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                                                                    EXHIBIT 10.2


                             MORGAN STANLEY DW INC.
                FINANCIAL ADVISOR PRODUCTIVITY COMPENSATION PLAN
                         [Amended as of March 26, 2001]

                                    SECTION I
                                  INTRODUCTION

(a)  The name of this plan is the Morgan Stanley DW Inc. Financial Advisor
     Productivity Compensation Plan (the "Plan").

(b)  The Plan was initially adopted to be effective for Awards granted for
     Fiscal Years commencing with 1984; was amended and restated December 23,
     1985 retroactive to the 1984 Fiscal Year; was further amended effective
     December 24, 1990 and July 15, 1991; was restated for Fiscal Years
     beginning with 1992; was amended and restated effective October 1, 1993;
     was amended effective January 1, 1994; amended and restated effective
     January 1, 1994; was amended and restated effective October 21, 1994; was
     amended June 18, 1997; was amended effective September 25, 1998; was
     amended effective September 21, 1999; and was amended effective March 26,
     2001.

                                   SECTION II
                                 PURPOSE OF PLAN

(a)  The purposes of the Plan are to retain and recruit key Financial Advisors
     to Morgan Stanley DW Inc. by enabling them to accumulate significant net
     worth.



                                   SECTION III
                                   DEFINITIONS

(a)  "Financial Advisor" means an Employee performing the functions of a retail
     Financial Advisor, as defined by Morgan Stanley.

(b)  "Account" means a bookkeeping account maintained in a confidential ledger
     by Morgan Stanley pursuant to Section VI of the Plan for each Participant
     under the Plan.

(c)  "Disability" means termination of employment from Morgan Stanley due to a
     medically determinable physical or mental incapacity which is reasonably
     expected to be of long-term duration or result in death. The determination
     of Morgan Stanley shall be conclusive on all parties as to whether a
     Participant is Disabled.

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(d)  "MWD" means Morgan Stanley Dean Witter & Co., a Delaware corporation.

(e)  "Morgan Stanley" means Morgan Stanley DW Inc., a Delaware corporation.

(f)  "Employee" means an employee of Morgan Stanley.

(g)  "Fair Market Value" means:

(1) for purposes of determining the number of shares of Stock to be allocated
pursuant to Section VII(a) to an award made pursuant to Section V, the fair
market value thereof as of the relevant date of determination, as determined in
accordance with a valuation methodology approved by the Board of Directors of
MWD or a committee thereof designated by such Board of Directors (such Board of
Directors or committee is hereinafter referred to as the "MWD Committee"); and

(2) for purposes of crediting a Participant pursuant to Section VII(c) with
shares of Stock based upon cash dividends paid or deemed to be paid on shares of
Stock credited to the Participant as of the record date for such dividends, the
average of the high and low sales prices, regular way, of a share of Stock as
reported on the New York Stock Exchange Composite Tape (the "High/Low Price") on
the relevant dividend payment date, or, if Stock is not traded on public markets
on the relevant dividend payment date, the first preceding date on which Stock
is traded on public markets; provided, however, that in the event a "Fair Market
Value" cannot be determined pursuant to the foregoing, the fair market value
thereof as of the relevant date of determination, as determined in accordance
with a valuation methodology approved by the MWD Committee; and

(3) for purposes of distributing cash in lieu of a fractional share pursuant to
Section VII(a), the High/Low Price on the date of the distribution, or, if Stock
is not traded on public markets on the date of the distribution, the first
preceding date on which Stock is traded on public markets; provided, however,
that in the event a "Fair Market Value" cannot be determined pursuant to the
foregoing, the fair market value thereof as of the relevant date of
determination, as determined in accordance with a valuation methodology approved
by the MWD Committee; and

(4) for such other purposes as may arise in connection with the Plan, the fair
market value of a share of Stock as of the relevant date of determination, as
determined in accordance with a valuation methodology approved by the MWD
Committee.

(h)  "Fiscal Year" means the fiscal year of Morgan Stanley.

(i)  "Gross Revenue" means the total gross revenue generated in a Fiscal Year by
     a Financial Advisor for any purchase or sale of securities and other
     investments to a Morgan Stanley client, based on criteria established and
     reported by Morgan Stanley in accordance with its standard accounting
     practices.

(j)  "Participant" means an Employee to whom an award has been made pursuant to
     Section V.

(k)  "Retirement" means termination of employment from Morgan Stanley: (i) after
     attaining age 65; (ii) as defined in the Morgan Stanley DW Inc. Pension
     Plan

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     whether or not the individual is a participant therein; or (iii) as
     otherwise specified by written agreement between Morgan Stanley and a
     Financial Advisor.

(l)  "Stock" means the common stock of MWD, par value $.01 per share.

(m)  "Valuation Date" means the last day of each Fiscal Year.


                                   SECTION IV
                                   ELIGIBILITY

(a)  Financial Advisors who produce Gross Revenue within a Fiscal Year which is
     equal to or exceeds criteria established from time to time by the
     Compensation Committee of the Board of Directors of Morgan Stanley, or who
     equal or exceed any other performance or production criteria established
     from time to time by the Compensation Committee of the Board of Directors
     of Morgan Stanley, shall be eligible to participate in the Plan.

