Document:

Exhibit 4.3

UNLESS THIS  CERTIFICATE  IS PRESENTED BY AN  AUTHORIZED  REPRESENTATIVE  OF THE
DEPOSITORY  TRUST COMPANY,  A NEW YORK  CORPORATION  ("DTC"),  TO ARIZONA PUBLIC
SERVICE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY  CERTIFICATE  ISSUED IS  REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER  NAME AS IS  REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY
PAYMENT  IS MADE TO CEDE & CO. OR TO SUCH  OTHER  ENTITY AS IS  REQUESTED  BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR  OTHERWISE BY OR TO ANY PERSON IS WRONGFUL  INASMUCH AS THE  REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

                         ARIZONA PUBLIC SERVICE COMPANY

                              5.625% Note due 2033

No. 1
                                                                    $200,000,000
                                                           CUSIP No. 040555 CF 9

     Arizona Public Service  Company,  a corporation duly organized and existing
under the laws of Arizona (herein called the "Company",  which term includes any
successor  Person  under  the  Indenture  hereinafter  referred  to),  for value
received,  hereby  promises to pay to Cede & Co.,  or  registered  assigns,  the
principal  sum of Two  Hundred  Million  Dollars  on May  15,  2033,  and to pay
interest thereon from May 12, 2003 or from the most recent Interest Payment Date
to which interest has been paid or duly provided for,  semi-annually  in arrears
on May 15 and November 15 in each year,  commencing  November  15, 2003,  at the
rate of  5.625%,  until  the  principal  hereof  is paid or made  available  for
payment.

     The interest so payable,  and punctually  paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the Person
in  whose  name  this  Security  (or  one or  more  Predecessor  Securities)  is
registered  at the  close  of  business  on the  Regular  Record  Date  for such
interest,  which shall be May 1 or  November 1, as the case may be,  immediately
preceding the Interest  Payment Date (whether or not a Business  Day).  Any such
interest not so punctually  paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular  Record Date and may either be paid to the
Person in whose name this Security (or one or more  Predecessor  Securities)  is
registered at the close of business on a Special  Record Date for the payment of
such  Defaulted  Interest to be fixed by the Trustee,  notice  whereof  shall be
given to Holders  of  Securities  of this  series not less than 10 days prior to
such Special  Record Date, or be paid at any time in any other lawful manner not
inconsistent  with the  requirements  of any  securities  exchange  on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.

     Payment of the principal of (and premium,  if any) and any interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the City of New York,  in such coin or currency of the United  States
of America as at the time of payment is legal  tender for  payment of public and
private debts;  provided,  however, that at the option of the Company payment of
interest  may be made by check  mailed to the  address  of the  Person  entitled
thereto as such address shall appear in the Security Register.

     Reference  is hereby made to the further  provisions  of this  Security set
forth on the reverse  hereof,  which further  provisions  shall for all purposes
have the same effect as if set forth at this place.

                                        1
<PAGE>
     Unless the  certificate of  authentication  hereon has been executed by the
Trustee  referred to on the reverse  hereof by manual  signature,  this Security
shall  not be  entitled  to any  benefit  under  the  Indenture  or be  valid or
obligatory for any purpose.

     IN WITNESS  WHEREOF,  the  Company has caused  this  instrument  to be duly
executed under its corporate seal.

                                        ARIZONA PUBLIC SERVICE COMPANY

                                        By Donald E. Brandt
                                           -------------------------------------
                                           Senior Vice President and
                                           Chief Financial Officer
Attest:

Nancy C. Loftin
----------------------------------
Secretary

                                        2
<PAGE>
     This  Security  is one of a duly  authorized  issue  of  securities  of the
Company (herein called the "Securities"), issued and to be issued in one or more
series  under an  Indenture,  dated as of January  15, 1998  (herein  called the
"Indenture",  which  term  shall  have  the  meaning  assigned  to  it  in  such
instrument),  between the Company and JPMorgan Chase Bank (formerly known as The
Chase  Manhattan  Bank),  as Trustee  (herein called the  "Trustee",  which term
includes any  successor  trustee under the  Indenture),  and reference is hereby
made to the Indenture for a statement of the respective  rights,  limitations of
rights,  duties and  immunities  thereunder of the Company,  the Trustee and the
Holders of the Securities  and of the terms upon which the  Securities  are, and
are to be,  authenticated  and  delivered.  This  Security  is one of the series
designated on the face hereof, which is unlimited in aggregate principal amount.

     The Securities of this series are subject to redemption  upon not less than
30 days' notice by mail at the option of the Company,  in whole or in part, from
time to time at a  Redemption  Price equal to the  greater of (a) the  principal
amount of the Securities (or portion thereof) of this series to be redeemed plus
interest (if any) accrued to the Redemption  Date or (b) the  Make-Whole  Amount
(as defined  below) with respect to the Securities of this series to be redeemed
(the "Redemption Price").

     If notice has been given as  provided  in the  Indenture  and funds for the
redemption of any  Securities  (or any portion  thereof)  called for  redemption
shall  have been made  available  on the  Redemption  Date  referred  to in such
notice,  such Securities (or any portion thereof) will cease to bear interest on
the date fixed for such  redemption  specified in such notice and the only right
of the Holders of such  Securities  will be to receive payment of the Redemption
Price.

     Notice of any  optional  redemption  of  Securities  of this series (or any
portion  thereof) will be given to Holders at their  addresses,  as shown in the
Security  Register for such  Securities,  not more than 60 nor less than 30 days
prior to the date fixed for  redemption.  The notice of redemption will specify,
among other items,  the  Redemption  Price or, if not then known,  the manner of
calculation  thereof,  and the principal amount of the Securities of this series
held by such Holder to be redeemed.  If less than all of the  Securities of this
series  are to be  redeemed  at the option of the  Company,  the  Trustee  shall
select,  in such  manner as it shall deem fair and  appropriate,  the portion of
such Securities to be redeemed in whole or in part.

     As used herein:

          "MAKE-WHOLE AMOUNT" means the sum, as determined by a Quotation Agent,
of the present  values of the principal  amount of the Securities of this series
to be redeemed,  together  with  scheduled  payments of interest  (exclusive  of
interest to the Redemption Date) from the Redemption Date to the Stated Maturity
of the Securities of this series, in each case discounted to the Redemption Date
on a  semi-annual  basis,  assuming a 360-day year  consisting  of twelve 30-day
months,  at the Adjusted  Treasury Rate,  plus accrued  interest (if any) on the
principal  amount  of the  Securities  of  this  series  being  redeemed  to the
Redemption Date.

