Exhibit 10.35
ADMINISTRATIVE SERVICES AGREEMENT
     THIS ADMINISTRATIVE SERVICES AGREEMENT (the “Agreement”) is dated and
effective as of January 30, 2006 (the “Effective Date”), by and among RSM
McGladrey, Inc. (“RSMM”), which is an indirect wholly-owned subsidiary of H&R
Block, Inc. (“Block”), and McGladrey & Pullen, LLP (“M&P”).
RECITALS
     WHEREAS, M&P is licensed to hold itself out as a licensed certified public
accounting firm in numerous states and jurisdictions; and
     WHEREAS, RSMM has performed certain administrative services under an
Administrative Services Agreement dated August 2, 1999 (the “Original
Agreement”); and
     WHEREAS, the Original Agreement provided that its term shall end on
August 2, 2004, which term was extended to January 30, 2006; and
     WHEREAS, the parties have decided to terminate the Original Agreement as of
the Effective Date and execute this Agreement in its place; and
     WHEREAS, M&P desires to continue to focus its effort, energy and expertise
generally on the provision of accounting services including Public Accounting
Services (as defined below) and certain tax preparation services to clients (the
“Business”), and to accomplish this goal, desires to outsource certain
administrative functions of the Business to RSMM; and
     WHEREAS, M&P desires to retain the administrative services of RSMM in
connection with the provision of certain services and products relating to the
Business that do not involve the provision of Public Accounting Services; and
     WHEREAS, M&P and RSMM have agreed upon a fair compensation for the
administrative services provided by RSMM hereunder; and
     WHEREAS, the parties also entered into a letter agreement dated August 2,
1999 relating to the mutual provisions of professional services to each other on
a subcontract basis; and
     WHEREAS, such letter agreement was of indefinite duration and the parties
wish to incorporate its provisions, as revised, into this Agreement.
AGREEMENT
     NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto agree as follows:

 

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1. Obligations of RSMM.
     1.1. Appointment of RSMM; Administrative Services. M&P hereby retains RSMM
and RSMM agrees to provide the administrative services described in Schedule 1.1
hereto (collectively, the “Administrative Services”). From time to time RSMM may
replace any of its employees or independent contractors (including hiring and
firing employees and terminating the relationship with any independent
contractors providing the Administrative Services hereunder), and may obtain
alternative types or sources of the Administrative Services in RSMM’s reasonable
discretion.
     1.2. Records. For purposes of performing records management services for
M&P, RSMM shall be granted access to all M&P files. M&P may impose reasonable
restrictions on RSMM’s management of client engagement files for Public
Accounting Services (as defined below). Such files shall be maintained at RSMM’s
and/or M&P’s offices and such offsite storage as may be obtained by RSMM.
     1.3. Limitation on RSMM’s Authority. Administrative Services shall not
include, and RSMM shall not at any time or in any manner engage, pursuant to
this Agreement, in providing to M&P or any client or customer of M&P, any
services which, under applicable state law, constitute the practice of public
accounting, or which require registration with the Public Company Accounting
Oversight Board (“PCAOB”), such services to be collectively referred to herein
as “Public Accounting Services.” If any Administrative Services or acts required
or requested of RSMM herein would be reasonably likely to be construed by a
court of competent jurisdiction or the applicable state agency, board or other
authority charged under the laws of the state with the licensing, registration
and/or regulation of public accountants (each a “State Board”) or by the PCAOB
to be Public Accounting Services, the requirement or other request to perform
that act shall be deemed waived. M&P shall have complete control and supervision
over its provision of any Public Accounting Services including, but not limited
to (i) the establishment and maintenance of quality assurance policies, (ii) the
hiring, training, promotion and termination of professional staff and partners,
(iii) the acceptance and continuation of clients, and (iv) the management and
supervision of client engagements. Anything in this Agreement to the contrary
notwithstanding, although M&P has delegated to RSMM under the terms of this
Agreement various ministerial administrative matters, M&P retains the exclusive
right, through its own personnel, to manage its own Business (including Public
Accounting Services) subject to the surviving terms and conditions of the Asset
Purchase Agreement of June 28, 1999 and the Operations Agreement of August 2,
1999 and the Amended and Restated Loan Agreement of even date herewith.
     1.4. Execution of Contracts. RSMM is hereby authorized to execute contracts
on behalf of M&P provided that the contracts so executed relate to the provision
of Administrative Services, and do not relate to the performance of Public
Accounting Services. M&P grants to RSMM a limited and special power of attorney
(the “Power of Attorney”) for the execution of contracts (with amounts due and
payable thereunder not to exceed Fifty Thousand Dollars ($50,000)).
Notwithstanding the foregoing, RSMM may execute contracts (including those
exceeding $50,000 in annual expenditures) that benefit both RSMM and M&P and
relate to services provided by RSMM under this Agreement. A form of the Power of
Attorney is set forth as Exhibit 1.4 hereto. The M&P Board of Directors (the
“McGladrey Board”) or Managing

