UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                                 --------------

                                   FORM 10-Q



                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934.

             For the quarterly period ended     October 29, 1994
                                             -----------------------



                       Commission file number   1-6049
                                               ----------



                        Dayton Hudson Corporation
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             (Exact name of registrant as specified in its charter)


          Minnesota                                            41-0215170
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(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)


           777 Nicollet Mall      Minneapolis, Minnesota        55402-2055
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(Address of principal executive offices)                        (Zip Code)


Registrant's telephone number, including area code           (612) 370-6948
                                                   -----------------------------


                                   None
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             (Former name, former address and former fiscal year,
                        if changed since last report.)



The registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

The number of shares outstanding of common stock as of October 29, 1994 was
71,645,735.

 
                   DAYTON HUDSON CORPORATION AND SUBSIDIARIES

                               TABLE OF CONTENTS
PAGE NO. PART I FINANCIAL INFORMATION: ITEM 1 - FINANCIAL STATEMENTS Condensed Consolidated Results of Operations for the Three 1 Months, Nine Months and Twelve Months Ended October 29, 1994 and October 30, 1993 Condensed Consolidated Statements of Financial Position at 2 October 29, 1994, January 29, 1994 and October 30, 1993 Condensed Consolidated Statements of Cash Flows for the 3 Nine Months Ended October 29, 1994 and October 30, 1993 Notes to Condensed Consolidated Financial Statements 5-6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF 6-9 OPERATIONS AND FINANCIAL CONDITION PART II OTHER INFORMATION: ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 10 Signatures 11 Exhibit Index 12
PART I. FINANCIAL INFORMATION CONDENSED CONSOLIDATED Dayton Hudson Corporation RESULTS OF OPERATIONS and Subsidiaries
(Millions of Dollars, Except Per-Share Data) Three Months Ended Nine Months Ended Twelve Months Ended - ----------------------------------------------- ------------------ ------------------ ------------------- OCT. 29, Oct. 30, OCT. 29, Oct. 30, OCT. 29, Oct. 30, (Unaudited) 1994 1993 1994 1993 1994 1993 - ----------------------------------------------- -------- -------- -------- -------- --------- -------- REVENUES $5,046 $4,625 $14,313 $12,952 $20,594 $18,853 COSTS AND EXPENSES Cost of retail sales, buying and occupancy 3,695 3,417 10,467 9,570 15,061 13,901 Selling, publicity and administrative 910 809 2,604 2,255 3,524 3,117 Depreciation 136 127 396 377 517 495 Interest expense, net 108 112 319 337 428 448 Taxes other than income taxes 88 85 273 252 364 335 - ----------------------------------------------- ------ ------ ------- ------- ------- ------- Total Costs and Expenses 4,937 4,550 14,059 12,791 19,894 18,296 - ----------------------------------------------- ------ ------ ------- ------- ------- ------- Earnings Before Income Taxes 109 75 254 161 700 557 Provision for Income Taxes 42 32 99 64 267 211 - ----------------------------------------------- ------ ------ ------- ------- ------- ------- NET EARNINGS $ 67 $ 43 $ 155 $ 97 $ 433 $ 346 =============================================== ====== ====== ======= ======= ======= ======= PRIMARY EARNINGS PER SHARE $ .86 $ .54 $ 1.96 $ 1.17 $ 5.76 $ 4.56 FULLY DILUTED EARNINGS PER SHARE $ .83 $ .53 $ 1.90 $ 1.15 $ 5.51 $ 4.37 =============================================== ====== ====== ======= ======= ======= ======= DIVIDENDS DECLARED PER COMMON SHARE $ .42 $ .40 $ 1.26 $ 1.20 $ 1.68 $ 1.60 AVERAGE COMMON SHARES OUTSTANDING (MILLIONS): Primary 72.0 71.8 72.0 71.8 72.0 71.7 Fully Diluted 76.3 76.1 76.3 76.1 76.2 76.1 =============================================== ====== ====== ======= ======= ======= =======
See accompanying Notes to Condensed Consolidated Financial Statements. 1 CONDENSED CONSOLIDATED STATEMENTS Dayton Hudson Corporation OF FINANCIAL POSITION and Subsidiaries
OCT. 29, Jan. 29, Oct. 30, (Millions of Dollars) 1994 1994* 1993 - ------------------------------------------------------------ ----------- --------- ----------- (Unaudited) (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 173 $ 321 $ 165 Accounts receivable 1,551 1,536 1,338 Merchandise inventories 3,681 2,497 3,346 Other 145 157 100 - ------------------------------------------------------------ ------- ------- ------- Total Current Assets 5,550 4,511 4,949 PROPERTY AND EQUIPMENT 8,938 8,283 8,222 Accumulated depreciation (2,614) (2,336) (2,323) ------- ------- ------- Net Property and Equipment 6,324 5,947 5,899 OTHER 334 320 307 - ------------------------------------------------------------ ------- ------- ------- TOTAL ASSETS $12,208 $10,778 $11,155 ============================================================ ======= ======= ======= LIABILITIES AND COMMON SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES Commercial paper and current portion of long-term debt $ 554 $ 373 $ 697 Accounts payable 2,346 1,654 1,931 Other 1,071 1,048 939 - ------------------------------------------------------------ ------- ------- ------- Total Current Liabilities 3,971 3,075 3,567 LONG-TERM DEBT 4,712 4,279 4,498 DEFERRED INCOME TAXES AND OTHER 550 536 463 CONVERTIBLE PREFERRED STOCK 363 368 370 LOAN TO ESOP (179) (217) (229) COMMON SHAREHOLDERS' INVESTMENT 2,791 2,737 2,486 - ------------------------------------------------------------ ------- ------- ------- TOTAL LIABILITIES AND COMMON SHAREHOLDERS' INVESTMENT $12,208 $10,778 $11,155 ============================================================ ======= ======= ======= COMMON SHARES OUTSTANDING (MILLIONS) 71.6 71.5 71.5 ============================================================ ======= ======= =======
* The January 29, 1994 Consolidated Statement of Financial Position is condensed from the audited financial statements. See accompanying Notes to Condensed Consolidated Financial Statements. 2
CONDENSED CONSOLIDATED Dayton Hudson Corporation STATEMENTS OF CASH FLOWS and Subsidiaries (Millions of Dollars) Nine Months Ended - ------------------------------------------------------ ------------------ OCT. 29, Oct. 30, (Unaudited) 1994 1993 - ------------------------------------------------------ -------- -------- OPERATING ACTIVITIES Net earnings $ 155 $ 97 Reconciliation to cash flow: Depreciation 396 376 Deferred tax provision (46) (1) Other noncash items affecting earnings 72 85 Changes in operating accounts providing/ (requiring) cash: Accounts receivable (15) 176 Merchandise inventories (1,184) (728) Accounts payable 692 335 Other 80 17 - ------------------------------------------------------ ------- ----- Cash Flow Provided by Operations 150 357 - ------------------------------------------------------ ------- ----- INVESTING ACTIVITIES Expenditures for property (796) (724) Other 9 50 - ------------------------------------------------------ ------- ----- Cash Flow Required for Investing Activities (787) (674) - ------------------------------------------------------ ------- ----- Net Financing Requirements (637) (317) FINANCING ACTIVITIES Increase in commercial paper 195 411 Additions to long-term debt 600 522 Reduction of long-term debt (179) (464) Dividends paid (108) (104) Other (19) - - ------------------------------------------------------ ------- ----- Cash Flow Provided by Financing Activities 489 365 - ------------------------------------------------------ ------- ----- Net (Decrease)/Increase in Cash and Cash Equivalents (148) 48 Cash & Cash Equivalents at Beginning of Period 321 117 - ------------------------------------------------------ ------- ----- CASH & CASH EQUIVALENTS AT END OF PERIOD $ 173 $ 165 ====================================================== ======= =====
Amounts in this statement are presented on a cash basis and therefore may differ from those shown elsewhere in this 10-Q report. SUPPLEMENTAL CASH FLOW INFORMATION: . Interest paid (including interest capitalized) in the first nine months of 1994 and 1993 was $275 million and $281 million, respectively. . Income tax payments of $244 million and $160 million were made during the first nine months of 1994 and 1993, respectively. See accompanying Notes to Condensed Consolidated Financial Statements. 3 NOTES TO CONDENSED CONSOLIDATED Dayton Hudson Corporation FINANCIAL STATEMENTS and Subsidiaries ACCOUNTING POLICIES The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statement disclosures contained in the Corporation's 1993 Annual Shareholders' Report throughout pages 21-32. As explained on page 31 therein, the same accounting policies are followed in preparing quarterly financial data as are followed in preparing annual data. In the opinion of management, all adjustments necessary for a fair presentation of quarterly operating results are reflected herein and are of a normal, recurring nature. Due to the seasonal nature of the retail industry, earnings for periods which exclude the Christmas season are not indicative of the operating results that may be expected for the full fiscal year. MERCHANDISE INVENTORIES The last-in, first-out (LIFO) provision, included in cost of retail sales, for the three- and nine-month periods ended October 29, 1994 was a credit of $10 million ($.08 per share) compared to charges of $3 million ($.02 per share) and $15 million ($.13 per share), respectively, for the same periods in 1993. The cumulative LIFO provision was $70 million at October 29, 1994, $80 million at January 29, 1994 and $186 million at October 30, 1993. LONG-TERM DEBT Beginning with the first quarter of 1994, commercial paper is classified as long-term debt because it is supported by the Corporation's revolving credit agreement of $600 million which expires in 1999. Commercial paper will be classified as long-term, provided the term of the related credit agreement exceeds one year and to the extent any unused commitments thereunder equal or exceed the amount of commercial paper outstanding. At October 29, 1994, $995 million of commercial paper was outstanding, of which $600 million was classified as long-term debt. SUBSEQUENT EVENT Subsequent to the third quarter end, the Corporation announced that it will consolidate the credit operations of Mervyn's and the Department Store Division. A pre-tax charge of approximately $10 million, or $.08 per share, will be recorded in the fourth quarter. The charge primarily represents severance, benefits and outplacement services for approximately 500 employees. The consolidation is expected to be completed by Fall 1995. 4 PER SHARE DATA Primary earnings per share are computed by dividing net earnings less dividend requirements on ESOP preferred stock (net of tax benefits related to unallocated shares) by the average common shares and common share equivalents outstanding during the period. Fully diluted earnings per share assumes conversion of the ESOP preferred stock (net of tax benefits related to unallocated shares) into common stock. Additionally, it assumes adjustment of net earnings for the additional expense required to fund the ESOP debt service resulting from the assumed replacement of the ESOP preferred dividends with common stock dividends. References to earnings per share relate to fully diluted earnings per share. 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION THIRD QUARTER 1994 ANALYSIS OF OPERATIONS Third quarter net earnings increased 54% to $67 million versus $43 million for the third quarter last year. Fully diluted earnings per share were $.83 for the third quarter compared with $.53 per share last year. For the nine-month period net earnings were $155 million, an increase of 59% over last year's net earnings of $97 million. Fully diluted earnings per share were $1.90 for the nine-month period compared with $1.15 last year. The following table illustrates the impact of the major factors contributing to the changes in earnings per share:
Three Nine Months Months ------ ------ 1993 Earnings Per Share $ .53 $1.15 Changes in earnings per share: Revenues .22 .56 Gross margin rate .10 .45 Operating expense rate (.03) (.08) Start-up expense (.04) (.15) Interest expense, net .03 .13 One-time tax adjustment (a) .05 .05 Corporate expense and other, net (.03) (.21) ----- ----- 1994 Earnings Per Share $ .83 $1.90 ====================================== ===== ===== (a) 1993 included a one-time after-tax charge as a result of applying the higher statutory tax rate to deferred tax balances.
Third quarter earnings were essentially as expected, led by Target's continued strong performance. Mervyn's continued to improve off last year's low base, while the Department Store Division's (DSD) results were slightly below expectations. The revenue increase reflects strong sales volume growth at Target and higher finance charge revenue associated with lowering of minimum payment terms on DSD-named credit cards, which are accepted at DSD and Target stores. The overall gross margin rate was favorable to last year, reflecting improved markdowns at Mervyn's and Target partially offset by lower markup at all divisions. The overall operating expense rate was slightly higher than last year, despite strong sales leverage at Target. Due to significant growth at Target, our lowest margin division, overall revenue growth and the operating expense rate were favorably affected, while the gross margin rate was unfavorably affected. If the revenue mix had remained constant with the third quarter and nine-month period of 1993, the gross margin rate variance would have been $.20 and $.70, respectively, and the operating expense rate variance would have been $(.12) and $(.37), respectively. 6 Revenues -------- For the three- and nine-month periods ended October 29, 1994, total revenues increased 9% and 11%, respectively. Comparable-store revenues (revenues from stores open longer than a year) increased 3% and 5%, respectively. Revenues by business segment were as follows:
Three Months Ended Percentage Change ------------------ ------------------- OCT. 29, Oct. 30, All Comparable (Millions of Dollars) 1994 1993 Stores Stores -------- -------- ------- ---------- Target $ 3,143 $ 2,741 15% 6% Mervyn's 1,103 1,091 1 (2) Department Store Division 800 793 1 1 ------- ------- -- -- Total $ 5,046 $ 4,625 9% 3% ======= ======= == == Nine Months Ended Percentage Change ----------------- ------------------- OCT. 29, Oct. 30, All Comparable 1994 1993 Stores Stores ------- ------- ------ ---------- Target $ 9,046 $ 7,807 16% 7% Mervyn's 3,114 3,055 2 (1) Department Store Division 2,153 2,090 3 3 ------- ------- -- -- Total $14,313 $12,952 11% 5% ======= ======= == ==
Target's strong third quarter revenue growth reflects solid base business growth, new store openings and good overall merchandising execution. While Mervyn's total revenues were up only 1% for the third quarter, we are pleased with the progress made toward the refinement of pricing and promotion strategies associated with its commitment to offering customers competitive prices. DSD's total and comparable-store revenues rose slightly in the third quarter primarily due to added promotional events, which were somewhat offset by unseasonably warm weather in the Midwest. Operating Profit ---------------- Both Target and Mervyn's contributed to the strong increase in operating profit while DSD's operating profit remained essentially unchanged for the third quarter compared to the same period last year. (Operating profit is LIFO earnings from operations before corporate expense, interest and income taxes.) For the nine-month period, operating profit increased 17% reflecting solid increases at all three operating companies. 7 TARGET produced a significant increase in operating profit for the three- and nine-month periods ended October 29, 1994 compared with the same periods last year. The increases were primarily due to strong revenue performance. The gross margin rates improved over last year reflecting lower markdowns partially offset by lower markup related to the refinement of the value pricing strategy. The operating expense rates improved slightly primarily due to sales leverage. MERVYN'S operating profit, for the third quarter and nine-month period, increased significantly as expected over last year's weak base. The gross margin rates improved for both the quarter and year-to-date periods reflecting a reduction in markdowns, somewhat offset by lower markup associated with the focus on competitive pricing. Both the markdown and markup changes were not as significant for the quarter compared with the year-to-date trend, as Mervyn's competitive pricing strategy is beginning to annualize. The operating expense rates deteriorated in both periods reflecting higher advertising expenses and lower sales leverage. DSD'S operating profit for the third quarter was approximately equal to a year ago and for the nine-month period showed a solid increase compared with the same period last year. The gross margin rate for the third quarter was essentially unchanged versus last year. The operating profit improvement for the nine-month period was led by an improved gross margin rate due to lower markdowns while the operating expense rate was higher, reflecting increased advertising expenses. Other Performance Factors ------------------------- The LIFO provision, for the three- and nine-month periods ended October 29, 1994 was a credit of $10 million ($.08 per share) compared to charges of $3 million ($.02 per share) and $15 million ($.13 per share), respectively, for the same periods in 1993. The reduced provision reflects the Company's expectations that the full year LIFO provision will be a credit resulting from modest rates of deflation across broad product lines and higher inventory levels associated with new store growth. Our internally-generated retail price indices capture the ongoing impact of our value-pricing strategies. In the fourth quarter of 1993, Mervyn's and DSD adopted the use of the internally-generated price indices for the LIFO inventory valuation. Net interest expense for the third quarter declined $4 million from a year ago ($.03 per share) due to a lower average interest rate on our debt portfolio. For the nine-month period, net interest expense decreased $18 million ($.14 per share) as a result of lower financing requirements and a lower average interest rate. Looking forward, we expect the trend of lower average interest rates on our debt portfolio to continue for the balance of 1994 and into 1995. For the third quarter 1994, the estimated annual effective income tax rate was 39% versus 37.8% in 1993, excluding the 1993 $4 million one-time after-tax charge associated with applying the higher federal tax rate to deferred tax balances. The increase in the 1994 rate reflects higher state tax rates and increased earnings diluting the effect of permanent deductions. 8 ANALYSIS OF FINANCIAL CONDITION Our financial condition remains strong. Our ratio of debt (including the present value of operating leases) to total capitalization was 61% at the end of third quarter 1994 compared with 63% a year ago and 59% at year-end. The debt ratio is generally at its highest point at the end of the third quarter due to the seasonal inventory build-up. We expect the debt ratio to continue declining toward the mid-point of our financial policy range of 45% to 65%. At October 29, 1994, working capital was $1,579 million, or 14% higher than a year ago. Accounts receivable increased 16% compared to a year ago and were essentially unchanged from the seasonally high year-end balances reflecting improved sales and the lowering of minimum payment terms on DSD's proprietary cards. Merchandise inventories and accounts payable increased 10% and 21%, respectively, compared to third quarter 1993 due primarily to new store growth. Compared to year-end, merchandise inventories and accounts payable were 47% and 42% higher, respectively, primarily reflecting the seasonal build-up of inventories and new store growth. Capital expenditures for the nine-month period were $796 million, compared with $724 million for the same period a year ago. Approximately 80% of these expenditures were made by Target, 12% by Mervyn's and 8% by DSD. For the total year, capital expenditures are expected to be approximately $1.1 billion. Capital investment in 1995 is expected to be approximately $1.3 billion for the construction of new stores, remodeling of existing stores and upgrading of systems and technology. Target plans to open 60 to 70 new stores primarily in existing markets, Mervyn's plans to open four new stores and DSD will open one new Marshall Field's store. STORE DATA ---------- At October 29, 1994 Target operated 611 stores in 32 states, Mervyn's operated 286 stores in 15 states and DSD operated 63 stores in nine states. 9 PART II. OTHER INFORMATION --------------------------- Item 6. Exhibits and Reports on Form 8-K a) Exhibits (2). Not applicable (3). By-Laws (4). Instruments defining the rights of security holders, including indentures. Registrant agrees to furnish the Commission on request copies of instruments with respect to long-term debt. (10).A. Agreement B. Executive Long Term Incentive Plan of 1981 (As amended and restated October 12, 1994). (11). Statements re Computations of Per Share Earnings (12). Statements re Computations of Ratios (15). Not applicable (18). Not applicable (19). Not applicable (22). Not applicable (23). Not applicable (24). Not applicable (27). Financial Data Schedule (99). Not applicable b) Reports on Form 8-K. The registrant did not file any reports on Form 8-K during the quarter ended October 29, 1994. 10 Signatures ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DAYTON HUDSON CORPORATION Registrant Date: December 9, 1994 By /s/ Douglas A. Scovanner -------------------------------- Douglas A. Scovanner Senior Vice President and Chief Financial Officer Date: December 9, 1994 By /s/ J.A. Bogdan -------------------------------- JoAnn Bogdan Controller and Chief Accounting Officer 11 Exhibit Index ------------- (3). By-laws (10)A. Agreement B. Executive Long Term Incentive Plan of 1981 (As amended and restated October 12, 1994). (11). Statements re Computations of Per Share Earnings (12). Statements re Computations of Ratios (27). Financial Data Schedule 12


