Document:

Ameritrade Holding Corporation

 

Exhibit 4.2

 

 

 

DATEK ONLINE HOLDINGS CORP.

1998 STOCK OPTION PLAN

(As Amended and Restated Effective as of September 9, 2002)

 

DATEK ONLINE HOLDINGS CORP.

1998 STOCK OPTION PLAN

(As Amended and Restated Effective as of September 9, 2002)

1. Purpose and General Information.

	 	A.	 	The purposes of the Datek Online Holdings Corp. 1998 Stock
Option Plan (the “Plan”) are:
	 
	 	•	 	to induce certain employees, directors and consultants to
remain in the employ or service of Datek Online Holdings Corp.
(“Datek”) and its present and future subsidiary corporations (each a
“Subsidiary”). The terms in quotes are defined in Section 424(f) of
the Internal Revenue Code of 1986, as amended (the “Code.”)
	 
	 	•	 	to attract new individuals to accept employment or service
with Datek and Subsidiaries and to encourage them to own Datek
stock.
	 
	 	B.	 	The Company, defined below, believes that the granting of
stock options (the “Options”) under the Plan will benefit the
Company in several ways. Options will help to retain management.
Options create incentives for good performance on the job.
Employees with Options should be more interested in the Company’s
doing well, which in turn should increase the value of their
Options.
	 
	 	C.	 	Two kinds of Options can be granted under the Plan. One kind
is called an “incentive stock option” (another term that is defined
in the Code, specifically Section 422(b) of the Code.) The other
kind is called a “non-qualified stock option”.) Which kind of
Option is being granted is decided by the Committee (the
“Committee”) referred to in Section 4 below at the time the Option
is granted. The Committee can grant one, the other, or both kinds
of Options to any person eligible to have Options under the Plan.

		
	 	Pursuant to an agreement and plan of merger (the “Merger
Agreement”), Datek became a subsidiary of a newly formed
corporation, Ameritrade Holding Corporation (“Ameritrade” or the
“Company”) effective as of September 9, 2002 (the “Restatement
Date”) and as of the Restatement Date Ameritrade assumed the Plan,
and all outstanding obligations hereunder. The following
provisions constitute an amendment, restatement and continuation
of the Plan as of the Restatement Date.

2. Effective Date of the Plan.

     The Plan became effective on March 25, 1998 by action of the Board of
Directors of Datek ratified by the holders of all of the issued and outstanding
shares of the common stock of Datek.

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3. Stock Subject to Plan.

     A total of 35,502,818 shares of the authorized but unissued
shares of the Common Stock, $.01 par value, of the Company (the “Common Stock”)
are reserved for issuance under the Plan. The Company has the right to reduce
this reserve, but to do so it has to buy the same number of shares of Common
Stock and put them aside for issuance when Options are exercised. If an Option
expires, or terminates for any reason, before it is fully exercised, the shares
that were reserved against its exercise will become available as a reserve for
other Options.

4. Committee.

     The Committee shall consist of the Compensation Committee of the Board of
Directors of the Company (the “Board”) or such other committee of the Board as
may be determined by the Board from time to time.

5. Administration.

	 	 	The Committee shall have complete authority and discretion to do the following:
	 
	•	 	Interpret the provisions of the Plan.
	 
	•	 	Prescribe, amend and rescind rules and regulations relating to the Plan.
	 
	•	 	Determine the terms and provisions of option agreements or certificates issued to a person to whom an Option is granted (a
“Participant”) which may be different for different Participants.
	 
	•	 	Determine who shall be granted an Option and the terms of each one, including when each Option is to be granted, the number
of shares subject to it, its exercise price, the time or times when it becomes exercisable, the time it expires, and
whether it is an incentive stock option or a non-qualified stock option.
	 
	•	 	Make all other determinations necessary or advisable for the administration of the Plan.

