EXHIBIT 10.4

MORGAN STANLEY

EMPLOYEES’ EQUITY ACCUMULATION PLAN

[YEAR] SPECIAL DISCRETIONARY RETENTION AWARDS

AWARD CERTIFICATE FOR STOCK OPTIONS

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Table of Contents for Award Certificate

 

1.

   Stock options generally.      2   

2.

   Vesting schedule.      2   

3.

   Expiration date.      3   

4.

   Exercise.      3   

5.

   Restrictions on transfer of Option Shares.      3   

6.

   Death, Disability and Full Career Retirement.      4   

7.

   Involuntary termination by the Firm.      4   

8.

   Governmental Service.      5   

9.

   Qualifying Termination.      5   

10.

   Cancellation of awards under certain circumstances.      5   

11.

   Tax and other withholding obligations.      7   

12.

   Obligations you owe to the Firm.      8   

13.

   Nontransferability.      8   

14.

   Designation of a beneficiary.      8   

15.

   Ownership and possession.      9   

16.

   Securities law compliance matters.      9   

17.

   Compliance with laws and regulation.      9   

18.

   No entitlements.      10   

19.

   Consents under local law.      10   

20.

   Award modification.      10   

21.

   Governing law.      10   

22.

   Defined terms.      11   

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MORGAN STANLEY

[YEAR] SPECIAL DISCRETIONARY RETENTION AWARDS

AWARD CERTIFICATE FOR STOCK OPTIONS

Morgan Stanley has awarded you special discretionary retention stock options as
part of your discretionary long-term incentive compensation for services
provided during [year] and as an incentive for you to remain in Employment and
provide services to the Firm through the Scheduled Vesting Dates. This Award
Certificate sets forth the general terms and conditions of your [year] special
discretionary stock option award. The number of stock options in your award has
been communicated to you independently.

If you are employed outside the United States, you will also receive an
“International Supplement” that contains supplemental terms and conditions for
your [year] special discretionary stock option award. You should read this Award
Certificate in conjunction with the International Supplement, if applicable, in
order to understand the terms and conditions of your stock option award.

Your stock option award is made pursuant to the Plan. References to “stock
options” in this Award Certificate mean only those stock options included in
your [year] special discretionary stock option award, and the terms and
conditions herein apply only to such award. If you receive any other award under
the Plan or another equity compensation plan, it will be governed by the terms
and conditions of the applicable award documentation, which may be different
from those herein.

The purpose of the stock option award is, among other things, to align your
interests with the interests of the Firm and Morgan Stanley’s stockholders, to
reward you for your continued Employment and service to the Firm in the future
and your compliance with the Firm’s policies (including the Code of Conduct), to
protect the Firm’s interests in non-public, confidential and/or proprietary
information, products, trade secrets, customer relationships, and other
legitimate business interests, and to ensure an orderly transition of
responsibilities. In view of these purposes, you will earn each portion of your
[year] special discretionary stock option award only if you (1) remain in
continuous Employment through the applicable Scheduled Vesting Date (subject to
limited exceptions set forth below), (2) do not engage in any activity that is a
cancellation event set forth in Section 10(c) below and (3) satisfy obligations
you owe to the Firm as set forth in Section 12 below. Even if your award has
vested, you will have no right to your award if a cancellation event occurs
under the circumstances set forth in Section 10(c) below. As Morgan Stanley
deems appropriate, it will require you to provide a written certification or
other evidence, from time to time in its sole discretion, to confirm that no
cancellation event has occurred, including upon a termination of Employment
and/or prior to the exercise of your stock option. If you fail to timely provide
any required certification or other evidence, Morgan Stanley will cancel your
award. It is your responsibility to provide the Executive Compensation
Department with your up-to-date contact information.

Capitalized terms used in this Award Certificate that are not defined in the
text have the meanings set forth in Section 22 below. Capitalized terms used in
this Award Certificate that are not defined in the text or in Section 22 below
have the meanings set forth in the Plan.

 

1. Stock options generally.

Each stock option gives you the right to purchase one share of Morgan Stanley
common stock at the Exercise Price.

 

2. Vesting schedule.

Except as otherwise provided in this Award Certificate, one-third of your stock
options will vest on each of the First Scheduled Vesting Date, Second Scheduled
Vesting Date and Third Scheduled Vesting Date.1 Your stock options will become
exercisable upon vesting. Any fractional stock options resulting from the
application of the

 

1  The vesting schedule presented in this form of Award Certificate is
indicative. The vesting schedule applicable to awards may vary.

 

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vesting schedule will be aggregated and will vest on the next Scheduled Vesting
Date. Except as otherwise provided in this Award Certificate, each portion of
your stock options will vest only if you continue to provide future services to
the Firm by remaining in continuous Employment through the applicable Scheduled
Vesting Date and providing value added services to the Firm during this
timeframe. The special vesting terms set forth in Sections 6, 7, 8 and 9 of this
Award Certificate apply (i) if your Employment terminates by reason of your
death or Disability, (ii) upon your Full Career Retirement following the first
anniversary of the Date of the Award, (iii) if the Firm terminates your
employment in an involuntary termination under the circumstances described in
Section 7, (iv) upon a Governmental Service Termination or (v) upon a Qualifying
Termination. Vested stock options and any Option Shares are subject to the
transfer restrictions and cancellation and withholding provisions set forth in
this Award Certificate.

 

3. Expiration date.

Your stock options will expire on the Expiration Date, assuming your Employment
continues until that date. If your Employment terminates before the Expiration
Date, any of your stock options that were vested at the time of the termination
of your Employment will expire on the earlier of (i) 90 days following your
termination and (ii) the Expiration Date. The special expiration and
cancellation provisions set forth in Sections 6, 7, 8 and 9 of this Award
Certificate apply (i) if your Employment terminates by reason of your death or
Disability, (ii) upon your Full Career Retirement following the first
anniversary of the Date of the Award, (iii) if the Firm terminates your
employment in an involuntary termination under the circumstances described in
Section 7, (iv) upon a Governmental Service Termination or (v) upon a Qualifying
Termination.