 

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Partner, or his/her or its designees, must authorize contracts with total
amounts due and payable thereunder in excess of such amount or which relate to
the performance of Public Accounting Services.
2. Term. The term of this Agreement shall commence on the Effective Date and
shall end at midnight central time on January 31, 2011 (unless sooner terminated
pursuant to Section 9 hereof) (the “Initial Term”), provided that, if not sooner
terminated, this Agreement shall continue thereafter from year to year, subject
to termination by either party at any time following the Initial Term, with or
without cause, upon two hundred ten (210) days prior written notice or as
otherwise set forth in Section 9. The Initial Term and any continuation
thereafter shall be collectively referred to herein as the “Term.”
3. Shared Expenses and Fee. RSMM and M&P shall agree to jointly share in certain
common overhead costs which are necessary operating expenses for the performance
of attest, accounting, tax and consulting services (the “Shared Expenses”). Such
Shared Expenses may include but are not limited to certain human resources,
client service, sales and marketing, lease and occupancy, equipment and
technology, and administrative expenses. RSMM and M&P agree that such annual
cost sharing arrangement will be allocated based upon budgeted Shared Expenses
and an allocation method (the “Allocation Method”) based to the extent feasible
and reasonable on actual usage by the respective parties and agreed upon in
advance by the President of RSMM and the Board of Directors of M&P. RSMM will be
responsible for payment of the Shared Expenses (except those expenses directly
related to the practice of Public Accounting Services) and will be reimbursed
monthly by M&P for its portion based on the Allocation Method. M&P shall pay
RSMM an annual administration fee for all of its Administrative Services equal
to 15% of M&P’s share of the budgeted Shared Expenses, payable monthly.
4. Occupancy and Partner Benefits.
     4.1. Occupancy and Notice to Vacate Premises. M&P shall be entitled to
occupy all office space from time to time occupied by RSMM. M&P agrees to give
RSMM at least 210 days’ prior written notice of its intention to vacate any
particular office space then occupied by M&P. RSMM agrees to give M&P at least
210 days’ prior written notice of its intention to vacate any office space at
the time occupied by both RSMM and M&P, unless such intent to vacate is due to
an office relocation or closing which is generally known. In the event of any
termination of this Agreement by either party for any reason, except an M&P
default for nonpayment of fees, M&P shall in any case be entitled if it so
elects to occupy all office space which it then occupies for 210 days after such
termination, subject to having received earlier notice of RSMM’s intention to
vacate such space as stated above. In the event M&P occupies such office space
after termination of the Administrative Services, the parties shall agree on
rent payable during M&P’s continued occupancy, or if they fail to do so, the
rent shall be prorated according to the Allocation Method.
     4.2. Partner Benefits. RSMM and M&P agree that certain partner benefits
may, if the parties agree, be paid by RSMM and in such case M&P will reimburse
RSMM for the payment of those benefits. In such case, RSMM and M&P will agree to
the allocation methodology as a part of the annual budgeting process and payment
for such benefits will be made monthly by M&P.

