Document:

Exhibit 10.7

 

Exhibit 10.7

JEFFERIES GROUP, INC.

2003 INCENTIVE COMPENSATION PLAN

RESTRICTED STOCK AGREEMENT

     AGREEMENT dated as of [insert grant date] (the “Grant Date”), between JEFFERIES GROUP, INC., a
Delaware corporation (the “Company”), and [insert employee name] (“Employee”).

     WHEREAS, the Compensation Committee of the Board of Directors (the “Committee”) has determined
that the Company shall make a grant of Restricted Stock to Employee under the Company’s 2003
Incentive Compensation Plan (the “2003 Plan”), in furtherance of the purposes of the 2003 Plan and
in recognition of Employee’s service as an employee of the Company and/or its subsidiaries; and

     WHEREAS, the Company desires to confirm the grant of Restricted Stock, and to set forth the
terms and conditions of such grant, and Employee desires to accept such grant and agree to the
terms and conditions thereof, as set forth in this Restricted Stock Agreement (the “Agreement”).

     NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto
agree as follows:

     1. Grant of Restricted Stock. The Company hereby confirms the grant, under the 2003 Plan, to
Employee on the Grant Date set forth above of [insert number of shares] shares of Restricted Stock
(the “Restricted Stock”). The Restricted Stock is subject to all of the terms and conditions set
forth in this Agreement, including the restrictions set forth in Section 3. The Company shall
issue in the name of Employee, as promptly as practicable, one or more certificates representing
the shares of Common Stock, $.0001 par value (“Common Stock”), granted as Restricted Stock or shall
instruct its transfer agent to issue Restricted Stock which shall be maintained in “book entry”
form on the books of the transfer agent. The Restricted Stock shall bear the restrictive legend
and be subject to the other terms set forth in Section 3. For purposes of this Agreement, each
tranche of shares of Common Stock will remain Restricted Stock until the expiration of the
Restrictions (as defined in Section 3) on such tranche or the forfeiture of the Restricted Stock,
without regard to extraordinary transactions which may affect the Common Stock except as may be
otherwise provided under the 2003 Plan and determinations of the Committee thereunder.

     2. Incorporation of 2003 Plan by Reference. The Restricted Stock has been granted to
Employee under the 2003 Plan. The 2003 Plan and information regarding the 2003 Plan, including
documents that constitute the “Prospectus” for the 2003 Plan under the Securities Act of 1933, can
be viewed and printed out from the Company’s secure Intranet website, www.corp.jefferies.com (go to
People Services, then to Plan Documents). All of the terms, conditions, and other provisions of
the 2003 Plan are hereby incorporated by reference into this Agreement. Capitalized terms used in
this Agreement but not defined herein shall have the same meanings as in the 2003 Plan. If there
is any conflict between the provisions of this Agreement and the provisions of the 2003 Plan, the
provisions of the 2003 Plan shall govern. Employee hereby acknowledges that the 2003 Plan and
information regarding the 2003 Plan has been made readily available to him and agrees to be bound
by all the
terms and provisions thereof (as presently in effect

 

 

or hereafter amended), rules and
regulations adopted from time to time thereunder, and by all decisions and determinations of the
Committee made from time to time thereunder.

     3. Restrictions on Restricted Stock and Related Terms.

     (a) Restrictions Generally. Until they expire in accordance with Section 3(b), the
following restrictions (the “Restrictions”) shall apply to the Restricted Stock: (1) the Restricted
Stock shall be subject to a risk of forfeiture as set forth in Section 3(b) (the “Risk of
Forfeiture”), and (2) Employee shall not sell, transfer, assign, pledge, margin, or otherwise
encumber or dispose of the Restricted Stock (except for transfers and forfeitures to the Company).
Upon issuance of certificates or the transfer agent making the appropriate entry on its books
representing the Restricted Stock in the name of Employee, which shall occur as promptly as
practicable after the Grant Date, Employee shall be entitled to receive dividends on the Restricted
Stock as provided in Section 3(e), shall be entitled to vote Restricted Stock on any matter
submitted to a vote of holders of Common Stock, and shall have all other rights in connection with
such Restricted Stock as would a holder of Common Stock except as otherwise expressly provided
under this Section 3, and subject to the Committee’s authority (including authority to make
adjustments to Awards) under the 2003 Plan.

     (b) Risk of Forfeiture and Expiration Thereof. Unless otherwise determined by the
Committee, if for any reason Employee’s employment by the Company or a subsidiary terminates prior
to the expiration of the Restrictions, and immediately thereafter Employee is not employed by the
Company or any direct or indirect subsidiary of Company (“Termination”), except as set forth below,
all Restricted Stock as to which the Restrictions have not expired at or before the time of such
Termination (and any related property resulting from Section 3(e)(iii)) shall be forfeited at the
time of such Termination. Except as otherwise specifically set forth herein, the Restrictions
shall expire as to [insert percentage to vest]% of the shares of Restricted Stock (and any related
property) on each of [insert vesting dates] (each being a “Vesting Date,” at which date such
Restricted Stock is deemed “vested”).

	 	(i)	 	Death or Disability. If Employee dies or if such Termination is by reason of
Employee’s Disability (as defined below), then such forfeiture shall not occur, and the
Restrictions as to all of the shares of Restricted Stock shall immediately expire upon
such death or Termination.
	 
