Document:

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                                                                  Exhibit 10.1

                      SUPPLEMENTAL EMPLOYMENT AGREEMENT

July 19, 2002

Mr. Garrett E. Pierce
3792 Coventry Lane
Boca Raton, Florida  33431

Dear Garrett:

This letter agreement (the "Agreement') sets forth certain compensation terms
described below that Orbital Sciences Corporation (the "Company") agrees to
provide to you in connection with your employment at the Company. This
Agreement is not an employment contract nor does it alter your status as an
at-will employee of the Company who may resign or be terminated at any time,
with or without cause.

1.      Title. This confirms that you currently serve as Executive Vice
President, Vice-Chairman and Chief Financial Officer, reporting to the Chief
Executive Officer of the Company. At the next regularly scheduled meeting of
the Board of Directors, the bylaws of the Company shall be amended to provide
for an office of Vice Chairman and you shall be appointed Vice Chairman and
Chief Financial Officer, reporting to the Chief Executive Officer.

2.      Term.  This Agreement commences as of the date written above and shall
remain in effect for so long as you are employed as an executive officer of
the Company.

3.      Termination of Employment. In the event your employment with the
Company is terminated by you or the Company, no further benefits will accrue
under Sections 4, 5, and 6 of this Agreement except as expressly elsewhere
provided, and your Executive Employment Agreement dated August 9, 2000 (the
"Executive Employment Agreement") and Change of Control Agreement dated August
9, 2000 (the "Change of Control Agreement"), if applicable, shall govern with
respect to any severance benefits you are entitled to receive upon, or
subsequent to, such termination, subject to Section 5(c) below.

4.      Base Salary. Your current annual base salary is $420,000, paid on a
bi-weekly basis at a rate of $16,153.85 per pay period. Effective with the
first pay period of January 2003, your annual base salary shall be
$450,000.00, paid on a bi-weekly basis at a rate of

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$17,307.70 per pay period. Effective with the first pay period of January
2004, your annual base salary shall be $500,000.00, paid on a bi-weekly basis
at a rate of $19,230.77 per pay period. Your base salary shall be reviewed in
subsequent years for appropriate salary adjustments consistent with the
Company's policy with respect to executive compensation.

5.      Annual Incentive Bonus. You shall be eligible to receive an annual
cash incentive bonus for each of calendar years 2002, 2003 and 2004, with a
target amount for each year equal to 80% of your aggregate base salary for
such year. The actual bonus amount (if any) awarded for any year shall be
determined and paid in accordance with the Company's then-current management
incentive program, shall be approved by the Company's Human Resources and
Governance Committee and shall be based on Company and/or individual
performance criteria as approved by the Board of Directors (or an authorized
Committee thereof) for such year.

6.      Special Cash Bonuses. The payment of the special cash bonuses outlined
below is subject to the consent of Foothill Capital Corporation ("Foothill"),
as agent under the Loan and Security Agreement between the Company and
Foothill dated March 1, 2002, and this Section 6 shall not become effective
unless and until such consent has been received.

        (a)    You shall receive a special cash bonus in the amount of
$400,000.00 promptly following the effective date of this Section 6.

        (b)    Conditioned upon the closing of a restructuring or refinancing
of the Company's convertible notes maturing in October 2002 accomplished
outside of Chapter 11 of the U.S. Bankruptcy Code, you shall be entitled to
receive a special cash bonus in the amount of $300,000.00 on each of December
31, 2002 and December 31, 2003, provided, however, that you must be employed
by the Company on the date that a cash bonus is due under this Section 6 in
order to receive it, unless your employment was previously terminated under
any of the following circumstances:

                (i) by reason of death or Disability (as defined in your
        Executive Employment Agreement),

                (ii) by the Company for any reason other than for Cause, as
        defined in your Executive Employment Agreement,

               (iii) by you for Good Reason, as defined in your Executive
        Employment Agreement, or

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               (iv) immediately prior to or at any time after a Change in
        Control (as defined in the Change of Control Agreement) (A) by the
        Company other than for Cause (as defined in the Change of Control
        Agreement) or (B) by you for Good Reason (as defined in the Change of
        Control Agreement).

        (c)    The special cash bonuses provided for in this Section 6 shall
not be taken into account when calculating any payments due under your
Executive Employment Agreement or your Change of Control Agreement.