 

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     4.3. Independent Identity. M&P shall maintain a separate legal identity and
shall observe all legal requirements and customary practices necessary to
maintain M&P as a separate and distinct legal entity from any other person or
entity. M&P shall also maintain its own business identity, including, without
limitation, letterhead and business cards and shall have the right at its option
to conduct its own marketing activities. Nothing herein shall prevent M&P from
being acquired by or otherwise combining with any other person.
5. Engagement Letters, Billing and Collection of Fees; Accounting.
     5.1. Engagement Letters. M&P will prepare engagement letters in accordance
with its policies for services and/or products to be provided by M&P to its
clients. The content of such letters shall be solely under the control of M&P
and shall be executed only by a partner or employee of M&P.
     5.2. Billing and Collection. As part of the Administrative Services, RSMM
shall prepare and mail statements for all services provided by or on behalf of
M&P to clients of M&P based upon time records, expense payments and other
information provided by M&P to RSMM. M&P shall and shall cause its partners and
employers to provide RSMM all records reasonably necessary for billing and
collection of accounts pursuant to the provisions of this Section.
     5.3. Accounting. As a part of the Administrative Services, RSMM shall
maintain books of account for M&P. In addition, RSMM shall prepare the monthly
and annual operational and financial reports for M&P.
6. Mutual Nondisclosure. Neither M&P nor RSMM shall at any time or in any
manner, directly or indirectly, use or disclose to any third party any trade
secrets or other Confidential Information (defined herein) learned or obtained
from the other party hereto as a result of its relationship with the other party
hereto or any direct or indirect subsidiary or affiliate (i.e., a person which
controls, is controlled by or under common control with a party) of the other
party. As used herein, the term “Confidential Information” means information
disclosed to or known by one party herein as a consequence of its relationship
with the other party hereto (whether before or after the date of this Agreement)
and not generally known in the industry in which the parties or any of their
direct or indirect subsidiaries or (in the case of information of or about
clients of either party) clients is engaged, and that in any way relates to the
products, processes, services, inventions (whether patentable or not), formulas,
techniques or know-how, including, but not limited to, information relating to
distribution systems and methods, research, development, purchasing, accounting,
procedures, marketing, customers, vendors, merchandising and selling, of RSMM or
M&P or any of their direct or indirect subsidiaries or affiliates, or the
clients of either party, and regardless of the format in which it is presented
or embodied (written, graphic, electromagnetic or otherwise). The term
“Confidential Information,” as used herein, does not include information
(a) which was already in the public domain through disclosure by the party or a
person owning such Confidential Information or (b) which is disclosed as a
matter of right by a third party source after the execution of this Agreement
provided such third party source is not bound by confidentiality obligations in
favor of the owner of the Confidential Information in question. This Section 6
shall survive the termination of this Agreement. Each party agrees that it will
adopt reasonable precautions to guard against unauthorized release or use of
Confidential Information, and that it will not use or disclose such Confidential
Information in any manner that

 

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will unfairly benefit itself or damage the other party hereto. Each party agrees
to return to the other party all such Confidential Information pertaining to the
other party upon termination of this Agreement. In lieu of returning all
Confidential Information, a party may destroy such Confidential Information
provided that the other party hereto has agreed in writing that destruction is
acceptable.
7. Administrative Services, Warranties, Disclaimers, Limitations on Liability
and Required Notices. RSMM will act diligently and use reasonable care in
providing Administrative Services to M&P. M&P and each Partner hereby release
and forever discharge RSMM and its affiliates, parents, employees, agents and
assigns from any liability in any way connected with this Agreement, except for
any liability for intentional torts or gross negligence. RSMM does not warrant
the success or results of M&P. RSMM shall not be liable to M&P or any Partner
under any circumstances for special, exemplary, punitive or consequential
damages relating to the Administrative Services except for intentional torts or
gross negligence. Neither M&P nor any Partner shall be liable to RSMM for
special, exemplary, punitive or consequential damages relating to this
Agreement.
8. Mutual Provision of Professional Services. RSMM and M&P may from time to time
request assistance from the other’s professionals and other personnel in meeting
the Contractor’s professional service obligations to its clients (the
“Professional Services”). The party requesting such assistance and billing the
client for the Professional Services rendered is referred to in this Section 8
as the “Contractor”. The party providing the requested Professional Services to
on or behalf of the Contractor and billing the Contractor is referred to in this
Section 8 as the “Subcontractor”. In no case shall the Administrative Services
rendered by RSMM to M&P pursuant to other sections of this Agreement be subject
to this Section 8. The Subcontractor may at its sole option and discretion,
provide or decline to provide the requested Professional Services to the
Contractor. The provisions set forth below shall apply with respect to all
Professional Services so provided pursuant to this Section 8.
     8.1. Nature of Requests. Such a request may be made by any person
authorized by the Contractor to do so, and such request may be accepted by any
person authorized by the Subcontractor to do so. No formalities are required.
     8.2. Contractor to Bill Client. The Contractor shall have sole
responsibility for billing and collecting from its own client with respect to
the Subcontractor’s Professional Services. No delay or failure by the client to
pay for such Professional Services shall relieve the Contractor from its
obligations to pay the Subcontractor for such Professional Services as provided
herein.
     8.3. Subcontractor’s Billing for Services Rendered. The Subcontractor shall
bill the Contractor for actual hours expended by its personnel to provide
Professional Services to the client of the Contractor. The rate to be charged
shall be mutually agreed upon from time to time between Contractor and
Subcontractor, in writing. The fees in effect as of the date hereof are 69% of
the standard rate typically charged by the Subcontractor to its own clients. The
objective of Contractor and Subcontractor is to establish a rate that results in
an approximately equal sharing of the net profit on an hour of services and that
approximates the negotiated borrowed-loaned rate for services provided between
M&P economic units prior to the sale of M & P’s non-attest assets and business
to RSMM in 1999. Contractor shall make payment to the

