Document:

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                                                                   Exhibit 10.42
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                             MORGAN STANLEY DW INC.
                FINANCIAL ADVISOR PRODUCTIVITY COMPENSATION PLAN
                        [Amended as of December 11, 2001]

                                    SECTION I
                                  INTRODUCTION

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

(b)       The Plan was initially adopted to be effective for Awards granted for
          Fiscal Years commencing with 1984; was amended and restated December
          23, 1985 retroactive to the 1984 Fiscal Year; was further amended
          effective December 24, 1990 and July 15, 1991; was restated for Fiscal
          Years beginning with 1992; was amended and restated effective October
          1, 1993; was amended effective January 1, 1994; amended and restated
          effective January 1, 1994; was amended and restated effective October
          21, 1994; was amended June 18, 1997; was amended effective September
          25, 1998; was amended effective September 21, 1999; was amended
          effective March 26, 2001; and was amended effective December 11, 2001.

                                   SECTION II
                                 PURPOSE OF PLAN

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

                                   SECTION III
                                   DEFINITIONS

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

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

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

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

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

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

(g)       "Fair Market Value" means:

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

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

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

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

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

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

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

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(k)       "Retirement" means termination of employment from Morgan Stanley: (i)
          after attaining age 65; (ii) as defined in the Morgan Stanley DW Inc.
          Pension Plan whether or not the individual is a participant therein;
          or (iii) as otherwise specified by written agreement between Morgan
          Stanley and a Financial Advisor.

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

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

                                   SECTION IV
                                   ELIGIBILITY

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

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

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

                                    SECTION V
                                     AWARDS

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

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

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

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

                                   SECTION VI
                              ACCOUNTS-ESCROW AGENT

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

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

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

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                                   SECTION VII
                                 AWARD PAYMENTS

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

(b)       Stock awards shall vest and cash awards shall be paid, four years and
          six months following the close of the Fiscal Year with respect to
          which awarded; provided that the Participant's status as an Employee
          has not been terminated prior to such date. Upon the Participant's
          termination of employment with Morgan Stanley, all unvested Stock
          awards and unpaid cash awards shall be forfeited. Notwithstanding
          anything in this Plan to the contrary, if a Participant terminates
          employment with Morgan Stanley due to Disability or Retirement, or
          upon a Participant's death, all of the Participant's awards shall vest
          immediately and be paid as promptly as practicable.

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

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          distribution or dividend is awarded.

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

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

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

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

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

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

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

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

(g)       The commencement of Related Employment by a Participant shall not be
          treated

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

                                  SECTION VIII
                             SUBORDINATION OF AWARDS

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

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

(c)       Any amount credited to a Participant's Account shall not be segregated
          but shall remain a part of the general corporate funds of Morgan
          Stanley subject to the

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          claims of general, unsecured creditors of Morgan Stanley to which
          claims the rights of the Participant to receive payment of the amount
          credited to the Participant's Account shall be subordinated pursuant
          to the terms of an Agreement.

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

                                   SECTION IX
                                 ADMINISTRATION

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

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

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

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

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

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

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                                    SECTION X
                                  MISCELLANEOUS

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

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

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

                                   SECTION XI
                    AMENDMENT, SUSPENSION AND DISCONTINUANCE

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

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

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

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

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                                   APPENDIX A

                             MORGAN STANLEY DW INC.
                FINANCIAL ADVISOR PRODUCTIVITY COMPENSATION PLAN

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

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

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

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

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

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

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

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

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

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

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

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

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

                                      A-2

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               (iv)  if Morgan Stanley's net capital, as defined in the Rule
or any successor rule as in effect at the time such payment is to be made would
be less than 120 percentum (or such other percentum as may be made applicable to
Morgan Stanley at the time of such payment by the Examining Authority) of the
minimum dollar amount required by the Rule as in effect at such time or such
dollar amount as may be made applicable to Morgan Stanley by the Examining
Authority, plus an amount equal to the guaranty deposits with clearing
organizations other than the CBOT, which were included in current assets under
Section 211 of the CBOT "Capital Requirements for Member FCM's", to the extent
such deposits cannot be used for margin purposes, or

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

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

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

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

                                      A-3

<PAGE>

years of the date of such payment. Morgan Stanley reserves the right to withhold
from the Participant's compensation the amount of any Payment Obligation which a
Participant fails to repay as required herein.

