Document:

f8k060713ex10i_epunk.htm

Exhibit 10.1

 

Operating Agreement

 

OPERATING AGREEMENT

 

 

This Operating Agreement ("Agreement") is made and entered into as of May 28, 2013, and effective as of May 28, 2013, by and between SanWest, Inc., (“Operator”), and ePunk, Inc., a Nevada corporation (“Owner”).

 

RECITALS

 

	
A.  

	
Owner and Operator desire to enter into an arrangement whereby Operator will plan, manage and operate all functions relating to the business of County Imports, including County Imports Parts, a division of ePunk (“County Imports”).

 

	
B.  

	
Operator has the personnel necessary to provide for the operation and efficient administration of County Imports and Operator has the ability to provide the services necessary, incidental and appropriate to conduct the “back office” business functions and operations for Owner as described more fully in this Agreement.

 

	
C.  

	
Owner and Operator acknowledge that all functions, including but not limited to the financial (collections and payables), banking, business development and administrative aspects of County Imports will be solely and singularly managed by Operator through the term of this Agreement.

 

NOW, THEREFORE, for and in consideration of the mutual premises, terms, covenants and conditions contained herein and for other good and valuable consideration, Owner and Operators agree as follows:

 

AGREEMENT

 

	
1.  

	
Term. The initial term of this Agreement will begin on May 28, 2013 (the "Commencement Date") and will end on May 28, 2014, unless earlier terminated in accordance with this Agreement. Unless this Agreement is earlier terminated in accordance with this Agreement, or unless either party provides the other with a written notice of non-renewal at least 90 days prior to May 8, 2014, the term will automatically be extended for successive one year periods until this Agreement is terminated as provided herein or unless either party provides a written non-renewal notice to the other party at least 90 days prior to the end of any renewal term. The expiration date of this Agreement (either at end of initial term, a renewal term or the effective date of termination as provided in this Agreement) is referred to as the "Termination Date."

 

	
2.  

	
Operator Contributions and Compensation.

 

	
a.  

	
Contributions. On or before the Commencement Date, Operator will complete the transition to become the operator of the Business. In this regard, Operator will take the following steps:

 

	
i.  

	
Operator will use good faith efforts to maintain the relationships with vendors that are currently maintained by Owner in connection with the Business, and Operator represents that any transactions it may conduct with vendors following the Commencement Date will be conducted through the Business.

 

  

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ii.  

	
Operator will use all commercially reasonable efforts to collect all accounts receivable of the Business, including those of Owner outstanding as of the Commencement Date. Operator will not be held accountable for failure to collect on receivables outstanding prior to the execution of this Agreement.

 

	
iii.  

	
Operator will assume and perform all contract commitments entered into by Owner on behalf of County Imports as of the Commencement Date.

 

	
iv.  

	
Notwithstanding the operation of the Business by Operator following the Commencement Date, the parties will make appropriate reimbursement to one another for any transactions occurring in connection with the Business prior to the Commencement Date.

 

	
b.  

	
Compensation. As compensation for its operation and management services under this Agreement, Operator will retain 50% of County Imports’ monthly "operating profits" derived from the Business. The calculation of monthly operating profits will be determined based on the financial statements prepared in connection with the Business and applying the calculation criteria set forth on Exhibit A, provided that in all cases each payment will be subject to later adjustment based on the results of any audit conducted for the period subject to that payment. Exhibit A will set forth the items that may be recorded as expenses for purposes of the net profits calculation, including insurance, salaries, costs of goods, leases and the other customary items. Operator will make payment of 50% of the quarterly operating profits calculation to Owner. Payment of each monthly payment will be made by Operator to Owner or Owner to Operator, as the case may be, in cash no later than the 10th business day of the month following the end of monthly calculation period, and any adjustment payments based on audits will be made in cash no later than the third business day following completion of the audit. The first monthly period will begin on the Commencement Date and will end on May 31, 2014, and subsequent periods will be each month thereafter.

 

	
3.  

	
Responsibilities.

 

	
a.  

	
Appointment and Acceptance. Owner appoints Operator, and Operator agrees, to solely and singularly, supervise, manage and operate County Imports substantially in the form as it exists as of the Commencement Date.

 

	
b.  

	
Operation. Operator is responsible for the management and day to day operations of the County Imports. Operator will conduct County Imports at all times in a prudent and businesslike manner and that is generally consistent with the manner in which it has been historically conducted (either by Owner or Operator). Operator agrees that the conduct of County Imports will be separate from that of any other entity or individual and will be clearly segregated from any other operations of Operator. Operator will consult with Owner with respect to strategic planning and material changes to County Imports.

 

  

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c.  

	
Accounting; Reporting. Operator, either directly or through its designee, will maintain accounting records, prepare and pay payrolls, maintain and discharge working capital lines of credit and perform required administrative duties related to County Imports. Operator will keep Owner fully informed of the status of County Imports and its financial condition. Operator will maintain the books of account, ledgers and records relating to County Imports, including paying and receiving monies, billing, tax return preparation and contract coordination. Operator will prepare accounting reports and financial statements (including balance sheets, income statements and statements of cash flows) on no less often than a monthly basis, and will provide those reports and statements to Owner on or before the 10th day of the subsequent month. All accounting records will be maintained on a GAAP basis, consistently applied. Operator will maintain separate, complete and accurate books of account relating to County Imports with entries for all receipts and expenditures made by or on behalf of County Imports. The books of account will open to inspection by any officer, director or designee of Owner at any time during normal business hours. Operator also will prepare and submit from time to time to Owner or its designee, such other reports, returns, notices or other filings as may be appropriate in the conduct of County Imports.

 

 

	
d.  

	
Audits. The books of records of Operator will be subject to periodic financial reviews and audits by Owner, including quarterly reviews and annual audits as conducted by Owner or its designee. The cost of conducting regular quarterly reviews (the expense for which will not exceed $5,500 per quarter), the annual audit and opinion (the expense for which will not exceed $25,000 per year) will be paid by Operator and included as an expense in the net profits calculation. The cost of any additional audits required by Owner will be paid solely by Owner and will not be included as part of the net profits calculation.

 

 

	
e.  

	
Accounts; Funds Received. Operator will maintain an operating account and lines of credit at banking institutions in relation to County Imports. These accounts and lines of credit will relate solely to the operation of County Imports and these accounts will have separate account numbers from accounts relating to any other activities, provided that Operator may also maintain accounts and lines of credit relating to other aspects of its operations. Material increases in the costs and conditions relating to the lines of credit pertaining to County Imports will be subject to the reasonable approval of Owner. Operator will receive and hold on behalf of Owner all monies and income received from or in connection with County Imports, and will deposit these monies and income into (and maintain them in) the operating account. The payment of all expenses and disbursements relating to County Imports will likewise be made solely from either the operating account or lines of credit maintained in relation to County Imports.

 

	
f.  

	
Personnel. Operator will hire, promote, discharge and supervise the work of all personnel employed in County Imports, all of whom will be employees of Operator and not of Owner. Operator will be responsible for paying salaries, providing benefits and maintaining compliance with applicable employment laws in connection with its employees.

 

  

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g.  

	
Insurance. Operator will secure and maintain at all times all insurance customarily maintained in connection with the conduct of County Imports, including workers compensation insurance, employee medical insurance and comprehensive and general liability insurance. Operator will supply Owner with evidence of its insurance upon request. Operator may include insurance costs as part of the net profits calculation.

 

	
h.  

	
Compliance. Operator will timely prepare and file all reports, forms, documents, certificates and other instruments required by federal, state and local tax and regulatory authorities in order to conduct lawfully County Imports. Operator will obtain and maintain at all times all bonds, licenses and permits appropriate for the operation of County Imports. Operator will comply with all applicable federal, state and local laws relating to the activity of County Imports.

 

	
i.  

	
Management of Receivables / Inventory. Operator's management of receivables / inventory will be as is consistent with past practices of County Imports. Operator will use all commercially reasonable efforts to collect accounts receivable of County Imports, as well as those outstanding with respect to County Imports as of the Commencement Date. To the extent Operator engages in any transaction where any portion of the accounts receivable is not received by Operator within seven days of the sale, Operator will charge that party interest commencing on the seventh day following the related sale for which the account receivable has been created, at the rate of the prime rate (as set forth in The Wall Street Journal on the first business day of each month) plus 1.5%, provided that Operator in its reasonable discretion may waive interest charges that are not material and do not amount to more than $5,000 per quarter in the aggregate.

