Document:

Contribution Agreement

CONTRIBUTION AGREEMENT

   

THIS CONTRIBUTION AGREEMENT (“AGREEMENT”) is made as of the 8th day of October, 2004, by and between IN RETAIL FUND, L.L.C., a Delaware limited liability company (the “Company”), INLAND REAL ESTATE
CORPORATION, a Maryland corporation (“Inland”), and THE NEW YORK STATE TEACHERS’ RETIREMENT SYSTEM (“NYSTRS”, and together with Inland, the “Members”).

   

RECITALS

   

A.        Reference is made to that certain Operating Agreement of the Company dated of even date herewith (the “Operating Agreement”) pursuant to which the sole members of the
Company are the Members.  (Capitalized terms not defined herein shall have the meaning ascribed to such terms in the Operating Agreement).

   

B.         Inland, directly, or through one or more affiliated entities, owns fee simple title to certain real property as more particularly described on Exhibit A attached hereto
(collectively, the “Properties”).

   

C.                    The Members have formed the Company for the purpose of owning, operating, leasing, managing and maintaining
certain parcels of real property as described in the Operating Agreement, including the Properties.

   

D.                    As contemplated under Sections 5.1 and 6.1 of the Operating Agreement, Inland is obligated to convey to
the Company fee simple title and all appurtenant rights in and to or related to the Properties, any and all rights and entitlements, including without limitation, any held to develop, consent and operate the Properties, including, without limitation, rights arising
under reciprocal easement agreements, development agreements and other agreements respecting the development, construction or use of the Properties, all rights of the landlord in, to or under any leases of the Properties, the improvements thereon, whether or not such
leases shall have heretofore commenced or are to commence in the future and all rights of owner under any and all operating or service agreements benefiting the Properties.

   

E.         The Company intends to designate to Inland single member limited liability companies of which the Company is the sole member and manager for purposes of holding title to each
of the Properties (collectively, the “Subsidiaries”, and each a “Subsidiary”).

   

F.         Inland, the Company and NYSTRS desire to enter into this Agreement for purposes of effectuating Sections 5.1 and 6.1 of the Operating Agreement.

   

AGREEMENT

   

NOW, THEREFORE, in consideration of the foregoing recitals and the covenants and promises contained herein, the parties do hereby agree as follows:

   

1.         Contribution of Property.  Pursuant to, based upon and subject to (i) the Operating Agreement, (ii) the assumption of the Assumed Liabilities (as defined herein)
by the Company and the applicable Subsidiary as provided in Section 2 and (iii) the terms and conditions herein set forth, Inland hereby agrees to contribute, convey and assign to the Subsidiaries from time to time hereafter, and Company, through its Subsidiaries,
agrees to accept from Inland as consideration for the issuance of an ownership interest in the Company as set forth in and pursuant to the Operating Agreement, all of the following:

 

(a)        The land associated with the Properties, together with any and all appurtenant improvements, rights, interests, easements, tenements and estates (collectively, “Real
Property”);

   

(b)        All tangible personal property owned, leased or licensed by Inland and located on or used exclusively in connection with the operation of the Real Property (collectively, the
“Personal Property”);

   

(c)        All rights of Inland under leases listed on Schedule 1(c) hereto, including any amendments, modifications, or supplements thereto  (collectively, the
“Leases”) together with all refundable and non-refundable security deposits;

   

(d)        All trade names owned by Inland used in connection with the Properties and all warranties, guarantees, licenses and other matters which are described more particularly in
Schedule 1(d) hereto (collectively, the “Rights”);

   

(e)        All permits, licenses, approvals, development rights and other entitlements necessary, required or desirable for the use and operation of the Real Property and the development and
construction thereof which are described more particularly in Schedule 1(e) hereto (collectively, the “Permits”);

   

(f)         All of Inland's rights under all agreements (collectively, the “Contracts”) other than the Leases, including all rights to contribution or indemnity, in
effect with respect to the Properties; and

   

All Inland’s other rights, tangible or intangible, rebates, refunds (excluding tax refunds for 2002 and any prior periods) and the like, of or associated with the Properties whether now or hereafter accruing (collectively, the “General
Intangibles”).  It is the intention of the parties that no such refunds, rebates or the like shall inure to Inland, but shall inure to the Company.

 

The date upon which each of the above is contributed to the Company with respect to any Property shall be referred to herein as the “Property Contribution Date” as to such Property.

2.         Assumption of Liabilities. On the terms contained in this Agreement or in the Operating Agreement, upon and after the Property Contribution Date applicable to
any Property contributed by Inland to the Company, the Company and the applicable Subsidiary shall assume, and agrees to discharge and perform as and when due the following liabilities and obligations of Inland relating to the Property (collectively, the
“Assumed Liabilities”): (a) that certain indebtedness related to the Property (including principal and interest payments and fees accruing after the applicable Property Contribution Date), and all obligations related thereto, of Inland pursuant to
the loan agreements entered into between Inland and the lenders described on Exhibit A with respect to the applicable Property (collectively, the “Loan Documents”); (b) trade accounts payable related to the Property as of the applicable Property
Contribution Date to the extent incurred in the ordinary course of business accruing after the Property Contribution Date; (c) expenses related to the Property as of the applicable Property Contribution Date to the extent incurred in the ordinary course of business
accruing after the applicable Property Contribution Date; and (d) all liabilities and obligations of Inland related to the Property accruing after the applicable Property Contribution Date under any written agreement (including the Contracts, Leases and Permits),
warranty or commitment by which Inland is bound with respect to the Property as of the Property Contribution Date and which is assigned and contributed to the Company.

   

3.         Contribution Consideration and Conditions. Inland and the Company agree that all items of income and expense relating to the Properties will be prorated as of
the applicable Property Contribution Date, with Inland benefited or liable, as applicable, to the extent such items relate to any time period up to but not including the Property Contribution Date, and the Company benefited or liable, as applicable, to the extent
such items relate to periods on and subsequent to the Property Contribution Date.  The method of calculating such prorations for each of the Properties shall be made in accordance with the Proration Agreement in the form of Exhibit B attached hereto (the
“Proration Agreement”).  Inland and the Company agree to furnish to each other and to NYSTRS such documents and other records as each party reasonably requests in order to confirm all adjustment and proration calculations made.  The net amount
due and payable to either Inland or the Company, as the case may be, as a result of all such prorations may be reflected as an adjustment to any distributions to Inland under the Operating Agreement.  All prorations will be made as of 12:01 a.m. on the
applicable Property Contribution Date and any item prorated hereunder on an estimated basis shall be reprorated once the final amounts are known, in accordance with the Proration Agreement.  Once the reprorations have been finally determined, either Inland shall
pay the adjustment to the Company or the Company shall pay the adjustment to Inland, as applicable, as is required to take account of such reprorations.  Payments in connection with any such reproration shall be paid in cash and be due within thirty (30) days of
demand.  All obligations under this paragraph shall survive the closing. 

   

4.         Cash Adjustments.  The parties agree that the Agreed Net Value of the Properties (as defined in the Operating Agreement) shall be increased, as set forth on
a Closing Statement prepared pursuant to the Proration Agreement prepared for each Property by the amount of the aggregate value of any cash or cash equivalents, including, without limitation, any deposits or bonds given by Inland (e.g. utility deposits, deposits or
reserves with the any lender and/or landscaping bonds) or amounts in any of Inland accounts, that are transferred, directly or indirectly, to the Company (whether as part of the Inland Capital Contribution or otherwise) on the Property Contribution Date, exclusive of
any amount attributable to net prorations as provided in Paragraph 3 above.

