BLOCK FINANCIAL CORPORATION
OFFICERS' CERTIFICATE
The undersigned, Becky Shulman, the Vice President and Treasurer of
Block Financial Corporation, a Delaware corporation (the "Corporation"), and
Bret G. Wilson, Secretary of the Corporation, do hereby establish the terms of
certain debt securities of the Corporation under the Indenture, dated
October 20, 1997 (the "Indenture"), among the Corporation, H&R Block, Inc.
("HRB") and Deutsche Bank Trust Company Americas (f/k/a Bankers Trust Company)
(the "First Trustee"), as supplemented by that certain First Supplemental
Indenture, dated as of April 18, 2000, among the Corporation, HRB, the First
Trustee and The Bank of New York, as separate trustee under the Indenture in
respect of BFC's 8.50% Notes due 2007 (the "Second Trustee), as follows:
(i) The title of the securities shall be "5.125% Notes due 2014" (the
"Notes");
(ii) Deutsche Bank Trust Company Americas shall be the Trustee,
Authenticating Agent, Paying Agent, Transfer Agent and Registrar
for the Notes;
(iii) The aggregate principal amount of the Notes which may be initially
authenticated and delivered under the Indenture shall be initially
limited to a maximum of $400,000,000, subject to the right of the
Corporation to issue additional principal amount of the Notes from time
to time;
(iv) The Notes shall mature on October 30, 2014; the holders of the Notes
shall not have the right to demand repayment of the Notes prior to
maturity; and the Notes shall not be subject to any sinking fund
requirement;
(v) The Notes shall bear interest at the rate of 5.125% per annum, which
interest shall accrue from October 26, 2004, or from the most recent
Interest Payment Date (as defined in the Indenture) to which interest
has been paid or duly provided for, which dates shall be April 30 and
October 30 of each year, and such interest shall be payable
semi-annually on April 30 and October 30, commencing on April 30, 2005,
to holders of record at the close of business on the April 15 or
October 15, respectively, next preceding each such Interest Payment
Date;
(vi) Deutsche Bank Trust Company Americas is appointed to be trustee for the
Notes, and Deutsche Bank Trust Company Americas or any other banking
institution hereafter selected by the officers of the Corporation, are
appointed agents of the Corporation (a) where the Notes may be presented
for registration of transfer or exchange, (b) where notices and demands
to or upon the Corporation in respect of the Notes or the Indenture may
be made or served and (c) where the Notes may be presented for payment
of principal and interest;
(vii) The Notes are approved in the form attached hereto as Exhibit A
and shall be issued upon original issuance in whole in the form of
book-entry Global Securities (as defined in the Indenture), and the
Depository (as defined in the Indenture) shall be the
Depository Trust Company, New York, New York. Such Global
Securities shall bear the legends set forth
in the form of Note attached as Exhibit A hereto;
(viii) In addition to the circumstances specified in Section 2.15(c)(i) and
(ii) of the Indenture, the Global Security may be exchanged for
individual Notes in definitive registered form if an Event of
Default has occurred and is continuing.
(ix) The Corporation may redeem the Notes at any time prior to maturity in
whole, or in part, at a redemption price equal to the greater of:
(i) 100% of the principal amount of the Notes to be redeemed,
plus accrued interest to the redemption date, or
(ii) as determined by the Independent Investment Banker, the sum
of the present values of the remaining principal amount and
scheduled payments of interest on the Notes to be redeemed
(not including any portion of payments of interest accrued
as of the redemption date) discounted to the redemption date
on a semi-annual basis at the Treasury Rate plus 20 basis
points plus accrued interest to the redemption date.
The redemption price shall be calculated assuming a 360-day
year consisting of twelve 30-day months.
"Treasury Rate" means, with respect to any redemption date,
the rate per year equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, calculated on the
third business day preceding the redemption date, assuming a
price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable
Treasury Price for that redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by the Independent Investment Banker as having
an actual or interpolated maturity comparable to the remaining
term of the Notes that would be used, at the time of selection
and in accordance with customary financial practice, in pricing
new issues of corporate debt securities of comparable maturity to
the remaining term of the Notes.
"Comparable Treasury Price" means, with respect to any
redemption date:
(i) the average of the Reference Treasury Dealer Quotations for
that redemption date, after excluding the highest and lowest
of the Reference Treasury Dealer Quotations, or
(ii) if the Trustee obtains fewer than three Reference Treasury
Dealer Quotations, the average of all Reference Treasury
Dealer Quotations so received.
"Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by the trustee after consultation with
the Corporation.
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"Reference Treasury Dealer" means (a) each of J.P. Morgan
Securities Inc. and Merrill Lynch Government Securities Inc. and
their respective successors, unless either of them ceases to be a
primary U.S. government securities dealer in New York City (a
"Primary Treasury Dealer"), in which case the Corporation shall
substitute another Primary Treasury Dealer, and (b) any other
Primary Treasury Dealer selected by the Corporation.