          "ADJUSTED  TREASURY RATE" means,  with respect to any Redemption Date,
(i)  the  yield,  under  the  heading  which  represents  the  average  for  the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15 (519)" or any successor  publication which is published
weekly  by the  Board of  Governors  of the  Federal  Reserve  System  and which
establishes  yields on actively  traded  U.S.  Treasury  securities  adjusted to
constant  maturity under the caption  "Treasury  Constant  Maturities,"  for the
maturity  corresponding  to the  Comparable  Treasury  Issue (if no  maturity is
within three months before or after the remaining term of the Securities of this

                                        3
<PAGE>
series,  yields for the two published  maturities most closely  corresponding to
the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate
shall be interpolated or extrapolated from such yields on a straight line basis,
rounding  to the  nearest  month)  or  (ii) if such  release  (or any  successor
release) is not published during the week preceding the calculation date or does
not contain such yields,  the rate per year equal to the semi-annual  equivalent
yield to maturity of the Comparable Treasury Issue, calculated using a price for
the  Comparable  Treasury  Issue  (expressed  as a percentage  of its  principal
amount) equal to the Comparable Treasury Price for such Redemption Date, in each
case calculated on the third Business Day preceding the Redemption Date, plus in
each case 0.150%.

          "COMPARABLE  TREASURY ISSUE" means the U.S. Treasury security selected
by the Quotation  Agent as having a maturity  comparable  to the remaining  term
from the Redemption Date to the Stated Maturity of the Securities of this series
that  would  be  utilized,  at the  time of  selection  and in  accordance  with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the Securities of this series.

          "QUOTATION AGENT" means the Reference  Treasury Dealer selected by the
Trustee after consultation with the Company.

          "REFERENCE   TREASURY  DEALER"  means  each  primary  U.S.  Government
securities dealer selected by the Company.

          "COMPARABLE  TREASURY  PRICE"  means,  with respect to any  Redemption
Date, if clause (ii) of the definition of Adjusted  Treasury Rate is applicable,
the  average of three,  or such lesser  number as is  obtained  by the  Trustee,
Reference Treasury Dealer Quotations for such Redemption Date.

          "REFERENCE  TREASURY DEALER  QUOTATIONS"  means,  with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee,  of the bid and asked  prices for the  Comparable  Treasury  Issue,
expressed  in each  case as a  percentage  of its  principal  amount,  quoted in
writing to the Trustee by such Reference  Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such Redemption Date.

     The Securities of this series will not be subject to any sinking fund.

     In the event of redemption of this Security in part only, a new Security or
Securities of this series and of like tenor for the  unredeemed  portion  hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.

     The Indenture contains  provisions for defeasance at any time of the entire
indebtedness  of this  Security or certain  restrictive  covenants and Events of
Default with respect to this Security, in each case upon compliance with certain
conditions set forth in the Indenture.

     If an Event of Default  with  respect to  Securities  of this series  shall
occur and be  continuing,  the principal of the Securities of this series may be
declared  due and  payable in the manner  and with the  effect  provided  in the
Indenture.

     The Indenture  permits,  with certain  exceptions as therein provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Company  and the rights of the  Holders of the  Securities  of each series to be
affected under the Indenture at any time by the Company and the Trustee  without

                                        4
<PAGE>
the consent of such Holders in certain limited circumstances or with the consent
of the  Holders of 66-2/3% in  principal  amount of the  Securities  at the time
Outstanding  of  each  series  to  be  affected.  The  Indenture  also  contains
provisions  permitting the Holders of specified  percentages in principal amount
of the  Securities  of each  series  at the time  Outstanding,  on behalf of the
Holders of all  Securities  of such series,  to waive  compliance by the Company
with certain  provisions of the  Indenture  and certain past defaults  under the
Indenture  and their  consequences.  Any such consent or waiver by the Holder of
this  Security  shall be  conclusive  and binding  upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer  hereof or in  exchange  herefor or in lieu  hereof,  whether or not
notation of such consent or waiver is made upon this Security.

     As provided in and subject to the provisions of the  Indenture,  the Holder
of this  Security  shall not have the right to  institute  any  proceeding  with
respect to the Indenture or for the  appointment of a receiver or trustee or for
any other remedy thereunder,  unless such Holder shall have previously given the
Trustee  written  notice of a  continuing  Event of Default  with respect to the
Securities of this series,  the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the  Trustee  to  institute  proceedings  in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have  received  from the Holders of a majority in principal  amount of
Securities of this series at the time Outstanding a direction  inconsistent with
such  request,  and shall have failed to institute any such  proceeding,  for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit  instituted  by the Holder of this  Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.

     No reference  herein to the  Indenture and no provision of this Security or
of the Indenture  shall alter or impair the obligation of the Company,  which is
absolute and unconditional, to pay the principal of and any premium and interest
on this  Security  at the times,  place and rate,  and in the coin or  currency,
herein prescribed.

     As provided in the Indenture and subject to certain limitations therein set
forth,  the transfer of this Security is registrable  in the Security  Register,
upon  surrender of this Security for  registration  of transfer at the office or
agency of the  Company in any place where the  principal  of and any premium and
interest on this  Security are payable,  duly endorsed by, or  accompanied  by a
written  instrument  of  transfer  in form  satisfactory  to the Company and the
Security  Registrar  duly  executed by, the Holder  hereof or his attorney  duly
authorized in writing,  and thereupon one or more new  Securities of this series
and of like  tenor,  of  authorized  denominations  and for the  same  aggregate
principal amount, will be issued to the designated transferee or transferees.

     The Securities of this series are issuable only in registered  form without
coupons  in  denominations  of $1,000  and any  integral  multiple  thereof.  As
provided in the Indenture and subject to certain  limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of  Securities  of this  series  and of like  tenor  of a  different  authorized
denomination, as requested by the Holder surrendering the same.

     No service  charge shall be made for any such  registration  of transfer or
exchange,  but the Company may require  payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

                                        5
<PAGE>
     Prior to due presentment of this Security for registration of transfer, the
Company,  the  Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this  Security is  registered  as the owner  hereof for all
purposes,  whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

     All terms used in this Security  which are defined in the  Indenture  shall
have the meanings assigned to them in the Indenture.

                          CERTIFICATE OF AUTHENTICATION

     This is one of the Securities of the series designated  therein referred to
in the within-mentioned Indenture.

Dated: May 12, 2003                     JPMORGAN CHASE BANK
                                        AS TRUSTEE

                                        By Kathleen Perry
                                           -------------------------------------
                                           AUTHORIZED OFFICER

                                        6<PAGE>

                                                                    EXHIBIT 10.1

                              JEFFERIES GROUP, INC.