		
	 	The Committee’s authority to take the above actions is limited
only by the express provisions of this Plan. Factors considered
by the Committee in deciding whether to grant Options and the
terms on which Options are granted may include: The nature of the
services rendered to the Company and Subsidiaries, present and
potential contributions to the success of the Company and
Subsidiaries, and any other factors as the Committee considers
relevant. The Committee’s determination on the matters referred
to in this Section 5 shall be conclusive. Any dispute or
disagreement which may arise under or as a result of or with
respect to any Option shall be determined by the Committee, in its
sole discretion, and any interpretations by the Committee of the
terms of any Option shall be final, binding and conclusive.

6. Eligibility.

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     An Option may be granted only to (i) an employee or consultant of the
Company or a Subsidiary, (ii) a director of the Company who is not employed by
the Company or any of the Subsidiaries (a “Non-Employee Director”) and (iii) an
employee of a corporation or other business enterprise which has been acquired
by the Company or a Subsidiary who holds options to purchase the acquired
company’s stock, if the Company has agreed to assume those options.

7. Option Prices.

	 	A.	 	Incentive Stock Options (“ISO”). The exercise price per
share of any ISO shall be the price determined by the Committee,
which shall not be less than 100% of the fair market value of a
share of Common Stock on the date of grant (not less than 110% of
fair market value for an ISO granted to a “Ten Per Cent
Participant,” that is, a Participant who owns more than 10% of the
total voting power of all shares of Common Stock, ownership being
determined under Section 424(d) of the Code.).
	 
	 	B.	 	Non-Qualified Stock Options (“NQO”). The exercise price per
share of any NQO shall be the price determined by the Committee
which shall not be less than 90% of the fair market value of a share
of the Common Stock on the date of the grant (not less than 100% of
fair market value for an NQO granted to a person who is, or in the
judgment of the Committee may reasonably be expected to become, a
“covered employee” within the meaning of Section 162(m)(3) of the
Code.)
	 
	 	C.	 	Exception. The minimum exercise prices in paragraphs A. and
B. above shall not apply in the case of Options granted in exchange
for options of an acquired company, as provided in Section 17.
	 
	 	D.	 	Fair Market Value. For purposes of the Plan, the “Fair
Market Value” of a share of Common Stock as of any date shall be the
closing market composite price for such Common Stock as reported on
NASDAQ on that date or, if Common Stock is not traded on that date,
on the next preceding date on which Common Stock was traded.

8. Option Term.

     Except as otherwise determined by the Committee, each Option granted under
the Plan shall have a term of five years from the date of grant. The maximum
term of any Option granted under the Plan shall be ten years from date of grant
(five years maximum for an incentive stock Option granted to a Ten Per Cent
Participant.)

9. Limitations on Amount of Options Granted.

	 	A.	 	Except as otherwise provided in Section 17, the maximum fair
market value of Common Stock subject to ISOs granted to any
Participant that become exercisable within a single calendar year is
$100,000. This applies both to ISOs granted under this Plan and
incentive stock options granted under any other stock option plan
the Company may have.

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	 	B.	 	Except as otherwise provided in Section 17, no Participant
shall, during any fiscal year of the Company, be granted Options to
purchase more than 3,550,282 shares of the Common
Stock.

10. Vesting and Exercise of Options.

	 	A.	 	Vesting. Except as otherwise provided in Section 17 or as
otherwise determined by the Committee at the time of grant, an
Option shall vest (and become a “Vested Option”) with respect to
thirty-three and one-third percent (33-1/3%) of the total number of
shares of Common Stock covered by the Option on each of the first
three (3) anniversaries of the day before the date of grant. The
Participant must be in the employ or service of the Company or a
Subsidiary on any scheduled date of vesting, otherwise vesting will
not occur. Any fractional number of shares of Common Stock
resulting from the application of the foregoing percentages shall be
rounded to the next higher whole number of shares of Common Stock.
	 
