Document:

Exhibit
                4.1 

        

      

	 
	FORM OF
          FIXED RATE SENIOR NOTE 
	 	 	 
	REGISTERED 	 	REGISTERED 
	No. FXR-1 	 	U.S. $ 
	 	 	CUSIP: 

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

 

 MORGAN STANLEY

  SENIOR GLOBAL MEDIUM-TERM NOTE, SERIES F

 PERFORMANCE LEVERAGED UPSIDE
      SECURITIES (“PLUS”)

      PLUS
      DUE NOVEMBER 20, 2007

  MANDATORILY EXCHANGEABLE

  FOR AN AMOUNT PAYABLE IN U.S. DOLLARS

  BASED ON THE VALUE OF THE AMEX CHINASM INDEX

	 ORIGINAL
        ISSUE DATE: 	 INITIAL
        REDEMPTION

   DATE: N/A 	 INTEREST
        RATE: None 	 MATURITY
        DATE: See

   “Maturity Date” below. 
	 INTEREST
        ACCRUAL

   DATE: N/A 	 INITIAL
        REDEMPTION

   PERCENTAGE: N/A 	 INTEREST
        PAYMENT

   DATE(S): N/A 	 OPTIONAL

   REPAYMENT

   DATE(S): N/A 
	 SPECIFIED
        CURRENCY:

   U.S. dollars 	 ANNUAL REDEMPTION

   PERCENTAGE

   REDUCTION: N/A 	 INTEREST
        PAYMENT

   PERIOD: N/A 	 APPLICABILITY
        OF

   MODIFIED

   PAYMENT UPON

   ACCELERATION OR

   REDEMPTION: See

   “Alternate Exchange

   Calculation in Case of an

   Event of Default” below. 
	 IF SPECIFIED

   CURRENCY OTHER

   THAN U.S. DOLLARS,

   OPTION TO ELECT

   PAYMENT IN U.S.

   DOLLARS: N/A 	 REDEMPTION
        NOTICE

   PERIOD: N/A 	 APPLICABILITY
        OF

   ANNUAL INTEREST

   PAYMENTS: N/A 	 If yes,
        state Issue Price:

   N/A 
	 EXCHANGE
        RATE

   AGENT: N/A 	 TAX REDEMPTION

   AND PAYMENT OF

   ADDITIONAL

   AMOUNTS: NO 	 PRICE APPLICABLE

   UPON OPTIONAL

   REPAYMENT: N/A 	 ORIGINAL
        YIELD TO

   MATURITY: N/A 
	 OTHER PROVISIONS:

   See below 	 IF YES,
        STATE INITIAL

   OFFERING DATE: N/A 	  	  

	Stated Principal Amount 

      Underlying Index

      Underlying Index Publisher 

      Initial Index Value 

      Pricing Date

      Denominations
	  	$10 per PLUS 

      AMEX China Index

      American Stock Exchange, LLC

       

       

      $10 and integral multiples thereof

	 	 	 
	Bull Market or Bear Market
        PLUS 	 	Bull Market PLUS 

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	 Maximum Payment at Maturity 	  	 $ 
	 	 	 
	Minimum Payment at Maturity	 	 
	      if
        Bear Market PLUS 	  	 N/A 
	 	 	 
	Leverage Factor

      Index Valuation Dates
	  	   %

      November 14, 2007, November 15, 2007 and November
          16, 2007; provided that
          if there is a Market Disruption Event on any scheduled Index Valuation
          Date or if any scheduled Index Valuation Date is not otherwise an Index
          Business Day, such Index Valuation Date shall be the immediately succeeding
          Index Business Day on which no Market Disruption Event shall have occurred.
          If either of the first two Index Valuation Dates is postponed pursuant
          to the preceding sentence, each of the following Index Valuation Date(s)
          shall be the Index Business Day(s) next succeeding such postponed Index
          Valuation Date (s); provided further that
          if a Market Disruption Event occurs on each of the five Index Business
          Days immediately succeeding the final scheduled Index Valuation Date,
          then such fifth succeeding Index Business Day shall be deemed to be
          the relevant Index Valuation Date, notwithstanding the occurrence of
          a Market Disruption Event on such day, and the Calculation Agent shall
          determine the Payment at Maturity based on the value of the AMEX China
          Index on such date in accordance with the formula for calculating the
          AMEX China Index last in effect prior to the commencement of the Market
          Disruption Event (or prior to the non-Index Business Day), without
          rebalancing or substitution, using the closing price (or, if trading
          in the relevant securities has been materially suspended or materially
          limited, its good faith estimate of the closing price that would have
          prevailed but for such suspension, limitation or non-Index Business
          Day) on such date of each security most recently comprising the AMEX
          China Index. See “Maturity Date.”

	 	 	 
	Maturity Date
	  	February 20, 2007, subject
          to extension if the scheduled Index Valuation Date is postponed in
          accordance with the definition thereof. If any Index Valuation
          Date is postponed so that the final Index Valuation Date falls less
          than two scheduled trading days prior to the scheduled Maturity Date,
          the Maturity Date shall be the second scheduled trading day

 3

 

	 	  	 following the final
          Index Valuation Date as so postponed. See “Index Valuation Dates.”

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

	 	 	 
	Payment at Maturity
	  	At maturity, upon delivery
          of this PLUS to the Trustee, the Issuer shall pay with respect to each
          Stated Principal Amount of this PLUS an amount in cash equal to:

      1. For
            a Bull Market PLUS, (i) if the
            Final Average Index Value is greater than the Initial Index Value,
            the lesser of (a) the Stated Principal Amount plus the Leveraged
            Upside Payment and (b) the Maximum Payment at Maturity or (ii) if
            the Final Average Index Value is
            less than or equal to the Initial Index Value, the Stated Principal
            Amount times the Index Performance Factor, subject to the Minimum
            Payment at Maturity.

 4

 

	 	  	2. For
            a Bear Market PLUS, (i) if the
            Final Index Value is less than the Initial Index Value, the lesser
            of (a) the Stated Principal Amount plus the Enhanced Downside Payment
            and (b) the Maximum Payment at Maturity or (ii) if the Final Index
            Value is greater than or equal to the Initial Index Value, the Stated
            Principal Amount minus the Upside Reduction Amount, subject to the
            Minimum Payment at Maturity.

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

 Applicable only for BULL MARKET
      PLUS

	     Leveraged
          Upside Payment
	  	The product of (i) the
          Stated Principal Amount and (ii) the Leverage Factor and (iii) the
          Index Percent Increase.

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

 Applicable only for BEAR MARKET
      PLUS

	     Enhanced
          Downside Payment
	  	The product of (i) the
          Stated Principal Amount and (ii) the Leverage Factor and (iii) the
          Index Percent Decrease.

	 	 	 
	     Upside
          Reduction Amount
	  	The product of (i) the
          Stated Principal Amount and (ii) the Index Percent Increase.

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

	 	 	 
	Applicable for all PLUS	 	 
	 	 	 
	Index Percent Increase
	 	A fraction, the numerator
          of which shall be the Final Average Index Value minus the Initial Index
          Value and the denominator of which shall be the Initial Index Value.

	 	 	 

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	Final Average Index Value
	  	The arithmetic average
          of the closing values of the AMEX China Index on the Index Valuation
          Dates.

	 	 	 
	Index Closing Value
	  	The Index Closing Value
          on any Index Business Day shall equal the closing value of the Underlying
          Index or any Successor Index (as defined under “Discontinuance
          of the Underlying Index; Alteration of Method of Calculation” below)
          published at the regular weekday close of trading on that Index Business
          Day, as determined by the Calculation Agent. In certain circumstances,
          the Index Closing Value shall be based on the alternate calculation
          of the Underlying Index described under “Discontinuance of the
          Underlying Index; Alteration of Method of Calculation.”

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

	 	 	 
	Index Business Day
	  	A day, as determined
          by the Calculation Agent, on which trading is generally conducted on
          the Relevant Exchange and on any exchange on which futures or options
          contracts related to the Underlying Index (or Successor Index) are
          traded, other than a day on which trading on such exchange is scheduled
          to close prior to its regular final weekday closing price.

	 	 	 
	Relevant Exchange
	  	Relevant Exchange means
          the primary exchange(s) or market(s) of trading for (i) any security
          (or any combination thereof) then included in the Underlying Index
          or any Successor Index and (ii) any futures or options contracts related
          to such Underlying Index or to any security then included in the Underlying
          Index.

	 	 	 
	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

 6

 

	 
	  	 conclusive for all
          purposes and binding on the holder of this PLUS, the Trustee and the
          Issuer.

      All calculations with respect to the Payment
          at Maturity shall be rounded to the nearest one hundred- thousandth,
          with five one-millionths rounded upward (e.g.,
          .876545 would be rounded to .87655); all dollar amounts related to
          determination of the amount of cash payable for each Stated Principal
          Amount of this PLUS shall be rounded to the nearest ten-thousandth,
          with five one hundred-thousandths rounded upward (e.g.,
          .76545 would be rounded up to .7655); and all dollar amounts paid on
          the aggregate number of PLUS shall be rounded to the nearest cent,
          with one-half cent rounded upward.

	 	 	 
	Market Disruption Event
	  	Market Disruption Event
          means, with respect to the Underlying Index:

      (i) the occurrence or existence of a suspension,
          absence or material limitation of trading of stocks then constituting
          20 percent or more of the level of the Underlying Index (or the Successor
          Index) on the Relevant Exchanges for such securities for more than
          two hours of trading or during the one-half hour period preceding the
          close of the principal trading session on such Relevant Exchange; or
          a breakdown or failure in the price and trade reporting systems of
          any Relevant Exchange as a result of which the reported trading prices
          for stocks then constituting 20 percent or more of the level of the
          Underlying Index (or the Successor Index) during the last one-half
          hour preceding the close of the principal trading session on such Relevant
          Exchange are materially inaccurate; or the suspension, material limitation
          or absence of trading on any major U.S. securities market for trading
          in futures or options contracts or exchange traded funds related to
          the Underlying Index (or the Successor Index) for more than two hours
          of trading or during the one-half hour period
          preceding the close of the principal trading session on such market,
          in each case as determined by the Calculation Agent in its sole discretion;
          and

      (ii) a determination by the Calculation Agent
          in its sole discretion that any event described in clause (i) above
          materially interfered with the ability of the Issuer or any of its
          affiliates to unwind or adjust all or a material 

 7

 

	 	  	portion of the hedge
          position with respect to this issuance of PLUS.

