Document:

Exhibit 10.3

 

Exhibit 10.3

MASTER AGREEMENT FOR THE

FORMATION OF A LIMITED LIABILITY COMPANY

     This is a Master Agreement for the Formation of a Limited Liability Company, dated as of
February 28, 2007 (as in effect from time to time, this “Agreement”), among (a) Jefferies Group,
Inc., a Delaware corporation (“JGI”), (b) Jefferies & Company, Inc., a Delaware corporation
(“Jefco”), and (c) Leucadia National Corporation, a New York corporation (“Leucadia”). All
capitalized terms used herein without definition shall have the meanings ascribed to them in the
Operating Agreement (as defined below).

     Whereas, the parties hereto wish to form a Delaware limited liability company (the
"Company”) for the purpose of engaging in the business of securities brokerage;

     Whereas, each of the parties hereto desire to participate in the Company through the
contribution to the capital of the Company or its wholly-owned subsidiaries of cash and/or
securities owned by them or their Affiliates in exchange for membership interests in the Company
(“Member Interests”), in each case upon the terms and conditions more fully set forth herein; and

     Whereas, the parties hereto desire that the Company enter into certain servicing
arrangements, pursuant to which Jefco will provide to the Company certain securities clearing,
accounting, legal and compliance services for its business, as more fully set forth in the Services
Agreement to be entered into between Jefco, the Company and JHYT.

     Now, Therefore, in consideration of the foregoing premises, the mutual covenants set
forth below and for other good and valuable consideration, the receipt and sufficiency of which are
herby acknowledged the parties hereto hereby agree as follows:

ARTICLE 1

DEFINED TERMS

     Section 1.1 Certain Defined Terms. In addition to the defined terms found elsewhere in this
Agreement, as used in this Agreement the following terms shall have the following meanings:

     “Affiliate” means with respect to any Person, any other Person controlling, controlled by or
under common control with, such Person. As used in this definition, (a) “control” (including, with
its correlative meanings, “controlling,” “controlled by” and “under common control with”) means the
possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting securities, by contract or
otherwise and (b) with respect to any Person other than a subsidiary of the Company, the term
"Affiliate” shall not include the Company or any subsidiary of the Company.

     “Agreement” has the meaning set forth in the preamble.

 

 

     “Business” means the business of securities brokerage, including acting as a broker or dealer
in securities, bank loans, high yield debt and special situation investments on substantially the
same basis as conducted prior to the date hereof by the High Yield Division of Jefco and those
broker-dealers managed by Jefco that participate in the securities brokerage business of the High
Yield Division, and to engage in any activity required thereby or incidental thereto, including
making markets and acting as a block positioner of securities.

     “Business Day” means a day other than Saturday, Sunday or any day on which banks located in
the City of New York are authorized or obligated to close.

     “Certificate of Formation” has the meaning set forth in Section 3.1.

     “Clearing Agreement” means the clearing agreement pursuant to which JHYT will introduce
accounts to Jefco on a fully disclosed basis.

     “Closing” has the meaning set forth in Section 3.8.

     “Closing Date” means a date not more than three business days following receipt of the NASD
Approval and the fulfillment of all other conditions to closing set forth in Article 6.

     “Closing Conditions” means the conditions set forth in Article 6 which must be fulfilled prior
to Closing.

     “Commitment” means, with respect to each member of the Company other than the Series A Member,
the aggregate amount of cash and other property agreed to be contributed as capital to the Company,
as specified in such Member’s Contribution Agreement and reflected on Schedule A to the Operating
Agreement maintained with the books and records of the Company at the Company’s principal office,
as such Schedule A may be modified from time to time.

     “Company” has the meaning set forth in Article 2.

     “Contribution Agreements” means the Series A Contribution Agreement, the Series B Contribution
Agreement, the Series C Contribution Agreement, the Series D Contribution Agreement and the Series
E Contribution Agreement.

     “Fund Investor” means a private investment fund organized as a limited liability company under
the Delaware Act, and managed by Jefco or an Affiliate thereof.

     “Governmental Authority” has the meaning set forth in Section 6.1(a).

     “JEOF” means Jefferies Employees Opportunity Fund, LLC, a Delaware limited liability company.

     “JHYT” means Jefferies High Yield Trading, LLC, a Delaware limited liability company that,
prior to the Closing and the amendment of its certificate of formation and limited liability
company agreement, is known as Jefferies Partners Opportunity Fund II, LLC.

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     “JPOF” means Jefferies Partners Opportunity Fund, LLC, a Delaware limited liability company.

     “JPOF II” has the meaning set forth in Section 3.3.

     “NASD Approval” means the approval of the National Association of Securities Dealers, Inc. to
the proposed reorganization of the secondary high yield securities brokerage and trading business
of Jefco, JPOF, JPOF II and JEOF contemplated by this Agreement, the Operating Agreement and the
other Related Agreements.

     “Operating Agreement” means that certain Amended and Restated Limited Liability Company
Agreement to be dated as of the Closing Date, by and among the Company, JGI, Jefco, Leucadia and
the other parties named therein, and in substantially the form attached hereto as Exhibit A, as in
effect from time to time.

     “Person” means any individual, partnership, corporation, association, trust, limited liability
company, joint venture, unincorporated organization and any government, governmental department or
agency or political subdivision thereof.

     “Regulatory Approvals” shall mean any approval or consent of, or notice to or filing with any
United States federal, state or local regulatory or other governmental agency or authority.

     “Related Agreements” means, collectively, the Certificate of Formation of the Company, the
Operating Agreement, the Contribution Agreements, the Clearing Agreement, the Management Support
Agreement and the Trademark License Agreement.

     “Series A Contribution Agreement” means the Contribution Agreement, to be dated as of the
Closing Date, by and between the Company and Jefco and in substantially the form attached hereto as
Exhibit B.

     “Series B Contribution Agreement” means a Contribution Agreement, to be dated as of the
Closing Date, by and between the Company, Jefco, JGI or one or more of their respective Affiliates
and in substantially the form attached hereto as Exhibit C.

     “Series C Contribution Agreement” means the Contribution Agreement, to be dated as of the
Closing Date, by and between the Company and Leucadia and in substantially the form attached hereto
as Exhibit D.

     “Series D Contribution Agreement” means the Contribution Agreement, to be dated as of the
Closing Date, by and between the Company and Fund Investor and in such form as may be agreed by the
parties thereto.

     “Series E Contribution Agreement” means the Contribution Agreement, to be dated as of the
Closing Date, by and between the Company and JEOF and in such form as may be agreed by the parties
thereto.

     “Servicer” means Jefco or an Affiliate of Jefco, in its capacity as Servicer pursuant to the
terms of the Management Support Agreement, and any permitted successor thereto.

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     “Services Agreement” means the Services Agreement, to be dated as of the Closing Date, by and
among JHYT, the Company and the Servicer and in substantially the form attached hereto as Exhibit
E.

     “Trademark License Agreement” means the Trademark License Agreement, to be dated as of the
Closing Date, by and between Jefco, the Company and JHYT and in such form as may be agreed by the
parties thereto.

     Section 1.2 Other Defined Terms. Capitalized terms used herein without definition have the
respective meanings given to such terms in the Operating Agreement.

ARTICLE 2

FORMATION OF LIMITED LIABILITY COMPANY

     The parties hereto agree that, subject to the terms and conditions of this Agreement and the
Related Agreements, JGI shall form the Company as a Delaware limited liability company and, upon
Closing, the terms of the limited liability company agreement of the Company shall be amended and
restated to be as set forth in the Operating Agreement, and further that, among other things,
pursuant to the Operating Agreement, the Company will hold all of the outstanding interests in
JHYT. It is further understood that (a) this Agreement itself shall not constitute or create a
joint venture, partnership, limited liability company or any other similar arrangement between the
parties hereto and (b) no party hereto is hereby authorized to act as agent of any other party
hereto.

ARTICLE 3

RELATED AGREEMENTS; CLOSING

     Section 3.1 Formation of the Company. (a) On or before the Closing Date, JGI shall cause the
Company to be organized and formed by filing a Certificate of Formation (as in effect from time to
time, the “Certificate of Formation”), with the Secretary of State of the State of Delaware.

          (b) On the Closing Date, the parties hereto shall enter into the Operating Agreement.

     Section 3.2 Contribution by Jefco. On the Closing Date, Jefco shall enter into the Series A
Contribution Agreement, pursuant to which Jefco shall contribute to the Company or, at the
direction of the Company, to JHYT for the account of the Company, the Brokerage Assets, in
consideration for Series A Member Interests, all as more fully set forth in the Series A
Contribution Agreement and the Operating Agreement.

     Section 3.3 Contribution by JGI and Jefco. On the Closing Date, JGI and Jefco shall enter
into the Series B Contribution Agreement, pursuant to which JGI and Jefco shall commit to
contribute capital to the Company or, at the direction of the Company, to JHYT for the account of
the Company in the amount of the JGI Commitment and shall contribute on and as of the Closing Date
cash and securities, including all of the interests in Jefferies Partners Opportunity

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Fund II, LLC, a Delaware limited liability company (“JPOF II”), held by JGI and Jefco, in
consideration for Series B Member Interests, all as more fully set forth in the Series B
Contribution Agreement and the Operating Agreement.

     Section 3.4 Contribution by Leucadia. On the Closing Date, Leucadia shall enter into the
Series C Contribution Agreement, pursuant to which Leucadia shall commit to contribute capital to
the Company or, at the direction of the Company, to JHYT for the account of the Company, in the
amount of the Leucadia Commitment and shall contribute, on and as of the Closing Date, cash and all
of the interests in JPOF II held by Leucadia, in consideration for Series C Member Interests, all
as more fully set forth in the Series C Contribution Agreement and the Operating Agreement.

     Section 3.5 Trademark License Agreement. On the Closing Date, Jefco and the Company shall
enter into the Trademark License Agreement.

     Section 3.6 Management Support Agreement. On the Closing Date, Jefco and the Company shall
enter into the Management Support Agreement.

     Section 3.7 Clearing Agreement. On the Closing Date, Jefco and the Company shall enter into
the Clearing Agreement.

     Section 3.8 Closing. Subject to the provisions of Article 6 hereof, the consummation of the
transactions contemplated by this Agreement shall take place at a closing (the “Closing”) to be
held at the offices of Morgan, Lewis & Bockius LLP, on a mutually acceptable date not earlier than
the fifth Business Day after receipt of the NASD Approval or on such other date or at such other
place as shall be agreed to in writing by all of the parties hereto. The date on which the Closing
actually occurs is referred to herein as the “Closing Date”.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

     Each of the parties hereto hereby represents and warrants to each of the other parties hereto
that (a) it is duly authorized, validly existing and in good standing in the jurisdiction of its
formation; (b) the execution, delivery and performance of this Agreement has been duly authorized
by all necessary corporate action, and will not result in a material violation of any Law
applicable to such party or of any contract binding upon such party or its property; and (c) except
for the NASD Approval and the consents of non-governmental third parties to be obtained by such
party and its Affiliates, no Regulatory Approvals or consents of non-governmental third parties are
required in connection with the execution, delivery or performance by such party or any of its
Affiliates of this Agreement or any of the Related Agreement to which such party or any of its
Affiliates is or is to be a party.

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ARTICLE 5

CERTAIN COVENANTS

     Section 5.1 Ordinary Course Operation. During the period commencing on the date hereof and
ending on the Closing Date, Jefco agrees to:

     (a) operate the Business only in the ordinary course on a basis consistent with past practice;

     (b) use all reasonable efforts to preserve the Business and keep available the services of the
full-time officers and employees engaged therein to the extent required to conduct the Business in
substantially the same manner as conducted on the date hereof;

     (c) use all reasonable efforts to maintain good relations with Persons having a business
relationship with the Business;

     (d) preserve and maintain all permits, licenses, approvals and authorizations necessary to
operate the Business and renew the same if any should expire;

     (e) comply in all material respects with all laws, ordinances, rules and regulations
applicable to the Business; and

     (f) maintain the books of account and records related to the Business in the ordinary course
consistent with past practices.

     Section 5.2 Cooperation. Each of the parties hereto will cooperate in good faith and use all
reasonable efforts to cause the transactions contemplated by this Agreement and the other Related
Agreements to be consummated in accordance with the terms and conditions hereof and thereof. The
foregoing obligations in this Section 5.2 shall not be deemed to require any party thereto to waive
any right under this Agreement or any other Related Agreement.

     Section 5.3 Consents and Approvals. Each of the parties hereto shall use all reasonable
efforts and cooperate in good faith with the other parties hereto with a view to (a) obtaining as
soon as practicable the NASD Approval and all third-party consents required for the consummation of
the transactions contemplated hereby and by the other Related Agreements, and each party hereto
shall make available to the other parties hereto all information reasonably required in connection
with obtaining such approvals and consents; and (b) satisfying all other Closing Conditions. Each
of the parties hereto shall deliver to the other parties hereto copies of all proposed filings to
be made by such party with securities regulatory and other Governmental Authorities, shall use its
reasonable efforts to accommodate any suggestions or recommendations made by the other parties
hereto with respect thereto and shall deliver to the other parties hereto, as soon as practicable,
copies of all final applications to Governmental Authorities, in each case with respect to the
transactions contemplated by this Agreement and the Related Agreements.

     Section 5.4 Executive Officers. On the Closing Date, the parties hereto shall take such
action as is necessary and proper to cause the Company to appoint and employ, on terms satisfactory
to the Board (as defined in the Operating Agreement), the following individuals to

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serve as executive officers of the Company, to hold the offices set forth opposite their
respective names in the table below, and such individuals shall have accepted such offices until
their successors are duly appointed.

	 	 	 
	Richard Handler

	 	Chief Executive Officer
	 
	 	 
	David Schwartz

	 	President
	 
	 	 
	Robert Welch

	 	Chief Financial Officer
	 
	 	 
	Robert Welch

	 	Secretary

     Section 5.5 Disclosure Supplements. From time to time prior to the Closing Date, each party
hereto will promptly give notice to the other parties hereto of any matter hereafter arising which,
if existing, occurring or known at the date of this Agreement, would have been required to be set
forth or described by such party in the Exhibits hereto or any Related Agreement or is necessary to
correct any information provided by such party in the Exhibits hereto or to any Related Agreement
or has caused any representation or warranty of such party herein or in any Related Agreement to
become inaccurate. No such notice shall be deemed to supplement or amend this Agreement or any
Related Agreement or any Schedules or Exhibits hereto or thereto; provided, however, that upon
consummation of the Closing, all matters disclosed in notices given pursuant to and in accordance
with the terms of this Section 5.5 shall be treated as having been disclosed herein or in the
applicable Related Agreement as of the date hereof for purposes of such party’s indemnity
obligations thereunder.

ARTICLE 6

CONDITIONS TO CLOSING

     Section 6.1 Conditions to Obligation of Each Party. The respective obligations of each of the
parties hereto to consummate the Closing under this Agreement and the other Related Agreements
shall be subject to the satisfaction, prior to or at Closing, of each of the following conditions:

     (a) No Injunction. On the Closing Date, there shall be no (i) injunction, restraining order
or decree of any nature of any United States federal, state or local court, governmental
commission, board or other regulatory authority or agency (“Governmental Authority”) of competent
jurisdiction in effect that restrains or prohibits the consummation of any transaction contemplated
under this Agreement or any Related Agreement or (ii) pending action, suit or proceeding brought by
any Governmental Authority which seeks to restrain or prohibit consummation of any such
transaction.

     (b) Regulatory Approvals. The NASD Approval shall have been obtained and any applicable
waiting period in respect thereof shall have expired or been terminated and the NASD Approval shall
be in full force and effect.

     (c) Other Transactions. Each of the Related Agreements shall have been duly executed and
delivered by each party thereto and shall be in full force and effect, and the

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transactions contemplated by the Contribution Agreements shall have been consummated and have
become effective in accordance with their respective terms.

     (d) Regarding JPOF. Jefco shall have obtained the consent of the members of JPOF to the
merger of JPOF with and into JHYT on and as of the Closing Date, or shall have otherwise arranged
for the sale or contribution of the assets of JPOF to the Company, or, at the direction of the
Company, to JHYT for the account of the Company.

     (e) Regarding JEOF. Jefco shall have arranged for the sale or contribution of the assets of
JEOF to the Company or, at the direction of the Company, to JHYT for the account of the Company.

     (f) Other Matters. The Company shall have received the written advice referred to in Section
2.10 of the Operating Agreement.

     Section 6.2 Additional Conditions to the Obligations of JGI and Jefco. The obligations of JGI
and Jefco to consummate the Closing under this Agreement and the Related Agreements shall be
subject to the satisfaction, prior to or at Closing, of each of the following additional
conditions:

     (a) Representations and Warranties. The representations and warranties of Leucadia or any of
its Affiliates which are set forth in this Agreement or in the Related Agreements shall be true and
correct in all material respects as of the Closing Date as though made at and as of the Closing
Date, except to the extent that any representation and warranty is made as of a specified date
other than the Closing Date, in which case such representation and warranty shall be true and
correct as of such date.

     (b) Performance of Covenants. Each of the other parties hereto shall have performed in all
material respects all obligations and agreements, and complied in all material respects with all
covenants and conditions, contained in this Agreement to be performed or complied with by such
party prior to or at the Closing.

     (c) Certificates. JGI and Jefco shall have received a certificate of Leucadia dated the
Closing Date, executed on behalf of Leucadia to the effect that the conditions specified in section
6.2(a) and 6.2(b) with respect to Leucadia have been fulfilled.

     (d) Consents. All consents of non-governmental third parties required for the consummation of
the transactions contemplated by JGI and its Affiliates shall have been obtained and shall be in
full force and effect on the Closing Date.

     (e) Additional Deliveries. Leucadia shall have furnished JGI with such certificates,
instruments or other documents in the name or on behalf of Leucadia, executed by appropriate
officers of such party, including, without limitation, certificates or correspondence of
Governmental Authorities or non-governmental third parties, to evidence fulfillment of the
conditions set forth in this Article 6 to be fulfilled by Persons other than JGI and its Affiliates
as JGI may reasonably request; provided, however, that any such certificate, instrument or other
document so requested by JGI shall be of a type that is customary in transactions similar to the
transactions contemplated hereby.

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     Section 6.3 Additional Conditions to the Obligations of Leucadia. The obligations of Leucadia
to consummate the Closing under this Agreement and the other Related Agreements shall be subject to
the satisfaction, prior to or at Closing, of each of the following additional conditions:

     (a) Representations and Warranties. The representations and warranties of JGI and Jefco or
any of their Affiliates which are set forth in this Agreement or the Related Agreements shall be
true and correct in all material respects as of the Closing Date as though made at and as of the
Closing Date, except to the extent that any representation and warranty is made as of a specified
date other than the Closing Date, in which case such representation and warranty shall be true and
correct as of such date.

     (b) Performance of Covenants. JGI and Jefco shall each have performed in all material
respects all obligations and agreements, and complied in all material respects with all covenants
and conditions, contained in this Agreement to be performed or complied with by JGI or Jefco prior
to or at the Closing.

     (c) Certificates. Leucadia shall have received a certificate of JGI and Jefco, dated the
Closing Date, executed on behalf of each of such parties to the effect that the conditions
specified in Sections 6.3(a) and 6.3(b) with respect to such party have been fulfilled.

     (d) Consents. All consents of non-governmental third parties required for the consummation of
the transactions contemplated hereby by Leucadia and its Affiliates shall have been obtained and
shall be in full force and effect on the Closing Date.

     (e) Additional Deliveries. Each of JGI and Jefco shall have furnished Leucadia with such
certificates, instruments or other documents in the name or on behalf of such party, executed by
appropriate officers of such parties, including, without limitation, certificates or correspondence
of Governmental Authorities or non-governmental third parties, to evidence fulfillment of the
conditions set forth in this Article 6 to be fulfilled by Persons other than Leucadia and its
Affiliates as Leucadia may reasonably request; provided, however, that any such certificate,
instrument or other document so required by Leucadia shall be of a type that is customary in
transactions similar to the transactions contemplated hereby.

     (f) Series C Contribution Agreement. The conditions to Leucadia’s obligations under the
Series C Contribution Agreement shall have been satisfied.

ARTICLE 7

TERMINATION

     Section 7.1 Grounds for Termination. This Agreement may be terminated at any time prior to
the Closing

     (a) by mutual written consent of all of the parties hereto;

     (b) by any of the parties hereto (i) thirty (30) days after the date on which any request or
application for the NASD approval shall have been denied, unless within the thirty

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     (30) day period following such denial a petition for rehearing or an amended application has
been filed with the applicable Governmental Authority; provided, however, that no party hereto
shall have the right to terminate this Agreement pursuant to this Section 7.1(b) if such denial
shall be due to the failure of the party seeking to terminate this Agreement to perform or observe
in any material respect the covenants and agreements of such party set forth herein, or (ii) if any
federal or state securities regulatory or other Governmental Authority shall have issued a final
permanent order, injunction or other legal restraint or prohibition preventing the consummation of
the transactions contemplated hereby and the time for appeal or petition for reconsideration of
such order, injunction, restraint or prohibition shall have expired without such appeal or petition
being granted or such order, injunction, restraint or prohibition shall otherwise have become final
and non-appealable;

     (c) by any of the parties hereto (but only if the terminating party is not then in material
breach of any representation, warranty, covenant or other agreement contained herein or in any of
the other Related Agreements) in the event of a material breach by any other party hereto of any
representation, warranty, covenant or other agreement contained herein or in any of the other
Related Agreements, which breach is not cured after thirty (30) days’ written notice thereof is
given to the party committing such breach; or

     (d) by any of the parties hereto if the Closing shall not have occurred on or prior to May 30,
2007, unless the failure of the Closing to occur by such date shall be due to the failure of the
party seeking to terminate this Agreement hereunder to perform or observe in any material respect
the covenants and agreements of such party set forth in this Agreement or in any other Related
Agreements.

     Section 7.2 Effects of Termination. In the event of termination of this Agreement by any of
the parties hereto as provided in Section 7.1, this Agreement shall forthwith become null and void
(other than this Section 7.2, which shall remain in full force and effect), and there shall be no
further liability on the part of any of the parties hereto or their respective officers or
directors to the other parties hereto, and, in the event of a willful breach by any of the parties
hereto of any representation, warranty, covenant or agreement contained in this Agreement, in which
case the breaching party shall remain liable for any and all damages, costs and expenses, including
all reasonable attorneys’ fees, sustained or incurred by the non-breaching parties as a result
thereof or in connection therewith or with the enforcement of any of their rights hereunder,
whether sustained or incurred prior to, on or after the date hereof. In no event shall any party
hereto or any of such party’s officers or directors have any liability to any other party hereto
arising out of or relating to this Agreement in the event that the Closing occurs; provided that
nothing herein shall limit the liability of the Person under any Related Agreement.

ARTICLE 8

GENERAL

     Section 8.1 Expenses. Except as expressly set forth in this Agreement or the Related
Agreements, each party shall pay its own expenses and costs incidental to the completion of the
transactions contemplated hereby incurred by such party.

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     Section 8.2 Notices. All notices, demands and other communications hereunder shall be in
writing or by written telecommunication, and shall be deemed to have been duly given if delivered
personally or if mailed by certified mail, return receipt requested, postage prepaid or if sent by
overnight courier or sent by written telecommunication (answerback confirmed), or electronic mail
as follows:

	 	 	 
	If to JGI or Jefco:

	 	Jefferies Group, Inc.
	 

	 	520 Madison Avenue
	 

	 	12th Floor
	 

	 	New York, New York 10022
	 

	 	Attention: Chief Financial Officer
	 

	 	                   General Counsel
	 
	 	 
	with a copy sent contemporaneously to:

	 	Morgan, Lewis & Bockius LLP
	 

	 	101 Park Avenue
	 

	 	New York, New York 10178
	 

	 	Attention: David G. Nichols, Jr., Esq.
	 
	 	 
	If to Leucadia:

	 	Leucadia National Corporation
	 

	 	315 Park Avenue
	 

	 	New York, New York 10022
	 

	 	Attention: Joseph S. Steinberg
	 
	 	 
	with a copy sent contemporaneously to:

	 	Weil, Gotshal & Manges LLP
	 

	 	767 Fifth Avenue
	 

	 	New York, New York 10153
	 

	 	Attention: Andrea Bernstein, Esq.

     Section 8.3 Entire Agreement. This Agreement (including the Exhibits hereto), together with
the Related Agreements (including the Exhibits and Schedules thereto) contains the entire
understanding of the parties hereto and thereto, supersedes all prior agreements and understandings
relating to the subject matter hereof and thereof and shall not be amended except by a written
instrument hereafter signed by all of the parties hereto or thereto. No waiver of any provision of
this Agreement shall be effective unless evidenced by a written instrument signed by the waiving
party. Each of the parties hereto further acknowledges and agrees that, in entering into this
Agreement and entering into the Related Agreements, it has not in any way relied upon any oral or
written agreements, statements, promises, information, arrangements, understandings,
representations or warranties, express or implied, not specifically set forth in this Agreement or
the Related Agreements.

     Section 8.4 Governing Law. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York without regard to its conflict of laws rules.

     Section 8.5 Consent to Jurisdiction. Each of the parties hereto agrees that any suit, action
or proceeding instituted against such party under or in connection with this Agreement may be
brought in a court of competent jurisdiction in the City of New York. By execution

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hereof, each party hereto irrevocably waives any objection to, and any right of immunity on
the grounds of, improper venue, the convenience of the forum, the personal jurisdiction of such
courts or the execution of judgments resulting therefrom. Each party hereto hereby irrevocably
accepts and submits to the jurisdiction of such courts in any such action, suit or proceeding.

     Section 8.6 Waiver of Certain Damages. Each of the parties hereto to the fullest extent
permitted by law irrevocably waives any rights that it might have to punitive, special, exemplary
or consequential damages in respect of any litigation based upon, or arising out of, this Agreement
or any Related Agreement or any course of conduct, course of dealing, statements or actions of any
of them relating thereto.

     Section 8.7 Section Headings. The headings of sections and subsections are for reference only
and shall not limit or control the meaning thereof.

     Section 8.8 Assigns. This Agreement and the Related Agreements shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, successors and permitted
assigns. Neither this Agreement nor any Related Agreement nor the obligations of any party
hereunder or thereunder shall be assignable or transferable by such party without the prior written
consent of the other parties hereto.

     Section 8.9 No Implied Rights or Remedies. Except as otherwise expressly provided herein,
nothing herein expressed or implied is intended or shall be construed to confer upon or to give any
Person, except the parties hereto, any rights or remedies under or by reason of this Agreement.

     Section 8.10 Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

     Section 8.11 Construction. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rule of strict construction
will be applied against any party.

     Section 8.12 Severability. The invalidity or unenforceability of any particular provision of
this Agreement or any Related Agreement shall not affect the other provisions hereof or thereof,
and this Agreement shall be construed in all respects as if such invalid or unenforceable provision
was omitted.

     Section 8.13 Waiver of Right to Jury Trial. Each of the parties hereto hereby waives its
rights to a trial by jury in any litigation in any court with respect to, in connection with, or
arising out of, this Agreement or the validity, interpretation or enforcement hereof or any of the
transactions contemplated hereby.

[Signature page follows.]

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     In witness hereof, and intending to be legally bound hereby, the parties hereto have
caused this Master Agreement for the Formation of a Limited Liability Company to be duly executed
and delivered as of the date and year first above written.

	 	 	 	 	 
	 	JEFFERIES GROUP, INC.

 	 
	 	By:  	     /s/ Richard B. Handler
 	 
	 	 	Name:  	Richard B. Handler 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	JEFFERIES & COMPANY, INC.

 	 
	 	By:  	     /s/ Richard B. Handler
 	 
	 	 	Name:  	Richard B. Handler 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	LEUCADIA NATIONAL CORPORATION

 	 
	 	By:  	     /s/ Joseph A. Orlando
 	 
	 	 	Name:  	Joseph A. Orlando 	 
	 	 	Title:  	Vice President and Chief Financial Officer 	 
	 

 

 

EXHIBIT A

Jefferies High Yield Holdings, LLC

A Delaware Limited Liability Company

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

Dated as of _______ __, 2007

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	ARTICLE I

	 	DEFINED TERMS
	 	 	1	 
	 
	 	 	 	 	 	 
	1.1

	 	Certain Defined Terms
	 	 	1	 
	 
	 	 	 	 	 	 
	1.2

	 	Other Defined Terms
	 	 	15	 
	 
	 	 	 	 	 	 
	1.3

	 	Headings
	 	 	15	 
	 
	 	 	 	 	 	 
	ARTICLE II

	 	ORGANIZATION
	 	 	16	 
	 
	 	 	 	 	 	 
	2.1

	 	Formation
	 	 	16	 
	 
	 	 	 	 	 	 
	2.2

	 	Name
	 	 	16	 
	 
	 	 	 	 	 	 
	2.3

	 	Term
	 	 	16	 
	 
	 	 	 	 	 	 
	2.4

	 	Registered Agent and Office
	 	 	16	 
	 
	 	 	 	 	 	 
	2.5

	 	Principal Place of Business
	 	 	16	 
	 
	 	 	 	 	 	 
	2.6

	 	Qualification in Other Jurisdictions
	 	 	17	 
	 
	 	 	 	 	 	 
	2.7

	 	Purpose
	 	 	17	 
	 
	 	 	 	 	 	 
	2.8

	 	Powers of the Company
	 	 	17	 
	 
	 	 	 	 	 	 
	2.9

	 	No State-Law Partnership
	 	 	19	 
	 
	 	 	 	 	 	 
	2.10

	 	No Investment Company
	 	 	19	 
	 
	 	 	 	 	 	 
	ARTICLE III

	 	MANAGEMENT AND OPERATIONS
	 	 	19	 
	 
	 	 	 	 	 	 
	3.1

	 	Board of Directors
	 	 	19	 
	 
	 	 	 	 	 	 
	3.2

	 	Composition of the Board
	 	 	22	 
	 
	 	 	 	 	 	 
	3.3

	 	Procedural Matters Regarding the Board
	 	 	23	 
	 
	 	 	 	 	 	 
	3.4

	 	Officers
	 	 	25	 
	 
	 	 	 	 	 	 
	3.5

	 	Insurance
	 	 	25	 
	 
	 	 	 	 	 	 
	3.6

	 	Compliance with Authority
	 	 	26	 
	 
	 	 	 	 	 	 
	3.7

	 	Services Agreement; Payment of Management Fee
	 	 	26	 
	 
	 	 	 	 	 	 
	3.8

	 	Delegation of Certain Matters
	 	 	27	 
	 
	 	 	 	 	 	 
	3.9

	 	Deadlock Resolution
	 	 	27	 
	 
	 	 	 	 	 	 
	3.10

	 	Expenses
	 	 	27	 
	 
	 	 	 	 	 	 
	ARTICLE IV

	 	MEMBERSHIP; CAPITAL CONTRIBUTIONS; CAPITAL
ACCOUNTS; AND ADDITIONAL INTERESTS
	 	 	28	 
	 
	 	 	 	 	 	 
	4.1

	 	Members
	 	 	28	 
	 
	 	 	 	 	 	 
	4.2

	 	No Liability of Members
	 	 	31	 
	 
	 	 	 	 	 	 

i

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	4.3

	 	Capital Contributions
	 	 	32	 
	 
	 	 	 	 	 	 
	4.4

	 	Member Interests are Personal Property
	 	 	36	 
	 
	 	 	 	 	 	 
	4.5

	 	Status of Capital Contributions
	 	 	36	 
	 
	 	 	 	 	 	 
	4.6

	 	Capital Accounts
	 	 	36	 
	 
	 	 	 	 	 	 
	4.7

	 	Issuance of Additional Interests; Additional Members
	 	 	37	 
	 
	 	 	 	 	 	 
	4.8

	 	Additional Payment
	 	 	38	 
	 
	 	 	 	 	 	 
	4.9

	 	Advances
	 	 	38	 
	 
	 	 	 	 	 	 
	ARTICLE V

	 	TRANSFERS
	 	 	39	 
	 
	 	 	 	 	 	 
	5.1

	 	Restriction on Transfers
	 	 	39	 
	 
	 	 	 	 	 	 
	5.2

	 	Invalid Transfers Void
	 	 	39	 
	 
	 	 	 	 	 	 
	5.3

	 	Effect of Transfer; Exclusions
	 	 	40	 
	 
	 	 	 	 	 	 
	ARTICLE VI

	 	REDEMPTION; CONVERSION AND WITHDRAWAL OF CAPITAL
BY MEMBERS
	 	 	40	 
	 
	 	 	 	 	 	 
	6.1

	 	Mandatory Redemption
	 	 	40	 
	 
	 	 	 	 	 	 
	6.2

	 	Additional Redemption Events
	 	 	41	 
	 
	 	 	 	 	 	 
	6.3

	 	Early Redemption
	 	 	42	 
	 
	 	 	 	 	 	 
	6.4

	 	Limitations on Redemptions by Members
	 	 	43	 
	 
	 	 	 	 	 	 
	6.5

	 	Distribution Upon Redemption
	 	 	43	 
	 
	 	 	 	 	 	 
	ARTICLE VII

	 	CONFIDENTIALITY
	 	 	44	 
	 
	 	 	 	 	 	 
	ARTICLE VIII

	 	ALLOCATIONS AND DISTRIBUTIONS
	 	 	45	 
	 
	 	 	 	 	 	 
	8.1

	 	Allocations
	 	 	45	 
	 
	 	 	 	 	 	 
	8.2

	 	Adjustments to Reflect Changes in Member Interests
	 	 	47	 
	 
	 	 	 	 	 	 
	8.3

	 	Allocation of Taxable Income and Loss
	 	 	47	 
	 
	 	 	 	 	 	 
	8.4

	 	Distributions
	 	 	48	 
	 
	 	 	 	 	 	 
	8.5

	 	Withholding
	 	 	50	 
	 
	 	 	 	 	 	 
	ARTICLE IX

	 	VALUATION
	 	 	50	 
	 
	 	 	 	 	 	 
	9.1

	 	Valuation
	 	 	50	 
	 
	 	 	 	 	 	 
	ARTICLE X

	 	BOOKS AND RECORDS
	 	 	51	 
	 
	 	 	 	 	 	 
	10.1

	 	Books, Records and Financial Statements
	 	 	51	 
	 
	 	 	 	 	 	 
	10.2

	 	Reports
	 	 	51	 
	 
	 	 	 	 	 	 

ii

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	10.3

	 	Accounting Method
	 	 	52	 
	 
	 	 	 	 	 	 
	10.4

	 	Audit
	 	 	52	 
	 
	 	 	 	 	 	 
	ARTICLE XI

	 	 TAX MATTERS
	 	 	52	 
	 
	 	 	 	 	 	 
	11.1

	 	Tax Matters Member
	 	 	52	 
	 
	 	 	 	 	 	 
	11.2

	 	Right to Make Section 754 Election
	 	 	52	 
	 
	 	 	 	 	 	 
	11.3

	 	Indemnity of Tax Matters Member
	 	 	52	 
	 
	 	 	 	 	 	 
	11.4

	 	Notices to Tax Matters Member
	 	 	53	 
	 
	 	 	 	 	 	 
	ARTICLE XII

	 	LIABILITY AND INDEMNIFICATION
	 	 	53	 
	 
	 	 	 	 	 	 
	12.1

	 	Liability
	 	 	53	 
	 
	 	 	 	 	 	 
	12.2

	 	Indemnification
	 	 	53	 
	 
	 	 	 	 	 	 
	ARTICLE XIII

	 	DISSOLUTION, LIQUIDATION AND TERMINATION
	 	 	55	 
	 
	 	 	 	 	 	 
	13.1

	 	Dissolution Generally
	 	 	55	 
	 
	 	 	 	 	 	 
	13.2

	 	Continuation
	 	 	55	 
	 
	 	 	 	 	 	 
	13.3

	 	Events Causing Dissolution
	 	 	55	 
	 
	 	 	 	 	 	 
	13.4

	 	Events of Bankruptcy of Member
	 	 	55	 
	 
	 	 	 	 	 	 
	13.5

	 	Withdrawal of Members
	 	 	56	 
	 
	 	 	 	 	 	 
	13.6

	 	Notice of Dissolution
	 	 	56	 
	 
	 	 	 	 	 	 
	13.7

	 	Liquidation
	 	 	56	 
	 
	 	 	 	 	 	 
	13.8

	 	Termination
	 	 	58	 
	 
	 	 	 	 	 	 
	13.9

	 	Claims of the Members
	 	 	58	 
	 
	 	 	 	 	 	 
	ARTICLE XIV

	 	MISCELLANEOUS
	 	 	58	 
	 
	 	 	 	 	 	 
	14.1

	 	Dispute Resolution
	 	 	58	 
	 
	 	 	 	 	 	 
	14.2

	 	Notices
	 	 	58	 
	 
	 	 	 	 	 	 
	14.3

	 	Entire Agreement
	 	 	59	 
	 
	 	 	 	 	 	 
	14.4

	 	Governing Law
	 	 	59	 
	 
	 	 	 	 	 	 
	14.5

	 	Member Defaults; Waiver of Certain Damages
	 	 	59	 
	 
	 	 	 	 	 	 
	14.6

	 	Assigns
	 	 	59	 
	 
	 	 	 	 	 	 
	14.7

	 	No Implied Rights or Remedies
	 	 	59	 
	 
	 	 	 	 	 	 
	14.8

	 	Counterparts
	 	 	59	 
	 
	 	 	 	 	 	 
	14.9

	 	Construction
	 	 	59	 
	 
	 	 	 	 	 	 

iii

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	14.10

	 	Severability
	 	 	60	 
	 
	 	 	 	 	 	 
	14.11

	 	Consent to Jurisdiction
	 	 	60	 
	 
	 	 	 	 	 	 
	14.12

	 	Waiver of Right to Jury Trial
	 	 	60	 
	 
	 	 	 	 	 	 
	14.13

	 	Amendments
	 	 	60	 
	 
	 	 	 	 	 	 
	14.14

	 	Side Letters
	 	 	61	 
	 
	 	 	 	 	 	 