 

	
j.  

	
Capital Expenditures. The parties will agree upon any capital expenditures made by Operator relating to County Imports that are in excess of $25,000 per quarter. To the extent the parties agree upon an expenditure that is made by Operator, the parties will agree upon the ownership or disposition of that item following the Termination Date and Operator may include as an expense the depreciation for the item purchased in the applicable depreciation period.

 

	
k.  

	
Facilities. Operator will be responsible for securing and maintaining the physical facilities on which County Imports is conducted, including the payment of rent, property taxes, governmental fees and charges,  utilities, insurance premiums, repairs, improvements, signage and any other fees and expenses related to the facilities. The amounts paid for the payment of rent is limited as to the use as part of the "net profits" calculation, as set forth in Exhibit A.

 

  

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5.  

	
Confidential Information. From the Commencement Date until the date that is one year after the termination of this Agreement, each party will keep the nature and terms of this Agreement and all confidential information each party may obtain concerning the other parties and its respective business (together, the "Confidential Information"), strictly confidential, using the information solely for the purposes contemplated by this Agreement and disclosing such information only to those persons or agents with a need to know (and then, solely for the purposes of assisting in such purposes and subject to such persons or agents being bound by this section). This section will not apply to extent the disclosing party can demonstrate the information (i) is generally available to or known by the public other than as a result of improper disclosure by a the disclosing party, (ii) is obtained by the disclosing party from a source other than the other party, provided that such source was not bound by a duty of confidentiality with respect to such information, (iii) is independently developed by the disclosing party without the use of the information learned from the other party, or (iv) is required to be disclosed under applicable law, or (v) is required to be disclosed by contract between Operator and Operator's lender. Owner will be permitted to file this Agreement and to describe the transactions contemplated hereby in filings under the Securities Exchange Act of 1934, as amended, provided that Owner will provide any intended disclosures regarding this Agreement to Operator for review in advance of filing. In the event of a termination of this Agreement, each party will promptly return to the other party all notes, memos, reports and other materials provided to such party in connection with this Agreement.

 

	
6.  

	
Termination.

 

	
a.  

	
Events of Termination. This Agreement may be terminated:

 

	
i.  

	
By either party, to the extent permitted under applicable law, if the other ceases to function as a going concern, becomes insolvent, makes an assignment for the benefit of creditors, files a petition in bankruptcy, permits a petition in bankruptcy to be filed against it  and such petition is not dismissed within 60 days of filing, or admits in writing its inability to pay its debts as they mature, or if a receiver is appointed over a substantial part of its assets.

 

	
ii.  

	
By either party by reasons of any material breach of this Agreement by the other party which breach has not resulted in a reasonably acceptable plan for remedy or cure or which breach has not been remedied or cured after at least 30 days' written notice delivered by the aggrieved party to the other party (provided that the terminating party is not in material breach of this Agreement).

 

	
b.  

	
Transition Plan Upon Expiration or Termination. Upon the expiration of this Agreement, or if this Agreement is rightfully terminated pursuant this Section, Operator will provide an adequate transition plan to Owner at least 60 days prior to the termination date. The transition plan will provide that Owner will have the right to extend offers of employment to Operator employees and provide for the orderly transition of the management of County Imports back to Owner. The transition plan will identify positions requiring transition, procedures in place supporting all responsibilities to be transitioned, documentation of existing personnel actions, and existing or planned projects and support activities. The parties will also agree with respect to the settlement of matters relating to the treatment of capital expenditures made by the parties during the term of this Agreement.

 

  

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c.  

	
Rights and Duties Upon Termination. Upon the expiration of this Agreement: (i) each party will cooperate reasonably and in good faith with the other and/or its designees, so that the transition of services rendered under this Agreement shall be timely and efficient and implemented in a manner so as not to unduly interfere with Owner's orderly conduct of its Business; (ii) all Confidential Information will be promptly delivered or returned (as applicable) to its respective owner; (iii) all equipment, documents, records, books, tapes, disks and files provided by Owner will be returned to Owner in substantially the same condition as received, ordinary wear and tear excepted.

 

	
d.  

	
Survival of Obligations. Each party's obligations relating to Confidential Information, Trade Secrets, Noncompetition, indemnity and payment obligations and the provisions of this Agreement which by their terms survive termination of this Agreement, will survive termination of this Agreement for any reason. Termination of this Agreement by either Owner or Operator according to the terms hereof will be without prejudice to the terminating party's other rights and remedies under this Agreement, both in law and in equity.

 

	
7.  

	
 Indemnification.

 

	
a.  

	
By Operator. Operator will indemnify and hold harmless Owner and its officers, agents and employees from and against all liability and expense for claims, actions, litigation and similar proceedings brought against Owner in connection with the operation of County Imports by Operator; provided, however, that Operator shall  not be liable for any injury, damage and/or loss occasioned by the gross negligence or willful misconduct of Owner or its officers, agents or employees or former officers, agents or employees.

 

	
b.  

	
By Owner. Owner will indemnify and hold harmless Operator and its officers, agents and employees from and against all liability and expense for claims, actions, litigation and similar proceedings brought against Operator in connection with any and all sales transactions effected by Owner prior to the execution of this Agreement, including, but not limited to sales transactions which had been collected upon by Owner but remain unfilled, which include any MSO paperwork and Warranty issues,  Owner's operation of its business that is unrelated to County Imports or in connection with Owner's execution of this Agreement; provided, however, that Owner shall not be liable for any injury, damage and/or loss occasioned by the gross negligence or willful misconduct of Operator or its officers, agents or employees or former officers, agents or employees.

 

	
c.  

	
Procedures. Each party will provide the other parties prompt and timely notice of any claims made or suits instituted which in any way, directly or indirectly, affect the indemnification obligations of this Section, and the indemnifying party will have the right to compromise and defend the same, provided that the indemnifying party may not, without the prior consent of the other parties, settle any pending or threatened claim or proceeding. Any failure to provide such notification shall discharge the indemnifying party of its indemnification obligation hereunder only to the extent that such failure materially prejudices the indemnifying party. Owner will be named as an additional insured in connection with its insurance policies for County Imports, and the indemnification obligations under this Agreement will be effective to the extent any claim is not covered by insurance.

 

  

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8.  

	
Representations and Warranties.

 

	
a.  

	
Operator. Operator represents and warrants to Owner that each of the following statements is true, correct and complete as of the date of this Agreement:

 

	
i.  

	
Operator is a corporation validly existing and in good standing under the laws of the state of Nevada and has full power to enter into and perform its obligations under this Agreement and under all other agreements, documents and/or instruments to be executed and/or delivered by Operator pursuant to or in connection with this Agreement. Operator has full power to own, operate and/or hold County Imports.

 

	
ii.  

	
The execution, delivery and performance by Operator of this Agreement and of all of the agreements, documents and/or instruments to be executed and/or delivered by Operator pursuant to or in connection with this Agreement have been duly authorized by all necessary action of Operator. This Agreement is, and the other agreements, documents and instruments referred to herein will be, when executed and delivered by the parties, the valid and binding obligations of Operator, enforceable against Operator in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors' rights generally, and except that the availability of the remedy of specific performance or other equitable relief is subject to the discretion of the court before which any proceeding therefor may be brought.

 

	
iii.  

	
The execution, delivery and performance of this Agreement by Operator does not and will not violate, conflict with or result in the creation or imposition of any lien, charge or encumbrance under any law, judgment, order or decree binding on Operator or the Articles of Incorporation of Operator.

 

	
iv.  

	
Operator has all licenses, permits and bonds required for the operation of County Imports. All licenses and permits held by Operator and necessary for the conduct of the Business are valid and in full force and effect and no proceedings which could result in the termination or impairment of any such license or permit are pending or threatened. Operator is not in violation of, nor has Operator received any notice of any violation of, nor does any state of facts exist which could lead to a penalty or termination of, any license or permit.

 

	
v.  

	
All information furnished to Owner by Operator herein or in any exhibit or schedule hereto is true, correct and complete. Such information states all facts required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements are made, true, correct and complete.

 

  

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vi.  

	
No authorization, consent, approval, permit or license of, or filing with, any governmental or public body or authority, any lender or lessor or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement or the agreements contemplated hereby on the part of Operator.

 

	
b.  

	
Owner. Owner represents and warrants to Operator that each of the following statements is true, correct and complete as of the date of  this Agreement:

 

	
i.  