	 	B.	 	Exercisability. Except as otherwise provided in Section 17
or as otherwise determined by the Committee at the time of grant, a
Vested Option may be exercised at any time.
	 
	 	C.	 	Complete or Partial Exercise. Except as otherwise set forth
in this instrument, an Option may be exercised either in whole at
any time or in part from time to time.
	 
	 	D.	 	Exercise Procedure. Except as otherwise expressly provided
in the Plan, an Option may be exercised, in whole or in part, in
accordance with terms and conditions established by the Board or the
Committee at the time of grant; provided, however, that no Option
shall be exercisable after the expiration date (as provided in
Section 12) applicable to that Option and no Option or any portion
thereof will first become exercisable after the Participant’s
termination of employment with the Company. The full exercise price
of each share of Common Stock purchased upon the exercise of any
Option shall be paid at the time of such exercise (except that, in
the case of a cashless exercise arrangement approved by the
Committee, payment may be made as soon as practicable after the
exercise) and, as soon as practicable thereafter, a certificate
representing the shares so purchased shall be delivered to the
person entitled thereto. The exercise price shall be payable in
cash or in shares of Common Stock (valued at Fair Market Value as of
the day of exercise), or in any combination thereof, as determined
by the Board or the Committee and, to the extent provided by the
Committee, a Participant may elect to pay the exercise price upon
the exercise of an Option through a cashless exercise arrangement.
	 
	 	E.	 	Discretionary Acceleration. The Committee may, in its
discretion, accelerate the vesting or exercisability of any Option,
in whole or in part.

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	 	F.	 	Effect of Change in Control. Unless otherwise provided by
the Committee at the time of grant, and notwithstanding the
provisions of paragraphs A and B of this Section 10, if a Change of
Control of the Company takes place, every Option previously granted
to any Participant that has not expired, been cancelled or otherwise
become unexercisable, shall immediately vest, and become
exercisable, in full. A “Change of Control of the Company” shall
occur or be deemed to have occurred only if any of the following
events takes place:

	 	(i)	 	any “person,” as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company,
any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportion as the ownership of stock of
the Company) is or becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing more than 50% of the
combined voting power of the Company’s then outstanding
securities;
	 
	 	(ii)	 	individuals who, as of the effective date of the
Plan set forth in Section 2 above, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least
a majority of the Board, provided that any person becoming a
director subsequent to the effective date whose election, or
nomination for election by the Company’s stockholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office
is in connection with an actual or threatened election contest
relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) shall be, for purposes of the Plan, considered
as though such person were a member of the Incumbent Board; or
	 
	 	(iii)	 	the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation,
other than (I) a merger or consolidation which would result in
the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) more than 60% of the combined voting
power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation or (II) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no person or group of persons acting in
concert acquires more than 50% of the combined voting power of
the Company’s then outstanding securities; or
	 
	 	(iv)	 	the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of the Company’s assets.

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11. Transferability.

     No Option shall be assignable or transferable except by will and/or by the
laws of descent and distribution and, during the life of any Participant, each
Option granted to him or her may be exercised only by him or her.

12. Termination of Employment.

	 	A.	 	Except as otherwise determined by the Committee at the time
of grant, in the event a Participant leaves the employ of the
Company and the Subsidiaries or ceases to serve as a consultant to
the Company and/or as a Non-Employee Director of the Company for any
reason other than his or her termination for “Cause” (as defined in
paragraph B of this Section 12), each Option previously granted to
him or her that has not already been exercised, expired or otherwise
been cancelled, and that was vested and exercisable on the date of
termination of employment or service, shall terminate thirty days
after the date of such Participant’s termination of employment or
service, or on the date of termination specified in the Option,
whichever comes first. Any Option that was not both vested and
exercisable on the date of termination shall expire on that date.
	 