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

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

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

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

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

                  (iii)  in the event that Morgan Stanley is registered as a
futures commission merchant under the CEA, the net capital of Morgan Stanley (as
defined in the CEA or CFTC Regulations as in effect at the time of such
Prepayment) would be less than the greatest of (A) 7 percentum (or such other
percentum as may be made applicable to Morgan Stanley at the time of such
Prepayment by the Examining Authority) of the funds required to be segregated
pursuant to the CEA and CFTC Regulations and the foreign futures or foreign
options secured amount, exclusive of the market value of commodity options
purchased by option customers on or subject to the rules of a contract market or
a foreign board of trade (provided the deduction for each

                                      A-4

<PAGE>

option customer shall be limited to the amount of customer funds in each option
customer's account(s) and foreign futures and foreign options secured amounts),
plus an amount equal to the guaranty deposits with clearing organizations other
than the CBOT, which were included in current assets under Section 211 of the
CBOT "Capital Requirements for Member FCM's", to the extent such deposits cannot
be used for margin purposes, (B) such amount as may be made applicable to Morgan
Stanley by an Examining Authority under Rule 15c3-1(b)(7), or (C) $2,000,000 (or
such other amount as required by the CEA or CFTC Regulations), or

                  (iv)   Morgan Stanley's net capital, as defined in the Rule or
any successor rule as in effect at the time of such Prepayment, would be less
than 120 percentum (or such other percentum as may be made applicable to Morgan
Stanley at the time of such Prepayment by the Examining Authority) of the
minimum dollar amount required by the Rule as in effect at such time (or such
other dollar amount as may be made applicable to Morgan Stanley at the time of
such Prepayment by the Examining Authority), plus an amount equal to the
guaranty deposits with clearing organizations other than the CBOT, which were
included in current assets under Section 211 of the CBOT "Capital Requirements
for Member FCM's", to the extent such deposits cannot be used for margin
purposes, or

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

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

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

                                      A-5

<PAGE>

commenced within two years of the date of such Prepayment. Morgan Stanley
reserves the right to withhold from the Participant's compensation the amount of
any Payment Obligation which a Participant fails to repay as required herein.

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

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

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

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

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

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

                                      A-6

<PAGE>

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

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

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

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

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

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

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

                                      A-7

<PAGE>

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

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

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

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

                                      A-8<PAGE>

                        FIXED RATE REVOLVING OR DRAW NOTE

WEST BANK                                        BORROWER
West Des Moines State Bank                       CE SOFTWARE, INC.
1601 22nd Street                                 1801 INDUSTRIAL CIRCLE
P.O. BOX 65020                                   WEST DES MOINES, IA 50265
West Des Moines, IA 50265-0020                   TELEPHONE NO.IDENTIFICATION NO.
515-222-2300      "LENDER"                       515-221-1801 42-1298712
<TABLE>
<CAPTION>
<S>        <C>        <C>                 <C>              <C>        <C>        <C>
OFFICER    INTEREST   PRINCIPAL AMOUNT/   FUNDING/         MATURITY   CUSTOMER   LOAN
INITIALS   RATE       CREDIT LIMIT        AGREEMENT DATE   DATE       NUMBER     NUMBER
322        9.000%     $650,000.00         01/31/02         12/31/06
REFINANCE BUILDING
</TABLE>

PROMISE TO PAY: For value received, Borrower promises to pay to the order of
Lender, indicated above, the principal amount of SIX HUNDRED FIFTY THOUSAND AND
NO/00 Dollars ($650,000.00) or, if less, the aggregate unpaid principal amount
of all loans or advances made by Lender to Borrower, plus interest on the unpaid
principal balance at the rate and in the manner described below, until all
amounts owing under this Note are paid in full. All amounts received by Lender
shall be applied first to expenses, late charges, accrued unpaid interest, and
then to unpaid principal, or in any other order as determined by Lender, in
Lender's sole discretion, as permitted by law.