 

4. Exercise.

The Exercise Price of your stock options may be paid to the Firm in the
following ways: (1) in cash, (2) in shares of Morgan Stanley common stock or
(3) in a combination of cash and shares. Any shares that you tender to pay the
exercise price will be valued at their fair market value on the exercise date,
using a valuation methodology established by Morgan Stanley. Morgan Stanley may
also allow you to make a “cashless” exercise of stock options (in which the
payment of the exercise price is funded by a sale of shares by a broker) or to
exercise your stock options through a net-share settlement.

Morgan Stanley may implement policies and procedures regarding the availability
of any of the foregoing exercise methods or to facilitate cashless exercises.
Your exercise and payment must conform to the policies and procedures that
Morgan Stanley implements from time to time.

Your stock options are considered to be exercised in the order in which they
vested.

 

5. Restrictions on transfer of Option Shares.

Your Option Shares may not be transferred prior to the applicable Scheduled
Vesting Date, except as otherwise provided in this Award Certificate. However,
you may sell shares to the extent required to cover the exercise price and tax
or other withholding obligations arising upon exercise.

If you pay the exercise price of your stock options by tendering shares of
Morgan Stanley common stock that you already own and that are not subject to
transfer restrictions, the transfer restrictions set forth in this Section 5
apply only to the Option Shares.

After the applicable Scheduled Vesting Date (and regardless of whether the
exercise occurs before or after the applicable Scheduled Vesting Date), the
Option Shares will not be subject to any transfer restrictions, other than those
that may arise under the securities laws, Section 12 below, and the Firm’s
policies as in effect from time to time.

 

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For purposes of this Award Certificate, a “transfer” of shares includes, without
limitation, any sale, assignment, pledge, mortgage, encumbrance or other
disposition, direct or indirect, whether or not for value, and whether or not
voluntary, but does not include a transfer after your death by will or the laws
of descent and distribution.

 

6. Death, Disability and Full Career Retirement.

The following special vesting terms apply to your stock options:

(a) Death during Employment.    If your Employment terminates due to death, all
of your unvested stock options will vest on the date of your death. Following
your termination due to death, your stock options will remain outstanding until
the Expiration Date, and the beneficiary you have designated pursuant to
Section 14 or the legal representative of your estate, as applicable, may
exercise your stock options until the Expiration Date.

After your death, the cancellation provisions set forth in Section 10(c) will no
longer apply, and any Option Shares will no longer be subject to transfer
restrictions (other than those that may arise under the securities laws,
Section 12 below or the Firm’s policies).

(b) Death after termination of Employment.     If you die after the termination
of your Employment, the beneficiary you have designated pursuant to Section 14
or the legal representative of your estate, as applicable, may exercise any
vested stock options that you held at the time of your death to the extent and
for the period of time that you would have been permitted to exercise your stock
options at the time of your death.

After your death, the cancellation provisions set forth in Section 10(c) will no
longer apply, and any Option Shares will no longer be subject to transfer
restrictions (other than those that may arise under the securities laws,
Section 12 below or the Firm’s policies).

(c) Disability.     If your Employment terminates due to Disability, all of your
unvested stock options will vest on the date your Employment terminates and
vested stock options will remain exercisable until the Expiration Date. Any
cancellation provisions set forth in Section 10(c) will no longer apply to your
stock options or Option Shares and your Option Shares will no longer be subject
to transfer restrictions (other than those that may arise under the securities
laws, Section 12 below or the Firm’s policies).

(d) Full Career Retirement.     If your Employment terminates in a Full Career
Retirement following the first anniversary of the Date of the Award, all of your
unvested stock options will vest on the date your Employment terminates and your
vested stock options will remain exercisable until the Expiration Date. The
transfer restrictions that apply to your Option Shares and the cancellation
provisions set forth in Section 10(c) that apply to your stock options and
Option Shares will continue to apply until the applicable Scheduled Vesting
Date.

 

7. Involuntary termination by the Firm.

If the Firm terminates your employment under circumstances not involving any
cancellation event set forth in Section 10(c), your unvested stock options will
vest on the date your employment with the Firm terminates, provided that you
sign an agreement and release satisfactory to the Firm. If you do not sign such
an agreement and release satisfactory to the Firm within the timeframe set by
the Firm in connection with your involuntary termination as described in this
Section 7, any stock options that were unvested immediately prior to your
termination shall be canceled. Your vested stock options will remain exercisable
until the later of (i) [fifth anniversary of February 2 following the Date of
the Award] and (ii) the second anniversary of your involuntary termination as
described in this Section 7 (but in no event later than the Expiration Date).
Any cancellation provisions set forth in Section 10(c) will no longer apply to
your stock options or Option Shares and your Option Shares will no longer be
subject to transfer restrictions (other than those that may arise under the
securities laws, Section 12 below or the Firm’s policies).

 

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8. Governmental Service.

(a) General treatment of awards upon Governmental Service Termination. If your
Employment terminates in a Governmental Service Termination and not involving a
cancellation event set forth in Section 10(c), then, provided that you sign an
agreement satisfactory to the Firm relating to your obligations pursuant to
Section 8(c), your unvested stock options will vest on the date of your
Governmental Service Termination and your vested stock options will remain
exercisable until (i) the date that is 90 days following your Governmental
Service Termination (but in no event later than the Expiration Date) or (ii) if
you satisfy the conditions for a Full Career Retirement at the time of your
termination and your termination occurs following the first anniversary of the
Date of the Award, the Expiration Date. Your Option Shares will no longer be
subject to transfer restrictions (other than those that may arise under the
securities laws, Section 12 below or the Firm’s policies).

(b) General treatment of vested awards upon acceptance of employment at a
Governmental Employer following termination of Employment.     If your
Employment terminates other than in a Governmental Service Termination and not
involving a cancellation event set forth in Section 10(c) and, following your
termination of Employment, you accept employment with a Governmental Employer,
then, provided that you sign an agreement satisfactory to the Firm relating to
your obligations pursuant to Section 8(c), any transfer restrictions will no
longer apply to your Option Shares upon your commencement of such employment,
provided you present the Firm with satisfactory evidence demonstrating that as a
result of such employment the divestiture of your continued interest in Morgan
Stanley equity awards or continued ownership of Morgan Stanley common stock is
reasonably necessary to avoid the violation of U.S. federal, state or local or
foreign ethics law or conflicts of interest law applicable to you at such
Governmental Employer.