                        STOCK OPTION GAIN AND STOCK AWARD
                                DEFERRAL PROGRAM

                        EFFECTIVE DATE: JANUARY 21, 2003

<PAGE>

    JEFFERIES GROUP, INC. STOCK OPTION GAIN AND STOCK AWARD DEFERRAL PROGRAM

<TABLE>
<CAPTION>
SECTION:
<S>                                                                                  <C>
I.       Name and Purpose.......................................................      1

II.      Effective Date.........................................................      1

III.     Definitions............................................................      1

IV.      Eligibility............................................................      5

V.       Administration of the Program..........................................      5

VI.      Deferral of Qualifying Gains and Stock Awards..........................      5

VII.     Election to Participate................................................      5

VIII.    Stock Deferral Account.................................................      6

IX.      Method of Distribution.................................................      8

X.       Offset for Obligations to Company......................................      9

XI.      Liability of Company...................................................      9

XII.     Change in Distribution Schedule........................................      9

XIII.    Benefit Plans..........................................................     10

XIV.     Rights of a Participant................................................     11

XV.      Amendment and Termination..............................................     11

XVI.     Determination of Benefits..............................................     11

XVII.    Notices................................................................     12

XVIII.   General Provisions.....................................................     12

XIX.     Unfunded Status of Program.............................................     13

XX.      Rights to Benefits.....................................................     13
</TABLE>

                                     - i -

<PAGE>

    JEFFERIES GROUP, INC. STOCK OPTION GAIN AND STOCK AWARD DEFERRAL PROGRAM

I.       NAME AND PURPOSE

         The name of this program is the Stock Option Gain and Stock Award
         Deferral Program (the "Program") of Jefferies Group, Inc. (the
         "Company"). Its purpose is to set forth the terms upon which certain
         individuals will be given the opportunity to defer receipt of
         compensation that otherwise would result from the exercise of certain
         stock options or the vesting of restricted stock, thereby implementing
         deferrals as contemplated or permitted under the Company's 1999
         Incentive Compensation Plan, 1999 Director's Stock Compensation Plan,
         Deferred Compensation Plan, and future equity plans. The Company has
         adopted this Program in recognition of the valuable service of eligible
         individuals, the desire to provide them with additional flexibility in
         their personal financial planning, and as a means to encourage
         long-term holdings of equity interests in the Company, consistent with
         the purposes of those equity plans under which the options and
         restricted stock were originally issued. This Program is intended to be
         an unfunded plan maintained primarily for the purpose of providing
         deferred compensation for a select group of management or highly
         compensated employees within the meaning of Title I of the Employee
         Retirement Income Security Act of 1974, as amended ("ERISA").

II.      EFFECTIVE DATE

         The Program shall be effective as of January 21, 2003.

III.     DEFINITIONS

         (a) ACCOUNT means the total balance credited to a Participant's Stock
             Deferral Account.

         (b) ADMINISTRATOR means the administrator of the Program, which shall
             be the Compensation Committee of the Board of Directors or any
             committee of officers appointed by the Compensation Committee.

         (c) BENEFICIARY means any person or persons so designated in accordance
             with the provisions of Section XII.

         (d) BOARD OF DIRECTORS means the board of directors of Jefferies Group,
             Inc.

         (e) CHANGE IN CONTROL means the first to occur of any of the following
             events after the effective date of the Program:

                  (i)      Any "person," as such term is used in Section 13(d)
             and 14(d) of the Exchange Act (other than the Company, any trustee
             or other fiduciary holding securities under an employee benefit
             plan of the Company, or any company owned, directly or indirectly,
             by the shareholders of the Company in substantially the same
             proportions as their ownership of stock of the Company), acquires
             voting securities of the Company and immediately thereafter is a
             "50% Beneficial Owner." For purposes of this provision, a "50%
             Beneficial Owner" shall mean a person who is the "beneficial owner"
             (as defined in Rule 13d-3 under the Exchange Act), directly or
             indirectly, of securities of the Company representing 50% or more
             of the combined voting power of the Company's then-outstanding
             voting securities; provided, however, that the term "50% Beneficial
             Owner" shall not include any person who shall become the beneficial
             owner of 50% or more of the combined voting power of the Company's
             then-outstanding voting securities solely as a result of an
             acquisition by the Company of its voting securities, until such
             time thereafter as such person shall become the

                                       1

<PAGE>

             beneficial owner (other than by means of a stock dividend or stock
             split) of any additional voting securities and becomes a 50%
             Beneficial Owner in accordance with this subsection;

                  (ii)     During any period of two consecutive years commencing
             on or after the effective date of this Program, individuals who at
             the beginning of such period constitute the Board of Directors, and
             any new director whose election by the Board or nomination for
             election by the Company's shareholders was approved by a vote of at
             least two-thirds (2/3) of the directors then still in office who
             either were directors at the beginning of the period or whose
             election or nomination for election was previously so approved (the
             "Continuing Directors"), cease for any reason to constitute at
             least a majority thereof;

                  (iii)    The shareholders of the Company have approved a
             merger, consolidation, recapitalization, or reorganization of the
             Company, or a reverse stock split of any class of voting securities
             of the Company, or the consummation of any such transaction if
             shareholder approval is not obtained, other than any such
             transaction which would result in at least 50% of the combined
             voting power of the voting securities of the Company or the
             surviving entity outstanding immediately after such transaction
             being beneficially owned by persons who together beneficially owned
             at least 80% of the combined voting power of the voting securities
             of the Company outstanding immediately prior to such transaction,
             with the relative voting power of each such continuing holder
             compared to the voting power of each other continuing holder not
             substantially altered as a result of the transaction; provided
             that, for purposes of this subsection, such continuity of ownership
             (and preservation of relative voting power) shall be deemed to be
             satisfied if the failure to meet such 50% threshold (or to
             substantially preserve such relative voting power) is due solely to
             the acquisition of voting securities by an employee benefit plan of
             the Company or of such surviving entity or a subsidiary thereof;
             and provided further, that, if consummation of the corporate
             transaction referred to in this subsection is subject, at the time
             of such approval by shareholders, to the consent of any government
             or governmental agency or approval of the shareholders of another
             entity or other material contingency, no Change in Control shall
             occur until such time as such consent and approval has been
             obtained and any other material contingency has been satisfied;

                  (iv)     The shareholders of the Company have approved a plan
             of complete liquidation of the Company or an agreement for the sale
             or disposition by the Company of all or substantially all of the
             Company's assets (or any transaction having a similar effect);
             provided that, if consummation of the transaction referred to in
             this subsection is subject, at the time of such approval by
             shareholders, to the consent of any government or governmental
             agency or approval of the shareholders of another entity or other
             material contingency, no Change in Control shall occur until such
             time as such consent and approval has been obtained and any other
             material contingency has been satisfied; and

                  (v)      any other event which the Board of Directors
             determines shall constitute a Change in Control for purposes of
             this Program.

         (f) CODE means the Internal Revenue Code of 1986, as amended, and the
             regulations and other authority issued thereunder by the
             appropriate governmental authority. References to the Code shall
             include references to any successor section or provision of the
             Code.

         (g) COMMITTEE means the Compensation Committee of the Board.

         (h) COMPANY means Jefferies Group, Inc. (and its successors and
             assigns) unless otherwise provided herein, or any other corporation
             or business organization which, with the consent of Jefferies
             Group, Inc. (or its successors or assigns), assumes the Company's
             obligations hereunder.

                                       2

<PAGE>

         (i) DEFERRAL ELECTION means a Stock Option Gain Deferral Election or a
             Stock Award Deferral Election.