   

5.         Costs.  All documentary, transfer, excise, lender or similar fees and any other property transfer costs shall be paid by the Company.  Each party shall
pay its own attorneys’ fees and all costs and expenses that relate solely to such party’s investment in the Company.  NYSTRS shall pay its own due diligence costs associated with the transactions contemplated hereunder.

   

6.         Conditions to Contribution.  Each Property shall be contributed to the Company at such time as each condition described in this Section 6 hereof have been
fulfilled (or, as the case may be, waived by any party expressly entitled to waive said condition) as to such Property; provided, however, that the Members and the Company agree that the initial contribution of Properties shall be made to the Company only when the
conditions for the contribution of a Property shall be fulfilled (or, as described above, duly waived) as to no less than 4 of the Properties set forth on Exhibit A, at which time such Properties shall be simultaneously contributed to the Company.  Inland shall
provide the Company with no less than 10 business days prior written notice of its intention to convey a Property or Properties to the Company.

   

(a)        Joint Conditions.  The obligations of the Members and the Company to effect the transactions contemplated herein with respect to any given Property are subject to the
fulfillment of all of the following conditions precedent, any or all of which may be waived in whole or in part solely by the unanimous written consent of both Members on behalf of the Company:

   

(i)         There shall have been obtained from the lender described on Exhibit A as to the Property to be contributed the Bank Approval in the form attached hereto as
Exhibit E or such other form as may be approved by NYSTRS and Inland in Section 11 hereof.

 

(ii)        No suit, proceeding or investigation shall have been commenced or threatened by any governmental authority or private person on any grounds to restrain, enjoin or hinder, or to
seek material damages on account of, the consummation of the transaction contemplated hereby.

   

(iii)       The Initial Annual Plan (consisting of the 2004 stub period budget and the preliminary Annual Plan for 2005 as defined in the Operating Agreement) has been approved by NYSTRS with
respect to the Property being contributed on that particular Property Contribution Date, and NYSTRS has confirmed to its satisfaction that the Property has been operated in a manner which is materially consistent with the 2004 stub period budget for the period from
the beginning date of the stub period budget through the Property Contribution Date.  Inland shall cooperate with NYSTRS in promptly preparing an Initial Annual Plan for each Property and submitting the same for NYSTRS’ approval.

   

(b)        Inland Conditions.  The obligation of Inland to contribute any Property as contemplated by this Agreement is subject to the fulfillment of all of the following
conditions precedent with respect to said Property, any or all of which may be waived in whole or in part solely by Inland:

   

(i)         The Company shall have received and have provided Inland with written evidence of the NYSTRS Initial Capital Contribution with respect to said Property (which may be made
concurrently with the contribution of the Property to the Company) as provided for in Section 5.1 of the Operating Agreement.

 

(ii)        NYSTRS shall have fulfilled all of its respective duties and obligations required to be fulfilled under the Operating Agreement, and any other documents contemplated therein or
hereby on or prior to the Property Contribution Date.

   

(c)        NYSTRS Conditions.  The obligation of the NYSTRS to make its Initial Capital Contribution with respect to any given Property as contemplated hereunder and under the Operating
Agreement is subject to the fulfillment of all of the following conditions precedent with respect to said Property, any or all of which may be waived in whole or in part solely by NYSTRS, it being agreed that the contribution of said Property shall not occur unless
and until said conditions are so satisfied or waived:

   

The Company and Inland shall have fulfilled all of their respective duties and obligations required to be fulfilled under the Operating Agreement and this Agreement, and any other documents contemplated therein or hereby on or
prior to the Property Contribution Date.

There shall have been obtained from the tenants located at the Property to be contributed the executed Approved Estoppel Certificates or such other form of estoppel certificate as described in Section 11
hereof. 

Between the date hereof and the Property Contribution Date of any Property, there shall have been no material adverse changes in any of the following (each, a “Property MAC”):  (x) the economic, physical or
environmental condition of said Property (including, for these purposes, any casualty damage of which the cost to restore, when aggregated with the casualty damage to any other Properties which have been previously been contributed to the Company, is reasonably
estimated to exceed $250,000, exclusive of the upgrades to be made to the Woodfield Commons Property described in Section 6(d) hereof) and the repairs to the flooring in the Ace Hardware store located at the Thatcher Woods Property, or (y) any casualty damage or
pending or threatened eminent domain proceedings with respect to said Property which would entitle any “major” tenant (as described in Section 11 hereof) of the Property the right to terminate its lease or abate its rent, or (z) any material adverse
change in the economic condition of any “major” tenants of the Property (as described in Schedule 11).

Each representation and warranty of Inland contained in this Agreement shall be true and correct at and as of the Property Contribution Date as though such representation and warranty were made again with respect to the
Property to be contributed at and as of the Property Contribution Date.

(v)        Stewart Title Company (“Stewart”) has confirm that it is prepared to issue to the Company a policy of title insurance for the Property containing each of the
endorsements listed on Schedule 7(b)-1.

(vi)       Inland has delivered to NYSTRS copies of the executed REIT Agreements consistent with the provisions of Section 13.5(c) of the Operating Agreement.

(vii)      With respect to the contribution of the Mill Creek Property only, the loan assumption agreement or other document delivered by the lender in connection with the assumption of the loan shall
eliminate any cross-default provisions in the Mill Creek mortgage loan documents related to loan defaults with respect to other properties which are not to be acquired by the Company.

(d)        Woodfield Commons.

(i)         Inland has provided to NYSTRS information regarding façade upgrades which have been determined by Inland to be necessary with respect to the Woodfield Commons
Property.  The parties have agreed that the façade upgrades shall not be considered a Property MAC for purpose of the contribution of Woodfield Commons to the Company.  The parties agree that all costs and expenses associated with the façade
repair shall be borne by the Company, subject to the inclusion of the costs of such upgrades in the Initial Annual Plan for Woodfield Commons and approval of such plan by NYSTRS in accordance with Section 6(a)(iii) hereof.

(ii)        Inland agrees that prior to the contribution of the Woodfield Commons Property to the Company, Inland shall cause the previously disclosed mold in the sprinkler riser room and in
the space occupied by Enterprise Car Rental (“Enterprise”), which are both in the Woodfield Common East location, to be remediated in accordance with current industry standards.  Such remediation shall be completed at Inland’s cost and expense,
provided, however, that Enterprise is obligated pursuant to its lease for the cost of such remediation, and Inland shall be entitled to be reimbursed for its cost and expense to the extent thereafter paid by Enterprise.  Inland will provide NYSTRS with a copy of
the close-out report obtained from the contractor who performs the remediation prior to contribution of the Woodfield Commons Property.

(e)        Thatcher Woods.  Inland has provided NYSTRS information regarding certain areas of the floor in the space occupied by Ace Hardware where the tiles are not adhering to the
floor, the exact cause of which is still being determined.  The parties agree that this matter shall not be considered a Property MAC for purposes of the contribution of Thatcher Woods to the Company.  The parties further acknowledge and agree that $30,000
will be allocated in the Company’s budget for the Thatcher Woods Property to complete commercially reasonable repairs to the floor and tile; provided, however, that in the event that the cost of such commercially reasonable repairs are in excess of $30,000,
Inland shall reimburse the Company for such excess amounts.

