FORM OF FIXED RATE SENIOR NOTE

REGISTERED                                                   REGISTERED
No. FXR-1                                                    U.S. $
                                                             CUSIP:

     Unless this certificate is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York, New York) to the
issuer or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name
as requested by an authorized representative of The Depository Trust Company
and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered
owner hereof, Cede & Co., has an interest herein.


<PAGE>


<TABLE>
                                                   MORGAN STANLEY
                                     SENIOR GLOBAL MEDIUM-TERM NOTES, SERIES F
                                                    (Fixed Rate)

                                           STOCK PARTICIPATION ACCRETING
                                 REDEMPTION QUARTERLY-PAY SECURITIES(SM) ("SPARQS")

                                          % SPARQS(R) DUE DECEMBER 1, 2006
                                              MANDATORILY EXCHANGEABLE
                                           FOR SHARES OF COMMON STOCK OF
                                                  TRANSOCEAN INC.

--------------------------------------------------------------------------------------------------------------------
<S>                           <C>                          <C>                          <C>
ORIGINAL ISSUE DATE:          INITIAL REDEMPTION DATE:     INTEREST RATE:      per      MATURITY DATE: See
                                See "Morgan Stanley Call     annum (equivalent to $       "Maturity Date" below.
                                Right" below.                per annum per SPARQS)
--------------------------------------------------------------------------------------------------------------------
INTEREST ACCRUAL DATE:        INITIAL REDEMPTION           INTEREST PAYMENT DATE(S):    OPTIONAL REPAYMENT
                                PERCENTAGE: See "Morgan      See "Interest Payment        DATE(S): N/A
                                Stanley Call Right" and      Dates" below.
                                "Call Price" below.
--------------------------------------------------------------------------------------------------------------------
SPECIFIED CURRENCY: U.S.      ANNUAL REDEMPTION            INTEREST PAYMENT PERIOD:     APPLICABILITY OF MODIFIED
  dollars                       PERCENTAGE REDUCTION: N/A    Quarterly                    PAYMENT UPON
                                                                                          ACCELERATION OR
                                                                                          REDEMPTION: See
                                                                                          "Alternate Exchange
                                                                                          Calculation in Case of
                                                                                          an Event of Default"
                                                                                          below.
--------------------------------------------------------------------------------------------------------------------
IF SPECIFIED CURRENCY OTHER   REDEMPTION NOTICE PERIOD:    APPLICABILITY OF ANNUAL      If yes, state Issue Price:
  THAN U.S. DOLLARS, OPTION     At least 10 days but no      INTEREST PAYMENTS: N/A       N/A
  TO ELECT PAYMENT IN U.S.      more than 30 days.  See
  DOLLARS: N/A                  "Morgan Stanley Call
                                Right" and "Morgan
                                Stanley Notice Date"
                                below.
--------------------------------------------------------------------------------------------------------------------
EXCHANGE RATE AGENT: N/A      TAX REDEMPTION AND PAYMENT   PRICE APPLICABLE UPON        ORIGINAL YIELD TO
                                OF ADDITIONAL AMOUNTS:       OPTIONAL REPAYMENT: N/A      MATURITY: N/A
                                N/A
--------------------------------------------------------------------------------------------------------------------
OTHER PROVISIONS: See         IF YES, STATE INITIAL
  below.                        OFFERING DATE: N/A
--------------------------------------------------------------------------------------------------------------------
</TABLE>

Issue Price............. $          per each $          principal amount of
                         this SPARQS


                                       2
<PAGE>


Maturity Date........... December 1, 2006, subject to acceleration as described
                         below in "Price Event Acceleration" and "Alternate
                         Exchange Calculation in Case of an Event of Default"
                         and subject to extension if the Final Call Notice Date
                         is postponed in accordance with the following
                         paragraph.

                         If the Final Call Notice Date is postponed because it
                         is not a Trading Day or due to a Market Disruption
                         Event or otherwise and the Issuer exercises the Morgan
                         Stanley Call Right, the Maturity Date shall be
                         postponed so that the Maturity Date will be the tenth
                         calendar day following the Final Call Notice Date. See
                         "Final Call Notice Date" below.

                         In the event that the Final Call Notice Date is
                         postponed because it is not a Trading Day or due to a
                         Market Disruption Event or otherwise, the Issuer shall
                         give notice of such postponement as promptly as
                         possible, and in no case later than two Business Days
                         following the scheduled Final Call Notice Date, (i) to
                         the holder of this SPARQS by mailing notice of such
                         postponement by first class mail, postage prepaid, to
                         the holder's last address as it shall appear upon the
                         registry books, (ii) to the Trustee by telephone or
                         facsimile confirmed by mailing such notice to the
                         Trustee by first class mail, postage prepaid, at its
                         New York office and (iii) to The Depository Trust
                         Company (the "Depositary") by telephone or facsimile
                         confirmed by mailing such notice to the Depositary by
                         first class mail, postage prepaid. Any notice that is
                         mailed in the manner herein provided shall be
                         conclusively presumed to have been duly given, whether
                         or not the holder of this SPARQS receives the notice.
                         Notice of the date to which the Maturity Date has been
                         rescheduled as a result of postponement of the Final
                         Call Notice Date, if applicable, shall be included in
                         the Issuer's notice of exercise of the Morgan Stanley
                         Call Right.

Interest Payment Dates.. March 1, 2006, June 1, 2006, September 1, 2006 and the
                         Maturity Date.

                         If the scheduled Maturity Date is postponed due to a
                         Market Disruption Event or otherwise, the Issuer shall
                         pay interest on the Maturity Date as postponed rather
                         than on December 1, 2006, but no interest will accrue


                                       3
<PAGE>


                         on this SPARQS or on such payment during the period
                         from or after the scheduled Maturity Date.

Record Date............. Notwithstanding the definition of "Record Date" on
                         page 23 hereof, the Record Date for each Interest
                         Payment Date, including the Interest Payment Date
                         scheduled to occur on the Maturity Date, shall be the
                         date 5 calendar days prior to such scheduled Interest
                         Payment Date, whether or not that date is a Business
                         Day; provided, however, that in the event that the
                         Issuer exercises the Morgan Stanley Call Right, no
                         Interest Payment Date shall occur after the Morgan
                         Stanley Notice Date, except for any Interest Payment
                         Date for which the Morgan Stanley Notice Date falls on
                         or after the "ex-interest" date for the related
                         interest payment, in which case the related interest
                         payment shall be made on such Interest Payment Date;
                         and provided, further, that accrued but unpaid
                         interest payable on the Call Date, if any, shall be
                         payable to the person to whom the Call Price is
                         payable. The "ex-interest" date for any interest
                         payment is the date on which purchase transactions in
                         the SPARQS no longer carry the right to receive such
                         interest payment.

                         In the event that the Issuer exercises the Morgan
                         Stanley Call Right and the Morgan Stanley Notice Date
                         falls before the "ex-interest" date for an interest
                         payment, so that as a result a scheduled Interest
                         Payment Date will not occur, the Issuer shall cause
                         the Calculation Agent to give notice to the Trustee
                         and to the Depositary, in each case in the manner and
                         at the time described in the second and third
                         paragraphs under "Morgan Stanley Call Right" below,
                         that no Interest Payment Date will occur after such
                         Morgan Stanley Notice Date.

Denominations........... $       and integral multiples thereof

Morgan Stanley Call
Right................... On any scheduled Trading Day on or after June 1, 2006
                         or on the Maturity Date (including the Maturity Date
                         as it may be extended and regardless of whether the
                         Maturity Date is a Trading Day), the Issuer may call
                         the SPARQS, in whole but not in part, for mandatory
                         exchange for the Call Price paid in cash (together
                         with accrued but unpaid interest) on the Call Date.


                                       4
<PAGE>


                         On the Morgan Stanley Notice Date, the Issuer shall
                         give notice of the Issuer's exercise of the Morgan
                         Stanley Call Right (i) to the holder of this SPARQS by
                         mailing notice of such exercise, specifying the Call
                         Date on which the Issuer shall effect such exchange,
                         by first class mail, postage prepaid, to the holder's
                         last address as it shall appear upon the registry
                         books, (ii) to the Trustee by telephone or facsimile
                         confirmed by mailing such notice to the Trustee by
                         first class mail, postage prepaid, at its New York
                         office and (iii) to the Depositary in accordance with
                         the applicable procedures set forth in the Blanket
                         Letter of Representations prepared by the Issuer. Any
                         notice which is mailed in the manner herein provided
                         shall be conclusively presumed to have been duly
                         given, whether or not the holder of this SPARQS
                         receives the notice. Failure to give notice by mail or
                         any defect in the notice to the holder of any SPARQS
                         shall not affect the validity of the proceedings for
                         the exercise of the Morgan Stanley Call Right with
                         respect to any other SPARQS.

                         The notice of the Issuer's exercise of the Morgan
                         Stanley Call Right shall specify (i) the Call Date,
                         (ii) the Call Price payable per SPARQS, (iii) the
                         amount of accrued but unpaid interest payable per
                         SPARQS on the Call Date, (iv) whether any subsequently
                         scheduled Interest Payment Date shall no longer be an
                         Interest Payment Date as a result of the exercise of
                         the Morgan Stanley Call Right, (v) the place or places
                         of payment of such Call Price, (vi) that such delivery
                         will be made upon presentation and surrender of this
                         SPARQS, (vii) that such exchange is pursuant to the
                         Morgan Stanley Call Right and (viii) if applicable,
                         the date to which the Maturity Date has been extended
                         due to a Market Disruption Event as described under
                         "Maturity Date" above.

                         The notice of the Issuer's exercise of the Morgan
                         Stanley Call Right shall be given by the Issuer or, at
                         the Issuer's request, by the Trustee in the name and
                         at the expense of the Issuer.