         (j) DEFERRAL ELECTION FORM means a Participant's written election form
             containing his Stock Option Gain Deferral Election or Stock Award
             Deferral Election. All Deferral Election Forms must be submitted on
             a timely basis to the Administrator, otherwise the Participant
             shall be deemed to have not submitted a Deferral Election Form for
             the Program Year to which it relates. A Deferral Election Form
             shall be deemed timely only if it is submitted prior to both its
             effective date and other deadlines imposed by the Administrator, in
             its discretion. Unless otherwise determined by the Administrator,
             the effective date of a timely filed Stock Option Gain Deferral
             Election shall be January 1 of the applicable Program Year and the
             effective date of a timely filed Stock Award Deferral Election
             shall be promptly upon the filing thereof, provided, however, with
             respect to the Program Year in which the Program is first
             implemented and/or the employee or member of the Board of Directors
             first becomes eligible to participate, the effective date of the
             Deferral Election Form shall be no earlier than the date such
             Deferral Election Form is submitted to the Company and no later
             than thirty (30) days from the date Program implementation or first
             eligibility occurs (as applicable).

         (k) DISTRIBUTION EVENT means the date or dates designated in advance by
             the Participant in his Deferral Election Form or specified under
             the terms of the Program, upon which payment of the Participant's
             Stock Deferral Account shall be deemed triggered for subsequent
             distribution, pursuant to Section IX, in the form of: (i) a lump
             sum payment due within thirty (30) days of the occurrence of the
             Distribution Event or (ii) annual installments commencing on the
             January 1 concurrent with or subsequent to the occurrence of the
             Distribution Event.

         (l) ELIGIBLE INDIVIDUAL means each employee of a Participating Company
             or member of the Board of Directors of the Company selected for
             participation in this Program pursuant to Section IV of the
             Program.

         (m) ELIGIBLE STOCK AWARD means an outstanding award of restricted stock
             under the 1999 Incentive Compensation Plan (or any Equity Plan
             hereafter adopted providing for restricted stock awards and awards
             of forfeitable deferred shares).

         (n) ELIGIBLE STOCK OPTION means one or more non-qualified stock
             option(s) exercisable under one of the Equity Plans.

         (o) EQUITY PLANS means the Company's 1999 Incentive Compensation Plan,
             1999 Directors' Stock Compensation Plan, and Deferred Compensation
             Plan, and any other plan hereafter adopted which permits the
             deferral of gains realized upon exercise of options in the form of
             deferred shares or permits the surrender of outstanding restricted
             stock in exchange for an award in the form of forfeitable deferred
             shares (a contractual obligation of the Company to deliver shares
             at a future date) that can be deferred as to delivery beyond the
             time any risk of forfeiture lapses.

         (p) FORFEITABLE STOCK AWARD AMOUNT means the number of shares credited
             to a Participant's Stock Deferral Account as a result of a valid
             deferral of an Eligible Stock Award. Such number of shares shall be
             subject to a risk of forfeiture and other restrictions in
             accordance with Section VI. Other provisions of the Program
             notwithstanding, the shares constituting the Forfeitable Stock
             Award Amount will not be subject to distribution upon a
             Distribution Event or any other circumstance specified in the
             Program until vesting of the such shares.

         (q) PARTICIPANT means an employee and/or member of the Board of
             Directors who is both eligible

                                       3

<PAGE>

             to participate in the Program under the terms of Section IV
             and has elected to participate in the Program.

         (r) PARTICIPATING COMPANY means the Company and each subsidiary of the
             Company the employees of which are permitted by the Company to
             participate in the Program. With respect to a specific Participant,
             the term "Participating Company" shall refer to the Participating
             Company that employs such Participant or, in the case of a director
             of the Company, the Company.

         (s) PROGRAM YEAR means the twelve (12) month period ending on the
             December 31st of each year during which the Program is in effect,
             provided that the first Program Year shall commence on January 21,
             2003 and end on December 31, 2003.

         (t) QUALIFYING GAIN shall mean the incremental value inuring to a
             Participant upon the exercise of an Eligible Stock Option, using a
             stock-for-stock payment method, during any Program Year. Such
             incremental value shall be deliverable to the Participant in the
             form of additional shares of Stock and shall be computed as
             follows: (i) the total fair market value of the shares of Stock
             held/acquired as a result of the exercise of an Eligible Stock
             Option using a stock-for-stock payment method, minus (ii) the total
             exercise price. For example, assume a Participant elects to
             exercise an Eligible Stock Option to purchase 1,000 shares of Stock
             at an exercise price of $20 per share (i.e., a total exercise price
             of $20,000), when the Stock has a current fair market value of $32
             per share (i.e., a total current fair market value of $32,000) and
             elects to defer one hundred (100) percent of the Qualifying Gain
             (i.e., $12,000). Using the stock-for-stock payment method, the
             Participant would deliver 625 shares of Stock (worth $20,000 at
             exercise) to exercise the Eligible Stock Option and would receive,
             in return, 625 shares of Stock (worth $20,000 at exercise) plus a
             Qualifying Gain, in the form of an unfunded and unsecured promise
             by the Company to deliver 375 additional shares of Stock in the
             future (worth $12,000 at exercise). The number of additional shares
             of Stock deliverable to the Participant in the future as a result
             of the Qualifying Gain shall be fixed and determined as of the date
             of the exercise of the Eligible Stock Option, using the fair market
             value of the Stock determined in the same manner as the fair market
             value of the stock surrendered to pay the option exercise price in
             the stock-for-stock exercise (in accordance with the Equity Plan
             under which the Eligible Stock Option was granted).

         (u) STOCK means Jefferies Group, Inc. common stock (and any securities
             which may be substituted or resubstituted for such common stock).

         (v) STOCK AWARD DEFERRAL ELECTION means an irrevocable election made by
             an Eligible Individual, during an enrollment period specified by
             the Administrator, to surrender restricted stock in exchange for an
             award of an equivalent number of deferred shares subject to a risk
             of forfeiture and other terms substantially the same as the terms
             of the surrendered restricted stock, where all or a portion of such
             deferred shares, upon vesting, will continue to be reflected as
             credits to the Participant's Stock Deferral Account. The Stock
             Award Deferral Election shall be documented by the Participant on
             the Deferral Election Form provided by the Company.

         (w) STOCK DEFERRAL ACCOUNT means the aggregate value, measured on any
             given date, of (i) the number of shares of Stock deferred by a
             Participant as a result of all Stock Option Gain Deferral Elections
             and Stock Award Deferral Elections, less (ii) the number of shares
             of Stock previously distributed to the Participant (or his or her
             Beneficiary) pursuant to this Program.

         (x) STOCK OPTION GAIN AMOUNT means, for any Eligible Stock Option, the
             portion of Qualifying Gains deferred in accordance with Section VII
             of this Program.

                                       4

<PAGE>

         (y) STOCK OPTION GAIN DEFERRAL ELECTION means an irrevocable election
             made by an Eligible Individual, during an enrollment period
             specified by the Administrator, to defer the receipt of a Stock
             Option Gain Amount for a given Program Year. The Stock Option Gain
             Deferral Election shall be documented by the Participant on the
             Stock Option Gain Deferral Election Form provided by the Company.