	 	(ii)	 	Retirement or Involuntary Termination by the Company not for Cause (and not
subject to Section 3(b)(iii)). In the event of Employee’s Retirement or an involuntary
Termination of Employment by the Company not for Cause (other than a Termination not
for Cause following a Change in Control), provided that the Employee executes a
settlement agreement and release in such form as may be requested by the Company (and
provided further that any period of revocation required by law has expired without
Employee exercising his right to revoke his agreement to the settlement agreement and
release), Restricted Stock not then or previously vested shall not then be forfeited,
but thereafter shall be forfeited if there occurs a Forfeiture Event prior to the
earlier of the Vesting Date for such Restricted Stock or Employee’s death. A
“Forfeiture Event” shall be deemed to occur if, following Employee’s Retirement or
Termination by the Company not for Cause,

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	 	 	 	Employee renders services for any
organization or engages (either as owner, investor, partner, stockholder, employer,
employee, consultant, advisor, or director) directly or indirectly, in any business
which is or becomes competitive with the Company, its subsidiaries or affiliates, or
otherwise engaged in conduct violating Section 7.4(a), 7.4(b) or 7.4(c) of the Plan.
However, following Employee’s Retirement or Termination by the Company not for
Cause, it shall not constitute a Forfeiture Event if Employee purchases stock or
other securities of an organization or business so long as the stock or other
securities are listed upon a recognized securities exchange or traded
over-the-counter and such investment does not represent a greater than five percent
equity interest in the organization or business.
	 
	 	(iii)	 	Termination not for Cause Following a Change in Control. If, following a
Change in Control, Employee’s employment is terminated not for Cause by the Company or
its successor, Restrictions on all of the then-outstanding Restricted Stock not vested
at the date of Termination will immediately expire and such Restricted Stock will
immediately vest. If a Change in Control occurs followed by Termination of Employment
by the Company not for Cause and a determination is made by the Company pursuant to
Sections 280G and 4999 of the Code that a “golden parachute” excise tax will be payable
in connection with compensation to Employee hereunder, Employee’s right to accelerated
vesting of the shares upon the Change in Control, to the extent such right results in
“parachute payments” (as such term is defined in Code Section 280G), shall be limited
to the extent just necessary to avoid the excise tax. This limitation shall be applied
in a manner that maximizes the number of shares as to which accelerated vesting can
apply (or, stated conversely, any limitation on acceleration of vesting shall apply
first to those shares with the lengthiest remaining vesting period, which shares would
result in the highest “parachute payments”).
	 
	 	(iv)	 	Termination by Employee for any reason or Termination by the Company for Cause.
In the event of Employee’s Termination of Employment by Employee for any reason (other
than due to Retirement, death or Disability) or by the Company for Cause, the portion
of the then-outstanding Restricted Stock not vested at the date of termination will be
forfeited.

	 	(c)	 	Certain Definitions. The following definitions apply for purposes of this Agreement:
	 
	 	(i)	 	“Cause” means Employee’s:
	 
	 	 	 	Neglect, failure or refusal to timely perform the duties of Employee’s employment
(other than by reason of a physical or mental illness or impairment), or Employee’s
gross negligence in the performance of his or her duties;
	 
	 	 	 	Material breach of any agreements, covenants and representations made in any
employment agreement or other agreement with the Company or any of its
subsidiaries or affiliates or violation of internal policies or procedures as are in
effect as of the date such action is taken, including but not limited to the
Company’s Code of Ethics, as amended from time to time;

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	 	 	 	Violation of any law, rule, regulation or by-law of any governmental authority
(state, federal or foreign), any securities exchange or association or other
regulatory or self-regulatory body or agency applicable to Employee, the Company,
its subsidiaries or affiliates or any material general policy or directive of the
Company, its subsidiaries or affiliates;
	 
	 	 	 	Conviction of, or plea of guilty or nolo contendere to, a crime involving moral
turpitude, dishonesty, fraud or unethical business conduct, or any felony of any
nature whatsoever;
	 
	 	 	 	Failure to obtain or maintain any registration, license or other
authorization or approval that Employee is required to maintain or that the Company,
its subsidiaries or affiliates reasonably believes is required in order for Employee
to perform his or her duties, provided, however, that Employee shall be given
written notice of any such registration, license or other authorization or approval
that he or she is required to obtain and a reasonable period of time to obtain such
registration, license, or other authorization or approval; or
	 
	 	 	 	Willful failure to execute a directive of the board of directors of the Company or
any of its subsidiaries or affiliates, the Executive Committee of any of the
Company’s subsidiaries or affiliates, or Employee’s supervisor (unless such
directive would result in the commission of an act which is illegal or unethical) or
commission of an act against the directive of such Board, such Executive Committee
or Employee’s supervisor.
	 
	 	(ii)	 	A “Change in Control” shall be deemed to have occurred if any of the following
conditions shall have been satisfied after the Grant Date:
	 
	 	 	 	Any person (as defined in section 3(a)(9) of the Securities Exchange Act of 1934, as
such term is modified in Section 13(d)), other than (i) an employee plan established
by the Company or any of its subsidiaries or (ii) any group of Company employees
holding shares subject to agreements relating to the voting of such shares, becomes
a beneficial owner, directly or indirectly, of more than 51% of the voting stock of
the Company;
	 
	 	 	 	The consummation of a merger or consolidation of the Company with any other
corporation or any other entity, or the issuance of voting securities in connection
with a merger or consolidation of the Company, if the holders of the Company’s
voting securities immediately prior to such transaction hold in the aggregate less
than a majority of the then outstanding voting securities of the Company (or any
successor company or entity) entitled to vote generally in the election of the
directors of the Company (or such other company or entity) after such transaction;

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	 	 	 	The sale or disposition by the Company of all or substantially all of its assets in
which one person or more than one person acting as a group acquires assets from the
Company that have a total gross fair market value equal to more than 50% of the
total gross fair market value of all of the assets of the Company
immediately prior to such acquisition; or
	 
	 	 	 	A change in the composition of the Board of Directors of the Company such that
individuals who, as of the date of this agreement, constitute the Board of Directors
of the Company (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board of Directors of the Company; provided, however, that any
individual becoming a member of the Board of Directors of the Company subsequent to
the date of this agreement whose election, or nomination for election by the
shareholders of the Company, was approved by a vote of at least a majority of the
directors then constituting the Incumbent Board shall be considered as if that
individual were a member of the Incumbent Board.
	 
