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Senior Managing Director Employment Agreement - RSM McGladrey Inc. and Thomas G. Rotherham

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SENIOR MANAGING DIRECTOR EMPLOYMENT AGREEMENT
(THOMAS G. ROTHERHAM)


                  THIS SENIOR MANAGING DIRECTOR EMPLOYMENT AGREEMENT (the
"Agreement") is made effective as of the 2nd day of August, 1999 (the "Effective
Date"), by and between RSM McGladrey, Inc. and assigns ("RSM McGladrey") and
Thomas G. Rotherham (the "Senior Managing Director"). All terms not otherwise
defined herein shall have the meaning set forth in that certain asset purchase
agreement by and among RSM McGladrey, McGladrey & Pullen, LLP ("McGladrey"), H&R
Block, Inc. ("Block") and others dated June 28, 1999.

                                    RECITALS

                  WHEREAS, RSM McGladrey is a wholly owned, indirect subsidiary
Block and RSM McGladrey is engaged in providing business services to the general
public;

                  WHEREAS, Senior Managing Director desires employment with RSM
McGladrey, and RSM McGladrey desires to employ Senior Managing Director to
provide business services to clients of RSM McGladrey, on the terms and
conditions set forth herein.

                                    AGREEMENT

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:

                  1.       EMPLOYMENT; POSITION; RESPONSIBILITIES.

                           1.1. EMPLOYMENT. RSM McGladrey hereby employs Senior
Managing Director, and Senior Managing Director hereby accepts and undertakes
such employment, pursuant to the terms and conditions of this Agreement.

                           1.2. POSITION; RESPONSIBILITIES. Senior Managing
Director shall hold the position of Chief Operating Officer and shall report to
the Chief Executive Officer or Chief Operating Officer of Block. Senior Managing
Director shall have the duties and responsibilities usually held by a Chief
Operating Officer of a Block subsidiary corporation which duties and
responsibilities shall include the integration of Block's national accounting
firm operations with McGladrey's operations.

                  2.       TERM. The term of the Senior Managing Director's
employment hereunder and of this Agreement shall be at will. This Agreement
shall commence on the date hereof. Thereafter, this Agreement may be terminated
pursuant to the provisions of Section 9 hereof. The term of this Agreement is
hereafter referred to as the "Term".

                  3.       CLASS OF SENIOR MANAGING DIRECTOR. Senior Managing
Director shall be in the Class of Senior Managing Directors.


<PAGE>   2

                  4.       PROFESSIONAL RESPONSIBILITIES AND DUTIES.

                           4.1. CERTAIN DUTIES OF SENIOR MANAGING DIRECTOR.
Senior Managing Director shall render such lawful services for RSM McGladrey and
its customers or clients as are from time to time reasonably requested of Senior
Managing Director and assigned to Senior Managing Director by RSM McGladrey (the
"Services"). RSM McGladrey and Senior Managing Director intend that Senior
Managing Director shall perform for RSM McGladrey only those Services which do
not constitute the performance of any services for which a CPA certificate,
permit and/or license (for either Senior Managing Director or RSM McGladrey) are
required by the laws of the applicable jurisdiction ("Public Accountancy").
Senior Managing Director shall, in addition to the duties described above:

                                (a) Keep or cause to be kept, appropriate
                  records, reports, claims and correspondence ("Records")
                  necessary and appropriate in connection with the Services
                  provided by Senior Managing Director hereunder.

                                (b) Promote, to the extent permitted by
                  applicable law and regulations, the business of RSM McGladrey;

                                (c) Perform all acts necessary to maintain all
                  of Senior Managing Director's skills at an appropriate level;
                  and

                                (d) Participate, at RSM McGladrey's request, in
                  activities designed to enhance and develop the national
                  accounting practice of RSM McGladrey and its affiliates.

                                (e) Promptly remedy any non-compliance with any
                  policies or procedures of RSM McGladrey.

                                (f) Promptly furnish to RSM McGladrey all
                  relevant information requested by RSM McGladrey related
                  directly or indirectly to Senior Managing Director's
                  performance of services for RSM McGladrey or any customer or
                  client of RSM McGladrey.

                           4.2. PERFORMANCE IN GOOD FAITH. Senior Managing
Director shall devote such of his productive time, attention, and energies to
RSM McGladrey's business, to the best of the Senior Managing Director's
abilities, competently, with diligence, in good faith and with integrity, as is
required for performance of his duties set forth under Section 4.2 above. Senior
Managing Director shall not, during the Term, engage in any other business
activity whether or not such business activity is pursued for gain, profit, or
other pecuniary advantage.

                           4.3. POLICIES AND PROCEDURES. The Senior Managing
Director will be subject to, and shall at all times comply with, the policies
and procedures which are from time to time established by RSM McGladrey or its
direct or indirect parent companies for Senior Managing Directors specifically
and for employees of RSM McGladrey generally. Senior Managing Director shall
also, at all times, conduct Senior Managing Director's activities hereunder and
otherwise in manner compliance with all applicable laws and rules promulgated



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thereunder, and with all policies, procedures and standards of any applicable
organization, for example, the AICPA.

                           4.4. CHARITABLE AND COMMUNITY ACTIVITIES. It is
hereby acknowledged that, Senior Managing Director may either presently, or in
the future, be involved in charitable or community activities so long as such
other activities do not interfere with the performance by Senior Managing
Director of Senior Managing Director's duties hereunder and such involvement is
in conformity with all laws applicable to Senior Managing Director.

                           4.5. PERFORMANCE OF PROFESSIONAL RESPONSIBILITY.
Senior Managing Director shall discharge Senior Managing Director's professional
responsibility with integrity, objectivity and due professional care.

                  5.       COMPENSATION.

                           5.1. SENIOR MANAGING DIRECTOR COMPENSATION. Pursuant
to this Agreement, Senior Managing Director shall receive that amount of
compensation as is set forth on Schedule 5.1 hereto. The compensation payable to
Senior Managing Director hereunder is intended to be the fair value for the
services actually performed by the Senior Managing Director on behalf of RSM
McGladrey and its customers or clients.

                           5.2. VACATION. Senior Managing Director shall be
entitled to vacation in amount and subject to such conditions as are set forth
in the RSM McGladrey personnel policy manual. Vacation shall be taken at times
mutually agreed upon by the Senior Managing Director and RSM McGladrey. Vacation
will accrue on a monthly basis and unused vacation cannot be carried over at the
end of each year of the Term.

                           5.3. BENEFITS. During the Term, the Senior Managing
Director shall be eligible to participate in those pension, profit-sharing,
stock option or similar plan(s) or program(s) made available to Senior Managing
Directors or executive officers of RSM McGladrey from time to time, including
but not limited to those benefits set forth on Schedule 5.3 of this Agreement.

