H&R BLOCK, INC. EXECUTIVE
SEVERANCE PLAN
This Plan document
is adopted by H&R Block, Inc., a Missouri corporation
(“HRB”) effective as of May 12, 2009.
The Company
considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best
interests of the Company and its shareholders. This Plan provides
severance pay to compensate management for the involuntary loss of
employment and a period of readjustment. The Company also
recognizes that a Change in Control of HRB may arise in the future
and that such event may result in the departure or distraction of
management to the detriment of the Company and its shareholders.
Accordingly, the Board has determined it is in the best interests
of the Company and its shareholders to secure the continued
services and dedication of such management in the event of any
threat or occurrence of a Change in Control of HRB by providing
such management the benefits set forth this Plan.
This Plan
supersedes all prior agreements, arrangements or plans of the
Company related to separation pay in the event of a Qualifying
Termination or Change in Control Termination. Notwithstanding the
foregoing, nothing under this Plan supersedes or replaces any
rights to acceleration of vesting granted to a Participant under
the H&R Block, Inc. 2003 Long-Term Executive Compensation Plan
for grants prior to participation in the Plan. Any benefits under
this Plan will be provided to eligible employees in lieu of
benefits under any other severance plan.
For purposes of
this Plan, the following terms shall have the meanings specified
below unless the context clearly requires otherwise:
(a) “Affiliate”
shall have the meaning ascribed to such term in Rule 12b-2 of
Regulation 12B under the Securities Exchange Act of 1934, as
amended.
(b) “Board”
means the Board of Directors of HRB.
(c) “Cause”
means any of the following unless, if capable of cure, such events
are fully corrected in all material respects by Participant within
ten (10) days after the Company provides notice of the
occurrence of such event:
(i) A
Participant’s misconduct that materially interferes with or
materially prejudices the proper conduct of the business of the
Company;
(ii) A
Participant’s commission of an act materially and
demonstrably detrimental to the good will of the
Company;
(iii) A
Participant’s commission of any act of dishonesty or breach
of trust resulting or intending to result in material personal gain
or enrichment of the Participant at the expense of the
Company;
(iv) A
Participant’s violation of any non-competition,
non-solicitation, confidentiality or similar restrictive covenant
under any employment-related agreement, plan or policy with respect
to which the Participant is a party or is bound; or
(v) A
Participant’s conviction of, or plea of nolo contendere to, a
misdemeanor involving an act of moral turpitude or a
felony.
If the Company
does not give the Participant a termination notice within sixty
(60) days after the Board or the Chairman of the Board has
knowledge that an event constituting Cause has occurred, the event
will no longer constitute Cause. The Company may place a
Participant on unpaid leave for up to 30 consecutive days while it
is determining whether there is a basis to terminate the
Participant’s employment for Cause. Such unpaid leave will
not constitute Good Reason.
For purposes of
this definition, (a) no act or omission by the Participant
will be “willful” unless it is made by the Participant
in bad faith or without a reasonable belief that the
Participant’s act or omission furthered the interests of the
Company and (b) any act or omission by the Participant based
on authority given pursuant to a resolution duly adopted by the
Board will be deemed made in good faith and in the best interests
of the Company.
(d) “Change
in Control” means the occurrence of one or more of the
following events:
(i) Any one
person, or more than one person acting as a group, acquires
ownership of stock of HRB 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 HRB. 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 voting power of the stock of HRB, the
acquisition of additional stock by the same person or persons shall
not be considered to cause a change in the ownership 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 HRB acquires its stock in exchange for
property will be treated as an acquisition of stock for purposes of
this Section 2(d)(i).
(ii) Any one
person, or more than one person acting as a group, acquires (or has
acquired during the 12-month period ending on the date of the most
recent acquisition by such person or persons) ownership of stock of
HRB possessing 35 percent or more of the total voting power of
the stock of HRB. 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.
(iii) 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.
