Exhibit 10.3
H&R BLOCK, INC.
2003 LONG-TERM EXECUTIVE COMPENSATION PLAN
PERFORMANCE SHARE UNITS
GRANT AGREEMENT
     This Grant Agreement is entered into by and between H&R Block, Inc., a
Missouri corporation (the “Company”), and [Participant Name] (“Participant”).
     WHEREAS, the Company provides certain incentive awards to key employees of
subsidiaries of the Company under the H&R Block, Inc. 2003 Long-Term Executive
Compensation Plan (the “Plan”);
     WHEREAS, receipt of such Awards under the Plan are conditioned upon a
Participant’s execution of a Grant Agreement within 180 days of [Grant Date],
wherein Participant agrees to abide by certain terms and conditions authorized
by the Compensation Committee of the Board of Directors;
     WHEREAS, the Participant has been selected by the Compensation Committee or
the Chief Executive Officer of the Company as a key employee of one of the
subsidiaries of the Company and is eligible to receive Awards under the Plan.
     NOW THEREFORE, in consideration of the parties’ promises and agreements set
forth in this Grant Agreement, the sufficiency of which the parties hereby
acknowledge,
IT IS AGREED AS FOLLOWS:
1. Definitions. Whenever a term is used in this Agreement or an Award
Certificate issued under 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.
     1.1 Amount of Gain Realized. The Amount of Gain Realized shall be equal to
the number of Earned Units or Restricted Shares delivered to the Participant
multiplied by the Fair Market Value (FMV) of one Share of the Company’s Common
Stock on the date the Earned Units or Restricted Shares became vested in or paid
to the Participant.
     1.2 Change of Control. Change of Control means the occurrence of one or
more of the following events:
     (a) Any one person, or more than one person acting as a group, acquires
ownership of stock of the Company that, together with stock held by such person
or group, constitutes more than 50 percent of the total fair market value or
total voting power of the stock of the Company. If any one person, or more than
one person acting as a group, is considered to own more than 50 percent of the
total fair market value or total voting power of the stock of the Company, the
acquisition of additional stock by the same person or persons shall not be
considered to cause a change in the ownership of the corporation. An

--------------------------------------------------------------------------------

 

increase in the percentage of stock owned by any one person, or persons acting
as a group, as a result of a transaction in which the Company acquires its stock
in exchange for property will be treated as an acquisition of stock for purposes
of this Section 1.2(a).
     (b) Any one person, or more than one person acting as a group, acquires (or
has acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the Company
possessing 35 percent or more of the total voting power of the stock of the
Company. If any one person, or more than one person acting as a group, is
considered to effectively control a corporation within the meaning of Treasury
Regulation §1.409A-3(i)(5)(vi), the acquisition of additional control of the
corporation by the same person or persons is not considered to cause a change in
the effective control of the corporation.
     (c) A majority of members of the Company’s Board of Directors (the “Board”)
is replaced during any 12-month period by directors whose appointment or
election is not endorsed by two-thirds (2/3) of the members of the Board before
the date of such appointment or election.
     (d) Any one person, or more than one person acting as a group, acquires (or
has acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) assets from the Company that have a total
gross fair market value equal to or more than 50 percent of the total gross fair
market value of all of the assets of the Company immediately before such
acquisition or acquisitions. For this purpose, gross fair market value means the
value of the assets of the Company, or the value of the assets being disposed
of, determined without regard to any liabilities associated with such assets.
Notwithstanding the foregoing, there is no Change of Control event under this
Section 1.2(d) when there is a transfer to an entity that is controlled by the
shareholders of the Company immediately after the transfer. A transfer of assets
by the Company is not treated as a change in the ownership of such assets if the
assets are transferred to: (i) a shareholder of the Company (immediately before
the asset transfer) in exchange for or with respect to its stock; (ii) an
entity, 50 percent or more of the total value or voting power of which is owned,
directly or indirectly, by the Company; (iii) a person, or more than one person
acting as a group, that owns, directly or indirectly, 50 percent or more of the
total value or voting power of all the outstanding stock of the Company; or
(iv) an entity, at least 50 percent of the total value or voting power of which
is owned, directly or indirectly, by a person described in (iii) above.
For purposes of the foregoing, persons will be considered acting as a group in
accordance with Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of
1934, as amended, and Section 409A of the Code.
     1.3 Code. Code means the Internal Revenue Code of 1986, as amended.
     1.4 Committee. Committee means the Compensation Committee of the Board of
Directors for H&R Block, Inc.
H&R Block Inc., 2003 Long-Term Executive Compensation Plan
Grant Agreement - Performance Units

2

--------------------------------------------------------------------------------

 