	 	B.	 	If a Participant’s employment by the Company and the
Subsidiaries or service as a consultant and/or as a Non-Employee
Director of the Company is terminated for “Cause,” each Option
previously granted to him or her that has not already been
exercised, expired or otherwise been cancelled shall terminate at
the same time the termination for Cause becomes effective. For
purposes of the foregoing, the term “Cause” shall mean, unless
otherwise defined in an employment agreement, or as otherwise
provided for by the Committee at the time of grant: (i) the
commission by a Participant of any act or omission that would
constitute a crime under federal, state or equivalent foreign law,
(ii) the commission by a Participant of any act of moral turpitude,
(iii) fraud, dishonesty or other acts or omissions that result in a
breach of any fiduciary or other material duty to the Company and/or
the Subsidiaries or (iv) continued alcohol or other substance abuse
that renders a Participant incapable of performing his or her
material duties to the satisfaction of the Company and/or the
Subsidiaries.

13. Adjustment of Number of Shares.

	 	A.	 	If a dividend is declared upon Common Stock payable in shares
of Common Stock, the number of shares of Common Stock—

	 	(i)	 	then subject to any Option
	 
	 	(ii)	 	reserved for issuance in accordance with the
provisions of the Plan but not yet covered by an Option
	 
	 	(iii)	 	referred to in paragraph B of Section 9

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shall be increased by the number of shares, or fraction of a share, that would
have been paid as a dividend to a person holding a single share of Common Stock
on the date fixed for determining the stockholders entitled to receive such
stock dividend (without giving effect to any cash payment made to actual
stockholders in lieu of fractional dividend shares.)

	 	B.	 	If the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation, or partly into
or for such shares or securities and partly into or for the right to
receive a cash payment, whether through reorganization,
recapitalization, stock split-up, combination of shares, sale of
assets, merger or consolidation, there shall be substituted for each
share of Common Stock—
	 
	 		 	(i)	 	then subject to any Option,
	 
	 		 	(ii)	 	reserved for issuance in accordance with the
provisions of the Plan but not yet covered by an Option,
	 
	 		 	(iii)	 	referred to in paragraph B of Section 9,
	 
	the number and kind of shares of stock or other securities, and cash, into
which each outstanding share of Common Stock shall be so changed or for which
each such share shall be exchanged.

	 
	 	C.	 	If, as the result of any transaction of the nature referred
to in paragraph B of this Section 13, holders of Common Stock
receive cash as the full and only consideration for their shares
thereof, there shall be substituted for each share of Common Stock
subject to any Option the right to receive a cash payment, on the
same date as, and equal in amount to, the payment to holders of
Common Stock for their shares thereof, and the vesting and
exercisability of each Option not currently vested and exercisable
shall without any action on the part of the holder thereof be
accelerated to the day before the consummation of such transaction,
and each Option shall without any action on the part of the holder
thereof be deemed to have been exercised in full on that day.
	 
	 	D.	 	If there is any change, other than as specified in paragraphs
A, B and C of this Section 13, in the number or kind of outstanding
shares of Common Stock, or of any stock or other securities into
which Common Stock has been changed, or for which it has been
exchanged, then, if the Committee shall, in its sole discretion,
determine that such change equitably requires an adjustment in the
number or kind of shares —

	 		 	(i)	 	then subject to any Option
	 
	 		 	(ii)	 	reserved for issuance in accordance with the
provisions of the Plan but not yet covered by an Option
	 
	 		 	(iii)	 	referred to in paragraph B Section 9

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such adjustment shall be made by the Committee and shall be effective and
binding for all purposes of the Plan and of each stock option agreement or
certificate entered into in accordance with the provisions of the Plan.

	 	E.	 	If any substitution or adjustment is made under this Section
13, the exercise price in each stock option agreement or certificate
for each share covered by the relevant Option immediately before
such substitution or adjustment shall be the exercise price for all
shares of stock or other securities substituted for that share or to
which that share is adjusted under this Section 13.
	 
