exv10w26






Exhibit 10.26




EMPLOYMENT AGREEMENT




     THIS EMPLOYMENT AGREEMENT (“Agreement”) is entered into as of July 12, 2005, by
and between H & R Block Digital Tax Solutions, LLC, a Delaware limited liability company
(the “Company”), and Thomas A. Allanson (“Executive”).



ARTICLE ONE




EMPLOYMENT




     1.01 Agreement as to Employment. Effective as of the date hereof (the
"Employment Date”), the Company hereby employs Executive to serve in the capacity set forth in
Section 1.02, and Executive hereby accepts such employment by the Company, in each case,
subject to the terms and conditions of this Agreement. The Company reserves the right, in
its sole discretion, to change the title of Executive at any time.



     1.02 Duties.



     (a) Executive is employed by the Company to serve as its Senior Vice President Digital
Tax Solutions, subject to the authority and direction of the Board of Directors of H&R Block,
Inc., a Missouri corporation (“Block”), and its President and Chief Operating Officer.
Subject to the foregoing, Executive will have such authority and responsibility as is
customarily associated with the position of Senior Vice President Digital Tax Solutions.
The Company reserves the right to modify, delete, add, or otherwise change Executive’s job
responsibilities or the person or persons to whom Executive reports, in its sole discretion,
at any time. Executive will also perform such other duties as are reasonably assigned to
Executive from time to time.



     (b) So long as Executive is employed by the Company pursuant to the terms hereof,
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 hereunder, provided
that Executive will not be prohibited from engaging in such personal, charitable, or other
nonemployment activities that do not interfere with Executive’s full-time employment hereunder
and that do not violate the other provisions of this Agreement or the H&R Block, Inc. Code of
Business Ethics & Conduct, which Executive hereby acknowledges having read and fully
understood. By execution hereof, Executive hereby represents that his only other employment
activities consist of his involvement, on a limited basis, in certain equipment leasing
activities (“Equipment Leasing Activities”), such Equipment Leasing Activities not
interfering with Executive’s full-time employment and obligations hereunder. Executive will
comply fully with all reasonable policies of the Company, Block and/or any other direct or
indirect subsidiary of Block or parent entity of any of their respective affiliates (the
Company, Block and/or any other direct or indirect subsidiary of Block or parent entity or any
of their respective affiliates being collectively referred to herein as the “Block
Entities”) as are from time to time in effect and applicable to Executive’s position.
Executive understands that the



 









 




business of the Block Entities may be subject to governmental regulation, some of which may
require Executive to submit to background or similar investigations. If Executive or any Block
Entity are unable to participate, in whole or in part, in any such activity as the result of any
action or inaction on the part of Executive, then this Agreement and Executive’s employment
hereunder may be terminated by the Company without notice.




     1.03 Compensation.



     (a) Base Salary. The Company will pay to Executive a gross salary at an annual rate
of Two Hundred Sixty Five Thousand and no/100 Dollars (US $265,000.00) (“Base Salary”),
payable semimonthly or at any other pay periods as the Company may use for its other
similarly-situated employees. The Base Salary will be reviewed for adjustment no less often than
annually during the term of Executive’s employment hereunder and, if adjusted, such adjusted amount
will become the “Base Salary” for purposes of this Agreement.



     (b) Short-Term Incentive Compensation. Executive shall participate in the HRB
Management, Inc. short-term incentive program that is based on the H&R Block Short-Term Incentive
Plan (the “Program”) as applicable to executives of the Company for its current fiscal
year. Under the Program, Executive shall have an aggregate annual target incentive award equal to
fifty percent (50%) of his Base Salary (“Target Bonus”), and an opportunity to earn up to
two times such Target Bonus, i.e., one hundred percent (100%) of his Base Salary. The payment of
the actual award under the Program shall be based upon such performance criteria which shall be
determined by the Compensation Committee of Block’s Board of Directors. Under the Program for the
Company’s current fiscal year only, Executive’s actual incentive compensation shall be prorated
based upon Executive’s actual gross wages for the fiscal year, provided that Executive must remain
employed through April 30, 2006 to receive any payments under the Program. Such incentive
compensation shall be paid to Executive following the completion of its current fiscal year when
the same is paid to other similarly situated Company employees.



     (c) Stock Options. As authorized under the H&R Block 2003 Long-Term Executive
Compensation Plan, as amended (the “2003 Plan”), subject to the terms of the related Option
and Restricted Stock Agreement (as such term is defined in the Stock Purchase Agreement), Executive
shall be granted on the Employment Date a stock option under the 2003 Plan to purchase ten thousand
(10,000) shares of Block’s common stock at an option price per share equal to the closing price of
such shares on the New York Stock Exchange on the date of grant, such option to expire on the tenth
anniversary of the date of grant; to vest and become exercisable as to one-third (three thousand
three hundred thirty-three (3,333)) of the shares covered thereby on the first anniversary of the
date of grant, as to an additional one-third (three thousand three hundred thirty-three (3,333)) of
such shares on the second anniversary of the date of grant, and as to the remaining one-third
(three thousand three hundred thirty-four (3,334)) of the shares on the third anniversary of the
date of grant; to be an incentive stock option for the maximum number of shares permitted by
Internal Revenue Code Section 422 and the regulations promulgated thereunder; and to otherwise be a
nonqualified stock option. In



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accordance with the terms of the Option and Restricted Stock Agreement, any non-vested portion
of stock options awarded pursuant to this Section 1.03(c) shall vest upon a “Change of Control,”
as such term in defined in the Option and Restricted Stock Agreement.




     (d) Restricted Stock. Subject to the terms of the related Option and Restricted
Stock Agreement (as such term is defined in the Stock Purchase Agreement), Executive shall also
be awarded promptly after the Employment Date, one thousand two hundred (1,200) restricted shares
of Block’s common stock under the 2003 Plan. One-third of the such restricted shares shall vest
(i.e., the restrictions on such shares shall terminate), respectively, on each of the first three
anniversaries following the Employment Date. Prior to the time such restricted shares are so
vested, (i) such restricted shares shall be nontransferable, and (ii) Executive shall be entitled
to receive any cash dividends payable with respect to unvested restricted shares and vote such
unvested restricted shares at any meeting of Block’s shareholders. The terms of the restricted
stock grant reference herein will be more specifically set forth in a separate agreement to be
entered into between Block and Executive.



     1.04 Expenses.



     (a) Travel Expenses. For a period of ninety (90) days from and after the Employment
Date, the Company will promptly pay directly, or reimburse Executive for all travel expenses
incurred in traveling between San Diego and Kansas City, including, but not limited to, lodging
and meal expenses, to the extent that such expenses are paid or incurred by Executive and to the
extent that such expenses are reasonable and necessary to Executive’s conduct pursuant to the
terms hereof. After such ninety (90) day period, the Company will promptly pay directly, or
reimburse Executive for all travel expenses incurred in traveling between San Diego and Kansas
City, including travel expenses, but excluding all lodging and meal-related expenses, to the
extent that such expenses are paid or incurred by Executive and to the extent that such expenses
are reasonable and necessary to Executive’s conduct pursuant to the terms hereof. In any event,
the Company’s reimbursement of Executive for any such expenses shall be in a manner consistent
with and subject to the terms of the Company’s related policies in effect from time to time.



