Document:

EXHIBIT 4.1

                         FORM OF FIXED RATE SENIOR NOTE

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

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

<PAGE>

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

                                   .25% EXCHANGEABLE NOTES DUE DECEMBER 30, 2011
                                         (EXCHANGEABLE FOR SHARES OF COMMON
                                        STOCK OF TWO OIL INDUSTRY COMPANIES)

<TABLE>
==================================================================================================================
<S>                           <C>                          <C>                          <C>
ORIGINAL ISSUE DATE:          INITIAL REDEMPTION           INTEREST RATE: 0.25%         MATURITY DATE:
                                DATE:                    .   per annum                    December 30, 2011
                                See also "Morgan
                                Stanley Call Right"
                                below.
------------------------------------------------------------------------------------------------------------------
INTEREST ACCRUAL              INITIAL REDEMPTION           INTEREST PAYMENT             OPTIONAL
  DATE:                         PERCENTAGE: See              DATE(S): Each June 30        REPAYMENT
                                "Morgan Stanley Call         and December 30,             DATE(S): N/A
                                Right" below.                beginning June 30, 2005
------------------------------------------------------------------------------------------------------------------
SPECIFIED CURRENCY:           ANNUAL REDEMPTION            INTEREST PAYMENT             APPLICABILITY OF
  U.S. dollars                  PERCENTAGE                   PERIOD: Semi-annually        MODIFIED
                                REDUCTION: N/A                                            PAYMENT UPON
                                                                                          ACCELERATION:
                                                                                          See "Alternate
                                                                                          Exchange Calculation
                                                                                          in Case of an Event
                                                                                          of Default" below.
------------------------------------------------------------------------------------------------------------------
IF SPECIFIED                  REDEMPTION NOTICE            APPLICABILITY OF             If yes, state Issue Price:
  CURRENCY                      PERIOD: See "Morgan          ANNUAL INTEREST
  OTHER THAN U.S.               Stanley Notice Date"         PAYMENTS: N/A
  DOLLARS, OPTION               below.
  TO ELECT
  PAYMENT IN U.S.
  DOLLARS: N/A
------------------------------------------------------------------------------------------------------------------
EXCHANGE RATE                 TAX REDEMPTION AND                                        ORIGINAL YIELD TO
  AGENT: N/A                  PAYMENT OF                                                MATURITY: N/A
                              ADDITIONAL
                              AMOUNTS: NO
OTHER PROVISIONS:             IF YES, STATE INITIAL
   See below.                 OFFERING DATE: N/A
==================================================================================================================
</TABLE>

Basket Value............ The Basket Value on any date equals the sum of the
                         products of the Closing Price and the Exchange Ratio
                         for each Basket Stock, each as determined as of such
                         date by the Calculation Agent.

                                      A-2
<PAGE>

Basket Stocks........... The Basket Stocks are the two common stocks of the two
                         issuers set forth in the table below, which both trade
                         on the New York Stock Exchange, Inc. ("NYSE"). The
                         table also indicates the ticker symbol for each Basket
                         Stock, the proportion of the initial Basket Value
                         represented by the shares of each Basket Stock, and
                         the Exchange Ratio (as defined below) with respect to
                         each Basket Stock, each as determined on        , 2004.

                                                           Proportion
                                                           of Initial
                         Issuer of                 Ticker    Basket    Exchange
                         Basket Stock              Symbol    Value       Ratio
                         ------------              ------  ----------  --------
                         Anadarko Petroleum
                         Corporation                APC      50.00%
                         Diamond Offshore Drilling   DO      50.00%

                         If, as a result of any event described under
                         "--Adjustments to the Exchange Ratios" below, this
                         Note is exchangeable into equity securities other than
                         the shares of the issuers of the Basket Stocks,
                         "Basket Stocks" shall include such other securities.
                         For additional details on adjustments, see
                         "--Antidilution Adjustments to the Exchange Ratios"
                         below.

Basket.................. The Basket is initially composed of the common stock
                         of two companies in the oil industry, and consists of
                         a number of shares of each Basket Stock equal to the
                         Exchange Ratio with respect to such Basket Stock.

Exchange Right.......... On any Exchange Date, subject to a prior call of this
                         Note for cash in an amount equal to the Call Price (as
                         defined below) by the Issuer as described under
                         "Morgan Stanley Call Right" below, the holder of this
                         Note shall be entitled, upon the holder's:

                         o    completion and delivery to the Issuer and the
                              Calculation Agent of an Official Notice of
                              Exchange (in the form of Annex A attached hereto)
                              prior to 11:00 a.m. (New York City time) on such
                              date; and

                         o    transfer of this Note to the Trustee on the
                              Issuer's behalf on or before the Exchange
                              Settlement Date (as defined below),

                         to exchange each $1,000 principal amount of this Note
                         for a number of shares of each of the Basket Stocks
                         equal to its Exchange Ratio (as defined below),
                         subject to any adjustment (x) to the Exchange Ratio or
                         (y) resulting in other Exchange Property (as defined
                         below) being required to be delivered instead of or in
                         addition to any such Basket Stock as a result of any
                         corporate event or

                                      A-3
<PAGE>

                         dividend payment described under "Adjustments to the
                         Exchange Ratios" below, in each case, required to be
                         made prior to the close of business on such Exchange
                         Date.

                         Upon any exercise of the Exchange Right, the holder of
                         this Note shall not be entitled, with respect to the
                         principal amount of this Note that is exchanged, to
                         receive any cash payment representing any accrued but
                         unpaid interest on this Note. Consequently, if this
                         Note is exchanged so that the Exchange Settlement Date
                         occurs during the period from the close of business on
                         a Record Date (as defined below) for the payment of
                         interest and prior to the next succeeding Interest
                         Payment Date, this Note must, as a condition to the
                         delivery of the Basket Stocks, other Exchange Property
                         or cash, be accompanied by funds equal to the interest
                         payable on the succeeding Interest Payment Date on the
                         principal amount so exchanged.

                         Upon any such exchange, the Issuer may, at its sole
                         option, either deliver shares of the Basket Stocks (or
                         such other Exchange Property) or pay an amount in cash
                         for each $1,000 principal amount of this Note equal to
                         the Basket Value on the Exchange Date, as determined
                         by the Calculation Agent, in lieu of such Basket
                         Stocks (or such other Exchange Property).

                         The Issuer shall, or shall cause the Calculation Agent
                         to, deliver such shares of the Basket Stocks or cash
                         to the Trustee for delivery to the holder of this Note
                         on the third Business Day after any Exchange Date,
                         subject to delivery of this Note to the Trustee on
                         such day (such third Business Day, or, if later, the
                         day on which this exercised Note is delivered to the
                         Trustee, the "Exchange Settlement Date").

                         Prior to 9:30 a.m. on the first Business Day
                         immediately succeeding any Exchange Date, the Issuer
                         shall cause the Calculation Agent to provide written
                         notice to the Trustee at its New York office and to
                         The Depository Trust Company, or any successor
                         depositary (the "Depositary"), on which notice the
                         Trustee and the Depositary may conclusively rely, (i)
                         of its receipt of any such "Official Notice of
                         Exchange," (ii) of the Issuer's determination to
                         deliver shares of the Basket Stocks (or, if
                         applicable, any

                                      A-4
<PAGE>

                         other Exchange Property to be delivered as a result of
                         any corporate event described in paragraphs 3 or 4
                         under "Adjustments to the Exchange Ratios" below) or
                         to pay an equivalent amount of cash for each $1,000
                         principal amount of this Note and (iii) if shares of
                         the Basket Stocks (or, if applicable, any other
                         Exchange Property) are to be delivered, of the number
                         of shares of the Basket Stocks (or the amount of such
                         other Exchange Property) to be delivered for each
                         $1,000 principal amount of this Note and of the amount
                         of any cash to be paid in lieu of any fractional share
                         of the Basket Stocks (or of any other securities
                         included in other Exchange Property, if applicable),
                         or, if cash is to be paid, of the amount of such cash
                         for each $1,000 principal amount of this Note.

Minimum Exchange........ The Exchange Right may only be exercised with respect
                         to aggregate principal amounts of $25,000 or greater,
                         unless the principal amount of this Note to be
                         exchanged represents the entire principal amount of
                         the interest in this Note beneficially owned by the
                         owner causing the exchange, as determined by the
                         Calculation Agent.

Exchange Ratio.......... The Exchange Ratio for each Basket Stock is set forth
                         in the table under "Basket Stocks" above, subject to
                         adjustment for certain corporate events relating to,
                         or dividend payments by, the issuer of that Basket
                         Stock.