"Reference Treasury Dealer Quotations" means, with respect
to each Reference Treasury Dealer and any redemption date, the
average, as determined by the trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case
as a percentage of its principal amount) quoted in writing to the
trustee by that Reference Treasury Dealer at 3:30 p.m., New York
City time, on the third Business Day preceding that redemption
date.
Notice of any redemption shall be given at least 30 days but
not more than 60 days before the redemption date to each holder
of the Notes to be redeemed. Notices of redemption may not be
conditional. Unless there exists a default in payment of the
redemption price, on and after the redemption date, interest
shall cease to accrue on the Notes or portions of the Notes
called for redemption.
If less than all of the Notes are to be redeemed at any
time, the Trustee shall select Notes for redemption on a pro rata
basis, by lot or by such method as the Trustee deems fair and
appropriate.
(x) The Notes shall be general unsecured obligations of the Corporation
and shall rank equal in right of payment, on a pari passu basis,
with all of its other existing and future unsecured and
unsubordinated senior indebtedness. The Notes shall be fully and
unconditionally guaranteed on a senior unsecured basis by the Guarantor.
The guarantee shall rank equal in right of payment, on a pari passu
basis, with all of the Guarantor's existing and future unsecured and
unsubordinated senior indebtedness and guarantees;
(xi) The definition of "Permitted Lien" in the Indenture with respect to the
Notes shall be replaced with the following:
"Permitted Liens" means, with respect to any Person,
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(a) Pledges or deposits by such Person under worker's
compensation laws, unemployment insurance laws, social
security laws or similar legislation, or good faith deposits
in connection with bids, tenders, contracts (other than for
the payment of Indebtedness) or leases to which such Person
is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or bonds to
secure performance, surety or appeal bonds to which such
Person is a party or which are otherwise required of such
Person, or deposits as security for contested taxes or
import duties or for the payment of rent or other
obligations of like nature, in each case Incurred in the
ordinary course of business;
(b) Liens imposed by law, such as carriers', warehousemen's,
laborers', materialmen's, landlords', vendors', workmen's,
operators', factors and mechanics liens, in each case for
sums not yet due or being contested in good faith by
appropriate proceedings;
(c) Liens for taxes, assessments and other governmental charges
or levies not yet delinquent or which are being contested in
good faith by appropriate proceedings;
(d) Survey exceptions, encumbrances, easements or reservations
of or with respect to, or rights of others for or with
respect to, licenses, rights-of-way, sewers, electric and
other utility lines and usages, telegraph and telephone
lines, pipelines, surface use, operation of equipment,
permits, servitudes and other similar matters, or zoning or
other restrictions as to the use of real property or Liens
incidental to the conduct of the business of such Person or
to the ownership of its properties which were not incurred
in connection with Indebtedness and which do not in the
aggregate materially adversely affect the value of said
properties or materially impair their use in the operation
of the business of such Person;
(e) Liens existing on or provided for under the terms of
agreements existing on the Issue Date (including, without
limitation, under the Credit Agreement);
(f) Liens on property at the time the Company or any of its
Subsidiaries acquired the property or the entity owning such
property, including any acquisition by means of a merger or
consolidation with or into the Company; provided, however,
that any such Lien may not extend to any other property
owned by the Company or any of its Subsidiaries;
(g) Liens on any Principal Property, or any shares of stock or
Indebtedness of any Subsidiary, acquired (including by way
of merger or consolidation) after the date of the Indenture
by the Company or any Subsidiary which are created
contemporaneously with such acquisition, or within 24 months
thereafter, to secure or provide for the payment or
financing of any part of the purchase price thereof;
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(h) Liens arising from, or in connection with, any
securitization, sale or other transfer, or any financing,
involving loans, servicing assets, securities, receivables
or other financial assets (or, in each case, portions of, or
participations in, thereof) and/or, in each case, related
rights and interests;
(i) Liens securing a Hedging Obligation so long as such Hedging
Obligation is of the type customarily entered into for the
purpose of limiting risk;
(j) Purchase Money Liens;
(k) Liens securing only Indebtedness of a Subsidiary of the
Company to the Company or one or more wholly owned
Subsidiaries of the Company;
(l) Liens on any property to secure Indebtedness incurred in
connection with the construction, installation or financing
of pollution control or abatement facilities or other forms
of industrial revenue bond financing or Indebtedness issued
or Guaranteed by the United States, any state or any
department, agency or instrumentality thereof;
(m) Government Contract Liens;
(n) Liens securing Indebtedness of joint ventures in which the
Company or a Subsidiary has an interest to the extent such
Liens are on property or assets of, such joint ventures;
(o) Liens arising in connection with payables to brokers and
dealers in the ordinary course of business;
(p) Liens arising in connection with deposits and other
liabilities incurred by banking and/or other financial
services activities in the ordinary course of business;
(q) Banker's Liens, rights of setoff and other similar Liens
existing solely with respect to bank accounts maintained by
the Company and its Subsidiaries, in each case granted in
the ordinary course of business in favor of the bank or
banks with which such accounts are maintained; provided
