EXHIBIT 10.3

 

 

 

MORGAN STANLEY 401(k) SAVINGS PLAN

Adopted Effective as of July 1, 2009

 

 

 

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TABLE OF CONTENTS

 

          Page SECTION 1.    INTRODUCTION    1 SECTION 2.    DEFINITIONS    2
SECTION 3.    PARTICIPATION    18    (a) Commencement of Participation    18   
(b) Enrollment Process    19    (c) Termination of Participation    19    (d)
Non-Duplication/Limitation of Benefits    19 SECTION 4.    PERIOD OF SERVICE   
20    (a) Application of Provisions    20    (b) Service Rules    20 SECTION 5.
   EMPLOYEE CONTRIBUTIONS    24    (a) Pre-Tax and Catch-Up Contributions    24
   (b) Changing the Rate and Suspension of Employee Contributions    25    (c)
Maximum Amount of Elective Deferrals    25    (d) Distribution of Excess
Elective Deferrals    25    (e) Actual Deferral Percentage Test    26    (f)
Distribution of Excess Contributions    29    (g) Actual Contribution Percentage
Test    30    (h) Distribution of Excess Aggregate Contributions    32    (i)
Roth Elective Deferrals    33    (j) Rollover Contributions    36    (k) Salary
Reduction and Tax Status of Pre-Tax Contributions    37    (l) Administrative
Procedures    37 SECTION 6.    COMPANY CONTRIBUTIONS    38    (a) Matching
Contributions for the 2009 Plan Year    38    (b) Make-up Contributions for the
2009 Plan Year    38    (c) Fixed Contributions for the 2009 Plan Year    39   
(d) Transition Contributions for the 2009 Plan Year    40    (e) Qualified
Non-Elective and Qualified Matching Contributions    41    (f) Form of
Contributions    41 SECTION 7.    INVESTMENT AND VALUATION OF THE TRUST FUND   
42    (a) The Trust Agreement    42    (b) Investment of the Trust Fund    42   
(c) Valuation of the Trust Fund    45    (d) Investment Option Elections    45

 

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   (e) Investment Committee    48 SECTION 8.    EMPLOYEE STOCK OWNERSHIP PLAN   
51    (a) ESOP Designation    51    (b) Cash Dividends on Morgan Stanley Stock
   51    (c) Non-cash Dividends    53    (d) Tenders and Voting    53 SECTION 9.
   ACCOUNTS    60 SECTION 10.    PLAN BENEFITS    61    (a) Amount of Benefit   
61    (b) Forfeitures    62    (c) Payee’s Location Not Ascertainable for 60
Months    63 SECTION 11.    DISTRIBUTION OF PLAN BENEFITS    64    (a) Form of
Distribution    64    (b) Time of Distribution    65    (c) Right to Deferred
Distribution    65    (d) Death of Participant    67    (e) Designation of
Beneficiary    67    (f) Administrative Procedures    68    (g) Optional Direct
Rollover of Eligible Rollover Distributions    68 SECTION 12.    WITHDRAWALS AND
LOANS    71    (a) General Rule    71    (b) Limitations on Withdrawals    71   
(c) Source and Amount of Withdrawals    71    (d) Time of Payment of Withdrawals
   72    (e) Form of Payment of Withdrawals    72    (f) Hardship    72    (g)
Loans    75    (h) Qualified Reservist Distribution    79 SECTION 13.   
INCORPORATION OF CERTAIN CODE       REQUIREMENTS BY REFERENCE    80    (a)
Incorporation of Code Section 401(a)(9)    80    (b) Incorporation of Code
Section 415 Limitations    80    (c) Military Service    82 SECTION 14.   
FIDUCIARY RESPONSIBILITIES AND PLAN       ADMINISTRATION    83    (a) General   
83    (b) Procedure and Performance of Duties; Delegation    83    (c) General
Powers of Plan Administrator    84

 

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   (d) Rules and Regulations    84    (e) Conversion of Amounts of Earnings   
85    (f) Indemnification    85    (g) Quorum    85    (h) Action Without
Meeting    86    (i) Meeting By Telephone Conference    86 SECTION 15.   
INVESTMENT POLICY    87 SECTION 16.    CLAIMS PROCEDURES    88    (a) Claims   
88    (b) Denial of Claims    89    (c) Small Claims    89    (d) Authority to
Terminate Committee Member    90 SECTION 17.    BENEFIT PLAN APPEALS COMMITTEE
   91    (a) Establishment of Benefit Plan Appeals Committee    91    (b)
Appeals from Claim Denials    91    (c) Decision on Review    92    (d)
Exhaustion of Administrative Remedies    93    (e) Authority of Benefit Plan
Appeals Committee    93    (f) Authority to Terminate Committee Member    93
SECTION 18.    EXPENSES OF PLAN AND TRUST FUND    94 SECTION 19.    AMENDMENT
AND TERMINATION    95    (a) Amendment of Plan    95    (b) Termination of Plan
   95    (c) Amendment Required for Qualification    96    (d) No Reversion of
Funds    96    (e) Full Vesting Upon Termination    97 SECTION 20.   
MISCELLANEOUS    98    (a) Inalienability of Rights    98    (b) Plan Mergers   
98    (c) Payments to and From the Plan    99    (d) No Right in Trust Fund or
to Employment    99    (e) Competency to Handle Benefits    99    (f) Governing
Law    99    (g) Costs of Legal Action    100 SECTION 21.    EXECUTION    101

 

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APPENDIX A. PARTICIPATING COMPANIES.    A-1 SUPPLEMENT A. TOP-HEAVY PROVISIONS
   AA-1 SUPPLEMENT B. PARTICIPANTS RESIDING IN PUERTO RICO    BB-1

 

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MORGAN STANLEY 401(k) SAVINGS PLAN

Adopted Effective as of July 1, 2009

SECTION 1. INTRODUCTION

The Morgan Stanley 401(k) Savings Plan (the “Plan”) is adopted effective as of
July 1, 2009 to facilitate the provision of retirement benefits to certain
individuals who become employees of Morgan Stanley and its affiliates in
connection with certain acquisitions, mergers or other corporate transactions.

The Plan is subject to amendment in accordance with Section 19, including
amendments required to meet applicable rules and regulations of the Internal
Revenue Service or the United States Department of Labor.

The Plan is intended to be a profit-sharing plan for purposes of Code section
401(a)(27). The Plan is also an eligible individual account plan (within the
meaning of ERISA section 407(d)(3)) and shall be interpreted accordingly. The
Plan provides for the acquisition and holding of “qualifying employer
securities” as defined in ERISA section 407(d)(5). Up to 100% of the Plan’s
assets may be invested in qualifying employer securities. The portion of the
Plan’s assets invested in the Morgan Stanley Stock Fund with respect to those
Participants for whom Morgan Stanley Stock constitutes “employer securities”
within the meaning of Code section 409(l) is designated as an “employee stock
ownership plan” under Code section 4975(e)(7).

 

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SECTION 2. DEFINITIONS

When used herein, the following terms shall have the following meanings unless
the context clearly indicates a different meaning:

“Accounts” means any or all of the Accounts maintained for a Participant
pursuant to Section 9.

“Affiliated Group” means any trade or business (including any Participating
Company), whether or not incorporated, which at the time of reference controls,
is controlled by or under common control with the Company, within the meaning of
Code section 414(b) or 414(c), or is a member of an affiliated service group
which includes the Company, within the meaning of Code section 414(m). To the
extent required by law, all employees of all corporations which are members of a
controlled group of corporations (as defined in Code section 414(b)) and all
employees of all trades and businesses (whether or not incorporated) which are
under common control (as defined in Code section 414(c)) will be treated as
employed by a single employer.

“Applicable Disaster Date” means the day or days on which the event (such as a
storm, tornado or flooding) giving rise to a presidentially-declared disaster
takes place.

“Authorized Absence” means an absence authorized by a Participating Company
without loss of employment status, including absence on account of parental
leave, family leave, illness, business of the Participating Company, vacation,
jury duty and military or governmental service, whether or not wages shall be
paid during such absence.

“Beneficiary” means the person or persons (which may include one or more trusts)
designated by a Participant pursuant to Section 11(e).

 

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“Board of Directors” shall mean the Board of Directors of the Company, or any
committee of such Board of Directors to the extent expressly authorized by
resolutions of the Board of Directors to exercise the powers of the Board of
Directors in respect of the Plan. The Board of Directors has authorized the
Executive Committee of the Board of Directors to exercise such powers.

“Business Unit” means Morgan Stanley, in whole or in part, and any subsidiary,
group of subsidiaries, divisions, departments, units, business activity or group
of business activities of Morgan Stanley, as determined by the Company for each
Plan Year.

“Citigroup Transferees” shall have the meaning given in Appendix A.

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

“Company” means Morgan Stanley & Co. Incorporated, a Delaware corporation.

“Company Contributions” means contributions made by a Participating Company
under Section 6 of the Plan.

“Dual Employee” means an Eligible Employee who is employed by both a
Participating Company and a member of the Affiliated Group that is not a
Participating Company, and who performs services for both employers.

“Earnings” of a Participant means, for the 2009 Plan Year:

(a) the regular base salary and wages, including overtime and shift
differentials, paid by a Participating Company during such Plan Year, as
determined prior to any pre-tax elective deferrals under Code sections 125,
132(f) or 402(e)(3) or under any nonqualified deferred compensation arrangement;
and

 

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(b) the portion of any commissions or any annual, quarterly, monthly or any
other performance-related bonus (i) paid in cash by such Participating Company
during such Plan Year or (ii) subject to any pre-tax elective deferrals under
Code sections 125, 132(f) or 402(e)(3) or under any nonqualified deferred
compensation arrangement which would have been paid in cash during such Plan
Year in the absence of such deferral.

Earnings shall include the amount of any differential wage payments made by the
Participating Company to a Participant in accordance with Code sections 3401(h)
and 414(u)(12).

Earnings shall exclude, even if includable in gross income: (1) any amount
includable in gross income attributable to the exercise of a stock option, or
attributable to the vesting of, or a Code section 83(b) election with respect
to, an award of restricted stock; (2) reimbursements or other expense allowances
including car allowances; (3) cash and non-cash fringe benefits; (4) moving
expenses; (5) severance pay; (6) tuition reimbursements; (7) pay in lieu of
unused vacation; (8) deferred compensation; (9) welfare benefits; (10) any
sign-on bonuses; (11) any retention bonuses; (12) the portion of any incentive
bonus or commissions paid in the form of an award of restricted stock and/or
stock options during such Plan Year; and (13) any extraordinary payments,
including, but not limited to, special one-time compensation arrangements,
payments related to settlements, or forgivable loans.

For purposes of determining allocations of Make-up Contributions, Fixed
Contributions and Transition Contributions for Citigroup Transferees for the
2009 Plan Year, a Participant’s Earnings for the 2009 Plan Year also shall
include any amounts paid by a Participating Company during June 2009 that would,
but for the timing of payment, qualify as Earnings under the foregoing
provisions. Notwithstanding the foregoing, for purposes of determining
allocations of Fixed Contributions, a Participant’s Earnings shall not include
any amounts that are excluded under the definition of Fixed Contribution
Earnings.

 

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If any person should receive Earnings during the same payroll period from a
Participating Company and also from a Foreign Subsidiary, and if such person is
considered an Eligible Employee, the aggregate amount so received shall be
treated as his or her Earnings.

Notwithstanding the foregoing, a Participant’s Earnings that shall be taken into
account under the Plan shall not exceed the limit prescribed by Code section
401(a)(17), pro-rated for any short plan year to the extent required by the
regulations thereunder, and adjusted for cost-of-living increases in accordance
with Code section 401(a)(17)(B).

Notwithstanding the foregoing, Earnings accrued by the Participant before his or
her termination of employment and paid no later than 30 days after the
Participant’s termination of employment or, if earlier, the end of the Plan Year
in which his or her termination of employment occurred, shall be included in
Earnings for all purposes under the Plan; provided, however that such Earnings,
absent a termination of employment, would have been paid to the Participant
while the Participant continued in employment with a Participating Company and
is regular compensation for services during regular working hours, or
compensation for services outside regular working hours (such as overtime),
commissions or other similar compensation. No amount shall be included in
Earnings if otherwise excluded by the terms of Code section 415.

“Elective Deferrals” means elective deferrals within the meaning of Code section
402(g). Elective Deferrals shall also include any Roth Elective Deferrals made
pursuant to Section 5(i).

“Eligible Employee” means any person who receives regular and stated
compensation from, and is treated as an employee for wage withholding purposes
by, a Participating Company, other than a pension, retainer or remuneration in
the nature of a consulting fee, and shall not include any person who is
classified by a Participating Company as

 

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(a) a leased employee of any Participating Company (including without limitation
a Leased Employee), an independent contractor or a consultant; (b) a provider of
services to a Participating Company pursuant to a contractual arrangement,
either with that person or with a third party, other than one specifically
providing for an employment relationship with a Participating Company; (c) a
non-resident alien who receives no earned income from a Participating Company
which constitutes U.S. source income (within the meaning of Code section
861(a)(3)); (d) an intern or a summer associate; or (e) covered by a collective
bargaining agreement with respect to which a member of the Affiliated Group is a
party, except to the extent that such agreement provides that Employees covered
thereby shall be considered to be Eligible Employees. An individual’s status as
an Eligible Employee shall be determined by the Plan Administrator and such
determination shall be conclusive and binding upon all persons. If any person
excluded as an Eligible Employee pursuant to the preceding sentence shall be
determined by a court or a federal, state or local regulatory or administrative
authority to have served as a common law employee of a Participating Company,
such determination shall not alter this exclusion as an Eligible Employee for
purposes of this Plan.

A Dual Employee shall be an Eligible Employee only if (a) the Business Unit in
which the Dual Employee is employed performs a greater amount of services for
the Participating Company listed on Appendix A that employs the Dual Employee
than the other member of the Affiliated Group that employs the Dual Employee or
(b) the Dual Employee has been designated by the Plan Administrator as an
Eligible Employee.

The Plan Administrator may, in its sole discretion and on the basis of uniform
rules applicable to all persons in similar circumstances, consider as an
Eligible Employee any person who is a United States citizen and who is employed
outside the continental limits of the United States by a Foreign Subsidiary.

 

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Notwithstanding anything in the foregoing to the contrary, the term “Eligible
Employee” shall not include any Employee coded and paid as an hourly employee,
except as otherwise provided in Appendix A, or an Employee otherwise excluded
from the Plan under Appendix A.

“Employee” means any individual employed by any member of the Affiliated Group
or any other employer required to be aggregated with any member of the
Affiliated Group under Code section 414(b), (c), (m) or (o). The term Employee
shall also include any Leased Employee deemed to be an employee of any such
employer as provided in Code section 414(n) or (o) to the extent required by
Code section 414(n).

“Employment Commencement Date” means Employment Commencement Date as defined in
Section 4(b).

“Entry Date” means:

(a) with respect to an Eligible Employee, other than a Part-time Employee who is
not regularly scheduled to work at least one half of the standard work week at
his or her Business Unit, as determined by the Plan Administrator, either the
first practicable pay date following such Eligible Employee’s Employment
Commencement Date or any pay date thereafter; or

(b) with respect to a Part-time Employee who is not regularly scheduled to work
at least one half of the standard work week at his or her Business Unit, as
determined by the Plan Administrator, either the first practical pay date
following such Eligible Employee’s completion of the applicable participation
requirements set forth in Section 3 of the Plan or any pay date thereafter.

 

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For purposes of this definition, a pay date is each date on which an Employee is
scheduled to be paid regular cash compensation (including bonuses) under the
payroll system of the Participating Company that employs such Employee.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

“Excess Aggregate Contributions” means the aggregate amount by which the amount
of contributions made by or on behalf of Highly Compensated Employees which are
taken into account for purposes of the ACP test exceeds the maximum amount of
such contributions permitted under Code section 401(m)(2), as set forth in
Section 5(g)(i). The maximum amount of such contributions shall be determined by
hypothetically reducing the contributions made by or on behalf of Highly
Compensated Employees in order of their actual contribution ratios, as described
in Section 5(g)(i), beginning with the highest of such actual contribution
ratios. Excess Aggregate Contributions for a Plan Year shall be allocated to
Highly Compensated Employees in accordance with Code section 401(m)(6)(C), on
the basis of the largest dollar amounts of such contributions taken into account
for purposes of the ACP test for the Plan Year, beginning with the Highly
Compensated Employee with the highest such dollar amount for the Plan Year and
continuing in descending order until the total amount of the Excess Aggregate
Contributions has been allocated.

“Excess Contributions” means the aggregate amount by which the amount of
contributions made by or on behalf of Highly Compensated Employees which are
taken into account for purposes of the ADP test exceeds the maximum amount of
such contributions

 

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permitted under Code section 401(k)(3), as set forth in Section 5(e)(i). The
maximum amount of such contributions shall be determined by hypothetically
reducing the Contributions made by or on behalf of Highly Compensated Employees
in order of their actual deferral ratios, as described in Section 5(e)(i),
beginning with the highest of such actual deferral ratios. Excess Contributions
for a Plan Year shall be allocated to Highly Compensated Employees in accordance
with Code section 401(k)(8)(C), on the basis of the largest dollar amounts of
such contributions taken into account for purposes of the ADP test for the Plan
Year, beginning with the Highly Compensated Employee with the highest such
dollar amount for the Plan Year and continuing in descending order until the
total amount of the Excess Contributions has been allocated.

“Excess Elective Deferrals” means those Elective Deferrals that are includible
in a Participant’s gross income under Code section 402(g) to the extent such
Participant’s Elective Deferrals for a taxable year exceed the dollar limitation
under such Code section.

“Fiduciary Responsibility” means those operational and administrative duties
required to be performed by fiduciaries pursuant to the provisions of Part 4 of
Title I of ERISA.

“Fixed Contribution” means a contribution made to the Plan pursuant to
Section 6(c).

“Fixed Contribution Earnings” means a Participant’s Earnings for the Plan Year;
provided, however, that Fixed Contribution Earnings shall exclude amounts paid
before the first day of the month following the Participant’s completion of any
applicable age and service requirements for participation in the Plan or, if
none apply, the date of the Participant’s completion of one Year of Service.

“Foreign Subsidiary” shall mean a foreign affiliate (as defined in Code section
3121(1)(6)) of a Participating Company if such Participating Company has entered
into an agreement under Code section 3121(l) (relating to Social Security Taxes)
which applies to such foreign affiliate.

 

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“Full-time Employee” means an Eligible Employee who is not a Part-time Employee.

“Highly Compensated Active Employee” means any Employee who (a) was a 5% owner
(as defined in Code section 416(i)(1)) during the calendar year or the preceding
calendar year or (b) for the preceding calendar year had compensation (within
the meaning of Code section 414(q) as in effect for the year of determination)
from the Participating Company or an Affiliated Group member in excess of
$80,000, as adjusted by the Secretary of the Treasury or a delegate thereof in
accordance with Code section 414(q), and was in the Top Paid Group of Employees
for such preceding calendar year. For purposes of the definition of “Highly
Compensated Active Employee,” Employee shall not include a non-resident alien
who receives no earned income from sources within the United States.

“Highly Compensated Employee” means a Highly Compensated Active Employee or a
Highly Compensated Former Employee.

“Highly Compensated Former Employee” means a former Employee who was a Highly
Compensated Active Employee at the time of his or her Severance Date or was a
Highly Compensated Active Employee at any time after attaining age 55. For these
purposes, the “Severance Date” means the date the Employee separates from
service within the meaning of Code section
414(q)(6)(A).

“Hour of Service” means an Hour of Service as defined in Section 4(b).

“Investment Committee” means the committee established to manage assets of the
Trust Fund in accordance with Sections 7 and 15.

 

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“Investment Funds” means the Morgan Stanley Stock Fund and such Investment Funds
as may be designated by the Investment Committee pursuant to Section 7.

“Leased Employee” means any person (other than an employee of the recipient)
who, pursuant to an agreement between the recipient and any other person, has
performed services for the recipient (or for the recipient and related persons
determined in accordance with Code section 414(n)(6)) on a substantially full
time basis for a period of at least one year, and whose services are performed
under the primary direction and control of the recipient within the meaning of
Code section 414(n)(2)(C). Contributions or benefits provided a leased employee
by the leasing organization which are attributable to services performed for the
recipient employer shall be treated as provided by the recipient employer. A
leased employee shall not be considered an employee of the recipient if:

(a) such employee is covered by a money purchase pension plan providing:

(i) a nonintegrated employer contribution rate of at least 10% of compensation,
as defined in Code section 415(c)(3), but including amounts contributed by the
employer pursuant to a salary reduction agreement which are excludable from the
employee’s gross income under Code section 125, 402(a)(8), 402(h) or 403(b),

(ii) immediate participation and

(iii) full and immediate vesting; and

(b) leased employees do not constitute more than 20% of the recipient’s non
highly compensated workforce.

“Make-up Contribution” means a contribution made to the Plan pursuant to
Section 6(b).

 

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“Matched Contributions” means Pre-Tax Contributions and Roth Elective Deferrals.

“Matching Contributions” means contributions allocated to a Participant’s
Account by reason of his or her Matched Contributions.

“Morgan Stanley Stock” means the common stock of Morgan Stanley, a Delaware
corporation, par value $.01 per share. Shares of Morgan Stanley Stock are
“qualifying employer securities” as defined in ERISA section 407(d)(5).

