Exhibit 10.1
Execution Version
EMPLOYMENT AGREEMENT
     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of July 19,
2008, by and between H&R Block Management, LLC, a Delaware limited liability
company (the “Company”), and Russell P. Smyth (“Executive”).
     WHEREAS, Executive is willing to serve the Company, and the Company is
willing to employ Executive, on the terms and conditions set forth below.
     NOW, THEREFORE, in consideration of the mutual promises contained herein
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, it is hereby agreed as follows:
ARTICLE ONE
EMPLOYMENT
     1.01 Agreement as to Employment; Title; Employment Period. The Company
hereby agrees to employ Executive to serve in the capacity of President and
Chief Executive Officer of H&R Block, Inc., a Missouri corporation (“Block”) and
the indirect parent corporation of the Company, and Executive hereby accepts
such employment by the Company, subject to the terms of this Agreement, for the
period commencing on August 1, 2008 (the “Employment Commencement Date”) and
ending on July 31, 2011 (the “Employment Period”). After the expiration of the
Employment Period, and provided that this Agreement is not extended or
superseded by the mutual written consent of the parties, the provisions of
Section 1.07 (relating to stock ownership requirements) and Articles Two through
Five of this Agreement shall survive the expiration of the Employment Period and
continue to be in effect to the extent applicable.
     1.02 Duties; Board Membership; Performance and Other Activities.
     (a) Duties. During the Employment Period, Executive will have the duties,
authorities and responsibilities commensurate with the duties, authorities and
responsibilities of chief executive officers in similarly sized companies, and
such other duties, authorities and responsibilities as the Board of Directors of
Block (the “Block Board”) designates from time to time that are not inconsistent
with Executive’s position. Executive will report directly to the Block Board.
     (b) Board Membership. The Block Board shall take such action as may be
necessary to appoint or elect Executive as a member of the Block Board as of the
Employment Commencement Date. Thereafter, during the Employment Period, the
Block Board shall nominate Executive for re-election as a member of the Block
Board at the expiration of the then current term, provided that the foregoing
shall not be required to the extent prohibited by legal or regulatory
requirements. At no time while Executive is employed by the Company shall
Executive serve as Chairman of the Block Board.
     (c) Performance and Other Activities. So long as Executive is employed
under this Agreement, Executive agrees to devote Executive’s full business time
and efforts exclusively on behalf of the Company and to competently and
diligently discharge Executive’s duties

 

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hereunder, provided that the foregoing shall not prevent Executive from
(i) serving on the boards of directors of non-profit organizations and, with the
prior written approval of the Block Board, one for profit public company,
(ii) participating in charitable, civic, educational, professional, community or
industry affairs, although any speaking engagements must be on behalf of Block
and Executive may not receive any remuneration for such speaking engagements and
(iii) managing his and his family’s passive personal investments, so long as
such activities in the aggregate do not interfere or conflict with Executive’s
full-time employment hereunder and do not violate the other provisions of this
Agreement or the H&R Block, Inc. Code of Business Ethics & Conduct, which
Executive acknowledges having read and understood. Executive will comply fully
with all reasonable policies of the Company as are from time to time in effect
and applicable to Executive’s position. Notwithstanding anything to the contrary
in this Section 1.02(c), service on the two non-public, for profit boards of
directors disclosed by Executive to the Company on which he is serving as of the
date of this Agreement are hereby approved, except that it is agreed that
Executive will use his best efforts to resign from one of those boards of
directors by the first anniversary of the Employment Commencement Date.
     1.03 Compensation.
     (a) Base Salary. During the Employment Period, the Company will pay to
Executive a gross salary at an annual rate of $950,000 (“Base Salary”), payable
semimonthly or at any other pay periods as the Company may use for its other
executive-level employees. The Base Salary will be reviewed for potential
increase, no less often than annually during the Employment Period, and may only
be decreased as part of an across-the-board salary reduction that applies in the
same manner to all executive-level employees. The Base Salary, as it may be
adjusted from time to time, shall constitute the “Base Salary” for purposes of
this Agreement.
     (b) Short-Term Incentive Compensation. Executive shall participate in
Block’s short-term incentive program (which for certain highly compensated
executives may include the H&R Block, Inc. Executive Performance Plan) (the
“Program”) as applicable to executives of the Company for its fiscal year 2009
(which ends April 30, 2009) and fiscal years thereafter. Under such Program,
Executive shall have an aggregate target incentive award equal to 110% of Base
Salary and an opportunity to earn a bonus at a maximum of 220% of Base Salary
(prorated as described below). Notwithstanding the foregoing, under the Program
for fiscal year 2009, Executive shall receive a minimum guaranteed short-term
incentive compensation award equal to at least 110% of Base Salary, prorated
based upon Executive’s actual Base Salary paid for the fiscal year (the “Minimum
Guarantee”). Other than the payment of the Minimum Guarantee, the payment of any
award under the Program shall be based upon the achievement of one or more
pre-established performance goals which shall be determined by the Compensation
Committee of the Block Board, provided that Executive must remain employed
through the end of the applicable fiscal year to receive any payments under the
Program. Such incentive compensation, including the Minimum Guarantee, shall be
paid to Executive following the completion of the fiscal year when the
short-term incentive compensation is paid to other executive-level employees of
the Company, which in any event shall be no later than two and one-half months
after the end of the fiscal year to which it relates (or as soon thereafter as
it can be properly determined).