     (b) Business Expenses. Subject to the provisions of Section 1.04(a) above, 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 term hereof in accordance with
the Company’s policy in effect from time to time and to the extent such expenses are reasonable
and necessary to Executive’s conduct pursuant to the terms hereof.



     1.05 Fringe Benefits. During the term of Executive’s employment hereunder, and
subject to the discretionary authority given to applicable benefit
plan administrators, the
Company will make available to Executive such insurance, sick leave, deferred compensation,
short-term incentive compensation, bonuses, stock options,
retirement, vacation, and other like
benefits as are approved and provided from time to time to the other similarly situated employees
of the Company or the other Block Entities.



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     1.06 Termination of Employment.



     (a) Without Notice. The Company may, at any time, in its sole discretion, terminate
this Agreement and the employment of Executive without notice in the event of:




     (i) Executive’s misconduct that interferes with or prejudices the proper conduct of
the business of any Block Entity or which may reasonably result in harm to the reputation
of any Block Entity; or




     (ii) Executive’s commission of an act materially and demonstrably detrimental to the
goodwill of any Block Entity, which act constitutes gross negligence or willful misconduct
by Executive in the performance of Executive’s duties hereunder; or




     (iii) 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
any Block Entity; or




     (iv) Executive’s violation of Article Two or Three of this Agreement; or




     (v) Executive’s conviction of a misdemeanor (involving an act of moral turpitude) or
a felony; or




     (vi) Executive’s failure in material respect to discharge Executive’s duties
hereunder as measured by the performance of matters within Executive’s areas of
responsibility against the plans and objectives prepared by Executive and any Block Entity
in the ordinary course; or




     (vii) Executive’s unwillingness to make all necessary travel to and from the
Company’s headquarters;




     (viii) the results of any Background Check (as such term is defined in the Stock
Purchase Agreement (as defined below)) are, in the reasonable opinion of Purchaser (as
such term is also defined in the Stock Purchase Agreement), unsatisfactory; or




     (ix) Executive’s suspension by the Internal Revenue Service from participation in the
Electronic Filing Program; or




     (x) The inability of Executive or any Block Entity to participate, in whole or in
part, in any activity subject to governmental regulation as the result of any action or
inaction on the part of Executive, as described in Section 1.02(b); or



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     (xi) Executive’s death or total and permanent disability. The term “total and
permanent disability” will have the meaning ascribed thereto under any long-term
disability plan maintained by any Block Entity for employees of the Company.



     (b) With Notice. Either party may terminate this Agreement for any reason, or no
reason, by providing not less than forty-five (45) days’ prior written notice of such termination
to the other party, and, if such notice is properly given, this Agreement and Executive’s
employment hereunder will terminate as of the close of business on the forty- fifth
(45th) day after such notice is given or such later date as is specified in such notice.



     (c) Termination Due to a Change of Control.




     (i) If Executive terminates Executive’s employment under this Agreement during the
one hundred eighty (180)-day period following the date of the occurrence of a “Change
of Control” (as defined below) of Block then, upon any such termination of Executive’s
employment and conditioned on Executive’s execution of an agreement under which Executive
releases all known and potential claims against each Block Entity, the Company will
provide Executive, at Executive’s election (the “Change of Control Election”), the
same level of severance compensation and benefits as would be provided under the H&R Block
Severance Plan (the “Severance Plan”) as the Severance Plan exists either (A) on
the date of this Agreement or (B) on Executive’s last day of active employment by the
Company pursuant to the terms hereof (the “Last Day of Employment”), as if
Executive had incurred a “Qualifying Termination” (as such term is defined in the
Severance Plan). The Severance Plan as it exists on the date of this Agreement is attached
hereto as Exhibit A. Executive must notify the Company in writing within five (5)
Business Days (as such term is defined in the Stock Purchase Agreement, dated of even date
herewith, among H&R Block Digital Tax Solutions, LLC, Executive and the other parties
thereto (“Stock Purchase Agreement”)) after Executive’s Last Day of Employment of
Executive’s Change of Control Election. Severance compensation and benefits provided under
this Section will terminate immediately if Executive violates Sections 3.02, 3.03, or 3.05
of this Agreement or becomes reemployed by any Block Entity.




     (ii) For the purpose of this subsection, a “Change of 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 thirty-five percent
(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, any such
acquisition by any Block Entity, or any employee benefit plan (or related trust) of
any Block Entity, or any corporation with respect to which, following such



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acquisition, more than fifty percent (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 individuals and entities 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, as the case may be; or




     (B) individuals who, as of the date hereof, constitute the Board of Directors
of Block (generally, the “Board,” and as of the date hereof, the “Incumbent
Board”) cease for any reason to constitute at least a majority of the 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 a majority of the Board (or nominating committee
of the 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-l 1 of Regulation 14A promulgated under the Exchange Act); or




     (C) the completion of a reorganization, merger or consolidation approved by
the shareholders of Block, in each case, with respect to which all or substantially
all of the individuals and entities who were the respective beneficial owners of
the voting securities of Block immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than fifty percent (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, or a complete liquidation or dissolution of Block, as approved by
the shareholders of Block, or the sale or other disposition of all or
substantially all of the assets of Block, as approved by the shareholders of Block.



     (d) Severance. Executive will receive severance compensation and benefits as would be
provided under the Severance Plan, as the same may be amended from time to time, if Executive
incurs a “Qualifying Termination.” as such term is defined in the Severance Plan (and
without regard to whether the termination is with or without notice under this Agreement), and
executes an agreement under which Executive releases all known and potential claims against any
Block Entity. Such compensation and benefits will, at Executive’s election (the “Severance
Election”) be at the same level of severance compensation and benefits as would be provided
under the Severance Plan as such plan



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exists either (A) on the date of this Agreement, or (B) Executive’s Last Day of Employment;
provided, however, (1) the “Severance Period” (as such term is defined in
the Severance Plan) will be 12 months, notwithstanding any provision in the Severance Plan to the
contrary, and (2) Executive will be credited with not less than 12 “Years of Service” (as
such term is defined in the Severance Plan) for the purpose of determining severance compensation
under Section 4(a) of the Severance Plan as it exists on the date of this Agreement or the
comparable section of the Severance Plan as it exists on Executive’s Last Day of Employment,
notwithstanding any provision in the Severance Plan to the contrary, and (3) all restrictions on
any restricted shares awarded to Executive that would have vested in accordance with their terms
by reason of lapse of time within eighteen (18) months of Executive’s Last Day of Employment
(absent such termination of employment) shall terminate (and such restricted shares shall be fully
vested) and any restricted shares that would not have vested in accordance with their terms by
reason of lapse of time within eighteen (18) months after Executive’s Last Day of Employment shall
be forfeited, notwithstanding any provision of the related Option and Restricted Stock (or
similar) Agreement or Severance Agreement to the contrary. Executive must notify the Company in
writing within five (5) Business Days after Executive’s Last Day of Employment of Executive’s
Severance Election. Severance compensation and benefits provided under this Section will terminate
immediately if Executive violates Sections 3.02, 3.03, or 3.05 of this Agreement or becomes
reemployed with by any Block Entity.