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

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

 8

 

	  	  	 is itself closed for
          trading under ordinary circumstances.

	Alternate Exchange Calculation	 	 
	   in Case of an
          Event of Default
	  	In case an event of
          default with respect to the PLUS shall have occurred and be continuing,
          the amount declared due and payable for each Stated Principal Amount
          of this PLUS upon any acceleration of this PLUS shall be determined
          by the Calculation Agent and shall be an amount in cash equal to the
          Payment at Maturity calculated using the Index Closing Value as of
          the date of such acceleration as the Final Average Index Value plus,
          if applicable, any accrued but unpaid interest as of the date of such
          acceleration.

      If the maturity of the PLUS is accelerated
          because of an event of default as described above, the Issuer shall,
          or shall cause the Calculation Agent to, provide written notice to
          the Trustee at its New York office, on which notice the Trustee may
          conclusively rely, and to the Depositary of the cash amount due with
          respect to each Stated Principal Amount of this PLUS as promptly as
          possible and in no event later than two Business Days after the date
          of acceleration.

	Discontinuance of the Underlying Index; 	 	 
	   Alteration of Method of	 	 
	   Calculation
	  	If the Underlying Index
          Publisher discontinues publication of the Underlying Index and the
          Underlying Index Publisher or another entity (including MS & Co.)
          publishes a successor or substitute index that the Calculation Agent
          determines, in its sole discretion, to be comparable to the discontinued
          Underlying Index (such index being referred to herein as a “Successor
          Index”), then any subsequent
          Index Closing Value shall be determined by reference to the published
          value of such Successor Index at the regular weekday close of trading
          on the Index Business Day that any Index Closing Value is to be determined.

 9

 

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

      If the Underlying Index Publisher discontinues
          publication of the Underlying Index prior to, and such discontinuance
          is continuing on, the Index Valuation Date or the date of acceleration
          and the Calculation Agent determines, in its sole discretion, that
          no Successor Index is available at such time, then the Calculation
          Agent shall determine the Index Closing Value for such date. The Index
          Closing Value shall be computed by the Calculation Agent in accordance
          with the formula for and method of calculating the Underlying Index
          last in effect prior to such discontinuance, using the closing price
          (or, if trading in the relevant securities has been materially suspended
          or materially limited, its good faith estimate of the closing price
          that would have prevailed but for such suspension or limitation) at
          the close of the principal trading session of the Relevant Exchange
          on such date of each security most recently constituting the Underlying
          Index without any rebalancing or substitution of such securities following
          such discontinuance.

      If at any time the method of calculating the
          Underlying Index or a Successor Index, or the value thereof, is changed
          in a material respect, or if the Underlying Index or a Successor Index
          is in any other way modified so that such index does not, in the opinion
          of the Calculation Agent, fairly represent the value of the Underlying
          Index or such Successor Index had such changes or modifications not
          been made, then, from and after such time, the Calculation Agent shall,
          at the close of business in New York City on each date on which the
          Index Closing Value is to be determined,
          make such calculations and adjustments as, in the good faith judgment
          of the Calculation Agent, may be necessary in order to arrive at a
          value of a stock index comparable to the Underlying Index or such Successor
          Index, as the case may be, as if such changes or modifications had
          not been made, and the Calculation Agent shall calculate the Final
          Average Index Value with reference to the Underlying Index or

 10

 

	  	  	 such Successor Index,
          as adjusted. Accordingly, if the method of calculating the Underlying
          Index or a Successor Index is modified so that the value of such index
          is a fraction of what it would have been if it had not been modified
          (e.g., due to a split in the index), then the Calculation Agent shall
          adjust such index in order to arrive at a value of the Underlying Index
          or such Successor Index as if it had not been modified (e.g., as if
          such split had not occurred).

 11

 

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

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

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

 12

 

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

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

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

      If the
    holder elects to receive all or a portion of payments of principal of, premium,
    if any, and interest on this Note, if denominated in a Specified Currency
    other than U.S. dollars, in U.S. dollars, the Exchange Rate Agent (as defined
    on the reverse hereof) will convert such payments into U.S. dollars. In the
    event of such an election, payment in respect of this Note will be based
    upon the exchange rate as determined by the Exchange Rate Agent based on
    the highest bid quotation in The City of New York received by such Exchange
    Rate Agent at approximately 11:00 a.m., New York City time, on the second
    Business Day preceding the applicable payment date from three recognized
    foreign exchange dealers (one of which may be the Exchange Rate Agent unless
    such Exchange Rate Agent is an affiliate of the Issuer) for the purchase
    by the quoting dealer of the Specified Currency for U.S. dollars for settlement
    on such payment date inthe amount of the
    Specified Currency payable in the absence of such an election to such holder
    and at which the applicable dealer commits to execute a contract. If such
    bid quotations are not available, such payment will be made in the Specified
    Currency. All currency exchange costs will be borne by the holder of this
    Note by deductions from such payments.

 13

 

     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.

 14

 

 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.

  

  THE BANK OF NEW YORK (as 

   successor Trustee to JPMORGAN

   CHASE BANK, N.A.), as Trustee

	 By: 	  
	 	 
 
	  	 Authorized Officer 

 15

 

 FORM OF REVERSE OF SECURITY

      This
    Note is one of a duly authorized issue of Senior Global Medium-Term Notes,
    Series F, having maturities more than nine months from the date of issue
    (the “Notes”) of the Issuer.
    The Notes are issuable under a Senior Indenture, dated as of November 1,
    2004, between the Issuer and The Bank of New York (as successor Trustee to
    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 The Bank of New York (as successor to JPMorgan Chase Bank, N.A.)
    at its corporate trust office in The City of New York as the paying agent
    (the “Paying
    Agent,” which term includes any
    additional or successor Paying Agent appointed by the Issuer) with respect
    to the Notes. The terms of individual Notes may vary with respect to interest
    rates, interest rate formulas, issue dates, maturity dates, or otherwise,
    all as provided in the Senior Indenture. To the extent not inconsistent herewith,
    the terms of the Senior Indenture are hereby incorporated by reference herein.

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

      If so
    indicated on the face hereof, this Note may be redeemed in whole or in part
    at the option of the Issuer on or after the Initial Redemption Date specified
    on the face hereof on the terms set forth on the face hereof, together with
    interest accrued and unpaid hereon to the date of redemption. If this Note
    is subject to “Annual Redemption Percentage Reduction,” the Initial
    Redemption Percentage indicated on the face hereof will be reduced on each
    anniversary of the Initial Redemption Date by the Annual Redemption Percentage
    Reduction specified on the face hereof until the redemption price of this
    Note is 100% of the principal amount hereof, together with interest accrued
    and unpaid hereon to the date of redemption. If the face hereof indicates
    that this Note is subject to “Modified Payment upon Acceleration or
    Redemption”, the amount of principal payable upon redemption will 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 accrued
    from the Interest Accrual Date to the date of redemption (expressed as a
    percentage of the aggregate principal amount), with the amount of original
    issue discount accrued being calculated using a constant yield method (as
    described below). 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.

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      If so
    indicated on the face of this Note, this Note will be subject to repayment
    at the option of the holder on the Optional Repayment Date or Dates specified
    on the face hereof on the terms set forth herein. On any Optional Repayment
    Date, this Note will be repayable in whole or in part in increments of $1,000
    or, if this Note is denominated in a Specified Currency other than U.S. dollars,
    in increments of 1,000 units of such Specified Currency (provided that any
    remaining principal amount hereof shall not be less than the minimum authorized
    denomination hereof) at the option of the holder hereof at a price equal
    to 100% of the principal amount to be repaid, together with interest accrued
    and unpaid hereon to the date of repayment, provided that
    if the face hereof indicates that this Note is subject to “Modified
    Payment upon Acceleration or Redemption”, the amount of principal payable
    upon repayment will 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
    accrued from the Interest Accrual Date to the date of repayment (expressed
    as a percentage of the aggregate principal amount), with the amount of original
    issue discount accrued being calculated using a constant yield method (as
    described below). For this Note to be repaid at the option of the holder
    hereof, the Paying Agent must receive at its corporate trust office in the
    Borough of Manhattan, The City of New York, at least 15 but not more than
    30 calendar days prior to the date of repayment, (i) this Note with the form
    entitled “Option to Elect Repayment” below duly completed or (ii)
    a telegram, telex, facsimile transmission or a letter from a member of a
    national securities exchange or the National Association of Securities Dealers,
    Inc. or a commercial bank or a trust company in the United States setting
    forth the name of the holder of this Note, the principal amount hereof, the
    certificate number of this Note or a description of this Note’s tenor
    and terms, the principal amount hereof to be repaid, a statement that the
    option to elect repayment is being exercised thereby and a guarantee that
    this Note, together with the form entitled “Option to Elect Repayment” duly
    completed, will be received by the Paying Agent not later than the fifth
    Business Day after the date of such telegram, telex, facsimile transmission
    or letter; provided,
    that such telegram, telex, facsimile transmission or letter shall only be
    effective if this Note and form duly completed are received by the Paying
    Agent by such fifth Business Day. Exercise of such repayment option by the
    holder hereof shall be irrevocable. In the event of repayment of this Note
    in part only, a new Note or Notes for the amount of the unpaid portion hereof
    shall be issued in the name of the holder hereof upon the cancellation hereof.

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

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

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

      This
    Note, and any Note or Notes issued upon transfer or exchange hereof, is issuable
    only in fully registered form, without coupons, and, if denominated in U.S.
    dollars, unless otherwise stated above, is issuable only in denominations
    of U.S. $1,000 and any integral multiple of U.S. $1,000 in excess
    thereof. If this Note is denominated in a Specified Currency other than U.S.
    dollars, then, unless a higher minimum denomination is required by applicable
    law, it is issuable only in denominations of the equivalent of U.S. $1,000
    (rounded to an integral multiple of 1,000 units of such Specified Currency),
    or any amount in excess thereof which is an integral multiple of 1,000 units
    of such Specified Currency, as determined by reference to the noon dollar
    buying rate in The City of New York for cable transfers of such Specified
    Currency published by the Federal Reserve Bank of New York (the “Market
    Exchange Rate”) on the Business Day immediately preceding the date
    of issuance.

