Document:

EX-10.17

 

Exhibit 10.17

THE McGRAW-HILL COMPANIES, INC.

EXECUTIVE SEVERANCE PLAN

(As Amended and Restated Effective October 23, 2003)

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TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 1.	 	Purpose
	 	 	51	 
	Section 2.	 	Effective Date
	 	 	51	 
	Section 3.	 	Administration
	 	 	51	 
	Section 4.	 	Participation
	 	 	51	 
	Section 5.	 	Payments Upon Qualified Termination of Employment
	 	 	52	 
	Section 6.	 	Unfunded Status of Plan
	 	 	55	 
	Section 7.	 	Termination and Amendment of the Plan
	 	 	55	 
	Section 8.	 	Benefit of Plan
	 	 	56	 
	Section 9.	 	Non-Assignability
	 	 	56	 
	Section 10.	 	Effect of Other Plans
	 	 	56	 
	Section 11.	 	Mitigation and Offset
	 	 	56	 
	Section 12.	 	Termination of Employment
	 	 	56	 
	Section 13.	 	Severability
	 	 	57	 
	Section 14.	 	Disputed Claims
	 	 	57	 
	Section 15.	 	Governing Law; Section Headings
	 	 	57	 
	Section 16.	 	Claims Procedure
	 	 	57	 
	Section 17.	 	Limit on Discretionary Authority After Change of Control
	 	 	58	 

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THE McGRAW-HILL COMPANIES, INC. EXECUTIVE SEVERANCE PLAN

Section 1. Purpose.

     The purpose of the Executive Severance Plan (the “Plan”) is to provide managers who are in a
position to contribute materially to the success of The McGraw-Hill Companies, Inc., or any
subsidiary at least 20% of whose voting shares are owned directly or indirectly by The
McGraw-Hill Companies, Inc. (collectively, the “Company”), with reasonable compensation in the
event of their termination of employment with the Company.

Section 2. Effective Date.

     The Plan is effective as of January 28, 1987.

Section 3. Administration.

     The Plan shall be administered by the Chief Executive Officer (the “CEO”) of the Company.
The CEO shall have authority to delegate responsibility for the operation and administration of
the Plan. Subject to the express provisions of the Plan, including without limitation Section 17
below, and the rights of Participants pursuant thereto, the CEO or his or her delegate (the
“Administrator”) shall have discretionary authority to (i) adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as the Administrator shall,
from time to time, deem advisable; (ii) resolve all questions or ambiguities relating to the
interpretation and application of the Plan (and any notices or agreements relating thereto);
(iii) make eligibility and benefit determinations under the Plan, including any factual
determinations relevant thereto; and (iv) otherwise supervise the administration of the Plan in
accordance with the terms hereof. The discretionary authority under the preceding sentence may
also be exercised by any person making a determination on a claim for benefits or a review of a
claim pursuant to Section 16 below, subject to Section 17 below.

     Subject to Sections 16 and 17 hereof, all decisions made by the Administrator pursuant to
the provisions of the Plan shall be final and binding on all persons, including the Company and
Participants.

Section 4. Participation.

     The CEO shall from time to time select the employees who are to participate in the Plan (the
“Participants”) from among those employees who are determined by the CEO to be in a position to
contribute materially to the success of the Company.

     The Company shall notify each Participant in writing of his participation in the Plan, and
such notice shall also set forth the payments and benefits to which the Participant may become
entitled. The Company may also enter into such agreements as the Company deems necessary or
appropriate with respect to a Participant’s rights under the Plan. Any such notice or agreement
may contain such terms, provisions and conditions not inconsistent with the Plan, including but
not limited to provisions for the extension or renewal of any such agreement, as shall be
determined by the Company in its sole discretion.

     A Participant shall cease to be a Participant in the Plan upon the earlier of (i) his
receipt of all the payments, if any, to which he is or becomes entitled

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under the terms of this Plan and the terms of any notice or agreement issued by the Company
with respect to his participation hereunder, or (ii) the termination of his employment with the
Company under circumstances not requiring payments under the terms of this Plan.

Section 5. Payments Upon Qualified Termination of Employment.

