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McGRAW-HILL, INC.
KEY EXECUTIVE SHORT-TERM INCENTIVE
DEFERRED COMPENSATION PLAN
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ARTICLE I
PURPOSE
The purpose of the McGraw-Hill, Inc. Key Executive Short-Term Incentive
Deferred Compensation Plan (hereinafter referred to as the "Plan") is to
provide funds for retirement or other expenses for executive employees (and
their beneficiaries) of McGraw-Hill, Inc. and its subsidiaries. It is intended
that the Plan will aid in retaining and attracting employees by providing such
employees with a means to defer receipt of short-term incentive compensation to
a future date.
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ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following words and phrases shall
have the meanings indicated, unless the context clearly indicates otherwise:
Section 2.01 BENEFICIARY. "Beneficiary" means the person, persons or
entity designated by the Participant to receive any benefits payable under the
Plan. Any Participant Beneficiary designation shall be made in a written
instrument filed with the Company and shall become effective only when
received, accepted and acknowledged in writing by the Company.
Section 2.02 BOARD. "Board" means the Board of Directors of
McGraw-Hill, Inc.
Section 2.03 CHANGE OF CONTROL. For purposes of this Plan, the term
"Change of Control" shall mean any of the following:
(i) The acquisition (other than from the Company) by any person,
entity or "group", within the meaning of Section 13(d) (3) or 14(d) (2) of the
Securities Exchange Act of 1934 (the "Exchange Act"), (excluding, for this
purpose, the Company or its subsidiaries, or any employee benefit plan of the
Company or its subsidiaries) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the
then outstanding shares of common stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally in the
election of directors; or
(ii) During any period of two consecutive years, individuals who at
the beginning of such period constitute the Board (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board, provided that
any person becoming a director during such period whose election, or nomination
for election by the Company's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act)
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shall be, for purposes of this Plan, considered as though such person were a
member of the Incumbent Board; or
(iii) Approval by the stockholders of the Company of a
reorganization, merger, or consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own,
directly or indirectly, more than 50% of the combined voting power entitled to
vote generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, or a liquidation or
dissolution of the Company or of the sale of all or substantially all of the
assets of the Company.
Section 2.04 COMMITTEE. "Committee" means the Management Compensation
Committee of the Board.
Section 2.05 COMPANY. "Company" means McGraw-Hill, Inc., its
successors, any subsidiary or affiliated organizations authorized by the Board
of Directors of McGraw-Hill, Inc. or the Committee to participate in the Plan
and any organization into which or with which the Company may merge or
consolidate or to which all or substantially all of its assets may be
transferred.
Section 2.06 DEFERRED ACCOUNT. "Deferred Account" means the account
maintained on the books of account of the Company for each Participant pursuant
to Article VI. Separate Deferred Accounts shall be maintained for each
Participant. More than one Deferred Account may be maintained for each
Participant as necessary to reflect (a) various interest credits and/or (b)
separate year deferral elections. A Participant's Deferred Account shall be
utilized solely as a device for the measurement and determination of the
amounts to be paid to the Participant pursuant to this Plan. A Participant's
Deferred Account shall not constitute or be treated as a trust fund of any
kind.
Section 2.07 DETERMINATION DATE. "Determination Date" means the date
on which the amount of a Participant's Deferred Account is determined as
provided in Article VI hereof. The last day of each calendar month shall be a
Determination Date.
Section 2.08 DISABILITY. "Disability" or "Disabled Participant" means
eligibility for disability benefits under the terms of the Company's Long-Term
Disability Plan in effect at the time the Participant becomes disabled.
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Section 2.09 INCENTIVE COMPENSATION. "Incentive Compensation" means
any short-term incentive compensation cash award payable by the Company to a
Participant in a Plan Year pursuant to the provisions of the McGraw-Hill, Inc.
1990 Key Executive Short-Term Incentive Compensation Plan.
Section 2.10 PARTICIPANT. "Participant" means any individual who is
designated by the Committee to participate in this Plan and who elects to
participate by filing a Participation Agreement as provided in Article IV.
Section 2.11 PARTICIPATION AGREEMENT. "Participation Agreement" means
the agreement filed by a Participant prior to the beginning of the first period
for which the Participant's Incentive Compensation is to be deferred pursuant
to the Plan and the Participation Agreement. Notwithstanding the foregoing
sentence, the Participation Agreement for the first Plan Year of the Plan may
be filed no later than August 31, 1990. A new Participation Agreement shall be
filed by the Participant for each separate Incentive Compensation deferral
election.