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     (c) Initial Stock Option Grant. The Compensation Committee of the Block
Board shall grant Executive a nonqualified stock option (the “Option”) to
purchase 900,000 shares of Block’s common stock, without par value (the “Block
Common Stock”) on or as soon as practicable, but in no event later than 30 days,
following the Employment Commencement Date. The Option shall be granted pursuant
to, and shall be subject to, the terms and conditions of Block’s 2003 Long-Term
Executive Compensation Plan, as amended (the “2003 Plan”), and the Company’s
standard stock option agreement, with the following terms:
          (i) Exercise Price. The Option shall be exercisable at the following
prices:

           # of Shares Subject to Option       Exercise Price
500,000
  The closing price for Block Common Stock on the New York Stock
Exchange on the date of grant (the “FMV”)
 
   
100,000
  FMV plus $3 (but in no event less than $25)
 
   
100,000
  FMV plus $6 (but in no event less than $28)
 
   
100,000
  FMV plus $9 (but in no event less than $31)
 
   
100,000
  FMV plus $12 (but in no event less than $34)

          (ii) Vesting Schedule. Subject to accelerated vesting as set forth in
this Agreement, the Option will vest and become exercisable as to one-third of
the shares subject to each exercise price on each anniversary of the grant date
(rounded down to the nearest whole number of shares for each vesting date,
except that the amount vesting on the final vesting date shall be such that 100%
of the aggregate number of shares of Block Common Stock subject to the Option
shall be cumulatively vested as of the final vesting date), provided that
Executive remains continuously employed by the Company through each vesting
date.
          (iii) Option Term. The Option is for a term of 10 years from the date
of grant, subject to earlier termination as provided in the 2003 Plan and the
underlying stock option agreement and in this Agreement.
     (d) Ongoing Equity Grants. In addition to the Option contemplated under
this Section 1.03, when annual equity awards are granted to executives of Block
generally, Executive shall be awarded additional grants of compensatory equity
awards at a level commensurate with his position and performance, as determined
by the Compensation Committee of the Block Board.
     1.04 Relocation.
     (a) Relocation Benefits. Executive shall promptly relocate to the vicinity
of Block’s principal U.S. headquarters. In accordance with Block’s Executive
Relocation Program, the Company shall provide Executive with a relocation
package commensurate with his position and will pay or reimburse Executive for
the reasonable moving and relocation expenses and costs actually incurred by
Executive in relocating to the Greater Kansas City Area, subject to the
limitations and procedures set forth in Block’s Executive Relocation Program.
During the period prior to his relocation (but in no event for more than three
months following the Employment

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Commencement Date), the Company shall provide suitable temporary housing for
Executive’s use when he is at Block’s principal U.S. headquarters. In addition,
the Company shall reimburse Executive for the reasonable cost of two house
hunting trips (to the extent not otherwise covered by Block’s Executive
Relocation Program) for Executive and his family not to exceed $10,000 in the
aggregate. All amounts payable under this Section 1.04(a) shall be subject to
Executive’s presentment to the Company of appropriate documentation. To the
extent that Executive incurs taxable income related to any relocation benefits
paid or provided pursuant to this Section 1.04(a) of this Agreement, the Company
will pay to Executive such additional amount as is necessary to “gross up” such
benefits and cover the anticipated income tax liability resulting from such
taxable income.
     (b) Cash Relocation Payment. The Company shall pay Executive a lump-sum
cash relocation payment of $200,000 on the Employment Commencement Date to cover
expenses not otherwise covered by Block’s Executive Relocation Program.
     1.05 Business Expenses. Upon presentment to the Company of appropriate
documentation, the Company will promptly pay directly, or reimburse Executive
for, all business expenses, to the extent such expenses are paid or incurred by
Executive during the Employment Period in accordance with the Company’s policy
in effect from time to time and to the extent such expenses are reasonable and
necessary to the conduct by Executive of the Company’s business. Upon
presentation to the Company of appropriate documentation, the Company shall also
pay directly, or reimburse Executive for, the reasonable legal fees actually
incurred in connection with the negotiation and documentation of this Agreement,
up to a maximum of $30,000.
     1.06 Employee Benefits. During the Employment Period, and subject to the
discretionary authority given to the applicable benefit plan administrators, the
Company will make available to Executive insurance, sick leave, deferred
compensation, vacation and other like benefits no less favorable than as
approved and provided from time to time to the other executive-level employees
of the Company. Coverage and eligibility for any such benefits are subject to
the terms of the various plans as they may be amended from time to time pursuant
to their respective terms. Executive will not have access to the company
aircraft for personal use.
     1.07 Stock Ownership Requirements. While employed by the Company, Executive
shall not sell shares of Block Common Stock until Executive is holding shares of
Block Common Stock (determined in accordance with the forms of ownership
recognized under Block’s stock ownership guidelines for executive-level
employees of the Company as in effect from time to time) with a value equal to
at least five times Executive’s Base Salary (although there is no specific
timetable for reaching such share retention threshold). In addition, after
Executive has accumulated the required amount of shares of Block Common Stock,
while employed by the Company, Executive must also hold 100% of the shares of
Block Common Stock subsequently acquired (net of taxes and, if applicable,
exercise price) pursuant to any compensatory equity award for a minimum of one
year from the date of acquisition (whether through exercise of stock options or
vesting of any other stock-based award, as applicable).

