Document:

Retention Agreement

 Exhibit 10.7 

 
 

 
 August 1, 2012 
 David Stafford 
 McGraw-Hill Education, Inc. 

2 Penn Plaza 
 New York, New York 10121

 Retention Agreement 
 Dear David: 
 You are an important member of the senior leadership team of
McGraw-Hill Education, Inc. (the “Company”), and your continued employment with the Company on and after the Transaction is important to the continued success of the Company and its business. As an incentive to you to continue in
the employment of the Company on and after the Transaction, the Company will provide you the severance payments and benefits described below if you experience an Involuntary Termination during the Transition Period. 

1. Transition Period. The “Transition Period” means the period beginning on the date of the Transaction and
ending on the first anniversary of such date. 
 2. Enhanced Severance Benefits. 

(a) If your employment with the Company ends in an Involuntary Termination during the Transition Period, the Company will pay or provide
you with the enhanced severance and other benefits (the “Severance Payments and Benefits”) payable to a “GV Participant” under Part 3 of Appendix A to the Executive Severance Plan of The McGraw-Hill Companies, Inc.
(“Severance Plan”) as in effect on the date of this Retention Agreement, as if such Severance Plan had been duly adopted by the Company for your benefit and the enhanced severance provisions in Appendix A thereof had remained in
effect through the date of your Involuntary Termination. 
 (b) In determining the amount of the Severance Payments and
Benefits, all of your service with (i) the Company and its subsidiaries (collectively, the “Company Group”) on and after the Transaction and (ii) The McGraw-Hill Companies, Inc. (“McGraw-Hill”) and its
subsidiaries prior to the Transaction will be taken into account in determining the amount of the Severance Payments and Benefits. The Company will pay you the Severance Payments and Benefits even if the circumstances resulting in your Involuntary
Termination would not have constituted a severance payment event under the terms of the Severance Plan. The Severance Payments and Benefits will be payable to you by the Company at the times and in the manner contemplated by the Severance Plan,
subject to the delivery by you to the Company of a release of claims in substantially the form used by McGraw-Hill in similar circumstances, and compliance with the provisions of the Severance Plan related to compliance with Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), which shall apply to the 

  
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payment of the Severance Payments and Benefits. Any benefit continuation contemplated by the Severance Plan shall apply only to comparable benefit plans, if any, of the Company in effect at the
time of your Involuntary Termination. 
 3. Involuntary Termination. 

(a) You will have experienced an “Involuntary Termination” if (i) the Company terminates your employment without
Cause during the Transition Period or (ii) you resign your employment with the Company for Good Reason during the Transition Period. For purposes of this Retention Agreement, you will also be deemed to have experienced an Involuntary
Termination during the Transition Period if either of the following apply: (i) you receive written notice from the Company during the Transition Period that your employment will be terminated without Cause after the Transition Period and your
employment with the Company actually ends in a termination without Cause within 30 days following your receipt of that notice; or (ii) an event constituting Good Reason occurs during the Transition Period, you provide the Company during the
Transition Period with written notice of your intention to resign for Good Reason, and your employment with the Company actually ends in a resignation for Good Reason within 30 days following the date of such notice to the Company. 

(b) “Cause” means your misconduct in respect of your obligations to the Company Group or other act of misconduct by you
occurring during the course of your employment, which, in either case, results in or could reasonably be expected to result in material damage to the property, business or reputation of the Company Group; provided that in no event shall
unsatisfactory job performance alone be deemed to be Cause. 
 (c) “Good Reason” means (i) a 10% or larger
reduction by the Company (in one or more steps) of your base salary; (ii) having received written notice from the Company of your planned transfer to a principal business location that increases the distance between your principal business
location and your place of residence at the time of the notice of planned relocation by more than 50 miles; or (iii) you cease to be the senior-most legal officer of the Company reporting directly to the Company’s Chief Executive Officer;
provided, however, that an event shall not constitute Good Reason unless you provide the Company with written notice of termination for reasons of such event within 15 days following the date of your first knowledge of such event, and
the Company does not cure such event to your reasonable satisfaction within 15 days following its receipt of the written notice of termination; and provided, further, that an event which is so cured by the Company shall not
constitute an event of Good Reason for purposes of this Retention Agreement. 
 4. Stay Bonus. 