Title.

Title to the Real Property shall be transferred and conveyed to the applicable Subsidiary as designated by the Company on the applicable Property Contribution Date free and clear of all liens, claims, encumbrances or defects,
other than the Permitted Exceptions (as defined below) and the Assumed Liabilities applicable to the Property being contributed.

Inland shall cause to be provided to the Subsidiary to which title to any Property is being conveyed on the applicable Property Contribution Date an ALTA 1970 Form B extended coverage Owner’s policy of title insurance
(“Title Policies”) issued by Stewart Title Company (“Stewart”), showing title to the Real Property vested in the applicable Subsidiary with liability in such portion of the Net Agreed Value attributable to the Property being conveyed,
containing the endorsements listed on Schedule 7(b)-1 attached hereto, and subject only to lien of real property taxes not yet due and payable and other matters set forth on Schedule 7(b)-2 attached hereto (collectively, “Permitted Exceptions”), along
with a copy of the ALTA plat of survey in Inland’s possession up-dated within 6 months prior to the Property Contribution Date.  Company shall pay all title insurance premiums, endorsements, surveyor and related charges for the issuance of the Title
Policy.   If Inland, after providing to Stewart such information as Stewart shall reasonably request for purposes of issuing the endorsements listed on Schedule 7(b)-1, cannot deliver an endorsement because Stewart Title is unwilling or unable to issue the
same, Inland shall not be liable to the Company or NYSTRS for such failure, and the NYSTRS, at its election, shall determine whether to waive the requirement for the delivery of the endorsement hereunder.

Title to the Leases, the Rights, the Permits, the Contracts and the General Intangibles shall be transferred and conveyed to the designated Subsidiary on the Property Contribution Date free and clear of all liens, claims,
encumbrances or defects, other than the Permitted Exceptions and the Assumed Liabilities.

Representations and Warranties.  Inland makes the following representations and warranties to Company:

Except as set forth in Schedule 8(a), no consent from or notice to any federal, state or local court or federal, state or local government bureau, department, commission or agency, or any other person or entity whether or not
governmental in character, is required to permit Inland to execute, deliver and perform this Agreement and convey the Properties to the Company, other than consents which have already been obtained or will be obtained prior to any Property Contribution
Date.

Inland is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland.  Inland has not alienated, encumbered (other than Permitted Exceptions), transferred, optioned, leased
(other than pursuant to the Leases), assigned, transferred or otherwise conveyed its interest or any portion of its interest in the Properties or any portion thereof, nor has Inland entered into any agreement (other than this Agreement) so to do.

Inland has the requisite power and authority to own and operate the Properties.  The execution, delivery and performance of this Agreement by Inland has been duly authorized by all necessary action and proceedings, and no
further corporate action or authorization will be necessary on the part of Inland in order to consummate the transactions contemplated herein.

This Agreement constitutes the legal, valid and binding obligation of Inland enforceable against Inland in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium and other principles relating to or limiting the rights of contracting parties generally.  Neither this Agreement nor the consummation of any of the transactions contemplated hereby violates or shall violate any provision of any agreement
or document to which Inland is a party or by which Inland is bound.

Except as expressly disclosed and described in the “Environmental Reports”, listed on Schedule 8(e) or as otherwise disclosed on Schedule 8(e), to Inland’s knowledge: (i) the Real Property is not in
violation, nor has it been or is it currently under, investigation for violation of any federal, state or local law, ordinance or regulation relating to industrial hygiene, worker health and safety, or to the environmental conditions in, at, on, under or about the
Real Property (“Environmental Law”) including, but not limited to, soil and groundwater conditions; the Real Property has not been subject to a deposit of any Hazardous Substance (as defined in Exhibit C hereto); (ii) neither Inland nor any third party
has used, generated, manufactured, stored or disposed in, at, on, under or about the Real Property or transported to or from the Real Property any Hazardous Substance; (iii) there has been no discharge, migration or release of any Hazardous Substance from, into, on,
under or about the Real Property; and (iv) there is not now, nor has there ever been on or in the Real Property underground storage tanks or surface impoundments, any asbestos-containing materials or any polychlorinated biphenyls used in hydraulic oils, electrical
transformers or other equipment, and (v) there is not now any phenolic foam located on the roof of any Property, and if there has ever been any phenolic foam on any roof, it has been removed.

Except as set forth on Schedule 8(f), there is no pending suit, action or arbitration, or legal, administrative, or other proceeding or governmental investigation, formal or informal, including but not limited to eminent
domain or condemnation proceeding, proceeding to establish a new assessment district or increase the assessments imposed by an existing assessment district, or zoning change proceeding, pending or threatened in writing, or any judgment, moratorium or other government
policy or practice which affects any of the Properties.

Except as set forth on Schedule 8(g), there are no lawsuits, claims, suits, proceedings or investigations pending or, to the best of Inland’s knowledge, threatened against or affecting Inland or any of the Properties
which have not been tendered to and accepted for defense by insurance carriers (whether under a reservation of rights or otherwise), nor, to Inland's actual knowledge, is there any basis for any of the same, and there are no lawsuits, suits or proceedings pending in
which any Inland is the plaintiff or claimant and which relate to any of the Properties.  There is no action, suit or proceeding pending or, to the best of Inland’s knowledge, threatened which questions the legality or propriety of the transactions
contemplated by this Agreement.

Except for the Contracts and Permits and as Inland has disclosed in writing to Company, and except with respect to the Leases or any matter constituting one of the Permitted Exceptions, Inland has made no material written
commitments or representations to, or understandings or agreements with, any person, firm or entity, any adjoining property owner or any governmental, or quasi governmental authority which would in any way be binding on Company and, after the Property Contribution
Date, Inland shall not make or enter into any such material commitment, representations, understandings or agreements without Company’s written consent or agreement.

Except for the Leases, the Contracts, the Permits, and the Permitted Exceptions, there are no contracts or agreements with respect to the occupancy of the Properties which will be binding on the Company or the Properties after
the Property Contribution Date.  Schedule 1(c) contains a true and correct list and description of the Leases respecting the Properties.  Subject to the Permitted Exceptions, Inland owns, free and clear of any lien, claim or encumbrance, and has full right,
power and authority to transfer and assign, the Leases.  Inland is currently the landlord under each lease, and Inland has not sold, assigned, or otherwise conveyed any of its right, title or interest in, to or under the Leases.  Except as set forth on
Schedule 1(c) (i) Inland has not sent any notices of default to any other party to any Lease, (ii) each Lease is in full force and effect in accordance with its terms, (iii) to Inland’s knowledge, no material default on the part of either party to any of the
Leases has occurred and is continuing and no event has occurred and is continuing which, with the giving of notice or passage of time, or both, would constitute a so-called “event of default” by either party or conditional limitation under a Lease and
(iv) to Inland’s knowledge, no tenant under any Lease has any right of offset or counterclaim arising thereunder or otherwise against Inland, its successors or any of the Properties.  True, correct and complete copies of all Leases have been delivered to
NYSTRS and to the Company.  No Lease has been amended except as evidenced by amendments similarly delivered to Company.  The Leases constitute the entire agreement between Inland and the other parties thereto with respect to occupancy of the
Properties.  The rent rolls (the “Rent Rolls”) attached hereto as Schedule 8(i) have been prepared in the ordinary course of Inland’s business, and Inland has no knowledge of any material inaccuracies therein.  All leasing commissions
accruing on or before the Property Contribution Date have been paid or will be paid by Inland, at its sole cost and expense, in the ordinary course of business.