(c) Repayment obligation.     If you engage in any activity constituting a
cancellation event set forth in Section 10(c) within the applicable period of
time that would have resulted in cancellation of all or a portion of your stock
options or Option Shares, you will be required to pay to Morgan Stanley an
amount equal to the sum of:

(1) the amount you were required to recognize as income for federal (or other
applicable) income tax purposes in connection with your exercise of any stock
options that would have been canceled (including in connection with your
exercise of any stock options resulting in Option Shares that would have been
canceled); and

(2) interest on the amount described in the preceding clause (1) at the average
rate of interest Morgan Stanley paid to borrow money from financial institutions
during the period from the date of such exercise through the date preceding the
payment date.

 

9. Qualifying Termination.

If your employment terminates in a Qualifying Termination, your unvested stock
options will vest and your vested stock options will remain exercisable until
the later of (i) [fifth anniversary of February 2 following the Date of the
Award] and (ii) the second anniversary of your Qualifying Termination (but in no
event later than the Expiration Date). Any cancellation provisions set forth in
Section 10(c) will no longer apply to your stock options or Option Shares and
your Option Shares will no longer be subject to transfer restrictions (other
than those that may arise under the securities laws, Section 12 below or the
Firm’s policies).

 

10. Cancellation of awards under certain circumstances.

(a) Cancellation of unvested awards.     Your unvested stock options will be
canceled if your Employment terminates for any reason other than death,
Disability, a Full Career Retirement following the first anniversary of the Date
of the Award, an involuntary termination by the Firm described in Section 7, a
Governmental Service Termination or a Qualifying Termination.

(b) General treatment of vested awards.     Except as otherwise expressly
provided in this Award Certificate, any vested stock options that you hold at
the time of the termination of your Employment will remain exercisable for 90
days following the termination of your Employment (but in no event later than
the Expiration Date).

 

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(c) Cancellation of awards under certain circumstances.     The cancellation
events set forth in this Section 10(c) are designed, among other things, to
incentivize compliance with the Firm’s policies (including the Code of Conduct),
to protect the Firm’s interests in non-public, confidential and/or proprietary
information, products, trade secrets, customer relationships, and other
legitimate business interests, and to ensure an orderly transition of
responsibilities. This Section 10(c) shall apply notwithstanding any other terms
of this Award Certificate (except where sections in this Award Certificate
specifically provide that the cancellation events set forth in this
Section 10(c) no longer apply).

Your stock options, even if vested, and Option Shares are not earned until the
applicable Scheduled Vesting Date (and until you satisfy all obligations you owe
to the Firm as set forth in Section 12 below) and, unless prohibited by
applicable law, will be canceled prior to the applicable Scheduled Vesting Date
in any of the circumstances set forth below in Section 10(c)(1) or (2). Although
you will become the beneficial owner of Option Shares upon exercise of your
stock options, the Firm may retain custody of your Option Shares following
exercise of your stock options pending any investigation or other review that
impacts the determination as to whether the stock options or Option Shares are
cancellable under the circumstances set forth below and, in such an instance,
the Option Shares shall be forfeited in the event the Firm determines that the
stock options or Option Shares were cancellable under the circumstances set
forth below.

(1) Competitive Activity.     If you resign and all or a portion of your stock
options vest upon such resignation and you engage in Competitive Activity, the
following shall apply, subject to applicable law:2

(i) If your Competitive Activity occurs before the First Scheduled Vesting Date,
then all of your stock options and Option Shares will be canceled immediately.

(ii) If your Competitive Activity occurs on or after the First Scheduled Vesting
Date but before the Second Scheduled Vesting Date, then:

(A) 2/3 of your stock options (including Option Shares acquired upon exercise of
such stock options) will be canceled immediately; and

(B) the remaining 1/3 of your stock options will expire on the date that is 90
days after your Employment termination date, any Option Shares that you acquired
upon an exercise occurring after such 90-day period will be canceled.

(iii) If your Competitive Activity occurs on or after the Second Scheduled
Vesting Date but before the Third Scheduled Vesting Date, then:

(A) 1/3 of your stock options (including Option Shares acquired upon exercise of
such stock options) will be canceled immediately; and

 

2  Provided that, for the President and Chief Executive Officer only, this
provision only applies if such termination is not a termination for Good Reason.
For these purposes, Good Reason is defined as a resignation following: (i) his
removal from the position of Chief Executive Officer of Morgan Stanley; (ii) his
failure to be elected or reelected to the Board of Directors of Morgan Stanley;
(iii) a change in his reporting relationship such that he is no longer reporting
directly and solely to the Board of Directors of Morgan Stanley; (iv) a material
diminution of his duties and responsibilities as the Chief Executive Officer of
Morgan Stanley that is not agreed by the parties or the assignment to him of
duties materially inconsistent with his position, duties or responsibilities, or
any other material action by Morgan Stanley which is materially inconsistent or
materially reduces his position, duties or responsibilities; (v) any material
breach by Morgan Stanley of its material obligations to provide payments or
benefits as required in his offer letter; or (vi) Morgan Stanley’s requiring his
principal office to be based at any office or location other than the office or
location designated as Morgan Stanley’s principal executive offices.

 

     Notwithstanding the foregoing, he will not be deemed to have resigned for
Good Reason unless (i) he has given the Chairman of the Board written
notification of his intention to do so, describing the factual basis for “Good
Reason” and (ii) the event giving rise to “Good Reason” is not cured by Morgan
Stanley within 30 business days after the Chairman of the Board’s receipt of the
notice.

 

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(B) the remaining 2/3 of your stock options will expire on the date that is 90
days after your Employment termination date, any Option Shares that you acquired
upon an exercise occurring after such 90-day period will be canceled.

