EXHIBIT
4.2

     

    MORGAN
STANLEY

    2009
REPLACEMENT EQUITY INCENTIVE COMPENSATION PLAN FOR MORGAN
 STANLEY SMITH
BARNEY EMPLOYEES

    


     

    1.        Purpose.   The
primary purpose of the Morgan Stanley 2009 Replacement Equity Incentive
Compensation Plan for Morgan Stanley Smith Barney Employees is to induce
employees employed by the Smith Barney or Quilter businesses of Citigroup,
employees of Citigroup (or its affiliates), and consultants or other persons who
perform services for Citigroup or any of its affiliates, to commence employment
with the Company or the MS Group, as applicable, in connection with the
Transaction and to contribute to the growth and profits of the
Company.

     

    2.        Definitions.  Except
as otherwise provided in an applicable Award Document, the following capitalized
terms shall have the meanings indicated below for purposes of the Plan and any
Award:

     

    “Administrator”
means the individual or individuals to whom the Committee delegates authority
under the Plan in accordance with Section 5(b).

     

    “Award”
means any award of Restricted Stock, Stock Units, Options, SARs or Other Awards
(or any combination thereof) made under and pursuant to the terms of the
Plan.

     

    “Award
Date” means the date specified in a Participant’s Award Document as the
grant date of the Award.

     

    “Award
Document” means a written document (including in electronic form) that
sets forth the terms and conditions of an Award.  Award Documents
shall be authorized in accordance with Section 12(e).

     

    “Board”
means the Board of Directors of Morgan Stanley.

     

    “Citigroup”
means Citigroup Inc., a Delaware corporation.

     

    “Code”
means the Internal Revenue Code of 1986, as amended, and the applicable rulings,
regulations and guidance thereunder.

     

    “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 to administer the Plan or to have authority with respect
to the Plan, or any subcommittee appointed by such Committee.

     

    “Company”
means MSSB and all of its Subsidiaries.

     

    “Eligible
Individuals” means the individuals described in Section 6 who are
eligible for Awards.

     

    
      
         

      

      
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    “Employee
Trust” means any trust established or maintained by the MS Group in
connection with an employee benefit plan (including the Plan) under which
current and former employees of the Company or the MS Group constitute the
principal beneficiaries.

     

    “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the
applicable rulings and regulations thereunder.

     

    “Fair Market
Value” means, with respect to a Share, the fair market value thereof as
of the relevant date of determination, as determined in accordance with a
valuation methodology approved by the Committee.

     

    “Incentive Stock
Option” means an Option that is intended to qualify for special federal
income tax treatment pursuant to Sections 421 and 422 of the Code, as now
constituted or subsequently amended, or pursuant to a successor provision of the
Code, and which is so designated in the applicable Award Document.

     

    “Morgan
Stanley” means Morgan Stanley, a Delaware corporation.

     

    “MS Group”
means Morgan Stanley and its Subsidiaries.

     

    “MSSB”
means Morgan Stanley Smith Barney Holdings LLC, a Delaware Limited Liability
Company.

     

    “Option” or
“Stock
Option” means a right, granted to a Participant pursuant to
Section 9, to purchase one Share.

     

     “Other
Award” means any other form of award authorized under Section 11 of the
Plan, including any such Other Award the receipt of which was elected pursuant
to Section 12(a).

     

    “Participant”
means an individual to whom an Award has been made.

     

    “Plan”
means the Morgan Stanley 2009 Replacement Equity Incentive Compensation Plan for
Morgan Stanley Smith Barney Employees, as amended from time to time in
accordance with Section 15(e) below.

     

    “Restricted
Stock” means Shares granted or sold to a Participant pursuant to
Section 7.

     

    “SAR” means
a right, granted to a Participant pursuant to Section 10, to receive upon
exercise of such right, in cash or Shares (or a combination thereof) as
authorized by the Committee, an amount equal to the increase in the Fair Market
Value of one Share over a specified exercise price.