	 	(iii)	 	“Disability” means that Employee has commenced receipt of long-term disability
benefits under the Company’s long-term disability policy as in effect at the date of
Employee’s termination of employment.
	 
	 	(iv)	 	“Retirement” means retirement after attaining the age at which an Employee’s
age plus his years of service equals 60 [(or age 62 if Employee has a title of
Executive Vice President or is a member of the Executive Committee)], provided,
however, that Employee has provided a minimum of 7.5 years of service to the Company,
its subsidiaries or affiliates [and such retirement is more than 12 months after the
Grant Date]. For this purpose, years of service shall be credited for each twelve
month period beginning on the date of Employee’s commencement of employment with the
Company and on each anniversary thereof during which the Employee was in active
employment with the Company. [For the avoidance of doubt, Employee’s retirement within
12 months of the Grant Date, shall not qualify as a Retirement hereunder.]
	 
	 	(v)	 	“Termination” or “Termination of Employment” means the event by which Employee
ceases to be employed by the Company, its subsidiaries and affiliates and immediately
thereafter is not employed by any other entity included within the Company.

             (d) Evidence of Restricted Stock. Restricted Stock shall be evidenced either (i) by
issuance of one or more certificates in the name of Employee or (ii) by an entry on the books of
the Company’s transfer agent. The Restricted Stock shall bear an appropriate legend referring to
the terms, conditions, and Restrictions applicable hereunder in substantially the following form:

The shares of Common Stock represented by this certificate (the “Shares”) have been granted
by Jefferies Company, Inc. (the “Company”) as Restricted Stock under the Company’s 2003
Incentive Compensation Plan (the “2003 Plan”) and the Restricted Stock Agreement (the
“Agreement”), dated as of [insert date of agreement] between the registered owner named
hereon (“Employee”) and the Company. Under the 2003 Plan and the Agreement, copies of

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which
may be examined at the office of the Secretary of the Company, until [insert last vesting
date] (subject to acceleration in certain circumstances), Employee shall not sell, transfer,
assign, pledge, margin, or otherwise encumber or dispose of the Shares (except for transfers
and forfeitures to the Company), and Employee shall forfeit the Shares upon termination of
Employee’s employment with the Company and its subsidiaries in certain circumstances. The
Shares are subject to certain other terms and conditions set forth in the Agreement.

Unless otherwise determined by the Company, certificates representing Restricted Stock shall remain
in the physical custody of the General Counsel of the Company or his designee until such time as
Restrictions on such Restricted Stock have expired. In addition, Restricted Stock shall be subject
to such stop-transfer orders and other restrictive measures as the General Counsel of the Company
shall deem advisable under federal or state securities laws, rules and regulations thereunder, and
the rules of the New York Stock Exchange (the “NYSE”) or any national securities exchange or
automated quotation system on which Common Stock is then listed or quoted, or to implement the
Restrictions.

     (e) Dividends and Distributions; Stock Splits. Employee shall be entitled to receive
dividends and distributions payable with respect to Restricted Stock if and to the extent that he
or she is the record owner of such Restricted Stock on any record date for such a dividend or
distribution and he or she has not forfeited such Restricted Stock on or before the payment date
for such dividend or distribution, and Restricted Stock shall be subject to any stock split,
subject to the following terms and conditions:

	 	(i)	 	In the event of a cash dividend or distribution on Common Stock which is not a
large, special and non-recurring dividend or distribution (as determined by the Board
of Directors), such dividend or distribution shall be paid in cash to Employee;
	 
	 	(ii)	 	In the event of a large, special and non-recurring cash dividend payable on
Common Stock, the Company shall retain the amount of such cash dividend and, in lieu of
delivery thereof, shall grant to Employee additional shares of Restricted Stock having
a fair market value (as determined by the Committee) at the payment date of the
dividend or distribution equal to the amount of cash paid as a dividend or distribution
on each share of Common Stock multiplied by the number of shares of Employee’s
Restricted Stock. Such additional Restricted Stock will be subject to the same
Restrictions and to such other terms and conditions as applied to the Restricted Stock;
	 
	 	(iii)	 	In the event of any non-cash dividend or distribution in the form of property
other than Common Stock payable on Common Stock (including shares of a subsidiary of
the Company distributed in a spin-off) (unless the Committee determines to make
equitable adjustments under Section 5.3 of the 2003 Plan in lieu of the procedure
specified in this Section 3(e)(iii)), the Company shall retain in its custody the
property so distributed in respect of Employee’s Restricted Stock, which property will
be subject to the same Restrictions and to such other terms and conditions of the 2003
Plan and this Agreement as apply to the Restricted Stock with respect to which such
property was distributed, until such time as the Restrictions expire or the Restricted
Stock (together with such property) are forfeited. To the greatest extent practicable,
such property will be treated the same as such Restricted Stock with respect to which

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	 	 	 	the property was distributed, including in the event of any dividends or
distributions paid in respect of such property or with respect to the placement of
any legend on certificate(s) or documents representing such property.
	 
	 	(iv)	 	In the event of a dividend or distribution in the form of Common Stock or
split-up of shares, the Common Stock issued or delivered as such dividend or
distribution or resulting from such split-up will be deemed to be additional Restricted
Stock and will be subject to the same Restrictions and to such other terms and
conditions of the 2003 Plan and this Agreement as applied to the Restricted Stock with
respect to which such dividend or distribution was paid or which was subject to such
split-up.

     (f) Delivery of Certificates. Upon expiration of Restrictions on any Restricted
Stock, the shares previously issued in the name of Employee as such Restricted Stock shall no
longer be deemed to be Restricted Stock, and the Company shall, subject to the satisfactory payment
of any federal, state or foreign taxes or other amounts referred to in Section 4, below, cause any
legend referring to the Restrictions to be removed from the certificate(s) representing such shares
and shall deliver such certificate(s) (together with any property resulting from Section 3(e)(iii))
to Employee.