that, unless the Liens are non-consensual and arise by
operation of law, the Liens shall not secure (either
directly or indirectly) the repayment of any Indebtedness;
(r) Liens resulting from the deposit of funds or evidences of
Indebtedness in trust for the purpose of defeasing Indebtedness
of the Company or any of its Subsidiaries;
(s) legal or equitable encumbrances deemed to exist by reason of
negative pledges or the existence of any litigation or other
legal proceeding and any related lis pendens filing
(excluding any attachment prior to judgment lien or
attachment lien in aid of execution on a judgment);
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(t) any attachment Lien being contested in good faith and
by proceedings promptly initiated and diligently
conducted, unless the attachment giving rise thereto
shall not, within sixty days after the entry thereof,
have been discharged or fully bonded or shall not have
been discharged within sixty days after the termination
of any such bond;
(u) any judgment Lien, unless the judgment it secures shall
not, within sixty days after the entry thereof, have
been discharged or execution thereof stayed pending
appeal, or shall not have been discharged within sixty
days after the expiration of any such stay;
(v) Liens to banks arising from the issuance of letters of
credit issued by such banks;
(w) Rights of a common owner of any interest in property
held by such Person;
(x) Any defects, irregularities or deficiencies in title to
easements, rights-of-way or other properties which do
not in the aggregate materially adversely affect the
value of such properties or materially impair their use
in the operation of the business of such Person; and
(y) Liens to secure any refinancing, refunding, extension,
renewal or replacement (or successive refinancings,
refundings, extensions, renewals or replacements), as a
whole, or in part, of any indebtedness secured by any
Lien referred to in the foregoing clauses (e) through
(n); provided, however, that (i) such new Lien shall be
limited to all or part of the same property that
secured the original Lien (plus improvements on such
property) and (ii) the Indebtedness secured by such
Lien at such time is not increased to any amount
greater than the sum of (A) the outstanding principal
amount or, if greater, committed amount of the
indebtedness described under clauses (e) through (j) at
the time the original Lien became a Permitted Lien
under this Indenture and (B) an amount necessary to pay
any fees and expenses, including premiums, related to
such refinancing, refunding, extension, renewal or
replacement.
(xii) Section 4.08 of the Indenture shall not be applicable to the Notes;
(xiii) Section 4.10 of the Indenture with respect to the Notes shall be
replaced with the following:
Limitation on Liens. Unless the Company contemporaneously
secures the Notes equally and ratably with (or prior to)
such obligation, the Company shall not, and shall not permit
any of its Subsidiaries to create or permit to exist any
Lien on any Principal Property, or any shares of stock or
Indebtedness of any Restricted Subsidiary whether owned on
the Issue Date or thereafter acquired, securing any
obligation except for:
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(i) Permitted Liens; or
(ii) Liens securing Indebtedness if, after giving pro forma
effect to the Incurrence of such indebtedness (and the
receipt and application of the proceeds thereof) or the
securing of outstanding Indebtedness, all Indebtedness of
the Company and its Subsidiaries secured by Liens on any
Principal Property (other than Permitted Liens), at the time
of determination does not exceed the greater of $250,000,000
or 15% of the total consolidated stockholders' equity of the
Company as shown on the audited consolidated balance sheet
contained in the latest annual report to stockholders of the
Company.
(xiv) The only Events of Default with respect to the Notes shall be those
listed in clauses (a) through (h) of Section 6.01;
(xv) Section 10.01 of the Indenture with respect to the Notes shall be
replaced with the following;
Consolidations and Mergers of the Company. Neither BFC nor
the Company shall consolidate with or merge with or into any
Person, or convey, transfer or lease all or substantially all the
assets of the Company on a consolidated basis, unless:
(i) either (a) the Company shall be the continuing Person in the
case of a merger or (b) the resulting, surviving or
transferee Person if other than the Company (the "Successor
Company") shall be a corporation organized and existing
under the laws of the United States, any State thereof or
the District of Columbia and the Successor Company shall
expressly assume, by an Indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory
to the Trustee, all the obligations of BFC and the Company
under the Notes according to their tenor, and this
Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the
Successor Company or any Subsidiary of the Company as a
result of such transaction as having been Incurred by the
Successor Company or such Subsidiary at the time of such
transaction), no Default or Event of Default would occur or
be continuing; and
(iii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental
Indenture (if any) comply with this Indenture.
(xvi) The Notes shall be subject to Article XI of the Indenture
(xvii) The initial public offering price of the Notes is 99.412% of
the principal amount thereof,
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plus accrued interest, if any, from October 26, 2004;
(xviii) The price to be received by the Corporation from the Underwriters for
the Notes shall be 98.762% of the principal amount thereof;
(xix) In case of any conflict between this Certificate and the Notes in the
form referred to in paragraph (vii), the Notes shall control.
[signature page follows]
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IN WITNESS WHEREOF, I have signed my name as of this 26th day of
October, 2004.
By: /s/ Becky Shulman
------------------------
Name: Becky Shulman
Title: Vice President and Treasurer
By: /s/ Bret G. Wilson
------------------------
Name: Bret G. Wilson
Title: Secretary
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