“Morgan Stanley Stock Fund” means that part of the Trust Fund invested as
provided in Section 7(b)(ii). The portion of the Plan’s assets invested in the
Morgan Stanley Stock Fund with respect to those Participants for whom Morgan
Stanley Stock constitutes “employer securities” within the meaning of Code
section 409(l) is designated as an “employee stock ownership plan” under Code
section 4975(e)(7).

“One Year Break” means a One Year Break as defined in Section 4(b).

“Participant” means an Eligible Employee who has become a Participant in the
Plan in accordance with Section 3(a) and whose participation has not terminated
pursuant to Section 3(c).

“Participating Company” means any member of the Affiliated Group that has been
designated in writing as a Participating Company by the Company and has accepted
such designation in writing, to the extent its employees are eligible for the
Plan. The Participating Companies are listed in Appendix A.

“Part-time Employee” means an Eligible Employee who is regularly scheduled to
work less than the standard work week at his or her Business Unit, as determined
by the Plan Administrator.

 

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“Period of Service” means a Period of Service, as defined under Section 4(b).

“Period of Severance” means a Period of Severance as defined in Section 4(b).

“Plan” means this Morgan Stanley 401(k) Savings Plan, including all Appendices
and Supplements hereto, as amended from time to time.

“Plan Administrator” means Morgan Stanley’s Global Director of Human Resources
or his or her delegate.

“Plan Benefit” means the amount so described in Section 10.

“Plan Year” means (a) with respect to the first plan year, the six-month period
beginning July 1, 2009 and ending December 31, 2009 and (b) each subsequent
12-month period ending December 31.

“Pre-Tax Contributions” means the contributions so described in Section 5(a)(i).

“Qualified Disaster Recovery Assistance Distribution” means a distribution made
to an individual after an Applicable Disaster Date, and before January 1, 2010,
whose principal residence on the Applicable Disaster Date is located in an area
declared to be a disaster area and who sustained an economic loss as a result of
such disaster. A Qualified Disaster Recovery Assistance Distribution is limited
to a maximum of $100,000 and shall be subject to such other conditions and
limitations as may be provided by statute or in other applicable guidance or as
may be determined by the Plan Administrator on a nondiscriminatory basis.

“Qualified Matching Contributions” means contributions to the Plan made by any
Participating Company and allocated to a Participant’s Account by reason of his
or her Matched Contributions that are nonforfeitable when made and designated by
the Plan Administrator as Qualified Matching Contributions.

 

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“Qualified Non-Elective Contributions” means contributions (other than Matching
Contributions, Make-up Contributions, Fixed Contributions, Transition
Contributions or Qualified Matching Contributions) made by any Participating
Company on behalf of any or all Eligible Employees that are nonforfeitable when
made, and designated by the Plan Administrator as Qualified Non-Elective
Contributions.

“Qualified Reservist Distribution” means, a distribution under Section 12(h)
made to a Participant who is on active duty in the uniformed services for a
period of more than 30 days that is a “qualified reservist distribution” under
Code section 72(t)(2)(G)(iii).

“Qualifying Compensation” for the 2009 Plan Year means the sum of the following
amounts paid to a Participant by a Participating Company or by Citigroup, Inc.
and its affiliates: (A) annualized base pay as of July 1, 2009, or, for a
Participant hired or rehired after July 1, 2009, annualized base pay as of the
date of hire or rehire, in all cases excluding any shift differential,
(B) commissions, if any, paid during the preceding year, (C) cash bonuses (other
than the cash portion of any annual discretionary award package), if any, paid
during the preceding year, (D) annual discretionary awards, if any, earned for
the preceding year and paid in cash and/or restricted or deferred stock or stock
options during the current year, (E) the nominal value of annual equity
discretionary awards, if any, the amount of which was determined in recognition
of performance for the preceding year and awarded in the current year under the
Citigroup Core Capital Accumulation Program (CAP) or a replacement plan, and
(F) short-term disability benefits paid in the preceding year, for
commission-paid employees only. Qualifying Compensation shall exclude, without
limitation, any guaranteed bonuses for newly hired employees, overtime, shift
differentials, sign-on or retention bonuses, pay for employment not covered by
the Plan or the Citigroup 401(k) Plan, proceeds from any stock option exercises,
reimbursements, tuition benefits, payments for unused vacation, cash and
non-cash fringe benefits, deferred compensation, disability benefits, severance
pay and relocation expense reimbursements.

 

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“Release” means any termination of a Participant’s employment which is initiated
by the Participating Company employing the Participant or an Affiliated Group
member by reason of its decision to close permanently a branch office or other
facility, or to reduce permanently the number of employees which it employs due
to a substantial change in economic conditions, and designated by the Plan
Administrator as a Release.

“Retirement” means termination of a Participant’s employment with a
Participating Company and all members of the Affiliated Group on or after the
date he or she has both (a) attained age 55 and (b) completed five Years of
Service.

“Rollover Contributions” means cash contributions to the Plan made by a
Participant pursuant to Section 5(j) which qualify for rollover treatment under
Code section 402(c)(1), 403(a)(4) or 408(d)(3)(A)(ii).

“Testing Compensation” means an Eligible Employee’s wages as defined in Code
section 3401(a) and all other payments of compensation by the Affiliated Group
(in the course of the Affiliated Group’s trade or business) for which the
Affiliated Group is required to furnish the Participant a written statement.
Taxable wages must be determined without regard to any rules under Code section
3401(a) limiting the remuneration included on the basis of the nature or
location of employment or services performed. The taxable wages for an Eligible
Employee prior to any pre-tax elective deferral under Code section 125, 132(f)
or 402(e)(3). Notwithstanding the foregoing, a Participant’s Testing
Compensation for a Plan Year that shall be taken into account under the Plan
shall not exceed the limit prescribed by Code section

 

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401(a)(17). Wages accrued by the Participant before a termination of employment
and paid no later than 30 days after the Participant’s termination of employment
or, if earlier, the end of the Plan Year in which his or her termination of
employment occurred shall be included in Testing Compensation for all purposes
under the Plan; provided, however, that such Testing Compensation, absent a
termination of employment, would have been paid to the Participant while the
Participant continued in employment with the Affiliated Group and is regular
compensation for services during regular working hours, or compensation for
services outside regular working hours (such as overtime), commissions or other
similar compensation. Testing Compensation shall also include amounts described
in Treasury Regulations section 1.415(c)-2(e)(3) if paid no later than 30 days
after the Participant’s termination of employment or, if earlier, the end of the
Plan Year in which the Participant’s termination of employment occurred. Testing
Compensation shall also include the amount of any differential wage payments
made by the Affiliated Group to a Participant in accordance with Code section
3401(h) and Code section 414(u)(12).

“Top Paid Group” means those Employees who are included in the group consisting
of the top 20% of the employees of the Company and its Affiliated Group members
when ranked on the basis of compensation paid during the calendar year, as
determined in accordance with Code section 414(q)(3). For these purposes,
(a) employees of an Affiliated Group member shall include employees of any
entity that would be taken into account pursuant to Code section 414(q)(7); and
(b) the number of employees in the Top Paid Group of Employees shall be
determined by excluding a person who has not completed at least six months of
service, normally works less than 17 1/2 hours each week, normally works less
than six months during any year, has not attained age 21, is a non-resident
alien and receives no earned income from sources within the United States or
except to the extent required to be included by Code section 414(q), who is
included in a unit of employees covered by a collective bargaining agreement.

 

16

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“Total and Permanent Disability” (or “Totally and Permanently Disabled”) means
the inability to engage in any substantial gainful activity by reason of
medically determinable physical or mental impairment which is reasonably
expected to last for a continuous period of not less than 12 months or to result
in death. A Participant shall be considered to be Totally and Permanently
Disabled if (a) he or she has been determined to be totally and permanently
disabled by the Company’s U.S. long-term disability administrator and (b) he or
she has terminated employment with the Company and all of its affiliates on
account of disability, as determined by the Plan Administrator.

“Transition Contribution” means a contribution made to the Plan pursuant to
Section 6(d).

“Trust Agreement” means any trust agreement entered into between the Company and
a Trustee, as amended from time to time.

“Trustee” means one or more persons appointed by the Company to act as a trustee
under the Plan (provided each person so appointed accepts such appointment
pursuant to a Trust Agreement) and any successor trustee or trustees appointed
from time to time who so accept such appointment.

“Trust Fund” means the trust fund or trust funds established pursuant to the
Trust Agreement to hold and reflect all assets of the Plan (and the income,
gains or losses attributable thereto).

“Valuation Date” means each day on which the New York Stock Exchange is open
and/or such other dates as the Plan Administrator shall determine.

“Year of Service” means a Year of Service as defined in Section 4(b).

 

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SECTION 3. PARTICIPATION

(a) Commencement of Participation.

(i) Except as otherwise provided in Appendix A, any Full-time Employee or
Part-time Employee who is regularly scheduled to work at least one half of the
standard work week at his or her Business Unit, as determined by the Plan
Administrator, may elect to become a Participant on any Entry Date coincident
with or following his or her Employment Commencement Date. Any Part-time
Employee who is not regularly scheduled to work at least one half of the
standard work week at his or her Business Unit, as determined by the Plan
Administrator, may elect to become a Participant as of the first Entry Date
following the date on which he or she has completed one Year of Service and has
attained the age of 21.

(ii) An individual shall become eligible to receive Company Contributions,
subject to Section 6, on the first day he or she may elect to become a
Participant pursuant to the foregoing provisions.

(iii) If a Participant who severs employment is an Eligible Employee at the time
of such severance and such Participant is later rehired as an Eligible Employee,
he or she may elect to resume participation immediately upon such rehire or upon
any Entry Date thereafter, even if he or she has been hired as a Part-time
Employee who is not regularly scheduled to work at least one half of the
standard work week at his or her Business Unit, as determined by the Plan
Administrator. Such Participant also shall become eligible to receive Company
Contributions, subject to Section 6, on the first day he or she is rehired as an
Eligible Employee.

 

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(b) Enrollment Process. Notwithstanding the foregoing, no Eligible Employee
shall become a Participant in the Plan until such individual has completed the
enrollment process established by the Plan Administrator.

(c) Termination of Participation. A Participant’s participation shall terminate
on the date no amount is payable to the Participant hereunder.

(d) Non-Duplication/Limitation of Benefits. In no event shall an Eligible
Employee be eligible to make or receive contributions hereunder based on base
salary, bonuses, commissions or other forms of compensation with respect to
which the individual is making or receiving contributions (whether or not
vested) under another funded defined contribution plan maintained by a member of
the Affiliated Group, or, except as expressly provided in the Plan for purposes
of determining Make-up Contributions, Fixed Contributions and Transition
Contributions for Citigroup Transferees for the 2009 Plan Year, based on base
salary, bonuses, commissions or other forms of compensation earned by the
individual prior to becoming an Eligible Employee.

 

19

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SECTION 4. PERIOD OF SERVICE

(a) Application of Provisions. The service of all Employees shall be determined
under Section 4(b) and, to the extent applicable, the additional service rules
set forth in Appendix A.

(b) Service Rules. For purposes of the Plan, an Employee shall have a “Year of
Service” for each Period or Periods of Service, whether or not consecutive,
equal to 12 months. An Employee’s “Period of Service” shall be determined under
the following rules:

(i) In General. An Employee’s Period of Service shall begin on the Employee’s
Employment Commencement Date or Reemployment Commencement Date and end on the
Employee’s Severance Date. An Employee’s Period of Service also includes any
other period which constitutes a “Period of Service” under written rules or
regulations adopted from time to time by the Plan Administrator. An Employee’s
Period of Service for eligibility and vesting purposes shall include such
periods as the Plan Administrator determines are required to be taken into
account in order to comply with Code section 414(n)(4).

(ii) Service of Rehired Employees. An Employee’s Period of Service shall include
any period following the Employee’s Severance Date and prior to the Employee’s
first Reemployment Commencement Date following such Severance Date if such
Reemployment Commencement Date occurs no later than 12 months after such
Severance Date. For vesting purposes only, an Employee’s Period of Service shall
not include any period prior to a One Year Break unless the Employee completes
an Hour of Service after returning to employment.

(iii) Aggregation of Periods of Service. An Employee shall receive credit for
Periods of Service of less than 12 consecutive months, by aggregating all
non-successive Periods of Service and all Periods of Service which are
fractional years or which do

 

20

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not constitute a whole 1-year Period of Service, whether or not consecutive.
Fractional periods of a year are expressed in terms of days, on the basis that a
day of service is credited if an Employee completes an Hour of Service during
such day, and on the basis that 365 days of service equals a 1-year Period of
Service.

(iv) Definitions. For purposes of the foregoing rules, the following terms have
the following meanings unless the context clearly indicates a different meaning:

“Affiliated Group” means Affiliated Group as defined in Section 2 and any other
entity required to be aggregated with any Participating Company pursuant to Code
section 414(o) and the regulations thereunder.

“Employment Commencement Date” means the date on which an Employee first is
credited with an Hour of Service.

“Hour of Service” means each hour for which an Employee is paid or entitled to
payment for the performance of duties for the Company or for any member of the
Affiliated Group.

“One Year Break” means a Period of Severance of 12 consecutive months.

“Period of Severance” means each period from an Employee’s Severance Date to the
Employee’s next Reemployment Commencement Date.

“Reemployment Commencement Date” means the date on which an Employee first is
credited with an Hour of Service after a Severance Date.

“Severance Date” means the earlier of the date on which an Employee quits,
retires, is discharged or dies; or the first anniversary of the first date of a
period in which an Employee remains continuously absent from service with an
employer (with or without pay) for any reason other than quit, retirement,
discharge or death. Notwithstanding the foregoing, an Employee shall not have a
Severance Date when the Employee:

(1) Takes a leave of absence without pay approved by the appropriate member of
the Affiliated Group. In the case of an approved leave of absence without pay
for a period in excess of 12 months, the Employee shall be deemed to have a
Severance Date as of the end of such 12-month period if the Employee fails to
abide by the terms and conditions of such leave, which may include a requirement
to return to active employment.

 

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(2) Enters the military service of the United States, provided the Employee
returns to active employment with any member of the Affiliated Group within the
time the Employee’s reemployment rights are protected under applicable law. If
the Employee does not so return, the Employee shall be deemed to have a
Severance Date as of the date of entry into military service.

(3) Is unable to work due to disability or sickness. If the Employee does not
return to employment with a member of the Affiliated Group before the second
anniversary of the beginning of an absence due to disability, the Employee shall
have a Severance Date on such second anniversary.

(4) Is on jury duty, a leave of absence with pay, an approved vacation or a
holiday.

(5) Is absent from work:

(A) by reason of the pregnancy of the individual,

(B) by reason of a birth of a child of the individual,

(C) by reason of the placement of a child with the individual in connection with
the adoption of such child by such individual, or

 

22

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(D) for purposes of caring for such child for a period beginning immediately
following such birth or placement. If the Employee does not return to employment
with a member of the Affiliated Group before the second anniversary of the
beginning of such absence the Employee shall have a Severance Date on such
second anniversary.

Notwithstanding the foregoing, if an Employee quits, is discharged, dies or
retires while on leave, vacation, holiday or jury duty, the Employee shall have
a Severance Date on the earlier of the date of such quit, discharge, death or
retirement, or 12 months after the commencement of such leave, vacation, holiday
or jury duty. An Employee shall be deemed to have been discharged as of the
earlier of the date the Employee received oral or written notice of discharge or
the date a written notice of discharge is deposited in the United States mail
(on a registered or certified basis) to the Employee’s last known address.

 

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SECTION 5. EMPLOYEE CONTRIBUTIONS

(a) Pre-Tax and Catch-Up Contributions. A Participant who is an Eligible
Employee may elect to make contributions to the Plan from cash Earnings pursuant
to the following provisions of this Section 5.

(i) Pre-Tax Contributions. A Participant may make Pre-Tax Contributions to the
Plan for any year equal to any whole percentage from 1% to 30% of his or her
Earnings for such year. The Plan Administrator may at any time and from time to
time limit the amount of Pre-Tax Contributions allowed to be made by some or all
Eligible Employees to ensure compliance with applicable nondiscrimination or
other rules, provided however, that in no event shall any such limitation
restrict employees that are not Highly Compensated Employees to any greater
extent than similarly situated individuals that are Highly Compensated
Employees.

(ii) Catch-Up Contributions. A Participant who shall have attained age 50 before
the end of the Plan Year shall be eligible to make catch-up contributions in
accordance with, and subject to the limitations of, Code section 414(v). A
Participant’s catch-up contributions for a year shall be determined at the end
of such year. Such contributions shall not be taken into account for purposes of
the provisions of the Plan implementing the limitations of Code sections 402(g)
and 415, including Sections 5(c) and 13(b). The Plan shall not be treated as
failing to satisfy the provisions of the Plan implementing the requirements of
Code section 401(k)(3) or 416, including Section 5(e) and Supplement A, by
reason of the making of such contributions. Catch-up contributions shall not be
treated as Matched Contributions for purposes of determining the amount of
matching or other employer contributions that may be made on behalf of such
Participant under this Plan.

 

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(b) Changing the Rate and Suspension of Employee Contributions. A Participant
may elect as of any Valuation Date to change the Participant’s rate of Pre-Tax
Contributions to any other rate that is within the applicable limitations
described in Section 5(a). The Participant may elect to discontinue all Pre-Tax
Contributions at any time. Such election shall take effect as soon as
administratively practicable after receipt by the Plan Administrator.

(c) Maximum Amount of Elective Deferrals. Notwithstanding anything to the
contrary herein, the amount of Elective Deferrals made with respect to any
individual during a calendar year under the Plan and all other plans, contracts
or arrangements of any member of the Affiliated Group may not exceed the amount
of the limitation in effect under Code section 402(g)(1) for taxable years
beginning in such calendar year, except to the extent permitted under
Section 5(a)(ii) and Code section 414(v).

(d) Distribution of Excess Elective Deferrals. No later than the date determined
by the Plan Administrator that follows the close of a Participant’s tax year,
the Participant may notify the Plan Administrator of the amount of the Excess
Elective Deferrals received by the Plan for the Participant’s tax year. A
Participant shall be deemed to have notified the Plan of the amount of any such
Excess Elective Deferrals to the extent the Participant has Excess Elective
Deferrals for the taxable year calculated by taking into account only Elective
Deferrals under the Plan and any other Plan maintained by a member of the
Affiliated Group. No later than the first April 15 following the close of such
taxable year, the Plan shall distribute to the Participant the amount designated
as an Excess Elective Deferral under this section (adjusted for any income or
loss allocable to that amount). The amount of Excess Elective Deferrals that may
be distributed with respect to a Participant for a taxable year shall be reduced
by any Excess Contributions previously distributed under Section 5(f)(i) with
respect to the Participant for the Plan Year

 

25

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beginning with or within the Participant’s taxable year for which such Excess
Elective Deferrals have been made. In the event that a Participant’s Elective
Deferrals and his elective deferrals (as defined by Code section 402(g)) to all
plans other than this Plan exceed the limit set forth in Code section 402(g) and
the Plan Administrator cannot reasonably distribute such Excess Elective
Deferrals prior to the April 15 next following the close of the taxable year in
which the excess deferrals were made, then such Participant’s Excess Elective
Deferrals shall remain in the Trust Fund on the same terms and subject to the
same distribution rules as other Elective Deferrals.

(e) Actual Deferral Percentage Test.

(i) Elective Deferrals hereunder shall satisfy one of the following actual
deferral percentage tests (referred to as the “ADP test”) for the Plan Year in
accordance with the provisions of Code section 401(k)(3) and the applicable
regulations thereunder:

(1) the actual deferral percentage for the Plan Year for the group of Eligible
Employees who are Highly Compensated Employees for the Plan Year shall not
exceed the actual deferral percentage for the prior Plan Year for the group who
were Eligible Employees and not Highly Compensated Employees for the prior Plan
Year multiplied by 1.25; or

(2) the actual deferral percentage for the Plan Year for the group of Eligible
Employees who are Highly Compensated Employees for the Plan Year shall not
exceed the actual deferral percentage for the prior Plan Year for the group who
were Eligible Employees and not Highly Compensated Employees for the prior Plan
Year multiplied by two; provided that the actual deferral percentage for the
Plan Year for the group of Eligible Employees who are Highly Compensated
Employees for the Plan Year does not exceed the actual deferral percentage for
the prior Plan Year for the group who were Eligible Employees and not Highly
Compensated Employees for the prior Plan Year by more than two percentage
points.

 

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For purposes of this provision, the actual deferral percentage for a group of
Eligible Employees for a Plan Year is the average of the actual deferral ratios
of the employees in the group. An Eligible Employee’s actual deferral ratio is a
fraction with a numerator equal to the Elective Deferrals made by the Eligible
Employee for the Plan Year, plus any additional amounts provided for below in
this Section 5(e), and a denominator equal to the Eligible Employee’s Testing
Compensation for the calendar year. The actual deferral percentage for the prior
Plan Year for the group who were Eligible Employees and not Highly Compensated
Employees for the prior Plan Year shall be determined in accordance with
applicable rules and regulations issued by the Secretary of the Treasury under
Code section 401(k). Notwithstanding anything in the foregoing to the contrary,
the actual deferral percentage for eligible non-Highly Compensated Employees
used in applying the ADP test for the Plan’s first Plan Year shall be the actual
deferral percentage for such employees for that first Plan Year.