     

    “Section
409A” means Section 409A of the Code (or any successor provisions
thereto).

     

    “Shares”
means shares of Stock.

     

    “Stock”
means the common stock, par value $0.01 per share, of Morgan
Stanley.

     

    
      
         

      

      
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    “Stock
Unit” means a right, granted to a Participant pursuant to Section 8,
to receive one Share or an amount in cash equal to the Fair Market Value of one
Share, as authorized by the Committee.

     

    “Subsidiary”
means (i) a corporation or other entity with respect to which either MSSB or
Morgan Stanley (as applicable), directly or indirectly, has the power, whether
through the ownership of voting securities, by contract or otherwise, to elect
at least a majority of the members of such corporation’s board of directors or
analogous governing body, or (ii) any other corporation or other entity in
which either MSSB or Morgan Stanley (as applicable), directly or indirectly, has
an equity or similar interest and which the Committee designates as a Subsidiary
for purposes of the Plan.  For purposes of the Plan, the Company shall
not be deemed to be a Subsidiary of Morgan Stanley.

     

    “Transaction”
means the transactions contemplated pursuant to the Joint Venture Contribution
and Formation Agreement, dated as of January 13, 2009, as it may be amended, by
and between Morgan Stanley and Citigroup.

     

    3.        Effective Date and Term of
Plan.

     

    (a)       Effective
Date.  The Plan shall become effective upon the later of its
adoption by the Board and the consummation of the Transaction.

     

    (b)       Term of Plan.   No
Awards may be made under the Plan after the date that is five years from the
Plan’s effective date.

     

    4.        Stock
Subject to Plan.

     

    (a)        Overall Plan
Limit.  The total number of Shares that may be delivered
pursuant to Awards shall be 5,000,000 as calculated pursuant to Section
4(c).  The number of Shares available for delivery under the Plan
shall be adjusted as provided in Section 4(b).  Shares delivered under
the Plan may be authorized but unissued shares or treasury shares that Morgan
Stanley acquires in the open market, in private transactions or
otherwise.

     

    (b)        Adjustments for Certain
Transactions.  In the event of a stock split, reverse stock
split, stock dividend, recapitalization, reorganization, merger, consolidation,
extraordinary dividend or distribution, split-up, spin-off, combination,
reclassification or exchange of shares, warrants or rights offering to purchase
Stock at a price substantially below Fair Market Value or other change in
corporate structure or any other event that affects Morgan Stanley’s
capitalization, the Committee shall equitably adjust (i) the number and kind of
shares authorized for delivery under the Plan, including the maximum number of
Incentive Stock Options as provided in Section 4(d), and (ii) the number and
kind of shares subject to any outstanding Award and the exercise or purchase
price per share, if any, under any outstanding Award.  In the
discretion of the Committee, such an adjustment may take the form of a cash
payment to a Participant.  The Committee shall make all such
adjustments, and its determination as to what adjustments shall be made, and the
extent thereof, shall be final.  Unless the Committee determines
otherwise, such adjusted Awards shall be subject to the same vesting schedule
and restrictions to which the underlying Award is subject.

     

    
      
         

      

      
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    (c)       Calculation of Shares Available for
Delivery.  In calculating the number of Shares that remain
available for delivery pursuant to Awards at any time, the following rules shall
apply (subject to the limitation in Section 4(d)):

     

    1.      The
number of Shares available for delivery shall be reduced by the number of Shares
subject to an Award and, in the case of an Award that is not denominated in
Shares, the number of Shares actually delivered upon payment or settlement of
the Award.

     

    2.      The
number of Shares tendered (by actual delivery or attestation) or withheld from
an Award to pay the exercise price of the Award or to satisfy any tax
withholding obligation or liability of a Participant shall be added back to the
number of Shares available for delivery pursuant to Awards.

     

    3.      The
number of Shares in respect of any portion of an Award that is canceled or that
expires without having been paid or settled by the Company or the MS Group shall
be added back to the number of Shares available for delivery pursuant to Awards
to the extent such Shares were counted against the Shares available for delivery
pursuant to clause (1).