(iv) If your Competitive Activity occurs on or after the Third Scheduled Vesting
Date, then all of your stock options and Option Shares will remain outstanding
and will continue to be subject to all the other terms and conditions set forth
in this Award Certificate.

(v) Your stock options are considered to be exercised in the order in which they
vested.

(2) Other Events.     If any of the following events occur at any time before
the applicable Scheduled Vesting Date all of your stock options (whether or not
vested), and any Option Shares, will be canceled immediately, subject to
applicable law:

(i) Your Employment is terminated for Cause or you engage in conduct
constituting Cause (either during or following Employment and whether or not
your Employment has been terminated as of the applicable Scheduled Vesting
Date);

(ii) Following the termination of your Employment, the Firm determines that your
Employment could have been terminated for Cause (for these purposes, “Cause”
will be determined without giving consideration to any “cure” period included in
the definition of “Cause”);

(iii) You disclose Confidential and Proprietary Information to any unauthorized
person outside the Firm, or use or attempt to use Confidential and Proprietary
Information other than in connection with the business of the Firm; or you fail
to comply with your obligations (either during or after your Employment) under
the Firm’s Code of Conduct (and any applicable supplements) or otherwise
existing between you and the Firm, relating to Confidential and Proprietary
Information or an assignment, procurement or enforcement of rights in
Confidential and Proprietary Information;

(iv) You engage in a Wrongful Solicitation;

(v) You make any Unauthorized Comments;

(vi) You fail or refuse, following your termination of Employment, to cooperate
with or assist the Firm in a timely manner in connection with any investigation,
regulatory matter, lawsuit or arbitration in which the Firm is a subject, target
or party and as to which you may have pertinent information; or

(vii) You resign from your employment with the Firm without having provided the
Firm prior written notice of your resignation consistent with the notice period
requirements undertaken by you in connection with your employment offer letter,
Sign-On or Notice & Non-Solicitation Agreement or any other contractual
obligation in connection with the terms and conditions of your employment, or,
in the event no such prior contractual notice period requirements exist, you
resign from your employment with the Firm without having provided the Firm prior
written notice of your resignation of at least thirty (30) days.

 

11. Tax and other withholding obligations.

Any exercise of your stock options shall be subject to the Firm’s withholding of
all required United States federal, state, local and foreign income and
employment/payroll taxes (including Federal Insurance Contributions Act taxes).
You authorize the Firm to withhold such taxes from any payroll or other payment
or compensation to you and to take such other action as the Firm may deem
advisable to enable it and you to satisfy obligations for the payment of
withholding taxes and other tax obligations, assessments, or other governmental
charges, whether of the United States or any other jurisdiction relating to the
exercise of your stock options.

Pursuant to rules and procedures that Morgan Stanley establishes, you may elect
to satisfy the tax or other withholding obligations arising upon exercise of
your stock options by having Morgan Stanley withhold shares of Morgan Stanley
common stock or by tendering shares of Morgan Stanley common stock, in each case
in an

 

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amount sufficient to satisfy the tax or other withholding obligations. Shares
withheld or tendered will be valued using the fair market value of Morgan
Stanley common stock on the date your stock options are exercised, using a
valuation methodology established by Morgan Stanley. In order to comply with
applicable accounting standards or the Firm’s policies in effect from time to
time, Morgan Stanley may limit the amount of shares that you may have withheld
or that you may tender.

 

12. Obligations you owe to the Firm.

As a condition to the earning of your award, the Firm may require you to pay
such sum to the Firm as may be necessary to satisfy any obligation that you owe
to the Firm. Notwithstanding any other provision of this Award Certificate,
Morgan Stanley may, in its sole discretion, take various actions affecting your
stock options in order to collect amounts sufficient to satisfy any obligation
that you owe to the Firm and any tax or other withholding obligations as
described in Section 11 relating to the exercise of your stock options. These
actions include the following:

(a) Upon exercise of stock options, Morgan Stanley may withhold a number of
shares sufficient to satisfy any obligation that you owe to the Firm and any tax
or other withholding obligations. The Firm shall determine the number of shares
to be withheld by dividing the dollar value of your obligation to the Firm and
any tax or other withholding obligations by the fair market value of Morgan
Stanley common stock on the date of exercise.

(b) Morgan Stanley may, at any time, cancel any of your unexercised stock
options or any Option Shares that remain subject to transfer restrictions in a
quantity sufficient to satisfy any obligation that you owe to the Firm and any
tax or other withholding obligations. Any canceled stock options will be
considered to have a value equal to the difference between the fair market value
of the underlying shares of Morgan Stanley common stock, determined on the date
of cancellation, and the exercise price. Any canceled Option Shares will be
considered to have a value equal to the fair market value of Morgan Stanley
common stock determined on the date of cancellation. Such amount, less any
applicable withholding taxes, will be credited against your obligation.

Morgan Stanley’s determination of any amount that you owe the Firm shall be
conclusive. The fair market value of Morgan Stanley common stock for purposes of
the foregoing provisions shall be determined using a valuation methodology
established by Morgan Stanley.

 

13. Nontransferability.

You may not sell, pledge, hypothecate, assign or otherwise transfer your stock
options, other than as provided in Section 14 (which allows you to designate a
beneficiary or beneficiaries in the event of your death) or by will or the laws
of descent and distribution. This prohibition includes any assignment or other
transfer that purports to occur by operation of law or otherwise. During your
lifetime, stock options may be exercised only by you.

Your personal representatives, heirs, legatees, beneficiaries, successors and
assigns, and those of Morgan Stanley, shall all be bound by, and shall benefit
from, the terms and conditions of your award.

 

14. Designation of a beneficiary.

You may make a written designation of beneficiary or beneficiaries to receive
all or part of the shares to be delivered under this Award Certificate in the
event of your death or, following your death, to exercise any stock options that
have become exercisable and have not expired or been canceled. To make a
beneficiary designation, you must complete and submit the Beneficiary
Designation form on the Executive Compensation website at [website redacted].