(b)  Any Financial Advisor who is eligible to participate in the Plan pursuant
     to Section IV(a) shall be eligible to participate in the Plan only with
     respect to the Fiscal Year for which he or she meets the criteria specified
     pursuant to Section V of the Plan.

(c)  Individuals selected to receive awards pursuant to Section V(d) of the Plan
     shall be eligible to participate in the Plan in connection with, and
     subject to the terms of, their awards.

                                    SECTION V
                                     AWARDS

(a)  At the beginning of each Fiscal Year Morgan Stanley shall establish the
     Gross Revenue criteria which will entitle a Financial Advisor to receive an
     award under the Plan for that Fiscal Year. Awards shall be expressed as a
     percentage of each Financial Advisor's Gross Revenue production for the
     Fiscal Year for which such award is being made. A Financial Advisor who
     achieves the Gross Revenue criteria for a Fiscal Year shall receive an
     award for that Fiscal Year based on such criteria. Awards shall be payable
     in accordance with Section VII.

(b)  At the beginning of each Fiscal Year, the Compensation Committee of the
     Board of Directors of Morgan Stanley may establish any other criteria which
     will entitle a Financial Advisor to receive an award under the Plan for
     that Fiscal Year. A Financial Advisor who achieves such other criteria
     shall receive an award for that Fiscal Year based on such criteria.

(c)  Any Participant who terminates as an Employee during the Fiscal Year, for
     whatever reason, shall not be eligible for any award for such Fiscal Year.

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(d)  The MWD Committee may, in its discretion from time to time, make to an
     individual, in consideration of such individual becoming (and remaining for
     such period of time, if any, as the MWD Committee may determine) a
     Financial Advisor and such other consideration, if any, as the MWD
     Committee determines, an award of Stock on such terms and conditions as the
     MWD Committee may determine, which terms and conditions need not be uniform
     with the terms and conditions of Section VI, VII or VIII hereof, but which
     shall be set forth in a written award certificate or award agreement
     delivered or made available by Morgan Stanley to the individual as soon as
     practicable following the date of the award. Awards of Stock under this
     Section V(d) shall be satisfied only out of shares held in treasury and not
     out of authorized but unissued shares.


                                   SECTION VI
                              ACCOUNTS-ESCROW AGENT

(a)  A separate Account shall be maintained by Morgan Stanley in a confidential
     ledger for each Participant awarded cash by Morgan Stanley for each Fiscal
     Year. Each such Account shall be credited with the amount of cash awards
     not paid to the Participant pursuant to Section VII of the Plan and
     increased from time to time by any additional cash awards not paid to each
     Participant. Each Account shall be decreased by any cash amounts paid to or
     on behalf of a Participant or forfeited pursuant to Section VII of the
     Plan.

(b)  Within a reasonable time after the end of each Fiscal Year, the Controller
     of Morgan Stanley shall give each Participant a written report of the
     status of such Participant's Account under the Plan, including the value
     thereof. For each Fiscal Year, Accounts shall be valued as of the Valuation
     Date.

(c)  As a condition to participation in this Plan, each eligible Employee shall
     be required to hold restricted Stock awarded hereunder in an escrow account
     and such Employee's decision to participate in the Plan shall constitute
     the appointment of Morgan Stanley Dean Witter Trust FSB, or such other
     custodian as Morgan Stanley shall designate (the "Custodian"), as the
     custodial agent for the purpose of holding such Stock. Such escrow account
     will be governed by and subject to the terms and conditions of a written
     agreement with the Custodian.

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                                   SECTION VII
                                 AWARD PAYMENTS

(a)  Awards under Section V(a) for the 1994 Fiscal Year will be paid, at the
     Participant's election prior to the date the award is made, in the form of
     (i) cash, payable four years and six months following the close of the
     Fiscal Year for which the award is made, or (ii) shares of Stock valued at
     100% of the Fair Market Value of Stock as of the date the award is made,
     payable as soon as practicable following the close of the Fiscal Year for
     which the award is made. Awards under Section V(a) for Fiscal Years
     commencing with the 1995 Fiscal Year, will be paid entirely in Stock valued
     at 100% of the Fair Market Value of Stock as of the date the award is made,
     payable as soon as practicable following the close of the Fiscal Year for
     which the award is made. Awards under Section V(b) may be paid in cash or
     in Stock as determined by the Compensation Committee of the Board of
     Directors of Morgan Stanley. The number of shares of Stock payable with
     respect to an award shall be calculated by reference to the amount of the
     award determined under Section V, discounted by an appropriate interest
     rate factor as Morgan Stanley shall establish from time to time so that the
     value of the award payable under this Section VII is equal to the present
     value of the amount determined pursuant to Section V and payable four years
     and six months following the close of the Fiscal Year for which the award
     is made. Payments to Participants of awards made in the form of Stock shall
     be made in the form of a certificate for whole shares and cash in lieu of
     any fractional share. A Participant on a leave of absence approved by
     Morgan Stanley or who is absent due to disability on the date an award
     payment is made shall not be entitled to payment of such award until the
     Participant returns to Morgan Stanley following completion of such leave of
     absence or disability.