                         If this SPARQS is so called for mandatory exchange by
                         the Issuer, then the cash Call Price and any accrued
                         but unpaid interest on this SPARQS to be delivered to


                                       5
<PAGE>


                         the holder of this SPARQS shall be delivered on the
                         Call Date fixed by the Issuer and set forth in its
                         notice of its exercise of the Morgan Stanley Call
                         Right, upon delivery of this SPARQS to the Trustee.
                         The Issuer shall, or shall cause the Calculation Agent
                         to, deliver such cash to the Trustee for delivery to
                         the holder of this SPARQS.

                         If this SPARQS is not surrendered for exchange on the
                         Call Date, it shall be deemed to be no longer
                         Outstanding under, and as defined in, the Senior
                         Indenture after the Call Date, except with respect to
                         the holder's right to receive cash due in connection
                         with the Morgan Stanley Call Right.

Morgan Stanley
Notice Date............. The scheduled Trading Day on which the Issuer issues
                         its notice of mandatory exchange, which must be at
                         least 10 but not more than 30 days prior to the Call
                         Date.

Final Call
Notice Date............. November 21, 2006; provided that if November 21, 2006
                         is not a Trading Day or if a Market Disruption Event
                         occurs on such day, the Final Call Notice Date will be
                         the immediately succeeding Trading Day on which no
                         Market Disruption Event occurs.

Call Date............... The day specified in the Issuer's notice of mandatory
                         exchange, on which the Issuer shall deliver cash to
                         the holder of this SPARQS, for mandatory exchange,
                         which day may be any scheduled Trading Day on or after
                         June 1, 2006 or the Maturity Date (including the
                         Maturity Date as it may be extended and regardless of
                         whether the Maturity Date is a scheduled Trading Day).
                         See "Maturity Date" above.

Call Price.............. The Call Price with respect to any Call Date is an
                         amount of cash per each $         principal amount of
                         this SPARQS, as calculated by the Calculation Agent,
                         such that the sum of the present values of all cash
                         flows on each $         principal amount of this
                         SPARQS to and including the Call Date (i.e., the Call
                         Price and all of the interest payments, including
                         accrued and unpaid interest payable on the Call Date),
                         discounted to the Original Issue Date from the
                         applicable payment date at the Yield to Call rate of
                             % per annum computed on the basis of a 360-day
                         year of twelve 30-day


                                       6
<PAGE>


                         months, equals the Issue Price, as determined by the
                         Calculation Agent.

Exchange at Maturity.... At maturity, subject to a prior call of this SPARQS
                         for cash in an amount equal to the Call Price by the
                         Issuer as described under "Morgan Stanley Call Right"
                         above or any acceleration of the SPARQS, upon delivery
                         of this SPARQS to the Trustee, each $
                         principal amount of this SPARQS shall be applied by
                         the Issuer as payment for a number of shares of common
                         stock of Transocean Inc. ("Transocean Stock") at the
                         Exchange Ratio, and the Issuer shall deliver with
                         respect to each $         principal amount of this
                         SPARQS an amount of Transocean Stock equal to the
                         Exchange Ratio.

                         The amount of Transocean Stock to be delivered at
                         maturity shall be subject to any applicable
                         adjustments (i) to the Exchange Ratio (including, as
                         applicable, any New Stock Exchange Ratio or any Basket
                         Stock Exchange Ratio, each as defined in paragraph 5
                         under "Antidilution Adjustments" below) and (ii) in
                         the Exchange Property, as defined in paragraph 5 under
                         "Antidilution Adjustments" below, to be delivered
                         instead of, or in addition to, such Transocean Stock
                         as a result of any corporate event described under
                         "Antidilution Adjustments" below, in each case,
                         required to be made through the close of business on
                         the third Trading Day prior to the scheduled Maturity
                         Date.

                         The Issuer shall, or shall cause the Calculation Agent
                         to, provide written notice to the Trustee at its New
                         York Office and to the Depositary, on which notice the
                         Trustee and Depositary may conclusively rely, on or
                         prior to 10:30 a.m. on the Trading Day immediately
                         prior to maturity of this SPARQS (but if such Trading
                         Day is not a Business Day, prior to the close of
                         business on the Business Day preceding the maturity of
                         this SPARQS), of the amount of Transocean Stock (or
                         the amount of Exchange Property) or cash to be
                         delivered with respect to each $ principal amount of
                         this SPARQS and of the amount of any cash to be paid
                         in lieu of any fractional share of Transocean Stock
                         (or of any other securities included in Exchange
                         Property, if applicable); provided that if the
                         maturity date of this SPARQS is accelerated (x)
                         because of a Price Event


                                       7
<PAGE>


                         Acceleration (as described under "Price Event
                         Acceleration" below) or (y) because of an Event of
                         Default Acceleration (as defined under "Alternate
                         Exchange Calculation in Case of an Event of Default"
                         below), the Issuer shall give notice of such
                         acceleration as promptly as possible, and in no case
                         later than (A) in the case of an Event of Default
                         Acceleration, two Trading Days following such deemed
                         maturity date or (B) in the case of a Price Event
                         Acceleration, 10:30 a.m. on the Trading Day
                         immediately prior to the date of acceleration (as
                         defined under "Price Event Acceleration" below), (i)
                         to the holder of this SPARQS by mailing notice of such
                         acceleration by first class mail, postage prepaid, to
                         the holder's last address as it shall appear upon the
                         registry books, (ii) to the Trustee by telephone or
                         facsimile confirmed by mailing such notice to the
                         Trustee by first class mail, postage prepaid, at its
                         New York office and (iii) to the Depositary by
                         telephone or facsimile confirmed by mailing such
                         notice to the Depositary by first class mail, postage
                         prepaid. Any notice that is mailed in the manner
                         herein provided shall be conclusively presumed to have
                         been duly given, whether or not the holder of this
                         SPARQS receives the notice. If the maturity of this
                         SPARQS is accelerated, no interest on the amounts
                         payable with respect to this SPARQS shall accrue for
                         the period from and after such accelerated maturity
                         date; provided that the Issuer has deposited with the
                         Trustee Transocean Stock, the Exchange Property or any
                         cash due with respect to such acceleration by such
                         accelerated maturity date.

                         The Issuer shall, or shall cause the Calculation Agent
                         to, deliver any such shares of Transocean Stock (or
                         any Exchange Property) and cash in respect of interest
                         and any fractional share of Transocean Stock (or any
                         Exchange Property) and cash otherwise due upon any
                         acceleration described above to the Trustee for
                         delivery to the holder of this Note. References to
                         payment "per SPARQS" refer to each $         principal
                         amount of this SPARQS.

                         If this SPARQS is not surrendered for exchange at
                         maturity, it shall be deemed to be no longer
                         Outstanding under, and as defined in, the Senior
                         Indenture, except with respect to the holder's right
                         to


                                       8
<PAGE>


                         receive Transocean Stock (and, if applicable, any
                         Exchange Property) and any cash in respect of interest
                         and any fractional share of Transocean Stock (or any
                         Exchange Property) and any other cash due at maturity
                         as described in the preceding paragraph under this
                         heading.

Price Event
Acceleration............ If on any two consecutive Trading Days during the
                         period prior to and ending on the third Business Day
                         immediately preceding the Maturity Date, the product
                         of the Closing Price of Transocean Stock and the
                         Exchange Ratio is less than $2.00, the Maturity Date
                         of this SPARQS shall be deemed to be accelerated to
                         the third Business Day immediately following such
                         second Trading Day (the "date of acceleration"). Upon
                         such acceleration, the holder of each $       principal
                         amount of this SPARQS shall receive per SPARQS on the
                         date of acceleration:

                              (i) a number of shares of Transocean Stock at the
                              then current Exchange Ratio;

                              (ii)accrued but unpaid interest on each $
                              principal amount of this SPARQS to but excluding
                              the date of acceleration; and

                              (iii) an amount of cash as determined by the
                              Calculation Agent equal to the sum of the present
                              values of the remaining scheduled payments of
                              interest on each $         principal amount of
                              this SPARQS (excluding the amounts included in
                              clause (ii) above) discounted to the date of
                              acceleration. The present value of each remaining
                              scheduled payment will be based on the comparable
                              yield that the Issuer would pay on a non-interest
                              bearing, senior unsecured debt obligation of the
                              Issuer having a maturity equal to the term of
                              each such remaining scheduled payment, as
                              determined by the Calculation Agent.

No Fractional Shares.... Upon delivery of this SPARQS to the Trustee at
                         maturity, the Issuer shall deliver the aggregate
                         number of shares of Transocean Stock due with respect
                         to this SPARQS, as described above, but the Issuer
                         shall pay cash in lieu of delivering any fractional
                         share of Transocean Stock in an amount equal to the


                                       9
<PAGE>


                         corresponding fractional Closing Price of such
                         fraction of a share of Transocean Stock as determined
                         by the Calculation Agent as of the second scheduled
                         Trading Day prior to maturity of this SPARQS.

Exchange Ratio.......... 1.0, subject to adjustment for corporate events
                         relating to Transocean Stock described under
                         "Antidilution Adjustments" below.

Closing Price........... The Closing Price for one share of Transocean Stock
                         (or one unit of any other security for which a Closing
                         Price must be determined) on any Trading Day (as
                         defined below) means:

                         o    if Transocean Stock (or any such other security)
                              is listed or admitted to trading on a national
                              securities exchange, the last reported sale
                              price, regular way, of the principal trading
                              session on such day on the principal United
                              States securities exchange registered under the
                              Securities Exchange Act of 1934, as amended (the
                              "Exchange Act"), on which Transocean Stock (or
                              any such other security) is listed or admitted to
                              trading,

                         o    if Transocean Stock (or any such other security)
                              is a security of the Nasdaq National Market (and
                              provided that the Nasdaq National Market is not
                              then a national securities exchange), the Nasdaq
                              official closing price published by The Nasdaq
                              Stock Market, Inc. on such day, or

                         o    if Transocean Stock (or any such other security)
                              is neither listed or admitted to trading on any
                              national securities exchange nor a security of
                              the Nasdaq National Market but is included in the
                              OTC Bulletin Board Service (the "OTC Bulletin
                              Board") operated by the National Association of
                              Securities Dealers, Inc. (the "NASD"), the last
                              reported sale price of the principal trading
                              session on the OTC Bulletin Board on such day.