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ARTICLE TWO
TERMINATION OF EMPLOYMENT
     2.01 Termination of Employment.
     (a) No Reason Required. The Company or Executive may terminate Executive’s
employment and the Employment Period at any time for any reason, or for no
reason, subject to compliance with Section 2.01 (c).
     (b) Related Definitions.
     (i) “Cause” means any of the following unless, if capable of cure, such
events are fully corrected in all material respects by Executive within 10 days
after the Company gives a Termination Notice:
     (A) Executive’s misconduct that materially interferes with or materially
prejudices the proper conduct of the business of Block, the Company and/or any
direct or indirect subsidiary of Block (each such other subsidiary an
“Affiliate”) or which may reasonably result in harm to the reputation of Block,
the Company and/or any Affiliate; or
     (B) Executive’s commission of an act materially and demonstrably
detrimental to the good will of Block, the Company and/or any Affiliate, which
act constitutes gross negligence or willful misconduct by Executive in the
performance of Executive’s material duties to Block, the Company and/or such
Affiliate; or
     (C) Executive’s commission of any act of dishonesty or breach of trust
resulting or intending to result in material personal gain or enrichment of
Executive at the expense of Block, the Company and/or any Affiliate; or
     (D) Executive’s violation of Article Three or Section 4.02, 4.03, 4.05 or
4.06 of this Agreement; or
     (E) Executive’s conviction of, or plea of nolo contendere to, a misdemeanor
involving an act of moral turpitude or a felony.
     If the Company does not give Executive a Termination Notice (as described
in Section 2.01(c)) within 60 days after the Block Board or the Chairman of the
Block Board has knowledge that an event constituting Cause has occurred, the
event will no longer constitute Cause. The Company may place Executive on unpaid
leave for up to 30 consecutive days while it is determining whether there is a
basis to terminate Executive’s employment for Cause. This leave will not
constitute Good Reason.
     For purposes of this definition, (1) no act or omission by Executive will
be “willful” unless it is made by Executive in bad faith or without a reasonable
belief that Executive’s act or omission furthered the interests of the Company,
Block and/or the Affiliates and (b) any act or

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omission by Executive based on authority given pursuant to a resolution duly
adopted by the Block Board will be deemed made in good faith and in the best
interests of the Company, Block and/or the Affiliates.
     (ii) “Change in Control” means:
     (A) the acquisition, other than from Block, by any individual, entity or
group (within the meaning of Section 13(d) (3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or
more of the then outstanding voting securities of Block entitled to vote
generally in the election of directors, but excluding, for this purpose, (i) any
such acquisition by Block or any of its subsidiaries, or any employee benefit
plan (or related trust) of Block or its subsidiaries, (ii) any corporation with
respect to which, following such acquisition, more than 50% of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the shareholders who were the beneficial owners of
the voting securities of Block immediately prior to such acquisition in
substantially the same proportion as their ownership, immediately prior to such
acquisition, of the then outstanding voting securities of Block entitled to vote
generally in the election of directors, (iii) pursuant to any acquisition by
Executive or any group of persons including Executive, or (iv) by any
underwriter temporarily holding securities pursuant to an offering of such
securities; or
     (B) during any 12-month period, individuals who, as of the date hereof,
constitute the Block Board (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Block Board, provided that any individual
or individuals becoming a director subsequent to the date hereof, whose
election, or nomination for election by Block’s shareholders, was approved by a
vote of at least two-thirds of the Block Board (or nominating committee of the
Block Board) will be considered as though such individual were a member or
members of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of Block
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
     (C) the completion of a reorganization, merger or consolidation of Block,
in each case, unless following such reorganization, merger or consolidation, the
shareholders who were the beneficial owners of the voting securities of Block
immediately prior to such reorganization, merger or consolidation continue to
beneficially own, directly or indirectly, more than 50% of the then outstanding
voting securities entitled to vote generally in the election of directors of the
corporation resulting from such reorganization, merger or consolidation in
substantially the same proportion as their ownership, immediately prior to such
reorganization, merger or consolidation, of the voting securities of Block
entitled to vote generally in the election of directors; or

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     (D) a complete liquidation or dissolution of Block or the consummation of a
sale or other disposition of all or substantially all of the assets of Block to
an entity that is not an affiliate of Block.
     (iii) “Disability” means Executive’s absence from Executive’s
responsibilities with the Company on a full-time basis for 130 business days in
any consecutive 12 months as a result of incapacity due to mental or physical
illness or injury. If the Company determines in good faith that Executive’s
Disability has occurred, it may give Executive a Termination Notice. If within
30 days of the Termination Notice Executive does not return to full-time
performance of Executive’s responsibilities, Executive’s employment will
terminate. If Executive does return to full-time performance in that 30-day
period, the Termination Notice will be cancelled for all purposes of this
Agreement. Except as provided in this Section 2.01(b)(iii), Executive’s
incapacity due to mental or physical illness or injury will not affect the
Company’s obligations under this Agreement (including that such illness or
injury will not constitute a basis for Cause).
     (iv) “Good Reason” means any of the following events, without the express
written consent of Executive, unless such events are fully corrected in all
material respects by the Company within 30 days after Executive gives a
Termination Notice:
     (A) A material diminution in Executive’s base compensation;
     (B) A material diminution in Executive’s authority, duties, or
responsibilities as President and Chief Executive Officer of Block, reporting
directly to the Block Board (but, if Block becomes a subsidiary of another
entity, “Block Board” shall be deemed to refer to the board of directors (or
other governing body) of the ultimate parent entity of Block); or
     (C) A material change in the geographic location at which Executive must
perform the services; or
     (D) Any other action or inaction that constitutes a material breach by the
Company of this Agreement.
     If Executive does not give a Termination Notice within 60 days after
Executive has knowledge that an event constituting Good Reason has occurred, the
event will no longer constitute Good Reason.
     (c) Advance Notice Generally Required.
     (i) To terminate Executive’s employment, either Executive or the Company
must provide a Termination Notice to the other. A “Termination Notice” is a
written notice that states the specific provision of this Agreement on which
termination is based, including, if applicable, the specific clause of the
definition of Cause or Good Reason and a reasonably detailed description of the
facts that permit termination under that clause; provided that the failure to
include any fact in a Termination Notice that contributes to a showing of Cause
or Good Reason does not preclude either party from asserting that fact in
enforcing its rights under this Agreement.

