Exhibit 10.3



 





Exhibit 10.3




June 1, 2007




Joseph A. Schenk

12 Magnolia Drive

Purchase, New York 10577




Dear Joe:




     This letter agreement and release (the “Agreement”) confirms our understanding and agreement
with regard to your retirement and the termination of your employment with Jefferies Group, Inc.
(the “Company”):



     1. You are retiring from the Company and your employment with the Company will terminate
effective December 31, 2007 (the “Termination Date”). Effective on the Termination Date, you are
also resigning from all positions with any and all affiliates of the Company.



     2. Your total and final payment and benefits from the Company shall be as follows:



          (a) Regardless of whether you sign this Agreement:





	 	(i)	 	You will receive your regular salary and
guaranteed bonus on a normal pay period cycle through and until December
31, 2007. Your discretionary bonus for 2007 will be determined by the
Compensation Committee of the Board of Directors in accordance with the
grid that it has previously approved, subject always to the exercise by
the Committee of its discretion, following the end of the fiscal year
and will be paid when paid to other Executive Officers.
	 
	 	(ii)	 	Your comprehensive life, accidental death and
dismemberment and long and short term disability insurance benefits and
all other benefits will cease as of December 31, 2007. You may have
conversion privileges under some of these benefits programs. Please
contact People Services for details.
	 
	 	(iii)	 	Subject to Section 2(b)(i) below, your coverage
under the Company’s group medical and dental insurance programs will
cease as of December 31, 2007. You may be eligible for continued
coverage under these programs pursuant to COBRA at your own expense.
Specific information regarding COBRA continuation will be sent to you
separately.
	 
	 	(iv)	 	You will cease participating in the Company’s
401(k), profit-sharing, pension, ESOP, stock purchase plan, restricted
stock award plan, deferred compensation plan and all similar plans in
which you participated or for which you were eligible as of December 31,
2007. You retain your right to benefits you have earned and are
entitled to, if any, through December31, 2007. Specific information
concerning




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	 	 	 	those plans in which you participated will be forwarded to you
separately.
	 
	 	(v)	 	You will be reimbursed for approved and
authorized out-of-pocket expenses incurred through the date of
termination of your employment provided you submit appropriate expense
reports no later than February 15, 2008.





     (b) Provided that (x) you execute this Agreement by July 15, 2007 and do not revoke it as
provided in paragraph 19, (y) you execute a similar agreement (the “Second Agreement”), which will
be provided to you promptly after the Termination Date releasing any potential claims as of the
date of execution of the Second Agreement (this Agreement and the Second Agreement are
collectively referred to as the “Separation Agreements”) and do not revoke it and (z) there is no
breach of either of the Separation Agreements at the time any of the payments referenced herein is
to be made or at the time any benefit referred to herein is to be provided, and in consideration
for your waiver and release in paragraph 4(a) below:




	 	(i)	 	You may elect to be covered as a “retiree” under
the Company’s group medical and dental insurance programs, rather than
to be covered under COBRA. This continued coverage shall be available
at your own expense. This continued coverage shall be subject to and in
accordance with the terms of the documents governing the program and
will be on the same terms and conditions as the coverage is made
available to other retirees of the Company.
	 
	 	(ii)	 	Provided that the conditions set forth above have
been met, the following grant of restricted stock units (“RSUs”) of
Jefferies Group, Inc. will not be forfeited upon the termination of your
employment, but will continue to vest in accordance with the terms and
conditions set forth in the Restricted Stock Unit Agreement governing
those grants subject to the following. The RSUs will continue to vest
provided (a) there is no breach of the terms and conditions of the
Restricted Stock Unit Agreement and (b) the conditions set forth therein
for the continued vesting of the RSUs are complied with through the
respective vesting dates of the RSUs. For the avoidance of doubt, if
there is a Forfeiture Event as defined in the Terms and Conditions of
Restricted Stock Units (including but not limited to your going to work
for a competitor of the Company) prior to the time the RSUs described
herein have fully vested, all RSUs which have not yet vested as of the
date of such Forfeiture Event will be forfeited. You acknowledge and
agree that you are responsible for the payment of all taxes and
withholding on the RSUs which have vested and/or




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	 	 	 	that are distributed to you. Provided that the conditions set forth
herein are complied with, the restricted stock and RSUs which are eligible to
continue to vest are as follows:






	 	 	 	17,283 RSUs granted on December 29, 2005, which remain
unvested as of the date of your retirement and termination of
your employment and which will not fully vest until December
29, 2010.