No Fractional Shares.... If upon any exchange or call of this Note the Issuer
                         delivers shares of the Basket Stocks (and, if
                         applicable, any other stock or other securities), the
                         Issuer shall pay cash in lieu of delivering any
                         fractional share of any Basket Stock (and, if
                         applicable, of any other stock or securities) in an
                         amount equal to the corresponding fractional Closing
                         Price of such Basket Stock (and, if applicable, any
                         such other stock or other securities) as determined by
                         the Calculation Agent on the applicable Exchange Date
                         or on the second Trading Day immediately preceding the
                         Call Date (as defined below).

Exchange Date........... Any Trading Day on which a holder of this Note has
                         duly completed and delivered to the Issuer and the
                         Calculation Agent through the Depositary and the
                         Issuer has received an official notice of exchange
                         prior to 11:00 a.m., or if the Issuer receives it
                         after 11:00 a.m., the next Trading Day; provided that
                         such Trading Day falls during the period

                                      A-5
<PAGE>

                         beginning         , 2004 and ending on the Trading Day
                         prior to the earliest of (i) the fifth scheduled
                         Trading Day prior to the Maturity Date, (ii) the fifth
                         scheduled Trading Day prior to the Call Date and (iii)
                         in the event of a call for the cash Call Price as
                         described under "Morgan Stanley Call Right" below, the
                         Morgan Stanley Notice Date.

Morgan Stanley Call
Right................... On or after            to and including the Maturity
                         Date, the Issuer may call this Note, in whole but not
                         in part, for mandatory exchange into shares of each of
                         the Basket Stocks (and, if applicable, any other
                         Exchange Property) at the applicable Exchange Ratio
                         (with respect to each $1,000 principal amount of this
                         Note); provided that, if the Basket Value on the
                         Trading Day immediately preceding the Morgan Stanley
                         Notice Date, as determined by the Calculation Agent,
                         is less than the Call Price, the Issuer shall pay the
                         Call Price in cash on the Call Date.

                         Unless the Issuer has called this Note for the Call
                         Price in cash pursuant to the Morgan Stanley Call
                         Right, on or after the Morgan Stanley Notice Date and
                         prior to the fifth scheduled Trading Day prior to the
                         Call Date, the holder of this Note shall continue to
                         be entitled to exchange this Note and receive any
                         amounts described under "Exchange Right" above.

                         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 Note by
                         mailing notice of such exercise by first class mail,
                         postage prepaid, at 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, at its New York office. 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 Note receives
                         the notice. Failure to give notice by mail, or any
                         defect in the notice to the holder of any Note shall
                         not affect the validity of the proceedings for the
                         exercise of the Morgan Stanley Call Right with respect
                         to any other Note.

                                      A-6
<PAGE>

                         The notice of the Issuer's exercise of the Morgan
                         Stanley Call Right shall specify (i) the Call Date (as
                         defined below), (ii) whether the Basket Value on the
                         Trading Day immediately prior to the Morgan Stanley
                         Notice Date, as determined by the Calculation Agent,
                         is less than the Call Price so that the Issuer shall
                         pay the Call Price in cash on the Call Date, (iii) the
                         place or places of payment in cash (in the event of a
                         call for the Call Price) or, if the Basket Value on
                         the Trading Day immediately prior to the Morgan
                         Stanley Notice Date, as determined by the Calculation
                         Agent, is equal to or greater than the Call Price, the
                         place or places of delivery of the shares of the
                         Basket Stocks (and, if applicable, of any other
                         Exchange Property to be delivered as a result of any
                         corporate event described in under "Adjustments to the
                         Exchange Ratios" below) (and of any cash to be paid in
                         lieu of any fractional share of each Basket Stock
                         (and, if applicable, of any such other stock or
                         securities)), (iv) the number of shares of each Basket
                         Stock (and, if applicable, the quantity of any other
                         Exchange Property), if any, to be delivered per $1,000
                         principal amount of this Note, (v) that such delivery
                         is subject to the subsequent election by the Issuer to
                         deliver the cash value of such shares in lieu of such
                         shares of each Basket Stock described below, (vi) that
                         such delivery will be made upon presentation and
                         surrender of this Note and (vii) that such exchange is
                         pursuant to the Morgan Stanley Call Right.

                         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 shares of the Basket Stocks (and, if applicable,
                         any other Exchange Property) are to be delivered and,
                         as a result of any corporate event described under
                         "Adjustments to the Exchange Ratios" occurring during
                         the period from and including the Morgan Stanley
                         Notice Date to the close of business on the third
                         Trading Day prior to the Call Date, the Calculation
                         Agent makes any adjustment to the Exchange Ratio of
                         any Basket Stock and consequent adjustment to the
                         number of shares of such Basket Stock to be delivered
                         or any adjustment to the quantity of any other
                         Exchange Property due to the holder of this Note, the
                         Calculation Agent shall give prompt notice of any

                                      A-7
<PAGE>

                         such adjustments to the Trustee at its New York office
                         and to the Depositary, on which notice the Trustee and
                         the Depositary may conclusively rely. No adjustment to
                         the Exchange Ratio of any Basket Stock shall be made
                         as a result of any corporate event occurring after the
                         close of business on the third Trading Day prior to
                         the Call Date.

                         Upon any call by the Issuer (as described above), the
                         holder of this Note shall not receive any accrued but
                         unpaid interest on the Note for the period from and
                         including the most recent Interest Payment Date to but
                         excluding the specified Call Date.

                         If this Note is so called for mandatory exchange by
                         the Issuer, then, unless the holder of this Note
                         subsequently exercises the Exchange Right (the
                         exercise of which shall not be available to the holder
                         of this Note following a call for cash in an amount
                         equal to the Call Price), the shares of each Basket
                         Stock (and, if applicable, any other Exchange
                         Property) or (in the event of a call for cash in an
                         amount equal to the Call Price, as described above,
                         or a Subsequent Cash Payment (as defined below)) cash
                         to be delivered to the holder of this Note 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 Note to the
                         Trustee. The Issuer shall, or shall cause the
                         Calculation Agent to, deliver such shares of each
                         Basket Stock or cash to the Trustee for delivery to
                         the holder of this Note.

                         If this Note 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 (as defined below) after the Call Date,
                         except with respect to the holder's right to receive
                         shares of each Basket Stock (and, if applicable, any
                         other Exchange Property) or 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 30 but no more than 60 days prior to the Call
                         Date.

                                      A-8
<PAGE>

Call Date............... The scheduled Trading Day on or after          or the
                         Maturity Date (regardless of whether the Maturity Date
                         is a scheduled Trading Day) as specified by the Issuer
                         in its notice of mandatory exchange on which the
                         Issuer shall deliver shares of the Basket Stocks, cash
                         equal to the Call Price, or, if applicable, the
                         Subsequent Cash Payment to the holder of this Note for
                         mandatory exchange.

Subsequent Cash Payment. If the Issuer has called this Note in accordance with
                         the Morgan Stanley Call Right (other than a call for
                         the Call Price of $1,000 per each $1,000 principal
                         amount of this Note), and on or after the Morgan
                         Stanley Notice Date any Basket Stock becomes subject
                         to a trading restriction under the trading restriction
                         policies of the Issuer or any of its affiliates that
                         would restrict the ability of the Issuer or any of its
                         affiliates to deliver such Basket Stock without
                         registration, as determined by the Calculation Agent
                         in its sole discretion, the Issuer will, in lieu of
                         shares of such Basket Stock equal to the applicable
                         Exchange Ratio, deliver on the Call Date the
                         "Subsequent Cash Payment," which shall be an amount of
                         cash per each $1,000 principal amount of this Note
                         equal to the value of the shares of such Basket Stock
                         that would have been deliverable per each $1,000
                         principal amount of this Note on the Call Date based
                         on the Closing Price of such Basket Stock and the
                         applicable Exchange Ratio, each determined by the
                         Calculation Agent as of the third scheduled Trading
                         Day prior to the Call Date.

                         If the Issuer is required to deliver the Subsequent
                         Cash Payment following its exercise of the Morgan
                         Stanley Call Right in lieu of delivering any Basket
                         Stock, the Issuer shall provide notice of such
                         requirement on the second scheduled Trading Day prior
                         to the Call Date (i) to the holder of this Note by
                         mailing notice of such requirement by first class
                         mail, postage prepaid, at 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, at its New York office. Any
                         notice that is mailed in the manner herein provided
                         shall be

                                      A-9
<PAGE>

                         conclusively presumed to have been duly given, whether
                         or not the holder of this Note receives the notice.
                         Failure to give notice by mail, or any defect in the
                         notice to the holder of any Note, shall not affect the
                         validity of the proceedings for the exercise of the
                         Morgan Stanley Call Right with respect to any other
                         Note. The notice of such requirement to make the
                         Subsequent Cash Payment shall specify (x) the place or
                         places of payment in cash, (y) the amount of cash to
                         be delivered per $1,000 principal amount of this Note
                         and (z) that such delivery shall be made upon
                         presentation and surrender of this Note. The
                         Subsequent Cash Payment shall be delivered to the
                         holder of this Note on the Call Date set forth by the
                         Issuer in its notice of mandatory exchange, together
                         with the shares of the other Basket Stock, upon
                         delivery of this Note 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 Note. Upon a call of this Note and the
                         payment of the Subsequent Cash Payment, the holder of
                         this Note shall not receive any accrued but unpaid
                         interest on this Note for the period from and
                         including the most recent Interest Payment Date to but
                         excluding the specified Call Date.

