TABLE OF CONTENTS

Exhibit 10.2

H&R BLOCK

DEFERRED COMPENSATION PLAN

FOR DIRECTORS

 

 

 

Amended and Restated

Effective July 1, 2002

 

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ARTICLE 1 DEFERRED COMPENSATION ACCOUNT Section 1.1 Establishment of Account.
Section 1.2 Property of Company and Participating Affiliates. ARTICLE 2
DEFINITIONS, GENDER, AND NUMBER Section 2.1 Definitions. Section 2.2 Gender and
Number ARTICLE 3 PARTICIPATION Section 3.1 Who May Participate Section 3.2 Time
and Conditions of Participation Section 3.3 Termination of Participation Section
3.4 Missing Persons Section 3.5 Relationship to Other Plans ARTICLE 4 ENTRIES TO
THE ACCOUNT Section 4.1 Deferrals Section 4.2 Crediting Rate ARTICLE 5 VESTING
ARTICLE 6 DISTRIBUTION OF BENEFITS Section 6.1 Time of Payment Section 6.2 Form
of Benefits for Distributions Made On Account of Termination of Membership on
All Boards of Directors. Section 6.3 Death Benefits. Section 6.4 Claims
Procedure Section 6.5 Alternate Forms of Benefit Distribution Section 6.6
Distributions on Plan Termination ARTICLE 7 FUNDING Section 7.1 Source of
Benefits Section 7.2 No Claim on Specific Assets ARTICLE 8 ADMINISTRATION AND
FINANCES Section 8.1 Administration Section 8.2 Powers of Committee Section 8.3
Actions of the Committee Section 8.4 Delegation Section 8.5 Reports and Records
ARTICLE 9 AMENDMENTS AND TERMINATION Section 9.1 Amendments Section 9.2
Termination ARTICLE 10 MISCELLANEOUS Section 10.1 No Guarantee of Membership
Section 10.2 Release Section 10.3 Notices Section 10.4 Non-Alienation Section
10.5 Tax Liability Section 10.6 Captions Section 10.7 Applicable Law EX-10.2
Deferred Compensation Plan for Directors [c70740exv10w2.htm] EX-10.3 Deferred
Compensation Plan for Executives [c70740exv10w3.htm] EX-10.9 First Amendment to
Executive Survivor Plan [c70740exv10w9.htm] EX-12 Computation of Ratio of
Earnings [c70740exv12.htm] EX-13 Portion of the Annual Report [c70740exv13.htm]
EX-21 Subsidiaries of the Company [c70740exv21.htm] EX-23 Consent of
PricewaterhouseCoopers LLP [c70740exv23.htm]

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H&R BLOCK
DEFERRED COMPENSATION PLAN
FOR DIRECTORS

TABLE OF CONTENTS

                                  Page                

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ARTICLE 1 DEFERRED COMPENSATION ACCOUNT
          1  
 
                 
Section 1.1
Establishment of Account       1    
Section 1.2
Property of Company and Participating Affiliates       1  
 
               
ARTICLE 2 DEFINITIONS, GENDER, AND NUMBER
          1  
 
                 
Section 2.1
Definitions       1    
Section 2.2
Gender and Number       3  
 
               
ARTICLE 3 PARTICIPATION
          3  
 
                 
Section 3.1
Who May Participate       3    
Section 3.2
Time and Conditions of Participation       3    
Section 3.3
Termination of Participation       3    
Section 3.4
Missing Persons       3    
Section 3.5
Relationship to Other Plans       4  
 
               
ARTICLE 4 ENTRIES TO THE ACCOUNT
          4  
 
                 
Section 4.1
Deferrals       4    
Section 4.2
Crediting Rate       4  
 
               
ARTICLE 5 VESTING
          6  
 
               
ARTICLE 6 DISTRIBUTION OF BENEFITS
          6  
 
                 
Section 6.1
Time of Payment       6    
Section 6.2
Form of Benefits for Distributions Made On Account of Termination of Membership
on all Boards of Directors       6    
Section 6.3
Death Benefits       8    
Section 6.4
Claims Procedure       9    
Section 6.5
Alternate Forms of Benefit Distribution       10    
Section 6.6
Distributions on Plan Termination       10  
 
               
ARTICLE 7 FUNDING
          10  
 
                 
Section 7.1
Source of Benefits       10    
Section 7.2
No Claim on Specific Assets       10  

 

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ARTICLE 8 ADMINISTRATION AND FINANCES
          10  
 
                 
Section 8.1
Administration       10    
Section 8.2
Powers of the Committee       10    
Section 8.3
Actions of the Committee       11    
Section 8.4
Delegation       11    
Section 8.5
Reports and Records       11  
 
