<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
------------------------------------------------
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
H&R BLOCK, INC.
----------------------------------------------
(Name of Registrant as Specified in Its Charter)
H&R BLOCK, INC.
----------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which the transaction applies:
___________
2) Aggregate number of securities to which transaction applies:___________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:_________________________________
4) Proposed maximum aggregate value of transaction:____________________
5) Total Fee Paid:____________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:_____________________________________
2) Form, Schedule or Registration Statement No.:__________________
3) Filing Party:____________________________________________
4) Date Filed:______________________________________________
<PAGE> 2
H&R Block, Inc.
4400 Main Street
Kansas City, Missouri 64111
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held September 10, 1997
The annual meeting of shareholders of H&R Block, Inc., a Missouri
corporation (the "Company"), will be held at the Nelson-Atkins Museum of Art,
4525 Oak Street, Kansas City, Missouri, at 9:00 a.m., Kansas City time, on
Wednesday, September 10, 1997. Shareholders attending the meeting are asked to
park on the east side of the parking lot that is north of the Museum and enter
the Museum's east entrance. The meeting will be held for the purpose of
considering and acting upon the following:
1. The election of three Class II directors to serve three-year terms
(See page 3);
2. The approval of an amendment to the 1993 Long-Term Executive
Compensation Plan in order to provide for the maximum number of
shares with respect to which awards may be granted to any one
individual in any calendar year (See page 21);
3. The adoption of the H&R Block Stock Plan for Non-Employee Directors
(See page 26);
4. The ratification of the appointment of Deloitte & Touche LLP as
the Company's independent auditors for the year ending April 30,
1998 (See page 28); and
5. The transaction of such other business as may properly come
before the meeting or any adjournments thereof;
all as set forth in the proxy statement accompanying this Notice.
The Board of Directors has fixed the close of business on July 11, 1997 as
the record date for determining shareholders of the Company entitled to notice
of and to vote at the meeting.
By Order of the Board of Directors
JAMES H. INGRAHAM
Secretary
Kansas City, Missouri
July 30, 1997
A PROXY FOR THE ANNUAL MEETING IS ENCLOSED HEREWITH. PLEASE DATE AND
SIGN THE PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IF
YOU ARE PRESENT AT THE MEETING AND DESIRE TO VOTE IN PERSON, THE PROXY WILL NOT
BE USED. THEREFORE, PLEASE RETURN THE SIGNED PROXY EVEN IF YOU PLAN TO ATTEND
THE MEETING.
<PAGE> 3
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of H&R
Block, Inc. (the "Company"), 4400 Main Street, Kansas City, Missouri 64111, for
use at the annual meeting of shareholders to be held on September 10, 1997, or
at any adjournment of that meeting, for the purposes set forth in the foregoing
notice. All costs of solicitation will be borne by the Company. In addition
to solicitation by mail, proxies may be solicited personally or by telephone or
telegram by regular employees of the Company. The Company has retained
Corporate Investor Communications, Inc. to assist in the solicitation of
proxies on behalf of the Board of Directors for a fee of $6,000, plus
reimbursement of reasonable expenses. Further, brokers and other custodians,
nominees and fiduciaries will be requested to forward soliciting material to
their principals and the Company will reimburse them for the expense of doing
so.
A shareholder giving a proxy has the power to revoke it at any time before
it is exercised. A proxy may be revoked by filing with the Secretary of the
Company a revoking instrument or a duly executed proxy bearing a later date.
The powers of the proxy holders will be suspended if the person executing the
proxy is present at the meeting and elects to vote in person. Subject to such
revocation or suspension, shares represented by properly executed proxies
received by the Board of Directors will be counted at the meeting and will be
voted in accordance with the shareholder's directions. If the form of proxy is
signed and returned and the shareholder has made no specifications with respect
to voting matters, the shares will be voted in accordance with the
recommendations of the Board of Directors.
QUORUM; VOTING PROCEDURES
A majority of the outstanding shares entitled to vote at the meeting,
represented in person or by proxy, shall constitute a quorum at such meeting.
Shares represented by a proxy that directs that the shares abstain from voting
or that a vote be withheld on a matter shall be deemed to be represented at the
meeting for quorum purposes. Shares represented by proxy as to which no voting
instructions are given as to matters to be voted upon shall be deemed to be
represented at the meeting for quorum purposes.
Shareholders do not have cumulative voting rights with respect to the
election of directors. For all matters to be voted upon at the meeting, the
affirmative vote of a majority of shares present in person or represented by
proxy, and entitled to vote on the matter, is necessary for election or
approval. For purposes of determining the number of shares present in person
or represented by proxy on a voting matter, all votes cast "for," "against,"
"abstain" or "withhold authority" are included. "Broker non-votes," which
occur when brokers or other nominees are prohibited from exercising
discretionary voting authority for beneficial owners who have not provided
voting instructions, are not counted for the purpose of determining the number
of shares present in person or represented by proxy on a voting matter.
OUTSTANDING VOTING SECURITIES AND DATE OF MAILING
At the close of business on July 11, 1997, the Company's outstanding
voting securities consisted of 104,093,161 shares of Common Stock.
The proxy statement and accompanying form of proxy are first being sent to
shareholders on or about July 30, 1997.
2
<PAGE> 4
ELECTION OF DIRECTORS
(ITEM 1 ON FORM OF PROXY)
The Company's Articles of Incorporation and Bylaws provide that the number
of directors to constitute the Board of Directors shall be not less than nine
nor more than 15, with the exact number to be fixed by a resolution adopted by
the affirmative vote of a majority of the whole Board. Effective December 11,
1996, the Board fixed the number of directors to constitute the Board of
Directors at nine. The Articles of Incorporation and Bylaws further provide
that the Board of Directors shall be divided into three classes: Class I, Class
II and Class III, with each class to consist, as nearly as possible, of
one-third of the members of the Board. The term of office of one class of
directors shall expire at each annual meeting of shareholders. Directors
elected at an annual meeting of shareholders to succeed those whose terms
expire shall be identified as being of the same class as those directors they
succeed and shall be elected for a term to expire at the third annual meeting
of shareholders after their election.
Nominations of persons for election to the Board of Directors may be made
at a meeting of shareholders only (i) by or at the direction of the Board of
Directors or (ii) by any shareholder of the Company entitled to vote for the
election of directors at the meeting who complies with the notice procedures
set forth in the Company's Bylaws.
At the annual meeting of shareholders to be held on September 10, 1997,
three Class II directors will be elected to hold office for three years and
until their successors are elected and shall have qualified. G. Kenneth Baum,
Henry F. Frigon and Roger W. Hale have been nominated for election as Class II
directors of the Company. All nominees are currently Class II directors of the
Company. The shares voted by the proxies will be voted for their election
unless authority to do so is withheld as provided in the form of proxy. All
nominees have consented to serve if elected and the Board of Directors has no
reason to believe that any of the nominees will be unable to accept the office
of director, but if such contingency should arise, it is the intention of the
proxies to vote for such person or persons as the Board of Directors may
recommend.
The nominees for election as Class II directors and the current Class I
and Class III directors are listed in alphabetical order in the following
table. Henry W. Bloch, Robert E. Davis and Frank L. Salizzoni serve as Class I
directors with terms scheduled to expire at the annual meeting of shareholders
in 1999. Donna R. Ecton, Marvin L. Rich and Morton I. Sosland serve as Class
III directors with terms scheduled to expire at the annual meeting of
shareholders in 1998.
<TABLE>
<CAPTION>
COMMON STOCK
(AND PERCENT SOLE SHARED
NAME, AGE AND PRINCIPAL OF CLASS) VOTING AND VOTING AND
OCCUPATION OR EMPLOYMENT DIRECTOR BENEFICIALLY INVESTMENT INVESTMENT
DURING THE PAST 5 YEARS SINCE OWNED(1) POWERS POWERS
- ------------------------ -------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
G. Kenneth Baum (67) 1961 105,199(4) 105,199(4) -0-
Chairman of the Board, (.11%)
George K. Baum Group, Inc.,
investment company(2)(3)
Henry W. Bloch (75) 1955 5,154,200(4) 4,925,000(4) 229,200
Chairman of the Board (4.96%)
of the Company(5)
Robert E. Davis (66) 1981 21,799(4) 21,599(4) 200
Managing Director, Axess (.03%)
Corporation, diversified
manufacturing(2)
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
COMMON STOCK
(AND PERCENT SOLE SHARED
NAME, AGE AND PRINCIPAL OF CLASS) VOTING AND VOTING AND
OCCUPATION OR EMPLOYMENT DIRECTOR BENEFICIALLY INVESTMENT INVESTMENT
DURING THE PAST 5 YEARS SINCE OWNED(1) POWERS POWERS
- ----------------------- ----- -------- ------ ------
<S> <C> <C> <C> <C>
Donna R. Ecton (50) 1993 4,299(4) 4,299(4) -0-
Chief Operating Officer, (.01%)
PETsMART, Inc.,
international pet supplies
retailer(2)(6)
Henry F. Frigon (62) 1992 13,999(4) 5,999(4) 8,000
Retired Chief Executive Officer, (.02%)
BATUS Incorporated, and
Executive Vice President,
Hallmark Cards Incorporated(2)(7)
Roger W. Hale (54) 1991 13,169(4) 13,169(4) -0-
Chairman, President and Chief (.02%)
Executive Officer, LG&E Energy
Corporation, a diversified
energy services company(2)(8)
Marvin L. Rich (63) 1961 68,479(4) 60,479(4) 8,000
Of Counsel, Craft, Fridkin & (.07%)
Rhyne, law firm
Frank L. Salizzoni (59) 1988 25,333(4) 23,333(4) 2,000
President and Chief Executive (.03%)
Officer of the Company(2)(9)
Morton I. Sosland (72) 1963 282,397(4) 97,809(4) 184,588
Chairman of the Board, Sosland (.28%)
Companies, Inc., publishers(2)(10)
</TABLE>
(1) As of June 1, 1997. For purposes of this disclosure, the Securities and
Exchange Commission has defined "beneficial ownership" to include
securities over which the individual has sole or shared investment or
voting power regardless of the economic incidents of ownership. The shares
reported in the table include shares held by certain family members of the
directors or in trusts or custodianships for such members (directly or
through nominees). The reported shares also include 6,400 shares held by
an estate of which Mr. Baum is the personal representative; 8,000 shares
held by a charitable foundation of which Mr. Frigon is a director; 2,000
shares held by a charitable foundation of which Mr. Salizzoni is an
officer; 9,000 shares held by a charitable foundation of which Mr. Sosland
is an officer and a director; and 104,592 shares held by a corporation of
which Mr. Sosland is an officer and a director. The respective directors
have disclaimed any beneficial ownership of those shares held by or for
their family members, Mr. Baum has disclaimed any beneficial ownership of
those shares held by the estate of which he is the personal representative,
Mr. Frigon has disclaimed any beneficial ownership of those shares held in
the name of the charitable foundation of which he is a director, Mr.
Salizzoni has disclaimed any beneficial ownership of those shares held in
the name of the charitable foundation of which he is an officer, and Mr.
Sosland has disclaimed any beneficial ownership of those shares held in the
name of the charitable foundation of which he is an officer and a director
or by the corporation of which he is an officer and a director.
4
<PAGE> 6
(2) With respect to other directorships held by the above persons in any
company with a class of securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934 or subject to the requirements of
Section 15(d) of said Act, Mr. Baum is a director of Interstate Bakeries
Corporation, Sealright Co., Inc. and Unitog Company; Mr. Davis is a
director of Rheometric Scientific, Inc. and USF&G Corporation; Ms. Ecton
is a director of Barnes Group, Inc., PETsMART, Inc. and Vencor, Inc.; Mr.
Frigon is a director of Buckeye Cellulose Corp., CompuServe Corporation,
Dimon, Inc. and Group Technologies Corp.; Mr. Hale is a director of
CompuServe Corporation and PNC Bank Corp.; Mr. Salizzoni is a director of
CompuServe Corporation, SKF USA Inc., and Orbital Sciences Corporation;
and Mr. Sosland is a director of CompuServe Corporation and Kansas City
Southern Industries, Inc.
(3) Mr. Baum has served as Chairman of the Board of George K. Baum Group,
Inc., Kansas City, Missouri, since May 1994. He was Chairman of the Board
of George K. Baum & Company, an investment banking firm, from 1982 until
May 1994.
(4) Includes shares which on June 1, 1997 the specified directors had the
right to purchase as of June 30, 1997 pursuant to options granted in
connection with the Company's stock option plans, as follows: Mr. Baum,
19,999 shares; Mr. Bloch, 25,500 shares; Mr. Davis, 15,999 shares; Ms.
Ecton, 3,999 shares; Mr. Frigon, 5,999 shares; Mr. Hale, 11,999 shares;
Mr. Rich, 19,999 shares; Mr. Salizzoni, 19,333 shares; and Mr. Sosland,
19,999 shares.
(5) Mr. Bloch has served as Chairman of the Board of the Company since August
1989. He was its Chief Executive Officer from 1974 through July 1992.
(6) Ms. Ecton has served as Chief Operating Officer of PETsMART, Inc.,
Phoenix, Arizona, since December 1996. She was Chairman of Business Mail
Express, Inc., Malvern, Pennsylvania, from June 1995 until December 1996,
and President and Chief Executive Officer of such corporation from
February 1995 until December 1996. She was President and Chief Executive
Officer of Van Houten North America, Inc. and Andes Candies Inc., Delavan,
Wisconsin, chocolate and confections companies, from December 1991 until
January 1994.
(7) Mr. Frigon served as the interim Chairman of the Board of CompuServe
Corporation from June 1996 until October 1996. He served as Executive
Vice President-Corporate Development & Strategy and Chief Financial
Officer of Hallmark Cards Incorporated, Kansas City, Missouri, greeting
card company, from January 1991 until his retirement in December 1994. He
had previously served as President and Chief Executive Officer of BATUS
Incorporated, Louisville, Kentucky.
