H&R BLOCK, INC.
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
(Amended and Restated Effective December 31,
2008)
H&R
Block, Inc. (the “Company”) amended and restated the
H&R Block, Inc. Deferred Compensation Plan for Executives
effective as of July 1, 2002. This amendment and restatement
is effective December 31, 2008, and is intended to comply with
the requirements of section 409A of the Code.
The
purpose of this Plan is to provide specified benefits to a select
group of management or highly compensated employees who contribute
materially to the continued growth, development and future business
success of the Company and its Affiliates, if any, that sponsor
this Plan. This Plan shall be unfunded for tax purposes and for
purposes of Title I of ERISA.
Notwithstanding
any provision in the Plan to the contrary, pursuant to IRS Notice
2007-86, all amounts accrued under the Plan for a Participant as of
December 31, 2008 will be paid in a lump sum on April 11,
2009, unless the Participant elects to defer Salary and Bonus
earned in 2009 in accordance with Article 3. If a Participant
elects to defer for 2009, the Participant may elect one time and
form of payment for all amounts attributable to pre-2009 deferrals,
as well as a time and form of payment for deferrals for 2009 and
subsequent years. For Participants in pay status on or before
December 31, 2008 (i) payments of pre-2004 deferrals
shall be paid according to the Plan as grandfathered under Code
§409A, and (ii) payments of deferrals made after 2004
shall be governed by the Participant’s payment elections and
the terms of the Amended and Restated Plan.
The
H&R Block, Inc. Deferred Compensation Trust Agreement, dated
December 13, 1988, is hereby revoked, effective
December 31, 2008, in accordance with §2.03. The H&R
Block, Inc. Deferred Compensation Trust Agreement is reinstated,
effective December 31, 2008 except that §§2.02-3 and
2.02-4 are deleted in the entirety.
For
the purposes of this Plan, unless otherwise clearly apparent from
the context, the following phrases or terms shall have the
following indicated meanings:
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1.1
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“Account Balance” means,
with respect to a Participant, a credit on the records of the
Employer equal to the sum of the Participant’s Deferral
Account balance, the Company Matching Account balance, and the
Discretionary Company Contributions Account balance. The Account
Balance, and each other specified account balance, shall be a
bookkeeping entry only and shall be utilized solely as a device for
the measurement and determination of the amounts to be paid to a
Participant, or his or her designated Beneficiary, pursuant to this
Plan.
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1.2
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“Affiliate” or
“Affiliates” 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).
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1.3
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“Annual Company Matching
Contributions” means for any one Plan Year, the amount
determined in accordance with Section 4.1.
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1.4
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“Annual Contributions”
means the Participant’s Annual Deferral Amount plus Annual
Company Matching Contributions for any one Plan Year.
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1.5
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“Annual Deferral Amount”
means that portion of a Participant’s Salary and Bonus that a
Participant defers in accordance with Section 3.1(a) for any
one Plan Year. In the event of a Participant’s Unforeseeable
Financial Emergency (if deferrals are revoked in accordance with
Section 6.1), Disability (if deferrals cease in accordance
with Section 8.1), death, or a Termination of Employment prior
to the end of a Plan Year, such year’s Annual Deferral Amount
shall be the actual amount withheld prior to such event.
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1.6
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“Beneficiary” means one
or more persons, trusts, estates or other entities, designated by a
Participant in accordance with Section 10.2, or in the absence
of such designation, the persons specified in Section 10.3,
that are entitled to receive benefits under this Plan upon the
death of a Participant.
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1.7
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“Beneficiary Designation
Form” means the form (which may be digital and require
electronic transmission) established from time to time by the
Committee by which a Participant designates one or more
Beneficiaries in accordance with the Committee’s
procedures.
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1.8
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“Board” means the Board
of Directors of the Company, as constituted at the relevant
time.
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1.9
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“Bonus” means
performance-based compensation paid under the Employer’s
short-term incentive plan (or other annual incentive program) which
is contingent on the satisfaction of pre-established organizational
or individual performance criteria over the Company’s
12-consecutive month Fiscal Year; but excluding any amounts paid
under an incentive program that will be paid regardless of
performance or based upon a level of performance that is
substantially certain to be met at the time the criteria is
established.
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1.10
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“Claimant” shall have
the meaning set forth in Section 14.1.
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1.11
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“Code” means the
Internal Revenue Code of 1986, as it may be amended from time to
time. References to a Code section shall be deemed to be to that
section or any successor to that section.