     (e) Further Obligations. Upon termination of Executive’s employment under this
Agreement, no Block Entity will have any further obligations under this Agreement and no further
payments of Base Salary or other compensation or benefits will be payable by any Block Entity to
Executive, except (i) as set forth in this Section, (ii) as required by the express terms of any
written benefit plans or written arrangements maintained by any Block Entity and applicable to
Executive at the time of such termination of Executive’s employment, or (iii) as may be required
by law. Any termination of this Agreement, however, will not be effective as to Sections 3.02,
3.03 and 3.05, or any other portions or provisions of this Agreement which, by their express
terms, require performance by either party following termination of this Agreement.



ARTICLE TWO




CONFIDENTIALITY




     2.01 Background and Relationship of Parties. The parties hereto acknowledge (for all
purposes, including, without limitation, Articles Two and Three of this Agreement) that the various
Block Entities 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
the various Block Entities and that Executive’s employment creates a relationship of confidence and
trust between Executive and the Block Entities with respect to any information applicable to the
businesses of the Block Entities. Executive will possess or have unfettered access to



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information that has been created, developed, or acquired by the Block Entities or otherwise
become known to the Block Entities and which has commercial value in the businesses in which the
Block Entities have been and will be engaged and has not been publicly disclosed by the Block
Entities. 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.




     2.02 Proprietary Information is Property of Block.



     (a) All Proprietary Information is the sole property of Block (or the applicable Block Entity)
and its assigns, and Block (or the applicable Block Entity) is the sole owner of all patents,
copyrights, trademarks, names, and other rights in connection therewith and without regard to
whether Block (or any applicable Block Entity) is at any particular time developing or marketing
the same. Executive hereby assigns to Block 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.



     (b) In the event of any termination of Executive’s employment hereunder, 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 any Block Entity 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 the Company or any other Block Entity 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 THREE




NON-HIRING;
NON-SOLICITATION; NO CONFLICTS; NON-COMPETITION




     3.01 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 and
the other Block Entities concerning the employees of the Block Entities (collectively, “Block
Employees”) and, in addition to Executive’s access to such information, Executive may, during
(and in the course of) Executive’s



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employment by the Company, develop relationships with such Block Employees whereby information
valuable to the various Block Entities concerning the Block Employees was acquired by Executive.
Such information includes, without limitation: the identity, skills, and performance levels of the
Block Employees, as well as compensation and benefits paid to such Block Employees. Executive
agrees and understands that it is important to protect the Block Entities and the Block Employees,
and the various agents, directors, clients and other representatives of the Block Entities from
the unauthorized use and appropriation of Block Employee information, Proprietary Information, and
trade secret business information developed, held, or used by any Block Entity, and to protect the
Block Entities, the Block Employees and the agents, directors, customers and other representatives
of the Block Entities, Executive agrees to the covenants described in this Article Three.




     3.02 Non-Hiring. During the period of Executive’s employment hereunder, and for a
period of one (1) year after Executive’s Last Day of Employment, Executive may not directly or
indirectly recruit, solicit, or hire any Block Employee or otherwise induce any such Block Employee
to leave the employment 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 one (1)- 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.



     3.03 Non-Solicitation. During the period of Executive’s employment hereunder and during
the time Executive is receiving payments hereunder, and for two (2) years after the later of
Executive’s Last Day of Employment or cessation of such payments, 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 any Block Entity for the purpose of engaging in any
business transaction of the nature performed by such Block Entity, or contemplated to be performed
by such Block Entity, for such customer, provided that this Section 3.03 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 (2)-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.



     3.04 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 any Block
Entity, 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



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Executive may have to former employers and Executive will fulfill all such obligations during
Executive’s employment with the Company.




     3.05 Non-Competition. During the period of Executive’s employment
hereunder and during the time Executive is receiving payments hereunder, and for two (2) years
after the later of Executive’s Last Day of Employment or cessation of such payments, Executive may
not engage in, or own or control any interest in (except as a passive investor in less than one
percent (1%) of the outstanding securities of publicly held companies), or act as an officer,
director or employee of, or consultant, advisor or lender 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).
“Line of Business of Block” means any line of business (including lines of business under
evaluation or development) of the Company, as well as any one or more lines of business (including,
without limitation, lines of business under evaluation or development) of any Block Entity with
which Executive was involved during the two (2)-year period preceding Executive’s Last Day of
Employment, provided that, “Line of Business of Block” will, in all events, include, but not be
limited to, the business conducted by Taxnet Inc. on and before the date hereof, and the business,
and any related products and services, related to the preparation of tax returns, whether on-line,
electronically or professionally assisted, including, without limitation, through the use or sale
of software, and provided further that if Executive’s employment was, as of the Last Day of
Employment or during the two (2)-year period immediately prior to the Last Day of Employment, with
the Company or any successor entity thereto, “Line of Business of Block” means any line of business
(including lines of business under evaluation or development) of any Block Entity. Notwithstanding
the foregoing, for purposes hereof, “Line of Business of Block” shall not include the
Equipment Leasing Activities. The running of the two (2)-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.



     3.06 Reasonableness of Restrictions. Executive, for the benefit of the Company
and each other Block Entity, 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.



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ARTICLE FOUR




MISCELLANEOUS




     4.01 Third-Party Beneficiary. The parties hereto agree that each other Block Entity
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 each other Block Entity is entitled to all of the rights and privileges associated with such
third-party-beneficiary status.



     4.02 Entire Agreement. This Agreement 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 or any
other Block Entity 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.



     4.03 Specific Performance by Executive. The parties hereto acknowledge that money
damages alone will not adequately compensate the Company or any other Block Entity or Executive for
breach of any of the covenants and agreements 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.



     4.04 Successors and Assigns. This Agreement is binding upon Executive and the heirs,
executors, assigns and administrators of Executive or Executive’s estate and property and will
inure to the benefit of the Company each other Block Entity and their successors 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 any other Block Entity with the consent of
Executive, in which case, after such assignment, the
“Company” means such other Block Entity to
whom this Agreement has been assigned.



     4.05 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.