     

    4.      If
an Award is settled or paid by the Company or the MS Group in whole or in part
through the delivery of consideration other than Shares, or by delivery of fewer
than the full number of Shares that was counted against the Shares available for
delivery pursuant to clause (1), there shall be added back to the number of
Shares available for delivery pursuant to Awards the excess of the number of
Shares that had been so counted over the number of Shares (if any) actually
delivered upon payment or settlement of the Award.

     

    (d)        ISO Limit.  The
full number of Shares available for delivery under the Plan may be delivered
pursuant to Incentive Stock Options, except that in calculating the number of
Shares that remain available for Awards of Incentive Stock Options the rules set
forth in Section 4(c) shall not apply to the extent not permitted by Section 422
of the Code.

     

    5.        Administration.

     

    (a)       Committee Authority
Generally.  The Committee shall administer the Plan and shall
have full power and authority to make all determinations under the Plan, subject
to the express provisions hereof, including without limitation: (i) to select
Participants from among the Eligible Individuals; (ii) to make Awards; (iii) to
determine the number of Shares subject to each Award or the cash amount payable
in connection with an Award; (iv) to establish the terms and conditions of each
Award, including, without limitation, those related to vesting, cancellation,
payment, exercisability, and the effect, if any, of certain events on a
Participant’s Awards, such as the Participant’s termination of employment with
the Company or the MS Group; (v) to specify and approve the provisions of the
Award Documents delivered to Participants in connection with their Awards; (vi)
to construe and interpret any Award Document delivered under the Plan; (vii) to
prescribe, amend and rescind rules and procedures relating to the Plan; (viii)
to make all determinations necessary or advisable in administering the Plan and
Awards, including without limitation determinations as to whether (and if so as
of what date) a Participant has commenced, or has experienced a termination of,
employment; provided,
however, that to the
extent full or partial payment of any Award that constitutes a deferral of
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    subject
to Section 409A is made upon or as a result of a Participant’s termination of
employment, the Participant will be considered to have experienced a termination
of employment if, and only if, the Participant has experienced a separation from
service with the Participant’s employer for purposes of Section 409A; (ix) to
vary the terms of Awards to take account of securities law and other legal or
regulatory requirements of jurisdictions in which Participants work or reside or
to procure favorable tax treatment for Participants; and (x) to formulate such
procedures as it considers to be necessary or advisable for the administration
of the Plan.

     

    (b)       Delegation.  To the
extent not prohibited by applicable laws or rules of the New York Stock
Exchange, the Committee may from time to time delegate some or all of its
authority under the Plan to one or more Administrators consisting of one or more
members of the Committee as a subcommittee or subcommittees thereof or of one or
more members of the Board who are not members of the Committee or one or more
officers of the Company or the MS Group (or of any combination of such
persons).  Any such delegation shall be subject to the restrictions
and limits that the Committee specifies at the time of such delegation or
thereafter.  The Committee may at any time rescind all or part of the
authority delegated to an Administrator or appoint a new
Administrator.  At all times, an Administrator appointed under this
Section 5(b) shall serve in such capacity at the pleasure of the
Committee.  Any action undertaken by an Administrator in accordance
with the Committee’s delegation of authority shall have the same force and
effect as if undertaken directly by the Committee, and any reference in the Plan
to the Committee shall, to the extent consistent with the terms and limitations
of such delegation, be deemed to include a reference to an
Administrator.

     

    (c)       Authority to Construe and
Interpret.  The Committee shall have full power and authority,
subject to the express provisions hereof, to construe and interpret the
Plan.