               
ARTICLE 9 AMENDMENTS AND TERMINATION
          11  
 
                 
Section 9.1
Amendments       11    
Section 9.2
Termination       11  
 
               
ARTICLE 10 MISCELLANEOUS
          12  
 
                 
Section 10.1
No Guarantee of Membership       12    
Section 10.2
Release       12    
Section 10.3
Notices       12    
Section 10.4
Non-Alienation       12    
Section 10.5
Tax Liability       12    
Section 10.6
Captions       12    
Section 10.7
Applicable Law       12  
 
               

 

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H&R BLOCK
DEFERRED COMPENSATION PLAN
FOR DIRECTORS

     H&R Block, Inc. (the “Company”) hereby amends and restates, effective July
1, 2002, the nonqualified deferred compensation plan for the benefit of
specified Directors of the Company and such other entities as may be designated
by the Company from time to time known as the H&R Block Deferred Compensation
Plan for Directors (the “Plan”).

ARTICLE 1 DEFERRED COMPENSATION ACCOUNT

     Section 1.1. Establishment of Account. The Company shall establish an
Account for each Participant which shall be utilized solely as a device to
measure and determine the amount of deferred Director’s Fees to be paid under
the Plan.

     Section 1.2. Property of Company and Participating Affiliates. Any amounts
so set aside for benefits payable under the Plan are the property of the Company
and its Participating Affiliates, except, and to the extent, of any assignment
of such assets to an irrevocable trust.

ARTICLE 2 DEFINITIONS, GENDER, AND NUMBER

     Section 2.1. Definitions. Whenever used in the Plan, the following words
and phrases shall have the meanings set forth below unless the context plainly
requires a different meaning, and when a defined meaning is intended, the term
is capitalized.

       2.1.1. “Account” means the device used to measure and determine the
amount of deferred Director’s Fees to be paid to a Participant or Beneficiary
under the Plan, and may refer to the separate Accounts that represent amounts
deferred by a Participant under separate Permissible Deferral elections.

       2.1.2. “Affiliates” or “Affiliate” means a group of entities, including
the Company, which constitutes a controlled group of corporations (as defined in
section 414(b) of the Code), a group of trades or businesses (whether or not
incorporated) under common control (as defined in section 414(c) of the Code),
and members of an affiliated service group (within the meaning of section 414(m)
of the Code).

       2.1.3. “Age” of a Participant means the number of whole years that have
elapsed since the date of the Participant’s birth.          2.1.4. “Assumed
Interest Rate” has the meaning specified in Section 6.2.3.

       2.1.5. “Beneficiary” or “Beneficiaries” means the persons or trusts
designated by a Participant in writing pursuant to Section 6.3.4 of the Plan as
being entitled to receive any benefit payable under the Plan by reason of the
death of a Participant, or, in the absence of such designation, the persons
specified in Section 6.3.5 of the Plan.          2.1.6. “Board” means the Board
of Directors of the Company as constituted at the relevant time.

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       2.1.7. “Closing Price” means the closing price of the Company’s Common
Stock on the New York Stock Exchange as of the applicable date; provided,
however, that if no closing price is available for such date, “Closing Price”
means the closing price of the Company’s Common Stock as of the immediately
preceding date for which a price is available.

       2.1.8. “Code” means the Internal Revenue Code of 1986, as amended from
time to time and any successor statute. References to a Code section shall be
deemed to be to that section or to any successor to that section.

       2.1.9. “Committee” means the Compensation Committee of the Board.

       2.1.10. “Common Stock” means the common stock of the Company.    
     2.1.11. “Company” means H&R Block, Inc.

       2.1.12. “Deferred Compensation Unit” means a unit equal in value to one
share of Common Stock and posted to a Participant’s Account for the purpose of
measuring the benefits payable under the Plan.

       2.1.13. “Director” or “Directors” means a Non-Employee serving as a
member on the Board of Directors of a Participating Affiliate.

       2.1.14. “Director’s Fees” of a Director for any Plan Year means that
individual’s (a) quarterly retainer, (b) Board meeting fees, (c) committee
meeting fees, and (d) any other retainer or fees for that Plan Year.    
     2.1.15. “Enrollment Period” for a Plan Year commencing January 1 means the
immediately preceding period of October 1 through December 15, inclusive.

       2.1.16. “Initial Payment Period” has the meaning specified in
Section 6.2.2.          2.1.17. “Non-Employee” means any person who is not
classified as a common-law employee of an Affiliate by such Affiliate.

       2.1.18. “Overall Payment Period” has the meaning specified in
Section 6.2.2.

       2.1.19. “Participant” means a Non-Employee Director who is eligible to
participate in the Plan and has elected to participate in the Plan.