Any shares that become deliverable upon your death, and as to which a
designation of beneficiary is not in effect, will be distributed to your estate.
Any stock options that remain exercisable following your death, and as to which
a designation of beneficiary is not in effect, will be exercisable by the legal
representative of your estate.

 

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If you previously filed a designation of beneficiary form for your equity awards
with the Executive Compensation Department, such form will also apply to all of
your equity awards, including this award. You may replace or revoke your
beneficiary designation at any time. If there is any question as to the legal
right of any beneficiary to receive shares or exercise stock options under this
award, Morgan Stanley may determine in its sole discretion to deliver the shares
in question to your estate or to allow the representative of your estate to
exercise the stock options in question. Morgan Stanley’s determination shall be
binding and conclusive on all persons and it will have no further liability to
anyone with respect to this award.

 

15. Ownership and possession.

(a) Before exercise.     Generally, you will not have any rights as a
stockholder in the shares of Morgan Stanley common stock subject to your stock
options until such shares are delivered to you following the exercise of your
stock options. Delivery of shares to you will be effected by entry of your name
in the share register of Morgan Stanley or by such other procedure as may be
authorized by Morgan Stanley.

(b) Following exercise.     Subject to Sections 5 and 10(c), following exercise
of your stock options you will be the beneficial owner of the Option Shares
delivered to you and, upon such delivery, you will be entitled to all rights of
ownership, including voting rights and the right to receive cash or stock
dividends or other distributions paid on the shares.

(c) Custody of shares.     Morgan Stanley may maintain possession of the Option
Shares until such time as your Option Shares are no longer subject to
restrictions on transfer.

 

16. Securities law compliance matters.

Morgan Stanley may affix a legend to any stock certificates representing shares
of Morgan Stanley common stock issued upon exercise of your stock options (and
any stock certificates that may subsequently be issued in substitution for the
original certificates). The legend will read substantially as follows:

THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE WERE ISSUED PURSUANT TO THE
MORGAN STANLEY EMPLOYEES’ EQUITY ACCUMULATION PLAN AND ARE SUBJECT TO THE TERMS
AND CONDITIONS THEREOF AND OF AN AWARD CERTIFICATE FOR STOCK OPTIONS AND ANY
SUPPLEMENT THERETO.

THE SECURITIES REPRESENTED BY THIS STOCK CERTIFICATE MAY BE SUBJECT TO
RESTRICTIONS ON TRANSFER BY VIRTUE OF THE SECURITIES ACT OF 1933.

COPIES OF THE PLAN, THE AWARD CERTIFICATE FOR STOCK OPTIONS AND ANY SUPPLEMENT
THERETO ARE AVAILABLE THROUGH THE EXECUTIVE COMPENSATION DEPARTMENT.

Morgan Stanley may advise the transfer agent to place a stop order against such
shares if it determines that such an order is necessary or advisable.

 

17. Compliance with laws and regulation.

Any sale, assignment, transfer, pledge, mortgage, encumbrance or other
disposition of shares issued upon exercise of your stock options (whether
directly or indirectly, whether or not for value, and whether or not voluntary)
must be made in compliance with any applicable constitution, rule, regulation,
or policy of any of the exchanges or associations or other institutions with
which the Firm or a Related Employer has membership or other privileges, and any
applicable law, or applicable rule or regulation of any governmental agency,
self-regulatory organization or state or federal regulatory body.

 

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18. No entitlements.

(a) No right to continued Employment.     This stock option award is not an
employment agreement, and nothing in this Award Certificate, the International
Supplement, if applicable, or the Plan shall alter your status as an “at-will”
employee of the Firm or your employment status at a Related Employer. None of
this Award Certificate, the International Supplement, if applicable, or the Plan
shall be construed as guaranteeing your employment by the Firm or a Related
Employer, or as giving you any right to continue in the employ of the Firm or a
Related Employer, during any period (including without limitation the period
between the Date of the Award and any of the Scheduled Vesting Dates or the
Expiration Date, or any portion of any of these periods), nor shall they be
construed as giving you any right to be reemployed by the Firm or a Related
Employer following any termination of Employment.

(b) No right to future awards.     This award, and all other awards of stock
options and other equity-based awards, are discretionary. This award does not
confer on you any right or entitlement to receive another award of stock options
or any other equity-based award at any time in the future or in respect of any
future period.

(c) No effect on future employment compensation.     Morgan Stanley has made
this award to you in its sole discretion. This award does not confer on you any
right or entitlement to receive compensation in any specific amount for any
future year, and does not diminish in any way the Firm’s discretion to determine
the amount, if any, of your compensation. This award is not part of your base
salary or wages and will not be taken into account in determining any other
employment-related rights you may have, such as rights to pension or severance
pay.

 

19. Consents under local law.

Your award is conditioned upon the making of all filings and the receipt of all
consents or authorizations required to comply with, or required to be obtained
under, applicable local law.

 

20. Award modification.

Morgan Stanley reserves the right to modify or amend unilaterally the terms and
conditions of your stock options, without first asking your consent, or to waive
any terms and conditions that operate in favor of Morgan Stanley. These
amendments may include (but are not limited to) changes that Morgan Stanley
considers necessary or advisable as a result of changes in any, or the adoption
of any new, Legal Requirement. Morgan Stanley may not modify your stock options
in a manner that would materially impair your rights in your stock options
without your consent; provided, however, that Morgan Stanley may, but is not
required to, without your consent, amend or modify your stock options in any
manner that Morgan Stanley considers necessary or advisable to (i) comply with
any Legal Requirement, (ii) ensure that your award does not result in an excise
or other supplemental tax on the Firm under any Legal Requirement, or
(iii) ensure that your stock options are not subject to United States federal,
state or local income tax or any equivalent taxes in territories outside the
United States prior to exercise. Morgan Stanley will notify you of any amendment
of your stock options that affects your rights. Any amendment or waiver of a
provision of this Award Certificate (other than any amendment or waiver
applicable to all recipients generally), which amendment or waiver operates in
your favor or confers a benefit on you, must be in writing and signed by the
Global Head of Human Resources or the Chief Operating Officer (or if such
positions no longer exist, by the holder of an equivalent position) to be
effective.

