EXHIBIT 10.25

 

MORGAN STANLEY

DIRECTORS’ EQUITY CAPITAL ACCUMULATION PLAN

(amended and restated as of September 16, 2003)

 

Section 1. Purpose

 

Morgan Stanley, a Delaware corporation (the “Company”), hereby adopts the Morgan
Stanley Directors’ Equity Capital Accumulation Plan (the “Plan”). The purpose of
the Plan is to promote the long-term growth and financial success of the Company
by attracting, motivating and retaining non-employee directors of outstanding
ability and assisting the Company in promoting a greater identity of interest
between the Company’s non-employee directors and its stockholders.

 

Section 2. Eligibility

 

Only directors of the Company who are not employees of the Company or any
affiliate of the Company (the “Eligible Directors”) shall participate in the
Plan.

 

Section 3. Plan Operation

 

(a) Administration. Other than as provided in Section 5(i) of the Plan, the Plan
requires no discretionary action by any administrative body with regard to any
transaction under the Plan. To the extent, if any, that questions of
administration arise, these shall be resolved by the Board of Directors of the
Company. The Board may, in its discretion, delegate to the Chief Financial
Officer or the Chief Legal Officer of the Company any or all authority and
responsibility to act pursuant to this Plan. All references to the “Plan
Administrators” in this Plan shall refer to the Board, or the Chief Financial
Officer or Chief Legal Officer if the Board has delegated its authority pursuant
to this Section 3(a). The determination of the Plan Administrators on all
matters within their authority relating to the Plan shall be conclusive.

 

(b) No Liability. The Plan Administrators shall not be liable for any action or
determination made in good faith with respect to the Plan or any award
hereunder, and the Company shall indemnify and hold harmless the Plan
Administrators from all losses and expenses (including reasonable attorneys’
fees) arising from the assertion or judicial determination of any such
liability.

 

Section 4. Shares of Stock Subject to the Plan

 

(a) Stock. Awards under the Plan shall relate to shares of common stock, par
value $.01 per share, of the Company and any other shares into which such stock
shall thereafter be changed by reason of any merger, reorganization,
recapitalization, consolidation, split-up, combination of shares or similar
event as set forth in and in accordance with this Section 4 (the “Stock”).

 

(b) Shares Available for Awards. Subject to Section 4(c) (relating to
adjustments upon changes in capitalization), as of any date, the total number of
shares of Stock with respect

--------------------------------------------------------------------------------

to which awards may be granted under the Plan shall be equal to the excess (if
any) of (i) 1,700,000 shares over (ii) the sum of (a) the number of shares
subject to outstanding awards granted under the Plan and (b) the number of
shares previously issued pursuant to the Plan. In accordance with (and without
limitation upon) the preceding sentence, shares of Stock covered by awards
granted under the Plan that are canceled or expire unexercised shall again
become available for awards under the Plan. Shares of Stock that shall be
issuable pursuant to the awards granted under the Plan shall be authorized and
unissued shares, treasury shares or shares of Stock purchased by, or on behalf
of, the Company in open-market transactions.

 

(c) Adjustments. In the event of any merger, reorganization, recapitalization,
consolidation, sale or other distribution of substantially all of the assets of
the Company, any stock dividend, split, spin-off, split-up, split-off,
distribution of cash, securities or other property by the Company, or other
change in the Company’s corporate structure affecting the Stock, then the
following shall be automatically adjusted in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be awarded under
the Plan:

 

(i) the aggregate number of shares of Stock reserved for issuance under the
Plan,

 

(ii) the number of shares of Stock subject to outstanding awards,

 

(iii) the number of “Stock Units” credited pursuant to Section 7(b) of the Plan,

 

(iv) the per share purchase price of Stock subject to Elective Options and
Director Options,

 

(v) the number of shares to be granted as Director Stock pursuant to Section
6(a), and

 

(vi) the number of shares with respect to which Director Options are granted
pursuant to Section 5(a).

 

Section 5. Director Options; Election to Receive Options.