(iv) Any one
person, or more than one person acting as a group, acquires (or has
acquired during the 12-month period ending on the date of the most
recent acquisition by such person or persons) assets from HRB 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
-2-
HRB immediately
before such acquisition or acquisitions. For this purpose, gross
fair market value means the value of the assets of HRB, 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
2(d)(iv) when there is a transfer to an entity that is controlled
by the shareholders of HRB immediately after the transfer. A
transfer of assets by HRB is not treated as a change in the
ownership of such assets if the assets are transferred to:
(a) a shareholder of HRB (immediately before the asset
transfer) in exchange for or with respect to its stock; (b) an
entity, 50 percent or more of the total value or voting power
of which is owned, directly or indirectly, by HRB; (c) 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 HRB; or (d) 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
(c) above.
For purposes of
the foregoing, persons will be considered 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 Section 409A
of the Code.
(e) “Change
in Control Termination” means a Participant’s
Qualifying Termination or Good Reason Termination, in either event
within 24 months immediately following a Change in
Control.
(f) “COBRA
Subsidy” means an amount equal to the Participant’s
monthly post-employment premium for health and welfare benefits
under the Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”) less the amount paid from time to time by
active employees for similar coverage. To be eligible for the COBRA
Subsidy, the Participant must be enrolled in the Participating
Employer’s health and welfare plans on the date of Separation
from Service.
(g) “Code”
means the Internal Revenue Code of 1986, as amended.
(h) “Company”
means HRB and its Affiliates.
(i) “Comparable
Position” means a position where:
(i) the primary
work location is within 50 miles of the Participant’s primary
work location prior to the Qualifying Termination, and,
(ii) the
compensation rate (salary and target bonus) is not more than 10%
below the Participant’s compensation rate at the time of the
Qualifying Termination.
(j) “Effective
Date” means May 12, 2009.
(k) “ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
(l) “Good
Reason Termination” means a Separation from Service within
24 months immediately following a Change in Control which is
initiated by the Participant upon one or more of the following
occurrences:
-3-
(i) A material
diminution in the Participant’s base compensation;
(ii) A material
diminution in the Participant’s authority, duties, or
responsibilities;
(iii) A material
change in the geographic location at which the Participant must
perform the services; or
(iv) Any other
action or inaction that constitutes a material breach by the
Company of any written employment-related agreement between the
Participant and the Company.
A Participant must
provide notice to the Company of the existence of any of the
foregoing conditions within 10 days of the initial existence
of the condition, upon the notice of which the Company must be
provided a period of at least 30 days during which it may
substantially remedy the condition and not be required to pay the
amount.
(m) “HRB”
means H&R Block, Inc., a Missouri corporation.
(n) “Monthly
Compensation” means a Participant’s highest annual
salary as of the Change in Control or during the 12-month period
immediately preceding his Separation Date divided by 12.
(o) “Participant”
means an associate of the Company who is nominated by HRB’s
Chief Executive Officer and approved by the Compensation Committee
of the Board.
(p) “Payment
Date” means the date which is thirty (30) days after the
later of: (i) a Participant’s Separation Date or
(ii) the Release Date.
(q) “Plan”
means this H&R Block, Inc. Executive Severance Plan, as amended
from time to time. This document serves as both the legal plan
document and summary plan description.
(r) “Plan
Administrator” and “Plan Sponsor” means H&R
Block Management, LLC. The address and telephone number of H&R
Block Management, LLC is One H&R Block Way, Kansas City,
Missouri 64105, (816)854-3000. The Employer Identification Number
assigned to H&R Block Management, LLC by the Internal Revenue
Service is 43-1632589.
(s) “Qualifying
Termination” means the involuntary Separation from Service by
the Company under circumstances not constituting Cause but does not
include:
(i) the
elimination of the Participant’s position where the
Participant was offered a Comparable Position with the Company or
with a party that acquires any asset from the Company (or a
subsidiary or an affiliate of such a party), or
(ii) the
redefinition of a Participant’s position to a lower
compensation rate or grade.