     

    (d)      Committee
Discretion.  All of the Committee’s determinations in carrying
out,  administering, construing and interpreting the Plan shall be
made or taken in its sole discretion and shall be final, binding and conclusive
for all purposes and upon all persons.  In the event of any
disagreement between the Committee and an Administrator, the Committee’s
determination on such matter shall be final and binding on all interested
persons, including any Administrator.  The Committee’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, the Committee shall be entitled, among other
things, to make non-uniform and selective determinations, and to enter into
non-uniform and selective Award Documents, as to the persons receiving Awards
under the Plan, and the terms and provisions of Awards under the
Plan.

     

    (e)       No
Liability.  Subject to applicable law: (i) no member of the
Committee or any Administrator shall be liable for anything whatsoever in
connection with the exercise of authority under the Plan or the administration
of the Plan except such person’s own willful misconduct; (ii) under no
circumstances shall any member of the Committee or any Administrator be liable
for any act or omission of any other member of the Committee or an
Administrator; and (iii) in the performance of its functions with respect to the
Plan, the Committee and an Administrator shall be entitled to rely upon
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    by the
officers, accountants and counsel of the Company or the MS Group and any other
party the Committee or the Administrator deems necessary, and no member of the
Committee or any Administrator shall be liable for any action taken or not taken
in good faith reliance upon any such advice.

     

    6.        Eligibility; Nature of
Awards.  Eligible Individuals shall include all officers and
other employees (including prospective employees) of the Company or the MS Group
who were formerly employed by the Smith Barney or Quilter businesses of
Citigroup, and all other employees of Citigroup (or its affiliates), and
consultants or other persons who performed services for Citigroup or any of its
affiliates, in each case, who commence employment with the Company or the MS
Group in connection with the Transaction (or whose employer becomes an affiliate
of MSSB in connection with the Transaction).  Any Award made to a
prospective employee shall be conditioned upon, and effective not earlier than,
such person’s becoming an employee.  An individual’s status as an
Administrator will not affect his or her eligibility to receive Awards under the
Plan.  Notwithstanding the above, Awards shall be granted under the
Plan only in compliance with the rules of the New York Stock Exchange governing
inducement awards or such other rules of the New York Stock Exchange, including
the New York Stock Exchange Corporate Governance Listing Standards, that allow
grants of equity compensation awards without obtaining stockholder approval of
the plan pursuant to which such award is granted, or of the award
itself.

     

    7.        Restricted
Stock.  An Award of Restricted Stock shall be subject to the
terms and conditions established by the Committee in connection with the Award
and specified in the applicable Award Document.  Restricted Stock may,
among other things, be subject to restrictions on transfer, vesting requirements
or cancellation under specified circumstances.

     

    8.        Stock Units.  An
Award of Stock Units shall be subject to the terms and conditions established by
the Committee in connection with the Award and specified in the applicable Award
Document.  Each Stock Unit awarded to a Participant shall correspond
to one Share.  Upon satisfaction of the terms and conditions of the
Award, a Stock Unit will be payable, at the discretion of the Committee, in
Stock or in cash equal to the Fair Market Value on the payment date of one
Share.  As a holder of Stock Units, a Participant shall have only the
rights of a general unsecured creditor of Morgan Stanley.  A
Participant shall not be a stockholder with respect to the Shares underlying
Stock Units unless and until the Stock Units convert to Shares.  Stock
Units may, among other things, be subject to restrictions on transfer, vesting
requirements or cancellation under specified circumstances.

     

    9.        Options.

     

    (a)       Options
Generally.  An Award of Options shall be subject to the terms
and conditions established by the Committee in connection with the Award and
specified in the applicable Award Document.  The Committee shall
establish (or shall authorize the method for establishing) the exercise price of
all Options awarded under the Plan, except that the exercise price of an Option
shall not be less than 100% of the Fair Market Value of one Share on the Award
Date.  Upon satisfaction of the conditions to exercisability of the
Award, a Participant shall be entitled to exercise the Options included in the
Award and to have delivered, upon Morgan Stanley’s receipt of payment of the
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    conditions
or procedures specified by Morgan Stanley, the number of Shares in respect of
which the Options shall have been exercised.  Options may be either
nonqualified stock options or Incentive Stock Options; provided that, unless the
Committee specifically determines otherwise upon the advice of counsel,
Incentive Stock Options may not be granted to employees of the
Company.  Options and the Shares acquired upon exercise of Options
may, among other things, be subject to restrictions on transfer, vesting
requirements or cancellation under specified circumstances.