     1.5 Common Stock. Common Stock means the common stock, without par value,
of the Company.
     1.6 Company. Company means H&R Block, Inc., a Missouri corporation, and,
unless the context otherwise requires, includes its “subsidiary corporations”
(as defined in Section 424(f) of the Internal Revenue Code) and their respective
divisions, departments and subsidiaries and the respective divisions,
departments and subsidiaries of such subsidiaries.
     1.7 Closing Price. Closing Price shall mean the last reported market price
for one share of Common Stock, regular way, on the New York Stock Exchange (or
any successor exchange or stock market on which such last reported market price
is reported) on the day in question. In the event the exchange is closed on the
day on which Closing Price is to be determined or if there were no sales
reported on such date, Closing Price shall be computed as of the last date
preceding such date on which the exchange was open and a sale was reported.
     1.8 Disability. “Disability” or “Disabled” means a Participant is, by
reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, receiving income replacement benefits under the
group long-term disability insurance program maintained by the Company, and
shall be deemed to first occur on the date as of which such income replacement
benefits commence.
     1.9 EBITDA. EBITDA means the Company’s net earnings before the deduction of
interest expenses, taxes, depreciation, and amortization, reduced by the portion
of such amount that is attributable to the ownership or operation of RSM
McGladrey, Inc. and its subsidiaries.
     1.10 Early Retirement. Early Retirement means the Participant’s voluntary
Termination of Employment with the Company and each of its subsidiaries at or
after the date the Participant has both reached age 55 but has not yet reached
age 65, and completed at least ten (10) years of service with the Company or its
subsidiaries.
     1.11 Earned Units. Earned Units for the Performance Period mean the portion
of the Performance Units awarded for such period determined in accordance with
the applicable provisions of Section 2.5 or 2.8.
     1.12 Fair Market Value. Fair Market Value (“FMV”) means the Closing Price
for one share of H&R Block, Inc. Stock.
     1.13 Fiscal Year. Fiscal Year means the Company’s fiscal year ended
April 30.
     1.14 Good Reason Termination. Good Reason Termination shall mean
Participant’s Termination of Employment which meets the definition of a “Good
Reason Termination” under a written severance plan sponsored by the Company or a
subsidiary of the Company. In the event that no written severance plan exists
for the Participant’s

3

--------------------------------------------------------------------------------

 

subsidiary, the definition of “Good Reason Termination” contained in any
applicable severance plan for the Company will govern.
     1.15 Last Day of Employment. Last Day of Employment means the date of a
Participant’s Termination of Employment.
     1.16 Maximum Performance. Maximum Performance means the level of Revenue or
EBITDA, as the case may be, for each Fiscal Year during the Performance Period
set by the Committee by the 162(m) Deadline for the applicable Fiscal Year that
results in a 200% factor in the Payment Formula set forth in Section 2.5.
     1.17 Minimum Performance. Minimum Performance means the level of Revenue or
EBITDA, as the case may be, for each Fiscal Year during the Performance Period
set by the Committee by the 162(m) Deadline for the applicable Fiscal Year that
results in a 0% factor in the Payment Formula set forth in Section 2.5.
     1.18 162(m) Deadline. 162(m) Deadline means the 90th day of the Fiscal Year
for which the Targets are set.
     1.19 Peer Companies. Peer Companies are the companies in the S&P 500 as of
the first day of the relevant period other than the Company. If a Peer Company
ceases to be a member of the S&P 500 during the relevant period, then such
company will be excluded from the calculation.
     1.20 Performance Period. Performance Period means the period commencing
May 1, 2011 and ending April 30, 2014.
     1.21 Performance Units. Performance Units means the number of units awarded
pursuant to this Agreement that may become Earned Units in accordance with
Section 2.5 or 2.8.
     1.22 Qualifying Termination. Qualifying Termination shall mean
Participant’s Termination of Employment which meets the definition of a
“Qualifying Termination” under a written severance plan sponsored by the Company
or a subsidiary of the Company. In the event that no written severance plan
exists for the Participant’s subsidiary, the definition of “Qualifying
Termination” contained in any applicable severance plan for the Company will
govern.
     1.23 Relative TSR. Relative TSR means the percentile placement of the
Company’s Total Shareholder Return relative to the Total Shareholder Return of
the Peer Companies. Relative Total Shareholder Return will be determined by
ranking the Company and the Peer Companies from highest to lowest according to
their respective Total Shareholder Returns. Based on this ranking, the
percentile performance of the Company relative to the Peer Companies will be
determined as follows:

4

--------------------------------------------------------------------------------

 

                         
P
  =   1   –   R – 1        
 
                     
 