                         If Transocean Stock (or any such other security) is
                         listed or admitted to trading on any national
                         securities exchange or is a security of the Nasdaq
                         National Market but the last reported sale price or
                         Nasdaq official closing price, as applicable, is not
                         available


                                      10
<PAGE>


                         pursuant to the preceding sentence, then the Closing
                         Price for one share of Transocean Stock (or one unit
                         of any such other security) on any Trading Day will
                         mean the last reported sale price of the principal
                         trading session on the over-the-counter market as
                         reported on the Nasdaq National Market or the OTC
                         Bulletin Board on such day. If, because of a Market
                         Disruption Event (as defined below) or otherwise, the
                         last reported sale price or Nasdaq official closing
                         price, as applicable, for Transocean Stock (or any
                         such other security) is not available pursuant to
                         either of the two preceding sentences, then the
                         Closing Price for any Trading Day will be the mean, as
                         determined by the Calculation Agent, of the bid prices
                         for Transocean Stock (or any such other security)
                         obtained from as many recognized dealers in such
                         security, but not exceeding three, as will make such
                         bid prices available to the Calculation Agent. Bids of
                         MS & Co. or any of its affiliates may be included in
                         the calculation of such mean, but only to the extent
                         that any such bid is the highest of the bids obtained.
                         The term "security of the Nasdaq National Market" will
                         include a security included in any successor to such
                         system, and the term OTC Bulletin Board Service will
                         include any successor service thereto.

Trading Day............. A day, as determined by the Calculation Agent, on
                         which trading is generally conducted on the New York
                         Stock Exchange, Inc. ("NYSE"), the American Stock
                         Exchange LLC, the Nasdaq National Market, the Chicago
                         Mercantile Exchange and the Chicago Board of Options
                         Exchange and in the over-the-counter market for equity
                         securities in the United States.

Calculation Agent....... MS & Co. and its successors.

                         All calculations with respect to the Exchange Ratio
                         and Call Price for the SPARQS shall be made by the
                         Calculation Agent and shall be rounded to the nearest
                         one hundred-thousandth, with five one-millionths
                         rounded upward (e.g., .876545 would be rounded to
                         .87655); all dollar amounts related to the Call Price
                         resulting from such calculations shall be rounded to
                         the nearest ten-thousandth, with five one hundred-
                         thousandths rounded upward (e.g., .76545 would be
                         rounded to .7655); and all dollar amounts paid with


                                      11
<PAGE>


                         respect to the Call Price on the aggregate number of
                         SPARQS shall be rounded to the nearest cent, with
                         one-half cent rounded upward.

                         All determinations made by the Calculation Agent shall
                         be at the sole discretion of the Calculation Agent and
                         shall, in the absence of manifest error, be conclusive
                         for all purposes and binding on the holder of this
                         SPARQS, the Trustee and the Issuer.

Antidilution
Adjustments............. The Exchange Ratio shall be adjusted as follows:

                         1. If Transocean Stock is subject to a stock split or
                         reverse stock split, then once such split has become
                         effective, the Exchange Ratio shall be adjusted to
                         equal the product of the prior Exchange Ratio and the
                         number of shares issued in such stock split or reverse
                         stock split with respect to one share of Transocean
                         Stock.

                         2. If Transocean Stock is subject (i) to a stock
                         dividend (issuance of additional shares of Transocean
                         Stock) that is given ratably to all holders of shares
                         of Transocean Stock or (ii) to a distribution of
                         Transocean Stock as a result of the triggering of any
                         provision of the corporate charter of Transocean Inc.
                         ("Transocean"), then once the dividend has become
                         effective and Transocean Stock is trading ex-dividend,
                         the Exchange Ratio shall be adjusted so that the new
                         Exchange Ratio shall equal the prior Exchange Ratio
                         plus the product of (i) the number of shares issued
                         with respect to one share of Transocean Stock and (ii)
                         the prior Exchange Ratio.

                         3. If Transocean issues rights or warrants to all
                         holders of Transocean Stock to subscribe for or
                         purchase Transocean Stock at an exercise price per
                         share less than the Closing Price of Transocean Stock
                         on both (i) the date the exercise price of such rights
                         or warrants is determined and (ii) the expiration date
                         of such rights or warrants, and if the expiration date
                         of such rights or warrants precedes the maturity of
                         this SPARQS, then the Exchange Ratio shall be adjusted
                         to equal the product of the prior Exchange Ratio and a
                         fraction, the numerator of which shall be the number
                         of shares of Transocean Stock outstanding immediately
                         prior to the


                                      12
<PAGE>


                         issuance of such rights or warrants plus the number of
                         additional shares of Transocean Stock offered for
                         subscription or purchase pursuant to such rights or
                         warrants and the denominator of which shall be the
                         number of shares of Transocean Stock outstanding
                         immediately prior to the issuance of such rights or
                         warrants plus the number of additional shares of
                         Transocean Stock which the aggregate offering price of
                         the total number of shares of Transocean Stock so
                         offered for subscription or purchase pursuant to such
                         rights or warrants would purchase at the Closing Price
                         on the expiration date of such rights or warrants,
                         which shall be determined by multiplying such total
                         number of shares offered by the exercise price of such
                         rights or warrants and dividing the product so
                         obtained by such Closing Price.

                         4. There shall be no adjustments to the Exchange Ratio
                         to reflect cash dividends or other distributions paid
                         with respect to Transocean Stock other than
                         distributions described in paragraph 2, paragraph 3
                         and clauses (i), (iv) and (v) of the first sentence of
                         paragraph 5 and Extraordinary Dividends.
                         "Extraordinary Dividend" means each of (a) the full
                         amount per share of Transocean Stock of any cash
                         dividend or special dividend or distribution that is
                         identified by Transocean as an extraordinary or
                         special dividend or distribution, (b) the excess of
                         any cash dividend or other cash distribution (that is
                         not otherwise identified by Transocean as an
                         extraordinary or special dividend or distribution)
                         distributed per share of Transocean Stock over the
                         immediately preceding cash dividend or other cash
                         distribution, if any, per share of Transocean Stock
                         that did not include an Extraordinary Dividend (as
                         adjusted for any subsequent corporate event requiring
                         an adjustment hereunder, such as a stock split or
                         reverse stock split) if such excess portion of the
                         dividend or distribution is more than 5% of the
                         Closing Price of Transocean Stock on the Trading Day
                         preceding the "ex-dividend date" (that is, the day on
                         and after which transactions in Transocean Stock on an
                         organized securities exchange or trading system no
                         longer carry the right to receive that cash dividend
                         or other cash distribution) for the payment of such
                         cash dividend or other cash distribution (such Closing
                         Price, the "Base Closing


                                      13
<PAGE>


                         Price") and (c) the full cash value of any non-cash
                         dividend or distribution per share of Transocean Stock
                         (excluding Marketable Securities, as defined in
                         paragraph 5 below). Subject to the following sentence,
                         if any cash dividend or distribution of such other
                         property with respect to Transocean Stock includes an
                         Extraordinary Dividend, the Exchange Ratio with
                         respect to Transocean Stock shall be adjusted on the
                         ex-dividend date so that the new Exchange Ratio shall
                         equal the product of (i) the prior Exchange Ratio and
                         (ii) a fraction, the numerator of which is the Base
                         Closing Price, and the denominator of which is the
                         amount by which the Base Closing Price exceeds the
                         Extraordinary Dividend. If any Extraordinary Dividend
                         is at least 35% of the Base Closing Price, then,
                         instead of adjusting the Exchange Ratio, the amount
                         payable upon exchange at maturity shall be determined
                         as described in paragraph 5 below, and the
                         Extraordinary Dividend shall be allocated to Reference
                         Basket Stocks in accordance with the procedures for a
                         Reference Basket Event as described in clause (c)(ii)
                         of paragraph 5 below. The value of the non-cash
                         component of an Extraordinary Dividend shall be
                         determined on the ex-dividend date for such
                         distribution by the Calculation Agent, whose
                         determination shall be conclusive in the absence of
                         manifest error. A distribution on Transocean Stock
                         described in clause (i), (iv) or (v) of the first
                         sentence of paragraph 5 below shall cause an
                         adjustment to the Exchange Ratio pursuant only to
                         clause (i), (iv) or (v) of the first sentence of
                         paragraph 5, as applicable.