     4.06 Indemnification. To the fullest extent permitted by law and its 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,



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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, employee, or agent of the Company or Block or serving in
such capacity for another corporation at the request of the Company. Notwithstanding the
foregoing, the indemnification provided in this Section 4.06 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.




     4.07 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 and Block
Entity, whether under the terms hereof, under the terms of the Stock Purchase Agreement, or
otherwise.



     4.08 Waiver of Jury Trial. Both parties to this Agreement, and Block, as a
third-party beneficiary pursuant to Section 4.01 of this Agreement, waive any and all right to any
trial by jury in any action or proceeding directly or indirectly related to this Agreement and
Executive’s employment hereunder.



     4.09 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 or mailed, postage prepaid to
Executive at: Thomas A. Allanson, 1632 Brahms Road, Cardiff by the Sea, California 92007, with a
copy to James W. Baker, Esq., The Law Office of James W. Baker, 10636 Scripps Summit Ct., Ste. 115,
San Diego, CA 92131, and to the Company at: 4400 Main Street, Kansas City, Missouri 64111, Attn:
President, with copies to H&R Block, Inc., 4400 Main Street, Kansas City, Missouri 64111,
Attention: General Counsel, and Thomas P. Sanders, Leonard, Street and Deinard Professional
Association, 150 South Fifth Street, Suite 2300, Minneapolis, Minnesota 55402; or to such other
address and/or person designated by either party in writing to the other party. Any notice given by
mail will be deemed given as of the date it is so mailed and postmarked or received by a nationally
recognized overnight courier for delivery.



     4.10 Counterparts. This Agreement may be signed in counterparts and delivered by
facsimile transmission confirmed promptly thereafter by actual delivery of executed counterparts.



[Balance of this page left blank intentionally.]




12









 





     Executed as a sealed instrument under, and to be governed by, construed and enforced in
accordance with, the internal laws of the State of Missouri, without regards to its conflicts of
laws provisions.



EXECUTIVE:




	 	 	 	 	 
	Dated: July     , 2005 	/s/ Thomas A. Allanson
 	 
	 	Thomas A. Allanson 	 



Accepted and Agreed:




H & R Block Digital Tax Solutions, LLC, 

a Delaware limited liability company




	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 






Dated: July     , 2005




13









 





     Executed as a sealed instrument under, and to be governed by, construed and enforced in
accordance with, the internal laws of the State of Missouri, without regards to its conflicts of
laws provisions.



EXECUTIVE:




	 	 	 	 	 
	Dated: July      , 2005 	
 	 
	 	Thomas A. Allanson                                                 	 



Accepted and Agreed:




H & R Block Digital Tax Solutions, LLC,

a Delaware limited liability company




	 	 	 	 	 
	By:

	 	/s/ Jeff Yabuki
 

Name: Jeff Yabuki
	 	 
	 

	 	Title: President	 	 






Dated: July     , 2005




14









 





EXHIBIT A



Severance Plan




[See attached.]




 









 





EXHIBIT A




H&R BLOCK SEVERANCE PLAN

Amended and Restated August 11, 2003



1. Purpose. The H&R Block Severance Plan is a welfare benefit plan established by HRB Management,
Inc., an indirect subsidiary of H&R Block, Inc., for the benefit of certain subsidiaries of H&R
Block, Inc. in order to provide severance compensation and benefits to certain employees of such
subsidiaries whose employment is involuntarily terminated under the conditions set forth herein.
This document constitutes both the plan document and the summary plan description required by the
Employee Retirement Income Security Act of 1974.



2. Definitions.





(a) “Cause” means one or more of the following grounds of an Employee’s
termination of employment with a Participating Employer:




(i) misconduct that interferes with or prejudices the proper conduct of the
Company, the Employee’s Participating Employer, or any other affiliate of the
Company, or which may reasonably result in harm to the reputation of the Company,
the Employee’s Participating Employer, or any other affiliate of the Company;




(ii) commission of an act of dishonesty or breach of trust resulting or intending
to result in material personal gain or enrichment of the Employee at the expense of
the Company, the Employee’s Participating Employer, or any other affiliate of the
Company;




(iii) commission of an act materially and demonstrably detrimental to the good will
of the Company, the Employee’s Participating Employer, or any other affiliate of
the Company, which act constitutes gross negligence or willful misconduct by the
Employee in the performance of the Employee’s material duties;




(iv) material violations of the policies or procedures of the Employee’s
Participating Employer, including, but not limited to, the H&R Block Code of
Business Ethics & Conduct, except those policies or procedures with respect to
which an exception has been granted under authority exercised or delegated by the
Participating Employer;




(v) disobedience, insubordination or failure to discharge employment duties;




(vi) conviction of, or entrance of a plea of guilty or no contest, to a misdemeanor
(involving an act of moral turpitude) or a felony;




(vii) inability of the Employee, the Company, the Employee’s Participating
Employer, and/or any other affiliate of the Company to participate, in whole or in
part, in any activity subject to governmental regulation as the result of any
action or inaction on the part of the Employee;



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(viii) the Employee’s death or total and permanent disability. The term “total and
permanent disability” will have the meaning ascribed thereto under any long-term disability
plan maintained by the Employee’s Participating Employer;




(ix) any grounds described as a discharge or other similar term on the Participating
Employer’s separation review form or other similar document stating the reason for the
Employee’s termination of employment, including poor performance; or




(x) any other grounds of termination of employment that the Participating Employer deems
for cause.




Notwithstanding the definition of Cause above, if an Employee’s employment with a Participating
Employer is subject to an employment agreement that contains a definition of “cause” for purposes
of termination of employment, such definition of “cause” in such employment agreement shall replace
the definition of Cause herein for the purpose of determining whether the Employee has incurred a
Qualifying Termination, but only with respect to such Employee.




(b) “Company” means H&R Block, Inc.




(c) “Employee” means a regular full-time or part-time, active employee of a Participating Employer
whose employment with a Participating Employer is not subject to an employment contract that
contains a provision that includes severance benefits. This definition expressly excludes
employees of a Participating Employer classified as seasonal, temporary and/or inactive and
employees who are customarily employed by a Participating Employer less than 20 hours per week.




(d) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.




(e) “Hour of Service” means each hour for which an individual was entitled to compensation as a
regular full-time or part-time employee from a subsidiary of the Company.




(f) “Line of Business of the Company” with respect to a Participant means any line of business of
the Participating Employer by which the Participant was employed as of the Termination Date, as
well as any one or more lines of business of any other subsidiary of the Company by which the
Participant was employed during the two- year period preceding the Termination Date,
provided that, if Participant’s employment was, as of the Termination Date or
during the two-year period immediately prior to the Termination Date, with HRB Management,
Inc. or any successor entity thereto, “Line of Business of the Company” shall mean any lines of
business of the Company and all of its subsidiaries.