(8) Mr. Hale has served as Chairman, President and Chief Executive Officer of
LG&E Energy Corporation, Louisville, Kentucky, since August 1990. He has
also served as Chairman of the Board of Louisville Gas & Electric Company
since February 1990 and as Chief Executive Officer of such company since
June 1989.
(9) Mr. Salizzoni has served as the Company's President and Chief Executive
Officer since June 19, 1996. He has also served as Chairman of the Board
of CompuServe Corporation since October 1996. He served as President and
Chief Operating Officer of USAir, Inc. and USAir Group, Inc., Pittsburgh,
Pennsylvania, airline, from March 1994 until April 1996. He was Executive
Vice President-Finance of USAir, Inc. from November 1990 until March 1994.
(10) Mr. Sosland has served as Chairman of Sosland Companies, Inc., Kansas
City, Missouri, since January 1993. He served as President of such firm
from July 1968 through December 1992. He has also served as Chairman of
Sosland Publishing Company since 1984.
5
<PAGE> 7
DIRECTORS' MEETINGS, COMPENSATION AND COMMITTEES
There were 13 meetings of the Board of Directors held during the 1997
fiscal year, and 10 meetings of the standing Board committees held during such
year. Each of the incumbent directors attended at least 75% of the aggregate
of (1) the total number of meetings of the Board held during the time in which
he or she served as a director in such year and (2) the total number of
meetings of the Board committees on which he or she served that were held
during the time in which he or she served on such committees in such year.
Directors, excluding those who are employed by the Company or its
subsidiaries, receive an annual director's fee of $25,200 and meeting fees of
$1,700 for each Board meeting attended and $1,100 for each committee meeting
attended. Effective September 1, 1997, committee chairmen will receive meeting
fees of $1,500 for committee meetings that they chair. In accordance with the
provisions of the H&R Block Deferred Compensation Plan for Directors, as
amended, eligible non-employee directors may defer 100% of their Board fees.
Deferrals are placed in an account maintained by the Company for each director
and such deferrals are fully vested at all times. Gains or losses are posted
to each account in accordance with the participant's election of a fixed rate
investment option, a variable rate investment option or the Company's Common
Stock as an investment alternative. Payment of benefits occurs in cash upon
the termination of the participant's services as a director, upon his or her
death or, if he or she first became eligible to participate in the Plan at age
68 or older, upon attainment of age 75. The account balance is generally paid
out in approximately equal monthly installments over a 10-year period after the
occurrence of the event which results in the benefit distribution.
On June 18, 1997, the Board of Directors approved the H&R Block Stock Plan
for Non-Employee Directors, subject to its approval by the Company's
shareholders at their 1997 annual meeting. In accordance with the provisions
of the proposed Stock Plan, non-employee directors have the opportunity to
receive payment of their retainers and/or meeting fees on a deferred basis in
shares of Common Stock of the Company. The retainers and/or fees are initially
paid in the form of stock units, with each stock unit equal to one share of
Common Stock. The stock units are fully vested at all times. A more detailed
description of the provisions of the Stock Plan is contained in the section
entitled "Approval of the H&R Block Stock Plan for Non-Employee Directors,"
below.
Prior to June 1997, a non-employee director who retired from the Board
after serving at least five years on the Board and attaining age 72, or after
incurring a permanent and total disability, received retirement income from the
Company pursuant to the H&R Block, Inc. Retirement Plan for Non-Employee
Directors. Such Plan was terminated effective June 18, 1997. In lieu of
benefits under such Plan, non-employee directors who participated in the
Retirement Plan have the option to transfer the present value of their
respective accrued retirement benefits to either the H&R Block Stock Plan for
Non-Employee Directors or the H&R Block Deferred Compensation Plan for
Directors and have such value converted to stock units. The present value of
each non-employee director's accrued retirement benefits and the number of
stock units which would be awarded under the Stock Plan in lieu of such
benefits are disclosed in the section of this proxy statement describing the
proposed Stock Plan, commencing on page 26.
The 1989 Stock Option Plan for Outside Directors, as amended, provides for
the grant of stock options to directors of the Company who are not employees of
the Company or any of its subsidiaries. The amended Plan specifies that
nonqualified stock options are to be automatically granted to outside directors
of the Company serving as such on June 30 of each year in which the Plan is in
effect. Each stock option granted to an outside director of the Company
pursuant to the Plan, as amended, is for 2,000 shares of the Company's Common
Stock, without par value, and the purchase price per share is equal to the last
reported sale price for the Common Stock on the New York Stock Exchange on the
date of grant. The maximum number of shares of Common Stock as to which
options may be granted under the Plan is 300,000 shares.
6
<PAGE> 8
Options for 2,000 shares each, with an option price of $32.75 per share,
were granted to Ms. Ecton and to Messrs. Baum, Davis, Frigon, Hale, Rich and
Sosland on June 30, 1996. Subject to certain exceptions, the outstanding stock
options may not be exercised until at least one year after the date of grant,
and then may be exercised only in increments in any one year of up to one-third
of the aggregate number of shares subject to the option. All outstanding
options expire 10 years after the date of grant.
In addition to his annual director's fee and Board and committee meeting
fees, Mr. Frigon received from CompuServe Corporation, an 80.1%-owned
subsidiary of the Company, a total of $132,000 in consulting fees during fiscal
year 1997.
The Company also offers to its non-employee directors free access to
CompuServe Corporation's Interactive Service, free income tax return
preparation services through H&R Block's Premium Tax Service and free business
travel insurance in connection with Company-related travel.
The standing committees of the Board include the Executive Committee, the
Audit Committee, the Compensation Committee, the Finance Committee, the
Nominating Committee and the Strategy & Development Committee (formerly known
as the Diversification Committee). Mr. Bloch, Chairman of the Board of the
Company, and Mr. Salizzoni, President and Chief Executive Officer of the
Company, are nonvoting ex officio members of the Finance Committee and the
Strategy & Development Committee.
The Executive Committee, whose members are Mr. Bloch (Chairman) and
Messrs. Baum, Salizzoni and Sosland, held no meetings during fiscal year 1997.
The primary function of the Executive Committee is to control and manage,
between meetings of the Board, the property and business of the Company in all
matters in which exclusive authority has not been given to the entire Board of
Directors or in which specific direction has not been given by the Board.
The Audit Committee, whose members are Ms. Ecton (Chairman) and Messrs.
Frigon, Hale and Rich, held three meetings during the 1997 fiscal year. The
functions of the committee include, among other things, reviewing the various
internal accounting controls of the Company; reviewing and approving the
services and fees of the Company's independent auditors, including any
non-audit services provided by them; making recommendations to the Board of
Directors with respect to the employment, retention or replacement of such
auditors, as well as monitoring the independence of such auditors; reviewing
the scope of the annual audit; reviewing and approving the Company's internal
audit plan and the appointment and replacement of the Director of Internal
Audit; overseeing the Company's financial reporting process and related
matters.
The Compensation Committee, whose members are Mr. Davis (Chairman), Ms.
Ecton and Messrs. Hale and Rich, held three meetings during fiscal year 1997.
The functions of the committee primarily include reviewing the compensation of
the executive officers of the Company and its subsidiaries; recommending to the
Board of Directors the salaries and any bonus or cash incentive plans for such
executive officers; and administering the Company's long-term incentive
compensation plans. See the Compensation Committee Report on Executive
Compensation under "COMPENSATION OF EXECUTIVE OFFICERS," below.
The Finance Committee, whose members are Messrs. Frigon (Chairman), Baum,
Davis and Rich, held three meetings during the 1997 fiscal year. The primary
duties of such committee are to provide advice to management and the Board of
Directors concerning the financial structure of the Company, the funding of the
operations of the Company and its subsidiaries, and the investment of Company
funds.
7
<PAGE> 9
The Nominating Committee, whose members are Mr. Sosland (Chairman), Ms.
Ecton and Messrs. Bloch, Davis and Salizzoni, held no meetings during the 1997
fiscal year. The Nominating Committee is responsible for the initiation of
nominations for election as a director of the Company.
The Strategy & Development Committee, whose members are Messrs. Hale
(Chairman), Baum, Frigon and Sosland, held two meetings during fiscal year
1997. The functions of the committee include, among other things, determining
appropriate areas of business development and expansion for the Company,
developing acquisition and divestiture strategies and recommending to the Board
of Directors the acquisition and/or divestiture of those businesses which in
the committee's judgment would best serve the interests of the Company.
INFORMATION REGARDING SECURITY HOLDERS
PRINCIPAL SECURITY HOLDERS
The following table sets forth the name, address and share ownership of
the persons or organizations known to the Company to be the beneficial owners
of more than 5% of the outstanding Common Stock of the Company. Information
provided is based upon Schedule 13G filings. The percentage of ownership is
based upon the number of shares of the Company's Common Stock issued and
outstanding as of June 1, 1997.
<TABLE>
<CAPTION>
PERCENT OF
SHARES COMMON
NAME AND ADDRESS BENEFICIALLY STOCK
OF BENEFICIAL OWNER OWNED OUTSTANDING
------------------------------ ------------- -----------
<S> <C> <C>
FMR Corp. 10,389,812(1) 9.99%
82 Devonshire Street
Boston, Massachusetts 02109
T. Rowe Price Associates, Inc. 5,340,536(2) 5.14%
100 East Pratt Street
Baltimore, Maryland 21202
</TABLE>
(1) Information as to number of shares is as of December 31, 1996, and is
furnished in reliance on the Schedule 13G of FMR Corp., a parent holding
company. The Schedule 13G indicates that such number of shares includes
531,112 shares with sole voting power, 10,389,812 shares with sole
dispositive power and no shares with either shared voting power or shared
dispositive power. The relevant subsidiaries of FMR Corp. identified by
FMR Corp. are Fidelity Management & Research Company (a registered
investment adviser reporting beneficial ownership of 9,496,350 shares) and
Fidelity Management Trust Company (a bank reporting beneficial ownership
of 893,462 shares).
(2) Information as to number of shares is as of December 31, 1996, and is
furnished in reliance on the Schedule 13G of T. Rowe Price Associates,
Inc., a registered investment advisor. The Schedule 13G indicates that
such number of shares includes 654,550 shares with sole voting power,
5,340,536 shares with sole dispositive power and no shares with either
shared voting power or shared dispositive power.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of Common Stock of the
Company of those executive officers of the Company listed in the Summary
Compensation Table, below, under "COMPENSATION OF EXECUTIVE OFFICERS," who are
not directors of the Company, as well as
8
<PAGE> 10
the beneficial ownership of Common Stock of all directors and executive
officers of the Company as a group as of June 1, 1997. Information regarding
individual directors is contained in the table above, under "ELECTION OF
DIRECTORS." No directors or executive officers of the Company own any shares
of Preferred Stock of the Company.
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT OF
OF BENEFICIAL OWNER OWNED CLASS
------------------------------ ------------ ----------
<S> <C> <C>
George T. Robson -0- .00%
Thomas L. Zimmerman 29,550(1) .03%
William P. Anderson 28,709(1) .03%
Richard H. Brown 25,307(2) .03%
All directors and officers 5,811,208(3)(4) 5.59%
as a group (16 persons)
</TABLE>
(1) Includes shares which the specified officers had the right to purchase as
of June 30, 1997 pursuant to options granted in connection with the
Company's 1984 Long-Term Executive Compensation Plan or its 1993 Long-Term
Executive Compensation Plan, as follows: Mr. Anderson, 27,999 shares, and
Mr. Zimmerman, 28,950 shares. All shares shown as beneficially owned by
Messrs. Anderson and Zimmerman are considered to be held with sole voting
and investment powers. Mr. Anderson resigned as President of Block
Financial Corporation effective June 30, 1997, and his options terminated
unexercised on that date.
(2) Mr. Brown has sole voting and investment powers with respect to 19,807
shares and shared voting and investment powers with respect to 5,500
shares.
(3) Includes shares held by certain family members of such directors and
officers or in trusts or custodianships for such members (directly or
through nominees). Also includes 238,816 shares which such directors and
officers have the right to purchase as of June 30, 1997 pursuant to
options granted in connection with the Company's stock option plans. The
figure does not include shares beneficially owned by Richard H. Brown, who
was not an executive officer of the Company at the end of fiscal year 1997
or on June 1, 1997.
(4) Includes 5,379,220 shares held with sole voting and investment powers and
431,988 shares held with shared voting and investment powers.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth for the year ended April 30, 1997, and the
two previous fiscal years, the annual, long-term and other compensation paid to
the Company's Chief Executive Officer serving as such at the end of such year,
to each of the four highest paid executive officers of the Company (other than
the Chief Executive Officer), who was serving as an executive officer of the
Company at the end of such year, and to the former Chief Executive Officer of
the Company who resigned during such year.