Schedule A — Members and Percentage Interests

Schedule B — Initial Directors

Schedule C — Initial Officers

iv

 

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF JEFFERIES HIGH YIELD HOLDINGS, LLC

     This Amended and Restated Limited Liability Company Agreement of Jefferies High Yield
Holdings, LLC, a Delaware limited liability company (the “Company”), is made as of ___
___, 2007 (as amended and in effect from time to time, this “Agreement”), by and among (a)
Jefferies Group, Inc., a Delaware corporation (“JGI”), (b) Jefferies & Company, Inc., a
Delaware corporation (“Jefco”), (c) Leucadia National Corporation, a New York corporation
(“Leucadia”), (d) Jefferies High Yield Partners, LLC, a Delaware limited liability company
(“Fund Investor”), and (e) Jefferies Employees Opportunity Fund LLC, a Delaware limited
liability company (“JEOF”), as members of the Company (the “Initial Members”), and
(f) the Company. Any reference in this Agreement to JGI, Jefco, Leucadia, Fund Investor or JEOF
shall include such Member’s successors to the extent such successors have become New Members in
accordance with the provisions of this Agreement.

     WHEREAS, JGI, Jefco, Leucadia, Fund Investor and JEOF desire to continue a limited liability
company pursuant to the Delaware Act for the purpose of continuing the Business;

     WHEREAS, Jefco, Leucadia and Persons affiliated with them (the “JPOF II Members”) own
all of the outstanding equity interests in Jefferies Partners Opportunity Fund II, LLC, a Delaware
limited liability company and a broker-dealer registered with the NASD (“JPOF II”);

     WHEREAS, pursuant to Series B Contribution Agreements and Series C Contribution Agreements,
the JPOF II Members will contribute all of the outstanding equity interests in JPOF II to the
Company in exchange for Series B Interests and Series C Interests, as the case may be;

     WHEREAS, promptly upon contribution of all of the outstanding equity interests in JPOF II to
the Company, the Company will, among other things, cause the name of JPOF II to be changed to
Jefferies High Yield Trading, LLC (“JHYT”);

     WHEREAS, the Company intends to continue the Business through JHYT; and

     WHEREAS, each of JGI, Jefco, Leucadia, Fund Investor and JEOF is executing and delivering
concurrently herewith the Related Agreements to which it is party.

     NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the Initial Members and the Company hereby agree
to amend and restate in its entirety the Original Agreement as follows:

ARTICLE I

DEFINED TERMS 

     1.1 Certain Defined Terms. As used in this Agreement, the following terms shall have
the meanings specified below:

1

 

     “Accounting Period” means a three (3) month period commencing on the first day of each
Fiscal Quarter, or any period of shorter duration commencing upon the Closing Date or the day
following the last day of the preceding Accounting Period and terminating upon the earlier of (a)
the last day of the current Fiscal Quarter or (b) the day preceding the effective date of the
admission of any New Member, any other change in the relative Member Interests of the Members, a
Transfer by any Member, a Company Sale or any other similar transaction or event, as determined by
the Board.

     “Additional Interests” means Member Interests issued in accordance with the provisions
of Section 4.7.

     “Adjusted Capital Account” means, with respect to the Capital Account of any Member,
the balance, if any, in such Member’s Capital Account as of the end of the relevant Accounting
Period, after giving effect to all allocations made with respect to such Accounting Period under
Section 8.1 and to the following adjustments:

                  (a) credit to such Capital Account any amounts that the Member is obligated to restore
pursuant to Treasury Regulation §1.704-1(b)(2)(ii)(c) or is deemed to be obligated to restore
pursuant to Treasury Regulation §§1.704-2(g)(1) or 1.704-2(i)(5);

                  (b) debit to such Capital Account the items described in Treasury Regulation
§§1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) that are
attributable to such Capital Account.

     The foregoing definition of Adjusted Capital Account is intended to comply with the provisions
of Treasury Regulation §1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

     “Adverse Party” means any Person whose acquisition by Transfer or otherwise of a
Member Interest (including any indirect acquisition by obtaining a controlling interest in any
Person that directly or indirectly controls a Member) could reasonably be expected to materially
and adversely affect the best interests of the Company, as determined in good faith by the Board.

     “AE Credits” means commissions, commission equivalents and credits awarded to
salespersons, traders and other employees of the Company, JHYT and/or the Servicer relating to
transactions by or on behalf of JHYT with customers assigned to or serviced by such salespersons,
traders or other employees.

     “Affiliate” means, when used with reference to a specified Person at the time of
evaluation, any Person that directly or indirectly controls or is controlled by or under common
control with the specified Person. The term “control” for purposes of this definition of Affiliate
means the possession, directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting securities, by contract or
otherwise.

     “Affiliated Vehicle” means any limited partnership, limited liability company,
business trust or other pooled investment vehicle sponsored, managed or advised by JGI or any of
its controlled Affiliates (other than the Company, JHYT or any other Subsidiary of the Company)

2

 

and for which the Servicer, sponsor, investment adviser or other Person is entitled to receive
a management fee and/or a carried interest or profit participation.

     “Aggregate Net Book Income” means, as calculated from time to time, the excess of the
aggregate Book Income for the then current and all previous Accounting Periods over the aggregate
Book Loss for the then current and all previous Accounting Periods, taking into account adjustments
under Section 4.6(b), and excluding any Net Income or Net Loss directly attributable to the
Brokerage Assets.

     “Aggregate Net Book Loss” means, as calculated from time to time, the excess of the
aggregate Book Loss for the then current and all previous Accounting Periods over the aggregate
Book Income for the then current and all previous Accounting Periods, taking into account
adjustments under Section 4.6(b), and excluding any Net Income or Net Loss directly attributable to
the Brokerage Assets.

     “Applicable Redemption Date” means (a) with respect to the mandatory redemption of the
Series B Interests, the Series C Interests, the Series D Interests or the Series E Interests, the
date upon which the Series B Term, the Series C Term, the Series D Term or the Series E Term shall
expire, as the case may be; (b) with respect to any redemption pursuant to Section 6.2, the date as
of which the Company gives effective notice of such redemption under Section 14.2 to the Member or
other Person whose Member Interests are to be redeemed thereunder; and (c) with respect to any
redemption pursuant to Section 6.3, the date as of which the Company receives effective notice of
such redemption under Section 14.2 from the Member that is exercising its right of redemption
thereunder.

     “Assets” means any cash, Securities, investments or any other property or assets,
including without limitation short positions with respect to any of the foregoing and intangible
assets.

     “Bank Loans” means performing senior debt obligations of corporate issuers, including
without limitation term loans and other funded investments, assignments of and participations in
such obligations and investments, whether acquired through primary bank syndications, in the
secondary market or otherwise.

     “Benefit Plan Investors” means any “benefit plan investor” as defined in Department of
Labor Regulation 29 C.F.R. § 2510.3-101(f)(2), including without limitation any employee benefit
plan subject to ERISA, any governmental plan, individual retirement account, Keogh plan or foreign
plan, and any insurance company general account funds or other pooled vehicle the underlying assets
of which are treated as “plan assets” for purposes of ERISA.

     “Book Income” or “Book Loss” means, for an Accounting Period, the net income
or net loss, respectively of the Company determined for the Accounting Period in accordance with
GAAP, and determined by marking-to-market the Assets to their Market Value at the end of the
Accounting Period.

     “Book Property” means property that is properly reflected on the books of the Company
at a book value that differs from the adjusted tax basis of such property, within the meaning of
Treasury Regulation §1.704-1(b)(2)(iv)(g)(1).

3

 

     “Book Value” means the book value of the Company as determined according to GAAP by
the Company’s auditors in a manner consistent with the methodology set forth in Article IX.

     “Brokerage Assets” means the tangible and intangible assets contributed by Jefco in
consideration for the Series A Interest pursuant to the Series A Contribution Agreement, together
with any like assets acquired by the Company or JHYT after the issuance of the Series A Interest.
For the avoidance of doubt, the Brokerage Assets do not include any cash, Securities or other
property contributed by JGI or Jefco in consideration for Series B Interests, or otherwise acquired
by the Company or JHYT, or any of the Business Employees.

     “Business” means the business of securities brokerage, including acting as a broker or
dealer in Securities, Bank Loans, High Yield Debt and Special Situation Investments on
substantially the same basis as conducted prior to the date hereof by the High Yield Division of
Jefco and those broker-dealers managed by Jefco that participate in the securities brokerage
business of the High Yield Division, and to engage in any activity required thereby or incidental
thereto, including making markets and acting as a block positioner of Securities.

     “Business Day” means a day other than Saturday, Sunday or any day on which banks
located in the State of New York are authorized or obligated to close.

     “Business Employee” means the individuals seconded to JHYT and/or the Company pursuant
to the Services Agreement.

     “Business Plan” means the business plan for the Company adopted by the Board no less
frequently than once each calendar year and setting forth (a) the budget for the Company for the
Fiscal Year covered by such plan and (b) the capital requirements for the Business, and the means
proposed for meeting such capital requirements.

     “Capital Account” means, with respect to any Member, the account maintained for such
Member in accordance with the provisions of Section 4.6 hereof. A Transferee may acquire an
interest in a Capital Account as provided in Section 4.6(d).

     “Capital Contribution” means, with respect to any Member, the amount of cash plus the
fair market value of any other property (net of liabilities that the Company is considered to
assume pursuant to Code Section 752 and the Treasury Regulations thereunder) contributed to the
Company pursuant to Article IV.

     “Cash Equivalents” means investments that are one or more of the following obligations
or securities:

          (a) U.S. Government Securities;

          (b) certificates of deposit of, banker’s acceptances issued by or money market accounts in,
any depository institution or trust company incorporated under the laws of the United States of
America or any state thereof and subject to supervision and examination by federal and/or state
banking authorities, so long as the deposits offered by such depository institution or trust
company are rated and have a rating of at least “F-1” if rated by Fitch, “P-1” if rated by Moody’s
or “A-1” if rated by S&P or, if rated by two or more of the foregoing, so rated

4

 

by any two of the foregoing (or, in the case of the principal depository institution in a
holding company system whose deposits are not so rated, the long-term debt obligations of such
holding company are rated and such rating is at least “A+” if rated by Fitch, “Al” if rated by
Moody’s or “A+” if rated by S&P or any two of the foregoing);

          (c) commercial paper issued by any depository institution or trust company incorporated under
the laws of the United States of America or any state thereof and subject to “supervision and
examination by federal and/or state banking authorities, or any corporation incorporated under the
laws of the United States of America or any state thereof, so long as the commercial paper of such
issuer is rated and has at the time of such investment a short-term rating of at least “F-1” if
rated by Fitch, “P-l” if rated by Moody’s or “A-1” if rated by S&P or, if rated by two or more of
the foregoing, so rated by any two of the foregoing on its commercial paper;

          (d) securities bearing interest or sold at a discount issued by any corporation incorporated
under the laws of the United States of America or any state thereof, so long as the obligations
thereof are rated and have a credit rating of at least “F-1” if rated by Fitch, “P-1” if rated by
Moody’s or “A-1” if rated by S&P or, if rated by two or more of the foregoing, so rated by any two
of the foregoing either at the time of such investment or the making of a contractual commitment
providing for such investment;

          (e) interest-bearing deposits in United States dollars in United States or Canadian banks with
an unrestricted surplus of at least $250,000,000 maturing within one year; provided, that: (i) in
no event shall Cash Equivalents include any obligations that provide for the payment of interest
alone or principal alone; (ii) except in the case of U.S. Government Securities, Cash Equivalents
shall mature within 183 days of acquisition by the Company; (iii) if any of Fitch, S&P or Moody’s
changes its rating system, then any ratings included in any subsection of this definition shall be
deemed to be an equivalent rating in a successor rating category of Fitch, S&P or Moody’s, as the
case may be; and (iv) if any of Fitch, S&P or Moody’s is not in the business of rating securities,
then any ratings included in any subsection of this definition shall be deemed to be an equivalent
rating from another rating agency of comparable standing; and

          (f) securities issued by money market funds substantially all the assets of which are
comprised of securities of the types described in clauses (a) through (e) hereof.

     “Certificate” means the Certificate of Formation of the Company and any and all
amendments thereto and restatements thereof filed on behalf of the Company with the office of the
Secretary of State of the State of Delaware pursuant to the Delaware Act.

     “Change of Law” means the enactment or adoption of any statute, rule, regulation,
interpretation, amendment, order or official investigation or inquiry that has, or could reasonably
be expected to have, an effect upon the characterization of the Company, JHYT or any Member
Interest that in the reasonable determination of the Board or any Member, as applicable, after
receipt of written advice of counsel, constitutes a change that is adverse in any material respect
from the written advice of counsel to the Company and/or any Member that was relied upon when
entering into this Agreement.

5

 

     “Clearing Agreement” means the clearing agreement pursuant to which JHYT will
introduce accounts to Jefco on a fully disclosed basis.

     “Closing Date” means ___, 2007.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time.

     “Commitment” means, with respect to each Member other than the Series A Member, the
aggregate amount of cash and other property agreed to be contributed as capital to the Company, as
specified in such Member’s Contribution Agreement and reflected on Schedule A maintained
with the books and records of the Company at the Company’s principal office, as such Schedule
A may be modified from time to time.

     “Company Sale” means (a) the sale or issuance by the Company after the date of this
Agreement in a single transaction or series of related transactions of Member Interests that
constitute, following consummation of such sale or issuance, more than fifty percent (50%) of the
outstanding Member Interests (measured by Percentage Interests and disregarding for such purpose
the Series A Interests) or (b) the sale, in a single transaction or in a series of related
transactions, to any Person or group (as defined for purposes of Section 13(d)(3) of the Exchange
Act) of (i) all of the outstanding Member Interests or (ii) all or substantially all of the
Company’s Assets determined on a consolidated basis, in each case whether accomplished directly or
indirectly and whether accomplished by purchase of Member Interests, stock or assets, merger,
recapitalization, reorganization or other form of transaction.

     “Competitor” means any Person that holds itself out to the public as being engaged in
a business substantially similar to the Business.

     “Contract” means any agreement, lease, evidence of Indebtedness, mortgage, indenture,
security agreement or other contract or commitment (whether written or oral).

     “Contribution Agreements” means the Series A Contribution Agreement, the Series B
Contribution Agreement, the Series C Contribution Agreement[, the Series D Contribution Agreement]
and the Series E Contribution Agreement.

     “Covered Person” means each Director, Officer, Member and employee of the Company.

     “Credit Agreement” means a loan agreement secured by the assets of JHYT that permits
JHYT to borrow up to an amount equal to the Total Commitments.

     “Default” with respect to any Member shall mean the failure of such Member to
contribute, within ten (10) Business Days of the date required, all or any portion of a Capital
Contribution that such Member is required to make as provided in this Agreement.

     “Delaware Act” means the Delaware Limited Liability Company Act, 6 Del. C. §
18-101, et seq., as amended and in effect from time to time, and any successor
statute.

     “Director” means a member of the Board.

6

 

     “Distribution” shall mean cash or property (net of liabilities that the Member is
considered to assume pursuant to Code Section 752 and the Treasury Regulations thereunder)
distributed to a Member or an assignee or Transferee of a Member in respect of such Member’s Member
Interest in the Company.

     “Encumbrances” means all liabilities, obligations, pledges, security interests,
security agreements, options, rights of first refusal, rights of first offer, options to purchase,
liens, mortgages, deeds of trust, leases, subleases, easements, encroachments, claims, encumbrances
or charges.

     “Exchange” means any national securities exchange, including NASDAQ, registered under
the Exchange Act or any other United States or foreign exchange, alternative trading system or
quotation system providing regularly published securities prices.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

     “Fee Offset Amount” means each amount determined on a case-by-case basis by the Board
of Directors with respect to any arrangements in which the Company or JHYT invests in an Affiliated
Vehicle.

     “Fiscal Quarter” means a fiscal quarter of a Fiscal Year.

     “Fiscal Year” for financial reporting and tax purposes means the calendar year, except
that the Company’s first fiscal year shall commence on the Closing Date and shall end on December
31, 2007 and, upon dissolution of the Company, the Company’s last Fiscal Year shall be from the end
of the last fiscal year immediately preceding the date of such dissolution to the last date on
which the winding up of the Company is completed.

     “Fitch” means Fitch IBCA, Inc. and its successors.

     “GAAP” means United States generally accepted accounting principles, as in effect from
time to time.

     “High Yield Debt” means debt securities having below-investment-grade ratings,
including without limitation secured, unsecured, senior or subordinated debt, with or without
equity components, and convertible securities, any of which may be issued in connection with
leveraged transactions such as management buyouts, acquisitions, refinancings, recapitalizations
and later-stage growth capital financings

     “Indebtedness” means as to any Person: (a) all obligations, whether or not
contingent, of such Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers’ acceptances, whether
or not matured), (b) all obligations of such Person evidenced by notes, bonds, debentures or
similar instruments, (c) all obligations of such Person representing the balance of deferred
purchase price of property or services, except trade accounts payable and accrued commercial or
trade liabilities arising in the ordinary course of business, (d) all interest rate and currency
swaps, caps, collars and similar agreements or hedging devices under which payments are obligated
to be

7

 

made by such Person, whether periodically or upon the happening of a contingency, (e) all
indebtedness created or arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession or sale of such
property), (f) all obligations of such Person under leases which have been or should be, in
accordance with GAAP, recorded as capital leases, (g) all indebtedness secured by any Encumbrance
on any property or asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is non-recourse to the credit of that
Person, and (h) all Indebtedness of any other Person referred to in clauses (a) through (g) above,
guaranteed, directly or indirectly, by that Person.

     “Investment Company Act” means the Investment Company Act of 1940, as amended, and the
rules and regulations promulgated thereunder.

     “Law” means any domestic or foreign federal or state statute, law, ordinance, rule,
administrative code, administrative interpretation, regulation, order, writ, injunction, directive,
judgment, decree, policy, ordinance, decision, guideline or other requirement (including those of
the SEC and any Self-Regulatory Organization).

     “LUK Change of Control” means (a) a Competitor or Adverse Party shall have acquired at
least twenty percent (20%) of the voting securities of Leucadia then outstanding and (b) either (i)
such Competitor or Adverse Party shall have acquired a Percentage Stock Ownership (as defined in
Article IV of Leucadia’s Certificate of Incorporation (as in effect on the date hereof)) in excess
of the Percentage Stock Ownership then held by Ian M. Cumming (“Cumming”), Joseph S. Steinberg
(“Steinberg”) and their respective Affiliates, in the aggregate, or (ii) neither Cumming nor
Steinberg is the Chief Executive Officer or President of Leucadia.

     “Management Fee” means the fee payable to the Servicer in consideration for the
Servicer’s services under the Services Agreement, in each case as set forth therein. The
Management Fee shall accrue at a per annum rate of 1.5 percent of the Market Value of JHYT’s
Assets.

     “Managing Members” means JGI, for so long as it and its controlled Affiliates hold
Series B Interests, and Leucadia, for so long as it and its controlled Affiliates hold Series C
Interests; provided that in the event of a Conversion, JGI shall be the sole Managing Member.

     “Market Value” means, (a) with respect to any Security (other than a Cash Equivalent
or an Unquoted Security) at any date, the product of (i) the Market Value Price for each unit of
such Security on such date (and, with respect to any Securities which have an amortizing principal
amount, the then-current factor related thereto, if applicable) times (ii) the number of
units of such Security held by the Company or JHYT, (b) with respect to cash, the amount thereof,
(c) with respect to any Cash Equivalent, (i) if interest-bearing, the face amount thereof and (ii)
if issued at a discount, the face amount thereof less any unamortized discount, and (d) with
respect to any Unquoted Security at any date, the value thereof most recently determined in good
faith by the Board. For purposes of this definition, (A) accrued interest on any interest-bearing
Security (unless it is quoted “flat”) will be included in the determination of Market Value by the
party making such determination and (B) the Market Value of all non-dollar-denominated

8

 

Securities will be converted into dollars (at the spot exchange rate at the close of business
of the relevant calculation date).

     “Market Value Price” means, with respect to any Security (other than a Cash Equivalent
or an Unquoted Security) as of any date, (a) in the case of long positions, the average bid price
and in the case of short positions, the average ask price for each unit of such Security obtained
by the Board as of the most recent weekly valuation quoted by at least two independent third party
broker-dealers or (b) the price for each unit of such Security obtained by the Board as of the most
recent weekly valuation quoted by a Pricing Service or (c) the closing price obtained by the Board
as of the most recent weekly valuation for each unit of such Security on an Exchange or, in the
event closing prices are not available on such Exchange, the closing bid price in the case of long
positions, and the closing ask price in the case of short positions.

     “Member” means any Person who becomes a party hereto as a Member in accordance with
the terms hereof, each in his or its capacity as a member of the Company.

     “Member Interest” means a Member’s membership interest in the Company and the rights
expressly provided in this Agreement or required by the Delaware Act. The Percentage Interest and
type of Member Interests assigned to each Member shall be listed opposite such Member’s name on
Schedule A.

     “Moody’s” means Moody’s Investors Service, Inc., and its successors.

     “NASD” means the National Association of Securities Dealers, Inc.

     “NASDAQ” means The NASDAQ Stock Market, Inc.

     “Net Asset Value” means the Market Value of the Assets held by the Company less the
liabilities of the Company, calculated in accordance with GAAP, determined according to Article IX.

     “Net Income” or “Net Loss” means, except as specified below, the income or
loss of the Company for “book” or “capital account” purposes under Treasury Regulation
§1.704-1(b)(2) (iv). In particular, but without limitation, for each Accounting Period, “Net
Income” or “Net Loss” shall mean the Company’s taxable income or loss for such Accounting Period,
determined in accordance with Code Section 703(a) (it being understood that for this purpose, all
items of income, gain, loss or deduction required to be stated separately pursuant to Code Section
703(a)(1) shall be included in such taxable income or loss), with the following modifications:

          (a) income, gain or loss from, and cost recovery, amortization or depreciation deductions with
respect to, any Book Property shall be computed by reference to the value of such Book Property as
set forth in the books of the Company, all in accordance with the principles of Treasury Regulation
§1.704-1(b)(2)(iv)(g), notwithstanding that the adjusted tax basis of such Book Property differs
from such value;

          (b) any income of the Company that is exempt from federal income tax, and that is not
otherwise taken into account in computing Net Income or Net Loss, shall be treated as an item of
income in computing such Net Income or Net Loss;

9

 

          (c) any expenditures of the Company that are described in Code Section 705(a)(2)(B) or treated
as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulation §1.704-1(b)(2)(iv)(i),
and that are not otherwise taken into account in computing Net Income or Net Loss, shall be treated
as items of expense in computing such Net Income or Net Loss;

          (d) in the event that the value of any Company property is adjusted pursuant to Section 4.6(b)
or Section 4.6(f) of this Agreement, the amount of such adjustment shall be taken into account as
gain or loss (as the case may be) from the disposition of such property for purposes of computing
Net Income and Net Loss;

          (e) to the extent (and only to the extent) that an adjustment made to the adjusted tax basis
of any Company Asset pursuant to Code Section 732, Code Section 734 or Code Section 743 is required
to be taken into account in determining Capital Accounts pursuant to Treasury Regulation
§1.704-1(b)(2)(iv)(m), the amount of such adjustment shall be treated as an item of gain or loss
(as the case may be) for purposes of computing Net Income or Net Loss; and

          (f) all items of Company gross income, gain, loss, deduction or expense for any Accounting
Period that are specially allocated pursuant to Section 8.1(b) shall be disregarded in computing
Net Income or Net Loss for the Accounting Period (but the amount of such items available for
allocation under Section 8.1(b) shall be determined by applying rules analogous to the
modifications set forth in clauses (a) through (e) above).

     “New Member” means any Member admitted to the Company pursuant to the terms of this
Agreement other than the parties to the Contribution Agreements.

     “Non-Defaulting Member” means, in the event of any Default, any Member not in Default.

     “Percentage Interest” means the interest of each Series B Member, Series C Member,
Series D Member and Series E Member in the profits and losses of the Company, based upon the
respective Capital Contributions of such Members and expressed as a percentage, as set forth on
Schedule A, all of which taken together shall equal one hundred percent (100%). Changes in
the Percentage Interests of the Series B Members, Series C Members, Series D Members and Series E
Member shall be recorded on Schedule A hereto.

     “Person” means any individual, partnership, corporation, association, trust, limited
liability company, joint venture, unincorporated organization and any government, governmental
department or agency or political subdivision thereof.

     “Presumed Tax Rate” means 45%.

     “Previously Undistributed Book Income” means, as calculated from time to time, the
excess, if any, of (i) Aggregate Net Book Income over (ii) the aggregate amount of Distributions
pursuant to Section 8.4(b) and 8.4(c) for the then current and all previous Accounting Periods.

     “Pricing Service” means any of [J.J. Kenny, Merrill Lynch or IDC].

10

 

     “Prime Rate” means the prime commercial lending rate as quoted by the Wall Street
Journal.

     “Related Agreements” means, collectively, the Certificate of Formation of the Company,
this Agreement, the Contribution Agreements, the Clearing Agreement, the Services Agreement and the
Trademark License Agreement.

     “Restricted Securities” means (i) the Member Interests and (ii) any securities issued
with respect to, or in exchange for, the securities referred to in clause (i) above in connection
with a conversion, combination, recapitalization, reclassification, reorganization, merger,
consolidation or other reorganization.

     “Revaluation Event” means (i) the last business day of each Accounting Period; (ii) a
contribution of more than a de minimis amount of money or property to the Company
by any new or existing Member; (iii) the distribution by the Company of more than a de
minimis amount of money or property to a retiring or continuing Member; and (iv) the
liquidation of the Company, within the meaning of Treasury Regulation §1.704-1(b)(2)(ii)(g) or
pursuant to Article XIII; provided, however, that in connection with an event described in clause
(ii) or (iii) above a “Revaluation Event” shall occur only if, as a result of such event, there is
a change in the proportionate interests of the Members.

     “S&P” means Standard & Poor’s Ratings Services, and its successors.

     “SEC” means the United States Securities and Exchange Commission.

     “Securities” means capital stock, preorganization certificates and subscriptions,
warrants, derivatives, swaps, trust receipts, bonds, notes, convertible debt, bank loans and any
other evidences of indebtedness (in each case, whether senior or subordinated or secured or
unsecured), and other restricted or marketable, equity, debt or equity- or debt-related securities,
obligations, or interests including any combination of the foregoing and including direct or
indirect interests or participations therein or other similar securities, obligations or interests
(including, without limitation, shares of beneficial interest, warrants, derivatives, swaps, rights
or options (including puts and calls) to purchase equity, debt or equity- or debt-related
securities, obligations or interests, limited and general partnership interests, limited liability
company interests, trade credit or other obligations or debt-related securities, obligations or
interests issued in connection with financing financially troubled companies, including in
connection with reorganizations or similar situations) and to the extent not included in the
foregoing, any right, claim, instrument or investment contract that is within the definition of
“security” in either the Securities Act or the Exchange Act.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Self-Regulatory Organization” means the NASD, each national securities exchange in
the United States and each other board or body, whether United States or foreign, that is charged
with the supervision or regulation of brokers, dealers, commodity pool operators, commodity trading
advisors, futures commission merchants, securities underwriting or trading, stock exchanges,
commodities exchanges, investment companies or investment advisers, or to the jurisdiction of which
the Company is subject.

11

 

     “Series A Contribution Agreement” means the Contribution Agreement, dated as of the
Closing Date, by and between the Company and Jefco and in substantially the form attached hereto as
Exhibit A.

     “Series A Interest” shall mean, with respect to any holder of Series A Interests, the
rights of such Member under this Agreement and applicable Law, including the right to a share of
Net Income and Net Loss, to Distributions and to the Brokerage Assets upon redemption of the Series
A Interests or liquidation of the Company, all in accordance with this Agreement.

     “Series A Members” means those Persons listed in Schedule A (as in effect on
the date hereof) as holder of a Series A Interest, and shall also include any New Member admitted
to the Company as a Series A Member after the date hereof in accordance with this Agreement. The
initial Series A Member is Jefco. In the event there is more than one Series A Member, the
percentage of the Series A Interests owned by each Series A Member shall be recorded by the Company
in its books and records.

     “Series B Contribution Agreement” means a Contribution Agreement, dated as of the
Closing Date, by and between the Company, Jefco, JGI or one or more of their respective Affiliates
and in substantially the form attached hereto as Exhibit B.