              N        

“P” represents the Company’s percentile performance which will be rounded, if
necessary, to the nearest whole percentile (with 5 being rounded up). “N”
represents the number of Peer Companies. “R” represents Company’s ranking among
the Peer Companies.
     1.24 Retirement. Retirement means the Participant’s voluntary Termination
of Employment with the Company and each of its subsidiaries at or after
attaining age 65.
     1.25 Revenue. Revenue means the Company’s total revenue, reduced by the
portion thereof that consists of revenue attributable to the ownership or
operation of RSM McGladrey, Inc. and its subsidiaries.
     1.26 S&P 500. S&P 500 means the 500 US Companies listed by the Standard and
Poor’s.
     1.27 Target Performance. Target Performance means the level of Revenue or
EBITDA, as the case may be, for each Fiscal Year during the Performance Period
set by the Committee by the 162(m) Deadline for the applicable Fiscal Year that
results in a 100% factor in the Payment Formula set forth in Section 2.5.
     1.28 Targets. Targets for a Fiscal Year mean the Minimum Performance,
Target Performance and Maximum Performance for Revenue and EBITDA for such
Fiscal Year.
     1.29 Termination of Employment. Termination of Employment, termination of
employment and similar references mean a separation from service within the
meaning of Code §409A. A Participant who is an employee will generally have a
Termination of Employment if the Participant voluntarily or involuntarily
terminates employment with the Company. A termination of employment occurs if
the facts and circumstances indicate that the Participant and the Company
reasonably anticipate that no further services will be performed after a certain
date or that the level of bona fide services the Participant will perform after
such date (whether as an employee, director or other independent contractor) for
the Company will decrease to no more than 20 percent of the average level of
bona fide services performed (whether as an employee, director or other
independent contractor) over the immediately preceding 36-month period (or full
period of services if the Participant has been providing services for less than
36 months). For purposes of this Section 1.30, “Company” includes any entity
that would be aggregated with the Company under Treasury
Regulation 1.409A-1(h)(3).
     1.30 Total Shareholder Return. Total Shareholder Return for the Performance
Period (or such shorter period provided in Section 2.8) for the Company and each
Peer Company means the percentage for that entity for that period that is the
quotient of: (i) the sum of the average fair market value per share of the
entity’s common stock for the last thirty (30) trading days of such period (the
“Ending Value”), minus the average fair market value per share of the entity’s
common stock for the most recent thirty (30) trading days

5

--------------------------------------------------------------------------------

 

preceding the beginning of such period (the “Beginning Value”), plus dividends
(other than stock dividends) with respect to which the record date occurs during
such period; divided by (ii) the Beginning Value. In the event of a stock split,
reverse stock split or stock dividend having a record date during such year
(whether of the Company or a Peer Company), the Committee shall adjust the
Beginning Value by multiplying it by the ratio of the number of shares
outstanding at the beginning of the period to the number of shares outstanding
at the end of the period.
2. Performance Shares.
     2.1 Grant of Performance Shares. As of [Grant Date] (the “Award Date”), the
Company shall award [Number of Shares Granted] Performance Units (the
“Performance Shares”).
     2.2 Performance Period. Performance Units shall become Earned Units that
shall be certified by the Committee in accordance with Section 2.5 or 2.8, as
applicable, based on the Company’s satisfaction of the Targets during the
Performance Period.
     2.3 Performance Goals. The Compensation Committee of the Board shall
specify by the 162(m) Deadline the Targets to be met during the Performance
Period or any sub-periods as a condition of payment pursuant to this Agreement.
     2.4 Dividends and Voting Rights. During the time that Performance Units are
outstanding and subject to substantial risk of forfeiture, the Participant shall
not receive dividend payments, rather dividends will accumulate as if each
Performance Unit represented one Share and the accumulated dividends (without
any interest) will be paid to the Participant within sixty (60) days after the
end of the Performance Period to the extent of dividends that are attributable
to Earned Units that are paid to the Participant. Participant shall not have
voting rights with respect to Performance Units or Earned Units.
     2.5 Payment Formula. Payments or conversions to Restricted Shares pursuant
to this Agreement shall be based on Earned Units, and the extent to which such
Earned Units become vested pursuant to this Agreement. The percentage of the
Performance Units that will become Earned Units (the “Earned Percentage”) shall
be determined after the end of the Performance Period in accordance with this
section, except as otherwise provided in Section 2.8. The Earned Percentage is
the product of “Average Revenue/EBITDA Performance” multiplied by the “Relative
TSR Factor,” which amounts shall be determined as set forth below.
     The “Average Revenue/EBITDA Performance” is the average of the Average
EBITDA Performance (“Ave. EBITDA”) and the Average Revenue Performance (“Ave.
Revenue”) determined as follows:

            (Average Revenue/EBITDA Performance) =   (Ave. EBITDA) + (Ave.
Revenue)          2                