(a) Subject to the terms and conditions contained herein, you will receive a special cash bonus payment of $125,000, less any
required deductions and withholding. This payment will be contingent upon your working for and remaining employed by the Company through the date that is six (6) months past the closing date of the Transaction (the “Bonus
Period”). Additionally, it will be contingent upon your receiving an overall performance rating of “Full Achievement” or better throughout the Bonus Period. 

(b) This payment will be paid to you in a lump sum, less required deductions and withholding, within thirty (30) days following
the end of the Bonus Period. You will not be entitled to any portion of this payment in the event that, prior to the end of the Bonus Period, you voluntarily terminate your employment other than for Good Reason or you are terminated by the

  
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Company for Cause. In the event you are subject to an Involuntary Termination prior to the end of the Bonus Period, you will be entitled to this payment within thirty (30) days
following the end of your employment. 
 5. Transaction. 

(a) For purposes of this Retention Agreement, “Transaction” means, as applied to the Company, a Private Sale, IPO or
Spin-off. 
 (b) “Spin-off” of the common stock of the Company means the distribution of the common stock of
the Company to the shareholders of McGraw-Hill in a transaction intended to qualify as tax-free at the stockholder level pursuant to Section 355 of the Code. 
 (c) “IPO” means an underwritten public offering of the common stock of the Company occurring prior to both a Private Sale and Spin-off and following which the common stock is listed or
quoted on any United States or foreign national securities exchange or quoted on any United States or foreign automated securities quotation system. 
 (d) “Private Sale” of the Company means the acquisition from McGraw-Hill by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
“Person”) (other than McGraw-Hill) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) more than 50% of the then outstanding shares of common stock or combined voting power
of the Company or (ii) all or substantially all of the assets of the Company. In no event, however, shall a Private Sale occurring prior to an IPO or Spin-off be treated as a “Change in Control” for purposes of the calculation of
severance under the Severance Plan. 
 (e) “Exchange Act” means the Securities Exchange Act of 1934, as
amended. 
 6. Miscellaneous. 
 (a) Nothing in this Retention Agreement shall be construed as changing your status as an employee-at-will of the Company during the Transition Period, and, subject to the obligations of the Company set
forth above, nothing in this Retention Agreement shall alter the rights of the Company to terminate your employment at any time for any reason or for no stated reason or your right to resign your employment with the Company for any reason or no
stated reason. Nothing in this agreement shall be construed as resulting in an actual or constructive termination of your employment at the end of the Transition Period, and any continuation of your employment with the Company after the Transition
Period will be at-will and be subject to plans and programs of the Company then in effect and any agreement to which you and the Company are then parties. 
 (b) The Company shall cause any entity (a “Successor Entity”) that acquires or succeeds to all or substantially all of the Company’s business or assets (i) to assume all of the
Company’s then outstanding rights and obligations under this Retention Agreement and (ii) to confirm such assumption to you in writing. By signing this Retention Agreement, you hereby consent to such assignment and delegation to the
Successor Entity of the Company’s rights and obligations under this Retention Agreement and further acknowledge and agree that, upon the assumption of this Retention Agreement by the Successor Entity, the Company shall have no further
obligations to you arising under or related to this Retention Agreement. 

  
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 (c) You agree that at no time during your employment by the Company and thereafter shall you
make, or cause or assist any other person or entity to make, any statement or other communication to any third party, including the media, which impugns or attacks, or is otherwise critical of, the reputation, business or character of the Company
Group or McGraw-Hill and its subsidiaries or any of their respective directors, officers or employees. Nothing contained in this Agreement is intended to prohibit or restrict you from providing truthful information to any government agency or when
testifying under oath. If you are subpoenaed, noticed or consent to testify with regard to the entities or persons set forth in this paragraph, you agree to promptly notify the General Counsel of the Company and McGraw-Hill and provide such
General Counsels with a copy of such subpoena, notice or consent. In the event you breach the terms of this paragraph, you shall forfeit any unpaid Severance Pay and Benefits, and you shall be required to repay to the Company any Severance payments
already made to you, and the Company shall be entitled to pursue any other relief legally available. 
 (d) This Retention
Agreement shall be void and of no further force and effect if a Transaction does not occur on or prior to December 31, 2013. 
 (e) This Retention Agreement shall be governed by the laws of the State of New York applicable to contracts executed and performed entirely in such State. 