     “Series B Interest” means, with respect to any holder of Series B Interests, the
rights of such Member under this Agreement and applicable Law, including the rights to vote, to a
share of Net Income and Net Loss, to Distributions and to a share of the Assets upon liquidation,
all in accordance with this Agreement.

     “Series B Members” means those Persons listed on Schedule A (as in effect on
the date hereof) as holders of a Series B Interest, and shall also include any New Member admitted
to the Company as a Series B Member after the date hereof in accordance with this Agreement. The
initial Series B Members are JGI and Jefco.

     “Series C Contribution Agreement” means the Contribution Agreement, dated as of the
Closing Date, by and between the Company and Leucadia and in substantially the form attached hereto
as Exhibit C.

     “Series C Interest” means, with respect to any holder of Series C Interests, the
rights of such Member under this Agreement and applicable Law, including the rights to vote, to a
share of Net Income and Net Loss, to Distributions and to a share of the Assets upon liquidation,
all in accordance with this Agreement.

     “Series C Members” means those Persons listed on Schedule A (as in effect on
the date hereof) as holders of a Series C Interest, and shall also include any New Member admitted
to the Company as a Series C Member after the date hereof in accordance with this Agreement. The
initial Series C Member is Leucadia.

     “Series D Contribution Agreement” means the Contribution Agreement, dated as of the
Closing Date, by and between the Company and Fund Investor and in the form agreed by the parties
thereto.

12

 

     “Series D Interest” means, with respect to any holder of Series D Interests, the
rights of such Member under this Agreement and applicable Law, including the rights to a share of
Net Income and Net Loss, to Distributions and to a share of the Assets upon liquidation, all in
accordance with this Agreement, it being acknowledged and agreed that the Series D Interests shall
have no voting or consent rights hereunder or under the Delaware Act, except as herein expressly
provided.

     “Series D Members” means those Persons listed on Schedule A (as in effect on
the date hereof) as holders of a Series D Interest, and shall also include any New Member admitted
to the Company as a Series D Member after the date hereof in accordance with this Agreement. The
initial Series D Member is Fund Investor.

     “Series E Contribution Agreement” means the Contribution Agreement, dated as of the
Closing Date, by and between the Company and JEOF and in the form agreed by the parties thereto.

     “Series E Interest” means, with respect to any holder of Series E Interests, the
rights of such Member under this Agreement and applicable Law, including the rights to a share of
Net Income and Net Loss, to Distributions and to a share of the Assets upon liquidation, all in
accordance with this Agreement, it being acknowledged and agreed that the Series E Interests shall
have no voting or consent rights hereunder or under the Delaware Act, except as herein expressly
provided.

     “Series E Members” means those Persons listed on Schedule A (as in effect on
the date hereof) as holders of a Series E Interest, and shall also include any New Member admitted
to the Company as a Series E Member after the date hereof in accordance with this Agreement. The
initial Series E Member is JEOF.

     “Servicer” means Jefco or an affiliate of Jefco, in its capacity as Servicer pursuant
to the terms of the Services Agreement, and any permitted successor thereto.

     “Services Agreement” means the Services Agreement, dated as of the Closing Date, by
and among JHYT, the Company and the Servicer and in substantially the form attached hereto as
Exhibit D.

     “Special Situation Financing” means distressed debt, including without limitation
performing or non-performing bank debt, high-yield bonds, trade claims and other obligations,
equity, post-reorganization equity, common and preferred stock of leveraged companies and interests
in the equity of real estate investment trusts, limited partnerships, limited liability companies
and other Persons, including the issuers of collateralized loan obligations and collateralized debt
obligations.

     “Subsidiary” means any corporation, association, trust, or other business entity, of
which the designated parent shall at any time own or control directly or indirectly through a
Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding shares of
capital stock (or other shares of beneficial interest) entitled ordinarily to vote for the election
of such business entity’s directors (or in the case of a business entity that is not a corporation,
for those Persons exercising functions similar to directors of a corporation).

13

 

     “Tax” or “Taxes” means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, sales, use, property, alternative
or add-on minimum, environmental or other taxes, assessments, duties, fees, levies or other
governmental charges of any nature whatever, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.

     “Total Commitments” means, as of the date of determination, the aggregate Commitments
of the Members.

     “Trademark License Agreement” means the Trademark License Agreement to be entered into
as of the date hereof, between Jefco, the Company and JHYT.

     “Transfer” or “Transferred” means, with respect to any Member Interest, a
sale, transfer, exchange, assignment, gift, pledge, hypothecation or other disposition or
Encumbrance of any nature, voluntarily or involuntarily or by operation of law of or on such Member
Interest (including any Transfer as a result of a merger or consolidation involving a Member, a
sale of all or substantially all of a Member’s assets or any indirect acquisition by obtaining a
controlling interest in any Person that directly or indirectly controls a Member).

     “Transferee” means, with respect to any Member Interest, the Person to whom such
Member Interest has been Transferred in accordance with the terms of this Agreement or, if the
context so requires, to whom the Transferor of such Member Interest desires to Transfer such Member
Interest.

     “Transferor” means, with respect to any Member Interest, the Member or Person who has
Transferred such Member Interest, or if the context so requires, who desires to Transfer such
Member Interest.

     “Treasury Regulations” means the income tax regulations, including temporary
regulations, promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).

     “Unfunded Commitment” means with respect to any Member as of any date, the excess, if
any, of (a) the amount of such Member’s Commitment, over (b) such Member’s aggregate Capital
Contributions previously made.

     “Unquoted Security” means any Security which is not (a) priced by a Pricing Service,
(b) quoted by two independent, third party dealers or (c) traded on an Exchange.

     “U.S. Government Securities” means Securities that are direct obligations of, and
obligations the timely payment of principal and interest on which is fully guaranteed by, the
United States of America or any agency or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of the United States of America.

     1.2 Other Defined Terms. The following terms have the meanings given such terms in
the Sections set forth below:

14

 

	 	 	 
	Term	 	Section
	Acting Member
	 	Section 4.3(d)
	Agreement
	 	Caption
	Alternate
	 	Section 3.2(a)
	Annual Distribution
	 	Section 8.4(b)
	Board
	 	Section 3.1(a)
	Capital Account
	 	Section 4.6(a)
	CEO
	 	Section 3.4(a)
	CFO
	 	Section 3.4(b)
	Chairman
	 	Section 3.2(b)
	Company
	 	Caption
	Conversion
	 	Section 6.3(d)
	Defaulted Portion
	 	Section 4.3(d)(i)
	Disclosing Party
	 	Section 7.1
	Disputed Matter
	 	Section 3.9
	Dispute Notice
	 	Section 3.9
	Fund Investor
	 	Caption
	Initial Members
	 	Caption
	Jefco
	 	Caption
	JEOF
	 	Caption
	JGI
	 	Caption
	JHYT
	 	Recitals
	JPOF II
	 	Recitals
	JPOF II Members
	 	Recitals
	Lending Member
	 	Section 4.3(d)(ii)
	Leucadia
	 	Caption
	Management Event
	 	Section 4.1(d)(i)
	New Series D Interests
	 	Section 6.3(d)
	Non-Contributing Member
	 	Section 4.3(d)
	Officer
	 	Section 3.4(b)
	Original Agreement
	 	Section 2.1(a)
	Proprietary Information
	 	Section 7.1
	Reduction Notice
	 	Section 6.3(d)
	Related Party
	 	Section 7.1
	Rules
	 	Section 4.1
	Series B Term
	 	Section 6.1(a)
	Series C Term
	 	Section 6.1(b)
	Series D Term
	 	Section 6.1(c)
	Series E Term
	 	Section 6.1(d)
	Tax Distribution
	 	Section 8.4(c)
	Tax Matters Member
	 	Section 11.1(a)
	Technical Withdrawal
	 	Section 13.4(a)
	Unredeemed Amount
	 	Section 6.3(d)

15

 

     1.3 Headings. The headings and subheadings in this Agreement are included for
convenience and identification only and are in no way intended to describe, interpret, define or
limit the scope, extent or intent of this Agreement or any provision hereof.

ARTICLE II

ORGANIZATION

2.1 Formation.

          (a) The Company has been formed as a limited liability company pursuant to the Delaware Act by
the filing of the Certificate with the Secretary of State of the State of Delaware on ___,
2007 and the execution of a limited liability company agreement dated as of ___, 2007 (the
“Original Agreement”) by JGI as the sole member. Upon the execution of this Agreement by
each of the parties set forth on Schedule A, and the execution and delivery to the Company
of the Series A Contribution Agreement, the Series B Contribution Agreement, the Series C
Contribution Agreement, the Series D Contribution Agreement and the Series E Contribution Agreement
by JGI, Jefco, Leucadia, Fund Investor and JEOF, respectively, this Agreement shall amend and
restate the Original Agreement in its entirety and the parties set forth on Schedule A
shall be Members of the Company.

          (b) The name and mailing address of each Member and, as applicable, each Member’s Percentage
Interest shall be listed on Schedule A attached hereto. The Board shall cause Schedule
A to be updated from time to time as necessary to accurately reflect the information required
to be stated therein. Any amendment or revision to Schedule A made in accordance with this
Agreement shall not be deemed an amendment to this Agreement. Any reference in this Agreement to
Schedule A shall be deemed to be a reference to Schedule A as amended and in effect
from time to time.

     2.2 Name. Subject to the rights of [Jefco] in the name “Jefferies”, the name of the
limited liability company shall continue to be Jefferies High Yield Holdings, LLC or such other
name as may be selected by the Board from time to time with written notice given to the Members of
such change. The Company may conduct its Business under any other name approved by the Board upon
compliance with applicable law.

     2.3 Term. The term of the Company commenced on the date on which the Certificate was
filed with the office of the Secretary of State of the State of Delaware and shall continue in
perpetuity, unless sooner dissolved as provided in Article XIII.

     2.4 Registered Agent and Office. The registered office of the Company required by the
Delaware Act to be maintained in the State of Delaware shall be the office of the initial
registered agent named in the Certificate or such other office (which need not be a place of
business of the Company) as the Board may designate from time to time in the manner provided by
applicable Law. The registered agent of the Company in the State of Delaware shall be the initial
registered agent named in the Certificate or such other Person as the Board may designate from time
to time in the manner provided by applicable Law.

16

 

     2.5 Principal Place of Business. The principal place of business of the Company
initially shall be The Metro Center, One Station Place, Three North, Stamford, CT 06902. At any
time, the CEO may change the location of the Company’s principal place of business, and this
provision shall be deemed to have been amended accordingly. The Company may have offices at such
other places within or without the State of Delaware as the CEO may from time to time determine or
the business of the Company may require.

     2.6 Qualification in Other Jurisdictions. The Company shall be qualified or
registered under assumed or fictitious name statutes or similar laws in any jurisdiction in which
the Company transacts business in which such qualification or registration is required. The CEO or
any other Officer shall execute, deliver and file any certificates (and any amendments and/or
restatements thereof) necessary for the Company to qualify to do business in a jurisdiction in
which the Company may wish to conduct business.

     2.7 Purpose. The Company is formed for the object and purpose of, and the nature of
the business to be conducted and promoted by the Company is, engaging, through JHYT or other
Subsidiaries of the Company, in the Business as previously conducted by the High Yield Division of
Jefco and those broker-dealers managed by Jefco that participate in the securities brokerage
business of the High Yield Division, and any other lawful act or activity for which limited
liability companies may be formed under the Delaware Act as determined from time to time by the
Board.

     2.8 Powers of the Company.

          (a) Subject to the provisions of this Agreement, the Company shall have the power and
authority to take any and all actions necessary, appropriate, proper, advisable, convenient or
incidental to or for the furtherance of the purposes of the Company set forth herein, including,
but not limited to, the power and authority:

               (i) to conduct its business, carry on its operations and have and exercise the powers granted
to a limited liability company by the Delaware Act in any state, territory, district or possession
of the United States, or in any foreign country, that may be necessary, convenient or incidental to
the accomplishment of the purposes of the Company;

               (ii) without limitation to the foregoing clause (i), to conduct through JHYT a securities
brokerage business in accordance with the applicable rules and regulations of the Exchange Act and
any Self-Regulatory Organization of which JHYT is a member, and any applicable state securities
law;

               (iii) to acquire by purchase, lease, contribution of property or otherwise, own, hold,
operate, maintain, finance, improve, lease, sell, convey, mortgage, transfer, demolish or dispose
of any real or personal property that may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company;

               (iv) to enter into, perform and carry out Contracts of any kind, including, without
limitation, Contracts with any Member or any Affiliate thereof, or any agent of the Company,
necessary to, in connection with, convenient to, or incidental to the accomplishment of the
purposes of the Company;

17

 

               (v) to purchase, take, receive, subscribe for or otherwise acquire, own, hold, vote, use,
employ, sell, mortgage, lend, pledge or otherwise dispose of (A) direct or indirect obligations of
or shares or other interests in domestic or foreign corporations, associations, general or limited
partnerships (including, without limitation, the power to be admitted as a partner thereof and to
exercise the rights and perform the duties created thereby), trusts, limited liability companies
(including, without limitation, the power to be admitted as a member or appointed as a Servicer
thereof and to exercise the rights and perform the duties created thereby), individuals or other
Persons or (B) direct or indirect obligations of the United States or of any government, state,
territory, governmental district or municipality or of any instrumentality of any of them;

               (vi) to lend money for any proper purpose, to invest and reinvest its funds, and to take and
hold real and personal property for the payment of funds so loaned or invested;

               (vii) to sue and be sued, complain and defend, and participate in administrative or other
proceedings, in its name;

               (viii) to appoint employees and agents of the Company, and define their duties and fix their
compensation;

               (ix) to indemnify any Person in accordance with the Delaware Act and to obtain any and all
types of insurance;

               
(x) to cease its activities and cancel its Certificate;

               (xi) to negotiate, enter into, renegotiate, extend, renew, terminate, modify, amend, waive,
execute, acknowledge or take any other action with respect to any Contract in respect of any Asset;

               (xii) to borrow money and issue evidences of Indebtedness and guarantee Indebtedness (whether
of any of its Subsidiaries or any other Person), and to secure the same by a mortgage, pledge or
other Encumbrance on the Assets, in an aggregate amount not to exceed the Total Commitments;

               (xiii) to pay, collect, compromise, litigate, arbitrate or otherwise adjust or settle any and
all other claims or demands of or against the Company or to hold such proceeds against the payment
of contingent liabilities; and

               (xiv) to make, execute, acknowledge and file any and all documents or instruments necessary,
convenient or incidental to the accomplishment of the purpose of the Company.

          (b) The Board may authorize any Person (including, without limitation, any Member) to enter
into and perform any document, instrument or agreement on behalf of, and in the name of, the
Company. Unless authorized by the Board, no Member, in such capacity, shall have the authority to
act for or bind the Company.

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          (c) The Company will not permit JHYT or any other Subsidiary to take any action that would not
be permitted if such action were proposed to be taken by the Company, unless such action shall have
been approved by the Board or the Members in accordance with the provisions of this Agreement and
on the same basis as if such action were to be taken by the Company.

          (d) The Company may merge with, or consolidate into, another limited liability company
(organized under the laws of Delaware or any other state), a corporation (organized under the laws
of Delaware or any other state) or other business entity (as defined in Section 18-209(a) of the
Delaware Act) upon approval of such transaction and related transaction documents by the Managing
Members (without necessity for the vote or consent of any other Members or the Board).

     2.9 No State-Law Partnership. The Members intend that the Company shall not be a
partnership (including, without limitation, a limited partnership) or joint venture, and that no
Member, Director or Officer shall be a partner or joint venturer of any other Member, Director or
Officer, for any purposes other than federal, and if applicable, state and local tax purposes, and
this Agreement shall not be construed to the contrary. The Members intend that the Company shall
be treated as a partnership for federal and, if applicable, state and local income tax purposes,
and each Member and the Company shall file all Tax returns and shall otherwise take all Tax and
financial reporting positions in a manner consistent with such treatment. The Members shall not
make any election under Treasury Regulation Section 301.7701-3, or any comparable provisions of
state or local law, to treat the Company as an entity other than a partnership for federal, state
or local income tax purposes.

     2.10 No Investment Company. The Members intend that the Company shall not be an
investment company, as such term is defined in the Investment Company Act, and that JYHT should be
entitled to rely on the exception from the registration requirements of the Investment Company Act
set forth in Section 3(c)(2) thereof and, in this connection, the Company shall obtain, on or prior
to the Closing Date, the written opinion of Morgan, Lewis & Bockius LLP in respect of such matters.
The Board shall cause JHYT to be operated so as not to be required to register as an investment
company, as such term is defined in the Investment Company Act.

ARTICLE III

MANAGEMENT AND OPERATIONS

     3.1 Board of Directors.

          (a) The business and affairs of the Company shall be managed by or under the direction of a
four-person board of directors (the “Board”) (which is composed of the Directors), except
as may otherwise be provided in this Agreement. Except as provided in this Agreement, each of the
Directors shall possess all rights, powers, duties and obligations of “managers” of a limited
liability company as provided under the Delaware Act or otherwise by applicable Law; provided, that
all of the actions of the Directors, in their capacity as such, shall be taken as a Board and no
Director shall unilaterally take any action in the name of or on behalf of the Company, including
without limitation assuming any obligation or responsibility on behalf of the

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Company, unless such action, and the taking thereof by such Director in his or her capacity as
a Director, shall have been expressly authorized by the Board in accordance with Sections 3.3
hereof, or such action is taken by such Director in his or her capacity as an Officer or employee
of the Company pursuant to authority delegated directly or indirectly by the Board. Subject to
Sections 2.8(c), 3.7 and 3.8, the Board shall have the sole power and authority on behalf and in
the name of the Company and/or JHYT to, and the Officers, employees and agents of the Company and
JHYT shall have no power or authority to (unless such power or authority is delegated thereto by
the Board):

               (i) establish policies and guidelines for the conduct of the business and affairs of the
Company;

               
(ii) consummate financings for the Company;

               
(iii) make capital expenditures for the Company;

               (iv) protect and preserve the interests of the Company and the Assets and comply with all
applicable Law and all agreements of the Company;

               (v) declare and approve payment of distributions to the Members, to the extent such
Distributions are not otherwise authorized herein;

               (vi) commence, defend, prosecute or settle any litigation with respect to which the amount at
issue exceeds $5 million or settle any material litigation that results in the entry of judgment
against the Company or JHYT; provided, for avoidance of doubt, that settlement of regulatory
matters that do not include the issuance of an injunction against the Company or JHYT, a limitation
on the activities of the Company or JHYT or payment of a fine not in excess of $5 million shall not
be deemed to be material; provided further, expenses incurred in connection with any litigation
commenced against JHYT shall be borne by JHYT;

               (vii) cause or permit the Company or JHYT to incur or otherwise assume any material
Indebtedness with a stated maturity of greater than one (1) year other than Indebtedness incurred
in the ordinary course of business pursuant to JHYT’s trading and securities brokerage activities
and borrowings under the Credit Agreement;

               (viii) develop any new products or services, including the allocation of capital for such
purposes;

               (ix) take all such actions as are necessary or desirable to cause the Company or JHYT to
acquire, hold and sell any interest in real estate necessary for the operation of the Business,
including, without limitation, executing any lease;

               (x) acquire, sell, lease, dispose of, or, except to the extent provided for in connection with
the Credit Agreement, permit any Encumbrance upon, any Asset that exceeds $50 million in value and
that is required to be consolidated for accounting purposes, other than purchases, sales, loans,
repurchases and reverse repurchases of Securities and other property in the ordinary course of
business;

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               (xi) acquire any Brokerage Assets, to the extent the cost of such acquisition(s) exceed(s)
$1,000,000 in any fiscal year of the Company (exclusive of any expense attributable to employee
compensation and benefits); provided, however, that approval of the Board shall be
required in connection with the acquisition by the Company or any Subsidiary of any business or
operations similar to the Business, including any assets thereof such as goodwill, licenses, or
trademarks;

               (xii) acquire any Securities which would result in the Company and/or JHYT holding a position
in the Securities of any single issuer having a value of $500 million or more as of the date of
acquisition;

               (xiii) without limiting the effect of Section 4.3 or Section 4.7, sell or otherwise issue any
Additional Interests, other than Series D Interests or Series E Interests to the extent such Series
D Interests or Series E Interests have not been issued on or prior to the commencement of
operations by the Company; provided that the Company shall not accept subscriptions for
Series D Interests, or issue Series D Interests, in an amount exceeding $300 million unless all of
the Commitments under the Series B Contribution Agreements and the Series C Contribution Agreement
shall have been drawn down; and provided, further, that the Company shall not
accept subscriptions for Member Interests, or issue Member Interests, with Commitments exceeding $2
billion in the aggregate without the approval of the Board;

               (xiv) redeem or offer to redeem the Member Interests or any other equity interests of the
Company, other than as required or otherwise provided for in Article VI;

               (xv) select the Company’s and JHYT’s outside legal counsel and accountants, which shall
initially be Morgan, Lewis & Bockius LLP and KPMG, respectively;

               (xvi) change any accounting method adopted by the Company and/or JHYT, except to the extent
any change is required by GAAP;

               (xvii) enter into any license pursuant to which the Company grants or obtains a license to any
intellectual property, other than the Trademark License Agreement, license agreements for
off-the-shelf software or any other licenses obtained or granted in the ordinary course of
business;

               (xviii) amend the terms of any of the Related Agreements, or enter into any agreement with a
Managing Member, any Affiliated Vehicle, or any Affiliate of any of them;

               
(xix) appoint Jefco as the initial Servicer, and any successor;

               
(xx) keep the books and records of the Company;

               (xxi) maintain the funds of the Company in one or more Company accounts in a bank or banks and
make payments for expenses of the Company out of such accounts;

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               (xxii) obtain and comply with all policies of insurance in place with respect to the Company
and the Assets;

               (xxiii) prepare and file all necessary returns, reports and statements and pay all Taxes,
assessments and other impositions relating to the operation of the Company and the Assets and make
any elections or take any other actions with respect to any material matter relating to such Taxes,
assessments and other impositions and direct the Tax Matters Member in the performance of its
duties as such;

               (xxiv) determine the value of the Assets from time to time as required hereunder and under any
Contract, and to appoint such investment banks, accountants, professional valuation consultants or
other professional advisers as it may determine to assist in the performance of such function;

               
(xxv) approve, on behalf of the Company, any Credit Agreement or amendment thereto;

               
(xxvi) sale of all or substantially all of the Brokerage Assets; and

               (xxvii) carry out any and all objects and purposes of the Company contemplated by this
Agreement and perform all acts which they may deem necessary, advisable or appropriate in
connection therewith.

          (b) The Members agree that all determinations, decisions and actions made or taken by the
Board shall be conclusive and absolutely binding upon the Company, the Members (but only in their
capacity as such) and their respective successors, assigns and personal representatives, and any
Person dealing with the Company shall be entitled to rely on such determinations, decisions and
actions, and any execution of any instrument in connection therewith, without any further
investigation, as to the authority of the Board to make or take any such determination, decision
for or action on behalf of the Company.

     3.2 Composition of the Board.

          (a) General. The Board shall consist of four (4) Directors, two (2) of whom shall be
appointed by each Managing Member. The initial Directors are set forth on Schedule B. Other than
as set forth in Section 3.7, whenever any Company action is to be taken by a vote of the Board, it
shall be authorized upon receiving the affirmative vote of three Directors present and voting at a
duly constituted meeting of the Board at which a quorum is present. Each Director present at a
duly constituted meeting of the Board at which a quorum is present shall be entitled to cast one
vote. Each Managing Member shall have the right to designate an alternate director (an
“Alternate”) to serve in the official capacity of such Director at a meeting of the Board.
Such Alternate shall be considered a Director under this Agreement. In the event a Managing Member
ceases to be a Member or there shall have been a Conversion of the Member Interests of such Member,
the terms of the Directors appointed by such Managing Member shall thereupon terminate, unless
extended by, and in such manner as set forth under, the written consent of the other Managing
Member.

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          (b) Chairman. A Director appointed by the Series B Members shall serve as Chairman of
the Board (the “Chairman”). Each Chairman shall serve until a replacement or successor has
been appointed and qualified by the Series B Members or until his or her earlier death, resignation
or removal. The duties of the Chairman shall be as set forth in Section 3.3(a) below.

          (c) Removal; Resignation; Vacancies. Except as otherwise provided in this Agreement,
each Director shall serve at the pleasure of the Managing Member which designated such Director.
Each such Managing Member shall have the right at any time, in its sole and absolute discretion, to
designate, remove (with or without cause) and replace any of its Directors by written notice to the
Company, the Board and the other Managing Member. No Director may be removed except by the
Managing Member designating such Director. Any Director may resign at any time by giving written
notice to the Company, the Managing Members and the Board. Such resignation shall take effect on
the date shown on or specified in such notice or, if such notice is not dated and the date of
resignation is not specified in such notice, on the date of the receipt of such notice by the
Company. No acceptance of such resignation shall be necessary to make it effective. Any vacancy
on the Board shall be filled only by the Managing Member the resignation, removal or death of whose
Director has caused the vacancy.

          (d) Compensation. No Person shall be entitled to any fee, remuneration or
compensation from or on behalf of the Company in connection with service as a Director. Any
reasonable direct costs and expenses incurred by a Director on behalf of the Company shall be
reimbursed by the Company.

          (e) Duties and Liabilities. Each Member, by execution of this Agreement, agrees to,
consents to and acknowledges the delegation of power and authority to the Board and the actions and
decisions of the Board within the scope of the Board’s authority as provided in this Agreement.
With respect to matters involving the Company and its affairs, each Director shall have the duty to
act in good faith. In the performance of his duties, each Director shall have the right to
consider such factors and interests as he deems relevant, including the interests of, and the
impact of Company action on, the Managing Member that appointed such Director; provided that a
Director shall not be required to consider any interests other than those of the Company and its
Members. No Director shall be liable to the Company, its Members or any other Person for violation
of any duty specified in this Section 3.2(e) or elsewhere in this Agreement, except to the extent
such violation constitutes bad faith or intentional misconduct on the part of such Director. To
the extent that, at law or in equity, a Director has duties (including fiduciary duties) and
liabilities relating thereto to the Company or any Member, a Director acting under this Agreement
shall not be liable to the Company or any Member for its good faith reliance on the provisions of
this Agreement. The provisions of this Agreement, to the extent they restrict or eliminate the
duties and liabilities of a Director otherwise existing at law or in equity, are agreed by the
Members to replace such other duties and liabilities of such Director.

     3.3 Procedural Matters Regarding the Board.

          (a) Meeting Agendas. The Chairman shall prepare or direct the preparation of the
agenda for, and preside over, meetings of the Board. The Chairman shall deliver such

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agenda to each Director forty-eight (48) hours prior to the giving of notice of a regular or
special meeting, and any Director may add items to such agenda.

          (b) Timing; Notice. The Board shall meet at least once every three (3) months at the
principal place of business of the Company or as otherwise agreed by the Board. Special meetings
of the Board may be called by any Director and shall be held at the principal place of business of
the Company or as otherwise agreed by the Board. Written notice of the time and place of each
regular and special meeting of the Board shall be given by or at the direction of the person
calling such meeting to each Director, in the case of a regular or a special meeting, at least
forty-eight (48) hours before such meeting by mail or facsimile or other electronic transmission,
including by electronic mail. The written notice shall include the place, day and hour of the
meeting of the Board, the purpose of such meeting and any information necessary to arrange
attendance through telecommunications equipment, if applicable. The required notice of any meeting
to any Director may be waived by such Director in writing either before or after such meeting.
Attendance by a Director at a meeting shall constitute a waiver of any required notice of such
meeting by such Director, except when such Director attends such meeting for the express purpose of
objecting to the transaction of any business on the grounds that the meeting is not properly called
or convened.

          (c) Quorum and Approval. The presence of three (3) of the Directors on the Board
shall constitute a quorum for the transaction of any business by the Board. Unless otherwise
provided herein, the acts of at least three Directors present and voting at a meeting at which a
quorum is present shall be required for any action of the Board; provided, however,
that if notice of a meeting is provided to the Directors, and such notice describes the business to
be considered, the actions to be taken and the matters to be voted on at the meeting in reasonable
detail, and insufficient Directors attend the meeting to constitute a quorum, the meeting may be
adjourned by those Directors attending such meeting for a period not to exceed twenty (20) days.
Such meeting may be reconvened by providing notice of the reconvened meeting to the Directors no
less than ten (10) days prior to the date of the meeting specifying that the business to be
considered, the actions to be taken and the matters to be voted upon are those set forth in the
notice of the original adjourned meeting.

          (d) Attendance by Telephone, Etc. Directors on the Board may, to the extent permitted
by applicable Law, participate in a meeting of the Board by means of conference telephone or
similar communications equipment by means of which all Persons participating in the meeting can
speak to and hear each other, and such participation shall constitute presence in person at such
meeting, except where a Director participates in the meeting for the express purpose of objecting
to the transaction of any business on the ground that the meeting is not properly called or
convened.

          (e) Action by Written Consent in Lieu of Meeting. To the extent permitted by
applicable Law, any action required or permitted to be taken at a meeting of the Board may be taken
without a meeting if a written consent (including a consent executed and delivered in counterpart
by facsimile or other electronic transmission), setting forth the action so taken, is signed by all
of the Directors and is filed with the minutes of the proceedings of the Board. Each request for
written consent of the Directors shall be given to each of the Directors as far in advance as is
reasonably practicable under the circumstances. Any consent shall have the same

24

 

force and effect as a vote of the Directors at a meeting of the Board duly called and held at
which a quorum was present.

          (f) Business Plan. The Board shall meet prior to the end of each Fiscal Year to
consider the proposed Business Plan for the succeeding Fiscal Year. In the event that the Board
has not approved a Business Plan prior to the beginning of a new Fiscal Year, the Business Plan in
effect in the preceding Fiscal Year shall be the Business Plan for such new Fiscal Year until a
succeeding Business Plan is developed and approved. The Business Plan shall not address the
deployment of capital in the trading and securities brokerage activities of JHYT, which shall be
determined by the CEO.

          (g) Sole Managing Member. If for any reason (including a redemption by or the
occurrence of a Management Event with respect to a Managing Member) there shall cease to be at
least two Managing Members or one of the Managing Members shall cease to be entitled to vote its
Member Interests, then the Directors appointed by such Managing Member shall be deemed to have
resigned from the Board, the other Managing Member shall be deemed to be the sole Managing Member,
and the notice and quorum requirements of this Section 3.3 shall be deemed amended so as to permit
the Directors appointed by such sole Managing Member to act as the duly constituted Board of the
Company.

     3.4 Officers.

          (a) CEO. The Board shall appoint the Chief Executive Officer of the Company (the
“CEO”); provided that the Series B Members shall have the exclusive right to
nominate individuals to serve as the CEO. Subject to the express provisions of this Agreement and
in particular the provisions of Section 3.1, the CEO shall have such powers and duties as are
generally exercised by the chief executive officer of a company engaged in the Business and in the
securities brokerage business generally, including those set forth in this Agreement or granted by
the Board. The CEO shall serve until a replacement or successor has been appointed and qualified
by the Directors appointed by the Series B Member or until his or her earlier death, resignation or
removal.

          (b) In addition to the CEO, the Board shall appoint a President, a Chief Financial Officer
(“CFO”) and a Secretary (each, together with the CEO, an “Officer”); provided that
the CEO shall have the exclusive right to nominate individuals to serve as Officers. Each Officer
shall be a natural person of full age who need not be a resident of the State of Delaware. The
initial Officers are set forth on Schedule C. Subject to the limitations set forth in
Section 3.8, the CEO may delegate specifically defined powers and duties to the Officers and other
employees of the Company. Notwithstanding the foregoing or any other provision of this Agreement
to the contrary, no Officer or employee shall have the power or authority to do or perform any act
with respect to any of the matters set forth in Section 3.8 unless such matter has been approved in
accordance with the provisions of Section 3.8.

          (c) The Board shall have the right, in its sole and absolute discretion, to remove (with or
without cause) any of the Officers. Any Officer that ceases to be a Business Employee shall be
deemed to have been removed as an Officer. Except as provided in Section

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3.4(d), each Officer shall hold office until a successor has been designated by the Board and
qualified or until his or her earlier death, resignation or removal.

          (d) An Officer may resign at any time by giving written notice to the CEO. The resignation of
an Officer shall be effective upon receipt of such notice or at such later time as shall be
specified in the notice. Unless otherwise specified in the notice, the acceptance of the
resignation shall not be necessary to make such resignation effective.

          (e) Except as otherwise provided in the Services Agreement, the salaries and other
compensation, if any, of the Officers paid, or whose compensation is reimbursed, by the Company
shall be fixed from time to time by the Board.

          (f) The CEO is hereby authorized to select, terminate and establish salaries or other
compensation for any employees and agents other than Officers, including the Business Employees.

          (g) The CEO shall develop and propose to the Board prior to the end of each Fiscal Year the
Business Plan for the succeeding Fiscal Year, substantially in the form of the financial model and
budget set forth as the initial budget for 2007.