Call Price.............. $1,000 per each $1,000 principal amount of this Note.

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

                         o    if such Basket 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

                                      A-10
<PAGE>

                              published by The Nasdaq Stock Market, Inc. on such
                              day, or

                         o    if such Basket Stock (or any such other security)
                              is neither listed or admitted to trading on any
                              national securities exchange nor is not 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 last
                              reported sale price of the principal trading
                              session on the OTC Bulletin Board on such day.

                         If such Basket 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 such Basket 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 such Basket
                         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 such Bakset 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 NYSE, the
                         American Stock Exchange LLC, the Nasdaq National

                                      A-11
<PAGE>

                         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 and on which a Market Disruption Event has not
                         occurred.

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

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

Antidilution
Adjustments............. The Exchange Ratio for each Basket Stock shall be
                         adjusted as follows:

                         1. If a Basket Stock is subject to a stock split or
                         reverse stock split, then once such split has become
                         effective, the Exchange Ratio for such Basket Stock
                         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 such Basket Stock.

                         2. If a Basket Stock is subject (i) to a stock
                         dividend (issuance of additional shares of such Basket
                         Stock) that is given ratably to all holders of shares
                         of such Basket Stock or (ii) to a distribution of such
                         Basket Stock as a result of the triggering of any
                         provision of the corporate charter of the issuer of
                         such Basket Stock, then once the dividend has become
                         effective and such Basket Stock is trading
                         ex-dividend, the Exchange Ratio for such Basket Stock
                         shall be adjusted so that the new Exchange Ratio for
                         such Basket Stock shall equal the prior Exchange Ratio
                         for such Basket Stock plus the product of (i) the
                         number of shares issued with respect to one share of
                         such Basket Stock and (ii) the prior Exchange Ratio
                         for such Basket Stock.

                         3. There shall be no adjustments to the Exchange Ratio
                         for any Basket Stock to reflect cash dividends or
                         other distributions paid with respect to such Basket
                         Stock other than distributions described in paragraph
                         2 and clauses (i), (iv) and (v) of the first sentence
                         of paragraph 4, Ordinary Dividend Adjustments and

                                      A-12
<PAGE>

                         Extraordinary Dividends. "Extraordinary Dividend"
                         means each of (a) the full amount per share of a
                         Basket Stock of any cash dividend or special dividend
                         or distribution that is identified by the issuer of a
                         Basket Stock as an extraordinary or special dividend
                         or distribution and (b) the full cash value of any
                         non-cash dividend or distribution per share of such
                         Basket Stock (excluding Marketable Securities, as
                         defined in paragraph 4 below). Subject to the
                         following sentence, if any cash dividend or
                         distribution of such other property with respect to
                         any Basket Stock includes an Extraordinary Dividend,
                         the Exchange Ratio with respect to such Basket 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 (as
                         defined below), 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, upon any
                         exchange or, if the Issuer calls this Note and the
                         Basket Value exceeds the principal amount per Note,
                         upon the Issuer's call of this Note, the payment, upon
                         an exchange or such call of this Note, shall be
                         determined as described in paragraph 4 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 4 below. For each Basket Stock, "Base
                         Closing Price" means the Closing Price of such Basket
                         Stock on the Trading Day preceding the "ex-dividend
                         date" (that is, the day on and after which
                         transactions in such Basket Stock on an organized
                         securities exchange or trading system no longer carry
                         the right to receive the cash dividend or other cash
                         distribution) for the payment of such cash dividend or
                         other cash distribution. 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

                                      A-13
<PAGE>

                         distribution on any Basket Stock described in clause
                         (i), (iv) or (v) of the first sentence of paragraph 4
                         below shall cause an adjustment to the Exchange Ratio
                         pursuant only to clause (i), (iv) or (v) of the first
                         sentence of paragraph 4, as applicable.

                         In the event of any change (whether positive or
                         negative) on or after November 22, 2004 in the regular
                         quarterly cash dividend payable to holders of a Basket
                         Stock relative to its Base Dividend (as defined
                         below), the Exchange Ratio with respect to such Basket
                         Stock will be adjusted (an "Ordinary Dividend
                         Adjustment") as of the related ex-dividend date for
                         such quarterly cash dividend with respect to such
                         Basket Stock so that the new Exchange Ratio will equal
                         the prior Exchange Ratio plus an amount of shares of
                         such Basket Stock equal to the Ordinary Dividend
                         Adjustment Amount. The "Ordinary Dividend Adjustment
                         Amount" will equal a fraction, the numerator of which
                         is (x) the new regular quarterly cash dividend minus
                         the Base Quarterly Dividend times (y) the prior
                         Exchange Ratio, and the denominator of which is the
                         Base Closing Price. The "Base Quarterly Dividend"
                         means (i) with respect to Anadarko Petroleum
                         Corporation, a quarterly dividend of $.14 per share
                         and (ii) with respect to Diamond Offshore Drilling,
                         Inc., a quarterly dividend of $.0625 per share.

                         4. Any of the following shall constitute a
                         Reorganization Event: (i) a Basket Stock is
                         reclassified or changed, including, without
                         limitation, as a result of the issuance of any
                         tracking stock by the issuer of such Basket Stock,
                         (ii) the issuer of a Basket Stock has been subject to
                         any merger, combination or consolidation and is not
                         the surviving entity, (iii) the issuer of a Basket
                         Stock completes a statutory exchange of securities
                         with another corporation (other than pursuant to
                         clause (ii) above), (iv) the issuer of a Basket Stock
                         is liquidated, (v) the issuer of a Basket Stock issues
                         to all of its shareholders equity securities of an
                         issuer other than the issuer of such Basket Stock
                         (other than in a transaction described in clause (ii),
                         (iii) or (iv) above) (a "spinoff stock") or (vi) the
                         issuer of a Basket 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 a Basket 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"), upon any exchange
                         or upon the Issuer's call of this Note for shares of
                         the Basket Stocks, the payment with respect to the
                         $1,000 principal amount of each Note following the
                         effective date for such Reorganization Event (or, if
                         applicable, in the case of spinoff stock, the
                         ex-dividend date for the distribution of such spinoff
                         stock) shall be determined in accordance with the
                         following:

                              (a) if a Basket Stock continues to be
                              outstanding, such Basket Stock (if applicable, as
                              reclassified upon the issuance of any tracking
                              stock) at the Exchange Ratio in effect for such
                              Basket Stock 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

                                      A-14
<PAGE>

                              (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 shares of the Basket
                              Stock, the number of shares of the New Stock
                              received with respect to one share of the Basket
                              Stock multiplied by the Exchange Ratio for such
                              Basket 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 a Basket 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 such Basket Stock is
                                   less than 25% of the Closing Price of such
                                   Basket Stock on the Trading Day immediately
                                   prior to the effective date of such
                                   Reorganization Event, a number of shares of
                                   such Basket 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
                                   such Basket 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 such
                                   Basket 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 that
                                   Basket Stock or any New Stock determined in
                                   accordance with

                                      A-15
<PAGE>

                                   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 a Basket Stock on the
                                   Trading Day immediately prior to the
                                   effective date relating to such
                                   Reorganization Event or, if a Basket 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 such Basket Stock on the Trading Day
                                   immediately prior to the effective date of
                                   such Reorganization Event. The "Reference
                                   Basket Stocks" shall be the three stocks
                                   with the largest market capitalization among
                                   the stocks that then comprise the S&P 500
                                   Index (or, if publication of such index is
                                   discontinued, any successor or substitute
                                   index selected by the Calculation Agent in
                                   its sole discretion) with the same primary
                                   Standard Industrial Classification Code
                                   ("SIC Code") as the issuer of such Basket
                                   Stock; 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
                                   this Note 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

                                      A-16
<PAGE>

                                   SIC Code for the issuer of such Basket
                                   Stock. Each Reference Basket Stock shall be
                                   assigned a Reference 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 such Basket
                                   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 3
                         above or any Reorganization Event described in this
                         paragraph 4, the Basket Value on any Trading Day
                         determined by the Calculation Agent upon any exchange,
                         call or at maturity of this Note with respect to the
                         $1,000 principal amount of each Note shall be an
                         amount equal to:

                              (x)  if applicable, the Closing Price of the
                                   Basket Stock times the Exchange Ratio then
                                   in effect for such Basket Stock; and

                              (y)  if applicable, for each New Stock, the
                                   Closing Price of such New Stock times the
                                   New Stock Exchange Ratio then in effect for
                                   such New Stock; and

                              (z)  if applicable, for each Reference Basket
                                   Stock, the Closing Price of such Reference
                                   Basket Stock times 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
                         Reference Basket Stock Exchange Ratio) shall be
                         determined, as applicable, upon any exchange, call or
                         maturity of this Note.