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

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

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

      If the
    face hereof indicates that this Note is subject to “Modified Payment
    upon Acceleration or Redemption,” then (i) if the principal hereof is
    declared to be due and payable as described in the preceding paragraph, the
    amount of principal due and payable with respect to this Note shall be limited
    to the aggregate principal amount hereof multiplied by the sum of the Issue
    Price specified on the face hereof (expressed as a percentage of the aggregate
    principal amount) plus the original issue discount accrued from the Interest
    Accrual Date to the date of declaration (expressed as a percentage of the
    aggregate principal amount), with the amount of original issue discount accrued
    being calculated using a constant yield method (as described in the next
    paragraph), (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

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 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.
      The
    constant yield shall be calculated using a 30-day month, 360-day year convention,
    a compounding period that, except for the initial period (as defined below),
    corresponds to the shortest period between Interest Payment Dates (with ratable
    accruals within a compounding period), and an assumption that the maturity
    will not be accelerated. If the period from the Original Issue Date to the
    first Interest Payment Date (the “initial period”) is shorter than
    the compounding period for this Note, a proportionate amount of the yield
    for an entire compounding period will be accrued. If the initial period is
    longer than the compounding period, then the period will be divided into
    a regular compounding period and a short period with the short period being
    treated as provided in the preceding sentence.

      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,” the amount of principal so
    payable will 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
    accrued from the Interest Accrual Date to the date of redemption (expressed
    as a percentage of the aggregate principal amount), with the amount of original
    issue discount accrued being calculated using a constant yield method (as
    described above)), if the Issuer determines that, as a result of any change
    in or amendment to the laws (including a holding, judgment or as ordered
    by a court of competent jurisdiction), or any regulations or rulings promulgated
    thereunder, of the United States or of any political subdivision or taxing
    authority thereof or therein affecting taxation, or any change in official
    position regarding the application or interpretation of such laws, regulations
    or rulings, which change or amendment occurs, becomes effective or, in the
    case of a change in official position, is announced on or after the Initial
    Offering Date hereof, the Issuer has or will become obligated to pay Additional
    Amounts, as defined below, with respect to this Note as described below.
    Prior to the giving of any notice of redemption pursuant to this paragraph,
    the Issuer shall deliver to the Trustee (i) a certificate stating that the
    Issuer is entitled to effect such redemption and setting forth a statement
    of facts showing that the conditions precedent to the right of the Issuer
    to so redeem have occurred, and (ii) an opinion of independent legal counsel
    satisfactory to the Trustee to such effect based on such statement of facts; provided that
    no such notice of redemption shall be given earlier than 60 calendar days
    prior to the earliest date on which the Issuer would be obligated to pay
    such Additional Amounts if a payment in respect of this Note were then due.

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

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      If the
    face hereof indicates that this Note is subject to “Tax Redemption and
    Payment of Additional Amounts,” the Issuer will, subject to certain
    exceptions and limitations set forth below, pay such additional amounts (the “Additional
    Amounts”) to the holder of this
    Note who is a U.S. Alien as may be necessary in order that every net payment
    of the principal of and interest on this Note and any other amounts payable
    on this Note, after withholding or deduction for or on account of any present
    or future tax, assessment or governmental charge imposed upon or as a result
    of such payment by the United States, or any political subdivision or taxing
    authority thereof or therein, will not be less than the amount provided for
    in this Note to be then due and payable. The Issuer will not, however, make
    any payment of Additional Amounts to any such holder who is a U.S. 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 U.S. federal income tax purposes, and
    the United States, including, without limitation, such holder, or such fiduciary,
    settlor, beneficiary, member or shareholder, being or having been a citizen
    or resident thereof or being or having been engaged in a trade or business
    or present therein or having, or having had, a permanent establishment therein
    or (ii) the presentation by or on behalf of the holder of this Note for payment
    on a date more than 15 calendar days after the date on which such payment
    became due and payable or the date on which payment thereof is duly provided
    for, whichever occurs later;

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

      (c)
    any tax, assessment or other governmental charge imposed by reason of such
    holder’s past or present status as a controlled foreign corporation
    or passive foreign investment company with respect to the United States or
    as a corporation which accumulates earnings to avoid U.S. 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;

 21

 

     (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 U.S. Alien who is a fiduciary or partnership
    or other than the sole beneficial owner of such payment to the extent such
    payment would be required by the laws of the United States (or any political
    subdivision thereof) to be included in the income, for tax purposes, of a
    beneficiary or settlor with respect to such fiduciary or a member of such
    partnership or a beneficial owner who would not have been entitled to the
    Additional Amounts had such beneficiary, settlor, member or beneficial owner
    been the holder of this Note.

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

     Except
    as set forth below, if the principal of, premium, if any, or interest on
    this Note is payable in a Specified Currency other than U.S. dollars and
    such Specified Currency is not available to the Issuer for making payments
    hereon due to the imposition of exchange controls or other circumstances
    beyond the control of the Issuer or is no longer used by the government of
    the country issuing such currency or for the settlement of transactions by
    public institutions within the international banking community, then the
    Issuer will be entitled to satisfy its obligations to the holder of this
    Note by making such payments in U.S. dollars on the basis of the Market Exchange
    Rate on the date of such payment or, if the Market Exchange Rate is not available
    on such date, as of the most recent practicable date; provided, however, that if the euro

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 has been substituted for such Specified Currency,
      the Issuer may at its option (or shall, if so required by applicable law)
      without the consent of the holder of this Note effect the payment of principal
      of, premium, if any, or interest on any Note denominated in such Specified
      Currency in euro in lieu of such Specified Currency in conformity with
      legally applicable measures taken pursuant to, or by virtue of, the Treaty
      establishing the European Community, as amended. Any payment made under
      such circumstances in U.S. dollars or euro where the required payment is
      in an unavailable Specified Currency will not constitute an Event of Default.
      If such Market Exchange Rate is not then available to the Issuer or is
      not published for a particular Specified Currency, the Market Exchange
      Rate will be based on the highest bid quotation in The City of New York
      received by the Exchange Rate Agent at approximately 11:00 a.m., New York
      City time, on the second Business Day preceding the date of such payment
      from three recognized foreign exchange dealers (the “Exchange
      Dealers”) for
      the purchase by the quoting Exchange Dealer of the Specified Currency for
      U.S. dollars for settlement on the payment date, in the aggregate amount
      of the Specified Currency payable to those holders or beneficial owners
      of Notes and at which the applicable Exchange Dealer commits to execute
      a contract. One of the Exchange Dealers providing quotations may be the
      Exchange Rate Agent unless the Exchange Rate Agent is an affiliate of the
      Issuer. If those bid quotations are not available, the Exchange Rate Agent
      shall determine the market exchange rate at its sole discretion.

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

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

      So long
    as this Note shall be outstanding, the Issuer will cause to be maintained
    an office or agency for the payment of the principal of and premium, if any,
    and interest on this Note as herein provided in the Borough of Manhattan,
    The City of New York, and an office or agency in said Borough of Manhattan
    for the registration, transfer and exchange as aforesaid of the Notes. The
    Issuer may designate other agencies for the payment of said principal, premium
    and interestat 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

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 of the Trustee or such Paying Agent
    with respect to such moneys shall thereupon cease, without, however, limiting
    in any way any obligation that the Issuer may have to pay the principal of
    or interest or premium, if any, on this Note as the same shall become due.

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

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

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

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

      As used
    herein, the term “U.S. Alien” means any person who is, for U.S.
    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 U.S. 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.

 24

 

 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.

 ______________________________

  

 25

 

 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.

 26

 

 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 will be issued for the portion not
    being repaid): __________________

  .

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

 27EX-10.10

 

Exhibit 10.10

FIRST SOLAR, INC.

2006 OMNIBUS INCENTIVE COMPENSATION PLAN

          SECTION 1. Purpose. The purpose of this First Solar, Inc. 2006 Omnibus Incentive
Compensation Plan is to promote the interests of First Solar, Inc., a Delaware corporation (the
“Company”), and its stockholders by (a) attracting and retaining exceptional directors,
officers, employees and consultants (including prospective directors, officers, employees and
consultants) of the Company and its Affiliates (as defined below) and (b) enabling such individuals
to participate in the long-term growth and financial success of the Company.

          SECTION 2. Definitions. As used herein, the following terms shall have the meanings
set forth below:

          “Affiliate” means (a) any entity that, directly or indirectly, is controlled by,
controls or is under common control with, the Company and (b) any entity in which the Company has a
significant equity interest, in either case as determined by the Committee.

          “Award” means any award that is permitted under Section 6 and granted under the Plan.

          “Award Agreement” means any written agreement, contract or other instrument or
document evidencing any Award, which may, but need not, require execution or acknowledgment by a
Participant.

          “Board” means the Board of Directors of the Company.

          “Cash Incentive Award” shall have the meaning specified in Section 6(f).