 

(a) Awards. Subject to the provisions of this Section 5, each Eligible Director
shall receive the following options to purchase Stock for service as a director
of the Company (the “Director Options”):

 

(i) Initial Awards. If a person is elected, appointed or otherwise becomes an
Eligible Director, then such Eligible Director shall receive a Director Option
to purchase 6,000 shares of Stock on the first day of the calendar month
following the month in which such Eligible Director first becomes an Eligible
Director; provided, however, that if a person is elected, appointed or otherwise
becomes an Eligible Director during a period 60 days prior to the Company’s
annual meeting of its stockholders (the “Annual Meeting”) in any year, then such
Eligible Director shall receive no Director Option pursuant to this Section
5(a)(i).

 

(ii) Subsequent Awards. As of the date of each Annual Meeting, each Eligible
Director shall automatically receive a Director Option to purchase 6,000 shares
of Stock provided that such Eligible Director shall continue to serve as a
director of the Company after such Annual Meeting.

 

2

--------------------------------------------------------------------------------

(b) Election to Receive Options. An Eligible Director may elect (an “Option
Election”) to receive options to purchase Stock (“Elective Options”) in lieu of
all (but not a portion) of the amount of the Eligible Director’s annual cash
retainer for services as a member of the Board (the “Annual Retainer”) by
submitting an Option Election Form (an “Option Election Form”) to the Company’s
Secretary indicating that the Eligible Director elects to receive Elective
Options in lieu of Annual Retainer. An Option Election shall become effective
only with respect to the Annual Retainer earned after the date on which the
Option Election Form is received by the Secretary. Each Option Election, once
made, shall be irrevocable. Notwithstanding the foregoing, an Option Election
may be superseded with respect to future payments of Annual Retainer by
submitting a new Option Election Form to the Secretary.

 

(c) Award of Elective Option. If the Company’s Secretary receives an effective
Option Election Form from an Eligible Director, such Eligible Director shall
receive Elective Options to acquire whole shares of Stock (but not fractional
shares) in lieu of the Annual Retainer elected to be received in Elective
Options. Each such Option shall be awarded on the date on which the Eligible
Director becomes entitled to the payment of the Annual Retainer. The number of
shares of Stock subject to each such Option shall be the number of whole shares
of Stock determined by multiplying (i) the number three (3) by (ii) the quotient
obtained by dividing the amount of the Annual Retainer by the Fair Market Value
of a share of Stock on the award date, provided that (x) in no circumstances
shall the Eligible Director be entitled to receive, or the Company have any
obligation to issue to the Eligible Director, any Elective Option in respect of
any fractional share of Stock and (y) in lieu of any Elective Option in respect
of any fractional share of stock, such Eligible Director shall be entitled to
receive, and the Company shall be obligated to pay to such Eligible Director,
cash equal to the value of any fractional share of Stock.

 

(d) Exercise Price. The purchase price of Stock subject to a Director Option or
an Elective Option shall be the Fair Market Value (as defined in Section 9) of
the Stock on the date such Option is granted, rounded up to the nearest whole
cent.

 

(e) Nontransferability. No Director Option or Elective Option granted pursuant
to this Plan shall be sold, assigned or otherwise transferred by an Eligible
Director other than by will or the laws of descent or distribution and may be
exercised during the Eligible Director’s lifetime only by such Eligible
Director.

 

(f) Limitation on Exercise. Director Options and Elective Options may not be
exercised for a period of six (6) months from the date such Options are granted.

 

(g) Effect of Termination.

 

(i) If an Eligible Director’s service as a director of the Company terminates
for a reason other than for Cause (as defined below), then the

 

3

--------------------------------------------------------------------------------

Director Options and the Elective Options granted to such Eligible Director
shall remain exercisable following the date of such Eligible Director’s
termination of service in accordance with the following provisions:

 

(A) Disability, Normal Retirement or Death. If service terminates by reason of
Disability (as hereinafter defined), Normal Retirement (as hereinafter defined)
or death, until the expiration date of the Option. With respect to any Eligible
Director, (1) “Disability” shall mean a “permanent and total disability” as
defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended;
and (2) “Normal Retirement” shall mean the termination of service for retirement
at or after attaining age 65.