 

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Subcontractor for Professional Services provided hereunder within 30 days after
the end of the month in which the Professional Services were provided by the
Subcontractor.
     8.4. Subcontractor Responsible for Own Expenses. Subcontractor is solely
responsible for the payroll, benefits, training, equipment and facilities
necessary for its personnel to provide Professional Services to the Contractor’s
client, and for its own profitability or lack thereof, relating to the rendition
of such Professional Services. Travel and living expenses away from
Subcontractor’s office normally employing personnel used to perform the
Professional Services shall be billed to Contractor as disbursements at the
actual amount paid to vendors.
     8.5. Compliance With Laws, Rules and Professional Standards. Contractor and
Subcontractor agree to comply, and to cause their respective partners and
employees to comply, with Rule 301, Confidential Client Information, of the Code
of Professional Conduct of the American Institute of Certified Public
Accountants, and all related interpretations and rulings in effect from time to
time in connection with providing Professional Services to each other’s clients.
In addition, the parties shall, in connection with providing of such
Professional Services, observe the mutual nondisclosure provisions of Section 6
of this Agreement. The parties also agree to comply, and to cause their
respective partners and employees to comply, with Section 7216 of the Internal
Revenue Code in connection with providing Professional Services to each other’s
clients. RSMM agrees to take all action necessary to comply with Interpretation
101-14 under Rule 101 of the Code of Professional Conduct of the American
Institute of Certified Public Accountants and, unless an exception is agreed to
by M & P (which agreement shall not be unreasonably withheld), M&P’s
Independence and Relationship Policies as in effect from time to time with
respect to all attest clients. The parties agree that RSMM shall not perform any
Professional Service which violates any state law governing the practice of
public accounting. It is specifically contemplated that M&P will utilize
Professional Services of RSMM only in a manner or in instances consistent with
the requirements of the governing public accounting licensing laws.
     8.6. Professional Services Indemnity. Contractor agrees to indemnify and
hold harmless Subcontractor and its partners, directors, officers, employees,
agents and members, as applicable, with respect to any and all claims, losses,
damages, liabilities, judgments or settlements (including but not limited to
reasonable attorneys’ fees, costs and other expenses) incurred by Subcontractor
on account of any Professional Services conducted by Subcontractor pursuant to
this Section 8 except those arising in the ordinary course of business of
performing requested services and allocated to Subcontractor by Section 8.4
hereof; provided, however, this indemnification shall not extend to cover any
claims, losses, damages, liabilities, judgments or settlements (including
attorneys’ fees, costs and other expenses) incurred by the Contractor on account
of the bad faith misconduct or intentional fraud of Subcontractor (or its
partners, directors, officers, employees, agents or members, as applicable).
9. Termination. In addition to any termination pursuant to Section 2 or
Section 10 hereof, this Agreement may be terminated in accordance with the
provisions of this Section 9.
     9.1. By RSMM. RSMM may terminate this Agreement: (a) on at least 210 days’
prior written notice of intention to terminate this Agreement without cause;
(b) on at least 210 days’ prior written notice, if M&P loses or has suspended
its license or certification to practice

