Document:

Exhibit 4.1

                         FORM OF FIXED RATE SENIOR NOTE

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

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

<PAGE>

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

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

                                          % SPARQS(R) DUE FEBRUARY 20, 2007
                                               MANDATORILY EXCHANGEABLE
                                            FOR SHARES OF COMMON STOCK OF
                                                  BEST BUY CO., INC.

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

                                       2
<PAGE>

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

Maturity Date....................  February 20, 2007, subject to acceleration
                                   as described below in "Price Event
                                   Acceleration" and "Alternate Exchange
                                   Calculation in Case of an Event of Default"
                                   and subject to extension if the Final Call
                                   Notice Date is postponed in accordance with
                                   the 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.

                                       3
<PAGE>

Interest Payment Dates...........  May 20, 2006, August 20, 2006, November 20,
                                   2006 and the Maturity Date.

                                   If the scheduled Maturity Date is postponed
                                   due to a Market Disruption Event or
                                   otherwise, the Issuer shall pay interest on
                                   the Maturity Date as postponed rather than
                                   on February 20, 2007, 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 23 hereof, the Record Date for
                                   each Interest Payment Date, including the
                                   Interest Payment Date scheduled to occur on
                                   the Maturity Date, shall be the date 5
                                   calendar days prior to such scheduled
                                   Interest Payment Date, whether or not that
                                   date is a Business Day; provided, however,
                                   that in the event that the Issuer exercises
                                   the Morgan Stanley Call Right, no Interest
                                   Payment Date shall occur after the Morgan
                                   Stanley Notice Date, except for any Interest
                                   Payment Date for which the Morgan Stanley
                                   Notice Date falls on or after the
                                   "ex-interest" date for the related interest
                                   payment, in which case the related interest
                                   payment shall be made on such Interest
                                   Payment Date; and provided, further, that
                                   accrued but unpaid interest payable on the
                                   Call Date, if any, shall be payable to the
                                   person to whom the Call Price is payable.
                                   The "ex-interest" date for any interest
                                   payment is the date on which purchase
                                   transactions in the SPARQS no longer carry
                                   the right to receive such interest payment.

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

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

                                       4
<PAGE>

Morgan Stanley Call Right........  On any scheduled Trading Day on or after
                                   August 20, 2006 or on the Maturity Date
                                   (including the Maturity Date as it may be
                                   extended and regardless of whether the
                                   Maturity Date is a Trading Day), the Issuer
                                   may call the SPARQS, in whole but not in
                                   part, for mandatory exchange for the Call
                                   Price paid in cash (together with accrued
                                   but unpaid interest) on the Call Date.

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

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

                                       5
<PAGE>

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

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

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

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

Final Call Notice Date...........  February 10, 2007; provided that if February
                                   10, 2007 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
                                   August 20, 2006 or the Maturity Date
                                   (including the Maturity Date as it may be
                                   extended and regardless of whether the
                                   Maturity Date is a scheduled Trading Day).
                                   See "Maturity Date" above.

Call Price.......................  The Call Price with respect to any Call Date
                                   is an amount of cash per each $
                                   principal amount of this SPARQS, as
                                   calculated by the Calculation Agent,

                                       6
<PAGE>

                                   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 common stock of Best Buy
                                   Co., Inc. ("Best Buy Stock") at the Exchange
                                   Ratio, and the Issuer shall deliver with
                                   respect to each $          principal amount
                                   of this SPARQS an amount of Best Buy Stock
                                   equal to the Exchange Ratio.

                                   The amount of Best Buy 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 Best Buy Stock
                                   as a result of any corporate event described
                                   under "Antidilution Adjustments" below, in
                                   each case, required to be made through the
                                   close of business on the third Trading Day
                                   prior to the scheduled Maturity Date.

                                   The Issuer shall, or shall cause the
                                   Calculation Agent to, provide written notice
                                   to the Trustee at its New York Office and to
                                   the Depositary, on which notice the Trustee
                                   and Depositary may conclusively rely, on or
                                   prior to 10:30 a.m. on the Trading Day
                                   immediately prior to maturity of this SPARQS
                                   (but if such Trading Day is not a Business
                                   Day, prior to the close of business on the
                                   Business Day preceding the maturity

                                       7
<PAGE>

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

                                       8
<PAGE>

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

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

                                        (i) a number of shares of Best Buy
                                        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.

