Document:

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                                                        JEFFRIES & COMPANY, INC.

         11100 Santa Monica Boulevard, 10th Floor, Los Angeles, California 90025
                                           Telephone (310) 445-1199 Cable JEFFCO

                                                                    Exhibit 10.8

                              As of February 15, 2002

Mr. Frank E. Baxter
519 Ocampo Drive
Pacific Palisades, CA 90272

Dear Frank:

     This letter confirms your resignation from the following positions:

     Jefferies Group, Inc. ("Group") -- Chairman
     Jefferies & Company, Inc. ("Jefco") -- Chairman and Director
     Jefferies International Limited -- Chairman
     Jefferies Pacific Limited -- Director
     Jefferies Venture Capital Fund I LLC -- President and Chief Executive
       Officer
     Jefferies FOF Manager Inc. -- Director
     Jefferies MB Manager Inc. -- Director
     Jefferies Employees Fund of Funds LLC -- President and Chief Executive
       Officer
     Jefferies Advisers Inc. -- Director
     Jefferies Realty Investment Corp. -- President and Director
     Jefferies International Realty Corp. -- President and Director
     Jefferies Global Trading Inc. -- Director

     In addition to the foregoing, you have indicated that you will not stand
for reelection as a director of Group at the Annual Meeting of Shareholders to
be held in May 2002.

     This letter also sets forth the terms and conditions of your retention as
Chairman Emeritus of and consultant to Group. The above listed resignations and
your retention will all be effective on February 15, 2002. Except as otherwise
provided for herein, the term of this agreement shall be the period from
February 15, 2002 (the "Effective Date") to February 14, 2004 (the "Term").

     You will be paid a retainer at the rate of $500,000.00 per annum during the
Term, to be paid in equal installments on the 15th and last day of each month.
The amounts set forth in this paragraph are gross amounts and will be paid to
you as such. As a consultant, you will be responsible for the payments of all
taxes on payments made to you. During such time as you remain a consultant to
Group, Jefco will maintain your securities registrations with Jefco.

     For a period of a five years from the Effective Date, you will receive the
same medical and dental health insurance benefits as Group employees.

     Effective at the close of business on the Effective Date, you will no
longer be eligible to participate in Group's 401k, Profit Sharing, Employee
Stock Purchase, Supplemental Stock Purchase, Deferred Compensation, or Employee
Stock Ownership Plans or any similar plans. However, you
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Mr. Frank E. Baxter
As of February 15, 2002
Page 2

retain your right to benefits you have earned and are entitled to under these
Plans through the Effective Date. Effective at the close of business on the
Effective Date, your coverage under Group's group life insurance and short term
and long term disability policies will also cease. However, Group will continue
to make the payments on the split-dollar insurance policy purchased by Group in
2000 for your benefit.

     Group will provide you with office space in its Los Angeles office and with
secretarial support for a period of five years from the Effective Date. The
office space to be provided to you will be comparable in size and proximity to
other senior executives in Los Angeles. The secretarial support which you
receive will be comparable to that currently being provided to you.

     Group will reimburse you for travel and entertainment expenses incurred by
you on behalf of Group in accordance with Group's policies on reimbursement of
such expenses.

     This letter agreement may be terminated by Group for Cause or in the event
of your death or disability. For purposes hereof, Cause shall mean that you
commit an act which, in Jefco's reasonable opinion, constitutes fraud, gross
negligence, willful misconduct or knowing breach of your fiduciary duties;
willfully engage in misconduct injurious to Jefco or which violates Jefco's
internal policies or procedures (as amended from time to time), including but
not limited to Group's Statement of Employee Conduct, as amended from time to
time; or commit an act which, in Jefco's reasonable opinion, may lead to your or
Jefco's censure, suspension or bar by any regulatory body or self-regulatory
organization having jurisdiction over Jefco and/or you, including but not
limited to commission of a felony or an act of moral turpitude.

     The parties agree that any and all controversies which may arise between
them or between you and Jefco arising out of or related to this Agreement shall
be determined by arbitration. Any such arbitration shall be determined before
the National Association of Securities Dealers ("NASD") in the city of New York,
in the State of New York, in accordance with NASD rules. Judgment upon
arbitration awards may be entered in any court, state or federal, having
jurisdiction.