(b)  Stock awards shall vest and cash awards shall be paid, four years and six
     months following the close of the Fiscal Year with respect to which
     awarded; provided that the Participant's status as an Employee has not been
     terminated prior to such date. Upon the Participant's termination of
     employment with Morgan Stanley, all unvested Stock awards and unpaid cash
     awards shall be forfeited. Notwithstanding the foregoing, if a Participant
     terminated employment with Morgan Stanley due to Disability or Retirement,
     all of the Participant's awards shall become vested and/or payable in
     accordance with this Section VII(b) without regard to the Participant's
     termination of employment. Notwithstanding anything in this Plan to the
     contrary, upon a Participant's death, all of the Participant's awards shall
     become vested immediately and payable as promptly as practicable.

(c)  A Participant may vote and receive dividends on any Stock awarded to such
     Participant under Section VII(a) or credited under this Section VII(c);
     provided that all dividends on Stock (other than dividends payable in
     Stock) shall be reinvested in shares of Stock at 100% of the Fair Market
     Value of Stock which shares shall be credited to the Participant and held
     by the Custodian. All shares of Stock received as a distribution with
     respect to Stock or purchased with reinvested dividends shall be subject to
     the same restrictions as the Stock on which the distribution or dividend is
     awarded.

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(d)  In accordance with the provisions of Appendix A to the Plan, if Morgan
     Stanley must recover a Payment Obligation previously paid to a Participant
     pursuant to this Section VII, a Participant shall be required to repay the
     amount of cash or the number of shares of Stock received (or an amount in
     cash equal to the fair market value of such Stock as of the date of such
     repayment). If any such amount is not repaid, Morgan Stanley reserves the
     right to withhold from a Participant's compensation the amount of any
     Payment Obligation which a Participant fails to repay as required herein.

(e)  All federal, state, local and other withholding tax requirements, if any,
     relating to the Plan shall be met pursuant to procedures determined by
     Morgan Stanley which may include:

     1.   Withholding from any cash amounts payable to a Participant under the
          Plan (including salary, bonus or any other amounts payable from Morgan
          Stanley or any affiliate of Morgan Stanley).

     2.   Requiring Participants to remit to Morgan Stanley an amount in cash
          prior to the delivery of any certificate for Stock or other payments
          under the Plan.

     3.   At the election of the Participant, tendering to Morgan Stanley a
          number of shares of Stock.

     4.   At the election of the Participant, withholding by Morgan Stanley of
          shares of Stock. In the event that the Custodian is directed by Morgan
          Stanley to withhold shares pursuant to this Section VII(e)(4), the
          Custodian shall distribute such shares from the custodial account to
          Morgan Stanley (or, at the direction of Morgan Stanley, sell such
          shares on public markets and distribute the cash proceeds to Morgan
          Stanley) and Morgan Stanley shall make appropriate withholding tax
          payments.

     5.   If a Participant is subject to Section 16(b) of the Securities
          Exchange Act of 1934, Morgan Stanley may prescribe such requirements
          or limitations on the Participant's ability to elect the withholding
          options contained in Sections VII(e)(3) and (4) of the Plan as may be
          required by Securities and Exchange Commission Rule 16b-3 or by any
          comparable or successor exemption.

(f)  Notwithstanding the foregoing provisions of this Section VII, Morgan
     Stanley reserves the right to accelerate the payment of any cash and/or the
     vesting of any Stock awarded pursuant to Sections V(a) and V(b) of the
     Plan, subject to the provisions of Appendix A hereof. The MWD Committee
     reserves the right to accelerate the vesting of any Stock awarded pursuant
     to Section V(d) of the Plan; provided that if the award of such Stock was
     made subject to Appendix A hereof, then vesting of such Stock shall be
     subject to Appendix A hereof.

(g)  The commencement of Related Employment by a Participant shall not be
     treated for purposes of the Plan and any Award

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     hereunder as a termination of employment. The Retirement, Disability or
     death of an individual during a period of Related Employment shall be
     treated for purposes of the Plan and any Award hereunder as if such event
     had occurred while the individual was an Employee. For purposes of this
     Section VII(g), "Related Employment" shall mean the employment of a
     Participant by an employer other than Morgan Stanley, provided that: (1)
     such employment is undertaken by the individual at the request or with the
     consent of Morgan Stanley; (2) immediately prior to undertaking such
     employment, the individual was an Employee or was engaged in Related
     Employment as defined herein; and (3) such employment is recognized by
     Morgan Stanley, in its discretion, as Related Employment.



                                  SECTION VIII
                             SUBORDINATION OF AWARDS

(a)  All Financial Advisors as a condition of participation, shall execute and
     deliver a written agreement (the "Agreement") within forty-five (45) days
     after notice of eligibility to Participate, or the announcement after
     December 24, 1990 of an award made under Section V(b), that such Financial
     Advisor's right to payment hereunder (the "Payment Obligation"), is
     subordinate to the prior payment or provision for payment in full of all
     claims of all present and future creditors of Morgan Stanley arising out of
     any matter occurring prior to the date on which the related Payment
     Obligation matures consistent with all applicable statutes, regulations and
     rules, except for claims which are the subject of subordination agreements
     which rank on the same priority (which claims shall be paid pari passu) or
     are junior to the Payment Obligation under the Agreement. The Agreement
     shall also provide that the Participant's right to payment hereunder shall
     be subordinate to claims which are now or hereafter expressly stated in the
     instruments creating such claims to be senior in right of payment to the
     claims of the class of claims created hereunder which arise out of any
     matter occurring prior to the maturity date of any payment under the
     Payment Obligation.