                                       9
<PAGE>

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

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

Closing Price....................  The Closing Price for one share of Best Buy
                                   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 Best Buy Stock (or any such other
                                        security) is listed or admitted to
                                        trading on a national securities
                                        exchange, the last reported sale price,
                                        regular way, of the principal trading
                                        session on such day on the principal
                                        United States securities exchange
                                        registered under the Securities
                                        Exchange Act of 1934, as amended (the
                                        "Exchange Act"), on which Best Buy
                                        Stock (or any such other security) is
                                        listed or admitted to trading,

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

                                      10
<PAGE>

                                   If Best Buy 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 Best Buy 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 Best Buy 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
                                   Best Buy Stock (or any such other security)
                                   obtained from as many recognized dealers in
                                   such security, but not exceeding three, as
                                   will make such bid prices available to the
                                   Calculation Agent. Bids of MS & Co. or any
                                   of its affiliates may be included in the
                                   calculation of such mean, but only to the
                                   extent that any such bid is the highest of
                                   the bids obtained. The term "security of the
                                   Nasdaq National Market" will include a
                                   security included in any successor to such
                                   system, and the term OTC Bulletin Board
                                   Service will include any successor service
                                   thereto.

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

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

                                   All calculations with respect to the
                                   Exchange Ratio and Call Price for the SPARQS
                                   shall be made by the Calculation Agent and
                                   shall be rounded to the nearest one
                                   hundred-thousandth, with five one-millionths
                                   rounded upward (e.g., .876545 would be
                                   rounded to

                                      11
<PAGE>

                                   .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 Best Buy 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 Best Buy Stock.

                                   2. If Best Buy Stock is subject (i) to a
                                   stock dividend (issuance of additional
                                   shares of Best Buy Stock) that is given
                                   ratably to all holders of shares of Best Buy
                                   Stock or (ii) to a distribution of Best Buy
                                   Stock as a result of the triggering of any
                                   provision of the corporate charter of Best
                                   Buy Co., Inc. ("Best Buy"), then once the
                                   dividend has become effective and Best Buy
                                   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 Best Buy Stock and (ii) the prior
                                   Exchange Ratio.

                                   3. If Best Buy issues rights or warrants to
                                   all holders of Best Buy Stock to subscribe
                                   for or purchase Best Buy Stock at an
                                   exercise price per share less than the
                                   Closing Price of Best Buy 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

                                      12
<PAGE>

                                   product of the prior Exchange Ratio and a
                                   fraction, the numerator of which shall be
                                   the number of shares of Best Buy Stock
                                   outstanding immediately prior to the
                                   issuance of such rights or warrants plus the
                                   number of additional shares of Best Buy
                                   Stock offered for subscription or purchase
                                   pursuant to such rights or warrants and the
                                   denominator of which shall be the number of
                                   shares of Best Buy Stock outstanding
                                   immediately prior to the issuance of such
                                   rights or warrants plus the number of
                                   additional shares of Best Buy Stock which
                                   the aggregate offering price of the total
                                   number of shares of Best Buy 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
                                   Best Buy Stock other than distributions
                                   described in paragraph 2, paragraph 3 and
                                   clauses (i), (iv) and (v) of the first
                                   sentence of paragraph 5 and Extraordinary
                                   Dividends. "Extraordinary Dividend" means
                                   each of (a) the full amount per share of
                                   Best Buy Stock of any cash dividend or
                                   special dividend or distribution that is
                                   identified by Best Buy 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 Best Buy as an extraordinary
                                   or special dividend or distribution)
                                   distributed per share of Best Buy Stock over
                                   the immediately preceding cash dividend or
                                   other cash distribution, if any, per share
                                   of Best Buy 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 Best
                                   Buy Stock on the Trading Day preceding the
                                   "ex-dividend date" (that is, the day on and
                                   after which transactions in Best Buy Stock
                                   on an organized securities exchange or
                                   trading system no longer carry the right to
                                   receive that

                                      13
<PAGE>

                                   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 Best Buy 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 Best Buy Stock includes an
                                   Extraordinary Dividend, the Exchange Ratio
                                   with respect to Best Buy Stock shall be
                                   adjusted on the ex-dividend date so that the
                                   new Exchange Ratio shall equal the product
                                   of (i) the prior Exchange Ratio and (ii) a
                                   fraction, the numerator of which is the Base
                                   Closing Price, and the denominator of which
                                   is the amount by which the Base Closing
                                   Price exceeds the Extraordinary Dividend. If
                                   any Extraordinary Dividend is at least 35%
                                   of the Base Closing Price, then, instead of
                                   adjusting the Exchange Ratio, the amount
                                   payable upon exchange at maturity shall be
                                   determined as described in paragraph 5
                                   below, and the Extraordinary Dividend shall
                                   be allocated to Reference Basket Stocks in
                                   accordance with the procedures for a
                                   Reference Basket Event as described in
                                   clause (c)(ii) of paragraph 5 below. The
                                   value of the non-cash component of an
                                   Extraordinary Dividend shall be determined
                                   on the ex-dividend date for such
                                   distribution by the Calculation Agent, whose
                                   determination shall be conclusive in the
                                   absence of manifest error. A distribution on
                                   Best Buy 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) Best Buy Stock is
                                   reclassified or changed, including, without
                                   limitation, as a result of the issuance of
                                   any tracking stock by Best Buy, (ii) Best
                                   Buy has been subject to any merger,
                                   combination or consolidation and is not the
                                   surviving entity, (iii) Best Buy completes a
                                   statutory exchange of securities with
                                   another corporation (other than pursuant to
                                   clause (ii) above), (iv) Best Buy is
                                   liquidated, (v) Best Buy issues to all of
                                   its shareholders equity securities of an
                                   issuer other than Best Buy