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1.12
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“Committee” means the
Compensation Committee of the Board.
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1.13
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“Company” means H&R
Block, Inc., a Missouri corporation, and any successor to all or
substantially all of its assets or business.
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1.14
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“Company Matching
Account” means (i) the sum of all of a
Participant’s Annual Company Matching Contributions, plus
(ii) amounts credited in accordance with all the applicable
crediting and debiting provisions of this Plan that relate to the
Participant’s Company Matching Account, less (iii) all
distributions made to the Participant or his or her Beneficiary
pursuant to this Plan that relate to the Participant’s
Company Matching Account.
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1.15
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“Deferral Account” means
(i) the sum of all of a Participant’s Annual Deferral
Amounts, plus (ii) amounts credited in accordance with all the
applicable crediting and debiting
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provisions of this Plan that relate
to the Participant’s Deferral Account, less (iii) all
distributions made to the Participant or his or her Beneficiary
pursuant to this Plan that relate to his or her Deferral
Account.
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1.16
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“Disability” or
“Disabled” means a Participant is, by reason of any
medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a
continuous period of not less than 12 months, receiving income
replacement benefits under the group long-term disability insurance
program maintained by the Participant’s Employer, and shall
be deemed to be incurred on the date as of which such income
replacement benefits commence.
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1.17
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“Discretionary Company
Contributions” means the amount credited to an Employee in
accordance with Section 4.2.
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1.18
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“Discretionary Company
Contributions Account” means the (i) sum of all of a
Participant’s Discretionary Company Contributions, plus
(ii) amounts credited in accordance with all the applicable
crediting and debiting provisions of the Plan that relate to the
Participant’s Discretionary contributions Account, less
(iii) all distributions made to the Participant or his or her
Beneficiary pursuant to the Plan that relate to the
Participant’s Discretionary Company Contributions
Account.
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1.19
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“Disability Benefit”
means the benefit set forth in Article 8.
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1.20
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“Election Form” means
the form (which form or forms may be in a digital format and
require electronic transmission) established from time to time by
the Committee by which a Participant makes elections under the Plan
in accordance with the Committee’s procedures.
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1.21
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“Eligibility Committee”
means the Chief Executive Officer of the Company, the Chief
Financial Officer of the Company, and the senior officer of the
Company responsible for human resources.
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1.22
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“Employee” means a
person who is an employee of any Employer.
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1.23
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“Employer” means the
Company and/or any of its Affiliates (now in existence or hereafter
formed or acquired) that have been selected by the Board to
participate in the Plan and have agreed to participate in the
Plan.
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1.24
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“ERISA” means the
Employee Retirement Income Security Act of 1974, as it may be
amended from time to time. References to an ERISA section shall be
deemed to be to that section or any successor to that
section.
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1.25
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“In-Service
Distribution” means a date-based distribution as set forth in
Section 7.1 providing for distribution no earlier than the
third Plan Year after the Plan Year for which the Annual
Contributions are made.
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1.26
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“Installment Method”
means installment payments over a number of years selected by the
Participant in accordance with this Plan. Each installment payment
shall be calculated by multiplying the Account Balance of the
Participant by a fraction, the numerator of which is one and the
denominator of which is the remaining number of payments due the
Participant. For purposes of this calculation, the Account Balance
of the Participant (or the appropriate portion thereof) shall be
calculated as of the close of business on or around the date of the
Participant’s payment.
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1.27
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“Measurement Fund” means
one or more investment funds which may, but need not, include the
investment funds provided under the H&R Block Retirement
Savings Plan (including Company stock) available as a measuring
standard for crediting earnings and
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losses to a Participant’s
Account Balance. Notwithstanding any other provision in this Plan
that may be interpreted to the contrary, the Measurement Funds are
to be used for measurement purposes only, and a Participant’s
election of any Measurement Fund, the allocation to his or her
Account Balance thereto, the calculation of additional amounts and
the crediting or debiting of such amounts to a Participant’s
Account Balance shall not be considered or construed in any manner
as an actual investment of his or her Account Balance in any
Measurement Fund.
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1.28
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“Open Enrollment” means,
with respect to the deferral of Salary for a Plan Year, such period
as established by the Committee ending before the beginning of such
Plan Year. With respect to the deferral of a Bonus, such period as
established by the Committee ending before the date that is no
later than 6 months prior to the expiration of the performance
period with respect to such Bonus.