     3.5 Insurance. The Company shall purchase and maintain insurance, including without
limitation directors’ and officers’ liability insurance covering the Directors and Officers, to the
extent and in such amounts as the CEO shall deem reasonable, on behalf of Covered Persons and such
other Persons as the CEO shall determine, against any liability that may be asserted against or
expenses that may be incurred by any such Person in connection with the activities of the Company
and JHYT. The Company and/or JHYT may enter into indemnity contracts with Covered Persons, or
agreements (including the Related Agreements) containing indemnity provisions and may adopt written
procedures pursuant to which arrangements are made for the advancement of expenses and the funding
of obligations under Section 12.3 hereof and containing such other procedures regarding
indemnification as may be deemed appropriate by the CEO.

     3.6 Compliance with Authority.

          (a) General Rules. The Company and each Subsidiary, including JHYT, shall, and the
CEO, the Board and the Members shall cause the Company and each such Subsidiary to, comply in all
material respects with all Laws applicable to the Company and/or any such Subsidiary, as the case
may be.

          (b) Taxes and Charges. Each Member shall promptly pay all applicable Taxes and other
governmental charges attributable to it in its individual capacity, shall satisfy all Encumbrances
attributable to it in its individual capacity and shall comply with all applicable governmental
rules attributable to it in its individual capacity, in each case, to the extent, and only to the
extent, that a failure to do so would create an Encumbrance or claim on the Company or the Assets
or would impose additional, or alter any existing, governmental approvals applicable to the Company
or the Business.

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     3.7 Services Agreement; Payment of Management Fee.

          (a) The Managing Members have approved the terms of the Services Agreement between the
Company, JHYT and the Servicer pursuant to which the Servicer shall provide certain services to the
Company and JHYT in consideration for the Management Fee. To the fullest extent permitted by law,
the Board and the Members hereby consent to the exercise by the Servicer of the powers conferred on
it by this Agreement and the Services Agreement. The Services Agreement shall not be amended
without the consent of the Board.

          (b) The Management Fee shall accrue monthly and shall be payable quarterly in arrears;
provided that any amount thus accrued shall be paid to the Servicer prior to the payment of any
Distribution or redemption, and in connection with dissolution of the Company, in the priority set
forth in Section 13.7.

          (c) Each Fee Offset Amount shall be credited against the Management Fee.

          (d) In the event an independent tribunal determines that the Servicer has committed fraud, a
felony or willful misconduct that has, or is reasonably expected to have, a material adverse effect
on the business of the Company and its Subsidiaries, taken as a whole, any two (2) Directors may
elect to terminate the Services Agreement by notice in writing to the Servicer.

     3.8 Delegation of Certain Matters. All authority of the Company and the Board with
respect to each of the following matters is hereby delegated to the Person designated below with
respect thereto:

          (a) the matters specified in the Services Agreement, to the Servicer or as otherwise expressly
set forth in the Services Agreement;

          (b) except as set forth in Section 3.1(a)(vi), litigation and similar proceedings, to the CEO;

          (c) except as set forth in Sections 3.1(a)(ii), 3.1(a)(vii) and 3.1(a)(xxv), incurrence or
assumption of Indebtedness, to the CEO;

          (d) except as set forth in Sections 3.1(a)(ix), 3.1(a)(x), 3.1(a)(xi) and 3.1(a)(xxvi), the
acquisition, sale, lease, disposal or granting or permitting of any Encumbrances on any Assets, to
the CEO;

          (e) except as set forth in Section 3.1(a)(xii), the acquisition of Securities, to the CEO; and

          (f) the nomination of individuals to serve as Officers, to the CEO.

     3.9 Deadlock Resolution. In the event that the Board is unable to agree with regard
to any matter (a “Disputed Matter”), then any Director, by written notice to the others (a
“Dispute Notice”) may invoke the procedures set forth in the following sentence. In the
event a Dispute Notice is delivered, each of the Managing Members shall cause one of its three (3)
most senior

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officers to meet periodically over the thirty (30) day period following receipt of the
Dispute Notice to negotiate in good faith a resolution of the Disputed Matter. If the Disputed
Matter remains unresolved after such thirty (30) day period, then either Managing Member shall have
the right to initiate the procedures under Section 14.1 to resolve the Disputed Matter.

     3.10 Expenses. The Company will bear all costs and expenses incurred in the
organization, operation and liquidation of the Company, including, without limitation, the
following: Management Fees; reasonable premiums for insurance protecting the Company, and solely
with respect to its activities on behalf of the Company, the Servicer, any of their respective
Affiliates and any of their respective employees and agents; legal and accounting expenses;
auditing expenses; expenses of any subsidiary of the Company being a registered broker-dealer;
expenses for information technology, computer hardware and software and computer time; expenses for
telephone equipment and telephone charges; travel expenses; expenses incurred in maintaining the
places of business of the Company; costs and expenses that are classified as extraordinary expenses
under GAAP; costs and expenses incurred in connection with any actual or threatened litigation and
any judgments or settlements paid in connection with litigation involving the Company or a Person
entitled to indemnification from the Company; costs of reporting to the Members; costs of Member
meetings; expenses incurred in connection with a Member that defaults in respect of a Capital
Contribution; and principal and interest payments and fees under any Indebtedness incurred by the
Company. The Company shall bear, and shall reimburse (i) the Servicer and each of its Affiliates
and Leucadia and each of its Affiliates for all legal fees and expenses incurred in connection with
the formation of the Company and (ii) the Servicer and its Affiliates for all other fees and tax,
accounting and other organizational expenses incurred in connection with the formation of the
Company and fees, if any, payable to any other agents, lenders or other persons in connection with
the Credit Agreement.

ARTICLE IV

MEMBERSHIP; CAPITAL CONTRIBUTIONS;

CAPITAL ACCOUNTS; AND ADDITIONAL INTERESTS

     4.1 Members.

          (a) Representations and Warranties of Members. Each Member and each other Person who
acquires a Member Interest in the Company hereby represents and warrants to the Company that: (i)
it is an “accredited investor” (as defined in Rule 501 under the Securities Act) and has such
knowledge and experience in financial and business matters and is capable of evaluating the merits
and risks of an investment in the Company and making an informed investment decision with respect
thereto; (ii) it is a “qualified purchaser” (as defined in Rule 2a51 under the Investment Company
Act); (iii) it is not a natural person; (iv) it is able to bear the economic and financial risk of
an investment in the Company for an indefinite period of time; (v) it is acquiring a Member
Interest for investment only and not with a view to, or for resale in connection with, any
distribution to the public or public offering thereof; (vi) it understands and acknowledges that
the Member Interests have not been registered under the securities laws of any jurisdiction and
cannot be disposed of unless they are subsequently registered and/or qualified under applicable
securities laws and the provisions of this Agreement have been complied with; (vii) the execution,
delivery and performance of this Agreement have been duly

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authorized by such Person and do not require such Person to obtain any consent or approval
that has not been obtained and do not contravene or result in a default under any provision of any
decree, order, law or regulation applicable to such Person or other governing documents or any
agreement or instrument to which such Person is a party or by which such Member is bound; and
(viii) this Agreement is valid, binding and enforceable against such Member in accordance with its
terms, except as the enforceability thereof may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditor’s rights and remedies
generally.

          (b) Power.

               (i) The Members shall have the power to exercise any and all rights or powers granted to the
Members pursuant to the express terms of this Agreement or as otherwise required by the Delaware
Act. The voting rights of the Members shall be as follows:

                    (1) Members holding Series A Interests shall not be entitled to cast any vote except for any
class vote of the Series A Interests required or permitted by Section 4.7(a) or Section 14.13, in
which event each Series A Member shall be entitled to cast votes equal to the proportion of all
Series A Interests represented by the Series A Interest held by such Series A Member;

                    (2) In addition to any class vote required by Section 4.7(a) or Section 14.13, Members holding
Series B Interests shall be entitled to cast votes equal to fifty percent (50%) of the voting power
of all Members (regardless of whether the aggregate Percentage Interest represented by all Series B
Interests is greater or less than fifty percent (50%)), provided that with respect to any class
vote of the Series B Interests, each Series B Member shall be entitled to cast the amount of votes
equal to the proportion of all Series B Interests represented by the Series B Interest held by such
Series B Member;

                    (3) In addition to any class vote required by Section 4.7(a) or Section 14.13, Members holding
Series C Interests shall be entitled to cast votes equal to fifty percent (50%) of the voting power
of all Members (regardless of whether the aggregate Percentage Interest represented by all Series C
Interests is greater or less than fifty percent (50%)), provided that with respect to any class
vote of the Series C Interests, each Series C Member shall be entitled to cast the amount of votes
equal to the proportion of all Series C Interests represented by the Series C Interest held by such
Series C Member; and

                    (4) No Member holding only Series D Interests or Series E Interests shall be entitled to cast
any vote except for any class vote required or permitted by Section 4.7(a) or Section 14.13.

               (ii) With respect to any matter on which holders of more than one Series of Member Interests
are entitled to vote, the vote of all of the Member Interests of a Series (voting separately) shall
be determined by the vote of holders of a majority in interest of the Member Interests of such
Series.

29

 

               (iii) The Members shall meet at such times as may be necessary or appropriate as determined by
the Board. The presence of the Members holding a majority of each of the Series B Interests and
Series C Interests (or a majority of the applicable class of Member Interests, in the case of any
separate class vote) shall constitute a quorum at any meeting of the Members (or Members
representing a specific class of Member Interests). Actions and decisions of the Members shall be
determined at meetings at which a quorum is present by the affirmative vote of the Members holding
a majority of each of the Series B Interests and Series C Interests (or applicable class of Member
Interests, in the case of any separate class vote), or the requisite applicable percentage of each
of the Series B Interests and Series C Interests (or applicable class of Member Interests, in the
case of any separate class vote) as may be expressly provided under this Agreement. To the extent
permitted by applicable Law, any action required or permitted to be taken at a meeting of the
Members may be taken without a meeting if a written consent (including a consent executed and
delivered in counterpart by facsimile or other electronic transmission) setting forth the action so
taken is signed by Members holding a majority (or applicable requisite percentage) of the Member
Interests entitled to vote thereon. Each request for written consent of the Members with respect
to any matter shall be given to each of the Members entitled to vote thereon as far in advance as
is reasonably practicable under the circumstances. Any consent shall have the same force and
effect as a vote of Members at a meeting of the Members entitled to vote thereon duly called and
held at which a quorum was present.

          (c) Certain Relationships.

               (i) Neither the Servicer, the Members nor their respective Affiliates or Directors will be
restricted from engaging in any other business activity (including securities brokerage, corporate
finance, the provision of financial advisory services, trading and investment) or from
participating in transactions with the Company, JHYT and Members in their individual capacities,
except that Jefco and its Affiliates shall hereafter conduct the Business primarily through JHYT.
Subject to the foregoing, each such Person may, in his sole discretion, direct such other business
activity away from the Company and JHYT, and expect to receive fees or other compensation from
third parties with respect to such business activity, which fees and compensation will be for the
benefit of its own account and not that of the Company or JHYT, except as specifically provided
herein with respect to the Offset Fee Amount. Neither the Company, JHYT nor any Member shall, by
virtue of this Agreement, have any right, title or interest in or to the business activity
permitted by this Section 4.1(c) or in or to any fees or consideration derived therefrom. Each
party to this Agreement acknowledges and agrees that conflicts are likely to arise between the
interests of the Company, JHYT the Members in their individual capacities and the Servicer in
connection with the business activity expressly permitted by this Section 4.1(c), and hereby
waives, to the fullest extent permitted by applicable Law and in equity, any duty, fiduciary or
otherwise, that might otherwise be owed by the Company, each Director, the Servicer, any other
Member or any Affiliate of any of the foregoing in connection with any business activity permitted
hereby.

               (ii) JHYT shall not be precluded from, and may purchase for its own account, and earn fees and
other compensation in connection with, primary distributions and other transactions in Securities
managed or underwritten by Jefco, a Managing Member or an Affiliate of any of them, provided, the
terms and conditions of any such transaction, taken as a

30

 

whole, are no less favorable to JHYT than are made available by Jefco, a Managing Member or an
Affiliate of any of them to third parties.

          (d) Suspension of Management Participation.

               (i) Upon the occurrence and for the duration of any of the following events in respect of a
Member (each a “Management Event”), such Member shall not be entitled to exercise any
rights hereunder, the Member Interests held by such Member shall be deemed to be non-voting and
such Member in its capacity as Member, Director and Officer, and the Directors and members of any
committee of the Board appointed by such Member, shall not be entitled (A) to exercise any rights
to vote on matters required to be voted on by Members or Directors under either the Delaware Act or
this Agreement, (B) to appoint Directors to the Board pursuant to Section 3.2, to have any
Directors appointed by such Member serve as Directors or vote on matters required to be voted on by
Directors under either the Delaware Act or this Agreement, or (C) to act as an Officer or member of
any committee of the Board:

                    (1) the entry by a court of competent jurisdiction of a decree or order for relief, unstayed
on final appeal or otherwise, in respect of such Member in an involuntary case under the bankruptcy
laws, or any such order adjudicating such Member as bankrupt or insolvent under any other
applicable bankruptcy, insolvency or liquidation law;

                    (2) the entry by a court of competent jurisdiction of a decree or order appointing a receiver,
custodian, assignee, trustee, liquidator, sequestrator or other similar official of such Member or
of any substantial part of the property of such Member, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order unstayed on final appeal or
otherwise, or the commencement by such Member of a voluntary case under the bankruptcy laws, or
under any other bankruptcy or insolvency law, seeking reorganization, liquidation, arrangement,
adjustment or composition of such Member under the bankruptcy laws or any similar statute;

                    (3) the making by such Member of an assignment for the benefit of creditors; or the failure of
such Member generally to pay its debts as they become due; or the consenting by such Member to the
appointment of or taking possession by a receiver, assignee, custodian, trustee, liquidator,
sequestrator or other similar official of it or of any substantial part of its property, or the
taking of corporate action by such Member in furtherance of any such action;

                    (4) the filing by a Member for dissolution under the laws of the jurisdiction of its
incorporation or the entering of a final order dissolving that Member by any court of competent
jurisdiction; or

                    (5) such Member shall be in Default.

               (ii) Except as provided in Section 4.1(c)(i) above, during the continuance of a Management
Event with respect to a Member, all the other terms and provisions of this Agreement and the
Delaware Act shall be applicable to such Member and its Member Interests.

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     4.2 No Liability of Members.

          (a) No Liability. Except as otherwise required by applicable Law, no Member shall
have any personal liability whatsoever in such Member’s capacity as a Member, whether to the
Company, to any of the other Members, to the creditors of the Company or to any other third party,
for the debts, liabilities, commitments or any other obligations of the Company or for any losses
of the Company. Each Member shall be liable only to make the contributions and payments expressly
provided for herein and in the Related Agreements to which it is a party, subject in each case to
the terms and conditions hereof and thereof.

          (b) Distribution. In accordance with the Delaware Act and the laws of the State of
Delaware, a member of a limited liability company may, under certain circumstances, be required to
return amounts previously distributed to such member. It is the intent of the Members that except
as otherwise expressly set forth in this Agreement, (i) the obligation of any Member under the
Delaware Act to return to or for the account of the Company any money or property wrongfully
distributed to a Member is hereby compromised by the consent of all Members and (ii) the Member
receiving any such money or property shall not be required to return to any Person any such money
or property. However, if any court of competent jurisdiction holds that, notwithstanding the
provisions of this Agreement, any Member is obligated to make any such payment, such obligation
shall be the obligation of such Member and not of any Director appointed by such Member or of any
other Member.

     4.3 Capital Contributions.

          (a) Pursuant to the Series A Contribution Agreement, and in consideration for the Series A
Interest, on or prior to the date hereof the Series A Member has contributed or shall contribute to
the Company or shall, at the direction of the Company, contribute to JHYT for the account of the
Company, the Brokerage Assets, including, without limitation, all necessary contractual and other
rights with respect thereto.

          (b) Each Series B Member, Series C Member, Series D Member and Series E Member shall make
contributions to the capital of the Company in the aggregate amount equal to its Commitment by
contributing in installments when and as called by the CEO upon at least ten (10) Business Days’
prior written notice; provided that unless approved in advance by the Board pursuant to Section
3.1(a) no contribution exceeding $100 million shall be required of either Managing Member without
twenty (20) Business Days’ prior written notice. Such installments made by the Managing Members
shall be made pro rata in accordance with their respective Commitments. The CEO may, in his or her
discretion, call capital from the Managing Members without calling capital from the Series D or
Series E Members; provided that capital may not be called from the Managing Members on
other than a pro rata basis. The CEO may also in his or her discretion, call capital from the
Series D or Series E Members without calling capital from the Managing Members so long as, after
giving effect to such capital call, the aggregate Capital Contributions of the Series D and Series
E Members will not exceed forty percent of the aggregate Capital Contributions of the Series B,
Series C, Series D and Series E Members. The amount of capital called from any Member shall not
exceed such Member’s Unfunded Commitment. A Member’s Unfunded Commitment shall terminate on the
third anniversary of the date of the Contribution Agreement between such Member and the Company
unless

32

 

otherwise provided in such Contribution Agreement or extended by written agreement of the
Company and such Member.

          (c) Members shall be required or permitted to make additional Capital Contributions only as
provided in this Section 4.3 or Section 4.7. Any other Person hereafter admitted as a Series B
Member, Series C Member, Series D Member or Series E Member, as permitted hereunder, shall make
such Capital Contributions, and shall be issued corresponding Member Interests, as shall be
determined by the Board in accordance with Section 4.7.

          (d) Except to the extent otherwise provided in a Contribution Agreement, any Capital
Contribution made pursuant to the terms of this Section 4.3 shall be made by wire transfer of
immediately available funds. Securities accepted in satisfaction of a Member’s obligation to
contribute capital to the Company under this Section 4.3 will be valued as of the date of such
contribution in accordance with Article IX. If any Member (the “Non-Contributing
Member”) does not contribute all or any portion of a Capital Contribution that such Member
is required to make as provided in this Agreement, then the Series B Member(s), Series C Member
and/or Series D Member(s) (if the Non-Contributing Member is the Series E Member), the Series B
Member(s), Series C Member and/or Series E Member (if the Non-Contributing Member is a Series D
Member), the Series B Member(s), Series D Member(s) and/or Series E Member (if the Non-Contributing
Member is the Series C Member) or the Series C Member, Series D Member(s) and/or Series E Member
(if the Non-Contributing Member is a Series B Member) (in each case, the “Acting
Member(s)”), acting in each case by a majority of the Percentage Interests of the Acting
Members, after having provided written notice to the Non-Contributing Member indicating such
Non-Contributing Member’s failure to contribute, which failure remains uncured for ten (10)
Business Days following receipt of such notice, may cause the Company to exercise one or more of
the following remedies:

               (i) taking such action (including court proceedings) as such Acting Member(s) may deem
appropriate to obtain payment by the Non-Contributing Member of the portion of the Non-Contributing
Member’s Capital Contribution that is in default (the “Defaulted Portion”), together with
interest thereon at the Prime Rate plus 5% from the date that the Capital Contribution was due
until the date that it is made, all at the cost and expense of the Non-Contributing Member;

               (ii) permitting such Acting Member(s) (in such capacity, the “Lending Member(s)”) to
advance, at their option, the Defaulted Portion (allocated between the Acting Members, if there is
more than one Acting Member, as may be agreed by them), with the following results:

               (A) the sum advanced shall constitute a loan from the Lending Member(s) to the
Non-Contributing Member and a Capital Contribution of that sum to the Company by the
Non-Contributing Member pursuant to the applicable provisions of this Agreement;

               (B) the principal balance of the loan and all unpaid interest thereon shall be due and payable
in whole on the tenth (10th) day after written demand therefor by the Lending Member(s) to the
Non-Contributing Member;

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               (C) the amount to be loaned shall bear interest at the Prime Rate plus 5% from the day that
the advance is deemed made until the date that the loan, together with accrued interest, is repaid
to the Lending Member(s);

               (D) all Distributions from the Company that otherwise would be made to the Non-Contributing
Member (whether before or after dissolution of the Company) in respect of the Defaulted Portion
instead shall be made to the Lending Member(s) (allocated between the Lending Members, if there is
more than one Lending Member, based on the respective principal amounts advanced) until the
principal amount of the loan and all accrued interest thereon have been paid in full to the Lending
Member(s) (with payments being applied first to accrued and unpaid interest and then to principal);
for purposes of this Agreement, any such amount shall be deemed to have been distributed by the
Company to the Non-Contributing Member in respect of the Defaulted Portion and then paid by the
Non-Contributing Member to the Lending Member(s) in repayment of the loan;

               (E) the payment of the principal amount of, and accrued interest on, the loan shall be secured
by a security interest in the Defaulted Portion of the Member Interest of the Non-Contributing
Member, as more fully set forth in Section 4.3(e); and

               (F) the Lending Member(s) shall have the right, in addition to the other rights and remedies
granted to it pursuant to this Agreement or available to it at law or in equity, to take any action
(including court proceedings) that the Lending Member(s) may deem appropriate to obtain payment by
the Non-Contributing Member of the principal amount of, and accrued interest on, the loan, at the
cost and expense of the Non-Contributing Member;

               (iii) exercising the rights of a secured party under the Uniform Commercial Code of the State
of Delaware, as more fully set forth in Section 4.3(e); or

               (iv) exercising any other rights and remedies available at law or in equity.

               In addition, the failure to make any Capital Contribution shall constitute a Default by the
Non-Contributing Member, and the other Members shall have the rights set forth in Section 4.3(f)
with respect to such Default and the Defaulted Portion.

          (e) Each Non-Contributing Member hereby grants to the Company, and to each Lending Member with
respect to any loans made by such Lending Member to such Non-Contributing Member pursuant to
Section 4.3(d)(ii), as security, equally and ratably, for the payment of all Capital Contributions
that the Non-Contributing Member has agreed to make and the payment of the principal amount of and
accrued interest on any loans made by such Lending Member to such Non-Contributing Member pursuant
to Section 4.3(d)(ii), a security interest in and a general lien on the Defaulted Portion of its
Member Interest and the proceeds thereof, all under the Uniform Commercial Code of the State of
Delaware. On any default in the payment of a Capital Contribution or in the payment of the
principal amount of or accrued interest on any such loan, the Company or any Lending Member, as
applicable, is entitled to all the rights and remedies of a secured party under the Uniform
Commercial Code of the State of Delaware with respect to the security interest granted in this
Section 4.3(e). Each Member shall execute and

34

 

deliver to the Company and any Lending Member all financing statements and other instruments
that the Company or such Lending Member, as applicable, may request to effect and carry out the
preceding provisions of this Section 4.3(e). At the option of the Company or any Lending Member,
this Agreement or a carbon, photographic or other copy hereof may serve as a financing statement.

          (f) In addition to and not in limitation of the foregoing Sections 4.3(a) – (d), upon fifteen
(15) days written notice to any Non-Contributing Member (and provided that any unpaid Capital
Contribution, and the payment of principal and interest owed to the Company or any Lending Member
with respect to such fifteen (15) day period shall not have been made by the Non-Contributing
Member) the Company may, upon the determination of the Board (in the following order):

               (i) purchase all or any part of the Defaulted Portion at a purchase price equal to fifty
percent (50%) of the Book Value of the Defaulted Portion;

               (ii) offer to the other Members, in such manner as the Board determines to be fair and
equitable, the opportunity to purchase all or any part of the Defaulted Portion at a purchase price
equal to fifty percent (50%) of the Book Value of the Defaulted Portion; and

               (iii) to the extent that the entire Defaulted Portion is not acquired pursuant to clause
(f)(i) or (f)(ii) above, designate one or more third parties to acquire all, but not less than all,
of the Defaulted Portion not so acquired by the other Members or the Company, at a purchase price
equal to fifty percent (50%) of the Book Value of the Defaulted Portion. Any third party that
acquires all or any portion of a Member Interest under this Section 4.3(f) may be admitted as a New
Member in accordance with the terms of this Agreement.

          (g) With respect to any acquisition made pursuant to clause (f) above, the aggregate
consideration payable to the Non-Contributing Member shall be a payment in cash or such other form
of consideration as may be satisfactory to the Company equal to fifty percent (50%) of the Book
Value of the Defaulted Portion. Each acquiring party shall be obligated, severally and not
jointly, to pay its pro rata portion of such consideration based on the proportion of the Defaulted
Portion acquired by such party. In the event that more than one other Member exercises its right
to acquire all or a portion of the Defaulted Portion, the Capital Accounts of the participating
Members shall be appropriately adjusted to reflect such acquisition. Any obligations of the
Non-Contributing Member with respect to any loan made pursuant to Section 4.3(d) shall be assumed
by the acquiring party hereunder.

          (h) Notwithstanding anything to the contrary contained herein, (A) in the event any Series B
Interest is transferred pursuant to Section 4.3 to a Person that is already a holder of Series C
Interests, the Transferred Member Interest shall be converted into a Series C Interest, (B) in the
event any Series C Interest is transferred pursuant to Section 4.3 to a Person that is already a
holder of Series B Interests, the Transferred Interest shall be converted into a Series B Interest,
and (C) in the event a Series B Interest or Series C Interest is transferred pursuant to Section
4.3 to any Person other than a Person that is already a holder of Series B

35

 

Interests or Series C Interests, the transferred Series B Interest or Series C Interest shall
be converted into a Member Interest of the same series as that held by the Transferee.

          (i) Each Member hereby agrees that in the event any Member shall become a Non-Contributing
Member, such Non-Contributing Member shall sell, assign, transfer and convey to the Company, the
other Members or any third party designees of the other Members its entire amount of the Defaulted
Portion in consideration of the amount specified in clause (g). No consent of any Member shall be
required as a condition precedent to any Transfer of any Defaulted Portion pursuant to this Section
4.3. Upon consummation of such sale, assignment, transfer or conveyance, Schedule A will
be appropriately modified.

          (j) Notwithstanding anything to the contrary herein, so long as a Non-Contributing Member
shall remain a Non-Contributing Member, such Member, and any Director, committee member or Officer
designated by such Member, shall not be entitled to exercise any voting or management rights
otherwise granted to such Member under this Agreement.

     4.4 Member Interests are Personal Property. A Member Interest shall for all purposes
be personal property. No Member has any interest in specific Company property.

     4.5 Status of Capital Contributions.

          (a) Except as otherwise set forth in Articles VI and XIII, no Member shall have the right to
withdraw any part of its Capital Contribution or otherwise to voluntarily or involuntarily resign
from the Company. Each of the Members waives any and all rights that it may have to maintain an
action for partition of the Company’s property or to otherwise be paid any amount in respect of a
withdrawal from the Company.

          (b) No Member shall receive any interest, salary or drawing with respect to its Capital
Contributions or its Capital Account or for services rendered on behalf of the Company or otherwise
in its capacity as a Member, except as otherwise specifically provided in this Agreement or any
Related Agreement to which such Member is a party.

          (c) A Member shall not be required to make a Capital Contribution that exceeds the amount of
such Member’s Unfunded Commitment. No Member shall have any personal liability for the repayment
of any Capital Contributions of any other Member.

     4.6 Capital Accounts.

          (a) The Company shall establish and maintain a separate capital account for each Member in
accordance with Code Section 704 and the Treasury Regulations promulgated thereunder, including
Treasury Regulation §1.704-1(b) (each such capital account, a “Capital Account”). Without
limiting the generality of the foregoing and subject to paragraphs (b), (c), (d), (e) and (f)
below, the Capital Account maintained for each Member shall be equal to:

               (i) the Capital Contribution made by such Member to the Company; increased by

36

 

               (ii) the aggregate amount of Net Income and other items of income and gain allocated to such
Member pursuant to Section 8.1; decreased by

               (iii) the aggregate amount of Distributions made by the Company to such Member; decreased
by

               (iv) the aggregate amount of Net Loss and other items of deduction, expenditure and loss
allocated to such Member pursuant to Section 8.1.

          (b) The Board may adjust the book values of all Company Assets to equal their respective fair
market values as determined by the Board, acting pursuant to Section 3.1(a), upon the occurrence of
any Revaluation Event; provided that the value of any Security shall be determined as provided in
Article IX. The Capital Accounts shall be increased or decreased (as appropriate) to reflect the
revaluation of the Company’s Assets, in accordance with Treasury Regulation §1.704-1(b)(2)(iv)(f).

          (c) Except as may be required by the Delaware Act or any other applicable Law, no Member with
a negative balance in its Capital Account shall have any obligation, in connection with the
liquidation of the Company or otherwise, to restore such negative balance.

          (d) Upon any Transfer (other than a pledge or hypothecation) of a Member Interest, a
proportionate share of the Capital Account of the Transferor shall be transferred to the
Transferee, and the Transferee shall be deemed to have made the contributions that were made by the
Transferor and to have received the Distributions and allocations that were received by the
Transferor from the Company, in each case to the extent of the Member Interest Transferred.

          (e) The maintenance of Capital Accounts pursuant to this Section 4.6 is intended to comply
with the requirements of Code Section 704 and the Treasury Regulations promulgated thereunder, and
the provisions of this Agreement regarding the maintenance of Capital Accounts shall be interpreted
and applied consistently therewith. If, in the opinion of the Board, the manner in which the
Capital Accounts are to be maintained pursuant to this Section 4.6 should be modified in order to
comply with the requirements of Code Section 704 and the Treasury Regulations promulgated
thereunder, then, notwithstanding anything to the contrary contained in this Section 4.6, the Board
may change the manner in which the Capital Accounts are maintained, and the Board shall have the
right, upon delivery of written notice to each Member and without obtaining the consent of any
Member, to amend this Agreement to reflect any such change in the manner in which the Capital
Accounts are maintained; provided, however, that any such change in the manner of maintaining the
Capital Accounts shall not alter materially the economic arrangement among the Members.

          (f) Accounting for Distributions in Kind. For purposes of maintaining Capital
Accounts when Company property is distributed in kind: (i) the Company shall treat such property
as if it had been sold for its fair market value on the date of distribution, with such fair market
value to be determined in accordance with the valuation procedures set forth in Article IX; (ii)
any difference between such fair market value and the Company’s prior book value in such property
for Capital Account purposes shall constitute Net Income or Net Loss, as the case may be, for the
Accounting Period ending on and including the date of such distribution

37

 

and shall be allocated to the Capital Accounts of the Members pursuant to Section 8.1; and
(iii) each Member’s Capital Account shall be reduced by the fair market value on the date of
distribution, as determined in accordance with the valuation procedures set forth in Article IX, of
the property distributed to such Member (net of any liabilities secured by such distributed
property that such Member is considered to assume or take subject to Section 752 of the Code).

     4.7 Issuance of Additional Interests; Additional Members.

          (a) Additional Interests. The following provisions shall govern the issuance of
additional Member Interests:

               (i) No additional Series A Interests may be issued without the approval of the Board and, in
addition thereto, the vote or written consent of a majority in interest of the Members holding
Member Interests of such Series.

               (ii) No additional Series B Interests or Series C Interests may be issued without the approval
of the Board and written consent of a majority in interest of the Members holding Member Interests
of such Series.

               (iii) So long as the Total Commitments do not exceed $2 billion, the CEO is authorized to
accept subscriptions for Series D Interests and Series E Interests from time to time without
further action by the Managing Members, the Board or the Series D Members or the Series E Members.

               (iv) Subject to Section 4.7(a)(ii) and upon approval by the Board, the Company shall issue or
sell to any Person (including Members and Affiliates of Members) additional Series B Interests and
Series C Interests.

               (v) If an Additional Interest is issued in accordance herewith, the CEO shall redetermine the
Percentage Interests in accordance with the respective Capital Accounts (taking into account the
Capital Contributions on account of such Additional Interest) and the Secretary of the Company
shall amend Schedule A without the further vote, act or consent of any other Person to
reflect the issuance of such Additional Interest. Upon such amendment of Schedule A, and
compliance with Section 4.7(b), such Member shall be issued his or its Additional Interest.

               (vi) Notwithstanding any issuance of Additional Interests or any redemption of Member
Interests, the aggregate Percentage Interest represented by the outstanding Member Interests held
by the Series B Members, Series C Members, Series D Members and Series E Members taken together
shall remain fixed at one hundred percent (100%).

          (b) New Members. In order for a Person to be admitted as a New Member, such Person
shall have delivered to the Company a written undertaking to be bound by the terms and conditions
of this Agreement and such other documents and instruments as the CEO (acting pursuant to Section
4.7(a)(iii)) or the Board (acting pursuant to Sections 4.7(a)(i) and (ii)) determines to be
necessary or appropriate in connection with the issuance of such Additional Interest to such
Person. Upon the amendment of Schedule A, and the delivery of an executed

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copy of this Agreement and the other documents and instruments referred to in the preceding
sentence, such Person shall be admitted as a Member and deemed listed as such on the books and
records of the Company and thereupon shall be issued his or its Additional Interest.

     4.8 Additional Payment. Each of the Series B Members, the Series C Members, the
Series D Members and Series E Members shall pay to Jefco a one-time placement fee equal to 0.25
percent (0.25%) of its Commitment. The payment of such placement fee shall be made by wire
transfer of immediately available funds on or prior to the date of this Agreement.

     4.9 Advances. If any Member shall advance any funds to the Company or any Subsidiary
in excess of its Capital Contribution, the amount of such advance shall neither increase its
Capital Account nor in any way affect such Member’s share of the profits, losses, credits and
Distributions of the Company. Any Member may, with the approval of the Board, make loans or
otherwise advance funds to the Company or any Subsidiary, and the amount of any such advance shall
be a debt obligation of the Company or any Subsidiary to such Member and shall be repaid to it by
the Company or any Subsidiary upon such terms and conditions as shall be determined by the Board.