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     (ii) Executive and the Company agree to provide the Termination Notice at
least 60 days in advance of any termination, unless (A) Executive’s employment
is terminated by the Company for Cause or because of Executive’s death, in which
case the termination may be effective immediately, or (b) Executive’s employment
is terminated because of Executive’s Disability, in which case the provisions of
Section 2.01(b)(iii) shall apply. If Executive dies or becomes Disabled after
Executive provides a valid Termination Notice with Good Reason or the Company
provides Termination Notice without Cause, Executive’s termination will be
treated as a termination with Good Reason, effective as of the date of
Executive’s death or Disability. If Executive provides a Termination Notice, the
Company may, in its sole discretion, relieve Executive of his duties,
responsibilities and title during the period prior to Executive’s termination
date; provided, however, that during such period Executive shall remain an
employee of the Company with the same compensation and benefit arrangements as
in place immediately prior to Executive’s delivery of the Termination Notice.
     2.02 Obligations of the Company upon Termination.
     (a) Other than For Cause; For Good Reason. If, at any time on or before
July 31, 2014 (the “Protected Period”), the Company shall terminate Executive’s
employment other than for Cause or Disability, or Executive shall terminate
employment for Good Reason, the Company shall have no further obligations to
Executive other than:
     (i) A lump sum cash payment equal to $1.5 million;
     (ii) All outstanding equity awards (other than performance shares) that
would have vested during the 12-month period following the date of termination
(if any) will immediately vest and any vested stock options (whether vested
prior to the date of termination or pursuant to this Section 2.02(a)(ii)) will
remain exercisable for 12 months after the end of Executive’s employment (or, if
earlier, until they would have expired but for Executive’s termination);
     (iii) A pro-rata award of any performance shares outstanding on the date of
termination based on the achievement of the performance goals at the end of the
applicable performance period and paid promptly after the end of the applicable
performance period, which in any event shall be no later than two and one-half
months after the end of the last fiscal year of the performance period to which
it relates (or as soon thereafter as it can be properly determined) (a “Pro-Rata
Performance Share Award”);
     (iv) Subject to Executive’s timely election of continuation coverage under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”)
and Executive’s continued co-payment of premiums at the same level and cost to
Executive as if he were an employee of the Company (excluding, for purposes of
calculating cost, an employee’s ability to pay premiums with pre-tax dollars),
continued participation in the Company’s group health plan for Executive and
Executive’s eligible dependents covered by such plan as of the date of
termination for a period of 12 months, provided that Executive remains eligible
for COBRA continuation coverage and provided, further,

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that if Executive obtains group health benefits through subsequent employment,
such continuation of coverage by the Company under this Section 2.02(a)(iv)
shall immediately cease (the “Continuation Coverage”); and
     (v) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to Executive (A) any unpaid Base Salary through the date
of termination, (B) any accrued but unused vacation in accordance with company
policy, (C) reimbursement for any unreimbursed business expenses incurred
through the date of termination, and (D) any other amounts or benefits required
to be paid or provided or which Executive is eligible to receive under any plan,
program, policy or practice or other contract or agreement of Block, the Company
and/or the Affiliates through the date of termination (such other amounts and
benefits shall be hereinafter referred to as the “Other Benefits”).
     (b) Other than For Cause or For Good Reason Following a Change in Control.
If (x) a Change in Control occurs during the Protected Period and (y) during the
two-year period commencing on the date of a Change in Control (but in no event
beyond the end of the Protected Period), the Company shall terminate Executive’s
employment other than for Cause or Disability, or Executive shall terminate
employment for Good Reason, in lieu of the payments and benefits provided under
Section 2.02(a), the Company shall have no further obligations to Executive
other than:
     (i) A lump sum cash payment equal to two times the sum of Executive’s Base
Salary and target short-term incentive compensation for the year in which the
date of termination occurs;
     (ii) All outstanding equity awards (other than performance shares) will
immediately vest and any vested stock options (whether vested prior to the date
of termination or pursuant to this Section 2.02(b)(ii)) will remain exercisable
for 12 months after the end of Executive’s employment (or, if earlier, until
they would have expired but for Executive’s termination);
     (iii) A Pro-Rata Performance Share Award;
     (iv) Continuation Coverage; and
     (v) Other Benefits.
     (c) Death; Disability; For Cause; Other than for Good Reason. If, during
the Protected Period, Executive’s employment shall terminate on account of death
or Disability or if the Company shall terminate Executive’s employment for Cause
or Executive terminates his employment without Good Reason, the Company shall
have no further obligations to Executive other than to provide Executive (or, in
the event of his death, his estate) the Other Benefits.
     (d) Timing of Benefits. The payments and benefits provided in this
Section 2.02 will be paid or provided at the end of Executive’s employment, and
any cash payments owed Executive under Section 2.02(a)(i) or 2.02(b)(i) will be
paid on the 30th day following the date of termination.