 

(B) Other. If service terminates for any other reason (except for Cause), until
the earlier of ninety days after the termination date and the expiration date of
the Option.

 

(ii) If an Eligible Director is terminated for Cause, all Director Options and
Elective Options granted to such Eligible Director shall be canceled and shall
no longer be exercisable, effective on the date of such Eligible Director’s
termination for Cause. For purposes of this Plan, “Cause” means, with respect to
any Eligible Director, on account of any act of (A) fraud or intentional
misrepresentation, or (B) embezzlement, misappropriation or conversion of assets
or opportunities of the Company or any affiliate.

 

(h) Expiration Date of Options. All Director Options and Elective Options shall
expire on the tenth anniversary of the date on which they are granted.

 

(i) Extension of Exercisability. Notwithstanding any other provision hereof, the
Board of Directors of the Company shall have the authority, in its discretion,
to amend any outstanding Director Option or Elective Option granted pursuant to
this Plan to extend the exercisability thereof, provided, however, that no such
amendment shall cause such Option to remain exercisable beyond its original
expiration date.

 

Section 6. Director Stock

 

(a) Awards. Each Eligible Director shall receive the following shares of Stock
for service as a director of the Company (the “Director Stock”):

 

(i) Initial Awards. If a person is elected, appointed or otherwise becomes an
Eligible Director, then such Eligible Director shall receive 2,000 shares of
Director Stock on the first day of the calendar month following the month in
which such Eligible Director becomes an Eligible Director; provided, however,
that if a person is elected, appointed or otherwise becomes an Eligible Director
during a period of 60 days prior to the Annual Meeting in any year, then such
Eligible Director shall receive no Director Stock pursuant to this Section
6(a)(i).

 

4

--------------------------------------------------------------------------------

(ii) Subsequent Awards. As of the date of each Annual Meeting, each Eligible
Director shall automatically receive 2,000 shares of Director Stock, provided
that such Eligible Director shall continue to serve as a director of the Company
after such Annual Meeting.

 

(b) Limitation on Transfer. Director Stock may not be sold, transferred,
pledged, assigned or otherwise conveyed by an Eligible Director for a period of
six (6) months from the date such Stock is awarded.

 

(c) Deferral of Awards. An Eligible Director may elect to defer the receipt of
all or a portion of the Director Stock by making an election pursuant to Section
7(a), in which case there shall be credited to the Eligible Director’s Stock
Unit Account (as defined in Section 7(b)) a number of units equal to the number
of shares of Director Stock being deferred.

 

Section 7. Elective Deferrals

 

(a) Election. Each Eligible Director may elect to defer receipt (a “Deferral
Election”) of all or part of:

 

  • the Annual Retainer;

 

  • the cash retainer for services as a member of any Board Committee (a
“Committee Retainer”);

 

  • the fees payable for meetings of the Board or any committee thereof
(“Meeting Fees”); and

 

  • shares of Director Stock.

 

An Eligible Director may make a Deferral Election by submitting a Deferral
Election Form (a “Deferral Election Form”) to the Secretary of the Company,
indicating: (i) the percentage of the Annual Retainer, Committee Retainers,
Meeting Fees and Director Stock to be deferred (the “Deferred Amount”); (ii) the
date on which distribution of Deferred Amounts should begin (the “Distribution
Date”); (iii) whether distributions are to be made in a lump sum, installments
or a combination thereof; (iv) the percentage of deferred Annual Retainer,
Committee Retainers and Meeting Fees to be credited to the Stock Unit Account
(as hereinafter defined) and the Cash Account (as hereinafter defined); and (v)
from which Account each distribution is to be made. A Deferral Election shall be
effective only with respect to the Annual Retainer, Committee Retainers, Meeting
Fees and Director Stock which are earned after the Deferral Election is made.
All Deferral Elections (including indications on the Deferral Election Form as
to Distribution Date and form of distributions), once made, shall be
irrevocable. Notwithstanding the foregoing, a Deferral Election may be
superseded with respect to future payments of Annual Retainer, Committee
Retainers and Meeting Fees and grants of Director Stock by submitting a new
Deferral Election Form to the Secretary. An Eligible Director may designate, in
any Deferral Election Form, one or more beneficiaries to receive any
distributions under the Plan upon the Eligible Director’s death, and may change
such designation at any time by submitting a new Deferral Election Form to the
Secretary.