 

21. Governing law.

This Award Certificate and the related legal relations between you and Morgan
Stanley will be governed by and construed in accordance with the laws of the
State of New York, without regard to any conflicts or choice of law, rule or
principle that might otherwise refer the interpretation of the award to the
substantive law of another jurisdiction.

 

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22. Defined terms.

For purposes of this Award Certificate, the following terms shall have the
meanings set forth below:

(a) “Board” means the Board of Directors of Morgan Stanley.

(b) “Cause” means:

(1) any act or omission which constitutes a breach of your obligations to the
Firm, including, without limitation, (A) your failure to comply with any notice
or non-solicitation restrictions that may be applicable to you or (B) your
failure to comply with the Firm’s compliance, ethics or risk management
standards, or your failure or refusal to perform satisfactorily any duties
reasonably required of you, which breach, failure or refusal (if susceptible to
cure) is not corrected (other than failure to correct by reason of your
incapacity due to physical or mental illness) within ten (10) business days
after written notification thereof to you by the Firm;

(2) your commission of any dishonest or fraudulent act, or any other act or
omission, which has caused or may reasonably be expected to cause injury to the
interest or business reputation of the Firm; or

(3) your violation of any securities, commodities or banking laws, any rules or
regulations issued pursuant to such laws, or rules or regulations of any
securities or commodities exchange or association of which the Firm is a member
or of any policy of the Firm relating to compliance with any of the foregoing.

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

(1) any one person or more than one person acting as a group (as determined
under Section 409A), other than (A) any employee plan established by Morgan
Stanley or any of its Subsidiaries, (B) Morgan Stanley or any of its affiliates
(as defined in Rule 12b-2 promulgated under the Exchange Act), (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (D) a corporation owned, directly or indirectly, by stockholders
of Morgan Stanley in substantially the same proportions as their ownership of
Morgan Stanley, is or becomes, during any 12-month period, the beneficial owner,
directly or indirectly, of securities of Morgan Stanley (not including in the
securities beneficially owned by such person(s) any securities acquired directly
from Morgan Stanley or its affiliates other than in connection with the
acquisition by Morgan Stanley or its affiliates of a business) representing 50%
or more of the total voting power of the stock of Morgan Stanley; provided,
however, that the provisions of this subsection (1) are not intended to apply to
or include as a Change in Control any transaction that is specifically excepted
from the definition of Change in Control under subsection (3) below;

(2) a change in the composition of the Board such that, during any 12-month
period, the individuals who, as of the beginning of such period, constitute the
Board (the “Existing Board”) cease for any reason to constitute at least 50% of
the Board; provided, however, that any individual becoming a member of the Board
subsequent to the beginning of such period whose election, or nomination for
election by Morgan Stanley’s stockholders, was approved by a vote of at least a
majority of the directors immediately prior to the date of such appointment or
election shall be considered as though such individual were a member of the
Existing Board;

(3) the consummation of a merger or consolidation of Morgan Stanley with any
other corporation or other entity, or the issuance of voting securities in
connection with a merger or consolidation of Morgan Stanley (or any direct or
indirect subsidiary of Morgan Stanley) pursuant to applicable stock exchange
requirements; provided that immediately following such merger or consolidation
the voting securities of Morgan Stanley outstanding immediately prior thereto do
not continue to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity of such merger or consolidation
or parent entity thereof) 50% or more of the total voting power of Morgan
Stanley stock (or if

 

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Morgan Stanley is not the surviving entity of such merger or consolidation, 50%
or more of the total voting power of the stock of such surviving entity or
parent entity thereof); and provided further that a merger or consolidation
effected to implement a recapitalization of Morgan Stanley (or similar
transaction) in which no person (as determined under Section 409A) is or becomes
the beneficial owner, directly or indirectly, of securities of Morgan Stanley
(not including in the securities beneficially owned by such person any
securities acquired directly from Morgan Stanley or its affiliates other than in
connection with the acquisition by Morgan Stanley or its affiliates of a
business) representing 50% or more of either the then outstanding shares of
Morgan Stanley common stock or the combined voting power of Morgan Stanley’s
then outstanding voting securities shall not be considered a Change in Control;
or

(4) the complete liquidation of Morgan Stanley or the sale or disposition by
Morgan Stanley of all or substantially all of Morgan Stanley’s assets in which
any one person or more than one person acting as a group (as determined under
Section 409A) acquires (or has acquired during the 12-month period ending on the
date of the most recent acquisition by such person or persons) assets from
Morgan Stanley that have a total gross fair market value equal to more than 50%
of the total gross fair market value of all of the assets of Morgan Stanley
immediately prior to such acquisition or acquisitions.

Notwithstanding the foregoing, (x) no Change in Control shall be deemed to have
occurred if there is consummated any transaction or series of integrated
transactions immediately following which the record holders of Morgan Stanley
common stock immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in an entity
which owns substantially all of the assets of Morgan Stanley immediately prior
to such transaction or series of transactions and (y) no event or circumstances
described in any of clauses (1) through (4) above shall constitute a Change in
Control unless such event or circumstances also constitute a change in the
ownership or effective control of Morgan Stanley, or in the ownership of a
substantial portion of Morgan Stanley’s assets, as defined in Section 409A. In
addition, no Change in Control shall be deemed to have occurred upon the
acquisition of additional control of Morgan Stanley by any one person or more
than one person acting as a group that is considered to effectively control
Morgan Stanley.

For purposes of the provisions of this Award Certificate, terms used in the
definition of a Change in Control shall be as defined or interpreted pursuant to
Section 409A.

(d) “Committee” means the Compensation, Management Development and Succession
Committee of the Board, any successor committee thereto or any other committee
of the Board appointed by the Board with the powers of the Committee under the
Plan, or any subcommittee appointed by such Committee.