(b)  The form of the Agreement shall be determined by Morgan Stanley. In the
     event Morgan Stanley elects to treat Payment Obligations as subordinated
     liabilities for purposes of determining net capital under Rule 15c3-1
     promulgated by the Securities and Exchange Commission under the Securities
     Exchange Act of 1934 and similar regulations promulgated under the
     Commodities Exchange Act, the form of the Agreement shall be subject to
     approval of the Examining Authority as defined by the Agreement. A copy of
     the Agreement is annexed hereto as Appendix "A", and incorporated by
     reference as fully as if set forth herein at length.

(c)  Any amount credited to a Participant's Account shall not be segregated but
     shall remain a part of the general corporate funds of Morgan Stanley
     subject to the claims of general, unsecured creditors of Morgan Stanley to
     which claims the rights of the Participant to receive payment of the amount
     credited to the Participant's Account shall be subordinated pursuant to the
     terms of an Agreement.

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(d)  If a Participant does not execute and deliver an Agreement within the
     forty-five (45) day period described in (a) above, such Participant shall
     cease to have any rights whatsoever hereunder.


                                   SECTION IX
                                 ADMINISTRATION

(a)  Morgan Stanley shall have full power and authority to construe, interpret
     and administer the Plan. Its decisions shall be final, conclusive and
     binding upon all persons, including employees and officers and the
     beneficiaries and personal representatives of such employees and officers.

(b)  The Plan shall be effective for all awards accrued for the Fiscal Year
     beginning in 1984 and each Fiscal Year thereafter, as amended from time to
     time until suspended or discontinued by Morgan Stanley.

(c)  The expenses of administering the Plan shall be borne by Morgan Stanley.

(d)  The interest and property rights of any person in the Plan or in any
     distribution to be made under the Plan shall not be subject to option nor
     be assignable, either by voluntary or involuntary assignment or by
     operation of law, including (without limitation) bankruptcy, garnishment,
     attachment or other creditor's process and any act in violation hereof
     shall be void.

(e)  Nothing herein shall be construed to require Morgan Stanley or any
     affiliate to segregate or set aside any funds or any property for the
     purpose of making award payments hereunder.

(f)  Morgan Stanley's determinations under the Plan need not be uniform and may
     be made by it selectively among persons who receive, or are eligible to
     receive, Awards under the Plan (whether or not such persons are similarly
     situated). Without limiting the generality of the foregoing, Morgan Stanley
     shall be entitled, among other things, to make non-uniform and selective
     determinations and to enter into non-uniform and selective Award
     agreements, as to (1) the person to receive Awards under the Plan, (2) the
     terms and provisions of Awards under the Plan and (3) the exercise by
     Morgan Stanley of its discretion in respect of the terms of the Plan.


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                                    SECTION X
                                  MISCELLANEOUS

(a)  The establishment of the Plan, the granting of benefits or any action by
     Morgan Stanley or any other person shall not be held or construed to confer
     upon any person any right to be continued as an employee of Morgan Stanley
     nor, upon termination of employment, to confer any right or interest other
     than as provided herein. No provision of the Plan shall restrict the right
     of Morgan Stanley to terminate any employee's employment with or without
     cause.

(b)  If, in the opinion of Morgan Stanley, any person becomes unable to handle
     properly any amount payable to such person under the Plan, Morgan Stanley
     may make any reasonable arrangement for payment on such person's behalf as
     it deems appropriate.

(c)  Where appropriate, the use of masculine terms within the Plan shall mean
     the feminine, the use of singular terms shall mean the plural, and vice
     versa.

                                   SECTION XI
                    AMENDMENT, SUSPENSION AND DISCONTINUANCE

(a)  Morgan Stanley shall have the authority to amend the Plan, in whole or in
     part, or to suspend or discontinue the Plan, in whole or in part, at any
     time.

(b)  The Plan shall continue in effect as amended from time to time, until
     suspended or discontinued by Morgan Stanley.

(c)  Notwithstanding any amendment, suspension or discontinuance, award payments
     previously announced shall be paid pursuant to the appropriate provisions
     of the Plan. Notwithstanding the foregoing, in the event of the
     discontinuance or termination of the Plan, Morgan Stanley reserves the
     right to accelerate payment of a Participant's entire Account balance to
     any date prior to the vesting periods applicable to awards in such Account,
     subject to provisions of Appendix A to the Plan.

(d)  If any part of this Plan, including Appendix A hereto, fails to receive any
     required approval of the appropriate regulatory and governing bodies or is
     otherwise declared void and of no effect, the rest of the Plan shall
     continue in full force.

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                                   APPENDIX A
                             MORGAN STANLEY DW INC.
                FINANCIAL ADVISOR PRODUCTIVITY COMPENSATION PLAN

     For purposes of this Appendix A, a Financial Advisor who is designated in
writing by Morgan Stanley as a participant under the Plan shall be known as a
"Participant", Morgan Stanley DW Inc. shall be known as "Morgan Stanley", and
Morgan Stanley's "Payment Obligation" shall be as defined below.