                           5.4. ADVERSELY AFFECTED PROVISION. If Senior Managing
Director's planned annual Base Salary (as defined in Schedule 5.1 hereto) (i) is
reduced by more than 25% from the greatest amount of such annual Base Salary
while employed by RSM McGladrey or (b) is reduced to less than 75% of his
greatest amount of actual annual Base Salary while employed by RSM McGladrey
then the Senior Managing Director has the right to claim to be "adversely
affected." If the Senior Managing Director elects to be adversely affected, then
such Senior Managing Director may elect one of the following:

                           (a) To terminate this Agreement and employment with
                  RSM McGladrey hereunder, and subject to compliance with all
                  applicable provisions hereof, to continue to perform services
                  as an accountant or consultant in competition with RSM
                  McGladrey. With respect to such competition, it is agreed that
                  considerable time, effort, and monies have been expended by
                  RSM McGladrey and its predecessors over the years to cultivate
                  and acquire the client group presently served by RSM
                  McGladrey, and it is that client group, among



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                  other assets, that represents the intangible value of RSM
                  McGladrey. It is, therefore, agreed that the Senior Managing
                  Director will compensate RSM McGladrey without interest (1)
                  for any client, customer or account of RSM McGladrey that was
                  serviced by an office of RSM McGladrey or a predecessor
                  organization to which the withdrawing Senior Managing Director
                  was assigned during the two-year period prior to termination,
                  or (2) for any client, customer or account of RSM McGladrey or
                  predecessor organization served or counseled by such
                  withdrawing Senior Managing Director during the two-year
                  period prior to such Senior Managing Director's withdrawal, or
                  (3) any client, customer or account who was introduced to such
                  withdrawing Senior Managing Director during that two-year
                  period of time, which client(s) within the five years
                  subsequent to withdrawal, transfers all of its work formerly
                  performed by RSM McGladrey to such withdrawing Senior Managing
                  Director, or organization with which he or she associates. The
                  amount of compensation shall be an amount equal to 100% of the
                  dollar amount of net services performed by RSM McGladrey or
                  any predecessor organization for such client(s) during the
                  twelve-month period ending on the last date services were
                  performed by RSM McGladrey or predecessor organization for
                  such client(s). Net services shall be determined on a full
                  accrual basis in accordance with RSM McGladrey's then current
                  method of accounting. The payments shall be made in three
                  annual equal installments, payable without interest,
                  commencing thirty (30) days after RSM McGladrey notifies the
                  Senior Managing Director of the amount payable by the Senior
                  Managing Director pursuant to this Section, and the subsequent
                  payments due on each of the first and second anniversary dates
                  of the date the first installment is due, without interest. In
                  addition, if the withdrawing Senior Managing Director or any
                  person or organization with whom or which he or she is
                  employed, professionally associated on behalf of which Senior
                  Managing Director sets ("New Organization") earns or accepts
                  fees or compensation from a client, customer or account
                  identified in Subsections 5.4(a)(1)-(3) above, while not
                  displacing RSM McGladrey for all services, provided to such
                  client, customer or account Senior Managing Director shall pay
                  RSM McGladrey 100% of such fees or compensation earned and/or
                  accepted by the terminated Senior Managing Director or New
                  Organization during the five-year period following Senior
                  Managing Director's withdrawal date within 30 days of receipt
                  by the withdrawing Senior Managing Director, to a maximum
                  amount equal to 100% of the dollar amount of net services
                  performed by RSM McGladrey or any predecessor organization for
                  such client, customer or account during the twelve-months
                  immediately prior to the date of withdrawal. RSM McGladrey
                  further shall have the right to set off any amounts due it
                  from the withdrawing Senior Managing Director against any
                  other amounts or accounts due the Senior Managing Director by
                  RSM McGladrey; or

                           (b) To terminate this Agreement and employment with
                  RSM McGladrey hereunder, and to receive, subject to compliance
                  with all provisions of Sections 6 and 7, a severance payment
                  of Five Thousand Dollars ($5,000) per year as a Senior
                  Managing Director (including previous year's as a partner or
                  equivalent position in a predecessor organization) with a
                  maximum payment of



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<PAGE>   5

                  One Hundred Twenty-Five Thousand Dollars ($125,000) paid out
                  over a five-year period without interest.

                           (c) This Section 5.4 is not applicable if Senior
                  Managing Director is terminated for "cause" as defined in
                  Section 9.1(a) below.

                  6.       CERTAIN COVENANTS OF SENIOR MANAGING DIRECTOR.

                           6.1. CERTAIN ACKNOWLEDGMENTS. Senior Managing
Director acknowledges and agrees as follows in exchange for valuable
consideration which Senior Managing Director acknowledges:

                                 (a) RSM McGladrey and Block have obtained and
                  will maintain an advantage over their respective competitors
                  as a result of name, location and reputation developed at
                  great expense;

                                 (b) Senior Managing Director's relationship
                  with RSM McGladrey involves the understanding of and access to
                  certain trade secrets and confidential information pertaining
                  to the property, business and operations of RSM McGladrey and
                  its affiliates;

                                 (c) Senior Managing Director recognizes the
                  value of the special, unique and extraordinary knowledge and
                  skill required to accept, undertake and perform the type of
                  work normally undertaken and performed by Senior Managing
                  Director, RSM McGladrey and RSM McGladrey's other employees
                  and agents;

                                 (d) Senior Managing Director's competition with
                  RSM McGladrey and/or its affiliates following the termination
                  of his employment hereunder would impair the operation of RSM
                  McGladrey and/or such affiliates beyond that which would arise
                  from the competition of an unrelated third party with similar
                  skills;

                                 (e) All clients/customers of RSM McGladrey,
                  regardless of when or by whom acquired, are RSM McGladrey
                  assets and not assets of the individual Senior Managing
                  Director;

                                 (f) Senior Managing Director has carefully
                  considered the restrictions contained herein, and Senior
                  Managing Director specifically agrees that same are reasonable
                  and necessary and essential to the preservation of the
                  business of RSM McGladrey; and

                                 (g) Senior Managing Director's agreements and
                  covenants under this Section 6 are an essential part of the
                  inducement to RSM McGladrey to enter into this Agreement.

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<PAGE>   6

                  6.2.     CERTAIN RESTRICTIONS ON SUBSEQUENT PRACTICE AND
ACTIVITIES.

                           (a) PRACTICE OF ACCOUNTING (OTHER THAN PUBLIC
         ACCOUNTING) WITHIN THE TERRITORY. Senior Managing Director agrees that
         upon termination of his relationship with RSM McGladrey for whatever
         reason, with or without cause, he shall refrain from providing any
         services offered by, or planned to be offered by, RSM McGladrey or
         McGladrey, to their respective clients or prospective clients, for
         himself, or for others, either directly or indirectly, in his
         individual capacity or as an employee, independent contractor or agent
         of another, for a period of two years after his termination date in any
         city or area located within a 50 mile radius of the following:

                               (i) any RSM McGladrey office operated by this or
                  a predecessor organization to which the terminating Senior
                  Managing Director was assigned, or from which he had rendered
                  services or serviced clients, customers, or accounts during
                  any part of the two-year period immediately prior to his
                  termination; or

                               (ii) any principal residence maintained by the
                  terminating Senior Managing Director during any part of the
                  two-year period immediately prior to his termination.

                           (b) SOLICITATION OF PROTECTED CLIENTS. In addition,
         each Senior Managing Director covenants and agrees that upon
         termination of his employment by RSM McGladrey for whatever reason,
         with or without cause, that the Senior Managing Director shall not for
         himself, or for others, either directly or indirectly, in his
         individual capacity, or as a Senior Managing Director, employee,
         independent contractor or agent of another, for a period of five years
         after his termination date:

                               (i) solicit, or attempt to solicit, divert or
                  attempt to divert or take away or attempt to take away any
                  Protected Client as defined below, or

                               (ii) render any services to or sell any products
                  to any Protected Client.


For purposes hereof, the term "Protected Client" means:


                           (x) any client, customer, or account serviced by an
                  office of RSM McGladrey or of a predecessor organization to
                  which the Senior Managing Director was assigned during the
                  two-year period prior to the effective date of termination; or


                           (y) any client, customer, or account that was
                  serviced or counseled by the Senior Managing Director during
                  the two-year period prior to the effective date of
                  termination; or




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                           (z) any client, customer or account serviced who was
                  introduced to the withdrawing Senior Managing Director during
                  the two-year period prior to withdrawal.