(e) “Competitive Activity” means:

(1) becoming, or entering into any arrangement as, an employee, officer,
partner, member, proprietor, director, independent contractor, consultant,
advisor, representative or agent of, or serving in any similar position or
capacity with, a Competitor, where you will be responsible for providing, or
managing or supervising others who are providing, services (x) that are similar
or substantially related to the services that you provided to the Firm, or
(y) that you had direct or indirect managerial or supervisory responsibility for
at the Firm, or (z) that call for the application of the same or similar
specialized knowledge or skills as those utilized by you in your services for
the Firm, in each such case, at any time during the year preceding the
termination of your employment with the Firm; or

(2) either alone or in concert with others, forming, or acquiring a 5% or
greater equity ownership, voting interest or profit participation in, a
Competitor.

(f) “Competitor” means any corporation, partnership or other entity that
competes, or that owns a significant interest in any corporation, partnership or
other entity that competes, with any business activity the Firm engages in, or
that you reasonably knew or should have known that the Firm was planning to
engage in, at the time of the termination of your Employment.

 

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(g) “Confidential and Proprietary Information” means any information that is
classified as confidential in the Firm’s Global Policy on Confidential
Information or that may have intrinsic value to the Firm, the Firm’s clients or
other parties with which the Firm has a relationship, or that may provide the
Firm with a competitive advantage, including, without limitation, any trade
secrets; inventions (whether or not patentable); formulas; flow charts; computer
programs; access codes or other systems information; algorithms; technology and
business processes; business, product or marketing plans; sales and other
forecasts; financial information; client lists or other intellectual property;
information relating to compensation and benefits; and public information that
becomes proprietary as a result of the Firm’s compilation of that information
for use in its business, provided that such Confidential and Proprietary
Information does not include any information which is available for use by the
general public or is generally available for use within the relevant business or
industry other than as a result of your action. Confidential and Proprietary
Information may be in any medium or form, including, without limitation,
physical documents, computer files or discs, electronic communications,
videotapes, audiotapes, and oral communications.

(h) “Date of the Award” means [insert grant date, which typically will coincide
approximately with the end of the year in respect of which the award is made].

(i) “Disability” means any condition that would qualify for a benefit under any
group long-term disability plan maintained by the Firm and applicable to you.

(j) “Employed” and “Employment” refer to employment with the Firm and/or Related
Employment.

(k) “Exercise Price” means [            ] per share.

(l) “Expiration Date” means [seventh anniversary of Date of the Award].

(m) The “Firm” means Morgan Stanley (including any successor thereto) together
with its subsidiaries and affiliates. For purposes of the definitions of
“Cause,” “Confidential and Proprietary Information,” “Unauthorized Comments” and
“Wrongful Solicitation” set forth in this Award Certificate and
Section 10(c)(2)(vi) of this Award Certificate, references to the “Firm” shall
refer severally to the Firm as defined in the preceding sentence and your
Related Employer, if any. For purposes of the cancellation provisions set forth
in this Award Certificate relating to disclosure or use of Confidential and
Proprietary Information, references to the “Firm” shall refer to the Firm as
defined in the second preceding sentence or your Related Employer, as
applicable.

(n) “First Scheduled Vesting Date” means [first anniversary of February 2
following the Date of the Award].

(o) “Full Career Retirement” means the termination of your Employment by you or
by the Firm for any reason other than under circumstances involving any
cancellation event described in Section 10(c), and other than due to your death
or Disability, a Governmental Service Termination or pursuant to a Qualifying
Termination, on or after the date on which:

(1) you have attained age 50 and completed at least 12 years of service as a
[            ]3 of the Firm or equivalent officer title; or

(2) you have attained age 50 and completed at least 15 years of service as an
officer of the Firm at the level of [            ]4 or above; or

(3) you have completed at least 20 years of service with the Firm; or

(4) you have attained age 55 and have completed at least 5 years of service with
the Firm and the sum of your age and years of service equals or exceeds 65.5

 

3  Specified officer title(s) in one or more specified business units.

 

4  Specified officer title(s) in one or more specified business units.

 

5  Age and service conditions specified in clauses (1) through (4) may vary from
year to year.

 

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For the purposes of the foregoing definition, service with the Firm will include
any period of service with the following entities and any of their predecessors:

(i) AB Asesores (“ABS”) prior to its acquisition by the Firm (provided that only
years of service as a partner of ABS shall count towards years of service as an
officer);

(ii) Morgan Stanley Group Inc. and its subsidiaries (“MS Group”) prior to the
merger with and into Dean Witter, Discover & Co.;

(iii) Miller Anderson & Sherrerd, L.L.P. prior to its acquisition by MS Group;

(iv) Van Kampen Investments Inc. and its subsidiaries prior to its acquisition
by MS Group;

(v) FrontPoint Partners LLC and its subsidiaries prior to its acquisition by the
Firm; and

(vi) Dean Witter, Discover & Co. and its subsidiaries (“DWD”) prior to the
merger of Morgan Stanley Group Inc. with and into Dean Witter, Discover & Co.;

provided that, in the case of an employee who has transferred employment from
DWD to MS Group or vice versa, a former employee of DWD will receive credit for
employment with DWD only if he or she transferred directly from DWD to Morgan
Stanley & Co. Incorporated or its affiliates subsequent to February 5, 1997, and
a former employee of MS Group will receive credit for employment with MS Group
only if he or she transferred directly from MS Group to Morgan Stanley DW Inc.
or its affiliates subsequent to February 5, 1997.

(p) “Governmental Employer” means a governmental department or agency,
self-regulatory agency or other public service employer.

(q) “Governmental Service Termination” means the termination of your Employment
due to your commencement of employment at a Governmental Employer; provided that
you have presented the Firm with satisfactory evidence demonstrating that as a
result of such new employment, the divestiture of your continued interest in
Morgan Stanley equity awards or continued ownership of Morgan Stanley common
stock is reasonably necessary to avoid the violation of U.S. federal, state or
local or foreign ethics law or conflicts of interest law applicable to you at
such Governmental Employer.

(r) “Internal Revenue Code” means the United States Internal Revenue Code of
1986, as amended, and the rules, regulations and guidance thereunder.

(s) “Legal Requirement” means any law, regulation, ruling, judicial decision,
accounting standard, regulatory guidance or other legal requirement.

