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                                                                    EXHIBIT 10.4

                              EMPLOYMENT AGREEMENT

            THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of
December 2, 2002, by and between HRB Management, Inc., a Missouri corporation
(the "Company"), and Tammy S. Serati ("Executive").

                                   ARTICLE ONE

                                   EMPLOYMENT

            1.01 - Agreement as to Employment. Effective December 2, 2002 (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, subject to the terms 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, Human Resources, and, conditioned on election by the Board of
Directors of H&R Block, Inc. ("Block"), the Senior Vice President, Human
Resources of Block, a Missouri corporation and the indirect parent corporation
of the Company, subject to the authority and direction of the Board of Directors
of Block and the Chief Executive Officer of Block. Subject to the foregoing,
Executive will have such authority and responsibility and duties as stated in
the job description for the position of Senior Vice President, Human Resources,
which has been provided to Executive on or before the Employment Date. The
Company reserves the right to modify, delete, add, or otherwise change
Executive's job responsibilities and job description, in its sole discretion, at
any time. Executive will perform such other duties, which may be beyond the
scope of the job description, as are assigned to Executive from time to time.

            (b) So long as Executive is employed under this Agreement, Executive
agrees to devote Executive's full business time and efforts exclusively on
behalf of the Company and to competently and diligently discharge Executive's
duties hereunder. 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 acknowledges having read and understood.
Executive will comply fully with all reasonable policies of the Company as are
from time to time in effect and applicable to Executive's position. Executive
understands that the business of Block, the Company, and/or any other direct or
indirect subsidiary of Block (each such other subsidiary an "Affiliate") may be
subject to governmental regulation, some of which may require Executive to
submit to background investigation as a condition of Block, the Company, and/or
Affiliates'


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participation in certain activities subject to such regulation. If Executive,
Block, the Company, or Affiliates 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) Signing Bonus. Subject to approval by the Compensation Committee
of the Board of Directors of Block and Board of Directors of Block itself, the
Company shall pay to Executive a $30,000 bonus within 30 days after the
Employment Date. If Executive voluntarily terminates Executive's employment with
the Company within 13 months after the Employment Date, Executive will reimburse
the Company the $30,000 on or before the 30th day after the effective date of
such termination.

            (b) Base Salary. The Company will pay to Executive a gross salary at
an annual rate of $220,000 ("Base Salary"), payable semimonthly or at any other
pay periods as the Company may use for its other executive-level employees. The
Base Salary will be reviewed for 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.

            (c) Short-Term Incentive Compensation. Executive shall participate
in the H&R Block Short-Term Incentive Plan and the discretionary short-term
incentive program. Under such Plan and program, Executive shall have an
aggregate target bonus for fiscal year 2003 of $88,000 and an opportunity to
earn 200% of such target bonus. The payment of the actual award under such Plan
and program shall be based upon such performance criteria which shall be
determined by the Compensation Committee of Block. Under such Plan and program,
for fiscal year 2003 only, Executive's actual incentive compensation shall be
prorated based upon the number of months during such year that Executive is
actually employed by the Company, provided that Executive must remain employed
through April 30, 2003 to receive any payments under the Plan and program. Such
incentive compensation shall be paid to Executive following the completion of
fiscal year 2003 when the same is paid to other senior executives of the
Company.

            (d) Stock Options. As authorized under the H&R Block 1993 Long-Term
Executive Compensation Plan, as amended (the "1993 Plan"), Executive shall be
granted on the Employment Date a stock option under the 1993 Plan to purchase
20,000 shares of Block's common stock at an option price per share equal to its
closing price 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 (6,666) of the shares covered thereby on the second
anniversary of the date of grant, as to an additional one-third (6,667) of such
shares on the third anniversary of the date of grant, and as to the remaining
one-third (6,667) of the shares on the fourth 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


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option.

            (e) Restricted Stock. Subject to approval by the Compensation
Committee of the Board of Directors of Block and Board of Directors of Block
itself, Executive shall be awarded promptly after the Employment Date, 1,000
Restricted Shares of Block's common stock under the 1993 Plan. One-third of the
1,000 shares shall vest (i.e., the restrictions on such shares shall terminate),
respectively, on each of the first three anniversaries following such employment
commencement date (in increments of 333, 333 and 334 whole shares). 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 shareholders of Block.

            1.04 - Relocation Benefits.