                           (c) CERTAIN MONETARY REMEDIES FOR VIOLATION OF
         SECTIONS 6.2(a) OR 6.2(b).

                               (i) Liquidated Damages. Notwithstanding the above
                  and the fact that money damages will be inadequate as a remedy
                  for any breach, threatened breach, or continuing breach of the
                  agreements and covenants contained in this Section, if a
                  Senior Managing Director violates any of the agreements and
                  covenants as contained in Section 6.2 (a) or (b) above, and if
                  RSM McGladrey for whatever reason elects not to pursue its
                  right to injunctive or other equitable relief as provided in
                  Section 7.1 or otherwise, or if upon submission to a court of
                  competent jurisdiction such injunctive or equitable relief is
                  not granted for any reason whatsoever, with respect to any
                  client which transfers all of the work formerly performed by
                  RSM McGladrey to the said withdrawing Senior Managing Director
                  or the organization with which he associates, the said
                  withdrawing Senior Managing Director shall pay to RSM
                  McGladrey without interest, as liquidated damages and not as
                  any for of penalty, in an amount equal to 100% of the dollar
                  amount of net services performed by RSM McGladrey or any
                  predecessor organization for such client(s) during the
                  twelve-month period ending on the last date services were
                  performed by RSM McGladrey or predecessor organization for
                  such clients. Net services shall be determined on a full
                  accrual basis in accordance with RSM McGladrey's then current
                  method of accounting. In fixing this formula for liquidated
                  damages, all Senior Managing Directors acknowledge that it is
                  difficult, if not impossible, to fix actual damages.
                  Nevertheless, all Senior Managing Directors agree that such
                  formula is fair and reasonable under the circumstances as a
                  method of partially compensating RSM McGladrey for the damage
                  it shall suffer as a result of such breach. Payment of this
                  amount shall be made in three equal annual installments with
                  the first installment due without interest within 30 days
                  after RSM McGladrey notifies the Senior Managing Director of
                  the amount payable by the Senior Managing Director pursuant to
                  this Section, and the subsequent installments are due without
                  interest on the first and second anniversary dates of the date
                  the first installment is due.

                               (ii) Payment of Fees. In addition, if a Senior
                  Managing Director violates the agreements and covenants as
                  contained in Section 6.2(a) and/or (b) above resulting in the
                  Senior Managing Director earning and/or accepting fees or
                  compensation from a client as defined above, while not
                  necessarily displacing RSM McGladrey for all services, 100% of
                  such fees or compensation earned and/or accepted by the
                  terminated Senior Managing Director or any person,
                  organization with whom he or she is employed, professionally
                  associated or in any manner acting for or



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<PAGE>   8

                  on behalf of during the five-year period after Senior Managing
                  Director's termination date will be paid to RSM McGladrey
                  without interest within 30 days of receipt by the Senior
                  Managing Director, to a maximum amount of 100% of the
                  displaced net services performed by RSM McGladrey or any
                  predecessor organization for such client during the twelve
                  months immediately prior to the date of termination.

                               (iii) Right of Offset. RSM McGladrey further
                  shall have the right (but not the obligation) to set off any
                  amount due from the withdrawing Senior Managing Director
                  against any other amounts or accounts due the Senior Managing
                  Director by RSM McGladrey.

                           (d) EMPLOYMENT OF PROTECTED PERSONNEL. Senior
         Managing Director covenants and agrees that in the event of the
         termination of his employment with RSM McGladrey for any reason
         whatsoever, or under any circumstance, with or without cause, that for
         a period of two (2) years following the effective date of such
         withdrawal (the "Prohibited Period"), the withdrawing Senior Managing
         Director shall not without the prior written consent of RSM McGladrey
         solicit, induce or in any manner encourage any employee of RSM
         McGladrey who is a professional employee with in excess of two years
         experience in work (the "Protected Personnel") to terminate Senior
         Managing Director's position at RSM McGladrey. Further, each Senior
         Managing Director covenants and agrees that upon termination, he will
         not during the Prohibited Period offer, or cause to be offered, a
         position of employment or of professional affiliation as a partner,
         member, owner, agent, representative or independent contractor to any
         member of the class of Protected Personnel who is employed by RSM
         McGladrey at the effective date of termination of employment of the
         Senior Managing Director, or was so employed at any time during the six
         (6) month period immediately prior to the effective date of withdrawal.

                           (e) CERTAIN MONETARY REMEDIES FOR VIOLATION OF
         SECTION 6.2(d).

                               (i) Liquidated Damages. Notwithstanding the fact
                  that money damages will be inadequate as a remedy for any
                  breach, threatened breach, or continuing breach of the
                  agreements and covenants contained in Section 6.2(d) and if
                  RSM McGladrey for whatever reason elects not to pursue its
                  right to injunctive or other equitable relief as provided in
                  Section 7.1 or otherwise or if upon submission to a court of
                  competent jurisdiction such injunctive or equitable relief is
                  not granted for any reason whatsoever, if Senior Managing
                  Director violates any of the agreements and covenants as
                  contained in Section 6.2(d), Senior Managing Director will pay
                  without interest the greater of Fifty Thousand Dollars
                  ($50,000) or one half of the base compensation of the
                  Protected Personnel for the 12 months prior to the termination
                  of Senior Managing Directors employment hereunder per person
                  to RSM McGladrey as liquidated damages for each Protected
                  Personnel induced or encouraged to terminate Senior Managing


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                  Director's position or who was offered or caused to be offered
                  a position of employment by such Senior Managing Director. In
                  fixing this formula for liquidated damages, Senior Managing
                  Director acknowledges that it is difficult, if not impossible,
                  to fix actual damages. Nevertheless, Senior Managing Director
                  agrees that such formula is fair and reasonable under the
                  circumstances as a method of partially compensating RSM
                  McGladrey for the damage it shall suffer as a result of such
                  breach. Payment of the damages will be due within 30 days
                  after RSM McGladrey notifies the Senior Managing Director of
                  the amount payable pursuant to this Section.

                               (ii) Right of Offset. RSM McGladrey further shall
                  have the right (but not the obligation) to set off any amount
                  due from the withdrawing Senior Managing Director against any
                  other amounts or accounts due the Senior Managing Director by
                  RSM McGladrey.

                  6.3. TOLLING OF COVENANT PERIOD. If Senior Managing Director
violates any of the provisions of Section 6.2 after the date hereof, the
Covenant Period shall be extended for a period of time equal to the period of
any such violation.

                  6.4. DUTY TO COOPERATE IN DEFENSE OF CLAIMS. Any retired or
terminated Senior Managing Director in consideration of this Agreement and the
mutual promises contained herein shall have a continuing obligation to RSM
McGladrey in connection with the defense of any claim involving RSM McGladrey
and/or its employees or agents in the event a claim is asserted against RSM
McGladrey and/or its employees or agents the Senior Managing Director (whether
or not then still employed by RSM McGladrey) shall assist and cooperate with RSM
McGladrey in good faith and in such manner as is reasonably possible in
developing the information, or providing the statements, documents or testimony
reasonably required to properly respond to or defend such claim. The Senior
Managing Director shall take no action at any time to initiate or voluntarily
assist the assertion or development of a claim.