          (a) In the event of a Qualified Termination of Employment, the Participant shall
be entitled, as compensation for services rendered, subject to any applicable payroll or other
taxes required to be withheld, to:

               (i) continue to receive an amount equal to his Monthly Base Salary for a period
following his termination of employment, based upon the following formula, but in no event for
less than 9 months: the number of full and partial years of the Participant’s continuous service
with the Company, up to a maximum of 20 years, multiplied by 0.9; provided that if the foregoing
formula yields a period exceeding 12 months, the Participant shall be entitled to salary
continuation for only 12 months and, in addition, shall be entitled to a single lump sum cash
payment equal to the product of the Participant’s Monthly Base Salary and the number of months
under the formula in excess of 12, to be paid 12 months after the Participant’s termination of
employment, or as soon thereafter as practicable;

               (ii) remain an active participant in all Company-sponsored retirement, life,
medical, dental, accidental death and disability insurance benefit plans or programs in which he
was participating at the time of his termination for the duration of the salary continuation
period described in Section 5(a)(i) above (not in excess of 12 months), but only to the extent
permitted by applicable law, as determined by the Company, it being understood that continued
participation in Company-sponsored retirement plans or programs shall be limited to such plans or
programs that are not intended to be qualified under Section 401(a) or 401(k) of the Internal
Revenue Code of 1986, as amended (the “Code”), and, in addition, if the formula in Section
5(a)(i) above yields a period exceeding 12 months, the Participant shall be entitled to a single
lump sum cash payment equal to 10% of the product of the Participant’s Monthly Base Salary and
the number of months under the formula in excess of 12, to be paid 12 months after the
Participant’s termination of employment, or as soon thereafter as practicable; provided that the
CEO may authorize, in his sole discretion, in lieu of the payments and benefits provided under
Section 5(a)(i) and (ii) above, payment to the Participant of a single lump sum equal to 110% of
the Participant’s Monthly Base Salary for the period under the formula specified under Section
5(a)(i), or for 9 months, if longer (100% of Monthly Base Salary for such period in lieu of
salary continuation, and 10% of Monthly Base Salary for such period in lieu of benefits
continuation).

     Such payments shall be in lieu of any other payments under the Plan or under any other
severance pay or separation allowance plan, program or policy of the Company including the
Company’s Separation Pay Plan; provided, however, if payments pursuant to the terms and
conditions of the Company’s Separation Pay Plan would result in greater payments to a Participant
than would be payable under this Plan, said Participant shall in such event receive payments
pursuant to the terms and conditions of the Company’s Separation Pay Plan in lieu of payments
pursuant to this Plan.

          (b) For purposes of this Section 5, the following definitions shall apply:

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               (i) A “Qualified Termination of Employment” shall mean termination of employment
with the Company (other than by reason of death, Disability, voluntary resignation by a
Participant under circumstances not qualifying under (B) below, or lawful Company mandated
retirement at normal retirement age)

          (A) by the Company for any reason other than for Cause, or

          (B) by the Participant after an Adverse Change in Conditions of
Employment or for any reason during the 30-day period following the first
anniversary of a Change of Control.

               (ii) “Cause” shall mean the participant’s misconduct in respect of the
participant’s obligations to the Company or other acts of misconduct by the participant occurring
during the course of the participant’s 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; provided that in no event shall unsatisfactory job performance alone be deemed to be
“Cause”; and, provided, further, that no termination of employment that is carried out at the
request of a person seeking to accomplish a Change in Control or otherwise in anticipation of a
Change in Control shall be deemed to be for “Cause.”

               (iii) An “Adverse Change in Conditions of Employment” shall mean the occurrence of
any of the following events:

          (A) an adverse change by the Company in the Participant’s functions,
duties or responsibilities, which change would cause the Executive’s position with
the Company to become one of substantially less responsibility, importance or
scope; or

          (B) a 10% or larger reduction by the Company (in one or more steps)
of the Participant’s Monthly Base Salary.

Notwithstanding the foregoing, the Participant’s failure to object to the Company in writing to a
change described in (A) or (B) above within 120 days after such change shall constitute a waiver
of such change as an Adverse Change in Conditions of Employment.

               (iv) “Disability” shall mean a Participant’s long-term disability pursuant to a
determination of disability under the Company’s Long-Term Disability Plan.

               (v) “Monthly Base Salary” shall mean a Participant’s highest regular monthly
salary during the preceding 24-month period, excluding any of the following: year-end or other
bonuses, incentive compensation, whether short-term or long-term, commissions, reimbursed
expenses, and any payments on account of premiums on insurance or other contributions made to
other Company welfare or benefit plans.

