Document:

FIXED RATE SENIOR 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.

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                                 MORGAN STANLEY
                   SENIOR GLOBAL MEDIUM-TERM NOTES, SERIES C
                                  (Fixed Rate)

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

                         10% SPARQS(R) DUE MAY 15, 2005
                            MANDATORILY EXCHANGEABLE
                         FOR SHARES OF COMMON STOCK OF
                       NATIONAL SEMICONDUCTOR CORPORATION

<TABLE>
<S>                                  <C>                            <C>                      <C>
ORIGINAL ISSUE DATE:          INITIAL REDEMPTION           INTEREST RATE:   % per       MATURITY DATE:
                                 DATE: See "Morgan            annum (equivalent            See "Maturity Date"
                                 Stanley Call Right"          to $        per annum per    below.
                                 below.                       SPARQS)

INTEREST ACCRUAL              INITIAL REDEMPTION           INTEREST PAYMENT             OPTIONAL
   DATE:                         PERCENTAGE: See              DATE(S): See "Interest       REPAYMENT
                                 "Morgan Stanley Call         Payment Dates" below.        DATE(S):  N/A
                                 Right" and "Call Price"
                                 below.

SPECIFIED CURRENCY:           ANNUAL REDEMPTION            INTEREST PAYMENT             APPLICABILITY OF
   U.S. dollars                  PERCENTAGE                   PERIOD: Quarterly            MODIFIED
                                 REDUCTION: N/A                                            PAYMENT UPON
                                                                                           ACCELERATION OR
                                                                                           REDEMPTION: See
                                                                                           "Alternate Exchange
                                                                                           Calculation in Case of
                                                                                           an Event of Default"
                                                                                           below.

IF SPECIFIED                  REDEMPTION NOTICE            APPLICABILITY OF             If yes, state Issue Price:
   CURRENCY OTHER                PERIOD: At least 10          ANNUAL INTEREST              N/A
   THAN U.S. DOLLARS,            days but no more than        PAYMENTS: N/A
   OPTION TO ELECT               30 days.  See "Morgan
   PAYMENT IN U.S.               Stanley Call Right" and
   DOLLARS: N/A                  "Morgan Stanley Notice
                                 Date" below.

EXCHANGE RATE                 TAX REDEMPTION               PRICE APPLICABLE             ORIGINAL YIELD TO
   AGENT: N/A                    AND PAYMENT OF            UPON OPTIONAL                   MATURITY: N/A
                                 ADDITIONAL                REPAYMENT: N/A
                                 AMOUNTS: N/A

OTHER PROVISIONS:             IF YES, STATE INITIAL
   See below.                 OFFERING DATE: N/A
</TABLE>

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

Maturity Date..................     May 15, 2005, subject to acceleration as
                                    described below in "Price Event
                                    Acceleration" and "Alternate Exchange
                                    Calculation in Case of an Event of Default"
                                    and subject

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                                    to extension if the Final Call Notice Date
                                    is postponed in accordance with the
                                    following paragraph.

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

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

Interest Payment Dates.........

                                    If the scheduled Maturity Date is postponed
                                    due to a Market Disruption Event or
                                    otherwise, the Issuer shall pay interest on
                                    the Maturity Date as postponed rather than
                                    on May 15, 2005, but no interest will
                                    accrue on this SPARQS or on such payment
                                    during the period from or after the
                                    scheduled Maturity Date.

Record Date....................     Notwithstanding the definition of "Record
                                    Date" on page 22 hereof, the Record Date
                                    for each Interest Payment Date, including
                                    the Interest Payment Date scheduled to

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

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

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

Morgan Stanley Call Right......     On any scheduled Trading Day on or after
                                    October    , 2004 or on the Maturity Date
                                    (including the Maturity Date as it may be
                                    extended and regardless of whether the
                                    Maturity Date is a Trading Day), the Issuer
                                    may call the SPARQS, in whole but not in
                                    part, for mandatory exchange for the Call
                                    Price paid in cash (together with accrued
                                    but unpaid interest) on the Call Date.