(g) “Monthly Salary” means -



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(i) with respect to an Employee paid on a salary basis, the Employee’s current annual
salary divided by 12; and




(ii) with respect to an Employee paid on an hourly basis, the Employee’s current hourly
rate times the number of hours he or she is regularly scheduled to work per week
multiplied by 52 and then divided by 12.




(h) “Participant” means an Employee who has incurred a Qualifying Termination and has signed a
Release that has not been revoked during any revocation period provided under the Release.




(i) “Participating Employer” means a direct or indirect subsidiary of the Company (i) listed on
Schedule A, attached hereto, which may change from time to time to reflect new Participating
Employers or withdrawing Participating Employers, and (ii) approved by the Plan Sponsor for
participation in the Plan.




(j) “Plan” means the “H&R Block Severance Plan,” as stated herein, and as may be amended from time
to time.




(k) “Plan Administrator” and “Plan Sponsor” means HRB Management, Inc. The address and telephone
number of HRB Management, Inc. is 4400 Main Street, Kansas City, Missouri 64111, (816) 753-6900.
The Employer Identification Number assigned to HRB Management, Inc. by the Internal Revenue
Service is 43-1632589.




(l) “Qualifying Termination” means the involuntary termination of an Employee, but does not
include a termination resulting from:




(i) the elimination of the Employee’s position where the Employee was offered another
position with a subsidiary of the Company at a comparable salary and benefit level, or
where the termination results from a sale of assets or other corporate acquisition or
disposition;




(ii) the redefinition of an Employee’s position to a lower salary rate or
grade;




(iii) the termination of an Employee for Cause; or




(iv) the non-renewal of employment contracts.




(m) “Release” means that agreement signed by and between an Employee who is eligible to
participate in the Plan and the Employee’s Participating Employer under which the Employee
releases all known and potential claims against the Employee’s Participating Employer and all of
such employer’s parents, subsidiaries, and affiliates.




(n) “Release Date” means, with respect to a Release that includes a revocation period, the date
immediately following the expiration date of the revocation period in the Release that has been
fully executed by both parties. “Release Date” means, with



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respect to a Release that does not include a revocation period, the date the Release has
been fully executed by both parties.




(o) “Severance Period” means the period of time during which a Participant may receive
benefits under this Plan. The Severance Period with respect to a Participant begins on
the Termination Date. A Participant’s Severance Period will be the shorter of (i) 12
months or (ii) a number of months equal to the whole number of Years of Service
determined under Section 2(q), unless earlier terminated in accordance with Section 8 of
the Plan.




(p) “Termination Date” means the date the Employee severs employment with a Participating
Employer.




(q) “Year of Service” means each period of 12 consecutive months ending on the Employee’s
employment anniversary date during which the Employee had at least 1,000 Hours of
Service. In determining a Participant’s Years of Service, the Participant will be
credited with a partial Year of Service for his or her final period of employment
commencing on his or her most recent employment anniversary date equal to a fraction
calculated in accordance with the following formula:



Number of days since most recent employment anniversary date

365





Despite an Employee’s Years of Service calculated in accordance with the above, an
Employee whose pay grade at his or her Participating Employer fits in the following
categories at the time of the Qualifying Termination will be credited with no less than
the specified Minimum Years of Service and no more than the specified Maximum Years of
Service listed in the following table as applicable to such pay grade:



	 	 	 	 	 
	Pay Grade	 	Minimum Years of Service	 	Maximum Years of Service
	81-89 and 231-235
	 	6
	 	18
	65-80, 140-145,

185-190, and 218-230
	 	3
	 	18
	57-64, 115-135,

175-180, and 210-217
	 	1
	 	18
	48-56, 100-110,

170, and 200-209
	 	1
	 	18







Notwithstanding the above, if an Employee has received credit for Years of Service under
this Plan or under any previous plan, program, or agreement for the purpose of receiving
severance benefits before a Qualifying Termination, such Years of Service will be
disregarded when calculating Years of Service for such Qualifying Termination under the
Plan; provided, however, that if such severance benefits were terminated prior to
completion because the Employee was rehired by any subsidiary of the Company then the
Employee will be re-credited with full Years of Service for which severance benefits were
not paid in full or in part because of such termination.



A-4









 






	3.	 	Eligibility and Participation.
	 
	 	 	An Employee who incurs a Qualifying Termination and signs a Release that has not been
revoked during any revocation period under the Release is eligible to participate in the
Plan. An eligible Employee will become a Participant in the Plan as of the Termination Date.
	 
	4.	 	Severance Compensation.






(a) Amount. Subject to Section 8, each Participant will receive during the
Severance Period from the applicable Participating Employer aggregate severance compensation
equal to:




(i) the Participant’s Monthly Salary multiplied by the Participant’s Years of
Service; plus




(ii) one-twelfth of the Participant’s target payout under the Short-Term Incentive
Program of the Participating Employer in effect at the time of his or her
Termination Date multiplied by the Participant’s Years of Service; plus




(iii) an amount to be determined by the Participating Employer at its sole
discretion, which amount may be zero.




	 	(b)	 	Timing of Payments. Except as stated in Section 4(c), and subject to Section 8,






(i) the sum of any amounts determined under Sections 4(a)(i) and 4(a)(ii) of the
Plan will be paid in semi-monthly or bi-weekly installments (the timing and amount
of each installment as determined by the Participating Employer) during the
Severance Period beginning after the later of the Termination Date or the Release
Date; and




(ii) any amounts determined under Section 4(a)(iii) of the Plan will be paid in one
lump sum within 15 days after the later of the Termination Date or the Release
Date, unless otherwise agreed in writing by the Participating Employer and
Participant or otherwise required by law.




(c) Death. In the event of the Participant’s death prior to receiving all payments
due under this Section 4, any unpaid severance compensation will be paid (i) in the same
manner as are death benefits under the Participant’s basic life insurance coverage provided
by the Participant’s Participating Employer, and (ii) in accordance with the Participant’s
beneficiary designation under such coverage. If no such coverage exists, or if no
beneficiary designation exists under such coverage as of the date of death of the
Participant, the severance compensation will be paid to the Participant’s estate in one-lump
sum.



A-5









 






	5.	 	Health and Welfare Benefits.






(a) Benefits. In addition to the severance compensation provided pursuant to
Section 4 of the Plan, a Participant may continue to participate in the following health and
welfare benefits provided by his or her Participating Employer during the Severance Period
on the same basis as employees of the Participating Employer:




(i) medical;




(ii) dental;




(iii) vision;




(iv) employee assistance;




(v) medical expense reimbursement and dependent care expense reimbursement benefits
provided under a cafeteria plan;




(vi) life insurance (basic and supplemental); and




(vii) accidental death and dismemberment insurance (basic and supplemental).




For the purposes of any of the above-described benefits provided under a Participating
Employer’s cafeteria plan, a Qualifying Termination constitutes a “change in status” or
“life event.”




