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                                                                 EXHIBIT 10.12


                         DEFERRED COMPENSATION AGREEMENT


This Deferred Compensation Agreement is entered into this 30th day of March, 
1998, by and between MERRILL CORPORATION, a Minnesota corporation located at 
One Merrill Circle, St. Paul, Minnesota (the "Company") and JOHN W. CASTRO, 
an individual residing at 3825 Bridgewater Drive, Eagan, Minnesota (the 
"Executive").

                                    RECITALS


FIRST:  The Executive is an employee of the Company.

SECOND:  The Executive and the Company have entered into an Employment 
Agreement.

THIRD:  The Employment Agreement provides that the Company will pay the 
Executive a Bonus.

FOURTH:  The Company and the Executive wish to provide for the automatic 
deferral of any portion of the Bonus that would cause the Executive's 
compensation for any fiscal year of the Company not to be deductible for the 
fiscal year pursuant to Code section 162(m).

NOW, THEREFORE, the Company and the Executive agree as follows:

                                    ARTICLE
                                       1.
                  DEFINITIONS, CONSTRUCTION AND INTERPRETATION

The definitions and rules of construction and interpretation set forth in 
this article apply in construing this Agreement unless the context otherwise 
indicates.

1.1.   ACCOUNT.  "Account" means the bookkeeping account maintained with 
       respect to the Executive pursuant to Section 2.1.

1.2.   AGREEMENT.  "Agreement" means this Deferred Compensation Agreement as 
       it may be amended from time to time.

1.3.   BONUS.  "Bonus" means the annual cash bonus to which Executive is 
       entitled pursuant to the Employment Agreement.

1.4.   BENEFICIARY.  "Beneficiary" is the person designated or otherwise 
       determined under the provisions of Section 3.5 as the distributee of 
       benefits payable after the Executive's death.

1.5.   CHANGE IN CONTROL.  "Change in Control" means a change in control of 
       the Company within the meaning of the Employment Agreement.

1.6.   CODE.  "Code" means the Internal Revenue Code of 1986, as amended.  
       Any reference to a specific provision of the Code includes a reference 
       to that provision as it may be amended from time to time and to any 
       successor provision.

1.7.   COMPANY.  "Company" means Merrill Corporation or any successor thereto.

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1.8.   CROSS REFERENCES.  References within a section of this Agreement to a 
       particular subsection refer to that subsection within the same section 
       and references within a section or subsection to a particular clause 
       refer to that clause within the same section or subsection, as the 
       case may be.

1.9.   EMPLOYMENT AGREEMENT.  "Employment Agreement" means the Employment 
       Agreement made as of February 1, 1989 between the Company and the 
       Executive, as amended by the Amendment to Employment Agreement dated 
       as of April 29, 1994, and as it may be further amended from time to 
       time.

1.10.  EXECUTIVE.  "Executive" means John W. Castro. 

1.11.  GOVERNING LAW.  To the extent that state law is not preempted by the 
       provisions of the Employee Retirement Income Security Act of 1974, as 
       amended, or any other laws of the United States, all questions arising 
       in connection with this Agreement, including, without limitation, 
       those pertaining to construction, validity, effect, enforcement and 
       remedies, will be determined in accordance with the internal, 
       substantive laws of the State of Minnesota without regard to the 
       conflict of laws rules of the State of Minnesota or any other 
       jurisdiction.

1.12.  HEADINGS.  The headings of articles and sections are included solely 
       for convenience of reference; if there exists any conflict between 
       such headings and the text of this Agreement, the text will control.

1.13.  TERMINATION OF EMPLOYMENT.  "Termination of Employment" means (a) a 
       complete termination of the employment relationship between the 
       Company and the Executive as determined in accordance with generally 
       applicable Company policies as in effect from time to time or (b) an 
       absence from active employment with the Company due to accident, 
       injury or illness if and when the Executive becomes entitled to 
       receive benefits under the Company's long-term disability plan in 
       connection with the absence.  For purposes of determining whether the 
       Executive has experienced a Termination of Employment, the term 
       "Company" includes all entities, whether or not incorporated, that 
       together with the Company are treated as a single employer pursuant to 
       Code sections 414(b) and (c).

1.14.  TRUST.  "Trust" means the trust established pursuant to Section 4.1 of 
       this Agreement, as it may be amended from time to time.