                                    On the Morgan Stanley Notice Date, the
                                    Issuer shall give notice of the Issuer's
                                    exercise of the Morgan Stanley Call Right
                                    (i) to the holder of this SPARQS by mailing
                                    notice of such exercise, specifying the
                                    Call Date on which the Issuer shall effect
                                    such exchange, by first class mail, postage
                                    prepaid, to the holder's last address as it
                                    shall appear upon the registry books, (ii)
                                    to the Trustee by telephone or facsimile
                                    confirmed by mailing such notice to the
                                    Trustee by first class mail, postage
                                    prepaid, at its

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                                    New York office and (iii) to the Depositary
                                    in accordance with the applicable
                                    procedures set forth in the Blanket Letter
                                    of Representations prepared by the Issuer.
                                    Any notice which is mailed in the manner
                                    herein provided shall be conclusively
                                    presumed to have been duly given, whether
                                    or not the holder of this SPARQS receives
                                    the notice. Failure to give notice by mail
                                    or any defect in the notice to the holder
                                    of any SPARQS shall not affect the validity
                                    of the proceedings for the exercise of the
                                    Morgan Stanley Call Right with respect to
                                    any other SPARQS.

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

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

                                    If this SPARQS is so called for mandatory
                                    exchange by the Issuer, then the cash Call
                                    Price and any accrued but unpaid interest
                                    on this SPARQS to be delivered to the
                                    holder of this SPARQS shall be delivered on
                                    the Call Date fixed by the Issuer and set
                                    forth in its notice of its exercise of the
                                    Morgan Stanley Call Right, upon delivery of
                                    this SPARQS to the Trustee. The Issuer
                                    shall, or shall cause the Calculation Agent
                                    to, deliver such cash to the Trustee for
                                    delivery to the holder of this SPARQS.

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

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                                    Call Right.

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

Final Call Notice Date..........    May 5, 2005; provided that if May 5, 2005
                                    is not a Trading Day or if a Market
                                    Disruption Event occurs on such day, the
                                    Final Call Notice Date will be the
                                    immediately succeeding Trading Day on which
                                    no Market Disruption Event occurs.

Call Date.......................    The day specified in the Issuer's notice of
                                    mandatory exchange, on which the Issuer
                                    shall deliver cash to the holder of this
                                    SPARQS, for mandatory exchange, which day
                                    may be any scheduled Trading Day on or
                                    after October    , 2004 or the Maturity Date
                                    (including the Maturity Date as it may be
                                    extended and regardless of whether the
                                    Maturity Date is a scheduled Trading Day).
                                    See "Maturity Date" above.

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

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

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

                                    The Issuer shall, or shall cause the
                                    Calculation Agent to, provide written
                                    notice to the Trustee at its New York
                                    Office and to the Depositary, on which
                                    notice the Trustee and Depositary may
                                    conclusively rely, on or prior to 10:30
                                    a.m. on the Trading Day immediately prior
                                    to maturity of this SPARQS (but if such
                                    Trading Day is not a Business Day, prior to
                                    the close of business on the Business Day
                                    preceding maturity of this SPARQS), of the
                                    amount of National Semiconductor Stock (or
                                    the amount of Exchange Property) or cash to
                                    be delivered with respect to each $
                                    principal amount of this SPARQS and of the
                                    amount of any cash to be paid in lieu of
                                    any fractional share of National
                                    Semiconductor Stock (or of any other
                                    securities included in Exchange Property,
                                    if applicable); provided that if the
                                    maturity date of this SPARQS is accelerated
                                    (x) because of a Price Event Acceleration
                                    (as described under "Price Event
                                    Acceleration" below) or (y) because of an
                                    Event of Default Acceleration (as defined
                                    under "Alternate Exchange Calculation in
                                    Case of an Event of Default" below), the
                                    Issuer shall give notice of such
                                    acceleration as promptly as possible, and
                                    in no case later than (A) in the case of an
                                    Event of Default Acceleration, two Trading
                                    Days following such deemed maturity date or
                                    (B) in the case of a Price Event
                                    Acceleration, 10:30 a.m. on the Trading Day
                                    immediately prior to the date of
                                    acceleration (as defined under "Price Event
                                    Acceleration" below), (i) to the holder of
                                    this SPARQS by mailing notice of such
                                    acceleration by first class mail, postage
                                    prepaid, to the holder's last address as it
                                    shall appear upon the registry books, (ii)
                                    to the Trustee by telephone or facsimile
                                    confirmed by mailing such notice to the
                                    Trustee by first class mail, postage
                                    prepaid, at its New York office and

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<PAGE>

                                    (iii) to the Depositary by telephone or
                                    facsimile confirmed by mailing such notice
                                    to the Depositary by first class mail,
                                    postage prepaid. Any notice that is mailed
                                    in the manner herein provided shall be
                                    conclusively presumed to have been duly
                                    given, whether or not the holder of this
                                    SPARQS receives the notice. If the maturity
                                    of this SPARQS is accelerated, no interest
                                    on the amounts payable with respect to this
                                    SPARQS shall accrue for the period from and
                                    after such accelerated maturity date;
                                    provided that the Issuer has deposited with
                                    the Trustee the National Semiconductor
                                    Stock, the Exchange Property or any cash
                                    due with respect to such acceleration by
                                    such accelerated maturity date.