Schedule 8(j) hereto contains a true, accurate and complete listing of all Contracts, other than Leases, binding on and/or benefiting the Properties, or Inland. Except for the Permitted Exceptions and subject to the Assumed
Liabilities, Inland owns, free and clear of any lien, claim or encumbrance, and has full right, power and authority to transfer and assign, all Contracts, to the extent the Contracts are assignable.   Inland has not sold, assigned, or otherwise conveyed any
of its right, title or interest in, to or under the Contracts.   Inland has not received any written notice of a default on the part of any party to the Contracts.  Except as set forth on Schedule 8(j), (i) Inland has not sent any notices of default to
any other party to any Contract, (ii) each Contract is in full force and effect in accordance with its terms and (iii) to Inland’s knowledge, no material default on the part of either party to any of the Contracts, including a default arising as a result of the
convey of the Properties as contemplated hereunder, has occurred and is continuing and no event has occurred and is continuing which, with the giving of notice or passage of time, or both, would constitute a so-called “event of default” by either party or
conditional limitation under a Contract.

Schedule 8(k) identifies the Assumed Liabilities with respect to each Property that the Company will be assuming or taking subject to at the Property Contribution Date.  The outstanding balance of principal and (if any)
accrued and unpaid interest with respect to the Assumed Liabilities as of July 1, 2004 is set forth on Schedule 8(k), with the amount identified separately for each Property. With the exception of any documents required to be executed in connection with the
Company’s assumption of the Assumed Liabilities, all of the documents evidencing or securing the Assumed Liabilities, and any amendments, supplements or modifications thereto, are listed on Schedule 8(k) attached hereto (“Assumed Debt
Documents”).  Inland has delivered to the Company true and complete copies of all Assumed Debt Documents.  Inland has not given to, or to Inland’s knowledge received from, any party to the Assumed Loan Documents any written notice of any default
that has not been cured.

As used in Section 8(a) through (k) above, the term “Inland” shall mean, when appropriate, the Inland affiliated entity which owns fee simple title to the Property for which the representation and warranty
applies.

On each Property Contribution Date, Inland shall furnish the Company with a certificate (i) stating that each representation and warranty of Inland in this Agreement remains true and correct as of said Property Closing Date,
and re‐making each representation and warranty at and as of said date, or (ii) identifying any changes to said representations and warranties arising as a result of matters occurring between the date hereof and said Property Closing Date.

Inland’s representations, warranties and indemnities shall survive for a period of nine (9) months following the Property Contribution Date; provided, however, that if a claim is made hereunder within such survival
period, the period shall continue until the claim is resolved.  The Company shall not be entitled to recover any Damages against Inland or its Affiliates for a breach of this Agreement until the aggregate amount which the Company would recover exceeds
$200,000.  In addition, the Company shall not be entitled to recover against, and in no event shall the liability of Inland or its Affiliates for any Damages for a breach of this Agreement in an aggregate amount exceeding $4,875,340; provided, however, that
there shall be no limit of liability of Inland for Damages hereunder resulting from a willful or intentional breach of any representation, warranty or covenant set forth in this Agreement.

For purposes of this Agreement, the term “Damages” shall mean all liabilities, demands, claims, actions or causes of action, regulatory, legislative or judicial proceedings or investigations, assessments, levies,
losses, fines, penalties, damages, costs and expenses, including reasonable attorneys’, accountants’, investigators’, and experts’ fees and expenses, sustained or incurred in connection with the defense or investigation of any claim; provided,
however, in no event shall Damages include any amounts which represent special, consequential or punitive damages, or arising from loss of profits or opportunity.

Company’s Representations.

Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.  The execution, delivery and performance of this Agreement by Company has been duly
authorized by all necessary action and proceedings, and no further corporate action or authorization will be necessary on the part of Company in order to consummate the transactions contemplated herein.

This Agreement constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium and other principles relating to or limiting the rights of contracting parties generally.   Neither this Agreement nor the consummation of any of the transactions contemplated hereby violates or shall violate any provision of
any agreement or document to which Company is a party or by which Company is bound. 

Conveyance Instruments. In connection with the conveyance of any Property by Inland pursuant to this Agreement, Inland and the Subsidiaries shall execute or cause to be executed such instruments, dated as of the Property
Contribution Date, substantially in the form of Exhibits D-1 through D-5 (collectively, the “Instruments”), as are necessary to give effect to each of the conveyances contemplated herein, including without limitation, a special warranty deed as to the
Real Property, an assignment and assumption of leases, an assignment and assumption of contracts and an assignment of rights and permits, including the Rights and Permits.

Lender Approvals and Estoppels. 

Inland has delivered, or promptly following the date hereof, shall deliver to the lenders described on Exhibit A the form of the lender approval attached hereto as Exhibit E and made a part hereof (the “Bank
Approval”). Inland shall use commercially reasonable efforts to obtain the Bank Approval from the applicable lender for each Property; provided, however, if any lender will not execute the Bank Approval in the form attached hereto as Exhibit E, Inland and
NYSTRS will cooperate in good faith to negotiate a form of Bank Approval that is acceptable to Inland, NYSTRS and the applicable lender; provided that if Inland has used commercially reasonable efforts to attempt to obtain the Bank Approval, Inland shall not be
liable hereunder for any failure to obtain same.  Inland shall not be required to pay any amounts to any lender to obtain the lender’s execution of the Bank Approval, and the Company shall pay any assumption fees or charges contemplated under the loan
documents to obtain the Bank Approval. Inland shall promptly deliver to the Company any Bank Approvals or other form of lender consent that it receives, with a copy to NYSTRS. 

Inland shall obtain and deliver on or prior to the Property Contribution Date applicable to any Property tenant estoppel certificates from the “major” tenants identified on Schedule 11 attached hereto and made
apart hereof, and shall obtain and deliver tenant estoppel certificates from no less than tenants occupying 80% of the remaining square footage at each of the Properties.  Each such tenant estoppel certificate shall be in the form of Exhibit F attached hereto or
in the form of estoppel certificate required under such tenant’s lease.  Inland shall send the completed estoppel certificates to NYSTRS for its approval, which approval NYSTRS will use its reasonable efforts to provide within 5 business days.  Inland
may deliver the Estoppel Certificates to the tenants prior to the time that they are approved by NYSTRS; provided, however, if NYSTRS reasonably requires modifications to the information inserted by Inland in any Estoppel Certificate, Inland agrees to modify the
Estoppel Certificate and resubmit the same to the tenant.  The forms of the fully prepared Estoppel Certificates as approved by NYSTRS are sometime referred to herein as the “Approved Estoppels Certificates.”  Inland shall send the Approved
Estoppels Certificates to all tenants and shall use commercially reasonable efforts to obtain the Approved Estoppel Certificates from all tenants, provided that Inland shall not be required to pay any amounts to said tenants or initiate litigation against said
tenants in order to obtain said Approved Estoppel Certificates.  Inland shall promptly deliver to the Company any Approved Estoppel Certificates or estoppel certificates in any other format that it receives, and deliver copies of the same to NYSTRS. Estoppel
Certificates, as executed and delivered by the tenants, shall contain only immaterial exceptions, qualifications or modifications thereto. For purposes of the foregoing, an exception, qualification or modification shall be deemed to be “immaterial” if
such exception, qualification or modification does not (i) dispute the enforceability of the Lease in question, (ii) disclose a material monetary or substantial non-monetary default under the Lease, (iii) assert a term or condition not contained in the copy of the
Lease delivered to NYSTRS (or otherwise disclosed to NYSTRS), which term or condition materially adversely affects the economic provisions of the Lease; or (iv) contain information which is materially inconsistent with the Rent Rolls or with any representation made
by Inland in this Agreement.