                                      14
<PAGE>

                                   (other than in a transaction described in
                                   clause (ii), (iii) or (iv) above) (a
                                   "spinoff stock") or (vi) Best Buy 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 Best Buy Stock receive
                                   any equity security listed on a national
                                   securities exchange or traded on The Nasdaq
                                   National Market (a "Marketable Security"),
                                   other securities or other property, assets
                                   or cash (collectively "Exchange Property"),
                                   the amount payable upon exchange at maturity
                                   with respect to each $      principal amount
                                   of this SPARQS following the effective date
                                   for such Reorganization Event (or, if
                                   applicable, in the case of spinoff stock,
                                   the ex-dividend date for the distribution of
                                   such spinoff stock) and any required
                                   adjustment to the Exchange Ratio shall be
                                   determined in accordance with the following:

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

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

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

                                      15
<PAGE>

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

                                             (ii) if the Non-Stock Exchange
                                             Property Value is equal to or
                                             exceeds 25% of the Closing Price
                                             of Best Buy Stock on the Trading
                                             Day immediately prior to the
                                             effective date relating to such
                                             Reorganization Event or, if Best
                                             Buy 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 Best
                                             Buy Stock on the Trading Day
                                             immediately prior to the

                                      16
<PAGE>

                                             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 Best Buy; 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 Best Buy.
                                             Each Reference Basket Stock shall
                                             be assigned a Basket Stock
                                             Exchange Ratio equal to the number
                                             of shares of such Reference Basket
                                             Stock with a Closing Price on the
                                             effective date of such
                                             Reorganization Event equal to the
                                             product of (a) the Non-Stock
                                             Exchange Property Value, (b) the
                                             Exchange Ratio in effect for Best
                                             Buy Stock on the Trading Day
                                             immediately prior to the effective
                                             date of such Reorganization Event
                                             and (c) 0.3333333.

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

                                      17
<PAGE>

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

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

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

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

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

                                   Following the occurrence of any
                                   Reorganization Event referred to in
                                   paragraphs 4 or 5 above, (i) references to
                                   "Best Buy 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 "Best Buy 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 Best
                                   Buy Stock shall be deemed to refer to the
                                   applicable unit or units of such Exchange
                                   Property, including any New Stock or
                                   Reference Basket Stock,

                                      18
<PAGE>

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

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

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

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

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

                                      19
<PAGE>

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

Market Disruption Event..........  Market Disruption Event means, with respect
                                   to Best Buy Stock:

                                        (i) a suspension, absence or material
                                        limitation of trading of Best Buy Stock
                                        on the primary market for Best Buy
                                        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 Best Buy
                                        Stock as a result of which the reported
                                        trading prices for Best Buy 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 Best Buy
                                        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 February 20, 2007,
                                        Mandatorily Exchangeable for Shares of
                                        Common Stock of Best Buy Co., Inc.