                         5. Any of the following shall constitute a
                         Reorganization Event: (i) Transocean Stock is
                         reclassified or changed, including, without
                         limitation, as a result of the issuance of any
                         tracking stock by Transocean, (ii) Transocean has been
                         subject to any merger, combination or consolidation
                         and is not the surviving entity, (iii) Transocean
                         completes a statutory exchange of securities with
                         another corporation (other than pursuant to clause
                         (ii) above), (iv) Transocean is liquidated, (v)
                         Transocean issues to all of its shareholders equity
                         securities of an issuer other than Transocean (other
                         than in a transaction described in clause (ii), (iii)
                         or (iv) above) (a "spinoff stock") or (vi) Transocean
                         Stock is the subject of a tender or


                                      14
<PAGE>


                         exchange offer or going private transaction on all of
                         the outstanding shares. If any Reorganization Event
                         occurs, in each case as a result of which the holders
                         of Transocean Stock receive any equity security listed
                         on a national securities exchange or traded on The
                         Nasdaq National Market (a "Marketable Security"),
                         other securities or other property, assets or cash
                         (collectively "Exchange Property"), the amount payable
                         upon exchange at maturity with respect to each $
                         principal amount of this SPARQS following the
                         effective date for such Reorganization Event (or, if
                         applicable, in the case of spinoff stock, the
                         ex-dividend date for the distribution of such spinoff
                         stock) and any required adjustment to the Exchange
                         Ratio shall be determined in accordance with the
                         following:

                              (a) if Transocean Stock continues to be
                              outstanding, Transocean Stock (if applicable, as
                              reclassified upon the issuance of any tracking
                              stock) at the Exchange Ratio in effect on the
                              third Trading Day prior to the scheduled Maturity
                              Date (taking into account any adjustments for any
                              distributions described under clause (c)(i)
                              below); and

                              (b) for each Marketable Security received in such
                              Reorganization Event (each a "New Stock"),
                              including the issuance of any tracking stock or
                              spinoff stock or the receipt of any stock
                              received in exchange for Transocean Stock, the
                              number of shares of the New Stock received with
                              respect to one share of Transocean Stock
                              multiplied by the Exchange Ratio for Transocean
                              Stock on the Trading Day immediately prior to the
                              effective date of the Reorganization Event (the
                              "New Stock Exchange Ratio"), as adjusted to the
                              third Trading Day prior to the scheduled Maturity
                              Date (taking into account any adjustments for
                              distributions described under clause (c)(i)
                              below); and

                              (c) for any cash and any other property or
                              securities other than Marketable Securities
                              received in such Reorganization Event (the
                              "Non-Stock Exchange Property"),


                                      15
<PAGE>


                                   (i) if the combined value of the amount of
                                   Non-Stock Exchange Property received per
                                   share of Transocean Stock, as determined by
                                   the Calculation Agent in its sole discretion
                                   on the effective date of such Reorganization
                                   Event (the "Non-Stock Exchange Property
                                   Value"), by holders of Transocean Stock is
                                   less than 25% of the Closing Price of
                                   Transocean Stock on the Trading Day
                                   immediately prior to the effective date of
                                   such Reorganization Event, a number of
                                   shares of Transocean Stock, if applicable,
                                   and of any New Stock received in connection
                                   with such Reorganization Event, if
                                   applicable, in proportion to the relative
                                   Closing Prices of Transocean Stock and any
                                   such New Stock, and with an aggregate value
                                   equal to the Non-Stock Exchange Property
                                   Value multiplied by the Exchange Ratio in
                                   effect for Transocean Stock on the Trading
                                   Day immediately prior to the effective date
                                   of such Reorganization Event, based on such
                                   Closing Prices, in each case as determined
                                   by the Calculation Agent in its sole
                                   discretion on the effective date of such
                                   Reorganization Event; and the number of such
                                   shares of Transocean Stock or any New Stock
                                   determined in accordance with this clause
                                   (c)(i) shall be added at the time of such
                                   adjustment to the Exchange Ratio in
                                   subparagraph (a) above and/or the New Stock
                                   Exchange Ratio in subparagraph (b) above, as
                                   applicable, or

                                   (ii) if the Non-Stock Exchange Property
                                   Value is equal to or exceeds 25% of the
                                   Closing Price of Transocean Stock on the
                                   Trading Day immediately prior to the
                                   effective date relating to such
                                   Reorganization Event or, if Transocean Stock
                                   is surrendered exclusively for Non-Stock
                                   Exchange Property (in each case, a
                                   "Reference Basket Event"), an initially
                                   equal-dollar weighted basket of three
                                   Reference Basket Stocks (as defined below)
                                   with an aggregate value on the effective
                                   date of such Reorganization Event equal to
                                   the Non-Stock Exchange Property Value
                                   multiplied by the Exchange Ratio in effect
                                   for Transocean Stock


                                      16
<PAGE>


                                   on the Trading Day immediately prior to the
                                   effective date of such Reorganization Event.
                                   The "Reference Basket Stocks" shall be the
                                   three stocks with the largest market
                                   capitalization among the stocks that then
                                   comprise the S&P 500 Index (or, if
                                   publication of such index is discontinued,
                                   any successor or substitute index selected
                                   by the Calculation Agent in its sole
                                   discretion) with the same primary Standard
                                   Industrial Classification Code ("SIC Code")
                                   as Transocean; provided, however, that a
                                   Reference Basket Stock shall not include any
                                   stock that is subject to a trading
                                   restriction under the trading restriction
                                   policies of Morgan Stanley or any of its
                                   affiliates that would materially limit the
                                   ability of Morgan Stanley or any of its
                                   affiliates to hedge the SPARQS with respect
                                   to such stock (a "Hedging Restriction");
                                   provided further that if three Reference
                                   Basket Stocks cannot be identified from the
                                   S&P 500 Index by primary SIC Code for which
                                   a Hedging Restriction does not exist, the
                                   remaining Reference Basket Stock(s) shall be
                                   selected by the Calculation Agent from the
                                   largest market capitalization stock(s)
                                   within the same Division and Major Group
                                   classification (as defined by the Office of
                                   Management and Budget) as the primary SIC
                                   Code for Transocean. Each Reference Basket
                                   Stock shall be assigned a Basket Stock
                                   Exchange Ratio equal to the number of shares
                                   of such Reference Basket Stock with a
                                   Closing Price on the effective date of such
                                   Reorganization Event equal to the product of
                                   (a) the Non-Stock Exchange Property Value,
                                   (b) the Exchange Ratio in effect for
                                   Transocean Stock on the Trading Day
                                   immediately prior to the effective date of
                                   such Reorganization Event and (c) 0.3333333.

                         Following the allocation of any Extraordinary Dividend
                         to Reference Basket Stocks pursuant to paragraph 4
                         above or any Reorganization Event described in this
                         paragraph 5, the amount payable upon exchange at
                         maturity with respect to each $         principal
                         amount of this SPARQS shall be the sum of:


                                      17
<PAGE>


                              (x)  if applicable, Transocean Stock at the
                                   Exchange Ratio then in effect; and

                              (y)  if applicable, for each New Stock, such New
                                   Stock at the New Stock Exchange Ratio then
                                   in effect for such New Stock; and

                              (z)  if applicable, for each Reference Basket
                                   Stock, such Reference Basket Stock at the
                                   Basket Stock Exchange Ratio then in effect
                                   for such Reference Basket Stock.

                         In each case, the applicable Exchange Ratio (including
                         for this purpose, any New Stock Exchange Ratio or
                         Basket Stock Exchange Ratio) shall be determined by
                         the Calculation Agent on the third Trading Day prior
                         to the scheduled Maturity Date.

                         For purposes of paragraph 5 above, in the case of a
                         consummated tender or exchange offer or going-private
                         transaction involving consideration of particular
                         types, Exchange Property shall be deemed to include
                         the amount of cash or other property delivered by the
                         offeror in the tender or exchange offer (in an amount
                         determined on the basis of the rate of exchange in
                         such tender or exchange offer or going-private
                         transaction). In the event of a tender or exchange
                         offer or a going-private transaction with respect to
                         Exchange Property in which an offeree may elect to
                         receive cash or other property, Exchange Property
                         shall be deemed to include the kind and amount of cash
                         and other property received by offerees who elect to
                         receive cash.

                         Following the occurrence of any Reorganization Event
                         referred to in paragraphs 4 or 5 above, (i) references
                         to "Transocean Stock" under "No Fractional Shares,"
                         "Closing Price" and "Market Disruption Event" shall be
                         deemed to also refer to any New Stock or Reference
                         Basket Stock, and (ii) all other references in this
                         SPARQS to "Transocean Stock" shall be deemed to refer
                         to the Exchange Property into which this SPARQS is
                         thereafter exchangeable and references to a "share" or
                         "shares" of Transocean Stock shall be deemed to refer
                         to the applicable unit or units of such Exchange
                         Property, including any New Stock or


                                      18
<PAGE>


                         Reference Basket Stock, unless the context otherwise
                         requires. The New Stock Exchange Ratio(s) or Basket
                         Stock Exchange Ratios resulting from any
                         Reorganization Event described in paragraph 5 above or
                         similar adjustment under paragraph 4 above shall be
                         subject to the adjustments set forth in paragraphs 1
                         through 5 hereof.

                         If a Reference Basket Event occurs, the Issuer shall,
                         or shall cause the Calculation Agent to, provide
                         written notice to the Trustee at its New York office,
                         on which notice the Trustee may conclusively rely, and
                         to DTC of the occurrence of such Reference Basket
                         Event and of the three Reference Basket Stocks
                         selected as promptly as possible and in no event later
                         than five Business Days after the date of the
                         Reference Basket Event.

                         No adjustment to any Exchange Ratio (including for
                         this purpose, any New Stock Exchange Ratio or Basket
                         Stock Exchange Ratio) shall be required unless such
                         adjustment would require a change of at least 0.1% in
                         the Exchange Ratio then in effect. The Exchange Ratio
                         resulting from any of the adjustments specified above
                         will be rounded to the nearest one hundred-thousandth,
                         with five one-millionths rounded upward. Adjustments
                         to the Exchange Ratios will be made up to the close of
                         business on the third Trading Day prior to the
                         scheduled Maturity Date.

                         No adjustments to the Exchange Ratio or method of
                         calculating the Exchange Ratio shall be made other
                         than those specified above.

                         The Calculation Agent shall be solely responsible for
                         the determination and calculation of any adjustments
                         to the Exchange Ratio, any New Stock Exchange Ratio or
                         Basket Stock Exchange Ratio or method of calculating
                         the Exchange Property Value and of any related
                         determinations and calculations with respect to any
                         distributions of stock, other securities or other
                         property or assets (including cash) in connection with
                         any corporate event described in paragraphs 1 through
                         5 above, and its determinations and calculations with
                         respect thereto shall be conclusive in the absence of
                         manifest error.