	
Owner is a corporation duly and validly existing and in good standing under the laws of Nevada and has full corporate power to enter into and perform its obligations under this Agreement and under all other agreements, documents and/or instruments to be executed and/or delivered by Owner pursuant to or in connection with this Agreement.

 

	
ii.  

	
The execution, delivery and performance of this Agreement and of all of the agreements, documents and/or instruments to be executed and/or delivered by Owner pursuant to or in connection with this Agreement have been duly authorized by all necessary corporate action. This Agreement is, and the other agreements, documents and instruments referred to herein will be, when executed and delivered by the parties, the valid and binding obligations of Owner, enforceable against Owner in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors' rights generally, and except that the availability of the remedy of specific performance or other equitable relief is subject to the discretion of the court before which any proceeding therefor may be brought.

 

	
iii.  

	
The execution, delivery and performance of this Agreement by Owner does not and will not violate or conflict with any law, judgment, order, or decree binding on Owner, or the Certificate of Incorporation or Bylaws of Owner.

 

	
iv.  

	
All information furnished to Operator by Owner herein or in any exhibit or schedule hereto is true, correct and complete. Such information states all facts required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements are made, true, correct and complete.

 

	
9.  

	
General

 

	
a.  

	
Notices. Any notice required or permitted by this Agreement shall be in writing and accomplished by registered or certified mail, personal delivery, or overnight courier. Such notice shall be deemed to have been delivered three (3) days after it has been mailed by such certified or registered mail, one day after it has been delivered to the overnight courier, or upon delivery if sent by hand delivery to the following:

 

  

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                               If to Owner:

 

 

                               With a copy to:

 

 

                               If to Operator:

 

 

                               with a copy to:

 

 

or to such other persons or addresses which the Owner or Operator may from time to time designate in writing to the other.

 

	
b.  

	
Waiver. An effective waiver under this Agreement must be in writing, and signed by the party waiving its right. A waiver by either party of any instance of the other party's noncompliance with any obligation or responsibility under this Agreement will not be deemed a waiver of subsequent instances.

 

	
c.  

	
Assignment. No party may assign its rights or delegate or subcontract its duties and obligations under this Agreement to any third party without the prior written consent of the other party, which consent shall not be unreasonably withheld. Any unauthorized assignment of this Agreement is void and a material breach of this Agreement.

 

	
d.  

	
No Authority. Neither party shall have any authority, and neither party shall represent that it has any authority, to assume or create any obligation, express or implied, on behalf of the other party, except as provided in this Agreement. Each party is an independent contractor, and this Agreement shall not be construed as creating a partnership, joint venture or employment relationship between the parties or as creating any other form of legal association that would impose liability on one party for the act or failure to act of the other party.

 

	
e.  

	
Governing Law. This Agreement, including its formation, application, performance, enforcement, the relationship between the parties, and any claims, demands, causes of action and disputes in any way arising out of or related to it, shall be governed, construed and interpreted under the substantive law (and the law of remedies, if applicable) of the State of California.

 

	
f.  

	
Severability. If any term in this Agreement is found by a competent legal authority to be illegal or unenforceable in any respect, the validity and enforceability of the remainder of this Agreement will be unaffected.

 

  

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g.  

	
Further Assurances. Each party shall execute, acknowledge and deliver all documents, provide all information, and take or forbear all such action as may be necessary or appropriate to achieve the purposes of this Agreement.

 

	
h.  

	
Amendments. The waiver, amendment or modification of any provision of this Agreement or any right, power or remedy hereunder, whether by agreement of the parties or by custom, course of dealing or trade practice, shall not be effective unless in writing and signed by the party against whom enforcement of such waiver, amendment or modification is sought.

 

	
i.  

	
Third-Party Beneficiaries. Nothing contained in this Agreement shall be construed to give any person other than Owner and Operator any legal or equitable right, remedy or claim under or with respect to this Agreement.

 

	
j.  

	
Counterparts. This Agreement may be signed in one or more counterparts, each of which when exchanged will be deemed to be an original, binding upon the parties as if a single document had been signed by all, and all of which when taken together will constitute the same agreement. Any true and correct copy of this Agreement made by customary, reliable means (e.g., photocopy or facsimile) shall be treated as an original.

 

	
k.  

	
Entire Agreement. This Agreement and the documents referred to in this Agreement constitute the entire agreement between the parties pertaining to the subject matter hereof, and supersede all prior and contemporaneous agreements, understandings, negotiations and discussions of the parties, whether oral or written, and there are no warranties, representations or other agreements between the parties in connection with the subject matter hereof, except as specifically set forth in this Agreement or documents referred to in this Agreement.

 

	
l.  

	
Specific Performance. Each of the parties agrees that the other parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their terms. Accordingly, each party agrees that the other parties shall be entitled to injunctive relief to prevent breaches of the provisions of this Agreement and to specifically enforce this Agreement in any action, in addition to any other remedy to which such party may be entitled at law or in equity.

 

	
m.  

	
Expenses. Each of the parties shall pay their respective fees and expenses incurred in connection with the transactions contemplated by this Agreement.

 

	
n.  

	
No Joint Venture. Nothing contained in this Agreement is intended to create a joint venture, partnership, employer / employee or similar relationship between Operator and Owner, and instead Operator will at all times be an independent contractor with respect to Owner.

 

  

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o.  

	
Arbitration. Any disputes arising pursuant to this Agreement shall be settled by arbitration held in Orange County, California, in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. Upon such a dispute, the parties will mutually agree upon one arbitrator. In the event the parties are unable to agree upon one arbitrator, each party will select one arbitrator, and each of those arbitrators will agree upon a third arbitrator, who will serve as the sole arbitrator for purposes of this Agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having in personam and subject matter jurisdiction. The arbitrator will decide any claim or controversy at issue in accordance with the terms of this Agreement, and will not be authorized to award any damages other than direct compensatory damages actually incurred and proven. The expenses of each party, including its share of the cost of the arbitration, will be borne such party. However, in the event either party institutes arbitration as a result of any claim, suit, action or proceeding being asserted against it by a third party arising out of or in connection with a matter for which the other party is alleged to be responsible under this Agreement, the party instituting arbitration may recover any attorney fees and expenses to which it became subject in connection with the arbitration in the event such party prevails in such arbitration. This provision will not preclude Owner from obtaining injunctive relief in the appropriate court for breaches or alleged breaches of the covenants contained in Sections 5 of this Agreement, or from precluding either party from obtaining other injunctive relief as allowed by law.

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first written above.

 

	SAN WEST, INC.	
 

	EPUNK, INC.	 
	 	 	 	 	 	 
	By:	/s/ Frank Drechsler	 	By:	/s/ Jesse Gonzales	 
	 	 	 	 	 	 
	Name:	Frank Drechsler	 	Name:	Jesse Gonzales	 
	 	 	 	 	
 

	 
	Title:	CEO	 	Title:	CEO	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 

 

  

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EXHIBIT A

 

Operating Profits Calculation

 

For the purpose of this Agreement, Operating Profit is determined by subtracting Operating Expenses from Gross Profit.

 

Key Calculations:

 

Gross Profit = Total Revenues Less Costs of Goods Sold1

 

Operating Profit = Gross Profit Less Operating Expenses2

 

Important: See Footnotes for definitions and explanations of Costs of Goods Sold and Operating Expenses.

 

 

 

 

 

1 Costs of Goods sold includes price paid by County Imports to Vendors for products sold, related shipping costs and advertising costs. Owner and Operator agree to meet no later than the 15th of each month to discuss and determine an advertising budget for the following month throughout the term of this Agreement. Any advertising costs made over and above those agreed upon by the Owner will be deducted directly from Operator’s share of the Operating Profit and paid directly to Owner by the Operator. Operator will provide Owner with detailed schedule for advertising expenses paid each month.

 

2 Operating Expenses consist of $2,000 paid monthly for Operating Administrative Expenses, 15% deduction from total sales for staffing, and expenses related to auditing Operator’s financial statements on a quarterly and annual basis. Chargebacks will also be included in Operating Cost calculations, and responsibilities for penalties and fees related to Chargebacks will be split between Owner and Operator on a 50/50 basis.