     

    (b)       Prohibition on Restoration Option
Grants.  Anything in the Plan to the contrary notwithstanding,
the terms of an Option shall not provide that a new Option will be granted,
automatically and without additional consideration in excess of the exercise
price of the underlying Option, to a Participant upon exercise of the
Option.

     

    (c)       Prohibition on Repricing of Options
and SARs.  Anything in the Plan to the contrary
notwithstanding, the Committee may not reprice any Option or
SAR.  “Reprice” means any action that constitutes a “repricing” under
the rules of the New York Stock Exchange.

     

    (d)       Payment of Exercise
Price.  Subject to the provisions of the applicable Award
Document and to the extent authorized by rules and procedures of Morgan Stanley
from time to time, the exercise price of the Option may be paid in cash, by
actual delivery or attestation to ownership of freely transferable Shares
already owned by the person exercising the Option, or by such  other
means as Morgan Stanley may authorize.

     

    (e)       Maximum Term on Stock Options and
SARs.  No Option or SAR shall have an expiration date that is
later than the tenth anniversary of the Award Date thereof.

     

    10.     SARs.  An Award of
SARs shall be subject to the terms and conditions established by the Committee
in connection with the Award and specified in the applicable Award
Document.  The Committee shall establish (or shall authorize the
method for establishing) the exercise price of all SARs awarded under the Plan,
except that the exercise price of a SAR shall not be less than 100% of the Fair
Market Value of one Share on the Award Date.  Upon satisfaction of the
conditions to the payment of the Award, each SAR shall entitle a Participant to
an amount, if any, equal to the Fair Market Value of one Share on the date of
exercise over the SAR exercise price specified in the applicable Award
Document.  At the discretion of the Committee, payments to a
Participant upon exercise of an SAR may be made in Shares, cash or a combination
thereof.  SARs and the Shares that may be acquired upon exercise of
SARs may, among other things, be subject to restrictions on transfer, vesting
requirements or cancellation under specified circumstances.

     

    11.     Other Awards.  The
Committee shall have the authority to establish the terms and provisions of
other forms of equity-based or equity-related Awards (such terms and provisions
to be specified in the applicable Award Document) not described above that the
Committee determines to be consistent with the purpose of the Plan and the
interests of the Company or the MS Group, which Awards may provide for (i) cash
or Stock payments based in whole or in part on the value or future value of
Stock or on any amount that Morgan Stanley pays as dividends or otherwise
distributes with respect to Stock, (ii) the acquisition or future acquisition of
Stock, (iii) cash or Stock payments (including  payment of
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    on one or
more criteria determined by the Committee unrelated to the value of Stock, or
(iv) any combination of the foregoing.  Awards pursuant to this
Section 11 may, among other things, be made subject to restrictions on transfer,
vesting requirements or cancellation under specified circumstances.

     

    12.     General
Terms and Provisions.

     

    (a)       Awards in
General.  Awards may, in the discretion of the Committee, be
made in substitution in whole or in part for cash or other compensation payable
to an Eligible Individual.  In accordance with rules and procedures
authorized by the Committee, an Eligible Individual may elect one form of Award
in lieu of any other form of Award, or may elect to receive an Award in lieu of
all or part of any compensation that otherwise might have been paid to such
Eligible Individual; provided, however, that any such
election shall not require the Committee to make any Award to such Eligible
Individual.  Any such substitute or elective Awards shall have terms
and conditions consistent with the provisions of the Plan applicable to such
Award.  Awards may be granted in tandem with, or independent of, other
Awards. The grant, vesting or payment of an Award may, among other things, be
conditioned on the attainment of performance objectives, including without
limitation objectives based in whole or in part on net income, pre-tax income,
return on equity, earnings per share, total shareholder return or book value per
share.