                                      19
<PAGE>


                         The Calculation Agent shall provide information as to
                         any adjustments to the Exchange Ratio, or to the
                         method of calculating the amount payable upon exchange
                         at maturity of the SPARQS made pursuant to paragraph 5
                         above, upon written request by the holder of this
                         SPARQS.

Market Disruption
Event................... Market Disruption Event means, with respect to
                         Transocean Stock:

                              (i) a suspension, absence or material limitation
                              of trading of Transocean Stock on the primary
                              market for Transocean Stock for more than two
                              hours of trading or during the one-half hour
                              period preceding the close of the principal
                              trading session in such market; or a breakdown or
                              failure in the price and trade reporting systems
                              of the primary market for Transocean Stock as a
                              result of which the reported trading prices for
                              Transocean Stock during the last one-half hour
                              preceding the close of the principal trading
                              session in such market are materially inaccurate;
                              or the suspension, absence or material limitation
                              of trading on the primary market for trading in
                              options contracts related to Transocean Stock, if
                              available, during the one-half hour period
                              preceding the close of the principal trading
                              session in the applicable market, in each case as
                              determined by the Calculation Agent in its sole
                              discretion; and

                              (ii)a determination by the Calculation Agent in
                              its sole discretion that any event described in
                              clause (i) above materially interfered with the
                              ability of the Issuer or any of its affiliates to
                              unwind or adjust all or a material portion of the
                              hedge with respect to the SPARQS due December 1,
                              2006, Mandatorily Exchangeable for Shares of
                              Common Stock of Transocean Inc.

                         For purposes of determining whether a Market
                         Disruption Event has occurred: (1) a limitation on the
                         hours or number of days of trading shall not
                         constitute a Market Disruption Event if it results
                         from an announced change in the regular business hours
                         of the relevant exchange, (2) a decision to
                         permanently discontinue trading in the relevant
                         options contract


                                      20
<PAGE>


                         shall not constitute a Market Disruption Event, (3)
                         limitations pursuant to NYSE Rule 80A (or any
                         applicable rule or regulation enacted or promulgated
                         by the NYSE, any other self-regulatory organization or
                         the Securities and Exchange Commission of scope
                         similar to NYSE Rule 80A as determined by the
                         Calculation Agent) on trading during significant
                         market fluctuations shall constitute a suspension,
                         absence or material limitation of trading, (4) a
                         suspension of trading in options contracts on
                         Transocean Stock by the primary securities market
                         trading in such options, if available, by reason of
                         (x) a price change exceeding limits set by such
                         securities exchange or market, (y) an imbalance of
                         orders relating to such contracts or (z) a disparity
                         in bid and ask quotes relating to such contracts shall
                         constitute a suspension, absence or material
                         limitation of trading in options contracts related to
                         Transocean Stock and (5) a suspension, absence or
                         material limitation of trading on the primary
                         securities market on which options contracts related
                         to Transocean Stock are traded shall not include any
                         time when such securities market is itself closed for
                         trading under ordinary circumstances.

Alternate Exchange
  Calculation in
  Case of an Event
  of Default............ In case an event of default with respect to the SPARQS
                         shall have occurred and be continuing, the amount
                         declared due and payable per each $     principal
                         amount of this SPARQS upon any acceleration of this
                         SPARQS (an "Event of Default Acceleration") shall be
                         determined by the Calculation Agent and shall be an
                         amount in cash equal to the lesser of (i) the product
                         of (x) the Closing Price of Transocean Stock (and/or
                         the value of any Exchange Property) as of the date of
                         such acceleration and (y) the then current Exchange
                         Ratio and (ii) the Call Price calculated as though the
                         date of acceleration were the Call Date (but in no
                         event less than the Call Price for the first Call
                         Date), in each case plus accrued but unpaid interest
                         to but excluding the date of acceleration; provided
                         that if the Issuer has called the SPARQS in accordance
                         with the Morgan Stanley Call Right, the amount
                         declared due and payable upon any such acceleration
                         shall be an amount in cash for each $     principal
                         amount of this SPARQS equal to the Call Price for the
                         Call Date specified in the Issuer's notice of
                         mandatory exchange, plus accrued but unpaid interest
                         to but excluding the date of acceleration.


                                      21
<PAGE>


Treatment of SPARQS
  for United States
  Federal Income Tax
  Purposes.............. The Issuer, by its sale of this SPARQS, and the holder
                         of this SPARQS (and any successor holder of, or holder
                         of a beneficial interest in, this SPARQS), by its
                         respective purchase hereof, agree (in the absence of
                         an administrative determination or judicial ruling to
                         the contrary) to characterize each $       principal
                         amount of this SPARQS for all tax purposes as a unit
                         consisting of (A) a terminable contract (the
                         "Terminable Forward Contract") that (i) requires the
                         holder of this SPARQS (subject to the Morgan Stanley
                         Call Right) to purchase, and the Issuer to sell, for
                         an amount equal to $        (the "Forward Price"),
                         Transocean Stock at maturity and (ii) allows the
                         Issuer, upon exercise of the Morgan Stanley Call
                         Right, to terminate the Terminable Forward Contract by
                         returning to such holder the Deposit (as defined
                         below) and paying to such holder an amount of cash
                         equal to the difference between the Deposit and the
                         Call Price and (B) a deposit with the Issuer of a
                         fixed amount of cash, equal to the Issue Price per
                         each $        principal amount of this SPARQS, to
                         secure the holder's obligation to purchase Transocean
                         Stock pursuant to the Terminable Forward Contract (the
                         "Deposit"), which Deposit bears a quarterly compounded
                         yield of     % per annum.




                                      22
<PAGE>


     Morgan Stanley, a Delaware corporation (together with its successors and
assigns, the "Issuer"), for value received, hereby promises to pay to CEDE &
CO., or registered assignees, the amount of Transocean Stock (or other Exchange
Property), as determined in accordance with the provisions set forth under
"Exchange at Maturity" above, due with respect to the principal sum of U.S.
$               (UNITED STATES DOLLARS                 ) on the Maturity Date
specified above (except to the extent redeemed or repaid prior to maturity) and
to pay interest thereon at the Interest Rate per annum specified above, from
and including the Interest Accrual Date specified above until the principal
hereof is paid or duly made available for payment weekly, monthly, quarterly,
semiannually or annually in arrears as specified above as the Interest Payment
Period on each Interest Payment Date (as specified above), commencing on the
Interest Payment Date next succeeding the Interest Accrual Date specified
above, and at maturity (or on any redemption or repayment date); provided,
however, that if the Interest Accrual Date occurs between a Record Date, as
defined below, and the next succeeding Interest Payment Date, interest payments
will commence on the second Interest Payment Date succeeding the Interest
Accrual Date to the registered holder of this Note on the Record Date with
respect to such second Interest Payment Date; and provided, further, that if
this Note is subject to "Annual Interest Payments," interest payments shall be
made annually in arrears and the term "Interest Payment Date" shall be deemed
to mean the first day of March in each year.

     Interest on this Note will accrue from and including the most recent date
to which interest has been paid or duly provided for, or, if no interest has
been paid or duly provided for, from and including the Interest Accrual Date,
until but excluding the date the principal hereof has been paid or duly made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, subject to certain exceptions
described herein, be paid to the person in whose name this Note (or one or more
predecessor Notes) is registered at the close of business on the date 15
calendar days prior to such Interest Payment Date (whether or not a Business
Day (as defined below)) (each such date, a "Record Date"); provided, however,
that interest payable at maturity (or any redemption or repayment date) will be
payable to the person to whom the principal hereof shall be payable. As used
herein, "Business Day" means any day, other than a Saturday or Sunday, (a) that
is neither a legal holiday nor a day on which banking institutions are
authorized or required by law or regulation to close (x) in The City of New
York or (y) if this Note is denominated in a Specified Currency other than U.S.
dollars, euro or Australian dollars, in the principal financial center of the
country of the Specified Currency, or (z) if this Note is denominated in
Australian dollars, in Sydney and (b) if this Note is denominated in euro, that
is also a day on which the Trans-European Automated Real-time Gross Settlement
Express Transfer System ("TARGET") is operating (a "TARGET Settlement Day").

     Payment of the principal of this Note, any premium and the interest due at
maturity (or any redemption or repayment date), unless this Note is denominated
in a Specified Currency other than U.S. dollars and is to be paid in whole or
in part in such Specified Currency, will be made in immediately available funds
upon surrender of this Note at the office or agency of the Paying Agent, as
defined on the reverse hereof, maintained for that purpose in the Borough of
Manhattan, The City of New York, or at such other paying agency as the Issuer
may determine, in U.S. dollars. U.S. dollar payments of interest, other than
interest due at maturity or on any date of redemption or repayment, will be
made by U.S. dollar check mailed to the address of the


                                      23
<PAGE>


person entitled thereto as such address shall appear in the Note register. A
holder of U.S. $10,000,000 (or the equivalent in a Specified Currency) or more
in aggregate principal amount of Notes having the same Interest Payment Date,
the interest on which is payable in U.S. dollars, shall be entitled to receive
payments of interest, other than interest due at maturity or on any date of
redemption or repayment, by wire transfer of immediately available funds if
appropriate wire transfer instructions have been received by the Paying Agent
in writing not less than 15 calendar days prior to the applicable Interest
Payment Date.