 

5

--------------------------------------------------------------------------------

(b) Stock Unit Deferral. An Eligible Director may elect to have all or part of
the Deferred Amount credited to an account (a “Stock Unit Account”) in units
which are equivalent in value to shares of Stock (“Stock Units”). Credits to an
Eligible Director’s Stock Unit Account will be made as follows:

 

(i) Deferral of the Annual Retainer, Committee Retainers and Certain Meeting
Fees. As of the date on which Eligible Directors become entitled to payment of
the Annual Retainer (a “Retainer Payment Date”), the Company shall credit to the
Stock Unit Account an amount equal to any Deferred Amount resulting from an
Eligible Director’s deferral of (A) all or part of the Annual Retainer plus (B)
all or part of any Committee Retainers that are payable as of such Retainer
Payment Date plus (C) any Meeting Fees for meetings of the Board or any
committee thereof held on such Retainer Payment Date. The number of Stock Units
credited to the Stock Unit Account shall be the amount obtained by dividing (X)
the Deferred Amount by (Y) the Fair Market Value of a share of Stock on the
Retainer Payment Date.

 

(ii) Deferral of Other Meeting Fees. Any Deferred Amount resulting from deferral
of all or part of an Eligible Director’s Meeting Fees (other than Meeting Fees
described in clause (i) above) will initially be credited to the Cash Account
(as defined in Section 7(c)) as of the date on which the Eligible Director
becomes entitled to payment of the Meeting Fees. Such Deferred Amount, together
with the Interest Equivalent (as defined in, and calculated under, Section 7(c))
thereon (such Deferred Amount as increased by such Interest Equivalent being the
“Adjusted Deferred Amount”), will thereafter be debited to the Cash Account and
credited to the Stock Unit Account as of the next Retainer Payment Date (or, if
the Eligible Director’s service on the Board terminates prior to the next date
as of which the Annual Retainer would be paid, as of the first business day
following termination of service). The number of Stock Units credited to the
Stock Unit Account shall be the amount obtained by dividing (i) the relevant
Adjusted Deferred Amount by (ii) the Fair Market Value of a share of Stock on
the Retainer Payment Date.

 

(iii) Deferral of Director Stock. An Eligible Director who defers the receipt of
Director Stock shall have an equal number of Stock Units credited to the Stock
Unit Account. The credit will be made as of the date on which the Eligible
Director becomes entitled to receive the Director Stock.

 

(iv) Dividend Equivalents. If Stock Units exist in an Eligible Director’s Stock
Unit Account on a dividend record date for the Company’s Stock, the Stock Unit
Account shall be credited, on the dividend payment date related to such dividend
record date, with an additional number of Stock Units equal to (i) the cash
dividend paid on

 

6

--------------------------------------------------------------------------------

one share of Stock, multiplied by (ii) the number of Stock Units in the Stock
Unit Account on the dividend record date, divided by (iii) the Fair Market Value
of a share of Stock on the dividend payment date.

 

(c) Cash Deferral. An Eligible Director may elect to have all or part of the
Deferred Amount derived from Annual Retainer, Committee Retainers or Meeting
Fees credited to a cash account (a “Cash Account”). The Deferred Amount
allocated to the Cash Account shall be credited thereto on the date on which the
Eligible Director becomes entitled to payment of such Deferred Amount. As of the
last day of each fiscal quarter and the date of termination of the Eligible
Director’s service on the Company’s Board of Directors (the “Service Termination
Date”) the Eligible Director’s Cash Account will be credited with an additional
amount (an “Interest Equivalent”) equal to (i) the “Rate of Interest”,
multiplied by (ii) the Average Daily Cash Balance, multiplied by (iii) the
number of days during which such Cash Account had a positive balance, divided by
(iv) 365. The “Rate of Interest” shall equal the time weighted average interest
rate paid by the Company for such quarter, or shorter period ending on the
Service Termination Date, to institutions from which it borrows funds. The
“Average Daily Cash Balance” shall equal the sum of the daily balances for such
Cash Account for such quarter or shorter period, divided by the number of days
on which a positive balance existed in such Cash Account.