                                                                     EXHIBIT (3)
 
                                    BY-LAWS

                                       OF

                           DAYTON HUDSON CORPORATION

                      As Amended Through October 12, 1994



                                  SHAREHOLDERS
                                  ------------

Section 1.01.  Place of Meetings and Annual Meeting
- ---------------------------------------------------

     Meetings of the shareholders shall be held at the principal executive
office of the corporation or at such other place or places as the Board may from
time to time designate. The regular annual meeting of the shareholders shall be
held on such day in May in each year as shall be designated by the Board, and at
such time as the Board may from time to time designate, for the election of
Directors and for the transaction of such other business as may lawfully come
before such meeting.

Section 1.02.  Shareholders' Special Meetings
- ---------------------------------------------

     Special meetings of the shareholders may be called for any purpose or
purposes, at any time, by the Chief Executive Officer; by the President; by the
Chief Financial Officer; by the Board or any two or more members thereof; or by
one or more shareholders holding not less than ten percent (10%) of the voting
power of all shares of the corporation entitled to vote (except that a special
meeting for the purpose of considering any action to directly or indirectly
facilitate or effect a business combination, including any action to change or
otherwise affect the composition of the Board for that purpose, must be called
by 25% or more of the voting power of all shares of the corporation entitled to
vote), who shall demand such special meeting by written notice given to the
Chief Executive Officer or the Chief Financial Officer specifying the purpose or
purposes of such meeting.

Section 1.03.  Meetings Held Upon Shareholder Demand
- ----------------------------------------------------

     Within 30 days of receipt of a demand by the Chief Executive Officer or the
Chief Financial Officer from any shareholder or shareholders entitled to call a
meeting of the shareholders, it shall be the duty of the Board to cause a
special or regular meeting of shareholders, as the case may be, to be duly
called and held on notice no later than ninety days after receipt of such
shareholder or shareholder's demand.  If the Board fails to cause such a meeting
to be called and held as required by this Section, the shareholder or
shareholders making the demand may call the meeting by giving notice as provided
in Section 1.04 at the expense of the corporation.

 
Section 1.04.  Notices of Meetings
- ----------------------------------

     Except as otherwise specified in Section 1.03 or required by law, written
notice of the time and place of every meeting of shareholders and in the case of
a special meeting, the purpose or purposes of the meeting shall be given at
least ten (10) days previous thereto, to each shareholder of record entitled to
vote at the meeting.  The business transacted at a special meeting of
shareholders is limited to the purpose or purposes stated in the notice of the
meeting.

Section 1.05.  Quorum
- ---------------------

     A quorum at any meeting of shareholders shall consist of shareholders
representing, either in person or by proxy, a majority of the outstanding shares
of the corporation entitled to vote at such meeting, except as otherwise
specially provided by law.  If a quorum is not present at any such meeting, it
may be adjourned from time to time until a quorum is present.

Section 1.06.  Adjournments
- ---------------------------

     Any meeting of the shareholders may be adjourned from time to time to
another date, time and place.  If any meeting of the shareholders is so
adjourned, no notice as to such adjourned meeting need be given if the date,
time and place at which the meeting will be reconvened are announced at the time
of adjournment.

Section 1.07.  Proposals Regarding Business Other Than Director Nominations
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     The proposal of business (other than business relating to the nomination
and election of directors) to be considered by the shareholders may be made at
an annual or special meeting of shareholders (a) pursuant to the corporation's
Notice of Meeting, (b) by or at the direction of the Board, or (c) by any
shareholder of the corporation who (i) was a shareholder of record at the time
of giving of notice provided for in these By-laws, (ii) is entitled to vote at
the meeting, and (iii) gives notice of the matter, which must otherwise be a
proper matter for shareholder action, in a writing which is received by the
Secretary of the corporation not less than 60 days prior to the date fixed for
the meeting.  In no event shall a proposal be made at a special meeting if it
was not included in the notice of the meeting.  Such shareholder's notice shall
set forth (a) a brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such shareholder and the beneficial owner,
if any, on whose behalf the proposal is made, and (b) the name and address of
such shareholder, as they appear on the corporation's books, and of the
beneficial owner, if any, on whose behalf the proposal is made; and the class
and number of shares of the corporation which are owned beneficially and of
record by such shareholder and such beneficial owner.

                                       2

 
                                 BOARD OF DIRECTORS
                                 ------------------

Section 2.01.  Regular Meetings
- -------------------------------

     Regular meetings of the Board may be established by the Board.  They may 
be held without notice at the principal executive office of the corporation,
or at such other place or places as the Board may from time to time designate.

Section 2.02.  Special Meetings
- -------------------------------

     Special meetings of the Board may be called at any time by the Chairman of
the Board, or the President, or in their absence by the Chairman of the 
Executive Committee or any Executive Vice President, or by a majority of the
members of the Board then elected and serving, to be held at the principal
executive office of the corporation or at such other place or places as the
Directors may from time to time designate.  Notices of all special meetings of
the Board shall be given to each Director by twenty-four hours' service of the
same by telegram, by letter, by telephone or personally, provided that when
notice is mailed, at least three days notice shall be given.

Section 2.03.  Quorum
- ---------------------

     A majority of the Board shall be necessary at all meetings to constitute a
quorum for the transaction of business, except as otherwise provided herein, 
but less than a quorum may adjourn any meeting, which may be held on a
subsequent date without further notice, provided that a quorum be present at
such deferred meeting.

Section 2.04.  Waiver of Notice; Previously Scheduled Meetings
- --------------------------------------------------------------

     A Director may waive notice of the date, time and place of a meeting of 
the Board.  A waiver of notice by a Director entitled to notice is effective
whether given before, at or after the meeting, and whether given in writing,
orally or by attendance.  Attendance by a Director at a meeting is a waiver of
notice of that meeting, unless the Director objects at the beginning of the
meeting to the transaction of business because the meeting is not lawfully
called or convened and thereafter does not participate in the meeting.

     If the day or date, time and place of a Board meeting have been provided 
herein or announced at a previous meeting of the Board, no notice is required.  
Notice of an adjourned meeting need not be given other than by announcement at 
the meeting at which adjournment is taken of the date, time and place at which 
the meeting will be reconvened.

Section 2.05.  Action in Writing
- --------------------------------

     Any action which may be taken at a meeting of the Board or of the
Executive Committee or any other committee may be taken without a meeting if
authorized by a writing or writings

                                       3

 
signed by all of the Directors or all of the members of the Executive Committee
or any other committee, as the case may be, and such action shall be effective
on the date on which the last signature is placed on such writing or writings or
such earlier date as is set forth therein.

Section 2.06.  Electronic Communications
- ----------------------------------------

     Any action which may be taken at a meeting of the Board or of the
Executive Committee or any other committee may be taken by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, with the same effect as though
all such persons were present in person at such meeting.