               (vi) “Change of Control” shall mean any of the following:

               (i) An acquisition by an individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within
the meaning of Rule 13d-3 promulgated

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under the Exchange Act) of 20% or more of either (1) the then outstanding shares of common
stock of the Corporation (the “Outstanding Corporation Common Stock”) or (2) the combined voting
power of the then outstanding voting securities of the Corporation entitled to vote generally in
the election of directors (the “Outstanding Corporation Voting Securities”); excluding, however,
the following: (1) any acquisition directly from the Corporation, other than an acquisition by
virtue of the exercise of a conversion privilege unless the security being so converted was
itself acquired directly from the Corporation; (2) any acquisition by the Corporation; (3) any
acquisition by any employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any entity controlled by the Corporation; or (4) any acquisition pursuant to a
transaction which complies with clauses (1), (2) and (3) of subsection (iii) of this definition;
or

               (ii) A change in the composition of the Board of Directors such that the
individuals who, as of the effective date of the Plan, constitute the Board of Directors (such
Board of Directors shall be hereinafter referred to as the “Incumbent Board”) cease for any
reason to constitute at least a majority of the Board of Directors; provided, however, for
purposes of this definition, that any individual who becomes a member of the Board of Directors
subsequent to the effective date of the Plan, whose election, or nomination for election by the
Corporation’s shareholders, was approved by a vote of at least a majority of those individuals
who are members of the Board of Directors and who were also members of the Incumbent Board (or
deemed to be such pursuant to this proviso), shall be considered as though such individual were a
member of the Incumbent Board; but, provided, further, that any such individual whose initial
assumption of office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule l4a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a Person other than
the Board of Directors shall not be so considered as a member of the Incumbent Board; or

               (iii) Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Corporation (“Corporate
Transaction”); excluding, however, such a Corporate Transaction pursuant to which (1) all or
substantially all of the individuals and entities who are the beneficial owners, respectively, of
the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities
immediately prior to such Corporate Transaction will beneficially own, directly or indirectly,
more than 50% of, respectively, the outstanding shares of common stock, and the combined voting
power of the then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation’s assets either directly or through
one or more subsidiaries) in substantially the same proportions as their ownership, immediately
prior to such Corporate Transaction, of the Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities, as the case may be, (2) no Person (other than the Corporation, any
employee benefit plan (or related trust) of the Corporation or such corporation resulting from
such Corporate Transaction) will beneficially own, directly or indirectly, 20% or more of,
respectively, the outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors except to the extent that
such ownership existed prior to the Corporate Transaction, and (3) individuals who were members
of the Incumbent Board will constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate Transaction; or

54

 

               (iv) The approval by the stockholders of the Corporation of a complete liquidation
or dissolution of the Corporation.

          (c) (i) In the event a Participant dies after the commencement of payments
pursuant to Section 5(a) above, the balance of said payments shall be payable to said
Participant’s estate.

               (ii) It is the intent of this Plan that a Participant’s transfer to another
location shall not by itself constitute an Adverse Change in Conditions of Employment; provided,
however, that such an Adverse Change in Conditions of Employment will be deemed to exist if,
after a Change of Control, a Participant is transferred to a principal business location so as to
increase the distance between the principal business location and such Participant’s place of
residence at the time of the Change of Control by more than 50 miles or such other distance
standard as may be established from time to time under Section 217(c)(1)(A) of the Code.

               (iii) It is the intent of this Plan that a Participant shall not receive payments
hereunder in the event of a sale of the business unit of the Company with which the Participant
is associated as an executive, provided that the Participant is offered a position and salary
with the buyer or the Company comparable to the position and salary of the Participant
immediately prior to said sale whether or not such offer is accepted by the Participant. If,
however, the Participant is not offered a comparable position and salary, Participant shall be
entitled to payments hereunder. A position shall not be deemed to be a “comparable position” for
purposes of this subsection (iii) if it increases the distance between the Participant’s
principal business location and the Participant’s place of residence at the time of the sale by
more than 50 miles or such other distance standard as may be established from time to time under
Section 217(c)(1)(A) of the Code.

Section 6. Unfunded Status of Plan.

     The Plan is intended to constitute an “unfunded” compensation arrangement. With respect to
any payments required to be made to a Participant by the Company, nothing contained herein shall
give any such Participant any rights that are greater than those of a general creditor of the
Company. In its sole discretion, the Company may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver payments in lieu of or
with respect to amounts payable hereunder, provided, however, that the existence of such trusts
or other arrangements is consistent with the unfunded status of the Plan.