       2.1.20. “Participating Affiliate” or “Participating Affiliates” means the
Company and the following indirect subsidiaries of the Company, each of which is
an Affiliate: HRB Management, Inc., H&R Block Services, Inc., Block Financial
Corporation, HRB Business Services, Inc., and the majority-owned U.S.
subsidiaries of such indirect subsidiaries; and such other Affiliates as may be
designated as such by the Committee from time to time.

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       2.1.21. “Permissible Deferral” means a deferral in a Plan Year of one
hundred percent (100%) of any one or more of the components of Director’s Fees.

       Director’s Fees deferrals shall be made in single sum deferrals at the
time that the Director’s Fees would otherwise be paid to the Director.

       2.1.22. “Plan” means the “H&R Block Deferred Compensation Plan for
Directors” as set forth herein and as amended or restated from time to time.

       2.1.23. “Plan Year” means the calendar year for Permissible Deferrals of
Participants elected to commence on January 1, 1998, or later.

       2.1.24. “Plan Year Payment Period” has the meaning specified in
Section 6.2.2.

       2.1.25. “Remainder Payment Period” has the meaning specified in
Section 6.2.2.          2.1.26. “Standard Form of Benefit” as to any Participant
means semimonthly payments for a ten (10) year period.          2.1.27. “Trust”
means the H&R Block, Inc. Deferred Compensation Trust Agreement.

     Section 2.2. Gender and Number. Except as otherwise indicated by context,
masculine terminology used herein also includes the feminine and neuter, and
terms used in the singular may also include the plural.

ARTICLE 3 PARTICIPATION

     Section 3.1. Who May Participate. Participation in the Plan is limited to
Directors.

     Section 3.2. Time and Conditions of Participation. An eligible Director
shall become a Participant only upon (a) the individual’s completion of a
Permissible Deferral election for the succeeding Plan Year during an Enrollment
Period, in accordance with a form established by the Company from time to time,
and (b) compliance with such terms and conditions as the Committee may from time
to time establish for the implementation of the Plan, including, but not limited
to, any condition the Committee may deem necessary or appropriate for the
Company to meet its obligations under the Plan.

     Section 3.3. Termination of Participation. Once a Director has become a
Participant in the Plan, participation shall continue until the first to occur
of (a) payment in full of all benefits to which the Participant or Beneficiary
is entitled under the Plan, or (b) the occurrence of an event specified in
Section 3.4 which results in loss of benefits. Except as otherwise specified in
the Plan, the Company may not terminate an individual’s participation in the
Plan.

     Section 3.4. Missing Persons. If the Company is unable to locate the
Participant or his or her Beneficiary for purposes of making a distribution, the
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under this Plan that would otherwise be considered as non-forfeitable shall be
forfeited effective four (4) years after (a) the last date a payment of said
benefit was made, if at least one such payment was made, or (b) the first date a
payment of said benefit was directed to be made by the Company pursuant to the
terms of the Plan, if no payments had been made. If such person is located after
the date of such forfeiture, the benefits for such Participant or Beneficiary
shall not be reinstated hereunder.

     Section 3.5. Relationship to Other Plans. Participation in the Plan shall
not preclude participation of the Participant in any other benefit plan or
program sponsored by an Affiliate for which such Participant would otherwise be
eligible.

ARTICLE 4 ENTRIES TO THE ACCOUNT

     Section 4.1. Deferrals. If the Participant elects the fixed and/or variable
crediting rate option for measuring the performance of the Account under
Section 4.2, the Company shall post to the Account of such Participant on the
date the Director’s Fees would otherwise be paid the amount of Director’s Fees
to be deferred as designated by the Participant’s Permissible Deferral election
in effect for each Plan Year. If the Participant elects the Common Stock
crediting rate option for measuring the performance of the Account under
Section 4.2, (a) the Company shall post to the Account of such Participant a
number of Deferred Compensation Units equivalent to the amount of Director’s
Fees to be deferred as designated by the Participant’s Permissible Deferral
election in effect for than Plan Year; (b) deferrals of Director’s Fees (and the
corresponding number of Deferred Compensation Units) shall be posted as of the
date the Director’s Fees would otherwise be paid the amount of Director’s Fees
to be deferred; and (c) the number of Deferred Compensation Units posted for
each calendar month in which Director’s Fees would otherwise be paid the amount
of Director’s Fees to be deferred shall be calculated by dividing: (i) the
dollar amount deferred during that month; by (ii) the Closing Price on the first
business day of that month. A Participant may elect to allocate no more than
twenty-five percent (25%) of his or her deferrals to the Common Stock crediting
rate. In the event a Participant has previously elected to allocate more than
twenty-five percent (25%) of his or her deferrals to the Common Stock crediting
rate and such election has not been changed on or before June 30, 2002,
effective July 1, 2002, the Participant’s allocation election will automatically
be changed to reduce such allocation of deferrals to the Common Stock crediting
rate to twenty-five percent (25%) and the amount previously allocated to the
Common Stock crediting rate that exceeds twenty-five percent (25%) will
automatically be allocated to the fixed rate crediting option.