(ii) All or part of the Qualified Matching Contributions and Qualified
Non-Elective Contributions made pursuant to Section 6(e) with respect to any or
all Eligible Employees may be treated as Elective Deferrals for purposes of the
ADP test provided that each of the requirements under Treas. Reg. section
1.401(k)-2(a)(6) is met, including the following:

(1) the amount of nonelective contributions, including the Qualified
Non-Elective Contributions treated as Elective Deferrals for purposes of the ADP
test, satisfies the requirements of Code section 401(a)(4);

(2) the amount of nonelective contributions, excluding those Qualified
Non-Elective Contributions treated as Elective Deferrals for purposes of the ADP
test and those Qualified Non-Elective Contributions treated as Matching
Contributions for purposes of the ACP test (described in Section 5(g) below),
satisfies the requirements of Code section 401(a)(4);

 

27

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(3) all such Qualified Non-Elective Contributions and Qualified Matching
Contributions are nonforfeitable when made and subject to the same distribution
restrictions that apply to Elective Deferrals, without regard to whether such
Qualified Non-Elective Contributions or Qualified Matching Contributions are
actually taken into account as Elective Deferrals;

(4) all such Qualified Non-Elective Contributions and Qualified Matching
Contributions are allocated to the Accounts of Eligible Employees as of a date
within the applicable year, as defined in Treas. Reg. section
1.401(k)-2(a)(2)(ii) (pursuant to Treas. Reg. section 1.401(k)-2(a)(4)(i)).
Consequently, such contributions must be contributed no later than the end of
the 12-month period immediately following the applicable year; and

(5) if the Plan uses the provisions of this Section 5(e)(ii) for purposes of the
ADP test, then, for purposes of Code section 410(b) (other than the average
benefit percentage test), the Plan may be aggregated with other plans of the
Affiliated Group to which qualified nonelective contributions and qualified
matching contributions are made. If the Plan Year is changed to satisfy the Code
section 410(b) requirement that aggregated plans have the same plan year, this
Section 5(e)(ii) may apply during the resulting short plan year only if such
contributions could have been taken into account under an ADP test for a plan
with that same short plan year;

(6) The contributions comply with the restrictions on disproportionate
contributions under Treas. Reg. section 1.401(k)-2(a)(6)(iv).

 

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(f) Distribution of Excess Contributions.

(i) Notwithstanding any other provision of the Plan, Excess Contributions, plus
any income and minus any loss allocable thereto, shall be distributed no later
than the last day of any Plan Year to Participants to whose Accounts Pre-Tax,
Qualified Matching and Qualified Non-Elective Contributions were allocated for
the preceding Plan Year. The Excess Contributions shall be adjusted for income
or loss up to the date of distribution. The income or loss allocable to Excess
Contributions shall be determined by multiplying the income or loss allocable to
the Participant’s Pre-Tax, Qualified Matching and Qualified Non-Elective
Contributions for the Plan Year by a fraction, the numerator of which is the
Excess Contribution for the preceding Plan Year allocated to the Participant and
the denominator of which is the sum of the Participant’s Account balances
attributable to Pre-Tax, Qualified Matching and Qualified Non-Elective
Contributions on the last day of the preceding Plan Year. Amounts distributed
under this Section 5(f) shall be made from amounts attributable to the
Participant’s Pre-Tax, Qualified Matching and Qualified Non-Elective
Contributions in proportion to the Participant’s Pre-Tax, Qualified Matching and
Qualified Non-Elective Contributions for the Plan Year.

(ii) The amount of Excess Contributions to be distributed under Section 5(f)(i)
shall be reduced by Excess Elective Deferrals previously distributed under
Section 5(d) for the Participant’s taxable year ending with or within the Plan
Year for which such Excess Contributions have been made.

 

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(g) Actual Contribution Percentage Test.

(i) Matching Contributions shall satisfy one of the following actual
contribution percentage tests (referred to as the “ACP test”) for the Plan Year
in accordance with the provisions of Code section 401(m) and the applicable
regulations thereunder:

(1) the actual contribution percentage for the Plan Year for the group of
Eligible Employees who are Highly Compensated Employees for the Plan Year shall
not exceed the actual contribution percentage for the prior Plan Year for the
group who were Eligible Employees and not Highly Compensated Employees for the
prior Plan Year multiplied by 1.25; or

(2) the actual contribution percentage for the Plan Year for the group of
Eligible Employees who are Highly Compensated Employees for the Plan Year shall
not exceed the actual contribution percentage for the prior Plan Year for the
group who were Eligible Employees and not Highly Compensated Employees for the
prior Plan Year multiplied by two; provided that the actual contribution
percentage for the Plan Year for the group of Eligible Employees who are Highly
Compensated Employees for the Plan Year does not exceed the actual contribution
percentage for the prior Plan Year for the group who were Eligible Employees and
not Highly Compensated Employees for the prior Plan Year by more than two
percentage points.

For purposes of this provision, the actual contribution percentage for a group
of Eligible Employees for a Plan Year is the average of the actual contribution
ratios of the employees in the group. An Eligible Employee’s actual contribution
ratio is a fraction with a numerator equal to the Matching Contributions made by
and on behalf of the Eligible Employee for the Plan Year, plus any additional
amounts provided for below in this Section 5(g), and a denominator equal to the
Eligible Employee’s Testing Compensation for the calendar year The actual
contribution percentage for the prior Plan Year for the group who were Eligible
Employees and not Highly Compensated Employees for the prior Plan Year shall be
determined in accordance with applicable rules and regulations issued by the
Secretary of the Treasury under Code section 401(m). Notwithstanding anything in
the foregoing to the contrary, the actual contribution percentage for eligible
non-Highly Compensated Employees used in applying the ACP test for the Plan’s
first Plan Year shall be the actual contribution percentage for such employees
for that first Plan Year.

 

30

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(ii) All or part of the Qualified Non-Elective Contributions made pursuant to
Section 6(e) and Elective Deferrals made with respect to any or all Eligible
Employees may be treated as Matching Contributions for purposes of the ACP test
provided that each of the requirements under Treas. Reg. section
1.401(m)-2(a)(6) is met, including the following:

(1) the amount of nonelective contributions, including the Qualified
Non-Elective Contributions treated as Matching Contributions for purposes of the
ACP test, satisfies the requirements of Code section 401(a)(4);

(2) the amount of nonelective contributions, excluding those Qualified
Non-Elective Contributions treated as Matching Contributions for purposes of the
ACP test and those Qualified Non-Elective Contributions treated as Elective
Deferrals under Treas. Reg. section 1.401(k)-2(a)(6) for purposes of the ADP
test satisfies the requirements of Code
section 401(a)(4);

(3) all Elective Deferrals, whether or not treated as Matching Contributions
hereunder, satisfy the ADP test.

(4) the Qualified Non-Elective Contributions are allocated to the Accounts of
Eligible Employees as of a date within the applicable year, as defined in Treas.
Reg. section 1.401(m)-2(a)(2)(ii) (pursuant to Treas. Reg. section
1.401(k)-2(a)(4)(i)(A)) and the Elective Deferrals satisfy Treas. Reg. section
1.401(k)-2(a)(4)(i) for the Plan Year. Consequently, such contributions must be
contributed no later than the end of the 12-month period immediately following
the applicable year; and

 

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(5) if the Plan uses the provisions of this Section 5(g)(ii) for purposes of the
ACP test, then for purposes of Code section 410(b) (other than the average
benefit percentage test), the Plan may be aggregated with other plans of the
Affiliated Group to which qualified nonelective contributions and elective
contributions are made. If the Plan Year is changed to satisfy the Code section
410(b) requirement that aggregated plans have the same plan year, this
Section 5(g)(ii) may apply during the resulting short plan year only if such
contributions could have been taken into account under an ADP test for a plan
with that same short plan year;

(6) The contributions comply with the restrictions on disproportionate
contributions under Treas.
Reg. section 1.401(m)-2(a)(6)(v).

(iii) Participating Companies may, in their sole discretion, satisfy the ACP
test either by making additional Qualified Non-Elective Contributions or
Qualified Matching Contributions pursuant to Section 6(e) and/or by distributing
Excess Aggregate Contributions pursuant to Section 5(h). The determination of
Excess Aggregate Contributions shall be made after first determining the Excess
Elective Deferrals and then determining the Excess Contributions for the Plan
Year.

(h) Distribution of Excess Aggregate Contributions.

(i) Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions allocated to Highly Compensated Employees plus any income or minus
any loss allocable thereto shall be forfeited, if forfeitable, or, if not
forfeitable, distributed not later than the last day of each Plan Year on the
basis of the respective portions of such Excess Aggregate Contributions
allocated to Highly Compensated Employees whose Contributions for the preceding
Plan Year must be reduced under Section 5(g) and Code section 401(m)(6)(C), to
enable the Plan to satisfy the ACP test.

 

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(ii) The income or loss allocable to a Highly Compensated Employee’s Excess
Aggregate Contributions shall be determined by multiplying such income or loss
by a fraction, the numerator of which is the Excess Aggregate Contribution for
the preceding Plan Year allocated to the Highly Compensated Employee and the
denominator of which is the sum of the Highly Compensated Employee’s Account
balances attributable to contributions taken into account for purposes of the
ACP test on the last day of the preceding Plan Year.

(iii) Amounts distributed under this Section 5(h) shall be withdrawn from
amounts attributable to Matching Contributions made on behalf of the
Participant.

(iv) In the event that any Matching Contributions made on behalf of a Highly
Compensated Employee for a Plan Year relate to Excess Elective Deferrals or
Excess Contributions, such Matching Contributions shall be forfeited. The actual
contribution test for this Plan for a Plan Year shall not take into account any
Matching Contributions forfeited in accordance with the preceding sentence.

(i) Roth Elective Deferrals.

(i) General Application.

(1) The Plan will accept Roth Elective Deferrals (as defined herein) made on
behalf of Participants. A Participant’s Roth Elective Deferrals will be
allocated to a separate Account maintained for such deferrals as described in
Section 5(i)(ii).

(2) Unless specifically stated otherwise, Roth Elective Deferrals will be
treated as elective deferrals for all purposes under the Plan.

(ii) Separate Accounting.

 

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(1) Contributions and withdrawals of Roth Elective Deferrals will be credited
and debited to the Roth Elective Deferral Account maintained for each
Participant.

(2) The Plan will maintain a record of the amount of Roth Elective Deferrals in
each Participant’s Account.

(3) Gains, losses and other credits or charges will be separately allocated on a
reasonable and consistent basis to each Participant’s Roth Elective Deferral
Account and the Participant’s other Accounts under the Plan.

(4) No contributions or other amounts other than Roth Elective Deferrals and
properly attributable earnings will be credited to each Participant’s Roth
Elective Deferral Account.

(iii) Direct Rollovers.

(1) Notwithstanding Section 11(g), a direct rollover of a distribution from a
Roth Elective Deferral Account under the Plan will only be made to another Roth
Elective Deferral account under an applicable retirement plan described in Code
section 402A(e)(1) or to a Roth IRA described in Code section 408A, and only to
the extent the rollover is permitted under the rules of Code section 402(c).

(2) The Plan will accept a rollover contribution to a Participant’s Roth
Elective Deferral Account, provided it is a direct rollover in cash from another
Roth elective deferral account under an applicable retirement plan described in
Code section 402A(e)(1) and only to the extent the rollover is permitted under
the rules of Code section 402(c).

 

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(3) A Participant’s Roth Elective Deferral Account and the Participant’s other
Accounts shall be aggregated for purposes of determining whether the total
amount of the Participant’s Account balances under the Plan exceeds $1,000 for
purposes of Section 11(c).

(4) The provisions of Section 11(g) of the Plan that allow a Participant to
elect a direct rollover of only a portion of an eligible rollover distribution
but only if the amount rolled over is at least $500 are applied by aggregating
any amount distributed from the Participant’s Roth Elective Deferral Account
with any amount distributed from the Participant’s other Accounts in the Plan.

(iv) Distribution of Excess Elective Deferrals.

(1) In the case of a distribution of Excess Elective Deferrals, Roth Elective
Deferrals made by the Participant shall be distributed first, to the extent of
such Roth Elective Deferrals for the year. To the extent necessary, Pre-Tax
Contributions for the year will be distributed after Roth Elective Deferrals.

(2) Any distribution of Excess Elective Deferrals shall be made in accordance
with Section 5(d), but also taking into account the Participant’s Roth Elective
Deferrals and the provisions of this Section 5(i)(iv) and the applicable
Treasury regulations.

(v) Correction of Excess Contributions.

(1) In the case of a distribution of Excess Contributions, Roth Elective
Deferrals made by a Highly Compensated Employee shall be distributed first, to
the extent of such Roth Elective Deferrals for the year. To the extent
necessary, Pre-Tax Contributions for the year will be distributed after Roth
Elective Deferrals.

 

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(2) Any distribution of Excess Contributions shall be made in accordance with
Section 5(f), but also taking into account the Participant’s Roth Elective
Deferrals and the provisions of this Section 5(i)(v) and the applicable Treasury
regulations.

(vi) Definition of Roth Elective Deferrals. A Roth Elective Deferral is an
Elective Deferral that is:

(1) Designated irrevocably by the Participant at the time of the cash or
deferred election as a Roth Elective Deferral that is being made in lieu of all
or a portion of the Pre-Tax Contributions the Participant is otherwise eligible
to make under the Plan; and

(2) Treated by the Participating Company as includible in the Participant’s
income at the time the Participant would have received the amount in cash if the
Participant had not made a cash or deferred election.

If a Participant does not designate an Elective Deferral as a Roth Elective
Deferral at the time of the cash or deferred election, then the Elective
Deferral will be treated as a Pre-Tax Contribution.

(j) Rollover Contributions. A Participant may at any time make a Rollover
Contribution to the Trust Fund if he or she provides satisfactory evidence to
the Plan Administrator that the amount to be contributed qualifies as a Rollover
Contribution and the Plan Administrator determines that such Rollover
Contribution will not impose a substantial administrative burden on the Trust
Fund or the Plan. Unless the Plan Administrator determines otherwise on a
nondiscriminatory basis, no Participant may make a Rollover Contribution to the
Plan consisting of after-tax contributions to a tax-qualified plan or the
proceeds thereof. Rollover Contributions must be made solely in cash.

 

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(k) Salary Reduction and Tax Status of Pre-Tax Contributions. For Federal tax
purposes (and, wherever permitted, for state and local tax purposes), Pre-Tax
Contributions and catch-up contributions shall be deemed to be Company
Contributions to the Plan, and a Participant’s election to make such
contributions shall constitute an election to have the amount of his or her
compensation that otherwise would have been reported as taxable compensation on
Form W-2 (or its equivalent) reduced by the amount of such contributions.

(l) Administrative Procedures. The Plan Administrator may require Participants
to complete such process as may be established by the Plan Administrator before
any election under this Section 5 may take effect.

 

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SECTION 6. COMPANY CONTRIBUTIONS

(a) Matching Contributions for 2009 Plan Year. Before the end of the 2009 Plan
Year, each eligible Participant shall be allocated a Matching Contribution with
a value as of that date equal to the dollar amount of the Participant’s Matched
Contributions for such Plan Year, up to 7 percent of Earnings. For this purpose,
a Participant shall be eligible to receive an allocation of Matching
Contributions for the 2009 Plan Year only if the Participant (i) is an Eligible
Employee on December 31 of such Plan Year (including any Participant on an
Authorized Absence) or (ii) was employed as an Eligible Employee immediately
prior to his or her termination of employment during such Plan Year as a result
of death, Total and Permanent Disability, Retirement or Release during such Plan
Year.

(b) Make-up Contributions for the 2009 Plan Year.

(i) A Participant shall be eligible to receive a Make-Up Contribution for the
2009 Plan Year if the Participant is (1) a Citigroup Transferee who was eligible
to participate in the Citigroup 401(k) Plan immediately prior to his or her
transfer to MSSB (as defined in Appendix A) and (2) (A) is an Eligible Employee
on December 31, 2009 (including any Participant on an Authorized Absence) or
(B) was an Eligible Employee immediately prior to his or her termination of
employment during the 2009 Plan Year as a result of death, Total and Permanent
Disability, Retirement or Release during the 2009 Plan Year.

(ii) Allocation of Make-up Contributions. The amount of the Make-up Contribution
allocated to an eligible Participant for the 2009 Plan Year shall equal the
excess, if any, of (1) the amount of the matching contribution the Participant
would have received for the year under the Citigroup 401(k) Plan had all
elective deferrals made by the Participant for the year to both the Citigroup
401(k) Plan, this Plan and any other Affiliated Group 401(k) plan

 

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(subject to all applicable Plan and Code limits) been made solely to the
Citigroup 401(k) Plan over (2) the total amount of matching contributions
actually made to the Participant’s accounts for the year under the Citigroup
401(k) Plan, this Plan and any other Affiliated Group 401(k) plan. For purposes
of calculating the amount in (1) above, the Participant’s earnings for the year
shall be deemed to equal the actual earnings taken into account under the
Citigroup 401(k) Plan for the year plus the Participant’s Earnings under this
Plan.

(c) Fixed Contributions for the 2009 Plan Year.

(i) Eligibility for Fixed Contributions. A Participant shall be eligible to
receive a Fixed Contribution for the 2009 Plan Year if the Participant (1) has
Qualifying Compensation of less than $100,000 for the 2009 Plan Year, (2) has
Fixed Contribution Earnings for the 2009 Plan Year, (3) is not employed as a
Financial Advisor, Producing Assistant Branch Manager, Producing Branch Manager,
or Producing Sales Manager on December 31, 2009, (4) is not grandfathered in the
Associates First Capital Corporation, Citibank or State Street formulas under
the Citigroup Pension Plan, and (5) (A) is an Eligible Employee on December 31,
2009 (including any Participant on an Authorized Absence) or (B) was an Eligible
Employee immediately prior to his or her termination of employment during the
2009 Plan Year as a result of death, Total and Permanent Disability, Retirement
or Release during the 2009 Plan Year.

(ii) Allocation of Fixed Contributions. The amount of the Fixed Contribution
allocated to an eligible Participant for the 2009 Plan Year, as set forth in the
following schedule, shall be based on (1) the Participant’s completed Years of
Service on December 31, 2009 and (2) the Participant’s Fixed Contribution
Earnings for the 2009 Plan Year:

 

Completed Years of Service on December 31, 2009

   % of Fixed Contribution Earnings  

Less than 1 Year

   0 % 

1 Year

   1 % 

2 or More Years

   2 % 

 

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(d) Transition Contributions for the 2009 Plan Year.

(i) Eligibility for Transition Contributions. A Participant shall be eligible to
receive a Transition Contribution for the 2009 Plan Year if the Participant
(1) is a Citigroup Transferee who was, immediately prior to his or her transfer
to MSSB (as defined in Appendix A), eligible to receive transition contributions
under the Citigroup 401(k) Plan and (2) (A) is an Eligible Employee on
December 31 of such Plan Year (including any Participant on an Authorized
Absence) or (B) was an Eligible Employee immediately prior to his or her
termination of employment during such Plan Year as a result of death, Total and
Permanent Disability, Retirement or Release during such Plan Year; provided,
however, that a Participant who is receiving salary continuation pay or other
severance pay on December 31 of such Plan Year shall not be eligible to receive
a Transition Contribution for such Plan Year. In addition, notwithstanding the
foregoing, a Participant who terminates employment with a Participating Company
and is subsequently rehired shall not be eligible to receive a Transition
Contribution for any period following his or her rehire.

(ii) Allocation of Transition Contributions. The amount of the Transition
Contribution allocated to an eligible Participant for the 2009 Plan Year shall
equal a specified percentage of the Participant’s Earnings, which shall be the
same as the percentage that previously applied for purposes of calculating the
Participant’s transition contributions under the Citigroup 401(k) Plan.

 

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(e) Qualified Non-Elective and Qualified Matching Contributions. The
Participating Companies may, in their sole and absolute discretion, make
Qualified Non-Elective or Qualified Matching Contributions to the Plan for a
Plan Year. Any such Qualified Matching Contributions may be made with respect to
any or all Participants as determined by the Company and shall be allocated in
proportion to each such Participant’s Matched Contributions for the Plan Year.
Qualified Non-Elective Contributions may be made with respect to any or all
Participants, as determined by the Company, and shall be allocated in a manner
determined by the Company.

(f) Form of Contributions. Company Contributions to the Plan for a Plan Year
shall be made in the form of cash, unless the Company determines that any or all
such contributions shall be made in the form of Morgan Stanley Stock.

 

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SECTION 7. INVESTMENT AND VALUATION OF THE TRUST FUND

(a) The Trust Agreement. The Company shall enter into a Trust Agreement which
shall contain such provisions as shall render it impossible for any part of the
corpus of the trust or income therefrom to be at any time used for, or diverted
to, purposes other than for the exclusive benefit of Participants or as provided
in Section 18. Any or all rights or benefits accruing to any person under the
Plan with respect to any contributions deposited under the Trust Agreement shall
be subject to all the terms and provisions of the Trust Agreement.

(b) Investment of the Trust Fund.

(i) All of the assets of the Trust Fund shall be invested in the Investment
Funds as described below. The Investment Funds shall consist of the Morgan
Stanley Stock Fund and such other investment options as shall be designated by
the Investment Committee from time to time. The Investment Funds designated
hereunder may include, but are not limited to, registered investment companies
for which the Company or an affiliate of the Company acts as investment adviser,
administrator or transfer agent. Except with respect to the Morgan Stanley Stock
Fund, the Investment Committee may, from time to time, establish additional
Investment Funds, liquidate, remove or close Investment Funds, limit the amounts
or contributions that may be made to an Investment Fund, change the permissible
investments of or investment guidelines applicable to an Investment Fund or
reopen an Investment Fund to new investments by Participants, direct the vote of
securities constituting an Investment Fund, or take such other action with
respect to such Investment Fund as the Investment Committee determines to be
appropriate.