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

                                      20
<PAGE>

                                   shall not constitute a Market Disruption
                                   Event, (3) limitations pursuant to NYSE Rule
                                   80A (or any applicable rule or regulation
                                   enacted or promulgated by the NYSE, any
                                   other self-regulatory organization or the
                                   Securities and Exchange Commission of scope
                                   similar to NYSE Rule 80A as determined by
                                   the Calculation Agent) on trading during
                                   significant market fluctuations shall
                                   constitute a suspension, absence or material
                                   limitation of trading, (4) a suspension of
                                   trading in options contracts on Best Buy
                                   Stock by the primary securities market
                                   trading in such options, if available, by
                                   reason of (x) a price change exceeding
                                   limits set by such securities exchange or
                                   market, (y) an imbalance of orders relating
                                   to such contracts or (z) a disparity in bid
                                   and ask quotes relating to such contracts
                                   shall constitute a suspension, absence or
                                   material limitation of trading in options
                                   contracts related to Best Buy Stock and (5)
                                   a suspension, absence or material limitation
                                   of trading on the primary securities market
                                   on which options contracts related to Best
                                   Buy 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 Best Buy Stock (and/or the value of
                                   any Exchange Property) as of the date of
                                   such acceleration and (y) the then current
                                   Exchange Ratio and (ii) the Call Price
                                   calculated as though the date of
                                   acceleration were the Call Date (but in no
                                   event less than the Call Price for the first
                                   Call Date), in each case plus accrued but
                                   unpaid interest to but excluding the date of
                                   acceleration; provided that if the Issuer
                                   has called the SPARQS in accordance with the
                                   Morgan Stanley Call Right, the amount
                                   declared due and payable upon any such
                                   acceleration shall be an amount in cash for
                                   each $         principal amount of this
                                   SPARQS equal to the Call Price for the Call
                                   Date specified in the Issuer's notice of
                                   mandatory exchange, plus accrued

                                      21
<PAGE>

                                   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 a unit consisting of
                                   (A) a terminable contract (the "Terminable
                                   Forward Contract") that (i) requires the
                                   holder of this SPARQS (subject to the Morgan
                                   Stanley Call Right) to purchase, and the
                                   Issuer to sell, for an amount equal to
                                   $         (the "Forward Price"), Best Buy
                                   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 Best Buy Stock
                                   pursuant to the Terminable Forward Contract
                                   (the "Deposit"), which Deposit bears a
                                   quarterly compounded yield of     % per
                                   annum.

                                      22
<PAGE>

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

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

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

                                      23
<PAGE>

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

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

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

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

                                      24
<PAGE>

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

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

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

                                      25
<PAGE>

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

DATED:                                 MORGAN STANLEY

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

TRUSTEE'S CERTIFICATE
    OF AUTHENTICATION

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

JPMORGAN CHASE BANK, N.A.,
    as Trustee

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

                                      26
<PAGE>

                          FORM OF REVERSE OF SECURITY

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

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

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

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

                                      27
<PAGE>

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

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

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

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

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

                                      28
<PAGE>

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

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

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

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

                                      29
<PAGE>

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

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

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

                                      30
<PAGE>

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

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

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

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

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

                                      31
<PAGE>

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

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

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

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

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

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

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

                                      32
<PAGE>

supplemental indentures adding any provisions to or changing in any manner the
rights of the holders of each series so affected; provided that the Issuer and
the Trustee may not, without the consent of the holder of each outstanding debt
security affected thereby, (a) extend the final maturity of any such debt
security, or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon, or reduce any amount payable on
redemption thereof, or change the currency of payment thereof, or modify or
amend the provisions for conversion of any currency into any other currency, or
modify or amend the provisions for conversion or exchange of the debt security
for securities of the Issuer or other entities or for other property or the
cash value of the property (other than as provided in the antidilution
provisions or other similar adjustment provisions of the debt securities or
otherwise in accordance with the terms thereof), or impair or affect the rights
of any holder to institute suit for the payment thereof or (b) reduce the
aforesaid percentage in principal amount of debt securities the consent of the
holders of which is required for any such supplemental indenture.

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

                                      33
<PAGE>

     All determinations referred to above made by, or on behalf of, the Issuer
or by, or on behalf of, the Exchange Rate Agent shall be at such entity's sole
discretion and shall, in the absence of manifest error, be conclusive for all
purposes and binding on holders of Notes and coupons.

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

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

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

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

     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

                                      34
<PAGE>

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.

                                      35
<PAGE>

                                 ABBREVIATIONS

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

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

     UNIF GIFT MIN ACT - ________________________ Custodian ____________________
                                  (Minor)                         (Cust)

     Under Uniform Gifts to Minors Act __________________________________
                                                   (State)

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

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

                                      36
<PAGE>

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

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

_______________________________________________________________________________

_______________________________________________________________________________

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

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

Dated: ______________________________

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

                                       37
<PAGE>

                           OPTION TO ELECT REPAYMENT

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

_______________________________________________________________________________

_______________________________________________________________________________

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

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

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

                                       38Exhibit 4.1

                         FORM OF FIXED RATE SENIOR NOTE

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

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

<PAGE>

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

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

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

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

                                       2
<PAGE>

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

Maturity Date....................  February 20, 2007, subject to acceleration
                                   as described below in "Price Event
                                   Acceleration" and "Alternate Exchange
                                   Calculation in Case of an Event of Default"
                                   and subject to extension if the Final Call
                                   Notice Date is postponed in accordance with
                                   the 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.