Section 2.07.  Executive Committee
- ----------------------------------

     (a) Designation, Number and Qualifications.  The Board may designate not 
less than five (5) of their number to constitute an Executive Committee.  The 
Chairman of the Board and the Chairman of the Executive Committee shall each be 
a member of the Executive Committee.  The Executive Committee shall act only
during the intervals between meetings of the Board, and shall be subject at all
times to the control and direction of the Board.

     (b) Powers.  Except as may be otherwise prospectively and specifically
provided in a resolution duly adopted by a majority of the members of the entire
Board at any meeting of the Board reducing or limiting the authority of the
Executive Committee, said Committee shall have and may exercise, during the
intervals between meetings of the Board, all of the powers of the Board except
that the Executive Committee shall not have power to act upon or submit to the
shareholders any proposal for amendment to the Articles of Incorporation, any
plan of merger or consolidation, any sale or other disposition of all or
substantially all of the property and assets of the corporation, or any proposal
for the dissolution of the corporation; to amend or repeal these By-Laws or
adopt new By-Laws; to fill vacancies in the Board, or to dissolve, remove
members or change the number of, or fill vacancies in, the Executive Committee;
to fix the compensation for any Director for serving on the Board or any
committee of the Board; or to amend or repeal any resolution of the Board which
by its terms shall not be so amendable or repealable.

     (c)  Rules of Procedure.

          (1) A majority of the members of the Executive Committee shall
constitute a quorum for the purpose of taking action upon any matter that may
come before it, and the affirmative vote of a majority of a quorum present at
the meeting shall be necessary to pass any resolution presented thereat.  All
action by said Executive Committee shall be reported to the Board at its meeting
next succeeding the taking of such action.

          (2) The Executive Committee may adopt such rules and regulations for
the conduct of its meetings as it may deem proper and as are not inconsistent
with law, the Articles of Incorporation, these By-Laws or any resolution duly
adopted by the Board.

          (3) The Executive Committee shall keep written minutes of its 
proceedings.

                                       4

 
     (d) Removal; Dissolution.  Any member or members of the Executive
Committee may be removed at any time, with or without cause, by the affirmative
vote of a majority of the members of the entire Board.  The Board may, by a
resolution duly adopted by a majority of the entire Board at any meeting of the
Board, dissolve the Executive Committee.

     (e) Vacancies.  If any vacancy shall occur in the Executive Committee by 
reason of death, resignation, removal or otherwise, such vacancy may be filled 
at any meeting of the Board.

     (f) Regular Meetings.  Regular meetings of the Executive Committee may be 
held without notice at such times and at such places, within or without the
State of Minnesota, as may from time to time be determined by the Executive
Committee or the Board.

     (g) Special Meetings.  Special meetings of the Executive Committee may be 
called by the Chairman of the Board, the President or the Chairman of the
Executive Committee and shall be called by the Chairman of the Board, the
Chairman of the Executive Committee or the Secretary on the written request of a
majority of the members of the Committee then elected and serving.

Special meetings shall be held at such times and such places as shall be
determined by the Chairman of the Board, the President or the Chairman of the
Executive Committee, subject to any requirement of notice as in these By-Laws
provided.

     (h) Notice of Meetings.  When required by these By-Laws to be given,
notice of the time and place of a meeting of the Executive Committee shall be
given to each member of the Executive Committee in the same manner as required
to be given for a Directors' meeting.

     (i) Adjournment.  At any meeting a majority of the members present,
without notice other than by announcement at the meeting, may adjourn such
meeting to another time and place, whether or not a quorum is present.

Section 2.08.  Notice of Committee Meetings
- -------------------------------------------

     Notices of meetings of Committees of the Board shall be given in the same 
manner required for a Directors' meeting, unless other provisions are set
by the Directors.

Section 2.09.  Absent Directors
- -------------------------------

     A Director may give advance written consent or opposition to a proposal to
be acted on at a Board meeting.  If the Director is not present at the meeting, 
consent or opposition to a proposal does not constitute presence for purposes 
of determining the existence of a quorum, but consent or opposition shall be 
counted as a vote in favor of or against the proposal and shall be entered in 
the minutes or other record of action at the meeting, if the proposal acted on 
at the meeting is substantially the same or has substantially the same effect 
as the proposal to which the Director has consented or objected.

                                       5

 
                                   OFFICERS
                                   --------

Section 3.01.  Number and Designation
- -------------------------------------

     The corporation shall have one or more natural persons exercising the
functions of the offices of Chief Executive Officer and Chief Financial Officer.
The Board may elect or appoint such other officers or agents as it deems
necessary for the operation and management of the corporation, with such powers,
rights, duties and responsibilities as may be determined by the Board,
including, without limitation, a Chairman, one or more Vice Chairmen, a
President, one or more Vice Presidents, a Secretary and a Treasurer, each of
whom shall have the powers, rights, duties and responsibilities set forth in
these By-Laws unless otherwise determined by the Board.  Any of the offices or
functions of those offices may be held by the same person.

Section 3.02.  Chairman of the Board
- ------------------------------------

     The Chairman of the Board shall be a member of the Board and shall preside
at all meetings of shareholders and of the Board, shall make reports to the 
Board and shareholders, and shall have such other authority and perform such
other duties as the Board may from time to time determine.  During the absence
or disability of the President, the Chairman of the Board shall exercise the
powers and perform the duties of the President.

Section 3.03.  President
- ------------------------

     The President shall, in the absence of the Chairman of the Board, preside 
at meetings of the Board and of the shareholders, and shall have such other 
authority and perform such other duties as the Board may from time to time
determine.

Section 3.04.  Vice Chairman
- ----------------------------

     A Vice Chairman may, but need not be a member of the Board.  If the Vice 
Chairman is a member of the Board, he/she shall in the absence of the Chairman 
of the Board and the President preside at meetings of the Board and of the 
shareholders, and shall have such authority and perform such duties as the
Board may from time to time determine.  If at any time there shall be elected
and serving more than one person in the office of Vice Chairman, then for all
purposes of succession as provided in these By-Laws, seniority of continuous
service in that office shall control.

Section 3.05.  Chairman of the Executive Committee
- --------------------------------------------------

     The Chairman of the Executive Committee shall be a member of the Board, 
shall in the absence of the Chairman of the Board, the President and any Vice 
Chairman who is a member of the Board preside at meetings of the shareholders 
and shall have such authority and perform such other duties as the Board may 
from time to time determine.

                                       6

 
Section 3.06.  Vice Presidents
- ------------------------------

     Any one or more of the Vice Presidents may be designated by the Board as 
an Executive or Senior Vice President, and each Vice President shall have such 
authority and perform such duties as the Board may from time to time determine.

Section 3.07.  Secretary
- ------------------------

     The Secretary shall issue notices for all meetings, except as otherwise 
provided for herein, and the Secretary shall keep minutes of all meetings, have
charge of the seal and the corporate books, and make such reports and perform 
the other duties incident to that office, and shall have such other authority 
and perform such other duties as the Board may from time to time determine.

Section 3.08.  Treasurer
- ------------------------

     The Treasurer shall have the custody of all monies and securities of the 
corporation, keep regular books of account, disburse the funds of the 
corporation in payment of the just demands against the corporation or as may be
ordered by the Board, taking proper vouchers for such disbursements, shall
render to the Board from time to time as may be required of the Treasurer, an
account of all the transactions of the Treasurer and of the financial condition
of the corporation, and shall perform the other duties incident to that office,
and shall have such other authority and perform such other duties as the Board
may from time to time determine.

Section 3.09.  Chief Executive Officer
- --------------------------------------

     The Board shall at least annually designate an officer of the corporation 
also to serve as its Chief Executive Officer who shall by such designation have
and exercise the highest level of executive authority and responsibility for the
management and affairs of the corporation.  Except as otherwise expressly
provided in these By-Laws or by the Board, the Chief Executive Officer may for
occasions of temporary absence or disability from time to time delegate the
authority and duties of that office to one or more other officers of the
corporation by written designation delivered to the Chairman of the Board or if
the Chairman of the Board is also the Chief Executive Officer, then to the Vice
Chairman of the Executive Committee and the Secretary. During any period when
such temporary delegation is in effect the Secretary shall be authorized to
attest or certify to any act performed or document executed pursuant to such
delegation as executed by the person then designated Chief Executive Officer.  
In the event of the death, or apparent incapacity or disability of the Chief
Executive Officer then currently designated by the Board, the Vice Chairman of
the Executive Committee or in his absence or unavailability the Chairman of the
Finance Committee, shall determine whether said Chief Executive Officer is or
will for more than a temporary period be unable to perform the duties of that
office, then upon notice to that effect given or promptly confirmed in writing
to each member of the Executive Committee then elected and serving, the Vice
Chairman of the Executive Committee or, as provided, the Chairman of the Finance
Committee shall designate an acting Chief Executive

                                       7

 
Officer who shall have and exercise all of the authority and responsibility of
the Chief Executive Officer as though designated by, and until further action
of, the Board.

Section 3.10.  Other Officers and Designations
- ----------------------------------------------

     The Board may elect or appoint such other officers and agents as it shall 
deem necessary or expedient, who shall hold their offices for such terms, and 
shall exercise such powers and perform such duties, as shall be determined from
time to time by the Board.  The Board may also from time to time designate, in 
addition and by way of further definition to the title and duties of any duly
elected officer of the corporation, a Chief Operating Officer, Chief
Administrative Officer, Chief Accounting Officer, and a General Counsel, or any
of them, and may so adopt any similar or comparable definition for any officer
which is not inconsistent with any express provision of these By-Laws.

Section 3.11.  Term of Office
- -----------------------------

     The officers of the corporation shall hold office until their respective 
successors are elected or appointed or until their earlier resignation, death 
or removal.  Any officer elected or appointed by the Board may be removed at 
any time, with or without cause, by the Board.

Section 3.12.  Vacancies
- ------------------------

     Vacancies in any office or designation arising from any cause may be
filled by the Directors at any regular or special meeting.

                   INDEMNIFICATION OF DIRECTORS AND OFFICERS
                   -----------------------------------------

Section 4.01.  Indemnification Committee
- ----------------------------------------

     There is hereby established an Indemnification Committee consisting of the 
Chief Executive Officer; the Senior personnel Officer; the Chief Financial
Officer and the General Counsel.  In the event of vacancy in the office of Chief
Executive Officer or in the event that officer is not a member of the Board, the
Chairman of the Board shall be an ex officio member of the committee.  In the
event of vacancy in any other position, the Chief Executive Officer shall
appoint an interim member of the committee.  By reason of their annual election
and designation to these offices, said officers shall be deemed to have been
annually appointed to the committee.

Section 4.02.  Duties of the Committee
- --------------------------------------

     The committee shall have the fullest authority and responsibility
available under Minnesota Statutes 302A. 521, including the authority to make a
determination, subject to the power of the Board, whether the person for whom
indemnification is sought is not a director or

                                       8

 
officer of the corporation nor a person possessing directly or indirectly the
power to direct or cause the direction of the management or policies of the
corporation.

     The committee shall report its actions to the Board at least once in each 
fiscal year.  At that time, the Board shall have the opportunity to ratify the 
existence and constitution of the committee.

     At all meetings of the committee, the presence of a least two members 
shall constitute a quorum for the transaction of business.

                             CERTIFICATES OF SHARES
                             ----------------------

Section 5.01.  Execution of Share Certificates
- ----------------------------------------------

     The certificates of shares of the corporation shall bear the corporate
seal and shall be signed by the Chairman of the Board or the president and by
the Secretary or an Assistant Secretary; but when a certificate is signed by a
transfer agent or a registrar the signature of any such corporate officer and
the corporate seal upon such certificate may be facsimiles engraved or printed.

Section 5.02.  Lost, Stolen or Destroyed Share Certificates
- -----------------------------------------------------------

     In the event of a certificate of shares being lost, stolen, or destroyed, 
a new certificate of the same tenor and for the same number of shares as the 
one lost, stolen or destroyed may be issued pursuant to the standards 
prescribed from time to time by the Board.

                                 MISCELLANEOUS
                                 -------------

Section 6.01.  Execution of Instruments
- ---------------------------------------

     All contracts, deeds, mortgages, notes, checks, conveyances, releases of 
mortgages and other instruments shall be signed on behalf of the corporation: 
by the Chief Executive Officer, the Chairman of the Board, the President, any
Vice Chairman, the Chairman of the Executive Committee or any Vice President, or
by such other person or persons as may be designated or authorized from time to
time by the Board or by the Chief Executive Officer.

Section 6.02.  Fiscal Year
- --------------------------

     The fiscal year of the corporation shall commence on whatever date the 
Sunday shall fall which Sunday immediately follows the Saturday which is nearest
to the last day of January in any one year, and such fiscal year shall end on
whatever date the Saturday which is nearest to the last day of January in the
following year shall fall.

                                       9

 
Section 6.03.  Amendments
- -------------------------

     These By-Laws may be altered, amended, added to, or repealed by the
affirmative vote of a majority of the members of the Board at any regular
meeting of the Board, or at any special meeting of the Board called for that
purpose, subject to the power of the shareholders to change or repeal such By-
Laws and subject to any other limitations on such authority of the Board
provided by the Minnesota Business Corporation Act.

                                       10


                                                                   EXHIBIT (10)A
 
                                   AGREEMENT
                                   ---------


     THIS AGREEMENT is made as of the 21st day of October, 1994 by and between 
DAYTON HUDSON CORPORATION (herein called the "Company") and JOSEPH C. VESCE 
(herein called "Executive").