     If this Note is denominated in a Specified Currency other than U.S.
dollars, and the holder does not elect (in whole or in part) to receive payment
in U.S. dollars pursuant to the next succeeding paragraph, payments of
interest, principal or any premium with regard to this Note will be made by
wire transfer of immediately available funds to an account maintained by the
holder hereof with a bank located outside the United States if appropriate wire
transfer instructions have been received by the Paying Agent in writing, with
respect to payments of interest, on or prior to the fifth Business Day after
the applicable Record Date and, with respect to payments of principal or any
premium, at least ten Business Days prior to the Maturity Date or any
redemption or repayment date, as the case may be; provided that, if payment of
interest, principal or any premium with regard to this Note is payable in euro,
the account must be a euro account in a country for which the euro is the
lawful currency, provided, further, that if such wire transfer instructions are
not received, such payments will be made by check payable in such Specified
Currency mailed to the address of the person entitled thereto as such address
shall appear in the Note register; and provided, further, that payment of the
principal of this Note, any premium and the interest due at maturity (or on any
redemption or repayment date) will be made upon surrender of this Note at the
office or agency referred to in the preceding paragraph.

     If so indicated on the face hereof, the holder of this Note, if
denominated in a Specified Currency other than U.S. dollars, may elect to
receive all or a portion of payments on this Note in U.S. dollars by
transmitting a written request to the Paying Agent, on or prior to the fifth
Business Day after such Record Date or at least ten Business Days prior to the
Maturity Date or any redemption or repayment date, as the case may be. Such
election shall remain in effect unless such request is revoked by written
notice to the Paying Agent as to all or a portion of payments on this Note at
least five Business Days prior to such Record Date, for payments of interest,
or at least ten calendar days prior to the Maturity Date or any redemption or
repayment date, for payments of principal, as the case may be.

     If the holder elects to receive all or a portion of payments of principal
of, premium, if any, and interest on this Note, if denominated in a Specified
Currency other than U.S. dollars, in U.S. dollars, the Exchange Rate Agent (as
defined on the reverse hereof) will convert such payments into U.S. dollars. In
the event of such an election, payment in respect of this Note will be based
upon the exchange rate as determined by the Exchange Rate Agent based on the
highest bid quotation in The City of New York received by such Exchange Rate
Agent at approximately 11:00 a.m., New York City time, on the second Business
Day preceding the applicable payment date from three recognized foreign
exchange dealers (one of which may be the Exchange Rate Agent unless such
Exchange Rate Agent is an affiliate of the Issuer) for the purchase by the
quoting dealer of the Specified Currency for U.S. dollars for settlement on
such payment date in the amount of the Specified Currency payable in the
absence of such an election to such holder


                                      24
<PAGE>


and at which the applicable dealer commits to execute a contract. If such bid
quotations are not available, such payment will be made in the Specified
Currency. All currency exchange costs will be borne by the holder of this Note
by deductions from such payments.

     Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.

     Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Note shall
not be entitled to any benefit under the Senior Indenture, as defined on the
reverse hereof, or be valid or obligatory for any purpose.


                                      25
<PAGE>


     IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed.

DATED:                                     MORGAN STANLEY


                                           By:
                                              ---------------------------------
                                              Name:
                                              Title:


TRUSTEE'S CERTIFICATE
  OF AUTHENTICATION

This is one of the Notes referred
  to in the within-mentioned
  Senior Indenture.

JPMORGAN CHASE BANK, N.A., as Trustee


By:
   ----------------------------------
   Authorized Officer


                                      26
<PAGE>


                          FORM OF REVERSE OF SECURITY

     This Note is one of a duly authorized issue of Senior Global Medium-Term
Notes, Series F, having maturities more than nine months from the date of issue
(the "Notes") of the Issuer. The Notes are issuable under a Senior Indenture,
dated as of November 1, 2004, between the Issuer and JPMorgan Chase Bank, N.A.
(formerly known as JPMorgan Chase Bank), as Trustee (the "Trustee," which term
includes any successor trustee under the Senior Indenture) (as may be amended
or supplemented from time to time, the "Senior Indenture"), to which Senior
Indenture and all indentures supplemental thereto reference is hereby made for
a statement of the respective rights, limitations of rights, duties and
immunities of the Issuer, the Trustee and holders of the Notes and the terms
upon which the Notes are, and are to be, authenticated and delivered. The
Issuer has appointed JPMorgan Chase Bank, N.A. at its corporate trust office in
The City of New York as the paying agent (the "Paying Agent," which term
includes any additional or successor Paying Agent appointed by the Issuer) with
respect to the Notes. The terms of individual Notes may vary with respect to
interest rates, interest rate formulas, issue dates, maturity dates, or
otherwise, all as provided in the Senior Indenture. To the extent not
inconsistent herewith, the terms of the Senior Indenture are hereby
incorporated by reference herein.

     Unless otherwise indicated on the face hereof, this Note will not be
subject to any sinking fund and, unless otherwise provided on the face hereof
in accordance with the provisions of the following two paragraphs, will not be
redeemable or subject to repayment at the option of the holder prior to
maturity.

     If so indicated on the face hereof, this Note may be redeemed in whole or
in part at the option of the Issuer on or after the Initial Redemption Date
specified on the face hereof on the terms set forth on the face hereof,
together with interest accrued and unpaid hereon to the date of redemption. If
this Note is subject to "Annual Redemption Percentage Reduction," the Initial
Redemption Percentage indicated on the face hereof will be reduced on each
anniversary of the Initial Redemption Date by the Annual Redemption Percentage
Reduction specified on the face hereof until the redemption price of this Note
is 100% of the principal amount hereof, together with interest accrued and
unpaid hereon to the date of redemption. Notice of redemption shall be mailed
to the registered holders of the Notes designated for redemption at their
addresses as the same shall appear on the Note register not less than 30 nor
more than 60 calendar days prior to the date fixed for redemption or within the
Redemption Notice Period specified on the face hereof, subject to all the
conditions and provisions of the Senior Indenture. In the event of redemption
of this Note in part only, a new Note or Notes for the amount of the unredeemed
portion hereof shall be issued in the name of the holder hereof upon the
cancellation hereof.

     If so indicated on the face of this Note, this Note will be subject to
repayment at the option of the holder on the Optional Repayment Date or Dates
specified on the face hereof on the terms set forth herein. On any Optional
Repayment Date, this Note will be repayable in whole or in part in increments
of $1,000 or, if this Note is denominated in a Specified Currency other than
U.S. dollars, in increments of 1,000 units of such Specified Currency (provided
that any remaining principal amount hereof shall not be less than the minimum
authorized denomination hereof) at the option of the holder hereof at a price
equal to 100% of the principal amount to be


                                      27
<PAGE>


repaid, together with interest accrued and unpaid hereon to the date of
repayment, provided that if this Note is issued with original issue discount,
this Note will be repayable on the applicable Optional Repayment Date or Dates
at the price(s) specified on the face hereof. For this Note to be repaid at the
option of the holder hereof, the Paying Agent must receive at its corporate
trust office in the Borough of Manhattan, The City of New York, at least 15 but
not more than 30 calendar days prior to the date of repayment, (i) this Note
with the form entitled "Option to Elect Repayment" below duly completed or (ii)
a telegram, telex, facsimile transmission or a letter from a member of a
national securities exchange or the National Association of Securities Dealers,
Inc. or a commercial bank or a trust company in the United States setting forth
the name of the holder of this Note, the principal amount hereof, the
certificate number of this Note or a description of this Note's tenor and
terms, the principal amount hereof to be repaid, a statement that the option to
elect repayment is being exercised thereby and a guarantee that this Note,
together with the form entitled "Option to Elect Repayment" duly completed,
will be received by the Paying Agent not later than the fifth Business Day
after the date of such telegram, telex, facsimile transmission or letter;
provided, that such telegram, telex, facsimile transmission or letter shall
only be effective if this Note and form duly completed are received by the
Paying Agent by such fifth Business Day. Exercise of such repayment option by
the holder hereof shall be irrevocable. In the event of repayment of this Note
in part only, a new Note or Notes for the amount of the unpaid portion hereof
shall be issued in the name of the holder hereof upon the cancellation hereof.

     Interest payments on this Note will include interest accrued to but
excluding the Interest Payment Dates or the Maturity Date (or any earlier
redemption or repayment date), as the case may be. Unless otherwise provided on
the face hereof, interest payments for this Note will be computed and paid on
the basis of a 360-day year of twelve 30-day months.

     In the case where the Interest Payment Date or the Maturity Date (or any
redemption or repayment date) does not fall on a Business Day, payment of
interest, premium, if any, or principal otherwise payable on such date need not
be made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on the Interest Payment Date or on the
Maturity Date (or any redemption or repayment date), and no interest on such
payment shall accrue for the period from and after the Interest Payment Date or
the Maturity Date (or any redemption or repayment date) to such next succeeding
Business Day.

     This Note and all the obligations of the Issuer hereunder are direct,
unsecured obligations of the Issuer and rank without preference or priority
among themselves and pari passu with all other existing and future unsecured
and unsubordinated indebtedness of the Issuer, subject to certain statutory
exceptions in the event of liquidation upon insolvency.

     This Note, and any Note or Notes issued upon transfer or exchange hereof,
is issuable only in fully registered form, without coupons, and, if denominated
in U.S. dollars, unless otherwise stated above, is issuable only in
denominations of U.S. $1,000 and any integral multiple of U.S. $1,000 in excess
thereof. If this Note is denominated in a Specified Currency other than U.S.
dollars, then, unless a higher minimum denomination is required by applicable
law, it is issuable only in denominations of the equivalent of U.S. $1,000
(rounded to an integral multiple of 1,000 units of such Specified Currency), or
any amount in excess thereof which is an


                                      28
<PAGE>


integral multiple of 1,000 units of such Specified Currency, as determined by
reference to the noon dollar buying rate in The City of New York for cable
transfers of such Specified Currency published by the Federal Reserve Bank of
New York (the "Market Exchange Rate") on the Business Day immediately preceding
the date of issuance.