                         5. No adjustments to the Exchange Ratio shall be
                         required other than those specified above. The
                         adjustments specified above do not cover all of the
                         events that could affect the Closing Prices of the
                         Basket Stocks, including, without limitation, a
                         partial tender or exchange

                                      A-17
<PAGE>

                         offer for any Basket Stock. However, the Issuer may,
                         at its sole discretion, cause the Calculation Agent to
                         make additional changes to the Exchange Ratios upon
                         the occurrence of corporate or other similar events
                         that affect or could potentially affect market prices
                         of, or shareholders' rights in, the Basket Stocks (or
                         other Exchange Property) but only to reflect such
                         changes, and not with the aim of changing relative
                         investment risk.

                                            *     *     *

                         For purposes of paragraph 4 above, in the case of a
                         consummated tender or exchange offer or going-private
                         transaction involving Exchange Property of a
                         particular type, Exchange Property shall be deemed to
                         include the amount of cash or other property paid by
                         the offeror in the tender or exchange offer with
                         respect to such Exchange Property (in an amount
                         determined on the basis of the rate of exchange in
                         such tender or exchange offer or going- private
                         transaction). In the event of a tender or exchange
                         offer or a going-private transaction with respect to
                         Exchange Property in which an offeree may elect to
                         receive cash or other property, Exchange Property
                         shall be deemed to include the kind and amount of cash
                         and other property received by offerees who elect to
                         receive cash.

                         Following the occurrence of any Reorganization Event
                         referred to in paragraphs 3 or 4 above, (i) references
                         to "Basket 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 pricing supplement to "Basket Stock" shall be
                         deemed to refer to the Exchange Property received with
                         respect to such Basket Stock into which this Note is
                         thereafter exchangeable and references to a "share" or
                         "shares" of a Basket 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 Reference Basket Stock
                         Exchange Ratios resulting from any Reorganization
                         Event described in paragraph 4 above or similar
                         adjustment under paragraph 3 above shall be subject to
                         the adjustments set forth in paragraphs 1 through 5
                         hereof.

                                      A-18
<PAGE>

                         No adjustment to any Exchange Ratio shall be required
                         unless such adjustment would require a change of at
                         least .1% in such Exchange Ratio then in effect. The
                         Exchange Ratio resulting from any of the adjustments
                         specified above shall be rounded to the nearest
                         ten-thousandth, with five one hundred-thousandths
                         rounded upward.

                         The Calculation Agent shall be solely responsible for
                         the determination and calculation of any adjustments
                         to the Exchange Ratios 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 3 or 4
                         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 any Exchange Ratio upon written
                         request by the holder of this Note.

                         If the holder of this Note exercises its Exchange
                         Right and the Issuer elects to deliver shares of the
                         Basket Stocks or if the Issuer calls this Note for
                         shares of the Basket Stocks, the Calculation Agent
                         shall continue to make such adjustments until, but not
                         beyond, the close of business on the Exchange Date or
                         the third Trading Day prior to the Call Date, as
                         applicable.

Market Disruption        "Market Disruption Event" means, with respect to any
  Event................. Basket Stock:

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

                                      A-19
<PAGE>

                              contracts related to such Basket 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 Exchangeable Notes due
                              April 1, 2009 (Exchangeable for Common Stock of
                              Three Health Care Companies).

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

                                      A-20
<PAGE>

Alternate Exchange
Calculation in Case of
an Event of Default..... In case an Event of Default with respect to this Note
                         shall have occurred and be continuing, the amount
                         declared due and payable per each $1,000 principal
                         amount of this Note upon any acceleration of this Note
                         shall be determined by MS & Co., as Calculation Agent,
                         and shall be equal to the principal amount of this
                         Note plus any accrued and unpaid interest at the
                         Interest Rate to but not including the date of
                         acceleration; provided that if (x) the holder of this
                         Note has submitted an Official Notice of Exchange to
                         the Issuer in accordance with the Exchange Right or
                         (y) the Issuer has called this Note, other than a call
                         for the cash Call Price, in accordance with the Morgan
                         Stanley Call Right, the amount declared due and
                         payable upon any such acceleration with respect to
                         each $1,000 principal amount of this Note (i) for
                         which such Official Notice of Exchange has been duly
                         submitted or (ii) that has been called (other than a
                         call for the cash Call Price) shall be an amount in
                         cash equal to the Basket Value, determined by the
                         Calculation Agent as of the Exchange Date or as of the
                         date of acceleration (or, if the Issuer has previously
                         elected to pay the cash value of such shares of Basket
                         Stocks on the Call Date, the Basket Value as of the
                         third scheduled Trading Day prior to the Call Date),
                         respectively, and shall not include any accrued and
                         unpaid interest thereon; provided further that if the
                         Issuer has called this Note for the Call Price in
                         cash, in accordance with the Morgan Stanley Call
                         Right, the amount declared due and payable upon any
                         such acceleration shall be an amount in cash per each
                         $1,000 principal amount of this Note equal to the Call
                         Price and shall not include any accrued and unpaid
                         interest thereon.

                                      A-21
<PAGE>

     Morgan Stanley, a Delaware corporation (together with its successors and
assigns, the "Issuer"), for value received, hereby promises to pay to CEDE &
Co., or registered assignees, the 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 on the Maturity Date
(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 shall 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 shall 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 shall, 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) shall
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, shall 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, shall be
made by U.S. dollar check mailed to the address of the person entitled thereto
as such address shall appear in the Note register. A holder of U.S. $10,000,000
(or the equivalent in a Specified Currency) or more in aggregate principal
amount of Notes having the same Interest

                                      A-22
<PAGE>

Payment Date, the interest on which is payable in U.S. dollars, shall be
entitled to receive payments of interest, other than interest due at maturity
or on any date of redemption or repayment, by wire transfer of immediately
available funds if appropriate wire transfer instructions have been received by
the Paying Agent in writing not less than 15 calendar days prior to the
applicable Interest Payment Date.

     If this Note is denominated in a Specified Currency other than U.S.
dollars, and the holder does not elect (in whole or in part) to receive payment
in U.S. dollars pursuant to the next succeeding paragraph, payments of
interest, principal or any premium with regard to this Note shall 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 shall 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) shall 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) shall convert such payments into U.S. dollars.
In the event of such an election, payment in respect of this Note shall 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 U.S. dollars for the Specified Currency of U.S. dollars for
settlement on such payment date in the amount of the Specified Currency payable
in the absence of such an election to such holder and at which the applicable
dealer commits to execute a contract. If such bid quotations are not available,
such

                                      A-23
<PAGE>

payment shall be made in the Specified Currency. All currency exchange costs
shall 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.

                                      A-24
<PAGE>

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

DATED:                                     MORGAN STANLEY

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

TRUSTEE'S CERTIFICATE
  OF AUTHENTICATION

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

JPMORGAN CHASE BANK, N.A.,
    as Trustee

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

                                      A-25
<PAGE>

                              REVERSE OF SECURITY

     This Note is one of a duly authorized issue of Senior Global Medium-Term
Notes, Series C, having maturities more than nine months from the date of issue
(the "Notes") of the Issuer. The Notes are issuable under 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 shall 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, shall not be
redeemable or subject to repayment at the option of the holder prior to
maturity.

     If so indicated on the face of 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 shall 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 hereof, this Note shall 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 shall be repayable in whole or in part in increments
of $1,000 or, if this Note is denominated in a Specified Currency other than
U.S. dollars, in increments of 1,000 units of such Specified Currency (provided
that any remaining principal amount hereof shall not be less than the minimum
authorized denomination hereof) at the option of the holder hereof at a price
equal to 100% of the principal amount to be repaid, together with interest

                                      A-26
<PAGE>

accrued and unpaid hereon to the date of repayment, provided that 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, shall 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 shall 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 shall be computed and paid on
the basis of a 360 day year of twelve 30 day months.