 

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public accounting in any state significant to its business and to hold itself
out as a firm engaged in public accounting; (c) if M&P is wound up or liquidated
or files a voluntary petition in bankruptcy or other action is taken voluntarily
or involuntarily under any statute for the protection of creditors; or (d) if
M&P materially breaches a provision hereof and fails either to commence cure of
the breach within thirty (30) days after the delivery of notice of such breach
by RSMM (such notice to detail specifically the breach being complained of), or
having so commenced cure fails thereafter to prosecute cure promptly to
completion within sixty (60) days after receipt of such initial notice.
     9.2. By M&P. M&P may terminate this Agreement: (a) if RSMM breaches a
provision hereof and fails either to commence cure of the breach within thirty
(30) days after its receipt of notice of such breach from M&P, such notice to
detail specifically the breach being complained of, or having so commenced cure
fails thereafter to prosecute cure promptly to completion within sixty (60) days
after receipt of such initial notice; or (b) on at least 210 days’ prior written
notice of intention to terminate this Agreement without cause.
     9.3. Effect of Termination.
     9.3.1. Payment of Money Owed. Upon the termination of this Agreement for
any reason, M&P shall pay all amounts due to RSMM and RSMM shall pay all amounts
due to M&P under this Agreement as soon as practicable but in no event later
than one hundred eighty (180) days after the effective date of such termination
(such effective date being referred to herein as the “Termination Date”).
     9.3.2. Survival of Certain Provisions. Sections 4.1, 6, 8.5 and 8.6, 9.3.4
and 9.3.5, 13, 14 and 17 shall survive the termination of this Agreement.
     9.3.3. Records; Files. In the event of termination for any reason, RSMM
may, at its expense, and, subject to RSMM’s compliance with any requirements for
prior client consent, copy all records or files of M&P, except for client
engagement files which contain or reflect the performance of Public Accounting
Services.
     9.3.4. License of Billing System. Effective upon any termination by either
party (except on the bankruptcy or insolvency of M&P), RSMM shall grant M&P a
world-wide royalty-free paid-up nonexclusive nontransferable license and right
to use the billing system then in use by RSMM relating to M&P’s accounts
receivable for a period (at M&P’s election) of up to eighteen (18) months after
termination hereof. Additionally, RSMM will use commercially reasonable efforts
to help M&P obtain licensing rights from the third party providers of the
payroll, payables, fixed assets, general ledger and financial statement software
systems that are being utilized at the time of the termination. This provision
shall survive termination of this Agreement.
     9.3.5. Transition Services and Return of Data. RSMM shall cooperate with
M&P in transitioning performance of the Administrative Services to M&P or to any
third party service provider designated by M&P; provided, however that M&P shall
pay RSMM an agreed upon amount for any work RSMM needs to perform to segregate
data, delete it and/or integrate such data with M&P and/or its third party
vendor, in conjunction

 