                                       3
<PAGE>

Interest Payment Dates...........  May 20, 2006, August 20, 2006, November 20,
                                   2006 and the Maturity Date.

                                   If the scheduled Maturity Date is postponed
                                   due to a Market Disruption Event or
                                   otherwise, the Issuer shall pay interest on
                                   the Maturity Date as postponed rather than
                                   on February 20, 2007, 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 23 hereof, the Record Date for
                                   each Interest Payment Date, including the
                                   Interest Payment Date scheduled to occur on
                                   the Maturity Date, shall be the date 5
                                   calendar days prior to such scheduled
                                   Interest Payment Date, whether or not that
                                   date is a Business Day; provided, however,
                                   that in the event that the Issuer exercises
                                   the Morgan Stanley Call Right, no Interest
                                   Payment Date shall occur after the Morgan
                                   Stanley Notice Date, except for any Interest
                                   Payment Date for which the Morgan Stanley
                                   Notice Date falls on or after the
                                   "ex-interest" date for the related interest
                                   payment, in which case the related interest
                                   payment shall be made on such Interest
                                   Payment Date; and provided, further, that
                                   accrued but unpaid interest payable on the
                                   Call Date, if any, shall be payable to the
                                   person to whom the Call Price is payable.
                                   The "ex-interest" date for any interest
                                   payment is the date on which purchase
                                   transactions in the SPARQS no longer carry
                                   the right to receive such interest payment.

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

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

                                       4
<PAGE>

Morgan Stanley Call Right........  On any scheduled Trading Day on or after
                                   August 20, 2006 or on the Maturity Date
                                   (including the Maturity Date as it may be
                                   extended and regardless of whether the
                                   Maturity Date is a Trading Day), the Issuer
                                   may call the SPARQS, in whole but not in
                                   part, for mandatory exchange for the Call
                                   Price paid in cash (together with accrued
                                   but unpaid interest) on the Call Date.

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

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

                                       5
<PAGE>

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

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

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

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

Final Call Notice Date...........  February 10, 2007; provided that if February
                                   10, 2007 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
                                   August 20, 2006 or the Maturity Date
                                   (including the Maturity Date as it may be
                                   extended and regardless of whether the
                                   Maturity Date is a scheduled Trading Day).
                                   See "Maturity Date" above.

Call Price.......................  The Call Price with respect to any Call Date
                                   is an amount of cash per each $
                                   principal amount of this SPARQS, as
                                   calculated by the Calculation Agent,

                                       6
<PAGE>

                                   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 common stock of
                                   Chesapeake Energy Corporation ("Chesapeake
                                   Energy Stock") at the Exchange Ratio, and
                                   the Issuer shall deliver with respect to
                                   each $         principal amount of this
                                   SPARQS an amount of Chesapeake Energy Stock
                                   equal to the Exchange Ratio.

                                   The amount of Chesapeake Energy 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 Chesapeake
                                   Energy Stock as a result of any corporate
                                   event described under "Antidilution
                                   Adjustments" below, in each case, required
                                   to be made through the close of business on
                                   the third Trading Day prior to the scheduled
                                   Maturity Date.

                                   The Issuer shall, or shall cause the
                                   Calculation Agent to, provide written notice
                                   to the Trustee at its New York Office and to
                                   the Depositary, on which notice the Trustee
                                   and Depositary may conclusively rely, on or
                                   prior to 10:30 a.m. on the Trading Day
                                   immediately prior to maturity of this SPARQS
                                   (but if such Trading Day is not a Business
                                   Day, prior to the close of

                                       7
<PAGE>

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

                                       8
<PAGE>

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

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

                                        (i) a number of shares of Chesapeake
                                        Energy 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

                                       9
<PAGE>

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

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

Closing Price....................  The Closing Price for one share of
                                   Chesapeake Energy 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 Chesapeake Energy Stock (or any such
                                        other security) is listed or admitted
                                        to trading on a national securities
                                        exchange, the last reported sale price,
                                        regular way, of the principal trading
                                        session on such day on the principal
                                        United States securities exchange
                                        registered under the Securities
                                        Exchange Act of 1934, as amended (the
                                        "Exchange Act"), on which Chesapeake
                                        Energy Stock (or any such other
                                        security) is listed or admitted to
                                        trading,

                                   o    if Chesapeake Energy 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 Chesapeake Energy Stock (or any such
                                        other security) is neither listed or
                                        admitted to trading on any national
                                        securities exchange nor a security of
                                        the Nasdaq National Market but is
                                        included in the OTC Bulletin Board
                                        Service (the "OTC Bulletin Board")
                                        operated by the National Association of

                                      10
<PAGE>

                                        Securities Dealers, Inc. (the "NASD"),
                                        the last reported sale price of the
                                        principal trading session on the OTC
                                        Bulletin Board on such day.