	 	F.	 	No adjustment or substitution provided for in this Section 13
shall require the Company to sell a fractional share under any stock
option agreement or certificate. Any fractional share resulting
from an adjustment or substitution provided for in this Section 13
shall be rounded up to the nearest whole share.
	 
	 	G.	 	If the Company is dissolved or liquidated, each Option, to
the extent not exercised before such event, shall terminate
immediately when dissolution or liquidation becomes effective.
	 
	 	H.	 	Replacement Options. Each holder of an Option related to the
common stock of Datek (“Datek Common Stock”) which was granted
pursuant to the Plan prior to the Restatement Date and which was
outstanding as of the Restatement Date after giving effect to the
transactions contemplated by the Merger Agreement, including the
reclassification of Datek stock (the “Existing Datek Options”),
will, as of the Restatement Date, be automatically granted a
“Replacement Option” under the Plan and the Existing Datek Options
shall be cancelled in exchange for the Replacement Options. The
number of shares of Common Stock subject to a Replacement Option
shall be equal to (i) the number of shares of Datek Common Stock
subject to the corresponding Existing Datek Option multiplied by the
Exchange Ratio (as defined in the Merger Agreement), rounded down to
the nearest whole number. The exercise price per share of Common
Stock subject to a Replacement Option shall be equal to the
per-share exercise price under the corresponding Existing Datek
Option divided by the Exchange Ratio, rounded up to the nearest
whole cent. Other than the number of shares of Common Stock and the
exercise price subject thereto, the Replacement Options granted
pursuant to this Section 13 shall be subject to the same terms and
conditions as the corresponding Existing Datek Options.

14. Purchase for Investment, Withholding and Waivers.

	 	A.	 	Unless the shares to be issued upon the exercise of an Option
by a Participant shall be registered prior to the issuance thereof
under the Securities Act of 1933, before issuance, such Participant
will, as a condition of the Company’s obligation to issue such
shares, be required to give a representation in writing that he or
she is acquiring such shares for his or her own account as an
investment and not with a view to, or for sale in connection with,
the distribution of those shares.

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	 	B.	 	In the event of the death of a Participant, a condition of
exercising any Option shall be the delivery to the Company of such
tax waivers and other documents as the Committee shall determine.
	 
	 	C.	 	Any Participant exercising a non-qualified stock option shall
first enter into whatever arrangements regarding withholding by the
Company of applicable income taxes is required by the Committee.

15. No Stockholder Status.

     Neither any Participant nor his or her legal representatives, legatees or
distributees shall be or be deemed to be the holder of any share of Common
Stock covered by an Option unless and until a certificate for such share has
been issued. Upon payment of the purchase price thereof, a share issued upon
exercise of an Option shall be fully paid and non-assessable.

16. No Restrictions on Corporate Acts.

     Neither the existence of the Plan nor any Option shall in any way affect
the right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in the
Company’s capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or
dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding
whether of a similar character or otherwise.

17. Options Granted in Connection With Acquisitions.

     If the Company or a Subsidiary acquires another corporation which becomes
a Subsidiary or division of the Company or a Subsidiary (“Acquired
Subsidiary”), Options may be granted under this Plan to employees and other
personnel of an Acquired Subsidiary in exchange for then outstanding options to
purchase securities of the Acquired Subsidiary. Such Options may be granted at
such option prices, may be exercisable immediately or at any time or times
either in whole or in part, and may contain such other provisions not
inconsistent with the Plan, or the requirements set forth in Section 19 that
certain amendments to the Plan be approved by the stockholders of the Company,
as the Committee, in its discretion, shall deem appropriate at the time of the
granting of such Options.

18. No Employment or Service Right.

     Neither the existence of the Plan nor the grant of any Option shall
require the Company or any Subsidiary to continue any Participant in the employ
or service of the Company or such Subsidiary or require the Company to continue
any Participant as a director of the Company.