                  6.5. NONDISCLOSURE. Senior Managing Director shall not at any
time or in any manner, directly or indirectly, during or after the Term, use or
disclose to any party other than RSM McGladrey any trade secrets or other
Confidential Information (defined herein) learned or obtained by Senior Managing
Director while a Senior Managing Director of RSM McGladrey. As used herein, the
term "Confidential Information" means information disclosed to or known by
Senior Managing Director (whether before or after the date of this Agreement) as
a consequence of Senior Managing Director's position with RSM McGladrey and not
generally known in the industry in which RSM McGladrey is engaged and that in
any way relates to the products, processes, services, inventions (whether
patentable or not), formulas, techniques or know-how, including, but not limited
to, information relating to distribution systems and methods, research,
development, manufacturing, purchasing, accounting, procedures, engineering,
marketing, customers, vendors, merchandising and selling, of RSM McGladrey, and
regardless of the format in which it is presented or embodied (written, graphic,
electromagnetic or otherwise). The term "Confidential Information," as used
herein, shall also include information regarding the clients of any person or
entity for which RSM McGladrey provides services pursuant to contract between
RSM McGladrey and such entity. The term "Confidential Information," as used
herein, does not include information: (a) which was already in the public



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domain through authorized disclosures by RSM McGladrey or its affiliates or (b)
which is disclosed as a matter of right by a third party source after the
execution of this Agreement provided such third party source is not bound by
confidentiality obligations in favor of RSM McGladrey.

                  6.6. INVENTIONS. Senior Managing Director agrees that all
inventions, discoveries, written materials, brochures, training programs,
training materials, programs, seminars, estate planning products, financial
planning products and asset management products conceived of or developed by the
Senior Managing Director during the Term, whether alone or jointly with others
and whether during working hours or otherwise, which relate to the business of
RSM McGladrey or any affiliate of RSM McGladrey shall be RSM McGladrey's
exclusive property. Senior Managing Director shall: (i) promptly disclose in
writing to RSM McGladrey each invention, written material, brochure, training
program, training material, program, seminar, estate planning product, financial
planning product or asset management product conceived by or developed by Senior
Managing Director during the term of Senior Managing Director's employment with
RSM McGladrey, (ii) assign all rights to the same to RSM McGladrey, and (iii)
assist RSM McGladrey in every way to obtain and protect any patents, trademarks,
copyrights or service marks on the same.

                  6.7. LIMITATIONS ON ENFORCEMENT. If any restriction set forth
in this Section is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time, over too great a
range of activities or in too broad a geographic area, it shall be interpreted
to extend only over the maximum period of time, range of activities or
geographic area as to which such court shall consider enforceable.

                  6.8. TERMINATION OF RESTRICTIVE COVENANTS. The restrictive
covenants set forth in Section 6.2(a) and 6.2(b) hereof shall expire if a
Payment Event of Default (defined below) occurs under the Guaranty dated August
____, 1999 by Block in favor of McGladrey (the "Guaranty"). For purposes of this
Section, a "Payment Event of Default" shall be deemed to occur if (i) any
undisputed Guaranteed Obligation (as defined in the Guaranty) is not timely paid
by RSM McGladrey when due and owing and (ii) Block fails to pay the amount of
any such Guaranteed Obligation (provided that RSM McGladery's nonpayment then
exists and is continuing) within thirty (30) days after delivery of written
notice thereof to Block pursuant to the notice provisions of the Guaranty. Any
expiration of such restrictive covenants pursuant to this Section shall not,
however, act or be deemed to work on or effect any expiration, termination,
waiver, forfeiture, or release of such restrictive covenants or in any way
affect their enforcement for any period prior to the occurrence of the
applicable Payment Event of Default.

         7.       CERTAIN REMEDIES.

                  7.1. SPECIFIC PERFORMANCE. If Senior Managing Director shall
at any time breach, violate or fail to comply fully with any of the terms,
provisions or conditions of this Agreement, the parties intend that RSM
McGladrey shall be entitled to equitable relief against Senior Managing Director
by way of injunction (in addition to, but not in substitution for, any and all
other relief to which RSM McGladrey may be entitled either at law or in equity,
or hereunder including, but not limited to, the payments provided in Section
6.2(c) and (e)) to restrain such breach or violation or to compel compliance
fully with the terms, provisions or



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<PAGE>   11

conditions per this Agreement. Liquidated damages and right of offset pursuant
to Section 6.2(c) and (e) shall be in addition to, and not in lieu of any other
remedy of RSM McGladrey.

                  7.2. NO PROOF OF BREACH; WAIVER. In any proceeding, whether in
equity or at law, Senior Managing Director specifically waives any requirement
that RSM McGladrey prove that any breach, violation or failure to comply fully
with the terms, provisions or conditions of this Agreement will cause
irreparable injury or that there is no adequate remedy at law(s); Senior
Managing Director also agrees not to raise as a defense in any such proceeding
any allegation; (i) that any of the provisions of Sections 6 and/or 7 are either
unnecessary, unreasonable or unenforceable, that any of them illegally restrain
trade, competition or any personal rights of Senior Managing Director; or (ii)
that payments made by RSM McGladrey subsequent to gaining knowledge of a
violation of this Agreement prejudices RSM McGladrey's rights to enforce the
Agreement or recover payments made, or (iii) that the non-enforcement of RSM
McGladrey's rights to enforce the Agreement or recover payments made or that the
non-enforcement of RSM McGladrey's rights with regard to one Senior Managing
Director or one act prejudices RSM McGladrey's rights and remedies of RSM
McGladrey under this Agreement, all of which are in addition to all rights and
remedies to which RSM McGladrey is or shall be otherwise entitled at law or in
equity. RSM McGladrey shall not be required to post bond in any proceeding to
enforce the provisions of Section 6 and/or 7 hereof.

         8.       EARLY RETIREMENT. [Reserved]

         9.       TERMINATION.

                  9.1.     METHODS OF TERMINATION. This Agreement and the
employment of the Senior Managing Director hereunder may be terminated as
follows:

                           (a) By RSM McGladrey for "cause," upon the delivery
         of written notice thereof to Senior Managing Director. For purposes of
         this Agreement, "cause" shall mean the occurrence of any one of the
         following on the part of the Senior Managing Director:

                                (i) Senior Managing Director's conviction of a
                  plea of guilty or nolo contendere to a crime involving moral
                  turpitude or a crime providing for a term of imprisonment.

                               (ii) Senior Managing Director's engagement in
                  willful misconduct (including but not limited to Senior
                  Managing Director discrimination or harassment or unethical or
                  unprofessional conduct) injurious to RSM McGladrey, its
                  affiliates or any of their respective reputations.

                               (iii) Senior Managing Director's breach of
                  his/her fiduciary duty to RSM McGladrey;

                               (iv) Senior Managing Director's engagement in
                  activities which constitute a material breach of this
                  Agreement or



                                       11
<PAGE>   12

                  any other material agreement or contract between Senior
                  Managing Director and RSM McGladrey;

                               (v) Senior Managing Director's gross negligence
                  in the execution of, or Senior Managing Director's willful
                  failure to carry out, his duties and responsibilities up to
                  the standards of performance which could reasonably be
                  expected from an Senior Managing Director in his position.

                               (vi) An act or acts of fraud, embezzlement or
                  dishonesty either (a) taken by the Senior Managing Director to
                  the detriment of RSM McGladrey or (b) by others in conspiracy
                  or affiliation with Senior Managing Director and intended to
                  result in enrichment or advantage to Senior Managing Director
                  at the expense of RSM McGladrey or with use of RSM McGladrey's
                  assets or information; or

                               (vii) Senior Managing Director's failure to
                  maintain a license as a certified public accountant in any
                  state where such license is required.

                               (viii) Senior Managing Director's material
                  violations of RSM McGladrey's policies or procedures except
                  those policies or procedures with respect to which an
                  exception has been granted under authority exercised or
                  delegated by the Advisory Board of RSM McGladrey.