                                    RECITALS
                                    --------

     A.  Executive is employed by Mervyn's, a California corporation
("Mervyn's), a subsidiary of Company; and

     B.  Company and Mervyn's and Executive wish to sever Mervyn's and
Executive's ties as employer and employee respectively, on the terms and
conditions hereafter set forth; and

     C.  The Company maintains an Income Continuance Policy (the "ICP") for
which Executive is eligible, the terms and provisions of which Executive has
been subject to and familiar with; and

     D.  The ICP requires a release in writing; and

     E.  Executive acknowledges he is fully aware of the potential rights and
remedies he may have as a result of his termination; and

     F.  Executive and the Company wish to memorialize herein the resolution and
settlement of all their respective rights, remedies and obligations whatsoever,
flowing

 
from Executive's employment and relationships with the Company and Mervyn's and
the severance and termination of that employment and said relationships.

     1.  Effective Termination Date.  From the date of this Agreement to and
through October 15, 1994, Executive shall act and perform his current duties for
Mervyn's.  Effective on October 15, 1994 (unless sooner terminated) the
employer-employee relationship of Mervyn's and Executive shall be severed and
terminated.

     2.  Salary.  Executive shall be paid his regular salary semi-monthly for
services rendered as an employee under paragraph 1 hereof, subject to all
required and voluntary withholdings.

     3.  Income Continuance Payments.  Executive shall be entitled to forty-
eight equal semi-monthly income continuance payments pursuant to and subject to
the terms and conditions of the ICP, commencing on or about November 15, 1998
and ending with the final payment on or about October 31, 2000.  The amount of
each semi-monthly payment, subject to the terms and conditions of the ICP, shall
be $34,813.50.  The semi-monthly amount shall be reduced for taxes withheld by
Company.

     4.  Vacation Pay.  Executive acknowledges that he has been paid all his
vacation.

     5.  Health Insurance.  Executive may continue to participate in Company's
medical and dental program to the extent, if any, permitted by Company's Health
Service Providers.  In order to continue such coverage, Executive must maintain
continuous coverage under the Company Plans and pay 102% of the full cost of
such Plans.  Company agrees to pay Executive's premiums on his behalf.
Executive acknowledges that Company may modify its premium structure, the terms
of its plans and the coverages of the plans, including the

                                       2

 
termination of all or part of a plan.  All insurance coverage shall terminate at
the earlier of April 15, 1996, or when Executive becomes a participant under
another group medical plan, whether or not that plan has a pre-existing
conditions clause, (provided however, if that plan has a pre-existing conditions
clause and Executive or a dependent are excluded from coverage because of that
clause Executive or such dependent can continue coverage until the end of the
pre-existing condition provision or other termination provisions set forth in
this sentence, whichever is earlier) or similar clauses or when the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") permits
terminations.  Executive agrees to notify Company when Executive is eligible to
participate in another group plan, when he begins to participate in another
group plan and when a pre-existing condition expires.

     6.  Life Insurance.  Executive may take his universal life insurance policy
with him after October 15, 1994.  In order to continue such policy, he will be
required to make all payments with respect to the policy.

     7.  Pension Plan - Savings Plan.  Executive's rights under the Mervyn's
Pension Plan and the Dayton Hudson Corporation Supplemental Retirement, Savings,
and Employee Stock Ownership Plan will be determined under the terms of such
plans as they are constituted on any relevant date.

     8.  Deferred Compensation Plan.  Executive will be paid his benefits for
his deferred compensation under the Dayton Hudson Corporation Deferred
Compensation Plan Senior Management Group pursuant to the terms of the plan.

                                       3

 
     9.  Excess Pension Plan.  Executive will be paid his benefits under the
Dayton Hudson Corporation Excess Pension Plan, if any, under the terms of such
plans as they are constituted on any relevant date.

     10.  Option Plans.  Executive's rights under the Company Executive Long
Term Incentive Plan ("LTIP") will be determined under such plan.    Executive
acknowledges that eligibility for the extension of option exercise under Section
6.1(b)(iii) of LTIP and extension of the performance shares under Section 5.5 of
LTIP requires the consent of the Compensation Committee of the Board of
Directors of the Company.    Management of the Company shall recommend to the
Compensation Committee that such consent be granted, except for the Stock
Options granted on September 10, 1992 that would vest on September 10, 1997;
provided this Agreement is, and continues to be in force.  Executive
acknowledges that such consent is in the sole discretion of the Compensation
Committee.

     11.  Other Benefits.  Except as specifically herein set forth, Executive
shall be entitled to no other employee benefits, fringe benefits or other
remuneration or compensation.

     12.  Non-Recruiting.  Executive agrees, unless he has a written agreement
signed by the Chief Personnel Officer of the Company allowing him to recruit
persons named in that agreement, that he will not as an employee or for the
period October 15, 1994 to October 15, 1999, recruit directly or indirectly any
employee of the Company or any subsidiary of the Company for employment with any
other operations.  Violation of this agreement will result in the termination of
paragraphs 3, 14, and any extension, if any, granted under paragraph 10.

     13.  Serving as a Witness.  Executive agrees that he will cooperate, make
himself available, and testify on the Company's or Mervyn's behalf, if the
Company requests, without

                                       4

 
requiring a subpoena, in any and all lawsuits or administrative hearings arising
out of acts, occurrences, or decisions while he was employed of which he has
direct knowledge and to which the Company's attorneys believe Executive's
testimony is necessary for the prosecution, defense or favorable resolution of
the claims or matter.  The Company agrees to reimburse Executive for any
reasonable out-of-pocket expenses he incurs as a result of such activities.

     14.  Payments.  Not later than November 1, 1994, the Company shall pay to
Executive the lump sum of $700,000 as compensation to Executive for the release
of his claims for personal injury, pain and suffering, emotional anguish,
distress and anxiety, loss of self esteem, humiliation, and damage to his
personal and business reputation.  No portion of the lump sum represents back
pay, severance pay, vacation pay, salary continuation or any other manner of
compensation and, therefore, there shall be no deductions for state or federal
taxes, FICA, or any other deduction or reporting.  No portion of the lump sum
represents punitive damages.

     15.  Confidentiality.  Executive agrees that he will not disclose the terms
or conditions of this Agreement or any of them, including without limitation,
the payments hereunder, the detrimental conduct provisions hereunder or the
benefits hereunder except as follows: (1) to his spouse, attorney, certified
public accountant and financial and estate planning advisors/its outside
attorney, auditors or others directly associated with its business or operations
and needing to know thereof, provided any such thereof agrees to keep them
confidential or (2) pursuant to a legally enforceable order, provided that he
notifies the Company of the proceeding and allows the Company to oppose or
contest the order on his behalf.  Executive recognizes and acknowledges that the
confidential information of various

                                       5

 
kinds, including but without limitation to lists of the Company's (as used
herein includes the Company's subsidiaries) executives and employees, the
ratings, performance appraisal scores and other employee data, as well as the
Company's strategic plans and manpower planning plans and goals, the Company's
new strategies, plans and proposals as they may exist from time to time, are
valuable, special and unique assets of the Company's business.  Executive will
not, during or after the term of his employment as an employee or a recipient of
payments described in paragraph 3, disclose or cause or permit to be disclosed
any of such information or any other information the Company treats as
confidential, to any person, firm, corporation, association, or other entity for
any reason or purpose whatsoever.  In the event of a breach or threatened breach
by Executive of the provisions of this paragraph or the violation of paragraph
12, the Company shall be entitled to an injunction restraining Executive from
violating paragraph 12 of this Agreement, from disclosing, in whole or in part,
any of the information listed above or any other information the Company treats
as confidential, or from rendering any services to any person, firm,
corporation, association, or other entity to whom such information, in whole or
in part, has been disclosed or is threatened to be disclosed by act or default
of Executive. Nothing in this Agreement shall be construed as prohibiting the
Company from pursuing any other remedy or remedies available to it for such
breach or threatened breach, including but without limitation to the recovery of
damages, together with costs and attorneys' fees, from or on account of
Executive.

     16.  Detrimental Conduct.  Executive agrees that he will not directly or
indirectly in any manner by word or action or any combination thereof or by any
other means enter into or

                                       6

 
perform conduct detrimental to the Company or any subsidiary of the Company, or
its or their reputation.

     17.  Termination of Payments.  In the event Executive violates any covenant
in this Agreement, including without limitation paragraphs 12, 15 or 16 hereof,
the Company shall be relieved of all liability and obligations to make any
payments under this Agreement, and to terminate the provisions of paragraphs 3,
5 (Company payment only) and 14 and any extension, if any, granted under
paragraph 10 shall terminate immediately.  Notwithstanding any termination of
payments under this paragraph, the requirements of paragraph 12, 13, 15 and 16
hereof and the Release set forth in paragraph 20 hereof shall remain in full
force and effect.

     18.  Directly Competitive Employment.  For purposes of Section II.G of the 
ICP, Directly Competitive Employment shall be employment with Kohl, 
Macy/Federated or J.C. Penney or any parent, subsidiary, division or affiliated
company of such companies.  Engaging in Directly Competitive Employment prior to
October 15, 1999 will terminate any extensions, if any, of options and
performance shares set forth in paragraph 10.

     19.  Taxes.  Executive will be solely responsible for the payment of any
and all taxes, if any, of whatever kind that may be due or payable from him as
the result of the payment of any non-wage settlement amount.

     20.  Release.

     A.  DEFINITIONS.  All words used in this Release are intended to have their
plain meanings in ordinary English.  Specific terms in this Release have the
following meanings:

                                       7

 
     1)  Executive includes both Executive and anyone who has or obtains any
legal rights or claims through Executive.

     2)  Company means Dayton Hudson Corporation and Mervyn's and any company
related to Company or Mervyn's in the present or past, any company providing
insurance to Company or Mervyn's in the present or past, any present or past
employee benefit plan sponsored by Company or Mervyn's, Company's or Mervyn's
present or past officers, directors, employees and agents and any person who
acted on behalf of Company or Mervyn's or on instructions from Company or
Mervyn's.

     3)  Executive Claims means all of the rights Executive has now to any
relief of any kind from Company, whether or not Executive knows about the rights
or claims, including without limitation:

     a.  All claims Executive has now arising out of his employment with Company
and his employment termination including, but not limited to, claims for breach
of contract; claims for unpaid compensation or benefits; breach of the covenant
of good faith and fair dealing; promissory or equitable estoppel; breach of
fiduciary duty; violation of the Age Discrimination in Employment Act, Title VII
of the Civil Rights Act of 1964, Civil Rights Act of 1991, Section 1981 of the
Civil Rights Act of 1866, the Equal Pay Act of 1963, Americans with Disabilities
Act, The California Fair Employment and Housing Act and other federal, state,
and local civil rights or discrimination laws; violation of the Employee
Retirement Income Security Act of 1974; violation of the National Labor
Relations Act; harassment; retaliation or reprisal; constructive discharge;
invasion of privacy; violation of public policy; Executive's conduct as a
"whistleblower"; fraud or misrepresentation;

                                       8

 
defamation; intentional or negligent infliction of emotional distress;
negligence; interference with contractual or business relationships;
interference with prospective economic advantage; wrongful termination of
employment; assault; battery; and any other claims for unlawful employment
practices, including all claims or causes of action in tort or contract;/1/ and

     b.  All claims for attorneys' fees and costs.

     B.  AGREEMENT TO RELEASE EMPLOYEE CLAIMS.  In exchange for Company having
entered into this Agreement, Executive agrees to give up all Executive Claims
against Company as described above.  Executive will not bring any lawsuits or
make any other demands against Company based on Executive Claims.  The money
Executive will receive is a full and fair payment for the release of Executive
Claims.  Company does not owe Executive anything in addition to what Executive
will be receiving.

     This release shall be a release of all claims, whether known or unknown,
and the parties hereby waive and release all rights reserved to them by Section
1542 of the Civil Code of the State of California, which provides as follows:

     "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
     KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
     WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH A
     DEBTOR."

     C.  ADDITIONAL AGREEMENTS AND UNDERSTANDINGS.  Even though Company will 
pay Executive to release Executive Claims against it, Company does not admit 
that it may be responsible or legally obligated to Executive.  In fact, Company
denies that it

- --------------------
/1/  Any references to government statutes include any amendments to such
statutes.

                                       9

 
is responsible or legally obligated for Executive Claims or that it has engaged
in any wrongdoing.

     21.  Miscellaneous.  The services under this Agreement are personal
services and this Agreement may not be assigned by Executive.  This Agreement
shall be binding upon the Company and its successors and assigns and the
Executive, his heirs, executors, successors and assigns.  This Agreement
embodies the entire Agreement and understandings between the Company and
Executive and supersedes all prior agreements and understandings (oral or
written) relating to the subject matter (including those with any subsidiary of
the Company).  The terms of this Agreement may only be modified by an agreement
in writing signed by Executive and a senior corporate officer of the Company.

     22.  Minnesota Law.  This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Minnesota, without giving
effect to the conflict of laws principles.