REVOLVING OR DRAW FEATURE: [_] This Note possesses a revolving feature. Upon
satisfaction of all conditions set forth in this Note, Borrower shall be
entitled to borrow up to the full principal amount of the Note and to repay and
re-borrow from time to time during the term of the Note. |X| This Note possesses
a draw feature. Upon satisfaction of all conditions set forth in this Note,
Borrower shall be entitled to make one or more draws under this Note. Any
repayment may not be re-borrowed. The aggregate amount of such draws shall not
exceed the full principal amount of this Note.

Information with regard to any loans or advances under this Note shall be
recorded and maintained by Lender in its internal records and such records shall
be conclusive of the principal and interest owed by Borrower under this Note
unless there is a material error in such records. Lender's failure to record the
date and amount of any loan or advance shall not limit or otherwise affect the
obligations of Borrower under this Note to repay the principal amount of the
loans or advances together with all interest accruing thereon. Lender shall not
be obligated to provide Borrower with a copy of the record on a periodic basis.
Borrower shall be entitled to inspect or obtain a copy of the record during
Lender's business hours.

CONDITIONS FOR ADVANCES: If there is no default under this Note, Borrower shall
be entitled to borrow monies under this Note (subject to the limitations
described above) under the following conditions:

    IN AGREEING TO THE FOREGOING PROVISIONS, IT IS UNDERSTOOD THAT NO MORE
    THAN TWO ADVANCES (IN A MINIMUM OF $10,000 EACH) WILL BE MADE IN EACH
    30 DAY PERIOD. ADVANCES AND DEDUCTS FROM ACCOUNT #239361.

<PAGE>

INTEREST RATE: Interest under this Note shall be computed on the basis of 365
days and the actual number of days per year. So long as there is no default
under this Note, interest on this Note shall be calculated at the fixed rate of
NINE AND NO/1000 percent (9.000%) per annum or the maximum interest rate Lender
is permitted to charge by law, whichever is less.

DEFAULT RATE: In the event of any default under this Note, the Lender may, in
its discretion, determine that all amounts owed to Lender shall bear interest at
the lesser of: THE RATE OF CONTRACT RATE PLUS 2%, or the maximum interest rate
Lender is permitted to charge by law.

PAYMENT SCHEDULE:  Borrower shall pay the principal and interest according to
         the following schedule:
         $6,800 PRINCIPAL AND INTEREST, PLUS ESCROW PAYMENTS FOR TAXES AND
         INSURANCE BEGINNING FEBRUARY 28, 2002 AND ON THE LAST DAY OF EACH
         CALENDAR MONTH THEREAFTER.

All payments will be made to Lender at its address described above, or at any
other address so designated by Lender, and in lawful currency of the United
States of America.

RENEWAL: If checked, [_] this Note is a renewal of Loan
Number __________.

SECURITY: To secure the payment and performance of obligations incurred under
this Note, Borrower grants Lender a security interest in, and pledges and
assigns to Lender, all of Borrower's rights, title, and interest, in all monies,
instruments, savings, checking and other deposit accounts of Borrower's,
(excluding IRA, Keogh and trust accounts and deposits subject to tax penalties
if so assigned) that are now or in the future in Lender's custody or control.
|X| If checked, the obligations under this Note are also secured by a lien on
and/or security interest in the property described in the documents executed in
connection with this Note as well as any other property designated as security
for this Note now or in the future. SEE TERMS AND CONDITIONS OF COMMITMENT
LETTER DATED AND ACCEPTED JANUARY 11, 2002.

PREPAYMENT:  This Note may be prepaid in part or in full on or before its
maturity date.  If this Note is prepaid in full, there will be: [_] No minimum
finance charge.  [X] A minimum finance charge of $7.50.