(b) Payment and Expiration. Payment of the Participant’s portion of contribution or
premiums for such selected benefits will be withheld from any severance
compensation payments paid to the Participant under this Plan. The Participating
Employer’s partial subsidization of such coverages will remain in effect until the earlier
of:




(i) the expiration or earlier termination of the Employee’s Severance Period, after
which time the Participant may be eligible to elect to continue coverage of those
benefits listed above that are provided under group health plans in accordance with
his or her rights under Section 4980B of the Internal Revenue Code; or




(ii) the Participant’s attainment of or eligibility to attain health and welfare
benefits through another employer after which time the Participant may be eligible
to elect to continue coverage of those benefits listed above that are provided under
group health plans in accordance with his or her rights under Section 4980B of the
Internal Revenue Code.



A-6









 






	6.	 	Stock Options.






(a) Accelerated Vesting. Any portion of any outstanding incentive stock
options and nonqualified stock options that would have vested during the 18-month
period following the Termination Date had the Participant remained an employee with
the Participating Employer during such 18-month period will vest as of the
Termination Date. This Section 6(a) applies only to options (i) granted to the
Participant under the Company’s 1993 Long-Term Executive Compensation Plan, or any
successor plan to its 1993 Long-Term Executive Compensation Plan, not less than 6
months prior to his or her Termination Date and (ii) outstanding at the close of
business on such Termination Date. The determination of accelerated vesting under
this Section 6(a) shall be made as of the Termination Date and shall be based solely
on any time-specific vesting schedule included in the applicable stock option
agreement without regard to any accelerated vesting provision not related to the
Plan in such agreement.




(b) Post-Termination Exercise Period. Subject to the expiration dates and
other terms of the applicable stock option agreements, the Participant may elect to
have the right to exercise any outstanding incentive stock options and nonqualified
stock options granted prior to the Termination Date to the Participant under the
Company’s 1984 Long-Term Executive Compensation Plan, its 1993 Long-Term Executive
Compensation Plan, or any successor plan to its 1993 Long-Term Executive
Compensation Plan that are vested as of the Termination Date (or, if later, the
Release Date), whether due to the operation of Section 6(a), above, or otherwise, at
any time during the Severance Period and, except in the event that the Severance
Period terminates pursuant to Section 8(a), for a period up to 3 months after the
end of the Severance Period (notwithstanding Section 8). Any such election shall
apply to all outstanding incentive stock options and nonqualified stock options,
will be irrevocable and must be made in writing and delivered to the Plan
Administrator on or before the later of the Termination Date or Release Date. If the
Participant fails to make an election, the Participant’s right to exercise such
options will expire 3 months after the Termination Date.




(c) Stock Option Agreement Amendment. The operation of Sections 6(a) and
6(b), above, are subject to the Participant’s execution of an amendment to any
affected stock option agreements, if necessary.


7. Outplacement Services. In addition to the benefits described above, career transition counseling
or outplacement services may be provided upon the Participant’s Qualifying Termination. Such
outplacement service will be provided at the Participating Employer’s sole discretion.
Outplacement services are designed to assist employees in their search for new employment and to
facilitate a smooth transition between employment with the Participating Employer and
employment with another employer. Any outplacement services provided under this Plan will be
provided by an outplacement service chosen by the Participating Employer. The Participant is not
entitled to any monetary payment in lieu of outplacement services.




A-7









 




8. Termination of Benefits. Any right of a Participant to severance compensation and benefits under
the Plan, and all obligations of his or her Participating Employer to pay any unpaid severance
compensation or provide benefits under the Plan will terminate as of the day:





(a) The Participant has engaged in any conduct described in Sections 8(a)(i), 8(a)(ii),
8(a)(iii) or 8(a)(iv), below, as the same may be limited pursuant to Section 8(a)(vi).




(i) During the Severance Period, the Participant’s engagement in, ownership
of, or control of any interest in (except as a passive investor in less than
one percent of the outstanding securities of publicly held companies), or
acting as an officer, director or employee of, or consultant, advisor or
lender 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 the Company,
provided that this Section 8(a)(i) shall not apply to the Participant if the
Participant’s primary place of employment by a subsidiary of the Company as
of the Termination Date is in either the State of California or the State of
North Dakota.




(ii) During the Severance Period, the Participant employs or solicits for
employment by any employer other than a subsidiary of the Company any
employee of any subsidiary of the Company, or recommends any such employee
for employment to any employer (other than a subsidiary of the Company) at
which the Participant is or intends to be (A) employed, (B) a member of the
Board of Directors, (C) a partner, or (D) providing consulting services.




(iii) During the Severance Period, the Participant directly or indirectly
solicits or enters into any arrangement with any person or entity which is,
at the time of the solicitation, a significant customer of a subsidiary of
the Company for the purpose of engaging in any business transaction of the
nature performed by such subsidiary, or contemplated to be performed by such
subsidiary, for such customer, provided that this Section 8(a)(iii) shall
only apply to customers for whom the Participant personally provided
services while employed by a subsidiary of the Company or customers about
whom or which the Participant acquired material information while employed
by a subsidiary of the Company.




(iv) During the Severance Period, the Participant misappropriates or
improperly uses or discloses confidential information of the Company and/or
its subsidiaries.




(v) If the Participant engaged in any of the conduct described in Sections
8(a)(i), 8(a)(ii), 8(a)(iii) or 8(a)(iv) during or after Participant’s term
of employment with a Participating Employer, but prior to the



A-8









 






commencement of the Severance Period, and such engagement becomes known to
the Participating Employer during the Severance Period, such conduct shall
be deemed, for purposes of Sections 8(a)(i), 8(a)(ii), 8(a)(iii) or 8(a)(iv)
to have occurred during the Severance Period.




(vi) If the Participant is a party to an employment contract with a
Participating Employer that contains a covenant or covenants relating to the
Participant’s engagement in conduct that is the same as or substantially
similar to the conduct described in any of Sections 8(a)(i), 8(a)(ii),
8(a)(iii) or 8(a)(iv), and any specific conduct regulated in such covenant
or covenants in such employment contract is more limited in scope
geographically or otherwise than the corresponding specific conduct
described in any of such Sections 8(a)(i), 8(a)(ii), 8(a)(iii) or 8(a)(iv),
then the corresponding specific conduct addressed in the applicable Section
8(a)(i), 8(a)(ii), 8(a)(iii) or 8(a)(iv) shall be limited to the same extent
as such conduct is limited in the employment contract and the Participating
Employer’s rights and remedy with respect to such conduct under this Section
8 shall apply only to such conduct as so limited.




(b) The Participant is rehired by his or her Participating Employer or hired by any other
subsidiary of the Company in any position other than a position classified as seasonal by
such employer.


9. Amendment and Termination. The Plan Sponsor reserves the right to amend the Plan or to
terminate the Plan and all benefits hereunder in their entirety at any time.