          “Change of Control” shall (a) have the meaning set forth in an Award Agreement or (b)
if there is no definition set forth in an Award Agreement, mean the occurrence of any of the
following events, not including any events occurring prior to or in connection with the initial
public offering of Shares (including the occurrence of such initial public offering):

          (i) during any period of 24 consecutive months, individuals who were members of the Board at
the beginning of such period (the “Incumbent Directors”) cease at any time during such
period for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the beginning of such period
whose appointment or election, or nomination for election, by the Company’s stockholders was
approved by a vote of at least a majority of the Incumbent Directors shall be considered as though
such individual were an Incumbent Director, but excluding, for purposes of this proviso, any such
individual whose initial

 

 

  2

assumption of office occurs as a result of an actual or threatened proxy contest with respect
to election or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of any “person” (as such term is used in Section 13(d) of the Exchange
Act) (each, a “Person”), other than the Board or any Specified Shareholder;

          (ii) the consummation of (A) a merger, consolidation, statutory share exchange or similar
form of corporate transaction involving (x) the Company or (y) any of its Subsidiaries, but in the
case of this clause (y) only if Company Voting Securities (as defined below) are issued or issuable
in connection with such transaction (each of the transactions referred to in this clause (A), being
hereinafter referred to as a “Reorganization”) or (B) a sale or other disposition of all or
substantially all the assets of the Company (a “Sale”), unless, immediately following such
Reorganization or Sale, (1) all or substantially all the individuals and entities who were the
“beneficial owners” (as such term is defined in Rule 13d-3 under the Exchange Act (or a successor
rule thereto)) of shares of the Company’s common stock or other securities eligible to vote for the
election of the Board outstanding immediately prior to the consummation of such Reorganization or
Sale (such securities, the “Company Voting Securities”) beneficially own, directly or
indirectly, more than 50% of the combined voting power of the then outstanding voting securities of
the corporation or other entity resulting from such Reorganization or Sale (including a corporation
or other entity that, as a result of such transaction, owns the Company or all or substantially all
the Company’s assets either directly or through one or more subsidiaries) (the “Continuing
Entity”) in substantially the same proportions as their ownership, immediately prior to the
consummation of such Reorganization or Sale, of the outstanding Company Voting Securities
(excluding any outstanding voting securities of the Continuing Entity that such beneficial owners
hold immediately following the consummation of such Reorganization or Sale as a result of their
ownership prior to such consummation of voting securities of any corporation or other entity
involved in or forming part of such Reorganization or Sale other than the Company or a Subsidiary),
(2) no Person (excluding (x) any employee benefit plan (or related trust) sponsored or maintained
by the Continuing Entity or any corporation or other entity controlled by the Continuing Entity and
(y) any Specified Shareholder beneficially owns, directly or indirectly, 20% or more of the
combined voting power of the then outstanding voting securities of the Continuing Entity and (3) at
least a majority of the members of the board of directors or other governing body of the Continuing
Entity were Incumbent Directors at the time of the execution of the definitive agreement providing
for such Reorganization or Sale or, in the absence of such an agreement, at the time at which
approval of the Board was obtained for such Reorganization or Sale;

          (iii) the stockholders of the Company approve a plan of complete liquidation or dissolution
of the Company, unless such liquidation or dissolution is part of a transaction or series of
transactions described in paragraph (ii) above that does not otherwise constitute a Change of
Control; or

          (iv) any Person, corporation or other entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act) other than any Specified Shareholder becomes the beneficial owner,
directly or indirectly, of securities of the

 

 

  3

Company representing a percentage of the combined voting power of the Company Voting
Securities that is equal to or greater than the greater of (x) 20% and (y) the percentage of the
combined voting power of the Company Voting Securities beneficially owned directly or indirectly by
the Specified Shareholders at such time; provided, however, that for purposes of
this subparagraph (iv) (and not for purposes of subparagraphs (i) through (iii) above), the
following acquisitions shall not constitute a Change in Control: (A) any acquisition by the
Company or any Subsidiary, (B) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary, (C) any acquisition by an underwriter
temporarily holding such Company Voting Securities pursuant to an offering of such securities or
(D) any acquisition pursuant to a Reorganization or Sale that does not constitute a Change in
Control for purposes of subparagraph (ii) above.

          “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the
regulations promulgated thereunder.

          “Committee” means the compensation committee of the Board, or such other committee of
the Board as may be designated by the Board to administer the Plan.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor
statute thereto.

          “Exercise Price” means (a) in the case of Options, the price specified in the
applicable Award Agreement as the price-per-Share at which Shares may be purchased pursuant to such
Option or (b) in the case of SARs, the price specified in the applicable Award Agreement as the
reference price-per-Share used to calculate the amount payable to the Participant.

          “Fair Market Value” means (a) with respect to any property other than Shares, the fair
market value of such property determined by such methods or procedures as shall be established from
time to time by the Committee and (b) with respect to the Shares, as of any date, (i) the closing
per share sales price of the Shares (A) as reported by NASDAQ for such date or (B) if the Shares
are listed on any other national stock exchange, as reported on the stock exchange composite tape
for securities traded on such stock exchange for such date or, with respect to each of clauses (A)
and (B), if there were no sales on such date, on the closest preceding date on which there were
sales of Shares or (ii) in the event there shall be no public market for the Shares on such date,
the fair market value of the Shares as determined in good faith by the Committee.

          “Incentive Stock Option” means an option to purchase Shares from the Company that (a)
is granted under Section 6 and (b) is intended to qualify for special Federal income tax treatment
pursuant to Sections 421 and 422 of the Code, as now constituted or subsequently amended, or
pursuant to a successor provision of the Code, and which is so designated in the applicable Award
Agreement.

          “Independent Director” means a member of the Board who is neither (a) an employee of
the Company nor (b) an employee of any Affiliate, and who, at the time of acting, is a
“Non-Employee Director” under Rule 16b-3.

          “IRS” means the Internal Revenue Service or any successor thereto and includes the
staff thereof.

 

 

  4

          “NASDAQ” means the National Association of Securities Dealers Autmomated Quotation
system.

          “Nonqualified Stock Option” means an option to purchase Shares from the Company that
(a) is granted under Section 6 and (b) is not an Incentive Stock Option.

          “Option” means an Incentive Stock Option or a Nonqualified Stock Option or both, as
the context requires.

          “Participant” means any director, officer, employee or consultant (including any
prospective director, officer, employee or consultant) of the Company or its Affiliates who is
eligible for an Award under Section 5 and who is selected by the Committee to receive an Award
under the Plan or who receives a Substitute Award pursuant to Section 4(c).

          “Performance Compensation Award” means any Award designated by the Committee as a
Performance Compensation Award pursuant to Section 6(e).

          “Performance Criteria” means the criterion or criteria that the Committee shall select
for purposes of establishing a Performance Goal for a Performance Period with respect to any
Performance Compensation Award, Performance Unit or Cash Incentive Award under the Plan.

          “Performance Formula” means, for a Performance Period, the one or more objective
formulas applied against the relevant Performance Goal to determine, with regard to the Performance
Compensation Award, Performance Unit or Cash Incentive Award of a particular Participant, whether
all, a portion or none of the Award has been earned for the Performance Period.

          “Performance Goal” means, for a Performance Period, the one or more goals established
by the Committee for the Performance Period based upon the Performance Criteria.

          “Performance Period” means the one or more periods of time as the Committee may select
over which the attainment of one or more Performance Goals will be measured for the purpose of
determining a Participant’s right to and the payment of a Performance Compensation Award,
Performance Unit or Cash Incentive Award.

          “Performance Unit” means an Award under Section 6(f) that has a value set by the
Committee (or that is determined by reference to a valuation formula specified by the Committee or
the Fair Market Value of Shares), which value may be paid to the
Participant by delivery of such property as the Committee shall determine, including without
limitation, cash or Shares, or any combination thereof, upon achievement of such Performance Goals
during the relevant Performance Period as the Committee shall establish at the time of such Award
or thereafter.

          “Plan” means this First Solar Holdings, Inc. 2006 Omnibus Incentive Compensation Plan,
as in effect from time to time.

 

 

  5

          “Restricted Share” means a Share delivered under the Plan that is subject to certain
transfer restrictions, forfeiture provisions and/or other terms and conditions specified herein and
in the applicable Award Agreement.

          “RSU” means a restricted stock unit Award that is designated as such in the applicable
Award Agreement and that represents an unfunded and unsecured promise to deliver Shares, cash,
other securities, other Awards or other property in accordance with the terms of the applicable
Award Agreement.

          “Rule 16b-3” means Rule 16b-3 as promulgated and interpreted by the SEC under the
Exchange Act or any successor rule or regulation thereto as in effect from time to time.

          “SAR” means a stock appreciation right Award that represents an unfunded and unsecured
promise to deliver Shares, cash, other securities, other Awards or other property equal in value to
the excess, if any, of the Fair Market Value per Share over the Exercise Price per Share of the
SAR, subject to the terms of the applicable Award Agreement.

          “SEC” means the Securities and Exchange Commission or any successor thereto and shall
include the staff thereof.

          “Shares” means shares of common stock of the Company, $0.001 par value, or such other
securities of the Company (a) into which such shares shall be changed by reason of a
recapitalization, merger, consolidation, split-up, combination, exchange of shares or other similar
transaction or (b) as may be determined by the Committee pursuant to Section 4(b).

          “Specified Shareholder” means JWMA Partners, LLC and, following the dissolution of
JWMA Partners, LLC, any of (i) the Estate of John T. Walton and its beneficiaries, (ii) JCL
Holdings, LLC and its beneficiaries, (iii) Michael J. Ahearn and any of his immediate family, (iv)
any Person directly or indirectly controlled by any of the foregoing and (v) any trust for the
direct or indirect benefit of any of the foregoing.

          “Subsidiary” means any entity in which the Company, directly or indirectly, possesses
50% or more of the total combined voting power of all classes of its stock.

          “Substitute Awards” shall have the meaning specified in Section 4(c).

          SECTION 3. Administration. (a) Composition of Committee. The Plan shall be
administered by the Committee, which shall be composed of one or more directors, as determined by
the Board; provided that after the date of the consummation of the initial public offering
of Shares, to the extent necessary to comply with the rules of NASDAQ and Rule 16b-3 and to satisfy
any applicable requirements of Section 162(m) of the Code and any other applicable laws or rules,
the Committee shall be composed of two or more directors, all of whom shall be Independent
Directors and all of whom shall (i) qualify as

 

 

  6

“outside directors” under Section 162(m) of the Code
and (ii) meet the independence requirements of NASDAQ.