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     2.03 Condition. The Company will not be required to make the payments and
provide the benefits stated in Section 2.02 (other than the Other Benefits)
unless Executive executes and delivers to the Company (and does not revoke) a
general release of claims in favor of Block, the Company and the Affiliates and
their respective past or present officers, directors, employees or agents. This
agreement will be in such form as reasonably requested by the Company.
     2.04 Resignations. Upon any termination of Executive’s employment with the
Company for any reason, Executive agrees to promptly resign as a director of
Block and from any other offices, directorships, trusteeships, committee
memberships and fiduciary capacities held with, or on behalf of, Block, the
Company and/or any Affiliate. Executive shall promptly execute any further
documentation thereof as requested by the Company and, if Executive is to
receive any payments from the Company (including, without limitation, those set
forth in Section 2.02 above), execution of such further documentation shall be a
condition thereof (other than the Other Benefits).
     2.05 No Duplication of Benefits. Any termination payments made and benefits
provided under this Agreement to Executive shall be in lieu of any termination
or severance payments or benefits for which Executive may be eligible under any
of the plans, policies or programs of Block, the Company and/or any Affiliate or
under the Worker Adjustment Retraining Notification Act of 1988 or any similar
state statute or regulation.
ARTICLE THREE
CONFIDENTIALITY
     3.01 Background and Relationship of Parties. The parties hereto acknowledge
(for all purposes including, without limitation, Articles Three and Four of this
Agreement) that Block, the Company and/or the Affiliates have been and will be
engaged in a continuous program of acquisition and development respecting their
businesses, present and future, and that, in connection with Executive’s
employment by the Company, Executive will be expected to have access to all
information of value to Block, the Company and/or the Affiliates and that
Executive’s employment creates a relationship of confidence and trust between
Executive and Block, the Company and the Affiliates with respect to any
information applicable to the businesses of Block, the Company and/or the
Affiliates. Executive will possess or have unfettered access to information that
has been created, developed, or acquired by Block, the Company and/or the
Affiliates or otherwise become known to Block, the Company and/or the Affiliates
and which has commercial value in the businesses in which Block, the Company
and/or the Affiliates have been and will be engaged and has not been publicly
disclosed by Block, the Company and/or the Affiliates. All information described
above is hereinafter called “Proprietary Information.” By way of illustration,
but not limitation, Proprietary Information includes trade secrets, customer
lists and information, employee lists and information, developments, systems,
designs, software, databases, know-how, marketing plans, product information,
business and financial information and plans, strategies, forecasts, new
products and services, financial statements, budgets, projections, prices, and
acquisition and disposition plans. Proprietary Information does not include any
portions of such information which are now or hereafter made public by third
parties in a lawful manner or made public by parties hereto without violation of
this Agreement.

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     3.02 Proprietary Information is Property of Block.
     (a) All Proprietary Information is the sole property of Block, the Company
and/or the applicable Affiliate and its assigns, and Block, the Company and/or
the applicable Affiliate is the sole owner of all patents, copyrights,
trademarks, names, and other rights in connection therewith and without regard
to whether Block, the Company and/or any Affiliate is at any particular time
developing or marketing the same. Executive hereby assigns to Block, the Company
and/or the Affiliate any rights Executive may have or may acquire in such
Proprietary Information. At all times during and after Executive’s employment
with the Company, Executive will keep in strictest confidence and trust all
Proprietary Information and Executive will not use or disclose any Proprietary
Information without the written consent of Block, except as may be necessary in
the ordinary course of performing duties as an employee of the Company or as may
be required by law or the order of any court or governmental authority (provided
that Executive provides Block, the Company and/or the Affiliate with prior
written notice of the contemplated disclosure and cooperates with Block, the
Company and/or the Affiliate in seeking a protective order or other appropriate
protection of such information).
     (b) In the event of any termination of Executive’s employment hereunder (or
at any time prior thereto at the Company’s request), Executive will promptly
deliver to the Company all copies of all documents, notes, drawings, programs,
software, specifications, documentation, data, Proprietary Information, and
other materials and property of any nature belonging to Block, the Company
and/or any Affiliate and obtained during the course of Executive’s employment
with the Company. In addition, upon such termination, Executive will not remove
from the premises of Block, the Company and/or any Affiliate any of the
foregoing or any reproduction of any of the foregoing or any Proprietary
Information that is embodied in a tangible medium of expression.
ARTICLE FOUR
RESTRICTIVE COVENANTS
     4.01 General. The parties hereto acknowledge that, during the course of
Executive’s employment by the Company, Executive will have access to information
valuable to the Company, Block and the Affiliates concerning the employees of
Block, the Company and the Affiliates (“Block Employees”) and, in addition to
Executive’s access to such information, Executive may, during (and in the course
of) Executive’s employment by the Company, develop relationships with such Block
Employees whereby information valuable to Block, the Company and the Affiliates
concerning Block Employees was acquired by Executive. Such information includes,
without limitation: the identity, skills, and performance levels of Block
Employees, as well as compensation and benefits paid by Block, the Company
and/or the Affiliates to such Block Employees. Executive agrees and understands
that it is important to protect Block, the Company and the Affiliates and their
employees, agents, directors, and clients from the unauthorized use and
appropriation of Block Employee information, Proprietary Information, and trade
secret business information developed, held, or used by Block, the Company
and/or the Affiliates, and to protect Block, the Company and the Affiliates and
their employees, agents, directors, and customers Executive agrees to the
covenants described in this Article Four.

