H&R BLOCK, INC.
The purposes of this 2003 Long-Term Executive Compensation Plan
are to provide
incentives and rewards to those employees and persons largely responsible for the success and
growth of H&R Block, Inc. and its subsidiary corporations, and to assist all such corporations in
attracting and retaining executives and other key employees and persons with experience and
(a) Award means one or more of the following: shares of Common Stock, Restricted Shares, Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Performance Shares, Performance Units
and any other rights which may be granted to a Recipient under the Plan.
(b) Committee means the Compensation Committee described in Section 3.
(c) Common Stock means the Common Stock, without par value, of the Company.
means H&R Block, Inc., a Missouri
corporation, and, unless the context otherwise
requires, includes its subsidiary corporations (as defined in Section 424(f) of the Internal
Revenue Code) and their respective divisions, departments and subsidiaries and the respective
divisions, departments and subsidiaries of such subsidiaries.
(e) Incentive Stock Option means a Stock Option which meets all of the requirements of an
incentive stock option as defined in Section 422(b) of the Internal Revenue Code.
(f) Internal Revenue Code means the Internal Revenue Code of 1986, as now in effect or
(g) Performance Period means that period of time specified by the Committee during which a
Recipient must satisfy any designated performance goals in order to receive an Award.
(h) Performance Share means the right to receive, upon satisfying designated performance goals
within a Performance Period, shares of Common Stock, cash, or a combination of cash and shares of
Common Stock, based on the market value of shares of Common Stock covered by such Performance
Shares at the close of the Performance Period.
(i) Performance Unit means the right to receive, upon satisfying designated performance goals
within a Performance Period, shares of Common Stock, cash, or a combination of cash and shares of
means this 2003 Long-Term Executive Compensation Plan
, as the same may be amended
from time to time.
(k) Recipient means an employee of the Company or other person who has been granted an Award
under the Plan.
(l) Restricted Share means a share of Common Stock issued to a Recipient hereunder subject to
such terms and conditions, including, without limitation, forfeiture or resale to the Company, and
to such restrictions against sale, transfer or other disposition, as the Committee may determine at
the time of issuance.
(m) Stock Appreciation Right means the right to receive, upon exercise of a stock appreciation
right granted under this Plan, shares of Common Stock, cash, or a combination of cash and shares of
Common Stock, based on the increase in the market value of the shares of Common Stock covered by
such stock appreciation right from the initial day of the Performance Period for such stock
appreciation right to the date of exercise.
(n) Stock Option means the right to purchase, upon exercise of a stock option granted under
this Plan, shares of the Companys Common Stock.
3. Administration of the Plan. The Plan shall be administered by the Committee which shall
consist of directors of the Company, to be appointed by and to serve at the pleasure of the Board
of Directors of the Company. A majority of the Committee members shall constitute a quorum and the
acts of a majority of the members present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the Committee, shall be valid acts of the Committee, however
designated, or the Board of Directors of the Company if the Board has not appointed a Committee.
The Committee shall have full power and authority to construe, interpret and administer the
Plan and, subject to the powers herein specifically reserved to the Board of Directors and subject
to the other provisions of this Plan, to make determinations which shall be final, conclusive and
binding upon all persons including, without limitation, the Company, the shareholders of the
Company, the Board of Directors, the Recipients and any persons having any interest in any Awards
which may be granted under the Plan. The Committee shall impose such additional conditions upon the
grant and exercise of Awards under this Plan as may from time to time be deemed necessary or
advisable, in the opinion of counsel to the Company, to comply with applicable laws and
regulations. The Committee from time to time may adopt rules and regulations for carrying out the
Plan and written policies for implementation of the Plan. Such policies may include, but need not
be limited to, the type, size and terms of Awards to be made to Recipients and the conditions for
payment of such Awards.
4. Absolute Discretion. The Committee may, in its sole and absolute discretion (subject to the
Committees power to delegate certain authority in accordance with the second paragraph of this
Section 4), at any time and from time to time during the continuance of the Plan, (i) determine
which Recipients shall be granted Awards under the Plan, (ii) grant to any Recipient so selected
such an Award, (iii) determine the type, size and terms of Awards to be granted (subject to
Sections 6, 10 and 11 hereof), (iv) establish objectives and conditions for receipt of Awards, (v)
place conditions or restrictions on the payment or exercise of Awards, and (vi) do all other things
necessary and proper to carry out the intentions of this Plan; provided, however, that, in each and
every case, those Awards which are Incentive Stock Options shall contain and be subject to those
requirements specified in Section 422 of the Internal Revenue Code and shall be granted only to
those persons eligible thereunder to receive the same.