                               (ix) Senior Managing Director's failure to pay
                  and file on a timely basis, including extensions, complete and
                  accurate Federal and state tax returns.

                               (x) Other gross misconduct which is detrimental
                  to the best interests of RSM McGladrey.

                  To prevent the inadvertent loss of rights as a result of
                  actions deemed to fall under (i) through (ix) above, the
                  Senior Managing Director shall first receive a written notice
                  from the Executive Management Committee of RSM McGladrey of
                  each item of misconduct and such Senior Managing Director
                  shall have not less than 30 days in which to cure any
                  misconduct by restoration, compensation and/or performance. If
                  the misconduct is so cured within the 30-day period, then the
                  Senior Managing Director shall not be terminated "for Cause".

                  (b) By RSM McGladrey without cause upon written notice to the
         Senior Managing Director.

                                       12
<PAGE>   13

                  (c) By Senior Managing Director on 180 days' written notice to
         RSM McGladrey (which notice period may be accelerated at RSM
         McGladrey's discretion);

                  (d) Upon the death or Disability (defined herein) of Senior
         Managing Director. For purposes of this Agreement, "Disability" means
         the inability of a Senior Managing Director to perform such Senior
         Managing Director's duties or services as provided in the RSM McGladrey
         Employment Agreement because of mental, physical or other illness,
         disease or injury, where such disability (a) shall have existed for an
         aggregate of six (6) months in any 12-month period and McGladrey and/or
         RSM McGladrey shall have so notified the Senior Managing Director
         thereof, or (b) has prevented Senior Managing Director from performing
         substantially all of his duties under the RSM McGladrey Employment
         Agreement for a period of six (6) consecutive months.

                  (e) By express mutual written agreement signed by Senior
         Managing Director and RSM McGladrey.

                  (f) Upon a "Change of Control" as defined in Section 9.2
         below.

         9.2. Termination of Employment Upon a Change of Control.

                  (a) If RSM McGladrey terminates Senior Managing Director's
         employment under this Agreement following a "Change of Control" (as
         defined herein) without "Cause" (as defined in Section 9.1), or if
         Senior Managing Director terminates his employment under this Agreement
         following both a Change of Control and a substantial reduction by RSM
         McGladrey (over the objection of Senior Managing Director) in Senior
         Managing Director's duties, authority or status, then, upon any such
         termination of Senior Managing Director's employment, (i) RSM McGladrey
         shall continue to pay to Senior Managing Director the base salary in
         effect upon such termination throughout the two-year period following
         such termination as the same would have been made had Senior Managing
         Director remained employed by RSM McGladrey hereunder; and (ii) any
         portion of any option to purchase shares of Block common stock granted
         pursuant to any stock option plan of Block and held by Senior Managing
         Director at the time of such termination of employment that is not yet
         vested in accordance with its terms shall vest upon the effective date
         of such termination of employment and shall be exercisable for a period
         of three months after such date of termination of employment.

                  (b) For the purpose of this subsection, a "Change of Control"
         shall mean:

                           (i) the acquisition by any individual, entity or
                  group (within the meaning of Section 13(d)(3) or 14(d)(2) of
                  the Securities Exchange Act of 1934, as amended (the "Exchange
                  Act")), of beneficial ownership (within the meaning of Rule
                  13d-3 promulgated under the Exchange Act) of 50% or more of
                  the then outstanding voting securities of RSM McGladrey or any


                                       13
<PAGE>   14

                  direct or indirect parent company of RSM McGladrey (the
                  "Acquired Block Entity") entitled to vote generally in the
                  election of directors, but excluding, for this purpose, any
                  such acquisition by any Block Entity, or any employee benefit
                  plan (or related trust) of any Block Entity, or any
                  corporation with respect to which, following such acquisition,
                  more than 50% of the then outstanding voting securities of
                  such corporation entitled to vote generally in the election of
                  directors is then beneficially owned, directly or indirectly,
                  by all or substantially all of the individuals and entities
                  who were the beneficial owners of the voting securities of the
                  Acquired Block Entity immediately prior to such acquisition in
                  substantially the same proportion as their ownership,
                  immediately prior to such acquisition, of the then outstanding
                  voting securities of the Acquired Block Entity entitled to
                  vote generally in the election of directors, as the case may
                  be; or

                           (ii) individuals who, as of the date hereof,
                  constitute the Board of Directors of Block (as of the date
                  hereof, the "Incumbent Board") cease for any reason to
                  constitute at least a majority of such Board, provided that
                  any individual or individuals becoming a director subsequent
                  to the date hereof, whose election, or nomination for election
                  by Block's shareholders, was approved by a vote of at least a
                  majority of the Board (or nominating committee of the Board)
                  shall be considered as though such individual were a member or
                  members of the Incumbent Board, but excluding, for this
                  purpose, any such individual whose initial assumption of
                  office is in connection with an actual or threatened election
                  contest relating to the election of the directors of Block (as
                  such terms are used in Rule 14a-11 of Regulation 14A
                  promulgated under the Exchange Act); or

                           (iii) approval by the shareholders of an Acquired
                  Block Entity of a reorganization, merger or consolidation of
                  such Acquired Block Entity, in each case, with respect to
                  which all or substantially all of the individuals and entities
                  who were the respective beneficial owners of the voting
                  securities of the Acquired Block Entity immediately prior to
                  such reorganization, merger or consolidation do not, following
                  such reorganization, merger or consolidation, beneficially
                  own, directly or indirectly, more than 50% of the then
                  outstanding voting securities entitled to vote generally in
                  the election of directors of the corporation or other entity
                  resulting from such reorganization, merger or consolidation,
                  or a complete liquidation or dissolution of an Acquired Block
                  Entity, or of the sale or other disposition of all or
                  substantially all of the assets of an Acquired Block Entity,
                  but excluding any such reorganization, merger, consolidation,
                  liquidation, dissolution or sale or other disposition of
                  assets after which a Block Entity continues to own more than
                  50% of the then outstanding voting securities entitled to vote
                  generally in the election of directors of the corporation or
                  other entity resulting from a reorganization, merger or
                  consolidation, or more than 50% of the assets of the
                  liquidated or dissolved Acquired Block Entity, or more than
                  50% of the assets of the Acquired Block Entity selling or
                  otherwise disposing of its assets.



                                       14
<PAGE>   15

                  9.3.     PAYMENTS UPON TERMINATION. Except as set forth in
Section 9.2, upon termination, any amount due RSM McGladrey or Senior Managing
Director under this Agreement shall be paid to RSM McGladrey or the Senior
Managing Director or Senior Managing Director's representative (as may be in
case in the event of death or disability), as set forth below:

                           (a) If this Agreement is terminated pursuant to
         Section 9.1(a) or by Senior Managing Director (pursuant to Section
         9.1(c)), RSM McGladrey shall pay to Senior Managing Director, if not
         already paid, any Base Compensation (as defined in Schedule 5) paid
         through the date of such termination but the Senior Managing Director
         shall not be eligible or entitled to receive any other compensation,
         whether bonus or other form thereof, for the year in which such
         termination occurred or any subsequent year, to the extent not
         theretofore paid;

                           (b) If this Agreement is terminated by RSM McGladrey
         without Cause pursuant to Section 9.1 (b) or because of the death or
         disability of the Senior Managing Director (pursuant to Section 9.1
         (d), RSM McGladrey shall pay to Senior Managing Director, if not
         already paid, any Base Salary paid through the date of such termination
         plus the portion of any bonus allocated to the Senior Managing Director
         by the Executive Committee of RSM McGladrey plus the remuneration
         provided for in Section 5.4(b) assuming the Senior Managing Director
         was eligible for but did not elect the provisions under Section 5.4(a).