Section 7. Termination and Amendment of the Plan.

     The Company shall have the right at any time, in its discretion, to amend the Plan, in whole
or in part, or to terminate the Plan, except that no amendment or termination shall impair or
abridge the obligations of the Company to any Participant or the rights of any Participant under
the Plan (1) under any notices or agreements previously issued pursuant to the Plan, (2) with
respect to any termination of employment that occurred before such amendment or termination, or
(3) with respect to any termination of employment that occurs during the period of 24 months
following a Change of Control or that is carried out at the request of a person seeking to
accomplish a Change in Control or otherwise in anticipation of a Change in Control, in each case
without the express written consent of the affected Participant.

     Except for the amendments or modifications made by the Board or Committee as provided for in
this section, no modifications, alterations and/or changes made to

55

 

the terms and/or provisions of the Plan, either globally or for an individual participant,
will be effective unless evidenced by a writing that directly refers to the Plan and which is
signed and dated by the Executive Vice President of Human Resources, as such title may be
modified from time to time.

Section 8. Benefit of Plan.

     The Plan shall be binding upon and shall inure to the benefit of the Participant, his heirs
and legal representatives, and the Company and its successors. The term “successor” shall mean
any person, firm, corporation or other business entity that, at any time, whether by merger,
acquisition or otherwise, acquires all or substantially all of the stock, assets or business of
the Company.

Section 9. Non-Assignability.

     Each Participant’s rights under this Plan shall be nontransferable except by will or by the
law of descent and distribution and except insofar as applicable law may otherwise require.
Subject to the foregoing, no right, benefit or interest hereunder shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or setoff
in respect of any claim, debt or obligation, or to execution, attachment, levy or similar
process, or assignment by operation of law, and any attempt, voluntary or involuntary, to effect
any such action shall, to the full extent permitted by law, be null, void and of no effect.

Section 10. Effect of Other Plans.

     Except as expressly provided in Section 5 with respect to the Company’s Separation Pay Plan,
(i) nothing in the Plan shall affect the level of benefits provided to or received by any
Participant (or the Participant’s estate or beneficiaries) as part of any employee benefit plan
of the Company, and (ii) the Plan shall not be construed to affect in any way a Participant’s
rights and obligations under any other plan maintained by the Company on behalf of employees.

Section 11. Mitigation and Offset.

     No Participant shall be required to mitigate the amount of any payment under the Plan by
seeking employment or otherwise, and there shall be no right of setoff or counterclaim, in
respect of any claim, debt or obligation, against any payments to the Participant, his
dependents, beneficiaries or estate provided for in the Plan.

     If, after a Participant’s termination of employment with the Company, the Participant is
employed by another entity or becomes self-employed, the amount (if any) payable under this Plan
to the Participant shall not be offset by the amounts (if any) payable to the Participant from
such new employment with respect to services rendered during the severance period applicable to
such Participant under this Plan.

Section 12. Termination of Employment.

     Nothing in the Plan shall be deemed to entitle a Participant to continued employment with
the Company, and the rights of the Company to terminate the employment of a Participant shall
continue as fully as though this Plan were not in effect.

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Section 13. Severability.

     In the event that any provision or portion of the Plan shall be determined to be invalid or
unenforceable for any reason, the remaining provisions and portions of the Plan shall be
unaffected thereby and shall remain in full force and effect to the fullest extent permitted by
law.

Section 14. Disputed Claims.

          (a) If a Participant makes a claim for payments under the Plan and such claim is
disputed by the Company (a “Disputed Claim”), the Company shall reimburse the Participant for any
reasonable attorney’s fees and disbursements incurred in pursuing such claim (“Attorney’s Fees”)
provided that the Participant obtains a non-appealable, final judgment from a court of competent
jurisdiction or a binding arbitration award granting the Participant all or substantially all of
the amount sought (a “Judgment or Award”). Unless the Judgment or Award specifies whether it
constitutes “all or substantially all of the amount sought,” such determination shall be made by
the Administrator in its sole and absolute discretion. Said reimbursement of Attorney’s Fees, if
applicable, shall be made as soon as practicable after said determination.

          (b) If a Disputed Claim is made with respect to a termination of employment
occurring during a period beginning on the date of a Change of Control and ending 24 months
thereafter, the Participant shall be entitled to reimbursement of Attorney’s Fees, whether or not
the Participant obtains a Judgment or Award. Such reimbursement shall be made on a
“pay-as-you-go” basis, as soon as practicable after presentation to the Company of any periodic
statements for Attorney’s Fees.