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

                                    If this SPARQS is not surrendered for
                                    exchange at maturity, it shall be deemed to
                                    be no longer Outstanding under, and as
                                    defined in, the Senior Indenture, except
                                    with respect to the holder's right to
                                    receive the National Semiconductor Stock
                                    (and, if applicable, any Exchange Property)
                                    and any cash in respect of interest and any
                                    fractional share of National Semiconductor
                                    Stock (or any Exchange Property) and any
                                    other cash due at maturity as described in
                                    the preceding paragraph under this heading.

Price Event Acceleration.......     If on any two consecutive Trading Days
                                    during the period prior to and ending on
                                    the third Business Day immediately
                                    preceding the Maturity Date, the product of
                                    the Closing Price per share of National
                                    Semiconductor Stock and the Exchange Ratio
                                    is less than $1.00, the Maturity Date of
                                    this SPARQS shall be deemed to be
                                    accelerated to the third Business Day
                                    immediately following such second Trading
                                    Day (the "date of acceleration"). Upon such
                                    acceleration, the holder of each $
                                    principal amount of this SPARQS shall
                                    receive per SPARQS on the date of
                                    acceleration:

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

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

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

No Fractional Shares...........     Upon delivery of this SPARQS to the Trustee
                                    at maturity, the Issuer shall deliver the
                                    aggregate number of shares of National
                                    Semiconductor Stock due with respect to
                                    this SPARQS, as described above, but the
                                    Issuer shall pay cash in lieu of delivering
                                    any fractional share of National
                                    Semiconductor Stock in an amount equal to
                                    the corresponding fractional Closing Price
                                    of such fraction of a share of National
                                    Semiconductor Stock as determined by the
                                    Calculation Agent as of the second
                                    scheduled Trading Day prior to maturity of
                                    this SPARQS.

Exchange Ratio.................     0.5, subject to adjustment for corporate
                                    events relating to National Semiconductor
                                    Corporation ("National Semiconductor")
                                    described under "Antidilution Adjustments"
                                    below.

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

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

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                                    (the "Exchange Act"), on which National
                                    Semiconductor Stock (or any such other
                                    security) is listed or admitted to trading,

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

                                    o  if National Semiconductor Stock (or any
                                    such other security) is not listed or
                                    admitted to trading on any national
                                    securities exchange or a security of the
                                    Nasdaq National Market but is included in
                                    the OTC Bulletin Board Service (the "OTC
                                    Bulletin Board") operated by the National
                                    Association of Securities Dealers, Inc.
                                    (the "NASD"), the last reported sale price
                                    of the principal trading session on the OTC
                                    Bulletin Board on such day.

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

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                                    security included in any successor to such
                                    system, and the term OTC Bulletin Board
                                    Service will include any successor service
                                    thereto.

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

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

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

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

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

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

                                         2. If National Semiconductor Stock is
                                    subject (i) to a stock dividend (issuance
                                    of additional shares of National
                                    Semiconductor Stock) that is given ratably
                                    to all holders of shares of National
                                    Semiconductor Stock or (ii)

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                                    to a distribution of National Semiconductor
                                    Stock as a result of the triggering of
                                    any provision of the corporate charter of
                                    National Semiconductor, then once the
                                    dividend has become effective and National
                                    Semiconductor Stock is trading ex-dividend,
                                    the Exchange Ratio shall be adjusted so
                                    that the new Exchange Ratio shall equal the
                                    prior Exchange Ratio plus the product of
                                    (i) the number of shares issued with
                                    respect to one share of National
                                    Semiconductor Stock and (ii) the prior
                                    Exchange Ratio.

                                         3. If National Semiconductor issues
                                    rights or warrants to all holders of
                                    National Semiconductor Stock to subscribe
                                    for or purchase National Semiconductor
                                    Stock at an exercise price per share less
                                    than the Closing Price of National
                                    Semiconductor Stock on both (i) the date
                                    the exercise price of such rights or
                                    warrants is determined and (ii) the
                                    expiration date of such rights or warrants,
                                    and if the expiration date of such rights
                                    or warrants precedes the maturity of this
                                    SPARQS, then the Exchange Ratio shall be
                                    adjusted to equal the product of the prior
                                    Exchange Ratio and a fraction, the
                                    numerator of which shall be the number of
                                    shares of National Semiconductor Stock
                                    outstanding immediately prior to the
                                    issuance of such rights or warrants plus
                                    the number of additional shares of National
                                    Semiconductor Stock offered for
                                    subscription or purchase pursuant to such
                                    rights or warrants and the denominator of
                                    which shall be the number of shares of
                                    National Semiconductor Stock outstanding
                                    immediately prior to the issuance of such
                                    rights or warrants plus the number of
                                    additional shares of National Semiconductor
                                    Stock which the aggregate offering price of
                                    the total number of shares of National
                                    Semiconductor Stock so offered for
                                    subscription or purchase pursuant to such
                                    rights or warrants would purchase at the
                                    Closing Price on the expiration date of
                                    such rights or warrants, which shall be
                                    determined by multiplying such total number
                                    of shares offered by the exercise price of
                                    such rights or warrants and dividing the
                                    product so obtained by such Closing Price.