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1.29
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“Participant” means any
Employee (i) who is selected to participate in the Plan,
(ii) who elects to participate in the Plan, (iii) who
executes an Election Form in a form acceptable to the Committee,
(iv) who commences participation in the Plan, and
(v) whose participation has not terminated. A spouse or former
spouse of a Participant shall not be treated as a Participant in
the Plan or have an account balance under the Plan, even if he or
she has an interest in the Participant’s benefits under the
Plan as a result of applicable law or property settlements
resulting from legal separation or divorce.
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1.30
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“Payment Date” means the
date during a month on which payments under this Plan are made, as
selected by the Committee from time to time.
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1.31
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“Plan” means the H&R
Block, Inc. Deferred Compensation Plan for Executives, which shall
be evidenced by this instrument as it may be amended from time to
time and Participant’s Election Forms.
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1.32
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“Plan Year” means a
period beginning on January 1 of each calendar year and continuing
through December 31 of such calendar year.
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1.33
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“Qualified Plan” means
the H&R Block Retirement Savings Plan or any successor plan
that is intended to satisfy the requirements of section 401 of the
Code.
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1.34
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“Salary” means the total
salary and wages , including fee based earnings and commissions
paid by all Affiliates to a Participant relating to services
performed during any Plan Year, excluding any other remuneration
paid by Affiliates such as Bonuses, other bonuses, overtime,
incentive pay, stock options, distributions of compensation
previously deferred, restricted stock, severance pay, allowances
for expenses (such as relocation, travel, and automobile
allowances), non-monetary awards and fringe benefits (cash or
noncash). Salary shall be calculated before reduction for
compensation voluntarily deferred or contributed by the Participant
pursuant to all qualified or non-qualified plans of any Affiliate
and shall be calculated to include amounts not otherwise included
in the Participant’s gross income under Code
Sections 125, or 402(e)(3) pursuant to plans established by
any Affiliate; provided, however, that all such amounts will be
included in compensation only to the extent that had there been no
such plan, the amount would have been payable in cash to the
Participant.
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1.35
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“Survivor Benefit” means
the benefit set forth in Article 9.
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1.36
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“Termination Benefit”
means the benefit set forth in Section 7.4.
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1.37
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“Termination of
Employment” means a separation from service within the
meaning of Code §409A. A Participant who is an employee will
generally have a Termination of Employment if the Participant
voluntarily or involuntarily terminates employment with
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the
Employer. A termination of employment occurs if the facts and
circumstances indicate that the Participant and the Employer
reasonably anticipate that no further services will be performed
after a certain date or that the level of bona fide services the
Participant will perform after such date (whether as an employee,
director or other independent contractor) for the Employer will
decrease to no more than 20 percent of the average level of
bona fide services performed (whether as an employee, director or
other independent contractor) over the immediately preceding
36-month period (or full period of services if the Participant has
been providing services for less than 36 months).
Notwithstanding the foregoing, the employment relationship is
treated as continuing while the Participant is on military leave,
sick leave or other bona fide leave of absence if the period does
not exceed 6 months, or if longer, so long as the Participant
retains the right to reemployment with an Employer under an
applicable statute or contract. When a leave of absence is due to
any medically determinable physical or mental impairment that can
be expected to result in death or to last for a period of at least
6 months and such impairment causes the Participant to be
unable to perform duties of his or her position or any
substantially similar position, a 29-month maximum period of
absence shall be substituted for the 6-month maximum period
described in the preceding sentence.
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1.38
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“Trust” means one or
more trusts established with respect to the Plan between the
Company and the trustee named therein, as amended from time to
time.
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1.39
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“Unforeseeable Financial
Emergency” means a severe financial hardship to the
Participant resulting from (i) an illness or accident of the
Participant, a Beneficiary or a dependent (as defined in Code
§152, without regard to §152(b)(1), (b)(2), and
(d)(1)(B)) of the Participant, (ii) a loss of the
Participant’s property due to casualty, or (iii) such
other extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant, all as
determined in the sole discretion of the Committee consistent with
the requirements of Code Section 409A.
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ARTICLE 2
Selection, Enrollment, Eligibility
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2.1
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Selection by
Committee . Participation in the Plan shall be
limited to a select group of management or highly compensated
Employees, as determined by the Committee or if the Committee so
directs, the Eligibility Committee. The Eligibility Committee will
report to the Compensation Committee not less frequently than
annually the individuals it selects for participation.