ARTICLE V

TRANSFERS

     5.1 Restriction on Transfers. No Member shall have the right to Transfer all or any
portion of its Member Interest (including, without limitation any of the economic interest
associated therewith) held by such Member, except in accordance with the provisions of Sections 4.3
or in accordance with the following:

          (a) The Series A Member may not Transfer its Series A Interest or any portion thereof without
the prior written consent of the Members holding a majority in interest of the Series B Interests
and the Series C Interests (voting separately), except that no such consent shall be required if
the Transferee is an Affiliate of the Series A Member.

          (b) No Series B Member may Transfer its Series B Interest or any portion thereof without the
prior written consent of the Series C Members, except that no such consent shall be required if the
Transferee is an Affiliate or employee of Jefco or JGI or if the Transfer is in connection with the
sale of all or substantially all the assets, equity interests or business of Jefco or JGI;
provided that a Transfer to an Affiliate or employee of Jefco or JGI shall not relieve
Jefco or JGI, as the case may be, of its obligations hereunder and, provided,
further, that the parties shall be entitled to deal with Jefco or JGI, as the case may be,
as the party in interest with respect to any matter relating to the Member Interest so Transferred.

          (c) No Series C Member may Transfer its Series C Interest or any portion thereof without the
prior written consent of the Series B Members, except that no such consent shall be required if the
Transferee is an Affiliate of Leucadia or if the Transfer is in connection with the sale of all or
substantially all of the assets, equity interests or business of Leucadia; provided that a
Transfer to an Affiliate of Leucadia shall not relieve Leucadia of its obligations

39

 

hereunder and, provided, further, that the parties shall be entitled to deal
with Leucadia as the party in interest with respect to any matter relating to the Member Interest
so Transferred.

          (d) No Series D Member or Series E Member may Transfer its Series D Interest or Series E
Interest or any portion thereof without the prior written consent of the CEO.

     5.2 Invalid Transfers Void. Notwithstanding anything contained herein to the
contrary, no Transfer of a Member Interest may be made if such Transfer (a) would violate the then
applicable federal or state securities laws or rules and regulations of the SEC, state securities
commissions or rules and regulations of any other government agencies with jurisdiction over such
Transfer or (b) would affect the Company’s existence or qualification under the Delaware Act or (c)
would result in the Company being required to be registered under the Investment Company Act. In
the event a Transfer of a Member Interest is otherwise permitted hereunder, notwithstanding any
provision hereof, no Member shall Transfer all or any portion of such Member’s Interest unless and
until such Member, upon the request of the Company, delivers to the Company an opinion of counsel,
addressed to the Company, reasonably satisfactory to the Company, to the effect that (i) such
Member Interest has been registered under the Securities Act and any applicable state securities
laws, or that the proposed Transfer of such Member Interest is exempt from any registration
requirements imposed by such laws and that the proposed Transfer does not violate any other
applicable requirements of federal or state securities laws and (ii) that such Transfer will not
result in the Company being taxed as a corporation or as an association taxable as a corporation.
Such opinion shall not be deemed delivered until the Company confirms to such Member that such
opinion is acceptable, which confirmation will not be unreasonably withheld or delayed. To the
fullest extent permitted by Law, any purported Transfer of any Member Interest or any part thereof
not in compliance with this Article V shall be void and of no force or effect and the transferring
Member shall be liable to the other Members and the Company for all liabilities, obligations,
damages, losses, costs and expenses (including reasonable attorneys’ fees and court costs) arising
as a result of such noncomplying Transfer.

     5.3 Effect of Transfer; Exclusions.

          (a) In addition to satisfaction of Section 3.7 and the other provisions of this Article V, no
Transferee of all or part of a Member Interest in the Company shall have the right to become
admitted as a Member or be entitled to exercise the rights thereof, unless and until:

               (i) the Transferee has executed an instrument reasonably satisfactory to the CEO accepting and
adopting the provisions of this Agreement; and

               (ii) the Transferee has paid all reasonable expenses of the Company in connection with the
admission of such Transferee as a Member.

          (b) A Person who is a permitted Transferee of a Member Interest Transferred in compliance with
the provisions of this Article V shall be admitted to the Company as a substituted New Member and
shall receive a Member Interest without making a Capital Contribution or being obligated to make a
Capital Contribution to the Company and shall

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thereupon be bound by the provisions of this Agreement. Such Transfer and related admission
as a Member shall be reflected in a revised Schedule A to this Agreement.

ARTICLE VI

REDEMPTION; CONVERSION AND 

WITHDRAWAL OF CAPITAL BY MEMBERS 

     6.1 Mandatory Redemption. The Series B Interests, Series C Interests, Series D
Interests and Series E Interests shall be subject to mandatory redemption by the Company as
follows:

          (a) The Company shall redeem all Series B Interests upon the expiration of the six (6) year
period commencing on the date of this Agreement (the “Series B Term”), provided that the
Series B Term may be extended for a one (1) year period up to three (3) times (for a maximum
extension of three (3) years) upon the prior written consent of the Series A Member and Members
holding a majority in interest of each of the Series B Interests and Series C Interests (voting
separately) given at least thirty (30) days prior to the expiration of the Series B Term or then
current extension period.

          (b) The Company shall redeem all Series C Interests upon the expiration of the six (6) year
period commencing on the date of this Agreement (the “Series C Term”), provided that the
Series C Term may be extended for a one (1) year period up to three (3) times (for a maximum
extension of three (3) years) upon the prior written consent of the Series A Member and Members
holding a majority in interest of each of the Series B Interests and Series C Interests (voting
separately) given at least thirty (30) days prior to the expiration of the Series C Term or then
current extension period.

          (c) The Company shall redeem all Series D Interests upon the expiration of the six (6) year
period commencing on the date of this Agreement (the “Series D Term”), provided that the
Series D Term may be extended for a one (1) year period up to three (3) times (for a maximum
extension of three (3) years) upon the prior written consent of the Series A Member and Members
holding a majority in interest of the Series D Interests, given at least thirty (30) days prior to
the expiration of the Series D Term or then current extension period.

          (d) The Company shall redeem all Series E Interests upon the expiration of the six (6) year
period commencing on the date of this Agreement (the “Series E Term”), provided that the
Series E Term may be extended for a one (1) year extension period up to three (3) times (for a
maximum extension of three (3) years) upon the prior written consent of the Series A Member and
Members holding a majority in interest of the Series E Interests, given at least thirty (30) days
prior to the expiration of the Series E Term or then current extension period.

     6.2 Additional Redemption Events. The CEO, in his or her sole discretion, may require
redemption by the Company of all or any portion of a Member’s Interests if:

          (a) such redemption is necessary to avoid registering such Member Interests or the sale
thereof under the Securities Act;

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          (b) such redemption is necessary to avoid registration of the Company under the Investment
Company Act;

          (c) such redemption is necessary to avoid adverse tax or other consequences to the Company or
the Members, including to insure that Benefit Plan Investors do not hold twenty-five percent (25%)
or more of the Member Interests;

          (d) such Member fails to perform in accordance with or to comply with its obligations
hereunder or such Member’s Contribution Agreement;

          (e) as a result of any action (other than (i) a public offering of securities, (ii) the
transfer of securities to a permitted Transferee or (iii) the transfer of a de minimis amount of
securities of a class that is publicly traded) on the part of the Member, any direct or indirect
parent of the Member or any Person controlling the Member or any such parent, any beneficial
interest in such Member Interest shall have been acquired, directly or indirectly, by a Competitor
or any Adverse Party; provided that the provisions of this Section 6.2(e) shall not apply to the
Managing Members or their Affiliates;

          (f) in the case of Member Interests held by Leucadia and any of its Affiliates, there shall
have been a LUK Change of Control;

          (g) such Member Interest (excluding Managing Members’ Interests) was Transferred in violation
of the provisions of Article V, unless, prior to a redemption permitted under this Article VI, in
the reasonable judgment of the CEO any such violation shall have been cured.

     6.3 Early Redemption. In addition to redemption pursuant to Sections 6.1 and 6.2
above:

          (a) The Board may require the redemption by the Company of all or any portion of a Member
Interest if failure to redeem such Member Interests would result in the violation of any Law
applicable to the Company or the Servicer or would otherwise subject the Company, JYHT, the
Servicer or any of their respective Affiliates to restrictions that would make it impossible or
uneconomic for the Company to operate as provided in this Agreement;

          (b) In the event Richard Handler serves as the CEO of neither JHYT nor, as long as JGI manages
or controls the Series A Members and Series B Members, JGI, the Series C Member shall have the
right to direct the Company to redeem all, but not less than all, of its Member Interests.

          (c) In the event the Services Agreement is terminated or the rights of Jefco or any Affiliate
thereof under the Services Agreement are assigned to an unaffiliated third party, the Series C
Members shall have the right to direct the Company to redeem all, but not less than all, of their
Member Interests.

          (d) In the event Leucadia determines there has occurred a Change of Law affecting Leucadia,
then Leucadia (i) shall so notify the Company and (ii) may also require the Company to redeem all
Series C Interests to the extent the Net Asset Value thereof exceeds $150

42

 

million (the “Unredeemed Amount”); provided that any notice requiring such redemption
shall be given in writing (a “Reduction Notice”) and shall, at the Company’s request, be
accompanied by written advice of counsel to Leucadia as to such Change of Law. The Company will
use its commercially reasonable efforts to redeem such Member Interests in cash as promptly as
reasonably practicable and to complete such redemption on or prior to the first anniversary of
receipt of the Reduction Notice (to the extent that cash is not available at the end of this twelve
month maximum redemption period, the redemption shall be completed by an in kind distribution);
provided that a determination not to incur indebtedness for the purpose of facilitating any
such redemption shall not be deemed to be unreasonable. Upon payment to the Series C Member of
redemption proceeds as provided under Section 6.5, the Series C Interests having a then value equal
to the Unredeemed Amount shall be converted into Series D Interests (a “Conversion”, and
such Member Interests shall be referred to thereafter as “New Series D Interests”).

          (e) To the extent the Series B Interests are redeemed under this Article VI, the holders of
Series C Interests shall have the right to require redemption of a like amount of their Member
Interests, and to the extent the Series C Interests are redeemed under this Article VI, the holders
of the Series B Interests shall have the right to require redemption of a like amount of their
Member Interests.

          (f) The CEO shall have the right to require redemption of the Series D Interests and the
Series E Interests at any time.

     6.4 Limitations on Redemptions by Members. The right of any Managing Member to direct
the Company to redeem all or any portion of its respective Member Interests is subject to the
following limitations:

          (a) any reporting requirement or limitation imposed by the Exchange Act, or any rule or
regulation thereunder, or by any regulatory authority, such as the SEC or NASD, having jurisdiction
over the Company and/or JHYT, including limitations on the withdrawal of equity from a registered
broker-dealer without the prior approval of the NASD or any such limitations on withdrawal imposed
by the SEC;

          (b) any limitations imposed by the Delaware Act;

          (c) any limitation imposed by any Credit Agreement or margin lending arrangements at the time
binding upon the Company and/or JHYT;

          (d) any limitation resulting from the fact that such redemption would result in Benefit Plan
Investors holding, in the aggregate, twenty-five percent (25%) or more of the Member Interests in
the Company; and

          (e) any limitation resulting from the fact that such redemption would result in the Company
being taxed as a corporation or an association taxable as a corporation, unless the Member that has
directed the Company to redeem its Member Interest shall, upon the request of the Company, deliver
to the Company an opinion of counsel addressed to the Company, reasonably satisfactory to the
Company, to the effect that such redemption will not result in the Company being taxed as a
corporation or as an association taxable as a corporation.

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     6.5 Distribution Upon Redemption. Upon redemption of any Member Interest, the holder
thereof shall be entitled to receive the amount it would be entitled to receive under Sections 13.7
and 13.9 had the Company been dissolved as of the Applicable Redemption Date. In the event the
Company is redeeming the Member Interests of more than one Member at the same time, proceeds of
such redemptions shall be paid to such Members pro rata in accordance with their respective Capital
Accounts as of the beginning of the Accounting Period during which the Applicable Redemption Date
occurs.

ARTICLE VII

CONFIDENTIALITY

     Each Member shall maintain, and shall cause each of its Affiliates and their respective
directors, officers, employees, agents, consultants and advisors (each a “Related Party”)
to maintain, the confidentiality of Proprietary Information and shall not use or disclose, or
permit any Related Party to use or disclose, any Proprietary Information other than to the extent
necessary to further the business objectives of the Company or with the written approval of the
Company; provided that the foregoing obligation of confidentiality shall not apply to (a) any
disclosure to, or required by, any regulatory authority (including any Self-Regulatory Organization
on which a Member’s Securities are listed) which is necessary in connection with any necessary
regulatory approval or regulatory compliance, (b) any disclosure required by judicial,
administrative or legislative process or, in the opinion of its counsel, by any other requirement
of Law or the applicable requirements of any regulatory agency or Self-Regulatory Organization
having jurisdiction over the Company or any Managing Member, (c) any information independently
developed by the Member on its own that does not relate to the Business (and, in the case of a
Member who is an Officer, that does not relate to his duties performed for the Company), (d) any
software or technical “know-how” the Member has independently developed or obtained a right or
license to use, (e) information for which disclosure is necessary in connection with enforcing this
Agreement or any Related Agreement and (f) information that becomes generally known to the public
or within the relevant trade or industry other than as a result of the Member’s violation of this
Section 7.1. “Proprietary Information” means confidential information of a proprietary
nature relating to the Company, any Subsidiary (including JHYT) or any other Member, as the case
may be, including all nonpublic records, books, contracts, reports, instruments, computer data and
other data and information (including without limitation confidential information of a business
nature relating to the Company and/or any Subsidiary, such as business plans, prospects, financial
information, information about costs, profits, markets, sales, lists of customers and suppliers of
the Company and any of its Subsidiaries and/or Affiliates, information relating to the management,
operation and planning of the Company and any of its Subsidiaries and/or Affiliates, and plans for
future development, sales, products, profits, costs, markets, key personnel, formulae, product
applications, computer programs, technical processes and trade secrets of the Company, any of its
Subsidiaries and/or Affiliates or any Member; provided that with respect to information developed
by a Member, such information was furnished or made available to the Company or another Member by
such Member or a Related Party pursuant to this Agreement or any Related Agreement or in connection
with the Business). No party shall release or disclose Proprietary Information to any other
Person, except its auditors, attorneys, financial advisors, bankers, other consultants and advisors
who have a need to know and are advised of the confidentiality of such

44

 

Proprietary Information and, to the extent permitted above, regulatory authorities or mandated
public disclosure under rules and regulations of the SEC or any Self-Regulatory Organization. In
the event that a Member or a Related Party receives notice that it will be compelled to disclose
any Proprietary Information in connection with (a) and (b) above, as promptly as practicable under
the circumstances, such party shall provide the Company and the Person, if known to the Member,
that provided such Proprietary Information to the Member (the “Disclosing Party”) with
prompt prior written notice of such requirement so that the Disclosing Party may seek a protective
order or other appropriate remedy. In the event that such protective order or remedy is not
obtained, only that portion of the Proprietary Information which is legally required to be
disclosed shall be so disclosed.

ARTICLE VIII

ALLOCATIONS AND DISTRIBUTIONS

     8.1 Allocations.

          (a) Net Income and Net Loss. The Company shall use its best efforts to determine and
allocate all items of income, gain, loss and deductions, as described below, with respect to each
Accounting Period of the Company within forty-five (45) days after the end of each Accounting
Period (other than any Accounting Period ending on the last day of the Fiscal Year, in which case
the Company shall make such allocations as soon as reasonably practicable following the end of such
Fiscal Year).

               (i) Except as otherwise provided in this Agreement, the Net Income of the Company (and items
thereof other than those attributable to the Brokerage Assets) for each Accounting Period shall be
allocated:

                    (A) first, to the extent that an amount of Net Loss has been allocated under Section
8.1(a)(ii) for a prior Accounting Period and that allocation has not been offset by a subsequent
allocation of Net Income pursuant to this Section 8.1(a)(i)(A), to the Members in proportion to,
and in an amount equal to, the unrecovered amount of such Net Loss (and, if there is an unrecovered
Net Loss for more than one Accounting Period or that has been allocated pursuant to Section
8.1(a)(ii)(A) or Section 8.1(a)(ii)(B), then this Section 8.1(a)(i)(A) shall be applied first to
the Net Loss arising in the most recent Accounting Period until that Net Loss is recovered fully,
and thereafter successively to each preceding Accounting Period for which there is an unrecovered
Net Loss, ending with the first such Accounting Period, in each case offsetting Net Losses
allocated pursuant to Section 8.1(a)(ii)(B) before those allocated pursuant to Section
8.1(a)(ii)(A)); and

                    (B) second, (1) twenty percent (20%) to the Members holding the Series A Interests on
a pro rata basis and (2) eighty percent (80%) to the Series B Members, the Series C Members, the
Series D Members and the Series E Members on a pro rata basis in proportion to their respective
Percentage Interests at the beginning of such Accounting Period.

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               (ii) Except as otherwise provided in this Agreement, Net Loss of the Company (and items
thereof other than those attributable to the Brokerage Assets) for each Accounting Period shall be
allocated:

                    (A) first, to the Members in proportion to the amounts of Net Income previously
allocated pursuant to Section 8.1(a)(i)(B), until such amounts have been offset in full or the
Capital Accounts of such Members have been reduced to zero; and

                    (B) second, to the Series B Members, the Series C Members, the Series D Members and
the Series E Members on a pro rata basis in proportion to their respective Percentage Interests at
the beginning of such Accounting Period.

               (iii) Any Net Income or Net Loss attributable to the Brokerage Assets shall be allocated pro
rata to the Series A Members in accordance with the proportion of Series A Interests held by such
Members.

     For purposes of this Section 8.1 and for other relevant purposes hereunder, an Accounting
Period shall be deemed to end either at or immediately preceding, as may be appropriate, the time
of any issuance or redemption of Member Interests or other event that results in a change in the
Member Interests (and a new Accounting Period shall commence immediately thereafter).

          (b) Special Allocations. Prior to making any allocations under Section 8.1(a), the
following special allocations shall be made in the following order:

               (i) Limitation on Net Losses. If any allocation of Net Loss or an item of deduction,
expenditure or loss to be made pursuant to Section 8.1(a) or this Section 8.1(b) for any Accounting
Period would cause a deficit in any Member’s Adjusted Capital Account (or would increase the amount
of any such deficit), then the amount that would cause such deficit shall be allocated to such
Members that have positive Adjusted Capital Account balances in proportion to the respective
amounts of such positive balances until all such positive balances have been reduced to zero.

               (ii) Qualified Income Offset. If any Member unexpectedly receives any adjustment,
allocation or distribution described in Treasury Regulation §1.704-1(b)(2)(ii)(d)(4),
§1.704-1(b)(2)(ii)(d)(5) or §1.704-1(b)(2)(ii)(d)(6) that creates or increases a deficit in the
Adjusted Capital Account of such Member, then items of income and gain (consisting of a pro
rata portion of each item of Company income, including gross income, and gain for the
relevant Fiscal Year and, if necessary, for subsequent Fiscal Years) shall be allocated to such
Member in an amount and manner sufficient to eliminate such deficit as quickly as possible. This
Section 8.1(b)(ii) is intended to constitute a “qualified income offset” within the meaning of
Treasury Regulation §1.704-1(b)(2)(ii)(d), and shall be interpreted and applied consistently
therewith.

               (iii) Substantial Economic Effect. Notwithstanding anything in this Agreement to the
contrary, if the allocation of any item of income, gain, loss or expense pursuant to this Section
8.1 does not have substantial economic effect under Treasury Regulation §1.704-1(b)(2) and is not
in accordance with the Member Interests in the Company within the meaning

46

 

of Treasury Regulation §1.704-1(b)(3), then such item shall be reallocated in such manner as
to (i) have substantial economic effect or be in accordance with the Member Interests and (ii)
result as nearly as possible in the respective balances of the Capital Accounts that would have
been obtained if such item had instead been allocated under the provisions of this Section 8.1
without giving effect to this Section 8.1(b)(iii).

               (iv) Corrective Allocations. If any amount is allocated pursuant to paragraph (ii) of
this Section 8.1(b), then, notwithstanding anything in Section 8.1(a) to the contrary (but subject
to the provisions of paragraphs (i) and (ii) of this Section 8.1(b)), income, gain, loss and
expense, or items thereof, shall thereafter be allocated in such manner and to such extent as may
be necessary so that, after such allocation, the respective balances of the Capital Accounts will
equal as nearly as possible the balances that would have been obtained if the amount allocated
pursuant to paragraph (ii) of this Section 8.1(b) instead had been allocated under the provisions
of this Section 8.1 without giving effect to the provisions of such paragraph.

          (c) Amendments to Allocations. The provisions hereof governing Company allocations
are intended to comply with the requirements of Code Sections 704(b) and 704(c) and the Treasury
Regulations that have been or may be promulgated thereunder, and shall be interpreted and applied
in a manner consistent therewith. If, in the opinion of the CEO, the allocations of income, gain,
loss and expense provided for herein do not (i) comply with such Code provisions or Treasury
Regulations, (ii) comply with any other applicable provisions of the Code or Treasury Regulations
(including the provisions relating to nonrecourse deductions and Member nonrecourse deductions) or
(iii) produce Capital Account balances of the Members equal to the liquidating distributions that
would be made to the Members pursuant to Section 13.7 if the assets of the Company were sold for
their book value and the net proceeds thereof distributed to the Members pursuant to Section 13.7,
then, notwithstanding anything in this Agreement to the contrary, such allocations shall, upon
notice in writing to each Member, be modified in such manner as the CEO determines is necessary to
satisfy the relevant provisions of the Code or Treasury Regulations, and the CEO shall have the
right to amend this Agreement (without the consent of any other Member being required for such
amendment) to reflect any such modification; provided, however, that no such modification shall
alter materially the economic arrangement among the Members.

     8.2 Adjustments to Reflect Changes in Member Interests. With respect to any
Accounting Period during which any Member Interest changes, whether by reason of the admission of a
New Member, the resignation of a Member, or otherwise as described in Code Section 706(d)(1) and
Treasury Regulations issued thereunder, allocations of Net Income, Net Loss and other items of
Company income, gain, loss and expense shall be adjusted appropriately to take into account the
varying interests of the Members during such Accounting Period. The CEO shall select the method of
making such adjustments.

     8.3 Allocation of Taxable Income and Loss.

          (a) Except as otherwise provided in Section 8.3(b), the taxable income or loss of the Company
for any Accounting Period shall be allocated among the Members in proportion to and in the same
manner as Net Income, Net Loss and separate items of income, gain, loss and expense (excluding
items for which there are no related tax items) are allocated among the

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Members for Capital Account purposes pursuant to the provisions of Sections 8.1(a) and (b).
Except as otherwise provided in this Section 8.3, the allocable share of a Member for tax purposes
in each specified item of income, gain, loss or expense of the Company comprising Net Income, Net
Loss or any item allocated pursuant to Section 8.1(a) and (b), as the case may be, shall be the
same as such Member’s allocable share of Net Income, Net Loss or the corresponding item for such
Accounting Period.

          (b) In accordance with Sections 704(b) and 704(c) of the Code and applicable Treasury
Regulations, including Treasury Regulation §1.704-1(b)(4)(i), items of income, gain, loss and
expense with respect to any Book Property of the Company (and, if necessary, any other property of
the Company) shall, solely for tax purposes, be allocated among the Members so as to take account
of any variation between the adjusted basis of the Book Property to the Company for federal income
tax purposes and its book value. In making allocations pursuant to this Section 8.3(b), the CEO
shall apply the “traditional method” set forth in Treasury Regulation §1.704-3(b).

          (c) The items of income, gain, loss and expense allocated to the Members for tax purposes
pursuant to this Section 8.3 shall not be reflected in the Members’ Capital Accounts. Any
elections or other decisions relating to the allocation provisions of this Article VIII shall be
made by the CEO in any manner that reasonably reflects the purpose and intent of this Agreement and
is consistent with the economic arrangement among the Members.

     8.4 Distributions.

          (a) From time to time, the Company shall make Distributions pursuant to Section 8.4(b) and
8.4(c), of all of the Company’s Aggregate Net Book Income, in each case to the extent permitted by
the applicable rules and regulations of any regulatory authority having jurisdiction over the
Company.

          (b) The Company shall distribute to the Members amounts reflecting Previously Undistributed
Book Income on an annual basis (after taking into account any Distributions made pursuant to
Section 8.4(c)) within sixty (60) days after the end of each Fiscal Year (each, an “Annual
Distribution”). In addition to the Annual Distributions and the Tax Distributions to be made
pursuant to Section 8.4(c), the Company may make Distributions of Previously Undistributed Book
Income to the Members, including distributions in kind pursuant to Section 8.4(f), at such times
and in such amounts as the CEO may determine. Any such Distribution of Previously Undistributed
Book Income shall be made (i) to the Members holding Series A Interests, pro rata in accordance
with the proportion of Series A Interests held by each such Member at the time of the Distribution
an amount equal to the lesser of (A) twenty percent (20%) or (B) an amount such that Distributions
pursuant to Section 8.4(b) and Section 8.4(c) received by the Members holding the Series A
Interests do not exceed twenty percent (20%) of the Company’s Aggregate Net Book Income and (ii)
the remainder to those Members holding Member Interests other than Series A Interests, pro rata in
accordance with their respective Percentage Interests at the time of the Distribution.

          (c) If the Company has net taxable income for federal income tax purposes for any Fiscal Year,
then the Company shall distribute, within ninety (90) days after the end of such

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Fiscal Year, cash (a “Tax Distribution”) to each Member in the amount, if any, that is
required, when the Tax Distribution is combined with all other Distributions theretofore made to
the Member with respect to such Fiscal Year, to cause the aggregate amount distributed to the
Member to be at least equal to the product of (i) the Presumed Tax Rate for such Fiscal Year and
(ii) the aggregate net taxable income allocated to such Member for such Fiscal Year. Distributions
pursuant to this Section 8.4(c) shall be treated as Distributions of Previously Undistributed Book
Income. Any Tax Distributions made pursuant to this Section 8.4(c) shall be made to those Members
that held Member Interests in the Company as of the close of such Fiscal Year. However, for
purposes of this Section 8.4(c), Distributions and allocations made to a predecessor-in-interest of
a Member with respect to such Fiscal Year shall be treated as having been made to such Member.
Notwithstanding the foregoing provisions of this Section 8.4(c), the CEO may make appropriate
adjustments to Tax Distributions in accordance with the intent of Sections 4.6(f) and 8.1(b)(iv).

          (d) Notwithstanding any provision to the contrary contained in this Agreement, (i) the Company
shall not make a Distribution to any Member on account of its Member Interest if such Distribution
would violate Section 18-607 of the Delaware Act or other applicable Law and (ii) the Board may
restrict all or any portion of a Distribution if it determines that the failure to do so could
result in a constraint on liquidity, or a violation of the Credit Agreement or applicable Law, or
if it determines it is in the best interest of the Company to do so.

          (e) Notwithstanding the foregoing (other than Section 8.4(c) above), the CEO may set aside
reasonable reserves for anticipated liabilities, obligations or commitments of the Company.

          (f) Although the Company shall use its best efforts to cause all Distributions to be made in
cash, at any time and from time to time prior to the dissolution of the Company, when the CEO
determines that it is in the interests of the Company to do so, the Company may distribute
Securities in kind to the Members. The Company shall provide at least ten (10) Business Days’
prior notice of any such Distribution in kind, which notice shall describe the Securities to be
distributed and shall state that, upon the request of any Member, the Company shall provide such
Member with such information regarding the issuer of such Securities as may be available and as may
be deemed appropriate for such provision by the Company. Any Securities to be distributed in kind
to the Members shall be valued in accordance with Article IX and upon such Distribution in kind,
such Securities shall be deemed to have been sold at such value on the date of Distribution and the
proceeds of such sale shall be deemed to have been distributed to the Members for all purposes of
this Agreement.

          (g) With respect to any Distribution, a portion of which is to be made in kind and a portion
of which is to be made in cash, such in-kind and in-cash portions shall be distributed to all
Members on a pro rata basis to the extent reasonably practicable; provided that the Company shall
endeavor to accommodate the wishes, to the extent practicable, of those Members desiring to receive
all (or a disproportionate amount) of such Distribution in kind or in cash, as the case may be, to
the extent possible, with a priority as to cash for any Member which, upon the advice of counsel,
determines that any Distribution would more likely than not cause

49

 

such Member to be in violation of any Law applicable to such Member, as contemplated by the
immediately following paragraph.

          (h) Notwithstanding anything to the contrary contained elsewhere in this Agreement, the
Company shall not distribute any securities in kind to any Member if the Distribution would cause
such Member or its Affiliates to be in violation of any Law applicable to such Member. In the
event a Member shall, upon the advice of counsel, determine that any Distribution would more likely
than not cause such Member to be in violation of any applicable Law, such Member shall deliver to
the Company a notice to such effect within ten (10) Business Days from the date of the notice to
the Member of the proposed Distribution of Securities in kind. In any such case, the Company shall
use reasonable efforts to cause such Securities (and only such allocable portion of such
Securities) to be sold to a third party, who may be another Member, for the best consideration
available under the circumstances and to distribute the cash proceeds thereof to such affected
Member. No such sale to a third party shall relieve any Member of its obligations hereunder. In
the event such a sale cannot be achieved on commercially reasonable terms and within a commercially
reasonable time period following the proposed Distribution, the obligation of the Company shall be
extinguished by establishing an escrow account for the benefit of any affected Members into which
shall be deposited such Securities, which account shall be liquidated at such time as a sale can be
accomplished, provided, that if any Member is not reasonably satisfied with the
establishment of such escrow account and does not elect to participate in such escrow arrangements,
the Company shall, at the direction of such objecting Member, transfer such Member’s pro rata share
of the Securities in accordance with instructions given by such objecting Member. Securities held
in any escrow account shall continue to earn dividends or interest, as the case may be, and to
carry all rights attributable to such Securities, and shall be deemed for all purposes of this
Agreement to have been distributed to the Members to whom, and at such time as, such Securities
would have been distributed but for this Section 8.4(h).

          (i) For the avoidance of doubt, amounts paid by or on behalf of the Company pursuant to the
Services Agreement and the Clearing Agreement shall not be considered Distributions for purposes of
this Agreement.

     8.5 Withholding. All amounts withheld pursuant to the Code or any provision of any
state, local or foreign tax law with respect to any payment, Distribution or allocation by the
Company shall be treated as amounts paid by the Company. Such amounts shall in turn be allocated
to and treated as distributed to the Members for all purposes under this Agreement. The Company is
authorized to withhold from payments, Distributions or allocations to the Members and to pay over
to the appropriate federal, state, local or foreign government any amounts required to be so
withheld. Subject to Section 3.1(a)(xxiii), the CEO shall allocate any such amounts to the Members
in respect of whose Distribution or allocation the tax was withheld and shall treat such amounts as
actually distributed to such Members.

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ARTICLE IX

VALUATION

     9.1 Valuation.

          (a) Basic Valuation. The Company will determine the Market Value of the Assets, and
will cause JHYT to determine the Market Value of Assets held by JHYT (other than the Brokerage
Assets) no less frequently than quarterly.

          (b) Brokers’ Commissions and Other Expenses of Sale. For the purposes of valuation of
any Securities, except a Security sold but for which payment has not been received, it shall not be
necessary to deduct from the value of an asset brokers’ commissions or other expenses that would be
incurred upon a sale thereof.

          (c) Valuation Binding. Any valuation of a Security made or approved by the Company
[or JHYT] in accordance with this Agreement shall be binding and conclusive upon all of the Members
and upon all those Persons who hold a beneficial interest in a Member, absent manifest error.

ARTICLE X

BOOKS AND RECORDS

     10.1 Books, Records and Financial Statements.

     At all times during the existence and continuance of the Company, the Company shall maintain
separate books of account for the Company that shall show a true and accurate record of all costs
and expenses incurred, all charges made, all credits made and received and all income derived in
connection with the operation of the Company in accordance with GAAP consistently applied, and, to
the extent inconsistent therewith, in accordance with this Agreement. Such books of account,
together with a copy of this Agreement and of the Certificate, shall at all times be maintained at
the principal place of business of the Company and shall be open to inspection and examination at
reasonable times by each Member and its duly authorized representative for any purpose reasonably
related to such Member’s interest as a member of the Company. Upon the request of a Member, the
Company shall promptly deliver to the requesting Member, at the expense of the Company, a copy of
any information which the Company is required by law to so provide.

