the Company's expense, (i) provide
          you with an additional $1,000,000 of term life insurance and (ii)
          pay you an amount sufficient to enable you to maintain an
          additional "own occupation" long-term disability policy (with a
          three month waiting period) paying monthly benefits of $5,000.  The
          Company shall also maintain in effect directors and officers
          liability insurance coverage during the term of this Agreement with
          limits of $5,000,000, unless the cost thereof is uneconomic as
          determined by the Board of Directors.

     (b)  You will be entitled to six weeks of paid vacation annually.

     (c)  The Company will provide for your relocation to
          Minneapolis-St. Paul in accordance with the terms of the relocation
          plan described on the attached Exhibit 3.

     (d)  The Company will pay you an additional amount required to pay
          any income and payroll taxes payable by you, at the maximum
          marginal rate, on the amounts paid by the Company pursuant to
          clause (ii) of Section 4(a) and under Section 4(c) and on any
          amounts paid pursuant to this Section 4(d).

5.   EXPENSES.  During the term of your employment, the Company will
reimburse you for your reasonable travel and other expenses incident to your
rendering of services in conformity with its regular policies regarding
reimbursement of expenses as in effect from time to time.  Payments to you
under this paragraph will be made upon presentation of expense vouchers in
such detail as the Company may from time to time reasonably require.

6.   TERM AND TERMINATION.

     (a)  TERM.  The term of this Agreement will begin on January 15, 1998
          and will continue for a period of three (3) years thereafter,
          unless and until terminated in accordance with the terms of this
          Agreement (the "Original Term").  Upon the expiration of the
          Original Term of this Agreement, and on each successive anniversary
          thereafter, the term of your employment under this Agreement will
          be automatically extended for one (1) additional year, unless at
          least 90 days prior to any such anniversary, either you or the
          Company delivers to the other written notice of the notifying
          party's desire not to extend the term of your employment. Notice by
          the Company of its desire not to extend the term of your employment
          as provided in this Section shall constitute termination without
          Cause and entitle you to the benefits of Section 7(b) below.

     (b)       TERMINATION.  This Agreement and your employment may be
          terminated:

          (i)       By your resignation upon 30 days prior written notice to
               the Company;

          (ii)      By you for Good Reason (as defined in this Agreement) upon 
               30 days prior written notice to the Company, provided that, with
               respect to Good Reason

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               as defined in subsection (d)(iii)(E) of this Section, such
               notice may not be given earlier than 90 days after a Change in
               Control as defined in the NQSOs;

          (iii)     By the Company for Cause (as defined in this Agreement)
               immediately upon written notice to you.

          (iv)      By the Company for any reason and at any time upon 30 days 
               prior written notice to you.

          (v)       By the Company at any time in the event of your Disability 
               (as defined in this Agreement.)

          In the event of your termination of employment for any of the
          foregoing reasons, you shall immediately resign as a director of the
          Company and any of its subsidiaries.

     (c)  DEATH.  This Agreement will automatically terminate upon your death.

     (d)  DEFINITIONS.  For purposes of this Agreement, the following terms will
          have the meanings set forth below:

          (i)        DISABILITY.  "Disability" means that you are deemed to be
               disabled under the terms of the Company's long term disability
               plan and have satisfied the qualifying period for entitlement to
               benefits under such plan (3 months of disability provided you do
               not return to work for 15 consecutive days).

          (ii)       CAUSE.  "Cause" means that you have (A) committed an act
               of dishonesty or fraud or involving a breach of trust; (B)
               committed any act or omission by you that is a substantial
               cause for a regulatory body with jurisdiction over the Company
               or any of its affiliates to request or recommend your
               suspension or removal or to take punitive action against you,
               the Company, or any of its affiliates; (C) failed to follow
               any reasonable and material policy of the Company or
               reasonable and material instructions of the Company's Board of
               Directors; (D) been indicted for or convicted of any felony;
               (E) engaged in any gross misconduct or gross negligence in the
               performance of your duties; or (F) have otherwise materially
               breached this Agreement; provided, however, that in the case
               of conduct described in clauses (C), (E), and (F), the Company
               must give you written notice of that failure or breach and you
               will have 30 days to correct the same.  You will be entitled
               to a hearing before the Board of Directors of the Company
               before any termination for Cause described in clauses (A),
               (C), (E) and (F) becomes effective.