                                   If Chesapeake Energy 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 Chesapeake Energy 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 Chesapeake Energy 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 Chesapeake Energy Stock (or any such
                                   other security) obtained from as many
                                   recognized dealers in such security, but not
                                   exceeding three, as will make such bid
                                   prices available to the Calculation Agent.
                                   Bids of MS & Co. or any of its affiliates
                                   may be included in the calculation of such
                                   mean, but only to the extent that any such
                                   bid is the highest of the bids obtained. The
                                   term "security of the Nasdaq National
                                   Market" will include a security included in
                                   any successor to such system, and the term
                                   OTC Bulletin Board Service will include any
                                   successor service thereto.

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

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

                                      11
<PAGE>

                                   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 Chesapeake Energy 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 Chesapeake Energy Stock.

                                   2. If Chesapeake Energy Stock is subject (i)
                                   to a stock dividend (issuance of additional
                                   shares of Chesapeake Energy Stock) that is
                                   given ratably to all holders of shares of
                                   Chesapeake Energy Stock or (ii) to a
                                   distribution of Chesapeake Energy Stock as a
                                   result of the triggering of any provision of
                                   the corporate charter of Chesapeake Energy
                                   Corporation ("Chesapeake Energy"), then once
                                   the dividend has become effective and
                                   Chesapeake Energy 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
                                   Chesapeake Energy Stock and (ii) the prior
                                   Exchange Ratio.

                                      12
<PAGE>

                                   3. If Chesapeake Energy issues rights or
                                   warrants to all holders of Chesapeake Energy
                                   Stock to subscribe for or purchase
                                   Chesapeake Energy Stock at an exercise price
                                   per share less than the Closing Price of
                                   Chesapeake Energy 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
                                   Chesapeake Energy Stock outstanding
                                   immediately prior to the issuance of such
                                   rights or warrants plus the number of
                                   additional shares of Chesapeake Energy Stock
                                   offered for subscription or purchase
                                   pursuant to such rights or warrants and the
                                   denominator of which shall be the number of
                                   shares of Chesapeake Energy Stock
                                   outstanding immediately prior to the
                                   issuance of such rights or warrants plus the
                                   number of additional shares of Chesapeake
                                   Energy Stock which the aggregate offering
                                   price of the total number of shares of
                                   Chesapeake Energy 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
                                   Chesapeake Energy Stock other than
                                   distributions described in paragraph 2,
                                   paragraph 3 and clauses (i), (iv) and (v) of
                                   the first sentence of paragraph 5 and
                                   Extraordinary Dividends. "Extraordinary
                                   Dividend" means each of (a) the full amount
                                   per share of Chesapeake Energy Stock of any
                                   cash dividend or special dividend or
                                   distribution that is identified by
                                   Chesapeake Energy 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 Chesapeake Energy as an
                                   extraordinary or special dividend or
                                   distribution) distributed per share of
                                   Chesapeake Energy Stock over

                                      13
<PAGE>

                                   the immediately preceding cash dividend or
                                   other cash distribution, if any, per share
                                   of Chesapeake Energy 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 Chesapeake Energy Stock on the
                                   Trading Day preceding the "ex-dividend date"
                                   (that is, the day on and after which
                                   transactions in Chesapeake Energy 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
                                   Chesapeake Energy 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 Chesapeake Energy Stock includes
                                   an Extraordinary Dividend, the Exchange
                                   Ratio with respect to Chesapeake Energy
                                   Stock shall be adjusted on the ex-dividend
                                   date so that the new Exchange Ratio shall
                                   equal the product of (i) the prior Exchange
                                   Ratio and (ii) a fraction, the numerator of
                                   which is the Base Closing Price, and the
                                   denominator of which is the amount by which
                                   the Base Closing Price exceeds the
                                   Extraordinary Dividend. If any Extraordinary
                                   Dividend is at least 35% of the Base Closing
                                   Price, then, instead of adjusting the
                                   Exchange Ratio, the amount payable upon
                                   exchange at maturity shall be determined as
                                   described in paragraph 5 below, and the
                                   Extraordinary Dividend shall be allocated to
                                   Reference Basket Stocks in accordance with
                                   the procedures for a Reference Basket Event
                                   as described in clause (c)(ii) of paragraph
                                   5 below. The value of the non-cash component
                                   of an Extraordinary Dividend shall be
                                   determined on the ex-dividend date for such
                                   distribution by the Calculation Agent, whose
                                   determination shall be conclusive in the
                                   absence of manifest error. A distribution on
                                   Chesapeake Energy 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

