Document:

exv4w1

 

EXHIBIT 4.1

FIRST AMENDMENT TO RIGHTS AGREEMENT

     FIRST AMENDMENT, dated as of April 19, 2006 (“First Amendment”), to Rights Agreement, dated as
of November 12, 2004 (the “Rights Agreement”), between Santarus, Inc., a Delaware corporation (the
"Company”), and American Stock Transfer & Trust Company, a New York corporation, as Rights Agent
(the “Rights Agent”). Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to them in the Rights Agreement.

     WHEREAS, the Company and the Rights Agent previously entered into the Rights Agreement; and

     WHEREAS, pursuant to Section 26 of the Rights Agreement, the Company and the Rights Agent may
from time to time supplement or amend any provision of the Rights Agreement in accordance with the
terms of such Section 26.

     NOW, THEREFORE, in consideration of the foregoing premises and mutual agreements set forth in
this First Amendment, the parties hereby amend the Rights Agreement as follows:

     1. Section 1.1 of the Rights Agreement is hereby modified, amended and restated in its
entirety as follows:

     “1.1. “Acquiring Person” shall mean any Person (as such term is hereinafter defined) who or
which, together with all Affiliates and Associates (as such terms are hereinafter defined) of such
Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or more of the
Common Shares of the Company then outstanding but shall not include (i) an Exempt Person (as such
term is hereinafter defined) or (ii) Westfield Capital Management Co. LLC, together with all of its
Affiliates and Associates (“Westfield Capital”), but only so long as (A) Westfield Capital is the
Beneficial Owner of less than 20% of the Common Shares outstanding and (B) Westfield Capital
reports or is required to report such ownership on Schedule 13G or Schedule 13D of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) (or any comparable or successor report),
which Schedule 13G or Schedule 13D does not state or is not required to state any present intention
to hold such Common Shares with the purpose or effect of changing or influencing the control of the
Company, nor in connection with or as a participant in any transaction having such purpose or
effect. Notwithstanding the foregoing, no Person shall become an “Acquiring Person” as the result
of an acquisition of Common Shares by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned by such Person to 15%
or more (or 20% or more in the case of Westfield Capital) of the Common Shares of the Company then
outstanding; provided, however, that if a Person shall become the Beneficial Owner of 15% or more
(or 20% or more in the case of Westfield Capital) of the Common Shares of the Company then
outstanding solely by reason of share purchases by the Company and shall, after such share
purchases by the Company, become the Beneficial Owner of one or more additional Common Shares of
the Company (other than pursuant to a dividend or distribution paid or made by the Company on the
outstanding Common Shares in Common Shares or pursuant to a split or subdivision of the outstanding
Common Shares), then such Person shall be deemed to be an “Acquiring Person” unless upon becoming
the Beneficial Owner of such additional shares of

 

 

Common Stock such Person does not beneficially own 15% or more (or 20% or more in the case of
Westfield Capital) of the shares of Common Stock then outstanding. Notwithstanding the foregoing,
if the Board of Directors of the Company determines in good faith that a Person who would otherwise
be an “Acquiring Person,” as defined pursuant to the foregoing provisions of this Section 1.1, has
become such inadvertently (including, without limitation, because (A) such Person was unaware that
it beneficially owned a percentage of Common Stock that would otherwise cause such Person to be an
“Acquiring Person” or (B) such Person was aware of the extent of its Beneficial Ownership of Common
Stock but had no actual knowledge of the consequences of such Beneficial Ownership under this
Agreement), and without any intention of changing or influencing control of the Company, and such
Person divests as promptly as practicable a sufficient number of Common Shares so that such Person
would no longer be an Acquiring Person, as defined pursuant to the foregoing provisions of this
Section 1.1, then such Person shall not be deemed to be or have become an “Acquiring Person” at any
time for any purposes of this Agreement. For all purposes of this Agreement, any calculation of
the number of Common Shares outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement.”

     2. Section 1.12 of the Rights Agreement is hereby amended to remove the reference to the term
“Existing Holder.”

     3. This First Amendment shall be effective as of the date hereof and, except as expressly set
forth herein, the Rights Agreement shall remain in full force and effect and be otherwise
unaffected hereby.

     4. This First Amendment may be executed in any number of counterparts, each of which, when
executed, shall be deemed to be an original and all such counterparts shall together constitute one
and the same document.

     5. If any term, provision, covenant or restriction of this First Amendment is held by a court
of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this First Amendment shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.

     6. This First Amendment shall be deemed to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by and construed in accordance with the laws of
such State applicable to contracts to be made and performed entirely within such State.

[Remainder of Page Left Blank Intentionally]

2

 

     IN WITNESS WHEREOF, the parties have executed this First Amendment as of the date first
written above.