     This letter agreement constitutes the entire agreement between you and
Group with respect to the subject matters referred to herein, and supersedes all
prior or contemporaneous negotiations, promises, covenants, agreements and
representations of every kind or nature with respect thereto, all of which have
become merged and finally integrated into this letter agreement.

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Mr. Frank E. Baxter
As of February 15, 2002
Page 3

     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
Jerry Gluck, at Jefferies' Los Angeles address.

                                                 Sincerely

                                                 /s/ RICHARD B. HANDLER
                                                 --------------------------
                                                 Richard B. Handler
                                                 Chief Executive Officer

Enclosure

ACCEPTED AND AGREED:

   /s/ FRANK E. BAXTER                           Dated: 2/28/, 2002
-------------------------                               -----
     Frank E. Baxter<PAGE>

                                                                  Exhibit 10(LL)

                                AMENDMENT NO. 3
                                       TO
                      MANAGEMENT AND OPERATIONS AGREEMENT
                           EFFECTIVE JANUARY 1, 2002

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                               AMENDMENT NO. 3 TO
                               ------------------
                       MANAGEMENT AND OPERATIONS AGREEMENT
                       -----------------------------------

         This Amendment No. 3 to Management and Operations Agreement (this
"Amendment") is entered into and effective as of January 1, 2002, among State
Automobile Mutual Insurance Company, an Ohio corporation ("Mutual"); State Auto
Financial Corporation, an Ohio corporation ("State Auto Financial"); State Auto
Property and Casualty Insurance Company, a South Carolina corporation ("State
Auto P&C); State Auto National Insurance Company, an Ohio corporation
("National"); Milbank Insurance Company, a South Dakota corporation ("Milbank");
State Auto Insurance Company, an Ohio corporation ("State Auto IC"); Stateco
Financial Services, Inc., an Ohio corporation ("Stateco"); Strategic Insurance
Software, Inc., an Ohio corporation ("S.I.S."); and 518 Property Management and
Leasing, LLC, an Ohio limited liability company ("518 PML").

                                    RECITALS

A. Effective January 1, 2000, Mutual, State Auto Financial, State Auto P&C,
National, Milbank, State Auto IC, Stateco, S.I.S. and 518 PML entered into a
Management and Operations Agreement and First Amendment thereto dated as of
January 1, 2000, which was subsequently amended by Amendment No. 2 thereto,
effective as of October 1, 2001 (together, the "Agreement"), providing for,
among other things, the management of the Managed Companies (as defined therein)
by State Auto P&C.

B. The parties to the Agreement now desire to amend the Agreement as of the
effective date hereof to substitute independent committees of Mutual and
Financial, respectively, for the Coordinating Committee charged with addressing
conflicts of interest which may arise from certain business opportunities.

         NOW, THEREFORE, intending to be legally bound, the parties to this
Amendment hereby agree as follows:

1.       RECITALS; DEFINITIONS. The Background Information contained in the
         Agreement and in the Recitals to this Amendment are each hereby
         incorporated by reference into the body of this Amendment. Capitalized
         terms not otherwise defined in this Amendment shall have the meanings
         set forth in the Agreement. All references in the Agreement to "this
         Agreement" shall be deemed to refer to the Agreement as amended hereby;
         and all references in the Agreement to the "Managed Companies" shall be
         amended to include all of the parties to this Amendment. All references
         in the Agreement to the "Service Companies" shall be deemed to refer to
         those Managed Companies which are not insurance companies under
         applicable law.

2.       AMENDMENT OF THE AGREEMENT. Subject to the satisfaction of the
         conditions set forth in Section 5 below, effective as of the date first
         written above, the Agreement shall be deemed amended and supplemented
         by this Amendment. To the extent not expressly amended or supplemented
         by this Amendment, the terms and provisions of the

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         Agreement shall remain in full force and effect without alteration for
         the remaining term thereof. Until the deemed effective date of this
         Amendment as set forth in Section 5 below, the Agreement shall be
         deemed to have governed the rights and obligations of the parties
         thereto in accordance therewith, without taking into account the
         amendments contemplated hereby.