 

(d) Distributions.

 

(i) Distribution Date. Each Eligible Director shall designate on the Deferral
Election Form one of the following dates as a Distribution Date with respect to
amounts credited to the Stock Unit Account or Cash Account thereafter: (A) the
first day of the calendar month following the date of the Eligible Director’s
death; (B) the first day of the calendar month following the Service Termination
Date; (C) the first day of a calendar month specified by the Eligible Director;
or (D) the earliest to occur of (A), (B) or (C). Unless a Deferral Election Form
designates a different Distribution Date for the Eligible Director’s Stock Unit
Account than for the Eligible Director’s Cash Account, the Eligible Director
shall be deemed to have selected the same Distribution Date for both Accounts.
Notwithstanding the election made by an Eligible Director on any Deferral
Election Form or any other provision of the Plan, in the event of an Eligible
Director’s death, all amounts credited to the Eligible Director’s Stock Unit
Account and Cash Account will be paid to the Eligible Director’s beneficiary (or
if no beneficiary has been designated, to the Eligible Director’s estate)
promptly following the date of death.

 

(ii) Distribution Method. An Eligible Director shall request on the Deferral
Election Form that distributions which are subject to such Deferral Election
Form be made in (A) a lump sum, (B) no more than 120 monthly, 40 quarterly or 10
annual installments or (C) in part as provided in clause (A) and in part as
provided in clause (B). The amount to be distributed in any installment pursuant
to a specific Deferral Election

 

7

--------------------------------------------------------------------------------

Form shall be determined by dividing the balance in the Cash Account or the
number of Stock Units in the Stock Unit Account, as the case may be, that are
subject to such Deferral Election Form by the number of remaining installments.
If an Eligible Director receives a distribution on an installment basis,
undistributed Deferred Amounts shall remain subject to the provisions of Section
7.

 

(iii) Form of Distributions. All distributions from the Cash Account shall be
paid in cash. Distributions made from the Stock Unit Account shall be for a
number of whole shares of Stock equal to the number of whole Stock Units to be
distributed and cash in lieu of any fractional share (determined by using the
Fair Market Value of a share of Stock on the date on which such distributions
are distributed).

 

Section 8. Election to Receive Stock.

 

(a) Election. An Eligible Director may elect (a “Stock Election”) to receive all
or a portion of the Eligible Director’s Annual Retainer, Committee Retainers and
Meeting Fees in shares of Stock by submitting a Stock Election Form (a “Stock
Election Form”) to the Company’s Secretary indicating the percentage of the
Annual Retainer, Committee Retainers and the percentage of Meeting Fees to be
paid in Stock (the “Stock Amounts”). A Stock Election shall become effective
with respect to the Annual Retainer, Committee Retainers and Meeting Fees,
respectively, payable after the date on which the Stock Election Form is
received by the Secretary. Each Stock Election, once made, shall be irrevocable.
Notwithstanding the foregoing, a Stock Election may be superseded with respect
to future payments of Annual Retainer, Committee Retainers and Meeting Fees by
submitting a new Stock Election Form to the Secretary.

 

(b) Payment in Stock. Upon receipt by the Company’s Secretary of an effective
Stock Election Form from an Eligible Director, such Eligible Director shall
thereafter receive whole shares of Stock (but not fractional shares) in lieu of
Annual Retainer, Committee Retainers and Meeting Fees elected to be received in
Stock as follows:

 

(i) Any Meeting Fees (other than Meeting Fees for meetings of the Board or a
committee thereof held on a Retainer Payment Date) subject to a Stock Election
will initially be credited to the Eligible Director’s Cash Account as of the
date on which the Eligible Director becomes entitled to payment of the Meeting
Fees.