*     *     *     * 

Please indicate your understanding and agreement with the above by signing the attached copy of this Retention Agreement and returning it
to the Company, attention of the undersigned. 
  

			
	MCGRAW-HILL EDUCATION, INC.
		
	By:	 	 

	Title:	 	Lloyd G. Waterhouse

  

	
	ACCEPTED AND AGREED:
	
	 

	David Stafford
	
	

	Date

  
 4Restricted Stock Unit Award Agreement

 Exhibit 10.8 
 RESTRICTED STOCK UNIT AWARD AGREEMENT 
 AGREEMENT (the
“Agreement”) made as of the 2nd day of July, 2012 (the “Grant Date”) by and between McGraw-Hill Education, Inc., a Delaware corporation (“MHE”), and Lloyd G. Waterhouse (the
“Executive”). 
 WHEREAS, the Executive has entered into an employment agreement, dated June 6, 2012 (the
“Employment Agreement”), with MHE, a wholly-owned subsidiary of The McGraw-Hill Companies, Inc., a New York corporation (“The McGraw-Hill Companies”), that provides for his employment as the Chief Executive Officer
of MHE; 
 WHEREAS, part of the consideration to be provided to the Executive under the Employment Agreement is an award of
cash-settled restricted stock units (the “Units”), initially valued in reference to a number of shares of common stock $1.00 par value, of The McGraw-Hill Companies (the “Stock”), which Units (the
“Award”) are to be granted on the terms specified below; 
 WHEREAS, the Board of Directors of The McGraw-Hill
Companies has designated the Compensation and Leadership Development Committee of the Board (the “Committee”) to administer the executive compensation programs of The McGraw-Hill Companies and its subsidiaries, such as MHE;

 WHEREAS, the Committee has approved the grant of the Units to the Executive on the terms set forth herein; and 

WHEREAS, the Executive is accepting the Award subject to the terms and conditions set forth below: 

1. Grant of Award. MHE hereby grants to the Executive 88,535 Units, each of which initially represents the right to receive a cash
payment in an amount equal to the “Fair Market Value” (as defined in Section 13 below) of one share of Stock, subject to the terms and conditions hereinafter set forth. As of the Grant Date, the aggregate Fair Market Value of the
Units granted hereunder (based on the corresponding value of the underlying shares of Stock) shall be $4 million (prior to rounding to the nearest whole Unit). 

 2. Restrictions. The restrictions on the Units covered by this Award shall lapse and
such Units shall vest in installments (“Installments”) on the applicable “Maturity Dates” set forth below, provided, that, for any given Installment, the Executive remains an employee of MHE until the
applicable Maturity Date (except as expressly contemplated in Sections 5 and 7 below). 
  

			
	 Installment
	 	 Maturity Date

	 1/3 of the Award

1/3 of the Award

1/3 of the Award
	 	 First Anniversary of Effective Date

Second Anniversary of Effective Date
 Third Anniversary of Effective Date

 3. Payment Following Maturity Date of Award. Subject to Section 5 below, if the Executive
remains an employee of MHE through the Maturity Date relating to any given Installment of the Award, the Units covered by such Installment shall become unrestricted and fully vested on such Maturity Date, and shall be converted into cash based on
their Fair Market Value on the Maturity Date and such cash shall be delivered by MHE to the Executive within three business days following such Maturity Date. Before any payments are delivered by MHE to the Executive pursuant to the terms of this
Agreement, MHE shall withhold Social Security, Federal income tax, and (where applicable) state and local income taxes to the extent that it is required by law to do so. 
 4. Termination for Cause; Resignation without Good Reason. If the Executive’s employment with MHE is terminated (a) by MHE for Cause or (b) on account of his resignation from
employment without Good Reason (or without a deemed Good Reason, as set forth in Section 5(c) below) prior to the Maturity Date for any given Installment of the Award, the Executive shall forfeit the right to the Units covered by such
Installment and any subsequent Installment. 