1. Payment Obligation
   ------------------

     (a) Payment Obligations shall consist of any deferred payments of deferred
bonuses owed from time to time to a Participant by Morgan Stanley pursuant to
the Plan.

     (b) Payment Obligations, including the dates payments are due, shall be
determined in accordance with the provisions of the Plan as in effect on the
date hereof, or as hereafter amended. As provided in Sections 4 and 5 of this
Appendix A, payment of any amount of a Payment Obligation may be made sooner
than five years following the year for which such Payment Obligation is accrued
by Morgan Stanley. If any provision of the Plan as now in effect or as hereafter
amended shall be inconsistent with the Appendix A, this Appendix A shall govern.

2. Subordination of Right of Payment
   ---------------------------------

     (a) Payment Obligations are and shall be subordinated in right of payment
and subject to prior payment or provision for payment in full of all claims of
other present and future creditors of Morgan Stanley whose claims are not
similarly subordinated (claims hereunder shall rank pari passu with claims
similarly subordinated) and to claims which are now or hereafter expressly
stated in the instruments creating such claims to be senior in right of payment
to the claims or the class of claims hereunder which arise out of any matter
occurring prior to the maturity date of any payment under the Payment
Obligation.

     (b) In the event of the appointment of a receiver or trustee for Morgan
Stanley or in the event of its insolvency, liquidation pursuant to the
Securities Investor Protection Act of 1970 ("SIPA"), or otherwise, its
bankruptcy, assignment for the benefit of creditors, reorganization, whether or
not pursuant to bankruptcy laws, or any other marshaling of the assets and
liabilities of Morgan Stanley, Participants shall not be entitled to participate
or share, ratably or otherwise, in the distribution of the assets of Morgan
Stanley until all claims of all other present and future creditors of Morgan
Stanley whose claims are senior to claims hereunder have been fully satisfied or
provision has been made therefor.

     (c) Notwithstanding the maturing of the Payment Obligation under any
provision of the Plan or this Appendix A, the right of a Participant to receive
payment of any Payment Obligation is and shall remain subordinate as provided in
this Section 2.

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3. Suspension of Maturity During Net Capital Stringency
   ----------------------------------------------------

     (a) Morgan Stanley's Payment Obligations shall be suspended and not mature
for any period of time during which, after giving effect to such Payment
Obligations (together with the payment of any other subordinated obligation of
Morgan Stanley payable at or prior to such payment of the Payment Obligations),

          (i) if Morgan Stanley is not operating pursuant to the alternative net
     capital requirements provided for in paragraph (f) of Rule 15c3-1 (the
     "Rule") under the Securities Exchange Act of 1934 (the "Act"), the
     aggregate indebtedness of Morgan Stanley would exceed 1,200 percentum of
     its net capital, as those terms are defined in the Rule, as in effect at
     the time such payment is to be made, or such percentum as may be made
     applicable to Morgan Stanley from time to time by the Examining Authority
     (as defined in paragraph 7(f) hereof) plus an amount equal to the guaranty
     deposits with clearing organizations other than the Chicago Board of Trade
     ("CBOT"), which were included in current assets under Section 211 of the
     CBOT "Capital Requirements for Member FCM's," to the extent such deposits
     cannot be used for margin purposes, or

          (ii) if Morgan Stanley is operating pursuant to the alternative net
     capital requirements provided for in paragraph (f) of the Rule, its net
     capital would be less than five (5) percentum of aggregate debit items (or
     such other percentum as may be made applicable to Morgan Stanley by the
     Examining Authority) computed in accordance with Exhibit A to Rule 15c3-3
     under the Act or any successor rule as in effect at the time such payment
     is to be made, plus an amount equal to the guaranty deposits with clearing
     organizations other than the CBOT, which were included in current assets
     under Section 211 of the CBOT "Capital Requirements for Member FCM's", to
     the extent such deposits cannot be used for margin purposes, or

          (iii) if Morgan Stanley is registered as a futures commission merchant
     under the Commodity Exchange Act (the "CEA"), the net capital of Morgan
     Stanley would be less than the greatest of (A) six (6) percentum of the
     funds required to be segregated pursuant to the CEA and Commodities Futures
     Trading Commission ("CFTC") Regulations and the foreign futures or foreign
     options secured amount exclusive of the market value of commodity options
     purchased by option customers of Morgan Stanley on or subject to the rules
     of a contract market or a foreign board of trade, provided the deduction
     for each option customer shall be limited to the amount of customer funds
     in each option customer's account(s), and foreign futures and foreign
     options secured amounts plus an amount equal to the guaranty deposits with
     clearing organizations other than the CBOT, which were included in current
     assets under Section 211 of the CBOT "Capital Requirements for Member
     FCM's", to the extent such deposits cannot be used for margin purposes, (B)
     such amount as may be made applicable to Morgan Stanley at the time of such
     payment by an Examining Authority under Rule 15c3-1(b)(7), or (C)
     $2,000,000 (or such other amount as required by the CEA and CFTC
     Regulations), or