            (a) The Company will reimburse Executive for reasonable packing,
shipping, transportation costs and other expenses incurred by Executive in
relocating Executive, Executive's family and personal property to the Greater
Kansas City Area, in accordance with the H&R Block Executive Relocation Program.

            (b) To the extent that Executive incurs taxable income related to
any relocation benefits paid pursuant to this Agreement, the Company will pay to
Executive such additional amount as is necessary to "gross up" such benefits and
cover the anticipated income tax liability resulting from such taxable income.

            1.05 - Business Expenses. 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 the conduct by Executive of the Company's business.

            1.06 - Fringe Benefits. During the term of Executive's employment
hereunder, and subject to the discretionary authority given to the 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 executive-level employees
of the Company or Affiliates.

            1.07 - 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 Block, the Company or any Affiliate
      or which


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      may reasonably result in harm to the reputation of Block, the Company
      and/or any Affiliate; or

                  (ii) Executive's commission of an act materially and
      demonstrably detrimental to the good will of Block or any subsidiary of
      Block, which act constitutes gross negligence or willful misconduct by
      Executive in the performance of Executive's material duties to Block or
      such subsidiary; 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 Block or any subsidiary of
      Block; 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 disobedience, insubordination or failure to
      discharge Executive's duties; or

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

                  (viii) The inability of Executive, Block, the Company, and/or
      an Affiliate 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

                  (ix) 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 the Company or
      Block for executives of the Company.

            (b) With Notice. Either party may terminate this Agreement for any
reason, or no reason, by providing not less than 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 45th day after such notice is deemed to have been 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 180-day period following the date of the occurrence
      of a "Change of Control" of Block then, upon any such termination of
      Executive's employment and conditioned on Executive's execution of an
      agreement with the


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      Company under which Executive releases all known and potential claims
      against Block, the Company, and Affiliates, the Company will provide
      Executive with Executive's election (the "Change of Control Election") of
      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 or any Affiliate (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 5
      business days after Executive's Last Day of Employment of Executive's
      Change of Control Election. Severance compensation and benefits provided
      under this Section 1.07(c) will terminate immediately if Executive
      violates Sections 3.02, 3.03, or 3.05 of this Agreement or becomes
      reemployed with the Company or an Affiliate.

                  (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 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 Block or any of its subsidiaries,
            or any employee benefit plan (or related trust) of Block or its
            subsidiaries, or any corporation with respect to which, following
            such acquisition, more than 50% of the then outstanding voting
            securities of such corporation entitled to vote generally in the
            election of directors is then beneficially owned, directly or
            indirectly, by all or substantially all of the 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


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            individual whose initial assumption of office is in connection with
            an actual or threatened election contest relating to the election of
            the directors of Block (as such terms are used in Rule 14a-11 of
            Regulation 14A promulgated under the Exchange Act); or

                        (C) the completion of a reorganization, merger or
            consolidation 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
            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 executes an agreement with the
Company under which Executive releases all known and potential claims against
Block, the Company, and Affiliates. Such compensation and benefits will be
Executive's election (the "Severance Election") of the same level of severance
compensation and benefits as would be provided under the Severance Plan as such
plan exists either (i) on the date of this Agreement or (ii) Executive's Last
Day of Employment; provided, however, Executive will be credited with the lesser
of (A) one-twelfth of Executive's target payout under the H&R Block Short-Term
Incentive Plan and the discretionary short-term incentive program as of the
Executive's Last Day of Employment, or (B) one-twelfth of Executive's actual
payout under the H&R Block Short-Term Incentive Plan and the discretionary
short-term incentive program for the fiscal year ended immediately prior to
Executive's Last Day of Employment for the purpose of determining severance
compensation under Section 4(a)(ii) 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. 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 5 business days after Executive's Last Day of
Employment of Executive's Severance Election. Severance compensation and
benefits provided under this Section 1.07(d) will terminate immediately if
Executive violates Sections 3.02, 3.03, or 3.05 of this Agreement or becomes
reemployed with the Company or an Affiliate.