     

    (b)       Discretionary
Awards.  All grants of Awards and deliveries of Shares, cash or
other property under the Plan shall constitute a special discretionary incentive
payment to the Participant and shall not be required to be taken into account in
computing the amount of salary, wages or other compensation of the Participant
for the purpose of determining any contributions to or any benefits under any
pension, retirement, profit-sharing, bonus, life insurance, severance or other
benefit plan of the Company or the MS Group or other benefits from either the
Company or the MS Group or under any agreement with the Participant, unless the
Company or the MS Group specifically provide otherwise.

     

    (c)       Dividends and
Distributions.  If Morgan Stanley pays any dividend or makes
any distribution to holders of Stock, the Committee may in its discretion
authorize payments (which may be in cash, Stock (including Restricted Stock) or
Stock Units or a combination thereof) with respect to the Shares corresponding
to an Award, or may authorize appropriate adjustments to outstanding Awards, to
reflect such dividend or distribution.  The Committee may make any
such payments subject to vesting, deferral, restrictions on transfer or other
conditions.  Any determination by the Committee with respect to a
Participant’s entitlement to receive any amounts related to dividends or
distributions to holders of Stock, as well as the terms and conditions of such
entitlement, if any, will be part of the terms and conditions of the Award, and
will be included in the Award Document for such Award.

     

    (d)       Deferrals.  In
accordance with the procedures authorized by, and subject to the approval of,
the Committee, Participants may be given the opportunity to defer the payment or
settlement of an Award to one or more dates selected by the
Participant.  To the extent an Award constitutes a deferral of
compensation subject to Section 409A, the Committee shall set forth in writing
(which may be in electronic form), on or before the date the applicable deferral
election is required to be irrevocable in order to meet the requirements of
Section 409A, the conditions under which such election may be made.

     

    
      
         

      

      
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    (e)       Award Documentation and Award
Terms.  The terms and conditions of an Award shall be set forth
in an Award Document authorized by the Committee.  The Award Document
shall include any vesting, exercisability, payment and other restrictions
applicable to an Award (which may include, without limitation, the effects of
termination of employment, cancellation of the Award under specified
circumstances, restrictions on transfer or provision for mandatory resale to the
Company or the MS Group).

     

    13.     Certain
Restrictions.

     

    (a)       Stockholder
Rights.  No Participant (or other persons having rights
pursuant to an Award) shall have any of the rights of a stockholder of Morgan
Stanley with respect to Shares subject to an Award until the delivery of the
Shares, which shall be effected by entry of the Participant’s (or other
person’s) name in the share register of Morgan Stanley or by such other
procedure as may be authorized by Morgan Stanley.  Except as otherwise
provided in Section 4(b) or 12(c), no adjustments shall be made for dividends or
distributions on, or other events relating to, Shares subject to an Award for
which the record date is prior to the date such Shares are
delivered.  Notwithstanding the foregoing, the terms of an Employee
Trust may authorize some or all Participants to give voting or tendering
instructions to the trustee thereof in respect of Shares that are held in such
Employee Trust and are subject to Awards.  Except for the risk of
cancellation and the restrictions on transfer that may apply to certain Shares
(including restrictions relating to any dividends or other rights) or as
otherwise set forth in the applicable Award Document, the Participant shall be
the beneficial owner of any Shares delivered to the Participant in connection
with an Award and, upon such delivery shall be entitled to all rights of
ownership, including, without limitation, the right to vote the Shares and to
receive cash dividends or other dividends (whether in Shares, other securities
or other property) thereon.

     

    (b)       Transferability.  No
Award granted under the Plan shall be transferable, whether voluntarily or
involuntarily, other than by will or by the laws of descent and distribution;
provided that, except with respect to Incentive Stock Options, the Committee may
permit transfers on such terms and conditions as it shall
determine.  During the lifetime of a Participant to whom Incentive
Stock Options were awarded, such Incentive Stock Options shall be exercisable
only by the Participant.