Section 2.12 PLAN ADMINISTRATOR. "Plan Administrator" means the
Executive Vice President, Administration of McGraw-Hill, Inc. or his designee.
Section 2.13 PLAN YEAR. "Plan Year" means a twelve month period
commencing January 1 and ending the following December 31. The first Plan Year
shall commence on January 1, 1990.
Section 2.14 RETIREMENT DATE. "Retirement Date" means the date on
which the Participant actually terminates employment due to retirement on or
after the first day of the month coincident with or next following a
Participant's attainment of age fifty-five (55).
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ARTICLE III
ADMINISTRATION
Section 3.01 PLAN ADMINISTRATOR; COMMITTEE; DUTIES.
This Plan shall be administered by the Plan Administrator. Decisions of the
Plan Administrator shall be reviewable by the Committee. The Committee shall
also have the authority to make, amend, interpret, and enforce all appropriate
rules and regulations for the administration of this Plan and decide or resolve
any and all questions, including interpretations of this Plan, as may arise in
connection with the Plan.
Section 3.02 BINDING EFFECT OF DECISIONS. The decision or action of
the Committee in respect to any question arising out of or in connection with
the administration, interpretation and application of the Plan and the rules
and regulations promulgated hereunder shall be final, conclusive and binding
upon all persons having any interest in the Plan, unless a written appeal is
received by the Committee within sixty days of the disputed action. The appeal
will be reviewed by the Committee and the decision of the Committee shall be
final, conclusive and binding on the Participant and all persons claiming by,
through or under the Participant.
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ARTICLE IV
PARTICIPATION
Section 4.01 PARTICIPATION. Participation in the Plan shall be
limited to executives selected by the Committee who elect to participate in the
Plan by filing a Participation Agreement with the Company. Except as provided
below, a Participation Agreement must be filed prior to December 15th
immediately preceding the Plan Year in which the Participant's participation
under the Agreement will commence, and the election to participate shall be
effective on the first day following receipt by the Company of a properly
completed and executed Participation Agreement. The Participation Agreement
for the first Plan Year of the Plan must be filed no later than August 31,
1990.
Section 4.02 DEFERRAL AMOUNT. A Participant may elect in any
Participation Agreement to defer all or a portion of his Incentive
Compensation.
Section 4.02 (a) With respect to Incentive Compensation deferrals, the
deferral selected in each Participation Agreement shall apply only to the
Participant's Incentive Compensation paid for the Plan Year for which the
respective Participation Agreement is applicable.
Section 4.02 (b) From time to time, the Committee may increase or
decrease the period for which the deferrals are effective by giving reasonable
written notice to the affected Participants. Such changes shall be effective
for all Participation Agreements filed thereafter.
Section 4.02 (c) A Participant's election to defer his Incentive
Compensation shall be irrevocable upon the filing of the respective
Participation Agreement; provided, however, that the deferral under any
Participation Agreement may be terminated or amended as provided in paragraphs
9.01 and 9.02.
Section 4.02 (d) With respect to Incentive Compensation deferrals, to
the extent the Participant participates in the Company's qualified Employee
Retirement Plan (ERP), Employee Retirement Account Plan (ERAP), and Savings
Incentive Plan (SIP), such deferrals will be credited with Company
contributions under non-qualified accounts for the ERP, ERAP and SIP Plans.
Section 4.03 ADDITIONAL PARTICIPATION AGREEMENT. A Participant may
enter into additional Participation Agreements if authorized to do so by the
Committee by filing a Participation Agreement with the Company prior to
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December 15th of any calendar year, stating the amount that the Participant
elects to have deferred for the next Plan Year. Such additional agreements
shall be effective as to Incentive Compensation paid in the Plan Year beginning
after the last day of the Plan Year in which the respective agreement is filed
with the Company.
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ARTICLE V
DEFERRED INCENTIVE COMPENSATION
Section 5.01 ELECTIVE DEFERRED INCENTIVE COMPENSATION. The amount of
Incentive Compensation that a Participant elects to defer in the Participation
Agreement executed by the Participant, with respect to each Plan Year of
participation in the Plan, shall be credited by the Company to the
Participant's Deferred Account. To the extent that the Company is required to
withhold any taxes or other amounts from the employee's deferred wages pursuant
to any state, Federal or local law, such amounts shall be taken out of the
portion of the Participant's Incentive Compensation which is not deferred under
this Plan, or the Participant's base salary.