9
<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
---------------------------------------
Pay-
Annual Compensation Awards outs
-----------------------------------------------------------------------------------
Other Securities
Annual Restricted Underly- LTIP All Other
Fis- Compensa- Stock ing Pay- Compensa-
Name and Principal cal Salary tion Awards(s) Options outs tion
Position Year ($) Bonus($) ($) ($) (#)1 ($) ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank L. Salizzoni 1997 427,269 253,500 84,035(3) 178,750(4) 250,000 0 49,363(5)
President and Chief 1996 0 0 0 0 2,000 0 47,900(5)
Executive Officer(2) 1995 0 0 0 0 2,000 0 44,450(5)
- --------------------------------------------------------------------------------------------------------------------
George T. Robson 1997 400,000 233,220 57,821(7) 138,000(8) 35,000 0 105,913(9)
Senior Vice 1996 112,308 200,967 0 0 150,000 0 10,000(9)
President, Chief 1995 0 0 0 0 0 0 0
Financial Officer
and Treasurer(6)
- --------------------------------------------------------------------------------------------------------------------
Henry W. Bloch 1997 500,000 0 47,189(10) 0 4,500 0 24,030(11)
Chairman of the Board 1996 651,500 0 53,450(10) 0 4,500 0 19,845(11)
1995 628,333 0 133,249(10) 0 4,500 0 23,450(11)
- --------------------------------------------------------------------------------------------------------------------
Thomas L. Zimmerman 1997 248,467 109,531 40 103,500(14) 30,000 0 13,802(15)
President, H&R Block 1996 206,417 200,000 133 0 3,750 0 9,786(15)
Tax Services, Inc.(12) 1995 181,667 36,665 665(13) 0 3,750 0 17,336(15)
- --------------------------------------------------------------------------------------------------------------------
William P. Anderson 1997 237,503 86,944 187 103,500(17) 10,000 0 53,582(18)
President, Block 1996 230,000 275,475 0 114,750(17) 10,000 0 71,433(18)
Financial 1995 221,667 135,000 72 127,500(17) 5,000 0 79,072(18)
Corporation(16)
- --------------------------------------------------------------------------------------------------------------------
Richard H. Brown 1997 160,833 0 10 0 0 0 154,763(23)
Former President and 1996 477,917 577,664(20) 90,581(21) 1,956,190(22) 250,000 0 182,917(23)
Chief Executive 1995 0 0 0 0 0 0 0
Officer(19)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO SUMMARY COMPENSATION TABLE:
(1) Stock options were granted pursuant to the Company's 1984 Long-Term
Executive Compensation Plan, its 1993 Long-Term Executive Compensation
Plan, or the 1989 Stock Option Plan for Outside Directors.
(2) Mr. Salizzoni was elected President and Chief Executive Officer of the
Company effective June 19, 1996.
(3) Includes payments by the Company of certain relocation-related expenses
in fiscal year 1997 and reimbursement in such year for the payment of
taxes incurred in connection with the payment of such relocation-related
expenses.
(4) Represents the dollar value of performance units awarded as of October
11, 1996, calculated by multiplying $27.50, the fair market value of a
share of the Company's Common Stock on October 11, 1996, the date that
the award was granted, by 6,500, the number of performance units awarded.
As of April 30, 1997, Mr. Salizzoni held 6,500 performance units with a
fair market value of $207,594 at that time. Dividends are not paid with
respect to the performance units, but, in determining the actual value of
a performance unit at the end of the three-year performance period
10
<PAGE> 12
(based upon a comparison of cumulative total shareholder return on the
Company's stock during such period to the cumulative total return of the
Standard & Poor's 500 Stock Index during such period), it is assumed that
dividends are reinvested.
(5) For fiscal year 1997, this figure includes $13,600 in director fees paid
by the Company before Mr. Salizzoni became an officer of the Company;
Company matching contributions under the Company's deferred compensation
plan for executives ("DCP") of $29,167; the $5,471 dollar value of
"above-market" amounts earned on deferred compensation under the DCP; and
the $1,125 economic value of the death benefit provided by the Company's
Executive Survivor Plan ("ESP"). The imputed income reported from the ESP
represents the portion of the premium paid by the Company pursuant to the
ESP that is attributable to term life insurance coverage for the executive
officer. The ESP provides only an insurance benefit with no cash
compensation element to the executive officer. For each of fiscal years
1996 and 1995, the figure represents the director fees paid by the Company
to Mr. Salizzoni.
(6) Mr. Robson commenced employment in January 1996 and resigned as Senior
Vice President, Chief Financial Officer and Treasurer of the Company
effective May 31, 1997.
(7) Includes $55,786 in payments by the Company of certain relocation-related
expenses in fiscal year 1997 and reimbursement in such year for payment of
taxes incurred in connection with the payment of such relocation-related
expenses. Also includes $1,995 in payment by the Company of fees incurred
for personal income tax return preparation and tax consultation services,
as well as amounts reimbursed for the payment of taxes incurred by him in
connection with the Company's payment of such fees.
(8) Represents the dollar value of performance units awarded as of June 18,
1996, calculated by multiplying $34.50, the fair market value of a share
of the Company's Common Stock on June 18, 1996, the date that the award
was granted, by 4,000, the number of performance units awarded. As of
April 30, 1997, Mr. Robson held 4,000 performance units with a fair market
value of $127,750 at that time. The performance units were forfeited as a
result of Mr. Robson's resignation.
(9) Consists of Company matching contributions under the DCP.
(10) Includes payments by the Company of fees incurred by Mr. Bloch for
personal income tax return preparation and tax consultation services, as
well as amounts reimbursed for the payment of taxes incurred by him in
connection with the Company's payment of such fees.
(11) Includes contributions under the Company's profit-sharing plan in fiscal
years 1997, 1996 and 1995 of $8,250, $5,250 and $11,000, respectively;
Company matching contributions under the Company's 401(k) savings plan in
each of fiscal years 1997, 1996 and 1995 of $2,250; and the $13,530
(1997), $12,345 (1996) and $10,200 (1995) economic value of the death
benefit provided by the Company's ESP.
(12) Mr. Zimmerman was elected President of H&R Block Tax Services, Inc.
effective June 1, 1996. He served as Executive Vice President, Field
Operations, of H&R Block Tax Services, Inc., from May 1, 1994 until May
31, 1996.
(13) Includes $557 in payments by the Company of fees incurred by Mr.
Zimmerman for personal income tax return preparation and tax consultation
services, as well as amounts reimbursed for the payment of taxes incurred
by him in connection with the Company's payment of such fees.
(14) Represents the dollar value of performance units awarded as of June 18,
1996, calculated by multiplying $34.50, the fair market value of a share
of the Company's Common Stock on June 18, 1996, the date that the award
was granted, by 3,000, the number of performance units awarded. As
11
<PAGE> 13
of April 30, 1997, Mr. Zimmerman held 3,000 performance units with a fair
market value of $95,813 at that time.
(15) Includes contributions under the Company's profit-sharing plan in fiscal
years 1997, 1996 and 1995 of $8,250, $5,250 and $8,327, respectively;
Company matching contributions under the Company's 401(k) savings plan in
each of fiscal years 1997, 1996 and 1995 of $2,250; and the $3,302 (1997),
$2,286 (1996) and $6,638 (1995) dollar value of "above-market" amounts
earned on deferred compensation under the DCP.
(16) Mr. Anderson resigned as President of Block Financial Corporation
effective June 30, 1997.
(17) For fiscal year 1997, this figure represents the dollar value of the
performance units awarded as of June 18, 1996, calculated by multiplying
$34.50, the fair market value of a share of the Company's Common Stock on
June 18, 1996, the date that the award was granted, by 3,000, the number
of performance units awarded. For fiscal year 1996, the figure represents
the dollar value of performance units awarded as of June 20, 1995,
calculated by multiplying $38.25, the fair market value of a share of the
Company's Common Stock on June 20, 1995, the date that the award was
granted, by 3,000, the number of performance units awarded. For fiscal
year 1995, the figure represents the dollar value of performance units
awarded as of May 1, 1994, calculated by multiplying $42.50, the
last-quoted market price for the Company's Common Stock on April 29, 1994
(the last business day prior to May 1, 1994), by 3,000, the number of
performance units awarded. As of April 30, 1997, Mr. Anderson held 6,000
performance units with a fair market value of $191,625. The performance
units awarded in fiscal years 1996 and 1997 were forfeited as a result of
Mr. Anderson's resignation. The performance units awarded in fiscal year
1995 had no value as of April 30, 1997, and no payout was made with
respect to such units.
(18) Includes contributions under the Company's profit-sharing plan in fiscal
years 1997, 1996 and 1995 of $8,250, $5,250 and $11,000, respectively;
Company matching contributions under the Company's 401(k) savings plan in
fiscal years 1997, 1996 and 1995 of $1,006, $2,587 and $2,250,
respectively; Company matching contributions under the Company's DCP of
$36,568 in fiscal year 1997, $62,455 in fiscal year 1996 and $59,644 in
fiscal year 1995; the $6,507 (1997), $1,141 (1996) and $6,178 (1995)
dollar value of "above-market" amounts earned on deferred compensation
under the DCP; and the $1,251 (1997) dollar value of "above-market"
amounts earned on deferred compensation under the Company's supplemental
deferred compensation plan for executives.
(19) Mr. Brown served as President and Chief Executive Officer of the Company
during that portion of the fiscal year 1997 ended June 19, 1996.
(20) Includes a $250,000 signing bonus paid at the commencement of employment
and $327,664 in bonus earned for fiscal year 1996 under the Company's
Management Incentive Plan.
(21) Includes $72,829 in payments by the Company of certain relocation-related
expenses and reimbursements for the payment of taxes incurred in
connection with the payment of such relocation expenses. Also includes
$17,752 in payments by the Company of fees incurred by Mr. Brown for
personal income tax return preparation services and reimbursements for the
payment of taxes incurred in connection with the Company's payment of such
fees.
(22) Includes the $1,715,690 value of 46,370 shares of restricted shares of
the Company's Common Stock received by Mr. Brown on August 5, 1995, and
the $240,500 value of 6,500 performance units awarded to Mr. Brown as of
August 5, 1995. In each case, the dollar value of the award was
calculated by multiplying $37.00, the fair market value of a share of
Common Stock on the date of the award, by the number of shares or units
awarded. Of the restricted shares, 18,153 shares vested on January 1,
1996. Mr. Brown earned dividends totalling $44,515 on the restricted
stock (including the vested shares) during fiscal year 1996. The 28,217
restricted shares and the 6,500 performance
12
<PAGE> 14
units were forfeited by Mr. Brown as a result of his resignation as
President and Chief Executive Officer of the Company.
(23) Includes Company matching contributions under the Company's DCP of
$154,763 in fiscal year 1997 and $102,917 in fiscal year 1996; and $80,000
paid by the Company to Mr. Brown during fiscal year 1996 for use by Mr.
Brown in the payment of premiums for life insurance on the life of Mr.
Brown obtained by him.
STOCK OPTION GRANT TABLE
The following table summarizes options to purchase the Company's Common
Stock granted during the fiscal year ended April 30, 1997 to the executive
officers named in the Summary Compensation Table, above (the "Named Officers"):
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants Option Term(1)
--------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees
Granted in Fiscal Exercise Expiration
Name (#)(2) Year Price ($/Sh) Date 5% ($) 10% ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Frank L. Salizzoni... 250,000 8.00% $27.625 10/11/03 $2,811,537 $6,552,077
George T. Robson..... 35,000 1.12% $32.75 06/30/06 $720,870 $1,826,827
Henry W. Bloch....... 4,500 0.14% $32.75 06/30/06 $92,683 $234,878
Thomas L. Zimmerman.. 30,000 0.96% $32.75 06/30/06 $617,889 $1,565,852
William P. Anderson.. 10,000 0.32% $32.75 06/30/06 $205,963 $521,951
Richard H. Brown..... 0 0.00% N/A N/A $0 $0
</TABLE>
NOTES:
(1) The amounts shown as potential realizable values on the options
identified in the table are based on arbitrarily assumed annualized rates
of appreciation in the price of the Company's Common Stock of five percent
and ten percent over the term of the options, as set forth in the rules of
the Securities and Exchange Commission relating to proxy disclosure.
Actual gains, if any, on stock option exercises are dependent on the
future performance of the Common Stock. There can be no assurance that
the potential realizable values reflected in this table will be achieved.
(2) Stock option grants consisted of nonqualified stock options, incentive
stock options or a combination of the two types of options. No stock
appreciation rights were granted during fiscal year 1997. Options were
granted under the 1993 Long-Term Executive Compensation Plan. The
exercise price for each option is the fair market value of a share of
Common Stock on the date of grant. Options granted to the Named Officers
become exercisable one year after the date of grant, at which time they
are exercisable on a cumulative basis at a maximum annual rate of 33 1/3%
of the total number of shares subject to the option. The stock options
become fully exercisable (a) at any time after the Named Officer reaches
retirement age, retires and more than one year has elapsed since the date
of grant, or (b) upon a change in control of the Company not less than six
months after the date of grant. The Named Officer must be employed by the
Company or one of its subsidiary corporations at the time of exercise,
except that the exercise of the options may take place for limited time
periods after the termination of employment in the event of death,
retirement, disability or termination without cause. All options expire
ten years after the date of grant, except for that option granted to Mr.
Salizzoni which expires seven years after the date of grant.