  
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 5. Termination without Cause; Resignation for Good Reason; Non-Renewal. If the
Executive’s employment with MHE (a) is terminated by MHE without Cause, (b) terminates on account of his resignation from employment for Good Reason, (c) terminates on account of a resignation deemed to be Good Reason under
Section 4(c) of the Employment Agreement, or (d) is not continued following the expiration of the Term on account of MHE and the Executive failing to mutually agree upon the Executive’s continued employment and the terms thereof (each
event described in clauses (a)-(d), a “Vesting Event”), prior to the Maturity Date for any given Installment of the Award, all of the Units covered by such installment and all other Units that had not previously become vested shall
become fully vested on the date of the occurrence of such Vesting Event and converted to the right to receive a cash payment based upon the Fair Market Value of such Units on the date of the occurrence of the Vesting Event. Any such cash payment to
Executive shall be made by MHE on the sixtieth day following the Vesting Event, subject to the Executive’s execution of and delivery to MHE, within 30 days following the date of his termination of employment, a general release of claims in
substantially the form attached as Exhibit C to the Employment Agreement (provided the Company furnishes to the Executive an execution copy thereof within seven days following the date of his termination of employment) and the release has become
effective and irrevocable in its entirety. 
 6. Death; Disability. In the event of the death or Disability of the
Executive while employed by MHE, the Executive shall receive payment of a pro rata portion of the Award. The pro rata portion of the Award to be paid to the Executive in the event of his death or Disability shall be based upon the
number of Units determined in accordance with the formula [(A x B) – C], where “A” is the number of Units specified in Section 1; “B” is the number of days elapsed from the Effective Date through and
including the date of termination of employment due to death or Disability divided by 1,095; and “C” is the number of Units subject to the Award for which the Maturity Date 

  
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or Maturity Dates have previously occurred. The Units determined in accordance with the previous sentence shall be converted into cash based on their Fair Market Value on the date of the
Executive’s termination of employment due to death or Disability, as the case may be, and such cash shall be delivered by MHE to the Executive (or in the event of his death, to his estate) within 30 days following such date of termination of
employment, subject to applicable tax withholding requirements. The Executive shall forfeit as of the date of termination of employment due to death or Disability the right to any then outstanding Units not vested and settled in accordance with this
Section 6. 
 7. Effects of a Transaction. In the event (i) of the occurrence of a Transaction and
(ii) the Executive has been continuously employed by MHE through the closing date of the Transaction, then, anything in this Agreement to the contrary notwithstanding, any outstanding Units for which the Maturity Date has not then occurred
shall vest as to 100% of such Units immediately prior to the closing date of the Transaction. The value of each of the Units shall convert to a fixed cash amount based on the average Fair Market Value of one share of Stock for the five trading days
prior to the closing date of the Transaction, and MHE shall pay the aggregate value (plus any then credited dividend equivalents) of all such Units to the Executive in two equal installments: (i) the first installment shall be paid in a cash
lump sum on the closing date of the Transaction and immediately prior to the closing of such Transaction and (ii) the second installment shall be paid in a cash lump sum on the first anniversary of the closing date of the Transaction, in each
case, less all applicable withholding. 
 8. Voting and Dividend Rights. The Executive shall not have the right to vote
the shares of common stock underlying the Units. In the event that an ordinary cash dividend is declared with respect to the shares of common stock underlying Units that have not been previously settled or forfeited in accordance with this Agreement
on or prior to the time such dividend is declared, MHE shall credit to the account of the Executive on the payment date for such dividend a cash dividend equivalent amount 