3.       Section 9 of the Agreement is hereby amended in its entirety to provide
         as follows:

         9.       CONFLICTS OF INTEREST -- The parties hereby acknowledge that,
                  due to the common management of Mutual and the State Auto
                  Financial Group, conflicts of interest may arise with respect
                  to business opportunities available to such companies. In
                  order to deal with such conflicts of interest on an equitable
                  basis, the following guidelines shall be used to determine
                  which company may avail itself of a business opportunity:

                           (a) As used herein, Mutual Independent Committee
                  shall mean a committee established by the Board of Directors
                  of Mutual and comprised solely of persons who are not, and
                  during the past three years have not been, directors, officers
                  or employees of companies in the State Auto Financial Group or
                  employees of Mutual or any wholly owned subsidiary of Mutual.
                  The Mutual Independent Committee members shall also represent
                  the interests of all wholly owned subsidiaries of Mutual
                  (together with Mutual, each "a Mutual Company" and, together,
                  the "Mutual Companies").

                           (b) As used herein, Financial Independent Committee
                  shall mean a committee established by the Board of Directors
                  of State Auto Financial and comprised solely of persons who
                  are not, and during the past three years have not been,
                  directors, officers or employees of Mutual or any wholly owned
                  subsidiary of Mutual or employees of any company in the State
                  Auto Financial Group. The Financial Independent Committee
                  members shall also represent the interests of all subsidiaries
                  of Financial (together with Financial, each "a Financial
                  Company" and, together, the "Financial Companies").

                           (c) A business opportunity shall not be required to
                  be presented to an Independent Committee, as described in 9(d)
                  below, if such business opportunity:

                  1.       Involves the purchase or sale on the open market of
                           marketable securities;

                  2.       Involves the new issue of stocks or bonds in a public
                           offering registered or exempt from registration under
                           the Securities Act of 1933, as amended;

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                  3.       Does not fit within the investment criteria and
                           guidelines established by their respective investment
                           committees, including without limitation debt to
                           equity mix, of either all Mutual Companies or all
                           Financial Companies;

                  4.       Involves the underwriting of policies of insurance or
                           reinsurance;

                  5.       Involves purchase by State Auto Financial of
                           securities issued by it; or

                  6.       Involves a sale or purchase of any property or
                           security which is not a material transaction to the
                           State Auto Company which is a party to the sale or
                           purchase or involves the sale or purchase of
                           marketable securities at the market price or an
                           approximation thereof.

                           (d) All other business opportunities shall be
                  presented by management, either at a joint meeting of the
                  Mutual Independent Committee and Financial Independent
                  Committee or by another means which assures that each shall
                  receive substantially equivalent information regarding the
                  business opportunity. The Mutual Independent Committee and the
                  Financial Independent Committee, jointly or, at the request of
                  either, separately, shall each review and evaluate such
                  business opportunities and the appropriate allocation thereof,
                  using such factors as it considers relevant, which may
                  include, without limitation:

                  1.       Whether the opportunity was developed by a Mutual or
                           Financial Company;

                  2.       Whether the opportunity was received by a Mutual or
                           Financial Company;

                  3.       Whether a Mutual or Financial Company has a history
                           of engaging in the particular activity which is the
                           subject of the opportunity;

                  4.       Whether the opportunity is within the scope and
                           regular course of business activities of a Mutual or
                           Financial Company;

                  5.       Whether public disclosures create an expectation that
                           a particular opportunity will be pursued by a Mutual
                           or Financial Company;

                  6.       The views of officers of Mutual and State Auto
                           Financial (including common officers) as to whether
                           the opportunity does not meet the investment policies
                           or objectives, or the underwriting or claims
                           guidelines, or is inconsistent with the cash flow or
                           tax situation of the Mutual Companies or members of
                           the State Auto Financial Group;

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                  7.       The respective ability (including, without
                           limitation, financial and legal ability) of the
                           Mutual and Financial Companies to acquire or pursue
                           the opportunity; and

                  8.       The willingness of a third party to deal with a
                           Mutual or Financial Company as the case may be.