Inland shall use commercially reasonable efforts to deliver on or prior to the Property Contribution Date applicable to any Property estoppel certificates to be completed by the parties to any reciprocal easement agreements
applicable to any Property.  The estoppel certificates (the “REA Estoppels”) shall be in the form attached here to Exhibit G.  Notwithstanding the delivery of the form of REA Estoppels as provided herein, Inland shall have no obligation to
obtain the executed REA Estoppels from the parties thereto; provided, however if the REA Estoppel is not received on the Property Contribution Date, Inland shall deliver an estoppel certificate to the Company on the Property Contribution Date substantially in the
form attached as Exhibit G.

Termination. 

This Agreement and the transactions contemplated hereby may be terminated (i) in their entirety at the election of either Inland or NYSTRS, upon written notice to the other party, if the contribution of at least 4 of the
Properties has not been completed on or before December 31, 2004; and (ii) as to any given Property, at the election of either Inland or NYSTRS, upon written notice to the other party, if the contribution of said Property has not been completed on or before
December 31, 2004.

This Agreement and the transaction contemplated hereby may be terminated as to any Property at the election of NYSTRS, if there has been a Property MAC.  If the Agreement is not so terminated, then, if applicable, Inland
shall assign to the Company all insurance or condemnation proceeds (or claims with respect thereto) relating to the Property in question and the Company shall receive a closing credit in the amount of the deductible under any applicable insurance policy.

If this Agreement is terminated pursuant to Section 12(a), this Agreement shall thereafter become void and have no further force and effect and all further obligations of the parties under this Agreement shall terminate
(either in its entirety, if the Agreement has been terminated in its entirety, or as to each Property with respect to which the Agreement has been terminated, if this Agreement has been terminated in part) without further liability of any party hereto to the other in
connection therewith; provided however, the termination of this Agreement (in whole or in part) pursuant to Section 12(a) shall not constitute a waiver by any party of any claim it may have for damages caused by reason or, or relieve any party for liability for,
any breach of this Agreement.

If this Agreement is terminated as to any Property pursuant to Section 12(b), this Agreement shall thereafter become void and have no further force and effect with respect to the Property for which this Agreement is being
terminated, and all further obligations of the parties under this Agreement with respect to such Property shall terminate without further liability of any party hereto to the other.

Bulk Sales.  Inland has requested and Company and NYSTRS have agreed that it shall not be a condition to closing that Inland obtain a release of the Company from the applicable governmental authorities under the
provisions of state and local laws relating to the bulk sales of real property or to the sale of a substantial portion of a business.  In consideration therefore, Inland agrees to reimburse the Company on demand for any state or local tax liability or other
payments that the Company is obligated to make to any governmental authority as a result of the failure to comply with the safe harbor provisions of said laws, including any failure to obtain a release of the Company by the applicable governmental authorities with
respect to any such liability.

Notices. All notices and demands which any party hereto is required or desires to give shall be given in accordance with Section 16.1 of the Operating Agreement.

Governing Law.  This Agreement and the Instruments are to be governed by and construed in accordance with the laws of the State of Illinois notwithstanding any conflict-of-laws doctrines of such state or any other
jurisdiction to the contrary.

Headings; Capitalized Terms.  Headings used in this Agreement are for convenience of reference only and are not intended to govern, limit, or aid in the construction of any term or provision thereof.  Capitalized
terms not defined herein shall have the meanings set forth in the Operating Agreement.

Amendment.  This Agreement may be amended or modified only in a writing signed by each of the parties hereto.

Gender.  Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the
context indicates is appropriate.  The term “including” shall mean “including, but not limited to.”

Time of the Essence.  Time shall be of the essence as to all dates and times of performance whether contained herein or in any Instrument executed pursuant hereto.

Severability.  The provisions of this Agreement are independent of and separable from each other, and no provisions shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any
other or others of them may be invalid or unenforceable in whole or in part.

Delivery of Possession; Operation Prior to Closing.  Possession of each Property, subject only to Permitted Exceptions, the Assumed Liabilities and the Leases, shall be delivered to the Company on the applicable Property
Contribution Date.  Between the date hereof and the applicable Property Closing Date, Inland shall continue to operate each Property in the same manner in which said Property is currently being operated.

Successors and Assigns.  This Agreement will be binding upon and shall inure to the benefit of the parties, and their respective distributees, heirs, successors and assigns.

Waiver.  A party may, at any time or times, at its election, waive any of the conditions to its obligations hereunder, but any such waiver shall be effective only if contained in a writing signed by such party.  No
waiver shall reduce the rights and remedies of such party by reason of any breach of any other party.  No waiver by any party of any breach hereunder shall be deemed a waiver of any other or subsequent breach.

Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute
one and the same instrument.  This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

Third Party Beneficiaries/Parties in Interest.  This Agreement has been made solely for the benefit of the parties to the Agreement, and their respective successors and permitted assigns.  Nothing in this Agreement
is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties to it and their respective successors and permitted assigns.  Nothing in this Agreement is intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement.

Remedies.  Inland acknowledges that pursuant to the Operating Agreement, NYSTRS, acting alone on behalf of Company, shall have the right to exercise Company’s rights and remedies, at law, in equity, or under this
Agreement, in the event of a breach of this Agreement by Inland.  No waiver, settlement or relinquishment of any right or claim that Company may have under this Agreement in the event of a breach by Inland of this Agreement shall be effective except by means of
a written instrument executed by NYSTRS.

Prevailing Party.  If any party shall commence any action against the other in order to enforce any provision of this Agreement or to recover damages as the result of the breach of any of the provisions of this Agreement,
the prevailing party in such action shall be entitled to recover all reasonable costs (including reasonable attorney’s fees and paralegal’s fees) incurred in connection therewith against the party who has breached this Agreement.  Notwithstanding a
settlement or other resolution of any such action without the issuance of a definitive ruling by a court, including, but not limited to, any agreement by the parties that such settlement is not an admission of liability by either party, no such settlement or
resolution shall constitute a waiver of this Section, and each party acknowledges and agrees that it shall be entitled to petition the court for a determination that it is the prevailing party and entitled to recovery of its reasonable costs hereunder.