(ii) The Morgan Stanley Stock Fund shall be invested and reinvested exclusively
in Morgan Stanley Stock, except that to facilitate liquidity in the Morgan
Stanley Stock Fund, certain amounts held in the Morgan Stanley Stock Fund may be
invested and

 

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reinvested in interest-bearing short-term investments, including (without
limitation) savings accounts, certificates of deposit, money market instruments,
United States treasury bills and such group annuity contracts, insurance company
pooled separate accounts, bank common or collective trust funds, mutual funds
and other pooled investment funds as the Trustee deems suitable for temporary
investments of the Morgan Stanley Stock Fund. The Morgan Stanley Stock Fund
shall consist of all Morgan Stanley Stock Fund investments held by the Trustee
and all cash held by the Trustee which is derived from dividends, interest or
other income from Morgan Stanley Stock Fund investments, from any Company
Contributions invested in the Morgan Stanley Stock Fund, from any other
contributions directed by the Participants to be invested in the Morgan Stanley
Stock Fund, and from the proceeds of the sale or redemption of Morgan Stanley
Stock Fund investments. Any cash held by the Trustee shall be invested as
provided in this
Section 7(b)(ii). Notwithstanding any provision of the Plan or the Trust
Agreement to the contrary, the continued availability and maintenance of the
Morgan Stanley Stock Fund, including its removal, closure or liquidation, shall
be changed or implemented only by amendment to the Plan adopted in accordance
with Section 19(a).

(iii) Pending investment and reinvestment or pending payments as provided
herein, the Trustee may invest temporarily all or any part of the Trust Fund
comprising any one or more of the Investment Funds, in securities or other
property of a fixed-income nature, including but not limited to commercial paper
and notes of finance companies, or part interest therein, or in obligations
issued or guaranteed as to interest and principal by the United States
Government or any instrumentality or agency thereof, excluding the notes or
other securities of any Participating Company under the Plan.

 

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(iv) The Trustee may invest and reinvest all or any part of the Trust Fund
comprising any one or more of the Investment Funds through the medium of any one
or more common, collective or commingled trust funds maintained by it or by an
investment manager (as defined in ERISA section 3(38)) appointed by the
Investment Committee for the purpose, each of which is invested principally in
property of the kind authorized for that Investment Fund, and each of which is
qualified under the provisions of Code section 401(a) and exempt under the
provisions of Code section 501(a) and during such period of time as an
investment through any such medium exists, the declaration of trust of such
trust fund shall constitute a part of the Trust Agreement.

(v) All interest, dividends, other income and cash received from the sale or
exchange of securities or other property of each Investment Fund shall be
reinvested in that Investment Fund (except as otherwise provided in Section 8(b)
with respect to dividends on Morgan Stanley Stock).

(vi) The Trustee shall transfer money between Investment Funds in accordance
with the direction of the Investment Committee or its delegate, subject to the
provisions of Section 7(d).

(vii) The Trustee may retain in cash and keep unproductive of income such amount
of the Trust Fund, or of any Investment Fund, as it deems advisable. The Trustee
shall not be required to pay interest on such cash balances or on cash pending
investment or disbursement.

(viii) The Trustee is specifically authorized to permit assets of the Trust Fund
to be held outside the United States in accordance with Labor Department
Regulation § 2550.404b-1.

 

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(c) Valuation of the Trust Fund. As of the Valuation Date and as of any other
date determined by the Plan Administrator, the Trust Fund shall be valued on the
basis of current market or fair value as determined by the Trustee in accordance
with the provisions of the Trust Agreement, or in the case of a stable value
fund, to the extent determined appropriate by the Trustee, at book value.

(d) Investment Option Elections.

(i) Each Participant may elect to invest contributions made by or on behalf of
such Participant, in whole percentage increments, in one or more of the
Investment Funds available from time to time, provided that (1) any Qualified
Non-elective or Qualified Matching Contributions made on behalf of a Participant
shall be invested in the Morgan Stanley Stock Fund, (2) any Company
Contributions made to the Plan in the form of Morgan Stanley Stock shall be
invested in the Morgan Stanley Stock Fund, and (3) any other Company
Contributions shall be invested in the Morgan Stanley Stock Fund to the extent
directed by the Company, subject, in each case, to the Participant’s right to
transfer investments pursuant to Section 7(d)(ii). A Participant’s election
pursuant to this Section 7(d)(i) shall remain in effect and shall apply to all
contributions made by or on behalf of such Participant (other than contributions
invested in the Morgan Stanley Stock Fund as described above) unless and until a
new election is filed. An election or change of election pursuant to this
Section 7(d)(i) shall be subject to such process, conditions or limitations as
the Plan Administrator shall determine. To the extent the Participant does not
make an election pursuant to this Section 7(d)(i), contributions made by or on
behalf of such Participant (other than contributions invested in the Morgan
Stanley Stock Fund as described above) shall be invested in one or more funds as
determined by the Plan Administrator from time to time each of which shall be
intended to be a “qualified default investment alternative” within the meaning
of Labor Department Regulation § 2550.404c-5.

 

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(ii) Each Participant shall have the right to elect that as of any Valuation
Date all or any whole percentage of his or her interest in any Investment Fund,
including the Morgan Stanley Stock Fund, shall be liquidated and the proceeds
thereof transferred to any other available Investment Fund, subject to (1) any
conditions or limitations as the Investment Committee or Plan Administrator
shall determine (in accordance with Section 7(d)(iii) or (iv) or otherwise), and
(2) any restrictions (including any redemption fees) imposed by the issuer,
underwriter or distributor of such Investment Funds. The Plan Administrator is
specifically authorized to impose transfer restrictions or redemption fees, and
to enforce transfer restrictions or redemption fees of the Investment Fund,
where the Plan Administrator determines such restrictions or fees to be in the
interests of Participants and Beneficiaries or required by law. Assets shall be
transferred from the Participant’s Accounts in the order determined by the Plan
Administrator or Investment Committee.

(iii) The Plan Administrator may require Participants to complete such process
as may be established by the Plan Administrator before any election under this
Section 7(d) may take effect. The Plan Administrator shall adopt such rules,
restrictions and procedures as it deems advisable with respect to all matters
relating to the election and use of the Investment Funds. The Plan Administrator
shall have the right, without prior notice to any Participant, to suspend
transfers between and among Investment Funds, to delay effecting transfers
between and among Investment Funds or to limit the frequency or amount of
transfers between and among Investment Funds, if the Plan Administrator
determines that such action is necessary or advisable, including without
limitation: (1) in light of unusual market conditions, (2) in response

 

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to technical or mechanical problems with the Plan’s record keeping or
administrative systems, (3) in connection with any suspension of normal trading
activity on the New York Stock Exchange or other applicable exchange or
automated trading system or (4) in connection with any restrictions on trading
that are contained in Morgan Stanley’s Code of Conduct or Code of Ethics, or
that are imposed by the issuer, underwriter or distributor of an Investment
Fund, from time to time.

(iv) Notwithstanding anything in this Section 7(d) or any other provision of the
Plan to the contrary, any election by a Participant involving an acquisition or
disposition of an interest in any Investment Fund shall be subject to such
conditions and restrictions as the Plan Administrator determines to be necessary
or advisable to ensure compliance with all applicable securities laws and Morgan
Stanley’s policies regarding the trading of investments by employees. Without
limiting the generality of the foregoing, (1) the Plan Administrator may from
time to time prescribe rules of uniform application to those Participants
subject to Section 16 of the Securities Exchange Act of 1934, as amended, to
ensure compliance with the conditions for exemption in
Rule 16b-3 under such Section, and (2) except as the Plan Administrator may
otherwise provide in its sole discretion, in accordance with Section 7(d)(iii)
no transaction in any Investment Fund may be effected at the direction of a
Participant or Beneficiary unless such Participant or Beneficiary would be
permitted, under Morgan Stanley’s policies regarding trading of investments by
employees, to effect such transaction on his or her account other than under the
Plan.

(v) The provisions of Sections 7(d)(iii) and (iv) shall be interpreted in a
manner that is consistent with the requirements of Code section
401(a)(35)(D)(ii)(II).

 

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(e) Investment Committee.

(i) The management of the Investment Funds shall be placed in the Investment
Committee. The members of the Committee shall be appointed from time to time by,
and shall serve during the pleasure of, the Board of Directors. The Investment
Committee shall consist of no fewer than three persons, who may (but need not)
be employees of the Company.

(1) The Investment Committee shall be a “Named Fiduciary” with respect to the
Plan, as such term is defined in ERISA section 402(a).

(2) Each person who has Fiduciary Responsibilities with respect to the Plan
shall be bonded if and as required by ERISA.

(ii) A majority of the members of the Investment Committee at the time in office
shall constitute a quorum for the transaction of its business. All resolutions
or other actions taken by the Investment Committee at any meeting shall be by
the vote of a majority of those present at any such meeting.

(iii) (1) The members of the Investment Committee shall elect one of their
number as Chairman and shall elect a Secretary who may, but need not, be a
member of the Investment Committee; may appoint from their number such
subcommittees with such powers as the Investment Committee shall determine; may
authorize one or more of their number or any agent to take any action or to
execute or deliver any instructions on behalf of the Investment Committee; and
may employ such counsel and agents, and obtain such clerical services, as the
Investment Committee may require in carrying out the provisions of the Plan.

(2) The Fiduciary Responsibilities of the Investment Committee may be allocated
among its members or delegated to persons who are not members of the Investment
Committee as the Investment Committee in its sole discretion shall decide. Upon
an allocation or delegation of Fiduciary Responsibilities, the person or persons
to whom such Fiduciary

 

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Responsibilities are allocated or delegated shall be solely responsible for the
performance of such Fiduciary Responsibilities, and the members of the
Investment Committee to whom such Fiduciary Responsibilities have not been
allocated shall not in any respect be responsible for the performance of such
Fiduciary Responsibilities, except as provided by law. The Investment Committee
shall perform its allocation and delegation functions in the same manner as it
performs all of its other Fiduciary Responsibilities pursuant to paragraph
(3) below.

(3) The Investment Committee shall perform only its Fiduciary Responsibilities
as provided in the Plan except those Fiduciary Responsibilities which are
delegated pursuant to paragraph (2) above, if any, and except those Fiduciary
Responsibilities which are to be performed by the Trustee pursuant to the Trust
Agreement.

(iv) To the fullest extent permitted by law, the Company will indemnify and save
harmless each member of the Investment Committee and each other person to whom
Fiduciary Responsibilities are delegated under Section 7 against any cost or
expense (including attorneys’ fees) or liability (including any sum paid in
settlement of the claim with the approval of the member’s employer) arising out
of any act or omission to act as a member of the Investment Committee or as
delegate, except in the case of willful misconduct or lack of good faith. This
Section 7(e)(iv) shall not supersede any separate agreement or contract between
the Company or the Plan and any person to whom Fiduciary Responsibilities are
delegated.

(v) Any action required or permitted to be taken at any meeting of the
Investment Committee may be taken without a meeting if a written consent thereto
is signed by all members of the Investment Committee and such written consent is
filed with the records of the proceedings of the Investment Committee.

 

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(vi) Members of the Investment Committee may participate in a meeting of the
Investment Committee by means of telephone conference or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section shall
constitute presence in person at such meeting.

(vii) The Board of Directors shall have the express authority to terminate the
appointment of any member of the Investment Committee provided for in this
Section 7(e) through written action of the Board of Directors or its delegate.

 

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SECTION 8. EMPLOYEE STOCK OWNERSHIP PLAN

(a) ESOP Designation. The portion of the Plan invested in the Morgan Stanley
Stock Fund with respect to those Participants for whom Morgan Stanley Stock
constitutes “employer securities” within the meaning of Code section 409(l) is
designated as the employee stock ownership plan (“ESOP”) component of the Plan,
as provided in Code section 4975(e)(7) and Treas. Reg. section 54.4975-11(a)(2).
The ESOP is designed to invest primarily in qualifying employer securities and
is intended to meet the other applicable requirements for an ESOP, as set forth
in this Section 8 and other applicable provisions of the Plan.

Participants’ interests in the Morgan Stanley Stock Fund are denominated in
“investment units” that represent Morgan Stanley Stock and other investments of
the Morgan Stanley Stock Fund. Set forth below in this Section 8 are various
provisions relating to Morgan Stanley Stock represented by investment units
credited to Participants’ Accounts.

(b) Cash Dividends on Morgan Stanley Stock.

(i) Dividend Options. In accordance with such procedures and subject to such
conditions as the Plan Administrator may provide, a Participant may elect to
have cash dividends that are paid on Morgan Stanley Stock represented by
investment units credited to his Account (as such dividends may be adjusted for
any investment losses while held in the Trust Fund or reduced for any
withholdings) and held as part of the ESOP either: (1) paid to the Trust Fund
and reinvested in the Morgan Stanley Stock Fund, (2) paid directly to the
Participant in cash, or (3) paid to the Trust Fund and distributed by the
Trustee in cash to the Participant not later than 90 days after the close of the
Plan Year in which paid to the Trust Fund (provided that the Plan Administrator
may determine that only one of option (2) or option (3), but not both, shall be
available to Participants).

 

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(ii) Participant Elections. In accordance with such procedures as the Plan
Administrator may provide, a Participant shall be given a reasonable opportunity
to make an election under this Section 8(b) before the beginning of each quarter
of Morgan Stanley’s taxable year with respect to dividends paid in such quarter.
A Participant may have only one election in effect for his or her Account at any
time (and may not make separate elections with respect to the different portions
of his or her Account). If a Participant who has previously made a timely
election under this Section 8(b) does not make a new election with respect to
dividends paid in a subsequent period, the Participant’s prior election shall
remain in effect for such subsequent period (and shall apply to all dividends
paid on Morgan Stanley Stock held as part of the ESOP during such period with
respect to which an election is offered). In the absence of a timely election,
the Participant shall be deemed to have elected to have the dividends with
respect to which an election is offered accumulated in his or her Account and
reinvested in the Morgan Stanley Stock Fund.

(iii) Payment of Dividends. Any dividends that are the subject of an election by
a Participant to receive such amounts in cash shall be distributed to the
Participant as soon as practicable following payment. The amount distributed to
the Participant shall be the lesser of (1) the original amount of the dividends
attributable to that Participant and (2) the amount of such dividends as
adjusted for any investment losses while held in the Trust Fund or reduced for
any withholdings. Any dividends that are the subject of an election (or deemed
election) by a Participant to have such amounts reinvested in the Morgan Stanley
Stock Fund shall be so reinvested as soon as practicable following payment.

 

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(c) Non-cash Dividends. Any non-cash dividends or distributions on or in respect
of Morgan Stanley Stock held in the Trust Fund shall be held or disposed of by
the Trustee in the manner directed by the Plan Administrator in its sole
discretion.

(d) Tenders and Voting.

(i) Tenders for Morgan Stanley Stock.

(1) Notwithstanding other provisions of this Plan to the contrary, in the event
an offer shall be received by the Trustee (including but not limited to a tender
offer or exchange offer within the meaning of the Securities Exchange Act of
1934, as from time to time amended and in effect) to acquire any shares of
Morgan Stanley Stock held by the Trustee in the Trust Fund (hereinafter referred
to as an “Offer”), the Trustee shall have no discretion or authority to sell,
exchange or transfer any of such shares pursuant to such Offer except in
accordance with the provisions of this Section 8(d)(i). The Trustee shall
solicit instructions from each Participant, as named fiduciary, with respect to
the sale, exchange or transfer of any Morgan Stanley Stock held by the Trustee
subject to such Offer and represented by investment units credited to the
Participant’s Account, and, subject to the provisions of
Sections 8(d)(i)(5) and (6) and to the provisions of Section 8(d)(iii)(2), will
follow any instructions timely received from such Participants with respect to
such Morgan Stanley Stock. A merger or similar transaction with respect to
Morgan Stanley Stock that is presented to Morgan Stanley stockholders for a vote
shall not be considered an Offer for purposes of this Section 8(d)(i), but shall
be subject to the provisions of Section 8(d)(ii).

(2) The failure of any Participant, as named fiduciary, to instruct the Trustee
in a timely manner with respect to Morgan Stanley Stock represented by
investment units credited to the Participant’s Account shall be deemed to
constitute instructions

 

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to the Trustee not to sell, exchange or transfer any of such shares. The Trustee
shall communicate or cause to be communicated to each Participant the provisions
of this Plan relating to the right of such Participant to direct the Trustee
with respect to Morgan Stanley Stock subject to the Offer that is represented by
investment units credited to the Participant’s Account. Such communication shall
also discuss the consequences of any such failure to timely instruct the
Trustee.

(3) In the event that, under the terms of an Offer or otherwise, any shares of
Morgan Stanley Stock tendered for sale, exchange or transfer pursuant to such
Offer may be withdrawn from such Offer, the Trustee shall follow such
instructions respecting the withdrawal of such securities represented by
investment units credited to the Account of any Participant from such Offer as
shall be timely received by the Trustee from the respective Participants, as
named fiduciaries therefor.

(4) In the event that an Offer for fewer than all of the shares of Morgan
Stanley Stock held by the Trustee in the Trust Fund shall be received by the
Trustee, each Participant whose Account holds investment units representing any
Morgan Stanley Stock subject to such Offer shall first be entitled to direct the
Trustee as to the acceptance or rejection of such Offer (as provided by
Section 8(d)(i)(1)) with respect to the largest portion of such Morgan Stanley
Stock as may be possible given the total number or amount of shares of Morgan
Stanley Stock the Plan may sell, exchange or transfer pursuant to the Offer
based upon the instructions received by the Trustee from all other Participants
who shall timely instruct the Trustee pursuant to this Section 8(d)(i) to sell,
exchange or transfer such shares pursuant to such Offer, each on a pro rata
basis in accordance with the number or amount of such shares represented by
investment units credited to their respective Accounts.

 

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(5) In the event an Offer shall be received by the Trustee and instructions
shall be solicited from Participants pursuant to this Section 8(d)(i) regarding
such Offer, and prior to termination of such Offer, another Offer is received by
the Trustee for the securities subject to the first Offer, the Trustee shall, if
practicable, make a reasonable effort under the circumstances to solicit
instructions from the Participants to the Trustee (A) with respect to securities
tendered for sale, exchange or transfer pursuant to the first Offer, whether to
withdraw such tender, if possible, and, if withdrawn, whether to tender any
securities so withdrawn for sale, exchange or transfer pursuant to the second
Offer and (B) with respect to securities not tendered for sale, exchange or
transfer pursuant to the first Offer, whether to tender or not to tender such
securities for sale, exchange or transfer pursuant to the second Offer. The
Trustee shall follow all such instructions received in a timely manner from
Participants in the same manner as provided in Section 8(d)(i)(1). With respect
to any additional Offer received by the Plan and subject to any earlier Offer
(including successive Offers from one or more existing offerors), the Trustee
shall act in the same manner as described above.

(6) In the event an Offer for any Morgan Stanley Stock held by the Trustee in
the Trust Fund shall be received by the Trustee and the Participants shall be
entitled to determine to accept, reject or withdraw an acceptance of such Offer
pursuant to paragraphs (1) through (5) of this Section 8(d)(i), neither the
Company nor the Trustee shall improperly interfere in any manner with the
decision of any Participant regarding the action of the Participant with respect
to such Offer and the Trustee shall arrange for such action to be taken on a
confidential basis.

 

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(ii) Voting Morgan Stanley Stock.

(1) Notwithstanding any other provision of this Plan to the contrary, the
Trustee shall have no discretion or authority to vote Morgan Stanley Stock held
in the Trust Fund by the Trustee on any matter presented for a vote of the
stockholders of Morgan Stanley except in accordance with the provisions of this
Section 8(d)(ii). The Trustee shall solicit instructions from each Participant,
as named fiduciary, as to the manner in which Morgan Stanley Stock represented
by investment units credited to such Participant’s Account shall be voted.
Subject to the provisions of this Section 8(d)(ii) and of Section 8(d)(iii)(2),
the Trustee shall follow any such directions that are timely received with
respect to such Morgan Stanley Stock.

(2) With respect to any Morgan Stanley Stock held by the Trustee and represented
by investment units credited to Participants’ Accounts for which no voting
directions were timely received, the Trustee shall vote all such shares in favor
of or against the matter being voted upon in the respective amounts determined
by multiplying the total number of such shares of Morgan Stanley Stock by a
fraction, the numerator of which is the number of shares of Morgan Stanley Stock
represented by investment units credited to the Accounts of Participants
directing a vote in favor of and against the matter, respectively, and the
denominator of which in both cases is the total number of shares of such Morgan
Stanley Stock represented by investment units credited to the Accounts of all
such Participants who have provided directions to the Trustee to vote either for
or against such matter. The Trustee shall communicate or cause to be
communicated to each Participant the provisions of this Plan relating to the
right of such Participant to direct the Trustee with respect to the voting of
Morgan Stanley Stock represented by investment units credited to such
Participant’s Account and the consequences of any failure to timely provide
voting directions.

 

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(iii) Trustee’s Responsibilities.

(1) The Trustee shall distribute or cause to be distributed any and all
communications required by this Section 8(d). Morgan Stanley shall provide the
Trustee with such information and assistance as the Trustee may reasonably
request in connection with any communications or distributions to Participants.