     (g) Stock Powers. Employee shall deliver to the General Counsel of the Company, at
the time of execution of this Agreement and/or at such other time or times as the General Counsel
may request, one or more executed stock powers, in the form attached hereto as Exhibit A or such
other form as may be specified by the General Counsel, authorizing the transfer of the Restricted
Stock to the Company upon forfeiture, and Employee shall take such other steps or perform such
other actions as may be requested by the General Counsel to effect the transfer of any forfeited
Restricted Stock (together with any property resulting from Section 3(e)(iii)) to the Company.

     4. Tax Withholding. Employee shall make arrangements satisfactory to the Company, or, in the
absence of such arrangements, the Company and any subsidiary may deduct from any payment to be made
to Employee any amount necessary, to satisfy requirements of federal, state, local, or foreign tax
law to withhold taxes or other amounts with respect to the grant of the Restricted Stock or the
expiration of the Restrictions applicable to the Restricted Stock (and any property resulting from
Section 3(e)(iii)). In the event that Employee files, under Section 83(b) of the Code, an election
to be taxed on his receipt of Restricted Stock as the receipt of ordinary income at the date of
grant of the Restricted Stock, Employee shall at the time of such filing notify the Company of the
making of such election and furnish a copy of the notice to the Company. Unless Employee has made
separate arrangements satisfactory to the Company, the Company may elect to withhold shares
deliverable upon lapse of the Restrictions on the Restricted Stock having a fair market value (as
determined by the Committee) equal to the amount of such tax liability required to be withheld in
connection with the grant of the Restricted Stock or the expiration of the Restrictions applicable
to the Restricted Stock, but the Company shall not be obligated to withhold such shares. The
Company may specify a reasonable deadline (for example, 90 days before lapse of Restrictions) by
which separate arrangements must be made for payment of withholding taxes other than through
withholding of shares.

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     5. Legal Compliance. Employee agrees to take any action the Company reasonably
deems necessary in order to comply with federal and state laws, or the rules and regulations
of the NYSE, the National Association of Securities Dealers, Inc., or any other stock exchange, or
any other obligation of the Company or Employee relating to the Restricted Stock or this Agreement.

     6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES.

     7. Miscellaneous. This Agreement shall be binding upon the heirs, executors, administrators,
and successors of the parties. This Agreement and the 2003 Plan constitute the entire agreement
between the parties with respect to the Restricted Stock, and supersede any prior agreements or
documents with respect thereto. No amendment, alteration, suspension, discontinuation, or
termination of this Agreement which may impose any additional obligation upon the Company or
materially impair the rights of Employee with respect to the Restricted Stock shall be valid unless
in each instance such amendment, alteration, suspension, discontinuation, or termination is
expressed in a written instrument duly executed in the name and on behalf of the Company and, if
Employee’s rights are being materially impaired, by Employee. Neither the Restricted Stock nor the
granting thereof shall constitute or be evidence of any agreement or understanding, express or
implied, that Employee has a right to continue as an officer or employee of the Company or any
subsidiary for any period of time, or at any particular rate of compensation. Any waiver by the
Company of a breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach of such provision or any other provision hereof.

     The Employee hereby acknowledges that the type and periods of restriction imposed in
the provisions of this Agreement are fair and reasonable. The Employee hereby further acknowledges
that the provisions of this Agreement shall be enforced to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly,
the Employee agrees that if any particular provision of this Agreement shall be adjudicated to be
invalid or unenforceable, such provision shall be deemed amended to delete therefrom the portion
thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the
operation of such provision in the particular jurisdiction in which such adjudication is made. In
addition, if any one or more of the provisions contained in this Agreement shall for any reason be
held to be excessively broad as to duration, geographical scope, activity or subject, it shall be
construed by limiting and reducing it, so as to be enforceable to the extent compatible with the
applicable law as it shall then appear. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

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

	 	 	 	 	 	 	 	 	 
	Employee:	 	 	 	JEFFERIES GROUP, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

[Insert employee name]

	 	 
	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	Social Sec. No.
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	[Insert employee address]
	 	 	 	 	 	 	 	 

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STOCK POWER

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto Jefferies Group,
Inc. [insert number of shares] shares of Common Stock, $0.0001 par value per share, of Jefferies
Group, Inc., a Delaware corporation (the “Corporation”), registered in the name of the undersigned
on the books and records of the Corporation, and does hereby irrevocably constitute and appoint [
]and [ ], and each of them, attorneys, to transfer the Common Stock on the books of the
Corporation, with full power of substitution in the premises.

	 	 	 	 	 
	 
	 

	 	 

(Signature should be in exact form as on Stock certificate)
	 	 
	 
	 	 	 	 
	 
	 

	 	 

Date
	 	 

- 10 -Exhibit 10.8

 

Exhibit 10.8

JEFFERIES GROUP, INC.

2003 Incentive Compensation Plan

Restricted Stock Units Agreement

This Restricted Stock Units Agreement (the “Agreement”) confirms the grant on                      (the
“Grant Date”) by Jefferies Group, Inc., a Delaware corporation (the “Company”), to                     
(“Employee”) of Restricted Stock Units (the “Units”), including rights to Dividend Equivalents as
specified herein, as follows:

	 	 	 	 	 
	 

	Number granted:
	 	                     Units
	 
	 	 	 	 
	 

	How Units Vest:
	 	___% of the Units, if not previously forfeited, will vest on each
of                     , provided that Employee continues to be employed by the Company or a
subsidiary on each vesting date (each, a “Stated Vesting Date”). In addition, if not
previously forfeited, the Units will become vested earlier upon the occurrence of
certain events relating to Termination of Employment to the extent provided in Section
4 of the Terms and Conditions of Restricted Stock Units attached hereto (the “Terms and
Conditions”). The terms “vest” and “vesting” mean that the Units have become
non-forfeitable, except for forfeitures specified under Section 7.4 of the Plan. If
Employee has a Termination of Employment prior to the Stated Vesting Date and the Units
are not otherwise deemed vested by that date, the Units will be immediately forfeited
except as otherwise provided in Section 4 of the Terms and Conditions.
	 