13
<PAGE> 15
OPTION EXERCISES AND FISCAL YEAR END VALUES
The following table summarizes the value realized on the exercise of
options during the fiscal year ended April 30, 1997 and presents the value of
unexercised options as of such date for the Named Officers. The value of
unexercised in-the-money options at fiscal year end is determined by
subtracting the exercise price for such options from the fair market value of
the shares subject to the options as of fiscal year end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at FY-End(#) FY-End ($)
Shares
Acquired on Value Exercisable (E)/ Exercisable (E)/
Name Exercise (#) Realized ($) Unexercisable (U) Unexercisable (U)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank L. Salizzoni 0 0 17,999(E) 105,750(E)
252,001(U) 1,078,125(U)
- -----------------------------------------------------------------------------------------------
George T. Robson 0 0 50,000(E) 0(E)
135,000(U) 0(U)
- -----------------------------------------------------------------------------------------------
Henry W. Bloch 0 0 21,000(E) 19,125(E)
9,000(U) 0(U)
- -----------------------------------------------------------------------------------------------
Thomas L. Zimmerman 0 0 16,450(E) 100,719(E)
33,750(U) 0(U)
- -----------------------------------------------------------------------------------------------
William P. Anderson 0 0 19,666(E) 0(E)
18,334(U) 0(U)
- -----------------------------------------------------------------------------------------------
Richard H. Brown 0 0 0(E) 0(E)
0(U) 0(U)
</TABLE>
LONG-TERM INCENTIVE PLAN AWARDS TABLE
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD
OR OTHER UNTIL MATURATION
NAME RIGHTS (#) OR PAYOUT
------------------- ------------- ----------------
<S> <C> <C>
Frank L. Salizzoni 6,500 Three Years
George T. Robson 4,000 Three Years
Henry W. Bloch -0- N/A
Thomas L. Zimmerman 3,000 Three Years
William P. Anderson 3,000 Three Years
Richard H. Brown -0- N/A
</TABLE>
The awards in the foregoing table are awards of performance units granted
by the Compensation Committee of the Board of Directors in June 1996 (October
1996 for Mr. Salizzoni) under the 1993 Long-Term Executive Compensation Plan
and the Long-Term Performance Program thereunder. Each performance unit has an
initial value of one share of the Common Stock, without par value, of the
Company. The recipient is entitled to receive whole shares of Common Stock
after the end of the three-year performance period (from May 1, 1996 to April
30, 1999 in each case) equal to the actual value of the unit at such time. The
actual value of a performance unit at the end of the performance period is
determined by dividing the percentage change in cumulative total shareholder
return on the Company's Common Stock during the performance period, assuming
reinvestment of dividends, by the percentage
14
<PAGE> 16
change in the cumulative total return of the Standard & Poor's 500 Stock Index
during such period, assuming reinvestment of dividends. If the performance
ratio so determined is 1.0 (target), the actual value of each unit is one share,
with the following other actual values prescribed by the Program: 1.5 or more
(performance ratio)/1.5 actual value of each unit); .85 (floor)/.5 share; below
.85/0 shares. The actual value of a performance unit is computed by
interpolation for performance ratios between .85 and 1.0 and between 1.0 and
1.5. Payments of performance units are made in whole shares of Common Stock
after the completion of the performance period.
EMPLOYMENT AGREEMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
An Employment Agreement dated October 11, 1996, between the Company and
Frank L. Salizzoni provides for annual renewal thereafter unless notice of
non-renewal is delivered within 45 days prior to the anniversary date. The
Agreement provides for a base salary of $500,000 for the first year and for
additional salary not to exceed $150,000 on an annual basis (payable only after
cessation of consulting services to CompuServe Corporation by another member of
CompuServe's Board of Directors, and reduced by the aggregate amount of such
consulting fees paid for such services). In addition, Mr. Salizzoni
participated in the Company's 1997 fiscal year Short-Term Incentive Plan as if
he had been employed by the Company from the start of the fiscal year, with a
target award of $325,000. After the first year, base salary, any additional
salary and incentive bonus compensation are to be determined by the
Compensation Committee.
Pursuant to the Agreement, Mr. Salizzoni received a stock option under the
Company's 1993 Long-Term Executive Compensation Plan to purchase a total of
250,000 shares of Block common stock at the last quoted market price ($27.625)
for the Company's Common Stock on October 11, 1996, the date of the grant. The
shares subject to such option vest and become exercisable as to one-third of
the shares covered on each of the first three anniversaries of the date of the
Employment Agreement, and the option expires on October 11, 2003. Mr.
Salizzoni also received an award of 6,500 performance units under the H&R Block
Long-Term Performance Program for the performance period from May 1, 1996
through April 30, 1999.
The Agreement provides that it may be terminated by the Company for
"cause" and by Mr. Salizzoni for "good reason," in each case as defined in the
Agreement. "Good reason" is defined to include a change in control. If the
Agreement is terminated by the Company without "cause" or by Mr. Salizzoni with
"good reason," the Company is obligated to continue to pay Mr. Salizzoni's
salary and bonuses and provide all other benefits for a period of two years
following such termination. In addition, all outstanding stock options are to
vest and be exercisable for such two-year period.
George T. Robson, Senior Vice President, Chief Financial Officer and
Treasurer of the Company until his resignation effective May 31, 1997, had an
arrangement with the Company negotiated in connection with the commencement of
his employment in January 1996. As a result of his resignation, the
arrangement has terminated. Pursuant to said arrangement, Mr. Robson would
have continued to receive payment of his base salary for a two-year period
following the termination of his employment after a change in control, he would
have been paid a bonus compensation for the fiscal year in which such
termination occurred and the subsequent fiscal year (in an amount equal to the
target award for the fiscal year in which the termination occurred), nonvested
stock options would have vested 100% and health, life and disability insurance
benefits would have continued for up to two years following termination of
employment to the extent that he did not obtain similar benefits from another
employer. Under the arrangement, a change in control included (i) an
acquisition of beneficial ownership of 50% or more of the Company's voting
securities by a person or entity not affiliated with the Company, (ii) the
approval by the Company's shareholders of certain reorganizations, mergers or
consolidations of the Company, (iii) a complete liquidation or dissolution of
the Company or the sale or other disposition of all or substantially all of its
assets, or (iv) the turnover of more than a majority of the directors on the
Board
15
<PAGE> 17
of Directors as a result of a proxy contest or series of contests. Any such
event, transaction or series of transactions initiated by the Company would not
have constituted a change in control.
Stock option agreements entered into on or after June 30, 1996, between the
Company and the recipients of incremental stock options granted pursuant to the
1993 Long-Term Executive Compensation Plan contain provisions that accelerate
the vesting of options held more than six months in the event of certain
changes in control. For purposes of such agreements, changes in control
include (i) the purchase or other acquisition by a person, entity or group of
persons of beneficial ownership of 20% or more of the Company's voting
securities, (ii) the turnover of more than a majority of the directors on the
Board of Directors as a result of a proxy contest or series of contests, or
(iii) approval by the Company's shareholders of (A) a reorganization or
consolidation such that the shareholders immediately prior to the
reorganization or consolidation do not, immediately after such reorganization
or consolidation, own more than 50% of the voting securities of the reorganized
or consolidated organization, or (B) a liquidation or dissolution of the
Company, or (C) the sale of all or substantially all of the assets of the
Company. The agreements expressly state that any sale, distribution or
other disposition by the Company of all or substantially all of the common
stock or assets of CompuServe Corporation held by the Company shall not
constitute a change in control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following non-employee directors serve on the Compensation Committee
of the Company's Board of Directors: Robert E. Davis, Donna R. Ecton, Roger W.
Hale and Marvin L. Rich. G. Kenneth Baum served on the Compensation Committee
during that portion of fiscal year 1997 ended September 11, 1996. No directors
on the Compensation Committee are employed by the Company or any of its
subsidiaries. Henry W. Bloch, Chairman of the Board of the Company, and Frank
L. Salizzoni, its President and Chief Executive Officer, served as ex officio
members of the Compensation Committee until their resignations as such ex
officio members, effective December 11, 1996. Such ex officio status did not
entitle them to vote on matters submitted to the Compensation Committee. Mr.
Salizzoni served as a non-employee director on the Compensation Committee
during the portion of the fiscal year ended June 18, 1996, prior to becoming an
executive officer of the Company. Mr. Salizzoni also served as Chairman of the
Compensation Committee of the Board of Directors of CompuServe Corporation, an
80.1%-owned subsidiary of the Company, from June 1996 until October 1996.
PERFORMANCE GRAPH
The graph on the following page sets forth for the five-year period ended
April 30, 1997, the cumulative total shareholder return to the Company's
shareholders, as well as the cumulative total return of the Standard & Poor's
500 Stock Index and the cumulative total return of the Standard & Poor's
Companies in Service (Commercial & Consumer) Index, the published industry
index to which the Company is currently assigned by Standard & Poor's. The
performance graph assumes that $100 was invested at the market close on April
30, 1992 and that dividends were reinvested. The data for the graph was
furnished by Standard & Poor's Compustat Custom Business Unit, a division of
The McGraw-Hill Companies. The Company has been advised that the Standard &
Poor's Service (Commercial & Consumer) Group consists of five corporations,
including the Company.
16
<PAGE> 18
TOTAL RETURN TO SHAREHOLDERS
<TABLE>
<CAPTION>
BASE
PERIOD RETURN RETURN RETURN RETURN RETURN
COMPANY\INDEX NAME 4/30/92 4/30/93 4/30/94 4/30/95 4/30/96 4/30/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
H&R BLOCK, INC. 100 109.87 138.64 141.53 122.37 115.83
S&P 500 INDEX 100 109.24 115.05 135.14 175.97 220.20
S&P SERVICE 100 84.09 80.82 89.45 112.45 115.16
(Commercial & Consumer)
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The Company continues to be strongly committed to maximizing shareholder
value through consistent growth and profitability. Superior performance by the
executive officers and management team of the Company and its subsidiary
corporations is an essential element to reaching that goal. As such, it is the
philosophy of the Company to ensure that executive compensation is directly
linked to sustained improvements in corporate performance and increases in
shareholder value as measured by the Company's stock price and dividend
history. It is the Compensation Committee's responsibility to review the
Company's executive compensation program and policies each year and to
recommend to the non-employee members of the Board of Directors the
compensation of the Company's executive officers. The objectives that serve as
guidelines for the Compensation Committee in connection with compensation
decisions are as follows:
(1) Provide a competitive total compensation program that enables the
Company and its subsidiary corporations to attract and retain the key
executives needed to accomplish the Company's goals.
(2) Integrate executive compensation programs with the Company's annual
and long-term business objectives and focus executive behavior on the
fulfillment of those objectives.
(3) Provide variable compensation opportunities that are directly
related to the performance of the Company and that align executive
compensation with the interests of the Company's shareholders.
COMPENSATION PROGRAM
The Company's executive compensation program has been designed to ensure
that pay levels and incentive opportunities for executives are competitive and
reflect the performance of both the individual executive and the Company. The
Committee from time to time confers with outside compensation consultants
concerning salaries, annual incentive compensation, long-term incentive
programs and overall executive compensation. In designing compensation
programs for executives and determining executive officer salaries, the
Committee takes into consideration information provided by such consultants
with
17
<PAGE> 19
respect to compensation paid to executives holding positions with similar
responsibilities in organizations of comparable size. The components of the
compensation program for executives are described below.
BASE SALARY. Base salaries are determined by reference to an individual's
salary grade and corresponding salary range. Several factors are considered in
determining the appropriate salary grade for a particular officer, including
level of responsibility, prior experience and accomplishments and the relative
importance of the job in terms of achieving corporate objectives. Among the
factors considered in determining the appropriate salary within a particular
salary range are the experience and performance of the executive. The
individual salaries of executive officers are reviewed annually by the
Committee.
SHORT-TERM INCENTIVE COMPENSATION. The H&R Block Short-Term Incentive
Plan, adopted by the Board of Directors in June 1996 and approved by the
Company's shareholders in September 1996, is designed to specifically relate
executive pay to Company performance. Cash bonuses under such Plan provide
financial rewards solely for the achievement of substantive business results.
Under the Short-Term Incentive Plan, the Committee establishes performance
goals for the Company and the subsidiaries and divisions thereof, as well as
competitive target bonus awards for the participants. The Committee specifies
the performance goals applicable to each participant and the portion of the
target award to which each performance target shall apply.
Bonuses are paid after the end of a fiscal year only if the Company (or a
subsidiary or division of the Company) has met the performance goal, or
performance goals, established by the Compensation Committee for such fiscal
year and only if the executive remained in the employ of the Company or one of
its subsidiary corporations at the end of such year. The Committee must first
review and approve the payout of each bonus. The primary factor upon which
bonus compensation was dependent for fiscal year 1997 under the Short-Term
Incentive Plan was the degree to which the Company (or a subsidiary of the
Company) attained its budgeted fiscal year pretax profit. The Company's
consolidated pretax profit performance objective applied to at least 25% of
each participant's target award. At the time that performance criteria under
the Short-Term Incentive Plan were approved by the Committee for fiscal year
1997, CompuServe Corporation was treated for financial purposes as a
discontinued operation and, for purposes of the Short-Term Incentive Plan and
the consolidated pretax profit objective in fiscal year 1997, it was also so
treated.
Among other performance factors upon which incentive awards for executive
officers depended in fiscal year 1997 were goals relating to specific business
results for the executive's applicable business unit, including revenues,
profit margins, increases in tax returns prepared, unit sales of software and
credit cards issued.
Under the Short-Term Incentive Plan, participants can earn more than the
target award (up to 200%) if actual results exceed the performance targets.
DEFERRED COMPENSATION. The Company offers to its executive officers and
to key employees of its subsidiaries a deferred compensation plan and a
supplemental deferred compensation plan, both of which are designed to enhance
the participants' financial security upon retirement. The primary plan offers
participants the opportunity to defer annually up to 35% of base salary with an
aggregate limit on deferrals of 280% of base salary. The Company contributes
$.50 for each dollar deferred and vesting in such Company contributions is
based on the length of employment with the Company following the commencement
of participation in the plan. Gains or losses are posted to a participant's
account in accordance with his or her election of a fixed rate, variable rate
or Company stock investment option. The supplemental plan offers participants
an opportunity to defer an additional 280% of base salary after they have
reached the aggregate deferral limit under the primary plan. Under the
supplemental plan, there is no Company match and the Company's Common Stock is
the sole benchmark for measuring gains and losses on deferral amounts. The
plans are unfunded and benefits are paid upon termination of employment, except
in cases of disability or hardship.
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STOCK OPTIONS. The Company encourages stock ownership by executive
officers of the Company, but has not established target levels for equity
holdings by executives. Long-term incentive awards which are tied to the
Company's Common Stock, such as stock options, are designed to encourage stock
ownership. Stock options provide incentive to executives by giving them a
strong economic interest in maximizing stock price appreciation, thereby better
aligning their interests with those of the Company's shareholders. Under the
Company's 1993 Long-Term Executive Compensation Plan, option exercise prices
are set at 100% of the fair market value of the stock on the date of grant and
the options generally expire after 10 years. Options granted to executive
officers provide that they are not exercisable until one year after the date of
grant, at which time, they become exercisable on a cumulative basis at a
maximum annual rate of 33 1/3% of the total number of shares subject to the
option. The grant of options to executive officers of the Company is
discretionary with the Compensation Committee and the Committee has generally
awarded stock options on an annual basis. The number of shares subject to any
stock option grant is determined by an analysis of the executive's applicable
salary grade, level of responsibility and prior year's performance. The
Compensation Committee believes that stock options have been effective in
attracting, retaining and rewarding executives and key employees of the Company
and its subsidiary corporations over the years.