	 	 	 	 	 	 	 
	 	 	SANTARUS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 /s/ Gerald T. Proehl	 	 
	 

	 	 	 	 
	 	 
	 

	 	 	 	Name: Gerald T. Proehl	 	 
	 

	 	 	 	Title: President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	AMERICAN STOCK TRANSFER & TRUST COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 /s/ Isaac J. Kagan	 	 
	 

	 	 	 	 
	 	 
	 

	 	 	 	Name: Isaac J. Kagan	 	 
	 

	 	 	 	Title: Vice President	 	 

3Exhibit 4.1

                         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>

                                                 MORGAN STANLEY
                                    SENIOR GLOBAL MEDIUM-TERM NOTE, SERIES F
                                                  (Fixed Rate)

                                         STOCK PARTICIPATION ACCRETING
                                REDEMPTION QUARTERLY-PAY SECURITIESSM ("SPARQS")

                                          % SPARQS(R) DUE MAY 20, 2007
                                            MANDATORILY EXCHANGEABLE
                                         FOR SHARES OF COMMON STOCK OF
                                            DEVON ENERGY CORPORATION

<TABLE>
<S>                           <C>                          <C>                          <C>
--------------------------------------------------------------------------------------------------------------------
ORIGINAL ISSUE DATE:          INITIAL REDEMPTION DATE:     INTEREST RATE: % per annum   MATURITY DATE: See
                                 See "Morgan Stanley Call                                  "Maturity Date" below.
                                 Right" below.
--------------------------------------------------------------------------------------------------------------------
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: NO    OPTIONAL REPAYMENT: N/A      MATURITY: N/A
--------------------------------------------------------------------------------------------------------------------
OTHER PROVISIONS: See below.  IF YES, STATE INITIAL
                                 OFFERING DATE: N/A
--------------------------------------------------------------------------------------------------------------------
</TABLE>

Stated Principal Amount....   $     per SPARQS

                                                          2
<PAGE>

Underlying Company.........   Devon Energy Corporation ("Devon Energy")

Underlying Stock...........   The common stock of Devon Energy

Pricing Date...............

Issue Price................   $    per each Stated Principal Amount of this
                              SPARQS

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

Acceleration Trigger Price.   $

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

Yield to Call..............       % per annum

First Call Date............   November 20, 2006

Maturity Date..............   May 20, 2007, 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 definition thereof. 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 scheduled 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

                                       3
<PAGE>

                              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.....   August 20, 2006, November 20, 2006, February 20,
                              2007 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 the scheduled Maturity
                              Date, but no interest will accrue 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 24 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

                                       4
<PAGE>

                              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.

Morgan Stanley Call
  Right....................   On any scheduled Trading Day on or after the
                              First Call Date 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.

                              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

                                       5
<PAGE>

                              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 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 calendar
                              days prior to the Call Date.

Final Call Notice Date.....   May 10, 2007; provided that if such date 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

                                       6
<PAGE>

                              holder of this SPARQS, for mandatory exchange,
                              which day may be any scheduled Trading Day on or
                              after the First Call Date 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 Stated 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 Stated
                              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
                              computed on the basis of a 360-day year of twelve
                              30-day 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 Stated Principal Amount of this
                              SPARQS shall be applied by the Issuer as payment
                              for a number of shares of the Underlying Stock at
                              the Exchange Ratio, and the Issuer shall deliver
                              with respect to each Stated Principal Amount of
                              this SPARQS an amount of the Underlying Stock
                              equal to the Exchange Ratio.

                              The amount of Underlying 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 Underlying 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

                                       7
<PAGE>

                              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 Underlying Stock (or
                              the amount of Exchange Property) or cash to be
                              delivered with respect to each Stated Principal
                              Amount of this SPARQS and of the amount of any
                              cash to be paid in lieu of any fractional share
                              of the Underlying 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 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

                                       8
<PAGE>

                              accelerated maturity date; provided that the
                              Issuer has deposited with the Trustee the
                              Underlying 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 the
                              Underlying Stock (or any Exchange Property) and
                              cash in respect of interest and any fractional
                              share of the Underlying 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 Stated
                              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 receive Underlying Stock (and, if
                              applicable, any Exchange Property) and any cash
                              in respect of interest and any fractional share
                              of the Underlying 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 the Underlying
                              Stock and the Exchange Ratio is less than the
                              Acceleration Trigger Price, 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 Stated
                              Principal Amount of this SPARQS shall receive per
                              SPARQS on the date of acceleration:

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

                                   (ii)accrued but unpaid interest on each
                                   Stated Principal Amount of this SPARQS to
                                   but excluding the date of acceleration; and

                                       9
<PAGE>

                                   (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 Stated
                                   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 the Underlying Stock due with
                              respect to this SPARQS, as described above, but
                              the Issuer shall pay cash in lieu of delivering
                              any fractional share of the Underlying Stock in
                              an amount equal to the corresponding fractional
                              Closing Price of such fraction of a share of the
                              Underlying Stock as determined by the Calculation
                              Agent as of the second scheduled Trading Day
                              prior to maturity of this SPARQS.