6

--------------------------------------------------------------------------------

 

     Ave. EBITDA is the average of the “EBITDA Factors” for each of the three
Fiscal Years during the Performance Period determined as follows:
(Ave. EBITDA) =

      (EBITDA Factor 1) + (EBITDA Factor 2) + (EBITDA Factor 3) 3

     “EBITDA Factor 1, 2 and 3” refers to the percentage EBITDA Factor for each
of the first, second and third Fiscal Years during the Performance Period,
respectively.
     “EBITDA Factor” means the percentage for a Fiscal Year determined as
follows: (i) EBITDA for such Fiscal Year equal to Target Performance for such
Fiscal Year results in an EBITDA Factor of 100%; (ii) EBITDA for such Fiscal
Year equal to or less than Minimum Performance for such Fiscal Year results in
an EBITDA Factor of 0%; (iii) EBITDA for such Fiscal Year greater than Minimum
Performance for such Fiscal Year and less than Target Performance for such
Fiscal Year results in an EBITDA Factor between 0% and 100% based on straight
line interpolation between Minimum and Target Performance; (iv) EBITDA for such
Fiscal Year equal to or greater than Maximum Performance for such Fiscal Year
results in an EBITDA Factor of 200%; and (v) EBITDA for such Fiscal Year greater
than Target Performance for such Fiscal Year and less than Maximum Performance
for such Fiscal Year results in an EBITDA Factor between 100% and 200%, based on
straight line interpolation between Target and Maximum Performance.
     Ave. Revenue is the average of the “Revenue Factors” for each of the three
Fiscal Years during the Performance Period determined as follows:

     
(Ave. Revenue) =

(Revenue Factor 1) + (Revenue Factor 2) + (Revenue Factor 3)         3

     “Revenue Factor 1, 2 and 3” refers to the percentage Revenue Factor for
each of the first, second and third Fiscal Years during the Performance Period,
respectively.
     “Revenue Factor” means the percentage for a Fiscal Year determined as
follows: (i) Revenue for such Fiscal Year equal to Target Performance for such
Fiscal Year results in a Revenue Factor of 100%; (ii) Revenue for such Fiscal
Year equal to or less than Minimum Performance for such Fiscal Year results in a
Revenue Factor of 0%; (iii) Revenue for such Fiscal Year greater than Minimum
Performance for such Fiscal Year and less than Target Performance for such
Fiscal Year results in a Revenue Factor between 0% and 100% based on straight
line interpolation between Minimum and Target Performance; (iv) Revenue for such
Fiscal Year equal to or greater than Maximum Performance for such Fiscal Year
results in a Revenue Factor of 200%; and (v) Revenue for such Fiscal Year
greater than Target Performance for such Fiscal Year and less than Maximum
Performance for such Fiscal Year results in a Revenue Factor between 100% and
200%, based on straight line interpolation between Target and Maximum
Performance.

7

--------------------------------------------------------------------------------

 

     The Earned Percentage is the product of Average Revenue/EBITDA Performance
and the Relative TSR Factor. The Relative TSR Factor will be 75% if Relative TSR
is at or below the 20th percentile. The Relative TSR Factor will be 125% if the
Relative TSR is at or above the 80th percentile. Relative TSR between the 20th
and 80th percentiles results in a Relative TSR Factor between 75% and 125%,
based on straight line interpolation between the 20th and 80th percentiles.
     2.6 Vesting. Except as otherwise provided in this Grant Agreement,
Participant shall become vested in the Earned Units only if Participant remains
continuously employed by the Company throughout the Performance Period, and the
Participant’s termination of employment before the end of the Performance Period
shall result in forfeiture of all rights in the Performance Units and
Participant shall not be entitled to a distribution.
     2.7 Acceleration of Vesting. Notwithstanding Section 2.6, the Participant
shall be entitled to pro-rata vesting of the Earned Units under this Grant
Agreement on the occurrence of any of the following events; provided that
receipt of the benefits set forth in this section 2.7 may be conditioned on the
Participant executing and not revoking a release and separation agreement within
60 days following the date of the applicable event. The pro-rata vesting of the
Earned Units shall be based on the period between the first day of the
Performance Period and the Participant’s Last Day of Employment. Such award
shall be calculated and paid in accordance with Section 2.10.
     (a) Retirement. Upon Retirement or Early Retirement, Participant shall be
entitled to pro-rata vesting of any Earned Units that relate to Performance
Units that were awarded more than one year prior to Retirement or Early
Retirement based on the achievement of the Targets as of the last day of the
Performance Period.
     (b) Qualifying Termination. If a Participant experiences a Qualifying
Termination, Participant shall be entitled to pro-rata vesting of any Earned
Units that relate to Performance Units that were awarded more than one year
prior to the Qualifying Termination based on the achievement of the Targets as
of the last day of the Performance Period.
     (c) Disability. In the event Participant terminates employment due to
Disability, Participant shall be entitled to pro-rata vesting of any Earned
Units that relate to Performance Units that were awarded more than one year
prior to the Disability based on the achievement of the Targets as of the last
day of the Performance Period.
     (d) Death. In the event Participant terminates employment due to
Participant’s death, Participant’s estate shall be entitled to pro-rata vesting
of any Earned Units that relate to Performance Units that were awarded more than
one year prior to Participant’s death based on the achievement of the Targets as
of the last day of the Performance Period.
     2.8 Change of Control. Notwithstanding Sections 2.5 and 2.6, upon the
occurrence of a Change of Control before the Participant has experienced
Termination of Employment with the Company other than a termination described in
Section 2.7, the