     23.  Revocation.  Executive understands that he may revoke, that is, cancel
the Release set forth in Paragraph 20, if he does so within 7 calendar days
after he signs this Agreement.  To revoke he must do so in writing.  The writing
must be hand delivered or postmarked within 7 calendar days of the date that
Executive signs this Agreement and must be addressed to the Corporate Secretary,
Dayton Hudson Corporation, 777 Nicollet Mall, Minneapolis, Minnesota  55402.
Executive understands that, if he mails his revocation, mailing by certified
mail, return receipt requested, is recommended to show proof of mailing.

                                      10

 
                      Please read carefully before signing
                      ------------------------------------

     .  Executive acknowledges that he has carefully read and understands the
terms of this Agreement.

     .  Executive acknowledges that he has been given 21 days (or more) to
consider whether to sign this Agreement.  Executive acknowledges that if he
signs this Agreement before the end of the 21 day period, it will be Executive's
personal, voluntary decision to do so.

     .  Executive understands that if he revokes this Release he will not
receive any payments or benefits set forth in paragraphs 3, 5 (Company payment
only), 10 (extension of options and performance shares), and 14.

      IN WITNESS WHEREOF the parties have hereto executed this Agreement.

                                    DAYTON HUDSON CORPORATION

      October 21, 1994                  /s/EDWIN H. WINGATE
Date:_________________              By: ________________________________________
                                           Senior Vice President
                                    Title:______________________________________


      October 21, 1994                  /s/JOSEPH C. VESCE
Date:_________________              ____________________________________________
                                           JOSEPH C. VESCE

                                      11


                                                                   EXHIBIT (10)B
 
                           DAYTON HUDSON CORPORATION

                       EXECUTIVE LONG TERM INCENTIVE PLAN
                                    OF 1981
                  (AS AMENDED AND RESTATED OCTOBER 12, 1994)


                                   ARTICLE I
                           ESTABLISHMENT OF THE PLAN

     1.1  The name of this plan shall be "The Dayton Hudson Corporation
Executive Long Term Incentive Plan of 1981" (hereinafter called the "Plan").

     1.2  The purpose of the Plan is to advance the interim performance and
long-term growth of the Company by offering long-term incentives, in addition to
current compensation and other benefits, to those key employees of the Company
and its Subsidiaries who the Plan Committee determines will contribute to such
performance and growth inuring to the benefit of the shareholders of the
Company.  Such long-term incentives may take the form of Stock Options, or
Performance Shares, or Restricted Stock Awards or any combination.

                                   ARTICLE II
                                  DEFINITIONS

     2.1  Award.  An "Award" is used at times in the Plan to refer to the act 
of granting a Stock Option, Performance Share or Restricted Stock Award under 
the Plan.

     2.2  Board.  "Board" is the Board of Directors of Dayton Hudson 
Corporation.

     2.3  Code.  "Code" is the Internal Revenue Code of 1986, as amended, as 
now in force or as hereafter amended.

     2.4  Company.  "Company" is Dayton Hudson Corporation, a Minnesota 
corporation, and any successor thereof.

     2.5  Date of Grant.  "Date of Grant" shall be the date designated in the 
resolution by the Plan Committee as the date of such Stock Option(s) or
Performance Share(s) or Restricted Stock Award(s), but such date shall not be
earlier than the date of the resolution and action thereon by the Plan
Committee, or earlier than the effective date of the Plan, and in the absence of
a date of grant or a fixed method of computing such date being specifically set
forth in the Plan Committee's resolution, then the Date of Grant shall be the
date of such Plan Committee's resolution and action.

     2.6  Fair Market Value.  "Fair Market Value" of a share of Company common 
stock on any date is 100% of the mean between the high and low prices for such 
stock as reported for such stock on the New York Stock Exchange Composite
Transactions Listing ("Composite Listing") on such date, or in the absence of
such report 100% of the mean between the high and

 
low prices of such stock on the New York Stock Exchange on such date or, if no
sale has been recorded on the Composite Listing or made on such Exchange on such
date, then on the last preceding date on which any such sale shall have been
made in the order of primacy above indicated.

     2.7  Holder.  A "Holder" is a person who has been granted a Restricted 
Stock Award.

     2.8  Incentive Stock Options.  "Incentive Stock Options" are Stock Options
that are intended to qualify under Section 422 of the Code.  No Stock Options 
granted prior to August 11, 1982 shall be Incentive Stock Options.

     2.9  Non-Qualified Options.  "Non-Qualified Options" are Stock Options 
that are not intended to qualify under Section 422 of the Code.

     2.10  Participant.  A "Participant" is a person designated as such by the 
Plan Committee, pursuant to Article III hereof, for participation in the Plan.

     2.11  Performance Goals.  "Performance Goals" are defined in Section 4.1 
hereof.

     2.12  Performance Period.  "Performance Period", with respect to a
Performance Share, is a period of four consecutive fiscal years of the Company,
beginning with the fiscal year in which such Performance Share is granted and
may be referred to herein and by the Plan Committee by use of the calendar year
in which a particular Performance Period commences.

     2.13  Performance Share.  A "Performance Share" is a potential award
consisting of a right to one share of the Company's $1.00 par value common stock
(subject to increase as provided in Section 4.2 hereof) or a lesser number of
shares and the cash payment set forth in Section 5.2 hereof.  A Performance
Share shall be of no value to a Participant unless and until earned in
accordance with Article V hereof.

     2.14  Plan Committee.  The "Plan Committee" is the Committee referenced in
Article IX hereof.

     2.15  Plan Year.  The "Plan Year" shall be a fiscal year of the Company 
falling within the term of this Plan except for the first year of the Plan, for
which the Plan Year shall commence as of the effective date of the Plan and 
terminate as of January 31, 1982.

     2.16  Relevant Change Adjustments.  Appropriate adjustments in the number 
of shares and in the option price per share designated in Sections 2.13, 2.17 
and 2.18 of this Article II, may be made by the Plan Committee, in its
discretion except as provided in Section 11.8 hereof, to give effect to
adjustments made in the number of shares of Company common stock through a
merger, consolidation, recapitalization, reclassification, combination, spin-
off, common stock dividend, stock split or other relevant change.

                                       2

 
     2.17  Restricted Stock Award.  A "Restricted Stock Award" is an Award
granted under Article VII of this Plan.

     2.18  Stock Option.  A "Stock Option" is a right accruing in a
Participant to purchase from the Company one share of the Company's $1.00 par
value common stock at the Fair Market Value of such share of common stock on the
Date of Grant of the Stock Option, such exercise of option to be made any time
within ten years and one day (ten years with respect to Incentive Stock Options)
following the Date of Grant, and containing the terms and conditions set forth
or allowed under Article VI hereof.  Stock Options may be either Non-Qualified
Options or Incentive Stock Options.

     2.19  Subsidiary Corporation.  For purposes of this Plan, the term
"Subsidiary" or "Subsidiary Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company, in
which each of the corporations other than the last corporation in the unbroken
chain owns stock possessing fifty percent or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain as
determined at the point in time when reference is made to such "Subsidiary" or
"Subsidiary Corporation" in this Plan.

     2.20  Change in Control.  A "Change in Control" shall be deemed to 
have occurred if:

     (a)  a majority of the directors of the Company shall be persons other than
          persons

          (i)  for whose election proxies shall have been solicited by the Board
               or

          (ii) who are then serving as directors appointed by the Board to fill
               vacancies on the Board caused by death or resignation (but not by
               removal) or to fill newly-created directorships,

     (b)  30% or more of the outstanding Voting Stock (as defined in Article IV
          of the Restated Articles of Incorporation, as amended, of the Company)
          of the Company is acquired or beneficially owned (as defined in
          Article IV of the Restated Articles of Incorporation, as amended, of
          the Company) by any person (as defined in Article IV of the Restated
          Articles of Incorporation, as amended, of the Company), or

     (c)  the shareholders of the Company approve a definitive agreement or plan
          to

          (i)  merge or consolidate the Company with or into another corporation
               (other than (1) a merger or consolidation with a Subsidiary of
               the Company or (2) a merger in which the Company is the surviving
               corporation and either (A) no outstanding Voting Stock of the
               Company (other than fractional shares) held by shareholders
               immediately prior to the merger is converted into cash (except
               cash upon the exercise by holders of Voting Stock of the

                                       3

 
               Company of statutory dissenters' rights), securities, or other
               property or (B) all holders of outstanding Voting Stock of the
               Company (other than fractional shares) immediately prior to the
               merger (except those that exercise statutory dissenters' rights)
               have substantially the same proportionate ownership of the Voting
               Stock of the Company or its parent corporation immediately after
               the merger),

          (ii) exchange, pursuant to a statutory exchange of shares of Voting
               Stock of the Company held by shareholders of the Company
               immediately prior to the exchange, shares of one or more classes
               or series of Voting Stock of the Company for shares of another
               corporation or other securities, cash or other property,

         (iii) sell or otherwise dispose of all or substantially all of the
               assets of the Company (in one transaction or a series of
               transactions) or

          (iv) liquidate or dissolve the Company.

                                  ARTICLE III
                 GRANTING OF STOCK OPTIONS, PERFORMANCE SHARES
                  AND RESTRICTED STOCK AWARDS TO PARTICIPANTS

     3.1  Eligible Employees.  Stock Options, Restricted Stock Awards or
Performance Shares may be granted by the Plan Committee to any key employee of
the Company or a Subsidiary Corporation.  A Stock Option(s) or Performance
Share(s) or Restricted Stock Award(s) may be granted to a director of the
Company provided that he/she is also at the time of grant a key employee of the
Company or a Subsidiary Corporation.  No Stock Option(s) or Performance Share(s)
or Restricted Stock Award(s) shall be granted to a person who is at the time of
award a member of the Plan Committee.  A person who has been engaged by the
Company for employment shall be eligible for grants under the Plan, provided
such person actually reports for and commences such employment within ninety
days after the Date of Grant.

     3.2  Designation of Participants.  At any time and from time to time during
the Plan Year, the Plan Committee may designate the key employees of the Company
and its Subsidiaries eligible for Awards.

     3.3  Allocation of Stock Option(s), Performance Share(s) or Restricted
Stock Award(s).  Contemporaneously with the designation of a Participant
pursuant to Section 3.2 hereof, the Plan Committee shall determine the number of
Stock Option(s) and/or Restricted Stock Award(s) and/or Performance Share(s) to
be granted to such Participant and the Date of Grant for such related Stock
Option or Performance Share or Restricted Stock Award, taking into consideration
such factors as it deems relevant, which may include the following:

                                       4

 
     (a)  the total number of Stock Option(s) and/or Restricted Stock Award(s)
          and/or Performance Share(s) available for allocation to all
          Participants; and

     (b)  the work assignment or the position of the Participant and its
          sensitivity and/or impact in relationship to the profitability and
          growth of the Company and its Subsidiaries; and

     (c)  the Participant's current and potential performance in reference to
          such factors.

Allocation of Awards may, in the discretion of the Plan Committee, be in the
form of Stock Option(s) solely or Performance Share(s) solely, or Restricted
Stock Award(s) solely, or any combination in whatever relationship one to the
other, if any, as the Plan Committee in its discretion so determines.
Allocation of Stock Options may, in the discretion of the Plan Committee, be in
the form of Incentive Stock Option(s) solely or Non-Qualified Option(s) solely
or a combination in whatever relationship to the other, if any, as the Plan
Committee in its discretion so determines.

     3.4  Notification to Participants and Delivery of Documents.  As soon as
practicable after such determinations have been made, each Participant, shall be
notified of (i) his/her designation as a Participant, (ii) the Date of Grant,
and (iii) the number of Stock Option(s), and/or Restricted Stock Award(s) and/or
the number of Performance Share(s) granted to the Participant, and in the case
of Performance Share(s), the Performance Period and in the case of Restricted
Stock Award(s), the Restriction Period.  The Participant shall thereafter be
supplied with written evidence of any such granted Performance Share(s) and/or
Restricted Stock Award(s), and shall receive a Stock Option exercisable for
purchase of one share of the Company's $1.00 par value common stock for each
Stock Option granted to the Participant pursuant to this Plan or indicating the
aggregate of such grant, which option agreement(s) shall be in conformity with
the provisions of Article VI hereof.

                                   ARTICLE IV
                               PERFORMANCE GOALS

     4.1  Establishment of Goals.  Within a reasonable period of time after the
beginning of each Performance Period, Performance Goals relative to such
Performance Period shall be established by the Plan Committee in its absolute
discretion.  Such Performance Goals may include, but shall not necessarily be
limited to, amounts or rates of growth in consolidated profits of the Company
expressed in dollars, earnings per share, return on capital, return on
investment, return on shareholder's equity, or other similar or relevant
measurement which may be absolute in their terms or be measured against or in
relationship to other companies comparably, similarly or otherwise situated.
The Plan Committee, in its sole discretion, may modify the Performance Goals if
it determines that circumstances have changed and modification is required to
reflect the original intent of the Performance Goals.  The Plan Committee may in
its discretion classify Participants into as many groups as it determines, and
as to any Participant(s) relate his/her Performance Goals partially, or
entirely, to the measured performance, either absolutely or

                                       5

 
relatively, of an identified Subsidiary, operating company or test strategy or
new venture of the Company.

     4.2  Levels of Performance Required to Earn Performance Shares.  At or
about the same time that Performance Goals are established for a specific
period, the Plan Committee shall in its absolute discretion establish the
percentage (not to exceed 150% thereof) of the Performance Share(s) granted for
such Performance Period which shall be earned by the Participant for various
levels of performance measured in relation to achievement of Performance Goals
for such Performance Period.