     Section 4.2. Crediting Rate. Gains or losses shall be posted to the Account
on a daily basis in accordance with the Participant’s election of investment
options which will be a reference for measuring the performance of the Account.
The Company intends to measure the performance of the Account in accordance with
the Participant’s election but reserves the right to do otherwise. Statements of
Account balances shall be provided no less frequently than on a quarterly basis.
The Participant shall elect from among the following investment options: (i) a
fixed rate as described in 4.2.1, (ii) a variable rate as described in 4.2.2, or
(iii) a Common Stock crediting rate as described in 4.2.3. A Participant may
elect to allocate no more than twenty-five percent (25%) of his or her deferrals
or Account to the Common Stock crediting rate. On a monthly basis, Participants
may elect to reallocate all or any portion of their Account balances among the
available investment options, including those funds selected by the Company for
the variable rate investment option, provided said reallocations are in whole
number increments and further provided that said reallocations will not result
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twenty-five percent (25%) of their Account balances to the Common Stock
crediting rate. If as of July 1, 2002, a Participant’s Account has an allocation
of greater than twenty-five percent (25%) of the Account to the Common Stock
crediting rate, the Participant will be given the opportunity to reallocate that
portion of the Account allocated to the Common Stock crediting rate that exceeds
twenty-five percent (25%) of the total Account balance to another crediting rate
option as of July 1, 2002. If the Participant does not elect to reallocate such
excess, such excess will automatically be reallocated to the fixed rate
crediting option as of July 1, 2002. If as of January 1, 2003, or any January 1
thereafter, a Participant’s Account has an allocation of greater than
twenty-five percent (25%) of the Account to the Common Stock crediting rate, the
portion of the Account allocated to the Common Stock crediting rate that exceeds
twenty-five percent (25%) of the total Account balance will automatically be
reallocated to the fixed rate crediting option as of the January 1 of the year
in which such reallocation was made.

     Subject to the percentage limits in the preceding paragraph, Participants
may change their crediting rate elections once each calendar month by giving the
Company notice of such change in accordance with a method and/or procedures
approved by the Company for that purpose. Upon receipt of such notice, the
Committee will effect the change on the first day of the calendar month
immediately following the month in which such notice was received. Such change
will govern the Participant’s Account balance and future deferrals occurring on
or after the effective date of such change.

       Section 4.2.1. Fixed Rate. If a Participant elects a fixed rate, the
interest will be compounded on a daily basis and posted to the Participant’s
Account daily at an effective annual yield equal to the rate of ten-year United
States Treasury notes in effect at the time as determined below. The rate will
be determined four times each Plan Year and for each Plan Year quarter will be
the rate in effect as of the last day of the calendar quarter immediately prior
to the calendar quarter to which it applies, as published in the Wall Street
Journal or as determined by the Chief Financial Officer of the Company.

       Through July 1, 2002, for Permissible Deferrals elected under the Plan
and commencing prior to January 1, 1995, the effective annual yield for the
fixed rate crediting option was equal to one hundred twenty percent (120%) of
the ten-year rolling average rate of ten-year United States Treasury notes. The
ten-year rolling average rate was the rate in effect as of September 30 of the
Plan Year immediately prior to the Plan Year to which it applied, as published
in the Wall Street Journal or as determined by the Chief Financial Officer of
the Company. Effective July 1, 2002, such effective annual yield for the fixed
rate crediting option is eliminated and replaced with an effective annual yield
equal to the rate of ten-year United States Treasury notes, as determined in
accordance with the first paragraph of this Section 4.2.1.

       Section 4.2.2. Variable Rate. If a Participant elects a variable rate,
the Participant’s Account will be credited or debited as if the Account balance
were invested in one or more funds selected by the Company in the proportions
elected by the Participant. Participants may elect to have their Accounts
treated as if they were invested in one or more of the funds selected, provided
the election is in whole number increments of the Account.

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       Section 4.2.3. Common Stock Crediting Rate. If a Participant elects the
Common Stock crediting rate, the Participant’s Account will be valued as if his
or her Account were invested in shares of Common Stock equal to the number of
Deferred Compensation Units posted to his or her Account. The value of a
Participant’s Account will vary with the value of the Company’s Common Stock.
The Participant’s Account will be credited, as of the applicable dividend
payment date, with additional Deferred Compensation Units equal in value to any
dividends declared on the Company’s Common Stock based on the number of Deferred
Compensation Units posted to the Participant’s Account as of the record date
with respect to the declaration of such dividend. As of any date of valuation,
the value of a Participant’s Account will be equal to the value (at the Closing
Price on such date) of the number of shares of Common Stock represented by the
Deferred Compensation Units credited to the Account as of that date.