(2) If, following a change in applicable law (as described below), the Trustee
shall determine, based on the opinion of counsel for the Trustee, that such
change invalidates under ERISA or other applicable federal law, in all
circumstances or in any particular circumstances, any provision or provisions of
Section 8(d)(i) regarding the determination to be made as to whether or not
Morgan Stanley Stock held by the Trustee shall be tendered pursuant to an Offer,
or any provision or provisions of Section 8(d)(ii) regarding the manner in which
Morgan Stanley Stock held in the Trust Fund shall be voted, or causes any such
provisions or provision to conflict with ERISA or other applicable federal law,
then, upon notice thereof to the Company and the Plan Administrator, such
invalid or conflicting provisions of Section 8(d)(i) or Section 8(d)(ii) shall
be given no further force or effect. In such event, the Trustee shall exercise
its residual fiduciary responsibility with respect to such matters, unless the
Trustee shall have received timely written directions from the Plan
Administrator, acting as a named fiduciary of the Plan, with respect to such
matters. For these purposes, the phrase “change in applicable law” shall mean
any amendment to ERISA, any enactment or amendment of any other applicable
federal law, any court opinion interpreting ERISA or such other applicable
federal law, or any regulation issued under, or ruling or interpretation issued
with respect to, ERISA or such other applicable federal law by an appropriate
governmental agency. To the extent that the Trustee is required to render any
residual fiduciary responsibility with

 

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respect to the sale, exchange, transfer or vote of Morgan Stanley Stock, the
Trustee shall, unless it is clearly imprudent to do so, take full recognition of
any directions timely received from Participants in exercising its fiduciary
judgment, as such directions are most indicative of what is in the best interest
of Participants. In addition the Trustee shall take into consideration any
relevant financial factors bearing on such decision as well as, to the extent
permissible under applicable law, any other relevant factors bearing on such
decision, including but not limited to the prospect of the Participants and
prospective Participants for future benefits under the Plan.

(3) In the event that any option, right, warrant or similar property derived
from or attributable to the ownership of the Morgan Stanley Stock shall be
granted, distributed or otherwise issued, such property shall be held in the
Morgan Stanley Stock Fund. In the event any such property is or shall become
exercisable, the Trustee may, in its sole discretion, unless otherwise directed
by the Plan Administrator, sell, exercise or retain and keep unproductive of
income any such option, right, warrant, or similar property. In the event of a
discretionary decision by the Trustee to exercise, the Trustee shall be deemed
to be authorized to accumulate the amount equal to the consideration necessary
to exercise from any of the sources specified herein and to hold such acquired
securities in the Trust Fund as specified herein. In connection with any
discretionary decisions by the Trustee to sell, exercise or retain and keep
unproductive of income any such option, right, warrant, or similar property, the
Trustee shall consider, in addition to any relevant financial factors bearing on
such decision, any relevant non-financial factors or other factors as the
Trustee may deem relevant.

(4) Notwithstanding anything elsewhere in this Plan to the contrary, any
proceeds received by the Trustee as a result of the sale, exchange or transfer
of Morgan Stanley Stock pursuant to an Offer or any proceeds received as a
result of a transaction

 

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presented to a vote of Morgan Stanley stockholders shall, unless otherwise
directed by the Plan Administrator, be reinvested in the Morgan Stanley Stock
Fund by the Trustee. To the extent Morgan Stanley Stock is not available for
purchase, the balance of the proceeds, if any, shall be invested in the
discretion of the Trustee in fixed-income investments issued or guaranteed by
the United States of America or any agency or instrumentality thereof having a
maturity of not more than one year from the time such investment is made until
the Trustee is otherwise directed by the Plan Administrator or, until the
Participants whose Accounts are invested in the Morgan Stanley Stock Fund shall
be entitled to receive distributions from the Trust Fund in accordance with the
Plan.

(iv) Shareholder Communications. Notwithstanding anything to the contrary in
this Section 8(d), the Trustee shall make any and all communications or
distributions required under the Shareholder Communications Act of 1985 and any
rules thereunder.

 

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SECTION 9. ACCOUNTS

The Plan Administrator shall cause to be maintained on behalf of each
Participant such Accounts as may be required by applicable law or deemed
appropriate by the Plan Administrator to reflect the Participant’s interest
under the Plan and in each of the applicable Investment Funds. Each of a
Participant’s Accounts shall be revalued at each Valuation Date. By this
revaluation, the balance in each of the Participant’s Accounts will be increased
or decreased by such Participant’s proportionate share of any realized
investment income, gains and losses of the applicable Investment Funds, and by
any increase or decrease in the fair market value of the assets of such
Investment Funds, which has occurred since the immediately preceding Valuation
Date. At least annually the Plan Administrator shall furnish to each Participant
having an interest in the Trust Fund a summary statement of the transactions of
the Trust Fund since the date of the last previous statement so furnished and of
his or her interest in the Trust Fund. Any such Participant who does not notify
the Plan Administrator as to any objection which he or she may have with respect
to any such statement within 90 days after the date of such distribution thereof
shall be conclusively presumed to have approved the transactions reflected
therein.

 

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SECTION 10. PLAN BENEFITS

(a) Amount of Benefit. A Participant’s Plan Benefit shall be the vested interest
of the Participant in his or her Accounts. A Participant shall have a fully
vested interest in his or her Accounts at all times, except as otherwise
provided below.

(i) Vesting Schedule for Company Contributions. Amounts attributable to Matching
Contributions, Make-up Contributions, Fixed Contributions and Transition
Contributions made on behalf of a Participant shall vest in accordance with the
following vesting schedule:

 

Years of Service

   Vested Percentage  

Less than 3

   0 % 

3 or more

   100 % 

Notwithstanding the foregoing, such a Participant shall have a fully vested
interest in amounts attributable to such contributions if the Participant
reaches age 65 (or any later age) and has completed at least three years of
service while employed by a Participating Company or member of the Affiliated
Group, or as required under Code section 411(a), or if the Participant
terminates employment as a result of Retirement, death, Total and Permanent
Disability or Release.

(ii) Vesting in Cash Dividends. Notwithstanding the foregoing, a Participant
shall fully vest in any cash dividends on Morgan Stanley Stock with respect to
which the Participant is offered an election under Section 8(b) (i.e., as to
whether the dividends will be distributed or reinvested in Morgan Stanley
Stock), without regard to whether the Participant is vested in the Morgan
Stanley Stock with respect to which such dividends are paid (with separate
accounting for vested and unvested amounts allocated to the Participant’s
Account).

 

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(b) Forfeitures. (i) If a Participant terminates employment before fully vesting
in his or her Account, any non-vested amounts attributable to the Participant’s
Company Contributions shall be forfeited upon the earlier of a Participant
(i) requesting a distribution from the vested portion of his or her Account or
(ii) incurring five consecutive One-Year Breaks. Notwithstanding the foregoing,
if a Participant who terminates employment shall subsequently be rehired before
incurring five consecutive One Year Breaks, the amount so forfeited shall be
restored to such Participant’s Accounts without adjustment for income, gains or
losses as provided herein. If the Participant is rehired before incurring a One
Year Break, his Accounts shall be restored as soon as administratively feasible
after his return to employment. If the Participant is rehired after incurring a
One Year Break, but before incurring five consecutive One Year Breaks, his
Accounts shall be restored as soon as administratively feasible after the date
he is credited with one Year of Service after his return to employment. All such
restorations shall be made from forfeitures arising in the Plan Year in which
the restoration occurs and, to the extent necessary, from a special employer
contribution which shall be made for that purpose. The foregoing forfeiture
provisions shall only apply to the extent permitted by applicable law.

(ii) Any forfeitures remaining after restoration payments are made may be
applied to pay Plan expenses, reduce future Company Contributions to
Participants’ Accounts pursuant to Section 6, or as otherwise determined by the
Plan Administrator.

(iii) In the event a profit sharing plan utilizing a graded vesting schedule (a
“Merged Plan”) is merged into the Plan, the time at which amounts credited to
accounts in the Merged Plan (immediately prior to such merger) are forfeited
will be determined pursuant to the terms of the Merged Plan and any forfeitures
attributable to accounts in the Merged Plan shall be disposed of as provided by
the terms of this Plan.

 

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(c) Payee’s Location Not Ascertainable for 60 Months. In the event any Plan
Benefit has been due and payable under the Plan for a period of more than 60
months and cannot be paid because the location of the payee cannot be
ascertained, the entire amount of such Plan Benefit shall be forfeited;
provided, that in the event the location of such payee is ascertained, the Plan
Benefit forfeited shall be restored, without adjustments for income, gains or
losses and shall be paid to such payee in a single lump sum payment; and
provided, that such restoration shall be made out of forfeitures arising in the
Plan Year in which the restoration occurs and, to the extent necessary, out of a
special employer contribution which shall be made for that purpose.

 

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SECTION 11. DISTRIBUTION OF PLAN BENEFITS

(a) Form of Distribution.

(i) Following a Participant’s termination of employment with all members of the
Affiliated Group, the Participant may request a distribution of all or any
portion of his or her Plan Benefit, in accordance with procedures specified by
the Plan Administrator. Distributions shall be made in the form of a lump sum
consisting of, at the election of the Participant, either a check for the entire
value of the Participant’s Accounts or (1) a certificate or certificates (which
may be in the form of a book-entry notation in the transfer agent’s records) for
whole shares of stock in the portion of the Participant’s Accounts invested in
the Morgan Stanley Stock Fund, plus (2) a check for any fractional share of
stock and uninvested cash in the portion of the Participant’s Accounts invested
in the Morgan Stanley Stock Fund and for the entire value of the portions of the
Participant’s Accounts invested in all other Investment Funds. A Participant may
not receive more than eight distributions in any calendar year, provided that a
Participant may receive more than eight distributions in a calendar year if,
after requesting eight partial distributions in a calendar year, the Participant
elects a lump sum distribution of the total value of his or her interest in the
Trust Fund. A Participant may not receive any distribution which is less than
$500 or, if less, the amount of the Participant’s remaining Plan Benefit. In the
case of a distribution which is less than the entire amount of a Participant’s
Plan Benefit, the Plan Administrator shall withdraw assets from the
Participant’s Accounts in the order determined by the Plan Administrator on a
uniform and nondiscriminatory basis in accordance with applicable law.

 

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(ii) Shares of Morgan Stanley Stock distributed pursuant to this Section 11(a),
or pursuant to Section 12(e), that at the time of such distribution are not
readily tradable on an established market shall be subject to a put option which
shall permit the Participant or Beneficiary to sell such stock to the Company
(or to the Participating Company that employs or employed the Participant) at
any time during two option periods, at the fair market value of such shares (as
of the most recent Valuation Date). The first period shall be for at least 60
days beginning on the date of distribution. The second period shall be for at
least 60 days beginning on the first Valuation Date in the calendar year
following the year in which the distribution was made. The Company or the Plan
Administrator may direct the Trustee to purchase shares tendered under a put
option. Payment for any shares of stock sold under a put option shall be made in
a lump sum or in substantially equal annual installments over a period not
exceeding five years, with interest payable at a reasonable rate (as determined
by the Plan Administrator). Except as may be permitted under applicable law or
regulations, the rights of a distributee of Morgan Stanley Stock under this
Section 11(a) shall survive the termination of the Plan and any amendment of the
Plan.

(b) Time of Distribution. Subject to Section 11(c), a Participant’s Plan Benefit
shall be distributed as soon as practicable after the date as of which the
Participant’s employment with all members of the Affiliated Group terminates.
Any allocation of contributions and forfeitures made subsequent to the
distribution of a Participant’s Account in a lump sum shall be paid as soon as
practicable after the date of such allocation.

(c) Right to Deferred Distribution. If a Participant’s vested Accounts under
this Plan and the Morgan Stanley 401(k) Plan total $1,000 or less in the
aggregate on the date distribution would commence under Section 11(b), then
payment of the Participant’s Plan Benefit shall be made in cash as soon as
practicable after the date as of which the Participant’s employment with all
members of the Affiliated Group terminates. If a Participant’s vested

 

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Accounts under this Plan and the Morgan Stanley 401(k) Plan total more than
$1,000, no distribution shall occur, subject to Section 13(a), without an
election by the Participant. Distributions hereunder shall be subject to the
Participant’s rights under Code section 409(h), to the extent applicable.

Notwithstanding anything to the contrary herein, unless a Participant otherwise
elects, the distribution of a Participant’s Plan Benefit shall begin not later
the 60th day after the close of the Plan Year in which the latest of the
following events occurs:

(i) The Participant attains normal retirement age by meeting the age and service
requirements set forth in Section 10(a)(i).

(ii) The 10th anniversary of the date on which the Participant commenced
participation in the Plan or

(iii) The termination of the Participant’s employment with the Affiliated Group.

If a distribution is one to which Code sections 401(a)(11) and 417 do not apply,
such distribution may commence less than 30 days after the notice required under
Treas. Reg. section 1.411(a)-11(c) is given, provided that:

(x) the Plan Administrator clearly informs the Participant that the Participant
has a right to a period of at least 30 days after receiving the notice to
consider the decision of whether or not to elect a distribution (and, if
applicable, a particular distribution option), and

(y) the Participant, after receiving the notice, affirmatively elects a
distribution.

 

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Accounts pending distribution shall continue to share in the investment
experience of the Trust Fund until the Valuation Date as of which distributed.

(d) Death of Participant. If a Participant dies prior to receiving the
Participant’s entire Plan Benefit, the remaining portion of the Participant’s
Plan Benefit shall be paid to the Participant’s surviving spouse, but if there
is no surviving spouse, or, if the surviving spouse consents in a manner
conforming to a qualified election under the Retirement Equity Act of 1984, as
amended, then to the Participant’s Beneficiary; provided that, any amount
distributed pursuant to this Section 11(d) shall be distributed no later than
December 31st of the calendar year which contains the fifth anniversary of the
Participant’s death. Subject to the provisions of the foregoing sentence, upon
the death of a Participant, the Participant’s Beneficiary, if any, shall be
entitled to make such elections or decisions as the Participant was authorized
to make under this Section 11, and any provision as to deferrals and elections
shall be made with reference to the date of death of the Participant (instead of
the date he or she terminated employment). Notwithstanding the foregoing, if
prior to being notified of the death of a Participant the Plan Administrator has
made a distribution or instructed the Trustee to make a distribution to any such
Participant, the provisions of this Section 11(d) shall not be applicable and
such distribution shall be considered to have been made in accordance with the
other provisions of this Section 11.

(e) Designation of Beneficiary. (i) Any designation of a Beneficiary shall be
made in writing and filed with the Plan Administrator. A Beneficiary designation
may be revoked by the Participant at any time without notice to or consent of
any previously designated Beneficiary; provided, that any new designation of
Beneficiary must comply with any applicable spousal consent requirement; and
provided further, that no designation shall be effective unless filed with and
accepted by the Plan Administrator prior to the death of the Participant. If no

 

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Beneficiary is designated, or the designated Beneficiary does not survive the
Participant and no alternative Beneficiary is designated, the Beneficiary shall
be the Participant’s surviving spouse, or, if none, the Participant’s estate.
Whether a person is a spouse or a surviving spouse will be determined using the
eligibility standards for U.S. Social Security benefits. If the designated
Beneficiary cannot be located by the Plan Administrator for a period of one year
following death, despite mailing to such Beneficiary’s last known address, and
the Beneficiary has not made written claim within such period to the Plan
Administrator, the Beneficiary shall be treated as having predeceased the
Participant.

(ii) In the event a Participant participates in this Plan and the Morgan Stanley
401(k) Plan, any Beneficiary designation made by the Participant under this Plan
shall not be effective unless the designated Beneficiary is the same as the
beneficiary designated under the Morgan Stanley 401(k) Plan.

(f) Administrative Procedures. The Plan Administrator may require Participants
to complete such process as may be established by the Plan Administrator before
any election under this Section 11 may take effect; provided, that such process
shall conform to applicable rules under the Code and that the Plan Administrator
shall provide the Participant and the Participant’s surviving spouse or
Beneficiary such information, within such time periods, as is required under the
Code and applicable law.

(g) Optional Direct Rollover of Eligible Rollover Distributions.

(i) A Participant who receives a distribution described in Section 11(a) or a
withdrawal described in Section 12 may direct the Plan Administrator to directly
roll over all or any portion of the distribution or withdrawal to an individual
retirement plan described in Code sections 408(a) or 408(b), to another
employer’s qualified plan described in

 

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Code sections 401(a)(31)(D) and 402(c)(8)(B), to an annuity contract described
in Code section 403(b), or to an eligible plan under Code section 457(b) that is
maintained by a state, political subdivision of a state, or any agency or
instrumentality of a state or political subdivision of a state, and which agrees
to separately account for amounts transferred into such plan from this Plan.

(ii) The election under this Section 11(g) shall not be applicable to (1) any
distribution which represents the minimum amount required to be distributed
under Code section 401(a)(9), (2) any hardship distribution under Section 12(f)
or (3) any distribution of dividends pursuant to Section 8(b). The election
under this Section shall be available with respect to any distribution or
withdrawal made to or by a spouse of a Participant following the death of the
Participant or pursuant to a qualified domestic relations order (as defined in
Code section 414(p)) if the election described herein would have been available
to the Participant had the Participant been the recipient of the distribution or
withdrawal.

(iii) The Plan Administrator may, in its sole discretion, adopt such
administrative rules as may be permitted by Code section 401(a)(31) or
regulations promulgated thereunder which limit or restrict the applicability of
this Section 11(g) to all or a portion of certain distributions or withdrawals.

(iv) The non-spouse Beneficiary of a Participant following the death of the
Participant may direct the Plan Administrator to directly roll over all or any
portion of a distribution or withdrawal made to such non-spouse Beneficiary to
an individual retirement plan described in Code sections 408(a) or 408(b). Any
such rollover shall be made in accordance with the requirements of Code section
402(c)(11) and any guidance promulgated thereunder.

 

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(v) An individual receiving a distribution that is eligible for a direct
rollover under the provisions of this Section 11(g) may also direct the Plan
Administrator to directly roll over all or any portion of such distribution to a
Roth individual retirement arrangement described in Code section 408A.
Notwithstanding the previous sentence, for taxable years beginning before
January 1, 2010, but only to the extent provided in Code section 408A, the
ability to roll a distribution over to a Roth individual retirement arrangement
shall not be available if the individual has modified adjusted gross income for
the year of the rollover exceeding $100,000 or is married and files a separate
tax return; provided, however, that it shall be the responsibility of the
individual receiving the distribution, and not the Plan Administrator, to assure
compliance with this restriction.

 

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SECTION 12. WITHDRAWALS AND LOANS

(a) General Rule. A Participant who is an Employee may elect to withdraw a
specified amount from his or her Accounts, subject to the following provisions.

(b) Limitations on Withdrawals. Withdrawals shall be subject to the following
limitations:

(i) To make a withdrawal, a Participant must complete such process as may be
established by the Plan Administrator.

(ii) A Participant may not make more than eight withdrawals (other than hardship
withdrawals described in Section 12(f)) per calendar year, provided that a
Participant may make more than eight withdrawals in a calendar year if, after
electing eight partial withdrawals in a calendar year, the Participant elects a
lump sum distribution of the total value of his or her interest in the Trust
Fund. The minimum amount a Participant may elect to withdraw shall be $500 or,
if less, the total value of the applicable Accounts.

(iii) A Participant may withdraw any or all amounts allocated to his or her
Accounts, to the extent vested, after attaining age 59 1/2. In addition, prior
to attaining age 59 1/2, a Participant may receive a hardship distribution, as
provided in Section 12(f), or a Qualified Reservist Distribution, as provided in
Section 12(h), from his or her Accounts, to the extent vested.

(c) Source and Amount of Withdrawals. In the case of a withdrawal, including a
hardship withdrawal or a Qualified Reservist Distribution, the Plan
Administrator shall withdraw assets from the Participant’s Accounts in the order
determined by the Plan Administrator on a nondiscriminatory basis in accordance
with applicable law. The amount being withdrawn shall be taken pro rata from the
Investment Funds in which such Accounts are invested (except that the Plan
Administrator may, on a nondiscriminatory basis, permit Participants to choose
whether or not investments in the Morgan Stanley Stock Fund shall be included
for this purpose).

 

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(d) Time of Payment of Withdrawals. Withdrawals and hardship withdrawals
described in this Section 12 will be paid as soon as administratively
practicable following the approval of the Participant’s request for a
withdrawal.

(e) Form of Payment of Withdrawals. All withdrawals under this Section 12 shall
be distributed in the form of a lump sum payment consisting of (i) cash equal to
the value of the portion of the Participant’s Accounts being withdrawn or
(ii) at the election of the Participant and as permitted under this Section 12,
whole shares of Morgan Stanley Stock (as may be credited to the Participant’s
Account) and cash equal to the amount of any uninvested cash, plus the value of
the portions of the Participant’s Accounts that are invested in all Investment
Funds other than the Morgan Stanley Stock Fund, in such proportions as the
Participant may elect and in the aggregate equal to the value of the portion of
the Participant’s Accounts being withdrawn. Unless the Participant elects
otherwise, payment will be made in accordance with clause (i) of the preceding
sentence. If a distribution is made in the form of shares of stock, any unpaid
dividends which may be due with respect to such stock and any portion to be
distributed representing fractional shares of such stock shall be paid in cash.

(f) Hardship.

(i) In case of a hardship withdrawal, the Plan Administrator shall withdraw
assets from the Participant’s Accounts in the order determined by the Plan
Administrator on a uniform and nondiscriminatory basis in accordance with
applicable law. Notwithstanding anything herein to the contrary, amounts in the
Participants’ Accounts attributable to Fixed Contributions and Transition
Contributions shall not be available for a hardship withdrawal.