 

 

 

 

12Exhibit 10.1 MSU Agreement

Exhibit 10.1
H&R BLOCK, INC.
2013 LONG TERM INCENTIVE PLAN
MARKET STOCK UNITS
AWARD AGREEMENT
This Award Agreement is entered into by and between H&R Block, Inc., a Missouri corporation (“H&R Block”), and [Participant Name] (“Participant”).
WHEREAS, H&R Block provides certain incentive awards (“Awards”) to key employees of subsidiaries of H&R Block under the H&R Block, Inc. 2013 Long Term Incentive Plan (the “Plan”);
WHEREAS, Participant has been selected by the Board, the Compensation Committee, or the Chief Executive Officer of H&R Block to receive an Award under the Plan; and
WHEREAS, receipt of this Award is conditioned upon Participant's execution of this Award Agreement within 180 days of [Grant Date], wherein Participant agrees to abide by certain terms and conditions authorized by the Compensation Committee of the Board.
NOW THEREFORE, in consideration of the parties' promises and agreements set forth in this Award Agreement, the sufficiency of which the parties hereby acknowledge,
IT IS AGREED AS FOLLOWS:
1.    Market Stock Units.
1.1    Grant of Market Stock Units.  As of [Grant Date] (the “Grant Date”), H&R Block hereby awards Participant [Number of MSUs Granted] Market Stock Units (“MSUs”).
1.2    Vesting Conditions.  Except as provided in Section 1.5 and Section 1.6 of this Award Agreement, Participant shall become vested in the MSUs (a) to the extent set forth in Section 1.4, only if (b) Participant remains continuously employed by Company from the Grant Date through the third anniversary of the Grant Date, such that Participant's Termination of Employment before the third anniversary of the Grant Date shall result in forfeiture of all rights in the MSUs and Participant shall not be entitled to a distribution of any shares of Common Stock related to such forfeited MSUs. The number of MSUs determined under Section 1.4 shall be certified by the Committee in accordance with Section 1.7, based on Company's satisfaction of the Performance Criteria during the Performance Period, and paid in accordance with Section 1.6 or 1.8, as applicable.  
1.3    No Shareholder Privileges; Dividend Equivalents. 
(a)    Neither Participant nor any person claiming under or through him or her shall be, or have any of the rights or privileges of, a shareholder of H&R Block (including the right to vote shares or to receive dividends) with respect to any of the Common Stock issuable pursuant to this Award Agreement, unless and until such shares of Common Stock shall have been duly issued and delivered to Participant as a result of the vesting of MSUs.
(b)    Notwithstanding Section 1.3(a), dividend equivalents will accrue and vest proportionally as the MSUs vest, and will be paid as additional whole shares of Common Stock (unless the Committee in its discretion determines to pay the value of the accrued dividend equivalents in cash), net of withholding, upon the date shares of Common Stock are delivered for vested MSUs pursuant to Section 1.6 or Section 1.8.  Dividend equivalents will apply to all cash dividends (excluding dividends for which an adjustment to the Award was or will be made pursuant to Section 4.3) and will be deemed reinvested in shares of Common Stock based on the Closing Price of the Common Stock on the trading day immediately preceding the ex-dividend date applicable to such dividend. Future dividend equivalents will apply to the shares of Common Stock relating to the reinvested dividend equivalents for each dividend record date that occurs before actual delivery of the shares. Notwithstanding the foregoing, the Committee retains discretion at any time, upon 

1

notice to Participant, to revise whether, and in what manner, dividend equivalents will be deemed reinvested with respect to any future dividends.
1.4    Payment Formula.  The number of MSUs that may vest (the “Earned Percentage”) shall be determined after the end of the Performance Period in accordance with this Section, except as otherwise provided in Section 1.5 and Section 1.6.  
(a)    No MSUs will vest if the End of Performance Period Stock Price is less than 50% of the Grant Date Stock Price.
(b)    No MSUs will vest if the Average Return on Equity during the Performance Period is less than 20%.
(c)    If the End of Performance Period Stock Price equals or exceeds 50% of the Grant Date Stock Price and the Average Return on Equity during the Performance Period equals or exceeds 20%, the number of MSUs that may vest shall be calculated as follows:
MSUs granted × (End of Performance Period Stock Price  Grant Date Stock Price)
In no event shall the number of shares of Common Stock delivered to Participant upon vesting of MSUs be more than 200% of the MSUs granted.
1.5    Potential Vesting.  Notwithstanding Section 1.2, if any of the events described in subsection (a), (b) or (c) of this Section 1.5 occur at least one year after the Grant Date and before the third anniversary of the Grant Date, Participant shall be entitled to either pro-rata or full vesting of the Earned Percentage of MSUs determined pursuant to Section 1.4 (or Section 1.6 if applicable), as set forth below.  The pro-rata portion of the Earned Percentage, if applicable, shall equal a percentage based upon the number of whole months of service completed between the Grant Date and Participant's Last Day of Employment divided by thirty-six (36).  
(a)    Involuntary Termination of Employment without Cause.  If, at least one year after the Grant Date, Participant ceases to be an employee of Company on account of an involuntary Termination of Employment without Cause that is not a Qualifying CIC Separation, and no Comparable Position is offered, Participant shall be entitled to pro-rata vesting of the Earned Percentage of MSUs that are determined pursuant to Section 1.4 after the end of the Performance Period.  
(b)    Retirement.  If Participant's Retirement from Company occurs at least one year after the Grant Date, Participant shall be entitled to pro-rata vesting of the Earned Percentage of MSUs that are determined pursuant to Section 1.4 after the end of the Performance Period.
(c)    Death or Disability.  If Participant terminates employment due to death or Disability at least one year after the Grant Date, Participant shall be entitled to 100% vesting of the Earned Percentage of MSUs that are determined pursuant to Section 1.4 after the end of the Performance Period.
1.6    Change in Control.  
(a)    Other provisions of this Agreement notwithstanding, if a Change in Control occurs before the third anniversary of the Grant Date, the Committee shall determine what equitable adjustments, if any, shall be made to this Award pursuant to the Committee's authority and obligations set forth in Sections 4.3, 4.4, and 4.5 of this Award Agreement. Such adjustments may include adjustment to the payment formula determined under Section 1.4 and the performance period over which the payment formula (whether or not revised) will be applied. After a Change in Control, the number of MSUs that may vest pursuant to the payment formula under Section 1.4 (including any revisions that may be made pursuant to this Section 1.6) shall be deemed the Earned Percentage for purposes of this Agreement.

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(b)    Potential Vesting after Change in Control. Except as provided below in (i), (ii) and (iii) or in Section 1.5, the Earned Percentage of MSUs will vest only if Participant remains continuously employed by Company from the Grant Date through the third anniversary of the Grant Date as set forth in Section 1.2(b). 
(i) If Participant's Termination of Employment occurs after the Change in Control due to Retirement, Disability or Death, Participant shall be entitled to 100% vesting of the Earned Percentage of MSUs as determined by the Committee. 
(ii) If Participant's Termination of Employment occurs due to Qualifying CIC Separation, Participant shall be entitled to 100% vesting of the Earned Percentage of MSUs as determined by the Committee.
(iii) If Participant's Termination of Employment occurs before the Change in Control under a circumstance described in Section 1.5, the pro-rata vesting rules of Section 1.5 shall continue to apply to the Earned Percentage of MSUs. 
(c)    Settlement Date after Change in Control.  If the Committee takes any action under Section 1.6(a) that, on its own or in connection with any other event, results in vesting of any Earned Percentage of MSUs earlier than otherwise provided in this Award Agreement (e.g., the MSUs become subject to Code Section 409A), such vested MSUs, plus any shares attributable to vested dividend equivalents, shall be settled upon the earliest to occur of (i) Participant's date of death, (ii) the third anniversary of the Grant Date as set forth in Section 1.2(b) or (iii) six months following Participant's Termination of Employment; provided, however, if any of the events set forth in (i), (ii) or (iii) occur before the date such early vesting occurs, the settlement date shall be the later of (x) within 60 days of the early vesting date, or (y) the earlier of the date that is six months following Participant's Termination of Employment and the third anniversary of the Grant Date as set forth in Section 1.2(b).  All other payments shall occur as set forth in Section 1.8.
1.7    Certification of a Performance Award.  The Committee shall certify in writing the extent to which the Performance Criteria have been satisfied before making any payment to Participant with respect to the vested Earned Percentage of MSUs.  
1.8    Settlement of MSUs.  
(a)    Except as provided in Section 1.6, the vested Earned Percentage of MSUs, plus any shares attributable to vested dividend equivalents, shall be settled and paid out in shares of Common Stock as soon as administratively practicable (while remaining compliant with Section 4.15) following the third anniversary of the Grant Date, but in no event later than the payment deadline set forth in Treas. Reg. § 1.409A-3(d). 
(b)    Company shall transfer shares of Common Stock equal to the number of the vested Earned Percentage of MSUs, plus any shares attributable to vested dividend equivalents, less any shares withheld for tax withholding purposes pursuant to Section 4.8, into a brokerage account established for Participant at a financial institution the Committee shall select at its discretion (the “Financial Institution”) or delivered to Participant in certificate form, such method to be selected by the Committee in its discretion. Any fractional share shall be rounded up to the next whole share. Participant agrees to complete, before the settlement date, any documentation for the Company or the Financial Institution which is necessary to effect the transfer of shares of Common Stock to the Financial Institution.
2.    Covenants.
2.1    Consideration for Award under the Plan.  Participant acknowledges that Participant's agreement to this Section 2 is a key consideration for the Award made under this Award Agreement.  Participant hereby agrees to abide by the covenants set forth in Sections 2.2, 2.3, 2.4, 2.5, 2.6, and 2.7.
2.2    Covenant Against Competition.  During the period of Participant's employment and for two (2) years after his or her Last Day of Employment, Participant acknowledges and agrees he or she will not, directly or indirectly, establish or engage in any business or organization, or own or control any interest in, 