Personal Jurisdiction.  The Company and each Member hereby irrevocably consent to the jurisdiction of the United States District Court for the District of Delaware for purposes of any litigation among or between the
Company and the Members concerning the Company or this Agreement.  In any such proceeding, the Company and each Member shall be deemed to have waived its right to a trial by jury.  The parties hereto hereby individually agree that they shall not assert any
claim that they are not subject to the jurisdiction of such courts, that the venue is improper, that the forum is inconvenient or any similar objection, claim or arguments.  Service of process on any of the parties hereto with regard to any such action may be
made by mailing the process to such person by regular or certified mail to the address of such person set forth herein or to any subsequent address to which notices shall be sent.

(Signatures continue on next page)

   

IN WITNESS WHEREOF, the parties hereto have executed this Contribution Agreement as of the date first written above.

	
COMPANY:

	
INLAND:

	
IN RETAIL FUND, L.L.C., a Delaware limited liability company

By:       IN RETAIL MANAGER, L.L.C.,

             a Delaware limited liability company,

             Manager

             By:       Inland Real Estate Corporation,

                         a Maryland corporation, Manager

                           /s/ Mark E. Zalatoris_____     

                         Name:_Mark E. Zalatoris______

                         Title:    Executive Vice President           

   

   

	
INLAND REAL ESTATE CORPORATION, a Maryland corporation

 By:         /s/ Mark E. Zalatoris__                      

             Name:_Mark E. Zalatoris__________

             Title:     Executive Vice President          

	
   

NYSTRS:

   

The New York State Teachers’ Retirement System

   

By:_/s/ Rosemarie C. Hewig____________

Its: _Assistant General Counsel__________

By:_/s/ Terri A. Pandolfi_______________

Its: _Assistant Real Estate Officer________FORM OF FIXED RATE NOTE

REGISTERED                                               REGISTERED
No. FXR                                                  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 C

                PERFORMANCE LEVERAGED UPSIDE SECURITIES ("PLUS")

                            PLUS DUE JANUARY 30, 2006
                            MANDATORILY EXCHANGEABLE
                      FOR AN AMOUNT PAYABLE IN U.S. DOLLARS
                 BASED ON THE VALUE OF THE RUSSELL 2000(R)INDEX

<TABLE>
<S>                             <C>                          <C>                          <C>
------------------------------- ---------------------------- ---------------------------- ----------------------------
ORIGINAL ISSUE DATE:            INITIAL REDEMPTION DATE:     INTEREST RATE: None          MATURITY DATE: See
                                   N/A                                                       "Maturity Date" below.
------------------------------- ---------------------------- ---------------------------- ----------------------------
INTEREST ACCRUAL DATE: N/A      INITIAL REDEMPTION           INTEREST PAYMENT DATES: N/A  OPTIONAL REPAYMENT
                                   PERCENTAGE: N/A                                           DATE(S):  N/A
------------------------------- ---------------------------- ---------------------------- ----------------------------
SPECIFIED CURRENCY: U.S.        ANNUAL REDEMPTION            INTEREST PAYMENT PERIOD:     APPLICABILITY OF MODIFIED
   dollars                         PERCENTAGE REDUCTION:        N/A                          PAYMENT UPON
                                   N/A                                                       ACCELERATION: 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       N/A                          INTEREST PAYMENTS: N/A       N/A
   TO ELECT PAYMENT IN U.S.
   DOLLARS: N/A
------------------------------- ---------------------------- ---------------------------- ----------------------------
EXCHANGE RATE AGENT: N/A        TAX REDEMPTION AND PAYMENT                                ORIGINAL YIELD TO
                                   OF ADDITIONAL AMOUNTS:                                    MATURITY: N/A
                                   N/A
------------------------------- ---------------------------- ---------------------------- ----------------------------
OTHER PROVISIONS: See below     If yes, state Initial
                                   Offering Date: N/A
------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>

For the purposes of this PLUS, the tenth paragraph of Section 2.08 of the
Amended and Restated Indenture, dated as of May 1, 1999, between the Issuer and
JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank) as Trustee,
shall not apply.

Maturity Date.............   January 30, 2006, subject to extension in
                             accordance with the following paragraph in the
                             event of a Market Disruption Event on the scheduled
                             Index Valuation Date (as defined below).

                                       2
<PAGE>

                             If due to a Market Disruption Event or otherwise,
                             the Index Valuation Date is postponed, the Maturity
                             Date shall be the second scheduled Trading Day
                             following the Index Valuation Date as postponed.
                             See "Index Valuation Date" below.

                             In the event that the Maturity Date of the PLUS is
                             postponed due to postponement of the Index
                             Valuation Date as described in the immediately
                             preceding paragraph, the Issuer shall give notice
                             of such postponement and, once it has been
                             determined, of the date to which the Maturity Date
                             has been rescheduled (i) to the holder of this PLUS
                             by mailing notice of such postponement by first
                             class mail, postage prepaid, to the holder's last
                             address as it shall appear upon the registry books,
                             (ii) to the Trustee by telephone or facsimile
                             confirmed by mailing such notice to the Trustee by
                             first class mail, postage prepaid, at its New York
                             office and (iii) to The Depository Trust Company
                             (the "Depositary") by telephone or facsimile
                             confirmed by mailing such notice to the Depositary
                             by first class mail, postage prepaid. Any notice
                             that is mailed in the manner herein provided shall
                             be conclusively presumed to have been duly given,
                             whether or not the holder of this PLUS receives the
                             notice. The Issuer shall give such notice as
                             promptly as possible, and in no case later than (i)
                             with respect to notice of postponement of the
                             Maturity Date, the Business Day immediately
                             following January 28, 2006, and (ii) with respect
                             to notice of the date to which the Maturity Date
                             has been rescheduled, the Business Day immediately
                             following the actual Index Valuation Date for
                             determining the Final Index Value (as defined
                             below).

Denominations.............   $10 and integral multiples thereof

Payment at Maturity.......   At maturity, upon delivery of this PLUS to the
                             Trustee, the Issuer shall pay with respect to each
                             $10 principal amount of this PLUS an amount in cash
                             equal to (i) if the Final Index Value is greater
                             than the Initial Index Value (as defined below),
                             the lesser of (a) $10 plus the Leveraged Upside
                             Payment (as defined below) and (b) the Maximum
                             Payment at Maturity (as defined below) or (ii) if
                             the Final Index Value is less than or equal to

                                       3
<PAGE>

                             the Initial Index Value, $10 times the Index
                             Performance Factor (as defined below).

                             The Issuer shall, or shall cause the Calculation
                             Agent to, (i) provide written notice to the Trustee
                             and to the Depositary of the amount of cash to be
                             delivered with respect to each $10 principal amount
                             of this PLUS, on or prior to 10:30 a.m. on the
                             Trading Day preceding the Maturity Date (but if
                             such Trading Day is not a Business Day, prior to
                             the close of business on the Business Day preceding
                             the Maturity Date), and (ii) deliver the aggregate
                             cash amount due with respect to this PLUS to the
                             Trustee for delivery to the holder of this PLUS on
                             the Maturity Date.

Leveraged Upside Payment..   The product of (i) $10 and (ii) 300% and (iii) the
                             Index Percent Increase (as defined below).

Maximum Payment at
Maturity..................   $

Index Percent Increase....   A fraction, the numerator of which shall be the
                             Final Index Value minus the Initial Index Value and
                             the denominator of which shall be the Initial Index
                             Value.

Index Performance Factor..   A fraction, the numerator of which shall be the
                             Final Index Value and the denominator of which
                             shall be the Initial Index Value.