ARTICLE 5 VESTING

     Participant deferrals are fully vested immediately.

ARTICLE 6 DISTRIBUTION OF BENEFITS

     Section 6.1. Time of Payment. Payments of benefits shall be made by the
Company upon the earliest to occur of the following:

       (a) the termination, voluntary or involuntary, of the Participant’s
membership on all Boards of Directors of all Participating Affiliates; or    
     (b) the Participant’s death.

Except as otherwise provided, benefit payments shall commence in the first month
of the first calendar quarter that begins at least forty-five days after the
occurrence of the event described in the preceding sentence which results in
benefit distribution.

     Section 6.2. Form of Benefits for Distributions Made On Account of
Termination of Membership on All Boards of Directors.

       Section 6.2.1. For distributions made on account of the termination,
voluntary or involuntary, of the Participant’s membership on all Boards of
Directors of all Participating Affiliates, payments from the Account shall be
made in accordance with the Standard Form of Benefit. The Participant in the
Plan Year prior to payment of benefits may, however, petition the Committee for,
and the Committee may approve at such time, one of the following forms of
benefit:

       (a) semimonthly payments over a five (5) year period; or          (b) a
single distribution paid within forty-five (45) days after the termination of
the Participant’s membership on all Boards of Directors of all Participating
Affiliates.

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       Section 6.2.2. Except for a single distribution, benefit payments shall
be in the form of semimonthly cash installments paid during the applicable
payment period (the “Overall Payment Period”). The amount of each installment
payment shall be level during the portion of the Overall Payment Period ending
on December 31 of the Plan Year in which benefit payments commence (the “Initial
Payment Period”), during each complete Plan Year of the Overall Payment Period
thereafter (a “Plan Year Payment Period”), and during any remaining period of
the Overall Payment Period following the last Plan Year Payment Period (the
“Remainder Payment Period”), but will vary from one such portion of the Overall
Payment Period to the next.

       Section 6.2.3. The amount of each level payment for the Initial Payment
Period, if any, shall be calculated using the balance in the Account as of the
beginning of the Initial Payment Period and amortizing such balance over the
remaining Overall Payment Period (a) using an assumed interest rate equal to the
rate of one-year United States Treasury notes for each Participant receiving
payments of benefits prior to December 8, 1999, said rate to be determined once
each Plan Year and to be the rate in effect as of the September 30 immediately
preceding the payment period to which it applies, as published in the Wall
Street Journal or as determined by the Chief Financial Officer of the Company
(the “Assumed Interest Rate”), and (b) using an assumed interest rate of zero
percent (0%) for all other Participants. The amount of each level payment for
each Plan Year Payment Period shall be calculated by taking the balance in the
Account as of November 30 of the Plan Year immediately prior to such Plan Year
Payment Period, subtracting the benefit payments made during the portion of such
preceding Plan Year following November 30, and amortizing the difference over
the remaining Overall Payment Period (x) using the Assumed Interest Rate for
each participant receiving payments of benefits prior to December 8, 1999, and
(y) using an assumed interest rate of zero percent (0%) for all other
Participants. The amount of each level payment for the Remainder Payment Period,
if any, shall be calculated by taking the balance in the Account as of
November 30 of the Plan Year immediately prior to the Remainder Payment Period,
subtracting the benefit payments made during the portion of such preceding Plan
Year following November 30, and amortizing the difference over the Remainder
Payment Period using an assumed interest rate of zero percent (0%) per annum. If
the actual crediting rate for the Remainder Payment Period is more than zero
percent, the additional gain resulting from the difference in crediting rates
shall be paid to the Participant in a single payment within six months after the
last day of the Remainder Payment Period.

       Section 6.2.4. The Account shall be credited during the Overall Payment
Period with gains and losses as provided in Section 4.2.

       Section 6.2.5. Notwithstanding anything in this Plan to the contrary, the
Committee may, in its sole discretion, (i) increase or reduce any assumed
interest rate set forth in this Section 6.2 and any such assumed interest rate,
as so adjusted, shall be effective for calculating level semimonthly
installments for Participants whose benefit payments commence after the date of
such adjustment, and (ii) change the date set forth in Section 6.2.3 on which
the balance in the Participant’s Account is to be determined for purposes of

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  calculating the amount of each level payment for each Plan Year Payment Period
and each Remainder Payment Period, and any such revised date shall be effective
for calculating level semimonthly installments for the Plan Year Payment Period
or the Remainder Payment Period beginning on or after the effective date of such
revision.

     Section 6.3. Death Benefits.