          (c) Without affecting the rights of a Participant under subsection (a) of this
Section 14, a Participant shall be entitled to reimbursement of Attorney’s Fees for a Disputed
Claim in accordance with the terms of subsection (b) with respect to termination of employment
occurring six months prior to a Change of Control, whether or not the Participant obtains a
Judgment or Award, provided, however, that no reimbursement will be made under this subsection
(c) in such case (i) unless and until the Change of Control actually occurs or (ii) if
reimbursement has been made under subsection (a) of this Section 14.

Section 15. Governing Law; Section Headings.

     All questions pertaining to the construction, regulation, validity and effect of the
provisions of the Plan shall be determined in accordance with the laws of the State of New York.

     The section headings used in this document are for ease of reference only and shall not be
controlling with respect to the application and interpretation of this Plan.

Section 16. Claims Procedure

          (a) Benefits shall be paid in accordance with the provisions of the Plan. Any
claim for benefits under the Plan shall be promptly filed in writing by the Participant,
Participant’s beneficiary or contingent beneficiary, or the Participant’s authorized
representative (hereinafter collectively referred to as the “Claimant”) with the Company. This
written claim shall be mailed or delivered to the Company by registered mail and shall be decided
by the person or

57

 

persons to whom this responsibility is delegated from time to time by the Administrator.

          (b) The Claimant shall be sent a written notice of the Company’s determination
with respect to the claim of the Claimant within 90 days of receipt of the claim, unless special
circumstances require an extension of time for processing the claim. Such extension shall not
exceed 90 days and notice thereof will be given within the first 90-day period. If the claim is
denied in whole or in part, the notice shall indicate the reason for the denial (including
references to the Plan provisions on which the denial is based), describe any additional
information or material needed and the reasons why such additional information or material is
necessary, and explain the claim review procedure.

          (c) If a claim is denied in whole or in part (or if no decision on a claim is
rendered within the limitations of the time described in Section 16(b)), the Claimant may request
a review of the decision (or of the claim, if no timely decision has been rendered). This
request shall be submitted in writing to the Chief Human Resources Officer of the Company (the
“Claims Reviewer”) within 60 days of receipt of the notice of denial. The business address and
telephone number of the Claims Reviewer is:

The McGraw-Hill Companies, Inc.

1221 Avenue of the Americas

New York, New York 10020

(212) 512-2000

This written request for review shall be mailed or delivered to the Claims Reviewer by registered
mail. The Claimant may review pertinent documents and may submit in writing additional comments
and material.

          (d) The Company shall have the right to change the Claims Reviewer under the Plan.
The Company shall also have the right to change the address and telephone number of the Claims
Reviewer. The Company shall give the Participants written notice of any change of the Claims
Reviewer, or any change in the address and telephone number of the Claims Reviewer.

          (e) A review decision shall be made by the Claims Reviewer within 60 days of
receipt of the request for review, unless there are special circumstances (such as the need for a
hearing) which require an extension of the time for processing. Such extension shall not exceed
60 days and notice thereof shall be given within the first 60-day period. The review decision
shall be in writing and include specific references to the Plan provisions on which the decision
is based.

Section 17. Limit on Discretionary Authority After Change of Control

     Notwithstanding any other provision of this plan, the authority granted pursuant to Sections
3, 14 and 16 above to the Administrator and to persons making determinations on claims for
benefits and reviews of claims shall, when exercised (1) during the period of 24 months following
a Change of Control or (2) with respect to any termination of employment that occurs during the
period of 24 months following a Change of Control or that is carried out at the request of a
person seeking to accomplish a Change in Control or otherwise in anticipation of a Change in
Control, shall not be “discretionary,” but shall be subject to de novo review by a court of
competent jurisdiction or an arbitrator, as applicable.

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     January 28, 1987

As amended:  March 25, 1987

September 30, 1987

September 28, 1988

April 26, 2000

April 24, 2002

October 23, 2003

59EX-10.20

 

Exhibit 10.20

THE McGRAW-HILL COMPANIES, INC.