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2.2
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Enrollment
Requirements . As a condition to a selected
Employee’s participation, the Committee must receive, in
accordance with the Committee’s procedures, an Election Form
during Open Enrollment or within thirty (30) days after he or
she is first selected for participation in the Plan. In addition,
the Committee may establish from time to time such other enrollment
requirements as it determines in its sole discretion are necessary.
Notwithstanding the foregoing, an Employee shall be deemed to
satisfy the enrollment requirements with respect to Discretionary
Company Contributions by approval of a Discretionary Company
Contribution for the Participant in accordance with
Section 4.2.
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2.3
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Eligibility; Commencement of
Participation . Provided an Employee selected to
participate in the Plan has met all enrollment requirements set
forth in this Plan and required by the Committee, the Employee
shall commence participation in the Plan on the first day of the
month following the month in which the Employee executes all
enrollment requirements or such later date as the Committee shall
determine in its sole discretion with respect to compensation paid
for services performed after the election. If
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an
Employee fails to meet all such requirements within the period
required, in accordance with Section 2.2, that Employee shall
not be eligible to participate in the Plan until the first day of
the Plan Year following the delivery to and acceptance by the
Committee of the required documents; provided, however, that such
Employee must continue to be eligible to participate in the Plan as
determined by the Committee in its sole discretion.
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2.4
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Termination of
Participation . Subject to Section 2.6, once
an Employee has become a Participant in the Plan, his or her
participation shall continue until the earlier of (i) payment in
full of all benefits to which the Participant or his or her
Beneficiary is entitled under the Plan or (ii) the occurrence
of an event specified in Section 2.5 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.
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2.5
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Missing Persons
. If the Company is
unable to locate a Participant or his or her Beneficiary for
purposes of making a distribution, the amount of the
Participant’s benefits under this Plan that would otherwise
be considered as non-forfeitable, shall be forfeited effective four
(4) years after (i) the last date a payment of said
benefit was made, if at least one such payment was made, or
(ii) the first date a payment of said benefit was to be made
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.
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2.6
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Changes in Employment
Status .
If a Participant has a change in his or her employment
responsibilities, title, compensation, and/or performance, such
that the Participant would not qualify for initial participation in
the Plan, as determined by the Committee in its sole discretion,
(i) the Participant shall continue to defer his or her Annual
Deferral Amount in accordance with the Participant’s election
for the Plan Year during which the change in employment
responsibilities, title, compensation, and/or performance occurs,
(ii) the Participant shall not be eligible to elect an Annual
Deferral Amount or to be credited with a Discretionary Company
Contribution in Plan Years following the Plan Year during which the
change in employment responsibilities, title, compensation, and/or
performance occurs unless and until the Participant again is
selected to elect an Annual Deferral Amount, as determined by the
Committee in its sole discretion, and (iii) the Participant
shall otherwise continue to participate in the Plan.
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2.7
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Participation upon
Reemployment . If a Participant terminates
employment with all Affiliates and later becomes reemployed by an
Affiliate, such reemployment shall not suspend or delay benefit
payments such Participant is receiving or is eligible to receive
under the Plan as a result of the Termination of Employment. Upon
reemployment, the Participant shall not be eligible to make
deferrals unless and until the Participant again qualifies for
initial participation as determined by the Committee.
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ARTICLE 3
Open Enrollment/ Annual Elections
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3.1
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Elections
. A Participant shall
complete an election for Salary and Bonus by completing and
delivering an Election Form to the Committee during Open Enrollment
for the Plan Year in the case of Salary and for the applicable
performance period in the case of Bonus. The Participant shall be
entitled to elect the following:
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(a)
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Annual Deferral
Amount .
For each Plan Year, a Participant may elect, subject to withholding
described in Section 5.2(a), to defer Salary and Bonus
according to the following schedule:
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Deferral
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Minimum
Percentage
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Maximum
Percentage
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0
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%
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100
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%
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0
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%
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100
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%
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Timely receipt of an Election Form
by the Committee is a condition to deferral of either Salary or
Bonus. If no Election Form is timely received by the Committee, the
applicable deferral percentage shall be zero.