LONG-TERM PERFORMANCE PROGRAM. Senior executive officers of the Company
and its subsidiary corporations may receive awards of performance units granted
pursuant to the terms of the Company's 1993 Long-Term Executive Compensation
Plan. The objectives of the Long-Term Performance Program are to provide a
meaningful incentive to senior executives, encourage their continued employment
and base the value of the compensation upon total shareholder return with
respect to the Company's Common Stock, thereby again aligning their interests
with those of the Company's shareholders. Each performance unit has an initial
value of one share of the Company's Common Stock and is subject to a
performance period of three years. The actual value of a performance unit at
the end of a performance period is dependent upon the cumulative total
shareholder return on the Company's Common Stock during the performance period,
assuming reinvestment of dividends, as compared to the cumulative total return
of the Standard & Poor's 500 Stock Index (which index was selected due to the
diversified nature of the Company). Based upon such comparison, the actual
value of a performance unit may be from 0% to 150% of one share of Common
Stock with payments of performance units to be made in whole shares of Common
Stock after the completion of the three-year performance period. The
Compensation Committee has absolute discretion to determine the recipients and
amounts of performance units to be awarded. The Committee's determination of
the size of any award granted is subjective and not subject to any specific
formula or criteria.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The salary, bonus, stock option awards, and performance unit awards of the
Chief Executive Officer are determined by the Committee substantially in
conformity with the policies described above for all other executives of the
Company.
On June 19, 1996, Frank L. Salizzoni was elected President and Chief
Executive Officer of the Company following the resignation of Richard H. Brown
as President and Chief Executive Officer. As Mr. Salizzoni's election was
initially believed to be on an interim basis, he was paid a base salary of
$40,000 per month from June 19, 1996 until October 11, 1996, on which date he
agreed to succeed Mr. Brown on a permanent basis. The compensation of Mr.
Salizzoni was determined by negotiation with Mr. Salizzoni and was approved by
the Board of Directors on October 11, 1996. Mr. Salizzoni's employment
agreement provides for a base salary at the annual rate of $500,000 through
August 31, 1997, with additional salary not to exceed $150,000 on an annual
basis (payable only after the cessation of the provision of consulting services
to CompuServe Corporation by another member of CompuServe's Board of Directors
and reduced by the aggregate amount of consulting fees paid for such services)
for such part of the period ending August 31, 1997 as the Company continued to
own a majority of the stock of CompuServe Corporation. In addition, Mr.
Salizzoni participated in the Company's Short-Term
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Incentive Plan for fiscal year 1997 as if he had been employed by the Company
from the start of the fiscal year, with a target award of $325,000. As Chief
Executive Officer of the Company, Mr. Salizzoni had responsibility for the
general and active management of the business of the Company and its
subsidiaries. Therefore, $250,000 of his target award for fiscal year
1997 related to the Company's achievement of its budgeted consolidated fiscal
year pretax profit (with CompuServe treated as a discontinued operation for
purposes of this portion of the award). The remaining $75,000 of his target
award related to CompuServe Corporation's attainment of its budgeted fiscal
year 1997 pretax profit. Based upon the results achieved by the Company, Mr.
Salizzoni was entitled to bonus compensation of $253,500 (all of which was
derived from the consolidated fiscal year pretax profit portion of his bonus).
Mr. Salizzoni was granted an option to purchase 250,000 shares of stock at
an option price of $27.625 per share, the last quoted market price for the
Company's Common Stock on October 11, 1996, the date of grant. Such option has
a term of seven years and vests 33 1/3% on each of the first three anniversary
dates of the employment agreement.
Mr. Salizzoni also received an award of 6,500 performance units under the
H&R Block Long-Term Performance Program for the performance period from May 1,
1996 through April 30, 1999.
Mr. Brown was compensated through July 1, 1996, in accordance with his
Executive Employment Agreement that became effective August 5, 1995. Pursuant
to that Agreement, his salary on an annual basis was $650,000. Mr. Brown did
not participate in the Short-Term Incentive Plan in fiscal year 1997 and he was
awarded no stock options or performance units during fiscal year 1997.
TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), and Treasury Regulations relating thereto limit to $1 million the
Company's federal income tax deduction for compensation paid to any one
executive officer named in the Summary Compensation Table of the Company's
proxy statement, subject to certain transition rules and exceptions for
specified types of compensation, such as amounts that are excludable from the
employee's gross income, payments made to a tax-qualified retirement plan, and
compensation that meets the Code definition of performance-based compensation.
To date, Code Section 162(m) has not limited the deductibility of the
Company's compensation of its executive officers under its current compensation
policies. The Committee believes that it is in the Company's and shareholders'
best interests to maximize tax deductibility only when practicable and
consistent with the Committee's overall compensation philosophy, the needs of
the Company, and shareholder interests. The Committee determined that it would
modify the Company's short-term incentive compensation program during fiscal
year 1997 in order to meet the deductibility requirements of Section 162(m) and
the H&R Block Short-Term Incentive Plan was approved by the shareholders of the
Company at the annual meeting of shareholders held on September 11, 1996. In
June 1997, the Committee approved an amendment to the 1993 Long-Term Executive
Compensation Plan in order that such Plan may meet the deductibility
requirements of Section 162(m), and such amendment will be submitted to a vote
of the shareholders of the Company at the annual meeting of shareholders
scheduled for September 10, 1997.
COMPENSATION COMMITTEE
Robert E. Davis, Chairman
Donna R. Ecton
Roger W. Hale
Marvin L. Rich
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AMENDMENT TO THE 1993 LONG-TERM EXECUTIVE COMPENSATION PLAN
(ITEM 2 ON FORM OF PROXY)
INTRODUCTION
The 1993 Long-Term Executive Compensation Plan was approved by the
shareholders at their 1993 annual meeting and became effective upon said
approval. Said Plan was amended by the Board of Directors in December 1995 and
said Plan, as so amended, shall hereafter be referred to as the "1993 Plan."
The Board believes that the 1993 Plan (and its predecessor, the 1984 Long-Term
Executive Compensation Plan) have been effective in attracting executives and
key employees to the Company and its subsidiaries and in providing long-term
incentives and rewards to those executives and key employees responsible for
the continued growth of the Company. The Board also believes that the stock
options, incentive stock options and other awards granted under the 1993 Plan
have provided an incentive that aligns the economic interests of management
and other key employees with those of the Company's shareholders. The Board
continues to believe that it is in the Company's best interests to utilize
these types of awards as an integral part of its compensation programs, and
considers these programs to be key contributors to the ongoing success of the
Company.
At a meeting of the Board of Directors on June 18, 1997, the Board adopted
an amendment to the 1993 Plan, effective upon its approval by the Company's
shareholders at their 1997 annual meeting, in order that the 1993 Plan may
satisfy the requirements of Section 162(m) of the Internal Revenue Code
("Section 162(m)").
Under Section 162(m), the Company may not claim a Federal income tax
deduction in any year on compensation in excess of $1 million paid to its chief
executive officer or to any of the four highest paid executives of the Company
named in the Summary Compensation Table contained in its proxy statement.
Section 162(m) provides an exception for certain performance-related
compensation paid pursuant to shareholder approved plans. Compensation
recognized by employees in connection with the exercise of stock options and
stock appreciation rights granted under the 1993 Plan may continue to be exempt
from the $1 million limitation as "performance-based compensation" if certain
requirements are satisfied, including the requirement that the 1993 Plan state
the maximum number of shares for which awards of stock may be granted during a
specified period of time to any employee.
The 1993 Plan does not currently limit the number of shares with respect
to which awards may be granted to any one individual during any specific time
period. Accordingly, the Board of Directors adopted the proposed amendment to
provide for such a limit, and the following resolution will be presented at the
annual meeting of shareholders:
"RESOLVED, That this Company's 1993 Long-Term Executive
Compensation Plan, as previously amended, be further amended as
follows:
(1) by adding the following sentence to the end of Section 6
thereof:
'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 350,000, subject to
adjustment as provided in Section 16 of the Plan.'; and
(2) by deleting Section 16 thereof and replacing it
with the following new Section 16:
'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
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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.'"
MATERIAL FEATURES OF THE 1993 PLAN
The material features of the 1993 Plan are summarized below. The summary
is qualified in its entirety by reference to the specific provisions of the
1993 Plan, as it is proposed to be amended, the full text of which is set forth
as Appendix A to this proxy statement.
ADMINISTRATION. The 1993 Plan is administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee"). All
members of the Committee are non-employee directors of the Company and such
members are not eligible to participate in the 1993 Plan. The Committee has
the authority to determine, within the limits of the express provisions of the
1993 Plan, the individuals to whom awards will be granted, the nature, amount
and terms of such awards and the objectives and conditions for earning such
awards. Under the December 1995 amendment, the Committee may delegate to the
Chief Executive Officer of the Company the authority to make such
determinations, provided that any authority so delegated may not apply to
awards to executive officers of the Company and may be exercised only in
accordance with the 1993 Plan and any guidelines, rules and limitations as the
Committee may prescribe.
TYPES OF AWARDS. Awards under the 1993 Plan may include shares of Common
Stock of the Company ("Common Stock"), restricted shares of Common Stock
("Restricted Shares"), nonqualified stock options, incentive stock options
("ISOs"), stock appreciation rights ("SARs"), performance shares, performance
units, as well as other types of awards that the Committee in its discretion
may determine are consistent with the objectives and limitations of the 1993
Plan. Restricted Shares are shares of Common Stock issued to a recipient
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. An
SAR is the right to receive cash, Common Stock, or both based on the increase
in the market value of the shares of Common Stock covered by such SAR from the
initial date of the performance period for such SAR to the date of exercise. A
"performance share" is the right to receive, upon satisfying designated
performance goals within a performance period, cash, Common Stock or both,
based on the market value of shares of Common Stock covered by such performance
shares at the close of the performance period. A "performance unit" is the
right to receive cash, Common Stock or both upon satisfying designated
performance goals within a performance period.
The Committee may determine that all or a portion of an award may be
deferred, that it may be vested at such times and upon such terms as the
Committee may select, or that a recipient must be an employee at the time the
award is paid or exercised. An employee may be granted multiple awards in any
one calendar year, and, as the 1993 Plan is proposed to be amended, such awards
may cover up to 350,000 shares of Common Stock under the 1993 Plan. The 1993
Plan provides that ISOs may be granted to a recipient during a calendar year
only if the aggregate fair market value (determined as of the time an ISO is
granted) of Common Stock with respect to which ISOs are exercisable for the
first time by such recipient during any calendar year under the 1993 Plan and
any other "incentive stock option plans" maintained by the Company does not
exceed the sum of $100,000. No ISO is exercisable later than ten years after
the date it is granted.
Neither the Company nor any subsidiary may receive any consideration from
the recipient of an award at the time that the award is granted.
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ELIGIBLE EMPLOYEES. The Committee may grant awards to any employee of the
Company or any of its direct or indirect subsidiaries. The highest number of
persons employed by subsidiaries of the Company during the fiscal year ended
April 30, 1997, including seasonal employees, was approximately 79,000. Since
awards under the 1993 Plan have not been made to seasonal employees in the
past, it is estimated that the approximately 1,640 regular, full-time employees
of the subsidiaries of the Company will be eligible to participate in the 1993
Plan. No ISO may be granted to an employee who owns stock possessing more than
10% of the combined voting power of all classes of stock of the Company.
AWARDS GRANTED UNDER THE 1993 PLAN. On June 18, 1996, the Committee
approved the grant of stock options as of June 30, 1996, with an exercise price
per share equal to $32.75, for the following numbers of shares of Common Stock:
35,000 shares for Mr. Robson; 4,500 shares for Mr. Bloch; 30,000 shares for Mr.
Zimmerman; 10,000 shares for Mr. Anderson; 104,500 shares for all executive
officers as a group and 523,650 shares for all employees as a group (excluding
executive officers). On the same date, the Committee also approved a grant of
performance units for the following numbers of shares of Common Stock: 4,000
shares for Mr. Robson; no shares for Mr. Bloch; 3,000 shares for Mr. Zimmerman;
3,000 shares for Mr. Anderson; 13,000 shares for all executive officers as a
group and no shares for all employees as a group (excluding executive
officers). Mr. Salizzoni was awarded a grant of 6,500 performance shares on
October 11, 1996.
On June 17, 1997, and June 18, 1997, respectively, the Committee and the
Board of Directors approved the grant of stock options as of June 30, 1997,
with an exercise price per share equal to $32.25, for the following numbers of
shares of Common Stock: 90,000 shares for Mr. Salizzoni; no shares for Mr.
Robson; 5,000 shares for Mr. Bloch; 45,000 shares for Mr. Zimmerman; no shares
for Mr. Anderson; 200,000 shares for all executive officers as a group and
851,750 shares for all employees as a group (excluding executive officers). No
performance units were awarded on said dates.
The exact types and amounts of any future awards to be made to any
eligible employees pursuant to the 1993 Plan are not presently determinable.
As a result of the discretionary nature of the 1993 Plan, it is not possible to
state who the participants in the 1993 Plan will be in the future or the number
of options or other awards to be received by a person or group.
ASSIGNABILITY. No award granted pursuant to the 1993 Plan is transferable
or assignable by its recipient other than by will or the laws of descent and
distribution.