          (iv) if Morgan Stanley's net capital, as defined in the Rule or any
     successor rule as in effect at the time such payment is to be made would be
     less than 120 percentum (or such other percentum as may be made applicable
     to Morgan Stanley at the time of such payment by the Examining Authority)
     of the minimum dollar amount required by the Rule as in effect at such time
     or such dollar amount as may be made applicable to Morgan Stanley by the
     Examining

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     Authority, plus an amount equal to the guaranty deposits with clearing
     organizations other than the CBOT, which were included in current assets
     under Section 211 of the CBOT "Capital Requirements for Member FCM's", to
     the extent such deposits cannot be used for margin purposes, or

          (v) if Morgan Stanley is registered as a futures commission merchant
     under the CEA and if its net capital, as defined in the CEA or CFTC
     Regulations as in effect at the time of such payment, would be less than
     120 percentum (or such other percentum as may be made applicable to Morgan
     Stanley by the Examining Authority) of the minimum dollar amount required
     by the CEA or the regulations thereunder as in effect at such time (or such
     other dollar amount as may be made applicable to Morgan Stanley by the
     Examining Authority at the time of such payment), plus an amount equal to
     the guaranty deposits with clearing organizations other than the CBOT,
     which were included in current assets under Section 211 of the CBOT
     "Capital Requirements for Member FCM's", to the extent such deposits cannot
     be used for margin purposes, or

          (vi) if Morgan Stanley is subject to the provisions of paragraph
     (a)(6)(v) or (a)(7)(iv) or (c)(2)(x)(B)(1) of the Rule, its net capital
     would be less than the amount required to satisfy the 1,000 percentum test
     (or such other percentum test as may be made applicable to Morgan Stanley
     by the Examining Authority at the time of such payment) stated in such
     applicable paragraph, plus an amount equal to the guaranty deposits with
     clearing organizations other than the CBOT, which were included in current
     assets under Section 211 of the CBOT "Capital Requirements for Member
     FCM's", to the extent such deposits cannot be used for margin purposes.

     The net capital required by (i)-(vi) above is hereinafter referred to as
the "Applicable Minimum Capital". During any such suspension, Morgan Stanley
shall, as promptly as consistent with the protection of its customers, reduce
its business to a condition whereby payment due under Payment Obligations could
be made (together with the payment of any other subordinated obligation of
Morgan Stanley payable at or prior to such payment) without Morgan Stanley's net
capital being below the Applicable Minimum Capital, at which time Morgan Stanley
shall make payment due under Payment Obligations on not less than five (5) days
prior written notice to the Examining Authority.

     (b) If immediately after any payment of a Payment Obligation Morgan
Stanley's net capital is less than the Applicable Minimum Capital, whether or
not the Participant had any knowledge or notice of such fact at the time of any
such payment, a Participant must repay to Morgan Stanley, its successors or
assigns, any sum so paid, to be held by Morgan Stanley pursuant to the
provisions of the Plan as if such payment had never been made; provided,
however, that any suit for the recovery of any such payment must be commenced
within two years of the date of such payment. Morgan Stanley reserves the right
to withhold from the Participant's compensation the amount of any Payment
Obligation which a Participant fails to repay as required herein.

     (c) If, pursuant to the terms hereof, payment of Morgan Stanley's Payment
Obligations are suspended, Morgan Stanley may be summarily suspended by the
Examining Authority.


                                       A-3

<PAGE>

4. Permissive Prepayment
   ---------------------

     With the prior written permission of the Examining Authority, Morgan
Stanley may, at its option and to the extent permitted by the Plan, pay all or
any portion of the Payment Obligation to the Participant (such payment
hereinafter referred to as a "Prepayment") at any time subsequent to one year
from the date subordinated funds became subject to this Appendix A. No
Prepayment shall be made, however, if after giving effect thereto (and to all
other payments of any other subordinated obligation of Morgan Stanley payable
within six months of such Prepayment) without reference to any projected profit
or loss of Morgan Stanley,

          (i) in the event that Morgan Stanley is not operating pursuant to the
     alternative net capital requirement provided for in paragraph (f) of the
     Rule, the aggregate indebtedness of Morgan Stanley would exceed 1,000
     percentum of its net capital as those terms are defined in the Rule or any
     successor rule as in effect at the time such Prepayment is to be made (or
     such other percentum as may be made applicable at such time to Morgan
     Stanley by the Examining Authority), plus an amount equal to the guaranty
     deposits with clearing organizations other than the CBOT, which were
     included in current assets under Section 211 of the CBOT "Capital
     Requirements for Member FCM's", to the extent such deposits cannot be used
     for margin purposes, or

          (ii) in the event that Morgan Stanley is operating pursuant to such
     alternative net capital requirement, the net capital of Morgan Stanley
     would be less than 5 percentum (or such other percentum as may be made
     applicable to Morgan Stanley at the time of such Prepayment by the
     Examining Authority) of aggregate debit items computed in accordance with
     Exhibit A to Rule 15c3-3 under the Act or any successor rule as in effect
     at such time, plus an amount equal to the guaranty deposits with clearing
     organizations other than the CBOT, which were included in current assets
     under Section 211 of the CBOT "Capital Requirements for Member FCM's", to
     the extent such deposits cannot be used for margin purposes, or