                                         4. There shall be no adjustments to
                                    the Exchange Ratio to reflect cash
                                    dividends or other distributions paid with
                                    respect to National Semiconductor Stock
                                    other than distributions described in
                                    paragraph 2, paragraph 3 and clauses (i),
                                    (iv) and (v) of the first sentence of
                                    paragraph 5 and Extraordinary Dividends.
                                    "Extraordinary

                                      A-12

<PAGE>

                                    Dividend" means each of (a) the full
                                    amount per share of National Semiconductor
                                    Stock of any cash dividend or special
                                    dividend or distribution that is identified
                                    by National Semiconductor as an
                                    extraordinary or special dividend or
                                    distribution, (b) the excess of any cash
                                    dividend or other cash distribution (that
                                    is not otherwise identified by National
                                    Semiconductor as an extraordinary or
                                    special dividend or distribution)
                                    distributed per share of National
                                    Semiconductor Stock over the immediately
                                    preceding cash dividend or other cash
                                    distribution, if any, per share of National
                                    Semiconductor Stock that did not include an
                                    Extraordinary Dividend (as adjusted for any
                                    subsequent corporate event requiring an
                                    adjustment hereunder, such as a stock split
                                    or reverse stock split) if such excess
                                    portion of the dividend or distribution is
                                    more than 5% of the Closing Price of
                                    National Semiconductor Stock on the Trading
                                    Day preceding the "ex-dividend date" (that
                                    is, the day on and after which transactions
                                    in National Semiconductor Stock on an
                                    organized securities exchange or trading
                                    system no longer carry the right to receive
                                    that cash dividend or other cash
                                    distribution) for the payment of such cash
                                    dividend or other cash distribution (such
                                    Closing Price, the "Base Closing Price")
                                    and (c) the full cash value of any non-
                                    cash dividend or distribution per share of
                                    National Semiconductor Stock (excluding
                                    Marketable Securities, as defined in
                                    paragraph 5 below). Subject to the
                                    following sentence, if any cash dividend or
                                    distribution of such other property with
                                    respect to National Semiconductor Stock
                                    includes an Extraordinary Dividend, the
                                    Exchange Ratio with respect to National
                                    Semiconductor Stock shall be adjusted on
                                    the ex-dividend date so that the new
                                    Exchange Ratio shall equal the product of
                                    (i) the prior Exchange Ratio and (ii) a
                                    fraction, the numerator of which is the
                                    Base Closing Price, and the denominator of
                                    which is the amount by which the Base
                                    Closing Price exceeds the Extraordinary
                                    Dividend. If any Extraordinary Dividend is
                                    at least 35% of the Base Closing Price,
                                    then, instead of adjusting the Exchange
                                    Ratio, the amount payable upon exchange at
                                    maturity shall be determined as described
                                    in paragraph 5 below, and the Extraordinary
                                    Dividend shall be allocated to Reference
                                    Basket Stocks in accordance with the
                                    procedures for a Reference Basket Event as
                                    described in clause 3(b) of paragraph 5
                                    below. The value of the non-cash component
                                    of an Extraordinary Dividend shall be
                                    determined on the ex-dividend date for such

                                      A-13

<PAGE>

                                    distribution by the Calculation Agent,
                                    whose determination shall be conclusive in
                                    the absence of manifest error. A
                                    distribution on National Semiconductor
                                    Stock described in clause (i), (iv) or (v)
                                    of the first sentence of paragraph 5 below
                                    shall cause an adjustment to the Exchange
                                    Ratio pursuant only to clause (i), (iv) or
                                    (v) of the first sentence of paragraph 5,
                                    as applicable.