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(b)
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Measurement Funds
. A Participant may
elect one or more Measurement Fund(s) to be used to determine the
amounts to be credited or debited to his or her Account Balance. If
a Participant does not elect any Measurement Funds, the
Participant’s Annual Deferral Amount shall be allocated
according to the Participant’s most recent election. If a
Participant has not previously elected any Measurement Fund,
amounts will be credited or debited according to a default
Measurement Fund as determined by the Committee, in its sole
discretion.
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(c)
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Time and Form of
Payment .
During the Open Enrollment for a Plan Year, a Participant may make
a payment election designating the time of commencement of payment
of the portion of the Participant’s Account Balance
attributable to his Annual Deferral Amount and Annual Company
Matching Contributions for the Plan Year, and the form of payment
(either lump sum or installments) for such portion according to the
permissible distribution events provided under the Plan which may
include any distribution or payment options provided for under
Article 7. The time and form of payment of any Discretionary
Company Contribution for an Employee for a Plan Year shall be
established by the Committee at the time any such Discretionary
Company Contribution is authorized.
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3.2
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Effect of Elections/Changes to
Elections .
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(a)
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Irrevocable Deferral
Elections . Once a Plan Year has commenced, a
Participant may not elect to change his or her deferral election
that is in effect for that Plan Year, except if and to the extent
permitted by the Committee and made in accordance with the
provisions of Section 3.2(c) and Code section 409A
specifically relating to a change and/or revocation of deferral
elections related to a Participant’s Disability or an
Unforeseeable Financial Emergency or a hardship distribution under
the Qualified Plan.
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(b)
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Allocations to Measurement
Funds .
The Participant may add, delete or change allocations to one or
more Measurement Funds used to determine the amounts to be credited
or debited to his or her Account Balance by submitting an Election
Form that is accepted by the Committee. Allocations may be made in
one percent (1%) increments. Election changes will be applied as
follows:
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(i)
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Changes. Changes to allocations for future
deferrals will be applied to the next contribution period following
the date of the election.
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(ii)
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Exchanges. Exchanges to allocations to
Measurement Funds shall be applied at the close of the next market
day following the date the election is received by the
Committee.
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Notwithstanding this
Section 3.2(b) allocations made to the Company Stock Fund
shall be limited to 25% of the Participant’s entire Account
Balance and shall be irrevocable.
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(c)
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Subsequent changes to Time and Form
of Payment . A Participant may elect one time
to change the time or form of payment elected for his Deferral
Account attributable to Annual Deferral Amounts for any Plan Year,
and for his Company Matching Account attributable to Company
Matching Contributions for any Plan Year, only in accordance with
this Section 3.2(c). Any election under this
Section 3.2(c) must comply with Code Section 409A and the
regulations and other guidance thereunder. Except as permitted
under this Plan with respect to an Unforeseeable Financial
Emergency or as described in Section 7.5, a Participant may
not elect to accelerate the date payment is to be made or
commenced. A Participant may elect to delay the time payment is to
be made or commenced, and may change the form of payment from lump
sum to installments, or vice versa, only if the following
conditions are met:
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(i)
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the
election is received by the Committee not less than twelve
(12) months before the date payment would have otherwise been
made or commenced without regard to this election;
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(ii)
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the
election shall not take effect until at least twelve
(12) months after the date on which the election is received
by the Committee; and
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(iii)
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except in the case of payment on
account of death or Disability, payment pursuant to the election
shall not be made or commenced sooner than five (5) years from
the date payment would have otherwise been made or commenced
without regard to this election.
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For
these purposes, installment payments shall be treated as a single
payment, with the result that an election to change from
installments to a lump sum will require that the lump sum be
postponed until a date which is at least five (5) years after
the scheduled payment date of the first installment.
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ARTICLE 4
Company Contribution Amounts/Vesting
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4.1
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Annual Company Matching
Contributions . A Participant’s Annual
Company Matching Contributions for any Plan Year shall be
determined by the Participant’s Employer. In order to receive
Annual Company Matching Contributions with respect to a Plan Year,
the Participant shall have contributed through elective
compensation deferrals in the Qualified Plan, an amount equal to
the maximum deferral permitted under the Qualified Plan for the
Plan Year, and shall be an Employee as of the last day of the Plan
Year. If the Participant fulfills these requirements with respect
to a Plan Year, the Annual Company Matching Contributions shall be
equal to (i) the Employer matching contribution that would
have been provided to the Participant in the Qualified Plan,
assuming that the Annual Deferral Amount had been included in the
definition of compensation in the Qualified Plan, a
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