	 	 	 	 
	 

	Settlement:
	 	Settlement of vested Units will occur on                     , or as promptly as possible
upon the death or Disability of Employee or Termination of Employment by the Company
not for Cause following a Change in Control, except settlement shall be deferred in
certain cases in accordance with Section 8(a) of the Terms and Conditions (the
“Settlement Date”). Units granted hereunder will be settled by delivery of one Share
for each Unit being settled (together with any cash or Shares resulting from Dividend
Equivalents). Any settlement required to be made “promptly” under this Agreement shall
in all cases be made not later than 60 days after the event that triggers such
settlement.

     The Units are subject to the terms and conditions of the 2003 Incentive Compensation Plan (the
“Plan”), and this Agreement, including the Terms and Conditions attached hereto. The number of
Units, the kind of shares deliverable in settlement of Units, and other terms relating to the Units
are subject to adjustment in accordance with Section 5 of the Terms and Conditions and Section 5.3
of the Plan.

     Employee acknowledges and agrees that (i) Units are nontransferable, except as provided in
Section 3 of the Terms and Conditions and Section 9.2 of the Plan, (ii) Units, and certain amounts
of gain realized upon settlement of Units, are subject to forfeiture, whether during employment or
following a Termination of Employment, in the event Employee fails to meet applicable requirements
relating to non-solicitation, confidentiality, and related matters with respect to the Company and
its subsidiaries and affiliates (together, “Group,” and each entity included in Group being a
“Group Entity”), as set forth in Section 7.4 of the Plan and (iii) sales of shares delivered in
settlement of Units will be subject to the Company’s policies regulating trading by employees if
the recipient is then an employee of the Company.

 

 

     IN WITNESS WHEREOF, JEFFERIES GROUP, INC. has caused this Agreement to be executed by its
officer thereunto duly authorized, and Employee has duly executed this Agreement, by which each has
agreed to the terms of this Agreement.

	 	 	 	 	 	 	 	 	 
	Employee	 	 	 	JEFFERIES GROUP, INC.	 	 
	 
	 

	 	 	 	By:	 	 	 	 
	 

[Employee Name]

	 	 
	 	 	 	 

	 	 

2

 

TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS

     The following Terms and Conditions apply to the Units granted to Employee by JEFFERIES GROUP,
INC. (the “Company”), and Units (if any) resulting from Dividend Equivalents, as specified in the
Restricted Stock Units Agreement to which these Terms and Conditions are attached (and of which
these Terms and Conditions form a part). Certain terms of the Units, including the number of Units
granted, vesting date(s) and Settlement Date, are set forth on the preceding pages, referred to as
the Cover Page in these Terms and Conditions. The Cover Page and these Terms and Conditions are
collectively referred to as the “Agreement.”

     1. General. The Units are granted to Employee under the Company’s 2003 Incentive Compensation
Plan (the “Plan”). A copy of the Plan and information regarding the Plan, including documents that
constitute the “Prospectus” for the Plan under the Securities Act of 1933, can be viewed and
printed out from the Company’s secure Intranet website, www.corp.jefferies.com (go to People
Services, then to Plan Documents). All of the applicable terms, conditions and other provisions of
the Plan are incorporated by reference herein. Capitalized terms used in this Agreement but not
defined herein shall have the same meanings as in the Plan. If there is any conflict between the
provisions of this document and mandatory provisions of the Plan, the provisions of the Plan
govern, otherwise, the terms of this document shall prevail. By accepting the grant of the Units,
Employee agrees to be bound by all of the terms and provisions of the Plan (as presently in effect
or later amended), the rules and regulations under the Plan adopted from time to time, and the
decisions and determinations of the Company’s Compensation Committee (the “Committee”) made from
time to time, provided that no such Plan amendment, rule or regulation or Committee decision or
determination shall materially and adversely affect the rights of the Employee with respect to the
Units.

     2. Account for Employee. The Company shall maintain a bookkeeping account for Employee (the
“Account”) reflecting the number of Units then credited to Employee hereunder as a result of such
grant of Units and any crediting of additional Units to Employee pursuant to payments equivalent to
dividends paid on Common Stock under Section 5 hereof (“Dividend Equivalents”).

     3. Nontransferability. Until Units are settled in accordance with the terms of this
Agreement, Employee may not sell, transfer, assign, pledge, margin or otherwise encumber or dispose
of Units or any rights hereunder to any third party other than by will or the laws of descent and
distribution, except for transfers to a Beneficiary or as otherwise permitted and subject to the
conditions under Section 9.2 of the Plan.

     4. Termination Provisions. The following provisions will govern the vesting and forfeiture of
the Units in the event of Employee’s Termination of Employment and/or occurrence of a
post-termination Forfeiture Event (as defined below), unless otherwise determined by the Committee
(subject to Section 9(a) hereof):

     (a) Death or Disability. In the event of Employee’s death or Termination of Employment
due to Disability (as defined below), all Units then outstanding, if not previously vested,
will immediately vest, and all Units (if not previously settled) will be settled in
accordance with the settlement terms set out on the Cover Page, giving effect to any valid
deferral election of Employee then in effect. The foregoing notwithstanding, any
distribution resulting from a Disability that does not constitute an “unforeseeable
emergency” under Section 409A(a)(2)(B)(ii) of the Internal Revenue Code (the “Code”) or as
to which Employee became “Disabled” as defined under Code Section 409A(a)(2)(B)(i) will be
subject to the six-month delay rule in Section 8(a)(i), if applicable.