7.      Restricted Stock Grant.

        (a)    Upon execution of this Agreement, you shall be awarded 200,000
shares of restricted common stock of the Company pursuant to the Orbital
Sciences Corporation 1997 Stock Option and Incentive Plan as then in effect
(the "1997 Plan"). Such shares are subject to all terms of the 1997 Plan and
of a restricted stock award agreement between you and the Company in the form
attached hereto as Exhibit A. Such shares are subject to a restrictive legend
to the effect that the shares may not be sold, transferred, assigned, pledged
of otherwise encumbered or disposed of until the shares vest, and then only to
the extent permitted by applicable federal and state securities laws. The
restricted stock award shall vest and become nonforfeitable as follows: (i)
100,000 shares shall vest and become nonforfeitable on December 31, 2002, and
(ii) 100,000 shares shall vest and become nonforfeitable on December 31, 2003.
Notwithstanding the foregoing and except as otherwise provided in Section 7(b)
below, any unvested shares shall be forfeited by you in the event you
terminate your employment with the Company or the Company terminates your
employment for Cause, as defined in your Executive Employment Agreement.

        (b)    Notwithstanding the foregoing, immediately prior to a
Terminating Transaction (as defined in the 1997 Plan) or in the event your
employment with the Company is terminated

               (i) by reason of your death or Total Disability, as defined in
        the 1997 Plan,

                (ii) by the Company for any reason other than for Cause, as
        defined in your Executive Employment Agreement, or

               (iii) by you for Good Reason, as defined in your Executive
        Employment Agreement,

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then all restricted shares granted to you pursuant to Section 7(a) shall
become immediately vested and nonforfeitable, with no restrictions on
transferability other than pursuant to applicable securities laws.

8.      Stock Options. As of April 25, 2002, you were granted options to
purchase 500,000 shares of Orbital common stock pursuant to the 1997 Plan, at
a price per share equal to $5.50 (which is 100% of the fair market value of a
share on the date of the grant), subject to the terms and conditions of the
1997 Plan. The option grant shall vest as follows: (i) 100,000 options shall
vest on June 30, 2002; (ii) 200,000 options shall vest on June 30, 2003; and
(iii) 200,000 options shall vest on June 30, 2004.

9.      Taxes.  All payments required to be made by the Company hereunder to
you shall be subject to the withholding of such amounts relating to federal,
state, local or foreign taxes as the Company reasonably may determine it
should withhold pursuant to any applicable law or regulation.

10.     Legal Expenses. The Company shall reimburse you for up to $50,000 for
legal fees actually and reasonably incurred by you in connection with this
Agreement, or in negotiating certain alternative employment arrangements,
within 15 days after you present to the Company reasonably detailed invoices
for such expenses, whether or not you have already made payment for such
expenses.

11.     Relocation Expenses.  The Company shall reimburse you for relocation
expenses in accordance with Exhibit A hereto, which replaces in its entirety
Exhibit B to the May 11, 2000 offer letter from David Thompson to you.

12.     Successors; Binding Agreement.

        (a)    The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all its business and/or assets to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.

        (b)    This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. If you should die
while any amount would still be payable to you hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms
of this Agreement to your devisee, legatee or other designee or if there is no
such designee, to your estate.

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13.     Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by registered mail,
return receipt requested, postage prepaid, addressed (i) if to the Company, to
Orbital Sciences Corporation, 21839 Atlantic Boulevard, Dulles, Virginia
20166, Attn: General Counsel, and (ii) if to you, to the address set forth on
the first page of this Agreement, or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.

14.     Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in a
writing that is signed by you and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
Nothing contained herein shall be held to alter, vary, or affect any of the
terms, provisions, or conditions of your Executive Employment Agreement and
your Change of Control Agreement. The validity, interpretation, construction
and performance of this Agreement shall be governed by the local laws of the
Commonwealth of Virginia (regardless of the laws that might otherwise govern
under principles of conflicts of law).

15.     Validity.  The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

16.     Counterparts.  This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

17.     Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by final and binding
arbitration in Washington, D.C. in accordance with the domestic rules of the
American Arbitration Association ("AAA") then in effect. a nd may be
consolidated with any arbitration proceeding under Section 10 of your
Executive Employment Agreement or Section 10 of your Change of Control
Agreement. Judgment may be entered on the arbitrator's award in any court
having jurisdiction; provided, however, that you shall be entitled to seek
specific

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performance of your right to be paid your base salary until the date of
termination of your employment during the pendency of any dispute or
controversy arising under or in connection with this Agreement. The party
seeking arbitration of a dispute under this section must give specific
writtten notice of ay claim to the other party within twelve (12) months of
the event giving rise to the dispute; otherwise the claim shall be void and
deemed waived, even if there is a federal or state statute of limitations
which would give more time to pursue the claim.