EMPLOYEE RETIREMENT ACCOUNT PLAN SUPPLEMENT1

ARTICLE I

PURPOSE

          The principal purpose of The McGraw-Hill Companies, Inc. Employee Retirement Account Plan
Supplement (the “Plan”) is to provide selected employees of The McGraw-Hill Companies, Inc. (the
“Company”) and its subsidiaries (hereinafter referred to collectively as the “Employers”), with
retirement benefits which would have been provided under the Employee Retirement Account Plan of
The McGraw-Hill Companies, Inc. (“ERAP”) except for the limitations imposed by Section 401(a)(17)
of the Internal Revenue Code of 1986, as amended (the “Code”), and which are payable in certain
circumstances to Participants in certain of the severance plans of the Company.

ARTICLE II

DEFINITIONS

          The following words and phrases as used herein shall have the following meanings:

          (a) “Account” means the account established for each Participant under the Plan.

          (b) “Benefit” means the benefit payable to a Participant or his beneficiary under
Article IV of the Plan.

          (c) “Change of Control” means any of the following:

	1	 	Including amendments adopted through April 26, 2000.

60

 

          (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) Individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (as of the Effective Date the “Incumbent Board”) cease
for any reason to constitute at least a majority of the Board of Directors of the
Company, provided that any person becoming a director subsequent to the Effective
Date 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 shareholders of the Company of a reorganization,
merger, or consolidation, in

61

 

each case, with respect to which persons who were the shareholders 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.

          (d) “Committee” means the Executive Committee of the Company.

          (e) “Earnings” means all compensation paid by the Employer to an employee for
services rendered, including short-term incentive compensation. Earnings shall also
include any reductions in compensation made pursuant to The McGraw-Hill Companies, Inc.
Flexible Spending Account Plan and the Savings Incentive Plan of The McGraw-Hill
Companies, Inc. and its Subsidiaries. For purposes of this Plan, “Earnings” excludes all
other executive contingent compensation.

          (f) “Participant” means an employee of an Employer who has been selected to
participate in the Plan and includes a Severance Plan Participant.

          (g) “Severance Plan” means the Company’s Management Severance Plan, Executive
Severance Plan or Senior Executive Severance Plan.

          (h) “Severance Plan Earnings” means the total amount of salary continuation payments
paid to a Severance Plan Participant

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under Section 5(a) of a Severance Plan (excluding any amount paid in a lump sum in
lieu of salary continuation).

          (i) “Severance Plan Participant” means a former employee of an Employer who is
entitled to remain an active participant in certain Company-sponsored plans and programs
under Section 5(a) of a Severance Plan (and who is not paid a single lump sum payment in
lieu thereof).

ARTICLE III

PARTICIPATION

          Section 3.01. Eligibility to Participate. The Committee shall
select those employees of the Employers who shall be eligible to participate in the Plan. Any
employee who is so selected by the Committee shall become a Participant as of the first day of
the month coinciding with or next following his selection.

ARTICLE IV

BENEFITS

          Section 4.01. Credits to Account. (a) As of December 31 of the
year beginning on or after the later of (i) January 1 of the year in which the Participant’s
participation in the Plan commenced or (ii) January 1, 1992, there shall be credited to the
Participant’s Account an amount equal to 5% of the sum of (A) the Participant’s Earnings for such
year in excess of the maximum amount of compensation that may be taken into account under ERAP as
a result of the limitations of Section 401(a)(17) of the Code for such year and (B) any
short-term incentive compensation for such year deferred by the Participant under the Company’s
Key Executive Short-Term Incentive Deferred Compensation Plan and (C) any salary earned for such
year

63

 

which is deferred by the Participant under any plan or arrangement of the Employer. Any
salary or short-term incentive compensation which is deferred by a Participant shall be excluded
from earnings in the year paid to the Participant. No credit with respect to clause (A) of the
preceding sentence shall be made to a Participant’s Account with respect to (i) the year in which
the Participant ceases to be an employee of the Employers, unless the Participant is eligible for
early or normal retirement under the Company’s Employee Retirement Plan, is terminated by an
Employer through no fault of his own or has any salary continuation installment due the
Participant under a Severance Plan, or (ii) the year after the year in which the Participant
ceases to be an employee of the Employers for any reason or ceases to have any salary
continuation installment due the Participant under a Severance Plan, if later. No credit with
respect to clause (B) of the first sentence of this Section shall be made to a Participant’s
Account with respect to any year after the year in which the Participant ceases to be an employee
of the Employers for any reason or ceases to have any salary continuation installment due the
Participant under a Severance Plan, if later.