     The Trustee has been appointed registrar for the Notes, and the Trustee
will maintain at its office in The City of New York a register for the
registration and transfer of Notes. This Note may be transferred at the
aforesaid office of the Trustee by surrendering this Note for cancellation,
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Trustee and duly executed by the registered holder hereof in
person or by the holder's attorney duly authorized in writing, and thereupon
the Trustee shall issue in the name of the transferee or transferees, in
exchange herefor, a new Note or Notes having identical terms and provisions and
having a like aggregate principal amount in authorized denominations, subject
to the terms and conditions set forth herein; provided, however, that the
Trustee will not be required (i) to register the transfer of or exchange any
Note that has been called for redemption in whole or in part, except the
unredeemed portion of Notes being redeemed in part, (ii) to register the
transfer of or exchange any Note if the holder thereof has exercised his right,
if any, to require the Issuer to repurchase such Note in whole or in part,
except the portion of such Note not required to be repurchased, or (iii) to
register the transfer of or exchange Notes to the extent and during the period
so provided in the Senior Indenture with respect to the redemption of Notes.
Notes are exchangeable at said office for other Notes of other authorized
denominations of equal aggregate principal amount having identical terms and
provisions. All such exchanges and transfers of Notes will be free of charge,
but the Issuer may require payment of a sum sufficient to cover any tax or
other governmental charge in connection therewith. All Notes surrendered for
exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Trustee and executed by the registered
holder in person or by the holder's attorney duly authorized in writing. The
date of registration of any Note delivered upon any exchange or transfer of
Notes shall be such that no gain or loss of interest results from such exchange
or transfer.

     In case this Note shall at any time become mutilated, defaced or be
destroyed, lost or stolen and this Note or evidence of the loss, theft or
destruction thereof (together with the indemnity hereinafter referred to and
such other documents or proof as may be required in the premises) shall be
delivered to the Trustee, the Issuer in its discretion may execute a new Note
of like tenor in exchange for this Note, but, if this Note is destroyed, lost
or stolen, only upon receipt of evidence satisfactory to the Trustee and the
Issuer that this Note was destroyed or lost or stolen and, if required, upon
receipt also of indemnity satisfactory to each of them. All expenses and
reasonable charges associated with procuring such indemnity and with the
preparation, authentication and delivery of a new Note shall be borne by the
owner of the Note mutilated, defaced, destroyed, lost or stolen.

     The Senior Indenture provides that (a) if an Event of Default (as defined
in the Senior Indenture) due to the default in payment of principal of,
premium, if any, or interest on, any series of debt securities issued under the
Senior Indenture, including the series of Senior Medium-Term Notes of which
this Note forms a part, or due to the default in the performance or breach of
any other covenant or warranty of the Issuer applicable to the debt securities
of such


                                      29
<PAGE>


series but not applicable to all outstanding debt securities issued under the
Senior Indenture shall have occurred and be continuing, either the Trustee or
the holders of not less than 25% in aggregate principal amount of the
outstanding debt securities of each affected series, voting as one class, by
notice in writing to the Issuer and to the Trustee, if given by the
securityholders, may then declare the principal of all debt securities of all
such series and interest accrued thereon to be due and payable immediately and
(b) if an Event of Default due to a default in the performance of any other of
the covenants or agreements in the Senior Indenture applicable to all
outstanding debt securities issued thereunder, including this Note, or due to
certain events of bankruptcy, insolvency or reorganization of the Issuer, shall
have occurred and be continuing, either the Trustee or the holders of not less
than 25% in aggregate principal amount of all outstanding debt securities
issued under the Senior Indenture, voting as one class, by notice in writing to
the Issuer and to the Trustee, if given by the securityholders, may declare the
principal of all such debt securities and interest accrued thereon to be due
and payable immediately, but upon certain conditions such declarations may be
annulled and past defaults may be waived (except a continuing default in
payment of principal or premium, if any, or interest on such debt securities)
by the holders of a majority in aggregate principal amount of the debt
securities of all affected series then outstanding.

     If the face hereof indicates that this Note is subject to "Modified
Payment upon Acceleration or Redemption," then (i) if the principal hereof is
declared to be due and payable as described in the preceding paragraph, the
amount of principal due and payable with respect to this Note shall be limited
to the aggregate principal amount hereof multiplied by the sum of the Issue
Price specified on the face hereof (expressed as a percentage of the aggregate
principal amount) plus the original issue discount amortized from the Interest
Accrual Date to the date of declaration, which amortization shall be calculated
using the "interest method" (computed in accordance with generally accepted
accounting principles in effect on the date of declaration), (ii) for the
purpose of any vote of securityholders taken pursuant to the Senior Indenture
prior to the acceleration of payment of this Note, the principal amount hereof
shall equal the amount that would be due and payable hereon, calculated as set
forth in clause (i) above, if this Note were declared to be due and payable on
the date of any such vote and (iii) for the purpose of any vote of
securityholders taken pursuant to the Senior Indenture following the
acceleration of payment of this Note, the principal amount hereof shall equal
the amount of principal due and payable with respect to this Note, calculated
as set forth in clause (i) above.

     If the face hereof indicates that this Note is subject to "Tax Redemption
and Payment of Additional Amounts," this Note may be redeemed, as a whole, at
the option of the Issuer at any time prior to maturity, upon the giving of a
notice of redemption as described below, at a redemption price equal to 100% of
the principal amount hereof, together with accrued interest to the date fixed
for redemption (except that if this Note is subject to "Modified Payment upon
Acceleration or Redemption," such redemption price would be limited to the
aggregate principal amount hereof multiplied by the sum of the Issue Price
specified on the face hereof (expressed as a percentage of the aggregate
principal amount) plus the original issue discount amortized from the Interest
Accrual Date to the date of redemption, which amortization shall be calculated
using the "interest method" (computed in accordance with generally accepted
accounting principles in effect on the date of redemption) (the "Amortized
Amount")), if the Issuer determines that, as a result of any change in or
amendment to the laws, or any regulations or rulings promulgated


                                      30
<PAGE>


thereunder, of the United States or of any political subdivision or taxing
authority thereof or therein affecting taxation, or any change in official
position regarding the application or interpretation of such laws, regulations
or rulings, which change or amendment becomes effective on or after the Initial
Offering Date hereof, the Issuer has or will become obligated to pay Additional
Amounts, as defined below, with respect to this Note as described below. Prior
to the giving of any notice of redemption pursuant to this paragraph, the
Issuer shall deliver to the Trustee (i) a certificate stating that the Issuer
is entitled to effect such redemption and setting forth a statement of facts
showing that the conditions precedent to the right of the Issuer to so redeem
have occurred, and (ii) an opinion of independent legal counsel satisfactory to
the Trustee to such effect based on such statement of facts; provided that no
such notice of redemption shall be given earlier than 60 calendar days prior to
the earliest date on which the Issuer would be obligated to pay such Additional
Amounts if a payment in respect of this Note were then due.

     Notice of redemption will be given not less than 30 nor more than 60
calendar days prior to the date fixed for redemption or within the Redemption
Notice Period specified on the face hereof, which date and the applicable
redemption price will be specified in the notice.

     If the face hereof indicates that this Note is subject to "Tax Redemption
and Payment of Additional Amounts," the Issuer will, subject to certain
exceptions and limitations set forth below, pay such additional amounts (the
"Additional Amounts") to the holder of this Note who is a United States Alien
as may be necessary in order that every net payment of the principal of and
interest on this Note and any other amounts payable on this Note, after
withholding or deduction for or on account of any present or future tax,
assessment or governmental charge imposed upon or as a result of such payment
by the United States, or any political subdivision or taxing authority thereof
or therein, will not be less than the amount provided for in this Note to be
then due and payable. The Issuer will not, however, make any payment of
Additional Amounts to any such holder who is a United States Alien for or on
account of:

          (a) any present or future tax, assessment or other governmental
     charge that would not have been so imposed but for (i) the existence of
     any present or former connection between such holder, or between a
     fiduciary, settlor, beneficiary, member or shareholder of such holder, if
     such holder is an estate, a trust, a partnership or a corporation for
     United States federal income tax purposes, and the United States,
     including, without limitation, such holder, or such fiduciary, settlor,
     beneficiary, member or shareholder, being or having been a citizen or
     resident thereof or being or having been engaged in a trade or business or
     present therein or having, or having had, a permanent establishment
     therein or (ii) the presentation by or on behalf of the holder of this
     Note for payment on a date more than 15 calendar days after the date on
     which such payment became due and payable or the date on which payment
     thereof is duly provided for, whichever occurs later;

          (b) any estate, inheritance, gift, sales, transfer, excise or
     personal property tax or any similar tax, assessment or governmental
     charge;

          (c) any tax, assessment or other governmental charge imposed by
     reason of such holder's past or present status as a personal holding


                                      31
<PAGE>


     company or foreign personal holding company or controlled foreign
     corporation or passive foreign investment company with respect to the
     United States or as a corporation which accumulates earnings to avoid
     United States federal income tax or as a private foundation or other
     tax-exempt organization or a bank receiving interest under Section
     881(c)(3)(A) of the Internal Revenue Code of 1986, as amended;

          (d) any tax, assessment or other governmental charge that is payable
     otherwise than by withholding or deduction from payments on or in respect
     of this Note;

          (e) any tax, assessment or other governmental charge required to be
     withheld by any Paying Agent from any payment of principal of, or interest
     on, this Note, if such payment can be made without such withholding by any
     other Paying Agent in a city in Western Europe;

          (f) any tax, assessment or other governmental charge that would not
     have been imposed but for the failure to comply with certification,
     information or other reporting requirements concerning the nationality,
     residence or identity of the holder or beneficial owner of this Note, if
     such compliance is required by statute or by regulation of the United
     States or of any political subdivision or taxing authority thereof or
     therein as a precondition to relief or exemption from such tax, assessment
     or other governmental charge;

          (g) any tax, assessment or other governmental charge imposed by
     reason of such holder's past or present status as the actual or
     constructive owner of 10% or more of the total combined voting power of
     all classes of stock entitled to vote of the Issuer or as a direct or
     indirect subsidiary of the Issuer; or

          (h) any combination of items (a), (b), (c), (d), (e), (f) or (g).