(t) “Release
Agreement” means the release agreement, substantially in the
form set forth as Exhibit A to this Plan, which a Participant
shall be required to execute as a condition to receiving payments
and benefits under this Plan.
-4-
(u) “Release
Date” means 60 days after a Participant’s
Separation Date.
(v) “Separation
Date” means the effective date of a Participant’s
Separation from Service.
(w) “Separation
from Service” means the date that a Participant separates
from service within the meaning of Section 409A of the Code
and Treasury Regulation §1.409A-1(h).
(x) “Year
of Service” means each period of 12 consecutive months of
employment measured from the Participant’s employment
commencement date. 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)
Notwithstanding
the foregoing, in no event will a Participant be credited with less
than 12 Years of Service or more than 18 Years of
Service.
Section 3. Severance Benefits.
(a) If a
Participant (1) incurs a Qualifying Termination or a Change in
Control Termination and (2) executes his Release Agreement and
returns it to the Company by the deadline set forth in the Release
Agreement, then the Participant shall be entitled to the following
compensation and benefits:
(i) The Company
shall pay the Participant, on the Payment Date, a lump sum
severance amount equal to:
(A) the
Participant’s Monthly Compensation multiplied by the
Participant’s Years of Service; plus
(B) a specified
percentage of the Participant’s Monthly Compensation as set
forth in the Appendix to this Plan multiplied by the
Participant’s Years of Service; plus
(C) an amount
equal to the Participant’s COBRA Subsidy multiplied by 12. To
be eligible for a payment under this Section 3(a)(i)(C), the
Participant must be enrolled in the Company’s applicable
health, dental, and vision benefits on the date of the Separation
from Service.
(ii) Subject to
Section 13, the Company, at its expense, shall provide
reasonable outplacement assistance to the Participant, for a period
not to exceed fifteen (15) months following the
Participant’s Separation Date, from a professional
outplacement assistance firm which is reasonably suitable to the
Participant and commensurate with the Participant’s position
and responsibilities. In no event shall the amount expended for
outplacement assistance for the Participant exceed One Thousand
Dollars ($1,000) per month.
-5-
(iii) The
Participant shall be entitled to a pro-rata award of any award
payable under the Company’s Short Term Incentive Plan
(“Incentive Plan”) based upon the Participant’s
actual performance and the attainment of goals established under
the Plan as determined by the Board in its sole discretion. Such
pro-rata award shall be payable at the time such awards are payable
under the Incentive Plan. The pro-rata portion shall be based on
the number of days preceding the Separation Date in the performance
period during which the Separation Date occurs, divided by
365.
(iv) The
Participant shall be entitled to a pro-rata award of any
outstanding performance shares granted under HRB’s 2003
Long-Term Executive Compensation Plan (or any predecessor or
successor plan) as of his Separation Date based on the achievement
of the performance goals at the end of the then applicable
performance period. Payment of such performance shares shall be
made in a single lump sum upon the later of: (a) ten
(10) days following the expiration of the applicable
performance period or (ii) the date which is six
(6) months following the Participant’s Separation from
Service.
(b) A
Participant who receives any payments and other benefits under this
Section 3 shall not be eligible for any severance-related
payments or benefits under any employment-related agreement or
plan, policy or program of the Company. The payments and other
benefits under this Section 3 shall offset any amounts due
under the Worker Adjustment Retraining Notification Act of 1988 or
any similar statute or regulation.
Section 4. Equity Awards.
(a)
Qualifying Termination
(i) In the event a
Participant incurs a Qualifying Termination, such Participant shall
become vested in any outstanding stock options that would have
vested during the 12-month period following the Participant’s
Separation Date had the Participant remained an employee with the
Company. This Section 4(a)(i) applies to stock options granted
under HRB’s 2003 Long-Term Executive Compensation Plan or any
predecessor or successor plan. The Participant may exercise such
options until the earlier of: (a) fifteen (15) months
following the Participant’s Separation Date or (b) the
last day the options would have been exercisable if the Participant
had not incurred a Separation from Service.