Final Index Value.........   The Index Closing Value of the Russell 2000 Index
                             on the Index Valuation Date.

Index Valuation Date......   The Index Valuation Date shall be the second
                             scheduled Trading Day prior to the Maturity Date,
                             subject to adjustment for Market Disruption Events
                             as described in the following paragraph.

                             If there is a Market Disruption Event on the
                             scheduled Index Valuation Date or if the scheduled
                             Index Valuation Date is not otherwise a Trading
                             Day, the Index Valuation Date shall be the
                             immediately succeeding Trading Day during which no
                             Market Disruption Event shall have occurred.

Initial Index Value.......

                                       4
<PAGE>

Index Closing Value.......   The Index Closing Value on any Trading Day shall
                             equal the closing value of the Russell 2000 Index
                             or any Successor Index (as defined under
                             "Discontinuance of the Russell 2000 Index;
                             Alteration of Method of Calculation" below)
                             published at the regular weekday close of trading
                             on that Trading Day. In certain circumstances, the
                             Index Closing Value shall be based on the alternate
                             calculation of the Russell 2000 Index described
                             under "Discontinuance of the Russell 2000 Index;
                             Alteration of Method of Calculation."

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 ("AMEX"), the Nasdaq National
                             Market, the Chicago Mercantile Exchange and the
                             Chicago Board of Options Exchange and in the
                             over-the-counter market for equity securities in
                             the United States.

Calculation Agent.........   Morgan Stanley & Co. Incorporated and its
                             successors ("MS & Co.").

                             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 PLUS, the Trustee and the Issuer.

                             All calculations with respect to the Payment at
                             Maturity 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
                             determination of the amount of cash payable for
                             each $10 principal amount of this PLUS shall be
                             rounded to the nearest ten-thousandth, with five
                             one hundred-thousandths rounded upward (e.g.,
                             .76545 would be rounded up to .7655); and all
                             dollar amounts paid on the aggregate number of PLUS
                             shall be rounded to the nearest cent, with one-half
                             cent rounded upward.

Market Disruption Event...   "Market Disruption Event" means, with respect to
                             the Russell 2000 Index:

                                       5
<PAGE>

                             (i)the occurrence or existence of a suspension,
                             absence or material limitation of trading of stocks
                             then constituting 20 percent or more of the level
                             of the Russell 2000 Index (or the Successor Index)
                             on the Relevant Exchanges for such securities for
                             more than two hours of trading or during the
                             one-half hour period preceding the close of the
                             principal trading session on such Relevant
                             Exchange; or a breakdown or failure in the price
                             and trade reporting systems of any Relevant
                             Exchange as a result of which the reported trading
                             prices for stocks then constituting 20 percent or
                             more of the level of the Russell 2000 Index (or the
                             Successor Index) during the last one-half hour
                             preceding the close of the principal trading
                             session on such Relevant Exchange are materially
                             inaccurate; or the suspension, material limitation
                             or absence of trading on any major U.S. securities
                             market for trading in futures or options contracts
                             or exchange traded funds related to the Russell
                             2000 Index (or the Successor Index) for more than
                             two hours of trading or during the one-half hour
                             period preceding the close of the principal trading
                             session on such 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 if the Issuer or any of its affiliates to
                             unwind or adjust all or a material portion of the
                             hedge position with respect to the PLUS due January
                             30, 2006, Mandatorily Exchangeable for an Amount
                             Payable in U.S. Dollars Based on the Value of the
                             Russell 2000 Index.

                             For the purpose of determining whether a Market
                             Disruption Event exists at any time, if trading in
                             a security included in the Russell 2000 Index is
                             materially suspended or materially limited at that
                             time, then the relevant percentage contribution of
                             that security to the level of the Russell 2000
                             Index shall be based on a comparison of (x) the
                             portion of the value of the Russell 2000 Index
                             attributable to that security relative to (y) the
                             overall value of the Russell 2000 Index, in each
                             case immediately before that suspension or
                             limitation.

                                       6
<PAGE>

                             For the purpose 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 or market, (2) a
                             decision to permanently discontinue trading in the
                             relevant futures or options contract or exchange
                             traded fund shall not constitute a Market
                             Disruption Event, (3) limitations pursuant to the
                             rules of any Relevant Exchange similar to NYSE Rule
                             80A (or any applicable rule or regulation enacted
                             or promulgated by any other self-regulatory
                             organization or any government agency 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 futures or options
                             contracts on the Russell 2000 Index by the primary
                             securities market trading in such contracts by
                             reason of (a) a price change exceeding limits set
                             by such securities exchange or market, (b) an
                             imbalance of orders relating to such contracts or
                             (c) a disparity in bid and ask quotes relating to
                             such contracts shall constitute a suspension,
                             absence or material limitation of trading in
                             futures or options contracts related to the Russell
                             2000 Index and (5) a "suspension, absence or
                             material limitation of trading" on any Relevant
                             Exchange or on the primary market on which futures
                             or options contracts related to the Russell 2000
                             Index are traded shall not include any time when
                             such securities market is itself closed for trading
                             under ordinary circumstances.

Relevant Exchange.........   "Relevant Exchange" means the primary exchange or
                             market of trading for any security (or any
                             combination thereof) then included in the Russell
                             2000 Index or any Successor Index.

Alternate Exchange
Calculation in Case of
  an Event of Default.....   In case an event of default with respect to this
                             PLUS shall have occurred and be continuing, the
                             amount declared due and payable for each $10
                             principal amount of this PLUS upon any acceleration
                             of this PLUS shall be determined by the Calculation
                             Agent

                                       7
<PAGE>

                             and shall be an amount in cash equal to the Payment
                             at Maturity calculated using the Index Closing
                             Value as of the date of such acceleration as the
                             Final Index Value.

                             If the maturity of this PLUS is accelerated because
                             of an event of default as described above, 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 the Depositary of the
                             aggregate cash amount due with respect to each $10
                             principal amount of this PLUS as promptly as
                             possible and in no event later than two Business
                             Days after the date of acceleration.

Discontinuance of the
Russell 2000 Index;
Alteration of Method
  of Calculation..........   If Frank Russell Company discontinues publication
                             of the Russell 2000 Index and Frank Russell Company
                             or another entity publishes a successor or
                             substitute index that MS & Co., as the Calculation
                             Agent, determines, in its sole discretion, to be
                             comparable to the discontinued Russell 2000 Index
                             (such index being referred to herein as a
                             "Successor Index"), then any subsequent Index
                             Closing Value shall be determined by reference to
                             the value of such Successor Index at the regular
                             official weekday close of the principal trading
                             session of the NYSE, the AMEX, the Nasdaq National
                             Market or the Relevant Exchange or market for the
                             Successor Index on the date that any Index Closing
                             Value is to be determined.

                             Upon any selection by the Calculation Agent of a
                             Successor Index, the Calculation Agent shall cause
                             written notice thereof to be furnished to the
                             Trustee, to Morgan Stanley and to the Depositary,
                             as holder of the PLUS, within three Trading Days of
                             such selection.