                                         5. Any of the following shall
                                    constitute a Reorganization Event: (i)
                                    National Semiconductor Stock is
                                    reclassified or changed, including, without
                                    limitation, as a result of the issuance of
                                    any tracking stock by National
                                    Semiconductor, (ii) National Semiconductor
                                    has been subject to any merger, combination
                                    or consolidation and is not the surviving
                                    entity, (iii) National Semiconductor
                                    completes a statutory exchange of
                                    securities with another corporation (other
                                    than pursuant to clause (ii) above), (iv)
                                    National Semiconductor is liquidated, (v)
                                    National Semiconductor issues to all of its
                                    shareholders equity securities of an issuer
                                    other than National Semiconductor (other
                                    than in a transaction described in clause
                                    (ii), (iii) or (iv) above) (a "spinoff
                                    stock") or (vi) National Semiconductor
                                    Stock is the subject of a tender or
                                    exchange offer or going private transaction
                                    on all of the outstanding shares. If any
                                    Reorganization Event occurs, in each case
                                    as a result of which the holders of
                                    National Semiconductor Stock receive any
                                    equity security listed on a national
                                    securities exchange or traded on The Nasdaq
                                    National Market (a "Marketable Security"),
                                    other securities or other property, assets
                                    or cash (collectively "Exchange Property"),
                                    the amount payable upon exchange at
                                    maturity with respect to each $    principal
                                    amount of this SPARQS following the
                                    effective date for such Reorganization
                                    Event (or, if applicable, in the case of
                                    spinoff stock, the ex-dividend date for the
                                    distribution of such spinoff stock) shall
                                    be determined in accordance with the
                                    following:

                                    (1) if National Semiconductor Stock
                                    continues to be outstanding, National
                                    Semiconductor Stock (if applicable, as
                                    reclassified upon the issuance of any
                                    tracking stock) at the Exchange Ratio in
                                    effect on the third Trading Day prior to
                                    the scheduled Maturity Date (taking into
                                    account any adjustments for any
                                    distributions described under clause (3)(a)
                                    below); and

                                      A-14

<PAGE>

                                    (2) for each Marketable Security received
                                    in such Reorganization Event (each a "New
                                    Stock"), including the issuance of any
                                    tracking stock or spinoff stock or the
                                    receipt of any stock received in exchange
                                    for National Semiconductor Stock where
                                    National Semiconductor is not the surviving
                                    entity, the number of shares of the New
                                    Stock received with respect to one share of
                                    National Semiconductor Stock multiplied by
                                    the Exchange Ratio for National
                                    Semiconductor Stock on the Trading Day
                                    immediately prior to the effective date of
                                    the Reorganization Event (the "New Stock
                                    Exchange Ratio"), as adjusted to the third
                                    Trading Day prior to the scheduled Maturity
                                    Date (taking into account any adjustments
                                    for distributions described under clause
                                    (3)(a) below); and

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

                                        (a) if the combined value of the amount
                                        of Non-Stock Exchange Property received
                                        per share of National Semiconductor
                                        Stock, as determined by the Calculation
                                        Agent in its sole discretion on the
                                        effective date of such Reorganization
                                        Event (the "Non-Stock Exchange Property
                                        Value"), by holders of National
                                        Semiconductor Stock is less than 25% of
                                        the Closing Price of National
                                        Semiconductor Stock on the Trading Day
                                        immediately prior to the effective date
                                        of such Reorganization Event, a number
                                        of shares of National Semiconductor
                                        Stock, if applicable, and of any New
                                        Stock received in connection with such
                                        Reorganization Event, if applicable, in
                                        proportion to the relative Closing
                                        Prices of National Semiconductor Stock
                                        and any such New Stock, and with an
                                        aggregate value equal to the Non-Stock
                                        Exchange Property Value multiplied by
                                        the Exchange Ratio in effect for
                                        National Semiconductor Stock on the
                                        Trading Day immediately prior to the
                                        effective date of such Reorganization
                                        Event, based on such Closing Prices, in
                                        each case as determined by the
                                        Calculation Agent in its sole
                                        discretion on the effective date of
                                        such Reorganization Event; and the
                                        number of such shares of National
                                        Semiconductor Stock or any New Stock
                                        determined in accordance with this
                                        clause (3)(a) shall be added at the
                                        time of such adjustment to the Exchange
                                        Ratio in subparagraph (1) above and/or
                                        the

                                      A-15

<PAGE>

                                        New Stock Exchange Ratio in
                                        subparagraph (2) above, as applicable,
                                        or