     (b) Retirement or Involuntary Termination by the Company not for Cause (and not subject
to Section 4(c)). In the event of Employee’s Retirement or Termination of Employment

3

 

by the Company not for Cause (other than a Termination not for Cause following a Change
in Control), Units not previously vested shall not then be forfeited provided that Employee
executes a settlement agreement and release in such form as may be requested by the Company
(and provided further that any period of revocation required by law has expired without
Employee exercising his right to revoke his agreement to the settlement agreement and
release), but thereafter all unvested Units shall be forfeited if there occurs a Forfeiture
Event prior to the Settlement Date which would have applied in the absence of such
Retirement or Termination of Employment. Upon such a Retirement or Termination of
Employment, the then-outstanding Units that are vested at the date of Termination (if not
already settled) and that become vested thereafter will be settled in accordance with the
settlement terms set out on the Cover Page, giving effect to any valid deferral election of
Employee then in effect. A “Forfeiture Event” shall be deemed to occur if, following
Employee’s Retirement or Termination by the Company not for Cause, Employee renders services
for any organization or engages (either as owner, investor, partner, stockholder, employer,
employee, consultant, advisor, or director) directly or indirectly, in any business which is
or becomes competitive with the Company, its subsidiaries or affiliates, or otherwise
engaged in conduct violating Section 7.4(a), 7.4(b) or 7.4(c) of the Plan. However,
following Employee’s Retirement or Termination by the Company not for Cause, Employee shall
be free to purchase stock or other securities of an organization or business so long as it
is listed upon a recognized securities exchange or traded over-the-counter and such
investment does not represent a greater than five percent equity interest in the
organization or business.

     (c) Termination Following a Change in Control. If, following a Change in Control,
Employee’s employment is terminated not for Cause by the Company or its successor, all of
the then-outstanding Units not vested at the date of Termination will immediately vest and
will be settled promptly thereafter, subject to the six-month delay rule in Section 8(a)(i),
if applicable. If a Change in Control occurs followed by Termination of Employment by the
Company not for Cause and a determination is made by the Company pursuant to Sections 280G
and 4999 of the Code that a “golden parachute” excise tax will be payable in connection with
compensation to Employee hereunder, Employee’s right to accelerated vesting of the Units
upon the Change in Control, to the extent such right results in “parachute payments” (as
such term is defined in Code Section 280G), shall be limited to the extent just necessary to
avoid the excise tax. This limitation shall be applied in a manner that maximizes the
number of Units as to which accelerated vesting can apply (or, stated conversely, any
limitation on acceleration of vesting shall apply first to those Units with the lengthiest
remaining vesting period, which Units would result in the highest “parachute payments”).

     (d) Termination by Employee for any Reason or by the Company for Cause. In the event
of a Termination of Employment by the Employee for any reason (other than due to Retirement,
death or Disability) or by the Company for Cause, the portion of the then-outstanding Units
not vested at the date of Termination will be forfeited, and the portion of the
then-outstanding Units that is vested at the date of Termination (if not already settled)
will be settled on the Settlement Date specified on the Cover Page unless forfeited pursuant
to the provisions of Section 7.4 of the Plan, except that any valid deferral election of
Employee shall be given effect.

     (e) Certain Definitions. The following definitions apply for purposes of this
Agreement, whether or not Employee has an employment agreement or other agreement with the
Company, or any of its subsidiaries or affiliates (the Company and any subsidiary or
affiliate each being a “Group Entity”) containing the same or similar defined terms:

     (i) “Cause” means Employee’s:

Neglect, failure or refusal to timely perform the duties of
Employee’s employment (other than by reason of a physical or mental
illness or

4

 

impairment), or Employee’s gross negligence in the performance of his
or her duties;

Material breach of any agreements, covenants and representations made
in any employment agreement or other agreement with the Company or
any of its subsidiaries or affiliates or violation of internal
policies or procedures as are in effect as of the date such action is
taken, including but not limited to the Company’s Code of Ethics, as
amended from time to time;

Violation of any law, rule, regulation or by-law of any governmental
authority (state, federal or foreign), any securities exchange or
association or other regulatory or self-regulatory body or agency
applicable to Employee, the Company, its subsidiaries or affiliates
or any material general policy or directive of the Company, its
subsidiaries or affiliates;

Conviction of, or plea of guilty or nolo contendere to, a crime
involving moral turpitude, dishonesty, fraud or unethical business
conduct, or any felony of any nature whatsoever;

Failure to obtain or maintain any registration, license or other
authorization or approval that Employee is required to maintain or
that the Company, its subsidiaries or affiliates reasonably believes
is required in order for Employee to perform his or her duties,
provided, however, that Employee shall be given written notice of any
such registration, license or other authorization or approval that he
or she is required to obtain and a reasonable period of time to
obtain such registration, license, or other authorization or
approval; or

Willful failure to execute a directive of the board of directors of
the Company or any of its subsidiaries or affiliates, the Executive
Committee of any of the Company’s subsidiaries or affiliates, or
Employee’s supervisor (unless such directive would result in the
commission of an act which is illegal or unethical) or commission of
an act against the directive of such Board, such Executive Committee
or Employee’s supervisor.