                           (c) If this Agreement is terminated by mutual
         agreement of the Senior Managing Director and RSM McGladrey pursuant to
         Section 9.1(e), RSM McGladrey shall pay to Senior Managing Director
         such payments, if any, as may be so agreed.

                           (d) Except as otherwise provided herein, no other
         consideration of any type will be due and owing to Senior Managing
         Director by RSM McGladrey upon any termination of this Agreement.

                  9.4. RELEASE OF CLAIMS. Notwithstanding the foregoing, RSM
McGladrey shall not be obligated to pay the Senior Managing Director any of the
payments referred to in Section 9.3(b) or Section 9.3(c) unless and until RSM
McGladrey has received a Release of Claims executed by Senior Managing Director
in a form satisfactory to RSM McGladrey at its reasonable discretion.

                  9.5. EFFECT OF TERMINATION. Upon any termination of the Senior
Managing Director's employment and this Agreement pursuant to Section 9.1 or 9.2
hereof, RSM McGladrey and the Senior Managing Director shall have no further
obligations under this Agreement to the other except Senior Managing Director's
obligations under the provisions of Section 6.2 shall continue for the Covenant
Period, and the Senior Managing Director's obligations under and the provisions
of the remainder of Section 6 and Section 7 shall continue in full force and
effect indefinitely.



                                       15
<PAGE>   16

         10.      MISCELLANEOUS.

                  10.1. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding among RSM McGladrey and Senior Managing Director
concerning the subject matter hereof. No modification, amendment, termination or
waiver of this Agreement shall be binding unless in writing and signed by Senior
Managing Director. To insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such terms,
covenants and conditions.

                  10.2. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Senior Managing Director and the heirs, executors and administrators of
Senior Managing Director or Senior Managing Director's estate and property, and
shall inure to the benefit of RSM McGladrey and its successors and assigns.
Being a contract for personal services, RSM McGladrey may not assign or transfer
to others (a) the right to receive payments hereunder, or (b) the obligation to
perform Senior Managing Director's duties and services hereunder. RSM McGladrey
may assign this Agreement to any person or entity on notice to Senior Managing
Director.

                  10.3. TAXES. From any payments due hereunder to Senior
Managing Director from RSM McGladrey, there shall be withheld amounts reasonably
believed by Senior Managing Director to be sufficient to satisfy liabilities for
federal, state and local income and related taxes and other charges.

                  10.4. NOTICES. Any notice, request, consent or communication
(collectively, a "Notice") under this Agreement shall be effective only if it is
in writing and (a) personally delivered, (b) sent by certified or registered
mail, return receipt requested, postage prepaid, (c) sent by a nationally
recognized overnight delivery service, with delivery confirmed, or (d) faxed or
telecopied, with receipt confirmed, addressed as follows:


         If to Senior Managing Director:

                  McGladrey & Pullen, LLP
                    3600 West 80th Street
                    Suite 500
                    Bloomington, Minnesota 55431

         If to RSM McGladrey to:

                  c/o H&R Block
                  4400 Main Street
                  Kansas City, Missouri  64111
                  Attn:  Bret G. Wilson
                  with a copy to James H. Ingraham at the same address

         with a copy to:

                  Bryan Cave LLP
                  3500 One Kansas City Place
                  1200 Main Street


                                       16
<PAGE>   17

                  Kansas City, Missouri  64105
                  Attn:  Gregory G. Johnson

                  10.5.   ARBITRATION OF DISPUTES. Any controversy, claim, or
dispute arising out of or relating to this Agreement or any breach thereof,
including without limitation any dispute concerning the scope of the arbitration
clause set forth below, shall be resolved as set forth below. Any party may seek
injunctive relief pending the completion of mediation and arbitration under this
Agreement.

                           (a) In the event a dispute arises relating to this
         Agreement, any party may demand mediation by notifying the American
         Arbitration Association ("AAA") in the location where any arbitration
         would be conducted as set forth below, in writing with copies to all
         other parties involved in the dispute. The notification will state with
         specificity the nature of the dispute and the amount of any claims.
         Upon receipt of the mediation demand, the AAA will immediately convene
         a pre-mediation telephone conference of the parties hereto. The parties
         will make a representative, with full authority to settle, available
         for such a conference within five (5) business days of being contacted
         by the AAA or its designated mediator ("Mediator"). During the
         pre-mediation telephone conference, the parties will agree on mediation
         procedures or, in the event they cannot agree, Mediator will set the
         mediation procedures. The mediation procedures will provide for the
         mediation to be completed within thirty (30) business days of the date
         of the initial demand for mediation. The parties will participate in
         good faith in the mediation and will use their best efforts to reach a
         resolution within the thirty (30) day time period. Each party will make
         available in a timely fashion a representative with authority to
         resolve the dispute. In the event that the dispute has not been
         resolved within thirty (30) days, the mediation may continue if the
         parties so desire. If not, the Mediator will so notify the parties and
         declare the mediation terminated. In the event that the mediation
         continues beyond thirty (30) days, but is not resolved within what
         Mediator believes is a reasonable time thereafter, the Mediator will so
         notify the parties, and declare the mediation terminated. Fees of the
         mediator shall be split equally between the parties.

                           (b) After the mediation has been declared terminated,
         the matters in dispute shall be settled by binding arbitration in
         accordance with the Commercial Arbitration Rules (the "Rules") of the
         AAA as supplemented herein and judgment upon the award rendered by the
         arbitrators may be entered in any court having jurisdiction thereof.
         The governing law of this Agreement shall be the law used by the
         arbitrators in rendering their award, except that the Federal Rules of
         Evidence shall apply. There shall be three arbitrators. Each party
         shall choose one arbitrator, and the two chosen arbitrators shall
         choose the third arbitrator. Pending final award, the arbitrators'
         compensation and expenses shall be advanced equally by the parties. The
         AAA shall hold an administrative conference with counsel for the
         parties within twenty (20) days after the filing of the demand for
         arbitration by any one or more of the parties. The parties and the



                                       17
<PAGE>   18

         AAA shall thereafter cooperate in order to complete the appointment of
         three arbitrators as quickly as possible. Within 15 days after all
         three arbitrators have been appointed, an initial meeting (which, if
         the arbitrators so determine, may be by phone) among the arbitrators
         and counsel for the parties shall be held for the purpose of
         establishing a plan for administration of the arbitration, including:
         (1) definition of issues; (2) scope, timing, and types of discovery,
         which may at the discretion of the arbitrators include production of
         documents in the possession of the parties, but may not without consent
         of all parties include depositions; (3) exchange of documents and
         filing of detailed statements of claims, prehearing memoranda and
         dispositive motions; (4) schedule and place of hearings; and (5) any
         other matters that may promote the efficient, expeditious, and
         cost-effective conduct of the proceeding. Each party shall have the
         right to request the arbitrator to make specific findings of fact.

                           (c) The majority decision of the arbitrators shall
         contain findings of facts on which the decision is based, including any
         specific factual findings requested by either party, and shall further
         contain the reasons for the decision with reference to the legal
         principles on which the arbitrators relied. Such decision of the
         arbitrators shall be final and binding upon the parties. The
         arbitration shall take place in Chicago, Illinois. The final award
         shall award to the prevailing party its reasonable attorneys' fees and
         costs incurred in connection with the arbitration (but if the
         prevailing party is not awarded all of the damages sought, only to the
         extent, prorata, of its award compared to the damages sought) and may
         grant such other, further, and different relief as authorized by the
         Rules, including damages and out-of-pocket costs but which may not
         include exemplary, consequential or punitive damages.