 

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(ii) The Plan Administrator may from time to time prescribe written rules of
uniform application by which Participants who make a hardship withdrawal may not
make elective or employee contributions to this or any other plan of a
Participating Company for a period to be determined by the Plan Administrator.

(iii) A distribution will be considered to be necessary to satisfy an immediate
and heavy financial need of a Participant only if the Participant has obtained
all distributions (including any available dividend distributions under this
Plan), other than hardship distributions, and all nontaxable loans available
under all plans maintained by any member of the Affiliated Group, and the
distribution is not in excess of the amount of the immediate and heavy financial
need.

(iv) In reviewing a request for a hardship distribution, the Plan Administrator
shall apply the following rules on a nondiscriminatory basis to all Participants
eligible for such hardship distributions.

(1) All requests for such payments must be made in such manner as the Plan
Administrator shall designate.

(2) All such requests must be accompanied by such documentation as the Plan
Administrator may require.

(3) The Plan Administrator will review all requests and will make a
determination as to whether the request should be approved or rejected.

(4) The Plan Administrator will consider the facts relevant to each requested
hardship distribution, subject to appropriate regulations.

 

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(5) The Plan Administrator may delegate its responsibilities under this
Section 12(f) to one or more persons.

(v) For purposes of this Section 12(f), the term “hardship” shall mean immediate
and heavy financial needs of the Participant where such Participant lacks other
reasonably available financial resources, arising out of any one or more of the
following:

(1) expenses for (or necessary to obtain) medical care described in Code section
213(d) for the Participant or the Participant’s spouse, children or dependents
(as defined in Code section 152, without regard to Code sections 152(b)(1),
(b)(2) and (d)(1)(B)), or, in accordance with regulations issued by the
Secretary of Treasury, any other person designated by the Participant as his/her
Beneficiary who is a domestic partner of the Participant;

(2) costs directly related to the purchase of a principal residence for the
Participant (excluding mortgage payments);

(3) payment of tuition, related educational fees, and room and board expenses,
for up to the next 12 months of post-secondary education for the Participant or
the Participant’s spouse, children or dependents (as defined in Code section
152, without regard to Code sections 152(b)(1), (b)(2) and (d)(1)(B)), or, in
accordance with regulations issued by the Secretary of Treasury, any other
person designated by the Participant as his/her Beneficiary who is a domestic
partner of the Participant;

(4) payments necessary to prevent the eviction of the Participant from the
Participant’s principal residence or foreclosure on the mortgage on that
residence;

 

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(5) amounts necessary to pay the funeral expenses of the Participant’s deceased
parent, spouse, children, dependents (as defined in Code section 152 without
regard to Code section 152(d)(1)(B)), or, in accordance with regulations issued
by the Secretary of Treasury, any other person designated by the Participant as
his/her Beneficiary who is a domestic partner of the Participant;

(6) expenses for the repair of damage to the Participant’s principal residence
that would qualify for the casualty deduction under Code section 165 (relating
to damage from fire, storm, shipwreck, theft or other casualty loss, but without
regard to whether such loss exceeds 10% of the Participant’s adjusted gross
income);

(7) a Qualified Disaster Recovery Assistance Distribution;

(8) any amounts necessary to pay any federal, state or local income taxes or
penalties reasonably anticipated to result from a hardship withdrawal under this
Section 12(f); or

(9) such other instances of deemed immediate and heavy financial needs together
with such additional methods for the hardship withdrawal to be deemed necessary
to satisfy such needs as the Commissioner of Internal Revenue shall provide
through the publication of revenue rulings, notices and other documents of
general applicability.

(g) Loans.

(i) Availability of Loans. A Participant may elect, in such form and manner as
the Plan Administrator may prescribe, to borrow from the Trust Fund an amount in
cash not to exceed the amount permitted under Section 12(g)(ii). No more than
one loan to a Participant under this Plan may be outstanding at any time. The
Plan Administrator may, in its discretion, impose additional conditions and
restrictions on a Participant’s eligibility for a loan

 

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under this Section 12(g), subject to applicable law. Notwithstanding anything
herein to the contrary, a Participant who is a member of the Management
Committee of Morgan Stanley shall be ineligible to take a loan from the Plan.

(ii) Limitations on Loans. Each loan under this Section 12(g) shall be limited
to an amount not to exceed (when added to the outstanding balance of all other
loans made to the Participant by all tax qualified plans maintained by the
Affiliated Group) the lesser of:

(1) $50,000 reduced by the excess, if any, of the highest outstanding balance of
loans from all such plans to the Participant during the one-year period ending
on the day before the date on which the loan is made, over the outstanding
balance of loans from all such plans to the Participant on the date on which the
loan is made, and

(2) one-half of the vested balance of the Participant’s Accounts as of the most
recent Valuation Date.

Notwithstanding the foregoing, no loan shall be granted under this Section 12(g)
in an amount less than $1,000. Notwithstanding anything herein to the contrary,
amounts in a Participant’s Accounts attributable to Fixed Contributions and
Transition Contributions shall not be available for a loan nor be included in
determining the maximum loan amount available to the Participant under the Plan.

(iii) Sources of Loan Proceeds and Designation of Payments. Loans made pursuant
to this Section 12(g) and payments thereof, shall be charged pro rata against
each Investment Fund in which the Participant is invested (except that the Plan
Administrator may, on a nondiscriminatory basis, permit Participants to choose
whether or not investments in the Morgan Stanley Stock Fund shall be included
for this purpose) and shall be appropriately

 

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charged against the Participant’s Accounts in such order as the Plan
Administrator shall determine on a nondiscriminatory basis. Prior to the
disbursement of the proceeds of a loan, an amount equal to the loan amount shall
be transferred from the Participant’s Accounts to a special loan fund
(consisting solely of the Participant’s loans) established for the purpose of
disbursing the loan to the Participant.

(iv) Loans Evidenced by Note and Secured by Interest in Account. A loan granted
pursuant to this Section 12(g) shall be evidenced by such documents as the Plan
Administrator shall designate including a note which shall bear a reasonable
rate of interest as determined by the Plan Administrator from time to time in a
nondiscriminatory manner and which otherwise shall conform to the repayment
terms set forth in this Section 12(g). A loan made to a Participant pursuant to
this Section 12(g) shall be secured by an interest in the Participant’s Accounts
and/or by such other interests as the Plan Administrator may determine to
constitute adequate security. The occurrence of an event of default under the
loan note shall entitle the Trustee of the Plan to reduce the balance of the
Participant’s Accounts up to the amount of the Plan’s security interest therein.
The loan note shall be an asset solely of the borrowing Participant’s Accounts
and interest on the loan shall be credited to the Participant’s Accounts.

(v) Loan Repayment Terms. A loan made pursuant to this Section 12(g) shall be
repaid over a period not to exceed five years from the date of the loan, unless
the Participant certifies in writing to the Plan Administrator that the loan
proceeds are to be used solely to acquire a dwelling unit which is to be used,
within a reasonable period of time, as the Participant’s principal residence, in
which case, the loan shall be repaid over a period not to exceed 15 years from
the date of such loan. Such repayment shall be made in level installments

 

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of principal and interest which the Participant shall authorize to be repaid by
payroll deductions or by such other method as is determined by the Plan
Administrator on a uniform and nondiscriminatory basis. Loan repayments
(principal and interest) will be proportionately credited among the
Participant’s Accounts from which the loan proceeds were transferred pursuant to
Section 12(g)(iii) above and reinvested in Investment Funds based on the
Participant’s then-current directions with respect to the investment of
contributions, or in such other manner as is determined by the Plan
Administrator in its discretion on a uniform and nondiscriminatory basis. The
entire outstanding amount of the loan may be prepaid without penalty at any
time. Partial prepayment shall not be permitted. The note shall provide that in
all events the outstanding principal and interest due thereon shall be repaid
not later than the date of the Participant’s termination of employment or such
other date as the Plan Administrator shall specify. If a Participant with an
outstanding loan is rehired by a Participating Company within 60 days of his
termination of employment, loan repayments shall automatically recommence in
accordance with this subsection 12(g)(v). In the event of default, foreclosure
on the note and attachment of security will not occur until a distributable
event occurs under the Plan.

(vi) Loans Available on Nondiscriminatory Basis. All loans made pursuant to this
Section 12(g) shall be made available to all Participants on a reasonably
equivalent, nondiscriminatory basis; and any Participant to whom a loan is made
agrees to such changes in the terms of the loan as may be required by changes in
the applicable law or regulations.

(vii) Other Provisions Relating to Loans. To the extent required by ERISA
section 408 or Code section 4975, notwithstanding the preceding provisions of
this Section 12(g), loans may be made to a Participant who is, at the time of
the loan, both a former employee

 

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and a “party in interest” as defined in ERISA section 3(14) with respect to the
Plan. In the case of any such loan, the preceding provisions of this
Section 12(g) dealing with payment by payroll deduction and acceleration on
termination of employment shall not apply. Loans shall not be made available to
highly compensated employees (as defined in Code section 414(q)) in an amount
greater than the amount made available to other employees.

(viii) Suspension of Loan Repayments during Military Service. Loan repayments
will be suspended under this Plan as permitted under Code section 414(u)(4).

(ix) Loan Administrative Fee. The Plan Administrator shall assess a loan
administrative fee of $75 for each new loan granted to a Participant, which
shall be applied to pay Plan expenses. The amount of the loan administrative fee
shall be deducted from the amount of the loan proceeds forwarded to the
Participant, but shall not reduce the principal amount of the loan.

(x) Securities Laws Restrictions. Notwithstanding anything in this Section 12(g)
to the contrary, a Participant’s ability to take a loan, or to prepay the
outstanding balance of a loan, shall be subject to such conditions and
restrictions as the Plan Administrator may determine to be necessary or
advisable to ensure compliance with all applicable securities laws.

(xi) Loan Procedures. The Plan Administrator shall promulgate loan procedures
consistent with this Section 12(g), which, as amended from time to time, are
hereby incorporated into and which hereby form a part of this Plan.

(h) Qualified Reservist Distribution. An eligible Participant may request a
Qualified Reservist Distribution. In the case of a Participant who receives a
Qualified Reservist Distribution, such Participant shall not be eligible to make
elective or employee contributions to this Plan or any other plan of a
Participating Company during the 6-month period following such Qualified
Reservist Distribution.

 

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SECTION 13. INCORPORATION OF CERTAIN CODE REQUIREMENTS BY REFERENCE

(a) Incorporation of Code Section 401(a)(9). Anything in the Plan to the
contrary notwithstanding, a Participant’s entire Plan Benefit shall be
distributed to the Participant no later than the April 1st next following the
later of the year in which the Participant (i) attains age 70 1/2 or
(ii) terminates from service. Distributions to a Participant under this Plan
shall otherwise meet the requirements of Code section 401(a)(9) and the
regulations thereunder, including the minimum distribution incidental death
benefit requirement of Code section 401(a)(9)(G). Distributions shall be made in
accordance with Treas. Reg. sections 1.401(a)(9)-1 through 1.401(a)(9)-9. Such
requirements shall override any inconsistent distribution options in the Plan.
Such requirements are incorporated herein by reference.

(b) Incorporation of Code Section 415 Limitations. The limitations on
allocations and contributions of Code section 415 are incorporated herein by
reference. For purposes of applying those limitations the following rules shall
apply:

(i) Definitions. For purposes of this Section 13, compensation means Testing
Compensation.

(ii) Disposition of Excess Amounts.

(1) If the annual additions otherwise made to the Accounts of a Participant
would cause the limitations of Code section 415 that are applicable to that
Participant to be exceeded for the limitation year, the amount by which such
limitations are exceeded will be eliminated (A) by returning to the Participant
the Participant’s Roth Elective Deferrals, if any, and then the Participant’s
Pre-Tax Contributions for such limitation year, in whole or in part as
necessary, and then (B) to the extent necessary, by reducing any Company
Contributions allocated to the Participant in accordance with Section 6. Such
excess amounts of Company Contributions shall be applied to reduce such
contributions for such Participant for the next limitation year (and succeeding
limitation years, if necessary).

 

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(2) Notwithstanding the foregoing, if a Participant is not covered by the Plan
as of the end of the limitation year as of which such excess amount arose, the
excess amounts shall be held in an unallocated suspense account and allocated
and re-allocated in the next limitation year to other eligible Participants in
the Plan. If such allocation or re-allocation will cause the limitations of Code
section 415 to be exceeded with respect to each eligible Participant for such
following limitation year, the excess amount shall be held unallocated in the
suspense account until the next limitation year. If the suspense account is in
existence at any time during a particular limitation year, other than the
limitation year as of which the excess amounts arose, all amounts in the
suspense account must be allocated and re-allocated to other eligible
Participants in the Plan (subject to the limitations of Code section 415) before
any Company Contributions which would constitute annual additions may be made to
the Plan for that limitation year.

(3) Notwithstanding the foregoing, the correction methods described in this
Section 13(b)(ii) shall be used only to the extent permitted under Code section
415.

(iii) Coordination With Another Defined Contribution Plan. If, in addition to
this Plan, a Participant is covered under another qualified defined contribution
plan or a welfare benefit fund, as defined in Code section 419(e), maintained by
the employer during any limitation year and a Participant’s annual additions
under this Plan and such other plans would result in an excess amount for a
limitation year, the excess amount will be deemed to consist of the annual
additions last allocated, except that annual additions attributable to a welfare
benefit

 

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fund will be deemed to have been allocated first regardless of the actual
allocation date. If an excess amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of another
plan, the excess amount attributed to this Plan will be the product of:

(1) the total excess amount allocated as of such date, times

(2) the ratio of (A) the annual additions allocated to the Participant for the
limitation year as of such date under this Plan to (B) the total annual
additions allocated to the Participant for the limitation year as of such date
under this and all the other qualified defined contribution plans. Any excess
amount attributed to this Plan will be disposed of in the manner described in
Section 13(b)(ii).

(iv) Regulations under Code section 415. The limitations imposed by this
Section 13(b) will be administered in accordance with the regulations
promulgated under Code section 415 and any other rulings and regulations issued
by the Secretary of the Treasury under Code section 415.

(c) Military Service. Notwithstanding any provision of this Plan to the
contrary, contributions, benefits and service credit with respect to qualified
military service will be provided in accordance with Code section 414(u).

 

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SECTION 14. FIDUCIARY RESPONSIBILITIES AND PLAN ADMINISTRATION

(a) General.

(i) The general administration of the Plan shall be placed in the Plan
Administrator.

(ii) The Plan Administrator shall be a “named fiduciary” with respect to the
Plan, as such term is defined in ERISA section 402(a).

(iii) The Plan Administrator shall be the Plan’s “administrator,” as such term
is defined in ERISA
section 3(16).

(iv) The Committee established in accordance with Section 16 shall be the “named
fiduciary,” as defined under ERISA section 402(a), that, subject to
Section 16(c), shall have the authority to act with respect to any claim for
benefits under the Plan.

(v) The Benefit Plan Appeals Committee established in accordance with Section 17
shall be the “named fiduciary,” as defined under ERISA section 402(a), that
shall have the authority to act with respect to any appeal from the denial of a
claim for benefits under the Plan.

(iv) The Plan Administrator, Committee, Benefit Plan Appeals Committee and each
other person who has Fiduciary Responsibilities with respect to the Plan shall
be bonded if and as required by ERISA.

(b) Procedure and Performance of Duties; Delegation.

(i) The Plan Administrator may employ such agents, counsel, accountants or other
persons (who also may be employed by a Participating Company or Affiliated Group
member) as the Plan Administrator may consider necessary or advisable to
properly carry out the administration of the Plan.

 

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(ii) The Plan Administrator may delegate its Fiduciary Responsibilities to any
other person as the Plan Administrator in its sole discretion shall decide. Upon
a delegation of Fiduciary Responsibilities, the person or persons to whom such
Fiduciary Responsibilities are delegated shall be solely responsible for the
performance of such Fiduciary Responsibilities, except as provided by law, and
all references in the Plan to the Plan Administrator shall be deemed to be
references to such person. The Plan Administrator shall perform its delegation
functions in the same manner as it performs all of its other Fiduciary
Responsibilities pursuant to Section 14(b)(iii) below.

(iii) The Plan Administrator shall perform only its Fiduciary Responsibilities
as provided in the Plan except those Fiduciary Responsibilities which are
delegated pursuant to Section 14(b)(ii) above, if any, and except those
Fiduciary Responsibilities which are to be performed by the Trustee pursuant to
the Trust Agreement.

(c) General Powers of Plan Administrator. The Plan Administrator shall have the
power and the duty to take all actions and to make all decisions necessary or
proper to carry out its responsibilities under the Plan. Subject to Sections 16
and 17, the Plan Administrator shall have the exclusive right to determine any
question arising under or in connection with the administration of the Plan,
including, but not limited to, the authority to interpret the Plan, to remedy
ambiguities, inconsistencies or omissions arising under or in connection with
the Plan, to direct disbursements by the Trustee and to exercise the other
rights and powers specified herein.

(d) Rules and Regulations. Subject to the limitations set forth in the Plan, the
Plan Administrator may from time to time establish such uniform and
nondiscriminatory rules and regulations as it may deem appropriate or necessary
for the transaction of business and for the administration of the Plan.

 

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(e) Conversion of Amounts of Earnings. The Plan Administrator shall have full
and final authority with respect to Earnings paid in a foreign currency to
convert such Earnings into currency of the United States, in such manner as the
Plan Administrator may from time to time determine, for purposes of the Plan.

(f) Indemnification. To the fullest extent permitted by law, the Company will
indemnify and save harmless the Plan Administrator, each member of the Committee
established in accordance with Section 16, each member of the Benefit Plan
Appeals Committee established in accordance with Section 17, and each other
person to whom Fiduciary Responsibilities are delegated under the terms of the
Plan against any cost or expense (including attorneys’ fees) or liability
(including any sum paid in settlement of a claim with the approval of the
Company) arising out of any act or omission to act as Plan Administrator, member
of the Committee, member of the Benefit Plan Appeals Committee or delegate,
except (i) in the case of willful misconduct or lack of good faith or (ii) with
respect to any person who is not an employee, officer, advisory director, Senior
Advisor or director of the Company or a member of the Affiliated Group. This
Section 14(f) shall not supersede any separate agreement or contract between the
Company or a member of the Affiliated Group or the Plan and any person to whom
Fiduciary Responsibilities are delegated.

(g) Quorum. A majority of the members of the Committee or Benefit Plan Appeals
Committee or any delegate of either of them at the time in office shall
constitute a quorum for the transaction of business. All resolutions or other
actions taken by the Committee or Benefit Plan Appeals Committee or by such
delegate, as the case may be, at any meeting shall be by the vote of a majority
of those present at any such meeting.

 

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(h) Action Without Meeting. Any action required or permitted to be taken at any
meeting of the Committee or the Benefit Plan Appeals Committee or by any
delegate of either of them may be taken without a meeting if a written consent
thereto is signed by all members of the Committee or Benefit Plan Appeals
Committee or by such delegate, as the case may be, and such written Consent is
filed with the records of the proceedings of the Committee or Benefit Plan
Appeals Committee or of such delegate, as the case may be.

(i) Meeting by Telephone Conference. Members of the Committee, the Benefit Plan
Appeals Committee or any delegate of either of them may participate in a meeting
of the Committee, Benefit Plan Appeals Committee or such delegate, as the case
may be, by means of telephone conference or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section shall constitute presence in
person at such meeting.

 

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SECTION 15. INVESTMENT POLICY

From time to time, the Investment Committee shall establish an investment policy
for the Plan which is consistent with the objectives of the Plan, with its
short-term and long-term financial needs and with the requirements of ERISA. The
investment policy, as established and amended from time to time, shall be
communicated in writing to the Trustee as appropriate.

 

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SECTION 16. CLAIMS PROCEDURE

(a) Claims. Sections 16 and 17 shall provide the exclusive rules relating to
claims for benefits under the Plan.

The Board of Directors shall appoint a claims committee (referred to herein as
the “Committee”), which shall consist of one or more individuals who may (but
need not) be employees of the Company. The Committee shall be the named
fiduciary that shall have the authority to act with respect to any claim for
benefits under the Plan. The Committee may adopt such rules and procedures,
consistent with ERISA and the Plan, as it deems necessary or appropriate in
carrying out its responsibilities under this Section 16. The Committee may
delegate some or all of its rights, privileges and duties to such person(s) as
it may choose; to the extent of such a delegation all references in this Section
to the Committee shall be deemed to be references to such person(s).

The Committee in its capacity as named fiduciary with respect to claims for
benefits shall have the discretionary right to interpret the Plan, including
those provisions governing eligibility and benefits, and to determine any
questions arising under or in connection with claims for benefits under the
Plan, including without limitation, the authority to make factual
determinations. The Committee shall have full authority to determine the
entitlement, rights or eligibility of employees, participants and/or any other
persons, and the amount of benefits, if any, due under the Plan. The Committee
shall also have the right and authority to remedy ambiguities, inconsistencies
or omissions, arising under or in connection with claims for benefits under the
Plan. The construction and interpretations of the Plan and the determinations of
the Committee hereunder shall be final and binding on all persons, other than
the Benefit Plan Appeals Committee established in accordance with Section 17
hereof.

 

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All claims for benefits shall be submitted to the Committee at such address as
the Committee shall designate from time to time. Claims for benefits must be in
writing on the form prescribed by the Committee and must be signed by the person
or persons indicated on such form.