         (z) TRUST mean a trust fund which may be established by the Company
             pursuant to the Program.

         (aa)TRUSTEE means the trustee named in the agreement establishing a
             Trust, if any, and such successor and/or additional trustees as may
             be named pursuant to the terms of the agreement establishing the
             Trust.

IV.      ELIGIBILITY

         An Eligible Individual shall be eligible to participate in the Program
         if he is approved to participate in the Program by the Committee or,
         for employees other than executive officers and directors of the
         Company, by the Administrator. An employee and/or director shall become
         a Participant under the Program upon the timely filing of a Deferral
         Election Form, as described in Section VII.

V.       ADMINISTRATION OF THE PROGRAM

         The Administrator shall have sole discretion to interpret the
         provisions of the Program. However, no Participant may partake in or
         vote on any decision, as Administrator, which would specifically affect
         his or her own Stock Deferral Account. Initially, the Administrator of
         the Program shall be the Company's Chief Financial Officer, General
         Counsel and Director of Human Resources.

VI.      DEFERRAL OF QUALIFYING GAINS AND RESTRICTED STOCK

         Subject to any terms and conditions imposed by the Administrator, an
         Eligible Individual may irrevocably elect to defer all or a portion of
         the Qualifying Gains that the Eligible Individual would otherwise
         recognize by exercise of Eligible Stock Options during the Program Year
         for which a Stock Option Gain Deferral Election is made and all or a
         portion of the Eligible Stock Awards that would vest during a specified
         Program Year for which a Stock Award Deferral Election is made. Such
         Deferral Elections shall be made as described in Section VII. In the
         case of an Eligible Stock Award, upon the effectiveness of the Stock
         Award Deferral Election the Participant's restricted stock subject to
         such Election shall be surrendered and cancelled, and the Participant's
         Stock Deferral Account shall be credited with a number of shares equal
         to the number of shares of restricted stock surrendered and cancelled,
         such share credits to constitute the Participant's Forfeitable Stock
         Award Amount. The Forfeitable Stock Award Amount shall remain subject
         to the same risk of forfeiture and other restrictions as applied to
         such restricted stock until the time as the restricted stock would have
         vested by its terms. Thereupon, the portion of the shares of Stock that
         had been credited as the Forfeitable Stock Award Amount but not subject
         to deferral beyond vesting shall be promptly distributed to the
         Participant in a lump sum, and the portion of such shares of Stock
         subject to further deferral shall remain credited to the Participant's
         Stock Deferral Account in accordance with the applicable Deferral
         Election and the terms of the Program.

VII.     ELECTION TO PARTICIPATE

         (a) For an election to defer the Qualifying Gain upon an Eligible Stock
             Option exercise to be valid, the following must occur: (i) a
             Deferral Election Form must be completed and signed by the
             Participant with respect to the Program Year, specifying the
             Eligible Stock Option(s) subject to the election; (ii) the Deferral
             Election Form must be delivered on a timely basis to the

                                       5

<PAGE>

             Administrator and accepted by the Administrator; (iii) the Deferral
             Election Form must be deemed by the Administrator to have been
             submitted sufficiently in advance of the date on which the
             Participant elects to exercise the Eligible Stock Option (the
             Administrator in its discretion may not enforce any Deferral
             Election Form received less than six (6) months prior to the date
             of exercise of the applicable Stock Option); (iv) the Eligible
             Stock Option must be exercised using a stock-for-stock payment
             method; (v) the Eligible Stock Option must be exercised at a time
             that the Participant remains an employee of a Participating Company
             or a director of the Company; and (vi) the Stock actually or
             constructively delivered by the Participant to exercise the
             Eligible Stock Option, if acquired from the Company pursuant to a
             plan, must qualify as a "mature" share for purposes of APB 25 if
             use of non-mature shares would result in accounting expense to the
             Company (thus, if such Stock was acquired by exercise of a stock
             option, it may be necessary for the Participant to have held the
             Stock for at least six months before delivery).

         (b) For an election to defer an Eligible Stock Award to be valid, the
             following must occur: (i) a Deferral Election Form must be
             completed and signed by the Participant with respect to the Program
             Year, specifying the Eligible Stock Award subject to the deferral;
             (ii) the Deferral Election Form must be delivered on a timely basis
             to the Administrator and accepted by the Administrator, (iii) the
             Deferral Election Form must be deemed by the Administrator to have
             been submitted sufficiently in advance of the vesting date of the
             Eligible Stock Award subject to the deferral; and (iv) the Stock
             Award Deferral Election must become effective at a time when the
             Participant remains an employee of a Participating Company or a
             director of the Company.

         (c) For each Eligible Stock Option, a Participant may elect to defer a
             minimum of ten (10) percent and a maximum of one hundred (100)
             percent of the Qualifying Gain related to exercise of the Eligible
             Stock Option. For each Eligible Stock Award, a Participant may
             elect to defer a minimum of ten (10) percent and a maximum of one
             hundred (100) percent of the Stock Award. A Participant's ability
             to defer may be further limited by other terms or conditions set
             forth in the Equity Plan or agreement under which such Eligible
             Stock Option or Eligible Stock Award was granted.

         (d) A newly Eligible Individual may make a Deferral Election within
             thirty (30) days of the date the Eligible Individual receives
             notification of eligibility to participate in the Program in order
             to defer Qualifying Gain attributable to an Eligible Stock Option
             exercised during the remainder of such current Program Year or to
             defer an Eligible Stock Award that will vest during the remainder
             of such current Program Year.

VIII.    STOCK DEFERRAL ACCOUNT

         (a) Stock Option Gain Amount(s) and any Eligible Stock Award deferred
             hereunder shall be reflected on the books of the Company as an
             unfunded, unsecured promise to deliver to the Participant a
             specific number of shares of Stock, upon a Distribution Event in
             the future. Such shares of Stock that would otherwise have been
             delivered to the Participant pursuant to the Eligible Stock Option
             exercise or vesting of an Eligible Stock Award, but for the
             Participant's Deferral Election, shall be the shares of Stock
             delivered upon distribution of the Stock Deferral Account, and
             therefore shall be deemed to have originated from, and shall be
             counted against, the shares reserved under the Equity Plan under
             which such Eligible Stock Option or Eligible Stock Award was
             granted.

         (b) The Participant's unfunded, unsecured right to receive a number of
             shares of Stock shall be reflected, in his or her Stock Deferral
             Account, on the books of the Company. In addition,

                                       6

<PAGE>

             actual shares of Stock may be acquired by/issued to the Trust
             established by the Company, if any, at any time after the total of
             such Stock Option Gain Amount has been determined. The Participant
             shall not have a right to diversify the balance of his Stock
             Deferral Account nor to receive cash equal to the value of the
             Stock reflected in such Stock Deferral Account.