8

--------------------------------------------------------------------------------

 

Performance Units shall be cancelled and a number of Restricted Shares shall be
issued that equal the portion of the number of cancelled Performance Units that
would become Earned Units under Section 2.5 based on: (i) actual Revenue and
EBITDA performance relative to the Targets for each completed Fiscal Year;
(ii) the assumption that performance would have been at Target Performance for
Revenue and EBITDA for Fiscal Years that have not been completed as of the date
of the Change of Control; (iii) Relative TSR through the date of the Change of
Control; and (iv) if the Participant terminated employment in a manner described
in Section 2.7 prior to the Change of Control the number of Restricted Shares
shall be further adjusted for the pro-rata adjustment required by Section 2.7.
Such Restricted Shares shall be subject to the terms set forth in this
Section 2.8. Unless the Participant terminated employment before the Change of
Control under a circumstance described in Section 2.7, such Restricted Shares
shall be subject to a “substantial risk of forfeiture” within the meaning of
Code Section 83 until the last day of the Performance Period that applied to the
cancelled Performance Shares. If a Participant Terminated Employment before a
Change of Control under a circumstance described in Section 2.7, the Participant
shall, upon the occurrence of the Change of Control, become 100% vested in all
outstanding converted Restricted Shares awarded under this Grant Agreement.
     During the period the Restricted Shares are subject to substantial risk of
forfeiture, the Restricted Shares shall be held by the Company, or its transfer
agent or other designee and shall be subject to restrictions on transfer. Except
as otherwise set forth in this Section 2.8, in order to become vested in the
Restricted Shares, the Participant must remain in continuous employment of the
Company during the period any Restricted Shares are subject to substantial risk
of forfeiture. Absent an agreement to the contrary, if Participant experiences a
Termination of Employment with the Company for any reason, other than Qualifying
Termination, Good Reason Termination, Retirement, Early Retirement, Death or
Disability while the Restricted Shares are subject to a substantial risk of
forfeiture, all Restricted Shares then held by the Company or its transfer agent
or other designee, if any, shall be forfeited by the Participant and Participant
authorizes the Company and its stock transfer agent to cause delivery, transfer
and conveyance of the Restricted Shares to the Company. If a Participant has a
Termination of Employment following a Change of Control due to a Qualifying
Termination, a Good Reason Termination, Retirement, Early Retirement, Death, or
Disability, the Participant shall, upon the occurrence of such termination,
become 100% vested in all outstanding converted Restricted Shares awarded under
this Grant Agreement.
     The Restricted Shares shall cease to be subject to a substantial risk of
forfeiture and an equal number of Shares shall be transferred directly into a
brokerage account established for the Participant at a financial institution the
Committee shall select at its sole discretion (the “Financial Institution”) or
delivered in certificate form free of restrictions, such method to be selected
by the Committee in its sole discretion upon: (i) if the Participant Terminated
Employment before a Change of Control under a circumstance described in
Section 2.7 other than death, the later of: (x) the date of the Change of
Control, or (y) six months following the date of Termination of Employment due
to a Qualifying Termination, Retirement, Early Retirement or Disability; (ii) if
the Participant Terminated Employment before a Change of Control under a
circumstance described in Section 2.7 due to death, the