       6.3.1. Death After Benefit Commencement. In the event a Participant dies
after commencement of benefits, the remaining benefit payments, if any, shall be
paid to the Participant’s Beneficiary in the same manner such benefits were
being paid to the Participant at the time of death and would have been paid to
the Participant had the Participant survived. A Beneficiary may petition the
Committee for an alternative method of payment. The Account shall be credited
from the Participant’s date of death through the end of the Overall Payment
Period at an interest rate equal to the rate of one-year United States Treasury
notes, said rate to be determined once each Plan Year and to be the rate in
effect as of September 30 of the Plan Year immediately prior to the Plan Year to
which it applies, as published in the Wall Street Journal or as determined by
the Chief Financial Officer of the Company.

       6.3.2. Death Prior to Benefit Commencement. In the event a Participant
dies prior to the time benefits commence, the Company shall pay a pre-retirement
death benefit to the Participant’s Beneficiary in the form of a lump sum
payment, semimonthly payments over a five-year period, or semimonthly payments
over a ten-year period, as selected by the Participant on a form and in a manner
prescribed by the Committee. A Participant may change such election once each
Plan Year. If the form of payment selected by the Participant is a lump sum, the
amount of the pre-retirement death benefit shall be equal to the Participant’s
Account as of the date of the Participant’s death. If the form of payment
selected by the Participant is semimonthly payments over a five or ten-year
period, the amount of the pre-retirement death benefit shall be equal to the
Participant’s Account as of the date of the Participant’s death, annuitized over
a five-year or ten-year period, respectively, at an interest rate equal to the
rate of one-year United States Treasury notes in effect as of September 30 of
the Plan Year immediately prior to the Plan Year in which payment of the
pre-retirement death benefit commences, as published in the Wall Street Journal
or as determined by the Chief Financial Officer of the Company. If a Participant
fails to select the form of the pre-retirement death benefit, the pre-retirement
death benefit shall be paid in the form of semimonthly payments over a ten-year
period.

       6.3.3. Marital Deduction. Any benefits which become payable under this
Article 6 to the surviving spouse of a Participant shall be paid in a manner
which will qualify such benefits for a marital deduction in the estate of a
deceased Participant under the terms of Section 2056 of the Code, and unless
specifically directed by a Participant to the contrary pursuant to an effective
beneficiary designation, any portion of a Participant’s death benefit payable to
a surviving spouse which remains unpaid at the death of such spouse shall be
paid to the spouse’s estate.

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       6.3.4. Designation by Participant. Each Participant has the right to
designate primary and contingent Beneficiaries for death benefits payable under
the Plan. Such Beneficiaries may be individuals or trusts for the benefit of
individuals. A beneficiary designation by a Participant shall be in writing on a
form acceptable to the Committee and shall only be effective upon delivery to
the Company. In the event a Participant is married at the time he or she
designates a beneficiary other than his or her spouse, such designation will not
be valid unless the Participant’s spouse consents in writing to such
designation. A beneficiary designation may be revoked by a Participant at any
time by delivering to the Company either written notice of revocation or a new
beneficiary designation form. The beneficiary designation form last delivered to
the Company prior to the death of a Participant shall control.

       6.3.5. Failure to Designate Beneficiary. In the event there is no
beneficiary designation on file with the Company, or all Beneficiaries
designated by a Participant have predeceased the Participant, the benefits
payable by reason of the death of the Participant shall be paid to the
Participant’s spouse, if living; if the Participant does not leave a surviving
spouse, to the Participant’s issue by right of representation; or, if there are
no such issue then living, to the Participant’s estate. In the event there are
benefits remaining unpaid at the death of a sole Beneficiary and no successor
Beneficiary has been designated, either by the Participant or the Participant’s
spouse pursuant to 6.4.3, the remaining balance of such benefit shall be paid to
the deceased Beneficiary’s estate; or, if the deceased Beneficiary is one of
multiple concurrent Beneficiaries, such remaining benefits shall be paid
proportionally to the surviving Beneficiaries.