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with such transition upon the written request of M&P. RSMM shall return all
copies of all M&P data, materials, and information in the possession or control
of RSMM to M&P in such form or format as reasonably requested by M&P. RSMM shall
not retain any copies of such data, materials, or information except as required
by law. This provision shall survive termination of this Agreement.
10. Regulatory or Legislative Change. In the event of any material change in any
statute, regulation or official interpretation thereof (“Laws”), or an
enforcement action arising under any Laws, any of which is reasonably likely to
materially and adversely affect the manner in which either party may perform or
be compensated for its services under this Agreement, or which shall make this
Agreement unlawful in whole or in material part, the parties shall immediately
enter into good faith negotiations regarding a new service arrangement or basis
for compensation for the Administrative Services provided hereunder which is
consistent with such Laws and approximates as closely as possible the economic
position of the parties hereunder prior to the change. If the parties are unable
to reach such an agreement within fifteen business days following written notice
from one party to the other, then either party may terminate this Agreement
effective upon thirty (30) days’ prior written notice. Termination of this
Agreement pursuant to this provision shall not, however, terminate M&P’s right
to occupy such office space as it then may occupy on premises leased by RSMM.
11. Miscellaneous. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assignees of the parties. M&P shall not assign its
rights under this Agreement without the prior written consent of the RSMM. RSMM
may, in its discretion, assign this Agreement to any other direct or indirect
parent, subsidiary or affiliate of RSMM, and M&P shall be liable hereon to the
same extent as if such agreement were originally made with such other person,
firm or corporation, but no such assignment shall constitute a novation or
relieve RSMM of any of its obligations or liabilities hereunder. This Agreement
contains the complete understanding of the parties with respect to the subject
matter hereof and no modification or waiver of any provision hereof shall be
valid unless in writing and signed by the parties, unless specifically provided
to the contrary. This Agreement may not be amended except by an instrument in
writing signed by RSMM and M&P. Notwithstanding anything to the contrary herein,
no party shall be required to violate any law or the good faith reasonable
exercise of such party’s professional responsibility.
12. Governing Law. This Agreement shall be governed by the laws of the State of
Missouri, without reference to its choice of law provisions.
13. Right to Offset. M&P agrees that RSMM may offset amounts due M&P hereunder
against amounts due RSMM hereunder. Such right to offset shall arise if M&P
fails to pay such amounts owed to RSMM within thirty (30) days after written
notice to the M&P’s Representative. In the event that any such offset is made
but is finally determined by mediation, arbitration or a court of competent
jurisdiction to be improper and such offset is revised, RSMM shall pay interest,
at the Prime Rate, on the amount of such offset for the period such offset was
in effect.
14. Arbitration. Any controversy, claim, or dispute arising out of or relating
to this Agreement or any breach thereof, including without limitation any
dispute concerning the scope

 

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of the arbitration clause set forth below (a “Dispute”), shall be resolved as
set forth below, except that this Section 14 shall not apply to any controversy,
claim or dispute asserted by either party hereto against the other arising out
of or related to a controversy, claim or dispute asserted by a third person
(other than M&P and/or any of its Partners or RSMM) against either or both
parties to this Agreement, nor to any controversy, claim or dispute where a
third party (other than M&P and/or any of its Partners or RSMM) would be an
indispensable party under the Federal Rules of Civil Procedure.
     14.1. In the event a Dispute arises, any party may demand mediation by
notifying the American Arbitration Association (“AAA”) in the location where any
arbitration would be conducted as set forth below, in writing with copies to all
other parties involved in the Dispute. The notification will state with
specificity the nature of the Dispute and the amount of any claims. Upon receipt
of the mediation demand, the AAA will immediately convene a pre-mediation
telephone conference of the parties hereto. The parties will make a
representative, with full authority to settle, available for such a conference
within five (5) business days of being contacted by the AAA or its designated
mediator (“Mediator”). During the pre-mediation telephone conference, the
parties will agree on mediation procedures or, in the event they cannot agree,
Mediator will set the mediation procedures. The mediation procedures will
provide for the mediation to be completed within thirty (30) business days of
the date of the initial demand for mediation. The parties will participate in
good faith in the mediation and will use their best efforts to reach a
resolution within the thirty (30) day time period. Each party will make
available in a timely fashion a representative with authority to resolve the
Dispute. In the event that the Dispute has not been resolved within thirty
(30) days, the mediation may continue if the parties so desire. If not, the
Mediator will so notify the parties and declare the mediation terminated. In the
event that the mediation continues beyond thirty (30) days, but is not resolved
within what the Mediator believes is a reasonable time thereafter, the Mediator
will so notify the parties, and declare the mediation terminated. Fees of the
mediator shall be split equally between the parties.
     14.2. After the mediation has been declared terminated, the matters in
dispute shall be settled by binding arbitration in accordance with the
Commercial Arbitration Rules (the “Rules”) of the AAA as supplemented or
modified herein and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. The governing law of this
Agreement shall be the law used by the arbitrators in rendering their award,
except that the Federal Rules of Evidence shall apply and that the parties have
the right and shall be permitted to conduct and enforce full pre-hearing
discovery in accordance with and to the same extent permitted by the Federal
Rules of Civil Procedure. There shall be three neutral arbitrators. Pending
final award, the arbitrators’ compensation and expenses shall be advanced
equally by the parties. The AAA shall hold an administrative conference with
counsel for the parties within twenty (20) days after the filing of the demand
for arbitration by any one or more of the parties. The parties and the AAA shall
thereafter cooperate in order to complete the appointment of three arbitrators
as quickly as possible. Within fifteen (15) days after all three arbitrators
have been appointed, an initial meeting (which, if the arbitrators so determine,
may be by phone) among the arbitrators and counsel for the parties shall be held
for the purpose of establishing a plan for administration of the arbitration,
including: (1) definition of issues; (2) scope, timing, and types of discovery;
(3) exchange of documents and filing of detailed statements of claims,
prehearing