Section 5.02 VESTING OF DEFERRED ACCOUNT. A Participant shall be
100% vested in his/her Deferred Account at all times.
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ARTICLE VI
DEFERRED ACCOUNT
Section 6.01 DETERMINATION OF ACCOUNT. Each Participant's Deferred
Account, as of each Determination Date, shall consist of the balance of the
Participant's Deferred Account as of the immediately preceding Determination
Date. The Deferred Account of each Participant shall be reduced by the amount
of all distributions, if any, made from such Deferred Account since the
preceding Determination Date.
Section 6.02 INTEREST CREDIT. As of each Determination Date, the
Participant's Deferred Account shall be increased by the amount of interest
earned since the preceding Determination Date. Interest shall be credited at a
rate determined to be in effect for each Plan Year, as determined by the
Committee based on the interest rate payable on the Company's long-term debt
securities. Notwithstanding the foregoing, if a Participant's Deferred Account
is paid in installments, interest shall be credited, (i) for retired
Participants, at the rate determined to be in effect during the Plan Year in
which the Participant retires, and (ii) for all other installment payments, at
the rate determined to be in effect during the Plan Year in which such payments
commence.
Section 6.03 STATEMENT OF ACCOUNTS. The Company shall submit to each
Participant, by July 1 following the close of each Plan Year, a statement in
such form as the Company deems desirable, setting forth the balance to the
credit of such Participant in his Deferred Account as of the last day of the
preceding Plan Year.
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ARTICLE VII
BENEFITS
Section 7.01 TIME OF PAYMENT. A Participant may elect in any
Participation Agreement whether payment of the balance to the credit of his
Deferred Account shall be paid or commence to be paid (i) on a date specified
by the Participant, or (ii) upon the earlier of the Participant's (A)
Retirement Date or (B) termination of employment other than death, disability,
or retirement. In either case, the Participant shall be entitled to the
balance to the credit of his Deferred Account determined under Section 6.01,
which shall be payable under Section 7.04 as of the Determination Date
coincident with or immediately following such date or event. No change in a
Participant's election shall be valid unless it is made in a Participation
Agreement which is filed with the Committee prior to the Plan Year preceding
the Plan Year in which payment of the Participant's Deferred Account would
otherwise have been made or commenced.
Section 7.02 DEATH. If a Participant dies after the commencement of
payments of his Deferred Account, or if a Participant while employed dies prior
to any payments of his Deferred Account, his Beneficiary shall receive a
lump-sum payment equal to his Deferred Account as of the Determination Date
coincident with or immediately following such death.
Section 7.03 DISABILITY. In the event of Disability prior to
retirement or termination of employment, the Disabled Participant, unless he
otherwise elects under this paragraph, shall have payment of his Deferred
Account made or commenced in accordance with the Participation Agreement filed
by the Participant. Before payments commence or are made under the preceding
sentence, a Disabled Participant may elect, subject to Committee approval upon
good cause shown, to have payments (i) made as soon as practicable in a lump
sum, or (ii) commence as soon as practicable in equal annual installments over
a period not in excess of 15 years.
Section 7.04 FORM OF PAYMENT. Upon the happening of the date or event
described in Sections 7.01 or 7.03, the Company shall pay to the Participant
the balance to the credit of his Deferred Account in a lump sum or in equal
annual installments as elected in the Participation Agreement filed by the
Participant. If a Participant elects to receive payments in installments,
payment of the Deferred Account shall be in an amount which amortizes the
Deferred Account balance in equal annual payments of principal and interest
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over a period not to exceed 15 years. For purposes of determining the amount
of the annual payment, the assumed rate of interest shall be the rate under the
terms of Section 6.02. No change in a Participant's election shall be valid
unless it is made in a Participation Agreement which is filed with the
Committee prior to the Plan Year preceding the Plan Year in which payment of
the Participant's Deferred Account would otherwise have been made or commenced.
Section 7.05 LUMP-SUM PAYMENT. Notwithstanding Section 7.04, in its
sole discretion the Committee may direct that the Company make a lump-sum
payment of the balance credited to a Participant's Deferred Account.
Section 7.06 WITHHOLDING OF TAXES. To the extent required by the law
in effect at the time payments are made, the Company shall withhold from
payments made hereunder any taxes required to be withheld from an employee's
wages for the Federal or any state or local government.