         (c) Unless otherwise determined by the Administrator, dividend
             equivalents will be credited with respect to shares credited to the
             Participant's Stock Deferral in the following manner:

             (i)    Cash Dividends. If the Company declares and pays a dividend
                    or distribution on Stock in the form of cash, no amount will
                    be credited to the Participant's Stock Deferral Account at
                    the dividend payment date, but instead, at the time of any
                    distribution of shares from his Stock Deferral Account, the
                    Administrator will calculate the aggregate amount of cash
                    dividends that would have been paid on the shares then being
                    distributed had receipt of such shares not been deferred,
                    together with an amount reflecting the interest that would
                    have accrued had cash been credited to the Account at the
                    relevant dividend payment dates and had been thereafter
                    credited interest based on rates applicable to cash balances
                    in brokerage accounts, and the Company shall pay such cash
                    amount to the Participant;

             (ii)   Non-Cash/Non-Stock Dividends. If the Company declares and
                    pays a dividend or distribution on Stock in the form of
                    property other than shares of Stock, then a number of
                    additional shares shall be credited to each Participant's
                    Stock Deferral Account as of the payment date for such
                    dividend or distribution equal to the number of shares
                    credited to the Stock Deferral Account as of the record date
                    for such dividend or distribution multiplied by the fair
                    market value of such property actually paid as a dividend or
                    distribution on each outstanding share of Stock at such
                    payment date, divided by the fair market value of a share of
                    Stock at such payment date; provided, however, that, in lieu
                    of crediting of additional shares, the Administrator may
                    provide an alternative means of dealing with such dividend
                    or distribution that provides the Participant with
                    substantially equivalent value to that which would have
                    otherwise been received under this subsection (ii), in such
                    manner and on such terms as the Administrator may specify.

             (iii)  Stock Dividends and Splits. If the Company declares and pays
                    a dividend or distribution on Stock in the form of
                    additional shares of Stock, or there occurs a forward split
                    of Stock, then a number of additional shares shall be
                    credited to each Participant's Stock Deferral Account as of
                    the payment date for such dividend or distribution or
                    forward split equal to the number of shares credited to the
                    Stock Deferral Account as of the record date for such
                    dividend or distribution or split multiplied by the number
                    of additional shares of Stock actually paid as a dividend or
                    distribution or issued in such split in respect of each
                    outstanding share of Stock.

             Shares (or any other cash or non-cash amounts) that become credited
             to the Participant's Stock Deferral Account directly or indirectly
             under this Section VIII(c) in respect of shares previously credited
             to the Account (the "underlying credited shares") shall be subject
             to the same terms and conditions, including a risk of forfeiture
             and other restrictions in the case of a Forfeitable Stock Award
             Amount and including Distribution Events in the case of other
             shares, as apply to the underlying credited shares.

         (d) The risk of forfeiture and other restrictions shall apply to the
             Forfeitable Stock Award Amount, as specified in Section VI. A
             Participant shall at all times be one hundred percent (100%) vested
             in the shares credited to his Stock Deferral Account other than the
             Forfeitable Stock Award Amount (but the forfeiture provisions of
             Section XII(e) will apply to any withdrawal pursuant to that
             provision).

                                       7

<PAGE>

         (e) The number of shares credited to a Participant's Stock Deferral
             Account, the kind of securities to which each credited share
             relates, and other terms relating to the Stock Deferral Account may
             be appropriately adjusted by the Administrator in order to prevent
             dilution or enlargement of the Participant's rights hereunder, in
             the event of a stock split, stock dividend, reorganization, merger,
             or other unusual corporate transaction or event which affects the
             Stock, provided that any such adjustment to a Stock Deferral
             Account shall be made taking into account any crediting of shares
             or other amounts to the Participant's Account under other
             provisions of this Section VIII in connection with such transaction
             or event.

IX.      METHOD OF DISTRIBUTION

         (a) Distribution of a Participant's Stock Deferral Account will
             commence upon the Participant reaching a Distribution Event
             selected by the Participant on his Deferral Election Form. The
             Participant's Stock Deferral Account balance shall be payable only
             in the form of Stock (except for cash payable under Section VIII(c)
             and as provided for fractional shares) and shall be distributed in
             either a lump sum or in equal annual installments of Stock over a
             predetermined number of years selected by the Participant on his
             Deferral Election Form. If the annual distribution method is
             elected, the number of shares of Stock distributed as an annual
             installment will be equal to the number of whole shares in the
             Participant's Stock Deferral Account on each distribution date
             divided by the number of remaining installments. Any fractional
             shares in the Participant's Stock Deferral Account will be
             liquidated on the date of any lump-sum distribution or the final
             installment payment and paid in cash to the Participant, unless the
             Administrator implements an alternative means of settling such
             fractional share.

         (b) Distributions will be subject to tax withholding in accordance with
             Section XVIII(d).

         (c) Annual installments will commence on the business day coinciding
             with or next following the January 1 subsequent to the
             Participant's applicable Distribution Event and continuing on each
             January 1 until all annual installments have been distributed. Lump
             sum distributions shall be paid by the Company no later than thirty
             (30) days following the applicable Distribution Event.

         (d) The Participant shall make an election upon entering the Program to
             elect a form and timing of payment of distributions from the Stock
             Deferral Account for the first Program Year which is allowed under
             Section IX(a). This election will continue in effect for future
             Program Years unless the Participant submits a written request
             revising his or her elections on a Deferral Election Form. Such
             revised elections shall be made on forms provided by the Company
             not later than one (1) year prior to the date the Participant would
             otherwise begin receiving a distribution in accordance with the
             most recently executed Deferral Election. No election to change the
             form or timing of payment shall be allowed within one (1) year
             prior to the date the Participant would otherwise begin receiving a
             distribution in accordance with the most recently executed Deferral
             Election.

         (e) The Administrator may determine that, if a Participant's Stock
             Deferral Account balance is below a minimum level specified by the
             Administrator at the time of a Distribution Event or termination of
             Participant's employment or service, the Account will be
             distributed in a lump sum rather than installments.

         (f) A Participant may elect on his Deferral Election (as initially
             filed) to receive an immediate distribution of his Stock Deferral
             Account balances upon a Change in Control. The Participant may
             modify this election by submitting a revised Deferral Election Form
             at least one (1) year prior to the Change in Control (or by such
             other deadline as may be specified by the

                                       8

<PAGE>

             Administrator). If the Participant does not elect to receive an
             immediate distribution of his Stock Deferral Account, the shares of
             Stock held in his Stock Deferral Account will be subject to Section
             XVIII(h).

X.       OFFSET FOR OBLIGATIONS TO COMPANY

         If, at such time as the Participant becomes entitled to payments in
         distribution hereunder, the Participant has any debt, obligation or
         other liability representing an amount owing to the a Participating
         Company or any affiliate of a Participating Company, and if such debt,
         obligation, or other liability is due and owing at the time
         distributions are payable hereunder, the Participating Company may
         offset the amount owing as such liability against the amounts otherwise
         distributable hereunder, but only if and to the extent that such offset
         is permitted under applicable law.