In addition, the Issuer shall not be required to make any payment of Additional
Amounts (i) to any such holder where such withholding or deduction is imposed
on a payment to an individual and is required to be made pursuant to any law
implementing or complying with, or introduced in order to conform to, any
European Union Directive on the taxation of savings; or (ii) by or on behalf of
a holder who would have been able to avoid such withholding or deduction by
presenting this Note or the relevant coupon to another Paying Agent in a member
state of the European Union. Nor shall the Issuer pay Additional Amounts with
respect to any payment on this Note to a United States Alien who is a fiduciary
or partnership or other than the sole beneficial owner of such payment to the
extent such payment would be required by the laws of the United States (or any
political subdivision thereof) to be included in the income, for tax purposes,
of a beneficiary or settlor with respect to such fiduciary or a member of such
partnership or a beneficial owner who would not have been entitled to the
Additional Amounts had such beneficiary, settlor, member or beneficial owner
been the holder of this Note.

     The Senior Indenture permits the Issuer and the Trustee, with the consent
of the holders of not less than a majority in aggregate principal amount of the
debt securities of all series issued under the Senior Indenture then
outstanding and affected (voting as one class), to execute supplemental
indentures adding any provisions to or changing in any manner the rights of the
holders of each series so affected; provided that the Issuer and the Trustee
may not, without the


                                      32
<PAGE>


consent of the holder of each outstanding debt security affected thereby, (a)
extend the final maturity of any such debt security, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or reduce any amount payable on redemption thereof, or change the
currency of payment thereof, or modify or amend the provisions for conversion
of any currency into any other currency, or modify or amend the provisions for
conversion or exchange of the debt security for securities of the Issuer or
other entities or for other property or the cash value of the property (other
than as provided in the antidilution provisions or other similar adjustment
provisions of the debt securities or otherwise in accordance with the terms
thereof), or impair or affect the rights of any holder to institute suit for
the payment thereof or (b) reduce the aforesaid percentage in principal amount
of debt securities the consent of the holders of which is required for any such
supplemental indenture.

     Except as set forth below, if the principal of, premium, if any, or
interest on this Note is payable in a Specified Currency other than U.S.
dollars and such Specified Currency is not available to the Issuer for making
payments hereon due to the imposition of exchange controls or other
circumstances beyond the control of the Issuer or is no longer used by the
government of the country issuing such currency or for the settlement of
transactions by public institutions within the international banking community,
then the Issuer will be entitled to satisfy its obligations to the holder of
this Note by making such payments in U.S. dollars on the basis of the Market
Exchange Rate on the date of such payment or, if the Market Exchange Rate is
not available on such date, as of the most recent practicable date; provided,
however, that if the euro has been substituted for such Specified Currency, the
Issuer may at its option (or shall, if so required by applicable law) without
the consent of the holder of this Note effect the payment of principal of,
premium, if any, or interest on any Note denominated in such Specified Currency
in euro in lieu of such Specified Currency in conformity with legally
applicable measures taken pursuant to, or by virtue of, the Treaty establishing
the European Community, as amended. Any payment made under such circumstances
in U.S. dollars or euro where the required payment is in an unavailable
Specified Currency will not constitute an Event of Default. If such Market
Exchange Rate is not then available to the Issuer or is not published for a
particular Specified Currency, the Market Exchange Rate will be based on the
highest bid quotation in The City of New York received by the Exchange Rate
Agent at approximately 11:00 a.m., New York City time, on the second Business
Day preceding the date of such payment from three recognized foreign exchange
dealers (the "Exchange Dealers") for the purchase by the quoting Exchange
Dealer of the Specified Currency for U.S. dollars for settlement on the payment
date, in the aggregate amount of the Specified Currency payable to those
holders or beneficial owners of Notes and at which the applicable Exchange
Dealer commits to execute a contract. One of the Exchange Dealers providing
quotations may be the Exchange Rate Agent unless the Exchange Rate Agent is an
affiliate of the Issuer. If those bid quotations are not available, the
Exchange Rate Agent shall determine the market exchange rate at its sole
discretion.

     The "Exchange Rate Agent" shall be Morgan Stanley & Co. Incorporated,
unless otherwise indicated on the face hereof.

     All determinations referred to above made by, or on behalf of, the Issuer
or by, or on behalf of, the Exchange Rate Agent shall be at such entity's sole
discretion and shall, in the


                                      33
<PAGE>


absence of manifest error, be conclusive for all purposes and binding on
holders of Notes and coupons.

     So long as this Note shall be outstanding, the Issuer will cause to be
maintained an office or agency for the payment of the principal of and premium,
if any, and interest on this Note as herein provided in the Borough of
Manhattan, The City of New York, and an office or agency in said Borough of
Manhattan for the registration, transfer and exchange as aforesaid of the
Notes. The Issuer may designate other agencies for the payment of said
principal, premium and interest at such place or places (subject to applicable
laws and regulations) as the Issuer may decide. So long as there shall be such
an agency, the Issuer shall keep the Trustee advised of the names and locations
of such agencies, if any are so designated. If any European Union Directive on
the taxation of savings comes into force, the Issuer will, to the extent
possible as a matter of law, maintain a Paying Agent in a member state of the
European Union that will not be obligated to withhold or deduct tax pursuant to
any such Directive or any law implementing or complying with, or introduced in
order to conform to, such Directive.

     With respect to moneys paid by the Issuer and held by the Trustee or any
Paying Agent for payment of the principal of or interest or premium, if any, on
any Notes that remain unclaimed at the end of two years after such principal,
interest or premium shall have become due and payable (whether at maturity or
upon call for redemption or otherwise), (i) the Trustee or such Paying Agent
shall notify the holders of such Notes that such moneys shall be repaid to the
Issuer and any person claiming such moneys shall thereafter look only to the
Issuer for payment thereof and (ii) such moneys shall be so repaid to the
Issuer. Upon such repayment all liability of the Trustee or such Paying Agent
with respect to such moneys shall thereupon cease, without, however, limiting
in any way any obligation that the Issuer may have to pay the principal of or
interest or premium, if any, on this Note as the same shall become due.

     No provision of this Note or of the Senior Indenture shall alter or impair
the obligation of the Issuer, which is absolute and unconditional, to pay the
principal of, premium, if any, and interest on this Note at the time, place,
and rate, and in the coin or currency, herein prescribed unless otherwise
agreed between the Issuer and the registered holder of this Note.

     Prior to due presentment of this Note for registration of transfer, the
Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
holder in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and none of the Issuer, the
Trustee or any such agent shall be affected by notice to the contrary.

     No recourse shall be had for the payment of the principal of, premium, if
any, or the interest on this Note, for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Senior Indenture or any
indenture supplemental thereto, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Issuer or of any
successor corporation, either directly or through the Issuer or any successor
corporation, whether by virtue of any constitution, statute or rule of law or
by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.


                                      34
<PAGE>


     This Note shall for all purposes be governed by, and construed in
accordance with, the laws of the State of New York.

     As used herein, the term "United States Alien" means any person who is,
for United States federal income tax purposes, (i) a nonresident alien
individual, (ii) a foreign corporation, (iii) a nonresident alien fiduciary of
a foreign estate or trust or (iv) a foreign partnership one or more of the
members of which is, for United States federal income tax purposes, a
nonresident alien individual, a foreign corporation or a nonresident alien
fiduciary of a foreign estate or trust.

     All terms used in this Note which are defined in the Senior Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Senior Indenture.


                                      35
<PAGE>


                                 ABBREVIATIONS

     The following abbreviations, when used in the inscription on the face of
this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:


          TEN COM  -  as tenants in common
          TEN ENT  -  as tenants by the entireties
          JT TEN   -  as joint tenants with right of survivorship and not as
                      tenants in common

     UNIF GIFT MIN ACT - _____________________ Custodian ______________________
                               (Minor)                          (Cust)

     Under Uniform Gifts to Minors Act __________________________
                                                (State)

     Additional abbreviations may also be used though not in the above list.

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


                                      36
<PAGE>


     FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto


_______________________________________
[PLEASE INSERT SOCIAL SECURITY OR OTHER
   IDENTIFYING NUMBER OF ASSIGNEE]

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________
    [PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE]

the within Note and all rights thereunder, hereby irrevocably constituting and
appointing such person attorney to transfer such note on the books of the
Issuer, with full power of substitution in the premises.


Dated: ______________________

NOTICE: The signature to this assignment must correspond with the name
        as written upon the face of the within Note in every particular
        without alteration or enlargement or any change whatsoever.


                                      37
<PAGE>


                           OPTION TO ELECT REPAYMENT

     The undersigned hereby irrevocably requests and instructs the Issuer to
repay the within Note (or portion thereof specified below) pursuant to its
terms at a price equal to the principal amount thereof, together with interest
to the Optional Repayment Date, to the undersigned at

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________
        (Please print or typewrite name and address of the undersigned)


     If less than the entire principal amount of the within Note is to be
repaid, specify the portion thereof which the holder elects to have repaid:
_____________; and specify the denomination or denominations (which shall not
be less than the minimum authorized denomination) of the Notes to be issued to
the holder for the portion of the within Note not being repaid (in the absence
of any such specification, one such Note shall be issued for the portion not
being repaid): ___________.


Dated: ______________________________    _______________________________________
                                         NOTICE: The signature on this Option
                                         to Elect Repayment must correspond
                                         with the name as written upon the face
                                         of the within instrument in every
                                         particular without alteration or
                                         enlargement.


                                      38