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

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

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

                                      A-27
<PAGE>

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
shall 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 shall not be required (i) to register the transfer of or exchange any
Note that has been called for redemption in whole or in part, except the
unredeemed portion of Notes being redeemed in part, (ii) to register the
transfer of or exchange any Note if the holder thereof has exercised his right,
if any, to require the Issuer to repurchase such Note in whole or in part,
except the portion of such Note not required to be repurchased, or (iii) to
register the transfer of or exchange Notes to the extent and during the period
so provided in the Senior Indenture with respect to the redemption of Notes.
Notes are exchangeable at said office for other Notes of other authorized
denominations of equal aggregate principal amount having identical terms and
provisions. All such exchanges and transfers of Notes shall be free of charge,
but the Issuer may require payment of a sum sufficient to cover any tax or
other governmental charge in connection therewith. All Notes surrendered for
exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Trustee and executed by the registered
holder in person or by the holder's attorney duly authorized in writing. The
date of registration of any Note delivered upon any exchange or transfer of
Notes shall be such that no gain or loss of interest results from such exchange
or transfer.

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

     The Senior Indenture provides that (a) if an Event of Default (as defined
in the Senior Indenture) due to the default in payment of principal of,
premium, if any, or interest on, any series of debt securities issued under the
Senior Indenture, including the series of Senior Medium-Term Notes of which
this Note forms a part, or due to the default in the performance or breach of
any other covenant or warranty of the Issuer applicable to the debt securities
of such series but not applicable

                                      A-28
<PAGE>

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

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

                                      A-29
<PAGE>

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 shall 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 shall 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 shall 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 shall, 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, shall not be less than the amount provided for in this Note to be
then due and payable. The Issuer shall not, however, be required to make any
payment of Additional Amounts to any such holder who is a United States Alien
for or on account of:

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

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

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

                                      A-30
<PAGE>

     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 supplemental

                                      A-31
<PAGE>

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 shall 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 shall 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 shall 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.

                                      A-32
<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 shall 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 assessment or penalty or otherwise,

                                      A-33
<PAGE>

all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released.

     This Note shall for all purposes be governed by, and construed in
accordance with, the laws of the State of New York.

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

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

                                      A-34
<PAGE>

                                 ABBREVIATIONS

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

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

     UNIF GIFT MIN ACT - ______________________ Custodian ______________________
                                 (Minor)                          (Cust)

     Under Uniform Gifts to Minors Act ________________________________
                                                   (State)

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

                             ______________________

                                      A-35
<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.

                                      A-36
<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.

                                      A-37

<PAGE>

                                                                        ANNEX A

                          OFFICIAL NOTICE OF EXCHANGE

                                                    Dated: [On or after        ]

Morgan Stanley                            Morgan Stanley & Co. Incorporated, as
1585 Broadway                               Calculation Agent
New York, New York 10036                  1585 Broadway
                                          New York, New York 10036
                                          Fax No.:

Dear Sirs:

     The undersigned holder of the Global Medium-Term Notes, Series F, Senior
Fixed Rate Notes, .25% Exchangeable Notes due          (Exchangeable for Shares
of Common Stock of Two Oil Industry Companies) of Morgan Stanley (CUSIP No.    )
(the "Notes") hereby irrevocably elects to exercise with respect to the
principal amount of the Notes indicated below, as of the date hereof (or, if
this letter is received after 11:00 a.m. on any Trading Day, as of the next
Trading Day), provided that such day is on or after             and is no later
than the Trading Day prior to the earliest of (i) the fifth scheduled Trading
Day prior to                 , (ii) the fifth scheduled Trading Day prior to the
Call Date and (iii) in the event of a call for the cash Call Price, the Morgan
Stanley Notice Date, the Exchange Right as described in Pricing Supplement
No.    dated                (the "Pricing Supplement") to the Prospectus
Supplement dated November 10, 2004 and the Prospectus dated November 10, 2004
related to Registration Statement No. 333-117752. Terms not defined herein have
the meanings given to such terms in the Pricing Supplement. Please date and
acknowledge receipt of this notice in the place provided below on the date of
receipt, and fax a copy to the fax number indicated, whereupon Morgan Stanley
will deliver, at its sole option, shares of the two oil industry companies or
cash on the third business day after the Exchange Date in accordance with the
terms of the Notes, as described in the Pricing Supplement.

     The undersigned certifies to you that (i) it is, or is duly authorized to
act for, the beneficial owner of the principal amount of the Notes indicated
below its signature (and attaches evidence of such ownership as provided by the
undersigned's position services department or the position services department
of the entity through which the undersigned holds its Notes), (ii) it will
cause the principal amount of Notes to be exchanged to be transferred to the
Trustee on the Exchange Settlement Date and (iii) the principal amount of Notes
to be exchanged pursuant to this notice is equal to or greater than $25,000,
unless the Notes identified for exchange hereby constitute the undersigned's
entire holding of Notes.

     If the Exchange Settlement Date for this exchange falls after a Record
Date and prior to the succeeding Interest Payment Date, the undersigned will
deliver to the Trustee on the Exchange Settlement Date an amount of cash equal
to the interest payable on the succeeding Interest Payment Date with respect to
the principal amount of Notes to be exchanged. The amount of any such cash
payment will be determined by the Calculation Agent and indicated in its
acknowledgment of this Official Notice of Exchange.

                                                Very truly yours,

                                                ________________________________
                                                [Name of Holder]

                                                By:_____________________________
                                                   [Title]

                                                ________________________________
                                                [Fax No.]

                                                $_______________________________
Receipt of the above Official                    Principal Amount of Notes to be
Notice of Exchange is hereby acknowledged        surrendered for exchange
MORGAN STANLEY, as Issuer
MORGAN STANLEY & CO. INCORPORATED, as Calculation Agent
By MORGAN STANLEY & CO. INCORPORATED, as Calculation Agent

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

Date and time of acknowledgment ____________________

Accrued interest, if any, due upon surrender of the Notes for exchange: $_______

                                      A-1<PAGE>

                                                                    Exhibit 10.1

                  [LETTERHEAD OF FORTRESS CREDIT CORPORATION]

                                                                October 22, 2004

Mr. Marshall W. Pagon, Chairman & CEO
Mr. Joseph Pooler, CFO
Howard E. Verlin, Executive VP of Business Affairs and Capital Markets
Pegasus Communications Corporation
c/o Pegasus Communications Management Company
225 City Line Avenue - Suite 200
Bala Cynwyd, PA 19004

c/o Mr. William Lisecky
Mr. Paul Conway
CIBC World Markets
425 Lexington Avenue
New York, NY 10017

Gentlemen:

      Pegasus Communications Corporation ("PCC") has requested that Fortress
Credit Corporation (the "Lender") provide Newco LLC, an entity created for
purposes of the acquisition, a $50,000,000 credit facility consisting of a
$5,000,000 Revolving Credit Facility (the "Revolver"), a $25,000,000 Term Loan A
(the "Term Loan A"), a $20,000,000 Term Loan B (the "Term Loan B") (Revolver,
Term Loan A, and Term Loan B collectively referred to as the "Credit Facility"),
a $10,000,000 Term Loan C (the "Term Loan C"), and up to $10,000,000 of
preferred equity in order to (i) enable Newco LLC to acquire all of the assets
of Pegasus Broadcast Television ("PBT" or the "Company") and its affiliates that
are used in their broadcast business or the equity of such entities (such
entities collectively referred to as "PBT") for $75,000,000, (ii) pay fees and
expenses related to the transaction, and (iii) fund ongoing working capital. The
Lender commits to provide the entire Credit Facility, and will have the right to
provide the Term Loan C and $5,000,000 to $10,000,000 of preferred equity, in
each case subject to the terms set forth in this letter and the attached Term
Sheet.

      PCC acknowledges that the Term Sheet is intended as an outline only and
does not purport to summarize all of the conditions, covenants, representations,
warranties and other provisions that would be contained in definitive loan
documentation for the Credit Facility.

      As provided in the Term Sheet, the Lender's commitment to provide the
Credit Facility is subject to confirmatory due diligence, credit review of the
Company, and our continuing satisfaction with the results thereof.

<PAGE>

      This commitment letter, including the attached Term Sheet, supersedes all
prior discussions, agreements, commitments, arrangements, negotiations or
understandings, whether oral or written, of the parties with respect thereto and
shall be governed by the laws of the State of New York.

      Should the terms and conditions of the commitment contained herein meet
with your approval, please indicate your acceptance by signing and returning a
copy of this letter to the Lender along with the Expense Deposit described
herein. This commitment letter shall expire at the end of day on October 22,
2004.