          (b) Effective April 26, 2000, an amount shall be credited to a Severance Plan Participant’s
Account equal to the amount that would have been credited to such Participant’s account under
ERAP had the Participant been eligible to have an employer contribution be made to the
Participant’s account under ERAP with respect to such Participant’s Severance Plan Earnings.
This amount shall be credited to the Severance Plan Participant’s Account at such time as it
would have been credited under ERAP.

          Section 4.02. Additional Credits to Account. An additional
amount shall be credited to the Participant’s Account as of

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December 31 of each year, commencing with the year following the year in which the initial
credit is made to the Account. Such additional amount shall be equal to the product of (i) the
balance of the Account as of January l of such year and (ii) the annual rate of return of the SIP
Stable Assets Funds for such year. No additional amount shall be credited to the Participant’s
Account for any period after December 31 of the year in which the Participant ceases to be an
employee of the Employers or ceases to have any salary continuation installment due the
Participant under a Severance Plan, if later.

          Section 4.03. Payment of Benefit. The Benefit provided under
the Plan shall consist of the balance credited to the Participant’s Account on the date benefit
payments under ERAP commence. Payment of the Benefit to a Participant shall be made in a lump
sum, within 90 days following the December 31 on which the additional amount is credited to the
Participant’s Account under Section 4.02 for the year in which the Participant ceases to be an
employee of the Employers or ceases to have any salary continuation installment due the
Participant under a Severance Plan, if later. The Benefit provided under this Article shall be
paid in accordance with the preceding sentence to the Participant’s beneficiary in the event of
the death of the Participant, whether prior to or after commencement of benefits under ERAP, if
such beneficiary is entitled to benefits under the provisions of ERAP.

          Notwithstanding anything contained herein to the contrary, an employee who becomes a
Participant on or after January 1, 1995 and does not have five years of Continuous Service under
ERAP when he ceases to be an employee of the Employers or ceases to have any salary continuation
installment due the Participant under a Severance Plan, if

65

 

later, shall forfeit the balance credited to his Account, unless his employment terminates
after his 65th birthday or his death.

          Section 4.04. Payment of Benefits in Event of Change of Control.
In lieu of the Benefits payable under Section 4.03, in the event of a Change of Control, each
Participant who has not received payment of the Participant’s Benefit shall receive a lump sum
payment immediately upon such Change of Control equal to the Benefit to which that Participant is
entitled under Section 4.03.

ARTICLE V

MISCELLANEOUS

          Section 5.01. Source of Payment of Benefits. The Benefits
provided under the Plan shall be paid by the Employers from their general assets at the time and
in the manner provided herein. The Benefits shall not be subject to assignment, pledge,
alienation or anticipation by a Participant or his beneficiary.

          Section 5.02. Amendment and Termination. The Board of Directors
of the Company or the Committee may cause the Plan to be amended at any time and from time to
time, prospectively or retroactively, and the Board of Directors of the Company may terminate the
Plan in its entirety at any time; provided, however, that no amendment to the Plan may be made by
the Committee which materially increases benefits to Participants. Notwithstanding the foregoing
provisions of this paragraph, no amendment or termination shall reduce the Benefit or rights of
any Participant except with the written consent of the Participant or other person then receiving
such Benefit.

          Section 5.03. Administration. The Committee shall administer
the Plan, resolve any ambiguities or inconsistencies, and decide all questions arising in its
administration, interpretation or

66

 

application. Any decision of the Committee shall be conclusive and binding upon all
Participants or other persons having or claiming an interest in the Plan.

          Section 5.04. Claims Procedure. The Committee shall provide
adequate written notice to any Participant whose claim for Benefits hereunder has been denied,
setting forth specific reasons for such denial, written in a manner calculated to be understood
by such Participant, and shall afford such Participant a full and fair review of the decision
denying the claim, in accordance with the requirements of the Employee Retirement Income Security
Act of 1974.

          Section 5.05. Withholding. The Employer shall have the right to
deduct from any payment of a Benefit any amount required to satisfy its obligation to withhold
federal, state and local taxes.

          Section 5.06. Conditions of Payment of Benefit. Notwithstanding
any provision of the Plan to the contrary, the right of a Participant or his beneficiary to
receive the Benefit otherwise payable hereunder shall cease upon the discharge of the Participant
from employment with the Employer for acts which constitute fraud, embezzlement, or dishonesty.

          Section 5.07. Effective Date. The Plan shall be effective as of
December 1, 1989.

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