(ii) In the event
a Participant incurs a Qualifying Termination, such Participant
shall become vested in any portion of any outstanding restricted
stock/stock unit awards (other than performance shares) that would
have lapsed during the 12-month period following the
Participant’s Separation Date had the Participant remained an
employee with the Company. This Section 4(a)(ii) applies to
restricted shares/units granted under HRB’s 2003 Long-Term
Executive Compensation Plan or any predecessor or successor
plan.
(i) In the event a
Participant incurs a Change in Control Termination, such
Participant shall become 100% vested in all outstanding stock
options granted under HRB’s 2003 Long-Term Executive
Compensation Plan or any predecessor or successor plan. The
Participant may exercise such options until the earlier of:
(a) fifteen (15)
-6-
months
following the Participant’s Separation Date or (b) the
last day the options would have been exercisable if the Participant
had not incurred a Separation from Service.
(ii) In the
event a Participant incurs a Change in Control Termination, such
Participant shall become 100% vested in all outstanding restricted
stock awards (other than performance shares) granted under
HRB’s 2003 Long-Term Executive Compensation Plan or any
predecessor or successor plan.
Section 5. Repayment; Clawback .
Notwithstanding
any provision in this Plan to the contrary, if (x) the Company
is required to restate any of its financial statements filed with
the Securities and Exchange Commission, other than restatements due
solely to factors external to the Company such as a change in
accounting principles or a change in securities laws or regulations
with retroactive effect or (y) the Participant violates the
provisions of any confidentiality, non-competition,
non-solicitation or similar agreement or policy, then the Board may
recover or require reimbursement of all severance, equity
compensation awards (including profits from the sale of Company
stock acquired pursuant to such awards) and/or other payments or
benefits made to the Participant under this Plan. In exercising its
discretion to recover or require reimbursement of any amounts as a
result of any restatement pursuant to clause (x) above, the
Board will give reasonable and due consideration to, among other
relevant factors, the level of the Participant’s
responsibility or influence, as well as the level of others’
responsibility or influence, over the judgments or actions that
gave rise to the restatement.
Section 6. Other Payments.
Upon any
Separation from Service entitling the Participant to payments under
this Plan, the Participant shall receive all accrued but unpaid
salary and all benefits accrued and payable under any plans,
policies and programs of the Company, except for benefits payable
under any severance plan, policy or arrangement of the
Company.
If a Participant
incurs any expenses associated with the successful enforcement of
his rights under this Plan by arbitration, litigation or other
legal action, then the Company shall pay the Participant on demand
of all reasonable expenses (including all attorneys’ fees and
legal expenses) incurred by the Participant in enforcing such
rights under this Plan. The Participant shall notify the Company of
the expenses for which the Participant demands reimbursement within
sixty (60) days after the Participant receives an invoice for
such expenses, and the Company shall pay the reimbursement amount
within fifteen (15) days after receipt of such notice, subject
to Section 13. For purposes of clarity, the Company shall have
no obligation to reimburse the Participant for any expenses
incurred by such Participant if any court, arbitrator, mediator or
other judicial panel rules in favor of the Company with respect to
the dispute giving rise to such expenses.
Section 8. No Mitigation.
A Participant
shall not be required to mitigate the amount of any payment or
benefit provided for in this Plan by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other
employment or otherwise.
-7-
Section 9. Nonexclusivity of Rights.
Nothing in this
Plan shall prevent or limit a Participant’s continued or
future participation in or rights under any benefit, bonus,
incentive or other plan or program provided by the Company and for
which the Participant may qualify, except as provided in this
Plan.
The
Company’s obligation to make the payments provided for in
this Plan and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Participant or
others.
(a) To the
extent applicable, this Plan shall be construed and administered
consistently with Section 409A and the regulations and
guidance issued thereunder. If the Participant is a
“specified employee” as described in Section 409A,
on his S
|