          (b) Authority of Committee. Subject to the terms of the Plan and applicable law, and
in addition to other express powers and authorizations conferred on the Committee by the Plan, the
Committee shall have sole and plenary authority to administer the Plan, including, but not limited
to, the authority to (i) designate Participants, (ii) determine the type or types of Awards to be
granted to a Participant, (iii) determine the number of Shares to be covered by, or with respect to
which payments, rights or other matters are to be calculated in connection with, Awards, (iv)
determine the terms and conditions of any Awards, (v) determine the vesting schedules of Awards
and, if certain performance criteria must be attained in order for an Award to vest or be settled
or paid, establish such performance criteria and certify whether, and to what extent, such
performance criteria have been attained, (vi) determine whether, to what extent and under what
circumstances Awards may be settled or exercised in cash, Shares, other securities, other Awards or
other property, or canceled, forfeited or suspended and the method or methods by which Awards may
be settled, exercised, canceled, forfeited or suspended, (vii) determine whether, to what extent
and under what circumstances cash, Shares, other securities, other Awards, other property and other
amounts payable with respect to an Award shall be deferred either automatically or at the election
of the holder thereof or of the Committee, (viii) interpret, administer, reconcile any
inconsistency in, correct any default in and supply any omission in, the Plan and any instrument or
agreement relating to, or Award made under, the Plan, (ix) establish, amend, suspend or waive such
rules and regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan, (x) accelerate the vesting or exercisability of, payment for or lapse
of restrictions on, Awards, (xi) amend an outstanding Award or grant a replacement Award for an
Award previously granted under the Plan if, in its sole discretion, the Committee determines that
(A) the tax consequences of such Award to the Company or the Participant differ from those
consequences that were expected to occur on the date the Award was granted or (B) clarifications or
interpretations of, or changes to, tax law or regulations permit Awards to be granted that have
more favorable tax consequences than initially anticipated and (xii) make any other determination
and take any other action that the Committee deems necessary or desirable for the administration of
the Plan.

          (c) Committee Decisions. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or with respect to the Plan
or any Award shall be within the sole and plenary discretion of the Committee, may be made at any
time and shall be final, conclusive and binding upon all

 

 

           persons, including the Company, any Affiliate, any Participant, any holder or beneficiary of
any Award and any stockholder.

          (d) Indemnification. No member of the Board, the Committee or any employee of the
Company (each such person, a “Covered Person”) shall be liable for any action taken or
omitted to be taken or any determination made in good faith with respect to the Plan or any Award
hereunder. Each Covered Person shall be indemnified and held harmless by the Company against and
from (i) any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon
or incurred by such Covered

 

 

  7

Person in connection with or resulting from any action, suit or
proceeding to which such Covered Person may be a party or in which such Covered Person may be
involved by reason of any action taken or omitted to be taken under the Plan or any Award Agreement
and (ii) any and all amounts paid by such Covered Person, with the Company’s approval, in
settlement thereof, or paid by such Covered Person in satisfaction of any judgment in any such
action, suit or proceeding against such Covered Person; provided that the Company shall
have the right, at its own expense, to assume and defend any such action, suit or proceeding, and,
once the Company gives notice of its intent to assume the defense, the Company shall have sole
control over such defense with counsel of the Company’s choice. The foregoing right of
indemnification shall not be available to a Covered Person to the extent that a court of competent
jurisdiction in a final judgment or other final adjudication, in either case not subject to further
appeal, determines that the acts or omissions of such Covered Person giving rise to the
indemnification claim resulted from such Covered Person’s bad faith, fraud or willful criminal act
or omission or that such right of indemnification is otherwise prohibited by law or by the
Company’s Certificate of Incorporation or Bylaws. The foregoing right of indemnification shall not
be exclusive of any other rights of indemnification to which Covered Persons may be entitled under
the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any
other power that the Company may have to indemnify such persons or hold them harmless.

          (e) Delegation of Authority to Senior Officers. The Committee may delegate, on such
terms and conditions as it determines in its sole and plenary discretion, to one or more senior
officers of the Company the authority to make grants of Awards to officers (other than executive
officers), employees and consultants of the Company and its Affiliates (including any prospective
officer, employee or consultant) and all necessary and appropriate decisions and determinations
with respect thereto.

          (f) Awards to Independent Directors. Notwithstanding anything to the contrary
contained herein, the Board may, in its sole and plenary discretion, at any time and from time to
time, grant Awards to Independent Directors or administer the Plan with respect to such Awards. In
any such case, the Board shall have all the authority and responsibility granted to the Committee
herein.

          SECTION 4.
Shares Available for Awards. (a) Shares Available. Subject to
adjustment as provided in Section 4(b), (i) the aggregate number of Shares that may be delivered
pursuant to Awards granted under the Plan shall be 1,200,000, of which the maximum number of Shares
that may be delivered pursuant to Incentive Stock Options granted under the Plan shall be 1,200,000 and the maximum number of Shares that may be
delivered pursuant to Awards of Restricted Shares under the Plan shall be 600,000,

 

 

  8

provided that
each such number of Shares does not reflect, and shall automatically be adjusted to take into
account any stock distribution or stock split that occurs in connection with the initial public
offering of Shares. If, after the effective date of the Plan, any Award granted under the Plan is
forfeited, or otherwise expires, terminates or is canceled without the delivery of Shares, then the
Shares covered by such forfeited, expired, terminated or canceled Award shall again become
available to be delivered pursuant to Awards under the Plan. If Shares issued upon exercise,
vesting or settlement of an Award, or Shares owned by a Participant (which are not subject to any
pledge or other security interest), are surrendered or tendered to the Company in payment of the
Exercise Price of an Award or any taxes required to be withheld in respect of an Award, in each
case, in accordance with the terms and conditions of the Plan and any applicable Award Agreement,
such surrendered or tendered Shares shall again become available to be delivered pursuant to Awards
under the Plan; provided, however, that in no event shall such Shares increase the
number of Shares that may be delivered pursuant to Incentive Stock Options granted under the Plan.
Subject to adjustment as provided in Section 4(b), (i) the maximum aggregate number of Shares with
respect to which Awards may be granted to any Participant in any fiscal year of the Company shall
be 140,000, provided that such number of Shares does not reflect, and shall automatically be
adjusted to take into account any stock distribution or stock split that occurs in connection with
the initial public offering of Shares, and (ii) the maximum aggregate amount of cash and other
property (valued at its Fair Market Value) other than Shares that may be paid or delivered pursuant
to Awards under the Plan to any Participant in any fiscal year of the Company shall be $20,000,000.

          (b) Adjustments for Changes in Capitalization and Similar Events. (i) In the event
of any extraordinary dividend or other extraordinary distribution (whether in the form of cash,
Shares, other securities or other property), recapitalization, stock split, reverse stock split,
split-up or spin-off, the Committee shall, in order to preserve the value of the Award and in the
manner determined by the Committee, adjust any or all of (A) the number of Shares or other
securities of the Company (or number and kind of other securities or property) with respect to
which Awards may be granted, including (1) the aggregate number of Shares that may be delivered
pursuant to Awards granted under the Plan, as provided in Section 4(a) and (2) the maximum number
of Shares or other securities of the Company (or number and kind of other securities or property)
with respect to which Awards may be granted to any Participant in any fiscal year of the Company
and (B) the terms of any outstanding Award, including (1) the number of Shares or other securities
of the Company (or number and kind of other securities or property) subject to outstanding Awards
or to which outstanding Awards relate and (2) the Exercise Price with respect to any Award.

               (ii) In the event that the Committee determines that any reorganization, merger,
consolidation, combination, repurchase or exchange of Shares or other securities of the Company,
issuance of warrants or other rights to purchase Shares or other securities

 

 

  9

of the Company, or
other similar corporate transaction or event affects the Shares such that an adjustment is
determined by the Committee in its discretion to be
appropriate or desirable, then the Committee may (A) in such manner as it may deem equitable
or desirable, adjust any or all of (1) the number of Shares or other securities of the Company (or
number and kind of other securities or property) with respect to which Awards may be granted,
including (X) the aggregate number of Shares that may be delivered pursuant to Awards granted under
the Plan, as provided in Section 4(a) and (Y) the maximum number of Shares or other securities of
the Company (or number and kind of other securities or property) with respect to which Awards may
be granted to any Participant in any fiscal year of the Company and (2) the terms of any
outstanding Award, including (X) the number of Shares or other securities of the Company (or number
and kind of other securities or property) subject to outstanding Awards or to which outstanding
Awards relate and (Y) the Exercise Price with respect to any Award, (B) if deemed appropriate or
desirable by the Committee, make provision for a cash payment to the holder of an outstanding Award
in consideration for the cancelation of such Award, including, in the case of an outstanding Option
or SAR, a cash payment to the holder of such Option or SAR in consideration for the cancelation of
such Option or SAR in an amount equal to the excess, if any, of the Fair Market Value (as of a date
specified by the Committee) of the Shares subject to such Option or SAR over the aggregate Exercise
Price of such Option or SAR and (C) if deemed appropriate or desirable by the Committee, cancel and
terminate any Option or SAR having a per Share Exercise Price equal to, or in excess of, the Fair
Market Value of a Share subject to such Option or SAR without any payment or consideration
therefor.

          (c) Substitute Awards. Awards may, in the discretion of the Committee, be granted
under the Plan in assumption of, or in substitution for, outstanding awards previously granted by
the Company or any of its Affiliates or a company acquired by the Company or any of its Affiliates
or with which the Company or any of its Affiliates combines (“Substitute Awards”). The
number of Shares underlying any Substitute Awards shall be counted against the aggregate number of
Shares available for Awards under the Plan; provided, however, that Substitute
Awards issued in connection with the assumption of, or in substitution for, outstanding awards
previously granted by an entity that is acquired by the Company or any of its Affiliates or with
which the Company or any of its Affiliates combines shall not be counted against the aggregate
number of Shares available for Awards under the Plan; provided further, however,
that Substitute Awards issued in connection with the assumption of, or in substitution for,
outstanding stock options intended to qualify for special tax treatment under Sections 421 and 422
of the Code that were previously granted by an entity that is acquired by the Company or any of its
Affiliates or with which the Company or any of its Affiliates combines shall be counted against the
aggregate number of Shares available for Incentive Stock Options under the Plan.

          (d) Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an
Award may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares.

 

 

  10

          SECTION 5. Eligibility. Any director, officer, employee or consultant (including any
prospective director, officer, employee or consultant) of the Company or any of its Affiliates
shall be eligible to be designated a Participant.

          SECTION 6. Awards. (a) Types of Awards. Awards may be made under the Plan
in the form of (i) Options, (ii) SARs, (iii) Restricted Shares, (iv) RSUs, (v) Performance Units,
(vi) Cash Incentive Awards and (vii) other equity-based or equity-related Awards that the Committee
determines are consistent with the purpose of the Plan and the interests of the Company. Awards
may be granted in tandem with other Awards. No Incentive Stock Option (other than an Incentive
Stock Option that may be assumed or issued by the Company in connection with a transaction to which
Section 424(a) of the Code applies) may be granted to a person who is ineligible to receive an
Incentive Stock Option under the Code.