 

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memoranda and dispositive motions; (4) schedule and place of hearings; and
(5) any other matters that may promote the efficient, expeditious, and cost
effective conduct of the proceeding.
     14.3. The majority decision of the arbitrators shall contain findings of
fact on which the decision is based, including any specific factual findings
requested by either party, and shall further contain the reasons for the
decision with reference to the legal principles on which the arbitrators relied.
Such decision of the arbitrators shall be final and binding upon the parties.
The arbitration shall take place in Minneapolis, Minnesota if the party
requesting same is RSMM, or Kansas City, Missouri, if the party requesting same
is McGladrey or any Partner. The final award may grant such relief as authorized
by the Rules, including damages and out-of-pocket costs but which may not
include exemplary, consequential or punitive damages to the extent inconsistent
with this Agreement.
15. Notices. Any notices or other communications requiring or permitted
hereunder shall be sufficiently given if in writing and sent by certified or
registered mail, postage prepaid or by facsimile (receipt confirmed) addressed
as follows:

         
 
  If to RSMM:   RSM McGladrey Business Services, Inc.
 
      4400 Main Street
 
      Kansas City, MO 64111
 
      Attn.: Steven Tait
 
      Facsimile: 816-753-8628
 
       
 
  with a copy to:   RSM McGladrey Business Services, Inc.
 
      3600 American Boulevard West, Third Floor
 
      Bloomington, MN 55431
 
      Attn: General Counsel
 
      Facsimile: 952.921.7701
 
       
 
  If to M&P:   McGladrey & Pullen, LLP
 
      3600 West 80th Street, Third Floor
 
      Bloomington MN 55431-4502
 
      Attn: William D. Travis
 
      Facsimile: (952) 921-7701
 
       
 
  with a copy to:   Quentin T. Johnson
 
      Fredrikson & Byron, P.A.
 
      200 South Sixth Street, Suite 4000
 
      Minneapolis, MN 55402
 
      Facsimile: (612) 492-7077

or in each case to such other address as shall have been furnished in writing,
and such notice or communication shall be deemed to have been given as of the
date so mailed.
16. Integration. This Agreement supersedes and replaces the Original Agreement
and that certain letter agreement dated August 2, 1999 between Contractor and
M&P, relating to the

 

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mutual provision of professional services between RSMM and M&P, and the Original
Agreement and such letter agreement shall have no further applicability after
the Effective Date.
17. Operations Agreement, Letter Agreement. On August 2, 1999, the parties
hereto (along with others not a party hereto) entered into an Operations
Agreement (attached hereto as Exhibit 17-1). Most of the provisions thereof have
by their terms expired, however, the parties agree that several of the
provisions are still in effect and that the Operations Agreement has not
terminated. As between themselves, the parties hereto, H&R Block Inc. (“HRB”)
and RSM McGladrey Business Services, Inc. agree that the following provisions
thereof shall remain in effect: (i) Section 13; and (ii) Section 15. On June 22,
2005, the parties hereto entered into a Letter Agreement (attached hereto as
Exhibit 17-2) which sets forth a process by which RSM McGladrey, Inc. may
authorize, in its sole discretion, exceptions to the non-compete provisions in
the Operations Agreement.
THIS AGREEMENT CONTAINS AN ARBITRATION PROVISION WHICH IS BINDING ON THE PARTIES
HERETO.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
effective as of the day and year first above written.

            RSM MCGLADREY, INC.
      By:   /s/ Steven Tait        Steven Tait, President               
MCGLADREY & PULLEN, LLP
      By:   /s/ William D. Travis        William D. Travis, Managing Partner   
         

 

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The following agree as to Section 17 hereof only:

              H&R BLOCK, INC.
 