     10.2 Reports.

          (a) The Company shall cause to be prepared and distributed to each Member:

               (i) within ninety (90) days after the end of each Fiscal Year, such information as is
necessary to complete the Member’s United States federal and state income tax or information
returns, including a copy of the Company’s United States federal, state and local income tax or
information returns for the year;

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               (ii) within fifty-five (55) days after the end of each Fiscal Year, annual audited financial
statements prepared in accordance with GAAP and meeting all applicable requirements of the SEC;

               (iii) within 17 Business Days after the end of each of the first three Fiscal Quarters and the
end of each Fiscal Year a financial report proposed in accordance with GAAP containing statements
of operations and cash flows, changes in Members’ Capital Accounts and changes in the Company’s
Assets for the period then ended; and

               (iv) any additional information that may reasonably be required by any such Member to enable
it to comply with the accounting and disclosure requirements of the SEC as in effect from time to
time, which information shall be provided to such Member promptly upon request; provided
that this Section 10.2 shall not be deemed to require or permit the Company to disclose to any
Member other than Jefco and its Affiliates the positions in Securities held by the Company.

          (b) The parties intend that the Security positions of the Company and any Subsidiary,
including JHYT, should not be subject to aggregation with the Security positions of any Member or
its Affiliates. After consultation with counsel, the Board and the CEO shall adopt such procedures
as they determine to be appropriate and in compliance with applicable Law for this purpose.

     10.3 Accounting Method. For both financial and tax reporting purposes and for
purposes of determining profits and losses, the books and records of the Company shall be kept on
the accrual method of accounting applied in a consistent manner and shall reflect all Company
transactions and be appropriate for the Company’s business.

     10.4 Audit. The annual financial statements of the Company shall be audited by a firm
of independent certified public accountants with relevant experience, selected by the Board, with
such audit to be accompanied by a report of such accounting firm containing its opinion. The cost
of such audits will be an expense of the Company. A copy of any such audited financial statements
and accountant’s report will be made available for inspection by the Members.

ARTICLE XI

TAX MATTERS

     11.1 Tax Matters Member.

          (a) JGI is hereby designated as the “Tax Matters Member” of the Company for purposes of §
6231(a)(7) of the Code and shall have the power, subject to the provisions of Section 3.1(a)(xxii)
to manage and control, on behalf of the Company, any administrative proceeding at the Company level
with the Internal Revenue Service relating to the determination of any item of Company income,
gain, loss, deduction or credit for federal income tax purposes.

          (b) The Tax Matters Member shall, promptly upon the receipt of any notice from the Internal
Revenue Service in any administrative proceeding at the Company level

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relating to the determination of any Company item of income, gain, loss, deduction or credit,
mail a copy of such notice to each Member.

     11.2 Right to Make Section 754 Election. The Board, acting pursuant to Section
3.1(a), may make or revoke, on behalf of the Company, an election in accordance with Code Section
754, so as to adjust the basis of Company property in the case of a Distribution of property within
the meaning of Code Section 734, and in the case of a transfer of a Company interest within the
meaning of Code Section 743. Each Member shall, upon request of the Board, supply the information
necessary to give effect to such an election. Upon Transfer of a Member Interest, the Transferee
may request that an election in accordance with Code Section 754 be made, in which event the
Company, upon approval by the Board, shall make the election for the Fiscal Year in which such
transfer occurs.

     11.3 Indemnity of Tax Matters Member. The Company shall indemnify and reimburse the
Tax Matters Member for all reasonable expenses (including reasonable legal and accounting fees)
incurred as Tax Matters Member pursuant to this Article XI in connection with any administrative or
judicial proceeding with respect to the tax liability of the Members as long as the course of
conduct of the Tax Matters Member is consistent with any instructions of the Board or, in the
absence of such instructions, was in, or not opposed to, the best interest of the Company. The
payment of all such expenses shall be made before any Distributions are made to the Members. The
taking of any action and the incurring of any expense by the Tax Matters Member in connection with
any such proceeding except to the extent provided herein (including without limitation Section
3.1(a)(xxii)) or required by applicable Law, is a matter in the sole discretion of the Tax Matters
Member and the provisions on limitations of liability of the Tax Matters Member and indemnification
set forth in Article XII shall be fully applicable to the Tax Matters Member in its capacity as
such.

     11.4 Notices to Tax Matters Member. Any Member that receives a notice of an
administrative proceeding under Code Section 6223 relating to the Company shall promptly notify the
Company and the Tax Matters Member of the treatment of any Company item on such Member’s federal
income tax return that is or may be inconsistent with the treatment of that item on the Company’s
return. Any Member that enters into a settlement agreement with the Internal Revenue Service with
respect to any Company item shall notify the Tax Matters Member of such agreement and its terms
within sixty (60) days after its date.

ARTICLE XII

LIABILITY AND INDEMNIFICATION

     12.1 Liability. Except as otherwise provided by the Delaware Act, the debts,
obligations and liabilities of the Company, whether arising in Contract, tort or otherwise, shall
be solely the debts, obligations and liabilities of the Company, and no Covered Person shall be
obligated personally for any such debt, obligation or liability of the Company solely by reason of
being a Covered Person. Each Covered Person shall be entitled to rely in good faith on the advice
of counsel, public accountants and other independent advisors experienced in the matter at issue,
and any act or omission of any Covered Person in reliance on such advice shall in no event subject
any Covered Person to liability to the Company or any Member.

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     12.2 Indemnification.

          (a) The Company shall indemnify and hold harmless any Covered Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason of the fact that
such Covered Person is or was a Member, Director, officer or employee of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by the Covered Person in connection with such action, suit or proceeding if the
Covered Person acted in good faith and in a manner the Covered Person reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the Covered Person’s conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the
Covered Person did not act in good faith and in a manner which the Covered Person reasonably
believed to be in or not opposed to the best interests of the Company (except as specifically
contemplated by Section 4.2(a)), and, with respect to any criminal action or proceeding, had
reasonable cause to believe that the Covered Person’s conduct was unlawful. The rights granted
pursuant to this Section 12.2(a) shall be deemed contract rights, and no amendment, modification or
repeal of this Section 12.2(a) shall have the effect of limiting or denying any such rights with
respect to actions taken or proceedings, appeals, inquiries or investigations arising prior to any
such amendment, modification or repeal.

          (b) The Company shall have power to indemnify any Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact that the Person is
or was an agent of the Company, or is or was serving at the request of the Company as an agent of
another limited liability company, corporation, partnership, joint venture, trust or other
enterprise, against expenses (including reasonable attorneys’ fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by the Person in connection with such action,
suit or proceeding if the Person acted in good faith and in a manner the Person reasonably believed
to be in or not opposed to the best interests of the Company (except as specifically contemplated
by Section 4.2(a)), and, with respect to any criminal action or proceeding, had no reasonable cause
to believe the Person’s conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall
not, of itself, create a presumption that the Person did not act in good faith and in a manner
which the Person reasonably believed to be in or not opposed to the best interests of the Company,
and, with respect to any criminal action or proceeding, had reasonable cause to believe that the
Person’s conduct was unlawful.

          (c) To the extent that a Covered Person has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsection (a) of this section, or in
defense of any claim, issue or matter therein, such Covered Person shall be indemnified against
expenses (including reasonable attorneys’ fees) actually and reasonably incurred by such Covered
Person in connection therewith.

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          (d) Except as otherwise provided in Section 12.2(c), any indemnification under subsections (a)
and (b) of this section (unless ordered by a court) shall be made by the Company only as authorized
in the specific case upon a determination that indemnification of the Person indemnified is proper
in the circumstances because the Person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made, with respect to a Person
who is a Covered Person at the time of such determination, (1) by a majority vote of the Directors
who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such Directors designated by majority vote of such Directors, even though less than a
quorum, or (3) if there are no such Directors, or if such Directors so direct, by independent legal
counsel in a written opinion, or (4) by the unanimous vote of the Managing Members.

          (e) Expenses (including attorneys’ fees) incurred by a Person indemnified pursuant to this
Section 12.2 in defending any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Person to repay such amount if it
shall ultimately be determined that such Person is not entitled to be indemnified by the Company as
authorized in this section. Such expenses (including attorneys’ fees) incurred by former Covered
Persons or other Persons may be so paid upon such terms and conditions, if any, as the Company
deems appropriate.

          (f) The indemnification and advancement of expenses provided by, or granted pursuant to, the
other subsections of this Section 12.2 shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under any Directors’
resolution, agreement, vote of Members or disinterested Directors or otherwise, both as to action
in such person’s official capacity and as to action in another capacity while holding such office.

ARTICLE XIII

DISSOLUTION, LIQUIDATION AND TERMINATION

     13.1 Dissolution Generally. Except as provided in this Agreement and by the Delaware
Act, no Member shall have the right to cause the dissolution of the Company.

     13.2 Continuation. Except as provided in this Agreement, the Company shall not be
dissolved or terminated by the incapacity of any Member as such, the Transfer by any Member of its
Member Interest, the redemption of the Member Interests of any Member or the admission of a New
Member.

     13.3 Events Causing Dissolution. The Company may be dissolved only upon the
occurrence of one of the following events:

          (a) by written consent of the Managing Members to the dissolution of the Company;

          (b) following the redemption or Conversion of the Member Interest of a Managing Member, by the
other Managing Member in its sole discretion;

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          (c) by written consent of the Series A Members to dissolve the Company, at any time after the
sixth anniversary of the Closing Date;

          (d) by a majority of the Board to dissolve the Company, at any time;

          (e) by a decree of judicial dissolution under Section 18-802 of the Delaware Act;

          (f) by the Technical Withdrawal of a Managing Member, unless the other Managing Member elects
to continue the Company within thirty days following notice of such Technical Withdrawal; or

          (g) at the time there are no Members unless the Company is continued without dissolution in
accordance with this Agreement or the Delaware Act.

     13.4 Events of Bankruptcy of Member.

          (a) Without limiting the generality of Section 13.3, but except as otherwise provided in
Section 13.3(e), the occurrence of any of the events set forth in this Section 13.4 with respect to
any Member shall not result, in and of itself, in the dissolution of the Company. Such Member
shall cease to be a member of the Company, but shall, however, retain its interest in allocations
and Distributions if and when any of the following events occurs (a “Technical
Withdrawal”):

               
(i) such Member makes an assignment for the benefit of creditors;

               
(ii) such Member files a voluntary petition in bankruptcy;

               (iii) such Member is adjudged a bankrupt or insolvent, or there has been entered against such
Member an order for relief, in any bankruptcy or insolvency proceeding;

               (iv) such Member files a petition or answer seeking for such Member any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation;

               (v) such Member files an answer or other pleading admitting or failing to contest the material
allegations of a petition filed against such Member in any proceeding of the type described in this
Section 13.4;

               (vi) such Member seeks, consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of such Member or of all or any substantial part of the properties of such Member,
including without limitation the appointment of a trustee pursuant to the Securities Investor
Protection Act of 1970; or

               (vii) one hundred twenty (120) days after the commencement of any proceeding against such
Member seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or
similar relief under any statute, law or regulation, if the

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proceeding has not been dismissed, or if within ninety (90) days after the appointment without
the consent or acquiescence of such Member, of a trustee, receiver or liquidator of such Member or
of all or any substantial part of the properties of such Member, the appointment is not vacated or
stayed, or within ninety (90) days after the expiration of any such stay, the appointment is not
vacated.

     13.5 Withdrawal of Members. A Member shall be deemed to have withdrawn from the
Company upon (a) such Member’s Technical Withdrawal, (b) the redemption in accordance with the
terms hereof, of all of the Member Interests held by such Member or (c) the permitted Transfer by a
Member of all of its Membership Interests. Except as set forth in this Section 13.5, no Member
shall have the right to withdraw from the Company.

     13.6 Notice of Dissolution. Upon the dissolution of the Company, the Board shall
promptly notify the Members of such dissolution.

     13.7 Liquidation.

          (a) Upon dissolution of the Company, (i) the Company shall immediately distribute the
Brokerage Assets to Jefco [in its capacity as a Series A Member and otherwise for the benefit of
the Series A Members other than Jefco] and (ii) Jefco shall immediately commence to wind up the
Company’s affairs; provided, that a reasonable time shall be allowed for the orderly liquidation of
the Assets and the satisfaction of liabilities to creditors so as to enable the Members to minimize
the normal losses attendant upon a liquidation; and provided further, however, that Jefco shall use
commercially reasonable efforts to complete the liquidation of the Assets on or prior to the first
anniversary of the dissolution of the Company.

          (b) Jefco shall distribute the proceeds of such liquidation and any other Assets (subject to
the requirements of the Delaware Act and other applicable Law) in the following order of priority:

               (i) first, to satisfy (whether by payment or reasonable provision for payment) of all of the
debts, liabilities and obligations of the Company (including, without limitation, all amounts then
due and payable under the Services Agreement and all expenses incurred in liquidation);

               (ii) second, to the establishment of adequate reserves for the payment and discharge of all
debts, liabilities and obligations of the Company, including contingent, conditional or unmatured
liabilities, in such amount and for such term as Jefco as the liquidating trustee may reasonably
determine; and

               (iii) third, any remaining proceeds of liquidation, and any Assets to be distributed in kind,
shall be apportioned among the Members, pro rata in accordance with their respective Percentage
Interests; the amount apportioned to each Member shall be distributed as follows:

                    (1) First, 100% to such Member until such Member has received pursuant to this Section
13.7(a)(iii)(1) an amount equal to the excess of (a) its aggregate

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Capital Contributions over (b) amounts distributed to such Member that were in excess of
Previously Undistributed Book Income;

                    (2) Thereafter, 80% to such Member and 20% to the Members holding Series A Interests, pro rata
in accordance with the proportion of Series A Interests held by each such Member.

          (c) Jefco shall use all reasonable efforts to reduce the Assets of the Company to cash and to
distribute cash upon liquidation to the Members. Subject to the foregoing, if any Assets are not
reduced to cash, then Jefco (i) shall value such Assets pursuant to Article IX, (ii) shall
allocate, in accordance with Section 4.6(f) and Article VIII, any unrealized gain or loss
determined by such valuation to the Members’ Capital Accounts as though the non-cash Assets had
been sold on the date of distribution and (iii) shall, after giving effect to any such adjustment,
treat the distribution of such non-cash Assets as equivalent to a distribution of cash in the
amount determined by the appraisal of such Assets. No Member shall have any right to any specific
Assets except as otherwise herein specifically provided. In making distributions of non-cash
Assets under this Section 13.7(c), Jefco may distribute such Assets unequally among the Members to
the extent necessary to avoid a Member receiving an Asset that it is prohibited from holding or
that could result in adverse tax consequences to a Member; provided that such unequal distribution
shall not affect the aggregate amount of Distributions to any Member.

          (d) Each of the Members shall be furnished with a statement prepared by, or under the
supervision of, Jefco, which shall set forth the assets and liabilities of the Company as of the
date of complete liquidation.

          (e) As soon as possible following application of the proceeds of liquidation and any Assets
that are to be distributed in kind, any Member (or any other appropriate authorized person of the
Company) shall execute a certificate of cancellation of the Certificate in the form prescribed by
the Delaware Act and shall file the same with the Secretary of State of the State of Delaware.

     13.8 Termination. The Company shall terminate when all of the Assets have been
distributed in the manner provided for in this Article XIII, and the Certificate shall have been
canceled in the manner required by the Delaware Act.

     13.9 Claims of the Members. Members and former Members shall look solely to the
Assets for the return of their Capital Contributions, and if the Assets remaining after payment of
or due provision for all debts, liabilities and obligations of the Company are insufficient to
return such Capital Contributions, the Members and former Members shall have no recourse against
the Company, the Servicer or any other Member.

ARTICLE XIV

MISCELLANEOUS

     14.1 Dispute Resolution. Any dispute, claim or controversy arising out of or relating
to this Agreement or the breach, termination, enforcement, interpretation or validity thereof,
including the determination of the scope or applicability of this agreement to arbitrate, shall be

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determined by arbitration in New York, New York, before a panel of three arbitrators.
The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and
Procedures (the “Rules”). The arbitrators shall be selected pursuant to the Rules.
Judgment resulting from the arbitration may be entered in any court having jurisdiction. This
clause shall not preclude parties from seeking provisional remedies in aid of arbitration from a
New York state or federal court sitting in the City of New York, Borough of Manhattan. The
arbitrator may, in issuing judgment in the arbitration, allocate all or part of the costs of the
arbitration, including the fees of the arbitrator and the reasonable attorneys’ fees of the
prevailing party.

     14.2 Notices. All notices, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally or if mailed by
certified mail, return receipt requested, postage prepaid or if sent by overnight courier or sent
by facsimile (answerback confirmed) or by electronic mail, to the address set forth on Schedule A,
or such other address or to the attention of such other Person as the recipient party shall have
specified by prior written notice to the sending party. Any such communication shall be deemed to
have been received (i) when delivered, if personally delivered, sent by nationally-recognized
overnight courier or sent via facsimile (answerback confirmed) or electronic mail (if receipt is
confirmed) or (ii) on the fifth (5th) Business Day following the date of mailing, if sent by
certified mail.

     14.3 Entire Agreement. This Agreement (including any exhibits, schedules and other
attachments hereto) together with the Related Agreements (including any exhibits, schedules and
other attachments thereto) contains the entire understanding of the parties hereto with respect to
the subject matter hereof and thereof and supersedes all prior agreements and understandings
relating to the subject matter hereof and thereof. Each of the parties hereto further acknowledges
and agrees that, in entering into this Agreement and entering into the Related Agreements (to the
extent applicable), it has not in any way relied (and such reliance is hereby expressly disclaimed)
upon any oral or written agreements, statements, promises, information, arrangements,
understandings, representations or warranties, express or implied, not specifically set forth in
this Agreement or the Related Agreements.

     14.4 Governing Law. This Agreement shall be governed by, and construed and enforced
in accordance with, the laws of the State of Delaware without regard to its conflict of laws rules.

     14.5 Member Defaults; Waiver of Certain Damages. In addition to any specific remedies
set forth herein, if any Member is in Default, the Company and any Non-Defaulting Member shall have
the right to pursue, in a manner consistent with Section 14.1, such remedies as are available to
the Company or such Member at law and in equity in connection with such Default; provided, that
notwithstanding the foregoing or any other term or provision of this Agreement: EACH OF THE
PARTIES HERETO TO THE FULLEST EXTENT PERMITTED BY LAW IRREVOCABLY WAIVES ANY RIGHTS THAT THEY MAY
HAVE TO PUNITIVE, SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY DISPUTE, CLAIM OR
CONTROVERSY ARISING OUT OF, OR RELATING TO THIS AGREEMENT.

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     14.6 Assigns. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors and permitted assigns. Except as otherwise
expressly set forth herein, neither this Agreement nor the rights and obligations of any party
hereunder shall be assignable or transferable by such party without the prior written consent of
the other parties hereto.

     14.7 No Implied Rights or Remedies. Except as otherwise expressly provided herein,
nothing herein expressed or implied is intended or shall be construed to confer upon or to give any
Person, except the parties hereto, any rights or remedies under or by reason of this Agreement.

     14.8 Counterparts. This Agreement may be executed by facsimile and in multiple
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

     14.9 Construction. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rule of strict construction
will be applied against any party.

     14.10 Severability. If any provision of this Agreement is held to be illegal, invalid
or unenforceable under any present or future law, (a) such provision will be fully severable, (b)
this Agreement will be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom, and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as
may be possible.

     14.11 Consent to Jurisdiction. Each Member hereby submits to the exclusive
jurisdiction of the courts of general jurisdiction of the State of New York, Borough of Manhattan
and the federal courts of the United States of America located in the City of New York solely in
respect of any proceeding in aid of arbitration, including, without limitation, the enforcement of
an arbitral award issued pursuant to Section 14.1 and hereby waives, and agrees not to assert, as a
defense in any action, suit or proceeding that such action, suit or proceeding may not be brought
or is not maintainable in such courts or that its property is exempt or immune from execution, that
the suit, action or proceeding is brought in an inconvenient forum, or that the venue of the suit,
action or proceeding is improper. Service of process with respect thereto may be made upon any
Member by mailing a copy thereof by registered or certified mail, postage prepaid, to such party at
its address as provided in Schedule A, provided that service of process may be accomplished
in any other manner permitted by applicable Law.

     14.12 Waiver of Right to Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES ITS
RIGHTS TO A TRIAL BY JURY WITH RESPECT TO ANY DISPUTE, CLAIM OR CONTROVERSY ARISING OUT OF OR
RELATING TO THIS AGREEMENT.

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     14.13 Amendments. This Agreement may be amended with the consent of the Managing
Members; provided, however, that no such amendment may adversely affect the rights (a) of the
Series A Members unless the Series A Members shall have consented thereto in writing, (b) of the
Series D Members unless a majority in interest of the Series D Members shall have consented thereto
in writing or (c) the Series E Members unless a majority in interest of the Series E Members shall
have consented thereto in writing. Notwithstanding the foregoing provisions of this Section 14.13,
the Board may amend this Agreement without the consent of the Members as follows: (i) to reflect
changes made in the name of the Company; (ii) to make changes to ensure that the Company will not
be treated as an association taxable as a corporation for federal income tax purposes; (iii) to
prevent the Company from being deemed to be an “investment company” subject to the provisions of
the Investment Company Act; (iv) in connection with qualifying the Company to obtain limited
liability under the laws of any state; (v) to prevent any material adverse effect to the Company or
any Member arising from the application of legal restrictions (including ERISA or similar
legislation) to any Member or the Company, subject to the requirement that the Members not be
materially and adversely affected; (vi) to make a change that is necessary or desirable to cure any
ambiguity or inconsistency and to make changes that will not be inconsistent with this Agreement to
satisfy any requirements, conditions or guidelines contained in any opinion, directive, order,
ruling or regulation of any applicable Law or other rules or policies of any Self-Regulatory
Organization or governmental authority having jurisdiction over the Company, in each case subject
to the requirement that the Members not be materially and adversely affected; (vii) to make any
changes that, in the reasonable opinion of the Board, will have no material adverse effect on the
Members or on the Company; and (viii) to make any other change similar to the foregoing, subject to
the requirement that the Members not be materially and adversely affected. Prior to entering into
any amendment pursuant to this Section 14.13, the CEO shall notify the Members in writing of the
material terms of such amendment. In addition, the provisions of this Agreement (including
Schedule A) specifically referred to in Sections 2.1(b), 2.5, 3.3(g), 4.6(e), 4.7(a)(5), 4.7(b),
8.1(c) and 14.14 may be amended or deemed amended without the consent of the Members, in each case
as provided therein.

     14.14 Side Letters. With the approval of the Board, the Company may enter into a
separate agreement with any Member or prospective Member, the terms of which may vary the terms of
this Agreement as they apply to such Member or prospective Member, provided that the terms
of any such agreement would not be expected to materially and adversely affect any other Member.

[Signature page follows]

61

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
stated.

	 	 	 	 	 
	 	THE COMPANY:

JEFFERIES HIGH YIELD TRADING, LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	SERIES A MEMBER:

JEFFERIES & COMPANY, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	SERIES B MEMBERS:

JEFFERIES GROUP, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	JEFFERIES & COMPANY, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	SERIES C MEMBER:

LEUCADIA NATIONAL CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

[Signature Page for Amended and Restated Limited Liability Company Agreement of Jefferies High

Yield Holdings, LLC]

 

	 	 	 	 	 
	 	SERIES D MEMBER:

JEFFERIES HIGH YIELD PARTNERS, LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	SERIES E MEMBER:

JEFFERIES EMPLOYEES OPPORTUNITY FUND LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

[Signature
Page for Amended and Restated Limited Liability Company Agreement of Jefferies
High Yield Holdings, LLC]

 

Schedule A

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Aggregate	 	 	Percentage	 
	Member	 	Notice Address	 	 	Commitment	 	 	Capital Contributions	 	 	Interest	 
	Series A Interests:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Jefferies & Company, Inc.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0%	 
	Series B Interests:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[Jefferies Group, Inc.]
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Jefferies & Company, Inc.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Series C Interests:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[Leucadia National Corporation]
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Series D Interests
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Jefferies High Yield Partners, LLC
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Series E Interests
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Jefferies
Employees Opportunity Fund LLC
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	100%	 

 

Schedule B

INITIAL DIRECTORS

Appointed by JGI:

1.

2.

Appointed by Leucadia:

1.

2.

 

Schedule C

INITIAL OFFICERS

CEO:

President:

CFO:

Secretary:

 

Exhibit A

SERIES A CONTRIBUTION AGREEMENT

(see attached)

 

Exhibit B

SERIES B CONTRIBUTION AGREEMENT

(see attached)

 

Exhibit C

SERIES C CONTRIBUTION AGREEMENT

(see attached)

 

Exhibit D

SERVICES AGREEMENT

(see attached)

 

EXHIBIT B

SERIES A CONTRIBUTION AGREEMENT

 

 

JEFFERIES HIGH YIELD HOLDINGS, LLC

SERIES A CONTRIBUTION AGREEMENT

          This SERIES A CONTRIBUTION AGREEMENT (this “Agreement”), dated as of ___, 2007, by
and between Jefferies & Company, Inc., a Delaware corporation (“Jefco”), and Jefferies High
Yield Holdings, LLC, a Delaware limited liability company (the “Company”). All capitalized
terms used herein without definition shall have the meanings ascribed to them in the Amended and
Restated Limited Liability Company Agreement of the Company, dated as of the date hereof (as such
agreement may be amended, restated, modified or supplemented from time to time, the “Operating
Agreement”).

RECITALS

          WHEREAS, in accordance with and pursuant to the Master Agreement for the Formation of a
Limited Liability Company (the “Master Agreement”), Jefco desires to make a Capital
Contribution to the Company in the form of a contribution of certain assets of Jefco’s High Yield
Division; and

          WHEREAS, in accordance with and pursuant to the Operating Agreement and the Series B
Contribution Agreement, JGI and Jefco have agreed to commit capital to the Company and to make
Capital Contributions to the Company, or at the direction of the Company, to a wholly-owned
subsidiary of the Company, in the form securities and cash, including the contribution of Jefco’s
membership interests in JPOF II to the capital of the Company; and

          WHEREAS, in accordance with and pursuant to the Operating Agreement and the Series C
Contribution Agreement, Leucadia desires to commit to contribute capital to the Company and to
make, or to cause to be made on its behalf, an initial Capital Contribution to the Company in the
form of a cash contribution and a contribution of the membership interests in JPOF II held by
LUK-HY FUND, LLC, a Delaware limited liability company and a wholly-owned indirect subsidiary of
Leucadia.

          NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this
Agreement and in the Operating Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     Section 1. Contributions. Jefco hereby agrees that, at the Closing, Jefco will
assign, convey, transfer and deliver to the Company or, at the direction of the Company, to a
wholly-owned subsidiary of the Company, as a Capital Contribution, all of its right, title and
interest in and to the Brokerage Assets identified on Exhibit A hereto.

     Section 2. Acceptance of Contributions by the Company. The Company and Jefco hereby
agree that, in consideration for the contribution of Brokerage Assets made hereunder, Jefco shall
be deemed to have made a Capital Contribution to the Company in the amount of $___. The
Company agrees to accept the Brokerage Assets at the Closing, and to assume all of Jefco’s
obligations with respect thereto, to the extent such obligations arise from and after the Closing
Date.

 

 

     Section 3. Representations, Warranties and Agreements of Jefco. Subject to the
Disclosure Schedule attached hereto as Exhibit B and incorporated by reference herein (the
“Disclosure Schedule”), Jefco hereby represents and warrants to, and agrees with, the
Company and each other Person who acquires an interest in the Company as follows:

     (a) Organization, Power and Authority. Jefco has all requisite power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. Jefco (i) is duly
and validly formed, validly existing and in good standing under the laws of the jurisdiction in
which it is organized; and (ii) has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now conducted and as currently proposed to be conducted.
Jefco is presently duly qualified, licensed to do business and in good standing as a corporation
in the State of New York and each jurisdiction where the failure to be so qualified or licensed
could reasonably be expected to have a material adverse effect on the business, properties or
financial condition of Jefco. Jefco is presently qualified, licensed to do business and in good
standing in each jurisdiction in which the failure to be so qualified or licensed could reasonably
be expected to have a material adverse effect on the business, properties or financial condition of
the Company (a “Material Adverse Effect”).

     (b) Execution; Enforceability. This Agreement has been duly executed and delivered by
Jefco and, assuming due authorization, execution and delivery hereof by the Company, is a valid and
legally binding obligation of Jefco, enforceable against it in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, reorganization, moratorium or other
similar laws relating to the enforcement of creditors’ rights generally and by general principles
of equity.

     (c) No Conflict with Other Instruments, Laws. The execution, delivery and performance
by Jefco of this Agreement and the consummation of the transactions contemplated hereby do not and
will not result in the violation of, constitute a default or require notice or consent under, or
conflict with, (i) any term of Jefco’s certificate of incorporation or other constitutive
documents; (ii) any term of any mortgage, indenture, contract, agreement or instrument to which
Jefco or any of its subsidiaries is a party or by which Jefco, or any of Jefco’s subsidiaries is
bound; (iii) any judgment, decree, order, law, statute, rule or regulation applicable to Jefco or
any of Jefco’s subsidiaries; or result in the creation or imposition of any material lien upon any
property, asset or revenue of Jefco, or any of Jefco’s subsidiaries or the suspension, revocation,
forfeiture, impairment or non-renewal of any material permit, license, authorization or approval
applicable to Jefco or any of Jefco’s subsidiaries or their respective businesses or operations, or
any of their respective assets or properties except for any lien, suspension, revocation,
forfeiture, impairment or non-renewal that would not, individually or in the aggregate, have a
Material Adverse Effect.

     (d) Title. Jefco has good and valid title to, and is the beneficial and record owner
of, the Brokerage Assets. Jefco owns the Brokerage Assets free and clear of any liabilities,
obligations, pledges, security interests, options, rights of first refusal, rights of first offer,
liens, claims, encumbrances or charges.

     (e) Government Consents. Except for the NASD Approval (as defined in the Master
Agreement), no consent, approval, order or authorization of or registration, qualification,

2

 

designation, declaration or filing with any domestic, foreign or local governmental authority
on the part of Jefco or any of Jefco’s subsidiaries is required in connection with the valid
execution, delivery and performance under this Agreement, except to the extent that the failure to
obtain any such consent, approval, order, authorization, registration, qualification, designation,
declaration or filing would not, individually or in the aggregate, have a Material Adverse Effect.

     (f) Compliance with Laws/Permits. Neither Jefco nor any of Jefco’s subsidiaries is in
violation of any applicable statute, rule, regulation, order or restriction of any domestic,
foreign or local government or any instrumentality or agency thereof in respect of the Brokerage
Assets or otherwise relating to Jefco’s ownership interest in the Brokerage Assets, which violation
could individually or in the aggregate have a Material Adverse Effect.

     (g) Litigation. There is no action, suit, proceeding or investigation pending or, to
Jefco’s knowledge, currently threatened against Jefco or any of Jefco’s subsidiaries that questions
the validity of this Agreement, or the right of Jefco to enter into this Agreement, or to
consummate the transactions contemplated hereby, or otherwise relating to Jefco’s ownership
interest in the Brokerage Assets, or that would otherwise result in a Material Adverse Effect.
Neither Jefco nor any of Jefco’s subsidiaries are parties or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or instrumentality
that would result in a Material Adverse Effect.

     (h) Bankruptcy. Jefco is not the subject of a voluntary or involuntary petition for
relief under the United States Bankruptcy Code or any other jurisdiction, and is not a named
defendant in any court action wherein the relief requested or sought includes a receivership,
assignment for benefit or creditors, or other liquidating procedure. Jefco has no any intention of
filing any bankruptcy or insolvency proceeding for protection from its creditors. Jefco is
generally able to pay its debts in the ordinary course as they become due.

     Section 4. Closings and Capital Contributions.

     (a) Closings. Subject to Section 4(b), the closing of the transactions contemplated
hereunder, including Jefco’s contribution of Brokerage Assets to the Company (the
“Closing”), shall take place at such place as shall be mutually agreed by the Company and
Jefco, and on the date mutually agreed by the parties that is not less than five (5) Business Days
immediately following the satisfaction of the conditions set forth in this Section 4 or on such
other date as shall be mutually agreed by the Company and Jefco (the “Closing Date”).

     (b) Conditions for the Company’s Obligation to Consummate the Closing. The obligation
of the Company to consummate the Closing shall be subject to the satisfaction of each of the
following conditions, any of which may be waived, in writing, by the Company:

          (i) Except as disclosed in the Disclosure Schedule, (i) the representations and warranties of
Jefco in this Agreement shall be true and correct in all respects on and as of the date of this
Agreement, and (ii) Jefco shall have performed and complied in all respects with all covenants,
obligations and conditions of this Agreement required to be performed and complied with by it as of
the Closing.

3

 

          (ii) The Company shall have been provided with a certificate executed on behalf of Jefco by an
authorized officer of Jefco to the effect set forth in Section 4(b)(i).

     (c) Additional Conditions for Obligation to Consummate the Closing. The obligation of
each of Jefco and the Company to consummate the Closing shall be subject to the receipt by JPOF II
of the NASD Approval.

     Section 5. Survival of Agreements, Representations and Warranties. All covenants,
agreements, representations and warranties of the parties contained herein shall survive the
execution and delivery of this Agreement, any investigation at any time made by Jefco or on its
behalf and the contribution of the Brokerage Assets.

     Section 6. Further Assurances. Each party hereto shall execute, deliver, file and
record, or cause to be executed, delivered, filed and recorded, such further agreements,
instruments and other documents and take, or cause to be taken, such further actions, as any other
party hereto may reasonably request as being necessary or advisable to effect or evidence the
transactions contemplated by this Agreement.

