Document:

exv10w15

 

Exhibit 10.15

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).

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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	 	 

3exv10w24

 

Exhibit 10.24

EMPLOYMENT AGREEMENT

          THIS EMPLOYMENT AGREEMENT (“Agreement”) is entered into as of November 1, 2006, by and between
HRB Management, Inc., a Missouri Corporation (the “Company”), and Carol Graebner (“Executive”).

ARTICLE ONE

EMPLOYMENT

          1.01 Agreement as to Employment. Effective November 13, 2006, (the “Employment
Date”), the Company hereby employs Executive to serve in the capacity of Executive Vice President
and General Counsel of H&R BLOCK, INC., a Missouri Corporation (“Block”) and the indirect parent
corporation of the Company, and Executive hereby accepts such employment by the Company, subject to
the terms of this Agreement. 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 Executive Vice President and General
Counsel, subject to the authority and direction of Block’s Board of Directors (the “Board”) and the
Chief Executive Officer of Block. Subject to Section 1.07 hereof, 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’ 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.

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          1.03 Compensation.

          (a) Base Salary. The Company will pay to Executive a gross salary at an annual rate
of $400,000 (“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.

          (b) Short-Term Incentive Compensation. Executive shall participate in the H&R Block
short-term incentive program (which for certain highly compensated executives may include the H&R
Block Executive Performance Short-Term Incentive Plan) (the “Program”) as applicable to executives
of the Company for its fiscal year 2006 (which ends April 30, 2007) and fiscal years thereafter.
Under such Program, Executive shall have an aggregate target incentive award equal to 60% of Base
Salary and an opportunity to earn a bonus at a maximum of 200% of Base Salary (prorated as
described below). Notwithstanding the foregoing, under the Program for fiscal year 2006, Executive
shall receive a minimum guaranteed short-term compensation award in the amount of $200,000 (the
“Minimum Guarantee”). Other than the payment of the Minimum Guarantee, the payment of the award
under the Program shall be based upon such performance criteria which shall be determined by the
Compensation Committee of the Board. Under such Program for fiscal year 2006 only, and other than
the Minimum Guarantee, which in no event will be prorated, Executive’s actual incentive
compensation shall be prorated based upon Executive’s actual gross wages for the fiscal year,
provided that, subject to Section 1.07, Executive must remain employed through April 30, 2007 to
receive any payments under the Program. Such incentive compensation, including the Minimum
Guarantee, shall be paid to Executive following the completion of fiscal year 2006 when the
incentive compensation is paid to other senior executives of the Company.

          (c) Stock Options. As authorized under the H&R Block 2003 Long-Term Executive
Compensation Plan, as amended (the “2003 Plan”), Executive shall be granted on the first day of the
month following the Employment Date a stock option under the 2003 Plan to purchase 50,000 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 first day of the month following the Employment Date (e.g. December 1, 2006) such
option to expire on the tenth anniversary of the date of grant; to vest and become exercisable as
to one-third (16,667) of the shares covered thereby on the first anniversary of the date of grant,
as to an additional one-third (16,667) of such shares on the second anniversary of the date of
grant, and as to the remaining one-third (16,666) 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 of 1986, as amended (the “Code”) Section 422 and the regulations promulgated
thereunder; and to otherwise be a nonqualified stock option. 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
is defined herein) pursuant to the terms of the H&R Block 2003 Long-Term Executive Compensation
Plan Award Agreement (the “Award Agreement”).

          (d) Restricted Stock. Executive shall be awarded on the first day of the month

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following the Employment Date (e.g. December 1, 2006), 10,000 Restricted Shares of Block’s
common stock under the 2003 Plan. One-third of the 10,000 shares shall vest (i.e., the
restrictions on such shares shall terminate), respectively, on each of the first three
anniversaries following the Employment Date (e.g., 3,334 shall vest on the first anniversary, 3,333
shall vest on the second anniversary, and 3,333 shall vest on the third anniversary). 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 to vote such unvested Restricted Shares at any meeting of the shareholders of
Block. Any non-vested portion of the Restricted Shares awarded pursuant to this Section 1.03(d)
shall, upon a Change of Control (as such term is defined herein) and termination of Executive’s
employment in accordance with the terms of Section 1.07(c)(i), vest and the restrictions on such
shares (or the equivalent of such shares of any successor entity) shall terminate effective as of
the Last Day of Employment (as defined in Section 1.07(c)(i) of this Agreement).