            (e) Further Obligations. Upon termination of Executive's employment
under this Agreement, neither the Company, Block, nor any Affiliate will have
any further obligations under this Agreement and no further payments of Base
Salary or


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other compensation or benefits will be payable by the Company, Block, or any
Affiliate to Executive, except (i) as set forth in this Section 1.07, (ii) as
required by the express terms of any written benefit plans or written
arrangements maintained by the Company or Block 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 Block and its subsidiaries 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 Company and Block and that Executive's employment
creates a relationship of confidence and trust between Executive and Block with
respect to any information applicable to the businesses of Block and its
subsidiaries. Executive will possess or have unfettered access to information
that has been created, developed, or acquired by Block and its subsidiaries or
otherwise become known to Block and its subsidiaries and which has commercial
value in the businesses in which Block and its subsidiaries have been and will
be engaged and has not been publicly disclosed by Block. 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 subsidiary of Block) and its assigns, and Block (or the
applicable subsidiary of Block) is the sole owner of all patents, copyrights,
trademarks, names, and other rights in connection therewith and without regard
to whether Block (or any subsidiary of Block) 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 or any Affiliate,
Executive will keep in strictest confidence and trust all Proprietary
Information and Executive will not use or disclose any Proprietary Information
without


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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 Block or any subsidiary of Block and obtained during the course of
Executive's employment with the Company. In addition, upon such termination,
Executive will not remove from the premises of Block or any subsidiary of Block
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 Block concerning the employees of Block
and its subsidiaries ("Block Employees") and, in addition to Executive's access
to such information, Executive may, during (and in the course of) Executive's
employment by the Company, develop relationships with such Block Employees
whereby information valuable to Block and its subsidiaries 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 by Block to such Block Employees.
Executive agrees and understands that it is important to protect Block, the
Company, Affiliates and their employees, agents, directors, and clients from the
unauthorized use and appropriation of Block Employee information, Proprietary
Information, and trade secret business information developed, held, or used by
Block, the Company, or Affiliates, and to protect Block, the Company, and
Affiliates and their employees, agents, directors, and customers Executive
agrees to the covenants described in this Article III.

            3.02 - Non-Hiring. During the period of Executive's employment
hereunder, and for a period of 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 of
Block (or the applicable employer-subsidiary of Block) 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
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
2


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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 the Company or an Affiliate for the purpose of
engaging in any business transaction of the nature performed by the Company or
such Affiliate, or contemplated to be performed by the Company or such
Affiliate, 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 an Affiliate or customers about whom or which Executive acquired
material information while employed by the Company or an Affiliate. The running
of the 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 the Company or Block nor
will Executive use in the performance of employment responsibilities at the
Company any proprietary materials or documents of a former employer that are not
generally available to the public, unless Executive has obtained express written
authorization from such former employer for their possession and use. Executive
has not and will not breach any obligation of confidentiality that Executive may
have to former employers and Executive will fulfill all such obligations during
Executive's employment with the Company.

            3.05 - Non-Competition. During the period of Executive's employment
hereunder and during the time Executive is receiving payments hereunder, and for
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 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), provided that this Section
3.05 will not apply to Executive if Executive's primary place of employment by
the Company or an Affiliate as of the Last Day of Employment is in either the
State of California or the State of North Dakota. "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 lines of business under evaluation or development) of any Affiliate
by which Executive was employed during the two-year period preceding the Last
Day of Employment, provided that, "Line of Business of Block" will in all events
include, but not be limited to, the income tax return preparation business, and
provided further that if Executive's employment was, as of the Last Day of
Employment or during the 2-year period immediately prior to the Last Day of
Employment, with HRB Management, Inc. or any successor entity thereto, "Line of
Business of Block" means any line of business (including lines of business under
evaluation or development) of Block and all of its subsidiaries. The


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<PAGE>

running of the 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 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.

                                  ARTICLE FOUR

                                  MISCELLANEOUS

            4.01 - Third-Party Beneficiary. The parties hereto agree that Block
is a third-party beneficiary as to the obligations imposed upon Executive under
this Agreement and as to the rights and privileges to which the Company is
entitled pursuant to this Agreement, and that Block is entitled to all of the
rights and privileges associated with such third-party-beneficiary status.

            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, Block, or
Executive to insist upon strict compliance with any of the terms, covenants, or
conditions hereof will not be deemed a waiver of such terms, covenants, and
conditions.

            4.03 - Specific Performance by Executive. The parties hereto
acknowledge that money damages alone will not adequately compensate the Company
or Block or Executive for breach of any of the covenants and agreements 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,
Block 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 an Affiliate with the consent of Executive, in which
case, after such assignment, the "Company" means the Affiliate to which this
Agreement has been


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<PAGE>

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. This Section 4.05 does not affect the
Company's obligation to "gross up" any relocation benefits paid to Executive
pursuant to Subsection 1.04(b).