 

(ii) As of each Retainer Payment Date, an Eligible Director who has made a Stock
Election, and who becomes entitled to be paid the Annual Retainer payable on
such Retainer Payment Date, will receive a whole number of shares of Stock
determined by dividing:

 

(A) the sum of (X) the amount of Annual Retainer and Committee Retainers that
are payable to the Eligible Director on the Retainer Payment Date and are
subject to a Stock Election, plus (Y) Meeting Fees for meetings of the Board or
any committee thereof held on the Retainer

 

8

--------------------------------------------------------------------------------

Payment Date that are subject to a Stock Election plus (Z) the amount credited
to the Cash Account pursuant to the foregoing clause (i) since the most recent
Retainer Payment Date, together with the Interest Equivalent thereon through the
Retainer Payment Date; by

 

(B) the Fair Market Value of a share of Stock on the Retainer Payment Date.

 

(iii) If an Eligible Director’s Service Termination Date occurs before or
coincides with a Retainer Payment Date, so that the Eligible Director is not
entitled to be paid the Annual Retainer paid on such Retainer Payment Date, the
Eligible Director shall receive as of the first business day following his or
her Service Termination Date (or as soon as practicable thereafter) (A) the
amount credited to the Cash Account pursuant to the foregoing clause (i) since
the most recent Retainer Payment Date, together with the Interest Equivalent
thereon through the Service Termination Date, divided by (B) the Fair Market
Value of a share of Stock on the Service Termination Date.

 

(iv) Upon delivery of shares of Stock pursuant to clauses (ii) or (iii) above,
an Eligible Director’s Cash Account will be debited the amount described in
subclause (ii)(A)(Z) or (iii)(A), as applicable.

 

In no circumstances shall an Eligible Director be entitled to receive, or the
Company have any obligation to issue to the Eligible Director, any fractional
share of Stock. In lieu of any fractional share of Stock, the Eligible Director
shall be entitled to receive, and the Company shall be obligated to pay to such
Eligible Director, cash equal to the value of any fractional share of Stock
(determined by using the Fair Market Value of a share of Stock on the date on
which such Stock is distributed).

 

Section 9. Fair Market Value

 

“Fair Market Value” shall mean, with respect to each share of Stock for any day:

 

(a) if the Stock is listed for trading on the New York Stock Exchange, the
closing price, regular way, of the Stock as reported on the New York Stock
Exchange Composite Tape, rounded up to the nearest whole cent, or if no such
reported sale of the Stock shall have occurred on such date, on the most recent
date such a reported sale occurred, or

 

(b) if the Stock is not so listed, but is listed on another national securities
exchange or on the Nasdaq Stock Market (“Nasdaq”), the closing price, regular
way, of the Stock on such exchange or Nasdaq, rounded up to the nearest whole
cent, as the case may be, on which the largest number of shares of Stock have
been traded in the aggregate on the preceding twenty trading days, or, if no
such reported sale of the Stock shall have occurred on such date on such
exchange or Nasdaq, as the case may be, on the most recent date on which such a
reported sale occurred on such exchange or Nasdaq, as the case may be, or

 

9

--------------------------------------------------------------------------------

(c) if the Stock is not listed for trading on a national securities exchange or
Nasdaq, the average of the closing bid and asked prices as reported by the
National Association of Securities Dealers, rounded up to the nearest whole
cent, or, if no such prices shall have been so reported for such date, on the
most recent date for which such prices were so reported.

 

Section 10. Issuance of Stock

 

(a) Restrictions on Transferability. All shares of Stock delivered under the
Plan shall be subject to such stop-transfer orders and other restrictions as the
Company may deem advisable or legally necessary under any laws, statutes, rules,
regulations and other legal requirements, including, without limitation, those
of any stock exchange upon which the Stock is then listed and any applicable
federal, state or foreign securities law.

 

(b) Compliance with Laws. Anything to the contrary herein notwithstanding, the
Company shall not be required to issue any shares of Stock under the Plan if, in
the opinion of legal counsel to the Company, the issuance and delivery of such
shares would constitute a violation by the Eligible Director or the Company of
any applicable law or regulation of any governmental authority, including,
without limitation, federal and state securities laws, or the regulations of any
stock exchanges on which the Company’s securities may then be listed.