                                           Very truly yours,

                                           FORTRESS CREDIT CORPORATION

                                           By: /s/ Kenneth M. Sands
                                              ---------------------------------
                                           Name:   Kenneth M. Sands
                                           Title:  Managing Director

AGREED AND ACCEPTED ON THIS
____ DAY OF OCTOBER, 2004:

PEGASUS COMMUNICATIONS CORPORATION

By: /s/ Howard E. Verlin
    ------------------------------
    Name:  Howard E. Verlin
    Title: VEP

<PAGE>

               OUTLINE OF PROPOSED TERM LOAN TERMS AND CONDITIONS

-------------------------------------- -----------------------------------------
Borrower:                              Newco LLC, a newly formed limited
                                       liability company (treated as a
                                       partnership for tax purposes) and/or its
                                       operating subsidiaries (the "Company" or
                                       the "Borrower") controlled directly or
                                       indirectly by Pegasus Communications
                                       Corporation ("PCC") and established for
                                       the purpose of acquiring the broadcast
                                       business operated by Pegasus Broadcast
                                       Television ("PBT") and its affiliates for
                                       a cash purchase price of $75 million (the
                                       "Transaction").
-------------------------------------- -----------------------------------------

-------------------------------------- -----------------------------------------
LENDER:                                Fortress Credit Corporation and/or its
                                       affiliates and assignees.
-------------------------------------- -----------------------------------------

-------------------------------------- -----------------------------------------
AGENT:                                 Fortress Credit Corporation.
-------------------------------------- -----------------------------------------
CREDIT FACILITY:                       The Credit Facility will consist of the
                                       following:

                                       Revolver
                                       --------
                                       $5,000,000, undrawn at the time of
                                       closing.

                                       Term Loan A
                                       -----------
                                       $25,000,000 at the time of closing.

                                       Term Loan B
                                       -----------
                                       $20,000,000 at the time of closing.

-------------------------------------- -----------------------------------------
TERM LOAN C:                           Term Loan C
                                       -----------
                                       Fortress shall have the right to provide
                                       a $10,000,000 Term Loan C at the time of
                                       closing.

-------------------------------------- -----------------------------------------
EQUITY INVESTMENT:                     In the event that Fortress elects to
                                       provide the Term Loan C, Fortress shall
                                       have the right to invest $5,000,000 or
                                       more up to a maximum of $10,000,000 of
                                       preferred equity in Newco LLC,
                                       convertible into common equity on a fully
                                       equivalent basis as the common equity to
                                       be invested by PCC. PCC shall invest,
                                       directly or indirectly, a minimum of
                                       $13,000,000 of cash common equity in
                                       addition to $3,000,000, which shall
                                       represent the in-kind value of WFXU to be
                                       contributed by PCC, subject to an
                                       appraisal satisfactory to us, and on
                                       terms and conditions satisfactory to us.
                                       If the appraised value of WFXU is less
                                       than $3,000,000, PCC has the right to
                                       contribute cash for common equity in the
                                       amount of the difference between
                                       $3,000,000 and the appraised value.
-------------------------------------- -----------------------------------------

<PAGE>

-------------------------------------- -----------------------------------------
                                       Fortress' preferred equity shall pay
                                       dividends at a rate of ten percent (10%)
                                       per annum, which may be accrued at the
                                       option of the Company.

                                       Notwithstanding the foregoing, PCC shall
                                       have the right, exercisable upon notice
                                       to Fortress not later than thirty (30)
                                       days before Closing, to increase its cash
                                       common equity investment by up to an
                                       additional $5,000,000, with such
                                       additional investment reducing the amount
                                       of the Fortress preferred equity
                                       investment. In no event, however, will
                                       the Fortress preferred equity investment
                                       be reduced to less than $5,000,000, in
                                       the event Fortress chooses to make such
                                       an investment.

                                       Within the first twenty-four (24) months
                                       after the closing, PCC shall have the
                                       right to purchase the amount of Fortress'
                                       preferred equity investment in excess of
                                       $5,000,000, if any, at a multiple of two
                                       (2) times Fortress' cost basis, plus the
                                       amount of any accrued dividends.

                                       In the event Fortress elects not to
                                       provide the Term Loan C, Fortress shall
                                       still have the right to invest up to
                                       $5,000,000 of common equity on a fully
                                       equivalent basis as the common equity to
                                       be invested by PCC. PCC shall have no
                                       right to purchase this equity from
                                       Fortress unless agreed upon.

-------------------------------------- -----------------------------------------
PURPOSE:                               The proceeds from the Credit Facility,
                                       Term Loan C, and any preferred equity
                                       will be used to consummate the
                                       Transaction, to pay related fees and
                                       expenses for the Transaction, and to fund
                                       ongoing working capital.

-------------------------------------- -----------------------------------------
UPFRONT FEE:                           The Company will pay to the Lender an
                                       upfront fee equal to the following:

                                       Revolver & Term Loan A
                                       ----------------------
                                       One and one-half percent (1.5%) of the
                                       Revolver and Term Loan A amount at
                                       closing.

                                       Term Loan B
                                       -----------
                                       Two and one-half percent (2.5%) of the
                                       Term Loan B amount at closing.

                                       Term Loan C
                                       -----------
                                       Three percent (3.0%) of the Term Loan C
                                       amount at closing.

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

<PAGE>

-------------------------------------- -----------------------------------------
INTEREST RATE:                         REVOLVER
                                       --------

                                       Obligations under the Revolver will
                                       accrue interest at a rate equal to LIBOR
                                       plus four and one-half of one percent
                                       (4.5%), subject to a LIBOR floor of two
                                       percent (2%) unless there is a
                                       Syndication in which case Agent will use
                                       best efforts to eliminate the LIBOR floor
                                       requirement.

                                       TERM LOAN A
                                       -----------

                                       Obligations under the Term Loan A will
                                       accrue interest at a rate equal to LIBOR
                                       plus four and one-half of one percent
                                       (4.5%), subject to a LIBOR floor of two
                                       percent (2%) unless there is a
                                       Syndication in which case Agent will use
                                       best efforts to eliminate the LIBOR floor
                                       requirement.

                                       TERM LOAN B
                                       -----------

                                       Obligations under the Term Loan B will
                                       accrue interest at a rate equal to 30,
                                       60, or 90-day LIBOR plus the Applicable
                                       Margin set forth in the table below,
                                       subject to a LIBOR floor of two percent
                                       (2%). The Broadcast Cash Flow Ratio ("BCF
                                       Ratio") shall be based on the leverage
                                       through the Term Loan B, measured as the
                                       sum of (a) the outstanding balance of the
                                       Revolver loan plus (b) the outstanding
                                       principal balance of the Term A loan plus
                                       (c) the outstanding principal balance of
                                       the Term B loan, divided by the Company's
                                       trailing twelve month Broadcast Cash Flow
                                       ("Broadcast Cash Flow"). Broadcast Cash
                                       Flow shall be calculated in a manner
                                       consistent with the presentation on page
                                       51 of the "Confidential Descriptive
                                       Memorandum" dated August 2004, but shall
                                       be net of Spectrasite and LMA fees, if
                                       any. To the extent PCC is successful in
                                       negotiating reduced Spectrasite payments
                                       or in the event that LMA fees are
                                       eliminated as a result of the Company's
                                       acquisition of such LMA stations,
                                       Broadcast Cash Flow shall be calculated
                                       to include the annualized savings. The
                                       BCF Ratio will be tested quarterly on a
                                       trailing twelve month basis.

                                       ----------------------------------------
                                           BCF Ratio       Applicable Margin
                                       ----------------------------------------
                                            > 9.0x              9.5%
                                       ----------------------------------------
                                       > 8.5x or <=9.0x         9.0%
                                       ----------------------------------------
                                       > 8.0x or <=8.5x         8.5%
                                       ----------------------------------------
                                       > 7.5x or <=8.0x         8.0%
                                       ----------------------------------------
                                           <= 7.5x              7.5%
                                       ----------------------------------------

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

<PAGE>

-------------------------------------- -----------------------------------------
                                       The Applicable Margin will be nine and
                                       one-half percent (9.5%) for the first six
                                       (6) months following closing.

                                       Provided no event of default has occurred
                                       or is continuing, five percent (5%) of
                                       the interest due may be paid-in-kind
                                       ("PIK"), and such PIK interest shall be
                                       added to the Term Loan B quarterly as
                                       principal and accrue interest. Such PIK
                                       option shall be determined by the
                                       Borrower quarterly, in advance, and in
                                       one percent (1%) increments.

                                       TERM LOAN C
                                       -----------
                                       Obligations under the Term Loan C will
                                       accrue interest at a rate equal to
                                       sixteen percent (16%).

                                       Provided no event of default has occurred
                                       or is continuing, all of the sixteen
                                       percent (16%) of the interest due may be
                                       paid-in-kind ("PIK"), and such PIK
                                       interest shall be added to the Term Loan
                                       C quarterly as principal and accrue
                                       interest. The Borrower may elect to pay a
                                       portion of the PIK interest in cash which
                                       the Borrower may determine quarterly, in
                                       advance, and in one percent (1%)
                                       increments.