  
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equal to the amount of the dividend that would have been paid to the Executive if he was the owner of the underlying shares of common stock. Such cash amount shall be subject to the vesting,
forfeiture and payment terms applicable to the corresponding Unit and (i) shall be forfeited, if the corresponding Unit is forfeited in accordance with the terms of this Agreement, and (ii) shall be paid (without interest or accretion), if
and when the corresponding Unit is settled through payment to the Executive in accordance with the terms of this Agreement. MHE shall make an appropriate equitable adjustment to the Award to take into account any extraordinary dividend or other
change in capitalization (other than a Transaction) affecting the common stock underlying the Units so as to preserve the relative economic value of the Award to the Executive immediately before and after such extraordinary dividend or change in
capitalization. 
 9. Transfer Restrictions; Successors and Assigns. This Award is nontransferable by the Executive, and
may not be transferred, sold, assigned, pledged or hypothecated by him. Any attempt to effect any of the foregoing shall be null and void. This Agreement shall be binding upon and inure to the benefit of any successors to or assigns of MHE (provided
that MHE shall not assign this Agreement except as incident to a reorganization, merger or consolidation or sale or transfer of all or substantially all of MHE’s assets) and the Executive’s heirs and the personal representatives of the
Executive’s estate. 
 10. Restrictive Covenants. In consideration for receiving this Award, the Executive agrees to
be bound by the restrictive covenants and related provisions set forth in Sections 5, 6, 7, 8, 9, 10 and 12 of the Employment Agreement and such provisions are incorporated by reference herein and made a part hereof. The Executive agrees that in the
event of a material breach of any of the foregoing provisions (which, for the avoidance of doubt, would not include any isolated, insubstantial or inadvertent breach that is not in bad faith), which results in or which would reasonably be expected
to result in material damage to the property, business or reputation of the Company or 

  
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the Company Group, which includes, prior to a Transaction , the Parent or the Parent Group), all further obligations of MHE to make payments hereunder shall cease; provided, that the Company has
provided the Executive with a written notice referencing this Section 10 of this Agreement and specifying in reasonable detail the conduct constituting such breach within 60 days of the Company’s first knowledge of its occurrence and such
breach is not cured, to the extent it is capable of being cured, or offending conduct corrected, within 30 days after the date such notice is received by the Executive. 
 11. Miscellaneous. The terms of this Award document (a) shall be governed by the laws of the State of New York (applicable to contracts executed and performed in such State), and any
applicable laws of the United States and (b) may not be amended without the written consent of both MHE and the Executive. For so long as MHE remains a wholly-owned subsidiary of The McGraw-Hill Companies, consent on behalf of MHE may only be
given through a writing signed, dated and authorized by the Chief Executive Officer of The McGraw-Hill Companies that directly refers to this Agreement. No other modifications to the terms of this Award document are valid under any circumstances. No
contract or right of employment shall be implied by this Award document. If this Award is assumed or a new award is substituted therefore in any corporate reorganization (including, but not limited to, any transaction of the type referred to in
Section 424(a) of the Code), employment by such assuming or substituting corporation or by a parent corporation or subsidiary thereof shall be considered for all purposes of this Award to be employment by MHE. Nothing in this Agreement shall
entitle the Executive to receive, or obligate MHE to pay, the Fair Market Value of a Unit more than once or require the payment of any amount for a Unit that has been previously forfeited in accordance with the terms of this Agreement. 

  
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 12. Section 409A. The provisions of Section 17 of the Employment Agreement
apply to payments under this Agreement and are incorporated herein by reference. 
 13. Definition of “Fair Market
Value”. For purposes of this Agreement, “Fair Market Value” shall mean Fair Market Value as defined in The McGraw-Hill Companies, Inc. 2002 Stock Incentive Plan, as in effect as of the date hereof, provided,
however, after the occurrence of a Spin-off or IPO of the common stock of MHE, the term “Stock”, as used in such definition, shall refer to the common stock of MHE which is then traded on the Applicable National Securities
Exchange, and the term “New York Stock Exchange,” as used in such definition, shall refer to the Applicable National Securities Exchange. With respect to shares of common stock underlying Units, the term “Applicable National
Securities Exchange” shall mean the New York Stock Exchange, or, if such equity securities are not traded on the New York Stock Exchange, such other national securities exchange on which such equity securities are then traded. 

14. Capitalized Terms. All capitalized terms not otherwise defined or described herein shall have the meanings set forth in
the Employment Agreement. For the avoidance of doubt, the following capitalized words are defined in the Employment Agreement: “Cause,” “Disability,” “IPO,” “Effective Date,” “Good Reason,”
“Parent,” “Private Sale,” “Spin-off”, “Term” and “Transaction.” 
  

					
	EXECUTIVE	 		 	McGRAW-HILL EDUCATION, INC.
			
	

	 		 	

	Lloyd G. Waterhouse	 		 	Harold McGraw III
		 		 	Chairman

  
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