The Committee may at any time and from time to time delegate to the Chief Executive Officer of
the Company authority to take any or all of the actions that may be taken by the Committee as
specified in this Section 4 or in other sections of the Plan in connection with the determination
of Recipients, types, sizes, terms and conditions of Awards under the Plan and the grant of any
such Awards, provided that any authority so delegated (a) shall apply only to Awards to employees
of the Company that are not officers of Company under Regulation Section 240.16a-1(f) promulgated
pursuant to Section 16 of the Securities Exchange Act of 1934, and (b) shall be exercised only in
accordance with the Plan and such rules, regulations, guidelines, and limitations as the Committee
5. Eligibility. Awards may be granted to any employee of the Company or to the non-executive
Chairman of the Board of the Company. No member of the Committee (other than any ex officio member
or the non-executive Chairman of the Board of the Company) shall be eligible for grants of Awards
under the Plan. A Recipient may be granted multiple forms of Awards under the Plan. Incentive Stock
Options may be granted under the Plan to a Recipient during any calendar year only if the aggregate
fair market value (determined as of the date the Incentive Stock Option is granted) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time by such Recipient
during any calendar year under the Plan and any other incentive stock option plans (as defined in
the Internal Revenue Code) maintained by the Company does not exceed the sum of $100,000.
6. Stock Subject to the Plan. The total number of shares of Common Stock issuable under this
Plan may not at any time exceed 10,000,000 shares, subject to adjustment as provided herein. All of
such shares may be issued or issuable in connection with the exercise of Incentive Stock Options.
Shares of Common Stock not actually issued pursuant to an Award shall be available for future
Awards. Shares of common Stock to be delivered or purchased under the Plan may be either
authorized but unissued Common Stock or treasury shares. The total number of shares of Common
Stock that may be subject to one or more Awards granted to any one Recipient during a calendar year
may not exceed 1,000,000, subject to adjustment as provided in Section 16 of the Plan.
(a) Awards under the Plan may include, but need not be limited to, shares of Common Stock,
Restricted Shares, Stock Options, Incentive Stock Options, Stock Appreciation Rights, Performance
Shares and Performance Units. The amount of each Award may be based upon the market value of a
share of Common Stock. The Committee may make any other type of Award which it shall determine is
consistent with the objectives and limitations of the Plan.
(b) The Committee may establish performance goals to be achieved within such Performance
Periods as may be selected by it using such measures of the performance of the Company as it may
select as a condition to the receipt of any Award.
8. Vesting Requirements. The Committee may determine that all or a portion of an Award or a
payment to a Recipient pursuant to an Award, in any form whatsoever, shall be vested at such times
and upon such terms as may be selected by it.
9. Deferred Payments and Dividend and Interest Equivalents.
(a) The Committee may determine that the receipt of all or a portion of an Award or a payment
to a Recipient pursuant to an Award, in any form whatsoever, shall be deferred. Deferrals shall be
for such periods and upon such terms as the Committee may determine.
(b) The Committee may provide, in its sole and absolute discretion, that a Recipient to whom
an Award is payable in whole or in part at a future time in shares of Common Stock shall be
entitled to receive an amount per share equal in value to the cash dividends paid per share on
issued and outstanding shares as of the dividend record dates occurring during the period from the
date of the Award to the date of delivery of such share to the Recipient. The Committee may also
authorize, in its sole and absolute discretion, payment of an amount which a Recipient would have
received in interest on (i) any Award payable at a future time in cash during the period from the
date of the Award to the date of payment, and (ii) any cash dividends paid on issued and
outstanding shares as of the dividend record dates occurring during the period from the date of an
Award to the date of delivery of shares pursuant to the Award. Any amounts provided under this
subsection shall be payable in such manner, at such time or times, and subject to such terms and
conditions as the Committee may determine in its sole and absolute discretion.
10. Stock Option Price. The purchase price per share of Common Stock under each Stock Option
shall be determined by the Committee, but shall not be less than market value (as determined by the
Committee) of one share of Common Stock on the date the Stock Option or Incentive Stock Option is
granted. Payment for exercise of any Stock Option granted hereunder shall be made (a) in cash, or
(b) by delivery of Common Stock having a market value equal to the aggregate option price, or (c)
by a combination of payment of cash and delivery of Common Stock in amounts such that the amount of
cash plus the market value of the Common Stock equals the aggregate option price.
11. Stock Appreciation Right Value. The base value per share of Common Stock covered by an
Award in the form of a Stock Appreciation Right shall be the market value of one share of Common
Stock on the date the Award is granted.
12. Continuation of Employment. The Committee shall require that a Recipient be an employee or
director of the Company at the time an Award is paid or exercised. The Committee may provide for
the termination of an outstanding Award if a Recipient ceases to be an employee or director of the
Company and may establish such other provisions with respect to the termination or disposition of
an Award on the death or retirement of a Recipient (or not being re-elected to the Board of
Directors) as it, in its sole discretion, deems advisable. The Committee shall have the sole power
to determine the date of any circumstances which shall constitute a cessation of employment or term
as a director and to determine whether such cessation is the result of retirement, death or any
13. Registration of Stock. Each Award shall be subject to the requirement that if at any time
the Committee shall determine that qualification or registration under any state or federal law of
the shares of Common Stock, Restricted Shares, Stock Options, Incentive Stock Options, or other
securities thereby covered or the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of or in connection with the granting of such Award or the
purchase of shares thereunder, the Award may not be paid or exercised in whole or in part unless
and until such qualification, registration, consent or approval shall
have been effected or obtained free of any conditions the Committee, in its discretion, deems
14. Employment Status. No Award shall be construed as imposing upon the Company the obligation
to continue the employment or term of a Recipient. No employee or other person shall have any claim
or right to be granted an Award under the Plan.