       
 
  By   /s/ Nicholas Spaeth 
 
       
 
  Its   SVP — Chief Legal Officer

              RSM McGLADREY BUSINESS SERVICES, INC.
 
       
 
  By   /s/ Steven Tait
 
       
 
      Steven Tait, President

 

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SCHEDULE 1.1
Administrative Services
Administrative Services to be provided by RSMM to M&P:

1.   Provision and maintenance of suitable office space.   2.   Recruiting,
training and provision of nonprofessional staff, including clerical services.  
3.   Provision of office supplies, furniture, fixtures and equipment.   4.  
Provision of Information Systems development, management and support, including
but not limited to hardware, software, operating systems, network systems and
Internet Services.   5.   Provision and maintenance of a computer system and
data processing activities.   6.   Provision of billing services.   7.  
Scheduling and payment of accounts payable.   8.   Assistance in collection of
accounts receivable.   9.   Preparation of payroll and related tax matters.  
10.   Records management as provided in Section 1.2.   11.   Development of
policies and procedures relating to the Administrative Services (except those
relating to the performance of Public Accounting Services or otherwise
inconsistent with those adopted by M&P).   12.   Assistance in compliance with
all regulatory requirements as requested by M&P.   13.   Assistance in
maintenance of the books and records of M&P.   14.   Provision of annual
budgeting assistance.   15.   Provision and maintenance of a system of internal
accounting.   16.   Provision of insurance policies and provision of risk
manager services except in each case, as to the professional liability of M&P,
including the gathering of underwriting data to submit to broker (payroll,
losses, locations, autos, etc.), securing and managing the third party
administer to administer workers’ compensation, general liability or auto claims
that M&P may have, obtaining Certificates or Evidences of Insurance for
distribution with proposals and reviewing contract language as it pertains to
insurance.   17.   Settlement of client disputes re bills in the ordinary course
of business, but not to exceed $                                        
reduction of M&P’s fees in any dispute, but RSMM shall have no such authority to
settle any dispute where the client or anyone acting on its behalf has
threatened legal action, which such threat shall be promptly reported in writing
to M&P’s managing partner.

 

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EXHIBIT 1.4
Form of Power of Attorney
LIMITED POWER OF ATTORNEY
     On this                      day of                     ,
20                    , McGladrey & Pullen, LLP, an Iowa limited liability
partnership (hereinafter referred to as “M&P”), hereby authorizes and appoints
as its attorney-in-fact RSM McGladrey, Inc. (hereinafter referred to as “RSMM”),
a corporation organized under the laws of the State of Delaware and having its
principal place of business at 4400 Main Street, Kansas City, Missouri 64111,
and its successors, to carry out its duties under the Administrative Services
Agreement of even date herewith (the “ASA”) in accordance with, but not limited
to, the following:

  1.   To enter into and execute contracts (with amounts due and payable
thereunder not to exceed Fifty Thousand Dollars ($50,000)) relating to the
performance of Administrative Services as defined in the ASA but do not relate
to the performance of Public Accounting Services; and     2.   To deposit into
M&P account(s), all funds, fees and revenues generated from the Business and to
make withdrawals from the M&P account(s) for payment to creditors, including
without limitation, RSMM and the employees of M&P and other persons who perform
services on behalf of M&P.

     This Limited Power of Attorney is coupled with an interest and shall be
irrevocable except with RSMM’s prior written consent, but in any event shall
terminate as provided below.
     This Limited Power of Attorney shall terminate on the expiration or earlier
termination of the Administrative Services Agreement.
     All capitalized terms not otherwise defined herein shall have the meaning
given to them in that certain Administrative Services Agreement of even date
hereto.

            McGLADREY & PULLEN, LLP
      By:           William D. Travis, Managing Partner             

     STATE OF                     )
                                             )ss.
     COUNTY OF                 )
     On this                      day of                     , 2006, before me,
                    , a Notary public in and for said state, personally appeared
William D. Travis and                      of McGladrey & Pullen, LLP, who
executed the above document, and acknowledged to me that he is the Managing
Partner of McGladrey & Pullen, LLP, and executed the same for the purposes
therein stated.
     IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
 
My commission expires:                                          

 

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Exhibit 17-1

 

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Exhibit 17-2