                             If Frank Russell Company discontinues publication
                             of the Russell 2000 Index prior to, and such
                             discontinuance is continuing on, the Index
                             Valuation Date or on the date of acceleration and
                             MS & Co., as the Calculation Agent, determines, in
                             its sole discretion, that no Successor Index is
                             available at such time, then the Calculation Agent
                             shall determine the

                                       8
<PAGE>

                             Index Closing Value for such date. The Index
                             Closing Value shall be computed by the Calculation
                             Agent in accordance with the formula for
                             calculating the Russell 2000 Index last in effect
                             prior to such discontinuance, using the closing
                             price (or, if trading in the relevant securities
                             has been materially suspended or materially
                             limited, its good faith estimate of the closing
                             price that would have prevailed but for such
                             suspension or limitation) at the close of the
                             principal trading session of the Relevant Exchange
                             on such date of each security most recently
                             comprising the Russell 2000 Index without any
                             rebalancing or substitution of such securities
                             following such discontinuance.

                             If at any time the method of calculating the
                             Russell 2000 Index or a Successor Index, or the
                             value thereof, is changed in a material respect, or
                             if the Russell 2000 Index or a Successor Index is
                             in any other way modified so that such index does
                             not, in the opinion of MS & Co., as the Calculation
                             Agent, fairly represent the value of the Russell
                             2000 Index or such Successor Index had such changes
                             or modifications not been made, then, from and
                             after such time, the Calculation Agent shall, at
                             the close of business in New York City on each date
                             on which the Index Closing Value is to be
                             determined, make such calculations and adjustments
                             as, in the good faith judgment of the Calculation
                             Agent, may be necessary in order to arrive at a
                             value of a stock index comparable to the Russell
                             2000 Index or such Successor Index, as the case may
                             be, as if such changes or modifications had not
                             been made, and the Calculation Agent shall
                             calculate the Final Index Value and the Initial
                             Index Value with reference to the Russell 2000
                             Index or such Successor Index, as adjusted.
                             Accordingly, if the method of calculating the
                             Russell 2000 Index or a Successor Index is modified
                             so that the value of such index is a fraction of
                             what it would have been if it had not been modified
                             (e.g., due to a split in the index), then the
                             Calculation Agent shall adjust such index in order
                             to arrive at a value of the Russell 2000 Index or
                             such Successor Index as if it had not been modified
                             (e.g., as if such split had not occurred).

                                       9
<PAGE>

Treatment of PLUS for
  United States Federal
  Income Tax Purposes.....   The Issuer, by its sale of this PLUS, and the
                             holder of this PLUS (and any successor holder of,
                             or holder of a beneficial interest in, this PLUS),
                             by its respective purchase hereof, agree (in the
                             absence of an administrative determination or
                             judicial ruling to the contrary) to characterize
                             each $10 principal amount of this PLUS for all tax
                             purposes as a single financial contract with
                             respect to the Russell 2000 Index that (i) requires
                             the holder of this PLUS to pay to the Issuer at
                             inception an amount equal to $10 and (ii) entitles
                             the holder to receive at maturity an amount in cash
                             based upon the performance of the Russell 2000
                             Index.

                                       10
<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 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 person entitled thereto as
such address shall appear in the Note register. A holder of U.S.

                                       11
<PAGE>

$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

                                       12
<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.

                                       13
<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,
     as Trustee

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

                                       14
<PAGE>

                               REVERSE OF SECURITY

     This Note is one of a duly authorized issue of Senior Global Medium-Term
Notes, Series C, having maturities more than nine months from the date of issue
(the "Notes") of the Issuer. The Notes are issuable under an Amended and
Restated Senior Indenture, dated as of May 1, 1999, between the Issuer and
JPMorgan Chase Bank (formerly known as The Chase Manhattan 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 at its corporate trust
office in The City of New York as the paying agent (the "Paying Agent," which
term includes any additional or successor Paying Agent appointed by the Issuer)
with respect to the Notes. The terms of individual Notes may vary with respect
to interest rates, interest rate formulas, issue dates, maturity dates, or
otherwise, all as provided in the Senior Indenture. To the extent not
inconsistent herewith, the terms of the Senior Indenture are hereby incorporated
by reference herein.

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

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

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

                                       15
<PAGE>

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

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

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

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

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

                                       16
<PAGE>

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 shall be free of charge, but the Issuer may require payment
of a sum sufficient to cover any tax or other governmental charge in connection
therewith. All Notes surrendered for exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Issuer and the Trustee and
executed by the registered holder in person or by the holder's attorney duly
authorized in writing. The date of registration of any Note delivered upon any
exchange or transfer of Notes shall be such that no gain or loss of interest
results from such exchange or transfer.

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

     The Senior Indenture provides that (a) if an Event of Default (as defined
in the Senior Indenture) due to the default in payment of principal of, premium,
if any, or interest on, any

                                       17
<PAGE>

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 amortized from the Interest
Accrual Date to the date of declaration, which amortization shall be calculated
using the "interest method" (computed in accordance with generally accepted
accounting principles in effect on the date of declaration), (ii) for the
purpose of any vote of securityholders taken pursuant to the Senior Indenture
prior to the acceleration of payment of this Note, the principal amount hereof
shall equal the amount that would be due and payable hereon, calculated as set
forth in clause (i) above, if this Note were declared to be due and payable on
the date of any such vote and (iii) for the purpose of any vote of
securityholders taken pursuant to the Senior Indenture following the
acceleration of payment of this Note, the principal amount hereof shall equal
the amount of principal due and payable with respect to this Note, calculated as
set forth in clause (i) above.

     If the face hereof indicates that this Note is subject to "Tax Redemption
and Payment of Additional Amounts," this Note may be redeemed, as a whole, at
the option of the Issuer at any time prior to maturity, upon the giving of a
notice of redemption as described below, at a redemption price equal to 100% of
the principal amount hereof, together with accrued interest to the date fixed
for redemption (except that if this Note is subject to "Modified Payment upon
Acceleration or Redemption," such redemption price would be limited to the
aggregate principal amount hereof multiplied by the sum of the Issue Price
specified on the face hereof (expressed as a percentage of the aggregate
principal amount) plus the original issue discount amortized from

                                       18
<PAGE>

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

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

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

          (a) any present or future tax, assessment or other governmental charge
     that would not have been so imposed but for (i) the existence of any
     present or former connection between such holder, or between a fiduciary,
     settlor, beneficiary, member or shareholder of such holder, if such holder
     is an estate, a trust, a partnership or a corporation for United States
     federal income tax purposes, and the United States, including, without
     limitation, such holder, or such fiduciary, settlor, beneficiary, member or
     shareholder, being or having been a citizen or resident thereof or being or
     having been engaged in a trade or business or present therein or having, or
     having had, a permanent establishment therein or (ii) the presentation by
     or on behalf 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;

                                       19
<PAGE>

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

          (c) any tax, assessment or other governmental charge imposed by reason
     of such holder's past or present status as a personal holding company or
     foreign personal holding company or controlled foreign corporation or
     passive foreign investment company with respect to the United States or as
     a corporation which accumulates earnings to avoid United States federal
     income tax or as a private foundation or other tax-exempt organization or a
     bank receiving interest under Section 881(c)(3)(A) of the Internal Revenue
     Code of 1986, as amended;

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

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

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

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

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

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

                                       20
<PAGE>

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 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

                                       21
<PAGE>

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
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.

                                       22
<PAGE>

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

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

                                       23
<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.

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

                                       24
<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.

                                       25
<PAGE>

                            OPTION TO ELECT REPAYMENT

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

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

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

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

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

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

                                       26

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