9

--------------------------------------------------------------------------------

 

date of the Change of Control; (iii) if the Participant Terminated Employment
after the date of the Change of Control due to a Qualifying Termination, Good
Reason Termination, Retirement, Early Retirement or Disability, the date that is
six months following the date of Termination of Employment; (iv) if the
Participant Terminated Employment after a Change of Control but prior to the
vesting date due to death, the date of death; or (v) if the Participant did not
Terminate Employment prior to the vesting date, the vesting date. The
Participant agrees to complete any documentation with the Company or the
financial institution that is necessary to effect the transfer of Shares to the
financial institution before the delivery will occur.
     2.9 Certification of a Performance Award. Upon completion of the
Performance Period or such earlier period set forth in Section 2.8, and prior to
the payment of any Earned Units to a Participant or conversion of Earned Units
to Restricted Stock pursuant to Section 2.8, the Committee shall certify in
writing the extent to which the Targets have been satisfied.
     2.10 Payment of Performance Awards. Except as provided in Section 2.8 or in
this Section 2.10, vested Earned Units shall be paid out, in Shares of the
Common Stock or cash (as determined by the Committee in its sole discretion),
sixty (60) days following the end of the Performance Period. Payment of any
vested Earned Units pursuant to Section 2.7(a), (b) or (c) shall be made in a
single lump sum in Shares of the Common Stock equal to the number of vested
Earned Units, or in cash (as determined by the Committee in its sole
discretion), upon the later of sixty (60) days following the end of the
Performance Period, or the date which is six (6) months following the
Participant’s Last Day of Employment. The amount of any cash paid shall be based
upon the Fair Market Value at the close of the Performance Period of shares of
Common Stock covered by such vested Earned Units.
3. Covenants.
     3.1 Consideration for Award under the Plan. Participant acknowledges that
Participant’s agreement to this Section 3 is a key consideration for any Award
under the Plan. Participant hereby agrees to abide by the Covenants set forth in
Sections 3.2, 3.3, and 3.4.
     3.2 Covenant Against Competition. Until the later of: (i) the first day
following the Performance Period, or (2) the period of Participant’s employment
and for two (2) years after his/her Last Day of Employment, Participant
acknowledges and agrees he/she will not engage in, or own or control any
interest in, or act as an officer, director or employee of, or consultant,
advisor or lender to, any entity that engages in any business that is
competitive with the primary business activities of the Company’s Tax Services
business which are tax preparation, accounting, and small business services.
     3.3 Covenant Against Hiring. Participant acknowledges and agrees the he/she
will not directly or indirectly recruit, solicit, or hire any Company employee
or otherwise

10

--------------------------------------------------------------------------------

 

induce any such employee to leave the Company’s employment during the period of
Participant’s employment and for one (1) year after his/her Last Day of
Employment.
     3.4 Covenant Against Solicitation. During the period of Participant’s
employment and for two (2) years after his/her Last Day of Employment,
Participant acknowledges and agrees that he/she will not directly or indirectly
solicit or enter into any business transaction of the nature performed by the
Company with any Company client for which Participant personally performed
services or acquired material information.
     3.5 Forfeiture of Rights. Notwithstanding anything herein to the contrary,
if Participant violates any provisions of this Section 3, Participant shall
forfeit all rights to payments or benefits under the Plan. All Shares held by
the Company and subject to forfeiture on such date shall terminate.
     3.6 Remedies. Notwithstanding anything herein to the contrary, if
Participant violates any provisions of this Section 3, whether prior to, on or
after any Settlement of an Award under the Plan, then Participant shall promptly
pay to Company an amount equal to the aggregate Amount of Gain Realized by the
Participant on all Shares received after a date commencing one year prior to
Participant’s Last Day of Employment. The Participant shall pay Company within
three (3) business days after the date of any written demand by the Company to
the Participant.
     3.7 Remedies payable in Company’s Common Stock or Cash. The Participant
shall pay the amounts described in Section 3.6 in the Company’s Common Stock or
cash.
     3.8 Remedies without Prejudice. The remedies provided in this Section 3
shall be without prejudice to the rights of the Company and/or the rights of any
one or more of its subsidiaries to recover any losses resulting from the
applicable conduct of the Participant and shall be in addition to any other
remedies the Company and/or any one or more subsidiaries may have, at law or in
equity, resulting from such conduct.
     3.9 Survival. Participant’s obligations in this Section 3 shall survive and
continue beyond settlement of all Awards under the Plan and any termination or
expiration of this Agreement for any reason.
4. Transfer Restrictions.
     4.1 Transfer Restrictions on Shares. Any Restricted Shares issued pursuant
to this Agreement, and the rights and privileges conferred hereby shall not be
transferred, assigned, pledged, or hypothecated in any way (whether by operation
of law or otherwise) and shall not be subject to sale under execution,
attachment or similar process, prior to the lapse of all restrictions. Upon any
attempt, contrary to the terms hereof, to transfer, assign, pledge, hypothecate,
or otherwise so dispose of such Shares or any right or privilege conferred
hereby, or upon any attempted sale under any execution, attachment, or similar
process upon such Shares or the rights and privileges hereby granted, then and
in any such event this Agreement and the rights and privileges hereby granted
shall immediately