          (c) Notwithstanding anything contained in any of the foregoing, any severance or other
payment hereunder or pursuant to any deferral election that you have previously made that would be
payable within less than six months following your termination of employment will be delayed where
necessary to avoid tax penalties under Section 409A of the Internal Revenue Code, to the date that
is six months after your termination of employment. For this purpose, termination of employment
shall mean a “separation from service” as defined in Treasury Regulation Section 1.409A-1(h) (or
any successor regulation).




     3. You understand and agree that you are receiving compensation, payments and/or benefits
under this Agreement which is in excess of those to which you are now or in the future may be
entitled from the Company or Releasees (as that term is defined below). Other than as set forth
herein, you will not receive compensation, payments or benefits of any kind from the Company or
Releasees (as that term is defined below), and you expressly acknowledge and agree that no other
amounts are due to you.



     4. In exchange for the compensation, payments, benefits and other consideration provided to
you pursuant to this Agreement, you agree as follows:



          (a) To the fullest extent permitted by law, you waive, release and forever discharge the Company
and Releasees from any and all legally waivable claims, grievances, injuries, controversies,
agreements, covenants, promises, debts, accounts, actions, causes of action, suits, arbitrations,
sums of money, attorneys’ fees, costs, damages, or any right to any monetary recovery or any other
personal relief, whether known or unknown, in law or in equity, by contract, tort or pursuant to
federal, state or local statute, regulation, ordinance or common law, which you now have, ever
have had, or may hereafter have, based upon or arising from any fact or set of facts, whether
known or unknown to you, from the beginning of time until the date of execution of this Agreement,
arising out of or relating in any way to your employment relationship with the Company and
Releasees or other associations with the Company and Releasees or any termination thereof.
Without limiting the generality of the foregoing, this waiver, release, and discharge includes any
claim or right based upon or arising under any federal, state or local fair employment practices
or equal opportunity laws, including, but not limited to, the Age Discrimination in Employment Act
(29 U.S.C. Section 621, et seq.) (“ADEA”), the Older Workers’ Benefits Protection Act, the
Rehabilitation Act of 1973, the Worker Adjustment and Retraining Notification Act, 42 U.S.C.
Section 1981, Title VII of the Civil Rights Act of 1964, the Equal Pay Act, the Employee
Retirement Income Security Act, the Americans With Disabilities Act, the National Labor Relations
Act, the Sarbanes-Oxley Act, the New York State Human Rights Law, the New York State Constitution,
the New York Labor Law, the New York Civil Rights Law, the New York City Human Rights Law, the New
York Executive Law, the Illinois

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Human Rights Act, 775 ILCS 5/101 et seq., and the Illinois Wage Payment and Collection Act,
including all amendments to any of the foregoing.




          (b) Notwithstanding the generality of the foregoing, nothing herein constitutes a release or
waiver by you of: (i) any claim or right you may have under COBRA or under any qualified pension
or retirement plan; (ii) any claim or right you may have for unemployment insurance benefits;
(iii) any claim or right that may arise after the execution of this Agreement; (iv) any claim or
right you may have under this Agreement, or (v) any right to indemnification you may have as a
director or officer of the Company pursuant to applicable law or the Company’s By-Laws.




          (c) For purposes of this Agreement, the term “the Company and Releasees” includes the Company
and its past, present and future direct and indirect parents, subsidiaries, affiliates, divisions,
predecessors, successors, and assigns, and the Company’s and their past, present and future
officers, directors, shareholders, representatives, agents and employees, in their official and
individual capacities, and all other related individuals and entities, jointly and individually,
and this Agreement shall inure to the benefit of and shall be binding and enforceable by all such
entities and individuals.




     5. Nothing contained in this Agreement shall be deemed to constitute an admission or evidence
of any wrongdoing or liability on the part of you or the Company or Releasees, nor of any violation
of any federal, state or municipal statute, regulation or principle of common law or equity. The
Company expressly denies any wrongdoing of any kind in regard to your employment or your
termination.



     6. Subject to paragraph 10 below:



          (a) Unless you shall first secure the Company’s written consent, you shall not directly or
indirectly publish, disclose, market or use, or authorize, advise, hire, counsel or otherwise
procure any other person or entity, directly or indirectly, to publish, disclose, market or use,
any trade secrets, proprietary computer software and programs, and other confidential and
proprietary information and materials of or about the Company and Releasees and their operations
and customers, including any confidential and proprietary information and materials of which you
became aware or informed during your employment with the Company (“Company Proprietary
Information”). Such Company Proprietary Information is and shall continue to be the exclusive
proprietary property of the Company and Releasees.