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be employed by, or act as an officer, director, consultant, advisor, or lender to, any of the following located in those geographic markets where Participant has had direct and substantial involvement in Company's operations in such geographic markets: (a) any entity that engages in any business competitive with the business activities of Company including, without limitation, its assisted and digital (including software) tax services businesses (“Prohibited Companies”); (b) any financial institution or business where any of Participant's duties or activities would relate to or assist in providing services or products to one or more of the Prohibited Companies for use in connection with products, services or assistance being provided to customers; or (c) any financial institution or business whose primary purpose is to provide services or products to one or more of the Prohibited Companies for use in connection with products, services or assistance being provided to customers.  Without limiting clause (c), any financial institution or business whose profits or revenues from the provision of services or products to the Prohibited Companies exceeds 25% of total profits or revenues, as the case may be, shall be deemed to be covered by clause (c).  For Participants whose primary place of employment as of the Last Day of Employment is in Puerto Rico or Arizona, the restrictions in this Section 2.2 shall be limited to one (1) year following Participant's Last Day of Employment.  The restrictions in this Section 2.2 shall not apply if Participant's primary place of employment as of the Last Day of Employment is in California or North Dakota; provided, however, to the extent permitted under such states' laws, Company nevertheless retains all rights and remedies set forth in Sections 2.8 and 2.9 in lieu of enforcing the restrictive covenant set forth in this Section 2.2.  Notwithstanding the foregoing, if Participant has a standalone employment agreement with Company and such employment agreement includes covenants against competition or non-solicitation of customers, the scope, but not the duration, of such covenants shall apply solely for purposes of Section 2.2 and Section 2.4, but shall have no other effect on this Award Agreement.  All other covenants contained in this Section 2 shall apply to Participant notwithstanding any covenants or other terms contained in any other agreement.
2.3    Covenant Against Solicitation of Employees. Participant acknowledges and agrees that, during the period of Participant's employment and for one (1) year after his or her Last Day of Employment, Participant will not directly or indirectly: (a) recruit, solicit, or otherwise induce any employee of Company to leave the employment of Company or to become an employee of or otherwise be associated with Participant or any company or business with which Participant is or may become associated; or (b) hire any employee of Company as an employee or otherwise in any company or business with which Participant is or may become associated.  The restrictions in this Section 2.3 shall not apply if Participant's primary place of employment as of the Last Day of Employment is in Wisconsin; provided, however, to the extent permitted under such state's laws, Company nevertheless retains all rights and remedies set forth in Sections 2.8 and 2.9 in lieu of enforcing the restrictive covenant set forth in this Section 2.3. 
2.4    Covenant Against Solicitation of Customers. During the period of Participant's employment and for two (2) years after his or her Last Day of Employment, Participant acknowledges and agrees that he or she will not, directly or indirectly, solicit or enter into any arrangement with any person or entity which is, at the time of the solicitation, a customer of Company for purposes of engaging in any business transaction of the nature performed by Company, or contemplated to be performed by Company, provided that this Section 2.4 will only apply to customers for whom Participant personally provided services while employed by Company or customers about whom or which Participant acquired material information while employed by Company.  For Participants whose primary place of employment as of the Last Day of Employment is in Puerto Rico or Arizona, the restrictions in this Section 2.4 shall be limited to one (1) year following Participant's Last Day of Employment.  The restrictions in this Section 2.4 shall not apply if Participant's primary place of employment as of the Last Day of Employment is in California or North Dakota; provided, however, to the extent permitted under such state's laws, Company nevertheless retains all rights and remedies set forth in Sections 2.8 and 2.9 in lieu of enforcing the restrictive covenant set forth in this Section 2.4.
2.5     Covenant Against Disclosure of Confidential Information. Participant acknowledges and agrees: (a) that “Confidential Business Information” includes, but is not limited to, Company's client lists 

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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, regardless of whether any court determines that such information constitutes a trade secret as defined by applicable law; and (b) that (i) Company has spent many years developing its business and clients, and is engaged in a continuous program of developing its business and clients, (ii) Company's methods of operation are unique within the industry, (iii) Participant's position creates a relationship of confidence and trust between Participant and Company with respect to Company's Confidential Business Information, and (iv) Participant's disclosure of Confidential Business Information could substantially injure Company's present and planned business.
Therefore, Participant agrees that at all times during employment and for a period of two (2) years after Participant's Last Day of Employment with Company, Participant shall keep in strictest confidence and trust all Confidential Business Information.  During this period, Participant shall not use or disclose any Confidential Business Information without the written consent of Company, except as may be necessary in the ordinary course of performing duties as an employee of Company or as may be required by law.  
Notwithstanding the foregoing, to the extent that any Confidential Business Information satisfies the legal definition of “trade secret,” and for so long as such information remains a trade secret, Participant shall keep in strictest confidence such trade secret and not use or disclose any such trade secret without the written consent of Company, except as may be necessary in the ordinary course of performing duties as an employee of Company or as may be required by law. Participant acknowledges that trade secrets include, but are not limited to, Company's client lists and all information identifying its clients, and all information pertaining to Company's business development, marketing plans, product information, business and financial information and plans, and strategies.
2.6    Covenant Regarding Company Property. Participant acknowledges and agrees that as between Participant and Company, all Confidential Business Information is the sole and exclusive property of Company and/or Company's nominee(s) or assign(s). Participant hereby assigns and agrees to assign to Company any rights Participant may have or may acquire in such Confidential Business Information. 
In the event that Participant conceives or develops, in whole or in part, any inventions, discoveries, ideas, concepts, strategies, plans, processes, systems, products, services, know-how, technology, software, website content, writings, expressions, designs, artwork, graphics, names, logos or other proprietary developments while employed by Company that (a) directly or indirectly relate in any way to or arise out of Participant's job responsibilities or the performance of the duties or assigned tasks of Participant with Company; or (b) directly or indirectly relate or pertain in any way to the existing or reasonably anticipated business, products, services, or other activities of Company; or (c) were otherwise conceived or developed, in whole or in part, using Company time or materials or based upon Confidential Business Information (collectively, the “Developments”), all right, title, and interest in and to the Developments including, without limitation, all patent, copyright, trademark, trade secret and other proprietary rights therein shall become the sole and exclusive property of Company and/or Company's nominee(s) or assign(s).
Participant acknowledges that any Developments subject to copyright protection shall be considered “works-for-hire” on behalf of Company as such term is defined under the copyright laws of the United States.  All right, title and interest in such Developments or components thereof shall automatically vest in Company and Company shall be the author and exclusive owner thereof including, without limitation, all copyrights (and renewals and extensions thereof), merchandising and allied, ancillary and subsidiary rights therein.  To the extent that any of the Developments, or any portion thereof, may not qualify as a work-for-hire or for copyright protection, Participant hereby irrevocably assigns and agrees to assign in the future all right, title, and interest in and to the Developments to Company or Company's nominee(s) or assign(s), including, without limitation, all patent, copyright, trademark, trade secret and any and all other proprietary rights therein.  