XI.      LIABILITY OF COMPANY

         Except as provided below, all contributions to be made as required by
         this Program by a Participating Company shall be determined separately,
         subject to all the terms and conditions of this Program. No
         Participating Company shall be held liable for any contributions to be
         made by any other party. The Administrator, shall keep separate books
         and records concerning the affairs of the each Participating Company
         hereunder and as to the accounts and credits of the Participants
         employed thereby.

XII.     CHANGE IN DISTRIBUTION SCHEDULE

         (a) DEATH OF PARTICIPANT. In the event of the death of a Participant
             before distribution of the Participant's Stock Deferral Account
             balance has commenced or been completed, the Administrator shall
             pay the remaining balance of the Stock Deferral Account (exclusive
             of any Forfeitable Stock Award Amount that remains unvested) in one
             lump sum, to the individual designated as Primary Beneficiary on
             the latest properly completed and executed "Notice of Change of
             Beneficiary" form on file, within a reasonable time period but not
             later than one hundred (180) days after the date of the
             Participant's death. If the Primary Beneficiary designated on the
             latest such "Notice of Change of Beneficiary" form is no longer
             living at the time of the Participant's death, the Administrator
             shall pay such remaining balance of the Stock Deferral Account in
             one lump sum to the individual designated as Secondary Beneficiary
             on the latest properly completed and executed "Notice of Change of
             Beneficiary" form on file. If the Secondary Beneficiary designated
             on the latest such "Notice of Change of Beneficiary" form is no
             longer living at the time of the Participant's death, the
             Administrator shall pay such remaining balance of the Stock
             Deferral Account in one lump sum to the Participant's estate.

             If a Participant wishes to change the beneficiary he or she has
             previously designated, he or she may do so at any time by
             submitting a new "Notice of Change of Beneficiary" form to the
             Administrator, which form, if properly completed and executed,
             shall become effective upon receipt by the Administrator.

         (b) PERMANENT DISABILITY OF THE PARTICIPANT. In the event of permanent
             disability (as defined below) before distribution of a
             Participant's Stock Deferral Account balance has commenced or been
             completed, the Administrator shall be permitted to pay the balance
             of the Participant's Account (exclusive of any Forfeitable Stock
             Award Amount that remains unvested) in one lump sum. Such payouts
             shall be made to the Participant or the legal representative of
             such Participant pursuant to paragraph (c) of Section XVIII.

             "Disability" shall mean, for purposes of the Program, a physical or
             mental impairment that

                                       9

<PAGE>

             would entitle the Participant to receive benefits under the
             Company's long term disability program, as determined by the
             Committee in its sole discretion. The Administrator may, in its
             discretion, require a medical examination performed by a physician
             at the expense of the Company, as a condition to any determination
             of disability.

         (c) DISTRIBUTION DUE TO FINANCIAL HARDSHIP. Other provisions of the
             Program notwithstanding, if the Administrator determines, after
             consideration of a Participant's application, that the Participant
             has sustained a severe financial hardship resulting from a sudden
             and unexpected illness or accident of the Participant or the
             Participant's dependent (as defined in Section 152(a) of the Code),
             loss of the Participant's property due to casualty, or other
             similar extraordinary and unforeseeable circumstances resulting
             from events beyond the Participant's control, the Administrator
             may, in its sole discretion, direct that all or a portion of the
             balance of the Participant's Stock Deferral Account (exclusive of
             any Forfeitable Stock Award Amount) be distributed to the
             Participant. The distribution will be made in the manner and at the
             time specified by the Administrator. No Participant who is also a
             member of the Administrator may in any way take part in any
             decision pertaining to a request for payment made by that
             Participant hereunder. The need to pay for educational expenses or
             to purchase a home are not considered to be financial hardships.

         (d) CHANGE IN DISTRIBUTION DATE. If a Participant wishes to modify the
             distribution schedule established in accordance with Section IX, he
             must submit a written petition to the Administrator for such
             change. The Administrator shall determine whether to permit the
             requested change in its discretion. The written petition must be
             submitted to the Administrator at least one (1) year prior to the
             date the Participant would otherwise be receiving a distribution in
             accordance with the most recent Deferral Election.

         (e) EARLY LUMP SUM DISTRIBUTION. Prior to a Distribution Event, a
             Participant may withdraw all or a portion of the balance of his
             Stock Deferral Account, other than a Forfeitable Stock Award
             Amount. If any such withdrawal is made, the Participant shall
             receive from his Stock Deferral Account a lump-sum distribution as
             follows:

             (i)      if the withdrawal is made before a Change in Control or
                      more than twenty-four months following a Change in
                      Control, the amount distributable shall equal 90% of the
                      amount requested, and the remaining 10% of the amount
                      requested shall be forfeited; or

             (ii)     if the withdrawal is made within the twenty-four month
                      period beginning on the date of a Change in Control, the
                      amount distributable shall equal 95% of the amount
                      requested, and the remaining 5% of the amount requested
                      shall be forfeited.

             No request to withdraw less than 10% of the balance of any Stock
             Deferral Account shall be permitted. Any request to withdraw 75% or
             more of the balance of a Stock Deferral Account shall result in the
             withdrawal and forfeiture of the entire balance of such Account.

XIII.    BENEFIT PLANS

         The amount of a Participant's Qualifying Gain or Eligible Stock Award
         which he elects to defer under the Program shall not be deemed to be
         compensation for the purpose of calculating the amount of Participant's
         benefits or contributions under a pension plan or retirement plan
         (qualified under Section 401(a) of the Internal Revenue Code) or any
         non-qualified supplemental retirement plan, the amount of life
         insurance payable under any life insurance plan, or the amount of any
         disability benefit payments payable under any disability plan
         established or maintained by a Participating Company, except to the
         extent specifically provided in any such plan.

                                       10

<PAGE>

XIV.     RIGHTS OF A PARTICIPANT

         Establishment of the Program shall not be construed as giving any
         Participant the right to be retained in the Company's service or employ
         or the right to receive any benefits not specifically provided by the
         Program.

         Qualifying Gain and Eligible Stock Awards deferred under this Program
         will not be segregated from the general funds of the Company and no
         Participant will have any claim on any specific assets of the Company.
         To the extent that any Participant acquires a right to receive benefits
         under this Program, his or her right will be no greater than the right
         of any unsecured general creditor of the Company and is not assignable
         or transferable except to his or her estate as defined in Section XII.

XV.      AMENDMENT AND TERMINATION

         The Program may be amended from time to time at the discretion of the
         Committee. The amendment of any one or more provisions of the Program
         shall not affect the remaining provisions of the Program. No amendment
         shall reduce any benefits accrued by any Participant prior to the
         amendment, except with the written consent of the Participant.

         The Committee has the right to terminate the Program at any time. Any
         amount accumulated prior to the Program's termination will continue to
         be subject to the provisions of the Program.