SHARES SUBJECT TO THE 1993 PLAN. An aggregate of 7,000,000 shares of
Common Stock is reserved for issuance under the 1993 Plan. As of April 30,
1997, 4,394,168 shares were available for awards under the 1993 Plan. All of
such shares may be issued in connection with the exercise of ISOs. Shares of
Common Stock not actually issued (as a result, for example, of the lapse of an
option, the failure of a recipient to earn an award or the payment of an award
in cash or a combination of cash and Common Stock) are available for additional
grants. Shares of Common Stock to be delivered or purchased under the 1993
Plan may be either authorized but unissued Common Stock or treasury shares.
ANTI-DILUTION PROTECTION. In the event of any changes in the capital
structure of the Company, including a change resulting from a stock dividend or
stock split, or combination or reclassification of shares, the Board of
Directors is empowered to make such equitable adjustments with respect to
awards or any provisions of the 1993 Plan as it deems necessary and
appropriate, including, if necessary, any adjustments in the maximum number of
shares of Common Stock subject to the Plan or the number of shares of Common
Stock subject to an outstanding award. The proposed amendment to the 1993 Plan
would add adjustments in the maximum number of shares that may be subject to
one or more awards granted to any one recipient during a calendar year to the
list of adjustments that the Board of Directors may make in the event of a
change in the capital structure of the Company.
MARKET VALUE RESTRICTIONS. The amounts of certain awards are based on the
market value of a share of Common Stock at a specified point in time. The
exercise price per share of Common Stock
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under each nonqualified stock option or ISO granted under the 1993 Plan, which
is paid to the Company at the time of the exercise, is determined by the
Committee, but may not be less than the market value of such Common Stock on
the date of grant of such option. The exercise price for each option remains
constant during the life of the option, subject to adjustment pursuant to the
anti-dilution provisions of the 1993 Plan described above. The market value of
a share of Common Stock on the date an SAR is granted is the base value of such
SAR. On June 30, 1997, the last reported sale price of the Company's Common
Stock on the New York Stock Exchange was $32.25 per share.
AMENDMENTS AND TERMINATIONS. The Board of Directors may at any time
terminate or amend the 1993 Plan, provided that no such action may be taken
that adversely affects any rights or obligations with respect to any awards
theretofore made under the Plan without the consent of the recipient. No
amendment may be made that would increase the maximum number of shares of
Common Stock that may be issued under the 1993 Plan (unless such increase is a
result of a change in the capital structure of the Company), change the
termination date of the 1993 Plan, or delete or amend the market value
restrictions contained in the 1993 Plan on the stock option exercise price or
the base value of an SAR without the prior approval of the holders of a
majority of the outstanding shares of Common Stock represented in person or by
proxy at a duly constituted meeting of shareholders. No awards may be made
under the 1993 Plan after September 7, 2003, on which date such Plan will
terminate, except as to awards then outstanding thereunder. All outstanding
awards under the 1993 Plan will expire no later than September 7, 2013.
FEDERAL INCOME TAX CONSEQUENCES
The Company has been advised by its counsel that the Federal income tax
consequences of the issuance and/or exercise of awards under the 1993 Plan are
as described below. The following information is not a definitive explanation
of the tax consequences of the awards. Recipients should consult with their
own tax advisors with respect to the tax consequences inherent in the ownership
and/or exercise of the awards, and the ownership and disposition of any
underlying securities.
COMMON STOCK AWARDS. The recipient of a Common Stock award will recognize
ordinary income for Federal income tax purposes at the time of receipt of
Common Stock in an amount equal to the fair market value of the Common Stock
received. The Company will be entitled to a deduction for such amount as and
when the ordinary income is recognized by the recipient. Upon disposition of
any Common Stock received, the recipient will recognize long-term or short-term
capital gain or loss, depending upon the period during which such recipient
has held the shares, in an amount equal to the difference between the selling
price and the fair market value of such shares on the date of receipt.
RESTRICTED SHARES. A recipient will not be taxed at the date of an award
of Restricted Shares, but will be taxed at ordinary income rates on the fair
market value of any restricted shares as of the date that the restrictions
lapse, unless the recipient, within 30 days after transfer of such Shares to
the recipient, elects under Section 83(b) of the Internal Revenue Code to
include in income the fair market value of the Restricted Shares as of the date
of such transfer. The Company will be entitled to a corresponding deduction.
Any disposition of shares after restrictions lapse will be subject to the
regular rules governing long-term and short-term capital gains and losses, with
the basis for this purpose equal to the fair market value of the shares at the
end of the restricted period (or the date of the transfer of the restricted
shares, if the employee elects to be taxed on the fair market value upon such
transfer). Dividends received by a recipient during the restricted period will
be taxable to the recipient at ordinary income tax rates and will be deductible
by the Company unless the recipient has elected to be taxed on the fair market
value of the restricted shares upon transfer, in which case they will
thereafter be taxable to the employee as dividends and will not be deductible
by the Company.
INCENTIVE STOCK OPTIONS. The 1993 Plan qualifies as an incentive stock
option plan within the meaning of Section 422 of the Internal Revenue Code. A
recipient who is granted an ISO will not recognize any taxable income for
Federal income tax purposes either on the grant or exercise of the ISO.
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If the recipient disposes of the shares purchased pursuant to the ISO more
than two years after the date of grant and more than one year after the
transfer of the shares to him (the required statutory "holding period"), (a)
the recipient will recognize long-term capital gain or loss, as the case may
be, equal to the difference between the selling price and the exercise price;
and (b) the Company will not be entitled to a deduction with respect to the
shares of stock so issued.
If the holding period requirements are not met, any gain realized upon
disposition will be taxed as ordinary income to the extent of the excess of the
lesser of (i) the excess of the fair market value of the shares at the time of
exercise over the exercise price, or (ii) the gain on the sale. The Company
will be entitled to a deduction in the year of disposition in an amount equal
to the ordinary income recognized by the recipient. Any additional gain will
be taxed as short-term or long-term capital gain depending upon the holding
period for the stock.
NONQUALIFIED STOCK OPTIONS. The recipient of a nonqualified stock option
under the 1993 Plan will not recognize any income for Federal income tax
purposes on the grant of the option. Generally, on the exercise of the option,
the recipient will recognize taxable ordinary income equal to the difference
between the fair market value of the shares on the exercise date and the
exercise price for the shares. The Company generally will be entitled to a
deduction on the date of exercise in an amount equal to the ordinary income
recognized by the recipient. Upon disposition of the shares purchased pursuant
to the stock option, the recipient will recognize long-term or short-term
capital gain or loss, as the case may be, equal to the difference between the
amount realized on such disposition and the basis for such shares, which basis
will include the amount previously recognized by the recipient as ordinary
income.
STOCK APPRECIATION RIGHTS. A recipient who is granted stock appreciation
rights will not recognize any taxable income on the receipt of the SARs. Upon
the exercise of an SAR, (a) the recipient will recognize ordinary income equal
to the amount received (the increase in the fair market value of one share of
the Company's Common Stock from the date of grant of the SAR to the date of
exercise); and (b) the Company will be entitled to a deduction on the date of
exercise in an amount equal to the ordinary income recognized by the recipient.
PERFORMANCE SHARES AND PERFORMANCE UNITS. A recipient of performance
shares or performance units will not recognize any income for Federal income
tax purposes on the date of the grant of the right to receive performance
shares or units. The recipient will recognize ordinary income for Federal
income tax purposes at the time of receipt of cash and/or Common Stock with
respect to the performance share or units in an amount equal to the excess, if
any, of the fair market value of the performance shares or units on the date
received over the price of the performance shares or units on the date of
grant. The Company will be entitled to a deduction on the date of receipt of
the performance shares by the recipient in an amount equal to the ordinary
income recognized by the recipient. Upon disposition of any stock received,
the recipient will recognize long-term or short-term gain or loss depending
upon the period for which he or she has held the stock in an amount equal to
the difference between the amount realized and the fair market value of the
stock on the date of receipt.
ALTERNATIVE MINIMUM TAX. In addition to the Federal income tax
consequences described above, a recipient may be subject to the alternative
minimum tax ("AMT"), which is payable only to the extent it exceeds the
recipient's regular tax liability. The AMT is assessed on the recipient's
alternative minimum taxable income in excess of an exemption amount that varies
by filing status. For purposes of computing the AMT, the alternative minimum
taxable income is equal to taxable income (1) increased by tax preference items
and (2) increased or reduced by certain AMT "adjustments." The exemption
amount must be reduced by 25% of the amount by which the alternative minimum
taxable income exceeds certain specified dollar amounts. In no event shall the
exemption amount be reduced below zero. Federal law currently provides for a
minimum tax credit that may be applied against the recipient's regular tax
liability in years following a year in which the recipient is subject to AMT.
The minimum
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tax credit is limited to the excess, if any, of the regular tax over the
tentative AMT for the year. Any credit not used because of the limitation may
be carried forward indefinitely.
EFFECTIVE DATE. The amendment to the 1993 Plan shall be effective immediately
on the date of its approval by the shareholders of the Company. If the
amendment is not approved by such shareholders, the 1993 Plan will remain in
effect as it currently exists, without the amended provisions proposed herein.
VOTE REQUIRED. The affirmative vote of the holders of a majority of the shares
of Common Stock represented and entitled to vote on this proposal at the annual
meeting of shareholders will constitute approval of the amendment to the 1993
Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS "FOR" THIS PROPOSAL
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE AMENDMENT TO THE 1993
LONG-TERM EXECUTIVE COMPENSATION PLAN, AND PROXIES SOLICITED BY THE BOARD WILL
BE SO VOTED IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY.
APPROVAL OF THE H&R BLOCK STOCK PLAN
FOR NON-EMPLOYEE DIRECTORS
(ITEM 3 ON FORM OF PROXY)
INTRODUCTION
The Board of Directors adopted the H&R Block Stock Plan for Non-Employee
Directors (the "Stock Plan") on June 18, 1997, subject to its approval by the
Company's shareholders at their 1997 annual meeting. The Stock Plan provides
to members of the Board of Directors of the Company who are not employees of
the Company or any of its subsidiaries ("Non-Employee Directors") the
opportunity to receive payment, on a deferred basis, of their retainers and/or
meeting fees in shares of the Company's Common Stock, without par value
("Common Stock"). It also provides for the award of units ("Stock Units") to
directors who participated in the H&R Block, Inc. Retirement Plan for
Non-Employee Directors ("Retirement Plan") and who elect to receive such Stock
Units in lieu of benefits under such Retirement Plan, with each Stock Unit
equivalent to one share of Common Stock and payable on a deferred basis in a
whole share of Common Stock. The Stock Plan is intended to provide outside
directors with the opportunity to acquire a larger equity interest in the
Company, to enhance the identity of interests between Non-Employee Directors
and the shareholders of the Company and to assist the Company in attracting and
retaining well-qualified individuals to serve as Non-Employee Directors. The
Board believes it is in the Company's best interest to adopt the Stock Plan.
MATERIAL FEATURES OF THE STOCK PLAN
The material features of the Stock Plan are summarized below. The summary
is qualified in its entirety by reference to the specific provisions of the
Stock Plan, the full text of which is set forth as Appendix B to this proxy
statement.
PARTICIPATION. Only Non-Employee Directors are eligible to participate in
the Stock Plan, provided that, if a Non-Employee Director becomes an employee
of the Company or one of its subsidiaries after he or she commences
participation in the Stock Plan, he or she will remain a participant in the
Stock Plan until his or her service as a director of the Company or any of its
subsidiaries terminates and all benefits under the Stock Plan are paid. There
are presently seven Non-Employee Directors of the Company eligible to
participate in the Stock Plan. No current executive officers or employees of
the Company or its subsidiaries are eligible to participate in the Stock Plan.
DIRECTOR RETAINERS AND MEETING FEES. Under the Stock Plan, Non-Employee
Directors may elect to have quarterly retainers and/or their meeting fees paid
in Stock Units instead of cash. Directors
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<PAGE> 28
will make separate elections with respect to the payment of the retainer, board
meeting fees and committee meeting fees. The number of Stock Units credited
to a Non-Employee Director's account will equal the cash amount of the
retainer or fees deferred divided by the fair market value of one share of
Common Stock on the date on which such cash amount would otherwise have been
paid. Stock Units for retainers and meeting fees are fully vested at all
times. Payment of Stock Units (in full shares of Common Stock) must be
deferred at least one year. The director chooses the date of the payment,
which may be upon termination of service as a director.
AWARD OF STOCK UNITS IN LIEU OF RETIREMENT PLAN BENEFITS. At its meeting
on June 18, 1997 the Board of Directors approved the termination of the H&R
Block, Inc. Retirement Plan for Non-Employee Directors as of that date and the
award of benefits under the Stock Plan or the H&R Block Deferred Compensation
Plan for Directors in lieu of benefits under the Retirement Plan. Participants
in the Retirement Plan as of such termination date may elect to receive the
present value of accrued benefits under the Retirement Plan in the form of (1)
an award of Stock Units under the Stock Plan or (2) deferrals under the H&R
Block Deferred Compensation Plan for Directors (with gains and losses on the
deferral amount credited in accordance with the H&R Block Common Stock
investment option). If the Non-Employee Director elects to receive an award of
Stock Units, the number of Stock Units to be awarded is determined by dividing
the present value of the Retirement Plan benefits by the fair market value of
the Common Stock on the effective date of the termination of the Retirement
Plan, with no award of Stock Units less than 1,000 and all awards of Stock
Units rounded up to the nearest 100-lot increment. Stock Units in lieu of
retirement benefits are fully vested at all times. Payment of Stock Units
awarded in lieu of benefits under the Retirement Plan will be in the form of
full shares of stock and will take place on the later to occur of the
termination of service as a director or one year after the effective date of
the Stock Plan.