Closing Price..............   The Closing Price for one share of the Underlying
                              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 the Underlying 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 the Underlying Stock (or any such
                                   other security) is listed or admitted to
                                   trading,

                              o    if the Underlying 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

                                      10
<PAGE>

                              o    if the Underlying 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 the Underlying 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 pursuant to the
                              preceding sentence, then the Closing Price for
                              one share of the Underlying 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 the Underlying 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 the Underlying 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

                                      11
<PAGE>

                              of Options Exchange and in the over-the-counter
                              market for equity securities in the United
                              States.

Calculation Agent..........   Morgan Stanley & Co. Incorporated ("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 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 the Underlying 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 the Underlying
                              Stock.

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

                                      12
<PAGE>

                              Exchange Ratio plus the product of (i) the number
                              of shares issued with respect to one share of the
                              Underlying Stock and (ii) the prior Exchange
                              Ratio.

                              3. If the Underlying Company issues rights or
                              warrants to all holders of the Underlying Stock
                              to subscribe for or purchase Underlying Stock at
                              an exercise price per share less than the Closing
                              Price of the Underlying 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 the Underlying Stock
                              outstanding immediately prior to the issuance of
                              such rights or warrants plus the number of
                              additional shares of Underlying Stock offered for
                              subscription or purchase pursuant to such rights
                              or warrants and the denominator of which shall be
                              the number of shares of Underlying Stock
                              outstanding immediately prior to the issuance of
                              such rights or warrants plus the number of
                              additional shares of Underlying Stock which the
                              aggregate offering price of the total number of
                              shares of Underlying 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 the Underlying
                              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
                              Underlying Stock of any cash dividend or special
                              dividend or distribution that is identified by
                              the Underlying Company 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 the

                                      13
<PAGE>

                              Underlying Company as an extraordinary or special
                              dividend or distribution) distributed per share
                              of Underlying Stock over the immediately
                              preceding cash dividend or other cash
                              distribution, if any, per share of Underlying
                              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 the Underlying Stock on the Trading Day
                              preceding the "ex-dividend date" (that is, the
                              day on and after which transactions in the
                              Underlying 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 Price") and (c) the full
                              cash value of any non-cash dividend or
                              distribution per share of Underlying 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 the
                              Underlying Stock includes an Extraordinary
                              Dividend, the Exchange Ratio with respect to the
                              Underlying 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 the Underlying Stock described in
                              clause (i), (iv) or (v) of the first sentence of
                              paragraph 5 below shall cause an adjustment to
                              the

                                      14
<PAGE>

                              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) the Underlying Stock is
                              reclassified or changed, including, without
                              limitation, as a result of the issuance of any
                              tracking stock by the Underlying Company, (ii)
                              the Underlying Company has been subject to any
                              merger, combination or consolidation and is not
                              the surviving entity, (iii) the Underlying
                              Company completes a statutory exchange of
                              securities with another corporation (other than
                              pursuant to clause (ii) above), (iv) the
                              Underlying Company is liquidated, (v) the
                              Underlying Company issues to all of its
                              shareholders equity securities of an issuer other
                              than the Underlying Company (other than in a
                              transaction described in clause (ii), (iii) or
                              (iv) above) (a "spinoff stock") or (vi) the
                              Underlying Stock is the subject of a tender or
                              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 the Underlying
                              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 Stated 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 the Underlying Stock continues to be
                                   outstanding, the Underlying 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"),

                                      15
<PAGE>

                                   including the issuance of any tracking stock
                                   or spinoff stock or the receipt of any stock
                                   received in exchange for the Underlying
                                   Stock, the number of shares of the New Stock
                                   received with respect to one share of
                                   Underlying Stock multiplied by the Exchange
                                   Ratio for Underlying 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"),

                                       (i) if the combined value of the amount
                                       of Non-Stock Exchange Property received
                                       per share of Underlying 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 the Underlying Stock is less
                                       than 25% of the Closing Price of the
                                       Underlying Stock on the Trading Day
                                       immediately prior to the effective date
                                       of such Reorganization Event, a number
                                       of shares of the Underlying 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 the Underlying 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 the
                                       Underlying 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 Underlying
                                       Stock or any New Stock determined in
                                       accordance with this clause (c)(i) shall
                                       be added at the time of such adjustment
                                       to

                                      16
<PAGE>

                                       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 Underlying Stock on the
                                       Trading Day immediately prior to the
                                       effective date relating to such
                                       Reorganization Event or, if the
                                       Underlying 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 the
                                       Underlying Stock 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 the Underlying Company;
                                       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

                                      17
<PAGE>

                                       primary SIC Code for the Underlying
                                       Company. 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 the
                                       Underlying 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
                              Stated Principal Amount of this SPARQS shall be
                              the sum of:

                                   (x) if applicable, the Underlying 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

                                      18
<PAGE>

                              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 "Underlying 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
                              "Underlying 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 Underlying Stock shall be
                              deemed to refer to the applicable unit or units
                              of such Exchange Property, including any New
                              Stock or 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.