          (b) For a period of one year from the termination of your employment with the Company,
without the written consent of the Company, you shall not solicit or hire away, or attempt to
solicit or hire away any employees of the Company, either for your benefit or for the benefit of
any other person or entity.




          (c) You will not issue any communication, written or otherwise, that disparages, criticizes
or otherwise reflects adversely or encourages any adverse action against the Company or the
Releasees.




     7. You shall return to the Company no later than December 31, 2007, any and all original and
duplicate copies of all your work product and of files, calendars, books, records, notes,



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notebooks, customer lists and proposals to customers, manuals, computer disks, diskettes and any
other magnetic and other media materials you have in your possession or under your control
belonging to the Company or Releasees or containing confidential or proprietary information
concerning the Company or Releasees or their customers or operations (“Company Information”).




     8. You acknowledge and agree that, by virtue of the various positions that you have held with
the Company and Releasees, your assistance may be required, whether in connection with formal or
informal investigations, court proceedings, arbitrations and other forms of actions, and whether by
the Company and Releasees or any third party. Therefore, you agree to provide such assistance to
the Company or Releasees in connection with such investigations, proceedings, arbitrations and
actions as may be requested of you from time to time.



     9. You agree to perform all acts and execute and deliver any documents that may be reasonably
necessary to carry out the provisions of this Agreement.



     10. Notwithstanding the foregoing, you understand that nothing in this Agreement shall
prohibit or restrict any party hereto or such party’s attorneys from participating, cooperating or
assisting in any action, investigation, or proceeding brought by or with any governmental agency or
legislative body, any self-regulatory organization, or the Company’s Legal Department;
provided that, to the extent permitted by law, upon receipt of any subpoena, court
order or other legal process compelling the disclosure of any such information or documents, the
disclosing party gives prompt written notice to the other party so as to permit such other party to
protect such party’s interests in confidentiality to the fullest extent possible. You acknowledge
and agree, however, that pursuant to paragraph 4(a), you are waiving any right to recover monetary
damages or any other form of personal relief in connection with any such charge, investigation or
proceeding.



     11. This Agreement may not be changed orally, and no modification, amendment or waiver of any
of the provisions contained in this Agreement, nor any future representation, promise or condition
in connection with the subject matter of this Agreement shall be binding upon any party hereto
unless made in writing and signed by such party.



     12. In the event you breach any of the provisions of paragraphs 6 through 9 of this Agreement,
you agree that the Company will be entitled to all appropriate remedies and damages, including but
not limited to seeking the return of all compensation, payments and benefits provided for in this
Agreement. You recognize that money damages will not be adequate to compensate the Company or to
protect and preserve the status quo. Therefore, you expressly consent to the issuance of a
temporary restraining order and/or a preliminary injunction, by any court or arbitral forum of
competent jurisdiction to prohibit the breach of those provisions of this Agreement.



     13. Except as provided in paragraph 12 of this Agreement, any controversy or claim arising out
of or relating to your employment or this Agreement will be settled by arbitration before the NASD
in accordance with its rules. The award rendered in arbitration shall be final and binding, and
judgment upon the award entered by the arbitrator(s) may be entered in any court of competent
jurisdiction. In addition, you agree to stipulate, upon request by the Company, to expedited
hearing procedures for such arbitration. You acknowledge that a court or an arbitration panel can
issue an injunction to maintain the status quo pending the outcome of any arbitration proceeding
that may be initiated, and further, that the propriety of temporary and preliminary injunctive relief will
be decided by a court and not by an arbitration panel should the Company in



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its sole discretion
elect to seek such relief in court. This arbitration agreement applies (but is not limited) to
statutory discrimination, harassment, retaliation and whistleblower claims under Title VII of the
Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities
Act, or any other federal, state or local discrimination, wage payment, whistleblower or fair
employment practices law, statute or regulation, or common law rules. You understand and agree
that by entering into this agreement, you are waiving any right to file a lawsuit or to have a jury
trial over any claim covered by this agreement, any right to bring or litigate any such claim as a
class or collective action, and any right to act as a class representative or to participate as a
member of a class of claimants with respect to any such claim.




     14. This Agreement shall be subject to and governed by and interpreted in accordance with the
laws of the State of New York without regard to conflicts of laws principles. This Agreement
contains the entire agreement between us and supersedes and terminates any and all previous
agreements between us, whether written or oral. All prior and contemporaneous discussions and
negotiations have been and are merged and integrated into, and are superseded by, this Agreement.