     (ii) A “Change in Control” shall be deemed to have occurred if any of the
following conditions shall have been satisfied after the Grant Date:

Any person (as defined in section 3(a)(9) of the Securities Exchange
Act of 1934, as such term is modified in Section 13(d)), other than
(i) an employee plan established by the Company or any of its
subsidiaries or (ii) any group of Company employees holding shares
subject to agreements relating to the voting of such shares, becomes
a beneficial owner, directly or indirectly, of more than 51% of the
voting stock of the Company;

The consummation of a merger or consolidation of the Company with any
other corporation or any other entity, or the issuance of voting
securities in connection with a merger or consolidation of the
Company,

5

 

if the holders of the Company’s voting securities immediately prior
to such transaction hold in the aggregate less than a majority of the
then outstanding voting securities of the Company (or any successor
company or entity) entitled to vote generally in the election of the
directors of the Company (or such other company or entity) after such
transaction;

The sale or disposition by the Company of all or substantially all of
its assets in which one person or more than one person acting as a
group acquires assets from the Company that have a total gross fair
market value equal to more than 50% of the total gross fair market
value of all of the assets of the Company immediately prior to such
acquisition; or

A change in the composition of the Board of Directors of the Company
such that individuals who, as of the date of this agreement,
constitute the Board of Directors of the Company (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the
Board of Directors of the Company; provided, however, that any
individual becoming a member of the Board of Directors of the Company
subsequent to the date of this agreement whose election, or
nomination for election by the shareholders of the Company, was
approved by a vote of at least a majority of the directors then
constituting the Incumbent Board shall be considered as if that
individual were a member of the Incumbent Board.

     (iii) “Disability” means that Employee has commenced receipt of long-term
disability benefits under the Company’s long-term disability policy as in effect at
the date of Employee’s termination of employment.

     (iv) “Retirement” means retirement after attaining the age at which an
Employee’s age plus his years of service equals 60 [(or age 62 if Employee has a
title of Executive Vice President or is a member of the Executive Committee)],
provided, however, that Employee has provided a minimum of 7.5 years of service to
the Company, its subsidiaries or affiliates [and such retirement is more than 12
months after the Grant Date]. For this purpose, years of service shall be credited
for each twelve month period beginning on the date of Employee’s commencement of
employment with the Company and on each anniversary thereof during which the
Employee was in active employment with the Company. [For the avoidance of doubt,
Employee’s retirement within 12 months of the Grant Date shall not qualify as a
Retirement.]

     (v) “Termination” or “Termination of Employment” means the event by which
Employee ceases to be employed by a Group Entity and immediately thereafter is not
employed by any other Group Entity.

5. Dividend Equivalents and Adjustments.

     (a) Dividend Equivalents. Subject to Section 5(d), Dividend Equivalents will be
credited on Units (other than Units that, at the relevant record date, previously have been
settled or forfeited) and deemed reinvested in additional Units, to the extent and in the
manner as follows:

     (i) Cash Dividends. If the Company declares and pays a dividend or
distribution on Shares in the form of cash, then a number of additional Units shall
be credited to Employee’s Account as of the last day of the calendar quarter in
which such dividend or distribution was paid equal to the number of Units credited
to the Account as

6

 

of the record date for such dividend or distribution multiplied by cash amount
of the dividend or distribution paid on each outstanding share of Common Stock at
such payment date, divided by the Fair Market Value of a share of Common Stock at
the date of such crediting; provided, however, that in the case of an extraordinary
cash dividend or distribution the Company may provide for such crediting at the
dividend or distribution payment date instead of the last day of the calendar
quarter.

     (ii) Non-Common Stock Dividends. If the Company declares and pays a dividend
or distribution on Common Stock in the form of property other than shares of Common
Stock, then a number of additional Units shall be credited to Employee’s Account as
of the payment date for such dividend or distribution equal to the number of Units
credited to the 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 Common Stock at such payment date, divided
by the Fair Market Value of a share of Common Stock at such payment date.

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

     (b) Adjustments. The number of Units credited to Employee’s Account shall be
appropriately adjusted, in order to prevent dilution or enlargement of Employee’s rights
with respect to Units or to reflect any changes in the number of outstanding shares of
Common Stock resulting from any event referred to in Section 5.3 of the Plan, taking into
account any Units credited to Employee in connection with such event under Section 5(a)
hereof, and any performance conditions relating to the Units may be likewise adjusted in the
discretion of the Committee.

     (c) Risk of Forfeiture and Settlement of Units Resulting from Dividend Equivalents and
Adjustments. Units which directly or indirectly result from Dividend Equivalents on or
adjustments to a Unit granted hereunder and which do not result from a dividend or
distribution on Shares in the form of cash shall be subject to the same risk of forfeiture
(including Section 7.4 of the Plan) as applies to the granted Unit and, if not forfeited,
will be settled at the same time as the granted Unit. Units which directly or indirectly
result from Dividend Equivalents on or adjustments to a Unit granted hereunder and which
result from an ordinary dividend or distribution on Shares in the form of cash shall not be
subject to forfeiture and will be settled at the same time as the granted Unit (or if the
granted Unit is forfeited, then at the time the granted Unit would have been settled if it
were not forfeited). Units which directly or indirectly result from Dividend Equivalents on
or adjustments to a Unit granted hereunder and which result from an extraordinary dividend
or distribution on Shares in the form of cash shall, unless otherwise determined by the
Company at the time of such extraordinary dividend or distribution, be subject to the same
risk of forfeiture (including additional forfeiture terms of Section 7.4 of the Plan) as
applies to the granted Unit and, if not forfeited, will be settled at the same time as the
granted Unit.

     (d) Changes to Manner of Crediting Dividend Equivalents. The provisions of Section
5(a) notwithstanding, the Company may vary the manner and timing of crediting

7

 

dividend equivalents for administrative convenience, including, for example, by
crediting cash dividend equivalents rather than additional Units.

     6. Additional Forfeiture Provisions. Employee agrees that, by signing this Agreement and
accepting the grant of the Units, the forfeiture conditions set forth in Section 7.4 of the Plan
shall apply to all Units hereunder and to gains realized upon the settlement of the Units.

     7. Employee Representations and Warranties and Release. As a condition to any non-forfeiture
of the Units at or after Termination of Employment and to any settlement of the Units, the Company
may require Employee (i) to make any representation or warranty to the Company as may be required
under any applicable law or regulation, to make a representation and warranty that no Forfeiture
Event has occurred or is contemplated, and that otherwise the requirements of Section 7.4(d) of the
Plan and Section 7 above have been met, and (ii) to execute a release of claims against the Company
arising before the date of such release, in such form as may be specified by the Company.