          (iii)     GOOD REASON.  "Good Reason" means the Company, without
               your express written consent, (A) materially reduces your
               principal duties, responsibilities, or authority  as President
               and Chief Executive Officer, including by requiring you to
               report to any person or body other than the Board of Directors
               of the

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November 24, 1997
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               Company; (B) reduces your annual base compensation as
               described in Section 2 (including any increases given under
               Section 2(b)) or your target bonus as described in Section 3,
               or reduces the benefits provided you under any fringe benefit
               plan; provided, however, that the Company alter, amend or
               terminate any benefit plan not expressly provided for under
               Sections 2 and 3 so long as any such change applies to
               executive officers generally; (C) relocates the Company's
               corporate headquarters or your principal place of work to a
               state other than Minnesota;  (D) materially breaches this
               Agreement or (E) undergoes a Change in Control, as such term
               is defined in the NQSOs.  The occurrence of an event described
               in this subparagraph (d)(iii) will not constitute Good Reason
               unless, within 60 days thereof (90 days in the case of a
               Change in Control), you give the Company written notice
               stating that an event of Good Reason has occurred and
               describing that event, and the Company does not correct the
               same if the same is correctable within 30 days.

7.   CONSEQUENCES OF TERMINATION.

     (a)       TERMINATION FOR CAUSE; RESIGNATION WITHOUT GOOD REASON.  If
          your employment is terminated by the Company for Cause or by you
          without Good Reason, then you will be paid your base salary to the
          date of termination and the unpaid portion of any bonus or
          incentive amount earned by you for the fiscal year ending prior to
          the termination of your employment which you are entitled to
          receive under the terms of the annual incentive plan.  You will not
          be entitled to receive any base salary or fringe benefits for any
          period after the date of termination, except for the right to
          receive benefits which have become vested under any benefit plan or
          to which you are entitled as a matter of law.

     (b)       TERMINATION WITHOUT CAUSE; RESIGNATION FOR GOOD REASON.  If
          the Company terminates your employment without Cause or does not
          extend the term of your employment, or if you resign your
          employment for Good Reason, then:

          (i)            For the remainder of the term of this Agreement or a
               period of 12 months after the effective date of the termination
               of your employment whichever is greater;

               (A)       The Company will continue to pay your then current
                    base salary in accordance with the Company's normal
                    payroll practice; and

               (B)  All stock options issued to you by the Company described
                    in your Consulting Agreement in consideration for your
                    employment hereunder or pursuant to Section 3(b) above
                    shall immediately become exercisable in full; and

               (C)  The Company will pay the unpaid portion of any bonus or
                    incentive

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November 24, 1997
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                    amount earned by you for the fiscal year ending prior to
                    the termination of your employment which you are entitled
                    to receive under the terms of the applicable incentive
                    plan; and

               (D)  You will be entitled to continued participation in the
                    health care coverage, and life insurance benefit plans of
                    the Company, as in effect on the date of your
                    termination. The Company will continue to pay its share
                    of the health care and life insurance premiums for this
                    coverage, and you shall pay your share of the cost
                    associated with that coverage as if you were still
                    actively employed by the Company.  In addition, the
                    Company shall pay you the amount described in Section
                    4(a)(ii) and 4(d) to enable you to maintain the long term
                    disability policy described therein. If you cannot be
                    covered under any of the Company's group plans or
                    policies, the Company will reimburse you for your full
                    cost of obtaining comparable alternative or individual
                    coverage elsewhere, less any contribution that you would
                    have been required to make under the Company's group
                    plans or policies, together with the amount contemplated
                    by Section 4(d) with respect to any such payment.  If,
                    during the aforesaid 12-month period, you are employed by
                    a third party and become eligible for any health care
                    coverage provided by that third party, the Company will
                    not, thereafter, be obligated to provide you with the
                    insurance benefits described in this clause (D).  This
                    12-month coverage shall run concurrently with COBRA and
                    thereafter you shall be responsible for the full cost of
                    any such coverage for which you may be entitled by law.

          (ii)      The Company will pay a reasonable amount for
               out-placement and job search services for you by a nationally
               recognized out-placement firm selected by you and reasonably
               acceptable to the Company.

     (c)       TERMINATION IN THE EVENT OF DEATH OR DISABILITY.  If your
          employment terminates due to your death or if the Company
          terminates your employment due to a Disability, then

          (i)       The Company will continue to pay your base salary to your
               estate or to you for the remainder of the month in which your
               death occurs or in which your employment is terminated due to
               Disability, together with the unpaid portion of any bonus or
               incentive amount earned by you for the fiscal year ending
               prior to the termination of your employment which you are
               entitled to receive under the terms of the applicable
               incentive plan; and in the event of termination due to
               Disability, you will continue to receive, during that month,
               all of the fringe benefits then being paid or provided to you;
               and

          (ii)      You will be entitled to receive all Disability and other
               benefits, such as

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November 24, 1997
Page 7


               continued health coverage or life insurance proceeds, provided
               in accordance with the terms and condition of the health care
               coverage, life insurance, disability,  or other employee
               benefit plans of the Company and applicable law; and

          (iii)     All stock options issued to you by the Company described in
               your Consulting Agreement or pursuant to Section 3(b) above shall
               immediately become exercisable in full.