            4.06 - Indemnification. To the fullest extent permitted by law and
Block's Bylaws, the Company hereby indemnifies during and after the period of
Executive's employment hereunder Executive from and against all loss, costs,
damages, and expenses including, without limitation, legal expenses of counsel
selected by the Company to represent the interests of Executive (which expenses
the Company will, to the extent so permitted, advance to executive as the same
are incurred) arising out of or in connection with the fact that Executive is or
was a director, officer, employee, or agent of the Company or Block or serving
in such capacity for another corporation at the request of the Company or Block.
Notwithstanding the foregoing, the indemnification provided in this Section 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 Block, the Company, or
Affiliates.

            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: 4400 Main
Street, Kansas City, Missouri 64111; and to the Company at: 4400 Main Street,
Kansas City, Missouri 64111, Attn: President, with a copy to H&R Block, Inc.,
4400 Main Street, Kansas City, Missouri 64111, Attn: Corporate Secretary; or to
such other address and/or person designated by either party in writing to the
other party. Any notice given by mail 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.


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<PAGE>

      Executed as a sealed instrument under, and to be governed by, construed
and enforced in accordance with, the laws of the State of Missouri.

                                         EXECUTIVE:

Dated: 12-2-02                           /s/ Tammy S. Serati
                                         ---------------------------------------
                                             Tammy S. Serati


Accepted and Agreed:

HRB MANAGEMENT, INC.
a Missouri corporation

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

Dated: 2 Dec. 2002


                                       12
<PAGE>

                                                                       EXHIBIT A

                            H&R BLOCK SEVERANCE PLAN
                           (AS AMENDED APRIL 15, 2002)

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) "Company" means H&R Block, Inc.

      (b) "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 seasonal,
      temporary and inactive employees of a Participating Employer and employees
      who are customarily employed by a Participating Employer less than 20
      hours per week.

      (c) "ERISA" means the Employee Retirement Income Security Act of 1974, as
      amended.

      (d) "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.

      (e) "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.


                                      A-1
<PAGE>

      (f) "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.

      (g) "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.

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

      (i) "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.

      (j) "Qualifying Termination" means the involuntary termination of an
      Employee, but does NOT include a termination resulting from:

            (i) the termination of an Employee as a result of 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;

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

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

            (iv) the non-renewal of employment contracts.

      (k) "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.

      (l) "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 respect to a Release that does not
      include a


                                      A-2
<PAGE>

      revocation period, the date the Release has been fully executed by both
      parties.

      (m) "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(p), unless earlier terminated in accordance with Section 8 of the Plan.

      (n) "Termination Date" means the date the Employee severs employment with
      a Participating Employer.

      (o) "Monthly Salary" means -

            (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.

      (p) "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:


                                      A-3
<PAGE>

<TABLE>
<CAPTION>
         PAY GRADE                MINIMUM YEARS OF                   MAXIMUM YEARS OF
                                      SERVICE                            SERVICE
         ---------                ----------------                   ----------------
<S>                               <C>                                <C>
     81-89 and 231-235                   6                                 18

      65-80, 140-145,                    3                                 18
   185-190, and 218-230

      57-64, 115-135,                    1                                 18
   175-180, and 210-217

      48-56, 100-110,                    1                                 18
     170, and 200-209
</TABLE>

      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..

3. ELIGIBILITY AND PARTICIPATION. All Employees who incur a Qualifying
Termination and sign a Release are 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,


                                      A-4
<PAGE>

            (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.

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


                                      A-5
<PAGE>

            (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.

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.


                                      A-6
<PAGE>

      (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.

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.

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


                                      A-7
<PAGE>

            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 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


                                      A-8
<PAGE>

            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 Participants are
      hereinafter


                                      A-9
<PAGE>

      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.


                                      A-10
<PAGE>

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.

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, the applicable
Participating Employer will have no liability to pay any amount so attempted to
be


                                      A-11
<PAGE>

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 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.


                                      A-12
<PAGE>

      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-13
<PAGE>

IN WITNESS WHEREOF, HRB Management, Inc. adopts this Severance Plan effective
this 23rd day of April, 2001.

                                         HRB MANAGEMENT, INC.


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


                                      A-14
<PAGE>

                                   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.

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-15