(b) Denial of Claims. In the event any claim for benefits is denied, in whole or
in part, the Committee shall notify the claimant of such denial in writing and
shall advise the claimant of his right to a review thereof. Such written notice
shall set forth, in a manner calculated to be understood by the claimant, the
specific reason or reasons for the denial, reference to the specific Plan
provisions upon which the denial is based, a description of any additional
information or material that is necessary for the claimant to perfect his claim
for benefits, an explanation of why such information or material is necessary,
and an explanation of the Plan’s review procedures and the time limits
applicable to such procedures, including a statement of the claimant’s right to
bring a civil action under ERISA if the claim is denied on review. Such written
notice shall be furnished to the claimant within 90 days after the Committee
receives the claim, unless special circumstances require an extension of time
for processing the claim. In no event shall such an extension exceed a period of
90 days from the end of the initial 90-day period; if such an extension is
required, written notice thereof shall be furnished to the claimant before the
end of the initial 90-day period. Such notice shall indicate the special
circumstances requiring an extension of time and the date by which the Committee
expects to render a decision.

(c) Small Claims. Any claim to be determined by the Committee may be determined
by Morgan Stanley’s Global Director of Human Resources, or his delegate, if the
Global Director of Human Resources (or such delegate) determines that the amount
involved is

 

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$20,000 or less. In any case where the Global Director of Human Resources (or
delegate) determines a claim, the provisions of Sections 16 and 17 shall apply
to the Global Director of Human Resources (or delegate) in the same manner as
would be applicable to the Committee. The Global Director of Human Resources has
delegated his authority under this provision to the Director of Benefits.

(d) Authority to Terminate Committee Member. The Board of Directors shall have
the express authority to terminate the appointment of any member of the
Committee provided for in this Section 16 through written action of the Board of
Directors or its delegate.

 

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SECTION 17. BENEFIT PLAN APPEALS COMMITTEE

(a) Establishment of Benefit Plan Appeals Committee. The Board of Directors
shall appoint a “Benefit Plan Appeals Committee,” which shall consist of one or
more individuals who may (but need not) be employees of the Company. The Benefit
Plan Appeals Committee shall be the named fiduciary that shall have the
authority to act with respect to any appeal from the denial of a claim for
benefits under the Plan. The Benefit Plan Appeals Committee may adopt such rules
and procedures, consistent with ERISA and the Plan, as it deems necessary or
appropriate in carrying out its responsibilities under Section 16 and this
Section 17. The Benefit Plan Appeals Committee may delegate some or all of its
rights, privileges and duties to such person(s) as it may choose; to the extent
of such a delegation all references in this Section to the Benefit Plan Appeals
Committee shall be deemed to be references to such person(s).

(b) Appeals from Claim Denials. Any person whose claim for benefits is denied,
in whole or in part, or such person’s duly authorized representative, may appeal
from such denial by submitting a request for review of the claim to the Benefit
Plan Appeals Committee within six months after receiving the written notice of
denial from the Committee. The request for review may include the reason the
claimant believes the claim was improperly denied and any additional comments,
documents, records and other information that may be appropriate (which will be
considered by the Benefit Plan Appeals Committee without regard to whether it
was considered by the Committee in its initial review of the claim). The Benefit
Plan Appeals Committee shall provide the claimant, upon request and without
charge, reasonable access to, and copies of, all documents, records and other
information relevant to the claim under applicable legal standards. A request
for review shall be in writing and shall be submitted to the Benefit Plan
Appeals

 

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Committee at such address as the Committee shall designate from time to time.
The request for review shall set forth all of the grounds on which it is based,
all facts in support thereof and any other matters that the claimant deems
pertinent. The Benefit Plan Appeals Committee may require the claimant (or his
representative) to submit such additional facts, documents or other material as
it deems necessary or appropriate in making its review.

(c) Decision on Review. The Benefit Plan Appeals Committee shall act upon a
request for review within 60 days after receipt thereof, unless special
circumstances require an extension of time for processing, in which event a
decision shall be rendered not more than 120 days after the receipt of the
request for review. If such an extension is required, written notice thereof
shall be furnished to the claimant (or his representative) before the end of the
initial 60-day period. If the Benefit Plan Appeals Committee extends the review
period for the appeal due to the claimant’s failure to submit information
necessary to decide the appeal, the period for deciding the appeal will be
tolled from the date on which the extension notice is sent until the date on
which the claimant responds to the request for additional information. The
Benefit Plan Appeals Committee shall give written notice of its decision to the
claimant (or his representative) and to the Committee. In the event that the
Benefit Plan Appeals Committee confirms the denial of the claim for benefits in
whole or in part, such notice shall set forth, in a manner calculated to be
understood by the claimant, the specific reason or reasons for the denial and
reference to the specific Plan provisions upon which such denial is based, the
claimant’s right to receive, upon request and without charge, reasonable access
to, and copies of, all documents, records, and other information relevant to the
claim under applicable legal standards, and the claimant’s right to bring a
civil action under ERISA.

 

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(d) Exhaustion of Administrative Remedies. No legal or equitable action for
benefits under the Plan shall be brought unless and until the claimant (i) has
submitted a written claim for benefits in accordance with Section 16(a),
(ii) has been notified that the claim has been denied, (iii) has filed a written
request for a review of the claim in accordance with Section 17(b) and (iv) has
been notified in writing that the Benefit Plan Appeals Committee has affirmed
the denial of the claim. In addition, no legal or equitable action for benefits
under the Plan may be brought after the earliest of (i) six months after the
Benefit Plan Appeals Committee has affirmed the denial of the claim, (ii) three
years after the date the claimant’s benefits under the Plan commenced, or
(iii) the end of the otherwise applicable statute of limitations period.

(e) Authority of Benefit Plan Appeals Committee. The Benefit Plan Appeals
Committee in its capacity as named fiduciary shall have the discretionary right
to interpret the Plan, including those provisions governing eligibility and
benefits, and to determine any questions arising under or in connection with the
administration of the Plan, including without limitation, the authority to make
factual determinations. The Benefit Plan Appeals Committee shall have full
authority to determine the entitlement, rights or eligibility of employees,
participants and/or any other persons, and the amount of benefits, if any, due
under the Plan. The Benefit Plan Appeals Committee shall also have the right and
authority to remedy ambiguities, inconsistencies or omissions, arising under or
in connection with the Plan. The construction and interpretations of the Plan
and the determinations of the Benefit Plan Appeals Committee hereunder shall be
final and binding on all persons.

(f) Authority to Terminate Committee Member. The Board of Directors shall have
the express authority to terminate the appointment of any member of the Benefit
Plan Appeals Committee provided for in this Section 17 through written action of
the Board of Directors or its delegate.

 

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SECTION 18. EXPENSES OF PLAN AND TRUST FUND

The reasonable expenses of administering the Plan and the Trust Fund shall be
charged to and paid out of the Trust Fund, unless they are paid by the Company
or a Participating Company. The expenses of administering the Plan shall
include, without limitation, the compensation of the Trustee, the expenses (such
as brokerage fees and stock transfer taxes) incurred by the Trustee in the
performance of its duties hereunder, real or personal property taxes, income
taxes (if any) and other taxes of any kind whatsoever that may be levied or
assessed under existing or future laws upon or in respect of the Trust Fund or
any property in the Trust Fund, and all other proper charges and disbursements
of the Trustee. Legal fees and related legal expenses arising out of legal
services rendered to the Trustee (whether or not rendered in connection with
judicial or administrative proceedings, and whether or not incurred prior to the
termination of the Trust Agreement) shall be considered to be reasonable
expenses of administering the Plan and Trust Fund only to the extent (a) they
are reasonable in amount, and (b) the payment of such expenses out of the Trust
Fund is permitted by applicable law. Nothing contained herein shall be construed
to require the Trust Fund, the Company or a Participating Company to pay any fee
or expense allocable under another Section of the Plan to a specific
Participant’s Account.

 

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SECTION 19. AMENDMENT AND TERMINATION

(a) Amendment of Plan. The Company reserves the right to make from time to time
any amendment or amendments to all or any part of the Plan, for itself and for
all Participating Companies, including amendments which are retroactive in
effect. Such amendment or amendments may be effected by action of the Company’s
Board of Directors or its delegate. The Company’s Board of Directors has
authorized the Executive Committee of the Company’s Board of Directors to take
such actions. Notwithstanding the foregoing:

(i) no amendment shall have the effect of vesting in the Participating Companies
any interest in any property of the Trust Fund; and

(ii) no amendment shall have any retroactive effect so as to deprive any
Participant or Beneficiary of any amount credited to the Participant’s or
Beneficiary’s Accounts, except as provided in Section 19(c) or as otherwise
permitted by law.

(b) Termination of Plan. The Plan is intended to be permanent, but the Company
reserves the right to terminate the Plan, in whole or in part, at any time. Such
termination may be effected by action of the Company’s Board of Directors or its
delegate. The Company’s Board of Directors has authorized the Executive
Committee of the Company’s Board of Directors to take such action. No such
action shall have the effect of:

(i) vesting in the Participating Companies any interest in any property of the
Trust Fund; or

(ii) retroactively depriving any Participant or Beneficiary of any amount
credited to the Participant’s or Beneficiary’s Accounts, except as provided in
Section 19(c) or as otherwise permitted by law.

 

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(c) Amendment Required for Qualification. All provisions of this Plan, and all
benefits and rights granted hereunder, are subject to any amendments,
modifications or alterations which are necessary from time to time to qualify
the Plan under Code sections 401(a) and 501(a) to continue the Plan as so
qualified, or to comply with any other provision of law. Accordingly,
notwithstanding Section 19(a) or any other provision of this Plan, the Company
or its delegate may amend, modify or alter the Plan, with or without retroactive
effect, in any respect or manner necessary to qualify the Plan under Code
sections 401(a) and 501(a).

(d) No Reversion of Funds. No part of the Trust Fund shall revert to any
Participating Company nor be used for or diverted to purposes other than the
exclusive purpose of providing benefits to Participants and Beneficiaries who
have an interest in the Plan and defraying the reasonable expenses of
administering the Plan; provided, that funds may be returned to Participating
Companies under the following circumstances:

(i) All contributions made prior to the receipt of an initial determination
letter are conditioned upon a favorable determination by the Internal Revenue
Service as to the qualified status of the Plan under Code section 401, and if
the Plan receives an adverse determination with respect to its initial
qualification, then all such contributions shall be returned to the Company
within one year after such determination;

(ii) Any contribution made as a result of a mistake of fact may be refunded
within one year after the date of such contribution;

(iii) All employer contributions are expressly conditioned on their
deductibility under Code section 404, and any employer contribution shall be
returned to the extent that the contribution is disallowed as a deduction,
within one year after such disallowance;

(iv) Amounts held unallocated pursuant to Sections 13(b)(ii) and (iii) upon
termination of the Plan shall be returned to the appropriate Participating
Company.

 

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(e) Full Vesting Upon Termination. Upon termination, partial termination or the
complete discontinuance of contributions to the Plan (the “terminating events”),
other than as provided in Section 19(d), the account balance of each affected
Participant shall be 100% vested and nonforfeitable to the extent required by
Code section 411(d)(3). In the event a terminating event occurs, except as
provided in Section 19(d), no part of the Trust Fund shall revert to any
Participating Company or be used for or diverted to purposes other than
providing benefits to Participants and Beneficiaries and defraying the
reasonable expenses of administering the Plan and the Trust Fund. Upon the
occurrence of a terminating event, the Trust Fund shall continue until
distributed as provided in Section 11, subject to ERISA section 403(d)(1),
provided that in the event of a partial termination, the Trust Fund shall
continue with respect to unaffected Participants and Beneficiaries
notwithstanding any distributions made as a result of the partial termination to
affected Participants and Beneficiaries.

 

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SECTION 20. MISCELLANEOUS

(a) Inalienability of Rights. The interest and property rights of any person in
the Plan, in the Trust Fund or in any distribution to be made under the Plan
shall not be subject to option nor be assignable, either by voluntary or
involuntary assignment or by operation of law, including (without limitation)
bankruptcy, garnishment, attachment or other creditor’s process, and any act in
violation hereof shall be void. Notwithstanding the foregoing, the following
shall not constitute a violation of this Section 20(a): (i) the creation,
assignment or recognition of a right to all or any portion of a Participant’s
Plan Benefit made pursuant to a state domestic relations order, provided that
such order is determined to be a “qualified domestic relations order” (as
defined in Code section 414(p)) (“QDRO”) under procedures adopted by the Plan
Administrator or (ii) the required offset of a Participant’s benefits pursuant
to a judgment or settlement described in Code section 401(a)(13)(C) or the
payment of a Federal tax levy or collection by the United States of an unpaid
tax assessment as described in Treasury Regulation section 1.401(a)-13(b)(2).
The Plan may pay benefits pursuant to a QDRO that provides for the payment of
benefits to an “alternate payee” (as such term is defined in Code section
414(p)) prior to the date a Participant has attained “earliest retirement age”
(as such term is defined in Code section 414(p)). Unless otherwise specified in
the QDRO, payment shall be made pro rata from each of the Participant’s Accounts
and pro rata from the Investment Funds in which any Account is invested.

(b) Plan Mergers. The Plan shall not merge or consolidate with, nor transfer
assets or liabilities to, any other plan unless each Participant would receive a
Plan Benefit immediately after the merger, consolidation or transfer (if the
Plan then terminated) which is equal to or greater than the Plan Benefit such
Participant would have been entitled to receive immediately before the merger,
consolidation or transfer (if the Plan had then terminated).

 

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(c) Payments to and From the Plan. All Employee and Company Contributions shall
be paid to the Trustee for investment and reinvestment as part of the Trust Fund
pursuant to the Trust Agreement. All benefits and withdrawals payable under the
Plan shall be paid out of the Trust Fund by the Trustee pursuant to the
directions of the Plan Administrator and the terms of the Trust Agreement.

(d) No Right in Trust Fund or to Employment. No person shall have any rights in
or to the Trust Fund, or any part thereof, or under the Plan, except as, and
only to the extent, expressly provided for in the Plan. The establishment of the
Plan, the granting of benefits and any action of any member of the Affiliated
Group or any other person shall not be held or construed to confer upon any
person any right to be continued as an Employee nor to confer any right or
interest in the Trust Fund other than as provided herein. No provision of the
Plan shall restrict the right of any member of the Affiliated Group to discharge
any Employee at any time, with or without cause.

(e) Competency to Handle Benefits. If, in the opinion of the Plan Administrator,
any person becomes unable to handle properly any property distributable to such
person under the Plan, or if a person to whom a benefit is payable hereunder is
an infant, the Plan Administrator may make any reasonable arrangement for
distribution on such person’s behalf as it deems appropriate.

(f) Governing Law. This Plan shall be construed in accordance with ERISA and, to
the extent permissible under ERISA, the laws of the State of New York.

 

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(g) Costs of Legal Action. If a legal action arises because of conflicting
claims to a Participant’s or other person’s benefits, including in connection
with a Participant’s or other person’s death or divorce, the cost to the Plan,
Trustee, Participating Companies, Plan Administrator, Committee or Benefit Plan
Appeals Committee or any member thereof of bringing, prosecuting or defending
the action shall be charged to the extent permitted by law to the sums, if any,
which were involved in the action or were payable to the person concerned.

 

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SECTION 21. EXECUTION

To record the adoption of the Plan to read as set forth herein, the Company has
caused its authorized officer to affix the corporate name and seal hereto,
effective as of July 1, 2009.

 

MORGAN STANLEY & CO. INCORPORATED By  

/s/    KAREN JAMESLEY

  Global Head of Human Resources

 

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MORGAN STANLEY 401(k) SAVINGS PLAN

APPENDIX A

PARTICIPATING COMPANIES

 

Participating Companies

  

Date of Adoption of Plan

Morgan Stanley Smith Barney Holdings LLC, and its

subsidiaries as listed below, to the extent their employees are

eligible for the Plan, as set forth below

   July 1, 2009

Morgan Stanley Smith Barney LLC

Morgan Stanley Smith Barney Payco LLC

  

Morgan Stanley Smith Barney Holdings LLC.

(a) Definitions. For purposes of these provisions and the Plan, the following
terms shall have the following meanings:

(i) “Citigroup” shall mean Citigroup, Inc. and its affiliates.

(ii) “Citigroup Cost Center” shall mean a payroll cost center formerly
associated with Citigroup immediately prior to the formation of MSSB.

(iii) “Citigroup Transferee” shall have the meaning given in the EMA.

(iv) “EMA” shall mean the Employee Matters Agreement, dated May 31, 2009, by and
among Citigroup, Morgan Stanley, Morgan Stanley Smith Barney Holdings LLC, and
Morgan Stanley Smith Barney LLC.

(v) “Morgan Stanley Cost Center” shall mean a payroll cost center formerly
associated with Morgan Stanley and its affiliates immediately prior to the
formation of MSSB.

(vi) “Morgan Stanley Transferee” shall have the meaning given in the EMA.

(vii) “MSSB” shall mean Morgan Stanley Smith Barney Holdings LLC and its
subsidiaries referred to above.

 

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(b) Eligibility. Notwithstanding anything in the Plan to the contrary, with
respect to employees of MSSB, the following rules shall apply:

(i) An Eligible Employee shall not include any individual who is: (1) a Morgan
Stanley Transferee or (2) a new employee hired by MSSB on or after June 1, 2009
into a Morgan Stanley Cost Center.

(ii) An Eligible Employee shall include any individual who is (1) a Citigroup
Transferee who otherwise qualifies as an Eligible Employee, (2) a Citigroup
Transferee who was compensated on an hourly basis and eligible to participate in
the Citigroup 401(k) Plan immediately prior to June 1, 2009 and who transferred
to MSSB on June 1, 2009, or (3) a new employee hired by MSSB on or after June 1,
2009 into a Citigroup Cost Center who otherwise qualifies as an Eligible
Employee.

(c) Participation and Service. In the case of any individual who is a Citigroup
Transferee, such individual’s “Period of Service” shall include such
individual’s service as an employee of Citigroup for purposes of determining:
(i) such individual’s eligibility for participation in the Plan pursuant to
Section 3 of the Plan, (ii) the vested percentage of such Employee’s Plan
Benefit pursuant to Section 10 of the Plan, and (iii) such individual’s
eligibility for and the level of any Fixed Contributions under Section 6(c) of
the Plan. Notwithstanding anything in the Plan to the contrary, any Citigroup
Transferee who was eligible to participate in the Citigroup 401(k) Plan
immediately prior to his or her transfer to MSSB and is an Eligible Employee
shall automatically become a Participant on July 1, 2009 or, if later, on the
date of his or her transfer to MSSB.

(d) Transfers Between Cost Centers. Notwithstanding the foregoing:

(i) If any individual who would otherwise qualify as an Eligible Employee but is
excluded under paragraph (b)(i) above is subsequently transferred to a Citigroup
Cost Center, such individual shall become an Eligible Employee as of the date of
such transfer.

(ii) If any individual treated as an Eligible Employee under paragraph (b)(ii)
above is subsequently transferred to a Morgan Stanley Cost Center, such
individual shall cease to be an Eligible Employee as of the date of such
transfer; provided, however, that such individual shall be entitled to receive,
for the year of such transfer, an allocation of each type of Company
Contribution under Section 6 of this Plan for which such individual otherwise
would have met all applicable requirements set forth in Section 6 but for the
transfer. Accordingly, for example, any such individual who is transferred to a
Morgan Stanley Cost Center and then terminates employment prior to December 31,
not as a result of death, Total and Permanent Disability, Retirement, or
Release, shall not be eligible to receive an allocation of Company Contributions
under Section 6.

(iii) For avoidance of doubt, any allocation of Company Contributions to an
individual’s account under this Plan for the year of a transfer described in
paragraph (d)(i) or (d)(ii) above shall in no event be based on compensation
paid by a Morgan Stanley entity that is not a Participating Company or through a
Morgan Stanley Cost Center or such individual’s contributions to the Morgan
Stanley 401(k) Plan.

 

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MORGAN STANLEY 401(k) SAVINGS PLAN

SUPPLEMENT A

TOP-HEAVY PROVISIONS

Section 1. Top-Heavy Provisions.

(a) Determination of Top-Heavy Status. Notwithstanding any other provision of
the Plan to the contrary, the following provisions shall become effective for
any Plan Year in which the Plan is a Top-Heavy Plan.

(b) Minimum Allocations. Notwithstanding any other provision of the Plan to the
contrary, for any Plan Year during which the Plan is a Top-Heavy Plan, the
employer contributions allocated on behalf of any Participant who is employed on
the last day of the Plan Year and who is not a Key Employee shall not be less
than a percentage of such Participant’s Compensation equal to the lesser of
(i) three percent, or (ii) the largest percentage of Compensation that is
allocated to any Key Employee for that Plan Year of employer contributions. This
minimum allocation shall be determined without regard to any contributions made
or benefits available under the Social Security Act, and shall be made even
though, under other Plan provisions, the Participant would not be entitled to
receive an allocation or would have received a lesser allocation for the Plan
Year because of (i) the Participant’s failure to complete a Year of Service,
(ii) the Participant’s failure to make mandatory Participant contributions to
the Plan or (iii) the Participant’s receipt of Earnings in an amount less than
the minimum required by the Plan for a Participant to qualify for an allocation
of contributions or forfeitures. Notwithstanding the foregoing, if a top heavy
minimum benefit is due to a non-Key Employee who is also a participant in the
Morgan Stanley Employees Retirement Plan (the “Pension Plan”), it shall be
provided under the Pension Plan and not under this Plan.