Using a fair market value of $33.375 per share on June 18, 1997 (the
average of the high and low sales prices quoted on the New York Stock Exchange
Composite Listing for the Common Stock on such date), and the present value of
retirement benefits as of such date (determined by an independent actuarial
consultant using the annual director retainer in effect on the effective date
of the termination of the Retirement Plan and an 8% interest rate), the awards
to Non-Employee Directors who elect to take Stock Units in lieu of retirement
benefits would be as follows:
<TABLE>
<CAPTION>
Present Value Number
Director of Accrued Benefits of Stock Units
-------- ------------------- --------------
<S> <C> <C>
Morton I. Sosland $134,230 4,100
G. Kenneth Baum 91,880 2,800
Robert E. Davis 85,070 2,600
Marvin L. Rich 66,000 2,000
Henry F. Frigon 61,110 1,900
Roger W. Hale 33,780 1,100
Donna R. Ecton 24,690 1,000
</TABLE>
DIVIDEND EQUIVALENT PAYMENTS. As of each cash dividend payment date with
respect to the Common Stock, each Stock Plan participant will have credited to
his or her account the number of Stock Units equal to the quotient obtained by
dividing (a) the product of the per share cash dividend and the number of Stock
Units credited to the account on the dividend record date, by (b) the fair
market value of one share of Common Stock on the dividend payment date. Stock
Units attributable to dividends are fully vested at all times and are paid in
full shares of Common Stock upon termination of service as a director.
SHARES OF COMMON STOCK ISSUABLE UNDER THE STOCK PLAN. The aggregate
number of shares of Common Stock that may be issued under the Stock Plan may
not exceed 300,000 shares, provided that
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<PAGE> 29
such aggregate number may be adjusted upon certain changes in the Company's
capitalization. No fractional shares of Common Stock may be issued under the
Stock Plan.
ADMINISTRATION OF THE STOCK PLAN. The Stock Plan is administered by the
Compensation Committee of the Company's Board of Directors, which has full
power and authority to supervise administration of the Stock Plan and to
interpret the provisions of the Plan and of any award, issuance or payment of
Stock Units. The Committee may delegate any of its responsibilities to one or
more agents, including employees of the subsidiaries of the Company. No
participant may participate in the decision made with respect to any question
relating to any Stock Unit issued under the Stock Plan exclusively to that
participant.
UNFUNDED PLAN. The Stock Plan is unfunded. A participant's right to
receive any payment of any Stock Unit is not greater than the rights of an
unsecured general creditor of the Company.
NON-ALIENATION. Stock Units are not assignable or transferable and are
not subject in any manner to alienation, sale or any encumbrances, liens,
levies, attachments, pledges or charges of the participant or his or her
creditors.
TERMINATION OR AMENDMENT OF THE STOCK PLAN. The Stock Plan is to remain
in effect until all shares of Common Stock authorized for issuance under the
Stock Plan have been issued, provided that the Board of Directors may at any
time terminate, suspend or amend the Stock Plan. Upon termination of the Stock
Plan, Stock Units credited to a participant's account will be paid in whole
shares of Common Stock.
FEDERAL INCOME TAX CONSEQUENCES. Under current Federal tax laws and
regulations, the award of a Stock Unit under the Stock Plan will not result in
taxable income for the participant or in a deduction for the Company. Upon
payment of Stock Units, the receipt of full shares of Common Stock will
generally result in taxable income for the participant and a deduction for the
Company, in each case based on the fair market value of the shares of Common
Stock on the date of such payment.
EFFECTIVE DATE. The Stock Plan shall be effective immediately on the date of
its approval by the shareholders of the Company. If the Stock Plan is not
approved by such shareholders at the annual meeting of shareholders in 1997,
the participants in the Retirement Plan as of its termination date will receive
benefits in lieu of retirement benefits in the form of deferrals under the H&R
Block Deferred Compensation Plan for Directors.
VOTE REQUIRED. The affirmative vote of the holders of a majority of the shares
of Common Stock represented and entitled to vote on this proposal at the annual
meeting of shareholders will constitute approval of the Stock Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS "FOR" THIS PROPOSAL.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE H&R BLOCK STOCK PLAN FOR
NON-EMPLOYEE DIRECTORS, AND PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED IN
THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY.
APPOINTMENT OF AUDITORS
(ITEM 4 ON FORM OF PROXY)
Deloitte & Touche LLP has audited the accounts of the Company since 1965.
It has offices or affiliates convenient to most of the Company's operations in
the United States and other countries and is considered to be well qualified.
The Board of Directors has appointed such firm as the Company's independent
auditors for the year ending April 30, 1998 and recommends that the
shareholders ratify such appointment. Representatives of Deloitte & Touche LLP
expect to attend the annual meeting, will be
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<PAGE> 30
afforded an opportunity to make a statement if they desire to do so, and
will be available to respond to appropriate questions by the shareholders.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR RATIFICATION OF
THE APPOINTMENT OF DELOITTE & TOUCHE LLP IN THE ABSENCE OF INSTRUCTIONS TO THE
CONTRARY.
SHAREHOLDER PROPOSALS
Recommendations for nominees to be elected to the Board of Directors and
proposals of shareholders intended to be presented at the next annual meeting
scheduled to be held on Wednesday, September 9, 1998 must be submitted in
writing to the Secretary of the Company, H&R Block, Inc., 4400 Main Street,
Kansas City, Missouri 64111. Shareholder proposals must be received by the
Secretary no later than April 9, 1998 in order to be included in next year's
proxy statement and form of proxy.
OTHER MATTERS
The Board of Directors knows of no other matters which will be presented
at the meeting, but if other matters do properly come before the meeting, it is
intended that the persons named in the proxy will vote according to their best
judgment.
By Order of the Board of Directors
JAMES H. INGRAHAM
Secretary
July 30, 1997
29
<PAGE> 31
APPENDIX A
H&R BLOCK, INC.
1993 LONG-TERM EXECUTIVE COMPENSATION PLAN
(As Amended)
1. PURPOSES. The purposes of this 1993 Long-Term Executive Compensation
Plan are to provide incentives and rewards to those employees 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 with experience and ability.
2. DEFINITIONS.
(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) COMMON STOCK means the Common Stock, without par value, of the
Company.
(c) COMPANY means H&R Block, Inc., a Missouri corporation, and, unless the
context otherwise requires, includes its subsidiary corporations and their
respective divisions, departments and subsidiaries and the respective
divisions, departments and subsidiaries of such subsidiaries.
(d) 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 of 1986, as now in effect or hereafter amended (the
"Internal Revenue Code").
(e) 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.
(f) 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.
(g) 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 Common Stock.
(h) PLAN means this 1993 Long-Term Executive Compensation Plan, as the
same may be amended from time to time.
(i) RECIPIENT means an employee of the Company who has been granted an
Award under the Plan.
(j) 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
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of issuance.
(k) 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.
(l) STOCK OPTION means the right to purchase, upon exercise of a Stock
Option granted under this Plan, shares of the Company's Common Stock.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
Compensation Committee (the "Committee") consisting 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 Committee's 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 employees
of the Company shall be granted Awards under the Plan, (ii) grant to any
employee 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, as hereafter
amended), (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 employees 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
A-2
<PAGE> 33
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 shall prescribe.
5. ELIGIBILITY. Awards may be granted to any employee of the Company. No
member of the Committee (other than any ex officio member) shall be eligible
for grants of Awards under the Plan. An employee 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 7,000,000 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
350,000, subject to adjustment as provided in Section 16 of the Plan.
7. AWARDS.
(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
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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 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 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 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 and to
determine whether such cessation is the result of retirement, death or any
other reason.
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 unacceptable.
14. EMPLOYMENT STATUS. No Award shall be construed as imposing upon the
Company the obligation to continue the employment 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,
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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 Awards.
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 Recipient's salary or otherwise) of any such taxes. Subject to such
conditions as the Committee may establish, Awards under the Plan payable in
shares of Common Stock may provide that the Recipients thereof may elect, in
accordance with any applicable regulations, to have the Company withhold shares
of Common Stock to satisfy all or part of any such tax withholding obligations,
with the value of such withheld shares of Common Stock based upon their fair
market value on the date the tax withholding is required to be made.
19. COSTS AND EXPENSES. The cost and expenses of administering the Plan
shall be borne by the Company and not charged to any Award nor 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 Recipient.
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, or (iii) delete or amend the market value restrictions
contained in Sections 10 and 11 hereof, 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
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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
September 7, 2003, 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 September 7, 2003, 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 upon due approval by the
shareholders of the Company.
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APPENDIX B
H&R BLOCK STOCK PLAN FOR
NON-EMPLOYEE DIRECTORS
ARTICLE I - PURPOSE OF THE PLAN
1.1 Purpose of Plan. H&R Block, Inc. (the "Company") adopts the H&R Block
Stock Plan for Non-Employee Directors (the "Plan") to provide for payment in
shares of the Company's Common Stock, without par value ("Stock"), of the
retainers and meeting fees of members of the Board of Directors of the Company
who are not employees of the Company or any of its affiliates or subsidiaries
("Non-Employee Directors"), on a deferred basis. The Plan also provides for an
optional award of Stock Units (as defined in Section 3.1) to directors
participating in the H&R Block, Inc. Retirement Plan for Non-Employee Directors
("Retirement Plan") upon the termination of the Retirement Plan and in lieu of
benefits under such Retirement Plan. The Plan is intended to provide
Non-Employee Directors with a larger equity interest in the Company, to enhance
the identity of interests between Non-Employee Directors and the shareholders
of the Company, and to assist the Company in attracting and retaining
well-qualified individuals to serve as Non-Employee Directors.
ARTICLE II - ELIGIBILITY AND PARTICIPATION
2.1 Eligibility and Participation. Only Non-Employee Directors shall be
eligible to participate in the Plan, provided that, if a Non-Employee Director
becomes an employee of the Company or one or more of its affiliates or
subsidiaries after he or she commences participation in the Plan, he or she
shall remain eligible and shall continue to participate in the Plan until his
or her service as a director of the Company terminates and all benefits under
the Plan are paid. An eligible Plan participant may be referred to herein as
"Participant."
ARTICLE III - STOCK UNITS AND DIRECTOR COMPENSATION DEFERRAL ELECTIONS
3.1 Retainers Payable in Stock Units. Each Non-Employee Director may elect to
have his or her director retainer fee that is payable in quarterly
installments, or in any other manner (determined without regard to the Plan)
(the "Retainer") paid in units ("Stock Units"), with each Stock Unit equivalent
to one share of Stock, and deferred in accordance with the Non-Employee
Director's deferral election.
3.2 Meeting Fees Payable in Stock Units. Each Non-Employee Director may elect
to have fees for attendance at meetings of the Company's Board of Directors
and/or committees thereof (determined without regard to the Plan) ("Meeting
Fees") paid in Stock Units and deferred in accordance with the Non-Employee
Director's deferral election.
3.3 Deferral Elections. An election under either Section 3.1 or 3.2 to have
Retainer or Meeting Fees, as the case may be, paid in Stock Units and deferred
must be made in writing and delivered to the Company prior to the start of the
calendar year in which the Retainer or Meeting Fees would otherwise be paid
(but for the deferral election) and such election will be irrevocable for the
affected calendar year. To participate in the Plan during the calendar year in
which the Plan becomes effective, the Non-Employee Director must make an
election to defer Retainer and/or Meeting Fees for services to be performed
subsequent to the election within 30 days after the Effective Date (as defined
in Section 13.1) and such election will be irrevocable for the remainder of the
affected calendar year. To participate in the Plan during the first calendar
year in which a Non-Employee Director becomes eligible to participate
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in the Plan, the new Non-Employee Director must make an election to defer
Retainer and/or Meeting Fees for services to be performed subsequent to the
election within 30 days after the date he or she becomes eligible and such
election will be irrevocable for the remainder of the affected calendar year.
Each election shall remain in effect until revoked in writing, and any such
revocation shall become effective no earlier than the first day of the first
calendar year commencing after such revocation is received by the Company.
3.4 Crediting Stock Units to Accounts. Amounts deferred by a Non-Employee
Director pursuant to Section 3.3 shall be credited in Stock Units as of the
date that payment would otherwise have been made in cash to a bookkeeping
account maintained by the Company for such Participant ("Account"). The number
of Stock Units credited to an Account with respect to any Non-Employee Director
shall equal the amount deferred divided by the Fair Market Value of one share
of Stock on the date on which such cash amount would have been paid but for the
deferral election pursuant to Section 3.3. For purposes of the Plan, the "Fair
Market Value" of Stock on any business day shall be the average of the high and
low sales prices quoted for such Stock on the New York Stock Exchange Composite
Listing on the day in question, or if there was no quotation on such date, on
the next preceding business day on which there was such a quotation. To the
extent that the application of any formula described in this Section 3.4 does
not result in a whole number of shares of Stock, the result shall be rounded
upwards to the next whole number such that no fractional shares of Stock shall
be issued under the Plan.
3.5 Fully Vested Stock Units. All Stock Units credited to a Participant's
Account pursuant to this Article III shall be at all times fully vested and
nonforfeitable.
3.6 Payment of Stock Units. A deferral election made in accordance with
Section 3.3 shall specify the date (the "Deferred Payment Date") on which the
Participant elects to receive payment for the Stock Units credited to such
Participant's Account pursuant to this Article III. Such Stock Units shall be
paid in an equal number of shares of Stock in a single distribution made on the
Deferred Payment Date specified by the Participant in the applicable deferral
election, provided that the Deferred Payment Date with respect to any election
must be at least two years after the first day of the calendar year during
which the Stock Unit was credited to the Participant's Account.
ARTICLE IV - AWARD OF STOCK UNITS IN LIEU OF BENEFITS UNDER THE H&R BLOCK, INC.