19. Termination and Amendment of the Plan.

     The Board may, at any time, amend or terminate the Plan, provided that,
subject to Section 13 (relating to certain adjustments), no amendment or
termination may, without the consent of the affected Participant, materially
adversely affect the rights of any Participant or

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beneficiary under any Award made under the Plan prior to the date such
amendment is adopted by the Board.

20. Expiration and Termination of the Plan.

     The Plan shall terminate on March 24, 2008 or at such earlier time as the
Board may determine. Options may be granted under the Plan at any time and
from time to time prior to its termination. Any Option outstanding under the
Plan at the time of the termination of the Plan shall remain in effect until
exercised or expiration in accordance with its terms.

-10-H & R Block Inc

 

Exhibit 10.1

AMENDMENT TO EMPLOYMENT AGREEMENT

     THIS AMENDMENT TO EMPLOYMENT AGREEMENT (“Amendment”) is entered into as of
the 18th day of June, 2002 by and between H&R Block Services, Inc. (the
“Company”) and Thomas L. Zimmerman (“Executive”) and constitutes an amendment
to the Employment Agreement between the parties dated November 1, 2001 (the
“Agreement”).

     WHEREAS, Executive will retire as President, U.S. Tax Operations of the
Company and as a regular, full-time employee of the Company as of July 1, 2002;

     WHEREAS, the parties desire that Executive continue to be employed by the
Company as a part-time employee for a period up to one year after July 1,
2002, subject to the terms and conditions specified herein and the Agreement,
as amended hereby; and

     WHEREAS, the parties desire to set forth the terms and conditions upon
which Executive will continue employment after July 1, 2002;

     NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the Company and Executive (collectively,
the “Parties”) agree as follows:

	1.	 	Change in Employment/Duties. Executive’s status as an officer of the
Company, H&R Block Tax Services, Inc. and any other affiliate of the
Company, and as a regular, full-time employee of the Company shall
terminate as of the close of business on July 1, 2002. Executive shall
continue to be employed by the Company under the Agreement, as amended
hereby, after July 1, 2002 solely as a part-time employee of the Company
and, after July 1, 2002, shall not be considered a regular, full-time
employee of the Company. After July 1, 2002, Executive will work on such
projects and assignments as are mutually agreed upon by the Company and
Executive. Without affecting his status as an employee, on or before July
1, 2002, Executive shall resign as a director and as President, U.S. Tax
Operations of the Company and as a director and/or officer of each
affiliate of the Company for which he serves as of the date of this
Amendment as a director and/or officer. Executive shall also assign any
shares of stock of H&R Block Limited or any other subsidiary of the
Company as to which Executive is the registered owner to such person or
entity, and at such time or times, as shall be specified by the Company.
To the extent that the provisions of this Section 1 of this Amendment are
inconsistent with the provisions of Section 1.02(a) of the Agreement, the
provisions of this Section 1 of this Amendment shall control.
	 
	2.	 	Compensation. Section 1.03 of the Agreement is amended effective July 1,
2002 by deleting the text of the existing Section 1.03 and replacing it
with the following new text: “The Company will pay to Executive after July
1, 2002 a salary at the monthly rate of $1,000.00 (“Base Salary”) and
will be paid such Base Salary in semi-monthly installments on the 15th and
last day of each month.”
	 
	3.	 	Contracts, Commitments and Business Expenses. Section 1.06 of the
Agreement is amended effective July 1, 2002 by deleting the existing
Section 1.03 and replacing with

 

 

	 	 	the following new Section 1.06: “1.06 –
Contracts, Commitments and Business Expenses. During the period July 2,
2002, through the date of the termination of the Agreement, Executive will
not initiate, make, renew, confirm or ratify any contracts or commitments
for or on behalf of the Company or any of its affiliates, nor will
Executive incur any expenses on behalf of the Company without the
Company’s prior written consent, except for such expenses as Zimmerman is
reasonably required to incur for the projects and assignments described in
Section 1 above. The Company shall promptly reimburse Executive for any
such expenses paid by him.”
	 