LATE PAYMENT CHARGES: If payment is received more than 10 days late, Borrower
will be charged a late payment charge of [_] _______% of the unpaid payment
amount; [X] $15.00 or n/a % of the unpaid payment amount, whichever is |X|
greater [_] less; as additional interest.

IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
BORROWER MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN
AGREEMENT.  THIS

<PAGE>

NOTICE ALSO APPLIES TO ANY OTHER CREDIT AGREEMENTS (EXCEPT EXEMPT TRANSACTIONS)
-------------------------------------------------------------------------------
NOW IN EFFECT BETWEEN YOU AND THIS LENDER.
------------------------------------------

BORROWER ACKNOWLEDGES THAT BORROWER HAS READ, UNDERSTANDS, AND AGREES TO THE
TERMS AND CONDITIONS OF THIS NOTE INCLUDING THE PROVISIONS ON THE REVERSE SIDE.
BORROWER ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS NOTE.

NOTE DATE: JANUARY 31, 2002
BORROWER: CE SOFTWARE, INC.

By:  ________/s/_________
JOHN S. KIRK
PRESIDENT

                              TERMS AND CONDITIONS

1. DEFAULT: Borrower will be in default under this Note in the event that
Borrower, any guarantor or any other third party pledging collateral to secure
this Note:

          (a) fails to make any payment on this Note or any other indebtedness
          to Lender when due;

          (b) fails to perform any obligation or breaches any warranty or
          covenant to Lender contained in this Note, any security instrument, or
          any other present or future written agreement regarding this or any
          other indebtedness of Borrower to Lender;

          (c) provides or causes any false or misleading signature or
          representation to be provided to Lender;

          (d) allows the collateral securing this Note (if any) to be lost,
          stolen, destroyed, damaged in any material respect, or subjected to
          seizure or confiscation;

          (e) permits the entry or service of any garnishment, judgment, tax
          levy, attachment or lien against Borrower, any guarantor, or any of
          their property;

          (f) dies, becomes legally incompetent, is dissolved or terminated,
          ceases to operate its business, becomes insolvent, makes an assignment
          for the benefit of creditors, fails to pay debts as they become due,
          has a material adverse change in its financial condition, or becomes
          the subject of any bankruptcy, insolvency or debtor rehabilitation
          proceeding; or

          (g) causes Lender, in good faith, to believe the prospect of payment
          or performance is impaired.

2. RIGHTS OF LENDER ON DEFAULT: If there is a default under this Note Lender
will be entitled to exercise one or more of the following remedies without
notice or demand (except as required by law):

          (a) to cease making additional advances under this Note;

          (b) to declare the principal amount plus accrued interest under this
          Note and all other present and future obligations of Borrower
          immediately due and payable in full;

          (c) to collect the outstanding obligations of Borrower with or without
          resorting to judicial process;

          (d) to take possession of any
          collateral in any manner permitted by law;

<PAGE>

          (e) to require Borrower to deliver and make available to Lender any
          collateral at a place reasonably convenient to Borrower and Lender;

          (f) to sell, lease or otherwise dispose of any collateral and collect
          any deficiency balance with or without resorting to legal process;

          (g) to set-off Borrower's obligations against any amounts due to
          Borrower including, but not limited to monies, instruments, and
          deposit accounts maintained with Lender; and

          (h) to exercise all other rights available to Lender under any other
          written agreement or applicable law.

Lender's rights are cumulative and may be exercised together, separately, and in
any order. Lender's remedies under this paragraph are in addition to those
available at common law, including, but not limited to, the right of set-off.

3. DEMAND FEATURE: If this Note contains a demand feature, Lender's right to
demand payment, at any time, and from time to time, shall be in Lender's sole
and absolute discretion, whether or not any default has occurred.