10. Administration of Plan. The Plan Administrator has the power and discretion to construe the
provisions of the Plan and to determine all questions relating to the eligibility of employees of
Participating Employers to become Participants in the Plan, and the amount of benefits to which any
Participant may be entitled thereunder in accordance with the Plan. Not in limitation, but in
amplification of the foregoing and of the authority conferred upon the Plan Administrator, the Plan
Sponsor specifically intends that the Plan Administrator have the greatest permissible discretion
to construe the terms of the Plan and to determine all questions concerning eligibility,
participation and benefits. Any such decision made by the Plan Administrator will be binding on
all Employees, Participants, and beneficiaries, and is intended to be subject to the most
deferential standard of judicial review. Such standard of review is not to be affected by any real
or alleged conflict of interest on the part of the Plan Administrator. The decision of the Plan
Administrator upon all matters within the scope of its authority will be final and binding.




11. Claims Procedures.





(a) Filing a Claim for Benefits. Participants are not required to submit claim forms to
initiate payment of benefits under this Plan. To make a claim for benefits, individuals
other than Participants who believe they are entitled to receive benefits under this Plan
and Participants who believe they have been denied certain benefits under the Plan must
write to the Plan Administrator. These individuals and such



A-9









 






Participants are hereinafter referred to in this Section 11 as “Claimants.” Claimants must
notify the Plan Administrator if they will be represented by a duly authorized
representative with respect to a claim under the Plan.




(b) Initial Review of Claims. The Plan Administrator will evaluate a claim for benefits
under the Plan. The Plan Administrator may solicit additional information from the
Claimant if necessary to evaluate the claim. If the Plan Administrator denies all or any
portion of the claim, the Claimant will receive, within 90 days after the receipt of the
written claim, a written notice setting forth:




(i) the specific reason for the denial;




(ii) specific references to pertinent Plan provisions on which the Plan
Administrator based its denial;




(iii) a description of any additional material and information needed for the
Claimant to perfect his or her claim and an explanation of why the material or
information is needed; and




(iv) that any appeal the Claimant wishes to make of the adverse determination must
be in writing to the Plan Administrator within 60 days after receipt of the notice
of denial of benefits. The notice must advise the Claimant that his or her failure
to appeal the action to the Plan Administrator in writing within the 60-day period
will render the Plan Administrator’s determination final, binding and conclusive.
The notice must further advise the Claimant of his or her right to bring a civil
action under Section 502(a) of ERISA following the exhaustion of the claims
procedures described herein.




(c) Appeal of Denied Claim and Final Decision. If the Claimant should appeal to the Plan
Administrator, the Claimant, or his or her duly authorized representative, must submit, in
writing, whatever issues and comments the Claimant or his or her duly authorized
representative feels are pertinent. The Claimant, or his or her duly authorized
representative, may review and request pertinent Plan documents. The Plan Administrator will
reexamine all facts related to the appeal and make a final determination as to whether
the denial of benefits is justified under the circumstances. The Plan
Administrator will advise the Claimant in writing of its decision within 60 days of the
Claimant’s written request for review, unless special circumstances (such as a hearing)
require an extension of time, in which case the Plan Administrator will make a decision as
soon as possible, but no later than 120 days after its receipt of a request for review.


12. Plan Financing. The benefits to be provided under the Plan will be paid by the applicable
Participating Employer, as incurred, out of the general assets of such Participating Employer.



13. General Information. The Plan’s records are maintained on a calendar year basis. The Plan
Number is 509. The Plan is self-administered and is considered a severance plan.




A-10









 




14. Governing Law. The Plan is established in the State of Missouri. To the extent federal
law does not apply, any questions arising under the Plan will be determined under the laws of the
State of Missouri.



15. Enforceability; Severability. If a court of competent jurisdiction determines that any
provision of the Plan is not enforceable, then such provision shall be enforceable to the maximum
extent possible under applicable law, as determined by such court. The invalidity or
unenforceabilty of any provision of the Plan, as determined by a court of competent jurisdiction,
will not affect the validity or enforceability of any other provision of the Plan and all other
provisions will remain in full force and effect.



16. Withholding of Taxes. The applicable Participating Employer may withhold from any benefit
payable under the Plan all federal, state, city or other taxes as may be required pursuant to any
law, governmental regulation or ruling. The Participant shall pay upon demand by the Company or the
Participating Employer any taxes required to be withheld or collected by the Company or the
Participating Employer upon the exercise by the Participant of a nonqualified stock option granted
under the Company’s 1984 Long-Term Executive Compensation Plan or its 1993 Long-Term Executive
Compensation Plan. If the Participant fails to pay any such taxes associated with such exercise
upon demand, the Participating Employer shall have the right, but not the obligation, to offset
such taxes against any unpaid severance compensation under this Plan.



17. Not an Employment Agreement. Nothing in the Plan gives an Employee any rights (or imposes any
obligations) to continued employment by his or her Participating Employer or other subsidiary of
the Company, nor does it give such Participating Employer any rights (or impose any obligations)
for the continued performance of duties by the Employee for the Participating Employer or any other
subsidiary of the Company.



18. No Assignment. The Employee’s right to receive payments of severance
compensation and benefits under the Plan are not assignable or transferable, whether by pledge,
creation of a security interest, or otherwise. In the event of any attempted assignment or
transfer contrary to this Section 18, the applicable Participating Employer will have no liability
to pay any amount so attempted to be assigned or transferred.



19. Service of Process. The Secretary of the Plan Administrator is designated as agent for
service of legal process. Service of legal process may be made upon the Secretary of the Plan
Administrator at:



HRB Management, Inc.

Attn: Secretary

4400 Main Street

Kansas City, Missouri 64111



20. Statement of ERISA Rights. As a participant in the Plan, you are entitled to certain rights
and protections under ERISA, which provides that all Plan Participants are entitled to:





(a) examine without charge, at the Plan Administrator’s office, all documents
governing the Plan and a copy of the latest annual report (Form 5500 Series) filed by



A-11









 






the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of
the Pension and Welfare Benefit Administration;




(b) obtain, upon written request to the Plan Administrator, copies of documents governing
the operation of the Plan, copies of the latest annual report (Form 5500 Series) and an
updated summary plan description. The Plan Administrator may make a reasonable charge for
the copies; and




(c) receive a summary of the Plan’s annual financial report if required to be filed for the
year. The Plan Administrator is required by law to furnish each participant with a copy
of this summary annual report if an annual report is required to be filed for the year.



     In addition to creating rights for Plan Participants, ERISA imposes duties upon the people who
are responsible for the operation of the Plan. The people who operate your Plan, called
“fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and other Plan
Participants and beneficiaries. No one, including your Participating Employer or any other person,
may fire you or otherwise discriminate against you in any way to prevent you from obtaining a
welfare benefit or exercising your rights under ERISA.



     If your claim for a welfare benefit is denied or ignored, in whole or in part, you have the
right to know why this was done, to obtain copies of documents relating to the decision without
charge, and to appeal any denial, all within certain time schedules.