                                        (b) if the Non-Stock Exchange Property
                                        Value is equal to or exceeds 25% of the
                                        Closing Price of National Semiconductor
                                        Stock on the Trading Day immediately
                                        prior to the effective date relating to
                                        such Reorganization Event or, if
                                        National Semiconductor Stock is
                                        surrendered exclusively for Non-Stock
                                        Exchange Property (in each case, a
                                        "Reference Basket Event"), an initially
                                        equal-dollar weighted basket of three
                                        Reference Basket Stocks (as defined
                                        below) with an aggregate value on the
                                        effective date of such Reorganization
                                        Event equal to the Non-Stock Exchange
                                        Property Value multiplied by the
                                        Exchange Ratio in effect for National
                                        Semiconductor Stock on the Trading Day
                                        immediately prior to the effective date
                                        of such Reorganization Event. The
                                        "Reference Basket Stocks" shall be the
                                        three stocks with the largest market
                                        capitalization among the stocks that
                                        then comprise the S&P 500 Index (or, if
                                        publication of such index is
                                        discontinued, any successor or
                                        substitute index selected by the
                                        Calculation Agent in its sole
                                        discretion) with the same primary
                                        Standard Industrial Classification Code
                                        ("SIC Code") as National Semiconductor;
                                        provided, however, that a Reference
                                        Basket Stock shall not include any
                                        stock that is subject to a trading
                                        restriction under the trading
                                        restriction policies of Morgan Stanley
                                        or any of its affiliates that would
                                        materially limit the ability of Morgan
                                        Stanley or any of its affiliates to
                                        hedge the SPARQS with respect to such
                                        stock (a "Hedging Restriction");
                                        provided further that if three
                                        Reference Basket Stocks cannot be
                                        identified from the S&P 500 Index by
                                        primary SIC Code for which a Hedging
                                        Restriction does not exist, the
                                        remaining Reference Basket Stock(s)
                                        shall be selected by the Calculation
                                        Agent from the largest market
                                        capitalization stock(s) within the same
                                        Division and Major Group classification
                                        (as defined by the Office of Management
                                        and Budget) as the primary SIC Code for
                                        National Semiconductor. Each Reference
                                        Basket Stock shall be assigned a Basket
                                        Stock Exchange Ratio equal to the
                                        number of shares of such Reference
                                        Basket Stock with a Closing Price on
                                        the effective date of such
                                        Reorganization Event equal to the
                                        product of (a) the Non-Stock Exchange
                                        Property

                                      A-16

<PAGE>

                                        Value, (b) the Exchange Ratio in effect
                                        for National Semiconductor Stock on the
                                        Trading Day immediately prior to the
                                        effective date of such Reorganization
                                        Event and (c) 0.3333333.

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

                                      (i)   if applicable, National
                                            Semiconductor Stock at the Exchange
                                            Ratio then in effect; and

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

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

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

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

                                    Following the occurrence of any
                                    Reorganization Event referred to in
                                    paragraphs 4 or 5 above, (i) references to

                                      A-17

<PAGE>

                                    "National Semiconductor Stock" under "No
                                    Fractional Shares," "Closing Price" and
                                    "Market Disruption Event" shall be deemed
                                    to also refer to any New Stock or Reference
                                    Basket Stock, and (ii) all other references
                                    in this SPARQS to "National Semiconductor
                                    Stock" shall be deemed to refer to the
                                    Exchange Property into which this SPARQS is
                                    thereafter exchangeable and references to a
                                    "share" or "shares" of National
                                    Semiconductor Stock shall be deemed to
                                    refer to the applicable unit or units of
                                    such Exchange Property, including any New
                                    Stock or Reference Basket Stock, unless the
                                    context otherwise requires. The New Stock
                                    Exchange Ratio(s) or Basket Stock Exchange
                                    Ratios resulting from any Reorganization
                                    Event described in paragraph 5 above or
                                    similar adjustment under paragraph 4 above
                                    shall be subject to the adjustments set
                                    forth in paragraphs 1 through 5 hereof.

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

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

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

                                    The Calculation Agent shall be solely
                                    responsible for the determination and
                                    calculation of any adjustments to the
                                    Exchange Ratio, any New Stock Exchange
                                    Ratio or Basket Stock Exchange Ratio or
                                    method of calculating the Exchange Property
                                    Value and of any related

                                      A-18

<PAGE>

                                    determinations and calculations with
                                    respect to any distributions of stock,
                                    other securities or other property or
                                    assets (including cash) in connection with
                                    any corporate event described in paragraphs
                                    1 through 5 above, and its determinations
                                    and calculations with respect thereto shall
                                    be conclusive in the absence of manifest
                                    error.

                                    The Calculation Agent shall provide
                                    information as to any adjustments to the
                                    Exchange Ratio or to the method of
                                    calculating the amount payable upon
                                    exchange at maturity of the SPARQS made
                                    pursuant to paragraphs 1 through 5 above
                                    upon written request by any holder of this
                                    SPARQS.