1.15.  TRUSTEE.  "Trustee" means the one or more banks or trust companies 
       that at the relevant time has or have been appointed by the Company to 
       act as Trustee of the Trust.

                                    ARTICLE
                                       2.
                                    BENEFITS

2.1.   ACCOUNT.  The Company will establish and maintain an Account for the 
       Executive to evidence amounts credited pursuant to Sections 2.2 and 
       2.3.

2.2.   DEFERRAL CREDITS.

       (A)  If payment of the Bonus for any fiscal year of the Company in 
            accordance with the terms of the Employment Agreement would cause 
            any portion of the Executive's compensation to not be deductible 
            by the Company for the fiscal year pursuant to Code section 
            162(m), the amount of the Bonus that would otherwise be paid to 
            the Executive 

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            in accordance with the terms of the Employment Agreement will be 
            reduced until no portion of the Executive's compensation is not 
            deductible pursuant to Code section 162(m) and the amount of the 
            reduction will be deferred pursuant to this Agreement.

       (B)  The amount of any deferral pursuant to this Section 2.2 will be 
            credited to the Executive's Account as of the date on which the 
            Executive would have otherwise received the Bonus with respect to 
            which such credit relates.

2.3.   EARNINGS.  As of the last day of each month, the Administrator will 
       adjust the Account by multiplying the average daily balance of the 
       Account for the month by the decimal equivalent of the percentage 
       increase or decrease in the Standard & Poors 500 index for the month, 
       determined by comparing the value of the index on the first business 
       day of the month to the value of the index on the last business day of 
       the month.  The Company and the Executive may from time to time agree 
       to an alternative methodology for calculating earnings.  The agreement 
       must be in writing and signed by the Company and the Executive.

2.4.   VESTING.  The Executive always has a fully vested nonforfeitable 
       interest in his Account.

                                    ARTICLE
                                       3.
                                  DISTRIBUTION

3.1.   DISTRIBUTION BEFORE TERMINATION OF EMPLOYMENT.  Prior to the 
       Executive's Termination of Employment, if, taking into account all 
       other compensation that the Executive has or will receive for a fiscal 
       year of the Company, the Company determines that the Executive may 
       receive additional compensation without exceeding the maximum amount 
       deductible by the Company for the fiscal year pursuant to Code section 
       162(m), not later than the last day of the fiscal year distribution of 
       the Executive's Account will be made, in the form of a single lump sum 
       payment, in an amount equal to the lesser of (a) the balance of the 
       Account and (b) the amount of additional compensation that the 
       Executive may receive for the fiscal year without exceeding the 
       maximum amount deductible by the Company for the fiscal year pursuant 
       to Code section 162(m).

3.2.   DISTRIBUTION AFTER TERMINATION OF EMPLOYMENT.  

       (A)  Distribution of the Executive's Account after his Termination of 
            Employment will be made or begin, as the case may be, as soon as 
            administratively practicable after the fifteenth day of the third 
            month following the last day of the Company's fiscal year that 
            includes the Executive's Termination of Employment. 

       (B)  The balance of the Executive's Account will be distributed to the 
            Executive after his Termination of Employment in the form of a 
            single lump sum payment, unless (1) the Executive makes an 
            irrevocable written election, on a form provided by the Company, 
            to receive his distribution in the form of annual installment 
            payments for either five or ten years and (2) the date of his 
            Termination of Employment is at least two years after the date on 
            which the written election is provided to the Company.  

       (C)  The balance of the Executive's Account will be distributed to his 
            Beneficiary as soon as administratively practicable after the 
            Executive's death in the form of a single lump sum payment.

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       (D)  If the distribution is made in the form of a lump sum payment, 
            the amount of the payment will be equal to the balance of the 
            Executive's Account as of the last day of the month immediately 
            preceding the distribution.

       (E)  If the distribution is made in the form of installment payments, 
            the undistributed portion of the Account balance will continue to 
            be credited with earnings pursuant to Section 2.3.  The first 
            annual payment will be made on a date determined in accordance 
            with Subsection A and subsequent annual payments will be made on 
            or around the same date in each of the following four or nine 
            years, as the case may be.  The amount of the payment each year 
            will be determined by dividing the Account balance as of the last 
            day of the month immediately preceding the payment date by the 
            total number of remaining payments (including the payment in 
            question).