     Section 6.4. Claims Procedure. The Committee shall notify a Participant in
writing within ninety (90) days of the Participant’s written application for
benefits of his or her eligibility or non-eligibility for benefits under the
Plan. If the Committee determines that a Participant is not eligible for
benefits or full benefits, the notice shall set forth (a) the specific reasons
for such denial, (b) a specific reference to the provision of the Plan on which
the denial is based, (c) a description of any additional information or material
necessary for the claimant to perfect his or her claim, and a description of why
it is needed, and (d) an explanation of the Plan’s claims review procedure and
other appropriate information as to the steps to be taken if the Participant
wishes to have his or her claim reviewed. If the Committee determines that there
are special circumstances requiring additional time to make a decision, the
Committee shall notify the Participant of the special circumstances and the date
by which a decision is expected to be made, and may extend the time for up to an
additional 90-day period. If a Participant is determined by the Committee to be
not eligible for benefits, or if the Participant believes that he or she is
entitled to greater or different benefits, he or she shall have the opportunity
to have his or her claim reviewed by the Committee by filing a petition for
review with the Committee within sixty (60) days after receipt by him or her of
the notice issued by the Committee. Said petition shall state the specific
reasons the Participant believes he or she is entitled to benefits or greater or
different benefits. Within sixty (60) days after receipt by the Committee of
said petition, the Committee shall afford the Participant (and his or her
counsel, if any) an opportunity to present his or her position t the Committee
orally or in writing, and said Participant (or his or her counsel) shall have
the right to review the pertinent documents, and the Committee shall notify the
Participant of its decision in writing within said sixty (60) day

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period, stating specifically the basis of said decision written in a manner
calculated to be under-stood by the Participant and the specific provisions of
the Plan on which the decision is based. If, because of the need for a hearing,
the sixty (60) day period is not sufficient, the decision may be deferred for up
to another sixty (60) day period at the election of the Committee, but notice of
this deferral shall be given to the Participant.

     Section 6.5. Alternate Forms of Benefit Distribution. Participants, no
later than in the Plan Year prior to the Plan Year in which payment of benefits
commence may petition the Committee to request methods of benefit distribution
other than those provided pursuant to this Article 6.

     Section 6.6. Distributions on Plan Termination. Notwithstanding anything in
this Article 6 to the contrary, if the Plan is terminated, distributions shall
be made in accordance with Section 9.2.

ARTICLE 7 FUNDING

     Section 7.1. Source of Benefits. All benefits under the Plan shall be paid
when due by the Company out of its assets or from an irrevocable trust
established by the Company for that purpose. The Company may, but shall have no
obligations to, make such advance provision for the payment of such benefit as
the Board may from time to time consider appropriate.

     Section 7.2. No Claim on Specific Assets. No Participant shall be deemed to
have, by virtue of being a Participant in the, Plan, any claim on any specific
assets of the Company such that the Participant would be subject to income
taxation on his or her benefits under the Plan prior to distribution and the
rights of Participants and Beneficiaries to benefits to which they are otherwise
entitled under the Plan shall be those of an unsecured general creditor of the
Company.

ARTICLE 8 ADMINISTRATION AND FINANCES

     Section 8.1. Administration. The Plan shall be administered by the
Committee. The Company shall bear all administrative costs of the Plan other
than those specifically charged to a Participant or Beneficiary.

     Section 8.2. Powers of Committee. In addition to the other powers granted
under the Plan, the Committee shall have all powers necessary to administer the
Plan, including, without limitation, powers:

       (a) to interpret the provisions of the Plan;

       (b) to establish and revise the method of accounting for the Plan and to
maintain the Accounts; and

       (c) to establish rules for the administration of the Plan and to
prescribe any forms required to administer the Plan.

Not in limitation, but in amplification of the foregoing and of the authority
conferred upon the Committee in Section 8.1, the Company specifically intends
that the Committee have the greatest permissible discretion to construe the
terms of the Plan and to determine all questions

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concerning eligibility, participation and benefits. Any such decision made by
the Committee is intended to be subject to the most deferential standard of
judicial review. Such standard of review is not to be effected by any real or
alleged conflict of interest on the part of the Company or any member of the
Committee.

     Section 8.3. Actions of the Committee. Except as modified by the Company,
all determinations, interpretations, rules, and decisions of the Committee shall
be conclusive and binding upon all persons having or claiming to have any
interest or right under the Plan.

     Section 8.4. Delegation. The Committee, or any officer designated by the
Committee, shall have the power to delegate specific duties and responsibilities
to officers or other employees of the Company or other individuals or entities.
Any delegation may be rescinded by the Committee at any time. Each person or
entity to whom a duty or responsibility has been delegated shall be responsible
for the exercise of such duty or responsibility and shall not be responsible for
any act or failure to act of any other person or entity.

     Section 8.5. Reports and Records. The Committee and those to whom the
Committee has delegated duties under the Plan shall keep records of all their
proceedings and actions and shall maintain books of account, records, and other
data as shall be necessary for the proper administration of the Plan and for
compliance with applicable law.