          (b) Options. (i) Grant. Subject to the provisions of the Plan, the
Committee shall have sole and plenary authority to determine the Participants to whom Options shall
be granted, the number of Shares to be covered by each Option, whether the Option will be an
Incentive Stock Option or a Nonqualified Stock Option and the conditions and limitations applicable
to the vesting and exercise of the Option. In the case of Incentive Stock Options, the terms and
conditions of such grants shall be subject to and comply with such rules as may be prescribed by
Section 422 of the Code and any regulations related thereto, as may be amended from time to time.
All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Award
Agreement expressly states that the Option is intended to be an Incentive Stock Option. If an
Option is intended to be an Incentive Stock Option, and if for any reason such Option (or any
portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such
nonqualification, such Option (or portion thereof) shall be regarded as a Nonqualified Stock Option
appropriately granted under the Plan; provided that such Option (or portion thereof)
otherwise complies with the Plan’s requirements relating to Nonqualified Stock Options.

               (ii) Exercise Price. Except as otherwise established by the Committee at the time an
Option is granted and set forth in the applicable Award Agreement, the Exercise Price of each Share
covered by an Option shall be not less than 100% of the Fair Market Value of such Share (determined
as of the date the Option is granted); provided, however, that (A) except as
otherwise established by the Committee at the time an Option is granted and set forth in the
applicable Award Agreement, the Exercise Price of each Share covered by an Option that is granted
effective as of the Company’s initial public offering of Shares shall be the initial public
offering price per Share and (B) in the case of an Incentive Stock Option granted to an employee
who, at the time of the grant of such Option, owns stock representing more than 10% of the voting
power of all classes of stock of the Company or any Affiliate, the per Share Exercise Price shall
be no less than 110% of the Fair Market Value per Share on the date of the grant. Options are
intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Code.

               (iii) Vesting and Exercise. Each Option shall be vested and exercisable at such
times, in such manner and subject to such terms and conditions as the Committee

 

 

  11

may, in its sole
and plenary discretion, specify in the applicable Award Agreement or thereafter. Except as
otherwise specified by the Committee in the applicable Award Agreement, an Option may only be
exercised to the extent that it has already vested at the
time of exercise. Except as otherwise specified by the Committee in the Award Agreement,
Options shall become vested and exercisable with respect to one-fourth of the Shares subject to
such Options on each of the first four anniversaries of the date of grant. An Option shall be
deemed to be exercised when written or electronic notice of such exercise has been given to the
Company in accordance with the terms of the Award by the person entitled to exercise the Award and
full payment pursuant to Section 6(b)(iv) for the Shares with respect to which the Award is
exercised has been received by the Company. Exercise of an Option in any manner shall result in a
decrease in the number of Shares that thereafter may be available for sale under the Option and,
except as expressly set forth in Section 4(c), in the number of Shares that may be available for
purposes of the Plan, by the number of Shares as to which the Option is exercised. The Committee
may impose such conditions with respect to the exercise of Options, including, without limitation,
any relating to the application of Federal or state securities laws, as it may deem necessary or
advisable.

               (iv) Payment. (A) No Shares shall be delivered pursuant to any exercise of an
Option until payment in full of the aggregate Exercise Price therefor is received by the Company,
and the Participant has paid to the Company an amount equal to any Federal, state, local and
foreign income and employment taxes required to be withheld. Such payments may be made in cash (or
its equivalent) or, in the Committee’s sole and plenary discretion, (1) by exchanging Shares owned
by the Participant (which are not the subject of any pledge or other security interest) or (2) if
there shall be a public market for the Shares at such time, subject to such rules as may be
established by the Committee, through delivery of irrevocable instructions to a broker to sell the
Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company
an amount equal to the aggregate Exercise Price, or by a combination of the foregoing;
provided that the combined value of all cash and cash equivalents and the Fair Market Value
of any such Shares so tendered to the Company as of the date of such tender is at least equal to
such aggregate Exercise Price and the amount of any Federal, state, local or foreign income or
employment taxes required to be withheld.

               (B) Wherever in the Plan or any Award Agreement a Participant is permitted to pay the
Exercise Price of an Option or taxes relating to the exercise of an Option by delivering Shares,
the Participant may, subject to procedures satisfactory to the Committee, satisfy such delivery
requirement by presenting proof of beneficial ownership of such Shares, in which case the Company
shall treat the Option as exercised without further payment and shall withhold such number of
Shares from the Shares acquired by the exercise of the Option.

               (v) Expiration. Except as otherwise set forth in the applicable Award Agreement,
each Option shall expire immediately, without any payment, upon the earlier of (A) the tenth
anniversary of the date the Option is granted and (B) either (x) 180 days after the date the
Participant who is holding the Option ceases to be a director, officer, employee or consultant of
the Company or one of its Affiliates for any reason other than the Participant’s death or (y) six
months after the date the Participant who is holding the

 

 

  12

Option ceases to be a director, officer,
employee or consultant of the Company or one of
its Affiliates by reason of the Participant’s death. In no event may an Option be exercisable
after the tenth anniversary of the date the Option is granted.

          (c) SARs. (i) Grant. Subject to the provisions of the Plan, the Committee
shall have sole and plenary authority to determine the Participants to whom SARs shall be granted,
the number of Shares to be covered by each SAR, the Exercise Price thereof and the conditions and
limitations applicable to the exercise thereof. SARs may be granted in tandem with another Award,
in addition to another Award or freestanding and unrelated to another Award. SARs granted in
tandem with, or in addition to, an Award may be granted either at the same time as the Award or at
a later time.

               (ii) Exercise Price. Except as otherwise established by the Committee at the time a
SAR is granted and set forth in the applicable Award Agreement, the Exercise Price of each Share
covered by a SAR shall be not less than 100% of the Fair Market Value of such Share (determined as
of the date the SAR is granted). SARs are intended to qualify as “qualified performance-based
compensation” under Section 162(m) of the Code.

               (iii) Exercise. A SAR shall entitle the Participant to receive an amount equal to
the excess, if any, of the Fair Market Value of a Share on the date of exercise of the SAR over the
Exercise Price thereof. The Committee shall determine, in its sole and plenary discretion, whether
a SAR shall be settled in cash, Shares, other securities, other Awards, other property or a
combination of any of the foregoing.

               (iv) Other Terms and Conditions. Subject to the terms of the Plan and any applicable
Award Agreement, the Committee shall determine, at or after the grant of a SAR, the vesting
criteria, term, methods of exercise, methods and form of settlement and any other terms and
conditions of any SAR. Any such determination by the Committee may be changed by the Committee
from time to time and may govern the exercise of SARs granted or exercised thereafter. The
Committee may impose such conditions or restrictions on the exercise of any SAR as it shall deem
appropriate or desirable.

          (d) Restricted Shares and RSUs. (i) Grant. Subject to the provisions of
the Plan, the Committee shall have sole and plenary authority to determine the Participants to whom
Restricted Shares and RSUs shall be granted, the number of Restricted Shares and RSUs to be granted
to each Participant, the duration of the period during which, and the conditions, if any, under
which, the Restricted Shares and RSUs may vest or may be forfeited to the Company and the other
terms and conditions of such Awards.

               (ii) Transfer Restrictions. Restricted Shares and RSUs may not be sold, assigned,
transferred, pledged or otherwise encumbered except as provided in the Plan or as may be provided
in the applicable Award Agreement; provided, however, that the Committee may in its
discretion determine that Restricted Shares and RSUs may be transferred by the Participant.
Certificates issued in respect of Restricted Shares shall be
registered in the name of the Participant and deposited by such Participant, together with a
stock power endorsed in blank, with the Company or such other custodian as may be designated by the
Committee or the Company, and shall be held by the Company or other

 

 

  13

custodian, as applicable, until
such time as the restrictions applicable to such Restricted Shares lapse. Upon the lapse of the
restrictions applicable to such Restricted Shares, the Company or other custodian, as applicable,
shall deliver such certificates to the Participant or the Participant’s legal representative.

               (iii) Payment/Lapse of Restrictions. Each RSU shall be granted with respect to one
Share or shall have a value equal to the Fair Market Value of one Share. RSUs shall be paid in
cash, Shares, other securities, other Awards or other property, as determined in the sole and
plenary discretion of the Committee, upon the lapse of restrictions applicable thereto, or
otherwise in accordance with the applicable Award Agreement. If a Restricted Share or an RSU is
intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Code,
all requirements set forth in Section 6(i) must be satisfied in order for the restrictions
applicable thereto to lapse.

          (e) Performance Units. (i) Grant. Subject to the provisions of the Plan,
the Committee shall have sole and plenary authority to determine the Participants to whom
Performance Units shall be granted and the terms and conditions thereof.

               (ii) Value of Performance Units. Each Performance Unit shall have an initial value
that is established by the Committee at the time of grant. The Committee shall set Performance
Goals in its discretion which, depending on the extent to which they are met during a Performance
Period, will determine the number and value of Performance Units that will be paid out to the
Participant.

               (iii) Earning of Performance Units. Subject to the provisions of the Plan, after the
applicable Performance Period has ended, the holder of Performance Units shall be entitled to
receive a payout of the number and value of Performance Units earned by the Participant over the
Performance Period, to be determined by the Committee, in its sole and plenary discretion, as a
function of the extent to which the corresponding Performance Goals have been achieved.

               (iv) Form and Timing of Payment of Performance Units. Subject to the provisions of
the Plan, the Committee, in its sole and plenary discretion, may pay earned Performance Units in
the form of cash or in Shares (or in a combination thereof) that has an aggregate Fair Market Value
equal to the value of the earned Performance Units at the close of the applicable Performance
Period. Such Shares may be granted subject to any restrictions in the applicable Award Agreement
deemed appropriate by the Committee. The determination of the Committee with respect to the form
and timing of payout of such Awards shall be set forth in the applicable Award Agreement. If a
Performance Unit is intended to qualify as “qualified performance-based compensation” under Section
162(m) of the Code, all requirements set forth in Section 6(i) must be satisfied in order for a
Participant to be entitled to payment.