Market Disruption Event........     "Market Disruption Event" means, with
                                    respect to National Semiconductor Stock:

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

                                        (ii) a determination by the Calculation
                                        Agent in its sole discretion that any
                                        event described in clause (i) above
                                        materially interfered with the ability
                                        of the Issuer or any of its affiliates
                                        to unwind or adjust all or a material
                                        portion of the hedge with respect to
                                        the SPARQS due May 15, 2005,
                                        Mandatorily Exchangeable for Shares of
                                        Common Stock of National Semiconductor.

                                      A-19

<PAGE>

                                    For purposes of determining whether a
                                    Market Disruption Event has occurred: (i) 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, (ii) a
                                    decision to permanently discontinue trading
                                    in the relevant options contract shall not
                                    constitute a Market Disruption Event, (iii)
                                    limitations pursuant to NYSE Rule 80A (or
                                    any applicable rule or regulation enacted
                                    or promulgated by the NYSE, any other
                                    self-regulatory organization or the
                                    Securities and Exchange Commission of scope
                                    similar to NYSE Rule 80A as determined by
                                    the Calculation Agent) on trading during
                                    significant market fluctuations shall
                                    constitute a suspension, absence or
                                    material limitation of trading, (iv) a
                                    suspension of trading in options contracts
                                    on National Semiconductor Stock by the
                                    primary securities market trading in such
                                    options, if available, 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 options
                                    contracts related to National Semiconductor
                                    Stock and (v) a suspension, absence or
                                    material limitation of trading on the
                                    primary securities market on which options
                                    contracts related to National Semiconductor
                                    Stock are traded shall not include any time
                                    when such securities market is itself
                                    closed for trading under ordinary
                                    circumstances.

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

                                      A-20

<PAGE>

                                    Right, the amount declared due and payable
                                    upon any such acceleration shall be an
                                    amount in cash for each $ principal amount
                                    of this SPARQS equal to the Call Price for
                                    the Call Date specified in the Issuer's
                                    notice of mandatory exchange, plus accrued
                                    but unpaid interest to but excluding the
                                    date of acceleration.

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

                                      A-21

<PAGE>

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

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

     Payment of the principal of this Note, any premium and the interest due at
maturity (or any redemption or repayment date), unless this Note is denominated
in a Specified Currency other than U.S. dollars and is to be paid in whole or
in part in such Specified Currency, will be made in immediately available funds
upon surrender of this Note at the office or agency of the Paying Agent, as
defined on the reverse hereof, maintained for that purpose in the Borough of
Manhattan, The City of New York, or at such other paying agency as the Issuer
may determine, in U.S. dollars. U.S. dollar payments of interest, other than
interest due at maturity or on any date of redemption or repayment, will be
made by U.S. dollar check mailed to the address of the person entitled thereto
as such address shall appear in the Note register. A holder of U.S. $10,000,000
(or the equivalent in a Specified Currency) or more in aggregate principal
amount of Notes having the same Interest

                                      A-22

<PAGE>

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 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.

                                      A-23

<PAGE>

     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.

                                      A-24

<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

                                      A-25

<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 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

                                      A-26

<PAGE>

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

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

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

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

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

                                      A-27

<PAGE>

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

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

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

                                      A-28

<PAGE>

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

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

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

                                      A-29

<PAGE>

notice of redemption shall be given earlier than 60 calendar days prior to the
earliest date on which the Issuer would be obligated to pay such Additional
Amounts if a payment in respect of this Note were then due.

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

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

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

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

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

                                      A-30

<PAGE>

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

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

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

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

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

                                      A-31

<PAGE>

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

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

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

                                      A-32

<PAGE>

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

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

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

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

     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.

                                      A-33

<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.

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

                                      A-34

<PAGE>

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

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

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

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   [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.

                                      A-35

<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

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

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

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

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

                                      A-36EX4.2.1

EXHIBIT
4.2

22 March 2004 
Strictly
  Private & Confidential

Mr
Iain Robertson

Chairman,
Corporate Banking and Financial Markets 

9th Floor 

Executive Office

135 Bishopsgate

LONDON 

EC2M 3UR 

Dear Iain,
I am
pleased to confirm that on 25 June 2003 the Boards of Directors of The Royal
Bank of Scotland Group plc (“the Group”), The Royal Bank of Scotland
plc (“the Bank”) and National Westminster Bank Plc
(“NatWest”) agreed that you would continue in your role as Chairman of
Corporate Banking and Financial Markets (“CBFM”), and as a Group Board
Director, but that these duties would be carried out in a non-executive
capacity. 

