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Exhibit (10)
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
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(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) 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.
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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.
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 and 1995 Key Executive Short-Term Incentive Compensation Plans.
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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.
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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 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.
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
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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.
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
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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.
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.
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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 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
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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.
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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.
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.
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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.
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.
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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
January 25, 1995
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