          (f) Cash Incentive Awards. Subject to the provisions of the Plan, the Committee, in
its sole and plenary discretion, shall have the authority to grant Cash Incentive Awards. The
Committee shall establish Cash Incentive Award levels to

 

 

  14

	 	 	determine the amount of a Cash Incentive
Award payable upon the attainment of Performance Goals. If a Cash Incentive Award is intended to
qualify as “qualified performance-based compensation” under Section 162(m) of the Code, all
requirements set forth in Section 6(i) must be satisfied in order for a Participant to be entitled
to payment.

          (g) Other Stock-Based Awards. Subject to the provisions of the Plan, the Committee
shall have the sole and plenary authority to grant to Participants other equity-based or
equity-related Awards (including, but not limited to, fully-vested Shares) in such amounts and
subject to such terms and conditions as the Committee shall determine. If such an Award is
intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Code,
all requirements set forth in Section 6(i) must be satisfied in order for a Participant to be
entitled to payment.

          (h) Dividend Equivalents. In the sole and plenary discretion of the Committee, an
Award, other than an Option, SAR or Cash Incentive Award, may provide the Participant with
dividends or dividend equivalents, payable in cash, Shares, other securities, other Awards or other
property, on a current or deferred basis, on such terms and conditions as may be determined by the
Committee in its sole and plenary discretion, including, without limitation, payment directly to
the Participant, withholding of such amounts by the Company subject to vesting of the Award or
reinvestment in additional Shares, Restricted Shares or other Awards.

          (i) Performance Compensation Awards. (i) General. The Committee shall
have the authority, at the time of grant of any Award, to designate such Award (other than Options
and SARs) as a Performance Compensation Award in order to qualify such Award as “qualified
performance-based compensation” under Section 162(m) of the Code. Options and SARs granted under
the Plan shall not be included among Awards that are designated as Performance Compensation Awards
under this Section 6(i).

               (ii) Eligibility. The Committee shall, in its sole discretion, designate within the
first 90 days of a Performance Period (or, if shorter, within the maximum period allowed under
Section 162(m) of the Code) which Participants will be eligible to receive Performance Compensation
Awards in respect of such Performance Period. However, designation of a Participant eligible to
receive an Award hereunder for a Performance Period shall not in any manner entitle the Participant
to receive payment in respect of any Performance Compensation Award for such Performance Period.
The determination as to whether or not such Participant becomes entitled to payment in respect of
any Performance Compensation Award shall be decided solely in accordance with the provisions of
this Section 6(i). Moreover, designation of a Participant eligible to receive an Award hereunder
for a particular Performance Period shall not require designation of such Participant eligible to
receive an Award hereunder in any subsequent Performance Period and designation of one person as a
Participant eligible to receive an
Award hereunder shall not require designation of any other person as a Participant eligible to
receive an Award hereunder in such period or in any other period.

               (iii) Discretion of Committee with Respect to Performance Compensation Awards. With
regard to a particular Performance Period, the Committee

 

 

  15

shall have full discretion to select the
length of such Performance Period, the types of Performance Compensation Awards to be issued, the
Performance Criteria that will be used to establish the Performance Goals, the kinds and levels of
the Performance Goals that are to apply to the Company or any of its Subsidiaries, Affiliates,
divisions or operational units, or any combination of the foregoing, and the Performance Formula.
Within the first 90 days of a Performance Period (or, if shorter, within the maximum period allowed
under Section 162(m) of the Code), the Committee shall, with regard to the Performance Compensation
Awards to be issued for such Performance Period, exercise its discretion with respect to each of
the matters enumerated in the immediately preceding sentence and record the same in writing.

               (iv) Performance Criteria. Notwithstanding the foregoing, the Performance Criteria
that will be used to establish the Performance Goals shall be based on the attainment of specific
levels of performance of the Company or any of its Subsidiaries, Affiliates, divisions or
operational units, or any combination of the foregoing, and shall be limited to the following: (A)
net income before or after taxes, (B) earnings before or after taxes (including earnings before
interest, taxes, depreciation and amortization), (C) operating income, (D) earnings per share, (E)
return on shareholders’ equity, (F) return on investment or capital, (G) return on assets, (H)
level or amount of acquisitions, (I) share price, (J) profitability and profit margins, (K) market
share (in the aggregate or by segment), (L) revenues or sales (based on units or dollars), (M)
costs, (N) cash flow, (O) working capital, (P) cost per watt, (Q) megawatts produced, (R) watts per
module, (S) conversion efficiency, (T) modules produced (U) produced production throughput rates,
(V) bill of material costs, (W) production yields, (X) production expansion build and ramp times,
(Y) module field performance, (Z) average sales price, (AA) budgeted expenses (operating and
capital), (BB) inventory turns and (CC) accounts receivable levels. Such performance criteria may
be applied on an absolute basis and/or be relative to one or more peer companies of the Company or
indices or any combination thereof. To the extent required under Section 162(m) of the Code, the
Committee shall, within the first 90 days of the applicable Performance Period (or, if shorter,
within the maximum period allowed under Section 162(m) of the Code), define in an objective manner
the method of calculating the Performance Criteria it selects to use for such Performance Period.

               (v) Modification of Performance Goals. The Committee is authorized at any time
during the first 90 days of a Performance Period (or, if shorter, within the maximum period allowed
under Section 162(m) of the Code), or any time thereafter (but only to the extent the exercise of
such authority after such 90-day period (or such shorter period, if applicable) would not cause the
Performance Compensation Awards granted to any Participant for the Performance Period to fail to
qualify as “qualified performance-based compensation” under Section 162(m) of the Code), in its
sole and plenary discretion, to adjust or modify the calculation of a Performance Goal for such
Performance Period to the extent permitted under Section 162(m) of the Code (A) in the event
of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or
development affecting the Company or any of its Affiliates, Subsidiaries, divisions or operating
units (to the extent

 

 

  16

applicable to such Performance Goal) or (B) in recognition of, or in
anticipation of, any other unusual or nonrecurring events affecting the Company or any of its
Affiliates, Subsidiaries, divisions or operating units (to the extent applicable to such
Performance Goal), or the financial statements of the Company or any of its Affiliates,
Subsidiaries, divisions or operating units (to the extent applicable to such Performance Goal), or
of changes in applicable rules, rulings, regulations or other requirements of any governmental body
or securities exchange, accounting principles, law or business conditions.

               (vi) Payment of Performance Compensation Awards. (A) Condition to Receipt of
Payment. A Participant must be employed by the Company on the last day of a Performance Period
to be eligible for payment in respect of a Performance Compensation Award for such Performance
Period. Notwithstanding the foregoing, in the discretion of the Committee, Performance
Compensation Awards may be paid to Participants who have retired or whose employment has terminated
prior to the last day of the Performance Period for which a Performance Compensation Award is made
or to the designee or estate of a Participant who died prior to the last day of a Performance
Period.

                    (B) Limitation. A Participant shall be eligible to receive payments in respect of a
Performance Compensation Award only to the extent that (1) the Performance Goals for such period
are achieved and certified by the Committee in accordance with Section 6(i)(vi)(C) and (2) the
Performance Formula as applied against such Performance Goals determines that all or some portion
of such Participant’s Performance Compensation Award has been earned for the Performance Period.

                    (C) Certification. Following the completion of a Performance Period, the Committee
shall meet to review and certify in writing whether, and to what extent, the Performance Goals for
the Performance Period have been achieved and, if so, to calculate and certify in writing that
amount of the Performance Compensation Awards earned for the period based upon the Performance
Formula. The Committee shall then determine the actual size of each Participant’s Performance
Compensation Award for the Performance Period and, in so doing, may apply negative discretion as
authorized by Section 6(i)(vi)(D).

                    (D) Negative Discretion. In determining the actual size of an individual Performance
Compensation Award for a Performance Period, the Committee may, in its sole and plenary discretion,
reduce or eliminate the amount of the Award earned in the Performance Period, even if applicable
Performance Goals have been attained.

                    (E) Timing of Award Payments. The Performance Compensation Awards granted for a
Performance Period shall be paid to Participants as soon as administratively possible following
completion of the certifications required by Section 6(i)(vi)(C), unless the Committee shall determine that any Performance Compensation Award
shall be deferred.

                    (F) Discretion. In no event shall any discretionary authority granted to the
Committee by the Plan be used to (1) grant or provide payment in respect of Performance
Compensation Awards for a Performance Period if the Performance Goals for such Performance Period
have not been attained, (2) increase a Performance Compensation Award for any Participant at any
time after the first 90 days of the Performance Period (or, if shorter, the maximum period allowed
under Section 162(m)) or (3) increase a

 

 

  17

Performance Compensation Award above the maximum amount
payable under Section 4(a) of the Plan.

          SECTION 7. Amendment and Termination. (a) Amendments to the Plan. Subject
to any applicable law or government regulation, to any requirement that must be satisfied if the
Plan is intended to be a shareholder approved plan for purposes of Section 162(m) of the Code and
to the rules of NASDAQ or any successor exchange or quotation system on which the Shares may be
listed or quoted, the Plan may be amended, modified or terminated by the Board without the approval
of the stockholders of the Company except that stockholder approval shall be required for any
amendment that would (i) increase the maximum number of Shares for which Awards may be granted
under the Plan or increase the maximum number of Shares that may be delivered pursuant to Incentive
Stock Options granted under the Plan; provided, however, that any adjustment under
Section 4(b) shall not constitute an increase for purposes of this Section 7(a) or (ii) change the
class of employees or other individuals eligible to participate in the Plan. No modification,
amendment or termination of the Plan may, without the consent of the Participant to whom any Award
shall theretofor have been granted, materially and adversely affect the rights of such Participant
(or his or her transferee) under such Award, unless otherwise provided by the Committee in the
applicable Award Agreement.

          (b) Amendments to Awards. The Committee may waive any conditions or rights under,
amend any terms of, or alter, suspend, discontinue, cancel or terminate any Award theretofor
granted, prospectively or retroactively; provided, however, that, except as set
forth in the Plan, unless otherwise provided by the Committee in the applicable Award Agreement,
any such waiver, amendment, alteration, suspension, discontinuance, cancelation or termination that
would materially and adversely impair the rights of any Participant or any holder or beneficiary of
any Award theretofor granted shall not to that extent be effective without the consent of the
impaired Participant, holder or beneficiary.