     (d)       The benefits provided you under this Section 7 are in lieu of any
          benefits that would otherwise be provided to you under any severance
          pay or other policies of the Company.

     (e)  In connection with your voluntary termination of this Agreement
                                    (including for Good Reason other than by
                                    reason of a material breach of this
                                    Agreement by the Company), you agree to
                                    cooperate with the Company in recruiting
                                    and orienting your successor as chief
                                    executive officer.  You recognize and
                                    agree that the foregoing obligation may
                                    require a portion of your time and effort
                                    following termination of your employment,
                                    and you agree to devote such time and
                                    effort as is reasonably requested by the
                                    Company to carry out the foregoing
                                    obligations, provided that no such
                                    obligations shall extend beyond 180 days
                                    after the effective date of termination.

8.   EFFECT OF TERMINATION ON STOCK OPTIONS.

(a)  In the event of (i) the termination of your employment by the Company
     for Cause, or (ii) your termination of your employment prior to the end
     of the Original Term other than for Good Reason and other than reason of
     death of Disability, the stock options granted to you under Section 3,
     to the extent unexercised, shall immediately terminate and be without
     further force or effect.

(b)  In the event of your violation in any material respect of your
     obligations under Section 10 following termination of your employment
     and during such period as such provisions remain in effect:

          (i)  The stock options granted to you under Section 3, to the
               extent unexercised, shall immediately terminate and be without
               further force or effect.

          (ii) The Company shall have the right to repurchase for cash any
               shares of

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               Company's stock acquired by you as a result of the exercise of
               any portion or all of the options and held by either you or by
               any member of your family or by any trust or other entity in
               which you or any member of your family has a beneficial
               interest.  The Company shall give you written notice of the
               exercise of its right to repurchase and shall close on the
               repurchase no later than six months after the date of notice.
               The purchase price for the shares shall be the option exercise
               price or the closing bid price for shares of the Company's
               common stock on the date of notice, whichever is lower.

         (iii) If you sell or have sold any shares acquired by you as a
               result of the exercise of any portion or all of the options at
               any time after the date which is 12 months prior to the date
               of the termination of your employment, you shall pay to the
               Company in cash, upon demand, all gains or other economic
               value actually or constructively received by you, any member
               of your family or any trust or other entity in which you or
               any member of your family has a beneficial interest, upon the
               sale of any such shares equal to the difference between the
               option exercise price and the value received.

     Notwithstanding the foregoing, the maximum value of the right to
     repurchase under clause (ii) above and the recovery of gain under clause
     (iii) above which the Company may recover shall be $1,000,000.  The
     foregoing limitation shall be applied first against the recovery of gain
     on the sale of shares under clause (iii) and then from the repurchase of
     any shares under clause (ii) based on the amount by which the closing
     bid price on the date of notice exceeds the option exercise price. The
     Company agrees that the $1,000,000 limit will be reduced to the extent
     that you do not derive a federal income tax benefit from the payments
     under this paragraph equal to the tax cost of the exercise of the
     options and/or the sale of the shares.

9.   NO MITIGATION.  Following termination of your employment for any reason,
you will be under no obligation to mitigate your damages by seeking other
employment, and there will be no offset  against the amounts due you under
Section 7, except as specifically provided in Section 7(b)(i)(D), or  for any
claims which the Company may have against you.

10.  CONFIDENTIAL INFORMATION, INVENTIONS AND NON-COMPETITION.  In
consideration of the benefits provided you under this Agreement, you will,
concurrently with the execution of this Agreement, sign the form of Agreement
Regarding Confidential Information, Inventions and Non-Competition attached
as Exhibit 5 (the "Non-Competition Agreement"), and the Non-Competition
Agreement is, by this reference, incorporated in and made a part of this
Agreement.  The remedies provided in the Non-Competition Agreement for
resolution of disputes under the Non-Competition Agreement will be in
addition to and not limited by Section 12 of this Agreement. In the event
that you breach the terms of the Non-Competition Agreement, the Company will
be relieved of the obligation to make any further payments to you under
Section 7(b).

11.  INDEMNIFICATION.  Concurrently with the execution of this Agreement, the
Company will enter into the form of Indemnification Agreement attached as
Exhibit 6.