          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; Short-Term and Long-Term Incentive Compensation. 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, performance shares, restricted stock, 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. Coverage and eligibility for any such benefits are subject to the terms of the various
Plans as they may be amended from time to time pursuant to their respective terms.

          1.07 Termination of Employment.

          (a) Without Notice. The Company may, at any time, in its sole discretion, terminate

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the employment of Executive without notice in the event of:

          (i) Executive’s misconduct that materially interferes with or prejudices the proper
conduct of the business of Block, the Company or any Affiliate or which 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) 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

          (viii) 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 the employment of Executive 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, 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 Company under which Executive releases
all known and potential claims related to Executive’s employment against Block, the

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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 (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 termination of employment that would result in the receipt of benefits as a participant in
the Severance Plan; provided, however, (1) Executive will be credited with no 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 a relevant severance plan as it may
exist on Executive’s Last Day of Employment (“Future Severance Plan”), notwithstanding any
provision in the Severance Plan or Future Severance Plan to the contrary, and (2) all
restrictions on any nonvested Restricted Shares (as defined in the applicable award
agreement) awarded to Executive pursuant to Section 1.03(d), or under the 2003 Plan or any
comparable plan shall terminate and such Restricted Shares shall be fully vested,
notwithstanding any provision in the Severance Plan or Future 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 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, (i) any such acquisition by Block or any
of its subsidiaries, or any employee benefit plan (or related trust) of Block or its
subsidiaries, or (ii) any corporation with respect to which, following such
acquisition, more than 50% of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
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;
or

          (B) individuals who, as of the date hereof, constitute the
Board (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

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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-11 of
Regulation 14A promulgated under the Exchange Act); or

          (C) the completion of a reorganization, merger or consolidation 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

          (D) a complete liquidation or dissolution of Block or the sale or other
disposition of all or substantially all of the assets 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 Section 1.07(e) hereof (and without
regard to whether the termination is with or without notice under this Agreement), and executes an
agreement with the Company under which Executive releases all known and potential claims related to
Executive’s employment 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 (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 or Future Severance Plan to the contrary, (2)
Executive will be credited with no 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 Future Severance Plan, notwithstanding
any provision in the Severance Plan as it exists on the date of this Agreement or Future Severance
Plan to the contrary, and (3) all restrictions on any nonvested Restricted Shares awarded to
Executive, including those awarded pursuant to Section 1.03(d), that would have vested in
accordance with their terms by reason of lapse of time within 18 months after the effective date of
the termination 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 18 months after the effective date of
termination of employment shall be forfeited, notwithstanding any provision in the Severance Plan
as it exists on the date of this Agreement or Future Severance Plan to the contrary.

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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) Qualifying Termination. For purposes of this Agreement, and notwithstanding the
terms of the Severance Plan or Future Severance Plan or any other agreement between Executive and
the Company, the term “Qualifying Termination” shall mean (i) the termination of Executive’s
employment by Executive upon or in connection with the redefinition of Executive’s position to a
lower salary rate or grade, or a reduction in Executive’s Base Salary, duties and responsibilities;
or (ii) the involuntary termination of Executive, other than the termination by the Company of
Executive’s employment pursuant to Section 1.07(a) of this Agreement .

          (f) 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 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.

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

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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 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 Three.

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          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 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 for 2
years after the Executive’s Last Day of Employment, 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

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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 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 supersedes all previous employment agreements,
whether written or oral between Executive and the Company and constitutes the entire agreement and
understanding between the Company and Executive concerning the subject matter hereof. No
modification, amendment, termination, or waiver of this Agreement will be binding unless in writing
and signed by Executive and a duly authorized officer of the Company. Failure of the Company,
Block, or Executive to insist upon strict compliance with any of the terms, covenants, or
conditions hereof will not be deemed a waiver of such terms, covenants, and conditions. If, and to
the extent that, any other written or oral agreement between Executive and Company or Block is
inconsistent with or contradictory to the terms of this Agreement, the terms of this Agreement
shall apply.