     4.3  Other Restrictions.  The Plan Committee may provide restrictions on
the delivery of common stock of the Company upon the earning of Performance
Shares, including the future forfeiture of all or part of the common stock
earned.  The Plan Committee may provide that the shares of the Company's one
dollar par value common stock issued on Performance Shares Earned be held in
escrow and/or legended.

     4.4  Notification to Participants.  Promptly after the Plan Committee has
established Performance Goals for a specific Performance Period or modified such
goals, each Participant who has received a grant of any Performance Share(s) for
that period shall be provided with written evidence of the Performance Goals so
established or modified.

                                   ARTICLE V
                         EARNING OF PERFORMANCE SHARES

     5.1  Measurement of Performance against Performance Goals.  The Plan
Committee shall as soon as practicable after the close of each Performance
Period, make a determination of:

     (a)  the extent to which the Performance Goals for such Performance Period
          have been achieved;

     (b)  the percentage of the Performance Shares granted for such Performance
          Period which are earned for such Performance Period by Participants
          who have been from his/her date of hire in the continuous employ of
          the Company or Subsidiary or a combination thereof, during the subject
          Performance Period; and

     (c)  the percentage of Performance Shares to be paid in cash, if any.  The
          percentage paid in cash shall be uniform for all Participants in a
          particular Performance Period.

These determinations shall be absolute and final as to the facts and conclusions
therein made and be binding on all parties.  Promptly after the Plan Committee
has made the foregoing determination each Participant who has earned Performance
Share(s) based thereon shall be notified, in writing, of the number of
Performance Shares so earned.  For all purposes of this

                                       6

 
Plan notice shall be deemed to have been given the date action is taken by the
Plan Committee making the determination.

     5.2  Treatment of Performance Shares Earned.  Upon the determination that a
percentage of the Performance Share(s) has been earned for a Performance Period,
a Participant to whom such earned Performance Share(s) has been granted and who
has been (or was) in the employ of the Company or a Subsidiary thereof
continuously from the date of his/her hire during the subject Performance Period
to which the grant relates, subject to the exceptions set forth at Section 5.5
and Section 5.6 hereof, shall be entitled, subject to the other conditions of
this Plan, to receive the shares of the Company's $1.00 par value common stock
for each Performance Share earned (less the shares paid in cash), plus a cash
payment in the amount of the Fair Market Value of the shares of common stock to
be paid in cash as determined in Section 5.1(c) hereof, calculated as of the
close of business on the date of the notice referred to in Section 5.1 hereof.
The provisions of Section 5.5 to the contrary notwithstanding, the Plan
Committee may provide that the issued shares of common stock be held in escrow
and/or be legended and that the common stock be subject to restrictions,
including the future forfeiture of all or a part of the shares.  Performance
Shares shall under no circumstances become earned or have any value whatsoever
for any Participant who is not in the employ of the Company or its Subsidiaries
continuously during the entire Performance Period for which such Performance
Shares are granted, except as provided at Section 5.5 or Section 5.6 hereof.

     5.3  Stock-Cash Distribution.  Each distribution determined in accordance
with Section 5.2 above shall be made as soon as practicable after Performance
Shares have been determined to have been earned unless the provisions of Section
5.4(a) hereof are applicable to a Participant.

     5.4(a)  Deferral of Receipt of Performance Share Earnout.  A Participant
who has received a grant of Performance Shares may by compliance with the then
applicable procedures under the Plan irrevocably elect in writing to defer
receipt of all or any part of the stock-cash distribution associated with the
earnout, if any, of the Performance Shares (the combination thereof hereafter
referred to as the "deferred account").  The deferral shall be effective until
the Participant terminates his/her employment with the Company and its
Subsidiaries except as otherwise provided herein.

     The terms and conditions of such deferral, including but not limited to,
the period of time for, and form of, election; the manner and method of payout;
the form in which the deferred account shall be held; the interest equivalent or
other payment that shall accrue upon the deferred account pending its payout;
and the use and form of dividend equivalents in respect of stock units included
within any deferred account, shall be as determined from time to time by the
Plan Committee, which Plan Committee may change any and all of the terms and
conditions at any time applicable to deferrals thereafter made.

     5.4(b)  Amendment of Deferral Arrangements.  The Plan Committee may, at any
time and from time to time, but prospectively only except as hereinafter
provided, amend, modify, change, suspend or cancel any and all of the rights,
procedures, mechanics and timing parameters relating

                                       7

 
to the deferral of receipt of Performance Share earnout under the Plan as set
forth at Section 5.4(a) hereof.  In addition, the Plan Committee may, in its
sole discretion, accelerate the payout of the deferred account, or any portion
thereof, either in a lump sum or in a series of payments, but under the
following conditions only:

     (a)  the Federal tax statutes, regulations or interpretations are amended,
          modified, or otherwise changed or affected in such a manner as to
          adversely alter or modify the tax effect of the "deferred account" as
          it is comprehended under the tax law and interpretations in effect for
          deferred accounts as of the effective date of this Plan, or

     (b)  the deferred account holder suffers or incurs an event that would
          qualify for a "withdrawal" of contributions that have not been
          accumulated for two years without adverse consequences on the tax
          status of a qualified profit-sharing or stock bonus plan under the
          Federal tax laws applicable from time to time to such types of plans.

     5.5  Non-Disqualifying Termination of Employment.  Except for Section 5.6
hereof, the only exceptions to the requirement of continuous employment during a
Performance Period for Performance Share earnout eligibility are termination of
a Participant's employment by reason of death (in which event the Performance
Shares may be transferable by will or the laws of descent and distribution only
to such Participant's beneficiary designated to receive the Performance Shares
or to the Participant's applicable legal representatives, heirs or legatees),
total and permanent disability, normal or late retirement or early retirement,
with the consent of the Plan Committee, or transfer of an executive in a spin-
off, with the consent of the Plan Committee, occurring during the Performance
Period applicable to the subject Performance share grant.  In such instance an
earnout of the Performance Shares shall be made, as of the end of the
Performance Period, and 100% of the total Performance Shares that would have
been earned during the Performance Period shall be earned and paid out;
provided, however, in a spin-off situation the Plan Committee may set additional
conditions, such as, without limiting the generality of the foregoing,
continuous employment with the spin-off entity.  If a Participant's termination
of employment does not meet the criteria set forth above, but the Participant
had at least 15 years of continuous employment with the Corporation or a
Subsidiary or any combination thereof, provided that if the person is not an
Executive Officer (as defined under the Securities Exchange Act 1934, as
amended, and the regulations promulgated thereunder) of the Corporation at time
of termination such 15 years need not be continuous, the Plan Committee may
allow earn-outs of up to 100% of the total Performance Shares for the
Performance Period(s) in which the termination of employment occurred, subject
to any conditions that the Plan Committee shall determine.

     5.6  Change in Control.  In the event of a Change in Control, all
outstanding Performance Shares granted under the Plan shall be proratably
payable ten days after the Change in Control; provided that no Performance Share
shall be payable to a Participant within six months after the Date of Grant.
The amount of Performance Shares payable shall be determined by multiplying

                                       8

 
100% of each Performance Share grant by a fraction, the numerator of which shall
be the number of months that have elapsed in the applicable Performance Period
and the denominator of which shall be forty-eight.

                                   ARTICLE VI
                                 STOCK OPTIONS

     6.1  Non-Qualified Option.  Non-Qualified Options granted under the Plan
are not intended to be Incentive Stock Options under the provisions of Section
422 of the Code.  The Non-Qualified Options shall be evidenced by Non-Qualified
Option agreements in such form and not inconsistent with the Plan as the Plan
Committee shall in its sole discretion approve from time to time, which
agreements shall specify the number of shares to which they pertain and the
purchase price of such shares and shall, but without limitation, contain in
substance the following terms and conditions:

     (a)  Option Period.  Each option granted shall expire and all rights to
          purchase shares thereunder shall cease ten years and one day after the
          Date of Grant of the Stock Option or on such date prior thereto as may
          be fixed by the Plan Committee, or on such date prior thereto as is
          provided by this Plan in the event of termination of employment or
          death or reorganization pursuant to Section 11.8(b) hereof.  No option
          shall permit the purchase of any shares thereunder during the first
          year after the Date of Grant of such option, except as provided in
          Section 6.3 hereof.

     (b)  Transferability and Termination of Options.  During the lifetime of an
          individual to whom an option is granted, the option may be exercised
          only by such individual and only while such individual is an employee
          of the Company or a Subsidiary and only if the Participant has been
          continuously so employed by any one or combination thereof since the
          Date of Grant of the option, provided, however, that if the employment
          of such Participant by the Company or a Subsidiary Corporation
          terminates, the option may additionally be exercised but only as
          follows and in no event later than ten years and one day after the
          Date of Grant of the Stock Option, except as set forth in (ii) below:

          (i)  if a Participant's termination of employment occurs by reason of
               normal or late retirement under any retirement plan of the
               Company or its Subsidiaries or, with the consent of the Plan
               Committee, by reason of early retirement under any retirement
               plan of the Company or its Subsidiaries, or, with the consent of
               the Plan Committee, the transfer of an executive in a spin-off,
               or by reason of total and permanent disability, as determined by
               the Plan Committee, without retirement, then within five years
               after the date of such termination of employment.  During the
               five-year period the right to exercise options, if any, accruing
               in installments, shall continue; provided, however, in a spin-off
               situation the Plan Committee may set

                                       9

 
               additional conditions, such as, without limiting the generality
               of the foregoing, continuous employment with the spin-off entity.

          (ii) if a Participant's termination of employment occurs by reason of
               death, then within five years after the date of death or the life
               of the option, whichever is less, but in no event less than one
               year after the date of death, during which time installments
               shall continue to accrue.

         (iii) if a Participant's termination of employment occurs for any
               reason other than as specified in Section 6.1(b)(i) or (ii)
               hereof, the Participant has been continuously employed by the
               Company or a Subsidiary or any combination for more than 15
               years, provided that if the person is not an Executive Officer
               (as defined under the Securities Exchange Act 1934, as amended,
               and the regulations promulgated thereunder) of the Corporation at
               the time of termination such 15 years need not be continuous, and
               if the Plan Committee so approves, then within a period of up to
               five years after the date of termination of employment.  During
               the period the right to exercise options, if any, accruing in
               installments shall continue; provided, however, the Plan
               Committee may set additional conditions.

          (iv) if a Participant's termination of employment occurs for any
               reason other than as specified in Section 6.1(b)(i) or (ii)
               hereof, the Plan Committee has not approved an extension pursuant
               to Section 6.1(b)(iii) and Participant's termination of
               employment is not occasioned by the commission of a dishonest or
               other illegal act, then, but only with respect to installments
               that have as of the date of termination already accrued, within
               ninety days after the date of such termination of employment
               except in the case of Participants who would at the time be
               subject to the provisions of Section 16(b) of the Securities
               Exchange Act of 1934, in which instance the period of exercise
               shall be two hundred ten days after termination.  Those
               Participants terminated because of the commission of a dishonest
               or other illegal act shall have no additional period after
               termination of employment in which to exercise their options.
               Absence on a leave of absence approved by the Plan Committee
               shall not be deemed a termination or interruption of continuous
               employment for the purposes of the Plan.

          (v)  Rights accruing to a Participant under the aforesaid Subsections
               (b)(i), (b)(iii) and (b)(iv) may, upon the death of a Participant
               subsequent to his/her termination of employment, be exercised or
               perfected by his/her duly designated beneficiary or otherwise by
               his/her applicable legal representatives, heirs or legatees to
               the extent vested in and unexercised or perfected by the
               Participant at the date of his/her death.

                                       10

 
               No option shall be assignable or transferable by the individual
               to whom it is granted, except that it may be transferable by will
               or the laws of descent and distribution in accordance with the
               provisions of the Plan.  An option, if so transferable, may be
               exercised after the death of the individual to whom it is granted
               only by such individual's beneficiary designated to exercise the
               option or otherwise by his/her applicable legal representatives,
               heirs or legatees, and only within the specific time period set
               forth above.

               In no event whether by the Participant directly or by his/her
               beneficiary or other representative shall any option be
               exercisable at any time after its expiration date as stated in
               the option agreement.  When an option is no longer exercisable it
               shall be deemed for all purposes and without further act to have
               lapsed and terminated.  The Plan Committee may in its sole
               discretion, but shall not be required to, determine, solely for
               the purposes of the Plan, that a Participant is permanently and
               totally disabled and the acts and decisions of the Plan Committee
               made in good faith in relation to any such determination shall be
               conclusive upon all persons and interests affected thereby.

     (c)  Exercise of Options.  An individual entitled to exercise an option
          may, subject to its terms and conditions and the terms and conditions
          of the Plan, exercise it in whole at any time, or in part from time to
          time, by delivery to the Company at its principal office of written
          notice of exercise, specifying the number of whole shares with respect
          to which the option is being exercised.  Before shares may be issued
          payment must be made in full, in legal United States tender, in the
          amount of the purchase price of the shares to be purchased at the time
          and any amounts for withholding as provided in Section 11.9 hereof;
          provided, however, in lieu of paying for the exercise price in cash as
          described above, the individual may pay all or part of such exercise
          price by delivering owned and unencumbered shares of the Company
          common stock having a Fair Market Value on the date of exercise of the
          option equal to or less than the exercise price of the options
          exercised, with cash, as set forth above, for the remainder, if any,
          of the purchase price.  Subject to rules established by the Plan
          Committee, the withholdings required by Section 11.9 hereof may be
          satisfied by the Company withholding shares of Company common stock
          issued on exercise that have a Fair Market Value on the date of
          exercise of the option equal to or less than the withholding required
          by Section 11.9 hereof.