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12.  ARBITRATION.  Any disputes arising under or in connection with this 
Agreement (including without limitation the making of this Agreement) shall 
be resolved by final and binding arbitration to be held in Minneapolis, 
Minnesota in accordance with the rules and procedures of the American 
Arbitration Association.  The parties shall select a mutually acceptable 
single arbitrator to resolve the dispute or if they fail or are unable to do 
so, each side shall within the following ten (10) business days select a 
single arbitrator and the two so selected shall select a third arbitrator 
within the following ten (10) business days.  The arbitration award or other 
resolution may be entered as a judgment at the request of the prevailing 
party by any court of competent jurisdiction in Minnesota or elsewhere.  The 
party prevailing as to a substantial preponderance of the issues as 
determined by the arbitration panel in the proceeding shall be entitled to be 
reimbursed for the cost and expenses thereof, including without limitation, 
the reasonable attorneys fees of the prevailing party, by the other party. 
The arbitrator shall have no power to award any punitive or exemplary 
damages.  The arbitrator may construe or interpret, but shall not ignore or 
vary the terms of this Agreement, and shall be bound by controlling law.  You 
acknowledge that your failure to comply with the terms of the Agreement 
regarding Confidential Information, Inventions, and Non-Competition could 
cause immediate and irreparable injury to the Company and that therefore, the 
arbitrators, or a court of competent jurisdiction, if an arbitration panel 
cannot immediately be convened, will be empowered to provide injunctive 
relief, including temporary or preliminary relief, to restrain any such 
failure to comply.

13.  GENERAL PROVISIONS.

     (a)       This Agreement may not be amended or modified except by a 
          written agreement signed by both of us.

     (b)       In the event that any provision or portion of this agreement 
          are determined to be invalid or unenforceable for any reason, the 
          remaining provisions of this Agreement will remain in full force 
          and effect to the fullest extent permitted by law.

     (c)       This Agreement shall bind and benefit the parties hereto and 
          their respective successors and assigns, but none of your rights or 
          obligations hereunder may be assigned by either party hereto 
          without the written consent of the other, except by operation of 
          law upon your death.

     (d)       This Agreement has been made in and shall be governed and 
          construed in accordance with the laws of the State of Minnesota 
          without giving effect to the principles of conflict of laws of any 
          jurisdiction.

     (e)  No failure on the part of either party to exercise, and no delay in 
          exercising, any right or remedy under this Agreement will operate 
          as a waiver; nor will any single or partial exercise of any right 
          or remedy preclude any other or further exercise of any right or 
          remedy.

     (f)       Any notice or other communication under this Agreement must be 
          in writing and 

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November 24, 1997
Page 10

          will be deemed given when delivered in person, by overnight courier 
          (with receipt confirmed), by facsimile transmission (with receipt 
          confirmed by telephone or by automatic transmission report), or 
          upon receipt if sent by certified mail, return receipt requested, 
          as follows (or to such other persons and/or addresses as may be 
          specified by written notice to the other party):

               If to RTW:

               RTW, Inc.
               Attention: Chairman of the Board of Directors
               8500 Normandale Lake Blvd., Suite 1400
               Minneapolis, MN 55437

               With a copy to:

               Lindquist & Vennum, PLLP
               4200 IDS Center
               Minneapolis, MN 55402
               Attn: Ronald G. Vantine

               If to Carl B. Lehmann:

               Carl B. Lehmann
               2626 Hillsden Drive
               Salt Lake City, UT 84117

               With a copy to:

               Christy & Viener
               620 Fifth Avenue
               New York, New York 10020
               Attn: Lanny A. Oppenheim

     (g)       This Agreement, together with the Consulting Agreement and the 
          various agreements ancillary hereto and thereto, contains our 
          entire understanding and agreement with respect to these matters 
          and supersedes all previous agreements, discussions, or 
          understandings, whether written or oral, between us on the same 
          subjects.

     (h)       In the event any provision of this Agreement is held 
          unenforceable, that provision will be severed and shall not affect 
          the validity or enforceability of the remaining provisions.  In the 
          event any provision is held to be overbroad, that provision shall 
          be deemed amended to narrow its application to the extent necessary 
          to render the provision enforceable according to applicable law.

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     (i)       All terms of this Agreement intended to be observed and 
          performed after the termination of this Agreement will survive such 
          termination and will continue in full force and effect thereafter, 
          including without limitation, Sections 7, 8, 9, 10, 11, 12, and 13.

     (j)       The headings contained in this Agreement are for convenience 
          only and shall in no way restrict or otherwise affect the 
          construction of the provisions hereof.  Unless otherwise specified 
          herein, references in this Agreement to Sections and Exhibits are 
          to the sections of and exhibits to this Agreement.  This Agreement 
          may be executed in multiple counterparts, each of which shall be an 
          original and all of which together shall constitute one and the 
          same instrument.

                  ------------------------------------------

If the foregoing correctly sets forth your understanding of our agreement,
please so indicate by signing and returning to us a copy of this letter.

                         Very truly yours,

                         RTW, INC.

                              /s/ David C. Prosser
                             --------------------------
                         By:  David C. Prosser
                                Chairman


Accepted and agreed to:

/s/ Carl B. Lehmann
--------------------------
Carl B. Lehmann