          (iii) in the event that Morgan Stanley is registered as a futures
     commission merchant under the CEA, the net capital of Morgan Stanley (as
     defined in the CEA or CFTC Regulations as in effect at the time of such
     Prepayment) would be less than the greatest of (A) 7 percentum (or such
     other percentum as may be made applicable to Morgan Stanley at the time of
     such Prepayment by the Examining Authority) of the funds required to be
     segregated pursuant to the CEA and CFTC Regulations and the foreign futures
     or foreign options secured amount, exclusive of the market value of
     commodity options purchased by option customers on or subject to the rules
     of a contract market or a foreign board of trade (provided the deduction
     for each option customer shall be limited to the amount of customer funds
     in each option customer's account(s) and foreign futures and foreign
     options secured amounts), plus an amount equal to the guaranty deposits
     with clearing organizations other than the CBOT, which were included in
     current assets under Section 211 of the CBOT "Capital Requirements for
     Member FCM's", to the extent such deposits cannot be used for margin
     purposes, (B) such amount as may be made applicable to Morgan Stanley by an
     Examining Authority under Rule 15c3-1(b)(7), or (C) $2,000,000 (or such
     other amount as required by the CEA or CFTC Regulations), or

          (iv) Morgan Stanley's net capital, as defined in the Rule or any
     successor rule as in effect at the time of such Prepayment, would be less
     than 120 percentum (or such other

                                       A-4

<PAGE>

     percentum as may be made applicable to Morgan Stanley at the time of such
     Prepayment by the Examining Authority) of the minimum dollar amount
     required by the Rule as in effect at such time (or such other dollar amount
     as may be made applicable to Morgan Stanley at the time of such Prepayment
     by the Examining Authority), plus an amount equal to the guaranty deposits
     with clearing organizations other than the CBOT, which were included in
     current assets under Section 211 of the CBOT "Capital Requirements for
     Member FCM's", to the extent such deposits cannot be used for margin
     purposes, or

          (v) in the event that Morgan Stanley is registered as a futures
     commission merchant under the CEA, its net capital, as defined in the CEA
     or the regulations thereunder, as in effect at the time of such Prepayment
     would be less than 120 percentum (or such other percentum as may be made
     applicable to Morgan Stanley at the time of such Prepayment by the
     Examining Authority) of the minimum dollar amount required by the CEA or
     the regulations thereunder as in effect as such time or such other dollar
     amount as may be made applicable to Morgan Stanley at the time of such
     Prepayment by the Examining Authority, plus an amount equal to the guaranty
     deposits with clearing organizations other than the CBOT, which were
     included in current assets under Section 211 of the CBOT "Capital
     Requirements for Member FCM's", to the extent such deposits cannot be used
     for margin purposes, or

          (vi) in the event that Morgan Stanley is subject to the provisions of
     paragraph (a)(6)(v) or (a)(7)(iv) or (c)(2)(x)(B)(1) of the Rule, the net
     capital of Morgan Stanley would be less than the amount required to satisfy
     the 1000 percentum test (or such other percentum test as may be made
     applicable to Morgan Stanley at the time of such Prepayment by the
     Examining Authority) stated in such applicable paragraph, plus an amount
     equal to the guaranty deposits with clearing organizations other than the
     CBOT, which were included in current assets under Section 211 of the CBOT
     "Capital Requirements for Member FCM's", to the extent such deposits cannot
     be used for margin purposes.

     If Prepayment is made of all or any part of the Payment Obligation before
the date payment is due and if Morgan Stanley's net capital is less than the
amount required to permit such Prepayment pursuant to the foregoing provisions
of this paragraph, the Participant agrees irrevocably (whether or not such
Participant had any knowledge or notice of such fact at the time of such
Prepayment) to repay Morgan Stanley, its successors or assigns, the sum so paid
to be held by Morgan Stanley pursuant to the provisions hereof as if such
Prepayment had never been made; provided, however, that any suit for the
recovery of any such Prepayment must be commenced within two years of the date
of such Prepayment. Morgan Stanley reserves the right to withhold from the
Participant's compensation the amount of any Payment Obligation which a
Participant fails to repay as required herein.


5. Special Prepayment
   ------------------

     Morgan Stanley, at its option and as permitted by the Plan, but not at the
option of the Participant, may make a payment of all or any portion of the
Payment Obligation hereunder sooner than one year from the date on which such
amount became subject to this agreement (a "Special Prepayment"), if the written
consent of the appropriate regulatory authority is first obtained. If Morgan
Stanley shall be a futures commission merchant, as that term is defined in the
CEA and CFTC Regulations, no such prepayment shall be made if:


                                       A-5


<PAGE>

          (i) after giving effect thereto (and to all payments of payment
     obligations under any other Subordination Agreements then outstanding, the
     maturities or accelerated maturities of which are scheduled to fall due
     within six months after the date such Special Prepayment is to occur
     pursuant to this provision or on or prior to the date on which the Payment
     Obligation in respect to such Special Prepayment is scheduled to mature
     disregarding this provision, whichever date is earlier) without reference
     to any projected profit or loss of Morgan Stanley, the net capital of
     Morgan Stanley is less than the greatest of (A) 10 percentum of the funds
     required to be segregated pursuant to the CEA and CFTC Regulations and the
     foreign futures or foreign options secured amount, exclusive of the market
     value of commodity options purchased by option customers of Morgan Stanley
     on or subject to the rules of a contract market or a foreign board of trade
     (provided the deduction for each option customer shall be limited to the
     amount of customer funds in such option customer's account(s) and foreign
     futures and foreign options secured amount), plus an amount equal to the
     guaranty deposits with clearing organizations, other than the CBOT, which
     were included in current assets under Section 211 of the CBOT "Capital
     Requirement for Member FCM's", to the extent such deposits cannot be used
     for margin purposes, (B) if Morgan Stanley is a securities broker or
     dealer, the amount of net capital specified in Rule 15c3-1(c)(5)(ii) of the
     regulations of the Securities and Exchange Commission (17 CFR
     240.l5c3-1d(c)5(ii), or (C) $2,000,000 (or such other amount as required by
     the CEA or CFTC Regulations), or

          (ii) Pretax losses during the latest three month period were greater
     than 15% of current excess adjusted net capital.

6. Maturity Upon Certain Events
   ----------------------------

     Notwithstanding the provisions of Section 3 hereof, the Payment Obligation
shall (to the extent not already matured) forthwith mature, together with all
other Subordination Agreements then outstanding in the event of any
receivership, insolvency, liquidation pursuant to SIPA or otherwise, bankruptcy,
assignment for the benefit of creditors, reorganization whether or not pursuant
to bankruptcy laws, or any other marshaling of the assets and liabilities of
Morgan Stanley.

7. Miscellaneous Provisions
   ------------------------

     (a) Participants may not rely upon any commodity exchange or securities
exchange to provide any information concerning or relating to Morgan Stanley.
Such exchanges have no responsibility to disclose to the Participant any
information concerning or relating to Morgan Stanley which they may have now or
at any future time. The Participant agrees that the New York Stock Exchange (the
"NYSE"), its Special Trust Fund or any director, officer, trustee or employee of
the NYSE or said Trust Fund or any other exchange or director, officer, trustee
or employee thereof shall not be liable to the Participant with respect to the
Plan or any distribution pursuant thereto.

     (b) The funds represented by the Payment Obligation shall be dealt with in
all respects as capital of Morgan Stanley, shall be subject to the risks of the
business and may be deposited in an account or accounts in Morgan Stanley's name
in any bank or trust company.


                                       A-6

<PAGE>

     (c) Payment Obligations under the Plan may not be transferred, sold,
assigned, pledged or otherwise encumbered or disposed of and no lien, charge or
other encumbrance may be created or permitted to be created hereon, without the
prior written consent of the Examining Authority.

     (d) If Morgan Stanley is a futures commission merchant as that term is
defined in the CEA, Morgan Stanley agrees, consistent with the requirements of
Section l.17(h) of CFTC Regulations that whenever prior written notice by Morgan
Stanley to the Examining Authority is required pursuant to the provisions of
this agreement the same prior written notice shall be given by Morgan Stanley to
(1) the CFTC at its principal office in Washington, D.C., Attention: Chief
Accountant of Division of Trading and Markets, and/or (2) the commodity
exchanges of which Morgan Stanley is a member and which are then designated by
the CFTC as Morgan Stanley's designated self-regulatory organizations as defined
in Section 1.3(ff) of the CFTC Regulations (the "DSROs").

     (e) "Subordination Agreement" as used herein shall include any subordinated
loan agreement and any secured demand note agreement constituting a satisfactory
subordination agreement under the Rule under which Morgan Stanley is the
borrower or the pledgee of collateral, and reference herein to the payment of a
subordinated obligation of Morgan Stanley shall be deemed to include the return
to the maker-pledgor of any secured demand note and the collateral therefore
held by Morgan Stanley.

     (f) The term "Examining Authority" shall refer to the regulatory body,
specified in paragraph (c)(12) of the Rule, responsible for inspecting or
examining Morgan Stanley for compliance with financial responsibility
requirements. If Morgan Stanley is and continues to be a member of the NYSE, the
references herein to the Examining Authority shall be deemed to refer to the
NYSE. If Morgan Stanley is and continues to be a futures commission merchant as
that term is defined in the CEA and regulations thereunder, references to the
Examining Authority shall also be deemed to refer to the CFTC and Morgan
Stanley's DSROs.

     (g) The provisions of this Appendix A shall be binding upon and inure to
the benefit of Morgan Stanley, its successors and assigns, and the Participant
and the Participant's heirs, executors and administrators.

     (h) Any controversy arising out of or relating to this Plan shall be
submitted to and settled by arbitration pursuant to the Constitution and Rules
of the NYSE. Morgan Stanley and Participant shall be conclusively bound by such
arbitration.

     (i) Morgan Stanley shall not modify, amend or cancel this Appendix or any
provision of the Plan governing the Payment Obligations that are the subject of
this Appendix without the prior approval of the Examining Authority.

     (j) This agreement shall be deemed to have been made under and shall be
governed by the laws of the State of New York.


                                       A-7