                                      14
<PAGE>

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

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

                                        (b) for each Marketable Security
                                        received in such Reorganization Event
                                        (each a "New Stock"), including the
                                        issuance of any tracking stock or

                                      15
<PAGE>

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

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

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

                                      16
<PAGE>

                                             shall be added at the time of such
                                             adjustment to the Exchange Ratio
                                             in subparagraph (a) above and/or
                                             the New Stock Exchange Ratio in
                                             subparagraph (b) above, as
                                             applicable, or

                                             (ii) if the Non-Stock Exchange
                                             Property Value is equal to or
                                             exceeds 25% of the Closing Price
                                             of Chesapeake Energy Stock on the
                                             Trading Day immediately prior to
                                             the effective date relating to
                                             such Reorganization Event or, if
                                             Chesapeake Energy 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 Chesapeake Energy
                                             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 Chesapeake
                                             Energy; 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

                                      17
<PAGE>

                                             (as defined by the Office of
                                             Management and Budget) as the
                                             primary SIC Code for Chesapeake
                                             Energy. Each Reference Basket
                                             Stock shall be assigned a Basket
                                             Stock Exchange Ratio equal to the
                                             number of shares of such Reference
                                             Basket Stock with a Closing Price
                                             on the effective date of such
                                             Reorganization Event equal to the
                                             product of (a) the Non-Stock
                                             Exchange Property Value, (b) the
                                             Exchange Ratio in effect for
                                             Chesapeake Energy 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:

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

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

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

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

                                   For purposes of paragraph 5 above, in the
                                   case of a consummated tender or exchange
                                   offer or going-private transaction involving
                                   consideration of particular types, Exchange
                                   Property shall be deemed to include the
                                   amount of cash or other property delivered
                                   by the offeror in the tender or exchange
                                   offer (in an amount determined on the basis
                                   of the rate of exchange

                                      18
<PAGE>

                                   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
                                   "Chesapeake Energy 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 "Chesapeake Energy 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 Chesapeake Energy
                                   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-

                                      19
<PAGE>

                                   thousandth, with five one-millionths rounded
                                   upward. Adjustments to the Exchange Ratios
                                   will be made up to the close of business on
                                   the third Trading Day prior to the scheduled
                                   Maturity Date.

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

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

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

Market Disruption Event..........  Market Disruption Event means, with respect
                                   to Chesapeake Energy Stock:

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

                                      20
<PAGE>

                                        primary market for trading in options
                                        contracts related to Chesapeake Energy
                                        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 February 20, 2007,
                                        Mandatorily Exchangeable for Shares of
                                        Common Stock of Chesapeake Energy
                                        Corporation.

                                   For purposes of determining whether a Market
                                   Disruption Event has occurred: (1) a
                                   limitation on the hours or number of days of
                                   trading shall not constitute a Market
                                   Disruption Event if it results from an
                                   announced change in the regular business
                                   hours of the relevant exchange, (2) a
                                   decision to permanently discontinue trading
                                   in the relevant options contract shall not
                                   constitute a Market Disruption Event, (3)
                                   limitations pursuant to NYSE Rule 80A (or
                                   any applicable rule or regulation enacted or
                                   promulgated by the NYSE, any other
                                   self-regulatory organization or the
                                   Securities and Exchange Commission of scope
                                   similar to NYSE Rule 80A as determined by
                                   the Calculation Agent) on trading during
                                   significant market fluctuations shall
                                   constitute a suspension, absence or material
                                   limitation of trading, (4) a suspension of
                                   trading in options contracts on Chesapeake
                                   Energy Stock by the primary securities
                                   market trading in such options, if
                                   available, by reason of (x) a price change
                                   exceeding limits set by such securities
                                   exchange or market, (y) an imbalance of
                                   orders relating to such contracts or (z) a
                                   disparity in bid and ask quotes relating to
                                   such contracts shall constitute a
                                   suspension, absence or material limitation
                                   of trading in options contracts related to
                                   Chesapeake Energy Stock and (5) a
                                   suspension, absence or material limitation
                                   of trading on the primary securities market
                                   on which options contracts related to
                                   Chesapeake Energy Stock are traded shall not
                                   include any time

                                      21
<PAGE>

                                   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 Chesapeake Energy Stock (and/or the
                                   value of any Exchange Property) as of the
                                   date of such acceleration and (y) the then
                                   current Exchange Ratio and (ii) the Call
                                   Price calculated as though the date of
                                   acceleration were the Call Date (but in no
                                   event less than the Call Price for the first
                                   Call Date), in each case plus accrued but
                                   unpaid interest to but excluding the date of
                                   acceleration; provided that if the Issuer
                                   has called the SPARQS in accordance with the
                                   Morgan Stanley Call Right, the amount
                                   declared due and payable upon any such
                                   acceleration shall be an amount in cash for
                                   each $         principal amount of this
                                   SPARQS equal to the Call Price for the Call
                                   Date specified in the Issuer's notice of
                                   mandatory exchange, plus accrued but unpaid
                                   interest to but excluding the date of
                                   acceleration.