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Participant will keep and maintain adequate and current written records of the conception and development of Developments in the form of notes, sketches, drawings, reports or other documents relating thereto, which records shall be and shall remain the sole and exclusive property of Company and shall be available to Company at all times.
Participant further agrees to execute and deliver all documents and do all acts that Company shall deem necessary or desirable to secure to Company or its nominee(s) or assignee(s) the entire right, title and interest in and to the Confidential Business Information and Developments, at Company's expense.  Participant further agrees to cooperate with Company as reasonably necessary to maintain or enforce Company's rights in the Confidential Business Information and Developments.
In the event Participant's employment terminates, Participant shall promptly deliver to Company the originals and all copies of all Confidential Business Information, Developments and other materials and property of any nature belonging to Company and obtained during the course of, or as a result of, Participant's employment with Company. In addition, upon such termination, Participant shall not remove from the premises of Company any of its documents or property.
2.7    Non-Disparagement. Participant agrees, that after his or her Last Day of Employment, Participant will not disparage Company or any of its directors, officers, executives, employees, agents or other Company representatives (“Related Parties”), or make or solicit any comments to the media or others that may be considered derogatory or detrimental to the good business name or reputation of Company or Related Parties. This clause has no application to any communications with the Equal Employment Opportunity Commission or any state or local agency responsible for investigation and enforcement of discrimination laws.
2.8    Forfeiture of Rights.  Notwithstanding anything herein to the contrary, if Participant violates any provisions of this Section 2, Participant shall forfeit all rights to payments or benefits under the Plan.  All unsettled MSUs shall terminate, be forfeited and be incapable of vesting.  
2.9    Remedies.  Notwithstanding anything herein to the contrary, if Participant violates any provisions of this Section 2, whether before, on or after any settlement of an Award under the Plan, then Participant shall promptly pay to Company an amount equal to the aggregate Amount of Gain Realized by Participant on all Common Stock received pursuant to this Award Agreement after the date occurring one (1) year before Participant's Last Day of Employment; provided, however, to the extent the violation occurs before the settlement of the MSUs, all rights to payments or benefits under the Plan and all MSUs shall terminate, be forfeited and be incapable of vesting in accordance with Section 2.8.  Participant shall pay Company within three (3) business days after the date of any written demand by Company to Participant.
2.10    Remedies Payable.  Participant shall pay the amounts described in Section 2.9 in cash or as otherwise determined by Company.
2.11    Remedies without Prejudice.  The remedies provided in this Section 2 shall be without prejudice to the rights of Company to recover any losses resulting from the applicable conduct of Participant, and shall be in addition to any other remedies Company may have, at law or in equity, resulting from such conduct.
2.12    Survival.  Participant's obligations in this Section 2 shall survive and continue beyond settlement of all Awards under the Plan and any termination or expiration of this Award Agreement for any reason.
2.13    Tolling.  The restricted period for each of the covenants in this Award Agreement shall be tolled during (a) any period(s) of violation that occur during the original restricted period; and (b) any period(s) of time required by litigation to enforce the covenant (other than any periods during which Participant is enjoined from engaging in the prohibited activity and is in compliance with such order of enjoinment) provided 

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that the litigation is filed within one year following the end of the two-year period immediately following the cessation of employment.
3.    Non-Transferability of Award.  This Award (including all rights, privileges and benefits conferred under such Award) shall not be transferred, assigned, pledged, or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of this Award, or of any right or privilege conferred hereby, contrary to the provisions hereof, or upon any attempted sale under any execution, attachment, or similar process upon the rights and privileges hereby granted, then and in any such event this Award and the rights and privileges hereby granted shall immediately become null and void. 
4.    Miscellaneous. 
4.1    No Employment Contract.  This Award Agreement does not confer on Participant any right to continued employment for any period of time, and is not an employment contract.
4.2    Clawback.  If a restatement of H&R Block's financial results occurs and (a) the vesting or the Amount of Gain Realized with respect to any portion of this Award, or (b) the vesting or issuance of performance-based Shares pursuant to any other award granted under the Plan or any other company-sponsored equity compensation plan, or (c) any other cash compensation received by Participant pursuant to a Company-sponsored incentive plan, would not have occurred, been paid or would have been reduced if the results represented by the restatement were known as of the time of the original issuance of the financial results, Participant may be required to reimburse Company for the Amount of Gain Realized related to this Award. The Committee has sole discretion to make all determinations that may be made pursuant to this section, including the amount of reimbursement.
4.3    Adjustment of MSUs.  If any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affects the Common Stock or the value thereof, the Committee shall make such adjustments and other substitutions to this Award Agreement as the Committee determines necessary or appropriate to prevent dilution or enlargement of benefits or potential benefits intended to be made available under this Award Agreement, in a manner the Committee deems equitable or appropriate, taking into consideration the accounting and tax consequences, including such adjustments in the aggregate number, class and kind of securities that may be delivered under the Plan, and in the number, class, kind and option or exercise price of securities subject to the Award Agreement (including, if the Committee deems appropriate, the substitution of awards denominated in the shares of another company).
4.4    Adjustment of Performance Criteria.  
(a)    In the event of the occurrence during the Performance Period of any recapitalization, reorganization, merger, acquisition, divestiture, consolidation, spin-off, split-off, combination, liquidation, dissolution, sale of assets associated with the sale of a line of business or other material operation, other similar corporate transaction or event, any material changes in applicable tax laws or accounting principles, any event that is considered an extraordinary item under GAAP or any other unusual or non-recurring event involving the Company, the Committee shall adjust the calculation of the Performance Criteria to exclude the effect of such occurrence(s).  Such adjustments shall be conclusive and binding for all purposes.
(b)    The direct or indirect sale of any or all of the stock of, merger or liquidation of, sale or assumption of all or substantially all the assets or liabilities of, or any other transaction regarding, H&R Block Bank FSB, will be deemed to be an event for which an adjustment under Section 4.4(a) should be made. 
4.5    Merger, Consolidation, Reorganization, Liquidation, etc. If H&R Block shall become a party to any corporate merger, consolidation, major acquisition of property for stock, reorganization, or liquidation, 

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all Plan awards outstanding on the effective date of the consummation of the transaction shall be treated in the manner the Committee, in its discretion, deems equitable and appropriate after taking into consideration relevant facts, including the accounting and tax consequences. Such treatment need not treat all Awards (or all portions of an Award) in an identical manner. Such treatment may include, but is not limited to, the substitution of new Awards, or for any Awards then outstanding, the assumption of any such Awards or the cancellation of such Awards for a payment to Participant in cash or other property in an amount equitably determined by the Committee (and, for the avoidance of doubt, such cancellation may be without any payment to Participant in the event the Committee determines that the intrinsic value of the Award is zero or negative).  Any such arrangements shall be binding upon Participant and any action taken under this Section 4.5 shall either preserve an Award's status as exempt from Code Section 409A or comply with Code Section 409A.
4.6    Interpretation and Regulations.  The Committee shall have the full power and authority provided under Section 4.2 of the Plan and provided by delegation by the Board, subject to the terms of the Plan, and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board. Such power and authority shall include, but not be limited to, the power and authority to: (a) interpret and administer the Plan, the Award Agreement, and any instrument or agreement entered into under or in connection with the Plan; (b) correct any defect, supply any omission or reconcile any inconsistency in the Plan or the Award Agreement in the manner and to the extent that the Committee shall deem desirable to carry it into effect; (c) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan and Award; (d) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan and Award; (e) determine whether, to what extent and under what circumstances the Award shall be canceled or suspended; and (f) determine, for purposes of the Plan and this Award Agreement, (i) the date and circumstances that constitute a cessation or termination of employment, (ii) whether such cessation or termination is the result of Retirement, death, Disability, termination without Cause or any other reason, and (iii) what constitutes continuous employment with respect to vesting under this Award Agreement. Notwithstanding the foregoing, leaves of absence approved by the Committee or transfers of employment among the subsidiaries of H&R Block shall not be considered an interruption of continuous employment under the Plan, unless otherwise required by Code Section 409A. 
4.7    Reservation of Rights.  If at any time Company determines that qualification or registration of the MSUs, or of any shares of Common Stock subject to the MSUs, under any federal, state or other applicable securities law, or the consent or approval of any governmental regulatory authority, is necessary or desirable as a condition of executing an Award or providing a benefit under the Plan, then such action may not be taken, in whole or in part, unless and until such qualification, registration, consent or approval shall have been effected or obtained free of any conditions Company deems unacceptable. 
4.8    Withholding of Taxes.  Company shall make the delivery of shares of Common Stock pursuant to this Award Agreement net of all federal, state, local or foreign taxes required to be paid or withheld as a result of the delivery of shares of Common Stock.  Unless otherwise determined pursuant to established procedures pursuant to the Plan, the number of shares of Common Stock withheld shall be based on the Fair Market Value of such shares on the delivery date and the minimum required tax withholding rate for Participant (or such other rate that will not cause an adverse accounting consequence or cost to Company).
4.9    Reasonableness of Restrictions, Severability and Court Modification.  Participant and Company agree that the restrictions contained in this Award Agreement are reasonable, but, should any provision of this Award Agreement be determined by a court of competent jurisdiction to be invalid, illegal or otherwise unenforceable or unreasonable in scope, the validity, legality and enforceability of the other provisions of this Award Agreement will not be affected thereby, and the provision found invalid, illegal, or otherwise unenforceable or unreasonable will be considered by Company and Participant to be amended as 