     15. In the event that, any one or more provisions (or portion thereof) of this Agreement is
held to be invalid, illegal or unenforceable for any reason, you and the Company agree that the
relevant provision (or portion thereof) shall be construed or modified so as to provide the Company
with the maximum protection that is lawful and enforceable, consistent with the intent of the
Company and you in entering into this Agreement. If the relevant provision (or portion thereof)
cannot be construed or modified to render it lawful and enforceable, the unlawful or unenforceable
provision shall be construed as narrowly as possible and shall be severed from the remainder of the
relevant provision(s) and the remainder of this Agreement shall be given full force and effect.
Notwithstanding the foregoing, if the wavier and release of claims set forth in paragraph 4 is held
to be invalid, illegal or unenforceable, the Company shall be relieved of its obligations under
paragraph 2(b).



     16. This Agreement shall inure to the benefit of and shall be binding upon (a) the Company,
its successors and assigns, and any company with which the Company may merge or consolidate or to
which the Company may sell all or substantially all of its assets and (b) you and your executors,
administrators, heirs and legal representatives. You may not sell or otherwise assign your rights,
obligations, or benefits under this Agreement and any attempt to do so shall be void.



     17. All notices in connection with or provided for under this Agreement shall be validly given
or made only if made in writing and delivered personally or mailed by registered or certified mail,
return receipt requested, postage prepaid, to the party entitled or required to receive the same,
as follows:



     If to you, addressed to:


Joseph A. Schenk

12 Magnolia Drive

Purchase, New York 10577




     If to the Company, addressed to:



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Judith Kester

Jefferies & Company, Inc.

11100 Santa Monica Boulevard, 11th Floor

Los Angeles, CA 90025



or at such other address as either party may designate to the other by notice similarly given.
Notice shall be deemed to have been given upon receipt in the case of personal delivery and upon
the date of mailing in the case of mail.




     18. You acknowledge and agree that:



          (a) You have entered into this Agreement knowingly and voluntarily.




          (b) You have read and understand this entire Agreement.




     19. If this Agreement conforms to your understanding and is acceptable to you, please indicate
your agreement by signing and dating the enclosed copy of this Agreement in the space provided
below and returning the signed Agreement to Judith Kester, at the address indicated above on or
before July 15, 2007. Once you have signed the Agreement, you will then be permitted to revoke
this Agreement at any time during the period of seven days following its execution by delivering to
Judith Kester at the address indicated above a written notice of revocation. If you wish to revoke
this Agreement, the notice of revocation must be received by the Company no later than the eighth
day following your execution of this Agreement. This Agreement will not be effective or
enforceable and no benefits shall be provided hereunder unless and until the seven-day revocation
period has expired without your having exercised your right of revocation. In the event that you
fail to execute and return this Agreement on a timely basis, or you execute and then elect to
revoke this Agreement, this Agreement will be of no force or effect, and neither you nor the
Company will have any rights or obligations hereunder. The Company advises you to consult with an
attorney prior to signing this Agreement.



	 	 	 	 	 
	 	Sincerely,



JEFFERIES GROUP, INC.

 	 
	 	By:  	/s/
Brian P. Friedman	 
	 	 	 	 
	 	 	 	 
	 


THIS AGREEMENT IS A LEGAL DOCUMENT. YOU SHOULD CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS
AGREEMENT.



BY SIGNING THIS AGREEMENT, YOU ACKNOWLEDGE AND AFFIRM THAT:





     1. YOU ARE COMPETENT;



     2. YOU WERE AFFORDED A REASONABLE TIME PERIOD OF AT LEAST 21



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DAYS TO REVIEW AND CONSIDER THIS
AGREEMENT WITH AN ATTORNEY OF YOUR CHOICE;




     3. YOU HAVE READ AND UNDERSTAND AND ACCEPT THIS DOCUMENT AS FULLY AND FINALLY RESOLVING,
WAIVING AND RELEASING ANY AND ALL CLAIMS AND RIGHTS WHICH YOU MAY HAVE AGAINST THE COMPANY AND
RELEASEES (AS DEFINED ABOVE), INCLUDING, WITHOUT LIMITATION, ANY AND ALL CLAIMS AND RIGHTS UNDER
THE AGE DISCRIMINATION IN EMPLOYMENT ACT;



     4. NO PROMISES OR INDUCEMENTS HAVE BEEN MADE TO YOU EXCEPT AS SET FORTH IN THIS AGREEMENT, AND



     5. YOU HAVE SIGNED THIS AGREEMENT FREELY, KNOWINGLY AND VOLUNTARILY, INTENDING TO BE LEGALLY
BOUND BY ITS TERMS.



ACCEPTED AND AGREED:




	 	 	 	 	 
	 
	 	 	 	 
	/s/ Joseph A. Schenk 

Joseph A. Schenk

	 	6/1/07 

Date
	 	 







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