     6.2  Incentive Stock Option.  Incentive Stock Options granted under the
Plan are intended to be incentive stock options under Section 422 of the Code
and the Plan shall be administered, except with respect to the right to exercise
options after termination of employment, to qualify Incentive Stock Options
issued hereunder as incentive stock options under Section 422 of the Code.  An
Incentive Stock Option shall not be granted to an employee who owns, or is
deemed under Section 424(d) of the Code to own, stock of the Company (or of any
parent or Subsidiary

                                       11

 
of the Company) possessing more than 10% of the total combined voting power of
all classes of stock therein.  The aggregate Fair Market Value (determined as of
the time the option is granted) of the stock with respect to which Incentive
Stock Options are exercisable for the first time by any Participant during any
calendar year (under all Incentive Stock Option Plans of the Company or any
parent or Subsidiary of the Company) shall not exceed $100,000.  The Incentive
Stock Options shall be evidenced by Incentive Stock Option Agreements in such
form and not inconsistent with the Plan as the Plan Committee shall in its sole
discretion approve from time to time, which agreements shall specify the number
of shares to which they pertain and the purchase price of such shares.

     The terms and conditions set forth in Subsections (a) through (c) of
Section 6.1 hereof shall apply to an Incentive Stock Option; provided that the
term of the Incentive Stock Option shall not exceed ten years; and provided,
further, that in the event Section 6.1(b)(i) hereof is applicable, all
installments shall become immediately exercisable.

     6.3  Change in Control.  In the event of a Change in Control, all
outstanding options granted under the Plan shall accelerate and will be
exercisable in full for a period of two hundred ten (210) days after the Change
in Control; provided that no option shall be exercisable by a Participant (i)
within six months after the Date of Grant of the option or (ii) after the
termination date of the option.

                                  ARTICLE VII
                                RESTRICTED STOCK

     7.1  Restriction Period to be Established by the Plan Committee.  At the
time a Restricted Stock Award is made, the Plan Committee shall establish a
period of time (the "Restriction Period") applicable to such Award, which shall
be not less than three years.  Each Restricted Stock Award may have a different
Restriction Period, at the discretion of the Plan Committee.  Except as
permitted or pursuant to Sections 7.4, 7.5 or 11.8 hereof, the Restriction
Period applicable to a particular Restricted Stock Award shall not be changed.

     7.2  Other Terms and Conditions.  Company common stock awarded pursuant to
a Restricted Stock Award shall be represented by a stock certificate registered
in the name of the Holder of such Restricted Stock Award.  The Holder shall have
the right to enjoy all shareholder rights during the Restriction Period with the
exception that:

     (i)  The Holder shall not be entitled to delivery of the stock certificate
          until the Restriction Period shall have expired.

     (ii) The Company may either issue shares subject to such restrictive
          legends and/or stop-transfer instructions as it deems appropriate or
          provide for retention of custody of the Company common stock during
          the Restriction Period.

                                       12

 
    (iii) The Holder may not sell, transfer, pledge, exchange, hypothecate or
          otherwise dispose of the Company common stock during the Restriction
          Period.

     (iv) A breach of the terms and conditions established by the Plan Committee
          pursuant to the Restricted Stock Award shall cause a forfeiture of the
          Restricted Stock Award, and any dividends withheld thereon.

     (v)  Dividends payable in cash or in shares of stock or otherwise may be
          either currently paid or withheld by the Company for the Holder's
          account.  At the discretion of the Plan Committee, interest may be
          paid on the amount of cash dividends withheld, including cash
          dividends on stock dividends, at a rate and subject to such terms as
          determined by the Plan Committee.

Provided, however, and the provisions of Section 7.4 to the contrary
notwithstanding, in lieu of the foregoing, the Plan Committee may provide that
no shares of common stock be issued until the Restriction Period is over and
further provide that the shares of common stock issued after the Restriction
Period has been completed, be issued in escrow and or be legended and that the
common stock be subject to restrictions including the forfeiture of all or a
part of the shares.

     7.3  Payment for Restricted Stock.  A Holder shall not be required to make
any payment for Company common stock received pursuant to a Restricted Stock
Award, unless the Plan Committee requires payment for such stock in the
Restricted Stock Award.

     7.4  Forfeiture Provisions.  Subject to Section 7.5, in the event a Holder
terminates employment during a Restriction Period, a Restricted Stock Award will
be forfeited; provided, however, when the Plan Committee issues the Restricted
Stock Award, it may provide in the Restricted Stock Award agreement for
proration or full payout in the event of a termination of employment because of
normal or late retirement, early retirement or spin-off with the consent of the
Plan Committee, or death or total and permanent disability, as determined by the
Plan Committee, or termination of employment after 15 years of continuous
employment with the Corporation or a Subsidiary or any combination thereof,
provided that if the person is not an Executive Officer (as defined under the
Securities Exchange Act 1934, as amended, and the regulations promulgated
thereunder) of the Corporation at the time of termination such 15 years need not
be continuous, subject to any other conditions the Plan Committee may determine.

     7.5  Change in Control.  In the event of a Change in Control, all
outstanding Restricted Stock Awards granted under the Plan will be proratably
payable ten days after the Change in Control; provided that no Restricted Stock
Award shall be payable to a Participant within six months after the Date of
Grant.  The amount of Company common stock payable shall be determined by
multiplying each Restricted Stock Award granted by a fraction, the numerator of
which shall be the number of months that have elapsed in the applicable
Restriction Period and the denominator of which shall be the number of months in
the Restriction Period.

                                       13

 
                                 ARTICLE VIII
                      SHARES OF STOCK SUBJECT TO THE PLAN

     8.1  The total number of shares that may be available for issuance under 
all Performance Shares, Stock Options and Restricted Stock Awards granted
pursuant to the Plan shall not exceed in the aggregate 6,200,000 shares of the
Company's $1.00 par value common stock.  Shares covered by granted Performance
Shares which are not earned pursuant to any of the provisions of Article V
hereof, or Stock Options or Performance Shares or Restricted Stock Awards which
are forfeited for any reason or are not distributed or are covered by options
that lapse or are canceled before exercise, shall (unless the Plan shall have
been terminated) again be available in the same relative amounts for other
Performance Share, Restricted Stock Award and Stock Option grants under the Plan
(except for shares for which cash equivalent payments are received by
Participants pursuant to the Plan), except that 220,275 shares for Stock
Options, Performance Shares or Restricted Stock Awards that were outstanding on
April 10, 1991 that are not earned or are forfeited for any reason or are not
distributed or lapse or are cancelled before exercise shall be available for
future grants and any additional shares for Stock Options, Performance Shares or
Restricted Stock Awards that were outstanding on April 10, 1991 that are not
earned or are forfeited for any reason or are not distributed or lapse or are
cancelled before exercise shall not be available for future Performance Shares,
Restricted Stock Awards or Stock Option Grants.  Such shares may be authorized
and unissued shares, or may be treasury shares held by the Company or may be
shares purchased or held by the Company or a Subsidiary for purposes of the
Plan, or any combination thereof.

                                   ARTICLE IX
                           ADMINISTRATION OF THE PLAN

     9.1  The Plan will be administered by a committee of the Board appointed 
from time to time by the Board.  Each member of the committee shall be a 
"disinterested person" as that term is defined under Rule 16b-3, promulgated
under the Securities Exchange Act of 1934, as amended, or any successor statute
or regulation comprehending the same subject matter.

     9.2  The Plan Committee shall have and exercise all of the powers and
responsibilities  granted expressly or by implication to it by the provisions of
the Plan.  Subject to and as limited by such provisions, the Plan Committee may
from time to time enact, amend and rescind such rules, regulations and
procedures with respect to the administration of the Plan as it deems
appropriate or convenient.

     9.3  All questions arising under the Plan, any Incentive Stock Option,
Non-Qualified Stock Option, Performance Share or Restricted Stock Award
agreement, or any rule, regulation or procedure adopted by the Plan Committee
shall be determined by the Plan Committee, and its determination thereof shall
be conclusive and binding upon all parties.

     9.4  Any action required or permitted to be taken by the Plan Committee 
under the Plan shall require the affirmative vote of a majority of a quorum of 
the members of the Plan

                                       14

 
Committee.  A majority of all members of the Plan Committee shall constitute a
"quorum" for Plan Committee business.  The Plan Committee may act by written
determination instead of by affirmative vote at a meeting, provided that any
written determination shall be signed by all members of the Plan Committee, and
any such written determination shall be as fully effective as a majority vote of
a quorum at a meeting.

                                   ARTICLE X
                              REDUCTION IN AWARDS

     10.1  Anything in this Plan to the contrary notwithstanding, the 
provisions of this Article X shall apply to a Participant if Ernst & Young
determines that each of (a) and (b) below are applicable.

     (a)  Payments or distributions hereunder, determined without application of
          this Article X, either alone or together with other payments in the
          nature of compensation to the Participant which are contingent on a
          change in the ownership or effective control of the Company, or in the
          ownership of a substantial portion of the assets of the Company, or
          otherwise (but after any elimination or reduction of such payments
          under the terms of the Company's Income Continuance Policy Statement
          or SMG Income Continuance Policy Statement), would result in any
          portion of the payments hereunder being subject to an excise tax on
          excess parachute payments imposed under Section 4999 of the Code.

     (b)  The excise tax imposed on the Participant under Section 4999 of the
          Code on excess parachute payments, from whatever source, would result
          in a lesser net aggregate present value of payments and distributions
          to the Participant (after subtraction of the excise tax) than if
          payments and distributions to the Participant were reduced to the
          maximum amount that could be made without incurring the excise tax.

     10.2  Under this Article X the payments and distributions under this Plan
shall be reduced (but not below zero) so that the present value of such payments
and distributions shall equal the Reduced Amount.  The "Reduced Amount" (which
may be zero) shall be an amount expressed in present value which maximizes the
aggregate present value of payments and distributions under this Plan which can
be made without causing any such payment to be subject to the excise tax under
Section 4999 of the Code.  The determinations and reductions under this
paragraph shall be made after eliminations or reductions, if any, have been made
under the Company's Income Continuance Policy Statement or SMG Income
Continuance Policy Statement.

     10.3  If Ernst & Young determines that this Article X is applicable to a
Participant, it shall so advise the Plan Committee.  The Plan Committee shall
then promptly give the Participant notice to that effect together with a copy of
the detailed calculation supporting such determination which shall include a
statement of the Reduced Amount.  The Participant may then elect, in his/her
sole discretion, which and how much of the Stock Options, Restricted Stock
Awards

                                       15

 
and/or Performance Shares otherwise awarded under this Plan shall be eliminated
or reduced (as long as after such election the aggregate present value of the
remaining Stock Options, Restricted Stock Awards and/or Performance Shares under
this Plan equals the Reduced Amount), and shall advise the Plan Committee in
writing of his/her election within ten days of his/her receipt of notice.  If no
such election is made by the Participant within such ten-day period, the Plan
Committee may elect which and how much of the Stock Options, Restricted Stock
Awards, and/or Performance Shares shall be eliminated or reduced (as long as
after such election their aggregate present value equals the Reduced Amount) and
shall notify the Participant promptly of such election.  For purposes of this
Article X, present value shall be determined in accordance with Section 280G of
the Code.  All the foregoing determinations made by Ernst & Young under this
Article X shall be made as promptly as practicable after it is determined that
parachute payments will be made to the Participant if an elimination or
reduction is not made.  As promptly as practicable following the election
hereunder, the Company shall provide to or for the benefit of the Participant
such amounts and shares as are then due to the Participant under this Plan and
shall promptly provide to or for the benefit of the Participant in the future
such amounts and shares as become due to the Participant under this Plan.

     10.4  As a result of the uncertainty in the application of Section 280G of
the Code at the time of the initial determination by Ernst & Young hereunder, it
is possible that payments or distributions under this Plan will have been made
which should not have been made ("Overpayment") or that additional payments or
distributions which will have not been made could have been made
("Underpayment"), in each case, consistent with the calculation of the Reduced
Amount hereunder.  In the event that Ernst & Young, based upon the assertion of
a deficiency by the Internal Revenue Service against the Company or the
Participant which Ernst & Young believes has a high probability of success,
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Participant which the Participant
shall repay together with interest at the applicable Federal rate provided for
in Section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant if and to the extent such payment would not reduce
the amount which is subject to the excise tax under Section 4999 of the Code.
In the event that Ernst & Young, based upon controlling precedent, determines
that an Underpayment has occurred, any such Underpayment shall be promptly paid
to or for the benefit of the Participant together with interest at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code.

     10.5  In making its determination under this Article X, the value of any
non-cash benefit shall be determined by Ernst & Young in accordance with the
principles of Section 280G(d)(3) of the Code.

     10.6  All determinations made by Ernst & Young under this Article X shall
be binding upon the Company, the Plan Committee and the Participant.