                                       The Term Loan C will be granted warrants
                                       for ten percent (10%) of the Borrower's
                                       closing date fully-diluted capital stock,
                                       nominally priced with standard
                                       anti-dilution features to be agreed upon.
                                       All common equity holders, including PCC
                                       and Fortress, will be diluted on a pro
                                       rata basis upon the exercise of such
                                       warrants. PCC shall have no right to
                                       purchase these warrants from Fortress
                                       unless agreed upon.

                                       The cash portion of interest on the
                                       Credit Facility and any cash portion of
                                       interest on the Term Loan C will be
                                       payable monthly and calculated on the
                                       basis of the actual number of days
                                       elapsed based on a 360-day year. Upon the
                                       occurrence and during the continuance of
                                       an Event of Default, the interest rate
                                       will be increased by three percent (3%)
                                       per annum.

-------------------------------------- -----------------------------------------
 MANDATORY REPAYMENTS:                 There will be no scheduled amortization
                                       of the Term Loan A, Term Loan B, and Term
                                       Loan C. The Term Loan A, Term Loan B, and
                                       Term Loan C will be repaid semi-annually
                                       in an amount equal to seventy-five
                                       percent (75%) of excess cash flow, to be
                                       applied first to the Term Loan A, then to
                                       the Term Loan B, and lastly to the Term
                                       Loan C. The 75% of excess cash flow shall
                                       be reduced to 50% upon satisfactory
                                       performance milestones to be determined.
                                       Excess cash flow shall be defined as
                                       EBITDA less cash interest less capital
                                       expenditures less cash taxes. The
                                       required excess cash flow contribution
                                       shall not trigger any prepayment
                                       penalties.
-------------------------------------- -----------------------------------------

<PAGE>

-------------------------------------- -----------------------------------------
VOLUNTARY PREPAYMENTS:                 The Company shall be entitled to make
                                       voluntary prepayments to the Term Loan A,
                                       Term Loan B, and Term Loan C, subject to
                                       amounts and conditions to be mutually
                                       agreed upon

-------------------------------------- -----------------------------------------
AGENT FEE:                             $100,000 payable per annum in advance
                                       each year.

-------------------------------------- -----------------------------------------
CLOSING DATE:                          On or about February 28, 2005, but in no
                                       event later than June 30, 2005

-------------------------------------- -----------------------------------------
MATURITY DATE:                         Five (5) years from the Closing Date.

-------------------------------------- -----------------------------------------
EARLY TERMINATION FEE:                 In the event the Credit Facility or Term
                                       Loan C is terminated and repaid in full,
                                       an early termination fee shall be payable
                                       based on the then outstanding balance of
                                       the Credit Facility and Term Loan C as
                                       follows:

                                           Year 1:                 3%
                                           Year 2:                 2%
                                           Thereafter:             1%

                                       In the event of a syndication of the
                                       Revolver and Term Loan A, Fortress will
                                       attempt to eliminate the Early
                                       Termination Fee associated with those
                                       facilities.

-------------------------------------- -----------------------------------------
COLLATERAL:                            The Credit Facility and the Term Loan C
                                       will be secured by a pledge of the
                                       Company's stock or membership interests,
                                       a pledge of all equity ownership
                                       interests of the Company in all
                                       subsidiaries and a first lien on all of
                                       tangible and intangible assets of the
                                       Company (and its subsidiaries) including,
                                       but not be limited to, the Company's (and
                                       its subsidiaries') accounts receivables,
                                       property, plant, and equipment, and
                                       broadcast licenses (to the extent
                                       permitted under applicable law) and
                                       products and proceeds thereof.

-------------------------------------- -----------------------------------------
COVENANTS:                             The loan documents will contain
                                       affirmative and negative covenants
                                       customarily found in loan agreements for
                                       similar financings, and the following
                                       financial covenants (a) minimum Broadcast
                                       Cash Flow, (b) Fixed Charge Coverage, (c)
                                       maximum Debt to EBITDA, and (d) maximum
                                       Capital Expenditures. The loan documents
                                       shall permit the Company to use the cash
                                       collateral acquired in the transaction to
                                       exercise options with KB Prime Media, LLC
                                       ("KB") to acquire television stations,
                                       and licenses owned by KB.
-------------------------------------- -----------------------------------------

<PAGE>

-------------------------------------- -----------------------------------------
MANAGEMENT FEES/AFFILIATED             PCC shall be entitled to a management fee
TRANSACTIONS:                          (the "Management Fee") payable quarterly
                                       in an amount equal to the lesser of (i)
                                       2% of the Company's net revenues, or (ii)
                                       $500,000 per annum. Management fees shall
                                       commence at such time as Broadcast Cash
                                       Flow is equal to or greater than
                                       $7,000,000 on a trailing twelve month
                                       basis. Additionally, it is understood
                                       that neither Marshall Pagon or Howard
                                       Verlin will receive compensation from
                                       Newco other than these management fees.

                                       Tax distributions at an agreed-upon
                                       assumed tax rate will be allowed to
                                       members of the Company based on certain
                                       financial performance criteria of the
                                       Company to be agreed upon and provided
                                       for in the loan documentation.

                                       Additionally, the Company will not be
                                       obligated to pay for any management
                                       services or overhead provided by PCC
                                       (other than the Management Fees provided
                                       for above). Any such services or overhead
                                       currently provided by PCC or its
                                       affiliates (other than PBT and its
                                       subsidiaries) on behalf of PBT and its
                                       subsidiaries shall be incurred directly
                                       by the Company. Notwithstanding the
                                       foregoing, the loan documents will permit
                                       certain specified payments relating to
                                       assets procured or expenses incurred by
                                       PCC or its affiliates (other than the
                                       Company) for the benefit of the Company,
                                       such as insurance and employee benefit
                                       plans, on terms to be discussed and
                                       agreed.

-------------------------------------- -----------------------------------------
ASSIGNMENT/PARTICIPATION:              The loan documents will include
                                       provisions allowing for assignments and
                                       participations in the Credit Facility,
                                       Term Loan C, and Fortress' preferred or
                                       common equity investment, as are
                                       customarily found in loan agreements for
                                       similar financings. Additionally, the
                                       loan documents will provide for the
                                       potential assignment of the Revolver and
                                       Term Loan A on a "first-out" basis.
-------------------------------------- -----------------------------------------

-------------------------------------- -----------------------------------------
CONDITIONS                             The conditions to the closing of the
PRECEDENT:                             Credit Facility and Term Loan C will be
                                       those customarily found in loan
                                       agreements for similar financings and
                                       others appropriate to the specific
                                       transaction, including:

                                       a)  The Lender shall have been provided
                                           with such financial and other
                                           information regarding the Company as
                                           the Lender may reasonably request.
-------------------------------------- -----------------------------------------
<PAGE>

-------------------------------------- -----------------------------------------
                                       b)  The cash equity investment in the
                                           Company from PCC, Fortress, and/or
                                           third-party investors, shall be at
                                           least $36,000,000 at closing, of
                                           which not less than $33,000,000 shall
                                           be in cash (with such cash amount
                                           reduced by the amount of the Fortress
                                           Term Loan C if provided).

                                       c)  Satisfactory completion of a
                                           financial review to be conducted by a
                                           third party acceptable to us which
                                           reviews the Company's financial
                                           systems, accounting controls, and the
                                           quality of the Company's historical
                                           and projected revenues, Broadcast
                                           Cash Flow, EBITDA, and management's
                                           proforma adjustments.

                                       d)  The Lender shall have received and
                                           reviewed a third-party appraisal with
                                           respect to the Company's television
                                           station assets with satisfactory
                                           results. The appraised value shall
                                           not be less than $75,000,000. WFXU
                                           and the KB options shall be included
                                           in this appraisal value.

                                       e)  The corporate and legal structure of
                                           the Company shall be acceptable to
                                           PCC and the Lender (it being
                                           acknowledged that PCC has proposed
                                           (but the Lender has not accepted as
                                           of the date hereof) a structure for
                                           the Transaction in which, on the
                                           closing date (i) the subsidiaries of
                                           PCC which hold assets used in the
                                           broadcast business) will contribute
                                           such assets (or entities holding such
                                           assets) to the Company (subject to
                                           all related obligations) in exchange
                                           for an equity interest in Borrower
                                           and (ii) $75 million of the equity
                                           and debt proceeds described herein
                                           will be paid to the liquidating trust
                                           established for the benefit of the
                                           creditors of PBT and its debtor
                                           affiliates); and the Lender shall
                                           also be satisfied with the nature and
                                           status of all material contracts,
                                           securities, labor, tax, litigation,
                                           environmental matters and other
                                           material matters involving or
                                           affecting the Company disclosed to
                                           the Lender during the Due Diligence
                                           Period (as defined below).
                                           Additionally, the Company shall have
                                           extended the Fox affiliation
                                           agreement for WOLF in Wilkes-Barre
                                           Scranton for a minimum of three years
                                           on the substantially same terms as
                                           the existing WOLF agreement.