(t) “Management Committee” means the Morgan Stanley Management Committee and any
successor or equivalent committee.

(u) “Option Shares” means the number of shares of Morgan Stanley common stock
underlying the portion of your stock options being exercised less the aggregate
number of shares of common stock, if any, tendered, withheld or disposed of
(including any shares disposed of in a cashless or net-share settlement
exercise) to pay the exercise price and tax or other withholding obligation
arising upon such exercise; provided, however, that solely for purposes of
Section 10(c), “Option Shares” means, in the case of a stock option for which
you pay the exercise price and/or tax or other withholding obligation in cash,
the number of shares of Morgan Stanley common stock underlying the portion of
your stock options being exercised less the number of shares calculated by
dividing (i) the aggregate amount of exercise price and tax or other withholding
obligation paid in connection with such exercise by (ii) the closing price of
Morgan Stanley common stock as reported on The Bloomberg Professional Service on
the date of exercise, and rounding such result down to the nearest whole share.

(v) “Plan” means the Employees’ Equity Accumulation Plan, as amended.

 

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(w) “Qualifying Termination” means your Separation from Service within eighteen
(18) months following a Change in Control under either of the following
circumstances: (a) the Firm terminates your employment under circumstances not
involving any cancellation event; or (b) you resign from the Firm due to (i) a
materially adverse alteration in your position or in the nature or status of
your responsibilities from those in effect immediately prior to the Change in
Control, as determined by the Committee or its delegees, or (ii) the Firm
requiring your principal place of employment to be located more than 75 miles
from the location where you were principally employed at the time of the Change
in Control (except for required travel on the Firm’s business to an extent
substantially consistent with your business travel obligations in the ordinary
course of business prior to the Change in Control).

(x) “Related Employment” means your employment with an employer other than the
Firm (such employer, herein referred to as a “Related Employer”), provided that:
(i) you undertake such employment at the written request or with the written
consent of Morgan Stanley’s Global Head of Human Resources (or if such position
no longer exists, the holder of an equivalent position); (ii) immediately prior
to undertaking such employment you were an employee of the Firm or were engaged
in Related Employment (as defined herein); and (iii) such employment is
recognized by the Firm in its discretion as Related Employment; and, provided
further that the Firm may (1) determine at any time in its sole discretion that
employment that was recognized by the Firm as Related Employment no longer
qualifies as Related Employment, and (2) condition the designation and benefits
of Related Employment on such terms and conditions as the Firm may determine in
its sole discretion. The designation of employment as Related Employment does
not give rise to an employment relationship between you and the Firm, or
otherwise modify your and the Firm’s respective rights and obligations.

(y) “Scheduled Vesting Date” means the First Scheduled Vesting Date, the Second
Scheduled Vesting Date and/or the Third Scheduled Vesting Date, as the context
requires.

(z) “Second Scheduled Vesting Date” means [second anniversary of February 2
following the Date of the Award].

(aa) “Section 409A” means Section 409A of the Internal Revenue Code and any
regulations thereunder.

(bb) “Separation from Service” means a separation from service with the Firm for
purposes of Section 409A determined using the default provisions set forth in
Treasury Regulation §1.409A-1(h) or any successor regulation thereto. For
purposes of this definition, Morgan Stanley’s subsidiaries and affiliates
include (and are limited to) any corporation that is in the same controlled
group of corporations (within the meaning of Section 414(b) of the Internal
Revenue Code) as Morgan Stanley and any trade or business that is under common
control with Morgan Stanley (within the meaning of Section 414(c) of the
Internal Revenue Code), determined in each case in accordance with the default
provisions set forth in Treasury Regulation §1.409A-1(h)(3).

(cc) “Third Scheduled Vesting Date” means [third anniversary of February 2
following the Date of the Award].

(dd) You will be deemed to have made “Unauthorized Comments” about the Firm if,
while Employed or following the termination of your Employment, you make,
directly or indirectly, any negative, derogatory, disparaging or defamatory
comment, whether written, oral or in electronic format, to any reporter, author,
producer or similar person or entity or to any general public media in any form
(including, without limitation, books, articles or writings of any other kind,
as well as film, videotape, audio tape, computer/Internet format or any other
medium) that concerns directly or indirectly the Firm, its business or
operations, or any of its current or former agents, employees, officers,
directors, customers or clients.

(ee) A “Wrongful Solicitation” occurs upon either of the following events:

(1) while Employed, including during any notice period applicable to you in
connection with the termination of your Employment, or within 180 days after the
termination of your Employment, directly or

 

15

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indirectly in any capacity (including through any person, corporation,
partnership or other business entity of any kind), you hire or solicit, recruit,
induce, entice, influence or encourage any Firm employee to leave the Firm or
become hired or engaged by another firm; provided, however, that this clause
shall apply only to employees with whom you worked or had professional or
business contact, or who worked in or with your business unit, during any notice
period applicable to you in connection with the termination of your Employment
or during the 180 days preceding notice of the termination of your Employment;
or

(2) while Employed, including during any notice period applicable to you in
connection with the termination of your Employment, or within 90 days (180 days
if you are a member of the Management Committee at the time of notice of
termination) after the termination of your Employment, directly or indirectly in
any capacity (including through any person, corporation, partnership or other
business entity of any kind), you solicit or entice away or in any manner
attempt to persuade any client or customer, or prospective client or customer,
of the Firm (i) to discontinue or diminish his, her or its relationship or
prospective relationship with the Firm or (ii) to otherwise provide his, her or
its business to any person, corporation, partnership or other business entity
which engages in any line of business in which the Firm is engaged (other than
the Firm); provided, however, that this clause shall apply only to clients or
customers, or prospective clients or customers, that you worked for on an actual
or prospective project or assignment during any notice period applicable to you
in connection with the termination of your Employment or during the 180 days
preceding notice of the termination of your Employment.

IN WITNESS WHEREOF, Morgan Stanley has duly executed and delivered this Award
Certificate as of the Date of the Award.

 

MORGAN STANLEY

/s/

[Name]

[Title]

 

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