                                      19
<PAGE>

                              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.

                              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
                              the Underlying Stock:

                                   (i) a suspension, absence or material
                                   limitation of trading of the Underlying
                                   Stock on the primary market for the
                                   Underlying 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 the
                                   Underlying Stock as a result of which the
                                   reported trading prices for the Underlying
                                   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 the Underlying Stock,

                                      20
<PAGE>

                                   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 this issuance of SPARQS.

                              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 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 the Underlying
                              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 the Underlying Stock and (5)
                              a suspension, absence or material limitation of
                              trading on the primary securities market on which
                              options contracts related to the Underlying Stock
                              are traded shall not include any time when such
                              securities market is itself closed for trading
                              under ordinary circumstances.

                                      21
<PAGE>

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 Stated
                              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 the Underlying 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 Stated 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.

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 Stated 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"), the Underlying 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

                                      22
<PAGE>

                              cash, equal to the Issue Price per each Stated
                              Principal Amount of this SPARQS, to secure the
                              holder's obligation to purchase the Underlying
                              Stock pursuant to the Terminable Forward Contract
                              (the "Deposit"), which Deposit bears a quarterly
                              compounded yield of      % per annum, provided,
                              however, that any interest payments on this
                              SPARQS made to non-U.S. investors will generally
                              be withheld upon at a rate of 30%.

                                      23
<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 Underlying 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

                                      24
<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

                                      25
<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.

                                      26
<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

                                      27
<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. If the face hereof indicates that this
Note is subject to "Modified Payment upon Acceleration or Redemption", the
amount of principal payable upon redemption will 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 accrued from the Interest Accrual Date to the
date of redemption (expressed as a percentage of the aggregate principal
amount), with the amount of original issue discount accrued being calculated
using a constant yield method (as described below). 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.

                                      28
<PAGE>

     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 repaid, together with interest
accrued and unpaid hereon to the date of repayment, provided that if the face
hereof indicates that this Note is subject to "Modified Payment upon
Acceleration or Redemption", the amount of principal payable upon repayment
will 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 accrued from
the Interest Accrual Date to the date of repayment (expressed as a percentage
of the aggregate principal amount), with the amount of original issue discount
accrued being calculated using a constant yield method (as described below).
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.

                                      29
<PAGE>

     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 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.

                                      30
<PAGE>

     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 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 accrued from the Interest
Accrual Date to the date of declaration (expressed as a percentage of the
aggregate principal amount), with the amount of original issue discount accrued
being calculated using a constant yield method (as described in the next
paragraph), (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)

                                      31
<PAGE>

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.

     The constant yield shall be calculated using a 30-day month, 360-day year
convention, a computing period that, except for the initial period (as defined
below), corresponds to the shortest period between Interest Payment Dates (with
ratable accruals within a compounding period), and an assumption that the
maturity will not be accelerated. If the period from the Original Issue Date to
the first Interest Payment Date (the "initial period") is shorter than the
compounding period for this Note, a proportionate amount of the yield for an
entire compounding period will be accrued. If the initial period is longer than
the compounding period, then the period will be divided into a regular
compounding period and a short period with the short period being treated as
provided in the preceding sentence.

     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," the amount of principal so payable will 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 accrued from the Interest
Accrual Date to the date of redemption (expressed as a percentage of the
aggregate principal amount), with the amount of original issue discount accrued
being calculated using a constant yield method (as described above)), if the
Issuer determines that, as a result of any change in or amendment to the laws
(including a holding, judgment or as ordered by a court of competent
jurisdiction), or any regulations or rulings promulgated 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 occurs, becomes effective or, in the case of a change in
official position, is announced 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.

                                      32
<PAGE>

     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 U.S. 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 U.S. 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 U.S. 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 controlled foreign corporation or
passive foreign investment company with respect to the United States or as a
corporation which accumulates earnings to avoid U.S. 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;

                                      33
<PAGE>

     (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 U.S. 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 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

                                      34
<PAGE>

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 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

                                      35
<PAGE>

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.

     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 "U.S. Alien" means any person who is, for U.S.
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 U.S.
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.

                                      36
<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.

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

                                      37
<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.

                                      38
<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 will 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.

                                      39

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