ARTICLE 9 AMENDMENTS AND TERMINATION

     Section 9.1. Amendments. The Company, by action of the Board, may amend the
Plan, in whole or in part, at any time and from time to time. Any such amendment
shall be filed with the Plan documents. No amendment, however, may be effective
to eliminate or reduce the benefits of any retired Participant or the
Beneficiary of any deceased Participant then eligible for benefits or the
benefits, if any, in any active Participant’s Account immediately before the
effective date of such amendment, and each such Account will be credited to the
date of such amendment in accordance with Section 4.2. Notwithstanding anything
in this Section 9.1 to the contrary, the Committee may, in its discretion, amend
the Plan to reduce the rates set forth in Section 4.2 for crediting the Accounts
of active Participants effective for crediting from the date of any such
amendment. Notwithstanding anything in this Section 9.1 to the contrary, the
Committee may, in its discretion, (i) amend the Plan to increase or reduce any
assumed interest rate set forth in Section 6.2, in accordance with the
provisions of Section 6.2.5, or (ii) amend the Plan to change the date set forth
in Section 6.2.3 on which the balance in the Participant’s Account is to be
determined for purposes of calculating the amount of each level payment for each
Plan Year Payment Period and each Remainder Payment Period, in accordance with
provisions of Section 6.2.5.

     Section 9.2. Termination. The Company expects the Plan to be permanent, but
necessarily must, and hereby does, reserve the right to terminate the Plan at
any time by written action of the Board. In all events, the Plan will be
terminated if the existence of a trust causes a federal court to hold that the
Plan is “funded” for ERISA purposes, as defined in Section 2.02-4 of the Trust,
and appeals from that holding are no longer timely or have been exhausted, and
the trust is therefore terminated with respect to the Plan. Upon termination of
the Plan, all deferrals will cease and no future deferrals will be made.
Termination of the Plan shall not operate to eliminate or reduce benefits of any
retired Participant or the Beneficiary of any deceased Participant then eligible
for benefits or the benefits, if any, in any active Participant’s Account
immediately before the effective date of such termination, and each such

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Account will be credited, to the date of distribution of all benefits in such
Account, in accordance with Section 4.2, as it may be amended from time to time
pursuant to Section 9.1.

     If the Plan shall at any time be terminated, payments from the Accounts of
all Participants and Beneficiaries shall be made as soon as administratively
convenient in the form of monthly payments over a five (5) year period; however,
the Committee in its sole discretion may pay the benefits in a lump sum.
Notwithstanding the preceding sentence, if the termination occurs because the
Plan is held to be “funded” as described in the first paragraph of this
Section 9.2, the distribution will be paid in a lump sum not later than ninety
(90) days after such termination.

ARTICLE 10 MISCELLANEOUS

     Section 10.1 No Guarantee of Membership. Neither the adoption and
maintenance of the Plan nor the execution by the Company of a Permissible
Deferral agreement with any Director shall be deemed to be a contract between
the Company and any Participant to retain his or her position as a Director.

     Section 10.2. Release. Any payment of benefits to or for the benefit of a
Participant or a Participant’s Beneficiaries that is made in good faith by the
Company in accordance with the Company’s interpretation of its obligations
hereunder, shall be in full satisfaction of all claims against the Company for
benefits under this Plan to the extent of such payment.

     Section 10.3. Notices. Any notice permitted or required under the Plan
shall be in writing and shall be hand delivered or sent, postage prepaid,
certified or registered mail with return receipt requested, to the principal
office of the Company, if to the Company, or to the address last shown on the
records of the Company, if to a Participant or Beneficiary. Any such notice
shall be effective as of the date of hand delivery or mailing.

     Section 10.4. Non-Alienation. No benefit payable at any time under this
Plan shall be subject in any manner to alienation, sale, transfer, assignment,
pledge, levy, attachment, or encumbrance of any kind.

     Section 10.5. Tax Liability. The Company may direct the trustee of the
Trust to withhold from any payment of benefits under the Plan such amounts as
the Company determines are reasonably necessary to pay any taxes (and interest
thereon) required to be withheld or for which the trustee of the Trust may
become liable under applicable law. The Company may also direct the trustee of
the Trust to forward to the appropriate taxing authority any amounts required to
be paid by the Company or the Trust under the preceding sentence. Any amounts
withheld pursuant to this Section 10.5 in excess of the amount of taxes due (and
interest thereon) shall be paid to the Participant or Beneficiary upon final
determination, as determined by the Company, of such amount. No interest shall
be payable by the Company to any Participant or Beneficiary by reason of any
amounts withheld pursuant to this Section 10.5.

     Section 10.6. Captions. Article and section headings and captions are
provided for purposes of reference and convenience only and shall not be relied
upon in any way to construe, define, modify, limit, or extend the scope of any
provision of the Plan.

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     Section 10.7. Applicable Law. The Plan and all rights hereunder shall be
governed by and construed according to the laws of the State of Missouri, except
to the extent such laws are preempted by the laws of the United States of
America.

          Dated:   June 10, 2002

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  H&R BLOCK, INC.           /s/ Mark A. Ernst

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Mark A. Ernst
President and Chief Executive Officer

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