                                       16

 
                                  ARTICLE XI
                              GENERAL PROVISIONS

     11.1  Amendment or Termination.  The Board may at any time amend, suspend,
discontinue or terminate the Plan (including the making of any necessary 
enabling, conforming and procedural amendments to the Plan to authorize and 
implement the granting of qualified Stock Options or other income tax preferred
stock options which may be authorized by enactment of the United States 
Congress and/or the Internal Revenue Service subsequent to the effective date 
of this Plan); provided, however, that no amendment by the Board shall, without
further approval of the shareholders of the Company:

     (a)  except as provided at Section 2.16 hereof increase the total number of
          shares of Company common stock which may be made subject to the Plan;
          or

     (b)  except as provided at Section 2.16 hereof change the purchase price of
          Company common stock under the Plan; or

     (c)  materially modify the class of employees that are eligible to receive
          Stock Options and/or Performance Shares and/or Restricted Stock Awards
          pursuant to the Plan.

No action taken pursuant to this Section 11.1 of the Plan shall, without the
consent of a Participant, alter or impair any Performance Share(s) or Stock
Option(s) or Restricted Stock Award(s) which have been previously granted to a
Participant.

     11.2  Non-Alienation of Rights and Benefits.  Except as expressly provided
herein, no right or benefit under the Plan shall be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance or charge and any attempt to
anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be
void.  No right or benefit hereunder shall in any manner be liable for or
subject to the debts, contracts, liabilities or torts of the person entitled to
such right or benefit.  If any Participant or beneficiary hereunder should
become bankrupt or attempt to anticipate, alienate, sell, assign, pledge,
encumber or charge any right or benefit hereunder, then such right or benefit
shall, in the sole discretion of the Plan Committee, cease and in such event the
Company may hold or apply the same or any or no part thereof for the benefit of
the Participant or beneficiary, his/her spouse, children or other dependents or
any of them in any such manner and in such proportion as the Plan Committee in
its sole discretion may deem proper.

     11.3  No Rights as Shareholder.  The granting of Performance Share(s)
and/or Stock Option(s) and/or Restricted Stock Award(s) under the Plan shall not
entitle a Participant or any other person succeeding to his/her rights, to any
dividend, voting or other right as a shareholder of the Company unless and until
the issuance of a stock certificate to the Participant or such other person
pursuant to the provisions of the Plan and then only subsequent to the date of
issuance thereof.

                                       17

 
     11.4  Limitation of Liability or Obligation of the Company.  As
illustrative only of the limitations of liability or obligation of the Company
and not intended to be exhaustive thereof, nothing in the Plan shall be
construed:

     (a)  to give any employee of the Company any right to be granted any Stock
          Option and/or Performance Share and/or Restricted Stock Award other
          than at the sole discretion of the Plan Committee,

     (b)  to give any Participant any rights whatsoever with respect to shares
          of the Company's $1.00 par value common stock except as specifically
          provided in the Plan,

     (c)  to limit in any way the right of the Company or any Subsidiary to
          terminate, change or modify, with or without cause, the employment of
          any Participant at any time, or

     (d)  to be evidence of any agreement or understanding, express or implied,
          that the Company or any Subsidiary will employ any Participant in any
          particular position at any particular rate of compensation or for any
          particular period of time.

     11.5  Government Regulations.  Notwithstanding any other provisions of the
Plan seemingly to the contrary, the obligation of the Company with respect to
Performance Shares, Stock Options or Restricted Stock Awards granted under the
Plan shall at all times be subject to any and all applicable laws, rules, and
regulations and such approvals by any government agencies as may be required or
deemed by the Board or Plan Committee as reasonably necessary or appropriate for
the protection of the Company.

     In connection with any sale, issuance or transfer hereunder, the
Participant acquiring the shares shall, if requested by the Company give
assurances satisfactory to counsel of the Company that the shares are being
acquired for investment and not with a view to resale or distribution thereof
and assurances in respect of such other matters as the Company may deem
desirable to assure compliance with all applicable legal requirements.

     11.6  Non-exclusivity of the Plan.  Neither the adoption of the Plan by the
Board nor the submission of the Plan to shareholders of the Company for approval
shall be construed as creating any limitations on the power or authority of the
Board to adopt such other or additional incentive or other compensation
arrangements of whatever nature as the Board may deem necessary or desirable or
preclude or limit the continuation of any other plan, practice or arrangement
for the payment of compensation or fringe benefits to employees generally, or to
any class or group of employees, which the Company or any Subsidiary now has
lawfully put into effect, including, without limitation, any retirement,
pension, savings, profit sharing or stock purchase plan, insurance, death and
disability benefits, and executive short term incentive plans.

                                       18

 
     11.7  Effective Date.  Subject to the approval of this restated Plan by the
holders of a majority of the voting power of the shares present and entitled to
vote at the Company's Annual Meeting of Shareholders to be held May 29, 1991 and
any necessary approval being obtained from any department, board or agency of
the United States or states having jurisdiction, the Plan shall be effective as
of May 29, 1991.

     11.8  Reorganization.  In case the Company is merged or consolidated with
another corporation, or in case the property or stock of the Company is acquired
by another corporation, or in case of a separation, reorganization or
liquidation of the Company, the Plan Committee or a comparable committee of any
corporation assuming the obligations of the Company hereunder, shall either:

     (a)  make appropriate provision for the protection of any outstanding
          Performance Shares, Stock Options and Restricted Stock Awards granted
          thereunder by the substitution on an equitable basis of appropriate
          stock of the Company, or of the merged, consolidated or otherwise
          reorganized corporation which will be issuable in respect to the
          shares of the Company's $1.00 par value common stock.  Stock to be
          issued pursuant to such Performance Shares shall be limited so that
          the excess of the aggregate fair market value of the shares subject to
          the Performance Shares immediately after such substitution over the
          purchase price thereof is not more than the excess of the aggregate
          fair market value of the shares subject to such Performance Shares
          immediately before such substitution over the purchase price thereof;
          or

     (b)  upon written notice to the Participant, provide that all Performance
          Shares granted to the Participant are deemed earned, that the
          Restriction Period of all Restricted Stock Awards has been eliminated
          and that all outstanding Stock Options shall accelerate and become
          exercisable in full but that all outstanding Stock Options, whether or
          not exercisable prior to such acceleration, must be exercised within
          not less than sixty days of the date of such notice or they will be
          terminated.  In any such case the Plan Committee may, in its
          discretion, extend the sixty day-exercise period.

     11.9  Withholding Taxes, etc.  All distributions under the Plan shall be
subject to any required withholding taxes and other withholdings and, in case of
distributions in Company common stock, the Participant or other recipient may,
as a condition precedent to the delivery of the common stock, be required to pay
to his/her participating employer the excess, if any, of the amount of required
withholding over the withholdings, if any, from any distributions in cash under
the Plan.  No distribution under the Plan shall be made in fractional shares of
the Company's common stock, but the proportional market value thereof shall be
paid in cash.

     11.10  General Restriction.  Each Performance Share, Stock Option and
Restricted Stock Award shall be subject to the requirement that, if at any time
the Board shall determine, in its discretion, that the listing, registration or
qualification of the shares subject to such option and/or

                                       19

 
right upon any securities exchange or under any state or Federal Law, or the
consent or approval of any government regulatory body, is necessary or desirable
as a condition of, or in connection with the granting of such Performance Share
or Stock Option or Restricted Stock Award or the issue or purchase of shares
respectively thereunder, such Performance Share or Stock Option or Restricted
Stock Award may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Board.

     11.11  Use of Proceeds.  The proceeds derived from the sale of the stock
pursuant to Stock Options or Restricted Stock Awards granted under the Plan
shall constitute general funds of the Company.

     11.12  Headings.  The headings of the Articles and their subparts in this
Plan are for convenience of reading only and are not meant to be of substantive
significance and shall not add to or detract from the meaning of such Article or
subpart to which it refers.

                                       20

 
                                                                    EXHIBIT (11)
                   DAYTON HUDSON CORPORATION AND SUBSIDIARIES
                       COMPUTATIONS OF PER SHARE EARNINGS

                      (In Millions, Except Per-Share Data)
Three Months Ended Nine Months Ended Twelve Months Ended ------------------------------- ------------------------------- ------------------------------- Oct. 29, 1994 Oct. 30, 1993 Oct. 29, 1994 Oct. 30, 1993 Oct. 29, 1994 Oct. 30, 1993 --------------- --------------- --------------- --------------- --------------- --------------- Earnings Shares Earnings Shares Earnings Shares Earnings Shares Earnings Shares Earnings Shares -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ Primary Computations - -------------------- Net earnings $ 67 $ 43 $ 155 $ 97 $ 433 $ 346 Less: Dividend requirements on ESOP preferred shares, net of tax benefit on unallocated shares (5) (4) (14) (13) (18) (19) ----- ----- ----- ----- ----- ----- Adjusted net earnings $ 62 $ 39 $ 141 $ 84 $ 415 $ 327 ===== ===== ===== ===== ===== ===== Average common shares outstanding 71.6 71.5 71.6 71.5 71.6 71.4 Average number of common share equivalents: Stock options 0.2 0.1 0.2 0.2 0.2 0.2 Performance shares 0.2 0.2 0.2 0.1 0.2 0.1 ----- ----- ----- ----- ----- ----- Adjusted common equivalent shares outstanding-primary 72.0 71.8 72.0 71.8 72.0 71.7 ===== ===== ===== ===== ===== ===== PRIMARY EARNINGS PER SHARE $0.86 $0.54 $1.96 $1.17 $5.76 $4.56 ===== ===== ===== ===== ===== ===== Fully Diluted Computations - -------------------------- Net earnings $ 67 $ 43 $ 155 $ 97 $ 433 $ 346 Less: Earnings impact of assumed ESOP preferred share conversion, net of tax benefit on unallocated shares (3) (3) (10) (9) (13) (14) ----- ----- ----- ----- ----- ----- Adjusted net earnings $ 64 $ 40 $ 145 $ 88 $ 420 $ 332 ===== ===== ===== ===== ===== ===== Average common and common equivalent shares-primary 72.0 71.8 72.0 71.8 72.0 71.7 Additional common stock equivalents attributable to application of the treasury stock method 0.1 - 0.1 - - - Assumed conversion of ESOP preferred shares 4.2 4.3 4.2 4.3 4.2 4.4 ----- ----- ----- ----- ----- ----- Adjusted common equivalent shares outstanding-fully diluted 76.3 76.1 76.3 76.1 76.2 76.1 ===== ===== ===== ===== ===== ===== FULLY DILUTED EARNINGS PER SHARE $0.83 $0.53 $1.90 $1.15 $5.51 $4.37 ===== ===== ===== ===== ===== ===== AVERAGE ALLOCATED ESOP PREFERRED SHARES OUTSTANDING (IN MILLIONS) 2.1 1.6 2.0 1.5 2.0 1.4 ===== ===== ===== ===== ===== =====

 
                                                                    EXHIBIT (12)
                  DAYTON HUDSON CORPORATION AND SUBSIDIARIES

              COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
        FOR THE NINE MONTHS ENDED OCTOBER 29, 1994 AND OCTOBER 30, 1993
                 AND FOR THE FIVE YEARS ENDED JANUARY 29, 1994

                             (Millions of Dollars)

Nine Months Ended Fiscal Year Ended ------------------- --------------------------------------------- Oct 29, Oct 30, Jan 29, Jan 30, Feb 1, Feb 2, Feb 3, 1994 1993 1994 1993 1992 1991 1990 --------- -------- -------- -------- ------- ------- ------- Earnings: Consolidated net earnings............... $ 155 $ 97 $ 375 $ 383 $ 301 $ 412 $ 410 Income taxes............................ 99 64 232 228 171 249 268 ----- ----- ------ ------ ----- ------ ----- Total earnings........................ 254 161 607 611 472 661 678 ----- ----- ------ ------ ----- ------ ----- Fixed charges: Interest expense........................ 328 346 459 454 421 333 283 Dividends on preferred stock (pre-tax basis)........................ 29 29 39 39 39 39 2 Interest portion of rental expense (a).. 38 33 45 43 39 46 45 ----- ----- ------ ------ ----- ------ ----- Total fixed charges................... 395 408 543 536 499 418 330 Less: Dividends on preferred stock (pre-tax basis)........................ (29) (29) (39) (39) (39) (39) (2) Capitalized interest.................... (5) (4) (5) (6) (11) (8) (10) ----- ----- ------ ------ ----- ------ ----- Fixed charges in earnings............. 361 375 499 491 449 371 318 ----- ----- ------ ------ ----- ------ ----- Earnings available for fixed charges...... $ 615 $ 536 $1,106 $1,102 $ 921 $1,032 $ 996 ===== ===== ====== ====== ===== ====== ===== Ratio of earnings to fixed charges........ 1.56 1.32 2.04 2.06 1.85 2.47 3.02 ===== ===== ====== ====== ===== ====== =====
(a) Calculated as one-third of rental expense, which is considered representative of the interest factor.
 


 
5 This schedule contains summary financial information extracted from Dayton Hudson Corporation's Form 10-Q for the nine-month period ended October 29, 1994 and is qualified in its entirety by reference to such financial statements. 1,000,000 9-MOS JAN-28-1995 JAN-30-1994 OCT-29-1994 173 0 1,593 42 3,681 5,550 8,938 2,614 12,208 3,971 4,712 72 363 0 2,719 12,208 14,106 14,313 10,467 10,467 3,206 67 319 254 99 155 0 0 0 155 1.96 1.90