Section 7.07 COMMENCEMENT OF PAYMENTS. Commencement of payments under
this Plan shall be made following the earlier of (i) the date specified in the
Participation Agreement filed by the Participant or (ii) receipt of notice by
the Plan Administrator of the event which entitles a Participant (or a
Beneficiary) to payments under this Plan. All payments shall be made as of the
first day of the month.
Section 7.08 PAYMENTS IN CONNECTION WITH CHANGE OF CONTROL.
Notwithstanding anything contained in the Plan to the contrary, in the event of
a Change of Control of the Corporation the company shall immediately pay to
each Participant in a lump sum the then remaining balance in his/her Deferred
Account.
The terms of sections 9.01 and 9.02 shall not be applicable following
a Change of Control of the Corporation.
The reasonable legal fees incurred by any Participant to enforce
his/her valid rights hereunder shall be paid for by the Company to the
Participant in addition to sums otherwise due hereunder, whether or not the
Participant is successful in enforcing his/her rights or whether or not the
matter is settled.
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ARTICLE VIII
BENEFICIARY DESIGNATION
Section 8.01 BENEFICIARY DESIGNATION. Each Participant shall have the
right, at any time, to designate any person, persons or entity as his
Beneficiary or Beneficiaries (both principal as well as contingent) to whom
payment under this Plan shall be paid in the event of his death prior to
complete distribution to the Participant of the benefits due him under the
Plan.
Section 8.02 AMENDMENTS. Any Beneficiary designation may be changed
by a Participant by the written filing of such change on a form prescribed by
the Company. The filing of a new Beneficiary designation form will cancel all
Beneficiary designations previously filed.
Section 8.03 NO BENEFICIARY DESIGNATION. If a Participant fails to
designate a Beneficiary as provided above, or if all designated Beneficiaries
predecease the Participant, then any amounts to be paid to the Participant's
Beneficiary shall be paid to the Participant's estate.
Section 8.04 EFFECT OF PAYMENT. The payment to the deemed Beneficiary
shall completely discharge the Company's obligations under this Plan with
respect to the Participant.
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ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
Section 9.01 AMENDMENT. The Board or the Committee may at any time
amend the Plan in whole or in part, provided, however, that no amendment shall
be effective to decrease or restrict any Deferred Account at the time of such
amendment.
Section 9.02 COMPANY'S RIGHT TO TERMINATE. The Board or the Committee
may at any time terminate the Plan with respect to new elections to defer if,
in its judgment, the continuance of the Plan, the tax, accounting, or other
effects thereof, or potential payments thereunder would not be in the best
interests of the Company. The Board or the Committee may also terminate the
Plan in its entirety at any time, and upon any such termination, the Company
shall immediately pay to each Participant in a lump sum the then remaining
balance in his Deferred Account.
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ARTICLE X
MISCELLANEOUS
Section 10.01 UNSECURED GENERAL CREDITOR. Participants and their
Beneficiaries shall have no legal or equitable rights, interest or claims in
any property or assets of the Company. Any and all of the Company's assets
shall be, and remain, the general, unpledged, unrestricted assets of the
Company. The Company's obligation under the Plan shall be merely that of an
unfunded and unsecured promise of the Company to pay money in the future.
Section 10.02 NONASSIGNABILITY. Neither a Participant nor any other
person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in
advance of actual receipt the amounts, if any, payable hereunder, or any part
thereof, which are, and all rights to which are, expressly declared to be
unassignable and non-transferable. No part of the amounts payable shall, prior
to actual payment, be subject to seizure or sequestration for the payment of
any debts, judgments, alimony or separate maintenance owed by a Participant or
any other person, nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency.
Section 10.03 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions
of this Plan shall not be deemed to constitute a contract of employment between
the Company and the Participant, and the Participant (or his Beneficiary) shall
have no rights against the Company except as may otherwise be specifically
provided herein. Moreover, nothing in this Plan shall be deemed to give a
Participant the right to be retained in the service of the Company or to
interfere with the right of the Company to discipline or discharge him at any
time.
Section 10.04 PROTECTIVE PROVISIONS. A Participant will cooperate
with the Company by furnishing any and all information requested by the
Company, in order to facilitate the payment of benefits hereunder, and by
taking such physical examinations as the Company may deem necessary and taking
such other action as may be requested by the Company.
As amended: October 27, 1993
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