                                       f)  The documentation relating to the
                                           Credit Facility and Term Loan C will
                                           be consistent with this term sheet
                                           and contain such other provisions,
                                           representations, warranties,
                                           conditions, affirmative and negative
                                           covenants and events of default as
                                           are customarily found in documents
                                           for similar financings and others
                                           appropriate to the specific
                                           transaction, in each case as are
                                           mutually satisfactory to the parties.
-------------------------------------- -----------------------------------------
<PAGE>

-------------------------------------- -----------------------------------------
                                       g)  The Lender shall have received
                                           satisfactory opinions of the
                                           Company's independent counsel as to
                                           the transactions contemplated hereby
                                           and such corporate resolutions,
                                           certificates and other documents as
                                           the Lender shall reasonably request.

                                       h)  Payment of all closing costs and fees
                                           and all unpaid expenses of the Lender
                                           for which the Lender has not
                                           previously received an Expense
                                           Deposit.

                                       i)  No material adverse change in the
                                           business, financial performance,
                                           operations, or in the condition of
                                           the assets of PBT and its
                                           subsidiaries, taken as a whole, shall
                                           have occurred since the date on which
                                           the Lender shall have delivered the
                                           Exclusivity Extension Letter.

                                       j)  In the event that Fortress elects to
                                           invest preferred or common equity as
                                           provided for above, PCC and Fortress
                                           shall have negotiated the terms of a
                                           mutually satisfactory LLC Agreement
                                           addressing governance and other
                                           matters relating to the Company and
                                           the parties' investment in the
                                           Company as are customarily addressed
                                           in such agreements.

-------------------------------------- -----------------------------------------
INDEMNITY:                             Customary and appropriate provisions
                                       relating to indemnity and related matters
                                       in a form reasonably satisfactory to the
                                       Lender.
-------------------------------------- -----------------------------------------

-------------------------------------- -----------------------------------------
GOVERNING LAW AND JURISDICTION:        The Company will submit to the
                                       non-exclusive jurisdiction and venue of
                                       the federal and state courts of the State
                                       of New York and shall waive any right to
                                       trial by jury. New York law shall govern
                                       the Credit Facility Documents.
-------------------------------------- -----------------------------------------
<PAGE>

-------------------------------------- -----------------------------------------
EXCLUSIVITY:                           For a period (the "Due Diligence Period")
                                       of approximately three weeks commencing
                                       with the start of the Lender's on-site
                                       due diligence and ending on November 22,
                                       2004, PCC agrees to deal exclusively with
                                       Fortress in connection with the Credit
                                       Facility and Term Loan C to finance the
                                       Transaction and agrees not to offer or to
                                       enter into any agreement comparable with
                                       the Credit Facility and/or Term Loan C in
                                       connection with the financing of the
                                       Transaction with any other person or
                                       entity. This exclusivity shall not apply
                                       to discussions in connection with any
                                       type of unsecured debt and/or equity
                                       capital, provided that during such
                                       exclusivity period PCC shall not enter
                                       into any agreement with unsecured debt
                                       and/or equity capital relating to the
                                       financing of the Transaction that would
                                       preclude Fortress from financing the
                                       Transaction on the terms contemplated
                                       hereby.
-------------------------------------- -----------------------------------------

-------------------------------------- -----------------------------------------
CONFIDENTIALITY:                       This Term Sheet and the financing
                                       arrangements described herein are
                                       delivered with the understanding that the
                                       Lender and the Borrower shall not
                                       disclose this letter or the substance of
                                       said proposed financing arrangements to
                                       any person or entity outside of the
                                       Lender's and Borrower's organization,
                                       unless this commitment letter has been
                                       fully signed by PCC and Fortress, with
                                       both parties bound by the terms herein,
                                       and only then to those professional
                                       advisors who are in a confidential
                                       relationship with PCC and require
                                       knowledge thereof to perform their duties
                                       (such as legal counsel, accountants, and
                                       financial advisors), or where disclosure
                                       is required by law, or to those parties
                                       that Fortress may otherwise approve.

                                       Notwithstanding the foregoing, if the
                                       Exclusivity Extension Letter is delivered
                                       by Fortress as provided below under
                                       "Exclusivity Extension", or any Alternate
                                       Commitment Letter is executed by PCC and
                                       Fortress as provided below under
                                       "Alternate Commitment Letter", PCC may
                                       provide a copy of such Exclusivity
                                       Extension Letter or Alternate Commitment
                                       Letter, as the case may be, together with
                                       a copy of this Term Sheet, to the
                                       Official Committee of Unsecured Creditors
                                       appointed in the pending Chapter 11 Cases
                                       (collectively, the "Bankruptcy
                                       Proceeding") of PBT and its affiliates
                                       (collectively, the "Debtors") and file a
                                       copy of the same in the Bankruptcy
                                       Proceeding.

-------------------------------------- -----------------------------------------
DEPOSIT:                               In connection with your request for
                                       financing, you understand that it will be
                                       necessary for us to incur certain
                                       expenses for financial, legal, and
                                       collateral due diligence. As such, in the
                                       expectation of establishing the financing
                                       arrangements between us and PCC, we
                                       request that PCC deposit with us $175,000
                                       against our due diligence expenses upon
                                       the execution of, and as a condition
                                       precedent to the effectiveness of, this
                                       letter and Term Sheet. This amount,
                                       together with any other deposits received
                                       by us, will be (i) returned to PCC, less
                                       our expenses if our approval of the
                                       proposed financing is not obtained, or
                                       (ii) returned to PCC, less our expenses
                                       if the financing is approved and booked.
-------------------------------------- -----------------------------------------

<PAGE>

EXCLUSIVITY EXTENSION:                 PCC shall continue to abide by the
                                       exclusivity requirement described above
                                       until the Exclusivity Termination Date if
                                       Fortress delivers a letter (the
                                       "Exclusivity Extension Letter") to PCC
                                       prior to the end of the Due Diligence
                                       Period indicating (i) its completion of
                                       business due diligence, (ii) its
                                       commitment to provide the Credit Facility
                                       and Term Loan C on terms and conditions
                                       the same in all material respects to
                                       those described herein, after giving
                                       effect to the elimination of the
                                       Conditions Precedent specified in clause
                                       (iv) below, (iii) the amount of preferred
                                       equity Fortress has elected to invest,
                                       and (iv) Fortress' willingness to
                                       eliminate paragraph c) and d) and the
                                       first sentence of paragraph e) (but
                                       Fortress shall continue to have the right
                                       to approve the final documentation and
                                       any modifications to the structure
                                       proposed after delivery of the
                                       Exclusivity Extension Letter) from the
                                       Conditions Precedent section described
                                       above. PCC shall provide an additional
                                       $25,000 expense deposit upon delivery of
                                       the Exclusivity Extension Letter to cover
                                       initial legal expenses.

                                       PCC acknowledges that, if PCC enters into
                                       a financing arrangement with a lender
                                       other than Fortress in breach of this
                                       exclusivity requirement and consummates
                                       the Transaction using such third party
                                       financing, the Lender would be entitled
                                       to payment of a Breakup Fee of $2,500,000
                                       as liquidated damages (i.e., PCC shall
                                       not be subject to any other claims by the
                                       Lender).

                                       The term "Exclusivity Termination Date"
                                       means the earliest to occur of (a) the
                                       end of the Due Diligence Period if Lender
                                       fails to deliver the Exclusivity
                                       Extension Letter prior to the end of such
                                       period, (b) the date on which the closing
                                       occurs of a sale to a purchaser other
                                       than PCC of a material portion of PBT's
                                       broadcast business, (c) the date on which
                                       the closing of the Credit Facility and
                                       Term Loan C occurs and (d) June 30, 2005.
<PAGE>

ALTERNATE COMMITMENT LETTER:           If the Exclusivity Extension Letter is
                                       not provided as described above but both
                                       PCC and Fortress execute an alternate
                                       commitment letter on other terms and
                                       conditions (an "Alternate Commitment
                                       Letter"), should PCC thereafter enter
                                       into a financing arrangement with a
                                       lender other than Fortress with respect
                                       to the Transaction and should PCC
                                       thereafter breach the terms of such
                                       Alternate Commitment Letter and
                                       consummate the Transaction using such
                                       third party financing, the Company will
                                       pay to the Lender upon such consummation
                                       a Breakup Fee of three percent (3%) of
                                       the total financing commitment provided
                                       for in such commitment letter, as
                                       liquidated damages (i.e., PCC shall not
                                       be subject to any other claims by the
                                       Lender).

                                       For the avoidance of doubt, this breakup
                                       fee shall not apply unless an Alternate
                                       Commitment Letter is executed and only
                                       under the circumstances described above.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00075-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00075-of-00352.parquet"}]]