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     4.02 Non-Solicitation of Employees. During the period of Executive’s
employment and for a period of two years after Executive’s date of termination,
Executive may not directly or indirectly recruit, solicit, or hire any Block
Employee or otherwise induce any Block Employee to leave the employment of
Block, the Company or the applicable Affiliate to become an employee of or
otherwise be associated with any other party or with Executive or any company or
business with which Executive is or may become associated. The running of the
two-year period will be suspended during any period of violation and/or any
period of time required to enforce this covenant by litigation or threat of
litigation.
     4.03 Non-Solicitation of Customers. During the period of Executive’s
employment and for two years after Executive’s date of termination, Executive
may not directly or indirectly solicit or enter into any arrangement with any
person or entity which is, at the time of the solicitation, a significant
customer of Block, the Company or an Affiliate for the purpose of engaging in
any business transaction of the nature performed by Block, the Company or such
Affiliate, or contemplated to be performed by Block, the Company or such
Affiliate, for such customer, provided that this Section 4.03 will only apply to
customers for whom Executive personally provided services while employed by the
Company or customers about whom or which Executive acquired material information
while employed by the Company. The running of the two-year period will be
suspended during any period of violation and/or any period of time required to
enforce this covenant by litigation or threat of litigation.
     4.04 No Conflicts. Executive represents in good faith that, to the best of
Executive’s knowledge, the performance by Executive of all the terms of this
Agreement will not breach any agreement to which Executive is or was a party and
which requires Executive to keep any information in confidence or in trust.
Executive has not brought and will not bring to the Company or Block nor will
Executive use in the performance of employment responsibilities at the Company
any proprietary materials or documents of a former employer that are not
generally available to the public, unless Executive has obtained express written
authorization from such former employer for their possession and use. Executive
has not and will not breach any obligation of confidentiality that Executive may
have to former employers and Executive will fulfill all such obligations during
Executive’s employment with the Company.
     4.05 Non-Competition. During the period of Executive’s employment hereunder
and for two years after Executive’s date of termination, Executive may not
engage in, or own or control any interest in (except as a passive investor in
less than one percent of the outstanding securities of publicly held companies),
or act as an officer, director or employee of, or consultant or advisor to, any
firm, corporation, partnership, limited liability company, institution,
business, government agency, or entity that engages in any line of business that
is competitive with any Line of Business of Block (as defined below). The
definition of “Line of Business of Block” shall be determined as of the date of
Executive’s termination of employment with the Company (or, if earlier, the date
of determination) and shall mean any line of business (including lines of
business under substantial evaluation or substantial development) of the Company
as of such date, as well as any one or more lines of business (including lines
of business under substantial evaluation or substantial development) of any
Affiliate as of such date, if Executive was employed during the two-year period
preceding the date of termination by such Affiliate, provided that, “Line of
Business of Block” will in all events include, but not be limited to, the income
tax return preparation business, and provided further that if Executive’s
employment

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was, as of the date of termination or during the two-year period immediately
prior to the date of termination, with the Company or any successor entity
thereto, “Line of Business of Block” means any line of business (including lines
of business under substantial evaluation or substantial development) of Block
and all of the Affiliates as of the date of Executive’s termination. The running
of the two-year period will be suspended during any period of violation and/or
any period of time required to enforce this covenant by litigation or threat of
litigation.
     4.06 Non-Disparagement. Executive, for himself and for his heirs,
dependents, assigns, agents, executors, administrators, trustees and legal
representatives agrees that he will not (and will use his best efforts to cause
such affiliates to not), during the period of Executive’s employment and for two
years after Executive’s date of termination, engage in any form of conduct, or
make any statements or representations, that disparage or otherwise impair the
reputation, goodwill, or commercial interests of Block, the Company or any
Affiliate or any of their agents, officers, directors, employees and/or
stockholders. The foregoing shall not be violated by truthful statements in
response to legal process or required governmental testimony or filings.
     4.07 Cooperation. During the period of Executive’s employment hereunder and
thereafter, Executive agrees to reasonably assist and cooperate with Block, the
Company and/or any Affiliate (and their outside counsel) in connection with the
defense or prosecution of any claim that may be made or threatened against or by
Block, the Company or any Affiliate, or in connection with any ongoing or future
investigation or dispute or claim of any kind involving Block, the Company or
any Affiliate, including any proceeding before any arbitral, administrative,
judicial, legislative, or other body or agency, including preparing for and
testifying in any proceeding to the extent such claims, investigations or
proceedings relate to services performed or required to be performed by
Executive, pertinent knowledge possessed by Executive, or any act or omission by
Executive. Executive will perform all acts and execute and deliver any documents
that may be reasonably necessary to carry out the provisions of this
Section 4.07. Upon presentment to the Company of appropriate documentation, the
Company will pay directly or reimburse Executive for the reasonable out-of
pocket expenses incurred as a result of such cooperation.
     4.08 Reasonableness of Restrictions. Executive and the Company acknowledge
that the restrictions contained in this Agreement are reasonable, but should any
provisions of any Article of this Agreement be determined to be invalid,
illegal, or otherwise unenforceable or unreasonable in scope by any court of
competent jurisdiction, the validity, legality, and enforceability of the other
provisions of this Agreement will not be affected thereby and the provision
found invalid, illegal, or otherwise unenforceable or unreasonable will be
considered by the Company and Executive to be amended as to scope of protection,
time, or geographic area (or any one of them, as the case may be) in whatever
manner is considered reasonable by that court and, as so amended, will be
enforced.
     4.09 Clawback. If (x) Block is required to restate any of its financial
statements filed with the Securities and Exchange Commission, other than
restatements due solely to factors external to Block and its Affiliates such as
a change in accounting principles or a change in securities laws or regulations
with retroactive effect; or (y) Executive violates the provisions of