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to scope of protection, time or geographic area (or any one of them, as the case may be) in whatever manner is considered reasonable by that court and, as so amended, will be enforced.
4.10    Waiver.  The failure of Company to enforce at any time any terms, covenants or conditions of this Award Agreement shall not be construed to be a waiver of such terms, covenants or conditions or of any other provision. Any waiver or modification of the terms, covenants or conditions of this Award Agreement shall only be effective if reduced to writing and signed by both Participant and an officer of H&R Block.
4.11    Plan Control.  The terms of this Award Agreement are governed by the terms of the Plan, as it exists on the Grant Date (except to the extent the Plan is amended from time to time and such amendment is intended to have retroactive effect). Except where the Plan expressly permits an award agreement to provide for different terms, if any provisions of this Award Agreement conflict with any provisions of the Plan, the terms of the Plan shall control.
4.12    Notices.  Any notice to be given to Company or election to be made under the terms of this Award Agreement shall be addressed to Company (Attention: Long Term Incentive Department) at One H&R Block Way, Kansas City Missouri 64105, or at such other address or by such other means as Company may hereafter designate in writing to Participant. Any notice to be given to Participant shall be addressed to Participant at the last address of record with Company or at such other address as Participant may hereafter designate in writing to Company. Any such notice shall be deemed to have been duly given when deposited in the United States mail via regular or certified mail, addressed as aforesaid, postage prepaid.  
4.13    Choice of Law.  This Award Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Missouri without reference to principles of conflicts of laws.
4.14    Choice of Forum and Jurisdiction.  Participant and Company agree that any proceedings to enforce the obligations and rights under this Award Agreement must be brought in the Missouri District Court located in Jackson County, Missouri, or in the United States District Court for the Western District of Missouri in Kansas City, Missouri.  Participant agrees and submits to personal jurisdiction in either court.  Participant and Company further agree that this Choice of Forum and Jurisdiction is binding on all matters related to Awards under the Plan and may not be altered or amended by any other arrangement or agreement (including an employment agreement) without the express written consent of Participant and H&R Block.
4.15    Compliance with Section 409A.  Notwithstanding any provision in this Award Agreement or the Plan to the contrary, this Award Agreement shall be interpreted and administered in accordance with Code Section 409A and regulations and other guidance issued thereunder (“Section 409A”).  For purposes of determining whether any payment made pursuant to this Award Agreement results in a “deferral of compensation” within the meaning of Treasury Regulation 1.409A-1(b), H&R Block shall maximize the exemptions described in such section, as applicable.  Any reference to a “termination of employment” or similar term or phrase shall be interpreted as a “separation from service” within the meaning of Section 409A.  If any deferred compensation payment is payable while Participant is a “specified employee” under Section 409A, and payment is due because of separation from service for any reason other than death, then payment of such amount shall be delayed for a period of six months and paid in a lump sum on the first payroll payment date following the earlier of the expiration of such six month period or Participant's death.  To the extent any payments under this Award Agreement are made in installments, each installment shall be deemed a separate payment for purposes of Section 409A and the regulations issued thereunder.  Participant or his or her beneficiary, as applicable, shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on Participant or his or her beneficiary in connection with any payments to Participant or his or her beneficiary pursuant to this Award Agreement, including but not limited to any taxes, interest and penalties under Section 409A, and neither H&R Block nor any of its affiliates shall have any obligation to indemnify or otherwise hold Participant or his or her beneficiary harmless from any and all of such taxes and penalties.   

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4.16    Attorneys Fees.  Participant and Company agree that in the event of litigation to enforce the terms and obligations under this Award Agreement, the party prevailing in any such cause of action will be entitled to reimbursement of reasonable attorneys fees.
4.17    Relationship of the Parties.  Participant acknowledges that this Award Agreement is between H&R Block and Participant.  Participant further acknowledges that H&R Block is a holding company and that Participant is not an employee of H&R Block.
4.18    Headings.  The section headings herein are for convenience only and shall not be considered in construing this Award Agreement.
4.19    Amendment.  No amendment, supplement, or waiver to this Award Agreement is valid or binding unless in writing and signed on behalf of H&R Block by an officer of H&R Block, and, if materially adverse to Participant, signed by Participant.
4.20    Execution of Agreement.  This Award Agreement shall not be enforceable by either party, and Participant shall have no rights with respect to the Awards made hereunder, unless and until it has been (a) signed by Participant within 180 days of the Grant Date, (b) signed on behalf of H&R Block by an officer of H&R Block, and (c) returned to H&R Block.
This Award Agreement may be signed by the parties via facsimile or electronic signature, as acceptable to Company, and may be signed by H&R Block via stamped signature. 
4.21    WAIVER OF JURY TRIAL. PARTICIPANT KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING, ACTION OR CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT.
5.    Definitions.  Whenever a term is used in this Award Agreement, the following words and phrases shall have the meanings set forth below or as set forth in the Plan unless the context plainly requires a different meaning, and when a defined meaning is intended, the term is capitalized.
5.1    Amount of Gain Realized.  The Amount of Gain Realized shall be equal to the number of shares of Common Stock that Participant receives pursuant to this Award Agreement multiplied by the Fair Market Value of one share of Common Stock on the date of delivery.
5.2    Average Return on Equity.  Average Return on Equity shall be based on Company's net income from continuing operations and total stockholders' equity, each as defined under Generally Accepted Accounting Principles (United States) (“GAAP”).  Average Return on Equity shall be calculated annually as net income from continuing operations divided by average equity, the result of which is averaged over the Performance Period, subject to those adjustments described in Section 4.4. 
5.3    Board.  Board means the Board of Directors of H&R Block. 
5.4    Cause.  Cause means those actions or omissions that constitute cause for termination under the written Company severance plan that applies to Participant.  If no severance plan applies to Participant or if the applicable severance plan does not define “Cause,” then Cause shall have the meaning found in the H&R Block Severance Plan, or any successor to that plan.  Notwithstanding any of the foregoing, if Participant has a standalone employment agreement with Company and such employment agreement includes a definition for cause, the definition of cause in the employment agreement shall apply.
5.5    Change in Control.  Change in Control means the occurrence of one or more of the following events:
(a)    Any one person, or more than one person acting as a group, acquires ownership of stock of H&R Block that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of H&R Block.  If any one person, or more than one person acting as a group, is considered to own more than 50 percent of the total fair market value or total 