3.3.   SPECIAL RULES.

       (A)  ACCELERATED DISTRIBUTION.  Notwithstanding Sections 3.1 and 3.2, 
            subject to Section 3.3(C) the Executive may elect an immediate 
            distribution in an amount equal to 90 percent of the amount of 
            the lump sum distribution to which he would then be entitled 
            pursuant to Section 3.2(C) and the remaining 10 percent of his 
            Account balance will be permanently forfeited. The distribution 
            will be made in the form of a lump sum payment within the 10-day 
            period following the receipt by the Company of the Executive's 
            written request for the distribution.

       (B)  UNFORESEEABLE EMERGENCY.  Notwithstanding Sections 3.1 and 3.2, 
            subject to Section 3.3(C) a distribution will be made to the 
            Executive if the Company determines that he has experienced an 
            "unforeseeable emergency."  The amount of the distribution may 
            not exceed the lesser of (1) the amount necessary to satisfy the 
            emergency, as determined by the Company or (2) the amount of the 
            lump sum distribution to which he would then be entitled pursuant 
            to Section 3.2(D).  The distribution will be made in the form of 
            a lump sum payment within the 10-day period following the 
            Company's determination that the Executive has experienced an 
            unforeseeable emergency.  For purposes of this section, an 
            "unforeseeable emergency" is an unanticipated emergency that is 
            caused by an event beyond the control of the Executive and that 
            would result in severe financial hardship to the Executive if the 
            hardship withdrawal was not permitted.  

       (C)  NONDEDUCTIBILITY.  

            (1)  If the Company determines in good faith prior to a Change in 
                 Control that there is a reasonable likelihood that any 
                 compensation paid to the Executive for a taxable year of the 
                 Company would not be deductible by the Company solely by 
                 reason of the limitation under Code section 162(m), solely 
                 to the extent deemed necessary by the Company to ensure that 
                 the entire amount of any distribution to the Executive 
                 pursuant to this Section 3.3 prior to the Change in Control 
                 is deductible, the Company may defer all or any portion of 
                 the distribution.  Any amounts deferred pursuant to this 
                 subsection will continue to be credited with earnings in 
                 accordance with Section 2.3. The deferred amounts and 
                 earnings thereon will be distributed to the Executive or to 
                 his Beneficiary in the case of his death at the earliest 
                 possible date, as determined by the Company in good faith, 
                 on which the deductibility of compensation paid or payable 
                 to the Executive for the taxable year of the Company during 
                 which the distribution is 

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                 made will not be limited by Code section 162(m) or, if 
                 earlier, the effective date of a Change in Control. 

            (2)  In lieu of a deferral of a distribution pursuant to 
                 Subsection (A), the Executive may make a written election to 
                 receive the distribution and reimburse the Company for the 
                 value of the deduction lost by operation of Code section 
                 162(m) as a result of the distribution, as determined by the 
                 Company.  The Company's good faith determination based on 
                 assumptions determined by the Company to be reasonable will 
                 be final and binding on the Company and the Executive and no 
                 adjustments will be made to reflect differences between 
                 assumptions and actual facts and circumstances.  The amount 
                 of any reimbursement pursuant to this Subsection (B) in 
                 connection with a distribution pursuant to Subsection (A) 
                 will reduce, dollar for dollar, the amount of any forfeiture 
                 pursuant to Subsection (A).  The Company may subtract the 
                 amount of any reimbursement due to the Company pursuant to 
                 this Subsection (B) from the amount of any distribution 
                 pursuant to this Agreement.

3.4.   DISTRIBUTION REDUCES ACCOUNT BALANCE.  The balance of the Account will 
       be reduced as of the date of any distribution by the gross amount of 
       the distribution.

3.5.   BENEFICIARY DESIGNATION.

       (A)  Executive may designate, on a form furnished by the Company, one 
            or more primary Beneficiaries or alternative Beneficiaries to 
            receive all or a specified part of his Account after his death, 
            and the Executive may change or revoke any such designation from 
            time to time.  No such designation, change or revocation is 
            effective unless executed by the Executive and received by the 
            Company during the Executive's lifetime.  If the Executive is 
            married, his spouse must consent to any designation, change or 
            revocation which would result in any person other than the spouse 
            being the Executive's primary Beneficiary.  The consent must be 
            in writing, signed by the spouse and witnessed by a notary 
            public.  The consent relates only to the specific Beneficiary or 
            class of Beneficiaries designated and the spouse may not 
            subsequently revoke the consent with respect to that Beneficiary 
            or class of Beneficiaries unless the Executive makes a new 
            designation.  No change or revocation requires the consent of any 
            person other than the Executive's spouse.