         Based upon such review and evaluation, such Independent Committees
         shall seek to arrive at a joint recommendation to the Boards of
         Directors of Mutual and State Auto Financial (which may be made only
         upon approval of a majority of members of the Mutual Independent
         Committee and a majority of members of the Financial Independent
         Committee) as to whether or not such business opportunity should be
         pursued and, if so, by which Company. If a joint recommendation is not
         approved, each Independent Committee shall report the same to its
         respective Board, along with its recommendation in respect of the
         business opportunity. The Boards of Directors of Mutual and of State
         Auto Financial must then act on the recommendation of its respective
         Committee, after considering all other factors deemed relevant by them.

4.       Section 16 of the Agreement is hereby amended in its entirety to
         provide as follows:

         16.      AMENDMENTS -- This Agreement may be amended by the parties,
                  upon authority of their officers without specific director
                  approval, if such amendment is solely for the purpose of
                  clarification and does not change the substance of this
                  Agreement and the parties have obtained an opinion of legal
                  counsel to that effect. Additionally, any present or future
                  subsidiary or affiliate of Mutual or State Auto Financial may
                  be added as a party to this Agreement by an amendment entered
                  into by Mutual, State Auto Financial and the new party, after
                  approval of the Independent Committee of each of Mutual and
                  State Auto Financial and the directors of each and of the new
                  party. Except as otherwise specifically provided in this
                  Agreement, all other amendments to this Agreement must be
                  presented to the Independent Committee of Mutual and of State
                  Auto Financial and be approved by the directors of each
                  Company pursuant to the procedures set forth in Section 9.

5.       EFFECTIVENESS. This Amendment shall be deemed effective as of January
         1, 2002, upon receipt (or deemed receipt) of all necessary regulatory
         approvals, the unanimous approval of the Board of Directors of Mutual
         (specifically including the members of the Independent Committee of the
         Board of Directors of Mutual) and the unanimous approval of the Board
         of Directors of State Auto Financial (specifically including the
         members of the Independent Committee of the Board of Directors of State
         Auto Financial). Unless and until all such approvals are received or
         deemed received, this Amendment shall not bind the parties hereto or
         amend or supplement the Agreement.

6.       REAFFIRMATION OF BALANCE OF THE AGREEMENT. Except as expressly amended
         hereby, the Agreement is hereby reaffirmed by the parties hereto. All
         terms and provisions of

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         Sections 6 through 17 of the Agreement shall apply to and be deemed
         incorporated into this Amendment.

         In Witness whereof, each of the parties hereto has subscribed its name
below effective as of the date first above written, subject to the provisions of
Section 5 above.

                        STATE AUTOMOBILE MUTUAL INSURANCE COMPANY

                        By:     /s/ Robert H. Moone
                                -----------------------------------------------
                                Robert H. Moone, President

                        STATE AUTO FINANCIAL CORPORATION

                        By:     /s/ Robert H. Moone
                                -----------------------------------------------
                                Robert H. Moone, President

                        STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY

                        By:     /s/ Robert H. Moone
                                -----------------------------------------------
                                Robert H. Moone, President

                        STATE AUTO NATIONAL INSURANCE COMPANY

                        By:     /s/ Robert H. Moone
                                -----------------------------------------------
                                Robert H. Moone, President

                        MILBANK INSURANCE COMPANY

                        By:     /s/ Robert H. Moone
                                -----------------------------------------------
                                Robert H. Moone, President

                        STATE AUTO INSURANCE COMPANY

                        By:     /s/ Robert H. Moone
                                -----------------------------------------------
                                Robert H. Moone, President

                                       5
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                        STATECO FINANCIAL SERVICES, INC.

                        By:     /s/ Robert H. Moone
                                -----------------------------------------------
                                Robert H. Moone, President

                        STRATEGIC INSURANCE SOFTWARE, INC.

                        By:     /s/ Robert H. Moone
                                -----------------------------------------------
                                Robert H. Moone, President

                        518 PROPERTY AND MANAGEMENT LEASING, LLC

                        By:     /s/ Robert H. Moone
                                -----------------------------------------------
                                Robert H. Moone, President

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