                  10.6. RIGHT TO OFFSET. RSM McGladrey, for itself and as an
affiliate of Block, a subsidiary of Block, shall have the right but not the
obligation to offset against amounts due Senior Managing Director hereunder any
amounts due RSM McGladrey by Senior Managing Director which are not paid to RSM
McGladrey by the primary obligor within ten (10) days following demand,
regardless of the source of such obligation from Senior Managing Director to RSM
McGladrey.

                  10.7. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Missouri, without giving effect to its choice of law
provisions.

                  10.8. HEADINGS. All headings in this Agreement are for
convenience only and are not intended to affect the meaning of any provision
hereof.

                  10.9. COUNTERPARTS. This Agreement may be executed in two or
more counterparts with the same effect as if the signatures to all such
counterparts were upon the same instrument, and all such counterparts shall
constitute but one instrument.

                  10.10. AMENDMENT. This Agreement cannot be added to, altered,
changed, modified or amended in any respect except by a writing duly executed by
the parties hereto. Where an amendment is agreed to by the parties hereto, the
box indicating that an



                                       18
<PAGE>   19

addendum is attached to this Agreement must be checked on this page 18 of this
Agreement and the addendum must be attached to this Agreement.


                  THIS AGREEMENT IS SUBJECT TO AN ARBITRATION PROVISION WHICH IS
BINDING THE PARTIES.


                                       19
<PAGE>   20



                  IN WITNESS WHEREOF, the Senior Managing Director has executed
this Agreement and RSM McGladrey has caused this Agreement to be executed by its
duly authorized officer as of the day and year first above written.



                                     RSM MCGLADREY, INC.

                                     By:      /s/ Bret G. Wilson
                                              -------------------------------
                                              Bret G. Wilson, Vice President

                                     SENIOR MANAGING DIRECTOR

                                     By:      /s/Thomas G. Rotherham
                                              -------------------------------
                                              Thomas G. Rotherham

[ ] Indicate that an approved addendum/amendment to this agreement is attached.

























                                       20
<PAGE>   21
                                  SCHEDULE 5.1

                      SENIOR MANAGING DIRECTOR COMPENSATION

         1.      DEFINITIONS. For purposes of this Schedule 5, the following
terms shall have the following meanings:

                 1.1.     "Annual Compensation" shall mean sixty-four percent
(64%) of the Compensation Base for a specified annual period.

                 1.2.     "Collection Deficit" shall mean the excess of net
accounts receivable and net unbilled services over eighty-five percent (85%) of
net services and expenses charged to clients for the preceding three months. Net
services are defined as gross services plus or minus billing adjustments,
unbilled services reserve adjustments, provision for bad debts and accounts
receivable reserve adjustments. The Collection Deficit will be computed at
October 31, January 31, April 30 and July 31 to adjust the Quarterly Target
Payments and Quarterly IPU Bonus at December 1, March 1, June 1 and September 1,
respectively.

                 1.3.     "Compensation Base" shall mean an amount equal to the
aggregate net income earned by Contractor and McGladrey and all of its
wholly-owned subsidiaries (excluding TP Services, LLC) for a specified annual
period before (1) the aggregate compensation and distributions paid by McGladrey
or Contractor to those persons who are partners and principals of McGladrey at
the Closing and thereafter; (2) amortization of goodwill; (3) income taxes; (4)
interest expense incurred with respect to Post-Closing Development Expenditures
(as defined in the Asset Purchase Agreement); (5) interest expense imputed on
purchase price installments paid after the Closing Date (as defined in the Asset
Purchase Agreement); (6) interest incurred with respect to Retired Partner
Obligations (as defined in the Asset Purchase Agreement); (7) Post-Closing
Development Expenditures that are accounted for as expenses; (8) any expense for
incremental direct expenses incurred or paid by the operations group
attributable to the business, operations or management of Foundation Firms,
Foundation Firm Managers or Prior Add-On Firms (each as defined in the Asset
Purchase Agreement); (9) any income for any gain, or expense for any loss, of
Contractor or McGladrey or any income for funds received by McGladrey or
Contractor on the sale of the Mutual Fund Business (as defined in the Asset
Purchase Agreement); and (10) compensation expenses up to One Hundred Thousand
Dollars ($100,000) annually corresponding to the grant of Block stock options to
employees or equity owners of McGladrey and after Contractor's and McGladrey's
aggregate share of FICA, federal and state unemployment taxes, Medicare, and
workers' compensation payments all as determined in accordance with GAAP.

                 1.4.     "Executive Management Committee" shall have the
meaning set forth in that certain Operations Agreement among Contractor,
McGladrey and others dated even date hereto.

                 1.5.     "Fringe Benefits" shall mean the value of the fringe
benefits (including but not limited to those set forth on Schedule 5.4 to the
Managing Director Employment Agreement) granted to such Managing Director or
Senior Managing Director from time to time for a specified period.


<PAGE>   22


                 1.6.     "IPUs" shall mean income participation units. The
designated value of an IPU and the number granted to any Managing Director or
Senior Managing Director on an annual basis shall be determined by the
Management Executive Committee of Contractor.

                 1.7.     "Senior Managing Directors" shall mean certain of
those Managing Directors who are designated "Senior Managing Directors."

                 1.8.     "Managing Directors" shall mean certain of those
individuals who from time to time on or after Closing are parties to a Managing
Director Employment Agreement with Contractor and who are partners or principals
of McGladrey.

                 1.9.     "Partner Compensation System" shall mean a system
approved by the Executive Management Committee from time to time, subject to
approval by the Contractor which approval shall not be unreasonably withheld.

                 1.10.    "McGladrey" shall mean McGladrey & Pullen, LLP an Iowa
limited liability partnership.

                 1.11.    "Retired Partners" shall have the meaning set forth in
the Asset Purchase Agreement.

                 1.12.    "Rotherham and Scally Compensation" shall mean all
compensation amounts (not including Fringe Benefits) paid to Thomas Rotherham
and Mark Scally under their respective Managing Director Employment Agreements.

                 1.13.    Other terms not otherwise defined herein shall have
the meanings set forth in the Managing Director Employment Agreement.

         2.      AGGREGATE ANNUAL COMPENSATION. Each year during the Term, the
Managing Directors and Senior Managing Directors shall receive as compensation
from Contractor (in consideration of the provision of their services for the
year) an aggregate amount (the "Net Annual Aggregate Compensation") equal (i) to
the Annual Compensation, minus (ii) the net income of McGladrey for such year
(whether or not distributed to equity owners) determined in accordance with
generally accepted accounting principals ("Distributable McGladrey Earnings").
The Rotherham and Scally Compensation shall be included in the Net Annual
Aggregate Compensation.

         3.      SENIOR MANAGING DIRECTOR COMPENSATION.

                 3.1.      TARGET INCOME. Prior to the first Quarterly Target
each distribution year ending July 31, each Senior Managing Director will be
assigned a certain number of IPUs prior to the first quarterly target. Each
Senior Managing Director's annual estimated target income shall be calculated as
such number of IPUs multiplied by the designated value of the IPUs less the
Fringe Benefits elected by the Senior Managing Director during such year (the
"Target Income").


                                       2
<PAGE>   23


                 3.2.     DISTRIBUTION OF BASE INCOME. Each month, each Senior
Managing Director shall be an amount determined annually by the Executive
Management Committee (collectively the "Base Income Payments").

                 3.3.     QUARTERLY TARGET PAYMENT. Subject to Section 4, the
Target Income less the Base Income Payments shall be paid to the Senior Managing
Director on a quarterly basis in equal payments on the following dates: December
1, March 1, June 1 and September 1 (each a "Quarterly Target Payment").