     Section 7. General Provisions.

     (a) Notice. All notices, requests and other communications required or permitted to
be given by or to any party hereto pursuant to this Agreement shall be in writing and shall be
deemed to have been duly given or delivered for all purposes hereof (i) when personally delivered
to the intended recipient, (ii) on the third Business Day after mailing, if mailed from within the
United States by first class U.S. mail, postage prepaid, (iii) on the date of sending, if sent by
prepaid telegram, facsimile transmission, telex or electronic mail, or (iv) on the first Business
Day after transmittal thereof to a reputable overnight courier service for overnight delivery to
the intended recipient. All such notices, requests and other communications shall be addressed, in
each case: (i) if to the Company, to Jefferies High Yield Holdings, LLC, [INSERT ADDRESS],
facsimile: (___) ___-___, Attn: ___; and (ii) if to Jefco, to Jefferies &
Company, Inc., [INSERT ADDRESS], facsimile: (___) ___-___, Attn: ___.

     (b) Binding Nature. This Agreement shall be binding upon Jefco, the Company and their
respective successors and permitted assigns.

     (c) Amendments. Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated except with the written consent of Jefco and the Company.

     (d) No Assignment. Jefco shall not assign or otherwise transfer this Agreement or any
of its rights or obligations hereunder to any other Person, and any such purported assignment or
transfer shall be null and void, except that Jefco may assign its rights to any wholly-owned
subsidiary of Jefco, which assignment shall not relieve Jefco from its obligations hereunder.

     (e) Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which taken together shall constitute one Agreement.

4

 

     (f) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to any rules or principles of conflicts of
law that would cause the application of the laws of any jurisdiction other than the State of
Delaware.

     (g) Entire Agreement. This Agreement and the Operating Agreement and the Schedules
and Exhibits thereto, supersede any and all oral or written agreements or understandings heretofore
made, and contain the entire agreement of the parties hereto or thereto, with respect to the
subject matter hereof or thereof.

     (h) Section Headings. Captions in this Agreement are for convenience only and do not
define, limit or otherwise affect any term of this Agreement. Unless the context otherwise
expressly requires, all reference herein to Sections are to Sections of this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

5

 

     IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by a duly authorized
officer of each party hereto as of the date first above written.

	 	 	 	 	 	 	 
	 	 	JEFFERIES & COMPANY, INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 

	 	 	 	 	 	 	 
	 	 	JEFFERIES HIGH YIELD HOLDINGS, LLC
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 

6

 

Exhibit A

     1. All goodwill associated with the Business.

     2. Proprietary information of Jefco relating specifically to operation of this Business.

A-1

 

EXHIBIT C

SERIES B CONTRIBUTION AGREEMENT

 

 

JEFFERIES HIGH YIELD HOLDINGS, LLC

SERIES B CONTRIBUTION AGREEMENT

          This SERIES B CONTRIBUTION AGREEMENT (this “Agreement”), dated as of ___, 2007, by
and among Jefferies Group, Inc., a Delaware corporation (“JGI”), Jefferies & Company, Inc.,
a Delaware corporation (“Jefco”), and Jefferies High Yield Holdings, LLC, a Delaware
limited liability company (the “Company”). All capitalized terms used herein without
definition shall have the meanings ascribed to them in the Amended and Restated Limited Liability
Company Agreement of the Company, dated as of the date hereof (as such agreement may be amended,
restated, modified or supplemented from time to time, the “Operating Agreement”).

RECITALS

          WHEREAS, Jefco is a wholly-owned indirect subsidiary of JGI; and

          WHEREAS, the Company is a wholly-owned subsidiary of JGI; and

          WHEREAS, Jefco is a member of Jefferies Partners Opportunity Fund II, LLC, a Delaware limited
liability company (“JPOF II”); and

          WHEREAS, in accordance with and pursuant to the Master Agreement for the Formation of a
Limited Liability Company (the “Master Agreement”), Jefco desires to commit to contribute
capital to the Company and to make a Capital Contribution to the Company or, at the direction of
the Company, to a wholly-owned subsidiary of the Company, in the form of a contribution of
securities and membership interests in JPOF II held by Jefco; and

          WHEREAS, in accordance with and pursuant to the Master Agreement for the Formation of a
Limited Liability Company, JGI desires to commit to contribute capital to the Company and to make a
Capital Contribution to the Company in the form of a cash contribution; and

          WHEREAS, in accordance with and pursuant to the Operating Agreement and the Series A
Contribution Agreement, Jefco desires to contribute the Brokerage Assets to the Company; and

          WHEREAS, in accordance with and pursuant to the Operating Agreement and the Series C
Contribution Agreement, Leucadia desires to commit to contribute capital to the Company and to
make, or to cause to be made on its behalf, an initial Capital Contribution to the Company in the
form of a cash contribution and a contribution of membership interests in JPOF II held by LUK-HY
FUND, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Leucadia.

          NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this
Agreement and in the Operating Agreement, and for other good and valuable

 

 

consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:

     Section 1. Commitment. JGI hereby commits to contribute, or to cause Jefco or another
of its Affiliates (including Jefferies Employees Opportunity Fund, LLC, a Delaware limited
liability company (“JEOF”)) to contribute to the Company or, at the direction of the
Company, to a wholly-owned subsidiary of the Company, cash and/or securities having a Market Value
(determined as of the date of each such Capital Contribution) equal, in the aggregate (but
exclusive of any value attributed to the Brokerage Assets contributed by Jefco pursuant to the
Series A Contribution Agreement), to $600 million (the “Commitment” of JGI).

     Section 2. Contributions by Jefco; Acceptance by the Company.

     (a) Contributions by Jefco. In partial satisfaction of JGI’s Commitment, Jefco hereby
agrees that, at the Closing, (a) Jefco will assign, convey, transfer and deliver, as a Capital
Contribution to the Company all of its right, title and interest in the membership interests held
by Jefco in JPOF II (including the Class B Interest held by Jefco) and the capital account
maintained by JPOF II for Jefco with respect to such interests, including, without, limitation,
Jefco’s right to receive allocations and distributions from JPOF II (collectively, the “JPOF II
Membership Interest”), and all other rights with respect to the JPOF II Membership Interest
under the operating agreement of JPOF II (the “JPOF II Operating Agreement”) and (b) Jefco
will assign, convey, transfer and deliver, as a Capital Contribution, Securities having a Market
Value equal to $___ (the Securities comprising such position to be referred to as the
“Contributed Securities”; such contribution to be referred to as the “Securities
Contribution”).

     (b) Acceptance by the Company. The Company and Jefco hereby agree that, in
consideration for the JPOF II Membership Interest and the Securities Contribution, Jefco shall be
deemed to have made Capital Contributions in the amounts of
$___ and $___,
respectively, for an aggregate initial Capital Contribution in the amount of $___, and that
the value thereof shall reduce the Commitment of JGI by an equal amount. The Company agrees to
accept the JPOF II Membership Interest and the Securities Contribution at the Closing, and to
assume all obligations with respect to the JPOF II Membership Interest (as a member but not as a
Manager) arising from and after the Closing Date under the JPOF II Operating Agreement.

     Section 3. Contributions by JGI; Acceptance by the Company.

     (a) Contributions by JGI. JGI hereby agrees that, at the Closing, JGI will contribute
to the Company in cash, as a Capital Contribution, an amount equal to
$___ (the “Initial
Cash Contribution”).

     (b) Acceptance by the Company. The Company and
 JGI hereby agree that, in
consideration for the Initial Cash Contribution made hereunder, JGI shall be deemed to have made a
Capital Contribution to the Company in the amount of $___. The Company agrees to, accept
the Initial Cash Contribution at the Closing, and that the value thereof shall reduce the
Commitment of JGI by an equal amount.

2

 

     Section 4. Contributions by JEOF; Acceptance by the Company. The Company and JGI
hereby agree that any Capital Contribution made by JEOF to the Company shall have such value as is
agreed between the Company and JEOF at the time of such Capital Contribution, and that the value
thereof shall reduce the Commitment of JGI by an equal amount.

     Section 5. Representations, Warranties and Agreements of Jefco and JGI. Subject to
the Disclosure Schedule attached hereto as Exhibit A and incorporated by reference herein
(the “Disclosure Schedule”), each of Jefco and JGI (each a “Contributor”), on a
several and not joint basis, and solely as to itself as a Contributor except as otherwise required
by the context, hereby represents and warrants to, and agrees with, the Company and each other
Person who acquires an interest in the Company as follows:

     (a) Organization, Power and Authority. Contributor has all requisite power and
authority to execute and deliver this Agreement, and to perform its obligations hereunder.
Contributor (i) is duly and validly formed, validly existing and in good standing under the laws of
the jurisdiction in which it is organized; and (ii) has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now conducted and as currently
proposed to be conducted. Contributor is presently duly qualified, licensed to do business and in
good standing as a corporation in the State of New York, and each jurisdiction where the failure to
be so qualified or licensed could reasonably be expected to have a material adverse effect on the
business, properties or financial condition of Contributor. Contributor is presently duly
qualified, licensed to do business and in good standing in each jurisdiction where the failure to
be so qualified or licensed could reasonably be expected to have a material adverse effect on the
business, properties or financial condition of the Company (a “Material Adverse Effect”).

     (b) Execution; Enforceability. This Agreement has been duly executed and delivered by
Contributor and, assuming due authorization, execution and delivery hereof by the Company, is a
valid and legally binding obligation of Contributor, enforceable against it in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy, reorganization,
moratorium or other similar laws relating to the enforcement of creditors’ rights generally and by
general principles of equity.

     (c) No Conflict with Other Instruments, Laws. The execution, delivery and performance
by Contributor of this Agreement and the consummation of the transactions contemplated hereby do
not and will not result in the violation of, constitute a default or require notice or consent
under, or conflict with, (i) any term of Contributor’s certificate of incorporation or other
constitutive documents; (ii) any term of any mortgage, indenture, contract, agreement or instrument
to which Contributor or any of its subsidiaries is a party or by which Contributor, or any of
Contributor’s subsidiaries is bound; (iii) any judgment, decree, order, law, statute, rule or
regulation applicable to Contributor or any of Contributor’s subsidiaries; or (iv) result in the
creation or imposition of any material lien upon any property, asset or revenue of Contributor, or
any of Contributor’s subsidiaries or the suspension, revocation, forfeiture, impairment or
non-renewal of any material permit, license, authorization or approval applicable to Contributor or
any of Contributor’s subsidiaries or their respective businesses or operations, or any of their
respective assets or properties except for any lien, suspension, revocation, forfeiture, impairment
or non-renewal that would not, individually or in the aggregate, have a Material Adverse Effect.

3

 

     (d) Title. Jefco has good and valid title to, and is the beneficial and record owner
of, the JPOF II Membership Interest and the Securities. Jefco owns the JPOF Membership Interest
and the Securities free and clear of any liabilities, obligations, pledges, security interests,
options, rights of first refusal, rights of first offer, liens, claims, encumbrances or charges.

     (e) Government Consents. Except for the NASD Approval (as defined in the Master
Agreement), no consent, approval, order or authorization of or registration, qualification,
designation, declaration or filing with any domestic, foreign or local governmental authority on
the part of Contributor, or any of Contributor’s subsidiaries is required in connection with the
valid execution, delivery and performance under this Agreement, except to the extent that the
failure to obtain any such consent, approval, order, authorization, registration, qualification,
designation, declaration or filing would not, individually or in the aggregate, have a Material
Adverse Effect.

     (f) Compliance with Laws/Permits. Neither Jefco nor any of Jefco’s subsidiaries is in
violation of any applicable statute, rule, regulation, order or restriction of any domestic,
foreign or local government or any instrumentality or agency thereof in respect of the JPOF II
Membership Interest or the Securities, or otherwise relating to Jefco’s direct or indirect
ownership interest in JPOF II or the Securities, which violation could individually or in the
aggregate have a Material Adverse Effect.

     (g) Litigation. There is no action, suit, proceeding or investigation pending or, to
Contributor’s knowledge, currently threatened against Contributor or any of Contributor’s
subsidiaries that questions the validity of this Agreement, or the right of Contributor to enter
into this Agreement, or to consummate the transactions contemplated hereby, or otherwise relating
to the ownership interest in JPOF II or the Securities (in the case of Jefco), or that would
otherwise result in a Material Adverse Effect. Neither Contributor nor any of Contributor’s
subsidiaries are parties or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality that would result in a Material Adverse
Effect.

     (h) Bankruptcy. Contributor is not the subject of a voluntary or involuntary petition
for relief under the United States Bankruptcy Code or any other jurisdiction, and is not a named
defendant in any court action wherein the relief requested or sought includes a receivership,
assignment for benefit or creditors, or other liquidating procedure. Contributor has no intention
of filing any bankruptcy or insolvency proceeding for protection from its creditors. Contributor
is generally able to pay its debts in the ordinary course as they become due.

4

 

     Section 6. Closings and Capital Contributions.

     (a) Closings. Subject to Section 4(b), the closing of the transactions contemplated
hereunder, including the Initial Cash Contribution and Jefco’s contribution of the JPOF II
Membership Interest and the Securities to the Company (the “Closing”), shall take place at
such place as shall be mutually agreed by and between the Company and JGI, and on the date mutually
agreed by the parties that is not less than five (5) Business Days immediately following the
satisfaction of the conditions set forth in this Section 4 or on such other date as shall be
mutually agreed by and between the Company and JGI (the “Closing Date”).

     (b) Conditions for the Company’s Obligation to Consummate the Closing. The obligation
of the Company to consummate the Closing shall be subject to the satisfaction of each of the
following conditions, any of which may be waived, in writing, by the Company:

          (i) Except as disclosed in the Disclosure Schedule, (i) the representations and warranties of
each of Jefco and JGI in this Agreement shall be true and correct in all respects on and as of the
date of this Agreement, and (ii) each of Jefco and JGI shall have performed and complied in all
respects with all covenants, obligations and conditions of this Agreement required to be performed
and complied with by it as of the Closing.

          (ii) The Company shall have been provided with a certificate executed on behalf of each of
Jefco and JGI by an authorized officer of each of Jefco and JGI to the effect set forth in Section
4(b)(i).

     (c) Additional Condition for Obligation to Consummate the Closing. The obligation of
each of Jefco, JGI and the Company to consummate the Closing shall be subject to the receipt by
JPOF II of the NASD Approval.

     Section 7. Survival of Agreements, Representations and Warranties. All covenants,
agreements, representations and warranties of the parties contained herein shall survive the
execution and delivery of this Agreement, any investigation at any time made by each of Jefco or
JGI or on its behalf and the contribution of the Initial Cash Contribution, the Securities and the
JPOF II Membership Interest.

     Section 8. Further Assurances. Each party hereto shall execute, deliver, file and
record, or cause to be executed, delivered, filed and recorded, such further agreements,
instruments and other documents and take, or cause to be taken, such further actions, as any other
party hereto may reasonably request as being necessary or advisable to effect or evidence the
transactions contemplated by this Agreement.

     Section 9. General Provisions.

     (a) Notice. All notices, requests and other communications required or permitted to
be given by or to any party hereto pursuant to this Agreement shall be in writing and shall be
deemed to have been duly given or delivered for all purposes hereof (i) when personally delivered
to the intended recipient, (ii) on the third Business Day after mailing, if mailed from within the
United States by first class U.S. mail, postage prepaid, (iii) on the date of sending, if

5

 

sent by prepaid telegram, facsimile transmission, telex or electronic mail, or (iv) on the
first Business Day after transmittal thereof to a reputable overnight courier service for overnight
delivery to the intended recipient. All such notices, requests and other communications shall be
addressed, in each case: (i) if to the Company, to Jefferies High Yield Holdings, LLC, [INSERT
ADDRESS], facsimile: (    )
    -    ,
Attn:     ; and (ii) if to Jefco or JGI, to
such party at [INSERT ADDRESS], facsimile:
(    )
    -    ,
Attn:     .

     (b) Binding Nature. This Agreement shall be binding upon Jefco, JGI, the Company and
their respective successors and permitted assigns.

     (c) Amendments. Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated except with the written consent of Jefco, JGI, and the Company.

     (d) No Assignment. Neither Jefco nor JGI shall assign or otherwise transfer this
Agreement or any of its rights or obligations hereunder to any other Person, and any such purported
assignment or transfer shall be null and void, except that Jefco may assign its rights to any
wholly-owned subsidiary of Jefco, which assignment shall not relieve Jefco from its obligations
hereunder, and JGI may assign its rights to any wholly-owned subsidiary of JGI, which assignment
shall not relieve JGI from is obligations hereunder.

     (e) Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which taken together shall constitute one Agreement.

     (f) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to any rules or principles of conflicts of
law that would cause the application of the laws of any jurisdiction other than the State of
Delaware.

     (g) Entire Agreement. This Agreement, the other Related Agreements to which Jefco,
JGI and the Company are each a party, the Operating Agreement and the Schedules and Exhibits
thereto, supersede any and all oral or written agreements or understandings heretofore made, and
contain the entire agreement of the parties hereto or thereto, with respect to the subject matter
hereof or thereof.

     (h) Section Headings. Captions in this Agreement are for convenience only and do not
define, limit or otherwise affect any term of this Agreement. Unless the context otherwise
expressly requires, all reference herein to Sections are to Sections of this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

6

 

     IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by a duly authorized
officer of each party hereto as of the date first above written.

	 	 	 	 	 	 	 
	 	 	JEFFERIES & COMPANY, INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 

	 	 	 	 	 	 	 
	 	 	JEFFERIES GROUP, INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 

	 	 	 	 	 	 	 
	 	 	JEFFERIES HIGH YIELD HOLDINGS, LLC
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 

7

 

EXHIBIT D

SERIES C CONTRIBUTION AGREEMENT

 

 

JEFFERIES HIGH YIELD HOLDINGS, LLC

SERIES C CONTRIBUTION AGREEMENT

          This SERIES C CONTRIBUTION AGREEMENT (this “Agreement”), dated as of ___, 2007, by
and between Leucadia National Corporation, a Delaware corporation (“Leucadia”), and
Jefferies High Yield Holdings, LLC, a Delaware limited liability company (the “Company”).
All capitalized terms used herein without definition shall have the meanings ascribed to them in
the Amended and Restated Limited Liability Company Agreement of the Company, dated as of the date
hereof (as such agreement may be amended, restated, modified or supplemented from time to time, the
“Operating Agreement”).

RECITALS

          WHEREAS, LUK-HY FUND, LLC, a Delaware limited liability company (“LUK-HY”), is a
wholly-owned indirect subsidiary of Leucadia; and

          WHEREAS, LUK-HY is a member of Jefferies Partners Opportunity Fund II, LLC, a Delaware limited
liability company (“JPOF II”); and

          WHEREAS, in accordance with and pursuant to the Master Agreement for the Formation of a
Limited Liability Company (the “Master Agreement”), Leucadia desires to commit to
contribute capital to the Company and to make, or to cause to be made on its behalf, an initial
Capital Contribution to the Company in the form of a cash contribution and a contribution of the
membership interests in JPOF II held by LUK-HY; and

          WHEREAS, in accordance with and pursuant to the Operating Agreement and the Series A
Contribution Agreement, Jefco desires to contribute the Brokerage Assets to the Company; and

          WHEREAS, in accordance with and pursuant to the Operating Agreement and the Series B
Contribution Agreement, JGI and Jefco have agreed to commit capital to the Company and to make
Capital Contributions to the Company, or, at the direction of the Company, to a wholly-owned
subsidiary of the Company, in the form of securities and cash, including the contribution of
Jefco’s membership interests in JPOF II to the capital of the Company.

          NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this
Agreement and in the Operating Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     Section 1. Commitment. Leucadia hereby commits to contribute, or to cause LUK-HY or
another of its Affiliates to contribute to the Company, or, at the direction of the Company, to a
wholly-owned subsidiary of the Company, cash and/or securities having a Market Value (determined as
of the date of each such Capital Contribution) equal, in the aggregate, to $600 million (the
“Commitment” of Leucadia).

 

 

     Section 2. Contributions. Leucadia hereby agrees that, at the Closing, Leucadia will cause
LUK-HY to (a) contribute to the Company in cash, as a Capital Contribution, an amount equal to
$___ (the “Initial Cash Contribution”), and (b) assign, convey, transfer and
deliver, as a Capital Contribution, all of its right, title and interest in, to and under the
operating agreement of JPOF II (the “JPOF II Operating Agreement”) and the capital account
maintained by JPOF II for LUK-HY, including, without, limitation, LUK-HY’s membership interest in
JPOF II and its right to receive allocations and distributions from JPOF II under the JPOF II
Operating Agreement (collectively, the “JPOF II Membership Interest”).

     Section 3. Acceptance of Contributions by the Company. The Company and Leucadia
hereby agree that, in consideration for the Initial Cash Contribution and the contribution of its
JPOF II Membership Interest, Leucadia shall be deemed to have made a Capital Contribution in the
amount of $___ and $___, respectively, for an aggregate initial Capital Contribution
in the amount of $___, and that the value thereof shall reduce the Commitment of Leucadia by
an equal amount. The Company agrees to accept the Initial Cash Contribution and the JPOF II
Membership Interest at the Closing, and thereupon to assume all obligations with respect to the
JPOF II Membership Interest arising from and after the Closing Date under the JPOF II Operating
Agreement.

     Section 4. Representations, Warranties and Agreements of Leucadia. Subject to the
Disclosure Schedule attached hereto as Exhibit A and incorporated by reference herein (the
“Disclosure Schedule”), Leucadia hereby represents and warrants to, and agrees with, the
Company and each other Person who acquires an interest in the Company as follows:

     (a) Organization, Power and Authority. Leucadia has all requisite power and authority
to execute and deliver this Agreement, and to perform its obligations hereunder. Each of Leucadia
and LUK-HY (i) is duly and validly formed, validly existing and in good standing under the laws of
the jurisdiction in which it is organized; and (ii) has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now conducted and as currently
proposed to be conducted. Leucadia is presently duly qualified, licensed to do business and in
good standing as a corporation in the State of New York, and each jurisdiction where the failure to
be so qualified or licensed could reasonably be expected to have a material adverse effect on the
business, properties or financial condition of Leucadia. LUK-HY is presently duly qualified,
licensed to do business and in good standing as a limited liability company in the State of
Delaware. LUK-HY is presently duly qualified, licensed to do business and in good standing in each
jurisdiction where the failure to be so qualified or licensed could reasonably be expected to have
a material adverse effect on the business, properties or financial condition of the Company (a
“Material Adverse Effect”).

     (b) Execution; Enforceability. This Agreement has been duly executed and delivered by
Leucadia and, assuming due authorization, execution and delivery hereof by the Company, is a valid
and legally binding obligation of Leucadia, enforceable against it in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, reorganization, moratorium or
other similar laws relating to the enforcement of creditors’ rights generally and by general
principles of equity.

2

 

     (c) No Conflict with Other Instruments, Laws. The execution, delivery and performance by
Leucadia of this Agreement and the consummation of the transactions contemplated hereby do not and
will not result in the violation of, constitute a default or require notice or consent under, or
conflict with, (i) any term of Leucadia’s certificate of incorporation or other constitutive
documents; (ii) any term of any mortgage, indenture, contract, agreement or instrument to which
Leucadia or any of its subsidiaries is a party or by which Leucadia, or any of Leucadia’s
subsidiaries is bound; (iii) any judgment, decree, order, law, statute, rule or regulation
applicable to Leucadia, LUK-HY or any of Leucadia’s other subsidiaries; or (iv) result in the
creation or imposition of any material lien upon any property, asset or revenue of Leucadia, or any
of Leucadia’s subsidiaries or the suspension, revocation, forfeiture, impairment or non-renewal of
any material permit, license, authorization or approval applicable to Leucadia, LUK-HY or any of
Leucadia’s other subsidiaries or their respective businesses or operations, or any of their
respective assets or properties except for any lien, suspension, revocation, forfeiture, impairment
or non-renewal that would not, individually or in the aggregate, have a Material Adverse Effect.

     (d) Title. LUK-HY has good and valid title to, and is the beneficial and record owner
of, the JPOF II Membership Interest, which membership interest is owned by LUK-HY free and clear of
any liabilities, obligations, pledges, security interests, options, rights of first refusal, rights
of first offer, liens, claims, encumbrances or charges.

     (e) Government Consents. Except for the NASD Approval (as defined in the Master
Agreement), no consent, approval, order or authorization of or registration, qualification,
designation, declaration or filing with any domestic, foreign or local governmental authority on
the part of Leucadia, LUK-HY or any of Leucadia’s other subsidiaries is required in connection with
the valid execution, delivery and performance under this Agreement, except to the extent that the
failure to obtain any such consent, approval, order, authorization, registration, qualification,
designation, declaration or filing would not, individually or in the aggregate, have a Material
Adverse Effect.

     (f) Compliance with Laws/Permits. Neither Leucadia, LUK-HY nor any of Leucadia’s
other subsidiaries is in violation of any applicable statute, rule, regulation, order or
restriction of any domestic, foreign or local government or any instrumentality or agency thereof
in respect of the JPOF II Membership Interest or otherwise relating to Leucadia’s or LUK-HY’s
direct or indirect ownership interest in JPOF II, which violation could individually or in the
aggregate have a Material Adverse Effect.

     (g) Litigation. There is no action, suit, proceeding or investigation pending or, to
Leucadia’s knowledge, currently threatened against Leucadia, LUK-HY or any of Leucadia’s other
subsidiaries that questions the validity of this Agreement, or the right of Leucadia to enter into
this Agreement, or to consummate the transactions contemplated hereby, or otherwise relating to
Leucadia’s or LUK-HY’s direct or indirect ownership interest in JPOF II, or that would otherwise
result in a Material Adverse Effect. Neither Leucadia, LUK-HY nor any of Leucadia’s other
subsidiaries are parties or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality that would result in a Material Adverse
Effect.

3

 

     (h) Bankruptcy. Neither Leucadia nor LUK-HY is the subject of a voluntary or
involuntary petition for relief under the United States Bankruptcy Code or any other jurisdiction,
or is a named defendant in any court action wherein the relief requested or sought includes a
receivership, assignment for benefit or creditors, or other liquidating procedure. Neither
Leucadia nor LUK-HY has any intention of filing any bankruptcy or insolvency proceeding for
protection from its creditors. Each of Leucadia and LUK-HY is generally able to pay its debts in
the ordinary course as they become due.

     Section 5. Closings and Capital Contributions.

     (a) Closings. Subject to Section 4(b), the closing of the transactions contemplated
hereunder, including the Initial Cash Contribution and LUK-HY’s contribution of the JPOF II
Membership Interest to the Company (the “Closing”), shall take place at such place as shall
be mutually agreed by the Company and Leucadia, and on the date mutually agreed by the parties that
is not less than five (5) Business Days immediately following the satisfaction of the conditions
set forth in this Section 4 or on such other date as shall be mutually agreed by the Company and
Leucadia (the “Closing Date”).

     (b) Conditions for the Company’s Obligation to Consummate the Closing. The obligation
of the Company to consummate the Closing shall be subject to the satisfaction of each of the
following conditions, any of which may be waived, in writing, by the Company:

          (i) Except as disclosed in the Disclosure Schedule, (i) the representations and warranties of
Leucadia in this Agreement shall be true and correct in all respects on and as of the date of this
Agreement, and (ii) Leucadia shall have performed and complied in all respects with all covenants,
obligations and conditions of this Agreement required to be performed and complied with by it as of
the Closing.

          (ii) The Company shall have been provided with a certificate executed on behalf of Leucadia by
an authorized officer of Leucadia to the effect set forth in Section 4(b)(i).

     (c) Additional Conditions for Obligation to Consummate the Closing.

          (i) The obligation of each of Leucadia and the Company to consummate the Closing shall be
subject to the receipt by JPOF II of the NASD Approval.

          (ii) The obligation of Leucadia to consummate the Closing shall be subject to (a) confirmation
by the Company of its status and the status of Jefferies High Yield Trading, LLC, as provided in
Section 2.10 of the Operating Agreement and (b) confirmation that written advice Leucadia has
previously received regarding its acquisition of Series C Interests shall not have been withdrawn.

     Section 6. Survival of Agreements, Representations and Warranties. All covenants,
agreements, representations and warranties of the parties contained herein shall survive the
execution and delivery of this Agreement, any investigation at any time made by Leucadia or on its
behalf and the contribution of the Initial Cash Contribution and the JPOF II Membership Interest.

4

 

     Section 7. Further Assurances. Each party hereto shall execute, deliver, file and
record, or cause to be executed, delivered, filed and recorded, such further agreements,
instruments and other documents and take, or cause to be taken, such further actions, as any other
party hereto may reasonably request as being necessary or advisable to effect or evidence the
transactions contemplated by this Agreement.

     Section 8. General Provisions.

     (a) Notice. All notices, requests and other communications required or permitted to
be given by or to any party hereto pursuant to this Agreement shall be in writing and shall be
deemed to have been duly given or delivered for all purposes hereof (i) when personally delivered
to the intended recipient, (ii) on the third Business Day after mailing, if mailed from within the
United States by first class U.S. mail, postage prepaid, (iii) on the date of sending, if sent by
prepaid telegram, facsimile transmission, telex or electronic mail, or (iv) on the first Business
Day after transmittal thereof to a reputable overnight courier service for overnight delivery to
the intended recipient. All such notices, requests and other communications shall be addressed, in
each case: (i) if to the Company, to Jefferies High Yield Trading, LLC, [INSERT ADDRESS],
facsimile: (___) ___-___, Attn: ___; and (ii) if to Leucadia, to Leucadia
National Corporation, 315 Park Avenue, New York, New York 10010, facsimile: (212) 598-4869, Attn:
Joseph S. Steinberg.

     (b) Binding Nature. This Agreement shall be binding upon Leucadia, the Company and
their respective successors and permitted assigns.

     (c) Amendments. Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated except with the written consent of Leucadia and the Company.

     (d) No Assignment. Leucadia shall not assign or otherwise transfer this Agreement or
any of its rights or obligations hereunder to any other Person, and any such purported assignment
or transfer shall be null and void, except that Leucadia may assign its rights to any wholly-owned
subsidiary of Leucadia, which assignment shall not relieve Leucadia from its obligations hereunder.

     (e) Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which taken together shall constitute one Agreement.

     (f) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to any rules or principles of conflicts of
law that would cause the application of the laws of any jurisdiction other than the State of
Delaware.

     (g) Entire Agreement. This Agreement, the other Related Agreements to which Leucadia
and the Company are each a party, the Operating Agreement and the Schedules and Exhibits thereto
and the side letter dated the date hereof between Leucadia and the Company, supersede any and all
oral or written agreements or understandings heretofore made, and contain the entire agreement of
the parties hereto or thereto, with respect to the subject matter hereof or thereof.

5

 

     (h) Section Headings. Captions in this Agreement are for convenience only and do not
define, limit or otherwise affect any term of this Agreement. Unless the context otherwise
expressly requires, all reference herein to Sections are to Sections of this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

6

 

     IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by a duly authorized
officer of each party hereto as of the date first above written.

	 	 	 	 	 	 	 
	 	 	LEUCADIA NATIONAL CORPORATION
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 

	 	 	 	 	 	 	 
	 	 	JEFFERIES HIGH YIELD HOLDINGS, LLC
	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 

7

 

EXHIBIT E

 SERVICES AGREEMENT

 

 

SERVICES AGREEMENT

          SERVICES AGREEMENT, dated as of ___, 2007, (this “Agreement”), between JEFFERIES
HIGH YIELD HOLDINGS, LLC, a Delaware limited liability company (“Holdings”), JEFFERIES HIGH
YIELD TRADING, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Holdings
(the “Company”), and JEFFERIES & COMPANY, INC., a Delaware corporation (“Jefco”).

          WHEREAS, the Company has been organized for the purpose of conducting a securities brokerage
business;

          WHEREAS, Holdings owns all of the outstanding limited liability company interests of the
Company;

          WHEREAS, the Company and Holdings each desires to avail itself of certain personnel and
facilities available to Jefco, and desires to have Jefco perform for it various support services;

          WHEREAS, Jefco is willing to make such personnel and facilities available to, and to perform
such services for, the Company and Holdings on the terms and conditions hereinafter set forth; and

          WHEREAS, Jefco has received a copy of the Amended and Restated Limited Liability Company
Agreement of the Holdings, dated as of ___, 2007 (as amended and restated and in effect from
time to time, the “LLC Agreement”; capitalized terms used herein without definition shall
have the respective meanings given to such terms in the LLC Agreement).

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

          1. Appointment of Servicer. The Company hereby appoints Jefco as Servicer of the
Company (in such capacity, the “Servicer”) and Jefco hereby accepts such appointment.

          2. Designation of Employees.

          (a) The Servicer will second to the Company its employees, listed on Schedule A, to serve as
employees of the Company (as such, the “Employees”) during the term of this Agreement;
provided that the Servicer shall have the authority to terminate the employment of any of
the Employees with the Servicer, and/or to remove any Employee from Schedule A, so long as such
termination or removal is, in the reasonable judgment of the Servicer, in the best interest of the
Company and/or the Servicer; provided, further, that the Servicer shall take
commercially reasonable efforts to ensure that the termination of Employees will not result in the
Company’s inability to conduct its business in compliance with applicable Law; and provided
further, that the Servicer may amend Schedule A from time to time in its discretion, so
long as no

1

 

person shall continue as an Employee if such person has been removed from Schedule A or ceased
to be an employee of Jefco for any reason. The Employees shall become “associated persons” of the
Company immediately following such secondment to the Company, and shall remain “associated persons”
of Jefco, in accordance with applicable rules and regulations of NASD until termination of this
Agreement.