     8. Other Terms Relating to Units.

     (a) Deferral of Settlement; Compliance with Code Section 409A. Settlement of any Unit,
which otherwise would occur at the Settlement Date, will be deferred in certain cases if and
to the extent Employee is permitted to participate in the Stock Option Gain and Stock Award
Deferral Program or otherwise permitted to defer the Units and Employee makes a valid
deferral election relating to the Units. Deferrals, whether elective or mandatory under the
terms of this Agreement, shall comply with requirements under Code Section 409A. Deferrals
will be subject to such other restrictions and terms as may be specified by the Company
prior to deferral. It is understood that Code Section 409A and regulations thereunder may
require any elective deferral to comply with Section 409A(a)(4)(C). Other provisions of this
Agreement notwithstanding, under U.S. federal income tax laws and Treasury Regulations
(including proposed regulations) as presently in effect or hereafter implemented, (i) a
distribution in settlement of Units to Employee triggered by a Termination of Employment
will occur only if the Termination constitutes a “separation from service” within the
meaning of Code Section 409A(a)(2)(A)(i) and, if at the time of such separation from service
Employee is a “specified employee” under Code Section 409A(a)(2)(B)(i) and a delay in
distribution is required in order that Employee will not be subject to a tax penalty under
Code Section 409A, such distribution in settlement of Units will occur at the date six
months after Termination of Employment; and (ii) any rights of Employee or retained
authority of the Company with respect to Units hereunder shall be automatically modified and
limited to the extent necessary so that Employee will not be deemed to be in constructive
receipt of income relating to the Units prior to the distribution and so that Employee shall
not be subject to any penalty under Code Section 409A.

     (b) Fractional Units and Shares. The number of Units credited to Employee’s Account
shall include fractional Units calculated to at least three decimal places, unless otherwise
determined by the Committee. Unless settlement is effected through a broker or agent that
can accommodate fractional shares (without requiring issuance of a fractional share by the
Company), upon settlement of the Units Employee shall be paid, in cash, an amount equal to
the value of any fractional share that would have otherwise been deliverable in settlement
of such Units.

     (c) Tax Withholding. Employee shall make arrangements satisfactory to the Company, or,
in the absence of such arrangements, a Group Entity may deduct from any payment to be made
to Employee any amount necessary, to satisfy requirements of federal, state, local, or
foreign tax law to withhold taxes or other amounts with respect to the lapse of the risk of
forfeiture (including FICA due upon such lapse) or the settlement of the Units. Unless
Employee has made separate arrangements satisfactory to the Company, the Company may elect
to withhold shares deliverable in settlement of the Units having a fair market value (as
determined by the

8

 

Committee) equal to the amount of such tax liability required to be withheld in
connection with the settlement of the Units, but the Company shall not be obligated to
withhold such Shares. The Company may specify a reasonable deadline (for example, 90 days
before the Settlement Date) by which separate arrangements must be made for payment of
withholding taxes other than through withholding of shares.

     (d) Statements. An individual statement of Employee’s Account will be issued to
Employee at such times as may be determined by the Company. Such a statement shall reflect
the number of Units credited to Employee’s Account, transactions therein during the period
covered by the statement, and other information deemed relevant by the Committee. Such a
statement may be combined with or include information regarding other plans and compensatory
arrangements for employees. Employee’s statements shall be deemed a part of this Agreement,
and shall evidence the Company’s obligations in respect of Units, including the number of
Units credited as a result of Dividend Equivalents (if any). Any statement containing an
error shall not, however, represent a binding obligation to the extent of such error,
notwithstanding the inclusion of such statement as part of this Agreement.

     9. Miscellaneous.

     (a) Binding Agreement; Written Amendments. This Agreement shall be binding upon the
heirs, executors, administrators, and successors of the parties. This Agreement and the
Plan, and any deferral election separately filed with the Company relating to this Award,
constitute the entire agreement between the parties with respect to the Units, and supersede
any prior agreements or documents with respect thereto. No amendment, alteration,
suspension, discontinuation, or termination of this Agreement which may impose any
additional obligation upon the Company or materially impair the rights of Employee with
respect to the Units shall be valid unless in each instance such amendment, alteration,
suspension, discontinuation, or termination is expressed in a written instrument duly
executed in the name and on behalf of the Company and, if Employee’s rights are being
materially impaired, by Employee.

     (b) No Promise of Employment. The Units and the granting thereof shall not constitute
or be evidence of any agreement or understanding, express or implied, that Employee has a
right to continue as an officer or employee of the Company for any period of time, or at any
particular rate of compensation.

     (c) Unfunded Plan. Any provision for distribution in settlement of Employee’s Account
hereunder shall be by means of bookkeeping entries on the books of the Company and shall not
create in Employee or any Beneficiary any right to, or claim against any, specific assets of
the Company, nor result in the creation of any trust or escrow account for Employee. With
respect to any entitlement of Employee or any Beneficiary to any distribution hereunder,
Employee or such Beneficiary shall be a general creditor of the Company.

     (d) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS
PRINCIPLES.

     (e) Legal Compliance. Employee agrees to take any action the Company reasonably deems
necessary in order to comply with federal and state laws, or the rules and regulations of
the New York Stock Exchange, the NASD, or any other stock exchange, or any other obligation
of the Company or Employee relating to the Units or this Agreement.

     (f) Notices. Any notice to be given the Company under this Agreement shall be
addressed to the Company at 520 Madison Avenue, 12th Floor, New York, NY 10022, attention:

9

 

Corporate Secretary, and any notice to the Employee shall be addressed to the Employee
at Employee’s address as then appearing in the records of the Company.

10

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