11

--------------------------------------------------------------------------------

 

terminate. Immediately after such termination, such Shares shall be forfeited by
the Participant.
     4.2 Non-Transferability of Awards Generally. Any Performance Unit, Earned
Unit or other Award (including all rights, privileges and benefits conferred
under such Award) shall not be transferred, assigned, pledged, or hypothecated
in any way (whether by operation of law or otherwise) and shall not be subject
to sale under execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate, or otherwise dispose of any Award, or of
any right or privilege conferred hereby, contrary to the provisions hereof, or
upon any attempted sale under any execution, attachment, or similar process upon
the rights and privileges hereby granted, then and in any such event such Award
and the rights and privileges hereby granted shall immediately become null and
void.
5. Miscellaneous.
     5.1 No Employment Contract. This Agreement does not confer on the
Participant any right to continued employment for any period of time, is not an
employment contract, and shall not in any manner modify any effective contract
of employment between the Participant and any subsidiary of the Company.
     5.2 Clawback. In the event of a significant restatement of the Company’s
financial results and a resulting overpayment in compensation or Awards under
this Plan, the Committee may require reimbursement of any portion of the Amount
of Gain Realized from such Awards where such Awards were greater than the Awards
would have been if calculated on the restated financial results.
     5.3 Adjustment of Shares. If there shall be any change in the capital
structure of the Company, including but not limited to a change in the number or
kind of the outstanding shares of the Common Stock resulting from a stock
dividend or split-up, or combination or reclassification of such shares (or of
any stock or other securities into which shares shall have been changed, or for
which they shall have been exchanged), then the Board of Directors of the
Company may make such equitable adjustments with respect to the Performance
Units, Earned Units and any Restricted Shares (and Shares following lapse of the
restrictions), or any other provisions of the Plan, as it deems necessary or
appropriate to prevent dilution or enlargement of the rights hereunder, of the
Performance Units, Earned Units or of any Restricted Shares subject to this
Grant Agreement.
     5.4 Merger, Consolidation, Reorganization, Liquidation, etc. If the Company
shall become a party to any corporate merger, consolidation, major acquisition
of property for stock, reorganization, or liquidation, the Board of Directors
shall, acting in its absolute and sole discretion, make such arrangements, which
shall be binding upon the Participant of outstanding Awards, including but not
limited to, the substitution of new Awards or for any Awards then outstanding,
the assumption of any such Awards and the termination of or payment for such
Awards.

12

--------------------------------------------------------------------------------

 

     5.5 Interpretation and Regulations. The Board of Directors of the Company
shall have the power to provide regulations for administration of the Plan by
the Committee and to make any changes in such guidelines as from time to time
the Board may deem necessary. The Committee shall have the sole power to
determine, solely for purposes of the Plan and this Agreement, the date of and
circumstances which shall constitute a cessation or termination of employment
and whether such cessation or termination is the result of retirement, death,
disability or termination without cause or any other reason, and further to
determine, solely for purposes of the Plan and this Agreement, what constitutes
continuous employment with respect to the delivery of Shares under the Grant
Agreement (except that leaves of absence approved by the Committee or transfers
of employment among the subsidiaries of the Company shall not be considered an
interruption of continuous employment for any purpose under the Plan).
     5.6 Reservation of Rights. If at any time counsel for the Company
determines that qualification of the Shares under any state or federal
securities law, or the consent or approval of any governmental regulatory
authority, is necessary or desirable as a condition of the executing an Award or
benefit under the Plan, then such action may not be taken, in whole or in part,
unless and until such qualification, registration, consent or approval shall
have been effected or obtained free of any conditions such counsel deems
unacceptable.
     5.7 Reasonableness of Restrictions, Severability and Court Modification.
Participant and the Company agree that, the restrictions contained in this
Agreement are reasonable, but, should any provision of this Agreement be
determined by a court of competent jurisdiction to be invalid, illegal or
otherwise unenforceable or unreasonable in scope, the validity, legality and
enforceability of the other provisions of this Agreement will not be affected
thereby, and the provision found invalid, illegal, or otherwise unenforceable or
unreasonable will be considered by the Company and Participant to be amended as
to scope of protection, time or geographic area (or any one of them, as the case
may be) in whatever manner is considered reasonable by that court, and, as so
amended will be enforced.
     5.8 Withholding of Taxes. To the extent that the Company is required to
withhold taxes in compliance with any federal, state, local or foreign law in
connection with any payment made or benefit realized by a Participant or other
person under this Plan, it shall be a condition to the receipt of such payment
or the realization of such benefit that the Participant or such other person
make arrangements satisfactory to the Company for the payment of all such taxes
required to be withheld. At the discretion of the Committee, such arrangements
may include relinquishment of a portion of such benefit. In the event the
Participant has not made arrangements, the Company shall withhold the amount of
such tax obligations from such dividend payment or instruct the Participant’s
employer to withhold such amount from the Participant’s next payment(s) of
wages. The Participant authorizes the Company to so instruct the Participant’s
employer and authorizes the Participant’s employer to make such withholdings
from payment(s) of wages.
     5.9 Waiver. The failure of the Company to enforce at any time any terms,
covenants or conditions of this Agreement shall not be construed to be a waiver
of such