 

Section 11. Withholding Taxes

 

The Company may require as a condition of delivery of any shares of Stock that
the Eligible Director remit an amount sufficient to satisfy all foreign,
federal, state, local and other governmental withholding tax requirements
relating thereto (if any) and any or all indebtedness or other obligation of the
Eligible Director to the Company or any of its subsidiaries.

 

Section 12. Plan Amendments and Termination

 

The Board of Directors of the Company may suspend or terminate the Plan at any
time and may amend it at any time and from time to time, in whole or in part.

 

Section 13. Listing, Registration and Legal Compliance

 

If the Plan Administrators shall at any time determine that any Consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any award under the Plan, the issuance or
purchase of shares or other rights hereunder or the taking of any other action
hereunder (each such action being hereinafter referred to as a “Plan Action”),
then such Plan Action shall not be taken, in whole or in part, unless and until
such Consent shall have been effected or obtained. The term “Consent” as used
herein with respect to any Plan Action means (i) the listing, registrations or
qualifications in respect thereof upon any securities exchange or under any
foreign, federal, state or local law, rule or regulation, (ii) any and all
consents, clearances and approvals in respect of a Plan Action by any

 

10

--------------------------------------------------------------------------------

governmental or other regulatory bodies, or (iii) any and all written agreements
and representations by an Eligible Director with respect to the disposition of
Stock or with respect to any other matter, which the Plan Administrators shall
deem necessary or desirable in order to comply with the terms of any such
listing, registration or qualification or to obtain an exemption from the
requirement that any such listing, qualification or registration be made.

 

Section 14. Right of Discharge Reserved

 

Nothing in the Plan shall confer upon any Eligible Director the right to
continue as a director of the Company or affect any right that the Company or
any Eligible Director may have to terminate the service of such Eligible
Director.

 

Section 15. Rights as a Stockholder

 

Except as otherwise provided by the terms of any applicable Benefit Plan Trust
(as hereinafter defined), an Eligible Director shall not, by reason of any
Director Option, Director Stock, Elective Option, Stock Unit or Stock Amount,
have any rights as a stockholder of the Company until Stock has been issued to
such Eligible Director.

 

Section 16. Unfunded Plan

 

The Plan shall be unfunded and shall not create (or be construed to create) a
trust or a separate fund or funds. The Plan shall not establish any fiduciary
relationship between the Company and any Eligible Director or other person. To
the extent any person holds any rights by virtue of a pending grant or deferral
under the Plan, such rights shall be no greater than the rights of an unsecured
general creditor of the Company. Notwithstanding the foregoing, the Company may
(but shall not be obligated to) contribute shares of Stock corresponding to
Stock Units to any trust established by the Company under which Eligible
Directors, or Eligible Directors and participants in designated employee benefit
plans of the Company, constitute the principal beneficiaries (a “Benefit Plan
Trust”).

 

Section 17. Governing Law

 

The Plan is deemed adopted, made and delivered in Delaware and shall be governed
by the laws of the State of Delaware applicable to agreements made and to be
performed entirely within such state.

 

Section 18. Severability

 

If any part of the Plan is declared by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity shall not invalidate any
portion of the Plan not declared to be unlawful or invalid. Any Section or part
of a Section so declared to be unlawful or invalid shall, if possible, be
construed in a manner that will give effect to the terms of such Section or part
of a Section to the fullest extent possible while remaining lawful and valid.

 

11

--------------------------------------------------------------------------------

Section 19. Notices

 

All notices and other communications hereunder shall be given in writing and
shall be deemed given when personally delivered against receipt or five days
after having been mailed by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows: (a) if to the Company: Morgan
Stanley, 1585 Broadway, New York, New York 10036, Attention: Corporate
Secretary; and (b) if to an Eligible Director, at the Eligible Director’s
principal residential address last furnished to the Company. Either party may,
by notice, change the address to which notice to such party is to be given.

 

Section 20. Section Headings

 

The Section headings contained herein are for the purposes of convenience only
and are not intended to define or limit the contents of said Sections.

 

12