	4.	 	Fringe Benefits. Section 1.07 of the Agreement is amended effective July
1, 2002 by deleting the text of the existing Section 1.07 and replacing it
with the following new text: “During the term of Executive’s employment
hereunder, and subject to the discretionary authority given to the
applicable benefit plan administrators and any plan amendments or plan
terminations made after the date of this Amendment, the Company will make
available to Executive such medical, dental and vision benefits, Section
125 cafeteria plan benefits, supplemental group life insurance benefits,
dependent life insurance benefits, supplemental accidental death &
dismemberment benefits, and dependent accidental death & dismemberment
benefits as are available to Executive as of July 1, 2002, provided that
Executive shall be responsible for the entire premium cost of such
benefits. Executive agrees that such cost shall be withheld from his base
salary. Executive shall not participate in or receive the benefit of any
basic group life insurance, basic accidental death and dismemberment
insurance, short-term disability, long-term disability insurance, legal
services, short-term incentive or other bonus plan or program, or any
other fringe benefit plan or program except as provided in this Section
1.07. Executive shall not accrue sick leave, reserved sick leave, vacation
or any other paid-time-off benefits after July 1, 2002. Executive will not
continue as a participant in the Executive Survivor Plan after December
31, 2002, but will be entitled to continuation of coverage after such date
in accordance with established Plan terms. Executive shall not be entitled
to make any deferrals under the H&R Block Deferred Compensation Plan for
Executives, as amended and restated, on or after July 1, 2002. Executive
shall not be granted a stock option under the 1993 Long-Term Executive
Compensation Plan or any similar plan on or as of June 30, 2002 or June
30, 2003, or any other date on which executives of the Company and its
affiliates are generally granted stock options by H&R Block, Inc. Stock
options that are outstanding shall become exercisable during the remaining
term of the Agreement in accordance with the specific vesting terms of
Executive’s Stock Option Agreements applicable to such options (including,
but not limited to, any terms relating to vesting of the options through
continuous employment and/or accelerated vesting of the options upon a
‘Change of Control’ or the achievement of certain ‘Closing Prices’ of H&R
Block, Inc. Common Stock). Executive will have three (3) months after the
termination of the Agreement (other than a termination for a reason
specified in Section 1.08 of the Agreement) to exercise under the terms of
applicable Stock Option Agreements any outstanding stock options granted
to Executive under the 1993 Long-Term Executive Compensation Plan to the
extent such options are exercisable as of the date of the termination of
the Agreement.”
	 
	5.	 	Termination of Employment. Section 1.08 of the Agreement is amended by
deleting Subsections 1.08 (b), (c), and (d) and replacing Subsection 1.08
(b) with the following new Subsection 1.08 (b):

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	 	 	"(b) Termination on July 1, 2003. By mutual agreement, Executive’s
employment with the Company and this Agreement shall automatically
terminate (without the requirement of any notice) at the close of
business on July 1, 2003 (the “Termination Date”), unless the parties
agree to terminate such employment and this Agreement on a date earlier
than the Termination Date (in which case, such earlier date shall become
the Termination Date).”
	 
	 	 	Subsections 1.08 (a) and (e) are not modified by this Amendment.
	 
	6.	 	Agreement in Force. Except to the extent modified by this Amendment, the
Agreement shall remain in full force and effect until it terminates in
accordance with Section 1.08 of the Agreement, as said Section 1.08 is
amended by this Amendment.

     IN WITNESS WHEREOF, the Parties have executed this Amendment effective as
of the day and year first above written.

H&R BLOCK SERVICES, INC.

	 	 	 
	/s/ Jeffery W. Yabuki	 	
/s/ Thomas L. Zimmerman
	
	 	

	Jeffery W. Yabuki	 	
Thomas L. Zimmerman
	President	 	 

3

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