(c) Matching Contributions. Employer matching contributions shall be taken into
account for purposes of satisfying the minimum contribution requirements of Code
section 416(c)(2) and the Plan. The preceding sentence shall apply with respect
to matching contributions under the Plan or, if the Plan provides that the
minimum contribution requirement shall be met in another plan, such other plan.
Employer matching contributions that are used to satisfy the minimum
contribution requirements shall be treated as matching contributions for
purposes of the actual contribution percentage test and other requirements of
Code section 401(m).

(d) Minimum Vesting. Notwithstanding any provision of Section 10 of the Plan to
the contrary, if a Participant (other than a Participant who did not complete
any Period of Service after the Plan became a Top-Heavy Plan) terminates
employment with the Affiliated Group while the Plan is a Top-Heavy Plan, and
after such Participant has completed three or more Years of Service, such
Participant shall be 100% vested in his or her Accounts. If a Participant
terminates employment with the Affiliated Group while the Plan is a Top-Heavy
Plan and before the Participant has completed three Years of Service, such
Participant’s vested percentage in any such amounts shall be the percentage
determined in accordance with Section 10 of the Plan.

 

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(e) Effect of Change in Top-Heavy Status on Vesting. If the Plan is a Top-Heavy
Plan at any time and thereafter ceases to be a Top-Heavy Plan, each Participant
who is credited with three or more Years of Service as of December 31 of the
last Plan Year in which the Plan is a Top-Heavy Plan shall thereafter continue
to be 100% vested in his or her Accounts. Each Participant who is credited with
fewer than three Years of Service as of December 31 of the last Plan Year in
which the Plan is a Top-Heavy Plan shall have his or her vested percentage
determined under Section 10 of the Plan (unless and until the Plan again becomes
a Top-Heavy Plan) provided that, as long as such Participant had an Hour of
Service after the Plans became a Top-Heavy Plan, no decrease in a Participant’s
nonforfeitable percentage may occur in the event the Plan’s status as a
Top-Heavy Plan alters during any Plan Year.

Section 2. Plan Distributions.

Notwithstanding any other provision of the Plan to the contrary, the
distribution of the Plan Benefit of a Participant who is a five percent owner of
the Company (as defined in Code section 416(i)) shall be made no later than
April 1 of the Plan Year following the Plan Year in which he or she attains age
70-1/2, whether or not he or she is still an Employee.

Section 3. Definitions.

For purpose of this Supplement A, the following definitions shall apply:

(a) “Aggregation Group” means a group of qualified plans consisting of: (i) each
Plan of the Affiliated Group in which a Key Employee participates, and each
other plan of any member of the Affiliated Group that enables any plan in which
a Key Employee participates to meet the requirements of Code sections 401(a)(4)
or 410; or (ii) all plans of the Affiliated Group included under (i), above,
plus at the election of the Company, one or more additional plans of the
Affiliated Group that satisfy the requirements of Code sections 401(a)(4) and
410 when considered together with the plans included under (i) above.

(b) “Compensation” means the total compensation actually paid to the Participant
by the Affiliated Group member that employs such Participant, as reported on the
Internal Revenue Service Form W-2 (or its equivalent) issued with respect to
such Participant plus any elective deferrals or contributions made with respect
to a Participant as described in Code section 415(c)(3)(D), including elective
deferrals or contributions under Code section 401(k), 125 or 132(f)(4), provided
that the annual compensation of a Participant taken into account shall not
exceed the $200,000 compensation limit under Code section 401(a)(17), as
adjusted for cost-in-living increases in accordance with Code section
401(a)(17)(B).

(c) “Determination Date” means the last day of the preceding Plan Year.

 

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(d) “Key Employee” means any Employee or former Employee (including any deceased
Employee) who at any time during the Plan Year that includes the Determination
Date was an officer of the Company or Participating Company having annual
compensation greater than $130,000 (as adjusted under Code section 416(i)(1)), a
5% owner of the Company or Participating Company, or a 1% owner of the Company
or Participating Company having annual compensation of more than $150,000. For
this purpose, annual compensation means compensation within the meaning of Code
section 415(c)(3). The determination of who is a Key Employee will be made in
accordance with Code section 416(i)(1) and the applicable regulations and other
guidance of general applicability issued thereunder.

(e) “Permissive Aggregation Group” means the Required Aggregation Group of plans
plus any other plan or plans of the Company or Participating Company which, when
considered as a group with the Required Aggregation Group, would continue to
satisfy the requirements of Code sections 401(a)(4) and 410.

(f) “Present Value” shall be computed only using the interest and mortality
rates specified by the Plan Administrator.

(g) “Required Aggregation Group” means (i) each qualified plan of the Company or
Participating Company in which at least one Key Employee participates or
participated at any time during the Determination Period (regardless of whether
the plan has terminated), and (ii) any other qualified plan of the Company or
Participating Company which enables a plan described in (i) to meet the
requirements of Code sections 401(a)(4) or 410.

(h) “Top-Heavy Plan” means the Plan if any of the following conditions exist:

(A) If the Top-Heavy Ratio for the Plan exceeds 60% and the Plan is not part of
any Required Aggregation Group or Permissive Aggregation Group of plans;

(B) If the Plan is part of a Required Aggregation Group of plans but not part of
a Permissive Aggregation Group and the Top-Heavy Ratio for the group of plans
exceeds 60%; or

(C) If the Plan is a part of a Required Aggregation Group and part of a
Permissive Aggregation Group of plans and the Top-Heavy Ratio for the Permissive
Aggregation Group exceeds 60%.

(i) “Top-Heavy Ratio” means as follows:

(A) If the Company or Participating Company maintains one or more defined
contribution plans (including any simplified employee pension plans) and the
Company or Participating Company has not maintained any defined benefit plan
which, during the five-year period ending on the Determination Date(s) has or
has had Vested Benefits, the Top-Heavy Ratio for the Plan alone or for the
Required Aggregation Groups or Permissive Aggregation Groups as appropriate is a
fraction, the numerator of which is the sum of the account balances of

 

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all Key Employees as of the Determination Date(s), and the denominator of which
is the sum of all account balances, both computed in accordance with Code
section 416 and the regulations thereunder. Both the numerator and the
denominator of the Top-Heavy Ratio are increased to reflect any contribution not
actually made as of the Determination Date, but which is required to be taken
into account on that date under Code section 416 and the regulations thereunder.

(B) If the Company or Participating Company maintains one or more defined
contribution plans (including any simplified employee pension plans) and the
Company or Participating Company maintains or has maintained one or more defined
benefit plans which, during the five-year period ending on the Determination
Date(s), has or has had any Vested Benefits, the Top-Heavy Ratio for any
Required Aggregation Groups or Permissive Aggregation Groups as appropriate is a
fraction, the numerator of which is the sum of the account balances under the
aggregated defined contribution plan or plans for all Key Employees, determined
in accordance with (A) above, and the Present Value of accrued benefits under
the aggregated defined benefit plan or plans for all Key Employees as of the
Determination Date(s), and the denominator of which is the sum of the account
balances under the aggregated defined contribution plan or plans for all
Participants, determined in accordance with (A) above, and the Present Value of
accrued benefits under the defined benefit plan or plans for all Participants as
of the Determination Date(s), all determined in accordance with Code section 416
and the regulations thereunder.

(C) For purposes of (A) and (B) above, the value of account balances and the
Present Value of accrued benefits will be determined as of the most recent
Valuation Date that falls within or ends with the 12-month period ending on the
Determination Date, except as provided in Code section 416 and the regulations
thereunder for the first and second plan years of a defined benefit plan. The
account balances and accrued benefits of a Participant (1) who is not a Key
Employee but who was a Key Employee in a prior year or (2) who has not been
credited with at least one Hour of Service with any Company or Participating
Company maintaining the Plan at any time during the one-year period ending on
the Determination Date will be disregarded. The calculation of the Top-Heavy
Ratio, and the extent to which distributions, rollovers, and transfers are taken
into account will be made in accordance with Code section 416 and the
regulations thereunder. Deductible Employee contributions will not be taken into
account for purposes of computing the Top-Heavy Ratio. When aggregating plans
the value of account balances and accrued benefits will be calculated with
reference to the Determination Dates that fall within the same calendar year.

(D) For purposes of (A) and (B) above, the present values of accrued benefits
and the amounts of account balances of an Employee as of the Determination Date
shall be increased by the distributions made with respect to the Employee under
the Plan and any plan aggregated with the Plan under Code section 416(g)(2)
during the one-year period ending on the Determination Date. The preceding
sentence shall also apply to distributions under a terminated plan which, had it
not been terminated, would have been aggregated with the Plan under Code section
416(g)(2)(A)(i). In the case of a distribution made for a reason other than
severance from employment, death, or disability, this provision shall be applied
by substituting “five-year period” for “one-year period.”

 

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The accrued benefit of a Participant other than a Key Employee shall be
determined under (x) the method, if any, that uniformly applies for accrual
purposes under all defined benefit plans maintained by the Company or
Participating Company, or (y) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under the
fractional rule of Code section 411(b)(1)(C).

(j) “Valuation Date” means December 31 of each year.

 

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MORGAN STANLEY 401(k) SAVINGS PLAN

SUPPLEMENT B

PARTICIPANTS RESIDING IN PUERTO RICO

1. Establishment and Purpose. This Supplement B provides for compliance with the
provisions of the Puerto Rico Code. Puerto Rico Participants will be subject to
the provisions of the Plan, in addition to and as modified by the provisions of
this Supplement B.

2. New Definitions. For the purposes of this Supplement, certain terms are
defined and added to Section 2 of the Plan. Except as provided in paragraph 3 of
this Supplement B, any other capitalized term has the meaning assigned to it in
Section 2 of the Plan.

“Puerto Rico Code” or “PR Code” means the Puerto Rico Internal Revenue Code of
1994, as amended from time to time.

“Puerto Rico Eligible Employee” means any Eligible Employee who is a resident of
Puerto Rico.

“Puerto Rico Highly Compensated Employee” means any Employee residing in Puerto
Rico who is “highly compensated” with the meaning of PR Code section
1165(e)(3)(E)(iii).

“Puerto Rico Participant” means an individual described in Section 3 of the Plan
and who is a resident of Puerto Rico.

3. Altered Definitions. For the purposes of this Supplement only, certain
definitions contained in Section 2 of the Plan are altered as follows:

(a) “Elective Deferrals” means elective deferrals within the meaning of Code
section 402(g)(3) and Article 1165-8(g)(2) of the Regulations issued under PR
Code section 1165(e).

(b) “Employee” means any individual employed by any member of the Affiliated
Group or any other employer required to be aggregated with any member of the
Affiliated Group under Code section 414(b), (c), (m) or (o). The term “Employee”
shall also include any Leased Employee deemed to be an employee of such employer
as provided in Code section 414(n) or (o).

(c) “Excess Contributions” for a Puerto Rico Participant shall be determined by
substituting the phrase “Puerto Rico Highly Compensated Employee” for the phrase
“Highly Compensated Employee” and by substituting the corresponding section of
the PR Code for each section of the Code.

 

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(d) “Excess Elective Deferrals” means those Elective Deferrals that are
includible in the Puerto Rico Participant’s gross income under Code section
402(g) or under PR Code section 1165(e)(7) to the extent that such Puerto Rico
Participant’s Elective Deferrals for a taxable year exceed the dollar limitation
under such respective section.

(e) “Participant” means an individual so described in Section 3 of the Plan
including any such individual who resides in Puerto Rico.

4. Payment of Company Contributions. For the purposes of this Supplement only,
the portion of any Company Contribution made by each Participating Company in
Puerto Rico for each Plan Year shall be determined by the Company and shall be
paid to the Trustee at such time or times as the Participating Company in Puerto
Rico shall determine, but in any event before the date for filing such
Participating Company’s Puerto Rico income tax return for the Plan Year,
including any extension of such date.

5. Revised Section 5 Employee Contributions. For the purposes of this Supplement
only, Section 5 of the Plan will read as follows:

SECTION 5: Employee Contributions.

(a) Employee Contributions. Each Puerto Rico Participant who is an Eligible
Employee may make Pre-Tax Contributions to the Plan for any year equal to any
whole percentage from 1% to 30% of the Puerto Rico Participant’s Earnings for
such year; the Committee may at any time and from time to time limit the amount
of Pre-Tax Contributions allowed to be made by some or all Eligible Employees to
ensure compliance with applicable nondiscrimination or other rules, provided,
however, that in no event shall any such limitation restrict employees that are
not Puerto Rico Highly Compensated Employees to any greater extent than
similarly situated individuals that are Puerto Rico Highly Compensated
Employees.

(b) Changing the Rate and Suspension of Contributions. A Puerto Rico Participant
may elect as of any Valuation Date to change the rate of Pre-Tax Contributions
to any other rate that is within the limitations described in Section 5(a) of
this Supplement. The Puerto Rico Participant may elect to discontinue all
Pre-Tax Contributions. Such election shall take effect as soon as reasonably
practicable following its receipt.

(c) Maximum Amount of Elective Deferrals. Notwithstanding anything to the
contrary herein, the amount of Elective Deferrals made with respect to any
individual during a calendar year under the Plan and all other plans, contracts
or arrangements of any member of the Affiliated Group may not exceed the amount
of the limitation in effect under Code section 402(g)(l) and PR Code section
1165(e)(7) for taxable years beginning in such calendar year.

(d) Distribution of Excess Elective Deferrals. A Puerto Rico Participant may
assign to the Plan any Excess Elective Deferrals made during a taxable year of
the Puerto Rico Participant by notifying the Plan Administrator no later than
the date determined by the Plan Administrator that follows the close of such
taxable year of the amount of the Excess Elective

 

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Deferrals to be assigned to the Plan. Notwithstanding any other provision of the
Plan, to the extent practicable, Excess Elective Deferrals, plus any income and
minus any loss allocable thereto, shall be distributed no later than April 15
following such taxable year to any Puerto Rico Participant to whose account
Excess Elective Deferrals were assigned for the preceding year and who claims
Excess Elective Deferrals for such taxable year.

(e) Actual Deferral Percentage Test.

(1) Elective Deferrals for Puerto Rico Participants shall not exceed the limits
set forth in PR Code section 1165(e)(3). For purposes of applying such limits,
PR Code section 1165(e)(3) and the regulations thereunder are incorporated by
reference and are hereinafter referred to as the “PR ADP Test.”

(2) All or part of the Qualified Matching Contributions and Qualified
Non-Elective Contributions made with respect to any or all Puerto Rico Eligible
Employees may be treated as Elective Deferrals for purposes of the PR ADP Test
provided that each of the following requirements is met:

(i) the nonelective contributions, including Qualified Non-Elective
Contributions treated as Elective Deferrals for purposes of the PR ADP Test,
satisfy the requirements of PR Code section 1165(a)(4);

(ii) the nonelective contributions, excluding Qualified Non-Elective
Contributions treated as Elective Deferrals for purposes of the PR ADP Test,
satisfy the requirements of PR Code section 1165(a)(4);

(iii) the matching contributions, including Qualified Matching Contributions
treated as Elective Deferrals for purposes of the PR ADP Test, satisfy the
requirements of PR Code section 1165(a)(4);

(iv) the matching contributions, excluding Qualified Matching Contributions
treated as Elective Deferrals for purposes of the PR ADP Test, satisfy the
requirements of PR Code section 1165(a)(4);

(v) all such Qualified Non-Elective Contributions and Qualified Matching
Contributions are nonforfeitable when made and subject to the same distribution
restrictions that apply to Elective Deferrals, without regard to whether such
Qualified Non-Elective Contributions and Qualified Matching Contributions are
actually taken into account as Elective Deferrals;

(vi) all such Qualified Non-Elective Contributions and Qualified Matching
Contributions are allocated to the Accounts of Puerto Rico Eligible Employees as
of a date with the Plan Year (pursuant to Treas. Reg. section
1.401(k)-2(a)(4)(i) as if such contributions were Elective Deferrals; and

 

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(vii) if the Plan uses the provisions of Section 5(e)(2) of this Supplement B
for purposes of the PR ADP Test, then, for purposes of PR Code section
1165(a)(3) (other than the average benefit percentage test), the Plan may be
aggregated with other plans of the Affiliated Group (determined with reference
to PR Code section 1028) to which the qualified non-elective contributions and
qualified matching contributions are made.

(f) Distribution of Excess Contributions.

(1) Notwithstanding any other provision of the Plan, Excess Contributions, plus
any income and minus any loss allocable thereto, shall be distributed no later
than the last day of any Plan Year to Puerto Rico Participants to whose Accounts
Pre-Tax, Qualified Matching and Qualified Non-Elective Contributions were
allocated for the preceding Plan Year. The Excess Contributions shall be
adjusted for income or loss up to the date of distribution. The income or loss
allocable to Excess Contributions shall be determined by multiplying the income
or loss allocable to the Puerto Rico Participant’s Pre-Tax, Qualified Matching
and Qualified Non-Elective Contributions for the Plan Year allocated to the
Puerto Rico Participant by a fraction, the numerator of which is the Excess
Contribution for the preceding Plan Year and the denominator of which is the sum
of the Puerto Rico Participant’s Account balances attributable to Pre-Tax,
Qualified Matching and Qualified Non-Elective Contributions for the Plan Year.

(2) The amount of Excess Contributions to be distributed under Section 5(f)(1))
shall be reduced by Excess Elective Deferrals previously distributed under
Section 5(d) for the Puerto Rico Participant’s taxable year ending with or
within the Plan Year for which such Excess Contributions were made.

(g) Payroll Deductions. All Pre-Tax Contributions shall be made solely through
periodic payroll deductions, unless the Plan Administrator consents to another
method of payment. All such contributions withheld during any calendar months
shall be credited to the Trustee not later than the last day of the next
following month and shall be credited to the appropriate Accounts as soon as
practicable thereafter.

(h) Salary Reduction and Tax Status of Pre-Tax Contributions. For Federal and
Puerto Rico tax purposes, Pre-Tax Contributions shall be deemed to be Company
Contributions to the Plan, and a Puerto Rico Participant’s election to make such
contributions shall constitute an election to have the amount of his or her
compensation that otherwise would have been reported as taxable compensation on
Form W-2/PR reduced by the amount of such contributions.

(i) Administrative Procedures. The Plan Administrator may require Puerto Rico
Participants to complete and file such forms, within such time periods as it
shall determine, before any election under this Section 5 may take effect.

(j) Catch-Up Contributions. A Puerto Rico Participant who shall have attained
age 50 before the end of the Plan Year shall be eligible to make catch-up
contributions in

 

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accordance with, and subject to the limitations of Code section 414(v) and
Section 1165(e)(7)(C) of the Puerto Rico Code. A Puerto Rico Participant’s
catch-up contributions shall be determined at the end of each such year.
Catch-up contributions under this Section shall not be taken into account for
purposes of the provisions of the Plan implementing the limitations of Code
Sections 402(g) and 415 and Puerto Rico Code Section 1165(e), including
Section 5(c) of Supplement B. The Plan shall not be treated as failing to
satisfy the provisions of the Plan implementing the requirements of Puerto Rico
Code Section 1165(e)(3), including Section 5(e) of Supplement B, by reason of
making such contributions. Catch-up contributions shall not be treated as
Matched Contributions for purposes of determining the amount of matching or
other employer contributions that may be made on behalf of such Puerto Rico
Participant under this Plan.

6. Eligible Rollover Distributions. For purposes of this Supplement only,
Section 11(g) of the Plan shall, for purposes of compliance with the Puerto Rico
Code, be modified as follows:

(a) With respect to a distributee who is a resident of Puerto Rico, an eligible
rollover distribution is any distribution of all or any portion of the balance
to the credit of the distributee. An eligible rollover distribution shall not
include any distribution that is a distribution of dividends pursuant to
Section 8(b).

(b) With respect to a distributee who is a resident of Puerto Rico, an eligible
retirement plan is a qualified trust described in Code section 401(a) that is
also qualified under section 1165(a) of the Puerto Rico Code, that accepts the
distributee’s eligible rollover distribution.

(c) No portion of a distribution shall fail to be an eligible rollover
distribution merely because the portion consists of after-tax employee
contributions. However, with respect to a distributee who is a resident of
Puerto Rico, such portion may be transferred only to a qualified defined
contribution plan described in Code section 401(a) that is also a qualified plan
under section 1165 of the Puerto Rico Code that agrees to separately account for
amounts so transferred, including separately accounting for the portion of such
distribution that is includible in gross income and the portion of such
distribution which is not so includible.

7. Amendment and Termination of This Supplement.

(a) Amendment Required for Qualification. All provisions of this Supplement, and
all benefits and rights granted hereunder, are subject to any amendments,
modifications or alterations which are necessary from time to time to qualify
the Plan and Supplement under Code section 401(a) or 501(a) or under PR Code
section 1165(a), to continue the Plan as so qualified or to comply with any
other provision of law. Accordingly, notwithstanding Section 19(a) of the Plan
or any other provision of this Plan, the Company may amend, modify or alter the
Plan, with or without retroactive effect, in any respect or manner necessary to
qualify the Plan and Supplement under Code section 401(a) or under PR Code
section 1165(a).

 

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(b) Reversion of Funds. All employer contributions are expressly conditioned on
their deductibility under Code section 404 and PR Code section 1023(n). To the
extent permissible under ERISA, any employer contribution shall be returned to
the appropriate Participating Company, upon its written request, to the extent
that the contribution is disallowed as a deduction, within one year after such
disallowance.

 

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