       (B)  If the Executive -

            (1)  fails to designate a Beneficiary, or

            (2)  revokes a Beneficiary designation without naming another 
                 Beneficiary, or

            (3)  designates one or more Beneficiaries none of whom survives 
                 the Executive,

            for all or any portion of his Account, such Account or portion 
            will be payable to the Executive's surviving spouse or, if the 
            Executive is not survived by a spouse, to the representative of 
            the Executive's estate.

       (C)  The automatic Beneficiaries specified above and, unless the 
            designation otherwise specifies, the Beneficiaries designated by 
            the Executive, become fixed as of the Executive's death so that, 
            if a Beneficiary survives the Executive but dies before the 

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            receipt of the payment due such Beneficiary, payment will be made 
            to the representative of such Beneficiary's estate.  Any 
            designation of a Beneficiary by name that is accompanied by a 
            description of relationship or only by statement of relationship 
            to the Executive is effective only to designate the person or 
            persons standing in such relationship to the Executive at the 
            Executive's death.

3.6.   PAYMENT IN EVENT OF INCAPACITY.  If the Executive or any Beneficiary 
       entitled to receive a payment under this Agreement is, in the judgment 
       of the Company, physically, mentally or legally incapable of receiving 
       or acknowledging receipt of the payment, and no legal representative 
       has been appointed for the individual, the Company may (but is not 
       required to) cause the payment to be made to any one or more of the 
       following as may be chosen by the Company:  the Beneficiary (in the 
       case of the incapacity of the Executive); the institution maintaining 
       the Executive or Beneficiary; a custodian under the Uniform Transfers 
       to Minors Act of any state (in the case of the incapacity of a 
       Beneficiary); or the Executive's or Beneficiary's spouse, children, 
       parents or other relatives by blood or marriage.  The Company is not 
       required to see to the proper application of any payment so made, and 
       any such payment completely discharges all claims under this Agreement 
       against the Company to the extent of the payment.

                                      ARTICLE
                                         4.
             ESTABLISHMENT OF TRUST; NATURE OF EXECUTIVE'S INTEREST

4.1.   ESTABLISHMENT OF TRUST.

       (A)  The Company may choose to provide benefits through a Trust with 
            an independent corporate trustee. The Trust must (1) be a grantor 
            trust with respect to which the Company is treated as grantor, 
            (2) not cause the benefits under this Agreement to be funded for 
            federal income tax purposes or for purposes of the Employee 
            Retirement Income Security Act of 1974, as amended, and (3) 
            provide that Trust assets will, upon the Company's insolvency, be 
            used to satisfy claims of the Company's general creditors. The 
            Company may from time to time transfer to the Trust cash, 
            marketable securities or other property acceptable to the Trustee 
            in accordance with the terms of the Trust.

       (B)  Notwithstanding Subsection (A), not later than the effective date 
            of a Change in Control, the Company must transfer to the Trust an 
            amount not less than the amount by which (1) 125 percent of the 
            balance of the Account as of the last day of the month 
            immediately preceding the effective date of the Change in Control 
            exceeds (2) the value of the Trust assets attributable to the 
            Agreement.  

4.2.   SOURCE OF PAYMENTS.  The Company may make payment of benefits directly 
       to the Executive or his Beneficiary as they become due under the terms 
       of this Agreement or may direct the Trustee to make such payments.  If 
       the Trust assets are not sufficient to make payments of benefits in 
       accordance with the terms of this Agreement, the Company will make the 
       balance of each such payment as it falls due.

4.3.   NATURE OF EXECUTIVE'S INTEREST.  Nothing contained in the Agreement is 
       to be construed as providing for assets to be held for the benefit of 
       the Executive or any other person or persons to whom benefits are to 
       be paid pursuant to the terms of this Agreement, the Executive's only 
       interest under the Agreement being the right to receive the benefits 
       set forth herein.  The Trust is established only for the convenience 
       of the Company and the Executive, and the Executive has 

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       no interest in the assets of the Trust prior to their distribution 
       pursuant to the Agreement.  To the extent the Executive or any other 
       person acquires a right to receive benefits under this Agreement or 
       the Trust, such right is no greater than the right of any unsecured 
       general creditor of the Company.