          (b) Those Employees listed in Table 1 of Schedule A are referred to as the “Research and
Trading Employees”. All expense for compensation and benefits for the Research and Trading
Employees will be borne by the Servicer as a Covered Expense (as defined below).

          (c) Those Employees listed in Table 2 of Schedule A are referred to as the “Administrative
Employees”. All expense for compensation and benefits for the Administrative Employees for
services to the Company or Holdings will be borne by the Company or Holdings, as the case may be;
provided that the Administrative Employees will remain on the payroll of the Servicer and
the Company and/or Holdings will reimburse the Servicer from time to time for such expense as
provided in Section 8. For this purpose, (i) awards of shares of the common stock or common stock
equivalents of Servicer’s publicly-traded parent company shall be valued as of the date of grant at
the closing price for such shares on the New York Stock Exchange on the date of grant and (ii)
compensation in the form of options, if any, or other derivative instruments that would result in a
material effect on general and administrative costs will be subject to valuation in accordance with
principles to be adopted by the Board from time to time in its reasonable discretion.

          3. Services. In addition to designating the Employees to serve as employees of the
Company and/or Holdings during the term of this Agreement, the Servicer will provide the Company
and/or Holdings with the following services (collectively, the “Services”):

          (a) Accounting Services, including, but not limited to,

               (i) such accounting services as may be required by Holdings or the Company to assure
that its books and records meet with both applicable regulatory requirements and generally
accepted accounting principles;

               (ii) preparation, for the Company’s submission, of all required regulatory accounting
reports, including but not limited to FOCUS Parts I and II;

               (iii) cooperation with any certified public accounting firm appointed by the Company to
prepare its annual audited reports or for any other reasonable purpose; provided
that the Servicer shall, on a timely basis, provide any required information in any format
specified, so long as both form and substance are reasonable in the circumstances; and

               (iv) additional support in connection with the Company’s obligations to report to its
members, including in connection with the preparation of tax returns, member capital
accounts, allocations and similar matters.

2

 

The foregoing shall not be deemed to include (and shall not include) other accounting services such
as audit, preparation of Forms K-1 for members of Holdings or the Company, or providing accounting,
securities inventory and regulatory haircut software.

          (b) Compliance Services, including, but not limited to,

               (i) assistance in maintaining registrations, and keeping supervisory procedures and
compliance manuals current and in performing website review for advertising compliance;

               (ii) on an annual basis, performing a review or audit of the Company’s business,
conducting compliance meetings with registered individuals, and analyzing the Firm Element
Continuing Education, and providing the Company with a Continuing Education Plan;

               (iii) on a daily basis, surveillance of trading, review and approval of daily comment
for compliance with advertising policies, and Chinese Wall procedures;

               (iv) as needed from time to time, (A) acting as regulatory liaison, advising on
applicable rules and regulation, preparing draft updates to Forms U-4 and BD, tracking the
regulatory element of the Continuing Education Plan, and administering the Firm Element of
Continuing Education; (B) assisting with regulatory investigations; (C) addressing customer
complaints; (D) addressing special registration problems; (E) maintaining the Company’s
Compliance Manual; and (F) maintaining the Company’s Supervisory Manual.

          (c) Personnel Services, including, but not limited to,

               (i) providing those services customarily performed by an internal personnel and/or
human resources department, including services associated with the recruitment, hiring and
termination of employees by the Company and Holdings;

               (ii) maintaining files on each employee of the Company and Holdings as required by good
business practice and by applicable local, state and/or federal law or regulation;

               (iii) advice on compliance with applicable local, state and/or federal fair employment
practices law and regulation; and

               (iv) providing employee benefit plans, policies and compensation arrangements including
without limitation retirement benefits, group life, health or dental insurance, workers’
compensation insurance, long-term disability insurance, sick leave, vacation leave, pay
policies, incentive plans and administration of executive perquisites.

          (d) Operations Services, including operations support consistent with the Clearing
Agreement as amended and in effect from time to time.

3

 

          (e) Legal Services, including consulting with Jefco’s Compliance Department on
regulatory issues; review and approval of standard contracts and agreements; advice regarding
maintaining the books and records of Holdings and the Company; supervision of regulatory and other
investigations, claims, disputes and litigation of any type; supervision of outside counsel;
preparation of material to be included in public reporting documents, including without limitation
proxy statements, reports on Forms 10-Q and 10-K and other reports required under the Securities
Act and the Exchange Act; and qualification of Holdings and the Company to do business in foreign
jurisdictions.

          (f) Technology Services, including, but not limited to,

               (i) providing and maintaining such computer software as has been developed by Jefco for
purposes of managing the Business, together with a royalty-free non-exclusive license
thereto;

               (ii) coordinating with outside vendors, including software and systems development
companies, on behalf of Holdings and the Company; and

               (iii) subject to the availability of adequate Jefco personnel, providing technology
support to Holdings and the Company.

          (g) Facilities, including office space and general facilities support.

          (h) Other Services as the Servicer or the Company may determine necessary or desirable
from time to time including, without limitation, such services as may be necessary for the Company
to comply with regulatory requirements then applicable to the Company.

          (i) Service-Related Overhead. It is understood and agreed that the hourly or other
amounts charged by the Servicer or third party vendors in connection with the provision of the
foregoing Services may include a reasonable allocation of overhead expense (“Service-Related
Overhead”); provided that amounts charged to the Servicer by any third party vendor
shall be passed through to the Company or Holdings without markup.

          4. Control by the Company. The Servicer shall submit such periodic reports to the
Company or Holdings regarding the Servicer’s activities hereunder as the Company or Holdings may
reasonably request, and a representative of the Servicer shall be available to attend meetings of
the Board and the board of directors of the Company.

          5. Conduct of the Servicer.

          (a) All actions engaged in by the Servicer hereunder shall at all times conform to and be in
accordance with the requirements imposed by:

               (i) any provisions of applicable Law, including without limitation, the requirements of
the NASD; and

               (ii) the provisions of the LLC Agreement and such policies as may be adopted from time
to time by the Board; provided, however,
      that the Servicer

4

 

shall not be bound by any amendment, supplement or revision of any of the foregoing
until it has been given notice thereof in accordance with Section 14(a) hereof.

          (b) The Company will maintain copies of this Agreement pursuant to Rules 17a-3 and 17a-4 under
the Exchange Act and all related supporting documents provided by Holdings or Jefco.

          (c) The parties hereby agree to permit inspects of their books and records by the NASD and
other regulatory organizations having jurisdiction with respect to payment or allocation of
expenses by Servicer or its Affiliates that are proportionately attributable to the Company, and
shall take such other actions as may be required under applicable Law to demonstrate that it is in
compliance with the financial responsibility rules regarding the expenses covered by this
Agreement.

          (d) The parties agree that the Company will notify the NASD in the event this Agreement is
amended, terminated or superseded by another agreement that addresses the matters set forth herein.

          6. Fees. As full compensation for the Covered Expenses, Holdings shall pay (or shall
cause the Company to pay) to the Servicer the Management Fee, which shall be calculated and accrued
as provided in the LLC Agreement. The Management Fee shall be paid within 10 days after the last
day of each fiscal quarter of Holdings.

          7. Expenses of the Company and Holdings. The Servicer shall bear (a) expense for
compensation of the Research and Trading Employees, including benefits, and (b) its overhead
expenses (other than Service-Related Overhead), including the expense of providing facilities,
furniture and fixtures, cafeteria services, telecommunications, computer hardware, information
systems support and business software (excluding for this purpose expense associated with provision
of trading system software, front-office trade processing software, communication and analytical
systems software (e.g. Bloomberg) and systems or software specifically developed for use by the
Company or Holdings) (the items in clause (a) and clause (b) collectively are referred to as
“Covered Expenses”). Except for the Covered Expenses, the Company and Holdings shall each
bear all its direct and indirect expenses, including any expense reasonably incurred by Holdings,
the Company, the Servicer and any other person in performing the Services for or on behalf of
Holdings or the Company. To the extent that any expense relates to the operations of Holdings or
the Company and one or more other accounts managed by the Servicer or any of its Affiliates, the
Servicer shall generally allocate such expenses equitably so as to reflect the proportionate
benefits to be received by Holdings or the Company, on the one hand, and such other account(s) or
any of the Servicers other Affiliates, on the other hand. Attached as Exhibit A are the Expense
Allocation Guidelines to be used by the Servicer for billings to Holdings and the Company
hereunder. The Expense Allocation Guidelines (i) indicate estimates of costs anticipated by the
Servicer with respect to Services described in Section 3, (ii) set forth guidelines regarding the
allocation of expenses between Jefco, on the one hand, and Holdings and/or the Company, on the
other hand, and (iii) contain an illustration regarding differences in the cost of operation under
this Services Agreement from costs that were applied for fiscal year 2006 for JPOF II that will
serve as an estimate of expenses for the first twelve months of operations of the Company,
excluding adjustments for inflation. Under no

5

 

circumstances shall any charges by the Servicer to Holdings or the Company include any profit
margin.

          8. Reimbursement by the Company. Holdings will (or will cause the Company) to
reimburse the Servicer for such expense as the Servicer may incur on behalf of Holdings and the
Company, other than the Covered Expenses. The Servicer may rely upon, in its discretion, the
advice of legal counsel to Holdings or the Company in connection with the performance of its
activities on behalf of Holdings and the Company hereunder, and Holdings and the Company shall bear
full responsibility therefor and for the expense of any fees and disbursements arising therefrom;
provided, however, that the provisions of Section 9 shall govern any claim for
exculpation or indemnification made by the Servicer.

          9. Exculpation; Indemnification of Servicer.

          (a) None of the Servicer nor any of its Affiliates, nor any of their respective members,
managers, partners, directors, officers, or employees (each, an “Indemnified Person”) shall
be liable to the Company or Holdings for any acts or omissions arising out of or in connection with
this Agreement, Holdings, the Company or any investment made or held by the Company, unless such
action or inaction was made in bad faith or constitutes fraud, willful misconduct or gross
negligence.

          (b) To the fullest extent permitted by law, the Company shall indemnify the Indemnified
Persons against any loss, cost or expense suffered or sustained by an Indemnified Person by reason
of (i) any acts, omissions or alleged acts or omissions arising out of, or in connection with, the
Company, any investment made or held by the Company or the Agreement, including, without
limitation, any judgment, award, settlement, reasonable attorneys’ fees and other costs or expenses
incurred in connection with the defense of any actual or threatened action, proceeding, or claim,
provided that such acts, omissions or alleged acts or omissions upon which such actual or
threatened action, proceeding or claim are based were not made in bad faith or did not constitute
fraud, willful misconduct or gross negligence by such Indemnified Person, or (ii) any acts or
omissions, or alleged acts or omissions, of any broker or agent of any Indemnified Person, provided
that such broker or agent was selected, engaged or retained by the Indemnified Person with
reasonable care. Each of the Servicer and Indemnified Persons may consult with counsel and
accountants in respect of Company and Holdings affairs and be fully protected and justified in any
action or inaction that is taken in accordance with the advice or opinion of such counsel and/or
accountants, provided that they shall have been selected with reasonable care.

          (c) The Company and/or Holdings shall advance to an Indemnified Person reasonable attorneys’
fees and other costs and expenses incurred in connection with the defense of any action or
proceeding arising out of such performance or non-performance. The Servicer agrees, and each other
Indemnified Person will agree as a condition to any such advance, that in the event it receives any
such advance, it shall reimburse the Company and/or Holdings for such fees, costs and expenses to
the extent that it shall be determined that it was not entitled to indemnification under this
Section 9.

6

 

          (d) Holdings shall cause the Company to fulfill the obligations of the Company under this
Section 9.

          10. Activities of the Servicer and Others. Subject to the terms of the LLC Agreement,
the Servicer and the members, managers, partners, employees, officers and affiliates of the
Servicer, who may or may not also be shareholders, directors, employees or officers of Holdings
and/or the Company, may engage, simultaneously with their management support activities on behalf
of Holdings and the Company, in other businesses and make investments for their own accounts, and
may render services similar to those described in this Agreement for other individuals, companies,
trusts or persons, and shall not by reason of so engaging in other businesses, making such
investments or rendering of services for others be deemed to be acting in conflict with the
interests of Holdings and the Company. Notwithstanding the foregoing, the Servicer shall devote
such time to the Services as it deems necessary to support the activities of Holdings and the
Company. Subject to the terms of the LLC Agreement, the members, managers, partners, directors,
employees or officers of the Servicer or its Affiliates, in their individual capacities may engage
in Securities transactions which may be different from, and contrary to, transactions engaged in by
the Company and/or Holdings.

          11. Term. This Agreement shall remain in effect through ___, 2012, and, upon
extension of the term of any Member Interest under Section 6.1 of the LLC Agreement, from year to
year thereafter, unless earlier terminated by the Servicer at any time after the [third]
anniversary of the date of this Agreement upon not less than
___ days written notice to Holdings
provided that a reasonable substitute shall have been identified and approved by the Board of
Holdings prior to the effective date of any such termination, or in accordance with Section
3.1(a)(xviii) or Section 3.7(d) of the LLC Agreement.

          12. Arm’s-Length Agreement. The Company and the Servicer each represents to, warrants
and agrees with the other that this Agreement constitutes an arm’s-length agreement between the
Company and the Servicer. The Board and the Company have each reviewed and approved this Agreement
and all of its terms.

          13. Attorney-in-Fact.

          (a) The Company and Holdings each hereby appoints the Servicer as attorney-in-fact for the
Company and Holdings, with full authority in the place and stead of the Company or Holdings, as the
case may be, as shall be required or reasonably desirable for the Servicer to perform its services
hereunder;

               (i) to execute and deliver on behalf of Holdings and the Company all payment and
transfer instructions and all other documents arising in the ordinary course of business and
financial affairs of Holdings and the Company;

               (ii) to execute and deliver on behalf of Holdings or the Company any and all notices,
consents and other communications under the LLC Agreement and any Contract of Holdings or
the Company, except that, to the extent such notices, consents or other communications
require approval of an Officer or the Board, such execution and delivery shall be subject to
such approval;

7

 

               (iii) to take such other actions in the ordinary course of Holdings’ or the Company’s
business on behalf of Holdings or the Company as the Servicer may deem necessary or
desirable to accomplish the purposes of this Agreement, including to ask, demand, collect,
sue for, recover, receive and give acquittance for moneys due or to become due in connection
with the Assets of Holdings or the Company, to receive, endorse and collect any drafts or
other instruments, documents and chattel paper in connection therewith and to file any
claims; and

               (iv) to take such other actions as the Servicer may deem necessary or advisable to
accomplish the purposes of Holdings or the Company, including the giving of notices, the
delivery of assignments and the delivery of instructions and documents;

provided that this grant of power of attorney will expire, and the Servicer will cease to
have any power to act as the attorney-in-fact of Holdings and the Company, upon termination of this
Agreement in accordance with its terms.

          (b) Each of Holdings and the Company hereby authorizes the Servicer to transfer and deposit
funds and Securities to and in such bank, securities, escrow and clearing accounts as may be
established in the name of Holdings and/or the Company and to cause operating expenses of Holdings
and/or the Company to be paid from such deposited funds.

          14. Miscellaneous.

          (a) Notices. Any notice, consent or other communication made or given in connection
with this Agreement shall be in writing and shall be deemed to have been duly given when delivered
by hand or facsimile, two days after being sent via overnight courier (or at such earlier time as
such overnight courier shall have committed to effect delivery but in no event less than one day)
or five days after being mailed by certified mail, return receipt requested, as follows:

If to the Servicer:

Jefferies & Company, Inc.

520 Madison Avenue

12th Floor

New York, New York 10021

Attention: Lloyd Feller, General Counsel

     Telephone: 212-284-2266

Facsimile No.: 212-284-2280

8

 

With a duplicate copy to :

Jefferies & Company, Inc.

520 Madison Avenue

12th Floor

New York, New York 10021

Attention: Joseph Schenk, Chief Financial Officer

     Telephone: 212-284-2338

Facsimile No.: 212-284-3443

If to Holdings:

Jefferies High Yield Holdings, LLC

The Metro Center

One Station Place

Three North

Stamford, Connecticut 06902

Attention Robert J. Welch, Chief Financial Officer

     Telephone: 203-708-5800

Facsimile No.: 203-708-5820

If to the Company:

Jefferies High Yield Trading, LLC

The Metro Center

One Station Place

Three North

Stamford, Connecticut 06902

Attention Robert J. Welch, Chief Financial Officer

     Telephone: 203-708-5800

Facsimile No.: 203-708-5820

          (b) Entire Agreement. This Agreement contains all of the terms agreed upon or made by
the parties relating to the subject matter of this Agreement, and supersedes all prior and
contemporaneous agreements, negotiations, correspondence, undertakings and communications of the
parties, oral or written, respecting such subject matter.

          (c) Amendments and Waivers. No provision of this Agreement may be amended, modified,
waived or discharged except as agreed to in writing by the parties. The failure of a party to
insist upon strict adherence to any term of this Agreement on any occasion shall not be considered
a waiver thereof or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.

          (d) Binding Effect; Assignment. This Agreement shall be binding upon and inure to the
benefit of Holdings, the Company, the Servicer, each Indemnified Person and their respective
successors and permitted assigns. Any person that is not a signatory to this

9

 

Agreement but is nevertheless conferred any rights or benefits hereunder (e.g., members of the
Servicer and others who are entitled to indemnification hereunder) shall be entitled to such rights
and benefits as if such person were a signatory hereto, and the rights and benefits of such person
hereunder may not be impaired without such person’s express written consent. No party to this
Agreement may assign or delegate, by operation of law or otherwise, all or any portion of its
rights, obligations or liabilities under this Agreement without the prior written consent of the
other parties to this Agreement; provided, however, that the Servicer may assign or
delegate all or any portion of its rights, obligations or liabilities under this Agreement to any
person or entity that it controls, is controlled by or in common control with the Servicer.

          (e) Governing Law. Notwithstanding the place where this Agreement may be executed by
any of the parties thereto, the parties expressly agree that all terms and provisions hereof shall
be governed by and construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely in that State.

          (f) No Third Party Beneficiaries. No provision of this Agreement is intended to
confer upon any person, including any Employee or any employee of Jefco, other than the parties
hereto, any rights or remedies hereunder; except that in the case of Section 9, the Indemnified
Persons and their respective heirs, executors, administrators, legal representatives, successors
and assigns are intended third party beneficiaries of Section 9 and shall have the right to enforce
this section in their own names.

          (g) Headings. The headings contained in this Agreement are intended solely for
convenience and shall not affect the rights of the parties to this Agreement.

          (h) Counterparts. This Agreement may be signed in any number of counterparts with the
same effect as if the signatures to each counterpart were upon a single instrument, and all such
counterparts together shall be deemed an original of this Agreement.

          (i) Survival. The provisions of Sections 6, 7, 8, 9, 14(d), 14(e) and 14(f) hereof
shall survive the termination of this Agreement.

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

10

 

     IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed as of the date
first written above.

	 	 	 	 	 
	 	JEFFERIES HIGH YIELD HOLDINGS, LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	JEFFERIES HIGH YIELD TRADING, LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	JEFFERIES & COMPANY, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

11

 

	 	 	 	 	 

SCHEDULE A

EMPLOYEES

Table 1

Research and Trading Employees

	 	 	 	 	 	 	 
	SH

	 	Bann
	 	Ken
	 	Research
	LA

	 	Bryan
	 	Brad
	 	Research
	ST

	 	Gude
	 	Chak
	 	Research
	ST

	 	Hollander
	 	Jordan
	 	Research
	SH

	 	Inogambaev
	 	Farhod
	 	Research
	NY

	 	Klatzkin
	 	Larry
	 	Research
	ST

	 	Levy
	 	Brett
	 	Research
	SH

	 	Parker
	 	John
	 	Research
	ST

	 	Reyes
	 	Romeo
	 	Research
	SH

	 	Smith
	 	Kyle
	 	Research
	LA

	 	Solomon
	 	Todd
	 	Research
	ST

	 	Templeton
	 	Evan
	 	Research
	ST

	 	Tsibulsky
	 	Kat
	 	Research
	SH

	 	Von Meister
	 	Joe
	 	Research
	SH

	 	Yeager
	 	Seth
	 	Research
	SH

	 	Budish
	 	Jon
	 	Trader
	SH

	 	Keller
	 	Lorne
	 	Trader
	ST

	 	Rogers
	 	Angus
	 	Trader
	LA

	 	Satzberg
	 	Mike
	 	Trader
	ST

	 	Schwartz
	 	David
	 	Trader

Table 2

Administrative Employees

	 	 	 	 	 	 	 
	ST

	 	Baker
	 	Steve
	 	Sales
	ST

	 	Carr
	 	Laury
	 	Sales
	ST

	 	Cherry
	 	Michael
	 	Sales
	LA

	 	Dizon
	 	Don
	 	Sales
	ST

	 	Hall
	 	Drew
	 	Sales
	ST

	 	Hewitt
	 	Brian
	 	Sales
	ST

	 	Macri
	 	Chris
	 	Sales
	LA

	 	Shapiro
	 	Michael
	 	Sales
	ST

	 	Thors
	 	Tyler
	 	Sales

12

 

	 	 	 	 	 	 	 
	ST

	 	Ulehla
	 	Tony
	 	Sales
	ST

	 	Voigt
	 	Paul
	 	Sales
	ST

	 	Welch
	 	Bob
	 	Admin*
	ST

	 	Chatham
	 	Christine
	 	Admin*
	ST

	 	George
	 	Nicholas
	 	Admin*
	ST

	 	Kelly
	 	Marianne
	 	Admin*
	LA

	 	Muir
	 	Tatia
	 	Admin*
	ST

	 	O’Neill
	 	Eileen
	 	Admin*
	ST

	 	Pastouna
	 	Nadia
	 	Admin*
	SH

	 	Silva
	 	KD
	 	Admin*
	LA

	 	Zamudio
	 	Jennifer
	 	Admin*
	LA

	 	Borovsky
	 	Victor
	 	Admin*
	LA

	 	Dispun
	 	Su
	 	Admin*
	LA

	 	Halac
	 	Bill
	 	Admin*
	LA

	 	Turnbough
	 	Dennis
	 	Admin*

 

*      HY Administration and Technology Employees

13

 

EXHIBIT A

Jefferies/ JHYH/JHYT Expense Allocation Guidelines

These guidelines and practices are designed to set forth general rules that Jefco will use in
billing Holdings and the Company (collectively, the “JV”) for expenses incurred pursuant to the
Services Agreement. These procedures shall be used as a guideline in determining allocations and
ultimate billings to the JV. Any expenses not specifically covered here should be discussed with
JV representatives. Any change to these guidelines that materially affects the methodology applied
to billing expenses shall be subject to review and approval by the Board of Directors of Holdings.
Rates and amounts detailed are estimates.

General Service Categories

People
Services – $250.00 per Administrative Employee per month

     Services include maintaining employee records and administering health, dental and other
insurance or benefit plans and performing a payroll function. Services do not include the expense
of these plans or benefits themselves. Cost for benefits provided to Administrative Employees will
either be billed directly to the JV or be incorporated in hourly or monthly rates for billed
expenses.

Legal – Monthly Labor Survey

     Includes all legal services provided by Jefco Legal staff to Holdings or the Company.

Accounting – Monthly Labor Survey

     Services include general accounting, tax, internal audit, risk, and treasury, preparation and
maintenance of company books and records, and preparation and filing regulatory reports.

Compliance – Monthly Survey and fixed allocation

     Services include actual time spent and a general allocation for compliance and surveillance
systems. Charges include day to day compliance coverage, monitoring day to day sales and trading
activity, responding to regulatory inquires, surveillance and maintaining policies and procedures.

Operations – Per Clearing Agreement

General Practices

Monthly Labor Survey Procedures –

     Individual surveys will be rolled up to sub departments and up to departments as appropriate.
Individual surveys will include time estimates in actual hours or percentage of overall time spent.

 

     Per person hourly and monthly rates will be based on the individual’s compensation and
benefits (including stock based compensation awards) and the department’s reasonable estimate of
cost incidental to the employees JV related tasks. These estimates may include an allocation for
overhead (specific to the employee’s department) and will not include any profit margin. Hourly or
monthly charges should be competitive with those provided by reputable and skilled third party
vendors for the same tasks.

     Fixed allocations will be based on actual costs incurred or an estimate of the percentage of
the resource consumed by or allocated to the JV. As with hourly and monthly rates, estimates may
include an allocation for overhead (specific to the department providing the service) and will not
include any profit margin. Fixed allocations will be competitive with those provided by reputable
and skilled third party vendors for the same tasks.

Clearing Services Agreement –

     Fees will be charged as defined in that agreement and the fee schedules attached thereto.

Other Services –

     Services in excess of those listed above will be billed by project with specific costs
detailed. Expense estimates will follow the same methodology.

Third party Vendor costs –

     Cost associated with third party contracts may be passed on to the JV so long as those vendor
services are used by the fund directly or, if those vendor services are used by multiple
departments, then such costs will be allocated on a reasonable basis. Third party vendor costs may
be allocated as part of hourly or monthly employee rates and if so, must be identified and
accounted for in the monthly survey. In no event can third party vendor cost/expenses be double
billed.

     Generally speaking, services billed to JHYT that benefit both Jefferies HY primary business
and JHYT’s secondary business shall be allocated on a 20/80 primary/secondary basis.

Employee Salary and Bonus –

     In calculating the hourly or monthly rate for an employee, departments will use current salary
plus any guaranteed bonus. If there is no guarantee applicable to the current period, the
employee’s prior year bonus will be used. Reasonable estimates should be used for new employees.
Signing bonuses will be allocated equally over the length of the underlying agreement. Salary and
bonus figures will include non-cash or stock compensation. Employee compensation in the form of
awards of shares of the common stock or common stock equivalents of Jefco’s publicly-traded parent
company shall be valued as of the date of grant at the closing price for such shares on the New
York Stock Exchange on the date of grant. Compensation in the form of awards of options, if any,
or other derivative instruments that would result in a material effect on general and
administrative costs will be subject to valuation in accordance with principles to be adopted by
the Board from time to time in its reasonable discretion.

 

HY Administration and Technology Employees* Seconded to the Company

Compensation including salary, bonus and benefits, will be allocated to JHYT at an 80% rate.
Employee compensation in the form of awards of shares of the common stock or common stock
equivalents of Jefco’s publicly-traded parent company shall be valued as of the date of grant at
the closing price for such shares on the New York Stock Exchange on the date of grant.
Compensation in the form of awards of options, if any, or other derivative instruments that would
result in a material effect on general and administrative costs will be subject to valuation in
accordance with principles to be adopted by the Board from time to time in its reasonable
discretion.

 

*     Identified by asterisk on Schedule A.

Illustration

Pro Forma G&A

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Estimate	 	 	21%	 	 	 	 
	 	 	JPOF II	 	 	JHYT	 	 	JPOF II	 	 	 	 
	 	 	2006 AFS	 	 	2006 Pro Forma	 	 	Pro Forma	 	 	Delta	 
	General & Administrative:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	HY Administration & Technology
	 	 	335,515	 	 	 	2,233,474	 	 	 	469,030	 	 	 	133,515	 
	Treasury
	 	 	50,671	 	 	 	80,000	 	 	 	16,800	 	 	 	(33,871	)
	People Services
	 	 	—	 	 	 	64,000	 	 	 	13,440	 	 	 	13,440	 
	Accounting
	 	 	91,407	 	 	 	550,000	 	 	 	115,500	 	 	 	24,093	 
	Legal
	 	 	1,230	 	 	 	200,000	 	 	 	42,000	 	 	 	40,770	 
	Compliance
	 	 	16,784	 	 	 	350,000	 	 	 	73,500	 	 	 	56,716	 
	Systems
	 	 	26,605	 	 	 	32,393	 	 	 	6,803	 	 	 	(19,802	)
	Printing Cost
	 	 	652	 	 	 	15,138	 	 	 	3,179	 	 	 	2,527	 
	Audit and Accounting Fees
	 	 	112,133	 	 	 	538,526	 	 	 	113,090	 	 	 	957	 
	Bank Charges
	 	 	45,123	 	 	 	135,827	 	 	 	28,524	 	 	 	(16,599	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Total General & Administrative
	 	 	680,120	 	 	 	4,199,358	 	 	 	881,865	 	 	 	201,745	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Technology Direct
	 	 	—	 	 	 	384,822	 	 	 	80,813	 	 	 	80,813	 
	Business Development
	 	 	—	 	 	 	181,104	 	 	 	38,032	 	 	 	38,032	 
	Consulting
	 	 	—	 	 	 	66,200	 	 	 	13,902	 	 	 	13,902	 
	Technology
	 	 	—	 	 	 	156,908	 	 	 	32,951	 	 	 	32,951	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Total Other
	 	 	—	 	 	 	789,034	 	 	 	165,697	 	 	 	165,697	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	680,120	 	 	 	4,988,391	 	 	 	1,047,562	 	 	 	367,442	 

16exv10w1

 

Exhibit 10.1

Summary of Compensation Payable

to Nonemployee Directors

May 2007

     The following is a summary of the compensation program for nonemployee members of the Board of
Directors (the “Board”) of Gardner Denver, Inc. (the “Company”).

Cash Compensation

     The components of annual cash compensation for nonemployee directors are as follows:

	•	 	An annual retainer of $40,000, payable quarterly;
	 
	•	 	Additional annual retainer of $7,500 for each of the Lead
Nonemployee Director and the Chair of the Audit and Finance
Committee and $5,000 for each of the Chairs of the Management
Development and Compensation Committee and the Nominating and
Corporate Governance Committee;
	 
	•	 	Meeting attendance fees of $1,250 per Board meeting and $1,000 per
meeting of Board Committees; and
	 
	•	 	Teleconference meeting attendance fees, beginning May 2006, of
$500 per meeting of the Audit and Finance Committee for review of
quarterly earnings releases.

In addition, the Company reimburses reasonable expenses incurred by the nonemployee directors in
connection with attending Board and Committee meetings.

Equity Compensation

     Under the Gardner Denver, Inc. Phantom Stock Plan (the “Phantom Stock Plan”), the Company
credits the equivalent of $7,000 annually, in equal quarterly amounts, to the phantom stock unit
account of each nonemployee director. Each nonemployee director may also elect to defer all or
some portion of his or her annual director’s fees under the Phantom Stock Plan and have such amount
credited on a quarterly basis as phantom stock units. If the Company were to pay dividends,
dividend equivalents would be credited to each nonemployee director’s phantom stock account on the
dividend record date. The fair market value of a director’s phantom stock account will be
distributed as a cash payment to the director (or his or her beneficiary) on the first day of the
month following the month in which the director ceases to be a director of the Company for any
reason. Alternatively, a director may elect to have the fair market value of his or her account
distributed in twelve or fewer equal monthly installments, or in a single payment on a
predetermined date within one year after he or she ceases to be a director, but without interest on
the deferred payments.

     Pursuant
to the Gardner Denver, Inc. Amended and Restated Long-Term Incentive Plan (the “Incentive Plan”), the
Board annually grants each nonemployee director an option to purchase shares of the Company’s
Common Stock. Under the 2007 Nonemployee Director Plan, each nonemployee director was granted
options valued at approximately $46,000 using a Black-Scholes type methodology, with the number
of shares rounded to an even number. On May 2, 2007, all nonemployee directors were granted 3,600
options to purchase shares of Common Stock. Under the Incentive Plan, nonemployee director stock
options become exercisable on the first anniversary of the date of grant and terminate upon the
expiration of five years from such date. If a person ceases to be a nonemployee director by virtue
of disability or retirement, outstanding
options generally remain exercisable for a period of five years (but not later than the expiration
date of the options). If a person ceases to be a nonemployee director by virtue of death (or dies
during the five-year exercise period after disability or

 

 

retirement described above), outstanding options generally remain exercisable for a period of one
year (but not later than the expiration date of the options). If a nonemployee director’s service
terminates for any other reason, options not then exercisable are canceled and options that are
exercisable may be exercised at any time within ninety days after such termination (but not later
than the expiration date of the options). Additionally, upon the occurrence of a change of
control, as defined in the plan, these options will be canceled in exchange for a cash payment
equal to the appreciation in value of the options over the exercise price as set forth in the plan.
The exercise price of these options is the fair market value of the Common Stock on the date of
grant.

     Pursuant to the Incentive Plan, the Board annually grants each nonemployee director restricted
shares of the Company’s Common Stock. Under the 2007 Nonemployee Director Plan, each nonemployee
director was granted restricted stock valued at approximately $46,000 using the normal discount
from the current market value on the date of the award, with the number of shares rounded to an
even number. On May 2, 2007, all nonemployee directors were granted 1,400 shares of restricted
stock. The restricted stock has a 3-year cliff vesting provision and will be subject to forfeiture
and transfer restrictions until the shares vest on May 2, 2010.

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