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
4.1 Award of Stock Units. Each Non-Employee Director serving as such as of
June 18, 1997 (the "Retirement Plan Termination Date") may, at his or her
option, have credited to his or her Account as of the Effective Date a number
of Stock Units equal to the quotient obtained by dividing (a) the present value
on the Retirement Plan Termination Date of his or her accrued benefits under
the Retirement Plan, as determined by an independent actuarial consultant
without regard to any service requirements under such Retirement Plan and
utilizing an annual director retainer rate equal to the annual retainer for
Non-Employee Directors in effect on the Retirement Plan Termination Date,
divided by (b) the Fair Market Value of one share of Stock on the Retirement
Plan Termination Date, provided, however that notwithstanding this formula, no
such Non-Employee Director shall be credited with less than 1,000 Stock Units
pursuant to the provisions of this Section 4.1. To the extent that the
application of the formula described in this Section 4.1 results in a number of
Stock Units other than an even 100-lot number of Stock Units, the result shall
be rounded up upwards to the next 100-lot whole number of Stock Units. For
example, if the application of the formula results in an award of 1,055.625
Stock Units, the actual award shall be rounded up to 1,100 Stock Units. A
Non-Employee Director who elects to defer under the H&R Block Deferred
Compensation Plan for Directors, as amended, the present value
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of accrued benefits under the Retirement Plan (determined as of the Retirement
Plan Termination Date) shall not be eligible for an award of Stock Units
under this Section 4.1 of the Plan.
4.2 Fully Vested Stock Units. All Stock Units credited to a Participant's
Account pursuant to this Article IV shall be at all times fully vested and
nonforfeitable.
4.3 Payment of Stock Units. Upon termination of service as a director of the
Company for any reason, the total number of Stock Units credited to the
Participant's Account pursuant to this Article IV shall be paid to the
Participant in equal number of shares of Stock in a single distribution,
provided that no payment pursuant to this Section 4.3 shall be made less than
one year after the Effective Date.
4.4 Award in lieu of Benefits. The Stock Units credited to the Participant's
Account pursuant to this Article IV are so credited in consideration of the
termination of the Retirement Plan and in lieu of any benefits under the
Retirement Plan. The Non-Employee Directors shall not be entitled to any other
benefits under the Retirement Plan.
ARTICLE V - DIVIDEND EQUIVALENT PAYMENTS
5.1 Dividend Equivalent Payments. As of each cash dividend payment date with
respect to Stock, each Participant shall have credited to his or her Account
the number of Stock Units equal to the quotient obtained by dividing (a) the
product of (i) the cash dividend payable with respect to each share of Stock on
such date and (ii) the total number of Stock Units credited to his or her
Account as of the close of business on the record date applicable to such
dividend payment date, by (b) the Fair Market Value of one share of Stock on
such dividend payment date. To the extent that the application of the formula
described in this Section 5.1 does not result in a whole number of Stock Units,
the result shall be rounded upwards to the next whole number.
5.2 Deferral, Vesting and Payment of Stock Units under Article V. Each Stock
Unit determined and credited to the Participant's Account in accordance with
Section 5.1 shall automatically be deferred and shall be fully vested at all
times. Upon termination of service as a director of the Company for any
reason, the total number of Stock Units credited to the Participant's Account
pursuant to this Article V shall be paid to the Participant in equal number of
shares of Stock in a single distribution, provided that no payment pursuant to
this Section 5.2 shall be made less than one year after the Effective Date.
ARTICLE VI - DELIVERY OF STOCK CERTIFICATES
6.1 Stock Unit Payments. The Company shall issue and deliver to the
Participant a stock certificate for payment of Stock Units as soon as
practicable following the date on which Stock Units are payable.
ARTICLE VII - STOCK
7.1 Authorized Stock. The aggregate number of shares of Stock that may be
issued under the Plan shall not exceed three hundred thousand (300,000) shares,
unless such number of shares is adjusted as provided in Article VIII of the
Plan. Such shares of Stock may be authorized but unissued shares, treasury
shares or shares acquired in the open market for the account of the
Participant.
7.2 Fractional Shares. No fractional shares of Stock shall be issued under the
Plan under any circumstances.
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<PAGE> 40
ARTICLE VIII - ADJUSTMENT UPON CHANGES IN CAPITALIZATION
8.1 Adjustment Upon Changes in Capitalization. In the event of a stock
dividend, stock split or combination, reclassification, recapitalization or
other capital adjustment of shares of Stock, the number of shares of Stock that
may be issued pursuant to Stock Units and the number of Stock Units credited to
Accounts shall be appropriately adjusted by the Board of Directors of the
Company, whose determination shall be final, binding on the Company and the
Participants and conclusive.
8.2 No Effect on Rights of Company. The grant of Stock Units pursuant to the
Plan shall not affect in any way the right or power of the Company to issue
additional Stock or other securities, make adjustments, reclassifications,
reorganizations or other changes in its corporate, capital or business
structure, to participate in a merger, consolidation or share exchange or to
transfer its assets or dissolve or liquidate.
ARTICLE IX - TERMINATION OR AMENDMENT OF THE PLAN
9.1 In General. The Plan shall remain in effect until all shares of Stock
authorized for issuance under the Plan have been issued. The Board of
Directors of the Company may at any time terminate, suspend or amend the Plan.
If the Plan shall at any time be terminated pursuant to this Section 9.1, Stock
Units credited to a Participant's Account shall be paid in equal number of
shares of Stock in a single distribution as if the Participant had terminated
his or her service as a director of the Company, provided that no payment
pursuant to this Section 9.1 shall be made less than one year after the
Effective Date.
9.2 Written Consents. No amendment may adversely affect the right of any
Participant to receive any Stock pursuant to an outstanding Stock Unit without
the written consent of such Participant.
ARTICLE X - GOVERNMENT REGULATIONS
10.1 Government Regulations.
(a) The obligations of the Company to issue any Stock pursuant to the
Plan shall be subject to all applicable laws, rules and regulations and
the obtaining of all such approvals by governmental agencies as may be
deemed necessary or appropriate by the Board of Directors of the Company.
(b) The Board of Directors of the Company may make such changes to the
Plan as may be necessary or appropriate to comply with the rules and
regulations of any governmental authority.
ARTICLE XI - ADMINISTRATION
11.1 In General. The Plan shall be administered by the Compensation Committee
of the Board of Directors (the "Committee"), which shall have full power and
authority, subject to the provisions of the Plan, to supervise administration
of the Plan and to interpret the provisions of the Plan and of any award,
issuance or payment of Stock Units hereunder. Any decision by the Committee
shall be final and binding on all parties. No member of the Committee shall be
liable for any determination made, or any decision or action taken with respect
to the Plan or any award, issuance or payment of Stock Units under the Plan.
The Committee may delegate any of its responsibilities to one or more agents,
including employees of the Company or one or more of its affiliates and
subsidiaries, and may retain advisors to provide advice to the Committee. No
Participant shall participate in the making of any
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<PAGE> 41
decision with respect to any question relating to any Stock Unit issued under
the Plan exclusively to that Participant.
11.2 Rules and Interpretation. The Committee shall be vested with full
authority to make such rules and regulations as it deems necessary to
administer the Plan and to interpret and administer the provisions of the Plan
in a uniform manner. Any determination, decision or action of the Committee in
connection with the construction, interpretation, administration or application
of the Plan shall be final, conclusive and binding on all parties.
11.3 Expenses. The cost of issuing and paying Stock Units pursuant to the Plan
and the expenses of administering the Plan shall be borne by the Company.
ARTICLE XII - MISCELLANEOUS
12.1 Unfunded Plan. The Plan shall be unfunded with respect to the Company's
obligation to pay any Stock Units and a Participant's rights to receive any
payment of any Stock Unit shall not be greater than the rights of an unsecured
general creditor of the Company.
12.2 Assignment; Non-Alienation. Stock Units, the right to receive Stock Units
under the Plan and the right to receive payment with respect to a Stock Unit
under the Plan are not assignable or transferable and shall not be subject in
any manner to alienation, sale or any encumbrances, liens, levies, attachments,
pledges or charges of the Participant or his or her creditors. Any attempt to
assign, transfer or hypothecate any Stock Unit, any right to receive Stock
Units or the right to receive payment with respect to a Stock Unit shall be
void and of no force and effect.
12.3 Death Benefit; Designation of Beneficiaries. Upon the death of a
Participant, the Stock Units remaining in his or her Account as of the date of
death shall be paid to the beneficiary or beneficiaries of the Participant, or
to his or her estate, as described in this Section 12.3, in equal number of
shares of Stock in a single distribution. A Participant may designate a
beneficiary or beneficiaries to receive any payments under the Plan upon his or
her death. A beneficiary designation shall be in writing on a form acceptable
to the Company and shall be effective only upon delivery to the Company. 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 written
beneficiary designation. The written beneficiary designation last delivered to
the Secretary of the Company prior to the death of the Participant shall
control. If no beneficiary has been designated, amounts due hereunder shall be
paid to the Participant's estate.
12.4 Release. Any payment of Stock Units to or for the benefit of a
Participant or his or her beneficiaries that is made in good faith by the
Company in accordance with the Company's good faith interpretation of its
obligations hereunder shall be in full satisfaction of all claims against the
Company for benefits under the Plan to the extent of such payment.
12.5 No Guarantee of Directorship. Neither the adoption and maintenance of the
Plan nor any election made hereunder by a Participant shall be deemed to be a
contract between the Company and the Participant to retain his or her position
as a director of the Company.
12.6 Applicable Law. The validity, interpretation and administration of the
Plan and any rules, regulations, determinations or decisions hereunder, and the
rights of any and all persons having or claiming to have any interest herein or
hereunder, shall be determined exclusively in accordance with
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<PAGE> 42
the laws of the State of Missouri (without regard to the choice of laws
provisions thereof), except to the extent such laws are preempted by the
laws of the United States of America.
12.7 Notices. All notices, elections or other communications made or given
pursuant to the Plan shall be in writing and shall be sufficiently made or
given if hand-delivered or mailed by certified mail, addressed (if from the
Company to the Participant) to any Participant at the address contained in the
records of the Company for such Participant, or addressed (if from the
Participant to the Company) to the Secretary of the Company at its principal
office.
12.8 Headings. The headings in the Plan are for reference purposes only and
shall not affect the meaning or interpretation of the Plan.
ARTICLE XIII - EFFECTIVE DATE OF THE PLAN
13.1 Effective Date. The Plan shall be effective immediately upon the date of
its approval by the shareholders of the Company (the "Effective Date").
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<PAGE> 43
H&R BLOCK, INC.
July 30, 1997
Dear Shareholder:
The annual meeting of shareholders of H&R Block, Inc. will be
held at the Nelson-Atkins Museum of Art, 4525 Oak Street, Kansas
City, Missouri, at 9:00 a.m., Kansas City time, on Wednesday,
September 10, 1997.
It is important that your shares are represented at this
meeting. Whether or not you plan to attend the meeting in person,
please review the enclosed proxy materials, complete the proxy
form attached below, and return it promptly in the envelope
provided.
PLEASE DETACH PROXY HERE, SIGN AND MAIL
- --------------------------------------------------------------------------------
The undersigned hereby appoints Henry W. Bloch, Marvin L. Rich and Frank L.
Salizzoni, and each of them, the proxies (acting by a majority or, if only one
be present, then that one shall have all of the powers hereunder), each with
full power of substitution, for and in the name of the undersigned to represent
and to vote all shares of stock of H&R BLOCK, INC., a Missouri corporation, of
the undersigned at the annual meeting of shareholders of said corporation to be
held at the Nelson-Atkins Museum of Art, 4525 Oak Street, Kansas City,
Missouri, on September 10, 1997, commencing at 9:00 a.m., Kansas City time, and
at any adjournment thereof, notice of said meeting and the proxy statement
furnished therewith having been received by the undersigned; and, without
limiting the authority hereinabove given, said proxies or proxy are expressly
authorized to vote in accordance with the undersigned's direction as to those
matters set forth on the reverse side hereof and in accordance with their best
judgment in connection with the transaction of such other business, if any, as
may properly come before the meeting.
Dated , 1997
--------------------
-----------------------------
-----------------------------
(Please date and sign exactly
as name appears at the left
and return in the enclosed
postage paid envelope. If
shares are owned in joint
names, all joint owners should
sign.)
<PAGE> 44
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING, WHETHER OR
NOT YOU ATTEND THE MEETING IN PERSON. TO MAKE SURE THAT YOUR SHARES ARE
REPRESENTED, WE URGE YOU TO COMPLETE, DETACH AND MAIL THE PROXY FORM BELOW AS
SOON AS POSSIBLE.
PLEASE DETACH PROXY HERE, SIGN AND MAIL
- --------------------------------------------------------------------------------
H&R BLOCK, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED
AS SPECIFIED BELOW. IF NO SUCH SPECIFICATION IS MADE, IT WILL BE VOTED FOR
EACH OF THE PROPOSALS.
1. ELECTION OF CLASS II DIRECTORS.
[] FOR all nominees listed below (except
as marked to the contrary below)
[] WITHHOLD AUTHORITY to vote for all nominees listed below
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S),
CLEARLY CROSS OUT HIS (THEIR) NAME(S) BELOW.
NOMINEES ARE: G. KENNETH BAUM, HENRY F. FRIGON AND ROGER W. HALE.
2. APPROVAL OF AN AMENDMENT TO THE 1993 LONG-TERM EXECUTIVE COMPENSATION PLAN
IN ORDER TO PROVIDE FOR THE MAXIMUM NUMBER OF SHARES WITH RESPECT TO
WHICH AWARDS MAY BE GRANTED TO ANY ONE INDIVIDUAL IN ANY CALENDAR YEAR.
[] FOR [] AGAINST [] ABSTAIN
3. ADOPTION OF THE H&R BLOCK, INC. STOCK PLAN FOR NON-EMPLOYEE DIRECTORS.
[] FOR [] AGAINST [] ABSTAIN
4. RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE YEAR ENDING APRIL 30, 1998.
[] FOR [] AGAINST [] ABSTAIN
BE SURE TO SIGN AND DATE THE REVERSE SIDE OF THIS FORM