XVI.     DETERMINATION OF BENEFITS

         (a) CLAIM - A person who believes that he is being denied a benefit to
             which he is entitled under the Program (hereinafter referred to as
             a "Claimant") may file a written request for such benefit with the
             Company, setting forth his claim. The request must be addressed to
             the Administrator at the Company's principal place of business.

         (b) CLAIM DECISION - Upon receipt of a claim, the Company shall advise
             the Claimant that a reply will be forthcoming within ninety (90)
             days and shall, in fact, deliver such reply within such period. The
             Company may, however, extend the reply period for an additional
             ninety (90) days for reasonable cause. If the claim is denied in
             whole or in part, the Company shall adopt a written report, using
             language calculated to be understood by the Claimant, setting
             forth:

             (1)          The specific reason or reasons for such denial;

             (2)          The specific reference to pertinent provisions of this
                          Program upon which such denial is based;

             (3)          A description of any additional material or
                          information necessary for the Claimant to clarify his
                          claim and an explanation why such material or such
                          information is necessary;

             (4)          Appropriate information as to the steps to be taken if
                          the Claimant wishes to submit the claim for review;
                          and

             (5)          The time limits for requesting a review.

         (c) REQUEST FOR REVIEW - Within sixty (60) days after the receipt by
             the Claimant of the written report described above, the Claimant
             may request in writing that the Committee review the determination
             of the Company. Such request must be addressed to the Compensation

                                       11

<PAGE>

             Committee of the Board of Directors at the Company's principal
             place of business. The Claimant or his duly authorized
             representative may, but need not, review the pertinent documents
             and submit issues and comments in writing for consideration by the
             Company. If the Claimant does not request a review of the Company's
             determination by the Committee within such sixty (60) day period,
             he shall be barred and stopped from challenging the Company's
             determination.

         (d) REVIEW OF DECISION - Within sixty (60) days after the Committee's
             receipt of a request for review, the Committee will review the
             Company's determinations. After considering all materials presented
             by the Claimant, the Committee will render a written report,
             written in a manner calculated to be understood by the Claimant,
             setting forth the specific reasons for the decision and containing
             specific references to the pertinent provisions of this Program on
             which the decision is based. If special circumstances require that
             the sixty (60)-day time period be extended, the Committee will so
             notify the Claimant and will render the decision as soon as
             possible, but no later than one hundred twenty (120) days after
             receipt of the request for review.

XVII.    NOTICES

         Notices and elections under this Program must be in writing. A notice
         or election is deemed delivered if it is delivered personally or mailed
         by registered or certified mail to the person at his or her last known
         business address.

XVIII.   GENERAL PROVISIONS

         (a) Controlling Law. The Program and the rights of all persons claiming
             hereunder shall be construed and determined in accordance with the
             laws of the State of New York without giving effect to the choice
             of law principles thereof, except to the extent that such law is
             preempted by federal law.

         (b) Captions. The captions of sections and paragraphs of this Program
             are for the convenience of reference only and shall not control or
             affect the meaning or construction of any of its provisions.

         (c) Facility of Payment. Any amounts payable hereunder to any
             Participant who is under legal disability or who, in the judgment
             of the Administrator, is unable to properly manage his or her
             financial affairs may be paid to the legal representative of such
             Participant or may be applied for the benefit of such Participant
             in any manner which the Administrator may select, and any such
             payment shall be deemed to be payment for such Participant's
             account and shall be a complete discharge of all liability of the
             Company with respect to the amount so paid.

         (d) Withholding of Taxes. To the extent required by the laws in effect
             at the time compensation is deferred hereunder or at the time
             deferred compensation payments are made, the Participating Company
             shall withhold any taxes required to be withheld for federal, state
             or local government purposes. Participation in the Program
             constitutes a Participant's agreement that a Participating Company
             may withhold from payroll or other payments owing to the
             Participant cash amounts to satisfy withholding obligations arising
             under the Program (for example, FICA withholding can arise in
             connection with deferrals upon exercise of Eligible Stock Options
             or deferrals of Stock Awards at the time of vesting). Unless other
             arrangements satisfactory to the Administrator have been made by
             the Participant to provide for payment of withholding amounts in
             connection with a distribution of the Participant's Stock Deferral
             Account, shares of Stock being distributed will be withheld from
             any distribution to satisfy mandatory withholding

                                       12

<PAGE>

             taxes, if permitted under the Equity Plan under which the shares
             originated.

         (e) Administrative Expenses. All expenses of administering the Program
             shall be borne by the Company. No part thereof shall be charged
             against any Participant's account or any amounts distributable
             hereunder. Sales of shares of Stock distributed to Participants are
             the sole responsibility of the Participant, however.

         (f) Severability. Any Provision of this Program prohibited by the law
             of any jurisdiction shall, as to such jurisdiction, be ineffective
             to the extent of such prohibition without invalidating the
             remaining provisions hereof.

         (g) No Liabilities. Except as otherwise expressly provided herein, no
             member of the Board of Directors of the Company, or the
             Compensation Committee thereof or any other person or group acting
             as Administrator, and no officer, employee, or agent of a
             Participating Company, shall have any liability to any person,
             firm, or corporation based on or arising out of the Program, except
             in the case of gross negligence or fraud.

         (h) Binding on all Successors. In the event of a Change in Control,
             any surviving or acquiring corporation shall (i) assume the Program
             and (ii) agree to substitute for each share of Stock then credited
             to each Stock Deferral Account the amount and type of consideration
             payable to a holder of one share of Stock (including if applicable
             shares of common stock of such surviving or acquiring corporation).
             In the event any surviving or acquiring corporation refuses to
             assume the terms set out in this Section, then each Participant
             will receive the balance in his or her Stock Deferral Account in a
             single lump-sum of Stock (together with any cash payable under
             Section VIII(c)).

XIX.     UNFUNDED STATUS OF PROGRAM

         It is the intention of the parties that the arrangements herein
         described be unfunded for tax purposes and for purposes of Title I of
         ERISA. Program Participants have the status of general unsecured
         creditors of the Company and any other Participating Company. The
         Program constitutes a mere promise by the Company to make payments in
         the future.

         The Company may establish a Trust(s) with the Trustee(s), pursuant to
         such terms and conditions as are set forth in the applicable trust
         agreement(s) entered into between the Company and the Trustee(s).
         Certain of the obligations of the Administrator pursuant to the terms
         of the Program may be delegated to a trustee pursuant to the terms of a
         trust agreement. Any Trust, if established, is intended to be treated
         as a "grantor" trust under the Internal Revenue Code of 1986 and the
         Regulations thereunder, as amended from time to time, and the
         establishment is not intended to cause Participants to realize current
         income on amounts contributed thereto, and the Trust shall be so
         interpreted.

XX.      RIGHTS TO BENEFITS

         A Participant's rights' to benefit payments under the Program are not
         subject in any manner to anticipation, alienation, sale, transfer,
         assignment, pledge, encumbrance, attachment, or garnishment by
         creditors of the Participant or the Participant's beneficiaries.

                                       13

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