4. FINANCIAL INFORMATION: Borrower will at all times keep proper books of record
and account in which full, true and correct entries shall be made in accordance
with generally accepted accounting principles and will upon Lender's request
deliver to Lender, within ninety (90) days after the end of each fiscal year of
Borrower, a copy of the annual financial statements of Borrower relating to such
fiscal year, such statements to include (i) the balance sheet of Borrower as at
the end of such fiscal year and (ii) the related income statement, statement of
retained earnings and statement of changes in the financial position of Borrower
for such fiscal year, which, at Lender's request, shall be prepared by such
certified public accountants as may be reasonably satisfactory to Lender.
Borrower also agrees to deliver to Lender within fifteen (15) days after filing
same, a copy of Borrower's income tax returns and also, from time to time, such
other financial information with respect of Borrower as Lender may request.

5. MODIFICATION AND WAIVER: The modification or waiver of any of Borrower's
obligations or Lender's rights under this Note must be contained in a writing
signed by Lender. Lender may perform any of Borrower's obligations or delay or
fail to exercise any of its rights without causing a waiver of those obligations
or rights. A waiver on one occasion will not constitute a waiver on any other
occasion. Borrower's obligations under this Note shall not be affected if Lender
amends, compromises, exchanges, fails to exercise, impairs or releases any of
the obligations belonging to any co-borrower or guarantor or any of its rights
against any co-borrower, guarantor or collateral.

6. SEVERABILITY/MAXIMUM RATE: If any provision of this Note is invalid, illegal
or unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. Notwithstanding
any reference to highest lawful rate, maximum interest rate permitted to be
charged by relevant law or other like terms, such references shall not be deemed
to establish a maximum lawful rate of interest as contemplated by Iowa Code
ss.535.2,2 because the parties have agreed

<PAGE>

in writing to a rate of interest pursuant to Iowa Code ss.535.2. There shall be
no automatic reduction to the highest lawful rate or other like term as to any
Borrower or any other party barred by law from availing itself in any action or
proceedings of the defense of usury, or any Borrower or other party barred or
exempted from the operation of any law limiting the amount of interest that may
be paid for the loan or use of money, or in the event this transaction, because
of its amount or purpose or for any other reason is exempt from the operation of
any statute limiting the amount of interest that may be paid for the loan or use
of money. Borrower agrees that any late charge, delinquency charge, or other
like charge shall be interest for the purpose of Iowa Law.

7. ASSIGNMENT: Borrower will not be entitled to assign any of its rights,
remedies or obligations described in this Note without the prior written consent
of Lender which may be withheld by Lender in its sole discretion. Lender will be
entitled to assign some or all of its rights and remedies describe in this Note
without notice to or the prior consent of Borrower in any manner. The term
"Lender" shall mean the Lender specified in this Agreement, its successors and
assigns, and subsequent holders of this Note.

8. NOTICE: Any notice or other communication to be provided to Borrower or
Lender under this Note shall be in writing and sent to the parties at the
addresses described in this Note or such other address as the parties may
designate in writing from time to time.

9. APPLICABLE LAW: This Note shall be governed by the laws of the state of Iowa.
Borrower consents to the jurisdiction and venue of any court located in such
state in the event of any legal proceeding pertaining to the negotiation,
execution, performance or enforcement of any term or condition contained in this
Note or any related loan document and agrees not to commence or seek to remove
such legal proceeding in or to a different court.

10. COLLECTION COSTS: If Lender hires an attorney to assist in collecting any
amount due or enforcing any right or remedy under this Note, Borrower agrees to
pay Lender's reasonable attorneys' fees and collection costs.

11. MISCELLANEOUS: This Note is being executed for Commercial purposes. Borrower
and Lender agree that time is of the essence. Borrower waives presentment,
demand for payment, notice of dishonor and protest. All reference to Borrower in
this Note shall include all of the parties signing this Note, and this Note
shall be binding upon the heirs, successors and assigns of Borrower and Lender.
If there is more than one Borrower, their Obligations will be joint and several.
This Note and any related documents represent the complete and integrated
understanding between Borrower and Lender pertaining to the terms and conditions
of those documents.

12. JURY TRIAL WAIVER: BORROWER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN
ANY CIVIL ACTION ARISING OUT OF, OR BASED UPON, THIS NOTE OR THE COLLATERAL
SECURING THIS NOTE.

13. ADDITIONAL TERMS:

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