If this Agreement correctly sets forth our agreement on the subject matter
hereof, kindly sign both of the enclosed copies, keeping one for your files
and returning the other to the Company.

Sincerely,

ORBITAL SCIENCES CORPORATION

By:  David W. Thompson
     Chairman and Chief Executive Officer

Agreed to:

Garrett E. Pierce
Date:  July 19, 2002

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                                                                  A. Exhibit A

                                  RELOCATION

The Executive shall be entitled to reimbursement of or for:

1.  Up to $3,000 per month for temporary housing in the Washington, D.C. area
    until September 30, 2002, plus reasonable expenses for rental furniture
    and utilities.

2.  Disposition of residence - Orbital will reimburse the Executive for the
    following:

    -      Reasonable and customary statutory costs imposed on the Executive
           as the seller by federal, state or local laws;

    -      Real estate brokerage fees; and

    -      Attorney fees, mortgage fees, title search costs and title
           insurance.

3.  Any loss incurred by reason of a sale at leas than fair market value of
    his residence, or the Company will purchase or arrange to have the
    residence purchased at such price.

4.  Reasonable travel, meals, lodging and related expenses incurred in
    connection with looking for housing.

5.  Interest costs of a bridge loan for up to one (1) year incurred to
    purchase a new residence if his old residence has not been sold before a
    new one is purchased.

6.  Purchase of a new home - Orbital will reimburse the Executive for the
    following:

    -    Title insurance or guarantee;

    -    Tax and title search;

    -    Attorney fees;

    -    Settlement fees;

    -    Mortgage origination fees charged by a bank or other commercial
         lender (up to two (2) percent of the amount of the loan); and

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    -    Fees for surveys, pest inspections, radon tests, etc.

7.  Movement of personal effects and household goods - Orbital will pay the
    reasonable costs of transporting household goods and personal effects for
    the Executive under the following conditions:

-   Transportation of goods will be provided from the former residence to the
    new residence;

-   Up to two cars may be shipped;

-   Orbital will provide for thirty (30) days of storage of household goods;

-   Moving services will include packing and unpacking of all goods;

-   Household goods will be insured for full value while in transit or for the
    Company-provided storage period. Additional insurance coverage is the
    responsibility of the Executive. Orbital is not liable for loss of or
    damage to items of extraordinary value (including, but not limited to,
    artwork, collections, etc.), irreplaceable items or items of sentimental
    value; and

-   Orbital will secure estimates for moving services and will contract with
    the selected vendor. Every effort will be made to accommodate the
    Executive's preferences for arrangements, including desired pack, load and
    delivery dates. Any deviation from the written authorization provided by
    Orbital to the vendor must be pre-approved by the appropriate Orbital
    Human Resources representative - payment for unauthorized services or
    changes will be the responsibility of the Executive.

8.  Costs of transportation from the current residence to the new work
    location for the Executive and his immediate family.

The Executive shall also receive a lump sum miscellaneous expense allowance of
$25,000 to cover those expenses not covered elsewhere (e.g., redecorating, new
wills, tax assistance).

All taxable payments or reimbursements that do not have a corresponding
deduction will be tax effected, i.e., the Company will pay an allowance to
offset the estimated tax liability, including the tax liability on the
allowance itself.

                                      8H&R Block, Inc.

Table of Contents

Exhibit 10.2

H&R BLOCK

DEFERRED COMPENSATION PLAN

FOR DIRECTORS

 

 

  

Amended and Restated

Effective July 1, 2002

 

TABLE OF CONTENTS

									
	 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
	EX-10.3 Deferred Compensation Plan for Executives
	EX-10.9 First Amendment to Executive Survivor Plan
	EX-12 Computation of Ratio of Earnings
	EX-13 Portion of the Annual Report
	EX-21 Subsidiaries of the Company
	EX-23 Consent of PricewaterhouseCoopers LLP

Table of Contents

H&R BLOCK

DEFERRED COMPENSATION PLAN

FOR DIRECTORS

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	Page	 
	 	 	 	 	 	 	 	
	 
	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		 

 

Table of Contents

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 		 
	 	 	 	 	 	 	 		 
	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	 
										
	 
	 	 	 	 	 	 	 	 

 

Table of Contents

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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Table of Contents

		
	 	     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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Table of Contents

		
	 	     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 amount of a Participant’s benefits

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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 in an allocation of more than

4

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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

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

Mark A. Ernst

President and Chief Executive Officer

13

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