                                    ARTICLE
                                       5.
                                 MISCELLANEOUS

5.1.   DETERMINATION OF BENEFITS.  The Company will make all determinations 
       as to rights to benefits under this Agreement.  Subject to and in 
       compliance with the specific procedures contained in the applicable 
       regulations under the Employee Retirement Income Security Act of 1974, 
       as amended.

       (A)  Any decision by the Company denying a claim by the Executive or 
            his Beneficiary for benefits under this Agreement will be stated 
            in writing and delivered or mailed to the Executive or such 
            Beneficiary.

       (B)  Each such notice will set forth the specific reasons for the 
            denial.

       (C)  The Company will afford a reasonable opportunity to the Executive 
            or Beneficiary for a full and fair review of the decision denying 
            such claim.

5.2.   ADMINISTRATION.  

       (A)  Prior to a Change in Control, the Company's Board of Directors 
            has discretionary power and authority to interpret, construe, 
            apply, enforce and otherwise administer this Agreement and to act 
            on behalf of the Company.  The Board of Directors may delegate 
            such power and authority to any individual or committee.  Any 
            action taken by the Board of Directors or the Board of Directors' 
            delegate in good faith is binding and conclusive upon all parties 
            in interest and neither the Board of Directors nor any such 
            delegate will be liable to any person for any action taken or 
            omitted to be taken in connection with the interpretation, 
            construction, application, enforcement or other administration of 
            this Agreement, so long as such action or omission to act be made 
            in good faith.

       (B)  After a Change in Control, the Board of Directors of the Company 
            will interpret, construe, apply, enforce and administer this 
            Agreement on behalf of the Company and, other than with respect 
            to ministerial acts, the Board's duties are not delegable.

5.3.   STATEMENTS.  The Company will provide the Executive, or his 
       Beneficiary after the Executive's death, with written statements, 
       indicating the balance of the Account as of each January 31 (a 
       "statement date") until the Account has been distributed in full.  The 
       statement will indicate the balance of the Account as of the last 
       statement date, deferrals credited to the Account since the last 
       statement date pursuant to Section 2.2, earnings credited to the 
       Account since the last statement date pursuant to  Section 2.3 and the 
       balance of the Account as of the current statement date.  If the 
       Executive or Beneficiary fails to object to the balance reflected on 
       the statement within 90 days after receipt, the balance will be 
       presumed to be correct and the Executive or Beneficiary may not 
       thereafter object to the balance or the computation thereof.  
       Statements will be provided within 30 days after the statement date.

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5.4.   AMENDMENT.  This Agreement may not be amended, altered or modified, 
       except by a written instrument signed on behalf of the Company by the 
       Chair of the Compensation Committee of the Company's Board of 
       Directors and the Executive, or their respective successors.

5.5.   INUREMENT.  This Agreement is binding upon and inures to the benefit 
       of the Company and its successors and assigns, and the Executive, his 
       successors, heirs, executors, administrators and Beneficiaries.

5.6.   NON-ASSIGNABILITY OF BENEFITS.  The benefits payable under this 
       Agreement and the right to receive future benefits may not be 
       anticipated, alienated, sold, transferred, assigned, pledged, 
       encumbered, or subjected to any charge or legal process.

5.7.   WITHHOLDING AND OFFSETS.  The Company and the Trustee retain the right 
       to withhold from any benefit payment under this Agreement and from any 
       other wages payable to the Executive, any and all income, employment, 
       excise and other tax as the Company or Trustee deems necessary and, 
       prior to a Change in Control, the Company may offset against amounts 
       payable to the Executive or Beneficiary any amounts then owing to the 
       Company by the Executive or Beneficiary.

5.8.   NO EMPLOYMENT RIGHTS.  Nothing in this Agreement either (a) confers on 
       the Executive any right to continued employment with the Company, 
       employment with the Company in any particular position or Bonus 
       payments in any particular amount or (b) alters, impairs or modifies 
       any such right arising under the Employment Agreement.