     4.03 Specific Performance. The parties hereto acknowledge that money damages alone
will not adequately compensate the Company or Block or Executive for breach of any of the covenants
and agreements set forth in Articles Two and Three herein and, therefore, in the event of

10

 

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 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 Certain Adjustments of Payments by Company. If Executive is liable for the
payment of any excise tax (the “Basic Excise Tax”) because of Code Section 4999, or any
successor or similar provision, with respect to any payments or benefits received or to be
received from the Company or any successor to the Company, whether provided under this Agreement or
otherwise, the Company shall pay Executive an amount (the “Special Reimbursement”) which, after
payment by Executive (or on Executive’s behalf) of any federal, state and local taxes applicable
thereto, including, without limitation, any further excise tax under such Code Section 4999, on,
with respect to or resulting from the Special Reimbursement, equals the net amount of the Basic
Excise Tax. If any federal income taxes are imposed on any benefits provided to Executive, the
Company shall “gross up” Executive for such tax liability by paying to Executive an amount
sufficient so that after payment of all such taxes so imposed, Executive’s position is what it
would have been had no such taxes been imposed. Executive will cooperate with the Company to
minimize the tax consequences to Executive and to the Company so long as the actions proposed to be
taken by the Company do not cause any additional tax consequences to Executive and do not prolong
or delay the time that payments are to be made, or the amount of payments to be made, unless
Executive consents, in writing, to any delay or deferment of payment. Except as otherwise
indicated in this Section 4.06, Executive shall be liable for and shall pay all income taxes owed
by virtue of any payments made to Executive under this Agreement.

     4.07 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, attorney, employee, or agent of the Company or Block or serving in such capacity for
another

11

 

corporation at the request of the Company or Block. Notwithstanding the foregoing, the
indemnification provided in this Section 4.07 will not apply to any loss, costs, damages, and
expenses arising out of or relating in any way to any employment of Executive by any former
employer or the termination of any such employment.

     4.08 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.

     4.09 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: 4950 Central, No. 103, Kansas City, MO 64112 and to H&R Block, Inc., One H&R
Block Way, Kansas City, Missouri 64105, Attn: Corporate Secretary; or to such other address and/or
person designated by either party in writing to the other party. Any notice given by mail 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.

     4.11 Section 409A. Notwithstanding anything in this Agreement to the contrary, if any
provision would result in the imposition of an applicable tax under Code Section 409A and related
Treasury guidance (“Section 409A”), that provision will be reformed to avoid imposition of the
applicable tax and no action taken to comply with Code Section 409A shall be taken without the
Executive’s consent if it will adversely affect the Executive’s rights to any compensation or
benefits hereunder .

     4.12 Arbitration. The parties hereto may attempt to resolve any dispute hereunder
informally via mediation or other means. Otherwise, any controversy or claim arising out of or
relating to this Agreement, or any breach thereof, shall, except as provided in Article Three, be
adjusted only by arbitration in accordance with the rules of the American Arbitration Association,
and judgment upon such award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The arbitration shall be held in Kansas City, Missouri, or such other place
as may be agreed upon at the time by the parties to the arbitration. The arbitrator(s) shall, in
their award, allocate between the parties the costs of arbitration, which shall include reasonable
attorneys’ fees of the parties, as well as the arbitrator’s fees and expenses, in such proportions
as the arbitrator deems just.

     4.13 Choice of Law. This Agreement shall be governed by, construed and enforced in
accordance with the Laws of the State of Missouri, excluding any conflicts of law, rule or
principle that might otherwise refer to the substantive law of another jurisdiction.

12

 

	 	 	 	 	 
	 	EXECUTIVE:

 	 
	Dated:  November 1, 2006 	/s/ Carol Graebner
 	 
	 	Carol Graebner 	 
	 	 	 
	 

	 	 	 	 	 
	 	Accepted and Agreed:

HRB Management, Inc.

a Missouri Corporation

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

Dated: November 1, 2006

13

 

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;

14

 

(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;

(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

15

 

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 –

(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

16

 

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 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

17

 

	 	 	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.
	 
	 	 	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

18

 

	 	 	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

(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

19

 

(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.

(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

20

 

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
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)

21

 

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 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

22

 

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
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

23

 

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.

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
unenforceability 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

24

 

 (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 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.

25

 

     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.

     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 	 

26

 

	 	 	 	 	 

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.

27

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