     Under ERISA, there are steps you can take to enforce the above rights. For instance, if you
request a copy of plan documents or the latest annual report from the Plan and do not receive them
within 30 days, you may file suit in a Federal court. In such a case, the court may require the
Plan Administrator to provide the materials to you and pay you up to $110 a day until you receive
the materials, unless the materials were not sent because of reasons beyond the control of the Plan
Administrator. If you have a claim for benefits that is denied or ignored, in whole or in part, you
may file suit in a state or Federal court. If it should happen that you are discriminated against
for asserting your rights, you may seek assistance from the U. S. Department of Labor, or you may
file suit in a Federal court. The court will decide who should pay court costs and legal fees. If
you are successful, the court may order the person you have sued to pay these costs and fees. If
you lose, the court may order you to pay these costs and fees, for example, if it finds your claim
is frivolous.



     If you have any questions about the Plan, you should contact the Plan Administrator. If you
have questions about this statement or about your rights under ERISA, or if you need assistance in
obtaining documents from the Plan Administrator, you should contact the nearest office of the
Pension and Welfare Benefits Administration, U.S. Department of Labor, listed in your telephone
directory or the Division of Technical Assistance and Inquiries, Pension and Welfare Benefits
Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.
You may also obtain certain publications about your rights and responsibilities under ERISA by
calling the publications hotline of the Pension and Welfare Benefits Administration.



A-12









 




IN WITNESS WHEREOF, HRB Management, Inc. adopts this Severance Plan, as amended and restated,
effective this 11th day of August, 2003.




	 	 	 	 	 
	 	HRB MANAGEMENT, INC.

 	 
	 	/s/ Mark A. Ernst
 	 
	 	Mark A. Ernst 	 
	 	President and Chief Executive Officer 	 
	 




A-13









 





Schedule A




Participating Employers




Block Financial Corporation




Financial Marketing Services, Inc.




Franchise Partner, Inc.




H&R Block Investments, Inc.




H&R Block Services, Inc. and its U.S.-based direct and indirect subsidiaries




HRB Business Services, Inc.




H&R Block Small Business Resources, Inc.




HRB Management, Inc.




HRB Retail Services, Inc.



OLDE Financial Corporation and its U.S.-based direct and indirect subsidiaries, which subsidiaries
include H&R Block Financial Advisors, Inc.




A-14









 





AMENDMENT NO. 1

TO THE

H&R BLOCK SEVERANCE PLAN



HRB Management, Inc. (the “Company”) adopted the H&R Block Severance Plan (the “Plan”), effective
as of April 23, 2001 (Amended and Restated August 11, 2003). Section 9 of the Plan provides that
the Plan Sponsor may amend the Plan at any time.



This Amendment amends the Plan as amended and restated effective August 11, 2003, as well as
certain prior versions of the Plan, as detailed below.




AMENDMENT




     1. Section 2 is amended, effective May 1, 2004, by deleting Section 2(q) in its
entirety replacing with the following:




2(q) “Year of Service” means each period of 12 consecutive months ending on the
Employee’s employment anniversary date during which the Employee had at least 1,000
Hours of Service. In determining a Participant’s Years of Service, the Participant
will be credited with a partial Year of Service for his or her final period of
employment commencing on his or her most recent employment anniversary date equal
to a fraction calculated in accordance with the following formula:



Number of days since most recent employment anniversary date

365





Despite an Employee’s Years of Service calculated in accordance with the above, an
Employee whose pay grade at his or her Participating Employer fits in the following
categories at the time of the Qualifying Termination will be credited with no less
than the specified Minimum Years of Service and no more than the specified Maximum
Years of Service listed in the following table as applicable to such pay grade:



	 	 	 	 	 
	Pay Grade	 	Minimum Years of Service	 	Maximum Years of Service
	81 and above
	 	6
	 	18
	65-80, 140-145, 185-190
	 	3
	 	18
	58-64, 117-135, 173-180, 299
	 	1
	 	18
	30-43, 100-116, 170-172, 298
	 	1
	 	18






 









 






Notwithstanding the above, if an Employee has received credit for Years of Service
under this Plan or under any previous plan, program, or agreement for the purpose of
receiving severance benefits before a Qualifying Termination, such Years of Service
will be disregarded when calculating Years of Service for such Qualifying
Termination under the Plan; provided, however, that if such severance benefits were
terminated prior to the completion because the Employee was rehired by any
subsidiary of the Company then the Employee will be re-credited with full Years of
Service for which severance benefits were not paid in full or in part because of
such termination.



     2. Section 5, “Health and Welfare Benefits” is deleted in its entirety and replaced
with the following, effective January 1, 2004:



     5. Health and Welfare Benefits.




(a) Benefits. In addition to the severance compensation provided pursuant
to Section 4 of the Plan, a Participant may continue to participate in the following
health benefits provided by his or her Participating Employer during the Continuing
Coverage Period on the same basis as employees of the Participating Employer:




(i). medical;




(ii). dental;




(iii). vision;




(b) Other Benefits. In addition to the severance compensation provided
pursuant to Section 4 of the Plan, a Participant may continue to participate in the
following health benefits provided by his or her Participating Employer during the
Severance Period on the same basis as employees of the Participating Employer:




(i). employee assistance;




(ii). medical expense reimbursement and dependent care expense reimbursement
benefits provided under a cafeteria plan;




(iii). life insurance (basic and supplemental); and




(iv). accidental death and dismemberment insurance (basic and
supplemental).



2









 






For the purposes of any of the above-described benefits provided under a Participating
Employer’s cafeteria plan, a Qualifying Termination constitutes a “change in status” or
“life event.”




(c) Payment and Expiration. Payment of the Participant’s portion of contribution or
premiums for such selected benefits will be withheld from any severance compensation
payments paid to the Participant under this Plan. The Participating Employer’s partial
subsidization of such coverages will remain in effect until the earlier of




	 	(i)	 	the expiration of earlier termination of the Employee’s
Severance Period, after which the Participant may be eligible to elect to
continue coverage of those benefits listed above that are provided under group
health plans in accordance with his or her rights under Section 4980B of the
Internal Revenue Code; or
	 
	 	(ii)	 	the Participant’s attainment of or eligibility to attain
health and welfare benefits through another employer after which time the
Participant may be eligible to elect to continue coverage of those benefits
listed above that are provided under group health plans in accordance with his
or her rights under Section 4980B of the Internal Revenue Code.





     IN WITNESS
WHEREOF, HRB Management, Inc. has adopted this Amendment No. 1 to
the H&R Block Severance Plan, this            day of May, 2004.



	 	 	 	 	 
	 	HRB
Management, inc.

 	 
	Date:                      	By:  	/s/ Mark A. Ernst
 	 
	 	 	Mark A. Ernst 	 
	 	 	President and Chief Executive Officer 	 
	 




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