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Article Three or Sections 4.02, 4.03 or 4.05, then the Block Board may seek to
recover or require reimbursement of short-term incentive compensation, equity
compensation awards (including profits from the sale of Block Common Stock
acquired pursuant to such awards) and/or severance payments made to Executive;
provided, however, that:
     (a) absent egregious or extraordinary circumstances, any recovery or
reimbursement based upon sub-section (x) above shall be limited to short-term
incentive compensation or equity compensation paid or awarded to Executive for
the period(s) covered by the restated financial statements that is in excess of
what would have been paid or awarded to Executive for such period(s) if the
short-term incentive compensation, equity compensation or severance payments had
been based upon the restated financial statements; and
     (b) in exercising its discretion to seek to recover or require
reimbursement of any amounts as a result of any restatement pursuant to
sub-section (x) above, the Block Board will give reasonable and due
consideration to, among other relevant factors, the level of Executive’s
responsibility or influence, as well as the level of others’ responsibility or
influence, over the judgments or actions that gave rise to the restatement.
     4.10 Survival. The obligations contained in this Article Four shall survive
the termination or expiration of the Employment Period and Executive’s
employment by the Company and shall be fully enforceable thereafter, provided,
that the provisions of Sections 4.02, 4.03 and 4.05 shall not apply if the
Company shall terminate Executive’s employment other than for Cause or
Disability after July 31, 2014.
ARTICLE FIVE
MISCELLANEOUS
     5.01 Third-Party Beneficiary. The parties hereto agree that Block is a
third-party beneficiary as to the obligations imposed upon Executive under this
Agreement and as to the rights and privileges to which the Company is entitled
pursuant to this Agreement, and that Block is entitled to all of the rights and
privileges associated with such third-party-beneficiary status.
     5.02 Block Guaranty. Block and the Company hereby agree to be jointly and
severally liable for the performance of all obligations and duties of the
entities hereunder, and the payment of all amounts and provision of all benefits
due to Executive under this Agreement.
     5.03 Entire Agreement. This Agreement supersedes all previous term sheets
and employment agreements, whether written or oral between Executive and the
Company and constitutes the entire agreement and understanding between the
Company and Executive concerning the subject matter hereof. No modification,
amendment, termination, or waiver of this Agreement will be binding unless in
writing and signed by Executive and a duly authorized officer of the Company.
Failure of the Company, Block, or Executive to insist upon strict compliance
with any of the terms, covenants, or conditions hereof will not be deemed a
waiver of such terms, covenants, and conditions. If, and to the extent that, any
other written or oral

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agreement between Executive and Company or Block is inconsistent with or
contradictory to the terms of this Agreement, the terms of this Agreement shall
apply.
     5.04 Specific Performance. The parties hereto acknowledge that money
damages alone will not adequately compensate the Company or Block or Executive
for breach of any of the covenants and agreements set forth in Articles Three
and Four herein and, therefore, in the event of the breach or threatened breach
of any such covenant or agreement by either party, in addition to all other
remedies available at law, in equity or otherwise, a wronged party will be
entitled to injunctive relief compelling specific performance of (or other
compliance with) the terms hereof, without posting any bond.
     5.05 Successors and Assigns. This Agreement is binding upon Executive and
the heirs, executors, assigns and administrators of Executive or Executive’s
estate and property. This Agreement will be binding upon and inure to the
benefit of the Company and Block and their respective successors (whether direct
or indirect, by purchase, merger, consolidation or otherwise) and assigns.
Executive may not assign or transfer to others the obligation to perform
Executive’s duties hereunder. The Company may assign this Agreement to an
Affiliate with the consent of Executive, in which case, after such assignment,
the “Company” means the Affiliate to which this Agreement has been assigned. In
the event of Executive’s death, any severance payment due and payable hereunder
based on a termination of Executive’s employment prior to such date of death
shall be paid or provided to Executive’s surviving spouse, or if there is no
surviving spouse, to his estate.
     5.06 Withholding Taxes. From any payments due hereunder to Executive from
the Company, there will be withheld amounts reasonably believed by the Company
to be sufficient to satisfy liabilities for federal, state, and local taxes and
other charges and customary withholdings. Executive remains primarily liable to
such authorities for such taxes and charges to the extent not actually paid by
the Company.
     5.07 Indemnification. To the fullest extent permitted by law and Block’s
Amended and Restated Bylaws, the Company hereby indemnifies during and after the
period of Executive’s employment hereunder Executive from and against all loss,
costs, damages, and expenses including, without limitation, legal expenses of
counsel selected by the Company to represent the interests of Executive (which
expenses the Company will, to the extent so permitted, advance to executive as
the same are incurred) arising out of or in connection with the fact that
Executive is or was a director, officer, attorney, employee, or agent of the
Company or Block or serving in such capacity for another corporation at the
request of the Company or Block. Notwithstanding the foregoing, the
indemnification provided in this Section 5.07 will not apply to any loss, costs,
damages, and expenses arising out of or relating in any way to any employment of
Executive by any former employer or the termination of any such employment.
     5.08 D&O Insurance. The Company shall cover Executive under directors and
officers liability insurance both during and, while potential liability exists,
after the term of this Agreement in the same amount and to the same extent as
the Company covers its other officers and directors.

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     5.09 Right to Offset. To the extent not prohibited by applicable law and in
addition to any other remedy, the Company has the right but not the obligation
to offset any amount that Executive owes the Company under this Agreement
against any amounts due Executive by Block, the Company or the Affiliates.
     5.10 Notices. All notices required or desired to be given hereunder must be
in writing and will be deemed served and delivered if delivered in person, by
certified or registered mail (return receipt requested), or by a nationally
recognized overnight courier to Executive at the address then on file with the
Company’s payroll department; and to the Company, One H&R Block Way, Kansas
City, Missouri 64105, Attn: Corporate Secretary; or to such other address and/or
person designated by either party in writing to the other party. Any notice
given by mail or by nationally recognized overnight courier will be deemed given
as of the date it is so mailed and postmarked or received by a nationally
recognized overnight courier for delivery.
     5.11 Counterparts. This Agreement may be signed in counterparts and
delivered by facsimile transmission confirmed promptly thereafter by actual
delivery of executed counterparts.
     5.12 Section 409A. The Company and Executive agree that this Agreement is
intended to comply with the requirements of Section 409A (“Section 409A”) of the
Internal Revenue Code of 1986, as amended, and the regulations and other
guidance promulgated thereunder (the “Code”) or an exemption from Section 409A
and, accordingly, this Agreement shall be interpreted to be consistent
therewith. Notwithstanding anything in this Agreement to the contrary, if
Executive is a “specified employee” (as described in Section 409A) on the date
of termination, any amount to which Executive would otherwise be entitled during
the first six months following a separation of service that constitutes
nonqualified deferred compensation within the meaning of Section 409A and that
is therefore not exempt from Section 409A as involuntary separation pay or a
short-term deferral will be accumulated and paid in a single lump sum cash
payment (without interest) on the earlier of (i) the first business day of the
seventh month following the date of such “separation from service” (as defined
under Section 409A) or (ii) the date of Executive’s death, and any remaining
payments and benefits due under this Agreement shall be paid or provided in
accordance with the normal payment dates specified for them herein. For purposes
of this Agreement, each amount to be paid or benefit to be provided hereunder
shall be construed as a separate identified payment for purposes of
Section 409A.
     5.13 Excise Tax.
     (a) Contingent Cutback. To the extent that any payment or distribution to
or for the benefit of Executive pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any Affiliate, any person
whose actions result in a change of ownership or effective control covered by
Section 280G(b)(2) of the Code or any person affiliated with the Company or such
person, whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise (the “Payments”) would be subject to the
excise tax (the “Excise Tax”) imposed by Section 4999 of the Code, then the
Company shall pay or provide to Executive the greatest of the following,
whichever gives Executive the highest net after-tax amount (after taking into
account federal, state, local and social security taxes at the maximum marginal
rates): (1) the Payments or (2) one dollar less than