         4.      RESTRICTIONS ON PAYMENT OF CERTAIN QUARTERLY PAYMENTS.

                 4.1.     Senior Managing Director must be employed by either
Contractor or McGladrey on the date the Quarterly Target Payment is paid to
receive the applicable Quarterly Target Payment.

                 4.2.     If the actual net actual aggregate compensation income
of RSM McGladrey is less than total IPUs times the designated value plus
Guaranteed income of RSM McGladrey, the fourth quarter distribution of the
Quarterly Target Payments to the Senior Managing Directors, payable on September
1 shall be reduced by the amount of such shortfall. The distribution will be
reduced pro rata among Senior Managing Directors in proportion to the value of
each Senior Managing Directors' IPUs to the total value of all Senior Managing
Directors' IPUs.

                 4.3.     The Quarterly Target Payments are subject to
adjustment for the Collection Deficit pursuant to the procedure set forth in
Section 5 of this Schedule 5.

                 4.4.     Notwithstanding anything to the contrary herein, the
total aggregate annual compensation for the applicable annual period (including
Fringe Benefits and bonuses) of the Senior Managing Directors and the Managing
Directors from Contractor paid by and/or due from and McGladrey (including
Distributable McGladrey Earnings), shall not exceed the Annual Compensation for
such period.

         5.      ALLOCATION OF THE COLLECTION DEFICIT. The Collection Deficit
will be allocated among the Managing Directors and Senior Managing Directors as
follows:

                 5.1.     A percentage of the Collection Deficit for RSM
McGladrey and McGladrey will be allocated to firmwide Managing Directors and
Senior Managing Directors. The percentage will approximately equal the
percentage that the base income of all firmwide Managing Directors and Senior
Managing Directors bears to the total of such compensation for all Managing
Directors and Senior Managing Directors who will share in the Collection
Deficit. It will be allocated to each firmwide Managing Director and Senior
Managing Director in the proportion that his or her Guaranteed Income or Target
Income, respectively, for the year bears to the total of such base income of all
firmwide Managing Directors and Senior Managing Directors.

                 5.2.     The Collection Deficit assigned to firmwide Managing
Directors and Senior Managing Directors will be deducted from the Collection
Deficits of economic units



                                       3
<PAGE>   24


in the proportion that the Collection Deficit of each economic unit bears to the
total Collection Deficit. Collection surpluses will be ignored in the
allocation.

                 5.3.     The remaining Collection Deficit for each economic
unit will be allocated among the economic unit's Managing Directors and Senior
Managing Directors in the proportion that each Senior Managing Director's and
Managing Director's Target Income or Guaranteed Income bears to the total of
such Target Income or Guaranteed Income, respectively, of all Senior Managing
Directors and Managing Directors in the economic unit.

         6.      ANNUAL PERFORMANCE AWARDS. Annual performance awards shall be
paid based on the Partner Compensation System approved by the Executive
Management Committee. The annual performance awards shall be distributed on
January 1 of each year.



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<PAGE>   25



                                  SCHEDULE 5.1
                        BASE SALARY AND PERFORMANCE BONUS


          1. BASE SALARY. During the first twelve (12) months of the Term, the
Managing Director shall be paid $360,000 per annum as base salary (the "Base
Salary"), which Base Salary shall be paid to the Managing Director in $30,000
monthly increments. For each twelve (12) month period during the Term,
thereafter, Managing Director's Base Salary shall be determined by the Chief
Executive Officer and Chief Operations Officer of H&R Block, Inc. ("Block")
subject to the approval of the Compensation Committee of the Board of Directors
of Block.

          2. PERFORMANCE BONUS. Each year during the Term, the Managing Director
shall be eligible for a bonus (the "Target Bonus") equal to 40% of the Base
Salary ($144,000). The actual bonus which the Managing Director is eligible for
(the "Performance Bonus") will be more or less than Target Bonus based on the
profit of RSM and McGladrey and its wholly-owned subsidiaries McGladrey (the
"Profit" as defined below). The performance targets and Performance Bonus are
set forth below: For purposes of this Schedule 5.1 "Profit" shall mean an amount
equal to the aggregate net income earned by Contractor and McGladrey and all of
its wholly-owned subsidiaries (excluding TP Services, LLC) for a specified
annual period before (1) the aggregate compensation and distributions paid by
McGladrey or Contractor to those persons who are partners and principals of
McGladrey at the Closing and thereafter; (2) amortization of goodwill; (3)
income taxes; (4) interest expense incurred with respect to Post-Closing
Development Expenditures (as defined in the Asset Purchase Agreement); (5)
interest expense imputed on purchase price installments paid after the Closing
Date (as defined in the Asset Purchase Agreement); (6) interest incurred with
respect to Retired Partner Obligations (as defined in the Asset Purchase
Agreement); (7) Post-Closing Development Expenditures that are accounted for as
expenses; (8) any expense for incremental direct expenses incurred or paid by
the operations group attributable to the business, operations or management of
Foundation Firms, Foundation Firm Managers or Prior Add-On Firms (each as
defined in the Asset Purchase Agreement); (9) any income for any gain, or
expense for any loss, of Contractor or McGladrey or any income for funds
received by McGladrey or Contractor on the sale of the Mutual Fund Business (as
defined in the Asset Purchase Agreement); and (10) up to One Hundred Thousand
Dollars ($100,000) per year compensation expenses corresponding to the grant of
Block stock options to employees or equity owners of McGladrey pursuant to the
Asset Purchase Agreement and after Contractor's and McGladrey's aggregate share
of FICA, federal and state unemployment taxes, Medicare, and workers'
compensation payments all as determined in accordance with GAAP.


<PAGE>   26

                                PERFORMANCE BONUS



----------------------------- --------------------------- ----------------------

                                      Percentage                 Performance
                                          of                        Bonus
           Profit                    Target Bonus                  Amount
       (in millions)

----------------------------- --------------------------- ----------------------
                                                           
            $90                            0%                     $        0
             95                           33.3%                       48,000
            100                           66.7%                       96,000
            105                          100.0%                      144,000
            110                          133.3%                      192,000
            115                          166.7%                      240,000
            120                          200.0%                      288,000
----------------------------- --------------------------- ----------------------



         During the Term, the Performance Bonus shall be calculated for the
period from August 1-July 31 (the "Bonus Calculation Period") and shall be
distributed to the Managing Director on or before September 15 following each
Bonus Calculation Period.









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<PAGE>   27







                                  SCHEDULE 5.3
                                    BENEFITS


          1. DEFERRED COMPENSATION PLAN. The Senior Managing Director will be
eligible to participate in the Deferred Compensation Plan developed by Block for
certain partners or principles of McGladrey.


          2. STOCK OPTIONS. On the Closing Date (as defined in the Asset
Purchase Agreement), the Senior Managing Director will be awarded stock options
for 21,000 shares of Block common stock, no par value (the "Block Common
Stock"), which options shall (a) have an option exercise price per share equal
to the closing price of the Block Common Stock on the New York Stock Exchange on
the Closing Date (the "Grant Date") (or, if the Closing Date is a date on which
such common stock is not traded on the New York Stock Exchange, on the last
trading day preceding the Grant Date); and (b) in all respects be granted and
governed by the terms of the H&R Block, Inc. 1993 Long Term Executive
Compensation Plan and (c) be evidenced by stock option agreements. Such option
shall vest as follows: 40% upon the third anniversary of the Grant Date; 30%
upon the fourth anniversary of the Grant Date; and 30% upon the fifth
anniversary of the Grant Date provided that such vesting shall be accelerated
upon retirement at or after age 55.











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