This
letter sets out the terms of your appointment. 

Appointment

Your appointment
as a non-Executive Director commenced on 25 June 2003 and will terminate at the
Group’s Annual General Meeting in April 2005, unless otherwise terminated
earlier by and at the discretion of either party upon one month’s written
notice. 

Your
appointment with the Bank as an Executive Director ended with effect from 25
June 2003. This letter supersedes your Service Agreement with the Bank (as
documented under the terms of a service agreement entered into between you and
the Bank dated 2 and 3 April 1992, as supplemented by a letter from the Bank to
you dated 26 May 1992 and varied by a variation agreement entered into between
you and the Bank dated 4 December 1996 and a variation agreement entered into
between you and the Bank dated 27 March 2002). 

The
date of commencement of continuous service with the Bank will for all purposes
be treated as 1 April 1992. 

Role

In
this role, you will undertake a number of duties in addition to becoming a
non-Executive Director of the Group, the Bank and NatWest. These additional
duties will include: 

	•	 	
Continuing as Chairman of CBFM, with reporting at Board Meetings being carried
out by Johnny Cameron, Chief Executive, CBFM. 

	•	 	
Providing advice and support to Johnny Cameron and other CBFM executives. 

	•	 	 Providing
general “consultancy” advice on business issues to the Board and Board
Committees, as appropriate, including attendance at the Group Audit Committee. 

	•	 	
Continuing as a member of the Advances Committee. 

In
this you will no longer be a member of the Chairman’s Advisory Group,
Chairman’s Committee or Group Executive Management Committee. 

Time
Commitment

Overall
we anticipate a time commitment of 18 days per year for non-Executive Director
duties and an additional 30 days per year for additional duties. This will
include attendance at Board Meetings, the annual strategy offsite session and
the Annual General Meeting. You will be expected to devote appropriate
preparation time ahead of each meeting. The agreement of the Chairman should be
sought before accepting additional commitments that might affect the time you
are able to devote to your role as non-Executive Director of the Group 

Fees

You
will be paid a fee of £100,000 gross per annum, which will be paid
monthly, after deduction of tax and national insurance contributions. You will
also be reimbursed for expenses incurred by you in the performance of your
duties. A review of fees of non-Executive Directors is undertaken each year and
fees paid are disclosed in the Group’s Report and Accounts. 

Pension and
Share Options

It has
  been agreed that, subject to the appropriate Inland Revenue approval and to
  the Rules thereof from time to time in force, you shall continue to be a
  non-contributory member
  of the Group’s Pension Scheme for the duration of your appointment as non-Executive
  Director.

It is
confirmed that when your pensionable service is calculated for the purpose of
establishing your pension entitlement on retirement, that you will be credited
with an additional 12 months’ service. 

It is
also agreed that your entitlement to share options under the Executive Share
Option Scheme and award under the Medium-term Performance Plan which have
accrued during your employment with the Bank to 25 June 2003 shall continue
until normal maturity date, in accordance with the rules of the respective
schemes. 

For
the avoidance of doubt you shall not be entitled to receive further grants of
options or awards under the Medium-term Performance Plan, the Executive Share
Option Scheme, Sharesave, Buy as you Earn or similar plans. You shall not be
entitled to participate in the Bank’s Profit Sharing Scheme. 

Outside
Interests

In the
event that you become aware of any potential conflicts of interest, in addition
to those you have already disclosed, you should advise the Chairman and the
Group Secretary as soon as possible. 

Confidentiality

All
information acquired during your appointment is confidential and should not be
released to third parties without prior clearance from the Chairman. 

Review
Process

The
performance of individual Directors and the whole Board and its Committees is
evaluated annually. If, in the interim, there are any matters which cause you
concern about your role you should discuss them with the Chairman as soon as is
appropriate. 

Insurance

The
Group has in place directors’ and officers’ liability insurance and it
is intended to maintain such cover for the full term of your appointment. 

Independent
Professional Advice

Procedures
  are in place which allow non-Executive Directors to seek independent professional
  advice about the performance of their duties at the expense of the Group. I
  hope that a situation will never arise where you need to take such advice but,
  should you require to do so, the procedure is that you should discuss any issues

 in
  advance with me, the Chairman, or the Senior Independent Director before taking
  such advice. 

Please
confirm your acceptance of the above terms by signing and returning the attached
copy of this letter. 

Yours sincerely,  

Miller
McLean

Group Secretary and General Counsel 

Name (printed)    I S Robertson     

Name (signed)  /s/  I S Robertson     

Date    28.3.04

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