15. Assignability. No Award granted pursuant to the Plan shall be transferable or assignable
by the Recipient other than by will or the laws of descent and distribution and during the lifetime
of the Recipient shall be exercisable or payable only by or to him or her.
16. Dilution or Other Adjustments. In the event of any changes in the capital structure of the
Company, including but not limited to a change resulting from a stock dividend or split-up, or
combination or reclassification of shares, the Board of Directors shall make such equitable
adjustments with respect to Awards or any provisions of this Plan as it deems necessary and
appropriate, including, if necessary, any adjustment in the maximum number of shares of Common
Stock subject to the Plan, the maximum number of shares that may be subject to one or more Awards
granted to any one Recipient during a calendar year, or the number of shares of Common Stock
subject to an outstanding Award.
17. Merger, Consolidation, Reorganization, Liquidation, Etc. If the Company shall become a
party to any corporate merger, consolidation, major acquisition of property for stock,
reorganization, or liquidation, the Board of Directors shall make such arrangements it deems
advisable with respect to outstanding Awards, which shall be binding upon the Recipients of
outstanding Awards, including, but not limited to, the substitution of new Awards for any Awards
then outstanding, the assumption of any such Awards and the termination of or payment for such
18. Withholding Taxes. The Company shall have the right to deduct from all Awards hereunder
paid in cash any federal, state, local or foreign taxes required by law to be withheld with respect
to such Awards and, with respect to Awards paid in other than cash, to require the payment (through
withholding from the Recipients salary or otherwise) of any such taxes. Subject to such conditions
as the Committee may establish, Awards payable in shares of Common Stock, or in the form of an
Incentive Stock Option or Stock Option, may provide that the Recipients thereof may elect, in
accordance with any applicable regulations, to satisfy all or any part of the tax required to be
withheld by the Company in connection with such Award, or the exercise of such Incentive Stock
Option or Stock Option, by electing to have the Company withhold a number of shares of Common Stock
awarded, or purchased pursuant to such exercise, having a fair market value on the date the tax
withholding is required to be made equal to or less than the amount required to be withheld.
19. Costs and Expenses. The cost and expenses of administering the Plan shall be borne by the
Company and not charged to any Award or to any Recipient.
20. Funding of Plan. The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of assets to assure the
payment of any Award under the Plan.
21. Award Contracts. The Committee shall have the power to specify the form of Award contracts
to be granted from time to time pursuant to and in accordance with the
provisions of the Plan and such contracts shall be final, conclusive and binding upon the Company,
the shareholders of the Company and the Recipients. No Recipient shall have or acquire any rights
under the Plan except such as are evidenced by a duly executed contract in the form thus specified.
No Recipient shall have any rights as a holder of Common Stock with respect to Awards hereunder
unless and until certificates for shares of Common Stock or Restricted Shares are issued to the
22. Guidelines. The Board of Directors of the Company shall have the power to provide
guidelines for administration of the Plan by the Committee and to make any changes in such
guidelines as from time to time the Board deems necessary.
23. Amendment and Discontinuance. The Board of Directors of the Company shall have the right
at any time during the continuance of the Plan to amend, modify, supplement, suspend or terminate
the Plan, provided that in the absence of the approval of the holders of a majority of the shares
of Common Stock of the Company present in person or by proxy at a duly constituted meeting of
shareholders of the Company, no such amendment, modification or supplement shall (i) increase the
aggregate number of shares which may be issued under the Plan, unless such increase is by reason of
any change in capital structure referred to in Section 16 hereof, (ii) change the termination date
of the Plan provided in Section 24, (iii) delete or amend the market value restrictions contained
in Sections 10 and 11 hereof, (iv) materially modify the requirements as to eligibility for
participation in the Plan, or (v) materially increase the benefits accruing to participants under
the Plan, and provided further, that no amendment, modification or termination of the Plan shall in
any manner affect any Award of any kind theretofore granted under the Plan without the consent of
the Recipient of the Award, unless such amendment, modification or termination is by reason of any
change in capital structure referred to in Section 16 hereof or unless the same is by reason of the
matters referred to in Section 17 hereof.
24. Termination. The Committee may grant Awards at any time prior to July 1, 2013, on which
date this Plan will terminate except as to Awards then outstanding hereunder, which Awards shall
remain in effect until they have expired according to their terms or until July 1, 2023, whichever
first occurs. No Incentive Stock Option shall be exercisable later than 10 years following the date
it is granted.
25. Approval. This Plan shall take effect July 1, 2003, contingent upon prior approval by the
shareholders of the Company.