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the amount of the Payments that would subject Executive to the Excise Tax (the
“Safe Harbor Cap”). Unless Executive shall have given prior written notice
specifying a different order to the Company to effectuate the Safe Harbor Cap,
the Payments to be reduced hereunder will be determined in a manner which has
the least economic cost to Executive and, to the extent the economic cost is
equivalent, will be reduced in the inverse order of when the Payment would have
been made to Executive until the reduction specified herein is achieved.
Executive’s right to specify the order of reduction of the Payments shall apply
only to the extent that it does not directly or indirectly alter the time or
method of payment of any amount that is deferred compensation subject to (and
not exempt from) Section 409A.
     (b) Determinations. All determinations required to be made under this
Section 5.13, including whether and when the Safe Harbor Cap is required and the
amount of the reduction of the Payments pursuant to the Safe Harbor Cap and the
assumptions to be utilized in arriving at such determination, shall be made by a
certified public accounting firm or executive compensation consulting firm, in
either case of national standing (a “Qualified Firm”) as mutually agreed to by
the Company and Executive (or, if the Company and Executive cannot reach such
mutual agreement, each shall select a Qualified Firm and such Qualified Firms
shall mutually select a third Qualified Firm) and such selected Qualified Firm
shall provide detailed supporting calculations both to the Company and Executive
within 15 business days of the receipt of notice from Executive that there has
been a Payment, or such earlier time as is requested by the Company. All fees
and expenses of the Qualified Firm selected by the Company (and the third
Qualified Firm if one is required to be selected) shall be borne solely by the
Company. Any determination by the Qualified Firm shall be binding upon the
Company and Executive. Executive shall cooperate, to the extent his reasonable
out-of pocket expenses are reimbursed by the Company, with any reasonable
requests by the Company in connection with any contests or disputes with the
Internal Revenue Service in connection with the Excise Tax.
     5.14 Arbitration. The parties hereto may attempt to resolve any dispute
hereunder informally via mediation or other means. Otherwise, any controversy or
claim arising out of or relating to this Agreement, or any breach thereof, will,
except as provided in Section 5.04, be adjusted only by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect. However, the rules will be modified in the following
ways: (a) the arbitration will be conducted before a panel of three arbitrators,
one selected by Executive within 10 days of the commencement of arbitration, one
selected by the Company in the same period and the third selected jointly by
these arbitrators (or, if they are unable to agree on an arbitrator within
30 days of the commencement of arbitration, the third arbitrator will be
appointed by the American Arbitration Association; provided that the arbitrator
shall be a partner or former partner at a nationally recognized law firm);
(b) each arbitrator will agree to treat as confidential evidence and other
information presented to them; (c) a decision must be rendered within 10
business days of the parties’ closing statements or submission of post-hearing
briefs; (d) the decision of the arbitrators must not be a compromise but must be
the adoption of the submission by one of the parties; (e) there will be no
authority to award punitive damages (and Executive and the Company agree not to
request any such award); and (f) there will be no authority to amend or modify
the terms of this Agreement except as provided in Section 5.03 (and Executive
and the Company agree not to request any such amendment or modification).
Judgment upon such award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The arbitration will be held in Kansas City,
Missouri, or such other

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place as may be agreed upon at the time by the parties to the arbitration. The
arbitrator(s) will, in their award, allocate between the parties the costs of
arbitration, which will include reasonable attorneys’ fees of the parties, as
well as the arbitrator’s fees and expenses, in such proportions as the
arbitrator deems just.
(Signature Page Follows)

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     5.15 Choice of Law. This Agreement shall be governed by, construed and
enforced in accordance with the Laws of the State of Missouri, excluding any
conflicts of law, rule or principle that might otherwise refer to the
substantive law of another jurisdiction.
     IN WITNESS WHEREOF, the parties hereto, through their duly authorized
officers, as applicable, have executed this Agreement as of the dates set forth
below.

            EXECUTIVE:
    Dated: July 19, 2008  /s/ Russell P. Smyth       Russell P. Smyth           

H&R Block Management, LLC,
a Delaware limited liability company

                  By:   /s/ Bret G. Wilson         Name:   Bret G. Wilson      
Title:   Vice President    

Dated: July 19, 2008
H&R Block, Inc.,
a Missouri corporation
(solely with respect to Sections 1.02(b),
1.03(c), 4.09, 5.01 and 5.02)

                  By:   /s/ Bret G. Wilson         Name:   Bret G. Wilson      
Title:   Vice President & Secretary    

Dated: July 19, 2008

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