Treatment of SPARQS for
  United States Federal
  Income Tax Purposes............  The Issuer, by its sale of this SPARQS, and
                                   the holder of this SPARQS (and any successor
                                   holder of, or holder of a beneficial
                                   interest in, this SPARQS), by its respective
                                   purchase hereof, agree (in the absence of an
                                   administrative determination or judicial
                                   ruling to the contrary) to characterize each
                                   $         principal amount of this SPARQS
                                   for all tax purposes as a unit consisting of
                                   (A) a terminable contract (the "Terminable
                                   Forward Contract") that (i) requires the
                                   holder of this SPARQS (subject to the Morgan
                                   Stanley Call Right) to purchase, and the
                                   Issuer to sell, for an amount equal to
                                   $         (the "Forward Price"), Chesapeake
                                   Energy 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

                                      22
<PAGE>

                                   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 Chesapeake Energy
                                   Stock pursuant to the Terminable Forward
                                   Contract (the "Deposit"), which Deposit
                                   bears a quarterly compounded yield of     %
                                   per annum.

                                      23
<PAGE>

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

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

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

                                      24
<PAGE>

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

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

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

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

                                      25
<PAGE>

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

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

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

                                      26
<PAGE>

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

DATED:                                 MORGAN STANLEY

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

TRUSTEE'S CERTIFICATE
    OF AUTHENTICATION

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

JPMORGAN CHASE BANK, N.A., as Trustee

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

                                      27
<PAGE>

                          FORM OF REVERSE OF SECURITY

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

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

     If so indicated on the face hereof, this Note may be redeemed in whole or
in part at the option of the Issuer on or after the Initial Redemption Date
specified on the face hereof on the terms set forth on the face hereof,
together with interest accrued and unpaid hereon to the date of redemption. If
this Note is subject to "Annual Redemption Percentage Reduction," the Initial
Redemption Percentage indicated on the face hereof will be reduced on each
anniversary of the Initial Redemption Date by the Annual Redemption Percentage
Reduction specified on the face hereof until the redemption price of this Note
is 100% of the principal amount hereof, together with interest accrued and
unpaid hereon to the date of redemption. 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

                                      28
<PAGE>

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

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

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

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

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

                                      29
<PAGE>

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

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

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

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

                                      30
<PAGE>

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

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

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

                                      31
<PAGE>

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

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

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

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

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

                                      32
<PAGE>

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

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

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

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

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

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

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

                                      33
<PAGE>

supplemental indentures adding any provisions to or changing in any manner the
rights of the holders of each series so affected; provided that the Issuer and
the Trustee may not, without the consent of the holder of each outstanding debt
security affected thereby, (a) extend the final maturity of any such debt
security, or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon, or reduce any amount payable on
redemption thereof, or change the currency of payment thereof, or modify or
amend the provisions for conversion of any currency into any other currency, or
modify or amend the provisions for conversion or exchange of the debt security
for securities of the Issuer or other entities or for other property or the
cash value of the property (other than as provided in the antidilution
provisions or other similar adjustment provisions of the debt securities or
otherwise in accordance with the terms thereof), or impair or affect the rights
of any holder to institute suit for the payment thereof or (b) reduce the
aforesaid percentage in principal amount of debt securities the consent of the
holders of which is required for any such supplemental indenture.

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

                                      34
<PAGE>

     All determinations referred to above made by, or on behalf of, the Issuer
or by, or on behalf of, the Exchange Rate Agent shall be at such entity's sole
discretion and shall, in the absence of manifest error, be conclusive for all
purposes and binding on holders of Notes and coupons.

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

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

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

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

     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

                                      35
<PAGE>

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.

                                      36
<PAGE>

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

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

     UNIF GIFT MIN ACT - ________________________ Custodian ____________________
                                  (Minor)                         (Cust)

     Under Uniform Gifts to Minors Act __________________________________
                                                   (State)

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

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

                                      37
<PAGE>

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

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

_______________________________________________________________________________

_______________________________________________________________________________

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

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

Dated: ______________________________

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

                                       38
<PAGE>

                           OPTION TO ELECT REPAYMENT

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

_______________________________________________________________________________

_______________________________________________________________________________

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

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

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

                                       39

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