     

    14.     Representation; Compliance with
Law.  The Committee may condition the grant, exercise,
settlement or retention of any Award on the Participant making any
representations required in the applicable Award Document.  Each Award
shall also be conditioned upon the making of any filings and the receipt of any
consents or authorizations required to comply with, or required to be obtained
under, applicable law.

     

    15.     Miscellaneous
Provisions.

     

    (a)       Satisfaction of
Obligations.  As a condition to the making or retention of any
Award, the vesting, exercise or payment of any Award or the lapse of any
restrictions pertaining thereto, Morgan Stanley may require a Participant to pay
such sum to the Company or the MS Group as may be necessary to discharge such
entities’ obligations with respect to any taxes, assessments or other
governmental charges (including FICA and other social security or similar tax)
imposed on property or income received by a Participant pursuant to the Award or to satisfy any obligation 

     

    
      
         

      

      
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    that the
Participant owes to the Company or the MS Group. In accordance with rules and
procedures authorized by Morgan Stanley, (i) such payment may be in the form of
cash or other property, including the tender
of previously owned Shares, and (ii)
in satisfaction of such taxes, assessments or other governmental charges or, exclusively in the case of an Award that does not
constitute a deferral of compensation subject to Section 409A, of other obligations that a Participant owes to
the Company or the MS Group, Morgan Stanley may make available for delivery a
lesser number of Shares in payment or settlement of an Award, may withhold from
any payment or distribution of an Award or may enter into any other suitable
arrangements to satisfy such withholding or other obligation.  To the extent an Award constitutes a deferral of
compensation subject to Section 409A, neither the Company nor the MS Group may offset from the payment of such Award amounts that a
Participant owes to the Company or the MS
Group with respect to any such other
obligation except to the extent such offset is not prohibited by Section 409A
and would not cause a Participant to recognize income for United States federal
income tax purposes prior to the time of payment of the Award  or to
incur interest or additional tax under Section 409A.

     

    (b)       No Right to Continued
Employment.  Neither the Plan nor any Award shall give rise to
any right on the part of any Participant to continue in the employ of the
Company or the MS Group.

     

    (c)       Headings.  The
headings of sections herein are included solely for convenience of reference and
shall not affect the meaning of any of the provisions of the Plan.

     

    (d)       Governing Law.  The
Plan and all rights hereunder shall be construed in accordance with and governed
by 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.

     

    (e)       Amendments and
Termination.  The Board or Committee may modify, amend, suspend
or terminate the Plan in whole or in part at any time and may modify or amend
the terms and conditions of any outstanding Award (including by amending or
supplementing the relevant Award Document at any time); provided, however, that
no such modification, amendment, suspension or termination shall, without a
Participant’s consent, materially adversely affect that Participant’s rights
with respect to any Award previously made; and provided, further, that the
Committee shall have the right at any time, without a Participant’s consent and
whether or not the Participant’s rights are materially adversely affected
thereby, to amend or modify the Plan or any Award under the Plan in any manner
that the Committee considers necessary or advisable to comply with any law,
regulation, ruling, judicial decision, accounting standards, regulatory guidance
or other legal requirement.  Notwithstanding the preceding sentence,
neither the Board nor the Committee may accelerate the payment or settlement of
any Award, including, without limitation, any Award subject to a prior deferral
election, that constitutes a deferral of compensation for purposes of Section
409A except to the extent such acceleration would not result in the Participant
incurring interest or additional tax under Section 409A.  No amendment
to the Plan may render any Board member who is not an employee of the Company or
the MS Group eligible to receive an Award at any time while such member is
serving on the Board.  To the extent required by applicable law or the
rules of the New York Stock Exchange, amendments to the Plan shall not be
effective unless they are approved by Morgan Stanley’s
stockholders.

     

     

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