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voting power of the stock of H&R Block, the acquisition of additional stock by the same person or persons shall not be considered to cause a Change in Control.  An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which H&R Block acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this Section 5.5(a).
(b)    Any one person, or more than one person acting as a group, acquires (when combined with all other acquisitions of H&R Block stock acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of H&R Block possessing 35 percent or more of the total voting power of the stock of H&R Block.  If any one person, or more than one person acting as a group, is considered to effectively control a corporation within the meaning of Treasury Regulation 1.409A-3(i)(5)(vi), the acquisition of additional control of the corporation by the same person or persons is not considered to cause a change in the effective control of the corporation. An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which H&R Block acquires its stock in exchange for property will not be treated as an acquisition of stock for purposes of this Section 5.5(b), but will be treated as an acquisition of stock for purposes of Section 5.5(a).
(c)    A majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by two-thirds (2/3) of the members of the Board before the date of such appointment or election.
(d)    Any one person, or more than one person acting as a group, acquires (when combined with all other acquisitions of H&R Block assets acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from H&R Block that have a total gross fair market value equal to or more than 50 percent of the total gross fair market value of all of the assets of H&R Block immediately before such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of H&R Block, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.  Notwithstanding the foregoing, there is no Change in Control event under this Section 5.5(d) when there is a transfer to an entity that is controlled by the shareholders of H&R Block immediately after the transfer. A transfer of assets by H&R Block is not treated as a change in the ownership of such assets if the assets are transferred to: (i) a shareholder of H&R Block (immediately before the asset transfer) solely in exchange for or with respect to its stock; (ii) an entity, 50 percent or more of the total value or voting power of which is owned, directly or indirectly, by H&R Block; (iii) a person, or more than one person acting as a group, that owns, directly or indirectly, 50 percent or more of the total value or voting power of all the outstanding stock of H&R Block; or (iv) an entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a person described in (iii) above.  
Notwithstanding the foregoing, the direct or indirect sale of any or all of the stock of, merger or liquidation of, or sale or assumption of all or substantially all the assets or liabilities of, H&R Block Bank FSB, (i) will not be considered a Change in Control for purposes of this Award Agreement, and (ii) will not be included in any determination of the total gross fair market value of assets of H&R Block sold during any 12-month period under Section 5.5(d) above.
For purposes of this section, persons will be considered to be acting as a group in accordance with Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as amended, and Code Section 409A.
5.6    Closing Price.  Closing Price shall mean the last reported market price for one share of Common Stock, regular way, on the New York Stock Exchange (or any successor exchange or stock market on which such last reported market price is reported) on the day in question.  If the exchange is closed on the day on which the Closing Price is to be determined or if there were no sales reported on such date, the Closing Price shall be computed as of the last date preceding such date on which the exchange was open and a sale was reported.
5.7    Code.  Code means the Internal Revenue Code of 1986, as amended.

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5.8    Committee.  Committee means the Compensation Committee of the Board.
5.9    Common Stock.  Common Stock means the common stock of H&R Block, without par value.
5.10    Company.  Company means H&R Block, Inc., a Missouri corporation, and includes its “subsidiary corporations” (as defined in Code Section 424(f)) and their respective divisions, departments and subsidiaries and the respective divisions, departments and subsidiaries of such subsidiaries.
5.11    Comparable Position. Comparable Position means a position where:
(a)    Participant's primary work location would be within 50 miles of Participant's current primary work location, and
(b)    Participant's compensation rate (salary and target bonus) would be no more than 10% below Participant's current compensation rate.
5.12    Disability. Disability or disabled means, determined in accordance with the following determination periods:  
(a)    If Participant has coverage under a group long-term disability program maintained by Company, Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of at least three months under such program; or
(b)    If Participant does not have coverage under a group long-term disability program maintained by Company, Participant is unable to engage in any substantial gainful activity for a period of at least 9 months by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.
For this purpose, Participant shall be deemed to have incurred a Disability on the last day of the applicable determination period above. Notwithstanding the foregoing, if Participant has a standalone employment agreement with Company and such employment agreement includes a definition of disability, the definition in the employment agreement shall apply. 
5.13    End of Performance Period Stock Price.  End of Performance Period Stock Price means the average of the Fair Market Value of the Common Stock for the 30 consecutive trading days ending on the last day of the Performance Period.   
5.14    Fair Market Value.  Fair Market Value means the Closing Price for one share of Common Stock.
5.15    Fiscal Year.  Fiscal Year means the  fiscal year ended April 30.
5.16    Good Reason Termination.  Good Reason Termination means a Termination of Employment initiated by Participant that is related to one or more conditions described in subsection (a), and that is subject to the timing, notice and remedy provisions of subsection (b):
(a)    Conditions for Good Reason Termination. The conditions that qualify for Good Reason Termination shall be those conditions provided in the definition of Good Reason Termination under the written Company severance plan that applies to Participant, unless Participant has a standalone employment agreement with Company and such employment agreement includes such definition (or a definition of “Good Reason”), in which case the definition in the employment agreement shall apply. For the avoidance of doubt, any such definition shall only apply with respect to determining the conditions that constitute “Good Reason.” The periods of time relating to the initial existence, notice, and remedy of any such condition are determined solely as described in subsection (b). If no severance plan or employment agreement applies to Participant or if neither includes a definition of “Good Reason” or “Good Reason Termination,” then the conditions that qualify for Good Reason Termination are:

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(i)    A change in Participant's primary work location that is more than 50 miles from Participant's previous primary work location, or
(ii)    A diminution of Participant's compensation rate (salary and target bonus) of more than 10%.
(b)    Timing, Notice and Remedy Requirements. Participant's voluntary Termination of Employment qualifies as a Good Reason Termination only if such Termination of Employment occurs within 18 months after a Change in Control because of a qualifying condition described in subsection (a), and only if (i)     the initial existence of the condition occurs no more than 75 days before the Change in Control, or occurs on or after the Change in Control; (ii) Participant does not consent to the condition; and (iii) Company does not remedy the condition (as further described in this section).
Participant must provide notice no more than 30 days after the initial occurrence of the event; provided, however, if the event initially occurs within the 75 day period preceding a Change in Control, notice must be provided by the earlier of (i) 90 days of the date of the initial occurrence and (ii) 30 days after the date of the Change in Control.  During the 30 days following receipt of the notice, Company may remedy the event, occurrence or condition for which notice was given, in which case a Good Reason Termination will not occur as a result of the condition.
5.17    Grant Date Stock Price.  The Grant Date Stock Price means the average of the Fair Market Value of the Common Stock for the 30 consecutive trading days ending on the Grant Date.
5.18    Last Day of Employment.  Last Day of Employment means the date of Participant's Termination of Employment.
5.19    Market Stock Units or MSUs.  The Market Stock Units or MSUs awarded pursuant to this Award Agreement are a form of Performance Share Units as defined in the Plan.
5.20    Performance Period.  Performance Period means the period commencing [May 1, 201X] and ending [April 30, 201X].
5.21    Qualifying CIC Separation.  Qualifying CIC Separation means (a) a Good Reason Termination or (b) Company's involuntary Termination of Employment of Participant without Cause no more than 75 days before or 18 months after a Change in Control; provided, however, that Qualifying CIC Separation described under subsection (b) does not include the elimination of Participant's position where Participant was offered a Comparable Position with Company or with a party (or a subsidiary or an affiliate of such a party) that acquires any asset from Company.
5.22    Retirement.  Retirement means Participant's voluntary Termination of Employment with Company at or after the date Participant (a) attains age 60 or (b) attains age 55 and completes at least five (5) years of service with Company.
5.23    Performance Criteria.  Performance Criteria means the End of Performance Period Stock Price set forth in Section 1.4(a) and the Average Return on Equity set forth in Section 1.4(b).
5.24    Termination of Employment.  Termination of Employment, termination of employment and similar references mean a separation from service within the meaning of Code Section 409A.  If Participant is an employee, Participant will generally have a Termination of Employment if Participant voluntarily or involuntarily terminates employment with Company.  A termination of employment occurs if the facts and circumstances indicate that Participant and Company reasonably anticipate that no further services will be performed after a certain date or that the level of bona fide services Participant will perform after such date (whether as an employee, director or other independent contractor) for Company will decrease to no more than 20 percent of the average level of bona fide services performed (whether as an employee, director or other independent contractor) over the immediately preceding 36-month period (or full period of services if Participant has been providing services for less than 36 months).  For purposes of this Section 5.24, 

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“Company” includes any entity that would be aggregated with Company under Treasury Regulation 1.409A-1(h)(3). 
6.    ACKNOWLEDGEMENT OF COVENANTS AND WAIVERS. 
6.1    Participant understands and acknowledges that this Award Agreement confers both rights and obligations upon Participant. 
6.2    Participant has reviewed this Award Agreement in its entirety and understands that by signing this Award Agreement, Participant agrees to all of its terms, including, but not limited to, the covenants set forth in Section 2 of this Award Agreement, the Choice of Forum and Jurisdiction, and the Waiver of Jury Trial set forth in Section 4 of this Award Agreement.
6.3    Participant acknowledges that Company has advised Participant to seek his or her own legal counsel before signing this Award Agreement and that Participant has consulted or has had the opportunity to consult with his or her personal attorney before executing this Award Agreement.

[Signature Page Follows.]

In consideration of said Award and the mutual covenants contained herein, the parties agree to the terms set forth above.
The parties hereto have executed this Award Agreement.
Participant Name:     [Participant Name]
Date Signed:        [Acceptance Date]
H&R BLOCK, INC.
By: 
William C. Cobb
President and Chief Executive Officer

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