5.9.   DISPUTES.  

       (A)  The Company and the Executive agree that any dispute regarding 
            this Agreement that they are unable to resolve to their mutual 
            satisfaction by negotiation will be resolved exclusively by 
            arbitration, by a panel of three arbitrators, in accordance with 
            the Commercial Arbitration Rules of the American Arbitration 
            Association then in effect.  Any arbitration proceeding that 
            commences before a Change in Control will be held in St. Paul, 
            Minnesota.  Any arbitration proceeding that commences after a 
            Change in Control will be held in a location within the 
            continental United States specified by the Executive.

       (B)  In connection with any dispute arising before a Change in 
            Control, the Executive or Beneficiary is responsible for paying 
            any costs he or she incurs, including attorney's fees and legal 
            expenses, and the Company is responsible for paying any costs it 
            incurs, including attorney's fees and legal expenses.  In 
            connection with any dispute arising after a Change in Control, 
            the Company is responsible for paying all costs of both parties, 
            including attorney's fees and expenses.

5.10.  NO WAIVER.  The waiver by either of the parties, express or implied, 
       of any right under this Agreement or any failure to perform under this 
       Agreement by the other party does not constitute a waiver of any other 
       right under this Agreement or of any other failure to perform under 
       this Agreement by the other party.

5.11.  OTHER BENEFITS.  

       (A)  Except to the extent otherwise expressly provided under a 
            specific benefit plan, practice, policy or procedure of the 
            Company, neither amounts deferred pursuant to Section 2.2 

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            nor amounts paid to the Executive pursuant to Article 3 
            constitute salary or compensation to the Executive for the purpose 
            of computing benefits to which he may be entitled thereunder.

       (B)  Amounts deferred pursuant to Section 2.2 will be considered 
            "excess pensionable earnings" for purposes of the Merrill 
            Corporation Supplemental Executive Retirement Plan for the plan 
            year during which the amounts would have been paid to the 
            Executive but for the deferral.

       (C)  Deferrals pursuant to this Agreement will be made after any 
            deferral of the Bonus pursuant to the Merrill Corporation Income 
            Deferral Plan.

5.12.  NO WARRANTIES REGARDING TAX TREATMENT.  The Executive acknowledges 
       that he has consulted independent counsel whose input has been 
       incorporated in structuring this Agreement.  The Company makes no 
       warranties regarding the tax treatment to the Executive of any 
       deferrals or payments made pursuant to this Agreement and the 
       Executive will hold the Company and its officers, directors, 
       employees, agents and advisors harmless from any liability resulting 
       from any tax position taken by the Company in good faith in connection 
       with this Agreement.

5.13.  NOTICE.  All notices, requests, elections, demands and all other 
       communications required or permitted by either party to the other 
       party by this Agreement must be in writing and will be deemed to have 
       been duly given when delivered personally or received by certified or 
       registered mail, return receipt requested, postage prepaid, at the 
       address of the other party, as follows:

            If to the Company, to:

            Merrill Corporation
            Energy Park
            1 Merrill Circle
            St. Paul, MN  55108
            Attention:  Chair of the Compensation Committee of 
                         the Board of Directors

            with a copy to the General Counsel

            If to Executive, to:

            John W. Castro
            3825 Bridgewater Drive
            Eagan, MN  55123

       Either party hereto may change its address for purposes of this 
       section by giving 15 days' prior notice to the other party.

5.14.  SEVERABILITY.  If any term or provision of this Agreement or the 
       application hereof to any person or circumstance is to any extent 
       invalid or unenforceable, the remainder of this Agreement or the 
       application of such term or provision to persons or circumstances 
       other than those as to which it is held invalid or unenforceable will 
       not be affected thereby, and each term and provision of this Agreement 
       will be valid and enforceable to the fullest extent permitted by law.

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5.15.  COUNTERPARTS.  This Agreement may be executed in several counterparts 
       each of which will be deemed to be an original copy, and all of which 
       together constitute one agreement binding on the Company and the 
       Executive.

To acknowledge and affirm their respective rights and obligations, the 
Company and the Participant have signed this Agreement as of the date first 
above written.

EXECUTIVE                                  MERRILL CORPORATION


                                           /s/ Kathleen A. Larkin,
/s/ John W. Castro                         Vice President-Human Resources
----------------------------               ------------------------------
March 30, 1998                             March 30, 1998









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