          (c) Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring
Events. The Committee is hereby authorized to make adjustments in the terms and conditions of,
and the criteria included in, Awards in recognition of unusual or nonrecurring events (including,
without limitation, the events described in Section 4(b) or the occurrence of a Change of Control)
affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate,
or of changes in applicable rules, rulings, regulations or other requirements of any governmental
body or securities exchange, accounting principles or law (i) whenever the Committee, in its sole
and plenary discretion, determines that such adjustments are appropriate or desirable, including,
without limitation, providing for a substitution or assumption of Awards, accelerating the
exercisability of, lapse of restrictions on, or termination of, Awards or providing for a period of
time for exercise prior to the occurrence of such event, (ii) if deemed appropriate or desirable by
the Committee, in its sole and plenary discretion, by providing for a cash payment to the holder of
an Award in consideration for the cancelation of such Award, including, in the case of an
outstanding Option or SAR, a cash payment to the holder of such Option or SAR

 

 

  18

in consideration for
the cancelation of such Option or SAR in an amount equal to the excess, if any, of the Fair Market
Value (as of a date specified by the Committee) of the Shares subject to such Option or SAR over
the aggregate Exercise Price of such Option or SAR and (iii) if deemed appropriate or desirable by
the Committee, in its sole and plenary discretion, by canceling and terminating any Option or SAR
having a per Share Exercise Price equal to, or in excess of, the Fair Market Value of a Share
subject to such Option or SAR without any payment or consideration therefor.

          SECTION 8. Change of Control. Unless otherwise provided in the applicable Award
Agreement, in the event of a Change of Control after the date of the adoption of the Plan, unless
provision is made in connection with the Change of Control for (a) assumption of Awards previously
granted or (b) substitution for such Awards of new awards covering stock of a successor corporation
or its “parent corporation” (as defined in Section 424(e) of the Code) or “subsidiary corporation”
(as defined in Section 424(f) of the Code) with appropriate adjustments as to the number and kinds
of shares and the Exercise Prices, if applicable, (i) any outstanding Options or SARs then held by
Participants that are unexercisable or otherwise unvested shall automatically be deemed exercisable
or otherwise vested, as the case may be, as of immediately prior to such Change of Control, (ii)
all Performance Units and Cash Incentive Awards shall be paid out as if the date of the Change of
Control were the last day of the applicable Performance Period and “target” performance levels had
been attained and (iii) all other outstanding Awards (i.e., other than Options, SARs,
Performance Units and Cash Incentive Awards) then held by Participants that are unexercisable,
unvested or still subject to restrictions or forfeiture, shall automatically be deemed exercisable
and vested and all restrictions and forfeiture provisions related thereto shall lapse as of
immediately prior to such Change of Control.

          SECTION 9. General Provisions. (a) Nontransferability. Except as otherwise
specified in the applicable Award Agreement, during the Participant’s lifetime each Award (and any
rights and obligations thereunder) shall be exercisable only by the Participant, or, if permissible
under applicable law, by the Participant’s legal guardian or representative, and no Award (or any
rights and obligations thereunder) may be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by a Participant otherwise than by will or by the laws of descent and
distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company or any Affiliate; provided
that (i) the designation of a beneficiary shall not constitute an assignment, alienation, pledge,
attachment, sale, transfer or encumbrance and (ii) the Board or the Committee may permit further
transferability, on a general or specific basis, and may impose conditions and limitations
on any permitted transferability; provided, however, that Incentive Stock
Options granted under the Plan shall not be transferable in any way that would violate Section
1.422-2(a)(2) of the Treasury Regulations. All terms and conditions of the Plan and all Award
Agreements shall be binding upon any permitted successors and assigns.

          (b) No Rights to Awards. No Participant or other Person shall have any claim to be
granted any Award, and there is no obligation for uniformity of treatment of Participants or
holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee’s
determinations and interpretations with respect thereto need not be the same with respect to each
Participant and may be made selectively among Participants, whether or not such Participants are
similarly situated.

 

 

  19

          (c) Share Certificates. All certificates for Shares or other securities of the
Company or any Affiliate delivered under the Plan pursuant to any Award or the exercise thereof
shall be subject to such stop transfer orders and other restrictions as the Committee may deem
advisable under the Plan, the applicable Award Agreement or the rules, regulations and other
requirements of the SEC, NASDAQ or any other stock exchange or quotation system upon which such
Shares or other securities are then listed or reported and any applicable Federal or state laws,
and the Committee may cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.

          (d) Withholding. A Participant may be required to pay to the Company or any
Affiliate, and the Company or any Affiliate shall have the right and is hereby authorized to
withhold from any Award, from any payment due or transfer made under any Award or under the Plan or
from any compensation or other amount owing to a Participant, the amount (in cash, Shares, other
securities, other Awards or other property) of any applicable withholding taxes in respect of an
Award, its exercise or any payment or transfer under an Award or under the Plan and to take such
other action as may be necessary in the opinion of the Committee or the Company to satisfy all
obligations for the payment of such taxes.

          (e) Award Agreements. Each Award hereunder shall be evidenced by an Award Agreement,
which shall be delivered to the Participant and shall specify the terms and conditions of the Award
and any rules applicable thereto, including, but not limited to, the effect on such Award of the
death, disability or termination of employment or service of a Participant and the effect, if any,
of such other events as may be determined by the Committee.

          (f) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall
prevent the Company or any Affiliate from adopting or continuing in effect other compensation
arrangements, which may, but need not, provide for the grant of options, restricted stock, shares
and other types of equity-based awards (subject to stockholder approval if such approval is
required), and such arrangements may be either generally applicable or applicable only in specific
cases.

          (g) No Right to Employment. The grant of an Award shall not be construed as giving a
Participant the right to be retained as a director, officer, employee or consultant of or to the
Company or any Affiliate, nor shall it be construed as giving a Participant any rights to continued
service on the Board. Further, the Company or an Affiliate may at any time dismiss a Participant
from employment or discontinue any consulting relationship, free from any liability or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.

          (h) No Rights as Stockholder. No Participant or holder or beneficiary of any Award
shall have any rights as a stockholder with respect to any Shares to be distributed under the Plan
until he or she has become the holder of such Shares. In connection with each grant of Restricted
Shares, except as provided in the applicable Award Agreement, the Participant shall not be entitled
to the rights of a stockholder in respect of such Restricted Shares. Except as otherwise provided
in Section 4(b), Section

 

 

  20

7(c) or the applicable Award Agreement, no adjustments shall be made for
dividends or distributions on (whether ordinary or extraordinary, and whether in cash, Shares,
other securities or other property), or other events relating to, Shares subject to an Award for
which the record date is prior to the date such Shares are delivered.

          (i) Governing Law. The validity, construction and effect of the Plan and any rules
and regulations relating to the Plan and any Award Agreement shall be determined in accordance with
the laws of the State of Delaware, without giving effect to the conflict of laws provisions
thereof.

          (j) Severability. If any provision of the Plan or any Award is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any Person or Award, or
would disqualify the Plan or any Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee, materially altering
the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to
such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in
full force and effect.

          (k) Other Laws. The Committee may refuse to issue or transfer any Shares or other
consideration under an Award if, acting in its sole and plenary discretion, it determines that the
issuance or transfer of such Shares or such other consideration might violate any applicable law or
regulation or entitle the Company to recover the same under Section 16(b) of the Exchange Act, and
any payment tendered to the Company by a Participant, other holder or beneficiary in connection
with the exercise of such Award shall be promptly refunded to the relevant Participant, holder or
beneficiary. Without limiting the generality of the foregoing, no Award granted hereunder shall be
construed as an offer to sell securities of the Company, and no such offer shall be outstanding,
unless and until the Committee in its sole and plenary discretion has determined that any such
offer, if made, would be in compliance with all applicable requirements of the U.S. Federal and any
other applicable securities laws.

          (l) No Trust or Fund Created. Neither the Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or a fiduciary relationship between the
Company or any Affiliate, on one hand, and a Participant or any other Person, on the other hand.
To the extent that any Person acquires a right to receive payments from the Company or any
Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured
general creditor of the Company or such Affiliate.

          (m) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant
to the Plan or any Award, and the Committee shall determine whether cash, other securities or other
property shall be paid or transferred in lieu of any fractional Shares or whether such fractional
Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.

 

 

  21

          (n) Requirement of Consent and Notification of Election Under Section 83(b) of the Code
or Similar Provision. No election under Section 83(b) of the Code (to include in gross income
in the year of transfer the amounts specified in Section 83(b) of the Code) or under a similar
provision of law may be made unless expressly permitted by the terms of the applicable Award
Agreement or by action of the Committee in writing prior to the making of such election. If an
Award recipient, in connection with the acquisition of Shares under the Plan or otherwise, is
expressly permitted under the terms of the applicable Award Agreement or by such Committee action
to make such an election and the Participant makes the election, the Participant shall notify the
Committee of such election within ten days of filing notice of the election with the IRS or other
governmental authority, in addition to any filing and notification required pursuant to regulations
issued under Section 83(b) of the Code or other applicable provision.

          (o) Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of
the Code. If any Participant shall make any disposition of Shares delivered pursuant to the
exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the
Code (relating to certain disqualifying dispositions) or any successor provision of the Code, such
Participant shall notify the Company of such disposition within ten days of such disposition.

          (p) Headings. Headings are given to the Sections and subsections of the Plan solely
as a convenience to facilitate reference. Such headings shall not be deemed in any way material or
relevant to the construction or interpretation of the Plan or any provision thereof.

          SECTION 10. Term of the Plan. (a) Effective Date. The Plan shall be
effective as of the date of its adoption by the Board and approval by the Company’s stockholders;
provided, however, that no Incentive Stock Options may be granted under the Plan
unless it is approved by the Company’s stockholders within twelve (12) months before or after the
date the Plan is adopted by the Board.

          (b) Expiration Date. No Award shall be granted under the Plan after the tenth
anniversary of the date the Plan is approved under Section 10(a). Unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award granted hereunder may, and the authority of the Board or the Committee to amend, alter, adjust,
suspend, discontinue or terminate any such Award or to waive any conditions or rights under any
such Award shall, nevertheless continue thereafter.

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