13

--------------------------------------------------------------------------------

 

terms, covenants or conditions or of any other provision. Any waiver or
modification of the terms, covenants or conditions of this Agreement shall only
be effective if reduced to writing and signed by both Participant and an officer
of the Company.
     5.10 Notices. Any notice to be given to the Company or election to be made
under the terms of this Agreement shall be addressed to the Company (Attention:
Long-Term Incentive Department) at One H&R Block Way, Kansas City Missouri 64105
or at such other address as the Company may hereafter designate in writing to
the Participant. Any notice to be given to the Participant shall be addressed to
the Participant at the last address of record with the Company or at such other
address as the Participant may hereafter designate in writing to the Company.
Any such notice shall be deemed to have been duly given when deposited in the
United States mail via regular or certified mail, addressed as aforesaid,
postage prepaid.
     5.11 Choice of Law. This Grant Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Missouri without
reference to principles of conflicts of laws.
     5.12 Choice of Forum and Jurisdiction. Participant and Company agree that
any proceedings to enforce the obligations and rights under this Grant Agreement
must be brought in Missouri District Court located in Jackson County, Missouri,
or in the United States District Court for the Western District of Missouri in
Kansas City, Missouri. Participant agrees and submits to personal jurisdiction
in either court. Participant and Company further agree that this Choice of Forum
and Jurisdiction is binding on all matters related to Awards under the Plan and
may not be altered or amended by any other arrangement or agreement (including
an employment agreement) without the express written consent of Participant and
H&R Block, Inc.
     5.13 Attorneys Fees. Participant and Company agree that in the event of
litigation to enforce the terms and obligations under this Grant Agreement, the
party prevailing in any such cause of action will be entitled to reimbursement
of reasonable attorney fees.
     5.14 Relationship of the Parties. Participant acknowledges that this Grant
Agreement is between H&R Block, Inc. and Participant. Participant further
acknowledges that H&R Block, Inc. is a holding company and that Participant is
not an employee of H&R Block, Inc.
     5.15 Headings. The section headings herein are for convenience only and
shall not be considered in construing this Agreement.
     5.16 Amendment. No amendment, supplement, or waiver to this Agreement is
valid or binding unless in writing and signed by both parties.
     5.17 Execution of Agreement. This Agreement shall not be enforceable by
either party, and Participant shall have no rights with respect to the Long Term
Incentive Award, unless and until it has been (1) signed by Participant and on
behalf of the Company by an

14

--------------------------------------------------------------------------------

 

officer of the Company, provided that the signature by such officer of the
Company on behalf of the Company may be a facsimile or stamped signature, and
(2) returned to the Company.
     5.18 Section 409A Compliance. To the extent any provision of the Plan or
action by the Board or Committee would subject any Participant to liability for
interest, penalties or additional taxes under Section 409A of the Code, it will
be deemed null and void, to the extent permitted by law and deemed advisable by
the Committee. It is intended that the Plan will comply with or be exempt from
Section 409A of the Code, and the Plan shall be interpreted consistent with such
intent. The Plan may be amended in any respect deemed necessary (including
retroactively) by the Committee in order to pursue compliance with or exemption
from, as applicable, Section 409A of the Code. The foregoing shall not be
construed as a guarantee of any particular tax effect for Plan benefits. A
Participant or beneficiary as applicable is solely responsible and liable for
the satisfaction of all taxes and penalties that may be imposed on the
Participant or beneficiary in connection with any payments to such Participant
or beneficiary under the Plan, including any taxes, interest and penalties under
Section 409A of the Code, and neither the Company nor any Affiliate shall have
any obligation to indemnify or otherwise hold a Participant or beneficiary
harmless from any and all of such taxes and penalties. Notwithstanding any
provision of the Plan that requires action or inaction to avoid the imposition
of taxes, penalties or interest due to Code Section 409A, neither the Company
nor any Affiliate shall have any responsibility to so act or fail to act, and
under no circumstances shall the Company or any of its Affiliates have any
liability for any taxes, interest, penalties or other amount imposed due to Code
Section 409A.
     In consideration of said Award and the mutual covenants contained herein,
the parties agree to the terms set forth above.
     The parties hereto have executed this Grant Agreement.

     
Associate Name:
  [Participant Name]  
Date Signed:
  [Acceptance Date]

H&R BLOCK, INC.
By:

15